1939-03-24

Mr. W. A. WALSH (Mount Royal) moved:: That the petition of John Roy Fumerton, presented on March 22, and the petition of Iris Ester Westerberg Duffy, presented on March 23, each praying for the passing of an act to dissolve the marriage of the petitioner, together with the respective reports of the clerk of petitions thereon, be referred to the standing committee on standing orders for such recommendations as may be deemed advisable.


[Stage Direction]
Motion agreed to.


[Stage Direction]
Hon. J. G. GARDINER (Minister of Agriculture) moved for leave to introduce Bill No. 59, to amend the Live Stock Pedigree Act, 1932.
Some hon. MEMBERS:: Explain.


Mr. GARDINER:: This bill is simply to
legalize a practice which has been carried on in connection with the pedigrees by the board which is entrusted with that responsibility, and I think it can be explained better on the second reading of the bill in committee.
Motion agreed to and bill read the first time. TRADE AND INDUSTRY COMMISSION



GOVERNOR IN COUNCIL UPON ADVICE OF COMMISSION MAY PRESCRIBE STANDARDS AND ESTABLISH GRADES

[Stage Direction]
Hon. W. D. EULER (Minister of Trade and Commerce) moved for leave to introduce Bill No. 60, to amend the Dominion Trade and Industry Commission Act, 1935.

United Church of Canada
Some hon. MEMBERS:: Explain.


Mr. EULER:: Mr. Speaker, this bill is the
outcome of certain representations made by the late Judge Sedgewick, the chairman of the dominion trade and industry commission. It includes certain provisions which he regarded as desirable in the public interest and which were omitted from the original bill. I may say that the bill was drafted by the late chairman himself. The purpose of the legislation is to make it possible to establish standards in respect of commodities which are not now provided for by any existing act of parliament, and also to prescribe the words by which the material content of any commodity shall be represented. A number of acts, such as the Food and Drugs Act, the Canada Grain Act, the Meat and Canned Foods Act, the Inspection and Sale Act, et cetera, provide for standards in respect of certain commodities, but there are many commodities which cannot be made subject to standards under any existing legislation. The Dominion Trade and Industry Commission have received suggestions for standards for a number of commodities. This is intended to give power to deal with such cases.
Motion agreed to and bill read the first time.



UNITED CHURCH OF CANADA


[Stage Direction]
Hon. W. R. MOTHERWELL (Melville) moved for leave to introduce Bill No. 57, respecting the United Church of Canada.
He said: This bill comes to us from the senate, and is founded upon a mutual agreement associated with reciprocal good fellowship between the official representatives of ihe United Church of Canada and corresponding representatives of that body of Presbyterians who decided to remain out of church union, as to the use of that official designation "The Presbyterian Church in Canada."
Inasmuch as both parties to this difference make some conscientious claims to some form of continuity, it was unanimously agreed, after friendly discussions, that that portion of the Presbyterian church which remained out of union, should have accorded to it the right by law to use the official term "The Presbyterian Church in Canada," without prejudice in any way to the rights, status, or powers of the United Church of Canada. This bill is designed to give effect to that reciprocal understanding.
I therefore take much pleasure in moving the first reading of this bill, seconded by the hon. member for Leeds (Mr. Stewart).
Motion agreed to and bill read the first time.


[Stage Direction]
Mr. C. A. CAMERON (Hastings South) moved for leave to introduce Bill No. 58, to incorporate the Trustee Board of the Presbyterian Church in Canada.
Motion agreed to and bill read the first time.


[Stage Direction]
Hon. W. D. EULER (Minister of Trade and Commerce) moved that -the house go into committee at the next sitting to consider the following proposed resolution:
That it is expedient to introduce a measure to provide for the supervision and regulation by the Board of Grain Commissioners of trading in grain futures on the Winnipeg grain exchange in accordance with the recommendation of the royal grain inquiry commission, 1938, and the appointment of a supervisor as an officer of the board, to observe trading on the exchange and report to the board, and for the payment of his salary and expenses of the board from moneys appropriated by parliament.
He said: His Excellency the Governor General, having been made acquainted with the subject matter of this resolution, recommends it to the favourable consideration of the house.
Motion agreed to.


[Stage Direction]
Hon. J. G. GARDINER (Minister of Agriculture) moved that the house go into committee at the next sitting to consider the following proposed resolution:
That it is expedient to introduce a measure making provision for a percentage deduction from all grain marketed in the spring wheat area, and making available other sums required for the purposes of the proposed act; to provide assistance to farmers in emergent conditions by making provision for an acreage payment, with provision also for the appointment and assignment of officials, auditors or employees.
He said:	His Excellency the Governor
General, having been made acquainted with the subject matter of this resolution, recommends it to the favourable consideration of the house.
Motion agreed to.
Seed and Feed


[Stage Direction]
Hon. J. G. GARDINER (Minister of Agriculture) moved that the house go into committee at the next sitting to consider the following proposed resolution:
That it is expedient to introduce a measure to encourage the cooperative marketing of wheat by guaranteeing the initial payment by cooperative associations, or elevator companies defined in the bill; to authorize the expenditure of sums appropriated by parliament for the purposes of this act; with provision also for the appointment and assignment of officials, auditors or employees.
He said: His Excellency the Governor General, having been made acquainted with the subject matter of this resolution, recommends it to the favourable consideration of the house.
Motion agreed to.


[Stage Direction]
On the orders of the day :
Mr. E. E. PERLEY (Qu'Appelle):: I wish to direct to the Minister of Finance a question based on a number of reports I have received from municipalities in Saskatchewan, and particularly a letter I have received today from the reeve and secretary of one municipality. The letter is to the effect that the municipality has been refused lines of credit and further loans from the banks on the excuse that the dominion government's guarantee for the purchase of seed and feed last spring has not been carried out. The question is: Will the minister say whether the banks are right in stating as a proper excuse for not extending loans, that the guarantee has not been carried out?
Hon. CHARLES A. DUNNING (Minister of Finance): I would have preferred notice of the question because it might involve something which is not within my immediate present knowledge, but I am quite sure that the dominion has in every respect followed through with the obligation of the guarantee authorized by this house one year ago. I am quite sure there must be some misunderstanding on the part of some branch bank involving a statement of that sort. As to whether the guarantee for specific amounts has yet been executed, that is another matter, because, of course, specific amounts could not be guaranteed until they were definitely ascertained from all municipalities for every bank. But there is no doubt in the mind of any of the banks, I am quite sure, as to the obligation of the dominion with respect to its guarantee given one year ago.



WAYS AND MEANS


[Stage Direction]
The house in committee of ways and means, Mr. Sanderson, in the chair.
On schedule I:
Customs tariff-438a. Automobiles and motor vehicles of all kinds, n.o.p.; electric trackless trolley buses; chassis for all the foregoing, 17i per cent.
Provided, that machines or other articles mounted on the foregoing, or attached thereto for purposes other than loading or unloading the vehicle, shall be valued separately and duty assessed under the tariff items regularly applicable thereto.
Mr. HEAPS:: We had an important discussion on this item just before six o'clock yesterday. The question merits more consideration than it has so far received. We are all interested to know whether statements made in the chamber yesterday with respect to certain industries threatening to leave the country are correct or otherwise. Some hon. members have stated that one of the industries has decided to leave Canada. On the other hand the Minister of Finance said he was not aware of anything of that kind having occurred.
Hon. CHARLES A. DUNNING (Minister of Finance): My hon. friend is not reading my statement when he says that. The allegation in the newspaper article, which the leader of the opposition (Mr. Manion) read yesterday, was that two of the large automobile manufacturers were contemplating leaving Canada, and my reply had reference to that statement. To-day I can confirm my reply, that I have no knowledge, and the government has no knowledge whatsoever, that any of the large automobile manufacturers are contemplating closing their Canadian plants.


Abraham Albert Heaps: Is it true, then, that any of the smaller ones are closing their factories on account of the removal of this three per cent excise duty?
Mr, DUNNING: We have no notification that any are definitely closing.


Abraham Albert Heaps: Well, we had better have that statement from the minister. The question is an important one. My mind goes back to 1926, when certain reductions were made in the automobile duties under the late Mr. Robb's budget. When these reductions were announced the automobile factories closed down almost entirely, and a few days later they organized a tremendous demonstration right here in Ottawa. Many thousands of employees came here and protested against the reduction. But when no action was taken by the government the factories reopened, and I believe that the following year they did

Canada-United, States Trade Agreement
more business than ever before in the history of the industry in Canada. In Oshawa, particularly was that true. Whether that was due to the reduction of the duty I cannot say, but the fact is although this tremendous protest was made, when the government took no action the matter blew over and the industry went on as actively as before.
I do not know what the position is now, whether they are just carrying on an agitation as they did in 1926, trying to induce the government to restore the three per cent excise tax. If I am not mistaken, all the protection that is being removed at the present time from the automobile industry is the three per cent excise tax. If I am wrong in that, I hope I shall be corrected immediately. Under the 17J per cent duty the industry has been doing fairly well. Whether the three per cent excise now is of such vital importance to the industry I do not know. But it seems that whenever there is a reduction in duty affecting any particular industry we are bombarded with threats that if the duty is not restored the industry will be ruined. I do not take a great deal of stock in such arguments. There may be certain industries in respect of which even a three per cent difference in protection might have considerable effect, but I do not know whether the automobile industry is in that position. According to my knowledge, which is meagre, the disparity between prices of automobiles in Canada and the same machines in the United States is so great that I cannot see that a reduction of three per cent could make such a great difference to the manufacturers in Canada.


Mr. MARTIN:: Do I understand the hon. gentleman to say he is opposed to the withdrawal of the three per cent excise tax?


Abraham Albert Heaps: I have offered no objection, because, so far as I can see, no case has been made out by the manufacturers to show that the industry would be seriously jeopardized. If I could be shown that the three per cent excise tax makes the difference between their remaining in business or closing down, I should certainly be opposed to removal of the tax. But all we have had is a number of statements and letters in general terms, nothing specific and definite. I object to these general statements which give us no clear knowledge of the situation.
Probably no hon. member of this house has taken a greater interest in the condition of the men and women employed in the industry than 'I have over a period of years. In 1926, when the duties were reduced, the
automobile industry was doing fairly well. It was doing fairly well in 1928, and employees who had come here to protest against the reduction in the tariff were the very ones who came about that time and protested against a reduction in wages. We all remember the strike in the automobile plants at Oshawa about 1928. At that time not half as many hon. members were prepared to take the part of the employees as supported the protest the year before.
I should like the minister to state if he can what the reduction of three per cent really means to the automobile industry. We have not had a clear statement from the manufacturers or from anyone else. This three per cent excise tax has been in effect, I believe, for six or seven years?


Mr. DUNNING:: Since 1931.


Abraham Albert Heaps: A little over seven years. Prior to that time the manufacturers were doing fairly well. I cannot see why we should always be threatened with the closing down of an industry the moment a duty is reduced. When a duty goes up, no threats are made by manufacturers, no better conditions are provided for those employed in the industry, and no greater stability of employment results. The hon. member for Essex East (Mr. Martin) last night spoke of the condition of the employees of this industry in his city. We know it is not very good. Yet I think the hon. member for Ontario (Mr. Moore) said their annual wages were the fourth highest in Canada. That may mean much or nothing. All we know is that the annual wages of those employed in the automobile industry are barely sufficient to give them a decent existence. To-day on account of improvement in industrial technique it takes a smaller number of days to produce the same number of automobiles than it did a few years ago. If that process continues we are bound to have a greater problem of unemployment to face as time goes on. No scheme of insurance or anything of the kind can take care of the part-time employee. I do not wish, however, to go into that aspect of the question now. But if it is possible to have a clear and concise statement from the minister as to what this three per cent really means, we should have it. We should not continually have these threats from the automobile manufacturers that unless the duty is kept up they will close their plants.


Mr. YOUNG:: It was not my intention to say anything about this item until other hon. members made some observations. I congratulate this country upon having a government which is prepared to take part of the burden off the people in connection with this
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industry. I was a member of this house some years ago and am familiar with the occasion to which the hon. .member who has just sat down (Mr. Heaps) referred, when the tariff on automobiles was reduced in 1926 and we had a delegation which filled the lawn in front of the parliament buildings, consisting I believe of about 5,000 people. They had banners and all that sort of thing, and they made all kinds of threats to the people of this country and particularly to hon. members of this house as to what would be done if we dared reduce the tariff on automobiles. In fact the demonstration was so noisy that one might think the whole industry was on the verge of ruin, I remember one man in front of this building who was so violent that he put his fist as close to my face as it is safe for any man to do, and said that if we did not recognize the terrible condition to which this industry was to be brought he did not know what was going to happen.
What did we do? The tariff at that time was reduced from 35 per cent to 20 per cent on cars costing up to SI ,200 and to 27J per cent on the others. What was the result? Well, what are we hearing now? We are told that if we dare to remove even this excise tax, again the industry is going to close down, or at least some companies will have to move out of Canada. On the previous occasion no companies moved out of Canada; on the contrary they enlarged their plants, sold more cars, created more employment and the industry prospered more than it had prospered at any other time. The same thing will happen to-day. If we make it easier for people to purchase cars, more cars will be purchased.
This tariff schedule provides a rate of 17J per cent, but let us examine how that rate of duty is applied. We have three large companies manufacturing cars in this country, the Ford Motor Company, the Chrysler Corporation and General Motors. I ask this question: does any dealer in Canada who is associated with any of these companies purchase cars made in the United States? Can he purchase any cars made by these companies in the United States and bring them into Canada? The answer is that it cannot be done. In rare cases a man in Canada might sell a car to some customer who happened to be down in the United States, but that has to be done by special arrangement. Then I would ask the further question, against whom this tariff operates. Certainly it does not operate against these three major companies, which do the vast majority of the automobile business in Canada. The tariff is listed at 17J per cent, but as it is applied

at present there is an effective rate of duty to the consumers of Canada

and that is what matters-of between 28 and 29 per cent. I challenge anyone to deny that. Anyone who does so cannot know the facts.


An hon. MEMBER:: Develop that.


Alexander MacGillivray Young: It is not hard to develop. Not one automobile company in Canada will deny it. Some of the accountants employed in the automobile industry were in my office on several occasions, and they admitted this to be the case. When I purchase a car in the United States I must pay the duty of 17i per cent on the retail price of that car. A couple of years ago I bought in this country what I thought, and still think, was a very good car. There was a radio installed in it, and while I was in the United States the radio went out of commission. I stopped at the garage of a dealer handling the same kind of car, and immediately alongside my car on the street was a United States car of exactly the same type. On many occasions we in this house have been told .that the Canadian car contains a little better material, that it is a little more substantially made in order to meet Canadian conditions. We examined the two cars, which were also examined by the mechanics, and found that the materials were identical, and I believe the workmanship was just as good in the one case as in the other. But the retail price of that car in that city was $859, while the retail price of the same car in Saskatoon, where I live, was $1,260. The differential in freight as between that city in the United States and Saskatoon amounted to $100. In other words on a car which retailed in the United States at $859, after allowing for freight I was obliged to pay a difference of something over $300. That is a pretty serious matter.


Mr. MANION:: What about the sales tax, as a matter of information?


Alexander MacGillivray Young: I have forgotten the exact figures. There was a little difference, but it was very slight.


Mr. LANDERYOU:: May I ask the hon. member if there will be any reduction when this schedule is passed?


Alexander MacGillivray Young: 
Mr. BAKER:: Was that an automobile
manufacturing company?


Alexander MacGillivray Young: It is one of the big companies.


Richard Langton Baker: Would the hon. member
mention the name?


Alexander MacGillivray Young: It is the Ford Motor Company. Is that a big enough company for you?


Richard Langton Baker: All right-just for information.


Alexander MacGillivray Young: Although I am not going
to discuss those items, I have been reading recently something of the set-up of the companies in the textile trade. I ask myself this question, and I put it to every hon. member: Are we being asked to give protection of an undue character to all these commodities in order that dividends may be paid on completely watered stock? If that kind of thing is to be permitted to continue it will be a serious condition for this country. The producers of western Canada who are trying to live will not be permitted to live unless wo have a reduction in the prices of commodities which they require in order that they may produce the commodities which they should produce.
I want to thank the government for taking off this three per cent. I want to ask them to go farther. I ask them to change the incidence of the collection of this tariff so that it will be on the retail price of the car in the United States, and so that the tariff rate will not be 17i per cent but will be cut down to 5 or 6 or 7 per cent. That will enable the consumer in this country to get his car at a more reasonable price than he ever got it before.
I had no notion whatever of saying anything about it, but when I hear hon. gentlemen berating the government for taking off the excise tax of three per cent, and when I find that outside of the house the automobile companies and the parts industry are making the same kind of fuss-well, to my mind,
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what is being done outside of this house is almost blackmail. I do not blame hon. members who receive these stories; they are reflecting that attitude. But in my humble judgment this automobile industry has had all the pap-feeding which any industry should ever have had. The sooner we get down to a better basis, the better it will be for the industry itself and for the consumers of Canada.


Mr. DEACHMAN:: May we return for a moment to the original situation? We entered into negotiations with the United States for mutual benefit under a trade treaty. Our negotiators went down there, and an agreement was made about this three per cent excise tax. It is now suggested that this should be changed.
There are two alternatives open to us. One is that the negotiators should be sent back there, and that they should speak to that nice, fine, mild-voiced southern gentleman, Mr. Hull, and say, " We have two or three large United States corporations operating in Canada. We have lowered the excise tax against United States importations, and we suggest to you that you permit an amendment of this agreement so that the people of Canada may continue to exploit themselves for the benefit of two of your largest motor car companies." That is all it amounts to. These are two, strong United States companies-Canadian companies let me say, with United States stockholders-and that is the suggestion.
The other alternative, a somewhat different one, was embodied in the suggestion made yesterday by the Minister of National Revenue, when he said:
The suggestion made to me as Minister of National Revenue is that the law respecting valuations for duty purposes is not being properly applied by the Department of National Revenue.
The hon. gentleman's ears and heart are touched by the voice of pleading from the motor companies, and he thinks that something may be done.
All that I can say in that regard is that these representations are receiving the consideration of the Department of National Revenue at the present time. I do not think there is anything more I can add.
But may I point out this to the Minister of National Revenue. There are many far more deeply convinced protectionists who have occupied for years the position which he now occupies; and if these mighty gleaners have gone over the field seeking justification for alteration of valuations, how does my less strenuous friend think he can find it under present conditions?


Mr. ILSLEY:: Did I understand the hon. member to say that I thought some change should be made?


Robert John Deachman: I will read the
paragraph.


Charles Avery Dunning: The hon. member interpolated something in the middle of it; that is scarcely fair.


Robert John Deachman: My hon. friend the Minister of Finance will permit me to read the full paragraph before he suggests what has been interpolated into it.


Charles Avery Dunning: But there was an interpolation.


Robert John Deachman: Let me read the item:
But the suggestion that has been made to me as Minister of National Revenue-and that is probably the reason why my name is mentioned in that regard-is that the law respecting valuations for duty purposes is not being properly applied by the Department of National Revenue. All that I can say in that regard is that these representations are receiving the consideration of the Department of National Revenue at the present time. I do not think there is anything more I can add.


James Lorimer Ilsley: Yes.


Robert John Deachman: Yes, that is what my hon. friend said. In other words, the suggestion is that they are making a very careful investigation to see if it may not be possible to adjust this situation.
May I say this to my hon. friend and to the House of Commons: Rather a hundred times I would have it that we should go boldly to the United States and ask for an amendment than that, having entered into negotiations with those people, who understood our system of valuation, we should then turn around and change that valuation at the request of interested parties. True, there is no limitation to genius in a corner seeking to satisfy the needs of greed. But I do say that we should hesitate, and hesitate a long time, before we face that method of settlement.
Let me turn to the next item. We had a story yesterday from the hon. member for Essex East (Mr. Martin):
I must say, and I say this in the house, that I first of all thank the Minister of National Revenue (Mr. Ilsley) for the statement he has made to-day, namely that this whole matter is receiving the consideration of the government. I want the committee to know that there could have been no more painstaking effort on the part of the Minister of Finance and on the part of the Minister of National Revenue in considering this problem, as they have done during the past two or three weeks particularly, in conference day after day with members from Essex county and other parts of Ontario and myself.

Canada-United States Trade Agreement


Paul Joseph James Martin: What is wrong with that?


Robert John Deachman: Government by the
house; government by party; a democracy- or what have we?


James Lorimer Ilsley: Did the hon. member ever confer with me about these matters?


Robert John Deachman: Yes, quite; but I did not have much of a conference, by the way.


Paul Joseph James Martin: Oh, oh.


Robert John Deachman: But here is the situation: I point this out-my hon. friend admits it himself and I will prove it. In a speech he delivered last year to the junior chamber of commerce of Canada, in the Windsor Hotel, Montreal, he used these words:
Another feature of political public service of the "less pleasing" type is the continuous and at times intense pressure of special interests-sectional, corporate or individual. I have often said, and now repeat, that no government can be truly efficient unless it continuously places the general interest above the particular, the national above the sectional. But it is so hard to defend the general interest, when everyone is fighting for some special interest.
So I say the minister himself admits the condition which exists. Why should anyone else attempt to deny it?
I now come to another paragraph of the hon. member for Essex East:
In answer to the hon. member for St. Paul's (Mr. Ross) I referred to the provisions of the Customs Act. In my judgment there is within the terms of the present Customs Act an opportunity to obviate whatever harm may exist because of the removal of the three per cent excise.
What did the hon. member for Essex East mean by that sentence? He meant that within the four corners of the Customs Act there remains the power for the Minister of National Revenue to obviate or to nullify the change which had been made. All that I am pleading for to-day before this house is that if we are to change this, let us face the situation, let us admit that we are wrong; but do not change it now by a shifting of valuations when these valuations have remained fixed over a long period of years.
I ask this question. We have in Canada two or three large United States automobile manufacturing companies. We have gone through this list which I have before me, and it has not been suggested for one moment that we change the excise tax in regard to the other items; these were Canadian companies.
But oft for our own the bitter tone, Though we love our own the best.
There is no reason except that the pressure upon this item is greater. And why the pressure? Pressure comes from power, and these gentlemen have the power.
I have before me the net earnings of the Ford Motor Company. In the year 1935 they were $2,109,000; 1936, S3,888,000; 1937, $4,-
375,000.	The record of their accumulated surplus has been as follows: 1935, $17,167,000; 1936, 818,825,000; 1937, $20,939,000,-almost $21,000,000-of accumulated surplus. I shall watch with some calmness and detachment the attitude which the government takes on this particular question. But I am quite confident what the attitude of the people of Canada will be if the government of to-day decides that by some other way rather than in the regular way they give back to this corporation and other similar corporations that which they took from them by negotiation.
We heard the other day some remarkable things which I think ought to be touched upon. My hon. friend the member for Ontario told us that the farmers had a very high tariff and that that tariff had done wonders for them. Well, that high farm tariff began in 1930. Liberals have always claimed that tariffs, so far as protecting the farmers are concerned, are hopeless, useless and absurd. Within three years <pf the inauguration of these farm tariffs the prices of farm products in this dominion were cut in two. What did the government do? The government of that day, in 1933, raised the tariffs still further. But something happened later. The price of farm products in the past year has declined twenty-five per cent. I ask you what would have happened among the industrial leaders, what would have happened among labour men, if in that year's time the price of their products had been cut 25 per cent? Suppose the price of automobiles had been cut by twenty-five per cent, let alone three per cent, would not everything possible have been done by parliament to put prices back? Suppose wages of labour had been by some means cut in two; would there not have been a desperate effort to restore them to the normal level? But although we are frankly unable to face the problem of the decline in farm prices, we stlil continue to hold up by every power we have, or as Mr. Bennett used to say, we exhaust the resources of civilization, to hold up the prices of manufactured goods.
There is one other thing which my distinguished friend from Ontario mentioned. He said that we should support this particular industry for another reason-that it is based on something we shall need in the future. The Minister of National Defence is here
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and I put this to him: If we are going to vote money for a particular purpose in a democratic parliament, should we not vote it definitely for that purpose? If you suggest that we should maintain our automobile industry by artificial means because possibly it may be necessary to us for military reasons in later years, then by all means submit a measure such as that to the house and let us consider it seriously and bravely. But I suggest that the idea that we pay more for an automobile now with the happy idea that we will get it back years later with a tank thrown in, is as great a piece of folly as could possibly be conceived.
It is suggested that the farmers of western Canada should have no objection to this. Well, the farmers of Manitoba recently presented a brief before the dominion-provincial commission in which the estimate was made that in a normal year high tariff interests took from the farmers of western Canada the sum total of 847,000,000. And what do we pay to maintain the price of wheat? The sum of 848,000,000. I suggest to the Minister of Finance that it might be helpful to short-circuit the cheque which we send to the western farmers, pass it directly to the Canadian manufacturers, and let it go at that, thus saving the expense of the present roundabout way of doing it,
It is further suggested that having established this reciprocity treaty with the United States, we should now enter into negotiations with them over another thing-and I shall relate all this to automobiles.


