1936-06-15

INDUSTRIAL AND INTERNATIONAL RELATIONS

[Stage Direction]
Third report of the standing committee on industrial and international relations-Mr. McIntosh.


[Stage Direction]
Hon. T. A. CRERAR (Minister of Mines) moved for leave to introduce Bill No. 102, respecting the establishment of a national park in each of the provinces of Nova Scotia and Prince Edward Island.
He said: The purpose of the bill is to establish parks in the provinces of Nova Scotia and Prince Edward Island. Under the Parks Act legislation of this kind is necessary. When the estimates were under consideration there was some discussion concerning the proposed national parks. There are practically no details in the bill to explain, beyond the fact that in Nova Scotia the park will be in the northern end of Cape Breton Island, while in Prince Edward Island the exact location has not yet been definitely established. There is a choice among three or four sites, and it is expected a decision will be made shortly.
Motion agreed to and bill read the first time.

[Stage Direction]
(Questions answered orally are indicated by an asterisk.)

Mr. BARBER:: 1.	What was the total cost of the commission appointed by the present government to inquire into employment camps?
2.	What amount was paid to each member in salary, and, or, per diem allowances and expenses?


Mr. ROGERS:: 1.	$6,423.28.
Allowance
at $20
2.	per diem

Mr. W. Humphrey Mitchell	 1,720 00
Dr. E. W. Bradwin	 1,720 00
Mr. R. A. Rigg	
Burr Motors, Princeton, B.C	
Transportation for the three members of the committee.
Travelling
Expenses

1,037 09 1,056 25 859 94 30 00
Note.-Mr. R. A. Rigg, director of the employment service of Canada, who was a member of the committee appointed to make a survey of the relief camp situation, received no additional remuneration for his services in that connection.


VIMY WAR MEMORIAL
Mr. LAPOINTE (Matapedia-Matane):: 1.	What inscriptions will be engraved on the Canadian War Memorial at Vimy?
2.	Will they be bilingual?


Mr. MACKENZIE (Vancouver):: Four inscriptions will be engraved on the Canadian War Memorial at Vimy: Two in both English and French; one in French; one in Latin. These inscriptions are as follows:-

Main inscription on westerly face of pylons:-


TO THE VALOUR OF THEIR COUNTRYMEN IN THE GREAT WAR AND IN MEMORY OF THEIR SIXTY THOUSAND DEAD THIS MONUMENT IS RAISED BY THE PEOPLE OF CANADA. A LA VAILLANCE DE SES FILS PENDANT LA GRANDE GUERRE, ET EN MEMOIRE DE SES SOIXANTE MILLE MORTS, LE PEUPLE C AN AD IE N A ELEVE CE MONUMENT.
[Stage Direction]
On the inner face of the second front wall:-
THE CANADUN CORPS, ON APRIL 9th, 1917, WITH FOUR DIVISIONS IN LINE ON A FRONT OF FOUR MILES ATTACKED AND CAPTURED THIS RIDGE.

Questions

[Stage Direction]
On front of one pylon, near the figure of sacrifice:-
FRERES D'ARMES FRANQAIS ET BRITANNIQTJES LE CANADA SE SOUVIENT!
Note: These words are intended as a tribute to French and British troops who suffered so heavily on this ground.
On the Tomb in front of the memorial:-
IN MEMORIAM SEXAGINTA MILLIUM CAN ADEN SIUM QUI ANNO DOMINI MCMXIV-MCMXVIII IN ARMIS ULTRA MARE VITAM PRO PATRLt ULTRO DEDIDERUNT.
Note: This may be rendered in English as follows:

Mr. CHURCH:: 1.	Has the attention of the government been called to working conditions of the red caps at the Union Station, Toronto, under the employ of the Toronto Terminal Company, made in the house last Thursday by the hon-ouraMe gentleman for West Hamilton (Mr. Wilton), reported on page 3678 of Hansard?
2.	How many red caps are employed by this company at this terminal?
3.	How many are single and how many married men?
4.	How many of them are returned soldiers?
5.	What is the wage schedule, if any?
6.	How many are receiving no pay, only tips from the public?
7.	Will the government institute an inquiry into it?
8.	What are the wages per week paid by this company for the ten only out of sixty who receive any pay?


Mr. HOWE:: The government has no information on this question. Red caps are employed by an independent corporation which acts for both railways, and details of its management are not available to us.


BAIE STE. ANNE, N.B., WHARF CONSTRUCTION
Mr. BROOKS:: 1.	Were tenders called for certain government work at Baie St. Anne, Northumberland county, New Brunswick, in the year 1935-36?
2.	If so, who were the tenderers, what was the amount of each, and to whom was the contract awarded?


Mr. CARDIN:: 1.	Yes, for construction of wharf.
2.	(a) and (b)
To tal as per unit prices quoted in form of tender
James T. Forrest... $16,049	00
J. Willard McMulkin..	..	19,977	00Diamond Construction Company, Limited..	..	21,840	00Abraham Asoyuf	
22,270	00J. E. and D. P. Connolly..	22,643	00Harold N. Price	
22,985	00Thos. P. Charleson	23,006	50
S. A. Doyle and W. A.
McKay	 23,531	00
(c) No contract awarded.



BLACK ROCK, N.S., WEIR PRIVILEGES

Mr. BROOKS:: 1.	Were weir privileges applied for and granted to C. V. Rawding at Black Rock, Kings county, Nova Scotia, in the year 1935?
2.	Has Mr. Rawding applied for these privileges again this year (1936)?
3.	If so, have they been granted?
4.	If not granted, for what reason or reasons were they refused?
5.	How much has Mr. Rawding spent for purchasing equipment, etc., in expectation of being granted this privilege?


Mr. MICHAUD:: 1.	A licence to operate a weir at Eaton Point, which is immediately adjacent to Black Rock, was applied for in 1935 by C. V. Rawding. A licence was granted on condition that it would not be renewed if it detrimentally affected the operation of the existing weir at Black Rock.
2.	Yes.
3.	No.
4.	Because it did detrimentally affect the Black Rock weir.
5.	No information.



TRANS-CANADA HIGHWAY, QUEBEC

Mr. POULIOT:: 1.	Was the federal government officially notined by the province of Quebec of a change to the Trans-Canada highway in Temiseouata county ?
2.	If so, on what date, and by whom?


Mr. ROGERS:: 1.	Yes.
2.	Under date of June 9, 1936, Jos. L. Boulanger, Esq., Deputy Minister of Highways for the province of Quebec, forwarded to the honourable the Minister of Railways and Canals a copy of executive order of the Province of Quebec No. 1630, approved
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I would much appreciate receiving from you definite information regarding the correctness or otherwise of the above referred to newspaper item and a copy of the order in council if such has been passed.
Yours very truly,
W. M. Dickson,
Deputy Minister.
The Honourable Emile Cote,
Minister of Roads,
Quebec, P.Q.
The Honourable the Minister _ of Public Works	reports for	the	information	of the
committee of the executive council:
That he has received a request from the Right	Honourable	R.	B. Bennett,	Prime
Minister of Canada, that the right-of-way of the Trans-Canada Highway through the province of New Brunswick be definitely designated;
The	Honourable	the	Minister of	PublicWorks now recommends that the route of the Trans-Canada Highway through the province of New Brunswick	be	definitely fixed and
designated as the route ordinarily known as route No. 2 and generally described as follows: -

"Beginning at a point from the boundary line between the province of Quebec and the province of New Brunswick where the main trunk highway route No. 2 intersects the said boundary line of the western side of the Madawaska river; thence following the main trunk highway on the west side of Madawaska river to Edmundston; thence along the eastern side of the St. John river to Grand Falls; thence along the western side of the St. John river to Andover crossing St. John river to Perth; thence down east side of St. John river to Hartland; thence down west side of St. John river through Woodstock, Fredericton, Oromocto, Gagetown, Westfield to St. John; thence from St. John through Sussex, Moncton and Saek-ville to the Nova Scotia boundary near Aulac." This route shown as route No. 2 on the attached map.
And the committee of council concurring in said report and recommendation,
It is accordingly so ordered. Certified passed.
August 15, 1931.
M. B. Dixon,
Clerk Executive Council.

Questions
Translation
Copy of the report of a committee of the honourable the executive council, dated October 1, 1931, approved by the Lieutenant-Governor October 2, 1931.
Concerning the Trans-Canada Highway
The Honourable, the Minister of Highways, in a memorandum dated October 1 (1931), recommends:
That a road be built across the province of Quebec, said road to be known as the "Trans-Canada Highway";
That said highway be made up as follows:
Highway No. 2 from the boundary line of New Brunswick, between Saint-Jacques, New Brunswick, and Sainte-Rose-du-Degele, province of Quebec, to the city of Levis, passing through the town of Riviere du Loup and following the river road between the village of Andreville and Sainte-Anne de la Pocatiere;
Highway No. 3, from the city of Levis to the intersection of highway No. 1;
Highway No. 1, by way of the Quebec bridge, from the intersection of highway No. 3 to Quebec city;
Highway No. 2, from Quebec city to Montreal following the river road connecting Saint-Sulpice and Charlemagne.
Highway No. 8, from Montreal to Hull.
Certified true copy.
A. Morrisset,
Clerk of the Executive Council.
Translation
Copy of the report of a committee of the honourable executive council dated June 7, 1933, approved by the Lieutenant-Governor, June 8, 1933.
Concerning the Trans-Canada Highway
The Honourable the Minister of Highways, in a memorandum dated June 7	(1933),
recommends:
That the alignment of the Trans-Canada Highway as determined by order in council No. 2510, dated October 2, 1931. and modified by order No. 524 on the 25th March, 1933, be further modified so as to follow the section of highway No. 2 which passes through the town of L'Assumption, instead of the river road, connecting Saint-Sulpice and Charlemagne.
Certified true copy.
A. Morrisset,
Clerk of the Executive Council.
Translation
Copy of the report of a committee of the honourable the executive council dated March 24, 1933, and approved by the Lieutenant-Governor on March 25, 1933.
Concerning the Trans-Canada Highway, in the province of Quebec
The Honourable the Minister of Highways, in a memorandum dated March 24 (1933),
recommends that the order in council No. 2510, approved October 2, 1931, in connection with the alignment of the Trans-Canada Highway, in the province of Quebec, be amended so that the alignment of said Transcontinental highway, between Montreal and Ottawa, follow highway No. 8 as far as Grenville, to cross thence to Hawkesbury by the new Interprovincial bridge over the Ottawa river, and proceed towards the federal capital on the Ontario side.
Certified true copy.
A. Morrisset,
Clerk of the Executive Council.
Ontario
Executive Council Office
Copy of an order in council, approved by The Honourable the Administrator of the Government of the Province of Ontario, dated the 26th day of August, A.D. 1931.
The committee of council have had under consideration the report of the Honourable the Minister of Lands and Forests, dated August 26th, 1931, wherein he states that the government of the Dominion of Canada have signified their intention of joining with the provinces in the construction of the Trans-Canada Highway as a national road and have agreed to make contributions to the construction of the said highway by the provinces;
Whereas the route of the said Trans-Canada Highway across the province of Ontario has been fixed by the province as to parts thereof and surveys are now in progress so as to obtain the necessary information to enable the Government of the Province of Ontario to designate the route of the balance of the said road;
And whereas it is desirable to designate by order in council such parts of the route of the said road as are ascertained so that work may proceed thereon promptly.
The Minister, therefore, recommends that the route of the proposed Trans-Canada Highway in Northern Otnario be designated as follows:
Section 1. Commencing at the northerly or westerly boundary of the Town of Pembroke in the County of Renfrew, and there connecting with Highway No. 17 of the King's Highway System of the Province of Ontario, and following the valley of the Ottawa River on a relocation of the existing road easterly and northerly on the south shore of the said Ottawa River to the Town of Mattawa, and thence westerly on a new survey to the easterly limit of the City of North Bay in the District of Nipissing, and
Section 2. Commencing at the westerly boundary of the town of Schreiber in the District of Thunder Bay and thence westerly following the northerly shore of Lake Superior to the Village of Nipigon, thence southwesterly to the Cities of Port Arthur and Fort William, and thence westerly through Upsala, Dryden and Kenora to a point 23-11 chains south from Mile Post 24 on the Interprovincial Boundary between the Province of Ontario and the Province of Manitoba and there connecting with the Trans-Canada Highway now being constructed by the Province of Manitoba.
The Minister further recommends that the Minister in charge of the Department of Northern Development be given authority to continue the survey and reconnaissance now being made to ascertain the most desirable route for the Trans-Canada Highway between the said City of North Bay and the Town of
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Schreiber, and upon the completion of the said survey to make a recommendation to Council as to the route of the said Trans-Canada Highway in the said territory.
The committee of council concur in the recommendation of the Honourable the Minister of Lands and Forests, and advise that the same be acted on.
Certified,	_
C. F. Bulmer,
Clerk, Executive Council.
Ontario
Executive Council Office
Copy of an order in council approved by The Honourable the Lieutenant-Governor, dated the 23rd day of November, A.D. 1932.
Upon consideration of the report of the Honourable the Minister of Highways wherein he states that by an order in council dated the 25th day of September, A.D. 1931, the route of the Trans-Canada Highway was designated from Ottawa easterly to the Quebec border, following King's Highway Number 17;	_
Whereas the Province of Quebec is desirous of having this link in the Trans-Canada Highway designated along the north shore of the Ottawa River within the Province of Quebec;
And whereas it would appear that a reasonable compromise between the original plan of the Ontario government and of the Quebec government should be adopted.
The Honourable the Minister of Highways recommends that the order in council passed on the 25th day of September, A.D. 1931, be repealed, and that the route of the proposed Trans-Canada Highway in eastern Ontario be designated as follows:	.
Commencing at the Perley Bridge m the Village of Hawkesbury and continuing westerly on King's Highway Number 17 in the province of Ontario through the towns of Hawkesbury and Rockland to the city 9f Ottawa; thence continuing in a westerly direction on King 8 Highway Number 17 through the Village of Carp, the towns of Arnprior and Renfrew, via the village of Cobden, to the town of Pembroke, with such deviations as may be necessary to permit of improvement of the said road.
Certified,
C. F. Bulmer, Clerk, Executive Council.
Ministere de la Voirie Province de Quebec
Quebec, le 9 juin 1936. Honorable C. D. Howe,
Minister of Transport,
Parliament,
Ottawa, Ont.
Dear Sir:
The Honourable Minister of Highways directs me to enclose you, herewith, a certified copy of order in council No. 1630 passed on the 3rd and approved on the 5th instant, changing the location of Trans-Oanada Highway in the lower part of this province.
I trust that you will see your way clear to recommend that such a change be approved by the federal government.
Thanking you, I remain,
Yours very truly,
J. L. Boulanger,
Deputy Minister.
(Translation)
Copy of the report of a committee of the honourable executive council dated June 3, 1986, approved by the Lieutenant-Governor, June 5, 1936.
Concerning the change in the route of the Trans-Canada Highway.
The Honourable the Minister of Highways,. in a memorandum dated June 3	(1936),
recommends:
That the location of the Trans-Canada Highway, determined by order in council No. 2610, dated October 2, 1931, and amended by order in council No. 524, dated March 25, 1933, be further amended so as to replace section of highway No. 2, from the boundary of New Brunswick to Riviere-du-Loup, by section of highway No. 6, between Matapedia and Sainte-Flavie, and highway No. 10, from Sainte-Flavie to Riviere-du-Loup.
Certified copy
Wm. Learmonth,
Assistant Clerk, Executive Council.
June 11, 1936.
Dear Sir:	-
I hiave yours of the 9th instant with enclosed certified copy of order-in-council No. 1630, passed on the 3rd and approved on the 5th instant, changing the location of the Trans-Canada Highway in the lower part of the Province of Quebec. I am referring your correspondence to the Minister of Labour as this is a matter which comes under his jurisdiction. Yours very truly,
C. D. Howe.
Jos. L. Boulanger, Esq., Deputy Minister, Department of Roads, Quebec, P.Q.
Office of
The Minister of Railways and Canals Ottawa, Canada
June 11, 1936
My dear Colleague:
I am attaching hereto letter received from Jos. L. Boulanger,- Deputy Minister, Department of Roads, Province of Quebec, with copy of order-in-council referred to therein. As this is a matter earning within the purview of your department, I have advised Mr. Boulanger that his communication was being referred to you for attention.
Yours faithfully,
C. D. Howe.
Honourable Norman McL. Rogers,
Minister of Labour,
Ottawa.


Mr. POULIOT:: Did the dominion government approve any change in the course of the Trans-Canada highway in the province of Quebec this year?


Mr. ROGERS:: No.



PREROGATIVES OP THE PRIME MINISTER

Mr. POULIOT:: 1. Referring to return S.P. 171Q of June 12, 1936, and the statement of the office of the

Questions as Orders for Returns
privy council to the effect that "among the special prerogatives of the Prime Minister is that of making recommendations in any departments of the government," is that a prerogative of the Prime Minister to make recommendations to council on behalf of any other head of department when he is not acting head of such department?
2.	If so, since when, and in virtue of what authority?
3.	What is the quorum of the privy council?


Mr. MACKENZIE KING:: 1.	Yes.
2.	For at least forty years, in virtue of orders in eouncil passed from time to time.
3.	Four.



QUESTIONS PASSED AS ORDERS FOR RETURNS


Mr. PERLEY (Qu'Appelle):: 1.	How many men are employed on the seasonal or temporary staff at the port of Fort Churchill at the present time?
2.	What are their names, and home addresses, and who recommended each of them?


MARKET GARDENING PRODUCTS-VALUE FOR DUTY PURPOSES
Mr. LACOMBE:: 1.	Did the government determine the valuation of certain market gardening products with a view to the imposition of customs duties thereon ?
2.	If so, upon what date, and upon what products?
3.	Were these valuations imposed by order in eouncil, and were the customs duties fixed in like manner?
4.	If so, at whose request were these valuations made, and the rates of duty determined?


NATIONAL EMPLOYMENT COMMISSION
Mr. BARBER:: 1.	Who have been appointed to the national employment commission?
2.	What are their addresses and occupations?
3.	What amount is to be paid each member by way of salary, and, or, per diem allowance and expenses?
4.	Who are employed under the commission and what salaries are paid such employees?


Norman McLeod Rogers: Return tabled herewith.


COAL INQUIRY
Mr. CHURCH:: 1.	Has another royal commission been appointed to investigate the coal question in Canada?
2.	If so, who is the commissioner?
3.	Will a copy of his commission be laid on the table?
4.	What knowledge of the coal business does the commissioner possess and what are his qualifications?
5.	What action has been taken regarding .a recent report of a prior commission on the same subject?
6.	Have any prosecutions resulted from this report, or to give effect to its findings?
7.	Will the report of the new commission be received before coal is purchased by consumers for next winter?


NEW BRUNSWICK PUBLIC BUILDINGS-COAL
Mr. BROOKS:: 1.	What persons or companies were awarded contracts for the supplying of coal for the dominion public buildings in New Brunswick for the coal year 1936-37?
2.	What tonnage was given to each contractor, what building or buildings was each to supply, what grade of coal, and at what price per ton?


INSPECTION OF POTATOES-NEW BRUNSWICK
Mr. PATTERSON:: 1.	What rate, per car, is charged for inspection of table potatoes in New Brunswick?
2.	Who collects this inspection fee?
3.	Has every inspection account in New Brunswick' been paid to date; if not, what amount is outstanding?
4.	If any amounts are outstanding, what are the names of the firms and their respective amounts?



MOTIONS FOR PAPERS


Mr. WERMENLINGER:: For a copy of all correspondence, telegrams * and other documents respecting the dismissal of Mr. M. P. Graham of Napanee, Ontario, as official receiver under The Farmers' Creditors Arrangement Act; also a copy of all correspondence, telegrams and other documents relating to the appointment of one Stuart Simmons, former tax collector for the township of Ernesttown to the aforesaid position.
CANADIAN PACIFIC RAILWAY-LOAN OF $60,000,000 Mr. POULIOT:
For a copy of all correspondence between the Minister of Labour, from May 31, 1933, to October 23, 1935, and one or any of the chartered banks or any railway company in connection with the guarantee given by the dominion government for the $60,000,000 loan to the Canadian Pacific Railway Company.



DOMINION GUARANTEE OF NEWFOUNDLAND LOAN

Jean-François Pouliot: For a copy of all correspondence in the possession of the government with regard to the dominion guarantee of a Newfoundland loan between August, 1930, and October, 1935.



BUSINESS OF THE HOUSE

Mr. J. S. WOODSWORTH (Winnipeg North Centre):: Would the Prime Minister indicate on what day the estimates for the Department of External Affairs will be brought down?

Franchise Act


Right Hon. W. L. MACKENZIE KING (Prime Minister):: Mr. Speaker, it is the intention, of the government to proceed with the various bills on the order paper before taking up further estimates. I do not give that as an order to be followed too rigidly, but it is our desire at as early a stage in this week as possible to get over to the Senate as much in the way of legislation as we can. I see no reason why the item to which the hon. member refers should not be among the very first to be considered when we reach a further consideration of estimates. Possibly Thursday at the latest might be fixed as a suitable day, if that is agreeable, and I hope that perhaps Wednesday may be arranged.



DOMINION FRANCHISE ACT, 1934

[Stage Direction]
The house resumed from Friday, June 12, consideration in committee of Bill No. 81, to amend the Dominion Franchise Act (dominion by-elections)'-Mr. Rinfret-Mr. Sanderson in the chair).
On section 2-Qualifications.
Mr. RINFRET:: Mr. Chairman, when we
dealt with this bill the other day the leader of the opposition suggested that we let stand subparagraph (c) of paragraph (B) of section 2, which deals with the qualifications of the voter, and in the last lines of which appear the words "and has continued to be ordinarily resident therein until polling day." The right hon, gentleman very properly pointed out that this condition could not be foreseen. Evidently the intention was to cover the case of the rural voter who can always present himself at the poll at the last moment, but that case is already covered by the Dominion Elections Act. There seems to be no purpose in having this provision here, and I would ask the chairman of the special committee to move to strike out those words.


Mr. BOTHWELL:: I move:
That section 2, subsection (b), paragraph (c), be amended by striking out the word "before" in the twenty-first line of the page and substituting therefor the words "immediately preceding"; and by deleting therefrom the following words, "and has continued to be ordinarily resident therein until polling day."


