1940-07-23

[Stage Direction]
Mr. VINCENT DUPUIS (Chambly-Rou-ville) moved that the first report of the joint committee of both houses on the printing of parliament be concurred in.
Hon. R. B. HANSON (Leader of the Opposition) :: Mr. Speaker, I confess that as yet I have not been able to go through this list of documents. I am going to ask the hon. member to allow this motion to stand until to-morrow, and I promise that then we will be able to indicate just what documents we
TMr. lisley.]
think should be printed. I should be greatly obliged if the hon. member would be good enough to do that, and I shall not delay it beyond that time.
Motion stands.



RAILWAYS AND SHIPPING-MOTION FOB CONCURRENCE IN THIRD REPORT

[Stage Direction]
Mr. J. P. HOWDEN (St. Boniface) presented the third report of the standing committee on railways and shipping owned, operated and controlled by the government, and moved that the report be concurred in.
Richard Burpee Hanson: This
motion should not be rushed through to-day. Under the rules should we not have some notice? We have not seen the report; we have heard it now for the first time. The motion is out of order.


Mr. MACKENZIE KING:: To-morrow.
Motion stands.



NATIONAL WAR SERVICES


Hon. J. G. GARDINER (Minister of National War Services):: Mr. Speaker, I desire to lay on the table of the house P.C. 3333, authorized under the national war services legislation.


Richard Burpee Hanson: Relating
to what?


James Garfield Gardiner: This order in council
transfers the public information bureau to the new department.



MOBILIZATION


William Lyon Mackenzie King: Mr. Speaker, yesterday the leader of the opposition (Mr. Hanson) asked me about regulations to be issued under the National Resources Mobilization Act, with reference to the terms under which men are to be drafted for service in the defence of Canada.
These regulations will be issued in part by the Minister of National War Services and in part by the Department of National Defence. They have necessitated conferences between the ministers and officials of the two departments, and I can assure my hon. friend that the regulations will be in shape to be tabled before prorogation.


Richard Burpee Hanson: Thank you.

Munitions and Supply-Plants



MUNITIONS AND SUPPLY


[Stage Direction]
On the orders of the day:
Richard Burpee Hanson: I desire to ask a question of the Minister of Munitions and Supply (Mr. Howe).
The press of Canada yesterday carried a report of an announcement made on Monday last by the minister of munitions of the immediate construction of twelve munitions plants at a total cost of approximately $19,000,000. I make no observation with respect to the place of announcement. I think it is the sort of thing which ought to be done in parliament. I have consistently maintained that such announcements should first be made here.
The report indicates that the largest of these plants will be located "somewhere in western Canada", where existing facilities are being extended to produce a large tonnage of ammonia and ammonium nitrate. It is further indicated that some of these expenditures are for the account of the British government. Nowhere in the statement is it indicated that any one of these plants will be located in the maritime provinces.
I hope I am not sectional in my outlook. I have tried to avoid anything of the sort, but the people of the maxitimes, and in particular the people of my own province, are beginning to think and to give expression to the view that the government in establishing new projects of the kind indicated is entirely overlooking the maritime provinces.
May I ask the minister if any of the proposed new plants are to be established in the maritimes, and if so, which and at what points? As a substantial portion of the products of these new plants must necessarily be for export to the United Kingdom, it would appear to me to be of advantage, especially with respect to transportation, if some of these plants were to be established near tidewater in these Atlantic coast provinces. If some consideration is not given to this point of view, there will be continued dissatisfaction down there when unemployment is acute, especially in the city of Saint John.


Hon. C. D. HOWE (Minister of Munitions and Supply):: Mr. Speaker, I would first beg to differ from my hon. friend the leader of the opposition (Mr. Hanson) as to the place of making announcements from the Department of Munitions and Supply. The announcement in question was made by the publicity staff of the department. I did not see it prior to its being made. It was made in the ordinary course of routine.
We have undertaken in the Department of Munitions and Supply to conduct the purchasing of war supplies free from political pressure; and that means pressure from any group or any province, just as much as it means pressure from any particular manufacturer to obtain preference. Due regard has been had to distributing the work as well as possible across Canada. Whether or not that is possible depends upon the location of raw materials involved, transportation costs to delivery points, and available supplies of labour.
The item to which the hon. member has referred mentions the location of a plant in western Canada. This plant was located where it was purely for the reason that in western Canada we have natural gas, a wasting asset, which to a great extent may be used to replace coke from the United States in the production of the particular type of product ;o be developed by this plant.
Locations of all plants have been determined only on the basis of economy. Part of the production programme-not necessarily the particular programme to which the hon. gentleman has referred-is being located in the maritime provinces. Again it is being located there for reasons which would appeal from a business rather than a sectional point of view.
I think the province of New Brunswick is working very close to capacity. We are trying to step up production of some industries in that province, and we should be very glad indeed if we could step those industries up to the amount of material we require. We are investigating the possibility of other types of production there. I would point out to the leader of the opposition that we are just as anxious as he is to use all the industrial facilities of New Brunswick, but so far we have not seen our way clear to locate a plant at any point where the cost of production would not be economically sound from the point of view of all parts of Canada.