Charles Avery Dunning: Pretty far afield.


Robert John Deachman: Not at all far afield, as you will see in a moment. It has been suggested that we enter into negotiations with the United States to permit them to increase the price of coal which they ship into this country.


Charles Avery Dunning: I must rise to a point of order, Mr. Chairman. If we are to have a general budget debate on this item of automobiles, my hon. friend is quite in order, but so will every hon. member be who follows him and attempts to expand in the same manner as he is now doing. I suggest to him in all seriousness that coal is not automobiles.


The CHAIRMAN:: I think the point of order raised by the Minister of Finance is well taken. I would ask the hon. member for Huron North to confine his remarks to the item under discussion, which is automobiles.


Robert John Deachman: Speaking to the point of order, it is rather curious, Mr. Chairman;

I am dealing directly here with the threat of an increased price on coal by negotiation with the United States, which necessitates in the view of some people an increase in the duty on automobiles. The Minister of Finance does not recognize that fact, but it is true. It may seem that we have wandered far afield, but it is directly and positively connected with the point I was going to discuss-


Frederick George Sanderson: I would point out to the hon. member that I have given my ruling, and I would ask him to abide by it.


Robert John Deachman: I accept your ruling, Mr. Chairman. Here is the point at issue. Are we going to negotiate directly with the United States, or are we going to change this rate by indirect action? I plead with the government that in the consideration of this item they at least give the House of Commons an opportunity to decide upon it, that they do not by some indirect means alter the direct intention of those who made the treaty.


Mr. MacINNIS:: This item seems to have engendered quite a lot of heat. I think this is the first time I have had occasion to say anything during the time the treaty has been debated or since the discussion of individual items in the schedules began. But as I sat here day after day listening to the debate I was struck by what must be the enormous difficulty of reconciling the various economic interests in this country. My friend from Essex East (Mr. Martin) nods his head in agreement. Yet he insists on maintaining a society in which you cannot help one person without doing harm to someone else.


Paul Joseph James Martin: Oh, I did not say that.


Angus MacInnis: I know that the hon. member did not, but his nod conveyed his approval of what I was saying, which had a direct bearing on that point.


Mr. MICHAUD:: Moral-don't nod.


Angus MacInnis: A great many things have to be taken into consideration in regard to this matter. If by high protection at some particular time we develop a certain industry, we should not at one stroke take that protection away-I am not suggesting that that has been done-and leave the workers concerned without employment, until we do something else for them. That is my first point.


Paul Joseph James Martin: Hear, hear.


Angus MacInnis: I think that is the first thing we should take into consideration.


An hon. MEMBER:: Make wheat farmers of them.

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Angus MacInnis: We should try to take a reasonable view of economic conditions in the dominion. Possibly neither the farmers nor those of us who happen to represent industrial centres have all the right on our side. If we are to have a balanced economy, an economy in which the products of the countryside are exchanged for the products of the towns and cities we must of necessity industrialize parts of the country. Farmers cannot sell their surplus milk, butter and eggs to other farmers, because those other farmers are producing for themselves; they must dispose of those products in industrial centres. In the same way, industrialists must find in the agricultural districts a market for most of the things they produce. No one will insist that we can have complete free trade, or that we can have a tariff so high as to keep everything out of the country. We must have reasonable trading relations with other countries.


Frederick George Sanderson: Order. I would ask
the hon. member to confine his remarks to the item of automobiles, and not discuss the whole tariff question.


Abraham Albert Heaps: I protest. The hon. member is confining himself to the item under discussion.


Angus MacInnis: I will try to do that as
far as I can. I do not think you can talk about automobile tariffs or the automobile industry without relating it to the general conditions within the country.
I have had some correspondence with representatives of employees in the automobile industry. I have a copy of a letter which was forwarded to me by the regional director of the United Automobile Workers. I should like to read it. It is addressed to C. H. Millard, in Toronto, and it is signed by Leo Grondin, chairman of Packard Shop Committee, Windsor, Ontario. It reads as follows:-


William Allen Walsh: Is that the original letter?


Angus MacInnis: It is a copy which Mr. Millard sent to me of Grondin's letter to him.


William Allen Walsh: There is no guarantee that
the copy is an exact copy, is there?


Angus MacInnis: No, I cannot give any
guarantee that the copy is an exact copy.


William Allen Walsh: Does the hon. member '
think that under the circumstances it should be read?


Angus MacInnis: It should or it should
not?


William Allen Walsh: I think it should not be
read unless the hon. member can guarantee the contents.


Angus MacInnis: I have been in this house for a number of years and I have never yet heard a member asked for a guarantee of anything he has read, and I know a good many who could not give any guarantees for what they have said. The letter is as follows:
Following is a report of the situation now existing in Packard Motor Company of Windsor.
The facts proving the critical situation brought about by the change in the tariff are as follows:
When a change in the Canadian content, from 50 to 40, was brought about in the latter part of 1938, the Packard Company of Canada were affected to the extent that the manufacturers decided to manufacture in Canada two jobs that had previously been imported, namely, the Super-eight and the convertible coupe.
Immediately after the announcement of the change in Canadian content, stock for these two jobs were brought into the Canadian plant in preparation for immediate production, but when the announcement of the excise tax being taken off, appeared in the papers, this stock was sent back to the American plant, and it was announced that these jobs would not be built in Canada.
Previous to the excise tax being taken off of imported automobiles, the company was seriously thinking of building or buying a larger plant, in order to increase production from 6 to possibly 30 or 40 jobs per day, which would include the new light-six which the company is putting on the market some time in July.
Now in addition to the super-eight and the convertible, they have also discontinued production of their model 120. Production on the 115, the only job now being built in Canada, will cease within the next ten days. The plans of the company after that date are rather indefinite. Rumour has it, that the plant will then close until possibly July 15, when there is a possibility that the company may start producing the new light-six. This is not definitely decided on as yet.
At six jobs per day the company employs approximately 80 men. If the increase in production had gone through, you can see what a difference it would have made in the economic situation of the border cities.
All cars discontinued in Canada are now being imported at the rate of about 20 or 25 per week.
The Packard organization have justly earned over a period of 30 years, a reputation of fair and decent treatment of their employees. Losing this company from the Canadian industry is not only an eeoonmic blow, but we will also lose an example of an amicable relationship between employer and employee that other manufacturers could well follow, with beneficial results to the industry, the employees, and the community at large.
I am not suggesting that everything stated in this letter is correct, but it is the point of view of some of the workers in that
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industry. I do not know what the government should do in the matter, but I think it would be advisable to find out just what the conditions are, and if anything can be done to make things a little better for the men employed in that industry without placing the burden on others who are no better able to bear it, it should be done.
I have in my hand a summary prepared by the tariff board on reference No. 91, dated, I believe, in 1936. In the board's report of which this is a summary they make a number of recommendations and also a number of statements in regard to the automobile industry. I quote paragraph 2:
(2) In section A of chapter VIII of this report the board has listed certain factors that might have to be weighed before arriving at an appraisal of the economic "value" of the automobile industry in Canada. The figures given therein would indicate that the increase in the total amount paid by dealers in Canada for automobiles and trucks and replacement parts thereof, in 1934, to the Canadian automobile industry, in excess of the amount that they would have paid if automobiles were permitted free entry into Canada, not including freight or licences, is approximately $14,000,000. As against this amount the board has also listed, in that section of the report, the disbursements that were made in 1934 in Canada for taxes-federal, provincial and municipal-for freight to transportation systems, for wages and salaries and for expense materials and services, which are directly attributable to the existence of the automobile industry in Canada.
These disbursements were from $40,000,000 to $47,000,000.
That is considerably above the $14,000,000 mentioned above.
The board, while not accepting the 'above comparisons as an accurate measure of the "value" of the industry to Canada, is of the opinion nevertheless that the figure would indicate that it is "good business" for Canada reasonably to encourage the maintenance and the expansion of the Canadian automotive industry.
Further on in this summary I find another paragraph which I should like to bring to the attention of the government. Paragraph 24 reads:
In section C of chapter VIII of this report, the board indicated that the selling price in Canada of copper and lead of Canadian origin, sold to automobile and automotive parts manufacturers, is substantially higher than the price at which these same metals are being sold for export by the Canadian producers.
In the reports on references 23, 25 and 40, the board drew the attention of his majesty's government in Canada to this situation, and the board is still of the opinion that the price structure in Canada indicates clearly that the Canadian producers are taking advantage of duties imposed under the customs tariff act to increase the price of such goods to the Canadian consumer.
[Mr. MacInnisJ
In view of that I submit that it is not enough for the government either to raise or to lower the tariff. It must take more control over the tariff and of industry itself and insist that when concessions are made to any industry those concessions shall be passed on to the consumers of Canada and to the employees. So that there is a great deal more to this question than we can settle in a debate in this house. I do not think that we are quite fitted for that sort of thing, although I am convinced that this is the proper place in which to bring these matters to the attention of the government. In my opinion the government should take this question into consideration, and see, as always must be done if good government is intended, that all sections of the community are given equal protection. And when I say protection I do not mean an increase in the tariff.


Paul Joseph James Martin: The committee will pardon me for again taking part in this debate, but hon. members will appreciate that this problem is one of immediate concern to me, representing a constituency in which the automobile industry predominates. While it concerns many other members of the house, I feel, in view of the inevitable absence of some of them, I may be permitted again to make a few observations.
I must observe in the first place that when the hon. member for Huron North (Mr. Deachman) pontificates I usually enjoy it. However, when he pontificates to the extent of conveying the impression that he is making a complete and adequate statement, I not only resent it but I think it calls for an answer. I am accused of having dared to confer with the Minister of National Revenue with respect to a problem which vitally concerns not only those who have a definite financial interest in the automobile industry, but also, and more particularly, the thousands of men and women whose very livelihood depends upon the continuance in Canada of that industry. These latter are my primary concern.
The member for Huron North constantly purports to speak in the name of the consumer. Let me tell him in no uncertain terms that he is not the only one who speaks in the name of the consumer. The working man is as much a consumer as any of the constituents of the hon. member for Huron North, and if it is a crime for me to have [DOT]conferred with the minister and to have brought to his attention this important question, then I am guilty of a crime and I do not believe that in doing so I was doing anything that was contrary to the spirit of parliament. In the conferences which the hon.

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member for Huron North has had since he was a member of parliament, not only conferences conducted on behalf of his constituents but other conferences never disclosed in full, he too, then, was guilty of a crime. Does he mean to say that all the time he appeared before the tariff board he was doing something that was contrary to the spirit of the parliamentary method? Of course, we see the absurdity of the remark and why it was made.


Robert John Deachman: On a point of order, surely it is not wrong or contrary to the spirit of democracy that I should have taken the place that a lawyer might take in a court of law. I did not make the law. The law was there, and I appeared.


Paul Joseph James Martin: That was not a point of order, but I allowed the hon. gentleman to go on. I pointed out inadequately last night, and I must point out more adequately to-day, that this is not a matter that concerns simply the automobile industry. The hon. member for Vancouver East (Mr. Maclnnis) has properly put his finger on the whole issue, and I congratulate him. It is a problem that concerns not only the automobile industry but a great many cities in Canada. It concerns my own city of Windsor in the province of Ontario. It concerns the riding from which the Minister of Labour comes; it concerns the riding from which the whip of this party comes; it concerns the cities of Toronto, Brantford, Woodstock, Oshawa, Whitby, Montreal, Quebec, Sherbrooke, Regina, Winnipeg, Vancouver, and many others that I could name. It affects thousands of working men directly employed in the automobile industry and in subsidiary and kindred industries. If this industry were seriously affected-


Mr. HOMUTH:: Why don't you say something for other industries?


Paul Joseph James Martin: Give me time and I will express myself about other industries.


Charles Avery Dunning: Not on this item.


Paul Joseph James Martin: Not on this item, no.
To show the importance of this industry, if anything happened that w'ould seriously prejudice its operations, it would put out of wrork not only thousands of men in my own city but 400 men in Sarnia, and so in every city and town I have mentioned, besides others that I have not. The interdependence of secondary industry generally and the automobile industry is very extensive; it is more extensive than in any other primary or secondary industry.
These are days when we are not only concerned about international affairs but are trying to give our people an opportunity to make a living. I say this, I hope not too emotionally, and I trust that every hon. member will consider me sincere when I make the statement that the automobile industry has helped to build my own city and it has helped to build communities around that city and in other parts of Canada.


John Charles Landeryou: At the expense of
the west.


Paul Joseph James Martin: A member of the Social
Credit party says, at the expense of the west. Well, I thought I had covered that last night. I am speaking now as vigorously and as sincerely as I can for humble men and women by the thousands who find themselves constantly faced with the spectre of insecurity, unemployment and insufficient means of livelihood. That is why I am primarily interested in bringing this question for the second time before the committee. As the hon. member for Vancouver East has said, this whole question in our day has to be considered differently from the way it was considered fifteen years ago; I fully agree with that. The task of government-of this government-is to afford protection to those who have large financial interest in industry, and at the same time to balance that as far as possible with some guarantee of security for those employed in industry.


Mr. MacNICOL:: As the Bennett government did.


Paul Joseph James Martin: I am prepared to agree
that if a concession of any sort is to be made to secondary industry, secondary industry itself must be prepared to make some sacrifice in taking greater care of its employees. Surely the tariff board is the logical body to consider this matter. As I said last night, after my election I attended the hearings of the tariff board for two and a half months and listened to a detailed inquiry about a matter on which one cannot speak dogmatically unless one has given extensive study to it. Hon. members who have spoken against this particular proposal have done so sincerely, I know; but I venture to suggest that none of them has taken the pains to go into the figures and to consider all the economic aspects of the problem as the tariff board has done.


Abraham Albert Heaps: Can the hon. member tell
me exactly what the three per cent really means to the automobile industry?
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Paul Joseph James Martin: Yes, I shall come to
that; I am grateful for that question.
I assume this government believes in the principle of allowing the tariff board to serve as a research medium for advising the government on these important matters. I hope I am not overstating the case when I say that in the first budget brought down in the present parliament the Minister of Finance acted upon the recommendations of the tariff board. Thereby he gave assurance to secondary industry generally, not only to the stockholders but particularly to the workers as well, that we intend to act only after careful examination of all the facts.


John Ritchie MacNicol: But they are acting without it in this matter.


Paul Joseph James Martin: The hon. member for Vancouver East referred to the tariff board report. I venture to suggest that the tariff board- and I say this without knowing their view, except that I have examined the same circumstances as they have-will regard as a serious matter to this industry any curtailment of the present level of protection, not alone because they want to protect that particular industry but because they realize the dislocation that will come to our whole economic life.


Mr. LANDER  YOU@: Better join the Conservatives.


John Ritchie MacNicol: He is talking Conservative doctrine.


Paul Joseph James Martin: I believe the people of
this country are sick and tired of the conflict between political parties over meaningless things like tariffs. There are more fundamental issues than tariffs.


Mr. BLACKMORE:: Now the hon. member is talking!


Paul Joseph James Martin: Anyone looking at the
economy of this country and of the world to-day knows very well that a system of protection within measure for the purpose of protecting industry is indispensable. And the people will soon grow tired of politicians-


Frederick George Sanderson: Order. I would ask the hon. member to confine himself to the item before the committee.


Some hon. MEMBERS:: Let him finish.


Paul Joseph James Martin: This is an important matter to the area from which I come. There have been no threats as suggested by the hon. member for Winnipeg North (Mr. Heaps). The mayor of my own city sits in the gallery to-day; he is here just as the Postmaster General (Mr. McLarty) and the hon. member for Essex South (Mr. Clark) are here, and

others all vitally concerned in this problem, from the point of view particularly of men whose livelihood depends on the course this parliament takes.


John Ritchie MacNicol: The Postmaster General has not said a word yet.


Paul Joseph James Martin: He is able to answer for himself. I am happy to think that his knowledge will not be lost to us. There have been no .threats, I assure hon. members. The fact is that one company is now about to leave. I hope no hon. member will ask that company's name; I do not want to advertise my city to its disadvantage. Three companies have left. That is the situation.


Abraham Albert Heaps: Can the hon. member give the names?


Paul Joseph James Martin: I asked hon. members not to ask for them, for the reason I mentioned.


Mr. McLEAN (Melfort):: If these three
companies have already left, it is no secret, and I think the hon. member should give the information.


Paul Joseph James Martin: Well, I do not intend to give it. I hope the hon. member is prepared to accept my statement.	.


Charles Avery Dunning: My hon. friend might state when they left.


Paul Joseph James Martin: Yes, that is a proper question.


Abraham Albert Heaps: Can the hon. member say
how many people were involved?


Paul Joseph James Martin: The working population
affected was not as great as in the case of the so-called big three.


Alexander MacGillivray Young: How much business did they do in Canada?


Paul Joseph James Martin: They did enough business to employ several hundred men in one case, ninety in another and five hundred in another.


John Ritchie MacNicol: And they were going to increase the size of their plant.


Charles Avery Dunning: When did they leave?


Paul Joseph James Martin: The questions are coming so fast that I cannot answer them all.


Charles Avery Dunning: The question when they left is very important.


Paul Joseph James Martin: One of them left a few months after 1935-36. One of them left while my hon. friends opposite were in power. Another left about a year and a half ago.


Abraham Albert Heaps: Then it had nothing to do with this treaty.

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Alexander MacGillivray Young: Does my hon. friend suggest that this three per cent reduction in excise tax had anything to do with it?


Paul Joseph James Martin: It had everything to do with it. The fact is, and we might as well realize it, that a number of these companies of United States parentage would like to be able to make cars for the Canadian market outside of this country, and our job, I take it, looking at this question not from an emotional or sectional point of view, is to do all we can to see that they stay here.


Mr. STEVENS:: Would the hon. member be good enough to say what he suggests might be done under item 438a to offset the damage to which he has referred?


Paul Joseph James Martin: That is a perfectly fair question, I answered it last night, but I will do so again. The treaty is a fait accompli; we cannot change that, but other measures to which I referred yesterday could be utilized,-


Karl Kenneth Homuth: Look out for Huron North (Mr. Deachman).


Paul Joseph James Martin: Well, I have to take that chance-to provide the compensation which is necessary. The Customs Act affords those opportunities. I do not suppose I need go into the various provisions concerned, but they are there. I hope that resorting to those measures will serve the necessary purpose.
In conclusion let me say-and I hope I shall not be accused of repetition, because I feel this keenly; it means everything, not to the stockholders, not to the presidents of these companies, but to humble men and women who have flocked from all parts of the country into the automobile manufacturing centres-let me say that this government would be remiss in its duty if it overlooked that circumstance. To do so would not only add to the insecurity and the economic plight of working men and women, but would seriously affect the economy of Canada. I have every faith that the government, alive to this problem, alive to the conditions in the Canadian economy at the moment, is not going to give in to sectional grumblings but is going to look at this problem in a large way, in the light in which the hon. member for Vancouver East presented it to-day. I do say the government should give this matter consideration, as I know it is doing, with the view of not only giving the industry the stability it requires in reference to its continuation but also of giving to the thousands of people engaged in this industry, if necessary through enabling legislation, a guarantee 71492-141
that in return for concessions given the protection and security of the workingmen may be safeguarded.


Mr. LANDER  YOU@: I am indeed disturbed because of the fact that conditions are as stated by the hon. member who has just spoken (Mr. Martin) in regard to the manufacture of automobiles. Why is it that the prosperity of one section of Canada must be secured at the expense of another? After all, these people should be engaged in meeting the needs and requirements of all Canada in regard to automobiles and motor vehicles of all kinds. I should like to ask the Minister of Finance just how many automobiles and other motor vehicles coming under item 438a have been purchased during each of the last five years in British Columbia, in Alberta, in Manitoba and in Saskatchewan?


Charles Avery Dunning: I have not that information by provinces. I can give my hon. friend the whole Canadian consumption, of course, but I do not have it divided into provinces.


John Charles Landeryou: I will tell the minister why I asked for that information with regard to western Canada in particular.


Charles Avery Dunning: I doubt if the statistics exist in that form.


John Charles Landeryou: I asked for the information in that form in order to impress upon the hon. member who just spoke the fact that I agree with him that the workers in the automobile plants of eastern Canada are consumers; but their power of consumption is limited by the amount of income they receive. I ask the hon. member and the committee this question: Just what do these workers in the industries he has mentioned purchase from western Canada? I cannot think of anything amounting to much that is produced in western Canada and purchased by the workers in these plants manufacturing automobiles. The agricultural production of the east is sufficient to meet their requirements; practically all our industries are in eastern Canada, and it is a well known fact that the west is suffering from the disequilibrium that exists as between the prices of manufactured goods. produced in eastern Canada and the prices of primary products produced in western Canada.


John Ritchie MacNicol: Would the hon. member give us credit for pegging the price of wheat?


