1933-05-05

[Stage Direction]
On the orders of the day:	*
Mr. E. R. E. CHEVRIER (Ottawa):: I should like to direct a question to the Minister of Finance (Mr. Rhodes). It is this: When will those employees in the government' service who have not been paid receive the cheque they should have received on the first of this month?	*


Hon. E. N. RHODES (Minister of Finance):: I could answer that question with greater accuracy, Mr. Speaker, if I knew when the interim supply bill, which is now in the Senate, will be passed. I would anticipate, however, that it will pass the Senate on Tuesday night, and we might have royal assent Wednesday so that the money would be available to pay the salaries in question.



WAYS AND MEANS


[Stage Direction]
The house, in committee of ways and means, resumed from Wednesday, May 3, consideration of the resolution of the Minister of Finance to amend the Income War Tax Act, Mr. MacDonald (Cape Breton South) in the chair.
Mr. McKENZIE (Assiniboia):: Paragraph 3 of this resolution reads:	'
That the exemption for a dependent child or grandchild be $400.
This makes no reference to age. Has the age limit been changed at all?


Edgar Nelson Rhodes: There has been no change with regard to the age.


Robert McKenzie: I believe the age limit is twenty-one years. Under pre-j

sent conditions I know many people who have educated their sons and daughters, but those children are unalble to find work to-day, and though they are over the age of twenty-one years they are still at home with their parents. It costs just as much to feed and clothe a boy or girl of twenty-two, twenty-three or twenty-four as it does a child of eighteen or nineteen, and under present conditions, when these young people cannot find anything to do and their parents are compelled to support them, it seems rather unfair that they do not get any exemption in regard to income tax.


Edgar Nelson Rhodes: I think it must be borne in mind that we have gone a considerable distance as it is. In the earlier stages the exemption applied only to those under the age of sixteen. It was then changed to eighteen and subsequently, whether wisely or not, to the full age of twenty-one. I can understand and sympathize with the cases to which my hon. friend has referred, but I think it must be borne in mind that we must legislate in matters of this kind for at least approximately normal conditions, and we should not put into a statute of this kind methods which are designed to meet a peculiar and abnormal and, we hope, transient situation.


Mr. CASGRAIN:: The Minister says that we should legislate for normal conditions, but it is obvious that the government is now resorting to certain taxes to meet conditions that are not normal. There are people in this country with children over the age of twenty-one, who very often find these younger members of the family coming back home when they cannot find work, with the result that the parents have to look after them. In many cases young people are charged with the responsibility of taking care of relatives such as aunts, grandmothers and others. Surely we are facing abnormal conditions to-day, and in taxing incomes the minister should bear this fact in mind, all the more when we see that in the province of Ontario and in other parts of Canada as well the taxpayers have to pay income tax not only to the dominion but to the provincial authorities as well. I think the minister should give this matter a little more consideration and recognize that we are faced with abnormal conditions at the present time.


Edgar Nelson Rhodes: The exemption in respect
to children is based on the presumption that they are dependent, and I think it can be said with equal force that a child over

Income War Tax Act
twenty-one years of age is presumably not dependent. Even if a law could be devised which would permit of exemptions in the case of those over twenty-one years of age, it would be opening the door to very wide abuses with respect to many children over the age of twenty-one who might be alleged to be dependent but who in fact were not so. I think we have gone as far as we ought to go in limiting the age to twenty-one.


Mr. DONNELLY:: Under section 4 it is
provided that the exemption for a dependent parent, grandparent, brother or sister shall be the actual amount expended by the taxpayer up to a maximum exemption of S400 for each such dependent person. I would point out to the minister that a man might have a son of twenty-five or thirty who because of physical incapacity might be absolutely dependent upon him. Why not make some provision with regard to such people?


Edgar Nelson Rhodes: There is a distinction
between parents or grandparents and children who are dependent because of physical disability, but a vigorous boy or girl of twenty-one is not to be considered in the same category. The presumption is that a child over twenty-one years of age is not dependent on the parents for sustenance.


James J. Donnelly: I notice that it is
covered elsewhere.


Edgar Nelson Rhodes: I am informed that if the child is physically or mentally incapacitated the exemption holds.


Mr. COOTE:: Will the minister explain
for the benefit of the committee and of the people of this country the principle on which this schedule has been worked out. Would it be correct to say that it is on the principle that the rate of taxation should increase with the increase in the income itself?


Edgar Nelson Rhodes: The schedule as set out
has been evolved as the result of experience not only in its application but in its effect upon those who pay. It is not worked out on the principle of a percentage increase on income but on the basis of the dollars paid by the individual or the corporation as the case may be. We cannot overlook the relative rates of income tax in Canada compared with the relative rates in the republic to the south of us, and in that connection I would point out that up to a substantial proportion in the various grades in the schedule it will be found that the total income tax payable under these rates is higher than that which obtains at the moment in the United States.


George Gibson Coote: In the first few items
in the schedule the rate increases apparently one per cent with each increase of one thousand dollars of income, but by the time you reach the last items in the schedule the increase of one per cent in the rate occurs with each increase of fifty thousand dollars in income. I think the principle contained in the first part of the schedule might have been continued right through, that is to say, increasing the rate one per cent on each increase of one thousand dollars in income as in the first part of the schedule. That would be much fairer to the people generally. I do not see why a lower rate of increase in the tax is carried out ia the schedules affecting the higher income. I suggest that the minister should not follow the example of the United States; we ought to draw up a complete income tax schedule to suit our own Canadian needs, and it would be better to impose a higher tax on incomes in excess of one hundred thousand, dollars. If this were done we could do away with a good many taxes that are so oppressive at the present time, such as the sales tax discussed the other day. The tax now before us is the best place to make increases. The principle contained in the act which the Prime Minister introduced two or three years ago but later withdrew, of increasing the rate of tax one per cent with each one thousand dollars increase of income, would be the ideal method, continuing that until it reached ninety-nine per cent on the ninety-ninth thousand dollars of income. Let us adopt that as an emergency measure to meet some of the deficits of the country. If we are to increase taxation that is the form it should take.


Edgar Nelson Rhodes: If my hon. friend were to apply in stages the percentage increase in income tax as he suggests, he would find that even if there were those larger incomes, they would in effect be practically wiped out. I think it is very unjust to take the case of a man with a small income and state that his tax will be increased by perhaps three hundred per cent because of the provisions of this bill. A man with an income of $2,500 would have paid $2 tax under the old schedule; under the new, he will pay $15. There is an increase of 750 per cent which may sound alarming when considered in terms of percentages, but in fact his tax has been increased by only $13. Looking at it from that angle, which, is a practical angle, this proposal does not seem unreasonable. If we t taxed all incomes of $100,000 and over even
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to the extent of confiscation, the result to the treasury would be practically negligible because such incomes are a very rare thing in these days.


George Gibson Coote: I did not want to suggest that there should be confiscation of anybody's income. The tax which I suggest would leave these very wealthy men with an income of at least 850,000. I am suggesting this only as an emergency measure. I think this would be a better means of obtaining revenue than by the taxing of buns, which we discussed the other day. I do not think the minister has given any justification for leaving the tax on the higher incomes as it was. He states that it is similar to the tax in the United States but I do not think we should go to that country for guidance in connection with our income tax.


Edgar Nelson Rhodes: May I say to my hon. friend that I did not attribute to him the argument in favour of confiscation. I, was using that merely as an illustration from my own point of view. I was referring to the yield which might be expected from such a tax.
I agree with my hon. friend's suggestion that we should not be dependent upon any country for the principle which shall govern us in our own legislation. However, it must be borne in mind that this country is in close contact with the United States. Money is such a sensitive and rapidly movable commodity that if we attempted to tax incomes out of line with the taxation in the United States, we would very soon find that our capital was migrating across the line. We have to legislate with that difficulty in mind.


George Gibson Coote: There is another suggestion I would like to make to the minister. I think he should endeavour ,to arrange a conference with the representatives of all the provinces to discuss this matter of income tax. Some of the provinces impose an income tax while a great many municipalities do likewise and it may happen that citizens may be required to pay three different taxes. If there is no consultation between these different taxing bodies, incomes may be taxed to the point of confiscation. I do not want to see that happen. I should like to obtain the minister's interest in this matter of a conference.


Edgar Nelson Rhodes: I may inform my hon,
friend and the committee that this subject was raised at the last provincial conference. As a result of the discussion a committee was appointed composed of the higher officials of the different provinces and the dominion, i
fMr. Rhodes.]
They are now at work upon this subject and I hope that as a result of their labours some understanding will be arrived at. In any event, we will have their report within the next two or three months.


Mr. SPENCER:: Replying to a question
asked by the hon. member for Maeleod (Mr. Coote), the Minister of Finance stated that incomes of $100,000 and upwards were very scarce. I obtained some figures six months ago which gave the number of such incomes as 132, showing an increase from 75 in four years, 1928-1032.


Edgar Nelson Rhodes: My bon. friend must bear
in mind that those figures are for incomes of 1931. I can assure him that the incomes for 1932 were very much less and I think I am safe in saying that for 1933 they will be still further decreased. I had that fact in mind when I made my statement to the horn, member for Maeleod. The figures disclose that the total number of incomes, not of $100,000 and upwards but of $50,000 and upwards were 614. This was the number returned in 1932 as being applicable to incomes of 1931. I venture to say that this figure will be very substantially reduced for the year 1933.


Henry Elvins Spencer: Has the minister the total number of incomes of $100,000 and upwards?


Edgar Nelson Rhodes: I am advised by the commissioner of income tax that the policy has been not to give out these figures. The reason is this: these incomes are very Tare and to give out the figures would be indicative of the incomes of individuals.


Henry Elvins Spencer: For the last ten or twelve years we have been able to obtain these figures, and I was able to obtain them as late as six months ago. Even if the figures showed that only one individual had an income of this size, I think the people would have a right to know. By what reasoning does the minister suggest that it is not in the public interest to give out this information.


Edgar Nelson Rhodes: For obvious reasons the
practice has been not to make public the incomes of individuals. I think that is a sound position to take. When the attempt was made to find out bow many incomes there were of $100,000 and upwards, the question first was: How many in Canada? Then, how many in a province? Then, if in a province, in what city? It reached the point where you might just as well ask for the man's name. Naturally the department has resisted efforts of that kind and I think quite properly so.

Income War Tax Act


Henry Elvins Spencer: But if the question is
confined to the number within Canada and does not embrace a small area, it seems that the government is simply holding back information for which hon. members have a right to ask. I cannot appreciate the wisdom of the course 'taken by the government, nor can I see why the minister objects to giving, not names-I am not asking for names-but the number of people in Canada with certain incomes.


Edgar Nelson Rhodes: There is no objection to
giving that information, and if the hon. gentleman would call at the income tax office, I am sure he would be given it freely.


Mr. MACKENZIE KING:: It is all
printed.


Edgar Nelson Rhodes: Yes, my hon. friend can
get the information. I am sorry my officials do not have it here, or I should give it now.


Mr. GARLAND (Bow River):: I just want to take this opportunity of stating that this type of statistics is available and I have no doubt it can be secured. But I wish to go further and register my protest against secrecy in connection with income tax returns. There should be the same freedom of information in Canada as there is in other countries, particularly in that to the south of us. After all, the minister must remember that in conditions such as these through which we are passing, more and more thought is being given to the causes that bring about such an unequal distribution of national income. A growing sense is invading every mind that interests itself in the subject, that this inequality of income is not necessarily the result of superiority on the part of the individual, but is due to advantages he is able to acquire by the possession of special privileges from governments, provincial and federal, and for other reasons including rather shady trickery in connection with commercial corporation life. The sooner this and other governments realize that they stand themselves as part of the destructive forces of modem society and modem parliamentary practice by hiding the facts that should be disclosed and not uncovering conditions that should be definitely stricken out of the society of our country, the better. As long as governments take the position of sheltering those people who without question are securing more of the national income than that to which they are entitled, just so long do governments place themselves in the position of being defenders of an unequal and unjust social order.


Edgar Nelson Rhodes: I can only say that, so far as I can ascertain, the result of experience has been that governments in all countries have found it to be in the public interest not to disclose the affairs of private individuals. An attempt to do so was made in one country and publicity was resorted to, but as a result of the unfortunate repercussions which arose from that policy, they reversed themselves and reverted to the policy which had obtained previously and which has obtained since in all countries.


Mr. WOODSWORTH:: What really were the unfortunate repercussions?


Edgar Nelson Rhodes: I do not know it is incumbent upon me to give that. All I can say is that in the judgment of that country it felt the experience had been unfortunate. I am not in a position to give my hon. friend the mental processes by means of which the government of that country arrived at that decision.


James Shaver Woodsworth: That is strange. The minister gives the experience of the United States-'I think that is the country to which he refers-as the reason we should not do this in Canada.


Edgar Nelson Rhodes: I did not, not even by inference.


James Shaver Woodsworth: Then I fail to follow the reasoning processes of the minister. I cannot see any meaning in the statement unless it is intended to be imferentially that. But leaving aside the United States or whatever other country was referred to, I would like the minister to give on his own behalf the real reasons the public should not be given this information. I think we are entitled to have the reasons. The minister simply says that the experience has been unfortunate in some other country, but he will not say why, and he gives no reason why the experience should be unfortunate or undesirable in this country. We expect him to give some particular reasons that such a course is undesirable, but the minister so far has not done so.
I take it that there is a growing conviction that the wealth of Canada is not properly distributed, and that owing to purely conventional or artificial arrangements in society, some Canadian citizens are able to enjoy very large fortunes while others are on the bread line. We have our tariffs, our special privileges of all kinds and financial manipulation which is permitted, if not in some cases almost encouraged by the government. Through all these means certain people are enabled to make large sums of money. On the other
Income War Tax Act

hand, some of those same people who have
made the money are drawing, through their ownership of bonds, enormous revenues directly from the public. Within the last day or two we have been discussing a tax on sugar and other necessities of life and this house has been asked to impose upon the common people of the country who are struggling to keep their heads above water a still greater burden in order to contribute indirectly or directly to those people who have more than they should have. That is the way in which a large number of people are beginning to think of things. It seems as if the government is undoubtedly contributing very largely to the popular unrest and to the destruction of our so-called democratic institutions when the wealthy are permitted to continue as they are doing and are shielded by the government in their actions. The minister has yet to give any reason for publicity of this kind not being given. This whole question arose because we simply wanted to get some information for statistical purposes. We cannot get it even when the information makes no disclosure of the names of individuals. Personally I join with some other members in asking for more than that.


Mr. STEWART (Edmonton):: The minister has just stated that the reason the increased percentage on the ratings by this year's amendments is higher on the lower incomes than on the larger is that it is feared that capital may leave the country.


Edgar Nelson Rhodes: No.


Charles A. Stewart: That is what I gathered from the remarks of the minister. The 500 per cent increase on the lower incomes plus the reduction in exemption, the reduction as regards single persons being $200 and as regards married persons being $400, makes a heavier burden on the small taxpayer. The same percentage of increase has not been carried into the higher incomes. I have frequently heard the statement made that the reason the higher incomes are not taxed according to the same percentage is that capital will leave the country. That attitude is unfair. If that is the case, what is the excuse other than what the minister has said, namely, the necessity of revenue, for taxing the lower incomes so heavily? I believe in the income tax; I do not for a moment desire to say that incomes should not be taxed. This form of tax is the fairest we have imposed upon us. May I say that I am not very much concerned about it; I do not pay very much, but at the same time I cannot see any 
reason for the inequality. I do not blame the present minister for making that statement; it has been made before in the house. It seems to me that if we are going to have an income tax it should be applied on a fair percentage basis from the lower to the highest incomes quite irrespective of any effect that it may have in diverting capital from the country. I think that bugaboo is raised too often. There should be a fair percentage of the incomes taken all along the line, not a five hundred per cent increase just in one case, as the minister mentioned, and particularly at a time when the Minister of Finance in order to raise revenue has to resort as he has done in this budget to increased taxation that falls upon those least able to bear it. If an individual has a large income I think his income should be taxed according to the same rate as the man with a lower income, and I rise to protest that that is not being done at the present time. Certainly it is not being done now because the minister himself has informed us that there has been a five hundred per cent increase in the income tax in one grade, but he says that only means raising the tax from two to fifteen dollars, and that therefore, after all, it is not so great. Nevertheless it is a five hundred per cent increase, and it is just as difficult for the individual to provide that additional taxation as it is for the man with $40,000 or $50,000.


Edgar Nelson Rhodes: May I say to my hon.
friend from West Edmonton that he entirely misapprehended my reference to the United States.


Charles A. Stewart: I did not
refer to the United States.


Edgar Nelson Rhodes: I only referred to the United States in answer to a question raised by my hon. friend from Macleod who urged that we might have still higher income taxes.
I was not referring to the individual tax paid in a given schedule. I might point out to my hon. friend from West Edmonton how impossible it would be to apply a fixed percentage. The case I cited was of an increase of five hundred per cent. What would he do in the case of a man who is already taxed fifty-six per cent of his income? How could he increase that man's tax by five hundred per cent?


Charles A. Stewart: There would be very few of them.


Edgar Nelson Rhodes: I do not think we have
any, but I am dealing with the schedule.

Income War Tax Act


Charles A. Stewart: If you cannot make an increase in his case, why increase the tax on the lower income? Just reverse the argument.


Edgar Nelson Rhodes: I am dealing first with the hon. gentleman's own argument. He says that we have increased the tax five hundred per cent in one of the schedules, and asks why we should not increase it five hundred per cent in the case of the higher income. How are you going to make an increase of five hundred per cent in the case of the man who already pays fifty-six per cent of his income? That simply shows that you cannot deal in percentages in a matter of this kind. That is why I said to my hon. friend from Macleod that the gradations were not based on percentages but upon the amount of money which the individual could afford to pay to the treasury.
Coming to the question of lowering the exemptions, my hon. friend thought that bore more heavily on the man with a lower income. Strange as it may appear, the exact opposite is the faot. It bears far more heavily upon the higher incomes than upon the lower because the higher incomes are affected through all the various stages, and in the final analysis the man who pays higher income tax has his income tax increased by a very large sum because of the lowering of the exemptions of income tax.


Edward Joseph Garland: I did not
follow the argument of my hon. friend in one or two matters. He suggested as one reason why secrecy should be maintained in connection with income tax information that the practice in that regard in the United States or some other country had been found distasteful and unsuitable. My reading in connection with the matter has not been possibly as extensive as I should have liked, but from what information I have been able to gather the real reaction in the United States was a sense of injustice on the part of the general public and a sense of deep inconvenience on the part of those who had the high incomes which were disclosed. In other words, it made those with the higher incomes feel a little ashamed of their position, and very properly so. My personal view is that in an orderly society any man who possesses an income out of all relation to that of the masses of bis fellowmen ought to have a sense of shame and disgust. He ought to recognize that it is not his wealth. Goods of that kind should never be regarded as his. It is the surplus wealth produced by those who may have been in his employment or in the industries from which he draws his profits.
So far as I am concerned the argument of the minister with regard to the flight of capital, if there was an increase in the income tax, is not tenable. We have not had that experience in Canada where income tax is imposed by some of the provinces and not by others. If the minister's argument were sound, why did not capital flee from the income taxing province to the province where incomes are not subject to taxation? There are other illustrations that might be given.
I have no hesitation in saying to the minister and the government that I think it is the duty of the government under present economic conditions in Canada, where we have such a terrible problem of increasing unemployment to meet, to confiscate all incomes over $50,000. Any man or any family that cannot live a luxurious life at present price levels on $50,000 does not deserve to possess more than that. It is plenty for any family. It is an ample allowance, and as it was made through the community effort of the entire state and never through the individual's own efforts-that is the most ridiculous argument anyone could put up, for no man could earn that amount alone; it depends entirely on the community-I would strongly recommend an income tax that would go to the point of confiscating all incomes over $50,000 as long as an emergency of this kind lasts.