Mr. COLD WELL:: Are these plants to be operated under public ownership and control, or is the work to be let out on a cost plus basis?


Clarence Decatur Howe: The policy has been for the federal government to retain ownership where a new plant is required. Where the operation of a plant requires a degree of technical skill and the operation is such that it can be conducted under government auspices, it is done in that way; but on certain occasions we have entered into a management contract with a firm specializing in the particular type of production, and the plant has been so operated.
Elections-Soldier Vote


FARMERS' CREDITORS
[Stage Direction]
On the orders of the day:
Mr. R. T. GRAHAM (Swift Current):: Mr. Speaker, would the Minister of Finance (Mr. Ilsley) state whether the government has taken any steps to appeal the decision of the court of appeal of the province of Saskatchewan in the Berg case, which dealt with the authority of the board of review under the Farmers' Creditors Arrangement Act?


Hon. J. L. ILSLEY (Minister of Finance):: I am informed that an appeal has been taken from that decision to the Supreme Court of Canada.


DOMINION ELECTIONS
[Stage Direction]
On the orders of the day:
Hon. C. G. POWER (Minister of National Defence for Air):: Mr. Speaker, yesterday on the orders of the day the leader of the opposition (Mr. Hanson) asked what provisions were being made to extend the franchise to soldiers, now under active service conditions, who are electors of the constituencies in which by-elections are about to be held.
Two questions are involved, the first being the right of a member of the Canadian active service force or the armed forces of the dominion to vote. There is no question whatsoever that he has a right to vote. This will be seen to be covered by section 16, subparagraph 4, of the Dominion Elections Act, which reads:
Any person on active service with the naval, military or air forces of Canada shall be deemed to continue to ordinarily reside in the polling division in which he was ordinarily resident at the time of enrolment for such active service, unless he has thereafter established some other ordinary residence in Canada.
In view of this provision any person now on active service, who was ordinarily resident at the time of his enrolment and is still ordinarily resident in an electoral district in which a by-election, has been ordered, is entitled to have his name entered on the list of electors and to vote at such by-election.
The real point raised by my hon. friend was whether it was possible or practicable to take any steps to provide facilities for this soldier to poll his vote if he 'has a right to vote. On consultation with the office of the chief electoral officer I found that it was impossible

in practice and utterly impracticable to endeavour to provide a soldier in Greenland, Iceland, the old country or at some point across Canada with facilities to exercise his right to the franchise. Hon. members of the house and you, Mr. Speaker, know that the regulations drawn up to provide for the taking of the vote of soldiers in Canada and overseas were somewhat complicated. The work required the services of a fairly large personnel and the attention of members of the naval, military and air forces. I suggest to my hon. friend and to hon. members that the men in our military services are occupied with other things at the present. time and it would be extremely difficult to take them away from their work in, order to set up the machinery necessary to provide for the taking of what after all would be a small number of votes when compared to the large number of men in the expeditionary forces, at home and abroad.


Richard Burpee Hanson: That answer is hardly good enough.


Charles Gavan Power: Too bad.


Richard Burpee Hanson: The minister as yet has not given a real reason why this vote should not be taken. The gist of the matter is that the government are so anxious to get on with these by-elections that they are not willing to extend the time between the issuing of the writs and the actual polling, nor are they willing to expend the money necessary to get these votes. This could be done if there was the will to do it.


Charles Gavan Power: The answer I make to my hon. friend is that if he wants to play politics, he can do it. Hon. members know that the military regulations governing the taking of the last military vote were the best ever enacted in Canada.


Richard Burpee Hanson: I never denied that.


Charles Gavan Power: They gave the right to a free and untrammelled exercise of the franchise by every soldier. Those who prepared those regulations have come to the conclusion that it would be utterly impracticable to ask the officers of our armed forces in the West Indies, in Iceland, in the United Kingdom and throughout Canada to set up polling booths in each unit at all points where Canadian soldiers, sailors or airmen are now stationed or operating, on the chance there would be someone there entitled to vote at Saskatoon or Kingston or the two other constituencies in which by-elections are to be held.