Charles Avery Dunning: I have here some figures which will at least partly meet the requirements of my hon. friend from Calgary. I have before me a statement of retail sales

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taken from the automobile statistics for Canada for 1937 as prepared by the Dominion Bureau of Statistics. The answers will not precisely meet my hon. friend's questions, in that they deal with the total retail sales, which of course would include sales of imported automobiles as well as sales of Canadian made machines. Broadly speaking, however, I think if one said that in connection with these figures eighty per cent would represent Canadian production, he would not be very far out.


John Charles Landeryou: Do the figures include automobiles, trucks, tractors and so on?


Charles Avery Dunning: These are the sales of new motor vehicles. I have not inquired as to whether trucks are classified as motor vehicles, but I am inclined to think all motor vehicles are included here. I will confirm thaf later. The figures are as follows:
Maritime provinces	$13,000,000
Quebec	 31,000,000
Ontario	 69,000,000
Manitoba and Saskatchewan..	15,600,000
Alberta	 9,000,000
British Columbia	 11,500,000
That is an approximation of the retail value of sales of new vehicles.


Mr. SENN:: For what year?


Charles Avery Dunning: 1937.


Mr. BARBER:: Would that include the cost of transportation?


Charles Avery Dunning: The retail value, I
presume, would include everything up to the time of the ultimate purchase.


John Charles Landeryou: On each of these purchases in western Canada we have to pay from $200 to $400 more than we would have to pay if there were no duty or tariff on these automobiles, trucks and so on.


Mr. ISNOR:: You are no worse off than the mari times.


John Charles Landeryou: I would not disagree with that; it may be equally true as far as the maritimes are concerned, but the point is that eastern Canada-that is Ontario and Quebec, where most of the industries are located

requires very little in the way of commodities from either western Canada or the maritimes. We always purchase at least three times as much from Ontario and Quebec as they purchase from us. I listened to the hon. member for Essex East pleading for support for the automobile industry. Why should I not plead for support from the workers of Ontario and Quebec in regard to coal and things of that nature?


Paul Joseph James Martin: Why not?
[Mr. Dunnicg.l


John Charles Landeryou: That is the point.


Robert James Manion: We have a subsidy on coal now.


John Charles Landeryou: What is the result? We bring in $30,000,000 or $35,000,000 worth of coal from the United States.


Frederick George Sanderson: Order. I must remind the hon. member that he should confine his remarks to this item, which deals with automobiles.


John Charles Landeryou: I am just making a comparison between the assistance given the manufacturers of automobiles and the assistance in connection with other commodities. There are very many men engaged in the manufacture and distribution of automobiles. They could spend many of the millions of dollars which they receive from western Canada back in western Canada, but what do they do with that money?


Mr. McCANN:: Pay fifty per cent of it as a bonus on your wheat.


John Charles Landeryou: Oh, no. Year after year millions and millions of dollars have flowed into the east because of our tariff, and now, for the first time as far as I know, the government has bonused the farmers of western Canada. I suppose we will never hear the last of it.


Paul Joseph James Martin: The first time?


John Charles Landeryou: What I suggest to my hon. friend is that he should also recommend to the government that the purchasing power which flows into the hands of those who produce automobiles in eastern Canada should be expended to a larger degree on commodities produced in other sections of Canada. That was the point I wished to make. According to the figures given by the Minister of Finance the benefits derived by the automobile industry of eastern Canada, due to these tariffs, amount to many millions of dollars a year. If we had the figures for the last twenty or thirty years I believe in connection with that one industry alone the cost to western Canada would be shown to be many millions of dollars more than has ever been spent in subsidies on wheat.


Abraham Albert Heaps: I would still like to find out what the three per cent excise duty means as far as the industry is concerned.


Alexander MacGillivray Young: It is a benefit.


Abraham Albert Heaps: As yet I have not heard what it means. I should like to understand this matter a little more clearly. If my understanding of the prices of cars is reasonably

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correct, a low priced car in the United States would sell for about $700 at the factory. Perhaps the Minister of National Revenue can elucidate that point. If the figure I have given is correct, the excise duty would be about $21 for such a car. On a car priced at about $800 or $900 it would be $27. I want to know whether $21 or $27 per car is really the difference between closing down a plant in this country and keeping it in existence. If the figures we have had up to now are to be believed, on a low priced car in this country the differential is about $200.


An hon. MEMBER:: More than that.


Abraham Albert Heaps: I give the lower figure of $200. I want to know if $21 per car is going to mean the difference between keeping a plant open and closing it. Then, would the minister give us definite information with respect to wages in the Canadian and United States automobile industries?


Paul Joseph James Martin: So far as the annual income is concerned, not enough.


Abraham Albert Heaps: No, not the annual income; I am referring to the hourly rate of pay. In the United States, where they have a higher ratio of production and a greater mass production than we have in Canada, the unit cost of producing a car might be slightly lower than it is in Canada.


Paul Joseph James Martin: So the tariff board found.


Abraham Albert Heaps: The extent of that lower cost in the United States, I cannot say, because I have not gone into the question to the extent to which the hon. member for Essex East and other hon. members have inquired into it. But if my information is correct, that the hourly pay of men employed in the automobile industry in Canada is lower than that in the United States, then the lower rate of wages paid in Canada should more than offset any advantage the United States manufacturer has in the way of greater mass production. I do not know whether those figures are available, but if they are I should like the Minister of Finance or the Minister of National Revenue to give them to the committee.


Ernest Edward Perley: This is a very important item, and I have found it interesting to listen to the arguments which have been made. One of the matters with which we in western Canada are concerned is the spread between the prices of United States and Canadian cars. The figures put on record this afternoon by the hon. member for Saskatoon are startling, and surely give food for thought. The farmer wants fair protection, and we 71492-141J
realize that labour wants protection. Everyone appreciates the value of labour employed in the east so far as a market for western Canada's products is concerned. The important point for the government to consider is how the tax or tariff applies. We want cheaper cars. To my mind the Canadian car is good enough for any Canadian but the government should see to it that under the tariff the industry should not be allowed to exploit the Canadian consumer or purchaser of cars. That is an important point which I believe the government should consider. I agree with much that has been said this afternoon in some parts of the house. However the item will no doubt pass as it now appears, and I shall not detain the committee further.


Malcolm McLean: The item under discussion is not a tariff item; it is simply a matter of the remission of taxation. I am amazed to find so many hon. members urging that the tax be kept on at the rate which has been in effect for some years past. Parliament used to foe called and is still called to grant supply to the crown. But only on extremely rare occasions has parliament insisted that the crown should take from its people more than the crown had asked for. That is what several hon. members have been doing. to-day.
The plea is made that this is done on behalf of workers employed in the industry. There is something in the plea that the tax should be retained in order to maintain employment, and if that contention could be fully established there might be some excuse for acting on the suggestion

although I notice nothing is said about the consumer, who has to pay the tax, by hon. members who make the plea on behalf of the workers in the industry. The consumers who buy cars and who have been paying this tax are not from one section of Canada alone; they are from every section from coast to coast- every city and every town. I venture to say no news would be more welcome to the residents of the county of Essex and other parts of industrial Ontario than the announcement that cars were now to be manufactured and sold at prices commensurate with those in effect across the boundary line.
Reference has been made to the reduction in the tariff on automobiles made effective in 1926. The people in the industrial area referred to benefited most from the reduction, because they were in a better position to purchase cars than those in lesser paid industries. There is some merit perhaps in the claim for consideration on behalf of the workers, but when I find the sponsor of the
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automobile industry and one who opposes the remission of this tax saying that even in normal times, and assuming this period of economic crisis had passed, unemployment in the automotive industry is to a great extent inevitable, I say that the value is taken out of the argument so far as employment is concerned. If my memory is correct-and I am speaking from memory alone-I heard another opponent of the tax remission say yesterday that employment conditions in the automobile industry are terrible. If that is so, after this industry has advanced so greatly, after it has paid so much in dividends and extensions-if employment conditions in that industry are so terrible that the people of Canada generally must continue to contribute this three and a half per cent by way of a levy which was imposed in the guise of an excise tax, then it is high time to reconsider our whole attitude towards this industry.
I do not know whether these claims are correct, but I believe the leading Canadian motor car manufacturing company would not leave this country, no matter what we did in the way of taxation or tariff adjustment. Because we have it on the very best authority in the world, the authority of the man whose name is attached to the industry and whose brains and genius have built it up, that cars could be and have been manufactured in Canada more efficiently than in the United States. That was the condition at the time he made that statement. When a factory gets beyond a certain size it becomes more expensive to operate. Then, there is the further reason: Labour in Canada was slightly more dependable and capable than it was across the river in that big city in which the bulk of his manufacturing plant is located. I am satisfied that company would stay, regardless of what we did, and that fully as many men would be employed in the automobile industry in Canada, even if one or two companies did leave the country. I say that because those who remained would pick up the business.
Everyone who has studied the matter is aware that one of the troubles in the automobile industry is seasonal unemployment. The industry is trying to get away from it. At times they have been working double and even treble shifts. By lengthening out the manufacturing year, by trying to continue employment over a longer part of the year than previously, they are now improving employment conditions. I have been advised and I believe that by building additions to their plants in the way of storage facilities, and by bringing out their models earlier in the fall, at least some of 
the larger companies are trying to meet the unemployment problem. But if the lowest paid man in this industry in Canada is receiving seventy-five cents an hour, no matter what work he does, and those employed by the month earn approximately as much, then, having regard to the earnings of the purchasers of the automobile produced, the workers are not suffering from low wages. It is true that they do suffer from broken time-but the purchasers of those cars, too, are suffering from broken time.


Abraham Albert Heaps: How could they purchase
cars if they are suffering from broken time?


Malcolm McLean: How does anyone purchase a car? Does the hon. member mean to tell me that the average automobile purchaser in Canada, the working men and women who have cars, have no broken time? Surely he does not want to tell me either, that they earn more than seventy-five cents an hour on an average.


Abraham Albert Heaps: The average workman cannot afford to buy a car.


Malcolm McLean: The average
worker of any kind perhaps cannot afford to buy a car, but if a man earning seventy-five cents an hour cannot afford to buy a ear, how can the average farmer or fisherman or lumber worker or city or rural labourer, whether skilled or unskilled, afford to buy one?


Abraham Albert Heaps: They cannot.


Malcolm McLean: 
Henry Herbert Stevens: May I ask the minister
one or two questions relating directly to this item? In figuring the value for duty of a

Canada-United, States Trade Agreement
car, is not the list price of the car taken and a certain discount or allowance made, and if so, what is the present discount allowed?


James Lorimer Ilsley: I am afraid I cannot give
the present discount for each make of ca,r. But the customs authorities have to ascertain the fair home market value of the car, which is the price at which the factory sells the car in the United States. Systems of sale vary. I am informed that the Ford company, for instance, in the United States, sells cars direct to dealers, and therefore the value for duty of a Ford car when imported, if such a thing should take place-it does not as a matter of fact-would be the price to the dealer in the United States. That would not be the list price, but the list price less between 20 and 25 per cent. With another company which exports quite a number of cars to this country, sales do not take place to dealers in the United States but to distributors, who in turn distribute them among the dealers. There the discount is higher than the ordinary dealer discount. It would vary with the type of car, but perhaps might run somewhere between 25 and 30 per cent. In the case of importation of that make of car by a distributor, the value for duty would be the price charged the distributor in the United States. Other companies have methods of distribution which are not as simple as the two I have mentioned. There are companies which sell cars to distributors at a dealer price and give a further discount, called an over-riding discount, at the end of the season on the cars that have been sold, but they do not allow that discount on cars unsold. In that case we say that the value for duty for an importer here must correspond to the price paid by a similar purchaser in the country of origin. These are the general principles upon which the value for duty purposes is determined.


Henry Herbert Stevens: I know it is very complicated. and the minister has given an excellent exposition of the different rates of discount, but may I ask this further^ question: Have these rates of discount remained fixed, shall I say, over a number of years?


James Lorimer Ilsley: I think they vary from time to time, but there has not been much change in the situation.


Henry Herbert Stevens: I was speaking of the principle. The principle has not changed as far as the Canadian customs is concerned?


James Lorimer Ilsley: It has not changed at all on cars.


Henry Herbert Stevens: One other question, and I imagine this would be for the Minister of
Finance. Under the treaty we bind certain rates. Do we also undertake not to change the method of computing the duty paid value as just described by the Minister of National Revenue?


Charles Avery Dunning: Perhaps I should read the article of the agreement which has a bearing on that question. We do not undertake to abandon our own sovereignty in any way, and my hon. friend would not intend to imply that. Article XI of the treaty I think answers his question. It reads:
In respect of articles the growth, produce or manufacture of the United States of America enumerated and described in schedule I, imported into Canada, and of articles the growth, produce or manufacture of Canada enumerated and described in schedule II, imported into the United States of America, on which ad valorem rates of duty, or duties based upon or regulated in any manner by value, are or may be assessed, the general principles on which dutiable value is determined in each of the importing countries on the day of the signature of this agreement shall not be altered so as to impair the value of any of the concessions provided for in this agreement.
My hon. friend knows how difficult it is to tie down the application of a general principle to a new condition which sometimes comes about, but we are not expecting any difficulty in that regard.


Henry Herbert Stevens: Would the minister say that the article which he has just read would preclude the Canadian government from making any variation or adjustment of the rates of discount in order to meet lower rates of duty?


Charles Avery Dunning: Obviously not for that purpose. But in connection with the application of the general principle which has been in effect in Canada, the Minister of National Revenue, of course, has the duty imposed upon him under the statute of applying that principle, and applying it fairly to each particular case. As to whether there might be any change in that regard I could not say at all. Quite frankly in connection with the whole question of discounts there is a very great deal of difficulty, and there is of course this to be said, that in connection with many sections of our customs laws, as my hon. friend knows, parties who may consider themselves aggrieved have the right of appeal to the tariff board against the minister's decision. That again enters into the question, as covered by article XI, of the general application of the principles of customs administration.


Henry Herbert Stevens: Then I take it that the government feels that it is perfectly free to change the rates of discount if it so desires, right across the board, shall I say?
2244	COMMONS
Canada-United, States Trade Agreement


James Lorimer Ilsley: I do not think the government is free to change the rates just for the sake of effecting a particular purpose desired by somebody who wants more protection, for example, but I think the government is not tied down to a particular interpretation of the act in the future if it is determined by competent authority that that interpretation is not in accordance with the law. When we agreed in the trade agreement not to vary the general principles of our customs administration, we did not agree to continue to do things demonstrated to be illegal. We agreed not to alter the structure of our act or in any way to change it. When I was speaking yesterday I said that representations had been made to the effect that in certain particulars we were acting illegally at the present time. Those representations, I said, were receiving consideration by the department. There must not fee the slightest suspicion of making an alteration of an interpretation to fit a particular situation: it must be a bona fide correction of an illegal situation.


Henry Herbert Stevens: The minister is quite clear in his explanation, but would he just clarify this point? In what way, is it suggested, has the department been acting in an illegal manner?


James Lorimer Ilsley: It has been submitted that in the case of one or more of the companies the department permitted discounts which did not appear on the invoices, I think in the country of origin-I am not just sure about that. But it has been argued that in one definite particular with regard to two importers we have violated the clear terms of the act.


Henry Herbert Stevens: Was that to the advantage of the importer?


James Lorimer Ilsley: Yes.


Henry Herbert Stevens: And to the detriment of the treasury?


James Lorimer Ilsley: Yes.


Henry Herbert Stevens: And now it is suggested that might be rectified?


James Lorimer Ilsley: Yes.


Henry Herbert Stevens: Which would raise the rate of duty in that particular instance?


William Daum Euler: Not the rate.


James Lorimer Ilsley: Raise the amount of the duty paid. That submission has been made on purely legal grounds, not on grounds of policy or anything else.


Henry Herbert Stevens: Well, that is ''pure."
[Mr. Stevens. 1


Robert James Manion: I was going to ask a little later a question which does not deal particularly with this item, but as this raises a general principle I can ask the question as well on this item as on any other. Perhaps I should have raised the point when the lumber item was being discussed, but the question is general rather than in reference to that particular item. We remember that a few months after the treaty of 1935 a lumber marking act w'as put into effect in the United States. I am not dealing particularly with that; later the provision was removed in accordance with this agreement.


Mr. MACKENZIE (Vancouver):: On the first of September last. It was in effect for only a few weeks.


Charles Avery Dunning: The leader of the opposition is wrong in one particular. The act was in being, but it had not been enforced against Canada until the time my hon. friend mentions.


Robert James Manion: Well, it was in force against Canada for a few months.


Ian Alistair Mackenzie: One
month.


Robert James Manion: It is not with that I wish to deal particularly. I wish to ask just this question. Since the United States government at that time put into effect a lumber marking act, which was effective against Canada and was said to damage very much exports of Canadian lumber to the United States, is there anything in this agreement which will prevent the United States government from applying the same principle against automobiles, if you like? That is why I feel I can ask the question on this item. Is there anything to prevent them from carrying out the same idea in some other way against Canada? In other words, is there any understanding between the Canadian and the United States governments that in the future, in view of this agreement, there will be no possibility of the United States government circumventing the treaty by some such regulation as the lumber marking act?


Charles Avery Dunning: To answer that specific question before I go on to make a few general remarks, which I have been trying to do, article IX specifies:
Sawed lumber and timbers, telephone, trolley, electric-light, and telegraph poles of wood, and bundles of shingles, the growth, produce or manufacture of Canada, imported into the United States of America, shall not be required to be marked to indicate their origin in any case where the imported article is of the same class or kind as articles which were imported

Canada-United States Trade Agreement
into the United States of America in substantial quantities during the five-year period immediately preceding January 1, 1937, and were not required during such period to be marked to indicate their origin.
That indicates that with respect to marking we are protected on those articles. I gather that my hon. friend intended also to ask the question in its general application.


Robert James Manion: That is exactly what I wanted.


Charles Avery Dunning: In that connection I previously read article XI. I need not read the preamble. The effective part is:
... on which ad valorem rates of duty, or duties based upon or regulated in any manner by value, are or may be assessed, the general principles on which dutiable value is determined in each of the importing countries on the day of the signature of this agreement shall not be altered so as to impair the value of any of the concessions provided for in this agreement.
There is that general undertaking.


Robert James Manion: Yes, that is true. But I think the words were "dutiable value." After all, the lumber marking act was not a question of changing the dutiable value or anything of that sort. It was a regulation-


Charles Avery Dunning: Yes.


Robert James Manion: -altogether outside the customs tariff. Obviously, it was put into effect for the purpose of lessening importations of lumber from Canada. I should like to know if there is anything in this agreement whereby any other regulation, having perhaps nothing to do with the customs tariff but being akin to it, could be prevented from being put into force. I think my hon. friend understands my question.


Charles Avery Dunning: Yes, I understand that. Obviously, the matter was one of discussion frequently, and every effort was made to cover it with sufficient exactitude. I would call my hon. friend's attention to articles VI and VII. My officers point out that article
VI	relates to the United States and article
VII	relates to Canada. But each, of course, is designed to have the same effect. Perhaps I had better read the one relating to Canada, because it would answer the question more directly.
Articles the growth, produce or manufacture of Canada enumerated and described in schedule II annexed to this agreement shall, on their importation into the United States of America, be exempt from ordinary customs duties in excess of those set forth and provided for in the said schedule, subject to the conditions therein set out. The said articles shall also be exempt from all other duties, taxes, fees, charges, or exactions imposed on
or in connection with importation, in excess of those imposed on the day of the signature of this agreement or required to be imposed thereafter under laws of the United States of America in force on the day of the signature of this agreement.
And so forth. Well, now, there is the other class of regulatory' measures which might be considered to have a prohibitive effect.


Robert James Manion: Yes, and not covered by that; having to do, for instance, with public health.


Charles Avery Dunning: Article X reads.
No prohibition, restriction or any form of quantitative regulation, whether or not operated in connection with an agency of centralized control, shall be imposed or maintained in Canada on the importation or sale of any article the growth, produce or manufacture of the United States of America enumerated and described in schedule I, or in the United States of America on the importation or sale of any article the growth, produce or manufacture of Canada enumerated and described in schedule II, except as otherwise expressly provided in the said schedules.
There are the exceptions with regard to quantitative regulations. There is a long detail there which I do not think would help. The important words are "prohibition," "quantitative regulation" and "restriction." The provision is pretty general in its terms, and of course applies equally to both countries.


Robert James Manion: Yes. The word "restriction" gets closer to the principle about which I have been trying to ask.


Charles Avery Dunning: It does not cover marking.


Robert James Manion: At the same time I am afraid no clause that the Minister of Finance has read would cover the situation with regard to the marking act.


Charles Avery Dunning: You had to have a separate section.


Robert James Manion: Is there any other section that might possibly cover such a regulation?


Charles Avery Dunning: Both countries have
marking acts and they are applied. But the difficulty, of course, was particularly great in connection with lumber and wood products, and it was for that reason that we secured exemption from any application or enforcement of the United States marking act during the life of the treaty. I have a few words which I should like to say-


Robert James Manion: I do not wish to interrupt the minister, but since we are dealing with that question I think we should dispose of it. I hope it would be considered a breach of the
2246	COMMONS
Canada-United. States Trade Agreement
whole spirit of the agreement if such a regulation on any product of either country were put into effect as was the marking act on lumber. I consider that was a breach of the spirit of the 1935 agreement, and what I am trying to make clear in the discussion, although it is too late to put it into the agreement, is that it should be understood between the two countries that, without any reference whatever to the rate of duty or to valuation or anything of that sort, any departure from the regulations which would serve as a means whereby the United States could keep out our products would be regarded as a breach of the whole spirit of the agreement. That is what I should like to think is in the mind of the government, although apparently it is not in any provision distinctly set out.


Charles Avery Dunning: We think we have
covered everything that is known. My hon. friend is suggesting protection against something we do not now know of.


Robert James Manion: Such as the marking act as applied to lumber.


Charles Avery Dunning: Article XV provides:
2. The government of each country will accord sympathetic consideration to, and when requested will afford adequate opportunity for consultation regarding, such representations as the other government may make with respect to the operation of customs laws and regulations, quantitative restrictions on imports or the administration thereof, the observance of customs formalities, and the application of sanitary laws and regulations for the protection of human, animal or plant health or life.
_ 3. In the event that the government of either country makes representations to the government of the other country in respect of the application of any sanitary law or regulation for the protection of human, animal or plant health or life, and if there is disagreement with respect thereto, a committee of technical experts on which each government will be represented shall, on the request of either government, be established to consider the matter and to submit recommendations to the two governments.
The marking act, of course, is the one thing which, as a result of the immediately preceding experience, was prominent in our minds, and that is why it is specially dealt with. It must be remembered that the United States marking act applies to commodities from any country, and the United States treasury department ruled that it would have to apply to lumber. It was applied, and we immediately protested, as my hon. friend knows. Both countries are quite free to apply their marking acts, and if either of them deems any particular regulation of any kind to be against the spirit of the agreement it can invoke article XV.