Mr. ROBERGE (Translation):: Mr. Chairman, I am opposed to these new taxes, especially as they affect the workmen, the farmers who are forced to sell their products at ridiculous prices, and the unemployed whom the government should relieve. I am quite aware that the hon. Minister of Finance (Mr. Rhodes) requires revenues to balance the budget; however, in order to succeed he should call upon companies or people who are in receipt of an income to supply the necessary funds and not upon citizens who possess nothing.
A number of suggestions made by members in the opposition are worthy of consideration and, if they were given a trial it would help the hon. Minister of Finance to raise the necessary funds for the administration of this country. In a speech which I delivered in the house on April 14, 1932, with reference to the ten per cent cut in salaries of civil servants, and which was to effect a saving of $8,000,000 to the government-such were the contentions-I stated at page 2022 of Hansard:
If the government actually requires these $8;000,000 to balance its budget, why call upon the small wage earners instead of requesting those who are making large profits and are in
Income War Tax Act

a better position to put up the money, for a year only? Why not increase the tax on profit from 7 per cent to 50 per cent, after deducting what the act allows for living and overhead expenses. I am quite sure that millionaires and high financiers, who boast of being so patriotic when they force small wage earners to pay, would be willing to help the government to balance its budget, since it would only be a matter of one year.
The present budget contains new taxes which are not popular and levied in numerous instances on citizens vVho should be exempt of such imposts. The tax of 2 cents per pound on sugar will raise a revenue of $20,000,000. The hon. Minister of Finance replying on May 2, 1933, to a question of a member on this side of the house, page 4513 of Hansard, stated:
My hon. friend wants to know what these imposts will yield. Our estimate is that altogether they will yield $57,000,000 but that figure will be subject to change, because there have been some variations.
Mr. McIntosh: That includes $20,000,000 from sugar ?
Mr. Rhodes: I have given the figure that was in our minds at the time the budget was brought down. I shall now direct my remarks to the tax on sugar. I know it is not popular; no tax is popular.
Further he repeats:
The sugar tax will not be popular; I realize that.
It certainly will not be popular during an election. At page 4516 of Hansard, on the same date, the hon. minister replied to another member:
My hon. friend has suggested that the tax should be reduced. If we reduce this tax we must make up an additional sum by some other form of taxation.
The hon. member for North Waterloo (Mr. Euler), at page 4517 of Hansard, May 2, 1933, stated:
Now I come to the question of sugar. I think by this time the minister is convinced that this is not a popular tax; it strikes at everyone in the country.
And the hon. Minister of Finance replied ;o him by the following question:
Mr. Rhodes: Can my hon. friend name a popular tax?
At page 4527, the hon. Minister of Finance, in reply to the hon. member for North Bruce (Mr. Malcolm), added:
Mr. Rhodes: Well, who pays the tariff? The people in this country pay. Hon. gentlemen discuss that phase of the question as if they were going to relieve the people of the country of the burden of taxation.
Mr. Malcolm: The tariff is paid by those who are able to pay.

The hon. minister made the following statement at page 4558 of Hansard :
Mr. Rhodes: However, if the committee would give unanimous consent I am content that the list should be printed in Hansard. Perhaps this would be a good time to do so, because Wednesday is a short day, and we would not be unduly encumbering the record.
Some hon. Members: Agreed.
1933 BUDGET
Resume of Changes in Sales and Excise Taxes
The following goods, formerly exempt from tax, now taxable at the full rate in force:
Self-raising flour, oatmeal, rolled oats, corn-meal and rolled wheat, when in packages exceeding five pounds each in weight; buckwheat meal and pea meal; pearl barley; split peas; barley meal; pot barley; rice, cleaned; macaroni and vermicelli; bran and middlings when sold for human consumption in packages exceeding five pounds each in weight;
Molasses: corn syrup; sugar cane syrup;
To a question of the hon. member for Charlevoix-Saguenay (Mr. Casgrain) the hon. Minister of Finance replied on May 3, 1933, page 4566 of Hansard, as follows:
The hon. member for Charlevoix-Saguenay has just returned to the chamber and I am reminded of a question he asked and which I inadvertently failed to answer. I know his absence was necessary because he happens to be the chief whip of the opposition. The articles which we have included in the list to be subject to the sales tax and which have been exempt since 1926 will, according to the best estimate which can be made by the officials of the Department of National Revenue, yield $13,000,000 per year in revenue even under existing conditions.
The budget further imposes other taxes which are too numerous to enumerate. As one may judge by the above quoted list, the hon. Minister of Finance has thought proper, this year, to tax certain staple commodities among the primary necessities of life and to increase the sales tax by 6 per cent on other articles. However, there was already last year a tax on many articles the list of which is too lengthy to enumerate here.
After having closely examined the budget,
I find that a large number of my constituents whom I have the honour to represent in the house, will have to face further taxation; they cannot afford it as the wages of the working class, throughout the country, have been cut 50 per cent and work has decreased 75 per cent since the government has assumed power. As to the farming classes they can neither afford this new taxation since they are selling their products at ridiculous prices.
Judging from a number of years' experience in business, I can realize that the hon. Minister of Finance requires revenues, however,

Income War Tax Act
be should be able to obtain them without haying to resort to a tax on sugar which will bring in $20,000,000; this does not include the tax on primary necessities which will raise $13,000,000, or the 10 per cent horizontal cut in the salaries of civil servants which will effect a saving of SS,000,000 to the government making a total of $41,000,000.
According to the report of the inquiry held by the government some time ago, and which I wish to consign to Hansard the government could have, in 1932, raised $78,000,000 more had they followed the suggestion I made on April 14, 1932. The following is the report of the inquiry mentioned above:


INCOME TAX
[Stage Direction]
Mr. Roberge:
1.	How many persons, companies, corporations or others paid income tax in 1932 on an income of (a) $10,000 to $20,000; (b) $20,000 to $50,000; (c) $50,000 to $75,000; (d) $75,000 to $125000;	(e) $125,000 to $175,000;	(f)
$175,000 to $225,000; (g) $225,000 to $250,000?
2.	What was the total amount of revenue collected by the government in 1932 under the heading of income tax?
Mr. Ryckman:
	Individuals	Corporations
(a)	8,306	849(b)	, (c)	1 (d)	|	2,867	879(e)	1 (f)	1 (g)	J	614	971
It is not deemed in the public interest to answer (d), (e), (f), (g) separately.
2. $61,254,399.80.
The total amount received is $61,254,399.80. On April 20, 1933, I directed another question to the minister:

[Stage Direction]
Mr. Roberge:	_
What amount did the government receive in 1932 by way of income tax from individuals, companies, corporations or others, who paid a tax on an income ranging from $10,000 to $500,000?
Mr. Ryckman:
Individuals. $21,753,463.37; corporations, $35,749,230.32.
To complete this inquiry, on May 2 last, I directed another question to the minister: INCOME TAX COLLECTIONS
Mr. Roberge:
What amount of money has the government collected by way of income tax during 1932 from individuals, companies, corporations or others who pay a tax on an income ranging from $500,000 to $1,000,000?
Mr. Ryckman:
[Stage Direction]
Thus the government received from indi-/iduals, companies or corporations in receipt
of an income of $10,000 to $1,000,000, the total amount of $78,267,265.74.	_
I am sure, sir, that if the hon. Minister of Finance put into practice the suggestion that I submitted to him last year, the people of Canada would be very grateful to him, and even the individuals or companies affected would understand that, during the crisis we are passing through, those who are in receipt of the incomes mentioned in the report must pay their full quota for the country's administration.
Mr. ELLIOTT:: I have made some computations. I wonder if the minister can tell us the percentage of increase on the $25,000 income?


Edgar Nelson Rhodes: I am sorry I have not the percentage figures, but my hon. friend will find a tabulated statement in comparative form in the budget speech. On a $25,000 income the tax formerly was $2,788.80. Under these proposals it will be $3,349.50, making an increase of $560.70.


John Campbell Elliott: It is twenty per cent,
practically. I have made some estimates rather hurriedly of the increase in percentages, and my estimate shows that on a $2,500 salary the tax was increased by over five hundred per cent.


Edgar Nelson Rhodes: Yes.


John Campbell Elliott: On a $25,000 salary the
increase is over twenty per cent. On a $100,000 salary the increase is 8-6 per cent and on a $250,000 salary it is six per cent. I would not be positive as to the accuracy of these figures but they are the percentages I obtained. I submit that those increases are in the wrong direction. I do not know that I will be able to convert my friend the Minister of Finance to this doctrine; but it seems to me that as you get higher up in the salary scale the percentage increase should be greater, just as the previous tax should be greater. Referring to the tax on which there was so much debate in this house the other night, the tax on a household commodity very much in use in this country, sugar, that tax bears upon the man with the $2,500 salary just as heavily as upon a man with a $25,000 salary having a family of the same size. I submit that the percentage of increase should be greater as the salaries increase, instead of the reduction we find.


Edgar Nelson Rhodes: Mr. Chairman, I have
sent my figures over to my hon. friend. If my hon. friend will show me how he can increase the rate of tax on an income of which the treasury already gets over half, then he will have converted me. My hon.
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friend may not have heard my reply to a similar objection which was raised at an earlier stage. It is impossible to deal with this scale in percentages. The very illustration I have given him indicates that. To increase the tax on the income I have referred to even one hundred per cent would mean that the individual would have all his income taken and would have to find some more money to pay it.


Mr. CHAPLIN:: Pay it next yearl


Edgar Nelson Rhodes: The principle which has
been followed is not to have regard to percentages but to have regard to sums, which are substantial, and which the individual can afford to pay.


John Campbell Elliott: I just call the attention
of my hon. friend to the fact that you have to get above the $500,000 income under this schedule before your fifty-six per cent is added, that is on the excess over $500,000.


Edgar Nelson Rhodes: I understand that this man is a mythical person wiho has an income of $250,000, and he pays an income tax amounting to 48 per cent of that income. How would you increase his tax by 500 per cent? This only illustrates the fact that you can twist percentages around and come to any conclusion or no conclusion at all, according to your point of view. I am prepared to admit that we may be taking too great a percentage out of one income and perhaps not enough from another, but certainly you cannot start with the basis of a 500 per cent increase in the case of the $2,500 income and apply that percentage all the way through.


John Campbell Elliott: Are we to understand,
then, that my hon. friend now says he thinks the increase of 500 per cent is too great?


Edgar Nelson Rhodes: No, Mr. Chairman; on the contrary I said that while it sounded terrible it really meant an increased revenue to the treasury of $13 from the man with an income of $2,500. That is all it means.


John Campbell Elliott: I want to assure the minister that I do not think it sounds any more terrible than it feels to the man having that income, with the various other burdens under which he is labouring at the present time. I want to direct the minister's attention to this fact: I understood the hon. gentleman to say that the man having an income of $250,000 was a mythical person?


Edgar Nelson Rhodes: Yes, largely so, if not
entirely. I have not seen the income tax returns for this year, but I think he is a mythical person.
TMr. Rhodes.]


John Campbell Elliott: Then of course this 56
per cent to which my hon. friend refers will not come into operation.


Edgar Nelson Rhodes: I do not anticipate that
there is the slightest danger.


John Campbell Elliott: Then this is merely
window dressing, providing for a case that cannot arise.


Edgar Nelson Rhodes: We have followed out the gradations as they have obtained for nearly twenty years, that is all. In former years there were incomes in some of the very high schedules, but it requires no exercise of the imagination to realize why there are none to be found these days.


Mr. BOWMAN:: It might be interesting to view the remarks of the hon. member for West Middlesex in the light of the record of the previous government during the nine years they were in office. We all know that during that period family and individual corporations were formed for the purpose of evading taxation, but they were wiped out by this government. We also find, on examining the record with regard to the corporation tax, that when the King administration took office in 1921 that tax was 10 per cent on corporation incomes in excess of $2,000 and less than $5,000, while in the case of an income of over $2,000 and more than $5,000 the tax was 10J per cent. In 1926 that tax was reduced to 9 per cent, in 1927 to 8-1 per cent and in 1928 to 8 per cent. So from 1921 to 1930 there were successive reductions in the rate of taxation on corporations, and this at a time when corporations were better able to pay a tax than they are at present. Since this government came into office, however, the mate has been increased. In 1931 it was made 10 per cent, later 11 per cent and finally 12J per cent.
Now let us look at the record with regard' to individual taxation, and I will refer to the figures mentioned in that regard by the hon. member for West Middlesex. In 1921 the tax on an income of $4,000 amounted to $80, and when they left office in 1930 that tax had been reduced to $16. By this legislation it is now suggested that this tax be increased to $70. On an income of $25,000 the tax amounted to $3,024 in 1921, and when the King administration went out of office in 1930 that tax had been reduced to $2,024. It is now proposed to increase it to $3,349.50. The next figure about which the hon. gentleman inquired was an income of $100,000. In 1921 the tax on such an income amounted to S32 749.50, and by 1930 it had been reduced

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to $19,064. It is now proposed that this tax shall be $27,447. The hon. gentleman also inquired with regard to an income of $250,000. In 1921 the tax on this income amounted to $133,549.50, while by 1930 it had been cut almost in half, amounting to $69,072. This government proposes that the tax be increased to $96,558.
I submit, Mr. Chairman, that these figures clearly show the record of the past government with regard to taxation on corporations and individuals as compared with the taxes imposed by the present government.


Mr. BROWN:: It may or may not be the case that the higher incomes are not being taxed as heavily as they should. I am prepared to agree in some measure with the hon. member for Bow River, who suggested that under present conditions all incomes in excess of a given amount might be confiscated, but I do agree with the minister when he says we do not get a proper picture of the matter by dealing in percentages. I am of a mathematical turn of mind; sometimes I like to work out mathematical problems, and I have often had occasion to point out the fallacies that we hear spoken in this house based on averages and percentages. Not long ago we had occasion to deal with an item concerning the importation of poultry for breeding purposes. It was pointed out that in one year one rooster was imported and that in the next year two were brought in, an increase of one hundred per cent. I think our friends on this side of the house who have been dealing in percentages have fallen into a similar error.


Edgar Nelson Rhodes: I have an amendment to move to this resolution, Mr. Chairman, as paragraph 20. It is as follows:
20.	That the exemption heretofore afforded with respect to war pensions be repealed.
It will be within the knowledge of the committee that this is part of the arrangement which was arrived at after conferences with the representatives of the several veterans' organizations.


Henry Elvins Spencer: Before that amendment is put, Mr. Chairman, I should like to direct the attention of the minister to a question which was placed on the order paper by the hon. member for Megantic (Mr. Roberge). May I read to the house the question and the answer, which will be found at page 4062 of Hansard for April 19 of this year:
1. How many persons, companies, corporations or others paid income tax in 1932 on an income of (a) $10,000 to $20,000; (b) $20,000
to $50,000; (c) $50,000 to $75,000; (d) $75,000 to $125,000;	(e)	$125,000 [DOT] to $175,000;	(f)
$175,000 to $225,000; (g) $225,000 to $250,000?
2. What was the total amount of revenue collected by the government in 1932 under the heading of income tax?
Mr. Ryckman:
	Individuals	Corporations
(a)	8,306	849(b) (c) (d)	2,867	879(e) (f) (g)	614	971
It is not deemed in the public interest to answer (d), (e), (f), (g) separately.
2. $61,254,399.80.
It will be seen that from (c) to (g), both inclusive, they are lumped together, and there is the note at the bottom, that it is not deemed in the public interest to answer (d), (e), (f) and (g) separately. How long has it been the rule of the department to take that stand in answering questions? This information has been given from time to time up until a fairly late date, and although the matter does not come directly under the minister, perhaps he can inform the house whether some new ruling has been given to the department instructing them not to give such information in the future.


Edgar Nelson Rhodes: There has been no new
ruling. The answer was prepared in the income tax division and I am advised by the commissioner of income tax that no change has been made. The practice of the department however has been to resist requests for information leading to inquiries with respect to individual concerns. At the same time, as I intimated to my hon. friend, he can get information from the department-I would give it here if I had it-as to how many people paid last year on incomes in excess of $100,-
000.


Henry Elvins Spencer: Am I to take it that if
the hon. member for Megantic had applied again to the department he would have been given as full information as he wanted?


Edgar Nelson Rhodes: The hon. member for
Megantic certainly has the same rights as the hon. gentleman who submits the question, and1 if he had applied to the department they would have given him the information. But this information was given in conformity with the practice that has obtained hitherto with respect to replies to questions of this kind.


Henry Elvins Spencer: The official must have
had instructions to answer the question in the wmy he did, because I have never yet seen an answer submitted limiting the information in this way.
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Mr. MARCIL:: I want to put in a word,
not for the large income but for the large families. I have seen the tax changed two or three times and I come from a district where incomes are not large but families are. In the province of Quebec, and I am glad to know that in other parts of Canada as well, Canadians have the habit of raising large families, and I think the exemption with regard to children should be graded; the same rate should not be paid by the man and woman with one or two children as by parents who have families of ten, twelve, fourteen or fifteen. The greatest asset of the oountry is the home, and the greatest asset in the home is the child. We should encourage large families. France, Great Britain, Italy and other countries are now paying bonuses to families with more than three children, graded according to the number of children. Instead of discouraging large families, I would ask the Minister of Finance to give further consideration to this question, if not in this budget at any rate in the coming one, because in his own province families are also large. He should give the father and mother of a large family some encouragement in bringing up what is after all the greatest asset in the country, its population.


Edgar Nelson Rhodes: I always listen with extreme interest to my hon. friend from Bona-venture, with whom I have 'had the privilege of associating in this house for many years; but it is news to me, even from him, that the good people of Quebec require encouragement to raise large families. As a matter of fact, to the extent that large families are raised are their heads spared the necessity of paying income tax, because those who receive t'he exemption multiply the total figure to such an extent as to wipe out any fear on the part of people who are not able to pay that they will be called upon to do so. There is this to be said. If the figure of $500, which was the exemption that obtained until this year, was a fair one having regard to the cost of living, the figure of $400 is to-day more generous. I do not think I can give a better answer than that. Turning to other countries, we find that in Great Britain the exemption to the married person is only $750, and so far as children are concerned, the first child has an exemption of $250 while for every other child it is only $200. So that, bearing in mind these various considerations, I think that on the whole it may be said that we have reached a fair figure. Certainly, under existing conditions, $400 is reasonable.


Mr. DUFF:: The minister has introduced
an amendment that war pensions shall be exempt from taxation. In his budget speech 
he said that these pensions under certain circumstances would be taxable. I am willing to admit that in that speech, acting for the government, he went too far. There are certain cases where it would be a hardship for the ordinary individual receiving a small pension to pay an income tax on it. But there are certain men in this country to-day who are receiving one hundred per cent disability pensions and in addition .thereto are drawing from this country as well as from private corporations very large salaries. If a man is physically fit and competent to be in the employ of the government, taking the place of some other man who is also physically fit and able to work, he should not be exempt so far as the amount he receives in pension is concerned. I am therefore opposed to the amendment as the minister has introduced it. I am willing to go a certain distance, because I know of men who are receiving very small salaries, either in private life or in the service of the government, and it would be a hardship for them to lose part of their pensions through income tax. There are to-day, however, certain men drawing eight or ten thousand dollars as employees of the government and where they are also getting one hundred per cent disability pension they should certainly pay their fair proportion of income tax.
I congratulate the hon. member for Dauphin (Mr. Bowman) on the very able speech he made; there could have been no greater compliment to the late government. He said that when the Liberal government was in power they decreased the percentage of taxation imposed on private corporations and other concerns. He went down the line from the time the Liberal government came into power, when the rate was very high, until they went out of power in 1930 when the rate had been decreased considerably. I am very .proud that the Liberal party were in a position to do that. The reason they were able to do that was that business, from the time they took charge in 1922 until they went out of power in 1930, was on the upgrade and consequently they did not have to resort to the methods of the present government in order to raise revenue to carry on the affairs of this country. I think he paid this government no compliment when he said that they had been compelled to increase the rate from eight to ten per cent and might be compelled to increase it still further. Let .me say to the hon. member for Dauphin that if this government stays in power another two or three years, 'instead of the rates which appear in this item, still higher rates will be in force. This will be necessary because of the policies of

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this government. Trade has decreased by more than fifty per cent since they came into power and in order to raise revenue they have been compelled to increase not only the income tax but the business and other taxes.


Edgar Nelson Rhodes: I am sure the hon. member for Antigonish-Guysborough will not expect me to follow him in the major portion of these remarks.


William Duff: I do not see how you can.


Edgar Nelson Rhodes: I would be happy to under other circumstances. I rose only to touch upon one point. My hon. friend referred to the proposals as originally brought down in the budget. It may be that, in the words of my hon. friend, those proposals went too far but I would point out that whatever merit they have, they were designed to meet the very case my hon. friend has in mind. They were not intended to be discriminatory against the returned soldier. There are returned soldiers who gave valiant service at the front walking the streets to-day without either a pension or a salary whereas, on the other hand, there are a number of their comrades who are in receipt of both. We abandoned those proposals for reasons which are well known. We desired to come to an amicable and satisfactory solution if at all possible. There has always been a general meritorious desire to keep proposals touching the welfare of the returned soldier Iree from political considerations. Conferences were held with the heads of the various veteran organizations who agreed to the proposal that pensions should be subject to income tax. This action was taken for the very reasons given by my hon. friend. It was felt that this tax would have a bearing only upon those whose incomes were large enough to be subject to income tax. It will not touch the great majority of pensions. These proposals will not bear at all except in the case of a returned soldier who has in addition to his pension an income from private or other sources running into substantial figures. We are asking for a contribution from the individual who can well and properly afford to make one by way of income tax. With all deference to my hon. friend from Antigonish-Guysborough, I submit that he ought to support the amendment for the very reasons he himself mentions.