Special War Revenue Act


William Lyon Mackenzie King: May I just say a word to my hon. friend about the government's alleged anxiety to have these by-elections over speedily. The criticism which has been directed against the government from many sources has been that we have delayed the bringing on of the by-elections, the vacancies having occurred in most of the constituencies a couple of months ago. Further, if we had been anxious to hasten the by-elections in any way, we could have brought in a special amendment to cover the holding of a byelection in war time.


DAIRYING INDUSTRY
[Stage Direction]
Hon. J. G. GARDINER (Minister of Agriculture) moved the third reading of Bill No. 89, to amend the Cheese and Cheese Factory Improvement Act.
Motion agreed to and bill read the third time and passed.

[Stage Direction]
Hon. J. L. ILSLEY (Minister of Finance) moved the second reading of Bill 103, to 'amend the Special War Revenue Act.
Motion agreed to, bill read the second time, and the house went into committee thereon, Mr. Vien in the chair.
On section 1-Taxes on matches.
Richard Burpee Hanson: What
revenue is derived to-day from this tax, and what increase is expected?


James Lorimer Ilsley: The revenue for the fiscal year 1939-40 was $2,040,726.55. It is expected that the increased tax will provide an additional $500,000 revenue in a full year.


[Stage Direction]
Section agreed to.
Section 2 agreed to.
On section 3-Excise tax on cigarette paper tubes made in or imported into Canada.
Richard Burpee Hanson: The increase here is very large. What is the revenue now, and what increased revenue is expected?


James Lorimer Ilsley: The revenue for 1939-40 on paper tubes was $1,877,985.27. It is expected that the revenue will be increased by this change to about $4,500,000.


[Stage Direction]
Section agreed to.
Sections 4 and 5 agreed to.
On section 6-By whom and when tax is payable.
Mr. HANSON (York-Sunbury) According to the press, the minister has had written representations made to him with respect to the tax on the higher priced cars. What is the reaction of the department?
James Lorimer Ilsley: The automobile dealers,
through their associations, have made two sets of representations. They have really made more than that, but their representations have pretty well crystallized into two sets. One class of representations is that there should be no tax on the cars in dealers' hands.


Mr. MacNICOL:: Or in transit.


James Lorimer Ilsley: That is a minor thing.


John Ritchie MacNicol: They seemed to consider it a big thing yesterday.


James Lorimer Ilsley: The representations that I
have received have been, generally speaking, under the heading that there should be no tax on cars in dealers' hands. This section is very much more lenient towards the dealers in any but the lowest priced cars than the original budget provision, which imposed high rates on the cars in the dealers' hands. Consideration was given to the question whether there should be some amelioration of these burdens, and it was decided that this was as far as the government ought to go, and that it was substantially just that there should be a flat rate of ten per cent on all cars whether high or low priced, in the dealers' hands.
The reason for making a concession to dealers in the higher priced cars is that undoubtedly the very high taxes imposed on the higher priced cars provided for in the budget will hurt the sale of these cars very much. Moreover, in the future the taxes will reduce the business done by the dealers in high priced cars to a very low ebb, and in some cases practically to the vanishing point. It was therefore thought that the dealers in the higher priced cars should be given this degree of consideration, although the budget by imposing these taxes really in one sense adds very considerably to the value of the high priced cars in the dealers' hands.


Richard Burpee Hanson: In a
very limited sense, I suggest.


James Lorimer Ilsley: Not so very limited. There will be a market for high priced cars.


Richard Burpee Hanson: A very
narrow one.


James Lorimer Ilsley: It was thought in view of
the considerations I have indicated that the tax should be reduced to a flat ten per cent.
Special War Revenue Act

The other class of representations is that the highest rates are entirely too high; that we should not move at all into these high rates of taxation such as 80 per cent of the excess over $1,200, and that we should be more considerate of the automobile business. To these our answer has been and must be that while this is serious taxation and will have a serious effect upon the dealers in high priced cars, the emergency is a grave emergency, and we are being asked to place our taxes on luxuries, particularly imported luxuries, for the purpose of conserving exchange. Members from all parts of the house have urged us to do that instead of imposing some of the taxation that we have imposed. At the present time there cannot be very much excuse for encouraging the use of high-priced cars, particularly imported cars, by the people of this country.