[Stage Direction]
Amendment agreed to.
Louis Édouard Fernand Rinfret: The leader of the opposition also directed our attention to paragraph (H) on page 24 of the bill. Evidently it is a useless section because the case is already covered by the first lines of section 2, which says that this bill applies only to by-elections. Why it was repeated here we were

not able to find out, and I will ask the chairman of the special committee to move that it be removed.


Charles Edward Bothwell: I move, Mr. Chairman, that subsection (H) on page 24 of the bill be deleted.


Mr. BENNETT:: Will that quite cover the situation? You see, you are retaining part of section 55. Is (I) dealt with separately? The whole of (H) comes out?


Charles Edward Bothwell: Section 55 was struck
out at the last sitting, and section 54 is now completely struck out.


Louis Édouard Fernand Rinfret: Mr. Chairman, the point
made by the right hon. gentleman is that the letter (I) will now be replaced by (H).


[Stage Direction]
Amendment agreed to.
Section as amended agreed to.
Bill reported, read the third time and passed.


[Stage Direction]
Hon. C. D. HOWE (Minister of Railways and Canals) moved the second reading of Bill No. 99, respecting the appointment of auditors for national railways.
Motion agreed to, bill mad the second time, and the house went into committee thereon, Mr. Sanderson in the chair.
On section, 1

Auditors appointed.
Richard Bedford Bennett: The only point I find
it difficult to understand, Mr. Chairman, is that the act says that the auditors shall be appointed by resolution. There is no objection to proceeding by way of a bill, but it was originally intended that a resolution of both houses would be all that was necessary to appoint auditors.
The other point to which I would direct attention is that practically six months of the year have gone; presumably, as was the case on the other occasion, there has been a continuous audit by the present auditors, and some provision should be made to compensate them for their services during that period of time if they have, as I believe they have, continued the audit of the company's books during the last six months. It is now the middle of June. I intended to look up over the week-end the statute that appointed the Clarkson firm as auditors. I have not it beside me at the moment but I will look it up.

C .N.II.-Auditors


Clarence Decatur Howe: It has been the practice to pass a bill for the appointment of the auditors. The difficulty is that the act says there shall be a resolution of parliament, and unfortunately there is no such thing.


Mr. CAHAN:: Yes there is.


Clarence Decatur Howe: A resolution of parliament?


William Lyon Mackenzie King: A resolution
of both houses of parliament but not of parliament.


Charles Hazlitt Cahan: A resolution of parliament is a resolution of both houses.


William Lyon Mackenzie King: The crown is part of parliament.


Charles Hazlitt Cahan: A resolution of parliament has usually been construed to mean a joint resolution by both the Commons and Senate. I think such a resolution would fulfil the requirements of the statute.


Clarence Decatur Howe: The previous government as well as the present government found that the only practical method of complying with the act was to pass a bill. We have been so advised by the Department of Justice. As far as compensation is concerned, there has been no work done in 1936 relative to the accounts for that year. There was some work in preparing the annual report for 1935, but it has been thoroughly understood that no work shall be done until the appointment is made. While it is a continuing audit, I am told that usually no work is done until the last half of the year.


Richard Bedford Bennett: There is a misprint in the next to the last line.	There is a word
spelled "thf" which no doubt should be "the."


[Stage Direction]
Section agreed to.
On the title.
Charles Hazlitt Cahan: If the Prime Minister will look at section 17 of the British North America Act I think he will find it conclusive with regard to the matter in controversy between us. This section reads:
There shall be one parliament for Canada, consisting of the queen, an upper house styled the Senate, and the House of Commons.


William Lyon Mackenzie King: Yes, parliament consists of the three, the Sovereign, the Senate, and the Commons.


[Stage Direction]
Title agreed to.
Bill reported, read the third time and passed

[Stage Direction]
Hon. ERNEST LAPOINTE (Minister of Justice) moved the second reading of bill No. 83, to amend the Judges Act.
Motion agreed to, bill read the second time, and the house went into committee thereon, Mr. Sanderson in the chair.
On section 1-Salaries of judges of Supreme Court of Ontario.
Richard Bedford Bennett: Mr. Chairman, I informed the minister when we were discussing the resolution in committee that I thought, as I still do, that the necessity for increasing the personnel of the high court in Ontario would disappear if those who had attained a condition which rendered it impossible for them to discharge their duties as they should were to resign their positions. I hold that opinion very strongly. I trust that the reports which have appeared in the newspapers as to the purpose of this legislation are not accurate and that there is some real necessity for this bill beyond political needs. After carefully considering the matter, I do not think it would serve any useful purpose to go through the various provinces and name those whom it is quite apparent should retire.
I would point out that we endeavoured to meet the situation some years ago by offering a bill to the house providing for retirement at seventy-five years. However, the Senate thought it undesirable that a change should be made without conditions, and the bill did not pass. The Minister of Justice of to-day took the view that some provision should be made to safeguard the interests of those who were affected by the legislation, to which my answer then was, and now is, that there is an implied condition in the appointment of a man to the bench that he shall be reasonably efficient for the purposes for which he is appointed, and if through physical or mental disability he is unable to discharge those duties, he has forfeited his position and should resign. The present Minister of Justice (Mr. Lapointe) is responsible for the provision that ultimately found its place in the statute books. For the reasons which he gave the other day, and which I believe are cogent reasons, it is very undesirable to have a commission appointed to inquire into the physical or mental condition of those who hold judicial office. Such a procedure would be calculated to drag the judiciary into a certain measure of contempt. Having regard to what I consider to be the larger phase of the question, namely, the public interest, I shall refrain from making any criticism beyond saying that I do feel it is almost an intolerable condition in a country such as this that there should be men willing to accept positions on the implied condition that they will be able to continue to discharge their duties and who, despite the fact that they are not-even on their own
Judges Act Amendment

admission-continue to hold office and draw the emoluments of their positions. I shall be much censured for making these observations by those who belong to that favoured class, the judiciary, but that is not going to deter me in any sense from discharging what I conceive to be my duty.
Had it not been that the bill to which I referred was destroyed in the Senate, the necessary arrangements would have been made and it would have been unnecessary to appoint these two judges. If every man was functioning according to the implied condition of his appointment, it would be wholly unnecessary that there should be any additions made to this court. There will be incurred an annual expense of $18,000, in addition to travelling expenses, which need not be incurred were the duties of office discharged to the extent to which I believe there is an implied undertaking that they should be.
I repeat that I make these observations with some reluctance. I believe that the larger public interest should induce me to refrain from going into details. I indicated the other day that. I would give much thought to this matter. I have, and I have concluded that the larger public interest is more important than the interest of the individuals in question. There would appear to be a seeming unwillingness on the part of these men to realize their obligations to the public in the same way as they compel litigants appearing before them to recognize their obligations. If an action were brought by a trained and skilled man to recover his salary, if it could be proven that he was in either the physical or the mental condition of some members of the courts, he could not recover, and it would be the duty of those who now continue to hold office to decide that he could not recover on the ground that he had not fulfilled that condition of special knowledge and fitness which is the very essence of the appointment. That is all I have to say.


Mr. LAPOINTE (Quebec East):: With
some, even most, of the points raised by my right hon. friend when this matter was before the committee on the resolution that preceded the bill, and with what he has just said, I agree. But I think the question presents itself to us in this simple way. The legislature of Ontario, in the exercise of its undoubted jurisdiction, and for reasons which I think are valid, has increased by two the number of judges in. the high court, trial division, of that province. Are there any reasons for our refusing to implement the wish of the province in the matter, even if some of us think that possibly, by some other arrangement with regard to the superannuation of old

judges or in some other way, these two additional judges might be done without? Can we tell the province of Ontario that we refuse to implement their legislation, which. they have the right to pass, because we have not yet made up our minds os to what we ought to do with respect to judges who have reached old age or are afflicted with some physical infirmity that prevents them from doing all that they could do on the bench previously?
In the first place, what the province says is that it wants two additional judges for the trial division. I do not think the condition my right hon. friend mentions applies to the trial division of Ontario, according to information given me by members of parliament who are practising law in that province. There are at the present time eleven judges in the trial division. As I said on the resolution, two of them cannot work very well on the ordinary business of the court for the reason that one of them is working continuously on the board under the Farmers' Creditors Arrangement Act, devoting all his time thereto, while the other is engaged entirely on bankruptcy matters demanding the whole of -his time. Then we have increased the work of the judges in Ontario. Two years ago we increased it by handing over to them the adjudication of matrimonial cases and I understand that, notwithstanding what was said here at the time-that this new method would result in a diminution of divorces- divorce cases have as a matter of fact vastly increased since this law was passed, and a great part of the time of the judges is taken up with these cases.
Now that the attorney general of Ontario has given 'his reasons to the legislature, which they find to be valid, may I repeat, just for the purpose of giving information to the committee, certain facts with respect to the courts.
There are forty-seven county and district towns-that is, outside the city of Toronto- where at least two courts a year and in many cases four are held. In the majority of cases the duration of the court is about one week. In Sandwich, Hamilton, London and Ottawa the jury- courts, of which there are two each year, usually last for at least three weeks and the non-jury courts, of which there are two each year, also usually last for at least two weeks. In some of the other county and district towns to which a judge is assigned for one week it often happens that a longer period than a week is required to dispose of the cases that are ready for trial. A weekly court is also held at London and Ottawa on Saturday morning, and this necessitates a judge going to each of these cities every Saturday.

Judges Act Amendment
In the city of Toronto a jury court sits three times each year and is usually engaged about eight weeks. At each of such sittings it usually happens that some of the civil cases are not dealt with and it is necessary that they stand over until the next court. The non-jury court at Toronto is a continuous court and sits the year round except for the period of court vacation. In this court the work is particularly heavy and in an effort to reduce the list to a size which will permit the hearing of cases within a reasonable time after they have been set down, it has been necessary for some years now to have two courts sitting. The Toronto weekly court, in which most of the time of the court is devoted to the hearing of motions, sits continuously the year round except- for the court vacation periods, and the court usually lasts the better part of a day, five days a week. Then the questions of bankruptcy and the Farmers' Creditors Arrangement Act are dealt w-ith.
I believe that the duty of this parliament and my duty as Minister of Justice is to see that the administration of justice in Ontario should be carried out reasonably, and those who have the responsibility there are those who know whether or not we should proceed in the way provided for in this bill. As to the other question, which arises incidentally- and I know my right hon. friend has this in mind-there is in two or three provinces more than room for improvement in view of the conditions that exist there. But as my right hon. friend knows, I have given this matter a good deal of attention, and I am inclined to agree with the members of the Canadian Bar Association, who have been specially charged with the investigation of this matter and who recommend that we should revert to the condition that existed before the amendment of 1920 and permit judges who have reached the age of seventy-five and who have been for a stated number of years on the bench-twenty years-to retire with the salary which they received on the bench. This was changed in 1920. The committee of the Canadian Bar Association favour this change. They suggest that we might require judges who have retired under such a provision to serve in emergency casies, or when there is need of their services, at the request of the chief justice of their court, and that they should retain their rank in the judiciary.
There is much to commend this to the favourable consideration of parliament. I have said that I am inclined to favour it. I submitted the matter to my colleagues, and, while I do not want to betray any secrets, . I may say they thought that this is no time for increases of pensions or things of that kind, and in my private conversations with
my right hon. friend (Mr. Bennett) I learn he also thinks that this would have no chance of getting through parliament at the present time. Possibly that is so. The hon. member for St. Lawrence-St. George (Mr. Ca'han) not only suggested but almost sought to impose upon us the necessity of adopting the drastic method he advised; he accused all the ministers of justice of lack of moral courage in not having taken advantage of a provision in the statute under which, if it is believed that a judge is not physically fit to do his work, an investigation may be held, a regular trial at which witnesses may be heard, and on a report being made accordingly, the judge in question would cease to receive any salary. I do not think this would increase the dignity of the bench and enhance respect for the courts.
When my hon. frie-nd said that it was while I was Minister of Justice that this provision was put on the statutes, I did not remember it, and I investigated the matter. I found that it was done in 1922 when Sir Lomer Gouin was Minister of Justice, and he was responsible for it in a peculiar way. There had been amendments to the Judges Acts, and when they were being discussed by the other house it was Senator Barnard who moved that amendment, and he was supported by members of that house who were strong opponents of the government. At the time, as my hon. friend knows, the party which now sits on this side of the house was in power, but very little so in the senate, as is the case at the present time. However, when the amendment came back to the house the then Minister of Justice merely said that he had no objection to it. That hardly supports the view of my hon. friend that this is my work, or even that of the government of the time.


Charles Hazlitt Cahan: I was not pressing that
point. I was just trying to recollect.


Ernest Lapointe: However, that has never been applied up to the present time. Of course in the provisions of the law affecting county court judges there is a stipulation of this kind, although not so drastic, of which advantage has been taken. I myself recommended a few years ago an investigation in Manitoba, but I must say that before I did it I had received an application from the bar association of that province, and it was because complaints were officially placed before the Department of Justice that this extraordinary method was adopted. I think I may say that if either the Canadian Bar Association or the bar association of any province-because they know the facts better

Judges Act Amendment

than anybody else-would officially ask for action as provided for in the section mentioned by my hon. friend, I woidd deem it my duty to take the necessary proceedings. But as it is, could the Minister of Justice act proprio motu or merely because he hears rumours and because certain newspapers have published some reports? It would be a very dangerous thing to do, and if the judge concerned had been in years gone by an opponent of the party in power, possibly the minister would be accused of having his actions dictated by political considerations. We must leave the bench absolutely outside of any possible suspicions about politics, and especially so with regard to any action that could be taken by the Department of Justice with regard to judges. A law could be made, as it applies to the Supreme Court of Canada and the federal courts, so that when a judge reaches a certain age he has to leave the bench. My hon. friend from St. Lawrence-St. George objects to age being taken into consideration. He says that in some cases old men are better than young men. I agree with him-


Charles Hazlitt Cahan: I was objecting to age
being the sole consideration.


Ernest Lapointe: -but I think the exceptions confirm the rule and that is being done in other countries. My right hon. friend was right when he said the other day that seventy-two years had been recommended as the age limit by the commissioners in England who considered that question. As a matter of fact at the present time county court judges are retired at seventy-two years of age, but there is a provision that if the Justice department considers their services could still be utilized, their term of office may be prolonged from year to year. I do not approve of the department intervening in the matter; I think retirement should be provided for without the executive having anything to do with making the decision. However, all that will have to be considered and will have to be dealt with. I do not like the drastic section of the Judges Act which was placed in the statutes in 1922 and which has never been acted upon. But we must do something to prevent possible abuses, and if my right hon. friend is correct-and I think he is-there are certain abuses. I submit, however, that this is only incidental to the present bill; we are merely asked to give effect to the statutes of Ontario, and they have the right to ask us so to do.


Richard Bedford Bennett: The Minister of Justice (Mr. Lapointe) was entirely right in saying he was not the author of the provision in the statute of 1922. If anything I said would

indicate that he was, I knew better, because I took the trouble to follow it up. It was introduced in the other chamber, as he suggested, and it came to this chamber and was accepted by the Commons. The present Minister of Justice was then, if I remember, Minister of Marine.


Ernest Lapointe: Yes, I was a sailor at the time.


Richard Bedford Bennett: Well, he has been in stormy seas since. This statute, being a statute of the province of Ontario, is being acted upon with greater celerity than usual. It was late in April when the statute increasing the bench by two was passed, and during my short time in parliament I have seen a year or more go by without any action being taken by the federal authority to implement an increase, for economic or other reasons. I remember one occasion when no provision was made for quite a considerable time, on the theory that there was really no necessity for the increase. I had thought that the Farmers' Creditors Arrangement Act ' would not be permanent and would not engage a judge's entire working hours for very long. In respect to bankruptcy, the registrar really does most of the work, but the judge must take certain steps because he does the final act.
I quite agree also that the discussion with respect to the tenure of office is but incidental to this question. I brought it up because there might be no other opportunity except on the estimates to refer to it, and I thought it well to refer to it. The answer I make to my hon. friend, and I am sure he had had it in mind-it was in the mind of those with whom I have discussed it-is that to provide at this time that all judges of a certain age should receive full pay would have the effect at once of inducing all those who had been superannuated and had attained that age to demand equal treatment, and I have not seen any answer that I could reasonably make to that request. I did look into the matter very carefully during the time we were in office, and I gathered from discussions that I had in various parts of the country that there was a general feeling that to undertake to increase pensions of the judiciary at this time would be an impolitic thing to do. I should be sorry if my hon. friend should conclude that I suggested he could not put the amendment to the Judges Act through if he so desired, for his majority is ample for that purpose. What I did mean to convey was that I do not think it carries the general approval of the country or of parliament, for reasons that I need not discuss. The very

Judges Act Amendment
suggestion of members of the judiciary holding on and continuing in office when they must know of their own limitations is an effort to induce parliament to do something under duress, if I may use that word-wrongly in that sense, perhaps-but under compulsion or of necessity. To be compelled by that method to provide pensions would not be a nice thing for this parliament, and would be resented I think by many people in every part of the country.
I was not able to look up the royal commission which investigated the matter in England; I am glad the hon. gentleman has done so, because my memory was that the age of retirement recommended was seventy-two or seventy-three, I was not sure which.
I should like to refer briefly to one point to which the minister directed attention, namely the ability to utilize the services of those who have retired but who are in good health. In England a retired judge frequently goes down at Christmas to help out in the divorce, admiralty and probate divisions. The late Lord Mersey used to do it frequently, helping the courts to dispose of arrears before the Christmas vacation. But in this country where you have the double jurisdiction there is that difficulty. The dominion would have to provide that they should be paid no salary beyond their retiring allowance. Clearly the province could not confer jurisdiction upon a retired judge to act, and clearly we would have to amend our statute to provide for it. There are grave complications. The matter was looked into once by a minister of justice and by one of the officials of the Department of Justice, and no conclusion was arrived at. I favour the proposal, and if the minister could work out any plan by which retired judges might be enabled to render service as judges through cooperative action on the part of the provinces and the dominion, I think it would be very desirable and would serve a useful purpose, permitting the attorneys general, with the aid perhaps of the Minister of Justice, to call upon a retired judge in times of stress to render further service without the payment of any further compensation than travelling expenses. Certainly in England where they have the unitary system, it is feasible, but under the complex system of the provinces determining the number of judges and the dominion providing their salaries it might require joint legislative action.


Ernest Lapointe: There is no doubt about it.


Mr. HEAPS:: Can the Minister of Justice give the committee information as to the number of judges in each province who are appointed by the federal government?


Ernest Lapointe: In Ontario in the high court there will be, when this bill becomes law and is acted upon, twenty-one judges. In Nova Scotia there are 8-chief justice, judge in equity, judge in divorce, and 5 puisne judges. In New Brunswick there are 8 judges of the high court.


Richard Bedford Bennett: The judge in divorce is also a judge in the same manner?


Ernest Lapointe: Yes, I include him. In Manitoba there are 11 judges; in British Columbia, 11; in Saskatchewan. 12; in Alberta, 11 judges of the high court. There are 3 in Prince Edward Island, and there is one in the Yukon territory. I will come to Quebec in a moment.
In addition to these there are the county court judges, who are also appointed by the federal government. In Ontario there are authorized-I do not say they are all appointed, but almost all-75 judges of the county and district courts. In Nova Scotia there are 7 county court judges; in New Brunswick, 6; in Manitoba, 9 and one junior county court judge. In British Columbia there are 14 judges and junior judges; in Prince Edward Island there are 3. In Saskatchewan there are 18 district court judges, and in Alberta, 12.
In Quebec the high court judges do most of the work that is assigned to the county court judges; there are no county court judges in Quebec. There are 12 judges of the court of king's bench as the appeal court, and there are 37 judges of the superior court. There are no other judges appointed in the province of Quebec by the federal government.


Richard Bedford Bennett: Is there not a smaller
court?


Ernest Lapointe: Yes, I should mention the circuit court of the district of Montreal.


Charles Hazlitt Cahan: Which is similar to the county court.


Ernest Lapointe: Yes; there are 4 judges, consisting of a senior judge and three other judges. The senior judge is paid $8,000 per annum and the three others are paid $7,000 per annum. Those judges are sitting in addition to the high court judges of the province of Quebec.


Abraham Albert Heaps: Is it a fact that there are only forty-nine judges appointed by the federal government in the province of Quebec?


Ernest Lapointe: Yes; there are magistrates appointed by the provincial government.


Abraham Albert Heaps: How is there such a wide discrepancy between Quebec and Ontario?
Juvenile Delinquents Act


Ernest Lapointe: Because the systems are altogether different. In Quebec there are no county court judges, while Ontario has a large number of them. But as the hon. member will have noticed, there are. less high court judges in Ontario than in Quebec. There are only twenty-one high court judges in Ontario and there are thirty-seven in the trial division of the superior court in Quebec, plus twelve appeal court judges.


Abraham Albert Heaps: As a layman the fact which appeals to me is that in Ontario there are ninety-six judges while in Quebec there are only forty-nine. I assume those forty-nine judges must be doing the same work as the ninety-six in Ontario.
' Mr. LAPOINTE (Quebec East): Except that in Quebec judges are appointed by the province to deal with smaller cases which are considered by county court judges in' Ontario. Secondly, I do not believe there is a very great discrepancy in the matter of expense, because the high court judges are paid $9,000 and the county court judges $5,000.


James Shaver Woodsworth: What is the expense per capita as compared to Great Britain?


Ernest Lapointe: I cannot answer immediately, but I could have someone figure it out for the hon. member.


Mr. COLDWELL:: Does the minister know how many judges there are in Great Britain?


Ernest Lapointe: I have not the figures before me.


Major James William Coldwell: I have heard criticism by lawyers and others as to the cost of the judiciary in Canada as compared with that of other countries. It seems to me an increase in the number of judges in Ontario, while requested by the province, is an example which should not be followed by other provinces. In view of the criticisms one hears I think hon. members might be given further information with regard to the relative costs of the judiciaries in the various parts of the British commonwealth.


Abraham Albert Heaps: The figures the minister has given would seem to indicate that the bill before the house is not essential. If there are almost twice as many judges in Ontario as there are in Quebec there would seem to be no valid reason for increasing the number. However, I suppose Ontario has asked for the change, and the minister has very obligingly acceded to the request of the provincial government-


Ernest Lapointe: No, not
the provincial government-the legislature of Ontario.


Abraham Albert Heaps: Yes, I may be slightly in
error. I can understand that legislatures will be quite willing to make all possible requests of the federal government if they believe it will always foot the bill.


Ernest Lapointe: (Quebec East):	That
will not happen.