To come back to automobiles, the discussion has been quite nonpartisan-ninety-nine per cent so, I think. Members on all sides of the house have spoken, taking varied views.


Robert James Manion: Our party just listened.


Charles Avery Dunning: No; we had one or two speeches the other day, and one to-day, from the Conservative party. That indicates that this question cuts directly across parties. It is one of those questions that are of greatest difficulty, inherent in the nature of this country itself. Every government has found difficulty with it, and I assume every government will for some time to come.
May I say at the outset that to answer specific questions, such as those asked by the hon. member for Winnipeg North (Mr. Heaps), would be difficult because he insists on asking about an automobile, whereas no one can answer a question with respect to an automobile unless he knows a number of other things-for instance, how many automobiles are produced in a particular year, in a particular plant. I mention that for this reason. If you had a Canadian tariff sufficiently high to enable the manufacturer of 1,000 automobiles a year to pay decent wages and a reasonably low interest on his investment, you would have a duty on a comparable car high enough to enable the so-called Big Three to make profits altogether out of reason. That is our difficulty. The hon. member for Essex East (Mr. Martin) told the committee quite properly that three small manufacturers had left Canada. He also told the committee that no one of these three left Canada in consequence of this treaty, because they were gone before the treaty was negotiated.
The annual production in Canada, which had been attained by at least two of the three concerns to which my hon. friend refers, could not possibly have enabled them to make money on their Canadian enterprise considered as a separate entity. One Ford car turned out in a plant would cost millions of dollars, but millions of Ford cars can be produced at a very few hundred dollars each. There is the nub of the problem so far as Canada is concerned.
I am under no apprehension whatever that either Ford, Chrysler or General Motors, who have made and are making between eighty and ninety per cent of the Canadian car production, will pull out of Canada, to use a common phrase. I go further and say I believe that those corporations, while they are controlled by foreign capital-


Paul Joseph James Martin: Two of them.

Canada-United, States Trade Agreement


Charles Avery Dunning: Two of them; the third, Ford, probably is controlled by Canadian capital.


Paul Joseph James Martin: No question of it.


Charles Avery Dunning: But even those that are
controlled by foreign capital have a sufficient sense of the value of their Canadian market, and their export markets from Canada, that they will not lightly take any arbitrary "pull* up stakes" attitude. I have reason to know that the attitude of these corporations in respect of public relations is such as to prohibit any such arbitrary action, for the best reason in the world, apart altogether from moral grounds, namely, that a great international corporation does not lightly give a slap in the face to a whole people. I believe that the three great producers of automobiles will carry on. But I say to this committee as sincerely as I can, that I can see no way of erecting a tariff structure which will be fair to Canadian consumers and at the same time will allow profitable operation of a company which is going to make only a thousand or two thousand cars a year. It just cannot be done. Economy to the consumer is brought about by the production in one plant of a great number of standardized units.
Having said that, may I say I found something to agree with in what everyone has said on this subject, and also something to disagree with. I would say to my hon. friend the member for Saskatoon (Mr. Young), one of my oldest friends in this house, that it is very easy to create misconceptions and misunderstandings by quoting such figures as he quoted respecting the original capitalization of the Ford plant in Canada and its dividend history down through the years.


Mr. GRAY:: He did not bring it up to date.


Charles Avery Dunning: Apart altogether from bringing it up to date. The factor which from my point of view requires to be stated is the one upon which has been erected the great bulk of our industrial development; that is the ploughing back into an industry of its earnings instead of distributing them in the form of cash dividends.


Alexander MacGillivray Young: Does the Minister of Finance suggest even remotely that the figures I quoted are not entirely accurate?


Charles Avery Dunning: Not for a moment, but I say that the mere statement of those figures is not an accurate representation of the situation, particularly when it is associated with the term "watered stock." There is such a thing as watered stock, but does 71492-142
anyone suggest that the ploughing back of earnings into industry for the creation of more capital goods which in turn produce more units of product is watered stock?


Some hon. MEMBERS:: No.


Alexander MacGillivray Young: I suggest that it is undue profit, made possible by a very high tariff.


Charles Avery Dunning: As to that opinions may differ, as to the extent to which the building up of the great Ford enterprise has been on account of tariff protection and the extent to which it is a result of mechanical genius allied to mass production and mass selling methods. For my part I do not believe it would ever have been possible to produce cars as cheap as they are at the present time if Henry Ford had not ploughed back the profits into that institution and thus build up its capital structure and its physical equipment to the point they have reached to-day. Watered stock, to my mind, is stock which is issued without having any real physical value back of it. I distinguish clearly between watered stock and the practice on which some of our great industries have been built up of ploughing back legitimate earnings into further physical plant and productive equipment.
As far as this item is concerned, anyone listening to the discussions in this house, no matter in what year, must realize how difficult the question is of balancing as far as possible the interest of producers and consumers of this very important facility in Canada. The government have done the best they could, in the light of the information which they had, in the proposal which is now before the committee. That proposal is to bind the duty, that it shall not increase during the term of the agreement; and tether, inasmuch as this is one of the items mentioned in the treaty, to undertake to propose to the Canadian House of Commons at a convenient opportunity after the passage of the treaty itself that the excise tax in connection with automobiles shall be repealed. The government gave to this matter grave and serious consideration. I have tried to express in a broad way the considerations which brought them to the decision which is now before the committee. I do not think I can add anything more. I believe that what are called the Big Three will continue to function in Canada to the fullest extent rendered possible by Canada's demand for motor cars and the opportunities for export from Canada, which are not by any means small. And I believe that the Canadian consumers will benefit.

2248	COMMONS
Canada-United. States Trade Agreement
On the questions addressed by the hon. member for Kootenay East (Mr. Stevens) to the Minister of National Revenue (Mr. Ilsley), I am sure that no one knows better than the hon. member for Kootenay East, because of his long experience in government and particularly in connection with matters of trade and industry, how difficult it is to administer any customs law, particularly because everybody is interested in a purely selfish manner when dealing with that department. Everybody, whether importer on the one hand or producer in Canada on the other, is trying to invent some means whereby whatever is done shall be turned to their individual or corporate advantage. To state positively what could be done with respect to a particular theoretical condition is all but impossible, for every day new methods are invented to beat the customs. There is an old saying that the safe maker is never more than two jumps ahead of the burglar, and I think that is true with respect to the administration of the Department of National Revenue. Eternal vigilance is the price of safety as far as that department is concerned.


John Charles Landeryou: Can the minister tell us what the protection to the motor vehicle industries has cost western Canada, or Canada as a whole?


Charles Avery Dunning: It is quite impossible.
Mr. LANDERYOUs That is a very important matter. I understand we ship a considerable number of automobiles to New Zealand; is that not right?


Charles Avery Dunning: Yes.


John Charles Landeryou: We ship them under an agreement which allows them to send to Canada some of the goods that are produced in New Zealand, and what do we find? We ship automobiles to New Zealand at the expense of the sheep raising industry of western Canada. In exchange for those automobiles we brought into this country, wool, mutton, butter and other agricultural products at the expense of [DOT] agriculture in Canada.
The minister says he cannot give us the effect of this protection on the various sections of Canada. Two or three years ago I purchased an automobile, and last year I purchased another. I live in western Canada, and I had to pay over $200 more in each case than I would have had to pay if there had been no protection. I ask myself where this $200 goes. Are we paying the workers in our factories more than is paid the workers in the factories of the United States? I find the answer is that we are not paying them more. This extra amount is going to increase the

profits and reserves of these companies, and I protest against giving protection to these industries unless similar concessions are given the industries of western Canada. The situation might be different if, as the purchaser of an automobile in western Canada, I were sure that at least a fair proportion of the money I sent east would be used to purchase commodities produced in the west instead of similar commodities imported from the United States, particularly the coal that is purchased by those employed in the industry under discussion. It is true, as the leader of the opposition has said, that we have subsidized the shipment of coal-


Frederick George Sanderson: Order. Once again I would ask the hon. member to confine his remarks to automobiles.


John Charles Landeryou: I am trying to follow the money that we send east when we purchase automobiles or other motor vehicles. I have followed the money we send to the United States for the purchase of coal, and I suggest to the government that protection be given the coal industry of Canada. If you want to sell more automobiles in western Canada-


Frederick George Sanderson: Order.


John Charles Landeryou: I am talking about automobiles.


Frederick George Sanderson: No; the hon. member is discussing the question of coal, and in doing so he is out of order.


John Charles Landeryou: Then I will say this. The minister stated that by mass production the cost of automobiles could be brought down, and that it was difficult for a new company to start the manufacture of motor vehicles in Canada because of the mass production carried on in the United States. If you wish to increase the production and sale of automobiles in Canada the best way to do it is by increasing the purchasing power of those who may buy automobiles in this country; and I suggest that the best way to increase the purchasing power of the people of western Canada so that they may buy automobiles is to assure them of a market in eastern Canada for the coal that can be produced in the west. If more of this money that we send east for the purchase of automobiles, trucks and tractors were diverted back to the west, there would be more purchasing power in the west to help this industry.


Abraham Albert Heaps: I should like to ask the Minister of National Revenue whether, when the excise duty is added to the cost of a car being imported into Canada, that duty is calculated on the price including the sales

Canada-United States Trade Agreement
tax. If a car is valued at SI,000 on entering Canada, the sales tax has to be paid in addition to that. Is the excise duty added to the sales tax, or is it taken just on the cost of the car?


James Lorimer Ilsley: On the duty paid value of the car, without sales tax.


Mr. ESLING:: Take the case of a dealer who is called upon to fill an order at the end of the season. Rather than send east for a carload of automobiles he finds it to his advantage to order a car from across the line. Is there any justification for making that dealer pay the duty and sales tax on the freight? That is a matter which seems to be causing some controversy in the west.


James Lorimer Ilsley: The duty would be reckoned on the value of the car at the point of shipment to Canada. So I assume that would include the freight from the factory in the eastern United States to the point of shipment to Canada.


Mr. PELLETIER:: A few moments ago the Minister of Finance said he saw no objection to 810,000,000 in dividends being paid on an investment of $125,000. I wonder if he would clarify that statement.


Charles Avery Dunning: No, Mr. Chairman; I never said any such thing, and my hon. friend well knows it.


Alexander MacGillivray Young: I now have in my hand the letter which I received from the company to which I referred some time ago. The first question asked was with regard to the original investment in the company, and the answer was $125,000. The second question was as to the additional capital put into the company, not taken out of profits, and the answer was that there was none. Then I asked as to the dividends paid, and the answer contained the figures I have already placed upon Hansard. I should like to point out that in addition to the dividends which were paid, there must have been a tremendous amount of money turned back into the industry. I have not that figure here, but I want to make it quite clear that what I read were the dividends paid. In addition, there must have been a tremendous sum of money ploughed back into the industry. With regard to watered stock, I have in my hand the record from the Hansard office, and it was in connection with the textile industry that I made the remark concerning watered stock. If anyone wants to know anything about watered stock, he can find out from the textile industry.


Frederick George Sanderson: Order.


[Stage Direction]
Item agreed to.
71492-142i
Customs tariff-438g. Motor cycles or side cars therefor, and complete parts of the foregoing: 174 per cent.
Item agreed to.
Customs tariff-439c. Farm wagons, farm sleds, logging wagons, logging sleds, and complete parts thereof: 15 per cent.
Item agreed to.
Customs tariff-ex 440g. Diesel and semidiesel engines, of a class or kind not made in Canada, and complete parts thereof, for use exclusively in the construction or equipment of ships or vessels: free.
Item agreed to.
Customs	tariff

440j.	Trawls, trawling
spoons, fly hooks, sinkers, swivels, sportsmen's fishing reels, bait, hooks, and fishing tackle, n.o.p.: 20 per cent.
Item agreed to.
Customs tariff-440 1:
(i)	Aircraft, not including engines, under regulations prescribed by the minister: 20 per cent.
(ii)	Complete parts of aircraft, not including parts of aircraft engines: 15 per cent.
Item agreed to.
Customs tariff-440m. Engines and complete parts thereof, when imported for use only in the equipment of aircraft: 17J per cent.
Item agreed to.
Customs tariff-440n. Complete parts for repair of engines enumerated in tariff item 440m: 10 per cent.
Item agreed to.
Customs tariff-44 le. Guns and rifles of a class or kind not made in Canada: 15 per cent.
Item agreed to.
Customs tariff-442. Articles which enter into the cost of manufacture of the goods enumerated in tariff items 409a, 409b, 409c 409d, 409e, 409f, 409g, 409j, 409k, 409o and 439c, when imported by manufacturers for use exclusively in the manufacture in their own factories of the goods enumerated in the aforesaid tariff items, under regulations prescribed by the minister: 5 per cent.
Provided that goods which are entitled to free entry or to a lower rate of duty than is mentioned in this item shall not be entered at the rate specified in this item.
Item agreed to.
Customs tariff-442a. Notwithstanding the provisions of the preceding item, materials or commodities as hereunder defined or described, w-hen imported by manufacturers for use exclusively in the manufacture, in their own factories, of the goods enumerated in tariff items 409a, 409b, 409c, 409d, 409e, 409f, 409g. 409j, 409o, 409p and 439c, under regulations prescribed by the minister:
(1)	Pig iron: per ton $1.
(2)	Bars or rods, of iron or steel, hot rolled: per ton $2.75.
Item agreed to.
2250	COMMONS
Canada-United States Trade Agreement
Customs tariff-443. Apparatus designed for cooking or for heating buildings:
1)	For coal or wood, 25 per cent.
2)	For gas, 25 per cent.
3)	For electricity, 25 per cent.
4)	For oil, 25 per cent.
(5) N.o.p., 25 per cent.
Item agreed to.
Customs tariff-445. Electric light fixtures and appliances, n.o.p., and complete parts thereof: 27J per cent.
Item agreed to.
Customs tariff-445a.	Electric head, side
and tail lights, n.o.p.; electric torches or flashlights and complete parts therefor: 27J per cent.
Item agreed to.	.
Customs tariff-445c:
(i)	Electric telegraph apparatus and complete parts thereof: 25 per cent.
(ii)	Electric telephone apparatus and complete parts thereof: 25 per cent.
Item agreed to.
Customs tariff-445f. Electric dynamos or generators and transformers, and complete parts thereof, n.o.p.: 25 per cent.
Item agreed to.
Customs tariff-445g. Electric motors, and complete parts thereof, n.o.p.: 25 per cent.
Item agreed to.
Customs tariff-445k. Electric apparatus and complete parts thereof, n.o.p.: 25 per cent.
Item agreed to.
Customs tariff-445n. Electrical instruments and apparatus of precision of a class or kind not made in Canada, viz.: meters or gauges for indicating and/or recording altitude, amperes, comparisons, capacity, density, depth, distance, electrolysis, flux, froee, frequency, humidity, inductance, liquid levels, ohms, operation, power factor, pressure, space, speed, stress, synchronism, temperature, time, volts, volume, watts; complete parts thereof:	17J
per cent.
Item agreed to.
Customs tariff-446a. Manufactures, articles or wares, of iron or steel or of which iron or steel or both are the component materials of chief value, n.o.p.: 25 per cent.
Customs tariff-ex 446a. Metal shells and hinges, for use in manufacturing jewellery boxes and spectacle cases, not further finished than shaped: 12J per cent.
Customs tariff-ex 446a. Tools of iron or steel, for use in machines, n.o.p., of a class or kind not made in Canada: 10 per cent.
Customs tariff-ex 446a. Welding rods or welding wires of rust, acid or heat resisting steel, whether or not flux-coated: 15 per cent.
Customs tariff-ex 446a. Locomotive beds or frames of steel, cast in one piece; tender frames of steel, cast in one piece; cast steel cradles for the rear ends of locomotive frames; cast steel truck frames and bolsters for engines,
[Mr. Young.1
tenders and passenger coaches; platform castings for passenger coaches; all the foregoing, whether in the rough or semi-manufactured, for use on railway rolling stock: 7J per cent.
John Ritchie MacNicol: In bringing in certain lines of tools, I understand that parts are made in Canada and other parts are imported. Under the item in reference to tools I suppose the whole tool will come in at the 10 per cent rate. I was wondering if, for duty purposes, when the tool is imported, the department could not separate the parts made in Canada from those not made in Canada.


James Lorimer Ilsley: I shall take that suggestion into consideration. It is the point which was raised yesterday by the hon. member. I am expecting a communication from him setting out the particulars of the machine he was talking about yesterday.


John Ritchie MacNicol: May I include this item, too?


James Lorimer Ilsley: Yes; I wish the hon. member would.


[Stage Direction]
Items agreed to.
Customs tariff-446c. Golf shafts of seamless steel, coated or not, but not chromium plated: 15 per cent.
Item agreed to.
Customs tariff-446g. Electric welding apparatus, not including motors: 20 per cent.
Item agreed to.
Customs tariff-447a. Sand cast rolls and chilled cast iron rolls, for use exclusively in rolling iron or steel, or in manufacturing paper: free.
Item agreed to.
Customs tariff-451. Buckles, clasps, eyelets,
hooks and eyes, dome, snap or other fasteners of iron, steel, brass or other metal, coated or not, n.o.p. (not being jewellery): 27J per cent.
Item agreed to.
Customs tariff-454; ex 446a. Frames not more than ten inches in width, clasps and fasteners (not to include slide or bookless fasteners), when imported by manufacturers of purses, chatelaine bags or reticules for use exclusively in the manufacture of purses, chatelaine bags or reticules, in their own factories, under regulations prescribed by the minister; parts of the foregoing: 12J per cent.
Item agreed to.
Customs tariff-462. (i) Philosophical, photographic, mathematical and optical instruments, n.o.p.; speedometers, cyclometers and pedometers, n.o.p.: complete parts of all the foregoing: 17J per cent.
Item agreed to.

Canada-United States Trade Agreement
Customs tariff-462. (ii) Cameras and complete parts thereof, n.o.p.: 20 per cent.
Item agreed to.
Customs tariff-462b; ex 462. Cinematograph and motion picture cameras, 35 mm., for use by professional motion picture producers having studios in Canada equipped for motion picture production; parts of the foregoing: 10 per cent.
Item agreed to.
Customs tariff-466; ex 711; ex 756. Iron sand and iron or steel shot, not further manufactured than crushed or ground, and dry putty, for sawing, polishing, pressure blasting or tumbling purposes: free.
Item agreed to.
Customs tariff-471a. Pressed steel belt pulleys for power transmission, and finished or unfinished parts thereof, including interchangeable bushings: 20 per cent.
Item agreed to.
Customs tariff-476. Surgical and dental instruments of any material; surgical needles; X-ray apparatus; microscopes valued at not less than 50 dollars each, retail; complete parts of all the foregoing: free.
Item agreed to.
Customs tariff-500. Logs and round unmanufactured timber, handle, heading, stave and shingle bolts, n.o.p.; firewood, hop poles, fence posts and railway ties: free.
Mr. BROOKS:: It seems to me that to import railway ties into Canada is like carrying coals to Newcastle. In my native province many operators are anxious to supply railway ties to the railway companies, and are producing many thousands of those ties. I have understood that both railway companies have been over-supplied for a number of years. What quantity of railway ties is imported from the United States, and are any exported from Canada to that country?


Charles Avery Dunning: Importations vary. They run from $200,000 to S400.000 worth a year, from the United States. I notice that our exports to the United States vary, running from a value of $100,000 to $155,000 a year. I imagine it is probably a matter of location, in each case.


Alfred Johnson Brooks: What is the duty against ties going into the United States?


Charles Avery Dunning: To make my previous
answer complete, I should say that fir ties to the value of $700,000 must be added to the item I gave, and would be included in the exports to the United States. Then, to answer the hon. member's question, may I say that they are free of duty both ways.


[Stage Direction]
Item agreed to.
Customs tariff-502. Mexican saddle trees and stirrups of wood, tree nails; hub, last, wagon, oar and gun blocks, and all like blocks or sticks, rough hewn, or sawn only; felloes of hickory or oak, not further manufactured than rough sawn or bent to shape; staves of oak, sawn, split or cut, not further manufactured than listed or jointed; shingles of wood; spokes of hickory or oak, not further manufactured than rough turned, and not tenoned, mitred or sized, and scale board for cheese: free.
Item agreed to.
Customs tariff-503. Planks, boards, clapboards. laths, plain pickets and other timber or lumber of wood, not further manufactured than sawn or split, whether creosoted, vulcanized, or treated by any other preserving process, or not: free.
Item agreed to.
Customs tariff-504. Planks, boards and other lumber of wood, sawn, split or cut, and dressed on one side only, but not further manufactured: free.
Mr. GREEN:: Would the minister give
the figures on importations under items 503, 504 and 505 for 1937 and 1938?


Charles Avery Dunning: With respect to item
503, which deals with lumber and timber creosoted or not, I am afraid I shall have to give the information in one figure covering items 503, 504 and 505.


Howard Charles Green: Is no separate record kept with respect to dressed lumber?


Charles Avery Dunning: I could give my hon.
friend a list running from white ash, and going through every variety. These woods are itemized by variety, but not according to their respective tariff items. The total figure I shall now give includes lumber and timber, creosoted or not, under item 503; lumber dressed on one side only under item 540, and lumber dressed on one or both sides under item 505. Our imports under those items last year from the United States were valued at $4,300,000. Our total exports to the United States were valued at $14,178,000. Those are the figures, apart from Douglas fir.


Mr. SLAGHT:: Have the exports from
Ontario been separated in connection with this item?


Charles Avery Dunning: I have not the figures separated by provinces.


[Stage Direction]
Item agreed to.
Customs tariff-505. Sawn boards, planks and deals planed or dressed on one or both sides, when the edges thereof are jointed or tongued and grooved, n.o.p.: 10 per cent.
Howard Charles Green: That is the item on which the tariff has been cut in half?


Charles Avery Dunning: Yes.
2252	COMMONS
Canada-United States Trade Agreement


Howard Charles Green: The minister has no separate figures under it?


Charles Avery Dunning: I have no separate figures. I have the separate figures by varieties of lumber, but not by tariff items. They are lumped together in our statistics of imports.


Mr. STIRLING:: What is the duty into the United States under item 505?


Charles Avery Dunning: If under item 505 the lumber were fir, pine, spruce, hemlock, or larch, it would be fifty cents per thousand feet. Other varieties are free. Of course, as was stated last night when the Minister of Trade and Commerce (Mr. Euler) was dealing with schedule II, at the present time in [DOT]both cases there is in addition the United States revenue tax of SI.50.


[Stage Direction]
Item agreed to.
Customs tariff-505a. Hardwood flooring, tongued and/or grooved, or jointed, viz.: beech, birch, maple and oak: 17$ per cent.
Item agreed to.
Customs tariff-506. Manufactures of wood, n.o.p.: 20 per cent.
Item agreed to.
Customs tariff-ex 506. Shingles of cedar, creosoted, vulcanized or otherwise processed or treated: free.
Howard Charles Green: I notice that item 506 is in two parts; what are the importations under the second part dealing with creosoted shingles?