Richard Burpee Hanson: I agree
with a good deal of what the minister has said, but there is a law of diminishing returns and I am afraid that he may not get any revenue at all. The market for high priced cars even in good times is a narrow one, and this new taxation will wipe it out altogether, I should think, especially in the smaller communities. The minister I presume has given consideration to the effect this taxation will have on the fortunes of a substantial element of our community. It is going to put a lot of them out of business. They are even now reduced to the status of second-hand dealers. That is the effect of this legislation.


Mr. GREEN:: The minister mentioned
something about cars in transit. Apparently recommendations have, been made to him along that line also. I know that in British Columbia it is a serious matter for dealers who have cars on order and in transit, and I would suggest that they also be taxed at the rate of ten per cent where it can be shown that the cars were actually in transit at the time the budget provision was brought down. The more distant parts of the country, those furthest removed from manufacturing plants, are entitled to receive that consideration.


James Lorimer Ilsley: I do not like to reopen this whole question if it is not necessary. A great deal of time was devoted to it when we were in committee of ways and means. I went over the law that applies and dealt with representations such as these just as fully as I was able to do at that time, and I have not anything to add now to what I said then.


Richard Burpee Hanson: But there is a principle involved.
[Mr. Ilsley.J


Howard Charles Green: I think some of the dealers in British Columbia did not understand the situation at that time because many representations have come in since. I do not think it is fair that the tax should be levied at the higher rate in cases where men have cars in transit. They should be given the advantage of the ten per cent tax.


Richard Burpee Hanson: The principle involved is this. The minister has given consideration to the dealers in high priced cars, but the dealer who for geographical reasons was not able to get delivery of his car, even a car in the lower priced brackets, gets no consideration. That is discrimination, absolutely.


James Lorimer Ilsley: The dealer in the lower priced cars pays only ten per cent anyway.


Richard Burpee Hanson: I know,
but he did not get delivery of this car. Perhaps I am not making my point clear, but there it is.


John Ritchie MacNicol: When I referred a moment ago to cars in transit I had in mind the item in this morning's paper that it had been represented to the minister yesterday or to someone delegated by him, that consideration should be given to cars in transit. According to the newspapers the dealers stated that they considered cars in transit as being on their showroom floor.


James Lorimer Ilsley: I went very fully into that question, Mr. Chairman, in committee of ways and means, and I am sorry if I did not make it clear. I know it is pretty intricate. But cars which are sold f.o.b. shipping point are in the same position when in transit as if they were on the showroom floor; when sold with documents attached they are deemed to be in the same position as if they were on the factory floor. I cannot make it any clearer.


[Stage Direction]
Section agreed to.
Section 7 agreed to.
On section 8-Remission of tax when goods are imported by sugar -refiners.
Mr. HARRIS (Danforth):: This follows the principle laid down in section 5. How much sugar is affected, or, what is the value of the sugar affected; and what is the difference between the delivered price by such refinery and the selling price.


James Lorimer Ilsley: This section is not changed at all, except that delivery to the purchaser is taken as the moment when he takes the goods-

Special War Revenue Act


Richard Burpee Hanson: That is
right. It is on page 4.


James Lorimer Ilsley: -instead of when the sale is made. That is the general principle in the act ,anyway, but there was this section in which the idea appeared of time of sale, rather than the delivery to the purchaser, being the important time. This is being changed to bring it into harmony with the general scheme of the act.


Richard Burpee Hanson: The effect of this is that the refiner does not have to pay until he sells?


James Lorimer Ilsley: That is right.


Richard Burpee Hanson: Now he is paying on the sale, and he is adding it to the invoice price to the confectioner or whoever it may be. Heretofore he has had to pay when it came in or when he took it out of bond; is not that right? The tax shall not be payable when the goods are-
-imported or bought in bond in Canada by recognized sugar refiners for further manufacture.
I suppose the refiners are the only people to whom that would refer.


James Lorimer Ilsley: Yes.


Richard Burpee Hanson: Has that been done at the request of the refiners, or is it a departmental request?


James Lorimer Ilsley: It is a departmental request.


Richard Burpee Hanson: It is only for the purpose of bringing the method in line with the other sections?


James Lorimer Ilsley: Yes.


Richard Burpee Hanson: Very good. Will there be any difference as to the amount of revenue received?


James Lorimer Ilsley: No.


Richard Burpee Hanson: Nothing
more than that is implied in the section?


James Lorimer Ilsley: That is all.


Joseph Henry Harris: Were not representations made to the department with regard to this item?