Abraham Albert Heaps: They may make other suggestions, too. When that time comes I do not suppose the government will be quite as willing to accede to the requests of legislatures as they are in this particular instance.


Ernest Lapointe: I will
keep the hon. member's observations in mind.


[Stage Direction]
Section agreed to.
Bill reported, read the third time and passed.

[Stage Direction]
Hon. ERNEST LAPOINTE (Minister of Justice) moved the second reading of Bill No. 89, to amend the Juvenile Delinquents Act, 1929.
Motion agreed to, bill read the second time and the house went into committee thereon, Mr. Sanderson in the chair.
On section 1-Summary trials.
Ernest Lapointe: This is
an amendment requested by the council of social welfare. Under the criminal code all prosecutions for offences by juvenile delinquents are proscribed after six months. Under a certain section of the act there is provision for the prosecution of one who passed the age of eighteen after committing an offence, and whose offence was not discovered until more than six months after that time. This is to provide that when a person is prosecuted for an offence committed while he was a juvenile, and which has been discovered subsequently, the six months proscription will not apply.


[Stage Direction]
Section agreed to.
On section 2-Adults liable who contribute to delinquency.
Ernest Lapointe: Section
2 is simply to correct a mistake in the statute enacted last year, at which time the subsections were eliminated by mistake, and the amendment did not apply to them. This section is to reinstate them in the law.


[Stage Direction]
Section agreed to.
Bill reported, read the third time and passed.

Dairy Industry Act

[Stage Direction]
Hon. J. G. GARDINER (Minister of Agriculture) moved the second reading of Bill No. 56, to amend the Dairy Industry Act.
Motion agreed to, bill read the second time and the house went into committee thereon, Mr. Sanderson in the chair.
On section 1-Sale of butter.
Mr STEW ART:: The minister might explain the general purpose of the clause and just why this change is being made.


Mr. GARDINER:: Section 1 amends subsection 3 of section 6 of the Dairy Industry Act. Subsection 3 of section 6 of the act reads:
No person shall sell, offer or have in his possession for sale,
(a) any butter moulded or cut into prints, blocks, squares or pats ...
That subsection is repealed, and the subclause that is being substituted for it by this bill makes this change only, that instead of confining the size of prints to quarter pounds, half pounds, one pound and two pounds, it makes it possible to have them in any multiple of a pound. The chief reason for the change is that it is customary in British Columbia and in other places to sell butter in three pound prints, and under the present law that is not legal.


Mr. STEWART:: There is a line underlined at the end of paragraph (a). Is that new?


James Garfield Gardiner: That is just a rewording of the language of the old act. The words in the old act were "as sold by farmers" and the amending words are "manufactured by individual farmers and sold by them." The butter must be made by the farmers as well as sold by them.


Hugh Alexander Stewart: Were any representations made by the dairy council or other agricultural interests asking for these amendments?


James Garfield Gardiner: Representations were
made. I am not sure whether by the dairy council or not, asking for these amendments, and the department considered them in the interests of the dairy industry, particularly in British Columbia.


[Stage Direction]
Section agreed to.
On section 2-Cheese.
Hugh Alexander Stewart: What is the reason for this change?


James Garfield Gardiner: The reason for this has to do with the recommendations that were made by the price spreads commission last year. One of their suggestions, which has been discussed at some length, was to the
effect that we should have prints of cheese made in multiples of a pound rather than in sizes of, say, five ounces, six and a half ounces or seven and a half ounces. This amendment provides that the prints must be put up in either multiples of a pound or in divisions of a pound, such as a quarter of a pound, or half a pound. It is one of the suggestions that was made in connection with the inquiry by the price spreads commission of the sizes of packages offered to the public for sale.


Hugh Alexander Stewart: But the individual farmer may sell cheese in any way he likes?


James Garfield Gardiner: A phrase similar to the one used at the end of the previous subsection is contained here, "but nothing in this subsection shall be held to apply to cheese of indiscriminate weight manufactured by individual farmers and sold by them." That is, home-made cheese is not subject to this legislation.


Charles Hazlitt Cahan: Wrhat is the meaning of "indiscriminate" weight?


James Garfield Gardiner: It can be any weight at all; it is not confined to multiples or divisions of a pound, if made and sold by a farmer.


[Stage Direction]
Section agreed to.
Bill reported, read the third time and passed.


[Stage Direction]
Hon. C. D. HOWE (Minister of Marine) moved that the house go into committee to consider the following proposed resolution:
That it is expedient to bring in a measure to provide for the constitution of a corporation to be known as the Canadian Broadcasting Corporation for the purpose of carrying on a national broadcasting service in Canada in the place and stead of the present Canadian radio broadcasting commission, to provide for honorariums, remuneration, salaries and other expenses incidental thereto, to authorize the governor in council to make certain advances for purposes therein mentioned, and to repeal the Canadian Radio Broadcasting Act, 1932.
Motion agreed to and the house went into committee, Mr. Sanderson in the chair.
Richard Bedford Bennett: Mr. Chairman, there are
some features of the report made by the special committee that dealt with the radio question to which I should like to direct attention. The report was a unanimous one. It contemplates the creation of a corporation similar to the British Broadcasting Corporation. I do not think the committee realized
Broadcasting Corporation

the difference between conditions in Great Britain and here. In the first phase of its report the committee recommend:
That in the opinion of your committee radio broadcasting could be best conducted by a general manager.
In 1934 the radio committee made the same recommendation; there is nothing new about that. That is the experience of Great Britain, where they are carrying on their broadcasting through a corporation with a general manager. He is a very eminent man, a scholar, an Oxford man possessing wide administrative experience. In this country he would be regarded as an extremely high type of official. He was drawn from the great reservoir that they have in Great Britain from which to draw men of this type for public service, and he has rendered conspicuous service to his country in the position which he holds. But when you come to appoint a general manager in Canada you find many difficulties in the way. I am not going to do more than point out that as far back as 1934 certain recommendations were made but were not acted upon because we realized, after the closest inquiry, that you cannot say that because a given condition in Great Britain assures certain results, different conditions in Canada will make the same results possible.
The report of the committee contemplates a condition exactly opposite to that which prevails in Great Britain. There are no such things as private broadcasting stations in Great Britain; all the broadcasting stations are under the sole control of the corporation, of which Sir John Reith is general manager. Owing to lack of funds, our organization was not able to build stations. It had to utilize, by leases and other arrangements, the existing facilities for the purpose of carrying out its undertaking. There was a constant endeavour on the part of private interests to secure licences for new stations. Under the existing law, the responsibility of deciding whether or not a new station shall be licensed rests with the commission and its technical officers; under the conditions that the committee reports upon, it will be left to someone in the Department of Transport, now the Department of Marine. I may say to the minister at once that that means disaster to the broadcasting undertaking in this country.
We know

it is not merely guessing-that very large numbers of people are constantly seeking licences for broadcasting stations. If the political department-I use the word in its broad sense-is to deal with these applications, an inevitable result will follow. Hon. members of this committee must know that

applications were refused by the commission, because part of the basis of the complaints against the commission was that it would not continue to grant licences. All you have to do is grant enough licences and you destroy the public character of Canadian broadcasting. At the moment we have secured the ownership of this facility, or utility, or whatever you may call it, in the people of Canada, and we have ensured it against destruction by private interests, but the private interests have been very vigilant. They have been watchful of their own interests and have determined that if it is within their power, this facility is not to function as a public enterprise. They have determined fairly and legitimately, so far as that is concerned, to destroy this publicly owned facility. Their idea is that it should be in the hands of private enterprise. The two or three great enterprises across the line have watched with increasing anxiety the operations of this publicly owned facility. They do not desire that their privately owned enterprises should be regarded merely as tentative experiments; they wish to continue as a privately owned enterprise and not be merged in a publicly owned and controlled broadcasting system such as we have in this country.
I point this out because if broadcasting in Canada is to be in the hands of a corporation, and that is what the report of the committee recommends, then you will have to ensure its continuance and life. If a department of government is to determine whether or not additional licences shall be issued for private stations, I say again that will mean the end of our publicly owned radio broadcasting facilities. If the minister will look into the matter under present conditions, he will have no difficulty in realizing why I say this.
One step further. When the former government brought this broadcasting enterprise into being as a publicly owned facility, it had first of all to take up with the United States the question of channels. This was an international side of the matter which had to be considered, and -there were many difficulties that had to be dealt with. They were fairly successfully overcome, but private interests were constantly demanding that their facilities should be used. The existing channels were in the hands of private interests in all parts of -the country, except possibly in British Columbia which was not adequately covered. The newspapers had facilities of their own, private interests had facilities of their own, and the result was that the commission, being without adequate funds, was compelled to

Broadcasting Corporation
make the best arrangements possible for the purpose of carrying on to the extent of its ability in broadcasting throughout the dominion.
I do not agree with the general tenor of the report of the committee with regard to the operations of the commission. It is human because it is composed of individuals. It 'had to meet an extraordinary situation. Without money, and limited to the revenues from licences, it had to provide coverage from Great Britain to Vancouver. Notwithstanding the terms in which the report of the special committee refers to the result of its efforts, in countries other than Canada this experiment has been regarded as very successful utider the circumstances. It is not encouraging to those who devoted their time to this matter, who laboured as they did and brought about results which were noted very highly in other countries, to find a committee of the House of Commons investigating their efforts and speaking of them in the terms in which they did. Undoubtedly mistakes were made, but I do not think anyone can deny that mistakes would be made in the bringing into being of a commission such as this. The commission was faced with difficulties in connection with complaints as to interference. There was a clashing in channels and there was also interference from the large powerful stations across the line.
The programs that were put upon the air reflected some measure of credit upon the Canadian enterprise. We could not expect that 11,000,000 people would be able to provide facilities comparable to those at the disposition of the two or three great private enterprises in the United States. Having made the election that we did, that is, to create a publicly owned enterprise, we would be manifestly unfair to attach too much criticism to the fact that in the judgment of some it does not compare favourably with the high powered stations in another country built up at the cost of millions of dollars. The temptation merely to copy slavishly the method adopted in another country for the purpose of operating this facility is very great, and the minister will find that conditions are quite different both as to ownership of facilities and as to the attitude of mind of the public to the facility, to advertising and advertisers and to the general situation. For instance, it is well known that facilities have been established in countries across the channel for the purpose of advertising in Great Britain and Ireland. That is well known. We have had many problems in connection with advertising. We have had very acute problems in connection with the language used on the radio-complaints from western Canada on the one hand, and on the other complaints from eastern Canada-and the endeavour to navigate through a very difficult channel and through very stormy waters the ship that was launched under such conditions *has not been an easy task.
I can only say to the minister, without going into the matter in further detail, that if the question of licences is to be determined by a political body, namely, the government or any department of government rather than by the corporation itself, then the corporation is destined to be supplanted in its public operations by private enterprises, because in the very nature of things we have not provided the money to carry on the kind of organization one would like to carry on. We increased the licence fee to two dollars, with much complaint and criticism, in order that the commission might have larger funds at its disposal. In its report the committee suggests that the government may lend money to the commission for the purpose of enabling it to provide facilities. The minister knows what difficulties will be encountered there. It is better to provide in the estimates for a loan to them so that they will be free as a corporation to spend it, than to leave them in a position where they will have to make application for the purpose of securing loans; for then there will enter into the question the many factors that have brought disaster to many of our enterprises of a public character, and it will certainly not enure to the henefit of this institution if we are to maintain it as it now is, a publicly owned facility operating for the people at no cost at the present time except the licence fee of two dollars. No country in the world that I know of, except some smaller European countries, is placed in a more difficult position than ourselves. You have great and powerful stations in New York, in Cincinnati and on the Pacific slope; and when the words have been projected into the air- they no longer say the ether-when they have been projected into space they go north as well as south, and you tune in your radio and hear what is being said. There is no way of controlling it adequately, and that is why some people have unfavourably compared our operations with those of the great republic. The multiplication of privately owned stations under any circumstances will be detrimental to the interests of this publicly owned facility, whether it be held and operated by the commission or by a corporation; and the essential limitation that has been imposed upon this undertaking by reason of our geographical position and lack of means has not made it
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possible to carry on in the way in which one would have liked. But I should like my fellow Canadians to think that the opinions expressed in other parts of the world as to what we have been able to do reflect credit at least upon Canada and Canadians and do not deserve unrestrained criticism, as will be found in some parts of the report to which I refer.


Clarence Decatur Howe: Radio broadcasting in Canada has been studied by one royal commission and three parliamentary committees, and these four reports agree on the broad principles that must govern us. That is to say, the aim of broadcasting should be a complete coverage by government facilities and the present situation demands complete control over all forms of broadcasting whether public or private. These conditions are being maintained in the present bill. There is no question whatsoever as to whether this bill is the last word m radio broadcasting. The government believes, however, having in mind the reports of these various committees, that the bill does represent the consensus of opinion as to the next step to be taken. We know that many conditions affecting radio broadcasting at the present time are unsatisfactory. I assume that more mail comes into my office protesting against various phases of broadcasting than against any other matter with which my department has to deal. Many of these complaints are frivolous; nevertheless the volume and general character indicate that there is something lacking in the present situation.
This bill follows very closely the report of the committee, and I believe that had the earlier legislation conformed more nearly to the reports of the royal commission and of the parliamentary committee that preceded the introduction of that legislation, perhaps we should not have wandered afield in our attempt to reach the ultimate goal. My right hon. friend has mentioned the fact that this gives power to the minister to licence private broadcasting stations. The minister has that power to-day; it is inherent in the Radiotelegraph Act of Canada.


Richard Bedford Bennett: No; it rests with the commission now.


Clarence Decatur Howe: On the advice of the commission.


Richard Bedford Bennett: Yes, exactly.


Clarence Decatur Howe: But after the minister receives the advice of the commission he has the power to issue the licence or not, and he has been known in my time to exercise that power. The only action I have taken in that regard is to refuse recommendations of the commission in the direction of issuing two additional broadcasting licences.

We have in Canada, as those familiar with radio matters agree, far too many private licences to-day for stations of small power, and the result is that the channels of communication are becoming very much involved. It is almost impossible to find a clear channel for a station of high power such as is needed to hold our place against the high powered stations across the line and particularly in Mexico, and in my opinion very serious consideration must be given to straightening out the situation that has been caused by the granting of so many licences to small powered stations. That is one of the most serious problems to be considered.


Richard Bedford Bennett: The first commission contemplated that.


Clarence Decatur Howe: I cannot say what was contemplated, but my observation leads me to believe that very little was done; in fact, the situation has become worse. That is my personal opinion, based on what I have seen since I took over control of the department which is responsible for this matter. I think the control of broadcasting is inherent in the government everywhere. Even in Great Britain the British Broadcasting Corporation does not determine the allocation of channels.


Richard Bedford Bennett: It is a monopoly.


Clarence Decatur Howe: Of course they have a
monopoly; nevertheless the power to allocate channels is vested in the Post Office Department under their radiotelegraph act. Similarly in the United States the power is vested in the government through an act of congress. This is logically a function of government in that the-channels are arranged by government negotiations. It will be remembered that all the governments interested in telegraphs met at Madrid some few years ago and worked out the allocation of free channels between the various countries. I think there is no particular occasion for criticism, but this can be discussed when the clauses are before us in committee, and I assure my right hon. friend that the government is not committed to the exact method set out in the bill; it is quite willing to consider modifications. All I wish to point out is that the government has always had that power and has always exercised it, but under the last act it was bound to receive, if not to accept, the recommendation of the commission.
I do not know that anything further need be said at this time. The bill can be more effectively discussed when it is before us. I think everyone in Canada realizes the difficulty of the situation. The very limited funds at the disposal of the commission are a great restriction. We collect and turn over to the

Broadcasting Corporation
commission roughly about a million and a half dollars a year. In Great Britain about ten times that amount is collected; in Australia also, a country with a smaller population than Canada, the amount is larger. It seems to me fairly well fixed in everyone's mind that a fee of two dollars is about all that can be expected.


Richard Bedford Bennett: All the traffic will stand.


Clarence Decatur Howe: All the traffic will bear. That of course is one great limitation. Then we have the tremendous cost of wire charges to cover the country from coast to coast. Further, we have a situation which is perhaps peculiar to this country, arising from the competition of high powered stations to the south of us broadcasting expensive programs which naturally invite comparison with ours. Considering the amount of the expenditure for programs, I think we have very little to be ashamed of at the moment. My feeling is that we have done extraordinarily well with the funds that have been made available. But I have not the slightest doubt that the committee have reported a program which should be adopted in Canada. As we know, the former act has not been satisfactory; it has been amended from time to time to permit it to operate. There are some features that are quite unworkable without amending legislation, and I sincerely commend the bill to the study of the members of the house in order that it may be discussed on second reading.


Charles Hazlitt Cahan: I was a member of the
committee which considered radio matters. I regret that I received no notice of the meeting of the committee at which the report was prepared until I found it in my post office box in the afternoon after the committee had closed its proceedings; but that would have made, perhaps, very little difference.


Mr. MARTIN:: Will the hon. gentleman
allow me to make an interruption?


Charles Hazlitt Cahan: Certainly.


Paul Joseph James Martin: One member of the committee was asked to communicate with the hon. gentleman in. respect of his personal attendance. We were advised that he had communicated with you and that you had said you had to go to Montreal.


Charles Hazlitt Cahan: What happened was that he did communicate with me at a time when I was on my feet and discussing an important matter before this house, and he suggested, supposing it were adjourned until the evening-this was on a Friday, if I remember correctly-


Mr. BEAUBIEN:: Mr. Chairman, if I
may interrupt the hon. member-


Charles Hazlitt Cahan: Will the hon. member
allow me a moment to state my case? As a matter of fact, under the circumstances I could not attend as I was discussing another measure in the house, and afterwards, in the evening, I found a notice in my box which I had not received beforehand. But I am not complaining about that, except to state that 1 was not present when this report was placed before the committee. If I had been,
I should have endeavoured to secure the insertion of a reference to certain matters w'hich I regard as important.
First, from sitting on that committee I found little by way of criticism of or reproach against the existing commission. I think the chairman of that commission, Mr. Charles-worth, is a gentleman of high culture, of literary experience and artistic taste, and a very useful member of a commission or board such as this. The impression I received was that he had not had experience in administering business affairs to the extent necessary to enable him to look carefully after the financial administration of the commission.
I heard nothing by way of evidence which cast any reproach upon Colonel Steel, who is regarded not only in this country but also in the neighbouring republic as one of the most eminent men connected with radio transmission work. I think if I had been present when the report was drawn up I would have suggested leaving out certain references to the political broadcasting. I admit that a certain script was placed before me of one broadcasting of the so-called Sage broadcast, which contained two references to the then leader of the opposition and the present Prime Minister (Mr. Mackenzie King) which I regard as uncalled for and tending toward defamation. There is no doubt in my mind, having been through it, that the investigation into a certain hydro electric power matter indicated that there had been an effort at organized corruption the like of which had never before been known in this country, and I should not have been surprised if, in making a political broadcast, either speakers on the platform or those who were preparing the script for a broadcast such as this should have made some reference to it. As a matter of fact I did not hear on any public platform any reference to the Beauharnois matter. I say further, while I am dealing with it, that I went through the evidence in the Beauharnois investigation and I heard what was said before the committee and what was said outside of the committee, and I did not hear of any evi-
Broadcasting Corporation

dence which cast any reflection upon the personal honour and integrity of the present Prime Minister, who then also was Prime Minister. That is clear in my mind, and I deprecate any such reference as was made in the Sage script.
But in dealing with defamation over the radio, hon. members know as well as I do that the practice was not confined to the propagandists of any one political party. There were sent to me examples which on their face appeared to be extreme defamation and which had been sponsored either by the Liberal party or by individual members of that party. I refrained from placing them before the committee because I thought that was not a proper matter for inquiry under the circumstances. For instance, one related to the hon. member for Kootenay East (Mr. Stevens), with whom I have had grave differences of opinion on political matters relating to his retirement from the late government. Nevertheless it would be very difficult to justify to me the radio propaganda which was directed by the Liberal party against him and his personal reputation and personal conduct. I believe that such matters should be eliminated from political discussion at election time or otherwise. So I should like to have had just a little different reference in this respect to political broadcasts. But I do not think the personnel of the commission were shown to be responsible either for the defamation by Liberal propagandists or for the defamation by Conservative propagandists which came over the radio at certain times. I listened myself to certain addresses delivered in the province of Quebec by some of my political opponents, which caused me to smile with contempt, but I think if they were stenographically reported they could not but be deemed defamatory, and I believe that the commission, if continued as a commission, would certainly have taken these matters under their consideration, because prior to the general election, at the suggestion of the then government, a by-law was adopted by the commission prohibiting political propaganda of a defamatory character.
I do not think much is to be gained by the new legislation. All that was desirable could have been attained by a few slight amendments to the present statute and by the appointment of a business manager to deal exclusively with financial and business operations. It is perhaps not to be expected that Mr. Charlesworth would be thoroughly competent and qualified for the financial part of the work, but I think the work he and his associates have done since they were appointed, the difficulties they have overcome and the problems they have solved entitle them to high com-
mendation and praise from this parliament and from the public in general. After listening to the witnesses and having read the report I have a slight suspicion that perhaps there is rather a political aim to be served by this proposed bill than to have material and satisfactory remedies provided for the existing defects. However I am not going to oppose the measure but shall let it go through. Perhaps in the course of a year or two-


Clarence Decatur Howe: There will be lots of graft and corruption 1


Charles Hazlitt Cahan: I am not talking in this instance about graft and corruption. There may be some of that, despite the honest efforts of the hon. gentleman, but 1 am suggesting that although he may have received numerous complaints with regard to the present commission, complaints will be just as numerous and far more pungent and critical in the future than those he has received in the past. You cannot please all the Canadian public with a publicly owned operated and controlled radio service. There will be dissatisfaction. But what I do say, having listened in, as it were, for the last two or three years, is that I think a splendid advance has been made, and that to-day the public is more satisfied with the radio commission service than it had been before we undertook government control of radio.


Charles-Philippe Beaubien: As chairman of the special committee to inquire into radio broadcasting in Canada, it is perhaps proper that at this time I should offer a few remarks on this resolution. In the first place may I answer the criticism of the hon. member for St. Lawrence-St. George (Mr. Cahan) in connection with his absence from the meeting-


Charles Hazlitt Cahan: I am not criticizing at all, but simply stating the fact.