Charles Avery Dunning: That is a new item created in the agreement, so that so far as the past is concerned it is not separately reported. It was part of another item.


Howard Charles Green: What was the total figure for the whole item before?


Charles Avery Dunning: I wonder if the hon. member would permit us to proceed with the understanding that I shall have that information looked up. In view of the fact that it is a new item, I have not the information before me. However, I shall get it for him.


Mr. CLARKE (Rosedale):: I notice that in this item we reduced the duty from 25 per cent to 20 per cent, and that we are now reducing it from 20 per cent to free. The item deals with shingles of cedar, creosoted, vulcanized or otherwise processed or treated. I am not familiar with the term "vulcanized." It would seem to me that a considerable amount of labour is involved in these processes, and the drop in the rate from 20 per cent may mean a great deal. Would the minister give an explanation?
IMr. Dunning.]


Charles Avery Dunning: The item to which my
hon. friend refers is, of course, a very small factor compared with shingles generally. No class of importers in Canada is more pleased with the treaty than the shingle manufacturers, and I think they have every reason so to be.
It is represented to me that the particular type of creosoted and vulcanized shingle to which he refers quite often results from the export of Canadian shingles to the United States for this form of processing, after which they are reshipped to Canada; but that trade is quite small, and as a matter of fact this processing is commencing in Canada.


Harry Gladstone Clarke: That is just
the point I wished to make, that we now ship our raw product to the United States.


Charles Avery Dunning: Shingles is not a raw
product.


Harry Gladstone Clarke: Partly so in
this case because the processing is done in the United States, and the shingles are then shipped back to Canada free. That is my point.


Charles Avery Dunning: Perhaps the answer I
can now give to the hon. member for Vancouver South (Mr. Green) may constitute an answer to the hon. member for Rosedale also. As I indicated a few moments ago, I cannot split the new item, but I can give the committee how much we imported under the old item, which comprised all shingles. For last year our imports amounted to 86,200 of all kinds of shingles, including these creosoted ones, and in the same year we exported to the United States SfilSOODOO worth.


Howard Charles Green: I think that figure must be
wrong because in the appendix to the United States press release it shows United States exports to Canada amounting to over $1,000,000.


Charles Avery Dunning: I think it must be mixed up with some other factors.


Howard Charles Green: The figure I mentioned
is given on page 96 of the United States press release, under item 506.


Charles Avery Dunning: Oh, that is their omnibus item, including all manufactures of wood.


Henry Herbert Stevens: If the hon. member for
Vancouver South will look at page 18, he will find that we exported shingles of wood to the United States to the amount of $5,567,000.


Howard Charles Green: I think the Minister of
Finance is wrong. We imported quite a lot of shingles from the United States; I am sure more than $6,000 worth.


Charles Avery Dunning: The United States figures are lumped together and cover two items.

Canada-United States Trade Agreement


Howard Charles Green: So does our item.


Charles Avery Dunning: I want to be accurate.
I have the figures under item 502; our total imports-and all of them came from the United States-of shingles of wood were $1,000 in 1936; $4,000 in 1937, and S6,200 in 1938. Those are the figures from our own bureau of statistics, and I am going to stand by the accuracy of our bureau.


Howard Charles Green: Would that include the
creosoted shingles?


Charles Avery Dunning: It includes all, because
there was no division of the item until the division created by this agreement.


Mr. MARSHALL:: Would the minister
explain why the rate of duty under the new agreement on shingles from the United States is free, while the rate under the British preferential tariff is 174 per cent?


Charles Avery Dunning: Britain is a most favoured nation, and therefore any goods coming in under that item come in free from Britain.


Howard Charles Green: They do not make any
shingles in Great Britain.


Charles Avery Dunning: No, it is a theoretical
item, but my hon. friend's question was quite a proper one. It is purely a paper item because shingles are not produced in Great Britain.


[Stage Direction]
Item agreed to.
Customs tariff-507a. Single-ply, sliced or rotary-cut veneers of wood, n.o.p., not over five-sixteenths of an inch in thickness, not taped nor jointed: 20 per cent.
Item agreed to.
Customs tariff-507c. Plywood made of two or more layers of veneer or lumber of wood, glued or cemented together, but not further manufactured: 224 per cent.
Howard Charles Green: What were the importations last year? This is one item on which it does seem Canada went a little far in making concessions.


Charles Avery Dunning: The importations of plywood from the United States last year amounted to $124,000. Our exports are included with veneers; we exported $25,000 worth of veneers generally to the United States. Our big customer for that class of item is the United Kingdom with over $1,000,000 worth last year.


[Stage Direction]
Item agreed to.
Customs tariff-509. Vulcanized fibre, karta-vert, indurated fibre, and like material, and manufactures of, n.o.p.: 174 per cent.
Item agreed to.
Customs tariff-511b. Fishing rods: 25 per cent.
Item agreed to.
Customs tariff-ex 518. Bagatelle and other game tables or boards: 274 per cent.
Item agreed to.
Customs tariff-519. House, office, cabinet or store furniture and parts thereof (not to include forgings, castings and stampings of metal, in the rough):
(i)	Substantially of wood: 324 per cent.
(ii)	Other than of wood: 274 per cent.
An hon. MEMBER:: What were the imports of all woods from the United States last year, and our exports?


Charles Avery Dunning: I must separate them. I will give furniture of wood first. From the United States last year we imported $819,000 worth of furniture of wood, and $471,000 worth of furniture of metal. Our total exports, distributed thinly over a number of countries, of which the United States took $30,000 worth, were furniture of wood, $205,000, and furniture of metal, $153,000.


John Ritchie MacNicol: Do the figures the minister has just given include imports under the $100 exemption?


Charles Avery Dunning: No, they do not.


John Ritchie MacNicol: A great deal must come in that way too.


[Stage Direction]
Item agreed to.
Progress reported.
At six o'clock the house took recess.
After Recess
The house resumed at eight o'clock.

[Stage Direction]
Bill No. 45, for the relief of Gertrude Saul Baker.-Mr. Walsh.
Bill No. 46, for the relief of Mary Frances Todd Lister Cardwell.-Mr. Heaps.
Bill No. 47, for the relief of Herbert John Butler.-Mr. Walsh.
Bill No. 48, for the relief of Afina Lasnier Blain.-Mr. Tomlinson.
Bill No. 49, for the relief of Annie March Breakey Cobum.-Mr. Macdonald (Brantford City).
Bill No. 50, for the relief of Mabel Gertrude Marks Lamoureux.-Mr. Factor.
Bill No. 51, for the relief of Earl Keith Drennan.-Mr. Bercovitch.
Bill No. 52, for the relief of Per Ernst Martinsson.-Mr. Thompson.
2254	COMMONS
Post Office Act-Communistic Literature


[Stage Direction]
The house resumed from Tuesday, February 21, consideration of the motion of Mr. Wilfrid Lacroix (Quebec-Montmorency) for the second reading of Bill No. 4, to amend the Post Office Act.
Mr. WILFRID GARIEPY (Three Rivers):: I rise to say a few words in support of this bill. It relates to liberty, and as we all know, abuse of liberty brings licence, and licence invites restraint. The spread of communism, as described by the mover of the bill, reveals an appalling situation. It is a menace to our civilization; it is a plague; it is the product of diseased minds; it is something destructive of the social order and our political and religious institutions; it conduces to revolution.
Communism is defined in the bill in a manner which is clearly understandable by any of the members of this house. Its effects are obvious. The other day the attorney general of Ontario announced, I am informed, that conditions are becoming so bad in this province that an investigation is to be started to discover the sources of this evil. I am told that in Toronto are at least forty so-called schools organized under this and that name, cluibs of one kind and another, groups which behind closed doors receive instructions, all leading to the same object, always with the same results in view. The sponsors of these schools not only talk to these people but also have newspapers published in different languages, disseminating their doctrine, distilling it drop by drop and sending it throughout the country, preparing people's minds for the evil day. When it will come we do not know. But this represents a constant effort to destroy the present order and bring in a new order of things.
In my province the Duplessis government enacted a statute which has been adversely appreciated and much criticized outside our boundaries. I have studied the comments of the various newspapers in the province of Quebec, and I find that criticism is very light; approval is general, and after two years the effects of this law are good. It may be proper to mention that the premier of Quebec himself is possibly too much mentioned in connection with this law. It is true that he was the father of it; but it was unanimously adopted by the Quebec legislature; both parties supported it, and in that house there are members of different creeds and races. English, Scotch, Irish, Hebrews, all joined hands. Quebec is the only province which
r. MacNiuoi.j
now has a second chamber. Its legislative council is composed of eighteen Liberals and six so-called Conservatives, or twenty-four in all. The twenty-four unanimously approved this law, notwithstanding their differences in politics, race and religion. So it is the law of the province; it represents the voice of our people. But the effect of this law is defeated when it comes to the press, because daily from Toronto there are pouring into the province of Quebec, and the rest of Canada for that matter, newspapers upholding the communist doctrine, threatening our institutions and everything which is dear to us.
What shall we do? It is evident that the postal regulations are not sufficient. They are not applied. This is not the fault of the minister or of his officials, possibly not the fault of the regulations, except that they do not go far enough. The law is not sufficiently clear. What was said by the mover of this bill warrants, to my mind, the conclusion that something should be done to give more powers under the law to the Postmaster General (Mr. McLarty). I do not want to discuss the legal opinion of the Minister of Justice (Mr. Lapointe). I bow to his wisdom. But statutes are always difficult to interpret. It is a privilege of lawyers to differ. Often judges do not agree. Courts are not always in agreement with each other. The Supreme Court of Canada and the privy council have often not seen eye to eye. I look at this regulation 205 of the Post Office Department, which states:
It is forbidden to post for delivery or transmission by or through the post any obscene or immoral book, pamphlet ... or other publication, matter or thing, of an indecent, immoral, seditious, disloyal or scurrilous character.
That is the regulation. That is as far as it goes. Does it cover the ordinary communist paper? The minister, as reported at page 1183 of Hansard said:
In short, anything that is subversive, seditious, that advocates the use of force for the purpose of bringing about any change in the government of Canada, is already prohibited under the regulations of the Post Office Department.
Quite so. We do not need these regulations when force is advocated. That is an offence under the general law of the land, under the criminal code. But these newspapers of which I speak do not advocate force. If one takes any number by itself, its contents are not subversive of society. The papers give their poison drop by drop. It is a series of small events leading to a conclusion. It is the construction of a building. They build

Post Office Act-Communistic Literature
stone by stone, piece by piece. No one newspaper can be condemned under these regulations. The only part of the post office law under which something can be done in so far as mailable matter is concerned is section 7, paragraph (d), which reads:
The Postmaster General may .	.	. make
regulations declaring what shall and what shall not be deemed to be mailable matter for the purposes of this act.
"Mailable matter." This does not refer to the contents, to the ideas, to the writings themselves. It relates to the outside, because the section continues:
. . . and for restricting within reasonable limits the weight and dimensions of letters and packets and other articles sent by post.
But the section does not stop there. Year after year, according to needs, changes have been made by means of additions, and we find, always under the same paragraph (d) of section 7, that the Postmaster General may prohibit the sending of matter of an obscene or immoral nature. That is one clause. It does not cover the case of a communist newspaper. The next is prohibitive of matter which would "tend to injuriously affect the commercial or social standing of the persons" to whom it is sent. That is another addition. If it is not expressed in explicit terms, no regulation of the postal department can cover this case. The third addition has to do with illegal lotteries; the fourth deals with devices for the purpose of obtaining money under false pretences. Those four points are included in order to give additional powers to the Postmaster General. It is clear to me that the law officer who prepared this bill, in making his notes, grasped the point, because he says:
The purpose of this -amendment is to enlarge the powers of the Postmaster General as to the making of regulations. At present, the Postmaster General may prohibit -the sending of obscene or immoral publications. It is intended in this bill that he should also have the power to prohibit and prevent the sending of communistic literature.
That is the request, and I submit with all due respect that it should be granted. This is a necessary bill. It merely gives power to the Postmaster General to prohibit the sending of communistic literature. If, in the judgment of the Postmaster General or of the government, it is not necessary or judicious that there should be any regulation it need not be adopted. I say, however, that a move should be made in the direction proposed in this bill. Detection is out of the
question. The bill will not entail any particular labour or expense. It merely creates an offence which in course of time may be detected.
These remarks are offered in good faith for the consideration of the house, and I trust that the bill will receive favourable consideration. We speak of national unity, we speak of the flag, we speak of our heritage, we resort to arms to defend our borders. Let us start to-day to defend the hearts and minds of our people. This communistic doctrine has no right to exist under the Canadian flag; it has no right to be protected by the institutions of our country.


Mr. J. S. WOODSWORTH (Winnipeg North Centre):: I think the last speaker (Mr. Gariepy) has given us one of the strongest reasons why this bill should be defeated. He says that the law as it now stands helps to defeat the purpose of the padlock law of Quebec. I have again and again spoken in this house against that padlock act. I believe it is depriving the people of the province of Quebec of their freedom. I believe it is an invasion of the field which, under the British North America Act, has been left to this parliament, that is the field of criminal jurisdiction, and for that reason alone I would be bound to protest and to vote against the bill before the house.
To those who have been in this house for any length of time I do not need to say that I am not a communist. The group I represent have a philosophy that is somewhat different from that of either the Liberal or the Conservative party, but it certainly is not the philosophy of the communist party. At the same time I think it right that we in this country should preserve the liberties of every section of the people of Canada. If the communist party commit any overt act, of course the law should be invoked, and they should be punished. But if it is just a matter of opinion, then they have just as much right to their views as anyone else. That has been my understanding of British free speech. They should have perfect liberty to propagate their ideas so long as those ideas do not lead to subversive acts.
Surely we have gone far enough now in the history of modern communism -to get away from the idea that everything done in the name of communism is necessarily wrong. Russia is a well-established country, and according to recent information Great Britain and France are likely to enter into some sort of defensive alliance with her. At any rate, you cannot sweep away a great population and an established order such as exists in
2256	COMMONS
Post Office Act-Communistic Literature
Russia. They have accomplished a great deal in that great country. I do not like their authoritarian principles at all; in fact, I am inclined to think the later rulers of Russia have rather betrayed the idealistic principles advocated at the beginning of the revolution. I do not like bringing about reforms by physical revolution, but I am not dealing with that question to-night. I do say, however, that no one can lightly pass over the achievements of any one great nation.
But, further than that, we have the communist party of Canada, an existing institution, taking part in various types of activity. I do not like the communist party. They have given our Cooperative Commonwealth Federation party more trouble than any other party.


An hon. MEMBER:: Almost as much as the Social Credit party.	,


James Shaver Woodsworth: Yes, almost as much. I have been opposed by the communist party and so have my colleagues. We differ in our points of view. But I must recognize that we have several communist members in our city councils. In my own province of Manitoba there is a communist member of the provincial house. There is a newspaper that comes into this house-one is put in my mail box-called The Clarion. Very often I do not agree with what I find in it; but it comes in, and I do not think it can be said -to be subversive in character. I understand that a representative of this communist paper has his place in our own press gallery.
So long as the communists confine themselves to advocating certain doctrines, but keeping within the law, I do not think we have any right to attempt to muzzle them.
I frankly admit that from the purely political' point of view I wish they were all back in Russia; it would be a great deal easier for us. But, as a matter of fact, a great many of them have not come from Russia; some are Canadian-born. They have adopted a particular philosophy; and, I repeat, so long as they keep within the law, they ought to have the full rights of citizenship.
There is one other point. Once we begin to adopt any authoritarian methods in Canada, we do not know where they will end. Already in the - province of Quebec certain people in high authority have classed the Cooperative Commonwealth Federation in the same group as the communists. These people have been quite misinformed; nevertheless it might readily mean that somebody might propose that the Cooperative Commonwealth Federation should not rent halls in the province of Quebec, or should not
[Mr. Woodsworth.J
circulate newspapers in the province of Quebec, or should not be permitted to do this, that or the other thing-in effect, was an illegal organization. What would be the outcome if we allowed arbitrary decisions of that kind?
It is much more in harmony with what most of us have been taught are the fundamentals of British liberty and the British constitution, if we allow people opportunities for free discussion. I for one believe that in the long run truth will win out. I believe that in the long run the doctrines of the communists will be shown to be false and ill founded, and that the truer doctrines, the better founded doctrines, will prevail.
It is an easy thing to get rid of a nuisance by shoving it to one side; it is an easy thing for the people of the province of Quebec to neglect the great social reforms, which neglect is really the basis of the communist agitation. If our social order is such that the people of Canada have opportunity for a decent living, they will not be appealed to by people who urge them to fight against that social order. I am a parliamentarian, because I believe that whatever reforms are necessary may be brought about by an intelligent electorate through constitutional means. If there is any attempt to stir up rebellion in this country, there are means by which that can be checked, but in the meantime I for one stand for full freedom of speech, and this house, if it is thoroughly British in its spirit, ought to stand for full freedom of speech.


Mr. J. S. TAYLOR (Nanaimo):: As one
who has come under the ban of the communist party I think I might well say a few words. The fish trap question which was before this house recently was one reason why the communists should inveigh against me. Soon after my election in Nanaimo riding the communists, having secured a place in the Cooperative Commonwealth Federation in British Columbia, made a determined effort to oust me from the party. Two of them declared on the night of my election that that was to be their purpose, and in a measure they achieved what they wanted. The manager of my campaign, who was a lady, Mrs. Mary E. James, took up the fight which she had started at the time of my election and was herself ousted by the Cooperative Commonwealth Federation on Vancouver island, Nanaimo council. I have in my office right now a copy of a resolution which the Cooperative Commonwealth Federation, Alberni-Nanaimo district council, recently passed, expunging all the material

Post Office Act-Communistic Literature
which had been stated against Mrs. Mary E. James at the time of her expulsion from the party, and exonerating her completely because of the machinations of the communist party. The man who sent the telegram to Toronto to have me removed from the floor of the convention there in 1936 is now secretary of the communist party on Vancouver island.
Therefore I know something about communists. But I warn hon. members to be British in this matter. Know the communists; learn about them, but under no circumstances fear them, because they have not the "intestinal fortitude" to interfere with the British system of justice. As long as you have par-liamentarianism and the right to speak in this house and say those things which you honestly believe, you need not be afraid of communism.
Let me relate something by way of diversion and interest, which will drive the point well home. I went to England in 1937. In journeying round the country, making an effort to learn what the working man thought about conditions, I slept in sixty different beds in eighty-six days. So that was some travelling. And if I tell you, Mr. Speaker, that for bed and breakfast I paid all the way from two shillings to eighteen shillings, you will know that I took in a long line and a pretty thorough one. I found myself in London in the first week of September, and the thought struck me:	This is Sunday in the
first week of September, 1937; in 1907 on Sunday in the first week of September I was in London also, and following my usual custom I went down to see how the poor people lived. In 1907 I wended my way to Petticoat lane, Middlesex street, a short street off Whitechapel in the east end of London. If you can visualize a narrow street with dingy houses and costers' barrows extending all the way up on either side of the pavement you will get a fair idea of what was happening on this Sunday morning; these itinerant vendors were selling second-hand goods of every kind. Policemen went three together up the centre of the street, afraid to go singly along the sidewalks for fear they would be battered from the open doors. The street was filled with tattered and bedraggled individuals, and poverty was everywhere. It was a common saying that you would have your watch stolen from you in Whitechapel and you could buy it back from the top barrow after you had passed through Middlesex street. Everywhere you saw individuals slowly recovering from the effects of the debauch of the night before.	,
So, thinking I might get a real view of the change in social conditions in England in
thirty years, I decided to do the same thing that Sunday in the first week of September, 1937. I went down to Middlesex street. The change amazed me. Young men and young women were well dressed and clean. The only dirty, tattered individual I saw was over fifty years of age. As I walked along the street they made a path for me. About one hundred yards up the street in a recess from the building line there was a cart, and on the cart a swarthy looking individual with shock, black hair yelling into a " mike." As I listened, the sound came imperfectly, because he did not know how to use a microphone properly, but he was talking communism. So I thought, now I will get a real slant on what is going on. The police officer on duty, the only one I could see, came down with his duty cuff on his arm and I accosted him.
I said: " Officer, do you allow this kind of thing to go on?" Well, he looked down at me-he was a big fellow-and said, " I don't think he is creating any disturbance." " Well,"
I said, " don't the people here make any noise about this, do they not complain about the disturbance? This is Sunday morning and they ought to have some rest." " Oh," he said, " look at them, they have their windows open, they are all listening to it." "But, officer,"
I said, " do you know what he is saying?" Then, with a tolerant smile he turned to me and said, " Oh, yes, sir, he is preaching communism; but you know this is a free country, sir, we have free speech here." I was compelled to say, " Thank God for that." If we can do the same thing in Canada; if we can face every overt idea; if we can challenge every opinion, maintaining our own while giving every other man the right to maintain his as long as he remains within the laws of our country, Canada will progress. But if we apply the hand that stultifies the imagination and destroys free opinion and free voice, God help Canada.


Robert James Manion: 
Mr. BOUCHARD:: He said he was speaking personally. He did not compromise the radio commission.

Post Office Act-Communistic Literature


Mr. TURGEON:: But that was not the authorities.


Robert James Manion: Well, I do not know how he can differentiate between his position as a private citizen and his position as chairman of the radio commission.


An hon. MEMBER:: How about yourself? You said you were speaking as an individual member.


Robert James Manion: All right; I cannot either, and I am willing to take the responsibility.
I was simply saying that for the benefit of my followers, to assure them that they could vote as they wished. I did say I was speaking as an individual member of this house, but at the same time I cannot differentiate between myself as a private member and myself as the leader of this party, so I accept whatever responsibility attaches to the statement I made to-night, and Mr. Brockington must do likewise.
I am not particularly finding fault with him personally, but I do not believe the communist party in this country has any right to be put on the' same basis as the other parties in this house. I think any of the parties having a real membership in this house should be entitled to the use of the radio, and when I say that I include the four parties represented here. I think Mr. Brockington was quite right to that extent; but when he brought in the communist party, which has no member in this house, I doubt if he had any right to suggest that they should have the same privileges over the radio as the Liberal party, which has 180 members here, or any of the other parties, which have not such a large number.
However, Mr. Speaker, the reason I rose is that I find it very difficult, in spite of my love for free speech, to do anything but support this bill. So far as I am concerned, if the bill goes to a vote I intend to vote for it. I heard one hon. gentleman mention Hyde park. I have been in Hyde park a good many times; I used to enjoy walking through the park and listening to the various speakers. But they do not always get complete freedom of speech even there. I have seen people arrested in Hyde park. There is a difference between liberty and licence, and if they go to licence they are arrested, even in Hyde park. Within the last year the daughter of a prominent member of the peerage of England-I wonder if any of the friends of the titled people of England could tell me the name-stood up in Hyde park and adopted a fascist attitude, and they mobbed her. So they do not always allow people to say what they like, even in Hyde park.