William Duff: If I understand the amendment correctly, those men who are drawing full time pay as officials of this government or in a private capacity and who are in receipt of one hundred per cent disability pension will not pay anything by way of income tax. I agree that the man in the ordinary 53719-293
walks of life who is receiving only a small pension and perhaps a very meagre salary from others sources should be exempt, but if I understand the amendment correctly, such men as are in receipt of salaries of $8,000 or $10,000 from this government as well as a pension of $2,000 or $3,000, will not have to pay a tax upon their pensions.


Edgar Nelson Rhodes: Under the provisions of the Income War Tax Act pensions have been specifically exempted, and the amendment proposes to strike out those exemptions. Once the exemptions are struck out, pensions will hereafter be subject to income tax.


William Duff: This year?


Edgar Nelson Rhodes: The tax will not apply to incomes of last year. The returns were passed on April 30 and it would be highly inconvenient to go back and deal with pensions received last year. However, when a man fills out his return next year he will have to pay a tax upon his pension and other income received in 1933.


William Duff: Did not the minister in his first proposal expect that all pensions would be taxed for last year?


Edgar Nelson Rhodes: No, that had no reference to a tax. The proposal in the budget was merely that we should eliminate conditions which obtained where returned soldiers were in receipt of both pension and salary. I have not exactly in mind the details, but the general principle to be applied was that the returned soldier should not receive both beyond a certain amount, the object in mind being that there would be available a number of positions for other returned soldiers who to-day are without either pension or salary. But there was no provision in the budget by way of taxation.


William Duff: I do not know that I am in
order, but since the Minister of Finance has brought the matter up, may I ask: Why was that proposal entirely dropped, as far as it refers to men who are now drawing $8,000 or $10,000 in salary from the government and also 100 per cent pension? I can understand their dropping it in regard to elevator men and some others, but why should the man who is drawing an S8,000 or $10,000 salary from the government still receive a pension of $2,000 or $2,500? That is wrong, and I want to say to the Minister of Finance that unless something is done with regard to this whole pension scheme, this country will be ruined. There is no question in my mind that in Canada there are hundreds of people who have no right to the pensions they are drawing, not only those men who are getting

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An hon. MEMBER:: Who is he?


William Duff: Colonel Lafleclie. There are
others besides (him and I am sorry I have to mention his name. It is neither right nor fair; there are hundreds who under the Pension Act are getting too much money, who are drawing 100 per cent disabality pensions and also receiving salaries of $5,000, $8,000 or $10,000 from this government or big corporations.


Edgar Nelson Rhodes: I hope the hon. member
for Antigonish-Guysborough will not think I desire to impart any party flavour to what I am about to say; I assure him I do not, but he will bear in mind that the financial critic of the opposition bore down very heavily in criticism on the proposals as outlined in the budget and those were designed to remedy in part the very injustice of which my hon. friend complains.


William Duff: Will the minister allow me to say that I do not agree with anybody, whether it is the financial critic of the opposition or

anybody else, who will load this country with a bill of $55,000,000 or $60,000,000 for pensions, where in my opinion and in that of thousands of others the pension bill is entirely too high and somebody must have the courage to have this condition remedied.


Edgar Nelson Rhodes: Having made that reference, I wish to say again that I do not make it in any party sense nor do I complain of the fact, but I speak of it merely for the purpose of indicating the difficulty any government has, owing to the atmosphere which has surrounded the soldier problems, in dealing with such matters as this.


William Duff: It is cowardice that is the
trouble.


Edgar Nelson Rhodes: My hon. friend will, I am sure, be the first to appreciate the difficulty. I agree with him that there are injustices of which he speaks, inequalities which, in the interest of the returned soldier himself, ought to be remedied, because I fear this, that if those injustices are perpetuated, partly as a result of the policy which has hitherto been pursued by the officials representing the returned soldiers, in the last analysis there will be a revulsion of public feeling which will recoil upon the unfortunate heads of thousands of many deserving pensioners in Canada, some of whom are even to this day not getting as good treatment as they ought to receive. The reason the government withdrew this proposal was not that it is not in sympathy with the idea enunciated by the hon. member for Antigonish-Guysborough, but rather that it hoped it might be able to deal with the matter without creating friction and bringing the soldier question into the political forum. So the government withdrew the proposal and accepted as a compromise different proposals, one of which is embodied in the amendment which is now before the committee, but it was by no means understood that the settlement we arrived at was final; it was a settlement for the moment. But our discussions went further and will call for a review of the whole position of pensions, with the result that perhaps we shall return to normalcy on these matters, if not next year certainly in the very near future. I hope-and I say this from a purely patriotic and public-spirited point of view-that we can now and in the future keep these soldier questions out of party politics, and if we do that, I believe we can, without injustice to the returned soldier who is deserving, eradicate many inequalities and injustices and in the process save a very substantial sum of money to the public treasury.

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Mr. MALCOLM:: On May 3, the hon. member for North Waterloo (Mr. Euler) brought to the attention of the minister inequalities which, in his opinion, existed in paragraphs 5 and 7 of the Income War Tax Act amendment resolution. I would like to know whether the minister has given any further consideration to the representations of my hon. friend. I want to submit to the minister, in supporting the complaint of my hon. friend, that a 12J per cent corporation tax cannot be any more just than can an even rate of income tax and that the only way whereby I believe he can correct the inequality pointed out by the hon. member for North Waterloo would be to have some graduation in the corporation tax of 12J per cent. The minister realizes, as do all other hon. gentlemen, that small family limited companies are not in the generally accepted sense of the term corporations at all. The convenience of operating one's business under a limited credit charter is very great. It allows in case of death the willing of the interest a man may have in his business to his heirs without the official winding up of the business. As a result through a great many years the practice has grown up in this country of forming limited companies of small private businesses. Under our legislation these small limited companies are treated as corporations, and there is no difference in the rate of taxation on these small companies and on a large corporation whose stock is broadly held.
The hon. member for North Waterloo has pointed out that Should any one operate a private business where the total earnings were $5,000, he would pay $126, but the same business in the form of a limited company would pay $713. A private business earning $10,000 would pay $546, but if operated as a corporation or limited company would pay $1,667. It makes no difference whether salary is credited or not. I am taking the case where a man takes the profits out of his own business. I think the minister realizes that considerable inequality does exist in that regard, and I suggest to him that the only way I can see of correcting it is to modify the corporation tax by having the corporation tax graduated, as is the income tax, with a maximum of whatever the minister decides, whether it be 12-J or 10 per cent. The fact that a straight 12J per cent is taken from the corporation first, and then the owner has to pay income tax on the dividend, means that if you operate as a limited company you are 53719-2934
paying three times as much taxation as if you operate as a private business. I would ask the minister if he has considered any possible amendment.


Edgar Nelson Rhodes: Mr. Chairman, I have.considered the question very, very carefully. In the first place let me point out that in the case cited by my hon. friend from North Waterloo it is a one-man company, of which there are very few, and so it is really a question of viewing the incidence of the tax as applied to corporations as a whole and as applied to just a handful. My hon. friend from North Waterloo overlooked one fact. He did not pay the manager of the company a salary, to which he was entitled. We will assume that a fair salary would be $3,000. I have a complete computation here with which I am not going to encumber the record, but which I shall send across to my hon. friend, which discloses that instead of that company paying a tax of $713.75 it would pay a tux of only $357.50.


James Malcolm: Allowing for salary?


Edgar Nelson Rhodes: Yes, a reasonable salary,
say of $3,000. So that even in the case cited by my hon. friend from North Waterloo and referred to by my hon. friend from North Bruce, you have the comparison of the company paying $357.50 as against the individual paying $120. But I might point out to my hon. friend that there are other incidental things to be borne in mind. If it is an incorporated company there must be some advantage in being incorporated.


James Malcolm: Convenience largely.


Edgar Nelson Rhodes: It might be convenience,
but it must also be borne in mind that in the case of an incorporated company the individual owning it derives all the privileges which go with incorporation. In other words, if the venture should prove unfortunate the total assets which would be available to the creditors would be the amount of capital in the business, whereas if the individual conducted that business he would be liable for all the assets he had. So whether it is done for convenience or for other purposes, all of which might be equally lawful and worthy, the fact remains that it is to the advantage of the individual to be incorporated rather than to conduct his business as an individual. Otherwise, he would not be incorporated. That being so, the difference is not so great as to cause any undue worry.
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James Malcolm: The minister knows better than I do that the withdrawal of the private family corporation privilege is what has caused this inequality to exist, as was pointed out by the hon. member for North Waterloo. In spite of what has been said with regard to the advantages of a limited company in freeing a man from the danger of having to hypothecate other personal securities in time of financial stress, I do submit that the general idea of taxation seems to be to get after corporations. Provincial taxes on corporations are mounting, and I am afraid that the result will be that a great many charters will be given up. Many small businesses which have been operating as limited companies will find it impossible so to operate, and the taxation derived from companies will be lost to the provinces as well as to the dominion. For that reason I would submit to the minister, without wanting to hold up his resolution at .all, that I believe the subject is worthy of considerable study. I believe the inequality could be corrected by making some graduated scale that would put taxation charges on small corporations back to where they were under the family corporation privilege.


Edgar Nelson Rhodes: I shall be very glad to
give consideration to the matter, and if any remedy can be found without doing injustice to corporations as a whole I shall be very happy.


Mr. SFEAKMAN:: May I, Mr. Chairman, revert to the question under discussion a few minutes ago? First I would like to indicate my unqualified approval of the suggestion of the minister to remove the income tax exemption from pensions. This does not affect the small pensions and small salaries, the men we are endeavouring to protect. It will only apply where the total income comes within the range of income tax. But it brings us to the proposal which the minister put forward that was afterwards withdrawn, and I must confess that with somewhat mixed feelings I watched both the introduction and the withdrawal of that proposal. Taking it on the whole I was glad that the proposal to suspend the payment of all pensions to civil servants in receipt of the full salary of their position was withdrawn; yet at the same time I recognize, as so many have recognized, that there are and have been many apparent injustices and anomalies throughout the service that not only should be corrected if possible but that unquestionably cause a great deal of heartburning and disturbance amongst the public and amongst the returned men themselves. I refer to cases of men in receipt of substantial salaries and performing responsible work and being at the same time in receipt of substantial pensions. I am not going to mention any names, but those of us whose work has brought us into contact with pension matters have seen a great many cases that I think are obviously unjust. As the hon. member for Antigonish-Guysborough said, where you find a man in receipt of a one hundred per cent disability pension, or indeed any substantial rate running from seventy-five per cent up, who at the same time is in a position the duties of which are responsible and onerous and drawing full salary, I think it is obvious to anyone that either the man is not entitled to that high disability pension or he is not qualified to perform the onerous duties of a high salaried position. I think there is no question that these cases scattered through the service bring to the mind of many people the inevitable contrast, which the minister recognizes, between the position of these men find that of other men whose services were just as great, whose disability is just as great, although it was impossible to prove its attri-butability; and who have neither pension nor

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employment. That tremendous and striking contrast has undoubtedly caused a great deal of disturbance and trouble.
On the whole I am glad that the minister withdrew the proposal, not because of the effect on these men with good incomes, but because of the effect on large numbers of men in the lower grades of service, who are just able to make it go with their small pension and small salary. It has been said, and quite truly, that the pension is supposed to make up the difference between a man's present earning capacity and that which he would have enjoyed had he not gone overseas; to make him stand on a par with other men. It was said by some that any man who is earning the full salary attached to some of these positions must have his earning capacity unimpaired. That is not the case with all men receiving disability pension, there are many men in the position they are in on account of their disability, who but for that disability would have been qualified to occupy a much more difficult position and earn a much higher salary, but who because of their disability are able to- perform only light duties, so they are low in the salary scale. They would have Suffered, particularly as many of them were using that small pension to pay for the soldiers' insurance, the only way they could provide for the future of their families. The withdrawal of that pension would have necessitated the dropping of the soldiers' insurance.
But when the minister says that the matter is not finally settled I am with him. I agree that the sendee itself-I am not speaking now of the whole pension scheme-the service itself should be examined, and each of those cases of men in receipt of a pension and a salary should be dealt with individually, should be examined into and the anomaly removed if possible. I think no one will accuse me of being unsympathetic towards the returned men, I think my record in the house will establish that. I have sometimes been accused of being over thoughtful of their interests. But I am satisfied from what knowledge and experience I have, and assuming that the cases with which I am familiar give a fair cross section of the whole, that if the pension payments all through were to be dealt with with absolute justice there would be a very considerable saving; probably four or five million dollars could be cut off from our pension payments. But I am of the opinion that that four or five million dollars would not be saved to the country, but would be paid to those who are not at the present time receiving what they
should receive if absolute justice could be done.
Our difficulty has been this, the minister referred to it and I agree with him, that although our purpose was right and we have done our best, parliament has been meticulously careful to withdraw pension matters from any connection with politics, and I think parliament has succeeded. I think no government and as far as I know no member of parliament haS been guilty of mixing politics and pension matters. I have been on the committee every year there has been one and I certainly would not have known at any time to what party any member belonged from his efforts in the committee. But one thing that has been overlooked, and overlooked perhaps to a greater degree by the returned men and their friends than any others, is that just to the degree that you eliminate politics in pension matters, to that degree you nullify any influence that any private member or the government itself may have over pension administration. To the extent that you eliminate politics you take away from parliament and from the government the influence which sometimes should be exerted over pension administration, and it is left wholly to the officials themselves, to their sense of justice, to see that pensions are properly administered. I sometimes wonder if we have not gone almost too far in our desire to eliminate political consideration wholly from pension matters. However I do not want to go into that question now, I simply want to indicate my complete approval of the minister's suggestion to apply the income tax to all pensions where the total income comes within the range of income taxation. Also I wish to indicate my agreement with him that this question of pensions to civil servants in receipt of salary, also settled for the moment, is not settled finally, but that the anomalies I have mentioned will be removed in the only way possible if justice is to be done, that is by going through the whole service with a fine toothed comb and dealing with each case on its merits. You cannot go right through with one great sweep without perhaps doing more harm than good. When that time comes I am certain that every member in the house interested in the welfare of the returned men will interest himself in seeing that those who should have pensions get them but those who should not should have them taken away.


Edgar Nelson Rhodes: I would like to say a
word arising out of what has just been so
Income War Tax Act

well said by my hon. friend from Red Deer.
I think we all recognize that no one in the house is more entitled, from his experience and his service, to speak for the returned men than is my hon. friend. And few if any are better qualified than he to do so. I concur almost in toto with everything my hon. Mend has said.
The reason I rose, Mr. Chairman, was to say that with respect to the proposals originally brought down in the budget we were met with the objection on the part of those who spoke for the different organizations that it was a violation of contract, and that was a difficult argument to meet. But here is where I met my first disappointment, and I should not be surprised if my hon. friend and myself are on common ground in that respect: I asked them if it would not be fair to agree that this should have application only to those in receipt of a salary in excess of 12,000, $2,500 or some similar sum. They still interposed the objection that it would be a violation of contract. Then I came back with this: I said very good, we will observe the sanctity of contract even though to do so will cause an injustice to individual returned soldiors who to-day have neither pension nor salary. Why not from now on, with regard to those who come into the service hereafter, make it applicable only when it goes beyond the sum of $2,500 per year, or $2,000 or whatever sum might be agreed upon. To that proposal they also objected, and if I may say so without reflecting upon them in any way, in my opinion they exercised bad judgment.
I think it would have been a case of justice to the returned soldiers who, because of the application of that principle, might hereafter have an opportunity for employment in public service which otherwise would be denied them. For that reason I am doubly glad to hear the remarks of my hon. friend from Red Deer, and I hope that when another year rolls -round we may be able to apply that principle, which I think would be fair to all concerned.


Alfred Speakman: That objection was
brought to me, and I could not but agree that it was a powerful objection. There was a contract; we did agree in every phase of our pension legislation that the pension should not be taken into consideration in this way. But this also is an underlying principle of the pension legislation-and I made the suggestion-that the pension is paid because of disability. That is, a man with a disability which detracts from his earning power by 20 per cent, 30 per cent, 80 per cent or 100 per cent is paid a pension to bring him up to par, to make up for that deficiency. It is

obvious that if a man suffers from a disability which impairs his earning powers to the extent of 80 per cent or 60 per cent, he cannot earn a full time salary at a full time job. If the pension is held sacred we might say to him. "If you are only 50 per cent capable you will only receive a 50 per cent salary, so you may take either the full salary and a smaller pension or the full pension and a smaller salary." Then we would be doing the fair thing and no contract would be broken.


Mr. McGIBBON:: I agree very largely with what the Minister of Finance said, and I think the hon. member for Red Deer predicated his remarks on a wrong assumption. Rightly or wrongly the parliaments of the past decided that pension would be paid according to a man's ability, to earn a living in the labour market, that is, with pick and shovel. It is quite obvious that a man may not be able to earn much of a living with pick and shovel though he might be 100 per cent efficient in many other lines of business. I think we must bear that in mind.
I do agree that an injustice is being done the country when we have a public servant as instanced by the hon. member for An-tigonidh-Guysborough, drawing a salary of $10,000 a year and a pension of $2,500. I do not think this country is under any obligation in a case of that kind. I am at a loss, however, to understand how that could happen. My recollection is that the maximum pension in the case of a private soldier was fixed at $60 per month, plus so much for his wife and so much for each child. I was wondering if the proposals of the minister could not be applied to officers, because I do not think many of the private soldiers will come under this taxation scheme in any case. A man with a total disability only receives $720 a year, so he would not come within the application of the income tax in any way, even with a liberal allowance for his wife and children. I do believe, however, that the returned men feel very strongly in the case of men drawing large salaries and large pensions. I do not think the elevator operators, for instance, should be taxed at all; I do not see how they could be taxed because I do not think their total income would be sufficient to bring them under the schedules, but I do think something should be done to protect the treasury if cases exist such as that mentioned by the hon. member for Antigonish-Guys-borough. In my opinion we do not owe any man, no matter what his services may have been, a return of $12,000 or $13,000 a year.

Income War Tax Act
May I say, Mr. Chairman, that for many of us it was a privilege to go overseas. It was an experience upon which we can look back and which we will never forget; we would not have missed it for anything. Personally I look upon that experience with a great deal of pride; I would rather have missed almost any other period of my life than the service I saw in the trenches. I think every returned man should be sufficiently interested in his country to share the burden that is being carried to-day by every man, woman and child in Canada, and I should like to see the minister do something with regard to these people who are receiving both high salaries and high pensions. I do not think that is just or equitable. As I said before, I do not see how the private soldier is going to be affected by this legislation; I do not think his pension and salary together would bring him under the schedules, but if his combined income is sufficient he should pay his tax.
With regard to the first proposal I have just this to say: I never saw how it could be defended, and I do not see that yet. A man went to the front and lost an arm, a leg or an eye, and the country said, "We will give you so much money to compensate you for your loss." Then we say to him, "If you enter government service and do the work that is done by another man, you must work for less money." That is penalizing him because he was injured in the war, always provided that he can do the work as efficiently as the other man. I do not believe that proposal could be defended. I do say to the minister, however, that he must do something with regard to these men drawing large pensions and large salaries. I think it is his duty to do so, and personally I will be quite willing to defend that policy at any time, because I think it is right.


Alfred Speakman: It is our job to find some way of putting that suggestion into effect.


[Stage Direction]
Amendment agreed to.
James Malcolm: Before this resolution
carries, Mr. Chairman, I should like to ask the minister a question with regard to paragraph 11, which reads:
11. That a tax of 5 per centum shall be imposed at the source on all dividends or interest paid or credited by Canadian debtors to non-residents of Canada.
I understood there were some amendments to that.


Edgar Nelson Rhodes: Perhaps my hon. friend has reference to the statement I made in the house on March 31.


James Malcolm: Yes.


Edgar Nelson Rhodes: The provisions contained in that statement are carried out to-day, but it is done administratively. No amendment to the resolution is required to effect that purpose.