Charles-Philippe Beaubien: If the hon. gentleman will allow me to make my statement. The clerk of the committee put the notice into the -mail box of every member of the committee the evening prior to the final meeting to prepare the report and present it to the house, and if my hon. friend did not receive that notice it must be either that he did not go to his mail box or else the notice was mislaid by him. But even if he did not receive the notice, I, as chairman, made an effort to have the hon. member attend that meeting. The hon. member for Greenwood (Mr. Massey) was asked to try to locate the hon. member, but at the time we were not able to locate him. I am not making any criticism, but I want to make it clear that the members of the committee made every effort

Broadcasting Corporation
to have every member of that committee at that final meeting before our report was prepared for presentation to the house.
May I say that it was one of the great privileges which I have enjoyed since I have been in public life to be chairman of this committee. Hon. members from all parties showed me every courtesy, and made my work light, because they did most of it. I think the aim of every member of the committee was to try to improve radio broadcasting in Canada. There was no other object. At the same time, we had an order of reference from the House of Commons, which we were obliged to follow. We were instructed to do certain things. When my hon. friend criticizes the clause which relates to the Mr. Sage broadcasts, he had the same privilege as every other member of the committee; there was no limit to our investigation. Let me read one or two lines from the order of reference:
Also to inquire into the extent to which there has been any abuse of broadcasting privileges, either for political or advertising purposes, and to advise as to what principles should govern the regulations or control thereof.
So that we had to investigate any abuses concerning political broadcasting as we were ordered to do so. My hon. friend had the same privilege as any other member of the committee; if he knew of any abuses, political or otherwise, it was for him to bring them before the committee.
Now I wish to answer briefly one or two criticisms made by -the right hon. leader of the opposition (Mr. Bennett). But before I do that may I say, Mr. Chairman, that the committee had before them the report of the Aird commission which made an extensive study of radio broadcasting in practically every country of the world and reported to the government of the day. We had also the evidence taken by the special committee in 1932, also the evidence taken by the special committee in 1934, and the evidence taken at the sittings of the committee this year. So that the committee, in arriving at their conclusions, had before them plenty of evidence on which they based the recommendations contained in the report, which recommendations, I am given to understand, will be embodied in a bill when this resolution is passed. Not only that, but this year we made an extensive inquiry. May I add that a great number of public bodies were anxious to make their presentations to the committee. They had made special studies of radio broadcasting not only in Canada but in all other countries. Not only did they appear
personally, but they prepared and presented to the committee extensive briefs. Representatives appeared in person in readiness to give members of the committee any explanation they might desire concerning the contents of the briefs presented. These bodies went to the trouble of preparing and presenting the briefs without any cost to the committee, and without pay for the work they had done. It is most gratifying to note that the people who appeared before us were prepared to do that. Their only object seemed to be that of giving better radio broadcasting in Canada.
As I stated previously we had before us the Aird report and the evidence taken in 1932 and 1934. Further, we had the recommendations made in 1934, which were not embodied in legislation. May I mention briefly the names of a few bodies which appeared before the committee. We had the Canadian Press, supported by Mr. J. F. B. Livesay, general manager, and Mr. E. Norman Smith, vice-president; Mr. Paul Coffey, representing the Young Men's Canadian Club; Mr. S. P. Dunlop, president of the Montreal Federation of Musicians, supported by Mr. W. M. Murdock, who represented the Canadian locals of the American Federation of Musicians; Mr. Alan B. Plaunt, honorary secretary of the Canadian Radio League, an organization composed of practical men throughout the dominion, men who have made a real study of radio broadcasting in Canada They had as their purpose giving Canada the best possible radio broadcasts under the circumstances. Then, we had Mr. Brooke Claxton, counsel for the Canadian Radio league, who appeared with Mr. Plaunt. We had the Reverend Father H. St. Denis, Professor of Philosophy at Ottawa university; Mr. Herbert Moore, of New York, president of the Transradio service, who lodged some charges against the Canadian Press. We had Mr. E. A. Weir, formerly with the Canadian radio commission; Mr. C. M. Pasmore of the MacLaren Advertising Company, Limited, Toronto; Mr. Glen Bannerman, of the Association of Canadian Advertisers; Mr. J. A. MacLaren, of the Canadian Association of Advertising Agencies; Mr. Harry Sedgwick, chairman of the Canadian Association of Broadcasters; Mr. W. T. Burford, representing the All Canadian Congress of Labour; Mr. R. W. Ashcroft, former general manager of the Trans-Canada Broadcasting Company; Hon. W. J. Major, Attorney General and Minister of Telephones and Telegraphs for the province of Manitoba, who also represented the telephone systems of the three
Broadcasting Corporation

western provinces. May I add that the publicly owned telephone system in Manitoba owns broadcasting station CKY, the most powerful station in Canada, and another one at Brandon. We had the Hon. J. L. Ralston, representing the Trans-Canada telephone system; Rev. H. L. Haslam, of Yarmouth, Nova Scotia.
In addition, many briefs were presented unaccompanied by witnesses. We received hundreds of letters containing requests, criticisms -of and praise for the radio commission. All those were placed before the committee. In presenting a concrete report I believe the committee should be commended. I do not believe the report of any special committee has received more favourable comment from the newspapers of Canada. I do not intend to weary this committee by quoting lengthy comments, although I have before me comments from newspapers of all political shades. They seem to agree that the unanimous report as presented to the house is satisfactory to Canadian listeners and to people generally who believe in a national broadcasting system in Canada. A comment from the Ottawa Journal of May 28, is as follows.


James Shaver Woodsworth: I have no desire to interrupt the hon. member but-


The CHAIRMAN:: Is the hon. member speaking to a point of order?


James Shaver Woodsworth: The hon. member is acting in a manner contrary to the rules of the house when he reads from editorial comments which might influence the passage of legislation. I am quite in sympathy with the presentation of the chairman of the committee, but from the standpoint of the rules of the house I believe I should not agree to the reading of editorial comments from newspapers when we remember that on occasions the chairman of the committee has tried to refuse us permission to read news items.


Ernest Lapointe: And the hon. member protested violently.


Charles-Philippe Beaubien: I am sorry the hon. member for Winnipeg North Centre has raised the point, because I was pretty certain nobody else would. I think these comments could be placed on the record, but if the committee does not wish me to do so I shall refrain from doing so. I do not want to break any rules. However, as I did want to read them, I shall simply read one or two paragraphs:
The report of the committee-


James Shaver Woodsworth: This matter has been brought up year after year, and while I

aha not a stickler for points of order, I suggest that in the present instance the hon. member is making a recital of newspaper opinion.


Charles-Philippe Beaubien: I shall not read them; I shall follow the rules.


Frederick George Sanderson: I think the hon. member for Winnipeg North Centre is correct in the position he takes, and I must ask the hon. member ior Provencher to follow the rules of the committee.


Charles-Philippe Beaubien: dence contained in the minutes of proceedings of the different meetings of the committee to prove that there was a lack of understanding and a lack of cooperation between the members of the commission. May I give just one example to make my point? And I am making no criticism of who got the contract or who did not. The radio commission entered into a contract for wire line network which involved an expenditure, under the contract, of $375,000, and which in the total aggregated an expenditure of $526,000. That contract was signed without the chairman of the commission knowing anything about it. Not only that, the contract was signed almost nine months before the contract which then existed expired. A few days after the contract was signed the chairman of the radio commission wrote a letter saying that it would be impossible to enter into a new contract as the one which already existed did not expire until April, 1936. If my right hon. friend were chairman of the commission and a contract were being entered into which involved that amount of expenditure, I am sure he would know what was in the contract before it was signed.
I am just about finished, Mr. Chairman, as I do not want to make any long speeches at this stage of the game. The committee refrained from making many specific recommendations because we wanted to leave the new body free in any administrative action they might take. However, the committee did make a specific recommendation with regard to future political broadcasting. I do not think there is any doubt but that the Canadian people were fed up with the broadcasting during the last election. There was too much broadcasting and I am sure the different parties spent money for broadcasting which could have been spent elsewhere to better advantage. The committee recommended that dramatized political broadcasts be prohibited. I think everyone is in favour of that recommendation, even the political parties that put out dramatized broadcasts during the last election.
Another recommendation was that full sponsorship of all political broadcasts be required. I think that is very necessary. Political broadcasts were put out during the last election without any sponsorship, and these broadcasts were sent out from the stations of the Canadian commission. I think every political broadcast should be sponsored by a party so that the people may know who is doing the broadcasting. There should not be any deception of the public. There is no doubt that during the last election certain dramatized broadcasts were sent out from the stations of the radio commissions with the

idea of deceiving the public into thinking they were dramatic productions. The public were deceived into listening to what they thought was drama, but which was nothing but a political broadcast. Another recommendation was:
That the limitation and distribution of time for political broadcasts be under the complete control of the corporation, whose duty it shall be to assign time on an equitable basis between all parties and rival candidates.
That no political broadcasts be allowed on an election day or during two days immediately preceding same.
Those are the only specific recommendations which were made. I want to thank the members of the committee who honoured me by making me chairman. If the bill which will follow this resolution embodies the main recommendations of this report, I believe radio broadcasting in Canada will be making progress, not only from the standpoint of the listeners but from the national standpoint.
Resolution reported, read the second time and concurred in. Mr. Howe thereupon moved for leave to introduce Bill No. 103, respecting broadcasting.
Motion agreed to and bill read the first time.



INCOME WAR TAX ACT AMENDMENT

[Stage Direction]
Hon. CHARLES A. DUNNING (Minister of Finance) moved the second reading of Bill No. 75, to amend the Income War Tax Act.
Motion agreed to, bill read the second time, and the house went into committee thereon, Mr. Sanderson in the chair.
On section 1-Company rate of tax.
Richard Bedford Bennett: Perhaps the minister
could give the committee some idea as to what will be involved by way of increased revenue under paragraphs C and D.


Mr. ILSLEY:: This section provides for the new rates of tax on corporations. The general rate on corporations is increased from 13i per cent to 15 per cent, and in the case of consolidated returns the increase is from 15 per cent to 17 per cent. It is estimated that these increases will yield about $4,500,000 to $5,000,000 additional revenue.


[Stage Direction]
Section agreed to.
On section 2-Rate on "non-resident-owned investment corporations."
Richard Bedford Bennett: As I understand it, the effect of this amendment will be that companies engaged in financial operations in this country and owned outside will compete with

Income War Tax Act
companies that are owned in Canada by-Canadians and will pay just half the tax. That is the position as I see it. Perhaps I have a wrong impression. Will the minister give some explanation?


Mr. DUNNING:: Perhaps a word on the object in addition to what was said in the budget address is in order at this stage, and I shall admit at the outset that this is a very complicated matter which calls for considerably more legal knowledge than I have.
I can say at once that the object is to produce more revenue from the class of companies embraced within the next few sections. It is estimated, as closely as the officials can estimate it, that approximately 81,000,000 of additional revenue should be involved in the changes provided. The object is partly to reverse the taxation instituted, I believe, in 1933 whereby dividends paid out by certain companies were taxable, thus differing in principle from income tax in general, which is a tax upon income coming in. At that time there were difficulties which I can appreciate, difficulties in the form of surpluses accumulated prior to the time the taxation of 1933 came into force. These difficulties still exist, because many of these companies do not pay out their surpluses in the form of dividends but allow them to accumulate. It is thought better to inaugurate taxation based upon income rather than to rely upon being able, at some unknown date in the future, to tax, as provided for in the existing law, the disbursement of surplus. Surpluses tend to accumulate year by year, in many cases reaching very substantial sums, and there is at least some difficulty when we contemplate the possibility of such companies being able to get out at some stage without paying a tax upon their disbursements in the form of dividends. I shall not attempt to discuss the legal possibilities in that regard. It will perhaps be sufficient at this stage to say that it must be remembered that some of these corporations have no assets in Canada, nothing which can be attached here, and the sums involved are considerable. For that reason the government is of the view that it would be far better to tax the revenue of such companies as it comes in rather than to rely upon receiving taxation from them as they pay out that revenue, now or in the future, in the form of dividends.
It may be asked: Why halve the normal corporation tax rate? The present rate of taxation on some companies, in so far as they are taxed under the present law, is 5 per cent when they pay out their dividends. As to making the tax half the normal corporation rate, the reason is, of course, as I indicated in committee of ways and means, our desire not to drive these corporations out but to make them pay revenue to the dominion treasury. Obviously, if we taxed them too highly from their own point of view, being international they could move anywhere and they would undoubtedly move out. I am of the opinion that if we attempted to oharge the normal Canadian corporation tax all such companies would vanish from our midst and consequently be non-taxable. Indeed, representations are made to me that the rate of taxation proposed in the bill will have the effect of driving some of them elsewhere. Be that as it may, after listening to all the representations on the subject, we believe that this is fair taxation and should not involve the companies in question moving out, but should result in a substantial increase in revenue to the federal treasury from this source.


Richard Bedford Bennett: I think the minister
must be in error in assuming that such companies have no assets in this country that we can get control of, for this is the definition on page 2 of the bill:
"N on-resident-owned-investment corporation" means a company incorporated in Canada, at least ninety-five per centum of the aggregate value of whose issued shares and all of whose bonds, debentures and other securities or evidences of funded indebtedness are beneficially owned by persons who are nonresidents of Canada or are owned or held by trustees for the benefit of non-resident persons____
And so on. And the income arises:
(i)	from the ownership of or the trading or dealing in bonds, stocks or shares, debentures, mortgages, hypothecs, bills, notes or other similar property, or any interest therein;
(ii)	from the lending of money with or without security, or by way of rent, annuity, royalty, interest or dividend;
(iii)	from or by virtue of any right, title or interest in or to any estate or trust.
Obviously the corporation has assets in Canada, and obviously the assets arise from the fact that it is domiciled in Canada, because it must be incorporated in Canada.


Charles Avery Dunning: It need not have assets
here.


Richard Bedford Bennett: It might have assets outside this country, but it is a company over which we have control because it is incorporated under our companies act, either federal or provincial; and once the parliament of Canada is seized of jurisdiction with respect to a company incorporated under our law, I should think it might deal with that company's assets, even though they were outside the country, by being able to deal with the
Income War Tax Act

corporate existence of the enterprise. I did know of a British company incorporated in Prince Edward Island. It would be difficult to say, with respect to trading within the limits prescribed by sections 1, 2 and 3, that this parliament would have no control over it at all, because in the very nature of things, for taxing purposes, I think we could easily relate ourselves to its assets. The point is that, as a matter of fact, it does compete with existing organizations which are paying 15 per cent tax in Canada. I am not unmindful of the difficulties with regard to the whole question. The former Minister of Finance initiated this form of taxation and he was at once inundated with protests. It was indicated that it would be injurious to the invitation of additional capital to come to this country seeking investment. But if it is to seek investment as a trading corporation in Canada, then its position should not be vastly different from that of other companies doing business in this country. If, on the other hand, it does not do that and its assets are in some other country, then this form of taxation should secure more revenue for Canada than the other method. But there should be a clear distinction between the two. If the corporation uses one of the large trust companies for the purpose of holding 810,000,000, and accumulates dividends without parting .with them, it is obvious it is not paying taxation. If, however, this method is pursued, then 7i per cent of its income is affected, which would be a much larger sum than could possibly be secured through a 5 per cent tax on dividends, for in many instances these companies permit their dividends to accumulate.
I was under the impression, however, that there was in our taxation act a provision by which dividends that accumulate in the way of rest or reserve or surplus are liable to taxation if they are not declared. That is so with respect to our own domestic companies, in any event. There was inserted in our law a provision whereby our companies could not escape taxation by accumulations in that way, although in 1930, of course, they were allowed to make a distribution of their surplus, and did so, without paying any taxes, from which situation we have not yet entirely recovered. But I was given to understand that the law as suggested by the departmental officials was ample to cover that situation, and that when certain contingencies happened the tax would be imposed. But as the section reads now, it was put to me a few days ago that what we are doing, after all, is saying that a firm of Canadians engaged in the same classes of

business as defined in this statute in the last three clauses of paragraph (p) would pay 15 per cent on their income as an income tax, and that the shareholders would pay their appropriate income tax on the dividend they received, whatever that might be, whereas this enterprise incorporated in Canada, with shareholders of whom at least ninety-five per cent were resident outside Canada, would not pay any tax as the law stood, that is until the present amendment was made, except five per cent on the dividend as declared. That is as I understood the matter at that time. Such a corporation now has to pay 7J per cent on the money which comes in by way of income in competition with other companies that are engaged in exactly the same class of business. Only the management in the one case is employed by .people who reside outside Canada, and the management in the other case i9 employed by shareholders who reside in Canada and are shareholders of a corporation incorporated in Canada. That is the statement as it was put to me, and I want to be sure whether it is correct-it looks to me as though it is correct-namely, that when this company accumulates income, its head office being in Canada and its income being referable to that head office, and it has an income of 8100,000, it pays 87,500 in taxes, whereas next door is a company engaged in exactly the same kind of business, with an income of $100,000, from which 815.000 is taken in taxes. I must say, after looking at the statute this afternoon and listening to what has been said, that seems a fair statement of the case, and it is that question which I desire to have answered in order that I may be informed and be in a position correctly to answer the inquiry which was made of me.


James Lorimer Ilsley: I shall attempt to make some explanation of that apparent discrimination.


Richard Bedford Bennett: Well, is it correct? That is the first question.


James Lorimer Ilsley: Not without a great deal of qualification. For instance, let us take what we call an ordinary financial corporation whose shares are not owned wholly by nonresidents. That company, if its assets are partly in Canada and partly outside Canada, is taxed at the rate of 15 per cent, but some of its income is exempt entirely from taxation. For instance, that part of its income which is derived from dividends of Canadian companies which themselves have paid income tax is exempt entirely from taxation.

Income War Tax Act


Richard Bedford Bennett: Quite so.


James Lorimer Ilsley: And then with regard to the income which it derives from foreign sources, from foreign securities, this government does not get the whole 15 per cent upon the entire income of the corporation; it is obliged to give a credit of the tax.


Richard Bedford Bennett: Of the tax the corporation pays abroad?


James Lorimer Ilsley: Paid abroad; so that it is impossible to say just what tax this government obtains from that corporation without knowing where its share holdings are and knowing in what securities it has invested. The provisions of the legislation are designed to reduce to a very small compass the number of cases in which there would be any discrimination whatever.


Richard Bedford Bennett: It might happen; probably it would not.


Mr ILSLEY:: It might happen. I could quote an extreme case in which there would be discrimination, but in most instances there would not be any real discrimination with regard to taxation between the ordinary financial corporation and the proposed nonresident-owned investment corporation.


Mr. BETTS:: I preface my remarks by saying that I do not wish to hold up the business of the committee, but inasmuch as this bill was handed to us only about an hour ago I wonder whether we could call it six o'clock, as I should like to have a chance to read the bill before anything more is carried.


Richard Bedford Bennett: It was not on our files this afternoon. We received it only a few minutes ago.


Abraham Albert Heaps: One minute to six.


Charles Avery Dunning: You can object.


Abraham Albert Heaps: I have the right to object.
At six o'clock the committee took recess.
After Recess
The committee resumed at eight o'clock.


Frederick George Sanderson: At six o'clock we were on clause 2.


Richard Bedford Bennett: What has been the revenue that we have received under clause 4(k) ?


James Lorimer Ilsley: The amount received for the fiscal year 1935-36 from the five per cent dividend tax is $7,207,600.


Charles Hazlitt Cahan: As far as I can follow these changes I commend them as a good experiment, but I think it is purely an experiment, 12739-237
which will have to be reconsidered possibly at a later date. I think the department is perhaps going to the extreme, to such an extreme as may induce a number of these companies to change their incorporation and remove themselves entirely from Canadian jurisdiction. Nevertheless I can understand that an experiment should be tried, and at the end of a year or two the department may be compelled to reconsider the matter, from the point of view of revenue.


Charles Avery Dunning: I should have indicated that our consideration of this matter is to some extent affected by the provisions of other countries,' notably Great Britain. It will probably be remembered that the Chancellor of the Exchequer there gave certain intimations in his budget speech in reference to taxing people who, from his point of view, were not paying the tax which he thought they should pay to the British exchequer. That, of course, has a bearing upon what we do in Canada. I think there is much force in what my hon. friend says; it is a matter which we must be prepared to deal with from year to year in the light of experience and also in the light of what other countries are doing.


Charles Hazlitt Cahan: Of course the Chancellor of the British Exchequer is looking at the matter from an entirely different point of view from that from which we approach the study of the question. He undoubtedly is trying to find ways and means of increasing his collection of taxes from British subjects domiciled in Great Britain. We are attempting to increase our collection from those domiciled not only in Great Britain, but in France, the United States and other countries, who make use of a Canadian corporation to control the assets vested in such a corporation whose stockholders are not resident in this country.


Richard Bedford Bennett: Is the minister sure that the sum collected is over $7,000,000? That represents a distribution of nearly $150,000,000 disbursed by these companies.


James Lorimer Ilsley: $7,207,600 is correct. This is the amount of tax collected not only on dividends sent abroad to shareholders of what are called 4(k) companies, but also on all dividends sent abroad to shareholders of Canadian companies, whether ordinary industrial or financial corporations or companies owned wholly abroad.


Charles Avery Dunning: The collections under this section were not so much as that.


Charles Hazlitt Cahan: What the leader of the opposition (Mr. Bennett) had in mind is: Can



Income MVar Tax Act
you distinguish now between the revenue received from 4(k) companies and the revenues received from foreign resident shareholders of Canadian companies?


Charles Avery Dunning: No; we cannot do that, It all comes under the five per cent tax in our returns.


[Stage Direction]
Section agreed to.
On section 3-Non-resident-owned investment corporation.
Frederick Cronyn Betts: I should like some help in connection with this clause. I am trying to ascertain the position of a company, under paragraph (p), as to which over ninety-five per cent of the stock is owned outside Canada, and whose gross income is derived from the ownership of stock. It is really a holding company. As I understand the definition of non-resident-owned investment corporation, such a company would be subject to a certain tax by, I think, section 9. But I find it impossible to reconcile that definition in paragraph (p) with the terms of section 4. Paragraph (i) of section 4(k) exempts certain corporations, among others a corporation "whose business operations are of an industrial, mining, commercial, public utility or public service nature, and are carried on entirely outside of Canada, either directly or through subsidiary or affiliated companies." That, I take it, would be the position of the company of which I speak.


James Lorimer Ilsley: Non-resident-owned?


Frederick Cronyn Betts: Yes. I say it is possible to imagine a corporation which could fall under both those definitions.


Charles Hazlitt Cahan: Under either.


Frederick Cronyn Betts: Yes; put it that way, under either.