Robert James Manion: I am not more sympathetic towards fascism than I am towards communism. As a matter of fact, the authorities saved this girl from being completely manhandled; but at any rate that was the reaction of the English people, who are the greatest lovers of freedom in the world. Some of them became tired of her attitude, and they took charge of proceedings.


James Samuel Taylor: And the authorities immediately stopped them.


Robert James Manion: The authorities stopped the people from beating her up; that is all. They hid her behind an iron fence so the people could not get at her; that was the way they stopped it.
The other evening the Minister of Justice (Mr. Lapointe) spoke in the house. I do not deny to him the perfect right to take whatever attitude he likes. But he said there is already in the law of Canada a clause against the sending round of seditious, disloyal or illegal literature. I believe those are the words.


Mr. LAPOINTE (Quebec East):: Scurrilous.


Robert James Manion: While I do not think I should have brought in a bill of this sort, the bill being here, so far as I am concerned it will get my support, so far as I am able to give it, if the bill is allowed to come to a vote to-night.


Mr. WILLIAM HAYHURST (Vegreville):: Mr. Speaker, we have listened with a great deal of interest to what has been said. I come here to speak on behalf of this group, with the idea that we should offer freedom of thought and expression to all people. I was in Hyde park last summer and listened to some of the most violent attacks upon the Prime Minister of Great Britain that one would hear anywhere-much more violent than one would hear in Canada. It also happens that most of the people in my constituency come from Ukraine. Most of them are nationalists. As we know, even Russia to-day is not that vile hotbed of the third internationale as it has been presented here to-night. As a matter of fact, we may need their support in a few years time-and probably before that time.
I would be remiss in my duty if I did not say something about free speech. I should not like to be the Postmaster General (Mr. Mc-Larty) who would have to censor publications and say what were communistic, what were fascist and what were not. Sometimes we have wondered what economic nationalism is, and
160	COMMONS
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we in this part of the house have been dubbed economic nationalists. We believe that truth can develop in a nation only as freedom of speech, freedom of utterance and writing, are allowed.
I sent to the library for the book Areo-pagitica, written a long time ago by Milton. It is one of the greatest classical works on freedom and those who love freedom. It happens that many of the things we think are false to-day are true to-morrow. Views change with respect to inventions. I read where a man in the south of England, when he first saw a steam engine, thought it was run by Satan himself. And so with all liberty; it does not matter whether it is liberty of thought along scientific lines, political lines, religious lines or economic lines-it does not matter vhat kind of liberty you may think about, it will be attacked. It may be that the very thing that is attacked and is unpopular at one time is in the next generation accepted as the truth.


Robert James Manion: Even to the extent of advocating revolution?


William Hayhurst: The leader of the opposition likes to talk about revolution. Well, I do not believe there is going to be any revolution in Canada. The type of argument put forth by the leader of the opposition will cause revolution, because people are determined to have their say in affairs.
I guarantee I get more letters from communists than does any other hon. member in the house. I could show a hundred letters I received in the last three months, since I spoke in the debate on the address in reply, because my constituents thought I was a fascist. Well, if they think I am a fascist, what do hon. members think? Do they think I am a fascist?


John Ritchie MacNicol: It is hard for us to say.


William Hayhurst: From what hon. members have heard me say, do they think I am a fascist? Some communists think I am. I believe the communists should have their freedom of thought. They should be in a position to write to me and give me their expressions of opinion, without the Postmaster General looking into my letter box and saying, Oh, this came from a communist organization, and^ therefore this man Hayhurst should not receive it ' -and, of all places, in the House of Commons!
I had not expected to speak on this subject to-night, 'because I did not know it was coming up for consideration, but I happen to have in my hand an article about Russia reshaping her policy in Europe to-day. We hear about 
revolution as though there were going to be attacks by the man on the street, and the third internationale would spread its doctrines throughout the world. As a matter of fact, Russia is changing its policy to one of nationalism. I am the spokesman of the Ukrainian people, and they are nationalist in sentiment. When I advocate nationalism on behalf of the Ukrainians the communists immediately say, " You cannot get nationalism in the Ukraine, because that means taking Carpatho-Ukraine, Polish-Ukraine and part of Roumania, and adding it into a great Ukrainian state." But I say to my communist friends: " You are not to-day believing what Karl Marx preached." The doctrine preached by Karl Marx and written in London is entirely different from the type of communism practised in Russia. When Engels, getting his money in Manchester, was paying Karl Marx to write that type of literature, it was written
in London under a free system of writing__*
a freedom condemned by the communists of that day. And we probably condemn communism to-day, but it is because the light of truth is coming upon it.
And so in Russia, when the people are taught in the language of education, liberty and understanding, their idea of communism changes. We believe that in Russia we shall have a great federalism-at least that is what I would think.
The communists and Ukrainian nationalists in my constituency will read what I say to-night. I am speaking spontaneously, and I hope they will be fair with me, because I should like to be fair with every section in my constituency. If I advocate a federalism in Russia it is only for the good of Russia, a federalism based upon Canadian federalism, the type of government where each group of people of each language has its own government. A great country like Russia could develop a type of democracy much like our own.
You cannot kill truth and reason; that is what Milton said. He who kills a man kills a reasonable creature; but he that destroys a good book kills not only a reasonable creature but kills reason itself. I quote from memory, and I may not have the exact words of Milton.


An hon. MEMBER:: Almost.


Mr. HAL  HURST@: I will read from Areo-pagitica. This book was written in the seventeenth century. It is the foundation of liberty and free speech for all people of all religions. I have many Roman Catholic friends, and I admire them because I realize that their religion is a great truth, and that

Post Office Act-Communistic Literature
we must have religious truth and freedom. But this man was not a Catholic. I am not reading his views with the idea of showing that this is the Protestant spirit. We believe in tolerance to all people. It does not matter of what nationality you may be; so far as I am concerned, it does not matter whether a man was born in a manger or in a castle or in a cottage by the sea. Every person should be allowed liberty to think as he wishes and to develop his life to the best of his ability. You cannot have that if you are going to have a rigid censorship upon literature and any subject which introduces new thought, and which many people therefore would not be in a position to judge.
I shall read a few lines from Areopagitica which will strengthen the remarks which I have made in imperfect English. This is what the great master of English has said:
Behold now this vast city, a city of refuge, the mansion-house of liberty, encompassed and surrounded with his protection; the shop of war hath not there more anvils and hammers waking, to fashion out the plates and instruments of armed Justice in defence of beleaguered Truth, than there be pens and heads there, sitting by their studious lamps, musing, searching, revolving new notions and ideas wherewith to present, as with their homage and their fealty, the approaching reformation: others as fast reading, trying all things, assenting to the force of reason and convincement. What could a man require more from a nation so pliant and so prone to seek after knowledge? What wants there to such a towardly and pregnant soil, but wise and faithful labourers, to make a knowing people, a nation of prophets, of sages, and of worthies?
I might have picked out a much better piece, but that is just one I took at random. We are trying to develop a nation of prophets, sages and worthies. I am proud of having been born in Great Britain and I realize what liberty and democracy mean. I must preach democracy to my people. I want my new Canadian friends, and they are my friends, to be good Canadian citizens and to understand what democracy is. If you pass legislation which takes away from one class or group of people their liberty, then they probably will be forced to use other weapons. That is what happened in Russia. Prior to the great war Russia was living under the iron heel of feudalism with all the great knowledge and truth that was abroad in the world. It took a bloody revolution to eliminate those in society above simply because they could not see any other way out. Would we wish to have a similar condition exist in this great Canadian democracy? No. Mr. Speaker, I probably should not talk out this measure and I shall sit down now. I do
want the people to realize that I am speaking from my own sentiments, that I believe in making democracy work. To cure the ills of democracy, you must give more democracy, more truth and more knowledge to all our people.


Mr. DANIEL McIVOR (Fort William):: Mr. Speaker, I am not sure that I understand the meaning of this 'bill. If it is as I understand it is, I should be committing a breach of the law if I mailed to some of my preacher brothers certain of the literary works I now have in my possession. I have one book that defines communism and compares it with Christianity. I come from one of the most intelligent cities in the Dominion of Canada, and the Minister of Transport (Mr. Howe) comes from a city alongside which is just about as intelligent. The councils of these two cities were asked if a communist could address the citizens. Port Arthur gave Mr. Tim Buck leave to do that, and the council of Fort William gave Mr. Gallagher, a fine Scotchman from the Clyde, an opportunity to address the people. I must say that perhaps these two distinguished gentlemen were somewhat disappointed when they found they had not changed the life of either city to any extent. They went on and the two cities remained as intelligent as before, being represented by intelligent individuals.
There is a member of the legislature in Winnipeg, Manitoba, who is a communist. Anything that he writes would be communistic; therefore, under the provisions of this bill he would not be permitted to pass any of his letters through the mail. As a man thinks, so is he, and as he writes, so does he express himtself. Therefore his letters would be communistic literature. That is logic. I may be wrong, but I believe that if there were an opportunity to become a Christian communist it would clean up many of the things now present in the political life of Canada. I cannot help thinking of the law as it has been administered by the former Postmaster General, the hon. member for Middlesex West (Mr. Elliott). Our present laws have enough in them to protect us against unclean literature. I do not wish to give any particular instances, but as long as the former Postmaster General is alive he will be considered a credit to the Dominion of Canada. He was a man who was above the taking of bribes for allowing anything wrong to go through the mails. .
I stand for free speech just as much as anybody else. It will never hurt anyone to express themselves along any particular lines as long as they observe the laws of Canada.
2262	COMMONS
Supply-National Revenue-Customs
I have addressed communistic gatherings and my advice to them has always been to observe the law. I visited Mr. Tim Buck when he was in Port Arthur. Perhaps that was a little risky, but I got the surprise of my life. He had been in an automobile accident, and I was wondering how many clergymen from the head of the lakes had visited him. I found him to be just as intelligent as I was. When we bowed our heads before the Great Creator, I was perhaps the one who slipped a little because I opened my eyes to peek to see if his were closed. They were closed as reverently as mine. I am going to be very careful in voting for any bill that will restrict the publications of a man of that type because I think deep down in the heart of Tim Buck there is something that is good.


Angus MacInnis: It is so close to nine o'clock that perhaps your honour will call it that hour.

The house in committee of supply, Mr. Sanderson in the chair.



DEPARTMENT OP NATIONAL REVENUE

[Stage Direction]
Customs and excise divisions-
218.	General administration, $972,135.
René-Antoine Pelletier: Will the minister explain the decrease in this item?


James Lorimer Ilsley: The decrease is $134,015, made up as follows:
Item	Decrease
Permanent salaries	$ 90,515
Temporary salaries	 7,500
Printing and stationery	 35,000
Telegrams and telephones	 500
Sundries	 500
Total	134,015


René-Antoine Pelletier: There is a decrease of some $90,000 in salaries. Has there been a transfer of employees from this department to some other department?


James Lorimer Ilsley: Yes. There was a transfer of sixty-nine permanent officers to the Department of Trade and Commerce. Does the hon. member want the details?


René-Antoine Pelletier: No, it is not necessary. I was just wondering if, on account of slackening business, it had been necessary to dismiss a number of employees.


James Lorimer Ilsley: No.


[Stage Direction]
Item agreed to.
(Mr. McTv^r.l
Customs and excise divisions-
219.	Customs excise chemical laboratory, $39,635.
James Alexander Marshall: How long has this particular branch been in operation?


James Lorimer Ilsley: This laboratory?


James Alexander Marshall: Yes.


James Lorimer Ilsley: I believe, since shortly after confederation.


James Alexander Marshall: The reason I asked this question is that prior to the estimates of 1938-39 they were all segregated, were they not? They are now split up, are they not?


James Lorimer Ilsley: This item formerly was included in the main item, and now it is taken out of the main item and shown separately.


James Alexander Marshall: That is the point I was trying to get.


[Stage Direction]
Item agreed to.
Customs and Excise division-
220.	Inspection, investigation and audit services, $1,110,925.
James Alexander Marshall: The auditor general made a report on this matter. It states, at page 47 of part I:
An examination was made of the procedure followed in collecting and recording revenues in the customs and excise divisions at the port of Toronto, and as a result, several recommendations were made to the commissioners of customs and excise respectively, which would prove beneficial, and would provide for a fuller compliance with the requirements of the consolidated revenue and audit act.
I wonder if the minister would enlarge on that point.


James Lorimer Ilsley: Is this in the last report of the auditor general?


James Alexander Marshall: It is found in the auditor general's report for the year ended March 31, 1938.


James Lorimer Ilsley: Yes. The auditor general did make some minor recommendations, recommending some minor changes in the port of Toronto, which I am informed have all been adopted. ,


[Stage Direction]
Item agreed to.
Customs and excise division-
221.	Preventive service undervaluation unit, $65,280.
René-Antoine Pelletier: Why is this service necessary as being distinct and apart from the investigation and audit services?


James Lorimer Ilsley: Well, there is not much
reason; perhaps there is no reason except an historical one why this should be separate from the item just before it. A few years

Supply-National Revenue-Customs
ago there was a large preventive service under the jurisdiction of the Department of National Revenue. The Royal Canadian Mounted Police took over almost wholly that preventive service, but some officers were left with the Department of National Revenue to do work which was not strictly speaking, police work; it is mostly clerical, and this item is to provide for the expenses of the remnants of the old preventive service.


René-Antoine Pelletier: If that is the case, it
seems to me that there might be more economy effected if these two preventive services were amalgamated. Perhaps if the inspection, investigation and audit services could take complete charge of this remnant of the former organization some economies might be effected there. Another reason is that the Royal Canadian Mounted Police have been active in carrying on the prevention of undervaluation concerning matters of this type, and I suggest there might be room there for economy in that particular branch.


James Lorimer Ilsley: Well, about the only separation is here in the book. They are all under the chief inspector of customs and excise.


René-Antoine Pelletier: There is no particular
officer designated specially to take charge of this work?


James Lorimer Ilsley: No. The chief inspector of customs and excise has charge of both.


[Stage Direction]
Item agreed to.
Customs and excise divisions-
222.	Ports, outports and preventive stations, including pay for overtime of officers, notwithstanding anything in the Civil Service Act, and temporary buildings and rentals, $7,619,100.
Alfred Johnson Brooks: In regard to this item I
have often felt that the matter of appointments was one to which the phrase, "notwithstanding anything in the Civil Service Act" might apply, and I could refer particularly to an appointment in my own town of Sussex, New Brunswick. However, I am not going to discuss that to-night. I should like to have an explanation from the minister of just what that phrase means, particularly in this case.


James Lorimer Ilsley: In 1928 the National Revenue Act was amended in such a way as to empower the governor in council to make certain appointments notwithstanding the provisions of the Civil Service Act. That amendment was introduced and passed as a result of a recommendation of a royal commission. The reason for the recommendation was this:	It was thought that the government should have some liberty of choice
of experts, and the appointments were confined to the preventive service, the appraisal service, and investigators of values-just those three. Under that amendment to the National Revenue Act quite a number of officers were appointed, both before 1930 and after 1930. I cannot remember just the number that are in the service, but I think it is somewhere between fifty and sixty. Since 1934 no one has been brought into the service from outside under the powers contained in that act; the practice has been discontinued; and when we need an investigator or an appraiser or anybody of that kind we ask the civil service commission to appoint him. The matter has been handed over to the civil service commission. For promotions of these particular national revenue appointees we have to resort to an order in council, because the civil service commission does not recognize them at all.


Alfred Johnson Brooks: That does not apply to
any new appointments at the present time?


James Lorimer Ilsley: No. It would not apply
to any new appointments unless we resumed the practice of making appointments under the National Revenue Act-which I have no intention of doing.


Mr. COLDWELL:: This item covers a number of things including out-ports, preventive stations, temporary buildings and rentals. Some of the customs stations, which would come under the Department of Public Works as well as under this department, are in my opinion a rather poor advertisement for Canada to people who cross the line and come to our side.


James Lorimer Ilsley: They advertise our economy.


Major James William Coldwell: I am thinking of the convenience of people crossing the line. I do not know much about the eastern stations, but I have seen a number of them in western Canada. When I was on the United States side of the line I saw well equipped customs stations, with toilet and other conveniences; on the Canadian side the stations were badly equipped. I could not help thinking that we presented the appearance of the poor neighbour of the United States, and I thought that on this item I would call attention to the fact that mady of the customs buildings and offices, particularly on the western Canadian boundary, are a poor advertisement for Canada, especially when we compare them with the buildings on the other side of the line. None of these is in my constituency and therefore I am not asking for such public works there, but if funds are available we

Supply-National Revenue-Customs
might profitably as a nation spend a little money on some of the customs stations that are not very attractive to people crossing the border.


James Alexander Marshall: There is a total reduction in staff of fifty-five. Does this mean that these employees have been transferred from the Department of National Revenue to the Department of Trade and Commerce?


James Lorimer Ilsley: There were sixty-nine transfers to the Department of Trade and Commerce. What page is the hon. member looking at?	.


James Alexander Marshall: I am looking at page 144 of the estimates. On page 141 the details are given.


René-Antoine Pelletier: There is an increase of .870,900, and on page 141 the details are set out showing so many new collectors, and so on; but apparently these do not account for the $70,900. Could the minister give some information as to the difference between the two?


James Lorimer Ilsley: There are quite a large number of decreases and a number of increases, and the net increase is $70,900. I can give the various increases.


René-Antoine Pelletier: I do not want to put the minister to the trouble of giving details with regard to each position. I simply want to know how this amount is made up. I want the reason for it.


James Lorimer Ilsley: It is made up of various items; it is a net increase of $70,900.


James Alexander Marshall: All increases in salaries?


James Lorimer Ilsley: No. This is the net result on balance between the number of increases and the decreases.


James Alexander Marshall: In salaries?


James Lorimer Ilsley: No, all kinds of things. The increase in temporary salaries is $69,605, and the reason for that is the employment of persons on a temporary basis on account of permanent employees leaving the service, or in consequence of death, resignation or superannuation. There is a decrease in permanent strength and an increase in temporary strength The others are small items, and that is the net increase.


James Alexander Marshall: According to my calculations there is a net decrease of fifty-five in the staff.


James Lorimer Ilsley: In the permanent staff?


James Alexander Marshall: Yes. Were they transferred to the Department of Trade and Commerce?


James Lorimer Ilsley: They are replaced by temporaries.


Robert James Manion: There was a policy of closing certain ports. Have any been closed in the past year and have some been opened?


James Lorimer Ilsley: Nearly ninety ports, outports, preventive stations and postal collecting stations have been closed since this government came in. Leaving out the postal collecting stations, which are not very large affairs, forty-eight ports, outports and preventive stations have been closed.


John Charles Landeryou: The minister says there has been a decrease in the permanent strength and an increase in the temporary. What happened to those who were on the permanent staff? Were they moved to another department?


James Lorimer Ilsley: They are accounted for by deaths, resignations and superannuations.


John Charles Landeryou: And the temporary
staff have replaced them?


James Lorimer Ilsley: Yes.


John Charles Landeryou: Was the increase on account of increase in salaries?


James Lorimer Ilsley: Perhaps I had better give the increases and the decreases. Taking the increases first:
Increase
Temporary salaries	$69,605
Living allowances	 2,100
Overtime	 10,000
Stamps and labels	 25,000
These are total increases of $106,705. Against them there have been the following decreases:
Decrease
Permanent salaries	$17,805
Printing and stationery	 y'ooo
Postage	 5,000
Express and freight	 3,000
Sundries	 3,000
This represents total decreases of $35,805. The balance, or net increase, is $70,900.


John Charles Landeryou: Is this overtime figure, $160,000, the total overtime paid to all the employees of the department?


James Lorimer Ilsley: Yes.


John Charles Landeryou: What is the reason for having such a large amount of overtime?


James Lorimer Ilsley: It is a very small amount; two years ago it was over $500,000. It is not the sort of business that one can do on a basis of an eight hour day without considerable loss of economy. To do that would require a much larger staff. But we have tried to cut out a great deal of overtime. As I say,

Supply-National Revenue-Customs
two or three years ago the overtime amounted to some $500,000, and we have brought it down to $160,000, taking on, if I remember, 150 or 160 additional staff.


John Charles Landeryou: I am in favour of
that. I do not think we should allow the employees to work so much overtime when there are so many unemployed.


James Lorimer Ilsley: That is an important change in the policy of the department.


John Charles Landeryou: Well, I am in favour of it.


James Alexander Marshall: What is the explanation of the item of $4,009.61, "appropriation not required for 1939-40"? I am interested in this because a similar item runs through almost every department.


James Lorimer Ilsley: It seems to me that should be 1938-39.


James Alexander Marshall: I agree with the minister that it should be.


James Lorimer Ilsley: If that is the case it is easy to see what it means; it means that we did not use quite all our vote, and shall not up to the end of this month.


John Charles Landeryou: How long will it be before those hired on the temporary staff are made permanent? Or is it the intention that they will be employed permanently?


James Lorimer Ilsley: There is a treasury board regulation which requires each unit of the service to keep a "cushion" of temporaries; it is twenty per cent in our department, in some departments I think it is ten per cent. This means that some appointees remain in the temporary class for a considerable length of time. To make them permanent would violate the rule that twenty per cent in a unit must remain as temporaries. My impression is that a good many become permanent in one or two years.


John Charles Landeryou: As soon as a position is open in the permanent staff, they are given the opportunity?


James Lorimer Ilsley: Yes. They do not change their duties; they are just given permanent status.


Grote Stirling: What is the principle that underlies the "cushion"?


James Lorimer Ilsley: The principle is, theoretically, that there should be a chance to reduce the service without hardship. It must not be admitted that a person once in the service is necessarily always there. Some occasion may arise for economy even in a government.


Robert James Manion: Has it ever arisen?


John Charles Landeryou: Would it not be just as easy to reduce staff if they were permanent?


James Lorimer Ilsley: No, it is one of the most difficult things to get a person who is permanent out of the service. If the position is abolished they have to have a pension; they are paying into the superannuation fund, and adjustments have to be made in regard to that; it is a difficult matter. "Permanent" status does give them a great deal of permanency.


John Charles Landeryou: It is cheaper to keep them?


Grote Stirling: How many outports are there, if any, that are open twenty-four hours a day?


James Lorimer Ilsley: The commissioner tells me that about half of the frontier ports are open twenty-four hours a day. If the hon. gentleman wants the number it will take a few minutes to get it.


Grote Stirling: In British Columbia, for instance, is there more than one?


James Lorimer Ilsley: There are two; Pacific highway and Douglas.
I want to answer that inquiry as to appropriations not required for 1939-40. The purpose of showing these appropriations in two columns is to show whether there is an increase or a decrease. That item of $4,009.61 is of a kind not covered by a vote this year at all. It was a special vote last year to cover payments to two individuals named. There is nothing like that this year, so it cannot be compared with anything, in other words, the appropriation is not required at all this year.