James Lorimer Ilsley: No.


Joseph Henry Harris: What is the
annual value of the sugar to which this item relates?


James Lorimer Ilsley: The hon. gentleman wants the total sugar tax? I have it here.


Richard Burpee Hanson: That would give us approximately the number of pounds.
95826-116J


James Lorimer Ilsley: The total sugar tax for
1939-40 was 812,084,484.92.


Richard Burpee Hanson: The consumption is going up; is that right?


James Lorimer Ilsley: Yes. In the previous year it was 810,797,453.42.


Richard Burpee Hanson: Would it be permissible at this point to ask the minister anything about sugar prices in Canada? We have a sugar controller in the person of Mr. S. R. Noble of Montreal, who is an old friend of mine from Fredericton. He is in control of the sugar situation, and arrangements have been made, with the British government, I believe, for an adequate supply of sugar-I refer now not to beet but to cane sugar-for Canada. The price to the importing refiners has been fixed by the British government, I assume after negotiations through the sugar controller with the refineries. I was told recently that on the last occasion upon which the price was fixed the refiners were allowed an extra profit of 35 cents per hundred pounds, which has been passed along to the consumer and which is in addition to the profits they previously had. I should like to know if there is any truth in that report. I do not affirm it, allege it, or deny it. I want information on the subject. If it is true, I should like to know what the justification has been.


James Lorimer Ilsley: I have no information for the hon. gentleman.


Richard Burpee Hanson: Where
can I get the information?


James Lorimer Ilsley: It can be obtained from
the war-time prices and trade board.


Richard Burpee Hanson: So far as I am concerned they are practically nonexistent. I have to get my information here. At what stage of the estimates can I get it?


James Lorimer Ilsley: On the estimates of the
Minister of Labour.


Richard Burpee Hanson: All right.


Mr. COLDWELL:: I want to support the leader of the opposition in asking for this information. I have been doing a little study on the sugar situation; and I submit that at the appropriate time information should be brought to this house as to why, having regard to the stocks of sugar at present in the country and the prices which are fixed by the British board, the price of sugar went up 35 cents a hundred wholesale and one cent a pound in the local stores early in May. I have been waiting for a suitable opportunity
Special War Revenue Act

to raise this whole question, and I support the leader of the opposition in asking that when the time comes the minister in charge be prepared to answer some of these questions.


The CHAIRMAN:: I want to point out to hon. gentlemen that there is no relation between the questions he has put and the clause under study. I did not wish to prevent the questions being put by way of notice to the minister.


Richard Burpee Hanson: There is a certain relevancy; I do not say how near or how remote it is. This section changes the method of the tax. Surely under that one can discuss the price of sugar.


Joseph Henry Harris: Practically all this duty, referring to the remission of tax when goods are imported by sugar refiners, is specific, I assume. Is there any ad valorem tax?


James Lorimer Ilsley: No.


Joseph Henry Harris: It is all specific?


Richard Burpee Hanson: The tax is one cent a pound.


Joseph Henry Harris: There is no ad valorem tax on sugar from any country; that is quite clear?


James Lorimer Ilsley: There is a specific customs tariff on sugar.


Richard Burpee Hanson: What is the rate?


James Lorimer Ilsley: There is a big range, depending on the polariscopic test.


Joseph Henry Harris: Is there any war exchange tax on any of the imports; and if so, how much is it?


James Lorimer Ilsley: The war exchange tax will apply to imported sugar.


Joseph Henry Harris: Not to sugar imported from British countries?


James Lorimer Ilsley: No.


Joseph Henry Harris: What proportion of the imports is from British countries and what proportion is subject to the tax?


James Lorimer Ilsley: Nearly all the raw sugar *comes in from British countries, mainly from the British West Indies; but there have been small imports from San Domingo.


Richard Burpee Hanson: But you do not expect any revenue from that, under this heading? The ten per cent will shut out, surely, any San Domingo sugar?


James Lorimer Ilsley: Oh, I don't know.
[Mr. Coldwell.l


Joseph Henry Harris: There will be no remission of the war exchange tax?


James Lorimer Ilsley: No.


[Stage Direction]
Section agreed to.
On section 9

"Automobile dealer" defined.
Richard Burpee Hanson: What is that? This is new. It is not in the resolution. One robin makes a summer-is that the idea?


James Lorimer Ilsley: The section serves two
purposes: (a) it is explanatory, in that it defines a distributor or a wholesaler as an automobile dealer; and (b) it imposes a tax on manufacturers who import certain models and on other manufacturers who import all models for sale to their dealer organization. But for this section, cars in the hands of such persons on June 25 would not be taxed under the new rates. It relates to imported cars.