Charles Avery Dunning: Under paragraph (p), as is indicated, the ownership must be at least ninety-five per cent outside Canada. That provision is simply to make allowance for directors' qualifying shares, and small holdings such as that. Also, the investment itself must be entirely outside Canada. Under section 4, which we have not yet reached, would come companies such as the Brazilian Traction, if there is no objection to my naming one. At the present time it is a 4(k) company in the sense that it is a Canadian holding company, the whole of whose assets and operations are outside Canada. It would qualify under section 4, but not under section 2.


Frederick Cronyn Betts: I do not see why it would not fall under paragraph 2 (p), and then be
[Mr Cahan.]
subject to a tax, because reading down in paragraph (p) I find:
... the gross income of which is derived from one or more of the following sources

From the ownership of stock, and so on.


James Lorimer Ilsley: The hon. member is right about that. He has in mind a holding company incorporated in Canada whose shares are shares in an industrial company carrying on business abroad; is that what the hon. member means?


Frederick Cronyn Betts: Yes.


James Lorimer Ilsley: I understand the hon. member has that type of company in mind, and he says that holding company-


Frederick Cronyn Betts: No; whose shares are their own shares. They do not own the shares of another corporation.


James Lorimer Ilsley: Perhaps I did not follow the hon. member, but I tried to do so when he was making his objection. I could see some validity in what he said, namely that if there were incorporated in Canada a company which held the shares of an industrial company the assets of which were abroad, then that company might come within the definition of a non-resident-owned investment corporation, and might also come within the definition of 4 (k) (i), because it would be a company whose operations are of an industrial nature, and 4 (k) (i) includes wholly owned subsidiary companies which are engaged solely in the transaction of business outside Canada. In the case of a company coming within both definitions, such company would have a right to elect as to whether it would be treated as a 4 (k) company or as a 2 (p) company. The right of election is provided for in another section of the bill.


Charles Hazlitt Cahan: Is it not clear that under paragraph (p) we are dealing with a nonresident-owned investment corporation?


James Lorimer Ilsley: Yes.


Charles Hazlitt Cahan: That is not an operating company.


James Lorimer Ilsley: No.


Charles Hazlitt Cahan: Brazilian Traction, Mexican Light and Power and Barcelona-there is a whole list of them-are not investment corporations within the meaning of paragraph (p); they are companies which are incorporated in this country and which are actually operating in foreign countries. That makes a clear distinction. It may be possible that one company may be found running near to

Income War Tax Act
both lines, but that is the clear distinction in the type of company which comes under one or the other of these two provisions.


Charles Avery Dunning: The ownership of shares also provides another distinction, in a practical way, although it is possible to visualize a situation in which the ownership of shares would not be a factor in the decision, because to come under paragraph (p) a company	like Brazilian could	not	qualify	because	ninety-five	per cent of its	stock is	not
owned outside Canada.


James Lorimer Ilsley: The company described by
the hon. member for St. Lawrence-St. George could be only a 4 (k) company for reasons stated by the Minister of Finance, and also because it is an industrial company. It is carrying on industrial operations.
Mr.	CAHAN:	Quite so.Mr.	BETTS:	Would it	not	be desirable
to make it clear that 3 (p) companies do not include any 4 (k) companies.


James Lorimer Ilsley: They may include some
4 (k) companies, and therefore the right of election is given in a later section of the bill.


Charles Hazlitt Cahan: The man who pays the
tax has the right to elect.


[Stage Direction]
Section agreed to.
On section 4-Business and assets situate abroad.
Richard Bedford Bennett: It is hard to think that
any company coming within 2 (p) would come within this clause, because 2 (p) companies have to derive their incomes from (i) (ii) and (iii) of paragraph (p), whereas 4 (k) companies are industrial mining, commercial, public utility and public service companies gaining their revenue from their operations either directly or through subsidiaries.
Is $100 an ample filing fee in cases like this? Two of the companies that have been mentioned are incorporated by the parliament of Canada, and have all the protection which can be given to them. They pay $100 towards revenue.


Charles Avery Dunning: That is a point worthy
of consideration.


Richard Bedford Bennett: The fee has not been
changed?


Charles Avery Dunning: There has been no
change, but I think the point is worthy of consideration.
12739-237 J


Richard Bedford Bennett: What are the sections
19 and 22A that are added? I notice the words are "except as hereinafter provided by sections 19 and 22A."


James Lorimer Ilsley: Section 19 is in the act
at the present time.


Charles Hazlitt Cahan: It provides for distribution
and winding up.


James Lorimer Ilsley: Yes; section 22A deals with the taxable income of a non-resident-owned investment corporation.


Richard Bedford Bennett: I understand.


[Stage Direction]
Section agreed to.
Section 5 agreed to.
On section 6-Non-resident-owned investment corporation elects.
Frederick Cronyn Betts: What is the tax upon income set out in paragraph E of the first schedule of the act? I cannot find it.


Charles Avery Dunning: One-half of the corporate rate.


Frederick Cronyn Betts: Is it in the act?


Charles Avery Dunning: In section 2 of the bill.


Richard Bedford Bennett: It is found in this bill,
section 2.


Frederick Cronyn Betts: How does a company which
falls under 4 (k) elect to pay a $100 filing fee only? I understood the minister to say that that right was available to a company falling under 4 (k).


James Lorimer Ilsley: Yes. Companies which
have been 4 (k) companies heretofore may qualify for admission to the class of nonresident-owned investment corporations, if they so desire. They have a right to elect to become non-resident-owned investment corporations, and to be so treated. That is provided for in this section. They may elect within such time effective from such date and in such manner as may be prescribed by regulations.


Richard Bedford Bennett: I can understand the
variability with respect to the other factors; but to say, "in respect of periods after the coming into force of this subsection," seems to present some difficulty. It looks like variable fees. That is the only observation I have to make about it.


Charles Avery Dunning: Of course, the idea of
putting that language into the law is in order to deal with a situation where election takes place part way during the taxation period. A company may go along for one year under
Income War Tax Act

one section, and then, some time during the following year, may elect to come under the other. Provision will have to be made whereby the minister will determine just when that election shall become effective.


Richard Bedford Bennett: The election must remain effective for the whole taxation period, one year, must it not? But, as the section reads, a company might elect one way for some months and then another way for the remaining months of the period. It is not desirable to have any election made except for the accounting period for which taxation is imposed, namely, the fiscal year, is it?


Charles Hazlitt Cahan: The accounting years of
many of these companies do not correspond.


Richard Bedford Bennett: Quite so.


Frederick Cronyn Betts: On this question of election
I may be stupid, but I can still visualize a situation in which, to turn back to section 3, paragraph (p):
-a company incorporated in Canada, at least ninety-five per centum of the aggregate value of whose issued shares and all of whose bonds, debentures and other securities or evidences of funded indebtedness are beneficially owned by persons who are non-residents of Canada-
And whose gross income is derived from the ownership of stock. Now that might be a 4 (k) company.


James Lorimer Ilsley: Yes.


Frederick Cronyn Betts: At least, if it wants to be
a 4 (k) company. Now, how does it elect? Where does it get the power to elect?
Mr. ILSLEY': It does not need to elect.


Frederick Cronyn Betts: Suppose somebody comes
along and says: You are a non-resident-owned investment corporation. What then?


James Lorimer Ilsley: If it is a 4 (k) company
within the definition of 4 (k) companies, it is taxed as a 4 (k) company. In order to be taxed as a non-resident-owned investment corporation it must elect.


Frederick Cronyn Betts: But my point is that it can fall within either the 2 (p) or 4 (k) definition by fulfilling these conditions which we find in 2 (p), because they apply as well to the one as to the other.
Mr. ILSLEY':	That company is a 4 (k)
company under the law, but it may move out of that class into the other class, the non-resident-owned investment corporation class, of its own volition by election if it can qualify as a non-resident-owned investment corporation. The hon. gentleman put this case. He said: Suppose somebody comes
(Mr. Dunning.]
along and says: We have here a non-resident-owned investment corporation and we are going to tax it accordingly. But we cannot tax it accordingly unless the company itself elects to be a non-resident-owned investment corporation. Otherwise it has to be treated as a 4 (k) company which it is under the law. The tax is not imposed on non-resident-owned investment corporations unless they elect to come under the provisions of section 6, which says:
A non-resident-owned investment corporation which elects . .. shall not be liable to the tax provided for in subsection 2 of this section but shall pay a tax upon income at the rate set forth in paragraph E in the first schedule of this act.


Frederick Cronyn Betts: My difficulty is this. The minister says that the company which I just outlined to him is a 4(k) company, but as I read the definition of 2(p), the one definition would fit either one or the other class of companies.


James Lorimer Ilsley: It may be a 4(k) company. Certainly not all the companies that are non-resident-owned investment corporations would necessarily be 4(k) companies, but there might be a company which could elect to come within the 2(p) category, and if that were the case and the company did nothing, it would be taxed as a 4(k) company. That is to say, there would be no income tax; there would be a tax only on dividends. But if the company elected to be regarded as a non-resident-owned investment corporation, then the tax applicable to those companies would apply to it.


Frederick Cronyn Betts: I do not see why you should say it is of necessity a 4(k) company.


James Lorimer Ilsley: I did not. I am simply
taking one that is a 4(k) company.


Frederick Cronyn Betts: I may be entirely wrong. I shall run over the definition I quoted before, and if the minister can tell me why that should be a 4(k) company more than a 3(p) corporation I shall be satisfied:
-a company incorporated in Canada, at least ninety-five per centum of the aggregate value of whose issued shares and all of whose bonds, debentures and other securities ... are beneficially owned by persons who are non-residents of Canada . .. the gross income of which is derived from

The ownership of stock. Now is that a 3(p) or a 4(k) company?


James Lorimer Ilsley: It certainly is a 2(p) company; 2(p) is the proper number, not 3(p). But it may be a 4(k) company. It would be a 4(k) company when its assets and its business are all situated abroad, and when it

Income War Tax Act
is an industrial corporation, not an investment corporation. Then, being a 4(k) company, it is exempt from income tax, but there is a tax on the dividends remitted to its nonresident shareholders, who, in the instance cited, would be all its shareholders. That is the way it would be taxed. It would be exempt unless it elected to come within the other provision applicable to non-resident-owned investment corporations, in which event it would be taxed on income, and not on dividends. That might be either an advantage or a disadvantage; it is for the company to decide.


Richard Bedford Bennett: Is there any doubt about the question of making more than one election a year? That is the point I put a moment ago. The words are, "from such date in respect of periods after the coming into force of this subsection and in such manner as may be prescribed by regulations hereunder." The company should not make more than one election in a year.


James Lorimer Ilsley: I do not know what occasion there would be to make more than one election.


Richard Bedford Bennett: Suppose the nature of
the business changes. Suppose I make an election now; I call the directors together and make an election. Then, six months hence, by reason of changes in my investments and in the set-up of the business, I make another election. I do not think there should be more than one election in a given fiscal period. Is the section open to that construction? That is all I am asking.


Charles Hazlitt Cahan: Would it not effect all that the department has in mind to leave out the words "in respect of periods after the coming into force of this subsection," so that it would read:
A non-resident-owned-investment corporation whieh elects within such time, effective from such date and in such manner as may be prescribed by regulations hereunder.


Richard Bedford Bennett: I would suggest leaving in the words "after the coming into force of this subsection," and delete the words "in respect of periods."


James Lorimer Ilsley: It is hard to consider all the implications of the suggestions. For the moment, I cannot think of any objection to what is being suggested. However I would observe that this matter can be regulated under the powers of the section; the minister has the power to make regulations which would prevent anything unworkable.


Richard Bedford Bennett: If you take out the words "in respect of periods," there would not be a possibility of difficulty and you would not impair the value of the section.


Charles Avery Dunning: The suggestion is to take out just the words "in respect of periods"?


Richard Bedford Bennett: Yes.


Charles Avery Dunning: I have no objection.


James Lorimer Ilsley: I move that the words "in" in line 30 and "respect of periods" in line 31 be struck out.
Section as amended agreed to.
On section 7-Five per cent tax on nonresidents.


Richard Bedford Bennett: Would there be any harm in leaving out the words "or credited by"? Can a man escape the tax because it is credited and not paid to him?


James Lorimer Ilsley: He might argue that he had not received it.


[Stage Direction]
Section agreed to.
On section 8-Payments in respect of rights to the use of works whether copyrighted or not.
Richard Bedford Bennett: This section reads, "sixty per centum of such payments shall not be subject to the tax under this section." Does that mean sixty per cent in every year in any particular case? If that is continued, it will amount to many times the value which attaches to a film.


Charles Avery Dunning: It is the amortization of the cost.


Richard Bedford Bennett: If it is carried on for three or four years in respect to the same transaction you will have dealt generously with the owner.


James Lorimer Ilsley: Films have a short life.


Richard Bedford Bennett: Yes; I suppose that is so.


[Stage Direction]
Section agreed to.
On section 9-Dividends of non-resident-owned investment corporations.
Richard Bedford Bennett: This is a most vital section and, if I am correctly informed, one that has caused a great deal of trouble. The following subsections are added:
Dividends paid or deemed to be paid by non-resident-owned investment corporations shall not be taxed under subsection 2 of this section, provided that there has been paid in respect of the income earned between the 1932 fiscal period and the fiscal period first taxed by reason of election under subsection four of section nine of this act, or in respect of dividends equal in amount to the said income, an amount of tax equal, in the aggregate, to five per centum of the said income.
Income War Tax Act

What does "in the aggregate" mean? This is an annual tax.


Charles Avery Dunning: There may be a combination of both.


Richard Bedford Bennett: This contemplates an
election being made in the middle of the year and that is the reason why I asked my question. If the combination comes about by reason of the election, then part of the tax would be referable to the period before the election was made. As the tax is annual, you would have the year divided into two forms of taxation. That was one of the reasons I asked a question with respect to the preceding section.


Charles Avery Dunning: Assume a case where small dividends are paid for a period and then an election is made, in the middle of the year or otherwise, to switch over to the other tax. The aggregate applies with respect to the tax from 1932 on. If there has been an escape from taxation, this provides the means of checking it up.


Richard Bedford Bennett: This is fixing 1932 as a base year?


Charles Avery Dunning: Yes.


James Lorimer Ilsley: The five per cent dividend tax was imposed in 1933.


Charles Avery Dunning: This is the most difficult section there is.


Charles Hazlitt Cahan: Suppose that the tax in force did not apply to the extent of five per cent?


Charles Avery Dunning: Because of no dividends being paid?


Charles Hazlitt Cahan: Yes, from 1932 to 1936; we shall say from March 31, 1932, to March 31, 1936. Is it not an unjust exaction by indirect means to increase the aggregate tax payable by means of an enactment made in May or June, 1936?


Charles Avery Dunning: Let us assume two cases, in one of which a dividend is paid each year and is taxed as a dividend, and in the other in which a dividend is earned and not paid, but in connection with which on a subsequent occasion an election is made to come under the other category. My hon. friend can see that we should not be putting a premium upon the holding back of dividends in order to escape taxation. The two cases would be treated alike by virtue of this section.


Charles Hazlitt Cahan: I can see the point where dividends have been wilfully withheld.


Charles Avery Dunning: Many of these companies are really formed with the object of paying out their incomes in the form of dividends only to a very limited extent.
[Mr. Bennett.l


Richard Bedford Bennett: 
James Lorimer Ilsley: It is not quite correct. The
per cent tax is not correct; it is really a five per cent tax by reason of later provisions in the legislation.


Richard Bedford Bennett: By reason of deductions and allowances. Then I shall use another wording. A tax which amounts to one-half of the tax on the income of a normal company, as provided for by section 2, if an election is made is not to be imposed if between the 1932 fiscal period and the final period first taxed by reason of the election the aggregate tax as paid equals five per cent of the said income. But does this section make that clear? There is nothing to indicate that the aggregate in one year shall be that. Surely it does not mean the aggregate in four years should equal five per cent. Is that clear? That is the whole point to which I direct attention. The words "fiscal period" are quite clear: "In respect of the income earned between the 1932 fiscal period"-whatever time in that year it is-"and the fiscal period first taxed by reason of election." That may be 1936; it must be some time this year, after this act comes into force. Then the subsection reads: "Or in respect of dividends equal in amount of the said income, an amount of tax equal, in the aggregate"-for the fiscal period -"to five per centum of the said income," because it must be an annual tax. As this subsection stands, it is during the period of four years that the five per cent must be made up. That is not what the government intends; the government intends to make the aggregate payment equal to five per cent of the dividend taxed during the fiscal period, or per annum, we shall say for the sake of argument. Now, this does not do anything but make it five per cent of the aggregate for the period, and there must be added somewhere in the subsection the words, "equal, in the aggregate in any one year or fiscal period," to five per cent of the said income.


James Lorimer Ilsley: It does not seem to me to make any difference. We are speaking now of a period-


Richard Bedford Bennett: Which begins some time in 1932.


James Lorimer Ilsley: 
Richard Bedford Bennett: The first of July, 1936
say.


James Lorimer Ilsley: -the first of July, 1936, there will be aa election, and that election will relate to some fiscal period. It would probably relate to the calendar year 1936.


Richard Bedford Bennett: Quite so, because it must be a period subsequent to the date of the coming into force of the act.


James Lorimer Ilsley: The date of the election must be subsequent.


Richard Bedford Bennett: The date of the period
also.


James Lorimer Ilsley: Let us say it is for the year 1936. We have to consider a period between these two dates and this will include the years 1933, 1934 and 1935.


Charles Hazlitt Cahan: Each year being a period.


James Lorimer Ilsley: Yes. Now this section provides that the crown shall receive a tax of five per cent on the income during those three years.


Richard Bedford Bennett: Per annum or per fiscal period, not on the aggregate of the three years.


James Lorimer Ilsley: Five per cent per annum, yes.


Richard Bedford Bennett: But is that clear? That is the only point, and I am afraid it is not clear. The minister's observation is not quite accurate because the date is subsequent to the coming into force of the subsection; it must be subsequent to that. The election is one thing, but the date must be subsequent to the coming into force of the subsection. The only criticism I have to make is that the subsection as it stands does not make it clear that the aggregate of the tax of five per cent must be in any one fiscal period or year, whichever term you use. As the subsection reads now, it would be necessary to take only an aggregate of five per cent for the whole of the period that has elapsed from the date in 1932 to the date of the election.


James Lorimer Ilsley: I think it amounts to the same thing. Suppose the company earns 8100,000 in each of the three years 1933, 1934 and 1935; that makes 8300,000 the company has had that by way of income. We consider that we are entitled to five per cent of 8300,000, and that is what the subsection provides.


Charles Hazlitt Cahan: But does it so provide? That is the point.


James Lorimer Ilsley: Yes, I have no doubt that is what it provides. It says:
Provided that there has been paid in respect of the income earned between the 1932 fiscal period and the fiscal period first taxed by reason of election under subsection 4 of section 9 of this act, or in respect of dividends equal in amount to the said income, an amount of tax equal, in the aggregate, to 5 per centum of the said income.	.
So long as we get five per cent of what is earned by w'ay of income during that period, that is all that matters.


Charles Hazlitt Cahan: "Said income" applies to the aggregate between the 1932 fiscal period and the date of the election?


James Lorimer Ilsley: Yes.


Richard Bedford Bennett: That is not quite the general principle which has governed in connection with these taxing acts. We have dealt with the income as income for a fiscal period or year; we are now dealing with it for a period, namely, that period which will have elapsed from some time in 1932 to the date of the election, which must be some time subsequent to the date of this subsection 4 coming into operation. The method of computation the minister has made fairly clear, but it is a departure from the ordinary rule that governs, because it deprives us of a certain measure of interest which we should otherwise get. We take the sum total of the income instead of computing it for the separate years. As the law now stands, we should be entitled to say: Your income in 1933 was 8100,000; we were then entitled to $5,000, and as you did not pay it we are entitled to interest for a period of two or three years,


James Lorimer Ilsley: As the law stands we are not entitled to anything until the income is paid out by way of dividends.


Richard Bedford Bennett: But we are predicating it on that assumption. As a matter of fact, they kept the money back from us; it was a scheme they devised for the purpose of escaping taxation. We are now making it retroactive to 1932, which is the base year from which we start, because that is the time we began to tax non-resident dividends. Then we say we shall take five per cent from that starting point in 1932 up to the date of election being made under this section subsequent to the coming into force of the section of the law which provides for the election. It must be subsequent to that date. I was dealing with the tax as an annual contribution.


Charles Hazlitt Cahan: It is a nice question whether "said income" covers the aggregate.


Richard Bedford Bennett: What is the real force of subsection 13 of section 9?
Income War Tax Act


James Lorimer Ilsley: There are certain companies that redeem debentures or bonds and in that way remit to bondholders abroad very substantial sums of money.


Richard Bedford Bennett: But are we going to
get them at home? Never mind the people abroad; what about the people at home? I think I know what the minister desires to accomplish, and it is a very desirable thing to accomplish. This is in connection with a scheme of financial reorganization whereby a non-interest bearing debenture is issued, and then it is redeemed, really a method of getting something out of the company which was earned by the company but which, as the law stood, escaped taxation. I think the former minister gave some attention to this. Probably officials of the department and the income tax commissioners have been trying to devise some plan to meet it. As I understand the matter, this subsection is prepared for that purpose; that is, if the tax has not been imposed and the companies have paid nothing, under the provisions of this subsection they shall pay an amount equal to five per cent of the said income. That is the story?


Charles Avery Dunning: Yes.


Charles Hazlitt Cahan: I think that covers it.


Richard Bedford Bennett: Yes; I think so.


[Stage Direction]
Section agreed to.
On section 10-Trusts in favour of the same beneficiaries.
Richard Bedford Bennett: What is the necessity
for that? That was to lessen the rate?


James Lorimer Ilsley: Yes. Trusts were set up
to lessen the rate, but all the money really belonged to the person who created the trust.


[Stage Direction]
Section agreed to.
On section 11-Surplus distribution taxable.
Richard Bedford Bennett: In 1930, I think it was, we permitted the distribution of a surplus. Subsequently we passed a statute by which we hoped to tax that at some period of later distribution. Is that a fair way to put it? Now, what does this cover that was not then covered?
Surplus distribution taxable.
(1) On the winding up, discontinuance or reorganization of the business of any incorporated company, the distribution in any form of the property of the company shall be deemed to be the payment of a dividend to the extent that the company has on hand undistributed income.