Henry Herbert Stevens: It has never been explained yet, although explanation has been asked for a thousand times. It does not mean a thing.


Mr. ROSS (St. Paul's):: Last year there was a change made in Toronto. Originally we had a port at Toronto and an outport at West Toronto. I remember I had some correspondence with the minister in respect to the matter, and I think he had some correspondence with the board of trade and others in Toronto with respect to making West Toronto a port. At that time it was explained to us that there would be a great economy effected by arranging for two separate ports instead of the one port with an outport. I always understood that both the port of Toronto and the outport of West Toronto had given excellent service. I felt at the time
2266	COMMONS
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that if there was dissatisfaction with the service at the outport of West Toronto we should have had a little better service, which the department could easily give. Would the minister be good enough to state just what saving has been effected by the opening of the new port of West Toronto?


James Lorimer Ilsley: It seems a shame to revive the old controversy about West Toronto. The facts were that West Toronto was an outport of Toronto, and as a result of its subordinate status, so to speak, about 25,000 entries annually had to be made a second time in the books of the main Toronto office. If I remember correctly, the services of about two men were employed doing this and nothing else. There was no sense to it at all; it did not serve a single useful purpose. The simplest and easiest way to get rid of that useless work, wasted effort and needless expenditure was to make West Toronto a port instead of an outport, which was done just by a stroke of the pen. Of course we were accused of working in the interests of Montreal; of trying to spoil the statistical showing of the port of Toronto and so on, and for a month or so a great campaign was waged against us in which I am sorry to say my hon. friend joined. I want to assure him, however, that I have not heard one word of complaint in regard to what we did from that time until this. Last session I think my hon. friend put a question on the order paper in this connection, 'but there has been no complaint at all.
With regard to expense, the accusation was that we were going to increase expenses by $25,000 a year by making West Toronto a port. The first rumour was that we were going to name a particular person as collector there; in fact, half a dozen ulterior motives were ascribed to the minister, the commissioner and others for making this change. All I can say about expense is that not a single salary has been raised in the port of West Toronto. The expense there is the same because they are doing the same amount of work they were doing before.


Robert James Manion: This increase of $70,000 is not on account of that change?


James Lorimer Ilsley: Oh, no; there is no increase, and the two men I mentioned have been absorbed in the Toronto office. One cannot point to a particular economy. There has been some increase in the staff of the Toronto office, and all we ever said was that we would absorb these men instead of bringing in people from outside.


Douglas Gooderham Ross: I have great regard for the Minister of National Revenue, and I

did not ascribe any ulterior motives to him when the outport of West Toronto was made a port. When he replied, to me he rather suggested in his letter, I think, that I was taking that attitude, but I was not. It was entirely a question of economy. I have listened carefully to the minister's rhetoric and to his statement that we were talking about Montreal, and so on. The minister has said that he has not increased any salaries there, but the number of entries through the ports of Toronto and West Toronto is less than it was last year. In spite of that fact there is an increase in the expense, and I was wondering if the port of West Toronto had anything to do with it.


John Charles Landeryou: There is an amount of $50,000 provided for legal expenses. How is this money spent?


James Lorimer Ilsley: To begin with, on what page is the item?


John Charles Landeryou: It is on page 144; the amount was $50,000 last year and it is $50,000 this year. Is that in connection with legal firms outside the department and the government?


James Lorimer Ilsley: Yes, that would be it. We have quite an amount of litigation in connection with the collection of taxes, and have to employ counsel.


John Charles Landeryou: The minister thinks it is better to employ outside counsel than to have his own departmental officials do the work?


James Lorimer Ilsley: We do both. We have counsel in the department, but it is necessary to have local solicitors and counsel as well.


John Charles Landeryou: Are they paid for each case? I should like to know how this money is paid, whether these solicitors are given a fixed sum to represent the department in a certain area, or what is the practice.


James Lorimer Ilsley: They are agents of the
Department of Justice; their accounts are taxed by that department, but we pay them.


Grote Stirling: What is the policy that governs the minister and the government with regard to customs entries at airports? Considerable expansion is going on, certainly in my part of the country, with regard to these air fields, and one is continually being asked whether customs facilities will naturally follow the opening of airports.


James Lorimer Ilsley: There is not a great deal of importation of goods by aeroplane. There are about four ports at which aeroplanes do land regularly, and at those ports there are

Supply-
-National Revenue-Income Tax
customs officers at the times the planes are scheduled to land. Entries are made in the usual way.


Grote Stirling: But there is a great deal of casual flying.


James Lorimer Ilsley: In that case the nearest port has to be notified. Then an officer goes at once by taxi and does whatever is necessary.


Grote Stirling: At the expense of the
department?


James Lorimer Ilsley: At the expense of the person accommodated.


John Charles Landeryou: I should like a little more information in regard to this amount for legal expenses. What is the number of cases handled in this way last year and the amount of money paid in legal expenses?


James Lorimer Ilsley: These are mostly prosecutions under the Special War Revenue Act. In addition, there would be some ordinary collection cases where accounts were placed in the hands of solicitors. I have not the particulars of the cases, but quite a number of them are going on all the time in various parts of Canada.


John Charles Landeryou: That is for evading payment of taxes?


James Lorimer Ilsley: Yes, not paying for one
reason or another. There are cases of all kinds. Sometimes people keep two sets of books, and resort to various practices in order to evade payment of their taxes. We keep after them.


Grote Stirling: I should like a little more information with regard to customs entries at airports. For instance, has the department an officer stationed at the St. Hubert airport in Montreal?


James Lorimer Ilsley: Yes.


Grote Stirling: And are there many of the larger ports at which there are permanent officers?


James Lorimer Ilsley: There are three others, Toronto, Winnipeg and Vancouver.


Grote Stirling: There was an instance
that occurred in my part of British Columbia quite recently. The dominion government is -to assist the municipality in the preparation of a field at Penticton, where there is a customs office. Does the incoming plane just come down and telephone the officer to come out. or what is the practice?


James Lorimer Ilsley: This is not a regular service. It would not be a regular or scheduled landing at Penticton.


Grote Stirling: It may become regular,
but it is not yet. Thirty miles south of Penticton there is an excellent field at a place called Oliver, which certainly has been used for casual landings. The difficulty has been' to arrange with the Penticton customs office. The next stage of the development will be the opening of the field at Penticton itself, where there is a customs office. I am wondering what the practice will be. There are other air fields dotted all along that piece of the southern boundary.


James Lorimer Ilsley: Arrangements can be made
in advance. A person coming into Canada can telegraph ahead, and an officer could meet him there. Or, if the man does not do that, and telephones to the nearest customs house the officer will get there as soon as he can.


Grote Stirling: The man would be told by the officer that at the man's expense the officer would take a car and go out to the field.


James Lorimer Ilsley: Yes.


[Stage Direction]
Item agreed to.
Income tax division-
223.	General administration, including authority to create positions and make appointments within the division, notwithstanding anything contained in the Civil Service Act, and the said positions and staff so appointed are hereby wholly excluded from the operation of the said act, $314,775.
Robert James Manion: Would the minister give
some general information as to the amounts collected and the numbers paying income tax in Canada? A short general statement would be of interest.


James Lorimer Ilsley: The amount collected this
fiscal year will be approximately $140,000,000.


Robert James Manion: Does that include business income tax?


James Lorimer Ilsley: That is just income tax.


Robert James Manion: Personal?


James Lorimer Ilsley: No, including corporation,
as well.


Robert James Manion: Would the minister mind
dividing it up?


James Lorimer Ilsley: Although I have not the
figures before me I shall have them in a few moments. The main divisions are corporation income tax, individual income tax and the tax on remittances to non-residents.


Robert James Manion: The minister has not the
figures for those three?


James Lorimer Ilsley: No, but roughly-and I
will correct the information if I am much out-I should think the ratio between cor-
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Supply-National Revenue-Income Tax
poration and individual is about three to two. The corporations pay about one and a half times as much as individuals.


Robert James Manion: About $85,000,000 personal; or is it the other way about?


James Lorimer Ilsley: I shall have the exact
figures in a moment. Of course one has to take out the tax on non-residents, and that is quite a large item. Strictly speaking, it is not an income tax. It is a tax on interest, dividends and so on paid from Canadian sources to persons residing outside Canada.


Karl Kenneth Homuth: It is an income tax on foreigners, is it?


James Lorimer Ilsley: Strictly speaking, it is not an income tax because, on balance, they may not have any income at all. Nevertheless they have to pay that five per cent.


Karl Kenneth Homuth: It is on Canadian earnings.


Robert James Manion: The same as Canadians do on United States income?


James Lorimer Ilsley: Yes.


Karl Kenneth Homuth: Are the figures divided as between industry, mining and financial houses, or in some such manner as that? For instance, could the minister give us the income from the mines of Canada and that from industrial concerns?


James Lorimer Ilsley: I shall see about that, although I have not the information before me. We do not have it readily available, and it would take some little time to get it. I think, however, there would be no objection to giving the hon. member that information. It would take some little time, but we could separate it into mining and nonmining corporations. Is that what the hon. member wants?


Karl Kenneth Homuth: Yes. My idea is this- and I am quite sincere-that in the house we hear a great deal of talk about how industry is continually milking the people of western and eastern Canada. I think it would be a good idea if we could have some figures showing the division of income tax as between what industry pays and what comes out of our natural resources such as mining, lumbering and so on. Those figures would be of interest to the committee.


Robert James Manion: Could the minister first give the figures I asked for?


James Lorimer Ilsley: I find my proportion was just a little out. I have not the figures for the current year, because it is not yet complete, but for the year 1937-38 I find that individuals paid $40,444,838.61 and corporations paid $69,768,605.17.


Robert James Manion: Are the proportions about the same this year?


James Lorimer Ilsley: I should think so, substantially. I was just going by my impression over a period of years.


Robert James Manion: That amounts to about $110,000,000. This year the minister expects roughly $140,000,000.


James Lorimer Ilsley: But I have not put in the five per cent tax in the figures I have given. That amounts to $10,152,087.


Robert James Manion: Five per cent makes a figure over $10,000,000?


James Lorimer Ilsley: Yes; there is a great deal of money invested in Canada by non-residents.


Robert James Manion: There was $120,000,000 collected last year, and this year the amount will be about $20,000,000 more?


James Lorimer Ilsley: Yes.


Robert James Manion: How many individuals
paid income tax? They used to be in the neighbourhood of a quarter of a million. What is the number for the last year for which the minister has the records?


James Lorimer Ilsley: Before I answer the question may I say the commissioner tells me that to date payments for the present fiscal year amount to $141,000,000. It is nearly the end of the month, and there will not be much more. In 1937-38 the number of individuals was 237,064.


Robert James Manion: As the minister is giving figures, would he give the division according to amounts? I am referring to those between $2,500 and $5,000, and proceeding up through the higher brackets.


James Lorimer Ilsley: I will give the figures for taxable incomes, that is, incomes above the exemptions. I shall give first the income figures and then the number of individuals. They are:
Number of
Taxable income	taxpayers
Under $2,000	 106,764
Between $2,000 and	$3,000	
56,026Between $3,000 and	$4,000	
30,973Between $4,000 and	$5,000	
14,727Between $5,000 and	$6,000	
8,016Between $6,000 and	$7,000	
5,148Between $7,000 and	$8,000	
3,344Between $8,000 and	$9,000	
2,290Between $9,000 and	$10,000	
1,691Between	$10,000	and	$15,000..	..	4,121Between	$15,000	and	$20,000..	..	1,613Between	$20,000	and	$25,000..	..	763Between	$25,000	and	$30,000..	..	452Between	$30,000	and	$35,000..	..	314Between	$35,000	and	$40,000..	..	215Between $40,000 and	$45,000....	134Between	$45,000	and	$50,000..	..	91Over $50,000	
382
Supply-National Revenue-Income Tax


Douglas Gooderham Ross: Would the minister give the amounts collected in each of these categories?


James Lorimer Ilsley: They are as follows:
Amount
Taxable income	collected
Under $2,000	$ 1,152,471
Between	$2,000	and	$3,000..	..	1,196,682Between	$3,000	and	$4,000..	..	1,348,556Between	$4,000	and	$5,000..	..	1,216,838Between	$5,000	and	$6,000..	..	1,174,617Between	$6,000	and	$7,000..	..	1,180,612Between	$7,000	and	$8,000..	..	1,048,250Between	$8,000	and	$9,000..	..	985,368Between	$9,000	and	$10,000.	..	919,723Between	$10,000	and	$15,000..	3,753,354Between	$15,000	and	$20,000..	2,919,947Between	$20,000	and	$25,000..	2,351,043Between	$25,000	and	$30,000..	2,087,838Between	$30,000	and	$35,000..	1,923,770Between	$35,000	and	$40,000..	1,622,398Between	$40,000	and	$45,000..	1,245,898Between	$45,000	and	$50,000..	1,095,111Over $50,000	
14,027,159


Alexander MacGillivray Young: What is the largest income in Canada upon which a tax is paid?


James Lorimer Ilsley: That is not available.


Alexander MacGillivray Young: It must be available somewhere.


James Lorimer Ilsley: Yes, it would be in the
department.


Angus MacInnis: Has the minister the percentages of the taxpayers and the percentages of taxes which they pay?


James Lorimer Ilsley: These are the figures:
Percentage Percentage
Taxable income	of total taxpayers	of total tax paidUnder $2,000	
Between-	.. 45-04	2-79$2,000 and $3,000..	.. 23-63	2-9$3,000 and $4,000..	.. 13-07	3-27$4,000 and $5,000..	.. 6-21	2-94$5,000 and $6.000..	.. 3-38	2-84$6,000 and $7,000..	.. 2-17	2-86$7,000 and $8,000..	.. 1-41	2-54$8,000 and $9,000..	.. -97	2-38$9,000 and $10,000.	.. -71	2-23$10,000 and $15,000.	.. 1-74	9-08$15,000 and $20,000.	.. -68	7-06$20,000 and $25,000.	.. -32	5-69$25,000 and $30,000.	.. -19	5-05$30,000 and $35,000.	.. -13	4-65$35,000 and $40,000.	.. -09	3-93[DOT] $40,000 and $45,000.	.. -06	3-01$45,000 and $50,000.	.. -04	2-65Over $50,000	.. -16	33-94


James Alexander Marshall: There has been some
correspondence between the auditor general and the income tax division with respect to whether or not the auditor general has the authority to examine the personal files of taxpayers in possession of the income tax division. The matter was referred to the
Department of Justice. Referring to the auditor general's report, I find this is what is stated:
He is not permitted to see these documents for two reasons: first, because he is precluded by the provisions of said section 81, and second, because he has no power to review the findings of the minister.
Then the auditor general goes on to say:
Consequently I cannot satisfy myself regarding the accuracy of assessments of income tax, nor ascertain on behalf of parliament that the provisions set forth in the Income War Tax Act, with regard to these assessments, have been properly applied by the income tax division.
The question I should like to direct to the minister is, if the auditor general has not the right to see these documents in order to verify the assessments, how are these statements verified?


James Lorimer Ilsley: The minister has to take responsibility. That is all I can say.


Karl Kenneth Homuth: The figures that the minister has given us are so interesting that it is perhaps unfortunate we cannot get a better division of them; first, perhaps, a division showing the various classifications from which income tax is received-those engaged in industrial pursuits, those engaged in mining and various other activities; second, the various provinces from which the income tax is collected.
As we sit here day after day we hear continuous attacks upon industry. I venture to say that if a careful analysis of income tax payments were made it would be found that those provinces which are highly industrialized are paying the greatest proportion of taxes to the government.


Mr. ROSS (Moose Jaw):: You did not
pay it, you collected it.


Karl Kenneth Homuth: I would expect that
from lion, members over there. Not only are we paying this tax, but as a result of the activities within our own provinces and the payment of provincial taxes in the various provinces in which we who are in industry have offices, we are paying a very large proportion of the tax in the western provinces in which we are doing business. It would be interesting to have a proper division of the whole tax, and then add to it the amount of money which we are paying in subsidies to western Canada, as a result of their wheat subsidy, as a result of other votes which are authorized for the minister's plans of rehabilitation, and so forth. It would give us a complete picture of just how much money is being taken from eastern Canada and distributed throughout the western provinces.
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Malcolm McLean: The hon. member would take in the whole of the landscape.


Karl Kenneth Homuth: My hon. friends would
not have even landscape, if it were not for some of us in eastern Canada.


Alexander MacGillivray Young: Some hon. members would hardly have a shirt to their backs if the west had not fed the east for twenty-five years.


Frederick George Sanderson: Order. I am afraid
that this discussion is out of order. I would ask the hon. member for Waterloo South (Mr. Homuth) to keep to the item before the committee.


Alexander MacGillivray Young: The hon. member had better get it out of his head.


Karl Kenneth Homuth: I imagine the chairman
will agree that these interruptions are out of order. The hon. member who has just spoken has certainly said long ago all he has in his head, because nothing worth while has come out of it for the past three years. As I was saying, it might be a good idea if we could get a complete picture of the taxes which are paid under all these various items, with the moneys distributed to the various provinces in connection with relief. It would show clearly where the money comes from and where it goes.


John Charles Landeryou: I wonder whether
the minister can give us the information as to where the money comes from-


An hon. MEMBER:: The twenty-five
dollars a month?


Karl Kenneth Homuth: The east has given the
hon. member's province all the money it deserves.


John Charles Landeryou: -which is paid in income tax by the industrialists of eastern Canada, just how much has come from western Canada in the last ten years.


Karl Kenneth Homuth: The west has got it back three times over.


Alfred Johnson Brooks: Would the minister give
us the amounts collected in each of the different districts in Canada? As I understand the situation, there is a central collecting office for each district.


James Lorimer Ilsley: If the hon. member for
Waterloo South (Mr. Homuth) will obtain a publication of the bureau of statistics called Incomes Assessed for Income War Tax in Canada in 1937, he will get a great deal of the information that he is seeking.


Karl Kenneth Homuth: But it will not give the distribution, will it?
[Mr. Homuth.J


James Lorimer Ilsley: It gives the distribution by provinces and by occupations in the various provinces. It also makes some division between corporations, but I do not think it segregates mining corporations.


Karl Kenneth Homuth: That is what I was wondering.


James Lorimer Ilsley: It is called "natural resources."


Karl Kenneth Homuth: Does it segregate natural resources and industry?


James Lorimer Ilsley: Yes, it does.


Karl Kenneth Homuth: And mines come under "natural resources"?


James Lorimer Ilsley: Yes. It is very good. I think the last year of publication is 1936-37; we have not bad anything since then.


Alfred Johnson Brooks: I asked for the amounts in the different districts.


James Lorimer Ilsley: How small a district does the hon. member want? There are quite a number of them.


Alfred Johnson Brooks: I mean, from the different centres like Saint John, Halifax, Charlottetown.


James Lorimer Ilsley: There are quite a number of districts here. The hon. member wants the total of individual and corporation income tax from each of these districts?


Alfred Johnson Brooks: As I understand it, there is an office in each district for the collection of income tax for that particular district. For instance, in New Brunswick, Saint John collects, I believe, for that district. I wanted the total from each of the districts. I may be wrong in my idea, but I thought-


John Charles Landeryou: Could the minister give the total for each of the provinces?


James Lorimer Ilsley: I have that information here. If I read it, it is going to take quite a long time.


Karl Kenneth Homuth: Put it on Hansard.


Alfred Johnson Brooks: I should be glad if the minister would put it on Hansard.


James Lorimer Ilsley: With the consent of the committee; but I would say that a person in New Brunswick can pay his income tax in Winnipeg, and a person in Nova Scotia can pay his income tax in Montreal if he wants to.


Alfred Johnson Brooks: Those are exceptional cases.


James Lorimer Ilsley: I am told by the commissioner that it is nevertheless segregated back to the district in which he resides.

Supply-National Revenue-Income Tax


Alfred Johnson Brooks: Can the minister give the figures for 1937 and 1938? I want to compare the two.


James Lorimer Ilsley: I will put the 1937-38 figures on Hansard.. Does the hon. gentleman, for purposes of discussion, want me to give him anything roughly right now?


Alfred Johnson Brooks: If he can give it for the provinces it will suit me.


James Lorimer Ilsley: By provinces these are the figures for 1937-38:
Prince Edward Island	$ 970,000
Nova Scotia	 1,614,000
New Brunswick	 1,100,000
Quebec	 34,111,000
Ontario	 68,170,000
Manitoba	 3,008,000
Saskatchewan	 537,000
Alberta	 1,922,000
British Columbia	 8,819,000
Yukon	 26,000


Alfred Johnson Brooks: What year?


James Lorimer Ilsley: The fiscal year 1937-38.


Abraham Albert Heaps: I wish to say just a word in regard to income tax payments, because there have been made to-night some remarks that would better have been left unsaid. When we talk about paying income tax, there is only one method by which it can be paid, and that is by the national production; and if we have no production in Canada there will be no tax paid anywhere, either in the east or in the west. It is therefore unfair for any hon. member, no matter what part of the country he comes from, to make disparaging remarks about any section of Canada especially when the west is experiencing difficulties.


Karl Kenneth Homuth: So is the east.


Abraham Albert Heaps: The hon. member has never heard me or any other western member making disparaging remarks about the east.


Karl Kenneth Homuth: You are continually criticizing industry in the east.


Abraham Albert Heaps: As to criticizing industry-


Frederick George Sanderson: Order. The hon. member is out of order.


Abraham Albert Heaps: May I point out-


Frederick George Sanderson: Not when the hon. member is out of order.


Abraham Albert Heaps: You never gave me a chance to argue the point of order. I do not like dictatorial methods from the chair.


Frederick George Sanderson: Order. My decision has been given.


Abraham Albert Heaps: And I have a right to appeal your decision if I wish to.


Frederick George Sanderson: The hon. member has all the privileges and rights of any other member, but when he is out of order he must obey the ruling of the chair.


Abraham Albert Heaps: That is perfectly true, but I wish to say that in all my experience in this chamber I have never seen a chairman interfere as much in the debates as the chairman at the present time.


Frederick George Sanderson: Order. That is a reflection on the chair, and must be withdrawn without reservation.


Abraham Albert Heaps: I am sorry I cannot make that remark in the house, but I would certainly say it out-side the house.


Frederick George Sanderson: Order. The hon. member must conform to the rules.


Abraham Albert Heaps: Yes. I am quite prepared to conform to the rules-


Frederick George Sanderson: I must ask him to withdraw the reflection on the chair.


Abraham Albert Heaps: If there is a reflection on the chair I certainly withdraw it, and all I hope is that we shall have from the chair at least that same latitude in discussion that we have always had from previous chairmen in this house.


Frederick George Sanderson: That is still a reflection and must be withdrawn.