Richard Burpee Hanson: It is
definite here. It says any automobile.


[Stage Direction]
Section agreed to.
On section 10-Tax on furs dressed or dyed.
Mr. BROOKS:: It is unfortunate that there should be such an increase in the tax on furs. The industry has been very hard hit in the last few years, and particularly since the outbreak of war. No doubt furs are to a great extent a luxury, but all over Canada there have been quite extensive fur farms, fox farms and others, and an increase of from 8 to 12 per cent will have a further detrimental effect on this important industry. Frankly, I think that instead of being further handicapped the industry should be encouraged. In the maritime provinces there are a great many fox farms but they are being gradually driven out of business. This is another step in that direction. Do furs coming in from the United States still enter free and are our furs dutiable when exported to that country?


James Lorimer Ilsley: I shall have to get that information. It was not the purpose of this provision to tax the production of furs; it is simply to equalize the taxation on fur coats with the taxation on cloth coats.


Richard Burpee Hanson: That may be a proper thing to do, but I can bear out the hon. member for Royal. The fur business in eastern Canada, I know, is gradually disappearing. I know that, because I have been a stockholder in some of these ranches and in one ranch we got back five per cent of the capital invested when we liquidated. That is a small return, especially when I cannot charge up the 95 per cent to my income tax

Special War Revenue Act
inasmuch as it is a loss of capital. The increase in the tax from eight to twelve per cent will have a detrimental effect on the fur ranches in the maritimes. The prices now are almost below the cost of production having regard to the mortality, which is very great especially in the season when the animals are being born. Has the minister had any representations from the association? The industry is being gradually put out of business, and it is an important one in Prince Edward Island and in certain parts of New Brunswick. Most ranches are disappearing because of the low price, and this is just another nail in their coffin.


James Lorimer Ilsley: There have been no representations.


[Stage Direction]
Section agreed to.
On section 11-War exchange tax.
Mr. FAIR:: Has the minister considered the representations made when this matter was discussed a few days ago in connection with the exemption of agricultural implements?


James Lorimer Ilsley: Naturally I have taken the matter into consideration. I listened carefully to a great number of speeches on it. The grave difficulty, however, about making a single exception to the tax is that then one has to make a large number of exceptions. The only reason this ten per cent war exchange tax is borne without great protest from a large number of persons and interests in various parts of Canada is its universality. I have received representations and delegations asking that exceptions be made for the particular goods in which they are interested and the only answer I can give is that it is universal; there are no commercial exceptions whatever. The three or four exceptions here are entirely non-commercial, and if we started to make exceptions in favour of any particular commodity which has a commercial or business or industrial importance, it would be impossible to withstand requests that other persons be treated on the same footing, and one would be led to a breakdown of the tax on quite a wide scale.
I will not attempt to answer the arguments that have been advanced in this house during the course of two days from all parties, but this tax is not discriminatory at all, so far as agricultural implements are concerned. It applies to agricultural implements imported by people in every part of Canada and the importers of such implements are treated like the importers of everything else. It has been represented that important raw materials which must come from the United States should clearly, by all the rules of taxation,
be exempted from the application of the tax. If we exempted agricultural implements from the ten per cent tax it would be necessary to make an exception of fertilizer, which is used in such quantities in eastern Canada and on which so many farmers depend-and they depend upon imported fertilizers to a great extent. I am sure I do not know where we should have to stop. If we depart from the principle that ithis is a universal tax without commercial exception we shall find ourselves in an impossible situation in this house, because member after member will say, "If you do it for that one you must do it for us".


Richard Burpee Hanson: But there is a great exception to the principle of universality. The exception is contained in 2(a) of 88A, which refers to entries under the British preferential tariff or under trade agreements between Canada and other British countries. We are going to allow vegetable oils to come in from some of the British crown colonies without any taxation. That of course is a glaring illustration of the exception, to the detriment of Canadian agriculture and the Canadian cow, but it can be remedied if the government will enter into negotiations with the British government. If the government would represent to the British authorities that they need revenue and that there are 260,000,000 pounds of this commodity coming into Canada free, and if there was a favourable report from the tariff board on the question, recommending a change, then the government would have a fine argument to put up to the British government to change that item in the United Kingdom agreement. I have read the agreement since speaking on this subject in the house on a recent occasion, and it visualizes just this sort of thing. When the trade agreement was first entered into this was an unimportant item. To-day the importations have increased to huge proportions, far beyond what anyone had imagined. If it had ever been contemplated that we should be importing such quantities of vegetable oils into Canada, an agricultural, a butter-producing country, we should never have agreed to it. I am sure those representing agricultural constituencies will agree with me. The government ought to do something about it. It is a crying evil that we should not at least get some revenue out of it, to put it on the lowest possible plane. The government has been derelict in its duty to the Canadian producer if it has not been seized of the importance of this matter; though I am sure they have been seized of it. Any department that would send this reference to the Department of Finance, ask for an investigation and then deliberately discard the results of that
Special War Revenue Act