James Malcolm: What method is the
minister taking to carry out the promise made on March 31?


Edgar Nelson Rhodes: Will my hon. friend put his question in another form.


James Malcolm: Do sections 11 and 12 cover the new interpretation of the tax on dividends of non-residents?


Edgar Nelson Rhodes: Dividends are still taxable when paid to non-residents,-


James Malcolm: All dividends?


Edgar Nelson Rhodes: -and interest only to the extent that it is paid in Canadian funds. There will be one or two minor amendments but they will be presented when the bill is in committee; it will not be necessary to amend the resolution. I am advised by the law officers that there is no necessity to amend the resolution itself in order to carry out fully the provisions as outlined in the statement I made on March 31. There will be some minor changes which it is thought wise to have made in committee of the whole on the bill.


John Campbell Elliott: Will the minister indicate those minor changes?


Edgar Nelson Rhodes: Perhaps I might table a summary of the proposals as applicable to this tax, which I think will answer succinctly every question which is likely to be submitted by my hon. friend from North Bruce or anyone else. I have copies in both English and French and I will table a few now, and more will be available as hon. gentlemen desire.


James Malcolm: The minister will remember that when the hon. member for Shel-burne-Yarmouth was speaking after the introduction of the budget he said he did not know very well how to criticize these provisions in the budget inasmuch as he had no idea what they would be when the budget was finally revised and amended. It was pretty common gossip on the street that on March 31 telegrams had reached the minister that the London stock exchange had deleted all Canadian securities from the official list and pro-
Income War Tax Act

hibited further dealings, with the result that on getting this word from London the minister took fright and set about making amendments. I am told that the idea of the minister at the present time is to exempt from payment of this tax and interest all Dominion government bonds held by non-residents, but that other bonds, provincial or corporate, will still have the tax applied. I understand also, if I am correctly informed, that all bonds payable in the currency of any other country are to be exempt. It seems to me that the exemptions are so extensive that the amount of tax that will be collected will not be considerable enough to justify the complications that will arise in the minister's endeavour to collect them.


Edgar Nelson Rhodes: Let me say this, particularly with reference to that part of my hon. friend's remarks touching what was said by the financial critic of the opposition, the hon. member for S'helbume-Yarmouth. It must be borne in mind that in this tax we are breaking new ground so far as Canada is concerned, and it is quite obvious that in doing so we shall encounter difficulties here and there. Therefore I make no apologies whatever for any changes which may have been found necessary from the original proposals-none whatever. It is certainly nothing new in this country to have changes made in the budget, because we have not had a budget in years that has not been changed materially. Instance after instance could be cited, in the case of governments which were supported by my hon. friends opposite, and I am not the least bit worried about criticism of that sort. The man who does not make mistakes never does anything, and a government that would be so timid that it could not proceed for fear it might have to retrace its steps would not be worthy of the name. So far as I am concerned therefore I have not the slightest feeling of diffidence in making changes if they are for -the better. I may say to my hon. friend that the consideration we had in mind was this. Britain for years has imposed taxes of this kind-


James Malcolm: Certainly.


Edgar Nelson Rhodes: -but they are in the
happy position of being a rich creditor country.


James Malcolm: Quite so.


Edgar Nelson Rhodes: The United States also for some years has imposed similar forms of taxation, and it too is a powerful creditor country. Now, we in humble little Canada attempt to impose the same sort of taxation and of

course we must dodge the big stick. Why? Because we are a debtor country, and a small country. It is true we had to relinquish some of this tax, largely by reason of the circumstances I have outlined and partly because it was pointed out to us that we had to honour contract obligations; and I regret that my hon. friend could even be able to refer to the incident with respect to the London stock exchange, because their attitude was not in keeping with that solid, sterling character which we have always associated with Britain, especially touching matters of finance. But they went off at halfcock-


James Malcolm: They certainly did.


Edgar Nelson Rhodes: -whereas our friends in
the United States who were subject to the same tax kept their heads, and were calm and cool about it, prepared to wait until they found out what the full incidence of the taxation meant. Our friends in London, however, became so hysterical that they went completely up in the air. They suspended operations. They did not wipe Canadian transactions off the boards but they suspended operations, "don't you know," until they could find out what the various proposals meant, in the meantime, no doubt, fully expecting that they would frighten the poor colonial.


James Malcolm: Which they did.


Edgar Nelson Rhodes: Which they were able to
do in part. If my hon. friend derives any comfort from that admission, very well; I make it freely.


James Malcolm: I am sorry.


Edgar Nelson Rhodes: I am happy to say that
we have held a substantial portion of the tax and it will yield a substantial sum to the treasury.


James Malcolm: You should have held
it all.


Edgar Nelson Rhodes: In its essence, it is a fair
tax as it enables us to pay into the treasury of Canada money which hitherto has gone into the treasuries of other countries. If a resident of Great Britain or the United States pays this tax he will receive full allowance for hds payment.


James Malcolm: That is when he pays the British tax?


Edgar Nelson Rhodes: When he pays his tax in
Great Britain. I must say that the attitude taken by the London stock exchange seemed to be singularly unfair especially when it is borne in mind that we are asking only for a humble five per cent while the mother coun-

Income War Tax Act
try asks for just exactly one quarter or twenty-five per cent under similar conditions. However, these are the facts and the circumstances and I recite them without any limitation or evasion whatsoever.


James Malcolm: I think the candor of
the minister is to be commended. My criticism of the action taken by the minister is that there was a want of courage. He should not have been frightened by a gun at half cock. As he points out, there was no justification for this action by a country which itself taxes non-residents twenty-five per cent. It is a fair tax. The investor in a foreign country must realize that there are two entirely separate fields in which a government may operate. Because a government sells securities does not mean that it is going to give up control of taxation. The minister was perfectly justified in proposing this tax but I do not think he was justified in receding from the original position which he took.


Edgar Nelson Rhodes: In part.


James Malcolm: Yes, in part. I think
the tax was fair and I think it was needed for revenue. I join with the minister in saying that the action taken by the London stock exchange to delete Canadian securities from the list in order to frighten the Canadian government was unfair. If I had been in the minister's place I would have gone through with the taxation as originally proposed.


Mr. LUCAS:: In connection with the collection of the tax upon bearer bonds, would the minister advise the committee what position an individual would be in who had not sufficient total income to necessitate the paying of the tax or who had already declared the income received from bearer bonds? Would the tax be deducted by the bank and then application made for refund?


Edgar Nelson Rhodes: A man who cashes a coupon in Canada of a bearer bond payable in Canada will be called upon to attach a certificate of ownership. No money will be deducted at the moment of payment but the certificate of ownership will be attached to the coupons and will subsequently come to the income tax office. If the individual does not come within the range of those who pay income tax, no tax will be collected, but, on the other hand, if he does come within the range, a tax will be collected. The advantage of the system is that it will prevent evasions which have hitherto taken place in the case of those who have not declared their whole income from bearer bonds.


James Malcolm: In order to get at the
interest rates paid on bonds there must either be reflotation or taxation. The minister's first attempt at taxation is very fair and modest and should not be complained of by anyone. There is no doubt that there is a great difference in value in the interest received to-day and that received in 1928 when the bonds were sold and there is a necessity for increased taxation upon the interest paid or a lowering of the rate of interest. As far as I am concerned, I would be entirely in favour of having the original proposals in the budget remain in force.


Mr. MacLEAN:: Has the minister ever
thought of having a more simple income tax form? I think most hon. members have received complaints about the forms from farmers and others, who have had to fill them out.


James Malcolm: Have the farmers any
bonds?


Alfred Edgar MacLean: Not so many bonds but
still many of them are compelled to fill out the forms. My suggestion would be that a form of questionnaire be sent to the farmers. This could be filled out and returned to the income tax office and if the individual was liable for tax, the income tax form could be filled out at a later date.


Edgar Nelson Rhodes: I can quite understand the attitude of mind of an individual who is confronted for the first time with an income tax form. I do not know whether my hon. friend has ever seen the form of ballot used in some of the states of the United States, but I shall never forget the first time I saw one of these. It was just about the fiercest document I have ever seen, filled with all sorts of diagrams and hieroglyphics and whatnots. Apparently those who had become familiar with its use were not awed by its presence. I think the same thing is true to a large extent of our income tax form. While they present complexities and difficulties to one who sees them for the first time, be gradually becomes familiar with their use. I do not think it is the form that bothers us so much as the figure which appears at the lower right hand comer. The income tax officials who have been able to profit by the experience they have gained in years gone by tell me that they feel that the form is as simple as it could be having regard to the safeguards which must be utilized in the collection of a tax of this character. I can say to my hon. friend and to all other hon. members of the committee that if they have
Income War Tax Act

any suggestions of a workable character to offer in the way of simplification of the form, I am sure the commissioner of income tax will be ready to consider their adoption if they are at all workable.
Mr. M-UNN: Referring to the bearer bond coupons, I am one of those who believe this, if carefully handled, will return to the coffers of the dominion and provincial governments a great deal of money. My opinion is that in handling the tax this year, the government should go back and see why the man was not able to pay t'he same tax last year. I hope the minister will have his officials instructed to have this made retroactive, because I really think a great deal of money has been lost to the dominion treasury through people who are dishonest in making up their returns.


Edgar Nelson Rhodes: It was part of the object I had in mind when these proposals were brought down that not only should we collect from the individual this year, but we should find out what he was doing with his income in previous years. The law is ample to enable us to do that. It may transpire that Mr. A, in making out his income tax return this year, discloses that he has certain bearer bond coupons on which he has not made returns previously, and as a result his income bears a different proportion from the one hitherto disclosed. The question will then be put to him: When did you purchase those bonds? There will be no difficulty in finding out when the purchase was made, and if it is disclosed that he purchased those two, three, four or five years before, he will be called upon to recoup the treasury to the extent he has defrauded it in times past.


Robert McKenzie: I wonder whether the minister would clarify paragraph 16. I have been reading it over and I cannot make out the real sense of it, particularly where it reads:
Provided that in no case shall such interest or taxes be apportioned against the taxpayer's income from his chief occupation or business.
Just what does that mean?


Edgar Nelson Rhodes: Perhaps I could answer my hon. friend's question, at least in part, by referring to a provision in the bill itself which will be based upon this resolution:
Section 6 of the said act is amended by adding thereto the following paragraph:
(h) Carrying charges of property the income from which is exempt, except to the extent that such carrying charges exceed the exempt income.

The explanation on the corresponding page of the bill is as follows:
This section provides that the carrying charges of productive property producing
income-
That would be property real or personal; it might be bonds or it might be something else. -which is exempted from taxation, such as tax-free bond interest or dividends received by one company from another shall be applied first against such exempt income. Any excess of such carrying charges may be applied against income other than the income from the taxpayer's chief position, occupation, trade, business or calling.
I do not know that I can make the matter any clearer than that.


Mr. NEILL:: I wish to draw the minister's attention to paragraph 12. The purpose of that is that if a man cashes a dividend cheque in the United States at a premium, he shall have to pay 5 per cent, not on the premium, but on the whole dividend. That may be all right, but it will be noticed that in the income tax return in the form that you have to make out, there is an item inserted in which you have to show any income you have received from premiums obtained in that way, so that you will have to pay not only twice, but three times. Supposing the premium on a specific cheque of $100 is 10 per cent. You do not pay 5 per cent on the $10; you pay 5 per cent on the whole dividend. Then when you come to make out your income tax return, you again have to pay whatever your income tax rate is upon the amount you have received in that way. That is certainly paying it a second time. I do not know whether the minister understands me.


Edgar Nelson Rhodes: I think I do.


Alan Webster Neill: Then there is the third effect. I submit it is not in accordance with the usual custom to charge for that at all. Should it not be called principal increment? For instance, if a man bought something in the United States, as he often does in the course of a year, he has to pay a premium on the money and he does not receive any allowance for that in his income tax return, so he pockets the loss. In the one case it should be called capital increment, the same as in the other it would be called capital loss.


Edgar Nelson Rhodes: To answer my hon. friend's last question first, our principle of taxation in Canada has been only to tax income. We have never taxed increment. I think the experience of the past two, three or four

Protective Service Salaries
years has abundantly proven that in that respect we have adopted the right principle, because to-day, despite the condition of the world and conditions in Canada, we are in receipt from our income tax of a total yield which is comparable with the tax which has been received in other years, whereas to take the example in the neighbouring country to the south where losses are to be taken into consideration in making up income tax returns, the result has been that the yield of their income tax has shrivelled to only a fraction of the normal amount. The result is shown in the enormous deficit which they had there last year.


Alan Webster Neill: The government does not tax increment? .


Edgar Nelson Rhodes: No.


Alan Webster Neill: But this is increment.


Edgar Nelson Rhodes: We do not take into
account the increment at all; they do.


Alan Webster Neill: I claim that this is increment.


Edgar Nelson Rhodes: Well, coming to the first question, when the man pays his 5 per cent tax, the amount that he pays, although paid upon the total, is less than the premium he receives.


Alan Webster Neill: It might not be.


Edgar Nelson Rhodes: Then the tax' will not be applicable; that is the answer. When in making up his income tax returns he comes to show the amount of premium he has received, that premium as shown would be less the 5 per cent which he has already paid.


Alan Webster Neill: But not less the other sums he may have paid as premiums if he had bought stuff in the United States during the year.


Edgar Nelson Rhodes: We could not cover a case of that kind.


Alan Webster Neill: Does the minister not consider the premiums as increment?


Edgar Nelson Rhodes: I would not think so. If anyone were to consider as increment the amount of purchases he has made, our income tax returns would disappear very rapidly.


Alan Webster Neill: I am referring to that specific case only; when you tax the increment, you ought to allow for the decrement, it seems to me.


Edgar Nelson Rhodes: Apart altogther from the question whether the tax is applicable to increment as such, tihere is the question whether it would be wise policy for us so to regulate our income tax as to make it to the advantage of the individual to purchase in a foreign country to the exclusion of his own. That question would also arise and it has no reference to tariff or protection or anything else. The fact of the matter is that that is what we would be doing.


[Stage Direction]
Resolution agreed to.
Edgar Nelson Rhodes: There are two or three items Standing in the customs schedules which I should like to take up.


PROTECTIVE SERVICE SALARIES
Mr. MAODOUGALL:: While we are waiting I should like to bring up a matter which is not controversial at all. It has been brought to my attention this afternoon that members of the protective Staff, charwomen and so forth, have not been paid for two weeks. I would ask the Minister of Finance if he has any idea of giving them a cheque on Saturday to bring a little happiness into their homes.


Edgar Nelson Rhodes: My hon. friend perhaps was not in the house earlier in the day. I did all that I could, and this house did all that it could do when it passed the interim supply bill. It was sent to the Senate, but unfortunately the Senate, for reasons best known to itself-I do not know what the answer is- gave the bill only a first reading and then adjourned, so that we are now in the position that until the Senate returns and passes the bill we cannot issue the cheques. I hope, however, that the Senate will pass the bill on Tuesday, in which event I can assure my hon. friend that we shall get royal assent just as quickly as possible because it is unfortunate that the cheques cannot be paid.


CUSTOMS TARIFF AMENDMENT
Edgar Nelson Rhodes: I have an amendment to propose, Mr. Chairman, which is new, but to which I hope the committee will take no exception, and that is to add item 106d. The object of the amendment is to give to the British West Indies on grape fruit when imported in airtight cans or other airtight containers the same rate as is applicable in the case of the Australian treaty, namely, one cent a pound instead of two cents a pound, which is the ordinary rate. I beg to move that the following item, enumeration, and rates of
Customs Tariff Amendment

duties, be included in the list of items indicated in resolution No. 2, of March 21, 1933, as for insertion in schedule A of the Customs Tariff:
106 (d). Grapefruit, the produce of the British West Indies, when prepared in airtight cans or other air-tight containers in the British West Indies and imported direct from the country of growth and manufacture, per pound, 1 cent.


[Stage Direction]
Item agreed to.
Edgar Nelson Rhodes: The next is a new item
of a similar character. I beg to move that the following item, enumeration, and rates of duties, be included in the list of items indicated in resolution No. 2, of March 21st, 1933, as for insertion in schedule A of the Customs Tariff:
152b. Orange juice, the produce of the British West Indies, when imported direct from the country of production, free.


[Stage Direction]
Item agreed to.
Edgar Nelson Rhodes: The next is an amendment in connection with tariff item 208o, which has already been passed, and which I am going to ask the committee to delete. I might explain that it is a conference item. It was agreed that it be struck out in the first instance, but it has since been ascertained that by changing the comtent rate we can procure this commodity in ample quantity from the mother country, and the British have asked that in those circumstances we restore the item, which we are prepared to do.


William Lyon Mackenzie King: What is the
commodity?


Edgar Nelson Rhodes: Tartaric acid crystals. I beg to move that resolution No. 2 of March 21, 1933, being a resolution to amend Schedule A to the Customs Tariff, be amended by striking thereout tariff item 208o wherever the said item, enumeration, and rates of duties occur in the said resolution.
In a word, 'the effect of the motion is to restore the conference item.


Alan Webster Neill: It cuts out both items?


William Lyon Mackenzie King: Why was it
ever changed?


Edgar Nelson Rhodes: Because it was found that we could not under the British content regulation of fifty per cent procure a supply in the mother country, but by making the content requirement 25 per cent, which we have done by order in council, the commodity can be fully supplied from Great Britain.


Alan Webster Neill: Does it apply to cream of
tartar in crystals as well as to tartaric acid crystals?


Edgar Nelson Rhodes: No, just tartaric acid
crystals.


[Stage Direction]
Amendment agreed to.
Edgar Nelson Rhodes: The next is 366b, which I had asked to stand. The rates as proposed in the budget were 10 cents intermediate and 15 cents general. I now move to reduce these rates from 10 cents intermediate and 15 cents general to 5 and 10 cents respectively.


[Stage Direction]
Amendment agreed to.
Edgar Nelson Rhodes: The next item is 568.
Customs tariff-568. Knitted garments, knitted underwear and knitted goods, n.o.p.: British preferential tariff, 25 per cent; intermediate tariff, 35 per cent; general tariff, 45 per cent; and 25 cents per pound intermediate tariff, and 30 cents per pound, general tariff.


Mr. YOUNG:: In regard to this item 568, the rate prior to September, 1930, was 20 per cent, 30 per cent and 35 per cent. In September, 1930, the rate was changed to 25 per cent, 25 per cent and 45 per cent. Now the proposed rate is 25 per cent under the British preference, which is not being touched; 35 per cent plus 25 cents a pound under the intermediate tariff, and 45 per cent plus 30 cents a pound under the general tariff. It is difficult to estimate what that specific rate will amount to when reduced to ad valorem, but roughly it will be 60 per cent under the intermediate and 75 per cent under the general. The minister told us that the production of these goods in Canada amounts roughly to $48,000,000, and that the work is done in 161 establishments, paying wages of $14,000,000, and employing between 17,000 and
18,000	people. He told us that the object was not to .increase the price but rather to secure a larger share of the market. He also told us that the importations were $1,500,000 worth, of which $900,000 came from Great Britain. The result therefore of this increase is that only $600,000 worth of business is left that can be captured from foreign markets, $600,000 of importations mostly from the United States and entering mostly under the general rate. That amounts to only 1J per cent of the Canadian production, so that all that these factories can possibly hope to accomplish 'is to increase their sales by li per cent. They employ, so the minister told us, nearly 18,000 people. If you increase their production by 1| per cent you will increase

Customs Tariff Amendment
the number of their employees by 225. The average wage paid in the industry is about 8800 per annum. Two hundred and twenty-five new employees drawing an average wage of $800 would mean an increased wage bill of $180,000. Importations of $600,000 which at present carry a duty of forty-five per cent will pay in revenue to the treasury $270,000 per annum. The minister proposes to sacrifice that revenue in order to secure an increased wage bill of $180,000. He would be $90,000 per annum ahead if he took $180,000 out of the treasury and paid these men to sit on the sidewalk and do nothing.


An hon. MEMBER:: Is this a conundrum?