That is, if the company has a surplus or rest which has been derived from operations, that would be undistributed income under this provision? Is that what is intended? I want to see if I have it clearly in my mind, because on the reorganization of a number of companies that has taken place in the last few years that question has always been put up to the commissioner of income tax, and I want to know exactly what this means.


James Lorimer Ilsley: We did not intend by this to do anything except to carry on what has been done in the past. Subsection 1 is in the act at the present time. The proviso of the section is omitted and subsection 2 has been changed from subsection 2 of the act, but the object of subsection 1 is to tax surpluses when distributed as though they were income.


Richard Bedford Bennett: The minister understands that I have in mind the criticisms which have been made against certain reorganizations. The point I am trying to ascertain is whether or not, under this subsection as it reads, there can be any such thing as reorganization, where there has been an accumulated surplus derivable from operations and set up as reserve or rest on a reorganization of the business, without the payment of taxes. As the subsection now reads, I cannot see how that can be accomplished, but it has been done, and if there is no change in the law, I cannot see how they have escaped it.


Charles Avery Dunning: There is no change in the law in that regard. The only change is the dropping of the proviso which provides for the companies dealt with elsewhere. That is absolutely the only change with regard to subsection 1.


Richard Bedford Bennett: Then I cannot see where that is ever going to be operative.


[Stage Direction]
Section agreed to.
On section 12-Deductions not allowed.
Mr. CLARK (York-Sunbury):: What is the point in deducting one-third of the dividends?


James Lorimer Ilsley: At the present time the tax imposed upon dividends sent from this country to non-resident shareholders is five per cent of the dividend. A company whose assets and business are outside Canada would perhaps not elect to become a non-resident-owned investment corporation if by so doing it increased its tax substantially, from five per cent to 71 per cent. The reason for providing that only two-thirds of the income derived from dividends of Canadian corporations shall be taxed is to equate the proposed income

Income War Tax Act
tax on 2(p) companies with the dividend tax on 4(k) companies. It really means, in respect of the income of the 2(p) companies derived from Canadian dividends, that the tax rate is the same as it has been in the past, except that it is imposed upon the income, not upon the dividend. If it is imposed upon the income we get it as soon as the income is earned; if it is imposed upon the dividend we may not get it for many years to come. It was felt desirable to transform this from a dividend tax into an income tax, and it is clear that if you raised it to 7J per cent there would not be the election which we desire to bring about.


Richard Bedford Bennett: As I understand it, what the minister says is this: Arbitrarily we have said that, in order to adjust upon a basis of equity the relations between these two classes of companies, payment shall be made of the tax upon two-thirds of the aggregate dividend received by that class of company from Canadian companies. That is the story?


Charles Avery Dunning: That is correct.


Richard Bedford Bennett: And that is the arbitrary determination by the officers of the department as to what they think will be a reasonable arrangement to effectuate equality of treatment. That is the story, is it?


James Lorimer Ilsley: That is the story.


Richard Bedford Bennett: I was a little curious as to how the government arrived at the two-thirds. As I understand the situation, the effort is, not to increase the toll taken from these companies, but to take it in a different form, because, they not having received the dividend we could not obtain it, but by taking it from income we receive it in a different form; and two-thirds of the dividend shall be treated as the whole dividend for the purpose of computing five per cent. Is that the story?


Charles Avery Dunning: That is the story, yes, very clearly put.


[Stage Direction]
Section agreed to.
On section 13-Transfers in trust.
Richard Bedford Bennett: Are there any changes
in this? The law at present is very clear; I cannot in my lifetime create a trust which permits the corpus of the trust to come back to me, and thus avoid taxation. That is the general rule. Now what does this effect?
(3) Where a person transfers property in trust and provides that the corpus of the trust shall revert either to the donor or to such persons as he might determine at a future date or where a trust provides that during the life-time of the donor no disposition or other dealing with the trust property shall be made without the consent, written
or otherwise, of the donor, such person shall nevertheless be liable to be taxed on the income derived from the property transferred in trust or from property substituted therefor as if such transfer had not been made, unless the minister is satisfied that the contingencies expressed in the trust deed do not substantially affect what is in substance a bona fide gift and are not for the purpose of evading taxes on income imposed under this act.
The last part of that is new, is it not? As a matter of fact it does not need to be there at all as far as the law is concerned. Where a donor creates a trust and that trust leaves the corpus in his hands or subject to his disposition he still must pay taxes upon the income from it, because he has not effectually put it out of his control. This is to declare the law, I take it, in order that there may be no doubt about it. But the provision at the end I certainly do not think is desirable. It is very undesirable to say that the minister shall be satisfied about any contingency.
I think the officers of the department will say that the law has been thus administered. I have in mind a case in which a gentleman told me that he had undertaken to make a trust, but he discovered that he had endeavoured to maintain control over the disposition of the corpus and he was informed that the revenue from that must be taxable. In other words, to use the language of Lord Eldon that I have so frequently quoted, you cannot approbate and reprobate at the same time. \ou cannot say: It is my property now for my purposes, and belong to the trustee for another purpose. I do not like this idea of: -unless the minister is satisfied that the contingencies expressed in the trust deed do not substantially affect what is in substance a bona fide gift and are not for the purpose of evading taxes.
I submit that that is very unsound. If it is a gift, it is a gift; if it is a trust, it is a trust. The minister should not be the one to decide whether or not the donor has correctly interpreted his own intentions.


James Lorimer Ilsley: I am afraid I cannot argue
that point exhaustively. As I understand it, there are certain transactions described in the early part of the section which are not necessarily regarded as non-gifts, that is, are not necessarily transactions which leave the subject matter of the transaction in the hands of the donor. Let me read the subsection:
Where a person transfers property in trust and provides that the corpus of the trust shall revert either to the donor or to such persons as he might determine at a future date-


Richard Bedford Bennett: We are familiar with
that form of trust.


James Lorimer Ilsley: That would not be allowed
as a gift.
Income War Tax Act


Richard Bedford Bennett: No; I think that is quite clear.


James Lorimer Ilsley: -or where a trust provides that during the lifetime of the donor no disposition or other dealing with the trust property shall be made without the consent, written or otherwise, of the donor-


Richard Bedford Bennett: That is no gift, because he still retains the power of disposition.


James Lorimer Ilsley: -such person shall nevertheless be liable to be taxed on the income derived from the property transferred in trust or from property substituted therefor as if such transfer had not been made


Richard Bedford Bennett: I wish the minister would stop there. It cannot be a bona fide gift and a trust fund at the same time. I think if the minister strikes these words out he will find it will not be an invitation to those who have to administer the act to depart from what is the declared sense of the law. I just suggest it.


James Lorimer Ilsley: Perhaps we could leave this section for the moment, and I shall be prepared to say a word about it a little later.


Richard Bedford Bennett: Yes. Have I made the point clear? As the minister has read the subsection, it is quite clear that it is divided into two classes. Neither can be called a gift. It is also clear that where the donor retains the powers of disposition, either directly or by reversion to him of the corpus, or to a person named by him, then he does not escape taxation. Why? Because the power of disposition remains with him. I think the minister is inviting trouble if he puts himself into the position where he can say: Oh, yes, it is true this was a trust deed, and all that sort of thing, but you want me to find that this is a bona fide gift. If it is a gift, there is never any trouble about realizing that it is not a trust, and the man knew it was not a trust when he started. This subjects the minister to pressure which should not be put upon him; it is unfair to him and to the administration of the legislation. I am trying to put myself in the minister's place;
I would not want to be subject to that form of pressure, having people come to me and say: It is true it is a trust, but I want you to say it is all right.


Charles Avery Dunning: Then section 13 stands for the moment.
Section stands.

On section 14-Interest and penalty.


Richard Bedford Bennett: What is the four per
cent?


Charles Avery Dunning: It is the penalty. There is a reduction in both.


[Stage Direction]
Section agreed to.
On section 15-One-third tax to be forwarded with return, balance within four months with interest.
Richard Bedford Bennett: Reverting to the latter part of section 14, I take it that this is intended to be applicable to the future, not only to this year. As it stands now it reads:
[DOT]-shall be applicable only in respect of the tax payable on the income of the year 1935-
Surely that is not what is intended to be said.	i


James Lorimer Ilsley: At the present time the
tax is payable in four instalments. The first instalment is due April 30, and they continue from that date.


Richard Bedford Bennett: The rate of interest was
six per cent and will be made five per cent; the penalty was four per cent and we are going to make it three per cent. But it is only one word to which I am directing the minister's attention. The end of the section says that it shall apply "only in respect of the tax payable on the income of the year 1935." If we say that it shall be applicable in respect of the tax payable on the income for the year 1935, and the fiscal period ending therein and thereafter, that is all we need to say until such time as we again amend it.


Charles Avery Dunning: Section 15 considered in conjunction with section 14 clarifies the matter.


James Lorimer Ilsley: Paragraphs 48 and 49 provide for payment by four instalments. I shall read them:
48. Every person liable to pay any tax under this act shall send with the return of the income upon which such tax is payable not less than one-quarter of the amount of such tax, and may pay the balance if any, of such tax, in not more than three equal bi-monthly instalments thereafter, together with interest at the rate of six per centum per annum upon each instalment from the last day prescribed for making such return to the time payment is made.
Paragraph 49 prescribes the penalty for short payment. Payment in four instalments is provided for in paragraphs 48 and 49. By a later section in the bill we propose to make the tax payable not in four but in

Income War Tax Act
two instalments. Therefore sections 48 and 49 as now existing in the act will apply only this year, and when we amend those sections we amend them for this year only. Later we substitute two other sections for them, providing for payment of income tax in two instalments instead of four.


Charles Avery Dunning: Section 15 clarifies the
matter.


James Lorimer Ilsley: If we were not to leave the word "only" in the section, we would be in a bad way. By this measure we provide for the payment of two instalments, and by section 14 we would be providing for the payment of four instalments.


Richard Bedford Bennett: The minister could have answered by saying that it is not intended that section 14 shall apply other than this year. I was simply asking whether the word "only" was used inadvertently, because clearly five per cent is to be the rate hereafter, and three per cent the penalty. It is not necessary to put in the word "only." But the minister has said that this is a separate thing standing by itself, and that therefore the word "only" should be there.
As regards section 15 is it desirable in these days of slow recovery to accelerate in that way the payment of income tax? Frankly, my observations would lead me to believe that with provincial taxes in most of the provinces the burden has become rather onerous, and to make instalments payable three in this year, and two in following years, is going to impose a heavy burden on a great many people.


James Lorimer Ilsley: We are making a concession to the taxpayer by reducing the rate of interest he must pay and another concession by reducing the rate of penalty, when he does not pay as he should pay. Instead of ten per cent he will be charged only eight per cent, and then the taxpayer is asked to do something for us, namely to pay his tax before the end of August, and to make his payments in two instalments instead of four. In this way we shall reduce the overhead and make less work. We shall save a great deal in administration costs because at the present time there are endless interest computaitions necessitated by these numerous payment dates.


Richard Bedford Bennett: I am afraid most taxpayers do not regard the concession as comparable with the increased burden.


[Stage Direction]
Section agreed to.
On section 16-Interest.
Richard Bedford Bennett: I think this is pretty hard, but it is not for me to say.


[Stage Direction]
Section agreed to.
On section 17-Agreements with provincial governments.
Richard Bedford Bennett: What do we get for doing this? Have we any agreement with Ontario in connection with collecting the income tax for that province?


James Lorimer Ilsley: The agreement with Ontario is not yet signed, but it is prepared and the terms have been orally agreed upon.


Richard Bedford Bennett: Does it mean that we get a collection fee for the service we render?


James Lorimer Ilsley: Yes, we do.


[Stage Direction]
Section agreed to.
Section 18 agreed to.
On section 19-Exemption from gift tax.
Richard Bedford Bennett: Is it correct that this applies only to gifts of capital? It cannot apply to gifts of any kind, because a man pays his tax on his income. If I give away a thousand dollars surely I cannot have a gift tax on it.


Charles Avery Dunning: The present gift tax applies to gifts whether they come from capital or income.


Richard Bedford Bennett: The tax is bad enough as it is.


Charles Avery Dunning: That is the way in which it has been administered so far; regardless of source, from either capital or income, it has so far been taxed. To some extent this is a relaxation.


Richard Bedford Bennett: I was told not. A man pays his tax at a certain rate, and he gives away a thousand dollars for some deserving purpose, possibly not to a charity, but for educational purposes; surely that should not be taxed. That would be absurd. The purpose of the act when it was put on the statute books was to prevent the distribution of capital under the guise of gifts, but the law was never meant to interfere with income; a man can do what he likes with his income after he pays his tax. No person ever thought of imposing a tax on the gifts a man made out of his income.


James Lorimer Ilsley: His freedom from all taxes on that does not depend upon whether it is taken out of his income; it depends upon whether it comes within the exemptions set out in the act.
Income War Tax Act


Richard Bedford Bennett: The exemptions do not touch it.


James Lorimer Ilsley: We have added another one. The exemptions are in section 88 of the act. I do not know that I need read them all. If he made a gift of one thousand dollars it would be exempt under this section.


Richard Bedford Bennett: I mean outside exemptions, altogether. I never have heard it suggested until this minute that it covered gifts made out of income, which had1 paid a high tax. Nobody ever thought of doing it until this minute. Look at the absurdity of it. I speak feelingly about it. You pay a thousand dollars to some youngster who is trying to get through university. You have already paid on that amount your income tax of, let us say for the sake of argument, at least thirty per cent, and now somebody says that you must pay a gift tax as well on that thousand dollars. The whole purpose of the gift tax was to meet the situation created by the distribution of capital by those who were endeavouring to escape taxation by making family gifts, as was the case in the United States. But in the United States they never thought of imposing a tax on gifts made out of income. I have made inquiries about the matter, and if this is to be the law, it will necessitate revision of my taxation account, at any rate. I have never heard of anything of the sort, and certainly as far as I know it has never been so interpreted in this country. It would be absurd if it were so, and the sooner it is ended the better. Every time I give away a quarter on the street to a chap to get something to eat, do I have to keep an account of that- because I give it out of my income, on which I have already paid income tax amounting to from thirty to fifty per cent? The reason for the gift tax was so clear. I remember when the gift tax was brought down by the minister. We followed the course that had been taken by the United States where fortunes were being distributed to escape taxation by the donor dividing his fortune among his family before death. There were three events that were challenged by the taxing authority. There was, first, the creation of a trust. If the trust completely severed1 the donor from his property, it was not taxable. If the donor still retained disposition of the corpus, it was taxable. People got over that by making outright gifts of $100,000 or $200,000 or $300,000, and that transferred the property and ended the matter. We followed, for the purpose of dealing with that very situation. The minister had in mind a particular case

which had arisen. Suppose I gave S100 to the Red Cross; that is a charity and therefore is exempt from taxation. But suppose I give $100 to someone I have never seen, who desires to complete his education in Saskatchewan. Must I pay, in addition to the tax I have paid on that as part of my income, a gift tax as well?


Mr. NEILL:: Surely not in addition.


Richard Bedford Bennett: That is the situation
exactly. That is the absurdity of it.
Mi-. NEILL:	Is it not rather that you
are not allowed to deduct that; you cannot claim it as an exemption?


Richard Bedford Bennett: No. They want me to pay a gift tax on it in addition.


James Lorimer Ilsley: The commissioner of income tax advises me that no inquiry is made as to whether the gift is made out of income or principal, and in all the cases put by the right hon. gentleman he would be exempt because the gifts he enumerated are among the exemptions.


Richard Bedford Bennett: No.


James Lorimer Ilsley: The thousand dollars-


Richard Bedford Bennett: No; the thousand dollars has long since gone, and so has the payment to charity. They tax the gifts made out of my income. The authorities have advised me that gifts for education and matters of that kind cannot be taxed.


James Lorimer Ilsley: There is an exemption.


Richard Bedford Bennett: But it is a limited exemption. I am talking of sums that far exceed the exemption. Surely it is not suggested in this country that, after having paid the present high rates of income taxes, if you give away money for any purpose in the world that is not covered by section 88, you have to pay a gift tax when the money comes out of your income.


Alan Webster Neill: It is ridiculous.


Richard Bedford Bennett: Not only ridiculous, but the statute never meant that.


Charles Avery Dunning: Section 88, as it stands,
does not appear to carry the meaning my right hon. friend says:
Save as herein otherwise provided, there shall be assessed and paid upon the transfer in any year by any individual residing or ordinarily resident in Canada of any property (whether situate within or outside of

Income War Tax Act
Canada) transferred by way of gift or donation a tax payable by such individual at the rate applicable in respect of the aggregate value of all the property so transferred during the year by such individual under the following schedule.
Then the schedule is set out.


Richard Bedford Bennett: That is just what it
means-"property" transferred during the year. That does not mean a man's income; it means his property.


Charles Avery Dunning: Subsection 2 provides:
The tax so imposed shall apply whether the transfer is in trust or otherwise, or direct or indirect, or whether the property is real or personal, tangible or intangible, and shall extend to gifts made by personal corporations.
Then comes the date payable, the donor being personally liable, the assessment, and application of the provisions of the act, and then the exemptions. But the commissioner advises me that certainly there has been no distinction whatever made from the point of view of the leader of the opposition.


Richard Bedford Bennett: Nobody ever thought of
taxing gifts from income. Think of the effect of it.


Ian Alistair Mackenzie: How
long has this been in operation?


Richard Bedford Bennett: The minister brought it
in last year.


Ian Alistair Mackenzie: Has it
had time to operate yet?


Richard Bedford Bennett: Oh, yes. Not only has it operated but the question became acute in a discussion I had only a few days ago. It is an invitation to leave this country quickly, and to give away no money. That is the main thing. It is a great invitation not to give anything to anybody, and the sooner you end it the better. A person pays a tax on the high rising scale of income taxes that we have in this act, and then you say that if a man with any surplus income gives anything away to a needy person he must pay a gift tax of eight per cent on what he gives away. Surely that was not ever intended to be the law of Canada. It certainly was not the intention of the former minister when he introduced the tax, or of parliament when it passed it. I recall vividly the circumstances that gave rise to its coming into operation. What is more, this will mean that people will have to revise their whole accounting arrangements because everybody is giving away money from time to time, I hope, to the extent of his ability, and he never thinks, because he gives it out of his income, therefore it is subject to a gift tax. Nobody has ever
suggested this to me before. It seems so absurd. Where a man has a large fortune and gives away $100,000 to this member of his family, $100,000 to another, and so on* to escape taxation-that is what the statute was passed for. I can only say with respect to the people who have been trying to give away a little money-and I think I have been one -that this will necessitate a revision of my own position and that of many other people in this country who have endeavoured to help the poor, and have never asked exemption for so doing. I do not want to talk about my own affairs, but during the last year I have helped in education in every province of this dominion, I have aided young people, some of whom I have never seen, and as long as the money came out of my income I did not think it was taxable; neither did the former minister who brought in the gift tax. It has always been assumed that the gift tax referred only to a distribution of capital; that when capital was distributed it was taxable.	. [DOT]


Mr. CAMERON (Cape Breton):: As I heard that section read by the finance minister, I certainly think it bears the interpretation which the minister is contending for. I would like to suggest to the leader of the opposition that there is a rule which settles the will of parliament. It is not what is in people's minds but what parliament says in black and white, and what is written in the section says that the gift is taxable even if it comes out of income.


Richard Bedford Bennett: I do not think that was ever intended.


John Charles Alexander Cameron: I believe it was not intended, and I think the section should be corrected. But that is the way it reads.


Richard Bedford Bennett: I warrant that there is not a man in either chamber of this parliament who has any such idea.


John Charles Alexander Cameron: I do not believe it is right.


Mr. ESLING:: If one chooses to give away a piece of revenue producing real estate after he has paid income tax and municipal tax, is he then to be taxed on the gift which he has given away outright? I can cite such a case. I have had a piece of property in Calgary for twenty-five years which does not even pay the taxes. If I want to give it away for nothing shall I be taxed?


James Lorimer Ilsley: The tax would be very small.


Richard Bedford Bennett: It is the principle.
Income War Tax Act


James Lorimer Ilsley: That gift undoubtedly would come within the exemptions.


William Kemble Esling: It is to an individual.


Charles Avery Dunning: Under the amendments now proposed, a gift not exceeding $1,000 to any individual would be exempt.


William Kemble Esling: There might 'be other gifts a man would like to make.


Charles Avery Dunning: So long as they do not exceed $1,000 to any one individual, he can give away as many as he likes under the amendment now proposed. The separate gifts would not be taxable provided they were under $1,000. That is the change being proposed here.


Richard Bedford Bennett: It is absurd.


Charles Avery Dunning: We are at least improving the situation a little.


Richard Bedford Bennett: As far as I am concerned, not a bit.


John Charles Alexander Cameron: I think the whole thing should be repealed.


William Kemble Esling: Suppose the value is more than $1,000 and you want to give away a piece of revenue producing property; in the computation of your income tax, your tax would be reduced, whereas the one to whom you give the property must make a return. It looks to me as though the tax is being doubled.


James Lorimer Ilsley: The donee may be in a lower tax category than the donor, and in that way the income tax might be reduced.


Richard Bedford Bennett: Surely the minister will not say that there has ever been anyone who has paid a gift tax on a gift made out of income. Certainly I never heard of such a thing until I heard it in this committee tonight. Money taken out of the income of a man who has paid his income tax and surtax is now to be taxed. This will mean that people will not give away any money. I do not think the section was ever intended for any such purpose. I was not in the chamber when the section passed and I do not know how this came about. The provision was intended to prevent the distribution of property in order to remove incomes from the higher brackets, which might run as high as sixty or seventy per cent and get it down to a lower and more desirable bracket. A man might transfer two or three hundred thousand dollars to a wife or to daughters or sons and thus reduce his income and bring it down to a lower bracket. But now the

government says that we are going to be taxed for giving away a little money after we have paid our income taxes, both federal and provincial. Certainly that cannot be the intention of parliament. Certainly parliament would never have passed the section over my say-so if I had known that was the interpretation to be placed upon it. This is just one of those sort of things which makes one wonder what it is all about. If in an economic depression one wants to become as generous as possible and give as much as he can, after he has paid high taxes, both federal and provincial, he is to be taxed because he makes a gift! A man is in difficulty; he writes you a letter and you send him $500 which you know you will never get back. This is a gift as far as you are concerned.


Charles Avery Dunning: To each individual, yes.


Richard Bedford Bennett: This is a tax on a gift
out of income; it puts people in a very difficult position who have been dealing honestly with their income tax.