Abraham Albert Heaps: If it is a reflection I withdraw it entirely. I do not want to reflect on the chair in any manner whatever, but I say with all due respect that if we are to discuss income tax we have a right to discuss the incidence of income tax, how it is paid, who pays it, and whom the money comes from.


Frederick George Sanderson: But the hon. member was not doing that.


Abraham Albert Heaps: All I was doing was referring to some remarks made about the poverty of people who cannot pay income tax. I say it is unfair to reflect on any part of the country that is not in a position to make large payments in income tax.
It has been said that reflections have been made upon industrialists. I have never attempted to make reflections on persons who pay income tax. We may criticize the tariff here and there and that is perfectly legitimate, but that is different from making disparaging remarks about people in other parts of the country.
So far as income tax is concerned, the west never did pay much even in its brightest days in years gone by, because when the west had

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received an amount of money for its production, mostly from the farm, that money was transferred to the east to large corporations; and it was moneys paid to large corporations in the east who have extensive interests in the west that swelled unduly the amount of taxation shown as having been paid in Toronto or in the province of Ontario or in the province of Quebec. Take the city of Montreal in relation to income tax. There are elevators in that city, large terminals, and income tax is derived in large amounts from many of these concerns. They pay vast sums by way of income tax, 'but it is not on wheat and farm produce grown in and around Montreal and maintaining these elevators. Therefore, it is most unfair to say that one part of the country pays so much income tax and another part so much more. I suggest that we should try as far as possible to do away with these artificial divisions, because the economy of one part of Canada depends to a large extent upon the economy of the other; and the growth and development, with accompanying payments in - income tax, in eastern Canada reflect the growth and development of western Canada. Similarly, if the farming industry in western Canada is not prosperous, if prices are low, that immediately reflects itself in the business of eastern Canada and the amount of income tax paid by eastern corporations. When conditions are bad in the east, the situation is reflected in the west.
I am one of those who prefer to try to understand the problems of the east just as I would ask the people of eastern Canada to try to understand the problems of the west. All day I have listened to interjections about the bonus paid to the wheat producer -and in this connection I realize that I am out of order this time. I will not deal with the question of wheat because I try as far as possible to keep within the rules of the house, although sometimes one has to sail pretty close to the wind on questions of the sort we have before us at the moment. All I have to say to my hon. friends, whether they come from one part of the country or the other, is that western Canada is passing through a very difficult period, and instead of casting reflections upon the people there, and making derogatory statements about them, it would be better to show them some sympathy in these difficult times.


Alexander MacGillivray Young: I agree with what the hon.
member has just said. I want to cite two classes of business which I think all hon. members will agree are not local. First, there are two transportation systems in this country. Where are the high salaries paid 
in connection with those systems? At the head offices, and we all know what province those head offices are in. Will any hon. member say those salaries are earned merely in that particular province, that the men at the head of those corporations receive those high salaries because the railway is in one province? The business that pays those salaries is done in all parts of Canada, and those salaries are really earned in every province of Canada. I could say the same thing in regard to life insurance companies, banks and corporations of all kinds.


Karl Kenneth Homuth: Compare it with the
deficit of the railways.


Alexander MacGillivray Young: If my hon. friend would
keep quiet we should get along better. I could go through all these large companies and show that these large salaries paid in Quebec or Ontario are actually drawn from all parts of Canada and not only from the province where the income tax is actually paid. Is it not entirely unfair to suggest that because the taxes are paid in the east, other parts of Canada are not paying their proper share?
Moreover, if there is one tax that we can point our finger at and say that it is paid because those paying it have an income, it is the income tax. In the west we do not pay income taxes because unfortunately, owing to certain conditions which have been so often stated, we are not permitted to make the incomes that we should make. I shall soon be stopped on a point of order.
I have another thing to say to the government. I am opposed to this business of a double income tax. An arrangement should be arrived at between the federal government and the provinces whereby there would be one collection only of income tax throughout Canada. The next suggestion I have is that there should be a rebate to every part of Canada according to population, and then we shall get a just distribution of income tax, for the reason I explained a few moments ago. But it ill becomes any hon. member to try to make it appear that because income taxes are collected in certain places, the rest of this country is not paying its just proportion of the taxation of this country.
If we were having a free-for-all to-night, and if you, Mr. Chairman, were very generous, we could show definitely why it is that some parts of Canada, owing to certain laws and regulations which have prevailed over the last twenty-five years, have paid the major part of the income tax collections.

Supply-National Revenue-*Income Tax


John Charles Landeryou: The $69,000,000 paid in Ontario and the large amount paid in Quebec are in large part a result of the contributions made to those provinces by the other sections of Canada; there is no question about that. We know, for instance, that western Canada purchased millions of dollars worth of farm machinery at high prices, and is now paying tremendous rates of interest on the payments still due; in fact, ten per cent is being charged on the overdue notes.


Karl Kenneth Homuth: No one contradicted that.


John Charles Landeryou: Then why should the hon. member cast reflections-


Karl Kenneth Homuth: I did not cast any reflection.


John Charles Landeryou: -and suggest that the east is going to pay the wheat bonus?


Karl Kenneth Homuth: I rise to a point of order. I did nothing of the kind. What I said was that we are continually hearing of the tribute paid to industry in Ontario and Quebec, and I said that surely these tax figures show that industry is at least taking its fair share of the burden of the whole dominion.


John Charles Landeryou: But it is taking too great a share of the national income-


Karl Kenneth Homuth: And is giving it all back.


John Charles Landeryou: [DOT]-and it is coming out of western Canada. But the members of the Conservative party in Ontario are continually stressing that they are making great contributions to the west.


Robert James Manion: Whom does the hon. member mean by the members of the Conservative party in Ontario?


John Charles Landeryou: Those coming from Ontario. They are continually pointing to the fact that they are making such great contributions.


Karl Kenneth Homuth: No, but we object to your criticism.


Frederick George Sanderson: Order. Shall the item carry?


Alexander MacGillivray Young: I rise to another point of order. I think this committee should object to the hon. member for Waterloo South (Mr. Homuth) taking the seat of the leader of the opposition.


Robert James Manion: I gave it to him. It is not a very nice seat anyway. I shall not be here long; I shall be over there.


Karl Kenneth Homuth: We have that all fixed.


Douglas Gooderham Ross: There is no hon. member who has greater sympathy with the west than I have. We should all act as Canadians, not criticize one part of the country from another part but all try to do our share.
Now a word for the miners. Section 89 of the Income War Tax Act exempts new producing mines from profit tax for a limited period after they come into production. A number of these new mines have been developed and brought to production by older mining companies. Section 4, paragraph (n) of the Income War Tax Act amendment of 1936 provides for exemption from income tax of dividends paid to an incorporated company by a company incorporated in Canada, the profits of which have been taxed under this act. But no exemption is given to the company receiving dividends from another company where the profits of that other company have not been taxed. In other words, the older mining companies that take the risk of developing new mining projects do not get the advantage of the exemption from taxation given to the new companies during the period in which the new companies are free from taxation under section 89. It seems to me that a simple amendment to section 4, paragraph (n) would cure the matter, and I suggest that that paragraph be amended by inserting, after the word "act" in the third line thereof the following words: "or by a company to which section 89 of this act applies during the period of such application."


James Lorimer Ilsley: I am familiar with the subject matter of that suggestion, and I hope the hon. member has made it or will make it in writing to the Minister of Finance, who must take the responsibility for that type of legislation. It should be discussed prior to the presentation of the budget. Possibly the Minister of Finance will see his way clear to accept the suggestion. But this is not the occasion to discuss it.


Douglas Gooderham Ross: Well I shall do that, and perhaps the Minister of Finance will read Hansard.
I want to bring to the attention of the committee an interesting example of the taxation paid by an industry. I have altered these figures slightly, but they are all in proportion. Here is a company which pays $1,000,000 in wages in a year. In taxes it pays $175,000 a year. That is to say, for every $100 paid to the workers it pays $17.50 in taxes, or for every $25 a week paid in wages it pays $4.37 in taxes.


James Lorimer Ilsley: What taxes?
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Douglas Gooderham Ross: All taxes, excluding customs and excise taxes. The dominion taxes alone paid by this concern were $146,500. I put this on record to show the very high taxes that industry has to pay, and meet the competition of other countries.


James Lorimer Ilsley: The amount of its taxes might be on account of the fact that it was making very high profits.


Douglas Gooderham Ross: No, they are making very little profit. I have not the amount, but it is very low.


James Lorimer Ilsley: They must have made about a million dollars profit.


Karl Kenneth Homuth: That amount of taxes would include municipal taxes, and provincial taxes and everything.


Douglas Gooderham Ross: And sales tax.


Grote Stirling: Income tax has been collected in Canada, I think, for about twenty yearn, and in Great Britain for something like eighty or ninety years.


James Lorimer Ilsley: It has been continuously collected in Great Britain since 1842, but William Pitt the younger had an income tax in 1799.


Grote Stirling: Then it has been collected continuously in England for nearly one hundred years. We do not hear as much criticism to-day as we did ten or fifteen years ago, very likely from uninformed people, who objected to paying income tax unless they were perfectly certain that their neighbour, their friend and their acquaintance also paid it. Of course the tightening up process has gone on in this country until possibly there are very few evasions to-day. One of the reasons why the income tax in Great Britain has been accepted as it has, and why it is being accepted in an improved manner year after year in Canada, is because of its secrecy. To what extent does that secrecy exist. Is it absolute? Can anybody get information from the income tax branch of the minister's department for any purpose? Can provincial governments get any information, and can even the minister himself open the files of individuals and look through them?


James Lorimer Ilsley: Yes, the minister can, but I cannot remember doing it in the case of any individual. We do give some information to the provincial government.


Grote Stirling: Information of what kind?


James Lorimer Ilsley: The cases are limited to those covered by agreements made under statute. There is a provision in the income tax act

which enables us to enter into agreements with provinces for the collection of their income tax, and to give them certain information. To be absolutely accurate I would require to have the clauses of those agreements before me, but I can tell the hon. member the substance of the provision. It is that if the provincial government represents that in its opinion fraud exists in the returns made by those giving it information in respect of its laws, for example in connection with succession duties, then we agree to allow it access, at its request, to certain income tax returns, in order to enable it to enforce its laws.


Grote Stirling: They do not ask certain questions which are answered; they have access to the return of the individual?


James Lorimer Ilsley: If the attorney general, or in some instances the provincial secretary, or some responsible minister of the government of the province with which we have an agreement, will state that there are indications that there has been fraud, and will request access to the files, we allow them to be seen. Generally speaking that is the arrangement which exists. As I say, to put it quite accurately I should have the clauses before me.


Grote Stirling: For instance, can the provincial secretary of British Columbia ask for a copy of an individual return?


James Lorimer Ilsley: No, we have no agreement with British Columbia.


Grote Stirling: Then how is it done in practice? Is an accountant sent from Victoria to Ottawa?


James Lorimer Ilsley: I do not think we have given the government of British Columbia any information. We do not have any agreement with that province; we do not collect their income tax for them.


Grote Stirling: So the arrangement
exists only between certain provinces and the dominion government?


James Lorimer Ilsley: Yes, only those with which
we have agreements.


Robert James Manion: Some months ago, I cannot recall exactly but my recollection is that it was last summer, a question came up that, I believe, caused a good deal of irritation. It concerned the mining fraternity and was dealt with particularly by the Northern Miner, that mining journal of northern Ontario. I believe it had to do with section 37 (b)-


James Lorimer Ilsley: Section 32 (b).

Supply-National Revenue-Income Tax


Robert James Manion: I was familiar with it at
the time, and I remember that they had the impression that the mining fraternity, through legislation passed last year, were going to be unfairly treated in some of their company dealings. Has that matter been entirely straightened out to the satisfaction of both the government and the mining fraternity, because there was a good deal of complaint about it at the time and then the complaint ceased. I have been curious to learn what really happened, and I wonder if the minister would make a statement in this connection.


James Lorimer Ilsley: I think the matter has been straightened out to the satisfaction of both the mining interests and the government.


Robert James Manion: Would the minister explain briefly?
Mr. ILSLEA': Yes. The amendment passed at the end of last session preserved the principle that capital gains were not to be taxed, but the Northern Miner became alarmed. They thought we were introducing into our system the principle of taxation of capital gains. Capital gains are taxed in the United States; they are not taxed in Great Britain or in Canada. There are a great many legal decisions as to what constitutes capital gains and what constitutes profit or income. The amendment was designed to meet an abuse. We were not introducing any new practice; we were legalizing a practice that already existed, as to the legality of which some doubt had arisen. It was not confined to mining companies in terms; mines were not mentioned at all, but the main application was to companies engaged in prospecting.


Robert James Manion: Was it also in connection with recapitalization?


James Lorimer Ilsley: Yes, it did have some application there. Let us say a group decide to prospect for gold, with the intention not of mining the gold but of finding whether or not the gold is there and then selling their claim to a company that will develop and operate it. If it is clear under the law that their sole source of income is the increase in the value of the property they buy, they are regarded as primarily a trading company; they are not making their income in any other, way than selling at a high price what they acquire at a lower price. Under those conditions the gain is not regarded as, and is not legally, a capital gain. It is in fact the income of that syndicate, and is taxable. Then, instead of selling that property it may be possible for them to exchange it for shares and to divide the shares among themselves, or something of that kind.


Robert James Manion: They may get a million shares out of a three million share company.


James Lorimer Ilsley: Yes, and that is all the profit they make. The practice of the income tax division had been to value the shares they divided among themselves and say that was the profit they made. This section simply said that could be done, that the minister could put a value on shares that were divided in specie among shareholders or among the members of a group, and in that way the profit or income could be ascertained. But it was specifically provided in the section that it did not render taxable anything that was not legally income. It did not make a capital gain taxable. In some instances it might be a capital gain; the line is hard to draw. But it did not change that principle at all. It simply prevented what we regarded as a division in specie of property among shareholders in such a way that the gain could not be located or ascertained, that one could not find out what to tax.


Robert James Manion: Was any change made ultimately? Did the amendment that was put into force make any change, or is the law to-day exactly where it was before the amendment was passed by the house?


James Lorimer Ilsley: It may have been that before the amendment was passed the minister did not have the power to value shares. It certainly made that change; the minister now can value them. I do not know exactly what the effect was. If I remember correctly, I think the point was raised, and the question was whether there was any power to place a value on them?


Robert James Manion: At any rate it is settled at the present time to the satisfaction of both parties?


James Lorimer Ilsley: I would say so, as satisfactorily as anything ever is settled. There is no complaint about the section now, that I know of.


Robert James Manion: Because it is probably carried out exactly as it was before.


James Lorimer Ilsley: That is right.


Douglas Gooderham Ross: Is it not mostly a matter of administration? There has been no change made in the amendment, and I would understand that it is only a matter of departmental ruling and administration. There has been no change in that.


James Lorimer Ilsley: No.


Douglas Gooderham Ross: I have in mind
one man who had actually lost some $50,000 or $60,000, but who received an assessment
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Supply-National Revenue-Income Tax
notice for $3,000. Probably the minister knows about the case. It seems to me that it is a matter of administration and departmental ruling.


James Lorimer Ilsley: No; the whole trouble arose over a misunderstanding of the amendment. It was feared by a great many persons that we were trying to assess capital gains. When it became apparent that we were not doing anything but what we had been doing, and that we were putting the law in such a position that there was no question as to our right to do it, that we had been taxing income in the past and were continuing to tax it, but so as to prevent distribution of shares in this way without a value being put upon them, or with a nominal value put upon them, the minister was authorized to put a fair value upon them, so that the profit could be definitely ascertained, and the taxpayer assessed. It has been carried out fairly, as it was before, and the people have ceased to be afraid.


William Kemble Esling: The minister has stated
that the remittance tax comes under this item. I have spoken about that tax on one or two occasions. As hon. members know, by that remittance tax five per cent is to be paid on all remittances from dividends, royalties, interest, rentals or any other investment. But under the 1936 amendment to the act, for some reason remittance taxes on films were reduced from five per cent to two per cent.
I suppose the minister has good reasons, of which we have not been informed, for that change. But the fact remains that there seems to be a general inclination towards gratuities to the picture producing companies in the United States. One excuse offered is that the films, after having had their run in Canada, are practically useless. Another reason given is that the remittances for the rentals of these films are not profits, but are really portions of the cost of the production in the United States.
I should like hon. members to realize that the saving by reason of this exemption applies only to the large picture producers in the United States. Nobody in Canada is benefited. I take the report of the Minister of Trade and Commerce for 1937, and there I find the rentals for those films. It must be remembered that the films are not brought into Canada as positives, to any great extent. A negative comes in and from that negative several prints are made in the processing plant at Montreal. The total tax paid to the government by reason of bringing in the negatives is about $90,000. But according to the Department of
rMr. Ilsley.]
Trade and Commerce, during the year 1937 the films have yielded to the film agency about $8,700,000. From that sum there was deducted for wages payable to the employees of some sixty-three film agencies in Canada the sum of $1,062,900. Then there was reserved from the $8,700,000 about thirty-five per cent to cover expenses and profits of the local film agencies. The fact remains that each year there is remitted between $4,000,000 and $5,000,000 to the picture producers of other countries.
I would ask the minister if he does not think in these strenuous days, when it is so difficult to balance the budget, and there are so many demands upon the Minister of Finance, he might give serious thought to repealing that section of the act, because it means a loss of about $150,000 a year to the taxpayers of Canada. If there is any good reason under the sun for such generosity or liberality to the picture producers in the United States the public would be interested to know about it. As I have said on previous occasions, no matter how small the investment in Canada of a resident of the United States may be, he suffers a loss of five per cent.
The claim is made that these remittances are really not dividends but they are a portion of the cost of production of the picture. Well, if a person makes an investment in Canada he certainly is contributing to the cost of production of a house, or whatever the investment may be, until he has recovered his investment. I think there is ground for considerable thought on the part of the minister and the government in reconsidering this exemption on films because it benefits only the picture producers in the United States.


James Lorimer Ilsley: I shall bring the remarks
of my hon. friend to the attention of the Minister of Finance (Mr. Dunning). I am very much interested in what he has said. He has spoken to me about the matter before, and he raised the point last year. It is not something that concerns me as Minister of National Revenue; it is a matter for the attention of the Minister of Finance. I shall be glad to discuss the matter with him and see that full consideration is given to the suggestion of the hon. gentleman.


Major James William Coldwell: Could the minister
give the total amount paid to his department last year by the gold mining interests of this country?


James Lorimer Ilsley: That is not segregated, but
it could be obtained.


Major James William Coldwell: I was trying to obtain
some idea of the revenue received from the

Supply-National Revenue-Income Tax
mining of precious metals in view of the services that we render. Perhaps at some other time I could ask this question.


Mr. MAYHEW:: I am not complaining
about income tax because I think it is the fairest tax we have in Canada, although I believe we think more of what we pay than of what we have left. If Ontario paid
S69.000.000 she must have $200,000,000 left, which is not too bad. Could the minister tell when it is possible for a business to obtain a clearance in connection with income tax? In other words, if you are buying or selling a business how far must you go back before you can get a clearance?


James Lorimer Ilsley: The matter can be settled
within a reasonable time. There is no fixed time, but if a company desires to settle up with the income tax division it can do so and the matter is not reopened unless fraud is discovered. There is no clearance possible that fraud will not reopen, but apart from that I am informed there is no trouble.


Robert Wellington Mayhew: Could one obtain a
clearance for 1937 which could not be opened up unless fraud were discovered?


James Lorimer Ilsley: If a company is being wound up-


Robert Wellington Mayhew: Not where a company is being wound up, but where an estate has to be settled. When would one know if one was going to be clear? I understand that to-day the department is carrying on thousands of investigations which go back twenty or thirty years. Anyone who has purchased a business in the meantime may be liable to pay income tax.


James Lorimer Ilsley: I suggest that the hon. member discuss the matter with the commissioner of income tax. It is a little difficult for me to discuss it without knowing the case to which he refers.


Henry Herbert Stevens: Could we hear a little of the interesting conversation that is going on over there? Things have been rather tiring and we should like to hear the interesting conversation on this private transaction.


James Lorimer Ilsley: I am sorry. I was not saying much except that it was pretty hard to give an answer to the hon. gentleman unless I knew the particular case.


Henry Herbert Stevens: It was an individual case, was it not, not a question of principle?


Robert Wellington Mayhew: It is not an individual case when thousands of investigations are going on at the present time throughout Canada.


Henry Herbert Stevens: It sounded like it.
Mr. O'NEILL: I believe the income tax is one of the fairest taxes that we have in Canada because it is collected from people who are best able to pay. In my opinion one of the great troubles is that too much of the wealth is in too few hands. This schedule of income taxes goes up one per cent per $1,000 until 18 per cent is reached, and then it refers one to chapter 41 for the taxes on the higher incomes. If the schedule is correct that far, why should there be any change? If it is not correct in the lower brackets, why not change the income tax set-up and have it right from the start? The increase in taxation should continue right from the start. In other words, when you reach a certain income there should be 100 per cent tax.


Frederick George Sanderson: Does the item carry?
Mr. O'NEILL: Is that an unreasonable or unfair question?


James Lorimer Ilsley: I did not know the hon. gentleman was asking a question; I thought he was making a suggestion. I can tell him that there are persons in Canada who, if they were situated in a certain way, would have to pay the whole of their income in taxes.
Mr. O'NEILL: What amount of income is that?


James Lorimer Ilsley: Is that not a question which should be asked privately?
Mr. O'NEILL: I am sorry if I asked an unfair question or a question which should not be asked here. It seems to me that if this schedule is right at the start there is no reason why it should not continue right along from there. If the schedule is wrong at the start, it should be corrected. There should be no difference between the low paid man and the high paid man.


Major James William Coldwell: Is any information available as to the income taxes paid by any group of taxpayers according to the size of their incomes?


James Lorimer Ilsley: Will the hon. gentleman allow that question to stand?
Item stands.
Progress reported.



REPORT RESPECTING ORGANIZATION AND RECLASSIFICATION OF PERMANENT STAFF

[Stage Direction]
The house having reverted to the order for motions.
Ernest Lapointe: Mr. Speaker, I move, seconded by the Minister of National Revenue (Mr. COMMONS
Carriage by Air-Warsaw Convention
Ilsley), that the report of the civil service commission in respect of the organization and reclassification of the permanent staff of the House of Commons, together with resolution of the commissioners of internal economy, laid on the table of the house on March 20, 1939, be approved. [DOT] I am told it is important that this should go through to-day.


Henry Herbert Stevens: What is the significance of this report? We ought to know what we are voting on.


Ernest Lapointe: There is no increase. As a matter of fact, there is a decrease of a little more than $2,000 over last year by reason of the fact that one employee has not been replaced and another one has been retired. This is just for the purpose of adjusting the salaries and paying the proper compensation for the same amount of work. It was approved by the commissioners of internal economy, and it has to go through the house.


[Stage Direction]
Motion agreed to.
At eleven o'clock the house adjourned, without question put, pursuant to standing order.
Monday, March 27, 1939