investigation, putting up the plea that it is against the iprovisions of the United Kingdom agreement, certainly is not looking after our primary producers. I am still a believer in Canada first.


James Lorimer Ilsley: This is not the time for that, as against Great Britain.


Richard Burpee Hanson: It is not against Great Britain; it is against one of the crown colonies which was in a bad financial situation. I know the argument that was advanced by the British authorities; they wanted to help out same of the crown colonies. They did not make any special reference to the fact that most of the refining was done in Great Britain and that they got the by-products. Of course we know they are keen traders in peace time, and this was an advantage not to the British government but to the British commercial world. But this has gone beyond a joke. It is an absolute detriment to the Canadian farmer, and it should not continue. The government will hear about this between now and the next election once the Canadian farmer realizes the situation and the supineness of the government in respect to it. I know there are difficulties, but difficulties may be overcome by negotiation. I believe that if we were to approach the British government now, under existing conditions, we would be met sympathetically and some remedy could be found. It can be done if there is the will to do it.


James Lorimer Ilsley: These vegetable oils, in so
far as they come from British sources, come from the sterling area, and they improve the exchange position of Great Britain. When we approached Great Britain a year or two ago, I think in the spring of 1939, they declined to agree to a modification-


Joseph Henry Harris: They left it
open. The British government declined but asked if some other method of approaching the problem could not be arrived at in order to meet agricultural conditions in this country. It was not entirely turned down.


James Lorimer Ilsley: In effect it was a turn-down. If I remember correctly the British government made it very clear that they would not agree to a waiver of their preferential position in the Canadian market, which was what Canada desired.


Joseph Henry Harris: And they gave
a reason.


James Lorimer Ilsley: We have not approached the British government recently; but is this a time to approach Great Britain and ask them to worsen their exchange position? The dollars

we send to the Straits Settlements find their way into the hands of Great Britain, enabling them to purchase the supplies they require. If Great Britain would not agree to a modification of her treaty rights last year certainly she would not agree this year, nor should she be asked to do so this year.


Joseph Henry Harris: I do not want
to labour the point, but the minister has given only part of the answer. They declined because they were afraid United States lard might be substituted for part of our vegetable oil consumption. But since that time the situation in regard to United States lard has changed entirely. Their objection was based upon conditions existing at the time the representations were made, but those conditions have altered in the meantime. Their reason for opposing our request has since disappeared; United States lard is not now coming into our market in place of vegetable oils.


Mr. CASTLEDEN:: What assurance can
the minister give us that the Canadian manufacturer will not take advantage of this opportunity to increase his prices? There seems to be no hope of getting this tax reduced; I was sorry to hear the minister say that it is to be applied universally. It may be all right for industries that can stand it, but certainly the agriculture industry is not able to do so. At all events, have we any assurance that the Canadian manufacturer will not be able to take advantage of this provision in order to boost his prices? By subsection 3 provision is made to set up a board to deal with matters of this kind. Are we to be furnished with the reports of that board?


James Lorimer Ilsley: That is under the jurisdiction of the Minister of Labour, who is open to questioning in this house as to the operations of the war-time prices and trade board. All I can say is that subsection 3 has been made as nearly watertight as possible, and I know that the board intends to exercise the closest supervision over price changes. I have confidence that a great deal can be done in that direction. Of course the matter of the control of price increases generally is difficult. It will require a large increase in staff, and the board has its plans made or in course of preparation for that increase. They also have their plans in connection with price control, so that no advantage will be taken of the tax imposed by this section in order to increase the prices of goods by an amount greater than is justified by any increase in cost properly arising from such tax.


[Stage Direction]
Section agreed to.
Section 12 agreed to.

Special War Revenue Act
On section 13-Personal liability where offence by incorporated company.
Richard Burpee Hanson: Is this
considered necessary? There was nothing about it in the resolutions, of course, and the section comes to our attention now for the first time. Is this principle brought in from other penal statutes?