Alan Webster Neill: Most of the debate this
evening has been far above my head, being a lawyers' debate on legal technicalities, but even my lay mind can grasp this situation. Years and years ago the government of the day conceived it to be a good idea to encourage people to give money for charitable purposes. They inserted a clause in the law providing income tax exemptions on such gifts up to ten per cent. These exemptions were to be obtained on the production of receipt to show that you had contributed to charitable institutions and so on. A broad interpretation was placed upon the section, the idea being to encourage people to make such contributions. We are now placing a direct tax upon generosity.


Charles Avery Dunning: That is not correct; the tax now exists; we are modifying it.


Alan Webster Neill: We passed a bad section
last year, but the principle is absolutely wrong to penalize a person with generous motives, who gives money away. Certainly if this section means anything at all, it is in the direction of discouraging that kind of thing. I think we shall make ourselves a laughing stock if we pass legislation like this.


Richard Bedford Bennett: It certainly never was
intended by parliament thafr there should be a tax on gifts out of income.


James Lorimer Ilsley: I might have been able to
make a better defence of this legislation if I had had some notice of it. We are improving t'he legislation by degrees. With regard to the point raised by the hon. member for

Income War Tax Act
Comox-Alberni (Mr. Neill), gifts or contributions to charitable organizations or educational institutions in Canada, when operated exclusively as such and not for the benefit, profit or gain of any person, member or shareholder, are exempt from the gift tax. By this proposed legislation, any number of gifts of $1,000 each are to be exempt from the gift tax, and over and above that, $4,000 in gifts is exempt from the gift tax. There are a number of other exemptions, but when we get out of the exemptions, gifts are taxable. No inquiry is made as to whether these gifts are made out of capital or out of income. I could see great administrative difficulty in making such an inquiry necessary. For instance, a man might claim that certain expenditures had been made out of his capital as his income had been used up, and who is to say whether he is right? At any rate, we are administering the law as we found it and as it stands, and I am not prepared at the moment to try to draft an amendment to place before the committee.


Charles Avery Dunning: I think the intention
might be found in the budget speech last year of the former Minister of Finance Mr. Rhodes. At page 1986 of Hansard of 1935, Mr. Rhodes is reported as follows:
F*nally, it is proposed to levy a tax on gifts. J his form of tax, adopted by many countries, is being imposed primarily to operate as a deterrent to transfers of property by gift, chiefly within family groups which would have the effect of reducing personal income to lower brackets and thus securing income tax assessment at rates lower than would otherwise be applicable. It is particularly expedient to introduce this measure at this time in view of the higher rates of taxation provided for in the new surtax on investment income. Not only should this tax put our income tax structure on a more secure foundation but also it should operate in a like manner with regard to succession and inheritance taxes levied by the provinces.
The rates at which gifts are to be taxed are as follows.
Then the list is given. I call attention particularly to this:
The tax shall not apply to gifts between husband and wife, nor to gifts to minors, as under the present act the donor in such cases continues to be taxed on the income from the property so transferred.
Mr. BENNETT. Yes; that makes the case complete.


Charles Avery Dunning: He goes on:
Certain classes of gifts are to remain free from tax such as, for example, gifts made for charitable, religious, educational, scientific or literary purposes, or to the dominion, any province or political subdivision thereof for public purposes. Furthermore, gifts in the aggregate not exceeding $1,000 a year are to be free from tax.
I have not the later discussion in committee of ways and means; that will be in a furthur volume of Hansard. Certainly, however. the administration of that section so far, under the government of my right hon, friend and under this government, has not contemplated a distinction as to whether the gift came from capital or income, so far as the donor is concerned.


Richard Bedford Bennett: For the obvious reason
that no one has paid tax on gifts from income in this country, so far as I know.


Charles Avery Dunning: I may tell my right hon. friend that I myself had some difficulty in deciding what I should return because of the existence of that provision.


Richard Bedford Bennett: As it stands now the
government should at least give some consideration to it, for it never was intended to dry up the sources of gifts in this country. As it stands now, I must try to keep a record of the number of ten dollar gifts I make.


Charles Avery Dunning: No, because the exemption is large enough to cover that.


Richard Bedford Bennett: Yes; but that applies to gifts not exceeding $1,000. After making his return and paying a tax on that basis, if the donor gives away money out of his income he will have to pay seven or eight per cent. This puts Canada in a class by itself; no other country so far as I can ascertain has thought of doing such a thing. Certainly, if my information is correct, this is not the situation in England, and they tax gifts, as do the United States. The minister referred to the case where capital is given away for the purpose of getting into a lower bracket. In that case there is a tax. But giving income away does not get you into a lower bracket unless you convert the income into capital; you spend your income and that is the end of it. I can only say that it is a desperate situation if it is as the minister suggests. The late government never had any intention of doing any such thing.


Charles Avery Dunning: But the statute is there.


Richard Bedford Bennett: I think the explanation
in the statute itself makes it clear. It was never intended to tax gifts out of income.


Charles Avery Dunning: If it was clear before then it is still clear.


Richard Bedford Bennett: But the question has
arisen now, it has been suggested that the law is not clear.
Income War Tax Act


Charles Avery Dunning: If the intention of the
statute is as my right hon. friend suggests, and if it can be so construed, then the amendment is not changing the intention of the last parliament.


Richard Bedford Bennett: But the law should be
clarified now if there is any question about it.


John Charles Alexander Cameron: The
speech of the former Minister of Finance is not a rule for interpreting the statute.


Charles Avery Dunning: Only as to intention.


John Charles Alexander Cameron: But his interpretation makes it clear that he had no idea that income was taxable. I think the legislation should be clarified. Once the taxpayer makes his return showing his income, on which income be will pay his tax, he should not have to account for any gifts which he may make during the year out of that income. He makes his return and pays his tax.


Richard Bedford Bennett: I do not think the clause should carry. At the same time, it is clear that this does not touch the operative section out of which this trouble has arisen. If language means anything, the language of the former Minister of Finance meant that gifts from income are not taxable; that is as clear as any man can put it.


Ian Alistair Mackenzie: I read
entirely the other way the language of the Minister of Finance of last year.


Richard Bedford Bennett: He spoke of a man trying to get out of one bracket into another by giving away capital. But now we are discussing the gift tax.


Ian Alistair Mackenzie: What
he said was:
The tax shall not apply to gifts between husband and wife, nor to gifts to minors, as under the present act the donor in such cases continues to be taxed on the income from the property so transferred.
Therefore the income tax does not apply under the exemptions made by the minister last year with respect to the gift tax, the inference being strong that it applies to those not exempted.


Richard Bedford Bennett: But read the first statement made by the former minister when he said that he proposed to impose the gift tax.


Ian Alistair Mackenzie: This was what he said:
Finally, it is proposed to levy a tax on gifts. This form of tax, adopted by many countries, is being imposed primarily to operate as a

deterrent to transfers of property by gift, chiefly within family groups which would have the effect of reducing personal income to lower brackets and thus securing income tax assessment at rates lower than would otherwise be applicable. It is particularly expedient to introduce this measure at this time in view of the higher rates of taxation provided for in the new surtax on investment income. Not only should this tax put our income tax structure on a more secure foundation but also it should operate in a like manner with regard to succession and inheritance taxes levied by the provinces.
Then comes the crucial point wdiere he makes specific exemptions from the gift tax:
The tax shall not apply to gifts between husband and wife, nor to gifts to minors, as under the present act the donor in such cases continues to be taxed on the income from the property so transferred.
He is making a special exemption, with reference to exemptions under the gift tax, leaving the obvious inference that in all other cases income is taxable.


Richard Bedford Bennett: But the hon. gentleman uses "income" in a wrong sense. There is no tax on gifts between husband and wife. The husband has an income of $50,000 and hands $25,000 to his wife. Somebody else takes $25,000 and gives it away in ten and twenty dollar lots, and he has to pay the tax. That is not what was intended. There is no question of exemption with respect to husband and wife, because it dealt with income.


Charles Avery Dunning: In committee of ways
and means last year there was a little discussion which to some extent clarifies the intention further. After making an explanation in response to a plea by Mr. Coote to have the exemption raised a little, the then Minister of Finance said, as reported in Hansard, volume 4, 1935:
Mr. Rhodes: Mr. Chairman, we did make inquiry with respect to this tax, which is in operation in other countries. The nearest example is to be found in the United States. The object of the tax is obvious; it is to prevent an individual with an income which would bear a very heavy income tax from escaping that tax by handing oyer to certain relatives, perhaps to his immediate family, a physical volume of securities, for instance, which would have the effect of dividing his income among five or six persons.


Richard Bedford Bennett: Can you get anything
clearer than that?


Charles Avery Dunning: These, paying individual income tax, would come under a lower bracket, being in receipt of a smaller income, and in the aggregate the income tax payable by these individuals would be nothing like the income tax that would be paid by the man under the higher bracket.


Richard Bedford Bennett: Quite so.

Income War Tax Act


Charles Avery Dunning: It was to prevent that sort of thing, without the state securing some compensation by way of revenue, that this gift tax was imposed. The figure originally mentioned in the resolution was $1,000.
He is now speaking of the exemption.
That was raised, because we did not want to include in the category of gifts which were intended to be taxed, for the reasons I have just indicated, certain bona fide gifts by individuals to members of their families by way of an annual income, for example. There were certain eases of that. Inasmuch as the individual who gives, we will say, an annuity of $1,000 to a member of his family has paid an income tax upon that, the exchequer is not cheated. Possibly $5,000 might be a fairer figure; that is the figure set in the United States. I should be quite content to have it raised to $5,000. but I doubt if we would be wise in increasing the exemption beyond that figure. In that regard I am entirely in the judgment of the committee.
The intention there, so far as I can gather it, is certainly to tax income.


Richard Bedford Bennett: No, exactly the opposite. It cannot mean anything but just that, that there should be no tax upon distribution of income by gift. Why? Because, he says, the idea is to prevent men from giving away their property in such a way as to make the aggregate tax payable upon the income derived from it, by the persons to whom they give it, less than if they paid in the higher brackets. You could not make the case clearer than that to show that the tax refers to corpus only and not to income.


Charles Avery Dunning: But in the further reference to exemption-


Richard Bedford Bennett: The exemptions only
strengthen the case.


Charles Avery Dunning: The figure originally
mentioned, the former minister said, speaking of exemptions, was SI .000. That was raised-
-because we did not want to include in the category of gifts which were intended to be taxed, for the reasons I have just indicated, certain bona fide gifts by individuals to members of their families by way of an annual income, for example. There were certain cases of that. Inasmuch as the individual who gives, we will say. an annuity of $1,000 to a member of his family has paid an income tax upon that, the exchequer is not cheated. Possibly $5,000 might be a fairer figure-[DOT]
And so on. To my mind the then minister on that occasion was certainly talking of a gift from income, and speaking of the exemption provision as one which would operate to prevent the individual being taxed twice on that amount.


Richard Bedford Bennett: Nothing can more clearly indicate that the minister had not in mind income than the reason he gave when the 12739-238
matter was first dealt with. The tax was a tax on gifts of principal which had the effect of reducing the income tax paid to the state upon a fortune. A man has $1,000,000 of income from his securities, and he wants to reduce that to $600,000. He gives securities to his children, just as the former minister says, until he reduces the income to that amount. Thereupon the tax that he pays is in the lower brackets of twenty and twenty-five per cent instead of sixty and seventy per cent. The others are in the low brackets as respects the sum total of taxes they pay, and as the former minister points out, the tax is less than the man would probably have paid as owner of all the property. I am not going to mention the particular case that the former minister had in mind when he was discussing that point, but nobody ever suggested seriously until I heard it here to-night that the income the man received was also to be taxable. The former minister said, "When a man provides an annuity of $4,000 for somebody we allow for that, because he has made a gift; he has set it aside and the income from it. He is not required to pay because it goes to that other person." To provide $4,000 or $5,000, $100,000 is set aside; that is quite common in this country; and because the former minister wanted to protect that sort of gift he said that he was not going to charge a gift tax on that transaction. That is all there is about the matter, but certainly from my standpoint it is incredible that any one should suggest it was ever the intention of the late government to impose a .tax upon gifts made out of income. The hon. member talks about administration. It is as simple as one, two, three as far as administration is concerned. That bogey has been worked to death in this country. By the time we get down to a fair appreciation of what is involved, we shall realize that it will be disastrous to any man who is trying to do something to aid another. A thousand dollars is not any good. For instance, what about a man's election expenses? Suppose he helps a friend by giving him $5,000.


An hon. MEMBER:: Too much.


Richard Bedford Bennett: Let us say it is too much. But even supposing it is, some of us have been known to have-


Charles Avery Dunning: He could go to a thousand dollars a head, which would be more helpful.


Richard Bedford Bennett: That is not the point. The candidate makes his return. Suppose a man pays in $5,000 to the fund in Queens county, Prince Edward Island.


Charles Avery Dunning: Thank you.

Income War Tax Act


Richard Bedford Bennett: Suppose he does that. Is he to pay eight per cent on that? Was it ever intended that the income thus used by him in his discretion should pay this tax? Surely the mere statement carries its refutation on its face. I know this much; it was never intended by the late government that it should be so. That is made clear by the explanation of the former minister which has just been read. I cannot speak with certainty, but it is not my understanding that such is the position in the United States, though they tax everything there, even the profits you make on the exchanges; here we do not. All the former minister was trying to do was to prevent a lessening of taxation by a distribution of the corpus of one's fortune. "I am going to take toll," he said, "out of that fortune as it is being disbursed by a man in his lifetime so that he may pay less taxes." As a matter of fact the practice of making distribution of the corpus of the estate was getting quite common in this country. I am greatly opposed to the section as it stands. I think the government should modify the principles of the law in that regard, because hitherto such has never been the intention of parliament; certainly I have not gone upon that assumption, nor has anyone else as far as I know.


James Lorimer Ilsley: In the light of this discussion I think I should say that as far as I am concerned I would certainly consider an amendment, but not at this session. I have been trying to determine what sort of amendment would meet the case of the right hon. gentleman.


Richard Bedford Bennett: Oh, it is easy.


James Lorimer Ilsley: But certainly an exemption up to the amount of the taxpayer's income would not be proper.


Richard Bedford Bennett: Why?


James Lorimer Ilsley: Because in that event he would say that his personal expenditures, whether $50,000 or $100,000, were out of capital.


Richard Bedford Bennett: How could he?


James Lorimer Ilsley: He would 'say that the gift was out of income. He could claim the exemption for the gift up to the amount of the income and then his other expenditures would be deemed in reduction of capital.


Richard Bedford Bennett: I do not understand that. I confess the genius of the minister's advisers is beyond me.


James Lorimer Ilsley: Let us think about that for a moment. The right hon. gentleman has not suggested anything.


Richard Bedford Bennett: Yes; I suggested that the law should be what was originally intended. There should be no tax except on capital distribution; that was all that ever was intended by this parliament or by the former minister who introduced the gift tax. The last extract-read by the minister makes that quite clear.


James Lorimer Ilsley: Suppose a gift of $100,000
comes to the attention of the department. The taxpayer says: That gift was out of income, because I have an income of $100,000. We say : But what about the other S100.000 that you spent on yourself and your wife and family and trips to Europe?


Richard Bedford Bennett: He can give it to his wife if he likes.


James Lorimer Ilsley: He says: I have a right to use up my capital in trips to Europe if I like. The amendment I have proposed to-night is the only one I can think of at the moment. If he can deplete his capital, and claim exemption by saying it was out of income-


Richard Bedford Bennett: That could not last long.


James Lorimer Ilsley: The right hon. gentleman will say:	You could make provision or
regulations to prevent that. I think we could, but it will take some consideration. I shall give consideration to the matter for next session, but not for this.


Richard Bedford Bennett: But think of the inequity of the section as it stands. There is the former minister's statement of what he introduced the tax for, and now we are going exactly opposite to that. When he brought in that bill he said that he did it for a given purpose, and we are negativing that puipose by saying that we are going to tax every gift. As regards the illustration about going to Europe, of course that is not a deductible item, in any event. One can speak with certainty about some things, that is what he knows himself. I am not engaged any longer in the practice of my profession; therefore I pay my income tax on income from investments, except as to the salary which I receive here and the indemnity. The two together make a sum in excess of that which I am allowed to deduct. In other words the maximum income which I am supposed to earn is $14,000, is it not? The rest of it is subject to surtax. I pay the ordinary tax, and then on any sums in excess of $14,000 there is the surtax. I am allowed $1,000 exemption, being single, plus what the department may regard as being vouched for as charitable donations, under the law not exceeding ten per cent of the taxable income. Then -there is the provincial tax which

Income War Tax Act
is on the amount of your income less the dominion tax. Now the government seeks [DOT] to make it impossible for me to lower the brackets under which I pay. As the former minister says, that can be brought about only in one way, not by gift of income, but by gift of capital. Giving away all my income, to whomever I give it, and in whatever sums, does not change the bracket. The bracket can be changed only in one way, that is by the gift of capital, the corpus.


Charles Avery Dunning: It could be changed for the next year by the gift of a large part of the income of this year.


Richard Bedford Bennett: No; I could not change the bracket in the least.


Charles Avery Dunning: For the next year.


Richard Bedford Bennett: But the principal is still intact ; that is the whole point. It is no use for the minister to suggest that the bracket can be changed in the way he indicates; it cannot be done. The cold-blooded fact is that my corpus has not changed between last year and this year. From that capital I have "X" income, and whatever I do with it cannot in any sense change the bracket. That is quite clear. That being so, that I cannot change the bracket by any gift of income, and the former minister having said that the purpose was to prevent a change of bracket, obviously there is only one way by which that can be prevented, that is by a tax on corpus. As regards the explanation given as to $1,000, $2,000, $3,000, $4,000, I could give the history of that. A man gives a bond of $1,000 as a birthday present to his child; no one suggests that is going to be taxed, whether he went to his safety deposit box and took $1,000 out and gave it or paid it out of income. But when he takes $100,000 or ten times $100,000, then there is to be a tax. But if he buys out of his income a $1,000 bond, that just adds to what the state gets. That is the odd part. Bear this in mind, that every time a man invests any part of his income as additional capital and thereby converts it into capital, the state wins. There are no longer any tax-exempt bonds; there will not be any to buy after 1937. Every time a man out of his income invests $5,000 he has added to his taxable income for next year, from which income the state takes its piece. But it is now said that if he gives away any part of his income, he incurs an additional burden of eight per cent in addition to the three kinds of tax he now pays, his income tax, the tax he pays the province and the surtax. Well, Mr. Rhodes, the ex-Minister of Finance, explained what he was doing; he was making it impossible 12739-238J
for a man with a fortune to reduce his bracket rate of income tax by giving his capital to his family. If he gives it to his wife he does not escape; why? Because she gets the income and pays tax on it. It is not as though this was not done with exactitude; it was done with care. The language is clear. There is no doubt as to Mr. Rhodes' explanation, and if one reads the section as it stands, it must be applicable only to gifts of corpus or capital. It would be an almost intolerable situation to suggest that a gift of capital is not in a different position from a gift of income. To tax a gift of income is to impose a burden on those who are anxious to pay; if that is the theory, it will make more people want to leave this country than do now. One would be very much better off in England, although we talk about the high taxes there, than with the municipal, provincial and federal taxes we have here, and in addition a gift tax on everything a man gives away. How much of a man's income does anyone think he spends on himself? Three meals a day and a few clothes! A very small part. The rest of it finds its way into channels of commerce in some way; he gives it here and there and elsewhere; he incurs obligations; he goes into various ventures, and now he is told that if he uses that income in the way in which he desires he has to pay a gift tax on it. This is wholly at variance with what Mr. Rhodes had in mind. When I heard the last statement read by the minister it recalled it exactly as Mr. Rhodes put it; that is the whole foundation of that tax. To suggest that this was a tax against income is to do violence to anything any hon. member had in mind at the time the provision was passed; I am sure of that. I was not here; I'was ill, as a matter of fact I never heard of it being discussed until it was mentioned the other day.


[Stage Direction]
Section agreed to.
Richard Bedford Bennett: Mr. Chairman, this clause in any event would have to pass; whether the tax be on income or capital would not make any difference. But it afforded an opportunity for the discussion.


Charles Avery Dunning: No; this is a modification of the bearing of it.


Richard Bedford Bennett: That is all.
On section 20-Exemption of metalliferous mines.


Richard Bedford Bennett: This is another illustration of the unfairness of it. Suppose a man's income is entirely derived from gold mines. Until last year he paid a tax on fifty per
Income War Tax Act

cent of the income, and that is all. If he gave away the other fifty per cent, he could pay the tax on it and still be better off than nowadays, whatever might be left to himself or whatever might be accumulated surplus. We changed this to thirty-three and a third per cent. Just see how it applies: First of all a man has a reduction of fifty per cent on his taxable income. The man's income as certified by the auditors is $10,000,000. After depletion is taken off and depreciation is allowed he has a net profit of $10,000,000. Fifteen per cent of that is $1,500,000. But instead of paying on the $10,000,000 you spin it in two and make it $5,000,000. Then you pay 15 per cent on that, which makes $750,000. That is the tax. Now comes the distribution of $10,000,000, in part, because part of it is still kept for reserve and rest. They distribute the dividends to shareholders and the balance is profits. Do they pay income tax, as I do? No; they reduce by thirty-three and a third per cent that dividend cheque and pay income tax on that.


Charles Avery Dunning: 


Richard Bedford Bennett: a third per cent.


Charles Avery Dunning: Twenty per cent.
It was thirty-three and
Not on dividends.


Richard Bedford Bennett: It was fifty per cent
when we came into office.


Charles Avery Dunning: You reduced it to twenty per cent.


Richard Bedford Bennett: We reduced it to thirtythree and a third per cent.


James Lorimer Ilsley: For companies and twenty
per cent for individuals.


Richard Bedford Bennett: When one begins to
talk about allowances for depletion and depreciation, this should be in the statute itself I had intended to deal with it by statute. It is not right to have it left to the caprice of individuals. It should be settled and fixed by statute. At one time it was to be; then it was settled by regulation. I am not sure now whether it is by regulation or statute. The former minister had intended to provide for it by statute but whether it has been done or not I cannot say. The minister has the statute before him; would he state whether it is by regulation or statute?


James Lorimer Ilsley: By regulation, and always
has been.