Edward James Young: It is not; it is the way the
taxation works out. The minister wonders where the revenue has gone, why the budget does not. balance; yet here he is proposing to take $270,000 out of the treasury in order that certain industries may pay an increased wage bill of $180,000. But no one believes for a moment that these gentlemen do not intend to raise prices; no one believes that they are asking an increased tariff to increase their sales one and one-quarter per cent. They do intend to increase prices. They could increase them thirty per cent under this legislation. Suppose they increase them only ten per cent, they take an additional $5,000,000 out of the pockets of the people of this country, all for the sake of paying $180,000 in wages.
How can this industry be helped? There is only one way to bring about any material
increase in the sale of these goods in Canada, that is by lowering prices. Every increase in price will further restrict sales, will force people to buy some other kind of goods, and the result will be less sales rather than more. I do not believe for a moment that this industry needs this added protection. I have in my hand a report concerning the Regent Knitting Mills Limited for 1932. It is dated from Montreal, April 9, and is headed:
Sales Lower but Profits of Knitting Mills Mount
A wide increase in profits in the face of declining sales was reported to-day by Regent Knitting Mills Ltd. for 1932. While total sales declined 9-81 per cent gross profits at $317,355 were up 46-24 per cent compared with $217,003 in 1931. Operating profit at $110,993 compared with $19,958.
Increase in profits was ascribed by the president, C. G. deTonnancour, to widespread economies and attainment of greater efficiency.
I would recommend to the minister that he advise all other persons and companies engaged in that industry to adopt the policy of this mill-widespread economies. Let them look to the increased efficiency of their plant rather than to further tariff protection, which will enable them to raise prices.
I said a moment ago that the minister was sacrificing $270,000 of revenue in order to enable this industry to pay a little more in wages. That is not the only case where the revenue is being sacrificed. I know the trouble he is meeting with in trying to make his budget balance, yet here we have some examples of where the revenue has gone. Take the figures with respect to soup:
Rate Amount Loss of Year	Imports per cent of duty revenue
1930	$1,974,000	25	$500,0001932	
184,000	35	62,000	$438,000
The wages paid in the industry in pro- The figures for mats and hearth rugs are as ducing that much more soup amounted to follows: about S250,000.
1930..	. 1932..	.	Year	' Imports 	
37,000	Rate per cent	Amount of duty $162,000 27,000	Loss of revenue $135,000Other 1930..	. 1932..	.	examples are: Year	Oriental Carpets Imports 	
389,000	Rate per cent 35 40+ 20c.	Amount of duty $488,000 242,000	Loss of revenue $246,0001930.. .	Year	Velvet Tapestry Imports 	$ 99,000	Rate per cent	Amount of duty $ 25,000	Loss of revenue
Customs Tariff Aviendment

Tweeds
1930	 1932		Year	Imports	Rate per cent	Amount of duty $755,000 381,000	Loss of revenue $374,000
					
1930	 ]932		Year	Overcoatings Imports	Rate per cent	Amount of duty $436,000 221,000	Rate of revenue $215,000
The minister has in these few items sacrificed in revenue nearly one and a half million dollars, to be exact $1,433,000, in order to encourage these industries to manufacture things at home which could be much more profitably imported, and the manufacture of which did not pay in wages as much as the loss of revenue.


William Lyon Mackenzie King: And made the cost of living higher for everyone.


Edward James Young: Yes. Is it any wonder
that we find the minister, to quote the words of Sir Robert Peel, "sitting on an empty chest by the pool of bottomless deficiency fishing for a budget." I urge the minister to strike that item out. There is no sense at all in proposing in times like these to sacrifice $270,000 of revenue in order to give $180,000 in wages. Seriously I ask him to withdraw it.


Edgar Nelson Rhodes: Mr. Chairman, I hope my
hon. friend will not consider me in the least disrespectful if I refuse to follow him in his discourse. My reason is-


Edward James Young: That there is no answer,
that is all.


Edgar Nelson Rhodes: Well, let us for the sake
of argument say that. I was going to say that whether we are right or wrong in our tariff proposals, this item is on all fours with the woven goods tariff, which we threshed over and over, discussed and rediscussed, and which is in the statute book, although we are not going as high in the matter of protection on this item as in connection with woven goods.


Edward James Young: Two wrongs can never make a right.


Edgar Nelson Rhodes: If we are wrong in the
former case we are wrong here. I can only say to my hon. friend-because I would like if possible to dispose of this before six o'clock -that the proof of the pudding is the eating.


Edward James Young: We have the proof.


An hon. MEMBER:: There is no pudding.


Edgar Nelson Rhodes: If it transpires that we
are mistaken in our view as to what will be the result of our tariff in respect to woven goods, we are wrong here.


The CHAIRMAN:: Carried?


Edward James Young: No, it is not carried.
At six o'clock the Speaker resumed the chair and the house took recess.
After Recess
The house resumed at eight o'clock.


INTEREST ACT AMENDMENT
[Stage Direction]
Mr. G. G. COOTE (Macleod) moved the second reading of Bill No. 81, to amend the Interest Act.
He said: Mr. Speaker, under section 91 of the British North America Act interest is one of the matters placed under the control of the Dominion parliament, and the present Interest Act is chapter 102 of the revised statutes of Canada, 1927. The bill I am introducing proposes to repeal section 2 of that act, which reads:
Except as otherwise provided by this or by any other act of the parliament of Canada, any person may stipulate for, allow and exact, on any contract or agreement whatsoever, any rate of interest or discount which is agreed upon.
Because of the very difficult economic conditions existing in Canada many persons are being compelled to pay very high rates of interest, and this bill asks that a maximum rate of five per cent be established in the Interest Act. Perhaps I -might read the bill to make this clear. The preamble states:
Whereas excessive rates of interest are being charged on loans on mortgage, agreements and contracts; and whereas it is advisable under present conditions to fix a maximum rate of interest in Canada, applicable to loans, contracts -and agreements of every kind: Therefore His Majesty, by and with the advice and consent of the Senate and House of Commons of Canada, enacts as follows:-
Then the bill proceeds:
1. Section two of the Interest Act, chapter one hundred and two of the revised statutes of Canada, 1927, is repealed, and the following is substituted therefor:-

Interest Act-Mr. Coote
"2. (1) Notwithstanding anything to the contrary in this or any other act of the parliament of Canada, the rate of interest shall not exceed five per centum per annum, and no person, corporation or company shall stipulate for, allow, exact, reserve or collect a rate of interest or discount greater than five per centum per annum, and in no case shall a higher rate of interest be recoverable.
(2) Every person, corporation or company who or which, directly or indirectly, takes, accepts and receives a higher rate of interest than is authorized by this section shall incur a penalty equal to twice the value of the moneys, wares, merchandise or other commodities lent or bargained for. Such penalty may be sued for and recovered in any court of competent purisdiction by any party injuriously affected, on proof of such excessive interest."
This principle of a maximum rate of interest is not entirely new in Canada; it was in force in the four provinces which originally came into confederation, and I think it remained on the statute books until 1890, when all the acts were repealed by a bill introduced by Sir John Thompson. Under the old act in Ontario and Quebec the maximum rate of interest was fixed at 6 per cent, except for insurance companies and religious, charitable and educational corporations, which might exact a rate not exceeding 8 per cent. Included in that section was a penalty for violation of the act amounting to treble the value of the goods or loan. In Nova Scotia the maximum rate was established at seven per cent, except with regard to loans on personal property or on personal responsibility, when rates up to ten per cent were allowed. In New Brunswick the maximum rate was six per cent, and the penalty imposed for violation was the value of the principal sum or the goods covered by the loan.
The bill I am introducing does not attempt to deal with the rate of interest on existing obligations. That question was raised in a motion introduced by the hon. member for Red Deer (Mr. Speakman), and his resolution was referred to the banking and commerce committee for consideration. Apparently there is not very much chance of any action by the committee on that resolution during this session of parliament, but by this act it is hoped to fix a maximum rate of 5 per cent on obligations entered into in the future. According to a definition which I found in the dictionary to-day interest means money paid for the use of money loaned, or money paid for the forbearance of debt, and I am afraid that at present most of the interest that is being paid is for the forbearance of debt rather than for the use of money loaned. In many cases the money loaned has largely disappeared.
Interest is sometimes referred to as the wages of money. Money is a sterile thing; it does not increase of itself. I am not going to enter into a discussion at this time as to whether or not interest is something that can be paid; I know some economists and financial writers differ on that point. I would simply say that if interest is actually paid it must be paid out of production. This was so well stated by the Minister of Trade and Commerce (Mr. Stevens) in this house last year that I am going to quote his words, which will be found at page 1911 of Hansard for 1932:
-let us get this as clearly as possible- interest is not something that is made by money but something that must be taken out of the productivity of the country and paid upon the money that is lent.
In other words, Mr. Speaker, interest is paid out of production; that production is sold for money and the money thus obtained is turned over to pay the interest. The rate of interest which industry can pay depends upon the price of the product. Because of the fall in price levels during the past three years the payment of interest in some cases has taken two or three times as much of the product of industry as it did three or four years ago. This increase in the general burden of debt can be well illustrated by the fall in the index prices of commodities in Canada. I find that in the wholesale commodity index price level there has been a drop from 100 in 1926 to 63.6 in February of this year, a fall of 36 per cent. In the case of the general range of farm products I find a drop from 100 in 1926 to 43 in February of this year, or 57 per cent. In the case of field products there is a drop from 100 to 36, or 64 per cent. In the case of animal products the drop has been from 100 to 54, or 46 per cent, while in retail prices and cost of services, according to the government's index figures, the drop has been from 100 to 79, or 21 per cent.
In the light of the index figures I have quoted let us look for a moment at farm mortgages. If a farmer paid the interest on his mortgage in field products, in 1926 the interest on $2,000 at 6 per cent would be $160, or 160 bushels of grain, whereas in 1932 the interest would be still $160, but it would require 440 bushels of grain. If the farmer paid in farm products generally it would take two and one-third times as much in 1933 as it did in 1926, and if he paid in animal products it would take practically twice as much. If it took ten steers to pay his interest in 1926 it would take twenty steers to pay
Interest Act-Mr. Coote
[Stage Direction]
his interest in 1933. If it took one hundred pigs to pay his interest in 1926, it would require two hundred in February, 1933. This will give the house an idea of the increase in actual interest so far as it is measured in terms of production

and it is only with production that the farmers can pay. Precisely the same principle applies to industry generally. I want to quote again from the speech of the Minister of Trade and Commerce, because he put the matter briefly and clearly. At page 1911 of Hansard of 1932 the minister' is reported on this point as follows:
Precisely the same principle applies to an industry. Take one that has for its basic product copper, lead or zinc, operating in some manufacturing concern. Suppose they borrowed $50,060 three or four years ago. In the payment of interest on that money, where they formerly calculated an output of a given amount would serve to meet that payment, it would to-day take an output of two to three times as much to discharge the obligation.
Surely these illustrations prove that our industries cannot continue to pay rates of interest of six and ten per cent and sometimes as high as twelve per cent. I want to quote another passage from the same speech of the minister:
Let me turn to the third factor, that of interest. I say this advisedly; I say it after a good deal of study and thought, and I ask my hon. friends angularly opposite to accept it in regard to not only agriculturists but industrialists and merchants, because it is only by having some degree of sympathetic contact among the different branches of activity in this country that wo are going to make any progress. No agriculturist, no industrialist and no merchant can afford to pay ten per cent interest for the money he uses in liis business: it simply cannot be done; normal business will not permit of that rate of interest. Moreover, no bank can afford to take a loan at ten per cent, because it is too risky. When a loan justifies a rate of ten per cent, in my opinion it is too risky a loan for a bank to take at all and ought not to be accepted.
I heartily agree with that.
Whether or not that can be covered by arbitrary statutory legislation is another question. That can be discussed next year at the revision of the Bank Act. I am laying down what I consider to be sound business principles directly affecting our welfare, and the same principles are operating in every corner of the world ki-day affecting the business of the world and affecting us along with the other countries. But I lay down the principle that a rate of interest around eight or ten per cent makes successful operation of the ordinary business activities impossible and unprofitable.
I am of the same opinion; I believe that rates of eight and ten per cent make the successful operation of any industry impossible and unprofitable, and it is partly for that reason that I am bringing forward this bill

to-night. The fall in commodity prices has reduced the purchasing power of the people engaged in these industries and this in turn has created unemployment. Thousands of workers, factory employees, salaried and professional men have had their income cut to the point where the tax paying ability of the people has been reduced by half. This has made the burden of some municipal and provincial government debts almost intolerable. The ability of large numbers of people to pay the interest on their debts has disappeared, while in many other instances it has been greatly curtailed, and in no industry that I can think of can they afford to pay interest at a greater rate than five per cent per annum.
I would again direct the attention of the house to the question of farm mortgages. According to the recent census in Canada these mortgages amount to over 8700,000,000. At the end of 1931, in respect of all mortgages held by insurance companies in the dominion, there were, in arrears of interest for one year or more, in Saskatchewan, forty-six per cent of the mortgages, in Manitoba forty-two per cent and in Alberta twenty-two per cent. It will be freely admitted I think that at the end of 1932 the percentage must have been much higher because of the low prices prevailing then. In many cases interest for three years compounded at eight or nine per cent is now arrears and the borrowers are asked to sign new mortgages in which these arrears have been added to the principal, so that the principal is being increased by from twenty-five to thirty per cent, and the people are being asked to renew these mortgages at rates of eight and even nine per cent.
There is a good reason for these large amounts of unpaid interest. Take the case of wheat producers. There are certain cash costs that must be incurred in the production of wheat and only after these are met can interest be paid. This applies to many other farm products. The selling price very often has not been sufficient to cover the cash cost, and if the interest has been paid the money has come from borrowings on insurance policies or from the sale of equipment or young live stock which should have remained on the farm. In other words, the farmer has been compelled to pay interest out of capital equipment which it has taken him years to accumulate. Very frequently the interest has not been paid because the farmer could not secure it. The fact is that the payment of interest at five per cent is for the most part a greater burden to-day than the payment

Interest Act-Mr. Coote
of interest at twenty-five or thirty per cent would have been three or four years ago.
I have in my hand an editorial from the High River Times, which I think brings this point out clearly. It tells of a farmer who has been unable to pay interest because of low prices. He bought a section of land in Alberta in 1917, paying for it at the rate of fifty dollars per acre. I quote:
However, in 1917, prices were good, and the price waB paid on the strength of the excellent crop prospects. Unfortunately in August of 1917 the crop was completely hailed, destroying the revenue for that year through no fault of the purchaser. The following year, when wheat was still good in price, the yield was poor Owing to drought. And so on, through the ups and downs of succeeding years. In the meantime, as an accommodation to the seller, the farmer got a loan from a loan company, to pay off the large part of the amount owing. He has been struggling to hold on to the land and meet the demands of the loan company. Interest charges and taxes amounted to approximately $1,400, and in recent years it has been impossible to meet this amount. Last year the company foreclosed on him.
In the years since the purchase, this farmer has paid out over $40,000 on the original price of $32,000 (a top price by the way). Yet despite the payment of this $40,000, which represents the effort of the best years of a. man's life, he has been foreclosed, and now stands well up in years, stripped of the reward of tifteen years of labour.
He has been industrious and capable, keeping his farm clean and productive. He will probably be replaced by a man much less capable and experienced. The district has lost an excellent farmer. Moreover the man has been financially ruined through the curse of interest. There are many who maintain that under the wheat prices of the last three years, a farmer cannot pay 8 per cent interest, and survive. It is a legalized hold-up, condoned by the government.
Back in the war years, when wheat threatened to soar to $3 the government had no hesitation in stepping in and preventing exploitation of the buyer by forming a wheat board and holding prices to a maximum of $2 a bushel. To-day, conditions are even more glaringly awry, but now it is interest which is soaring far above the ability of the primary producer and normal citizen to pay. Why is there any more difficulty in bringing interest charges under control?
Not only have the inexorable demands of money lenders (demands sanctioned by government) brought financial ruin to thousands of Canada's finest citizens, but worse still, these demands tacitly supported by the government have produced discouraged and embittered citizens who know that under all laws of justice, they have been deprived of the labours of a life time.
I regret to say that according to all accounts a great many farmers have found themselves in the position of the man referred to in this editorial, and it is time that parliament took such action as lies in its power to restrict the rate of interest charged. Farm mortgages are 53719-294
being renewed to-day at eight per cent, and I believe even at nine per cent. Many machine notes carry interest rates of from eight to twelve per cent; buyers of automobile trucks and so forth, purchased on time have to pay interest rates running as high as fifteen per cent. The rate of interest paid on savings accounts has been reduced, so why should not the rates charged by banks and others be reduced. Eight, nine and ten per cent is being charged for bank loans. I received a letter recently from a man in Hamilton complaining of the loan companies in Ontario asking for higher rates of interest on mortgages now maturing than the rates paid some years ago. One case has been brought to my attention where a mortgage made in 1927 at seven per cent with a proviso that six and a half per cent would be accepted if the payments of interest were tendered on the due dates. That mortgage is now due the original principal of $3,400 has been reduced to $2,050. The mortgage company has offered to renew this mortgage but they want a straight rate of seven per cent. In effect, that is an increase of one-half per cent in the rate charged. This man states that this is a general practice on the part of the company he mentions, and he also names another company which is trying to exact higher interest rates from its mortgagors. He says:
The mortgage and insurance companies are combined in an association to fight for what they -want, whereas the average mortgagor has no one to represent his case except where he can bring his position to the notice of parliament.
Rentals, wages and salaries have been reduced up to twenty-five to thirty-five per cent, yet the mortgagees go merrily on charging the same old rates and in some cases demanding higher rates.
Here is a paragraph which I think is very important:
If it is left to the mortgagees to voluntarily reduce, it may be that some of them will offer a slight reduction, others will give no leaway at all and others -will try to get the last nickel out of the people that it is possible to get, and I am convinced that some of the companies are and will be the worst offenders.
It appears to me that the loan companies have not done so badly during the last few years and there is no need for an increase in the rates of interest. A statement presented to the banking committee by the head of the bureau of statistics shows that the following average dividends have been paid by the loan companies of Canada:
Per cent
1929		 11.34
1930		 11.64
1931		 11.63
[Stage Direction]


Interest Act-Mr. Coote
The average dividends paid by the trust companies are as follows:
Per cent
1929		 9.63
1930		 9.80
1931		 10.32
I think this is evidence enough that the loan and trust companies do not need to raise their rates of interest. A few days ago I referred to a return which had been tabled in this house. This return shows the following classifications for loans made by the banks:
Class A-Loans up to $250.
Class B-Loans from $250 to $1,000.
Class C-Loans from $1,000 to $25,000.
Class D-Loans over $25,000.
This return shows that there was one class C loan drawing interest at ten per cent. It shows also that the discount rate charged on a class B loan for one month was nine per cent. It shows that twelve per cent was charged on a class B loan, ten per cent on a class C loan and eight per cent on a class D loan. These were all demand loans.
Edward James Young: Will the hon. member permit a question?


George Gibson Coote: of production and the price level of our commodities has fallen so low as to make payment of interest at present rates impossible in many cases. I ask for it because of the tremendous volume of our debts and the huge burden which debts are upon the business community at this time.
I would like to point out one thing which I did not mention before; that is, that the burden of debt is on the retailers of Canada. In many cases they are unable to collect from their customers. They owe large amounts to the wholesalers and the latter are charging them in many cases eight per cent interest on past due accounts. In addition to that, they are making drafts against the retailers once a month and the latter are forced to pay exchange, stamp tax and a tax on each cheque which goes through the bank. Really, this burden of interest, exchange and taxes is nearly ruining many of the small retailers.
I ask for the passage of this bill because many debtors are being forced to renew obligations at rates that are ruinous, while their ability to pay is greatly reduced because not only have commodities and goods generally been reduced in prices, but salaries and wages have also been reduced, the reductions in many cases ranging from twenty to as much as fifty per cent.
I ask for the passage of this bill because of the increased purchasing power of the money which the creditor receives as interest, and finally, because I think the maintenance of the present high rates is retarding the business recovery which we are all so anxious to see in Canada. I would ask therefore that this bill receive the fair and earnest consideration of the house.


Edward James Young: Before the hon. member
takes his seat, I wonder if he could tell us what portion of the interest charged is being used to pay the running expenses of the lending institutions.


Armand Renaud La Vergne: The hon. member has spoken for forty minutes and he cannot speak longer unless by general consent.


Some hon. MEMBERS:: Consent.


George Gibson Coote: The answer I would give to that is that the average dividends declared during the past three years by all loan companies in Canada have been over 11| per cent, so while I cannot tell the hon. gentleman the amount that goes for actual running expenses, the dividends which they have been earning, are, I think, sufficiently large to indicate that they have a very good surplus over their running expenses.


James Langstaff Bowman: Do I understand the hon. member to say that this bill does not affect
contracts, mortgages and so forth at present, in existence?


George Gibson Coote: I want to make it clear that this bill will not affect existing contracts. It will affect only contracts that may be entered into after the passing of this bill.


Edgar Nelson Rhodes: 
George Gibson Coote: Would the minister permit
me an interjection just there? All I said was that on small loans I thought there was justification for a sendee charge. I do not think the interpretation which the minister is now putting on my statement is quite fair in connection with what I said.


Edgar Nelson Rhodes: Mr. Speaker I stated precisely what my hon. friend has said, and I am entitled to put my own interpretation upon what would follow if what he admits can be done is done. In other words, he admits that there is a distinction between loans, and in that he is right.


George Gibson Coote: A loan might be made on
exactly the same security but it might be for a very small amount, in which case a service charge would be justified.


Edgar Nelson Rhodes: There is one phase of this question which I am sure my hon. friend has overlooked, and it is one of numerous considerations which have a bearing upon the principle of the bill. My hon. friend has been an advocate of a central bank. One of the strongest arguments that can be adduced in favour of the establishment of a central bank is that it could control the flow of ci'edit. My hon. friend knows full well that there is just as much danger in a policy of too easy money as there is in a policy which makes for dear money. The banks in the United States saw the danger of that great inflation movement, the stock market boom of 1928 and the early part of 1929, and they tried to stop it, the bank rate being raised to as high as ten per cent, if not indeed higher. I think perhaps a major feature which the advocates of a central bank claim for it is that, through its control of open market operations on the one hand and of rediscount rates on the other, it can make for a reasonable equilibrium of the ebb and flow of credit, and for a fair interest rate. If my hon. friend should fix a maximum interest rate of five per cent he would take out of the hands of a central bank the greatest lever it would' have to prevent just such an inflationary movement as occurred in the New York stock market in 1928 and the early part of 1929. If there were no other objections to this bill, I think that of itself would be sufficient to condemn it in the eyes of this house.
I am satisfied that my hon. friend could do no greater injury to those whom I know
Interest Act-Mr. Rhodes

he earnestly desires to serve than to have his bill passed in the terms in which it is drafted, because the effect would be to deny credit altogether to those who should have it. If they could secure any capital at all they could do so only through what I might call underground or bootleg channels, and if they got it under those conditions they would rate far higher than the open market going rate. It is idle to suggest, even with all the "isms" that are afloat to-day, that there is any other method whereby the rate of interest can be determined than the age old law of supply and demand. If this bill were to pass, apart from surreptitious methods which I have indicated the effect would be to deny credit to all others in Canada except the dominion itself, one or two provinces, and a few select municipalities and borrowers having the very highest class of security. I hope, therefore, that this house in its wisdom, having in mind the very objects which I know my hon. friend seeks to achieve and which he so earnestly believes in, will vote against the motion for the Second reading of this bill.


William Duff: Is it not a fact that if there
is no specific arrangement made between debtor and creditor the legal rate of interest is five per cent?


Edgar Nelson Rhodes: Quite so.


Robert McKenzie: The minister spoke of denying credit. I should like to ask him if his argument is that capital, instead of adjusting itself to changed conditions brought about by this bill, would seek investment in other countries? Or what is his argument?


Edgar Nelson Rhodes: It would either seek investment in other countries or would restrict itself to the very highest class of investment in this, which as I said would be the dominion, one or two provinces and a few municipalities. I was speaking with only some haphazard notes before me; but may I emphasize again the fact that we agree entirely as to the desirability of having a lower rate of interest. This is especially desirable in a young country where large volumes of capital are required, and in times like the present when commodity prices are low-although I am glad to say that apparently the corner has definitely been turned and the movement now is towards increased commodity prices.


An hon. MEMBER:: We have been told
that before.


Edgar Nelson Rhodes: As an evidence that the
government desires that there should be an

improvement by way of lower interest rates, we have for some time, as my hon. friend knows, in cooperation with the banks endeavoured to have a lower interest rate made effective on deposits. That lower rate has been put in force since the first of May. Its value will be reflected in lower interest charges. I can only repeat that the experience of the past, and I think cold logic as well, teach us that there is no sovereign remedy to compel a man to lend money at any other rate of interest than that which he chooses to demand for it. The best method is to aim for a lower interest rate through recognized and time-honoured methods.


George Gibson Coote: Mr. Speaker-


Armand Renaud La Vergne: If the hon.
member speaks it will close the debate.


Alfred Speakman: I think, Mr. Speaker,
it being only half a minute before nine o'clock, it would be well to call it nine o'clock.




[Stage Direction]
The house in committee of ways and means, Mr. MacDonald (Cape Breton) in the chair.
Customs tariff-568. Knitted garments, knitted underwear and knitted goods, n.o.p.: British preferential tariff, 25 per cent; intermediate tariff, 35 per cent and 25 cents per pound; general tariff, 45 per cent and 30 cents per pound.
Albert Joseph Brown: There is a seeming discrepancy between what the minister has said and the rates as they appear in the tariff schedule. Perhaps that can foe explained; if so I should be glad to hear it. I think the minister said the duty on this item would have been increased at the time there was a general revision of the tariff had it not been for certain provisions of the French treaty. I have here the customs tariff and amendments with index to September 8, 1930, and also the one for October 1, 1931. In the older tariff schedule we have this item which now seems to be included under 568, covering three items. For instance we have 568, knitted garments, knitted underwear and knitted goods, n.o.p., all valued at more than ninety cents per pound, and the tariff rates are given, 20, 30 and 35 per cent. Then, if I understand it correctly, we had an "ex" item, which would have to do with the most favoured nations. Then there was also item 568a:
Knitted garments, knitted underwear and knitted goods, n.o.p., all valued at 90 cents per pound or less.

Customs Tariff Amendment
Those three items were included under the one item 568 when the tariff was revised during the short session of 1930, and it will be noticed that the tariff rates are higher than in the earlier schedule. At present they are 25 per cent, 25 per cent and 45 per cent, so it would seem that the government has already raised the tariff on this particular class of goods. I want to point out further that in the new tariff schedules the different valuations are omitted; that is, in the one case the value was fixed at more than 90 cents per pound while in the other it was fixed at less than 90 cents. Those words have been omitted in the new schedule, but we notice that in the proposed change, to the rates of 25 per cent, 35 per cent and 45 per cent are to be added 25 cents per pound under the intermediate tariff and 30 cents per pound under the general tariff. If that 30 cents per pound is applied to goods averaging 90 cents per pound it would mean an additional tariff of 33i per cent which, added to the 45 per cent, would make the general tariff rate 78-J- per cent. If that tax were levied at the 35 per cent rate given in the older schedule it would mean a rate of 683 per cent.
When this matter first came up I know the minister said the government had made substantial increases in the tariff on woven goods, and certainly this is a very substantial increase in this item. On one occasion the minister said he did not concede that this was a high tariff government, and I know hon. gentlemen opposite from the prairies are very fond of asserting that they are not high tariff men. If 683- per cent and 78| per cent do not represent a high tariff I should like to know what does. If the minister can explain what seems to be the discrepancy in the statement he made with regard to the French treaty I should like to have the explanation, because it seems to me the government has already raised the tariff on this line of goods.


Edgar Nelson Rhodes: This afternoon my hon. friend from Lisgar said that he was of a mathematical turn of mind, and I was grateful for his support of the argument I was then making, dealing with the question of percentages. May I say to him that in some circumstances 78 per cent would be a very high tariff while in others it might be a comparatively low tariff. Certainly, with the conditions that have existed for the last two or three years, a tariff of 100 per cent would not necessarily be high in some cases. That may sound rather strange to my hon. friend, but
with world exchanges on a parity a much lower tariff would afford a considerably greater degree of protection than obtains to-day when we may have a tariff of 78 per cent.
The previous statement I made to the committee I think was true both in substance and in fact; at all events it was according to the advice given me by the experts of the department and I believed then as I believe now that the statement was correct. What we did in 1930 was to group together some five items, which carried different rates, under one classification with the rates as follows: British preferential rate, 25 per cent; intermediate rate, 25 per cent; and general rate, 45 per cent.


Albert Joseph Brown: Where did you get those figures?


Edgar Nelson Rhodes: Item 568 of the existing tariff shows these rates as 25 per cent, 25 per cent and 45 per cent. This item, covering knitted garments, knitted underwear and knitted goods, n.o.p., displaced five former items. The change we propose now, as my hon. friend knows, is to add a specific rate of duty of 25 cents per pound under the intermediate tariff and 30 cents per pound under the general tariff.


Albert Joseph Brown: Would the minister give us the five items that were grouped together?


Edgar Nelson Rhodes: The first item was 542 in the ischedule prior to September, 1930. It
reads as follows:
Woven or knitted fabrics, wholly or in part of vegetable fibres, and all such fabrics with cut pile, n.o.p., not containing silk, artificial silk nor wool: British preferential tariff, 20 per cent; intermediate tariff, 271 per cent; general tariff, 30 per cent.
Then there are these items:
Customs tariff-554b. Woven or knitted fabrics, composed wholly or in part of wool, the hair of the camel, alpaca, goat or other like animal, not exceeding in weight five ounces to the square yard, n.o.p.: British preferential tariff, 221 per cent; intermediate tariff, 30 per cent; general tariff, 35 per cent.
Customs tariff-554e. Woven or knitted fabrics, composed wholly or in part of wool, the hair of the camel, alpaca, goat or other like animal, n.o.p.: British preferential tariff, 27J per cent; intermediate tariff, 35 per cent; general tariff, 35 per cent.
Customs tariff-568. Knitted garments, knitted underwear and knitted goods, n.o.p., all valued at more than ninety cents per pound: British preferential tariff, 20 per cent; intermediate tariff, 30 per cent; general tariff, 35 per cent.
Customs tariff-568a. Knitted garments, knitted underwear and knitted goods, n.o.p., all

Customs Tariff Amendment
valued at ninety cents per pound or less: British preferential tariff, 15 per cent; intermediate tariff, 30 per cent; general tariff, 35 per cent.
In the short session of September, 1930, these items were all united in the one item 568 which I read.


Albert Joseph Brown: That simply proves what I have said, that this government has already raised the tariff on all these different items now included in item 568, because the highest rate in any case in the old tariff was thirty-five per cent, the general rate. I do not think it takes a mathematician to understand that you cannot group together a number of items in which the highest rate is thirty-five per cent and get an average of forty-five per cent. And that is what 'has happened. The government, in the short session of 1930, did raise the general tariff

because that is what I am speaking of-on all these items that are grouped under 568, the increase being from thirty-five to forty-five per cent.


Edgar Nelson Rhodes: I never suggested that we did not raise the general tariff. What I did say was that we could not raise the tariff, under the intermediate at any rate, above twenty-five per cent, owing to the French treaty. But if it is any comfort to my hon. friend to have it on the record I may say that but for the French treaty we would have increased it at that time. To-day we are only doing what we would have done then but for that treaty.


Albert Joseph Brown: We will accept that as regards the treaty, because I see that under the old schedules the intermediate tariff was thirty per cent on some of these articles. But this increase on this particular class of goods is an increase on top of the increase which was made in 1930. I want the public to understand that.


Edgar Nelson Rhodes: That is true so far as the general tariff is concerned.


Mr. BROY  N@: Yes, and that is the one that principally concerns us in this matter, since the great bulk of these goods in which it is proposed to increase trade comes from the United States, under the general tariff. That is of prime importance to the consumer.


Edgar Nelson Rhodes: I must correct my hon. friend in one particular. The bulk of them does not come from the United States but from the United Kingdom.


Albert Joseph Brown: No.


Edgar Nelson Rhodes: The statistics are available. We are not increasing the rate under the British preference at all.


Albert Joseph Brown: That point has been made clear, that these increases do not apply to the United Kingdom. If I remember the figures rightly, approximately 8900,000 comes from the United Kingdom and 8600,000 from other sources. It is only the $600,000 we are dealing with now, the bulk of which is from the United States, and the duty has already been increased by the government. It was increased in 1930 on goods coming from that country, and now on top of that there is to be the increase proposed by the minister.


Edgar Nelson Rhodes: Let me give the figures for last year, putting them in parallel columns with the statement of my hon. friend, that the bulk of these goods comes from the United States.	.


Albert Joseph Brown: I am referring to the $600 -
000.


Edgar Nelson Rhodes: Of knitted goods, we imported last year $155,000 worth, of which $145,000 came from the United Kingdom and $5,000 jrom the United States. Of woollen underwear we imported $235,000 worth, the United Kingdom supplying $216,000 and Switzerland $11,000. Of knitted garments we imported from the United Kingdom $647,000 and from the Lhiited States $140,000, and as regards unspecified garments, that is, in addition to the ones I have cited, we imported from the United Kingdom $105,000 worth and from the United States $95,000. WTith regard to these figures it must be remembered that even under these proposals to-day we are not disturbing the British preference; we are not raising the duty one cent.


Albert Joseph Brown: That does not agree with the figures given the other night. We were told that of this particular item, knitted goods, $48,000,000 worth was manufactured in Canada. We were told that approximately $1,-
500,000	was imported from outside countries, $900,000 of this coming from the British Em-piie and $600,000 from elsewhere. I may have been wrong in asserting that the bulk came from the United States but that was the statement made and I accepted it as correct. We are dealing only with knitted goods, and my contention is that the duty on that class of goods was already increased by the tariff of 1930 by combining it along with others in this present item 568.


Edgar Nelson Rhodes: I do not think that iteration and reiteration will help us at all, but the

Customs Tariff Amendment
figures I have given to-night are the figures I gave the other night. The only figure I have not given has no bearing on the statement made by my hon. friend, which was so wildly at variance with the facts, namely, that we imported the bulk of these goods from the United States. Let me give the figures from the United Kingdom as compared with the United States. I cited all the figures in three ranges, and the only additional figures that can be given will not vary my statement to any appreciable degree. In addition to the knitted garments which we imported to the extent of $1,220,000-knitted garments alone- we imported from the United Kingdom to the value of $647,000 and from the United States $140,000. I cite these two figures only because of the statement made by my hon. friend. But let us take all the importations: Czechoslovakia, $93,000; Belgium, $66,000; Switzerland, $65,000; Japan, $47,000; Austria, $45,000; and Germany, $38,000. In other words, we imported more from the United Kingdom, of that class of goods alone, than we did from the United States and all the rest of the world.


Albert Joseph Brown: That is perfectly in harmony with what I said. There does not seem to be anything that the minister has said that contradicts my statement that the government in the short session of 1930 raised the tariff on goods on which it is now proposed to make an additional increase. That is the essential point that I want to bring out.


Edgar Nelson Rhodes: Perhaps I might emphasize what I consider to be the essential point. The great bulk of these goods comes from the United Kingdom and we are not disturbing the British preferential rate. In order to keep the record straight and to keep my hon. friend wholly on the rails, I may say that even in 1930 we made one reduction with respect to item 554c, covering woven fabrics. Under the previous administration this item bore a rate of twenty seven and a half per cent, and even in that shocking session of 1930 it was reduced to twenty-five per cent.


Edward James Young: The hon. member for Lisgar is quite right. The other evening the minister told us quite distinctly that the importations last year under this item totalled $1,500,000, of which $900,000 came from the United Kingdom and $600,000 from other places. He now tells us that the importations from other than the United Kingdom were valued at only $250,000. If that is true he is raising the tariff in order to divert one half of one per cent of the value of the production. All he hopes to get by this item is an
additional market of one half of one per cent. The only benefit to be derived by the Canadian manufacturers will be an increased production of one half of one per cent. A moment ago the minister told the hon. member for Lisgar that a rate of 78 per cent might be high under some conditions but not under others. He said that where a country had a depreciated currency a rate of 78 per cent would not be considered high. I have before me the Commercial Intelligence Journal issued to-day, and I find that the countries at which this increase of tariff is directed are countries whose currency is not depreciated, but rather at a premium as compared with Canadian currency.


Edgar Nelson Rhodes: What about Japan, Austria and Czechoslovakia?


Edward James Young: My hon. friend did not mention any importations from Japan. Most of this quarter of a million dollars which he wants to shut out comes from the United States, whose currency is at a premium as compared with ours. If the minister considers a rate of 78 per cent as high when- another country's currency is on a parity with ours, it must be abnormally high when another country's currency is worth more than ours. The exchange itself constitutes a considerable tariff. This afternoon when I was pleading with my hon. friend not to put through this item because it would divert $270,000 from the revenues of this country and provide only $180,000 in additional wages he replied that if he was wrong it was only in keeping with his general policy. He wanted to be consistently wrong.


Edgar Nelson Rhodes: I have the greatest respect for my hon. friend and I always listen with interest to his remarks, but he must make his own speech. He must not make speeches for me or put an interpretation like that upon what I said. I said that if we were wrong with respect to the duties we imposed upon woven fabrics, then we were wrong in what we were doing now in connection with knitted fabrics.


Edward James Young: That is just what I said;
you want to be consistently wrong. My hon. friend knows that he is confronted with a deficit amounting to something over $150,000,000, and he is turning greyheaded wondering how he can meet it. He does not know how to balance his budget, and yet, without the least concern, he now proposes to divert another $270,000 from the revenues of this country to an industry which will pay out only an additional $180,000 in wages. The people of Canada will have to be taxed another $270,000 next year. He has asked
Customs Tariff Amendment

the people to make all sorts of sacrifices; he asked us to make a sacrifice of ten per cent in our indemnities and he asked the civil service to sacrifice ten per cent of their salaries. He is doing everything he can to raise revenue, and yet he now proposes to divert money to the pockets of private individuals. I wonder if he has any idea what this industry is costing the country. Its total production is valued at $48,000,000. The lowest tariff rate of twenty five per cent is under the British preferential. Taking that as the prevailing rate, this industry is costing us 812,000,000 per year, and it pays out only $14,000,000 in wages. Does my hon. friend consider that such an industry is a profitable one to maintain? The only way this industry can be helped is by an increase in sales. Sales abroad cannot be increased so long as they maintain high production costs; the only way that sales in Canada can be increased is by reduced prices. By this proposal the government is inviting the manufacturers to increase their prices, and increased prices will mean decreased sales because the people have no money to spend. In replying to the hon. member for Macleod a moment ago in connection with another matter, the minister said the age old law of supply and demand was the only way of proving the true value of money. I contend that the age old law of supply and demand is the only way to fix the true value of knitted goods. Let the law of supply and demand operate and it will be found that the price of these woollen goods will reach a point where the people can buy them. The manufacturer's will be forced to do what the knitting mill to which I referred this afternoon did, that is, increase their efficiency, eliminate expensive equipment, and cut down expenses. If they did that they would be able to put these goods on the market at a price the people could afford to pay. With reduced prices there would be increased sales. I would get down on my knees to the minister if I thought it would do any good and beg him not to throw away this money. The country will be bankrupt unless something is done, and I beg the minister not to waste this money.


Edgar Nelson Rhodes: I know that my hon.
friend is a consistent believer in what he believes. I would not for one moment attempt to influence his judgment, but I do not propose to go over and over the same old ground we covered in connection with the exchange and duties upon woven fabrics. I think the safest thing for me to say is that I disagree not only with what he has said just now, but with what he said last session, and that

I shall disagree with anything he is going to say. I think I can let it go at that. Let me say to my hon. friend that the worst thing that could happen under these proposals would be that more business would be deflected to the mother country. The duties in that regard have not been increased, in fact they are lower than they were when my hon. friend supported the last government. To the extent that we increase the flow of goods over the British preferential-that is the lowest rate and the one which obtained when the friends of my hon. friend were in power,-it follows that we are taking the course which will give us the most revenue. I must say that I do not agree with my hon. friend when he says that we are shutting out
8270,000	of revenue.


Charles A. Stewart: May I ask
my hon. friend the; reason for this increase when on his own statement Great Britain is getting as much business as is coming into Canada? Of course the bulk of business is in Canadian mills, but when they are already getting the business except to the very limited extent which my hon. friend has just announced, what is the necessity for the increase?


Edgar Nelson Rhodes: The increase in the general tariff is not so important; the increase of greater importance is that in the intermediate, because we are being subjected at the moment to a type of competition which is very serious.


Charles A. Stewart: But, according to the minister's statement, it has not been so.


Edgar Nelson Rhodes: It has been.


Edward James Young: One half of one per cent.


Edgar Nelson Rhodes: The intermediate tariff is
where, in our minds, the importance of the provision rests.


Charles A. Stewart: My fear is
that this affords an opportunity for an increase all along the line for both the Canadian manufacturer and the importer who will take advantage of the increase.


Edgar Nelson Rhodes: How can he do it when we have not touched the British preference?


Charles A. Stewart: My hon.
friend has just stated that every advantage you give the British manufacturer along with the Canadian, just gives the latter a greater opportunity to take a little bit more. That is the advantage the minister gives him, particularly when the minister has just announced the fact that all the importation comes from Great Britain.