Richard Bedford Bennett: That is right; it has
been. In view of the fact we are undertaking to make a contract not to vary the tax for a given number of years it might be desirable that in the statute itself there should be

stated just what is to be allowed for depletion. For when you read in the papers that the ore reserves are now good for fifty years, and that is put in the annual report, and you show that a rest is accumulated by which the company could in any event retire its common shares at their original cost, it is a little difficult to understand why they should be thus favoured beyond any other person. There was great trouble in the department for a long time in getting the depletion in connection with coal mines settled. In the United States they settled it in one way. They had great difficulty to get it settled in this country. The same applies to silver, platinum, nickel, copper and so on. Might it not be desirable that there should be a schedule indicating just what the allowance would be for depletion in the company's hands and in the hands of the dividend receiver?


[Stage Direction]
Section agreed to.
Section 21 agreed to.
On section 22-Taxation periods affected.
Mr. STEVENS:: Section 22 refers to sections 1, 2, 3, 4, 6, 7, 8, 9, 10, 11, 12, 13, and 16 of the act and it states that they shall be applicable to the income for the year 1935. It will be noted that in section 8 which is one of these, provision is made for the taxation of motion picture films, and an exemption of sixty per cent is allowed. But the practice in this and, I take it, in some other instances, is to remit royalties, or whatever the earnings may be, monthly or at short periods of time. Virtually all of that which occurred prior to the notification of the public that this was to be done had been remitted. Obviously an agent who could not possibly be expected to have anything like the resources of his principals could not bear the taxation, and could not collect it from his principals. I should like to ask the minister if that feature of it has been given consideration, and if those who have remitted the income to their principals in Great Britain, for instance, for British films or matters of that kind-I imagine musical copyrighted productions would be in the same position-will now be called upon to try to pay the tax for the 1935 year, which I submit in many many cases will be utterly impossible?


James Lorimer Ilsley: I know that is the submission of certain persons who are affected by this provision. However, one has to know something about the whole background of the section in order to come to a conclusion as to what should be done. This is what

Income War Tax Act
happened in connection with motion picture films: In the past the companies have been paying a five per cent tax on ten per cent of the royalties or payments they have been remitting. The view of the department is that they have got off very lightly in the years gone by. I do not know that we would be justified in limiting this to the year 1936 and subsequent periods. It is true that the tax could not be deducted from the remittances of last year, but they can be paid now in respect of the remittances of last year. We have arrived at a reasonable tax concerning the justice of which there can be very little dispute, namely two per cent of all such royalties or payments. That is to be the rate, instead of five per cent.


Henry Herbert Stevens: I am not criticizing the
set-up. But may I put the matter to the minister in this way:	While this is an inr
come tax it is almost in the nature of a sales tax. If it were a sales tax and remittances were made for last year on goods sold and disposed of, we would not think of making it retroactive and applying it to invoices which had been issued. I imagine some of these remittances are made bimonthly or monthly, at very short periods, and the transactions are ended. The minister has properly said that there was very light taxation in the past, but that was the law. We should not say: You have got off too easily, and therefore we shall come down on you with a heavy hand. That was the law.


James Lorimer Ilsley: But our view was that
there should have been a payment of five per cent on the whole thing, under the law as it stood. They have been paying five per cent on ten per cent, and were doing it through last year.


Henry Herbert Stevens: I think that is perfectly sound but it should be made applicable from the time the tax was announced in the budget, May 1. They could not possibly have known of it; the agent could not have retained the amount out of his remittances, and he will simply have to make it up in some way out of his own resources, which would not be fair. For instance, companies in the old country or in Germany or France, or wherever they may happen to be, certainly will not now pay a retroactive tax, and I earnestly suggest to the minister that in cases of that kind the tax should not be made applicable until the date it was announced, May 1.


James Lorimer Ilsley: There are always objections to retroactive taxation, but it has been the practice here, ever since there have been
amendments to the Income War Tax Act, to make the amendments, many of them at least, retroactive to the extent of the previous year. I do not think, therefore, that any more injustice will be done in this case than in the case of ordinary individuals. The view we have taken is that the five per cent is taxable on the whole remittance as the law stood. This now says that the five per cent is applicable only to forty per cent of the remittance. The companies claim that we should come to their point of view as regards last year and say that they should pay only five per cent on ten per cent of the remittance. We never concurred in their view that only ten per cent should be taxed. They want us not only to agree that that was the law but to confirm it now for last year. We have considered the matter and do not think we should do so.


Henry Herbert Stevens: While it is true that we have made the income tax retroactive or applied it to last year, that is quite normal because income tax returns for last year's income as a rule are not made until early this year. All I am asking in this case-I am not criticizing the rate of taxation proposed; I accept that-is that this tax, which is in the nature of a duty, should not be made applicable until the date the tax was announced, because the poor agent in this country, as far as I can see, is the one who will have to pay the tax. He having had a contract, and having fulfilled his contract and made his remittances, his company or his principals certainly would not think of returning to him the taxes for last year which now suddenly and unexpectedly become payable. I think the agent is the one who will have to bear the weight of this taxation. This is not something that is sweeping over a very wide field and for the future we could make clear what is taxable and impose the taxation, but in justice, fairness and equity to the agent I submit that the tax should not be applicable this year prior to May 1, the date when the budget came down.


[Stage Direction]
Section agreed to.
Sections 23 and 24 agreed to.
On section 13-Transfers in trust.
James Lorimer Ilsley: Mr. Chairman, upon consideration I agree that the change suggested by the leader of the opposition should be made in this section, and I therefore move that all the words after the word "made" in line 41 of page 6 to the end of the subsection be struck out.
Section as amended agreed to.
Income War Tax Act

On section 20-Exemption of metalliferous mines.


Richard Bedford Bennett: Mr. Chairman, I should like to say one word on section 89, which is a new section being added to the act by section 20 of this bill. I had intended to say something but we passed the section fairly quickly. Would it not be desirable to provide that the regulations shall be printed in the gazette? This is an extraordinary power which is being left to one man, and in view of the declared general policies of the administration I think it might be desirable that the regulations should be published in the gazette, and that notice should be given when the certificate issues. I do not wish to prolong the discussion in committee, but certainly in view of that power which is given, I think it would be desirable from the public standpoint, and from the standpoint of the minister himself, to have the regulations published in the gazette, and notice given when the certificate issues. Under the old law relating to the Interior department, when certain lands were alienated a certificate to that effect was issued, and I think a great deal of improvement may be effected in connection with the administration of the law if publicity is given as I suggest.


James Lorimer Ilsley: Notice to whom?


Richard Bedford Bennett: Notice to the world in the gazette-notice is hereby given.


James Lorimer Ilsley: I think publication in the gazette is reasonable, but I am just wondering whether it would not be sufficient if I gave an undertaking that notice will be published in the gazette.


Richard Bedford Bennett: The kind of notice I had reference to was such as was usually given under the Department of the Interior Act. For instance, under subsection 3 of section 89 you would say: Notice is hereby given that on July 1, 1937, a certificate was issued by the
minister that a mine known as

was
deemed to have come into production from and after that date. That is what I mean. It is the old provision that had to do with publication in connection with any alienation of the public domain. In this case it is a question of lessening public taxation.


James Lorimer Ilsley: I do not see that anybody is legitimately interested in that notice except the company. The public is likely to be misled by such a notice. I see no reason for publicity; on the other hand there are many objections against it. Speculators would say: The government has given a certificate that this mine has come into production. Now we do not know whether or not the mine is any good, but for our purposes we have come to
(Mr. Usley.]
the conclusion that it has come into production. That fact should not be paraded round the country as an invitation to persons to put their money into that mine; yet that is what might happen. I do not see what good it would do. The people interested in the notice are the people who will get the exemption, and we will tell them.


Richard Bedford Bennett: I would think it is far wider than that, but I shall not undertake to discuss it to-night. In any event the minister has to issue a certificate; I can move in the House of Commons to have it tabled, and therefore it follows that ultimately it may become a public document. I was suggesting that we follow the course which was pursued under our statutes in the early days with respect to the alienation of the public domain, when a certificate was published in the gazette with respect to lands in western Canada, mines, timber limits and matters of that sort. The gazette may not be the best place in the world to do it. But if any man has the duty cast upon him under the law, I submit that it is in the public interest that he discharge that duty involving the issuing of a certificate itself and publishing it in the gazette of the country, to the effect that notice is given; that pursuant to the provisions of section so-and-so a certificate has been issued that the mine has come into production. If the minister does not think well of the suggestion, I am quite content, but I think something of that sort would be in the interest of the minister as well as of the country.


[Stage Direction]
Section agreed to.
Bill reported, read the third time, and passed.


[Stage Direction]
Hon. NORMAN McL. ROGERS (Minister of Labour) moved the second reading of Bill No. 100, to amend the Unemployment Relief and Assistance Act, 1936.
Motion agreed to, bill read the second time, and the house went into committee thereon, Mr. Sanderson in the chair.
On section 1-Agreements with provinces.
Richard Bedford Bennett: There was certain information the minister was to give.


Norman McLeod Rogers: Mr. Chairman, when the house was in committee on the resolution preceding this bill I gave an undertaking that at this stage I would give the leader of the opposition (Mr. Bennett) certain information

Unemployment-Relief Expenditures
which he sought when the Unemployment Relief and Assistance Act, 1936, was before the house some weeks ago. His inquiry related to the adequacy of the federal supervision over relief expenditures in the western provinces, more particularly in Saskatchewan. He will correct me if I am mistaken in what I now say, but my impression was that he was concerned as to the adequacy of the supervision over expenditures under the farm placement scheme.


Richard Bedford Bennett: That was one of the
questions.


Norman McLeod Rogers: Some question arose as to whether or not a representative of the dominion government had been asked to make a report under the farm placement scheme in the province of Saskatchewan. I may say that following that inquiry I secured information which I think will provide what the leader of the opposition had in mind. The facts of the matter are that Major Barnett was appointed to represent the Department of Finance in Saskatchewan in connection with the moneys advanced for relief in the drought area. That is to say, his duties related specifically to the accountable advance of $9,000,000 which was made for relief in the drought area. Major Barnett was appointed in November, 1934. Subsequently Mr. Burgess, whose name was also mentioned in the previous discussion, and certain other clerks were engaged to assist Major Barnett. When Major Barnett resigned, Mr. Burgess took his place in May, 1935. There was some trouble between the dominion government and the Saskatchewan government as to payments under the farm placement scheme, and there was a short period during which Major Barnett, acting for the dominion government, did assume responsibility for payments under the farm placement scheme. However, distribution was actually made from lists supplied by the province of Saskatchewan, the certificates of expenditure being signed by Major Barnett and countersigned by Mr. Symons, the resident auditor of the Department of Labour who has been in the service of the department since he was seconded from the income tax branch in November, 1931. While Major Barnett did supervise these expenditures during that brief period, there was no report made by him on the farm placement scheme in Saskatchewan. My right hon. friend will recall that that was one of the main points of his inquiry. I gathered that he was under the impression that a report had been made by Major Barnett or by Mr. Burgess with respect to expenditures under the farm placement scheme in Saskatchewan, but no such report was made to the Department of Labour.


Abraham Albert Heaps: I had hoped the minister would give a more extensive explanation of the general unemployment situation in the Dominion of Canada. I do not know whether he is prepared to give us any more information to-night than he did the other evening, but if he is, I shall be extremely glad.


Norman McLeod Rogers: On Friday evening the hon. member asked me if I was prepared to give a statement as to the number of those on relief in April of this year as compared with April of last year, or at any rate to give some comparison between the numbers on relief this year and last year. I gave him the preliminary figures for April of this year and the figures for April of last year, but I explained that the April figures were subject to correction. I may say that we now have available the preliminary figures for May of this year which can be compared with the figures for May of last year. .The preliminary figures for May of this year indicate that there are 261,674 heads of families on relief, which figure includes 25,572 heads of families in the drought areas of the prairie provinces. Exclusive of the dried out areas the dependents and individual cases numbei 878,908. In the dried out areas there are 104,379 dependents and individual cases, and the total number on direct relief for the month of May is, therefore, 1,244,961 as compared with 1,277,464 in May, 1935, a reduction of 2-54 per cent. In addition, in May, 1936, there were 19,596 single homeless persons cared for as compared with 37,024 in May, 1935, a reduction of 47-07 per cent. There were employed on relief works at wages during May, 1936, 5,991 persons as compared with 12,330 in May, 1935, a reduction of 51-41 per cent. Including dependents, there were 18,295 individuals placed on the land under the relief settlement plan as compared with 18,097 last year. The number of persons placed under this plan, by the nature of the plan, will be larger with each succeeding year. These figures represent, I believe, the proportions of the relief iproblem at the present time as compared with last year, and obviously we have to consider the problem in a relative sense, using the figures of the preceding years as a measure of increase or decrease under the particular categories which I have given the committee. I take it that these are the figures which my hon. friend had in mind when he put his question to me some days ago.


Mr. BARBER:: Is there any corresponding decrease in the cost of relief?
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Unemployment-Relief Expenditures


Mr. STIRLING:: Will the minister give
the figures with regard to the work camps instituted in connection with the railways?


Norman McLeod Rogers: I propose to take that
question up later. I have made a notation of several questions put to me when the resolution was under consideration, and I have the information. First of all I might answer the question put by the hon. member (Mr. Barber), who has asked as to the total cost of relief this year as compared with last year, taking corresponding months. The total cost including expenditures by municipalities, provinces and dominion for April, 1935, was $7,771,279. The preliminary report from the provinces for April, 1936, indicates an expenditure of $7,490,801, a reduction of 3-61 per cent. I am giving the total figures and not simply the grant in aid by the dominion to the provinces for relief purposes.


Mr. DONNELLY:: Do the figures given
for the dried out area in western Canada include those who receive seed and feed or only those who receive groceries, coal and clothing?


Norman McLeod Rogers: I am informed that the
figures for the dried out areas apply to those actually in receipt of relief within that area.


James J. Donnelly: But what kind of relief -clothing or seed?


Norman McLeod Rogers: Shelter, food and clothing.
I do not think the figures I have given include those who receive seed and fodder.


Jean-François Pouliot: This bill provides that
the governor in council may enter into agreements with corporations, partnerships or individuals engaged in industry respecting the expansion of industrial employment. The minister should be very careful in dealing with companies or individuals as mentioned in the bill. There is something quite interesting which I should like to bring to his attention; I refer to what was said by the right hon. leader of the opposition (Mr. Bennett) when he was a witness before the committee on banking and commerce in 1934. According to an answer given by the Prime Minister (Mr. Mackenzie King) on June 4, the leader of the opposition was not sworn as a witness. He said, at page 194 of the report:
... and thereupon Mr. Beatty presented me a memorandum which was marked "confidential," the substance of which was communicated to me verbally and which, in fact, if my memory serves me. I read to my colleagues.
[Mr. Barber.!
Evidently the memorandum was confiden tial, because this question was put:
In the office of the Prime Minister or in any other department, is there a copy of the memorandum presented by Sir E. W. Beatty, president of the Canadian Pacific Railway Company, to the Right Hon. R. B. Bennett, then Prime Minister, about the dominion guarantee of the $60,000,000 loan to the Canadian Pacific Railway, and referred to by the latter in his evidence before the select standing committee of banking and commerce during the year 1934, at page 194 of the report.
The answer of the department, 171G, was threefold: No, nil, no information. It is not surprising that it is impossible to get a copy of the memorandum. Now we have the letter of May 31, 1933.


Some hon. MEMBERS:: Order.


Jean-François Pouliot: I submit that I am in
order because I am discussing action taken by the then Prime Minister under relief measures, and this is a continuation of those relief measures. I submit, therefore, that I am perfectly in order in discussing the whole matter.


Frederick George Sanderson: The hon. gentleman
has been in order so far.


Richard Bedford Bennett: It has nothing to do
with this bill.


Frederick George Sanderson: I would point out,
with all due respect to the leader of the opposition, that the bill provides that the governor in council may enter into agreements with corporations, partnerships or individuals engaged in industry respecting the expansion of industrial employment.


Hugh Alexander Stewart: So far as future agreements are concerned.


Jean-François Pouliot: I just want to warn the minister so that history may not repeat itself. The Secretary of State (Mr. Rinfret) said on June 9 that it was impossible to find the carbon copy of the letter of guarantee of May 31, 1933, which was signed by the then Prime Minister on behalf of the Dominion of Canada. In return No. 171E from the Department of Finance this information is given:
Nothing on record in the Department of Finance within the scope of the above mentioned order.
The Department of Railways and Canals is not concerned. So far as the Prime Minister's office is concerned, there is no information on the files of the office relating to this

Unemploymen t-R e lief
Expenditures
matter. So far as the privy council is concerned, there is no information. It was a letter which we may call of the vanishing kind. On May 31, 1933, the then Prime Minister was not Minister of Finance; the Minister of Finance was Hon. E. N. Rhodes, and the Minister of Railways and Canals was Hon. R. J. Manion, according to Hansard of May 27, 1936, page 3130. On June 3 I asked the following question:
1.	From May 31,	1933, inclusive, until
February 13, 1934, was a copy of the letter of guarantee, dated May 31, 1933, signed by the Right Hon. R. B. Bennett, then Prime Minister, and addressed to Sir Charles Gordon, president of the Bank of Montreal, about the $60,000,000 loan to the Canadian Pacific Railway Company, forwarded (a) to the Department of Finance; (b) to the Department of Railways and Canals, and (c) to any other department of the government.
2.	If so, by whom, to whom, and on what date or dates?
The answer from all departments is also threefold:	No, nil, no information. The
question was also asked whether the then Prime Minister had asked for a ruling of the Department of Justice about the matter, and the answer from the Minister of Justice was that there was no record of the Department of Justice being asked to furnish such a ruling.


Frederick George Sanderson: Order. I must inform the hon. member that he has been out of order for the last two or three minutes, because he is trying to connect with this last paragraph in the section something which in my judgment is not relevant. I would ask him to keep within the rules.


Jean-François Pouliot: This bill is an act to
amend The Unemployment Relief and Assistance Act, 1936, and you will find that it is an embodiment of all previous acts on relief. This guarantee was given in virtue of the relief act and therefore it forms part of the whole subject, so that I am perfectly in order in discussing what was done under the previous acts, in view of the fact that the main legislation which we are now amending is a continuation of the legislation in virtue of which that guarantee was given. I hope that explanation is satisfactory.


Frederick George Sanderson: No; it is not quite
satisfactory. All I ask my hon. friend to do is to confine his remarks to the bill now before the committee and not to introduce anything that is irrelevant.


Jean-François Pouliot: According to this legislation the Minister of Labour (Mr. Rogers) will be bound to give a certain guarantee. I ask him one thing on behalf of the country; it is, not to practise any illegal operation on the east block for the removal of the viscera of the office of the Prime Minister into another building. It is not possible, according to the numerous returns which have been tabled at the very table before which the minister sits, to get any information about the matter. I will not insist on it any more at this time, but I have a lot to say, and I will say it elsewhere.
I have one thing to say in conclusion. It is, that all that has been done has not been done in vain, because that loan was mentioned in this committee on April 27 of this year, and the Canadian Pacific Railway Company, which prior to that time had paid only $12,000,000 on the capital of the loan, decided to pay, three days after that speech, on May 1, the total amount, both capital and interest, which was due. If what has been said did not serve any other purpose, it served at least to force the refunding of that loan.
I hope that one document which is a state paper just as much as any paper can be, the guarantee of $60,000,000 on behalf of the dominion government, will, either as an exact copy or a carbon copy, remain on file. Why do we not have it now? It is because the then Prime Minister did not mind his own business, and was acting on behalf of all his ministers. In fact the few letters that were signed by the then Minister of Finance are still there, but they were signed after the order in council was passed, late in the fall. Therefore, sir, to be practical, I am sure that every minister will make a distinction between confidential and state papers. I had so much trouble, during the five years when the late government was in power, in getting some correspondence. I was told always that it was confidential. Here we have state papers which are therefore official and public, and they have vanished; it is impossible to get any trace of them. In England the thing would be decided by a court. In Canada we are more lenient. I cannot understand how such papers could have disappeared. It is impossible to find a trace of this document to which I refer, and the only copy which is on record in the Prime Minister's office is not a carbon copy of that famous and unforgettable letter; it is a copy of a return which has been tabled in this house.
3748	COMMONS
Unemployment-Relief Expenditures
Sir, the soil has been scratched. I attribute motives to no one, but I find it shameful to think that state papers which belong to this country have vanished. I cannot explain that, but the returns say so; the returns are official, and they will not disappear, because they will be locked in a room set apart for that purpose in the House of Commons. But the other papers belong just as much to the country. That is why I protest so strongly against their disappearance.


Frederick George Sanderson: Is section 1 carried?


Richard Bedford Bennett: No, Mr. Chairman. In view of the observations that have been made by the hon. member (Mr. Pouliot) who has just taken his seat, I think it is very desirable to refer briefly to the matters to which he has alluded. It will be within the memory of this committee that the House of Commons standing committee heard witnesses with respect to this guarantee of S60,000,000 by the government of Canada. Departing from the general rule, I attended that committee, and I offered to be sworn, telling Colonel Ralston that if he desired to swear me I would be sworn. I gave my evidence, as did all witnesses before that committee, without being sworn, and on that occasion there were produced all the documents which had to do with this transaction. The letter to which reference has been made would naturally be in the hands of the addressee; that is where one would expect to find it. A copy of it was printed1 in the report which I have in my hands. Together with all the communications that passed, it will be found in the report of the banking and commerce committee. The Canadian Pacific Railway company paid S12.000.000 of the obligations, and this year retired the balance of it, $36,000,000, and the arrangement, that is the underwriting, was made, obviously, long before the matter was mentioned in this house. The guarantee was for a period of five years. I believe three of the years had expired when the payments were made in full. It was explained before the committee, not only by myself but by the president of the company, that the reason the order in council was not passed until the fall was because the president went to England hoping that he would be able to secure consent from the British authorities to sell his debenture stock upon the markets there. That permission was not forthcoming. On my return the order in council was prepared, and it has been frequently presented, in answer to a return of this house, and in the report of the committee on banking and commerce. I may add that the various letters which passed between Mr. Dodds and Sir George Perley are 
set out in this report of the committee on banking and commerce, from March 6, 1934 to June 14, 1934. In view of what has been said, since the member has made charges of illegality and wrongdoing and matters of that kind, I desire, in fairness to my colleagues as well as myself, to make a few observations, which I shall do at a later time, when we have again convened.


Jean-François Pouliot: Mr. Chairman, the original letters from Mr. Dodds, Mr. Bog and Sir Charles Gordon are not there. Everything has vanished.
Progress reported.


[Stage Direction]
At eleven o'clock the house adjourned, without question put, pursuant to standing order.
Tuesday, June 16, 1936