Edgar Nelson Rhodes: That will not be affected.

Customs Tariff Amendment


James Malcolm: I would like to call the
attention of the minister to the remark he made about the rate being the same as it was when the late government was in power. When the former government was in office the rates were: British preferential, 20 per cent; intermediate, 30 per cent and general, 35 per cent.


Edgar Nelson Rhodes: I was speaking of the
British preference only.


James Malcolm: The British preferential
rate was only 20 per cent at that time.


Edgar Nelson Rhodes: There were five items; I
called off only one.


Charles A. Stewart: Was there
only one 27| per cent?


Edgar Nelson Rhodes: Yes, and I referred to that item.


Albert Joseph Brown: I have just been looking
up the matter. The minister says that the rates which the hon. member for Weyburn supported under the former government were higher than those prevailing to-day. I take the five items he gave.


Edgar Nelson Rhodes: One item, I said.


Albert Joseph Brown: Number 542 was 20 per
cent British preference.


Edgar Nelson Rhodes: I quoted all that.
Mr, BROWN:	Number 544b was 22J per
cent; number 568, 20 per cent; number 568a. 15 per cent and number 554c alone, 27-j per cent.


Edgar Nelson Rhodes: That is the one.


Albert Joseph Brown: It is very easy to fix upon
one item. Perhaps, to arrive at an accurate conclusion, we would have to figure out the amounts imported under different tariffs before we reached an average, but it is not fair for the minister, in view of these figures, to make the statement that the rates were higher then than they are now.


Edgar Nelson Rhodes: It all depends upon the point of view. The hon. member says that it is not fair to pick upon one item, yet as a matter of fact, while sixty-seven items are referred to under the proposals of the last budget, only five of them involve an increase in tariff.


Charles A. Stewart: On the
British preference.


Edgar Nelson Rhodes: No, under any tariff. Numbers of them lowered the tariff and numbers of them took the duty off altogether. At the moment I am merely reminding the hon.
member for Lisgar of his argument that it was not fair to pick on one item. He has picked out this item we are now considering, and his friends have done so also. I have no objection to that. More time has been taken on this one item than on all the rest of them put together.


Albert Joseph Brown: The minister is very astute in trying to get away from the real point at issue. He made the distinct statement on this item we are now considering, that the British preferential rate was higher under the former government than it is now.


Edgar Nelson Rhodes: Only on one item. I am
in the judgment of Hansard; I take the record as it now appears in Hansard. I cited every one of those items and I referred specifically to only one; I said the words I say now and I am prepared to abide by Hansard that it will be found there that is what I said.


Albert Joseph Brown: I understood we were discussing the five items under the old tariff that are now grouped under one on which the rate is now 25 per cent, whereas the former rate on only one of the five exceeded 22} per cent,


Edgar Nelson Rhodes: I would not ask my hon.
friend to break the Sabbath, but I would suggest quietly that to-morrow morning he take Hansard and read what I said to-night with respect to this item and I would be prepared to accept his judgment as to whether what I said is not precisely what I have just now said I said.


Edward James Young: The minister has not changed his course, but he has changed his objective. The other night he was doing this in order that the Canadian manufacturers might capture the 8600,000 worth of importations which are coming from other countries; now he wants to divert that trade to Great Britain. I would suggest to him that if he wants to divert that trade to Great Britain, he does not need to raise the general or intermediate rate; all he has to do is to lower the preferential rate and let goods come in from Great Britain.


Charles A. Stewart: And thus
get revenue.


Edward James Young: Yes.


Edgar Nelson Rhodes: Then my hon. friend
suggests that we would get more revenue?


Edward James Young: Yes, and cheaper goods.
Customs Tariff Amendment


Mr. MULLINS:: I have been listening to the apostles of free trade so long that I have become somewhat tired. They are free traders when they are on the hustings and protectionists when they are in power. I wonder why they cannot be consistent. They have maintained a higher tariff than hon. gentlemen on this side of the house ever did. I should like the hon. member for Lisgar to listen to the words of a gentleman who was one of his own allies when he sat in the far corner of the house. I was a member of the house in 1925 and 1926. I am going to read what this gentleman says in his book and it will bear me out so far as the Liberal party and their tariffs are concerned. The whole thing is a joke. The Liberals are no more free traders and they do not practise free trade more than we do on this side of the house. This gentleman says:
The Liberal party was first elected to power in 1873. The issue was lower tariff with a view to ultimate free trade; it held power for four years. No alteration in the tariff policy resulted. It was elected again in 1896. The issue was still lower tariff, with a view to free trade; it was in office for five years: result, tariff unaltered. It was in power again in 1900. The issue was once more tariff reduction with a view to free trade; it held power for four years,-result, tariff practically unchanged. Reelected in 1904, held office four years, the tariff still unchanged. Again in 1908 the Liberal party was returned to office on a policy of tariff reduction; it held power another three years without results as to low tariffs. In 1921, the Liberals once more cape to power; policy, a gradual downward revision of the tariff; it held power until 1925-the result was that the tariff stood as before.


Edward James Young: What is the name of the book?


Henry Alfred Mullins: I was in the house in 1925 when I saw the parade in front of this building and I heard the statement made from this side of the house when you occupied these seats, as to what you were going to do, and when you got those men nicely home, what did you do? You know very well what you did. You took the duties off parts for the automobile manufacturer and you gave them more protection than before. One of the manufacturers told me so in Oshawa. The ex-Minister of Trade and Commerce knows that just as well as I do.


James Malcolm: No, I do not.


Henry Alfred Mullins: I heard the statement made from the platform of a theatre in Ottawa that you were going to stay right where you were; you had made your stand. Then when you got everything nicely quiet, what did you do? You know what you did.

What is the use of being inconsistent? Why not be honest and play the game squarely? You know you are protectionists, even more so than we are. The hon. member for Lisgar sat with the Progressives.


Edward James Young: What is the name of the book?


Henry Alfred Mullins: This is a book by William Irvine, M.P.


Some hon, MEMBERS:: Oh, oh.


Henry Alfred Mullins: Don't laugh at that, because when they get a fair sized group you will want them. You will be running around after them as you were in this house a few years ago. I look into the faces of many of you over there, and I remember your activities very well. The hon. gentleman who sits as an independent knows how persistent you were to throw your arms around them and try to hold them. You do not want them just now, but Mr. Massey says that the Cooperative Commonwealth Federation ought to join up with the Liberals, and you will want them if they become a large sized group. You know that, and you know you will then begin your activities again. I remember a gentleman coming into the office that I occupied on the sixth floor on the same corridor with these gentlemen in the far corner, and seeing my door wide open he said: "If you do not close that door you will get what is coming to you." He told me I would be bumped off. "Well," I said, "go to it," Protectionists, yes; that is what you are. The hon. member for Labelle was right when he said that you were free traders when not in power and protectionists when in power. The right hon. leader of the opposition, speaking at Kingston, Ontario, on October 20, 1925, as reported in the Winnipeg Free Press, said:
We realize that our industries here have to have safeguards with respect to competition from other parts of the world, competition from the country to the south of us-
The country that you think so much about. He went on:
. . . competition from conditions as they are in England, and we think that is all the more reason why in these days of depreciated currency and the like we should have the benefit of expert advice and information on all these great questions of the tariff.
Now I want you hon. gentlemen opposite to be consistent, I do not want you to be using the tariff and making out when you are in opposition that you are apostles of free trade just to get it on Hansard and then go out on the hustings and use it. You have done that long enough. I am a lower tariff

Customs Tariff Amendment
believer than any of you sitting opposite Not one on the opposite side believes in a lower tariff more than I do. You know very well the position of this old ship of state. You know she is struggling, and you are just talking polities. There is only one faithful free trader on the other side, and that is the hon. member for Weyburn. I give him credit. The others are just as much protectionists, and more so, than we on this side of the house.	[DOT]
I did mot intend to speak, but I know that the man out west is struggling hard, and I know that on this side of the house nothing will be done to make his lot more burdensome. We are doing our best to save the ship and to save the mess you left to us. You know what we inherited. Oh yes, we went out after it and we got it, and now we are struggling to save this old ship from swamping. I believe the hon. Minister of Finance is doing everything that is honest and faithful, and why do hon. gentlemen opposite hold up the house and keep us sitting here when we ought to be home? They are doing it for politics and nothing else, and the gentlemen in the southeast corner know it just as well as I do. They know that the Liberals are not consistent.
Mr. 'BROWX: I want to correct my hon. friend in one particular, and that is in his statement that the hon. member for AVetaski-win and I were allies. I have never on any occasion sat. in a caucus room or had any intercourse with the hon. member for Wet-askiwin, and I have no doubt that he is just as ready to repudiate the suggestion as I am.


Henry Alfred Mullins: Hon. gentlemen were with him. They had him in the group. I do know you ran as a Liberal-Progressive, but I would rather have a man that comes out as a straight United Farmer than with a hyphenated name such as you have. There are only two of you left. But you are in your right place, and why don't you be honest and say, "I am a Liberal."


[Stage Direction]
Item agreed to.
Edgar Nelson Rhodes: There is only one other item on the tariff list, Mr. Chairman, and that is item 6S2a, to which I have an amendment to move.
Customs tariff-682a. Net floats of aluminum, glass or cork, for use only in deep-sea or lake fishing, not to include floats for sportmen's use: British preferential tariff, free; intermediate tariff, free; general tariff, free.
In the budget provisions we included among the free items, floats of glass or aluminum.
The amendment I have is to widen that to include canvas floats as well. My hon. friend from Comox-Alberni made a plea that we ought to include trawl kegs and sinkers. May I say with respect to trawl kegs that I find they are made almost entirely by the fishermen themselves. They are a home-made product, and to the extent that they are purchased it is of advantage to the fishermen that they should be purchased from themselves. With respect to sinkers, they are made of lead and they are a home-made product also. Certainly they are to a large extent in the east. At all events, I am advised that on balance there would be no advantage to the industry as a whole to amend the item to include sinkers, and for that reason I have thought it wise not to do so. I therefore move:
That tariff item 682a as amended by resolution No. 2 of March 21, 1933, be further amended by inserting therein after the word "glass" the word "canvas."


Alan Webster Neill: The desire to include sinkers arises from the fact that it militates against both fishermen and manufacturers in this way. I have not the tariff item before me, but when these sinkers are attached to nets brought in in one complete entity, so to speak, they come in free. But many sinkers are used on the same net later on in the ordinary course, as the sinkers often get lost, and if the minister does not put the word "sinkers" in here he is hurting the Canadian manufacturer, which is not supposed to be his object. It is an inducement to the fisherman to buy his net from the United States complete -with all the sinkers and lines and floats, because then they come in free. But a great many fishermen do not want to do that. They prefer to buy just their web and the lines and sinkers, and then put them together themselves. The people who are in the business of manufacturing these articles are handicapped because they have to pay a duty on sinkers coming in individually and which they sell retail, or wholesale and then retail and the extra cost is of course paid by the fishermen, whereas when the sinkers come in with the net they come in free. While it may be true that in the maritimes, and possibly to a limited extent in British Columbia, the sinkers are made out of lead by the fishermen themselves, there is a regular standard sinker manufactured for the purpose, of a certain shape and with a hole in it to run the line through, which is quite distinct from the home-made article which the fisherman cuts out of a piece of lead. I cannot
Customs Tariff Amendment

see that it would do any harm to the revenue by inserting the word "sinkers." I was given to understand that we had a fair prospect of getting this inserted, and I so advised the fishermen. I am sorry to find it is not going to be accepted now. I have a letter here from a manufacturer quoting a letter from the department as follows:
Concerning the leads referred to in paragraph three of your letter, When attached to nets et cetera, provision is made in the act for exemption from sales tax on goods enumerated in customs tariff item No. 682, when under a class or kind and for the purpose stated therein. The exemption applying equally to similar goods manufactured or produced in Canada.
That is dealing with the sales tax, but the same principle applies. Last year the minister was good enough to exempt the sinkers from sales tax and I thought the same argument would have applied in regard to duty. I remember a delegation waiting on him, and I formed the opinion that we might have got a favourable decision then if it had not been for his desire not to open the tariff act last .year. Is it not possible that the minister might leave this over for further consideration?


Edgar Nelson Rhodes: I assure my hon. friend I have given careful consideration to this matter. If he was under the impression that I said this amendment would be made, I must say he had no warrant for such an impression. In that regard I am not depending only on my memory, which may not be of the best at this stage of the session, as I have full occasion to know', but if he will refer to page 4296 of Hansard he will see that I made it abundantly clear that while I allowed the item to stand there was no understanding with respect to what action would be taken. It is true that last year an amendment was made freeing these sinkers from sales tax, but it by no means follows that the same reasoning applies in relation to customs duty. I cannot speak with the knowledge my hon. friend has as to conditions in the west, but in the east there is no demand for this exemption. The fishermen there make their own sinkers, and there is no reason they should not do it in the west. It is a simple piece of lead; the crudest apparatus would enable them to make it, so I do not think it is a matter which requires much time and thought. I should like to be courteous to my hon. friend, but I think the item ought to carry.


[Stage Direction]
Item agreed to.
[Mr. Neill.3
1. Resolved,-That the customs tariff, being chapter forty-four of the revised statutes of Canada, 1927, as amended by chapter thirty-nine of the acts of 1929, chapter thirteen of the acts of 1930 (first session), chapter three of the acts of 1930 (second session), and chapter thirty of the acts of 1931, be further amended by adding to section six thereof the following subsection:-
(9) Notwithstanding the provisions of any other law, the governor in council may from time to time and as occasion requires order and direct, subject to such exceptions as may be made, what shall be the rate of exchange fixed for any currency in computing the value for duty of goods imported into Canada from any place or country the currency of which is depreciated, and in case a sum in Canadian currency less than the invoice value of the goods in the currency of the place or country of export, computed at the rate of exchange so ordered, be paid for the goods, the actual selling price of the goods to the importer shall be regarded as less than the fair market value of the goods when sold for home consumption, and the provisions of this section shall apply and special or dumping duty shall apply equal to the difference between the value of the invoice computed at the current rate of exchange or at the average current rate from time to time fixed by order of the governor in council, and the value of such invoice, computed at the rate of exchange for duty so ordered as aforesaid, or may be less than such difference as the governor in council may from time to time order and direct; and the governor in council may order and direct that in all cases pf sales or consignments of goods imported into Canada, where the importer owns, controls or is interested in the business of the exporter, or the exporter owns, controls or is interested in the business of the importer, or the importer and exporter operate under a controlling or holding company, notwithstanding the expressed terms of the sale or consignment, the transaction shall be regarded as a sale and the actual selling price to the purchaser in Canada shall be taken to be the value of the goods in the currency of the place or country of export converted into Canadian currency at the current rate of exchange, or at the average current rate from time to time fixed by order of the governor in council, and shall be regarded as less than the fair market value of the goods when sold for home consumption and the provisions of this section shall apply and special or dumping duty shall be deemed to apply equal to the difference between the value of the invoice computed at the current rate of exchange or at the average current rate from time to time fixed by order of the governor in council, and the value of such invoice computed at the rate of exchange for duty so ordered as aforesaid, or may be less than such difference as the governor in council may from time to time order and direct.
Any order in council made hereunder may be varied, extended or revoked at any time by the governor in council.
This subsection .shall be deemed to have had effect from and after the first day of September, 1931.
Resolution agreed to.

Stabilization Fund

Alan Webster Neill: Mr. Chairman, did not the minister promise to allow a debate on the stabilization fund proposal after we passed this?


Edgar Nelson Rhodes: My hon. friend is quite right. The understanding was that by unanimous consent discussion would take place in committee prior to report. The understanding the other day when we were in committee will be found at page 4560 of Hansard:
After we have eoncluded our several items in committee, and just before reporting, I should be perfectly content if by unanimous consent there should be a discussion in committee of the stabilization fund.
That was the understanding arrived at then,
. as against consideration that we would discuss it on a motion to go into supply, which would confine hon. members to one speech,


Alan Webster Neill: I will not detain the committee long; at any rate I will not go as far afield as did the hon. member for Marquette. I just want to reiterate a plea for the inclusion in the stabilization items of pilchard meal and pilchard oil. I brought this up before in a general way, but I lacked full information, and the Prime Minister said the door was left open for further details. I just want to put a few additional facts on the record.
The request is that pilchard manufacturers of British Columbia, which is the only place in Canada where they manufacture pilchard oil and meal, should have their products included in the stabilization scheme. In speaking of it the other day I made a mistake about the valuation of the plants. Thinking of the buildings only I said they would probably be worth $5,000 to $8,000 apiece, but I am advised I was wrong in that regard; I had forgotten the expensive machinery and boats. I am told that the investment will run in each case from $50,000 to $400,000. There are twenty-seven plants, and if you multiply that number by $150,000 as a mean, it gives an investment of over $4,000,000. The industry employs some 2,000 men. I would like to state one or two facts to show the desperate condition this once prosperous industry is in. Four years ago there were twenty-four plants running; last year there were seven. Four years ago eighty-six seines were operating, that would employ at least 600 men; last year there were only twenty-two. Four years ago the selling price per gallon for the oil was thirty-seven cents; last year it was eleven cents, a fall of two-thirds. Wages of fishermen per ton four years ago were $4 ; 'ast year they were $1.60.
In addition to the troubles they had at that time the government made conditions a little more onerous by putting a sales tax on fuel oil, which while it may be of benefit to the coal mines or to the revenue is going to make it more expensive to operate these plants. Hitherto the great market for pilchard oil has been in the United States, where they have a tariff against it of five cents a gallon. When the price is thirty-seven cents that is one thing, but when the price is ten or eleven cents it is a much greater thing, it amounts to fifty per cent. They state that there is no expectation of any sale in the United States this year; the only inquiries for pilchard oil now in hand are from Great Britain. The British market is an enormous one if they can get into it. Japanese shipments of fish oil to Britain last year were 4,000,000 gallons. They state that under present conditions unless something is done the industry is practically wiped out. You can imagine that if it drops from twenty-four plants down to seven it is nearly wiped out. It is impossible to reduce further the charter rates for fishing vessels; they are already so low that they pay only operating expenses. The pay of. fishermen and plant workers is also so low that a further reduction would result in their going on relief. The operators suggest that the only possibility is the inclusion of these products in the stabilization fund, and they say the cost would not be excessive. On last year's products it would amount to someting like $16,500, and probably would be much less now owing to the increase in the value of the pound. They ask also that pilchard meal should be included as well. That is part of the business. The price dropped from $54 a ton four years ago to $20 a ton. The United Kingdom is a market for that also.
I might also suggest as an argument in favour of it that the usual expression used concerning these things is "fish and fish products," and I think that was at one time in the mind of the right hon. Prime Minister, because my recollection is that he used it. But it has not been so expressed; it is only "fresh and canned fish." It is a question of these people 'having to go entirely out of business, in which case 2,000 white people will be thrown out of work and an investment of $4,000,000 will be almost thrown into the discard. The possibility of selling in the United States is negligible because, as I was saying before the right hon. Prime Minister came in, the duty in that country now amounts to about fifty per cent of the value. Formerly it was very much lower, but it is
Stabilization Fund,

a fixed duty and now it amounts to practically fifty per cent of the value. There is an enormous market in Great Britain, and under present conditions the expense to the government would not be very heavy. It is indicated that S16,500 would at least keep these remaining plants operating for another year, and I earnestly hope the government will give this question its serious consideration.


William Duff: 
Alan Webster Neill: The hon. member (Mr. Duff) speaks of including lumber, and as there are large lumber interests in my district I might

Stabilization Fund

be expected to endorse his remarks. I understand however, at least I heard the Prime Minister say some weeks ago, that it was not intended to apply the stabilization fund to lumber because he had in view other methods whereby he hoped to benefit the lumber industry. I take it I am at liberty to guess or to suggest that that means some negotiations with the United States, and that is where we in British Columbia want the market. The stabilization fund might help us to get into the British market, but that would be like trying to make water run uphill. Our natural market for the second and third grade of goods we want to sell is right at hand in the United States; we cut the product the way they want it and they are accustomed to our standards. Putting the duty back as it was last year in the United States would do us infinitely more good, so far as the lumber business in British Columbia is concerned, than including that product in the provisions of the stabilization fund. That at any rate is my individual opinion. What I do want is to have pilchard products included in the stabilization fund. That would do us as much good as applying the fund to salmon. I do not hesitate to say that the stabilization scheme will be of material advantage to the canned salmon industry of the country, and I ain glad to express my appreciation of it; but the including of pilchards would do us as much good. A couple of thousand men are engaged in the industry. I have hopes in this matter, because the Prime Minister, speaking on March 24, said that the door was not closed against other agricultural and fish products. I hope therefore that consideration will be given pilchards later on.
How will this stabilization fund be put into effect? It does not appear that the Minister of Finance intends to bring in an act to carry it out. The money comes out of the general relief vote and I presume that an order in council will be passed. If it is done in that way will the minister publish the order in council so that everyone will know what is included and what the conditions are?


Edgar Nelson Rhodes: It is proposed to bring the stabilization fund into effect by order in council, and it is intended that the widest possible publicity shall be given as soon as it is announced.


Alan Webster Neill: Is there any limit to the fund in dollars, in amount?


Edgar Nelson Rhodes: No.


William Duff: Is the door still open for
other items to be included?


Edgar Nelson Rhodes: I am sure the Prime Minister will carry out his undertaking in that respect.


Alfred Edgar MacLean: I desire to support the
plea made by the hon. member for Antigo-nish-Guystorough on behalf of the people in his section of the country in connection with fish products. As hon. members well know, the largest item of export from Prince Edward Island is potatoes, but because of the embargo against this commodity by the British government, very little benefit will be derived by the producers from the stabilization fund if it does come into effect as far as Prince Edward Island is concerned. Some little benefit may be derived by the producers of cheese and meat products, but that is all. Strong representations have been made to the minister, not only from Prince Edward Island but from other parts of the country, on behalf of the silver fox industry. If any industry lends itself to the application of this stabilization fund it is the silver fox industry. Many people think that as this industry has been in operation for a great number of years it does not need any assistance, but many of the large ranches are not making a profit to-day. They are carrying on in the hope that they may get a break in later years. Shippers of silver fox pelts ship direct to the British market and separate accounts are kept, so that any money which might accrue through this fund would go direct to the shipper and not be absorbed by other interests. If the pound keeps on improving it may be that the government will not have to pay out anything through the stabilization fund. I suppose everyone would welcome that happening.


William Duff: They should make it retroactive.


Alfred Edgar MacLean: There is another factor
to be considered in connection with this industry. It is quite possible that the operation of the stabilization fund will increase the price of meats. As everyone knows, carload after carload of meat products are sent down to the maritimes from the abattoirs in this part of the country. If the price of meat products is increased, there will be an increase in the cost of producing silver fox pelts. If this industry is not included in this fund, its operations would react against it. I hope the Minister of Finance will give this matter his special attention.


James Malcolm: Any cost that might
arise from the payment by the government of the difference between the existing rate of

Stabilization Fund
exchange and $4.60 has now been transferred in large measure from the taxpayers of Canada to the ordinary buyer of the pound when sold on the market. It would almost appear as though the action of the American government in abandoning the redemption of her currency in gold is putting the relationship of the pound to the dollar back to the position occupied when both the pound and the dollar were on a gold basis. Nor personally do I imagine that when the market settles the relationship between the pound and the dollar will differ very greatly from the relationship that existed at the time both currencies were on a gold redemption basis. Inasmuch as the margin between the present rate of exchange and $4.60 mentioned by the government is so narrow, I submit that in order to benefit alike all products, the government might without very heavy expense to the treasury apply the stabilization to all products shipped to Great Britain.


Mr. BENNETT:: The hon. gentleman who has just taken his seat has touched upon one phase of this matter which was in my mind some weeks ago when I spoke in the house and indicated that the door was not absolutely closed. We had some reason to believe that there would be an increase in the value of the pound in terms of dollars. Perhaps that increase has come about more rapidly than was expected by most people, and speaking to-night I should not care to indicate that I was of the opinion that it is at all stabilized. I suppose I should not say more than that the figure at which sterling exchange is selling today is not in my judgment the true measure of what the ultimate value of the pound, as stabilized, will be. However, that is only an individual opinion and has no particular value beyond being my own view of the matter. The circumstances which have brought about the rise during the last few days are perhaps not unknown to hon. gentlemen. All I can say is that if one were certain and could predicate with some degree of authority a fixed value, I believe my colleagues would agree, as I agree, with what has been said by the hon. gentleman. It was for that reason that we did not desire to express with too much certainty a limitation upon the articles which might enjoy the benefit of this fund, and that thought is still in the mind of the government. In particular is that so of the commodities which cannot in any sense be affected at this moment, that is, commodities which will not be in condition for export until much later on in the year. I ask the committee to appreciate our position in the matter. We determined that this was the proper step to take at 53719-295J
this particular time and we did this for reasons which I think most hon. members who have followed the trend of economic conditions will agree were apparent to every observer. Having done so, we contented ourselves for the moment with stating the articles to which it would apply. Those articles have been referred to to-night.
There are such items as apples, which has been pressed so strongly, about which we might be compelled to arrive at another conclusion in the light of crop conditions which may prevail this fall. The same is true with respect to pears, plums, and other fresh fruits which have been finding a market under very considerable difficulties in Great Britain. Apparently the hon. member for Antigonish-Guysborough has misunderstood the effect of the preference upon apples. I think the hon. member for Hants-Kings could represent more authoritatively the views of the apple growers of Nova Scotia. I think this was indicated by his vote upon the United Kingdom agreement. The fact is that to-day apples enjoy a larger preference in the British market than they ever have before. At the moment that preference amounts to $1.25 per barrel as against apples coming from outside the empire. The strongest pressure was exercized by Australia and New Zealand with respect to apples and only last week I was told in Washington that the Argentine is capable of supplying apples which because of seasonal conditions would not conflict with those from Canada. I fancy the former Minister of Trade and Commerce is familiar with the details of the Argentine production of apples. I can only say this: I desire to make it quite clear that the movement in the value of the pound sterling has made the amount payable on the limited number of items mentioned rather small, and contemplating as we did an expenditure much larger than would be involved under existing rates, if there is a stabilized value approximating one around the figures that we have had during the last few days, I will say it might be possible to extend the list, and substantially too. The Minister of Finance and various other members of the government have received applications with respect to a very considerable number of products. I do not suppose it would greatly interest the committee but as a matter of curiosity, the committee might like to learn the views of various Canadians as to the items that might be placed upon that list. They are, for instance:
Macaroni products.
Fresh apples.
Fresh and frozen fish and fish meal industries.
Stabilization Fund

Lumber.
Soft drinks.
Evaporated apples.
Dehydrated apples.
Fresh fruits.
Fresh vegetables.
Pilchard oil.
British Columbia fish oil and fish meal.
Black fox pelts.
Silver fox pelts.
Alfalfa meal.
Farm furs.
All furs.
Mining industry.
Ice cream mix.
Cattle sales made after budget speech.
Ranch raised furs.
Frozen salmon.
Raw fruits.
Canned meats.
Fresh plums.
Fresh peaches.
Fresh pears.
Fruit pulps.
Cider.
Concentrated cider.
Butter.
Pulpwood and pitwood.
Fish oils.
Dry salted fish.
Fruit preserved in sulphur dioxide for English market.
Lobsters.
Cattle exported.
Salt fish.
Wool exported to United Kingdom.
Eggs.
Cheese.
That is a list just recorded as the applications were received in letters sent to various members of the administration. I mention it because it is not as comprehensive a list as at one time I thought -the application would indicate.
I do not think I can usefully sajr more than I have said, except with respect to the matter mentioned by the hon. member for Comox-Alberni. Similar representations containing the figures he has given the committee to-night were embodied in a communication received, I think, by the hon. member for East Kootenay as well as by myself and the Minister of Finance. With respect to that there is just one difficulty which the committee, I am sure, will appreciate, and it is this:	This relief or assistance does not
extend beyond March 31, 1934, which is the date of the expiration of the Relief Act. The pilchard oil industry, in which considerable numbers of men are engaged and substantial capital invested, has been one of recent growth in British Columbia. One of the difficulties that we fear from the investigations that thus far we have been able to make- and they have not been exhaustive under the conditions in which life is carried1 on from day to day here-is this: that this might

stimulate the industry merely for a few months inasmuch as the power which is conferred expires on March 31 next and the reaction might be so injurious to the new industry as to counteract any benefits that would accrue by the action suggested.


William Duff: I agree with that.


Richard Bedford Bennett: The fact that the hon.
member for Antigonish-Guysborough agrees with it, puts the imprimatur of high authority upon the matter of fish.


Albert Joseph Brown: Extend the argument to
artificial stimulus of trade.


Richard Bedford Bennett: I am sorry the hon.
member for Lisgar has lived so long on the prairies that he is not able to understand the fish argument made by the hon. member for Shelburne-Yarmouth and the hon. member for Comox-Alberni. But the only point I desire to make is that the matter has been considered and the question of determining the extent to which the reaction might be injurious rather than helpful has not been determined. It has not been settled that some assistance along the line suggested may not be given to the industry.
The hon. member for Lisgar suggests an artificial stimulus to industry. I can safely say that the cattle growers on the prairies do not look upon the matter in that way; they, represented at least in the other house by one of the ranchers from Alberta, do not hold any such idea as that. At a meeting of the Western Cattle Growers' Association, they passed a resolution stating that the action taken at the time it was, meant the salvation of the cattle industry on the plains. But if, as the former Minister of Trade and Commerce says, ordinary conditions bring about a value of the pound of $4.60 or any value approximating that, we shall rejoice that the necessity for relying upon the fund will have passed and that the conditions of trade in the world, world price levels and commodity prices generally will have ensured a return to some measure of prosperity that will enable the businesses to which 1 have referred to carry on at a profit and not under conditions that now exist.
I should have said that in regard to the pilchard oil industry there are special difficulties of which the hon. member for Comox-Alberni is no doubt aware. The experimental stage has undoubtedly been passed in connection with the use of pilchard oil, but the competition is such as to make it extremely

Stabilization Fund
difficult to predict with any degree of certainty what conditions may be within the not distant future. I suppose the hon. gentleman knows to what I refer.
With respect to lumber, the imposition of a revenue tax upon lumber by the United States was, as will be recalled by the committee, for a limited time only, and, if my memory serves me arig-ht, it expires next year. It was not a tariff; it was included in the revenue bill, and I think it is only fair to say that with the entire disapproval of the administration it was written in for very special reasons through the efforts of those who live in states contiguous to British Columbia and who are also engaged in the lumber industry. Undoubtedly the embargo placed by Great Britain upon the importation of Russian lumber during the last few weeks has had some effect upon the lumber industry in the eastern part of Canada. The distances are so great that the same benefit has not aocrued with respect to British Columbia lumber, but some benefits have arisen by reason of that in regard to the finer qualities of fir and lumber that, as I understand the matter, are used for finishing purposes in Great Britain.
The list that was submitted to the house of course embraces a larger number than thirteen items because, for instance, meats include a large number of items, such as:
Bacon and hams, shoulders and sides.
Beef and veal, fresh, chilled or frozen.
Beef and. veal, pickled in barrels.
Mutton and lamb, fresh, chilled or frozen.
Pork, dry salted.
Pork, fresh, chilled or frozen.
Pork, pickled in barrels.
Poultry, dressed.
Other edible meats.
That would be the classification involved in the use of the word "meats" with respect to the fund. The item of eggs involves three classifications:
Eggs in shell.
Eggs, dried.
Eggs, frozen.
The item of milk products embraces several classifications. I am afraid I have been very discursive in what I have had to say to the committee, but I desired only to make it clear that in the light of improving conditions with respect to the medium of exchange between the two countries we may be able substantially to broaden the list without increasing the expenditure.


James Malcolm: My observation directed to the Minister of Finance with respect to the narrowness of the spread between the
existing rate of exchange and $4.60 was not based particularly on the belief that it is a wise plan to bonus all commodities exported to Great Britain, but rather on the fact that the amount of money involved being very much less with the narrower spread on account of present exchange rates, as mentioned by the Prime Minister, made it possible to extend this list to include all commodities. It is, of course, natural for everyone to have a desire to sell his commodities, whether abroad or at home, in terms of dollars with which he is accustomed to deal, and it is indeed desirable that our exporters should know how many dollars they will receive for any given quantity of their exports. It is dangerous for anyone to make any prophecy on the fluctuations of the money market, but I do feel that the rate of exchange in Canada to-day, being practically the same as it was when both England and the United States were on the gold standard, only indicates that so long as they both stay off the gold standard, or if they both come back on, the parity of exchange will not fluctuate violently from the present level of $3.90 to $4. Inasmuch as the benefits of this stabilization fund expire in March, 1934, and as between now and then the Prime Minister will have attended the world economic conference in London, I hope for the sake of the trade of the world that before next March some definite relationship will have been established between the various currencies of the trading nations. I do not estimate that the spread between the current rate of the pound and $4.60 will be very much greater than twenty or thirty cents at any time. I doubt if it will be that. To-day there is only the matter of a very few cents difference.
I do submit again that the government would be well advised to adopt the principle of giving this assistance to all exports so that the exporters may realize from the stabilization fund on their commodities, whether they be lumber, fish or any other commodity, unless through some drastic drop in the value of the pound the assistance could no longer be continued. The government, of course, has the right under the legislation giving them power to deal with emergencies to withdraw this assistance if they are not able to continue it.


Richard Bedford Bennett: I think the hon. gentleman must be in error when he says that the relationship of the pound to the dollar, and the dollar to the pound, is substantially the
Stabilization Fund

same as it was when both Great Britain and the United States were on the gold standard. The English pound before Great Britain went off the gold standard was quoted at $4.80 to $4.90.


James Malcolm: In Canada, yes.


Richard Bedford Bennett: In Canada it was usually at par before Great Britain went off the gold standard. I think my hon. friend is confusing the $3.90. Par was $4.86, and the value in the United States, whether it be by cable transfer or on demand or thirty days, was usually somewhere between $4.80 and $4.90, par then being $4.86, while to-day it is only slightly over $4.


James Malcolm: It is not quite $4.


Richard Bedford Bennett: It ran to $4 at the close for a little while. So there is a discount of 86 cents on the American side. Here in Canada we ran to-day up to $4.52 as a maximum, I think, reflecting to a very large extent the difference between Canada and New York with respect to currency generally. I just correct my hon. friend because I think his observations were directed to the time when Great Britain was off the gold standard and America was still on.


James Malcolm: That is so.


Richard Bedford Bennett: What he said was when both countries were on the gold standard. It was just that, that I desired to correct.


Mr. MOTHERWELL:: Ever since this
stabilization fund was announced by the Minister of Finance I have been in somewhat of a dilemma to know upon what basis these thirteen commodities have been selected. "When the matter was under discussion shortly after the announcement was made I endeavoured then to find out the basis and failed. I will be more particular now with regard to what I have in mind.
Why were animals, for instance, chosen as one of the commodities, when we all know that anything paid out of the stabilization fund will be less likely to get back to the producer in respect of this commodity than of almost any other commodity of the thirteen you could mention? I do not need to mention the reasons. I might indicate, however, that the packing industry is pretty much one entity in Canada, and you have not the ordinary competition that you would get if there were a number of independent packers, although 
there are a few, of course. This exchange stabilization will not therefore reflect itself back as freely on animals as it would on many other commodities I might mention.
Again, why is cheese put on this preferred list and not butter? An attempt was made to explain that, but I certainly could not understand it. Cheese has been included among milk products but not butter. If cheese is made from a different kind of milk or a different kind of cow than butter I did not know that before. Milk products, of course, include both these commodities, and yet one gets the preference and the other does not. One is taken and the other is left for no apparent reason.
Then why should honey and maple sugar products be given this preference when both these commodities have already been given a substantial hoist because of the duty on sugar? All these saccharine products are affected by the sugar duty, consequently the tiny bee and the maple tree are very much in on this deal. There is only $16,000 worth of honey exported and $180,000 worth of maple products. A number of articles are mentioned in the return which I got from my hon. friend the minister, particularly on representations from the west, but those people had no idea under the sun when they were asking for these things that the government (was going to make a selection of thirteen articles and never include one of the cereals on the selected list or butter or many other articles I could mention. I could not imagine any more teeny-weeny pinhead way of dealing with a big national question than that which the government has adopted, waiting and waiting, dilly-dallying and shilly-shallying until almost there was no occasion for the stabilization fund, and then at last under the reflected glory of the president of the United States the government emerges with some tiny degree of credit in the matter.
May I ask one or two other questions for information which will enable us to talk a little more intelligently and a little more comprehensively on Monday if this matter again comes up then? I wonder what was the lowest figure to which the pound dropped since September, 1931? Could the minister tell us?


Edgar Nelson Rhodes: I would not like to give
a figure offhand, but I could get it.

Customs Tariff Amendment


William Richard Motherwell: I would be interested in having that. Then another question; why should canned frujt and canned vegetables be given the benefit of this stabilization fund while the raw products are not? It is true that some of these raw products would be too perishable to export, but the fact remains that when they are manufactured they come on the preferred list. That requires some justification, I think. Then in estimating the losses we must consider not only the enormous losses that have been sustained on farm products, but also those on factory, forest and everything since September, 1931. Now when there is nothing mudh to be done the (government comes along courageously to do something already done by nature. Let nature take her course! The law of the survival of the fittest always works, but it is a ghastly and costly process, leaving wreckage in its trail all over the country. The same with the law of supply and demand; it is sure to work, but what [DOT]happens to our people in the meantime?
These are some of the cogitations I engage in on this quiet Friday night, I do not know if I can continue in the same vein on Monday. Ju-st now the government is pretty quiescent; it knows it is vulnerable to attack on front and rear and on both flanks. If any flank is more exposed than another it is the rear, I think. I am not saying this threateningly, but if my bon. friends knew the condition of the country, especially of agriculture, the despair and distress that exist while they are dilly-dallying with this thing, I do not believe they would be able to muster a smile at all. I find great difficulty in being able to smile about it myself. If you notice, Mr. Chairman, I have been keeping distressingly quiet. You know what is said about the weather when it is very quiet; it indicates a storm brewing. I do not think there is anything like that in my case, but I feel terribly serious to think the government has waited so long to throw us even a wee lifeline. I have heard some supporters of the government telling each other what a lucky fellow that man Bennett is-


Richard Bedford Bennett: They don't know!


William Richard Motherwell: Possibly. Here he
is holding on to his wheat with the backing of the Dominion government, while the rest of us. with no backing behind us, had to sell
ours during last December at five bushels for a dollar. He hung on to his, but at the expense of those who had to sell. The cheaper it was the more we had to sell to get a bit of money to pay our taxes. All those things are still fresh in our minds, and will keep until Monday as far as I am concerned. I think if the minister would give us that exchange information by months from the time the pound went off gold, and maybe a month before, it would be of interest.
As to the canned vegetables, some of these of course could not be exported in the raw state, but somehow the manufacturers get in on these things pretty frequently. Of course if they passed the stabilization fund proceeds back to the growers it would not be so bad, but how much would be passed back? A great many of these products are controlled under a complete merger. A merger is not always a bad thing, but if they want to use it for bad purposes they can do so.
Another thing; will the minister provide us with an estimate of the number of commodities that we export to Great Britain? Thirteen are mentioned; I wonder if there are a thousand altogether. If there are thirteen hundred then at the rate of thirteen a year it would take one hundred years to get around to them. I do not think there are thirteen hundred, but there may be half that number, in 'which case it would take fifty years to cover the lot at thirteen per year.


Edgar Nelson Rhodes: Would there be any objection to reporting the resolutions for the purpose of bringing in a bill, it being understood that this discussion can continue when we are next in ways and means?


William Lyon Mackenzie King: Yes, that will be satisfactory.
Resolutions reported, read the second time and concurred in.


Edward James Young: Mr. Chairman, there is one resolution which has not been dealt with.


CUSTOMS TARIFF AMENDMENT
[Stage Direction]
Hon. E. N. RHODES (Minister of Finance) moved for leave to introduce Bill No. 93, to amend the Customs Tariff.
Motion agreed to and bill read the first time.
Questions

[Stage Direction]
Hon. E. N. RHODES (Minister of Finance) moved for leave to introduce Bill No. 94, to amend the Excise Act.
Motion agreed to and bill read the first time.

[Stage Direction]
Hon. E. N. RHODES (Minister of Finance) moved for leave to introduce Bill No. 95, to amend the Special War Revenue Act.
Motion agreed to and bill read the first time.

[Stage Direction]
Hon. E. N. RHODES (Minister of Finance) moved for leave to introduce Bill No. 96, to amend the Income War Tax Act.
Motion agreed to and bill read the first time.
At eleven o'clock the house adjourned without question put, pursuant to standing order.
Monday, May 8, 1933