James Lorimer Ilsley: I do not know that it is, but it is all right.


Richard Burpee Hanson: Then it is a new principle?


James Lorimer Ilsley: I do not know whether or not it is in other statutes.


Richard Burpee Hanson: This section
says:
Where an incorporated company has been convicted of any offence against this act, every officer, director or agent of the company who has directed, authorized, condoned or participated in the commission of the offence, shall be liable to the like penalties as such company and as if he had committed the like offence personally, and he shall be so liable cumulatively with the company and with such officers, directors or agents of the company as may likewise be liable hereunder.
That is a pretty strong principle.


James Lorimer Ilsley: It is not new. The only new part is the first line or two.


Richard Burpee Hanson: But the remainder of the section is all predicated on that. If a company is convicted you make every officer, director or agent of the company who has done thus and so likewise personally liable for the offence, and they are to be held liable cumulatively with the company. That is, they are both to be liable, if I understand the application of the word "cumulative," and with such officers or directors as may likewise be liable. The whole posse are made liable, if t-hat is a good word to use.


James Lorimer Ilsley: It is an excellent word.


Richard Burpee Hanson: I believe it covers the case. This seems to me a large extension of the principle of making an agent liable together with the company. What is the necessity for it?


James Lorimer Ilsley: It is to discourage crime.


Richard Burpee Hanson: It is a
whip over people, is it not? You say that an agent is liable if he is authorized by his general manager to do a certain thing, which may be merely the commission of a prohibited act. As the minister knows, there is a distinction between the common law and the Roman law in connection with offences under this and other legislation. In the
present instance, the agent who performs an act under the direction of a higher officer is liable. The higher officer is liable, and the board of directors is liable, although they may know nothing about it. Then, the company is liable. They are all liable, together. Well, my only comment is that we are living in a land of regimentation. This is too great an extension of the authority of the department. The hon. member for Essex East (Mr. Martin) appears to be listening; I should like to hear what he has to say in the matter.


Mr. MARTIN:: I never refuse an invitation. It seems to me that the minister's point of view is supported by the words "condoned or participated in." The criticism of the leader of the opposition is that a director of a company would be guilty, even though he knew nothing about it. But the section does not envisage that. It uses the expression, "director or agent of the company who has directed, authorized, condoned or participated in."


Richard Burpee Hanson: Participation might carry it; but a director either does or does not direct. If a matter comes to his attention and he does not prohibit it, he would be liable. However, I shall not hold up the section.


James Lorimer Ilsley: The principle condemned by the leader of the opposition has been in the act all along. The only change is one of procedure, and that change is found in the first two lines of the section. Under the law as it has been all along, if an agent of a company or a director of a company was prosecuted, it was necessary to prove that the company had committed the offence. This was done all over again in the prosecution against the employee of the company.


Richard Burpee Hanson: Of course a conviction could not be made until a foundation was laid; I agree with that.


James Lorimer Ilsley: But there is no reason why, if a company has itself been convicted, production of the proof of conviction should not be sufficient, without proving all over again in the prosecution against a director that the company itself committed the offence.


Richard Burpee Hanson: If that is the sole purpose of the section, I agree entirely with the minister.


James Lorimer Ilsley: That is it.


Richard Burpee Hanson: Then I
agree with it.


[Stage Direction]
Section agreed to.
Sections 14 and 15 agreed to.
Special War Revenue Act
[Stage Direction]
On section 16-Amount may be applied on account of sales or other tax.
Richard Burpee Hanson: This is a new subsection; I should like to have an explanation.


James Lorimer Ilsley: This subsection is in favour of the subject rather than the crown.


Richard Burpee Hanson: Hurrah!
Three cheers! We have not had much of that recently.


James Lorimer Ilsley: It has been the general
practice to apply one-half the further penalty, equal to double the amount of the tax properly payable-those words are taken out of section 112

to payment of the tax itself. If only that provision applied, the taxpayer would be obliged to pay the tax in addition to the penalty. The present subsection is designed to make clear that such is not the intention of subsection 3 of section 112. That is to say, penalties are provided here based on the tax in other parts of the act; and this permits application of that kind of penalty to the liquidation of the tax liability.


Richard Burpee Hanson: In other words, the department catches the fellow breaking the law, penalizes him, and then gives him back part of the penalty?


James Lorimer Ilsley: Yes, that is the effect of it. I am glad we are too soft instead of too hard, for once.


[Stage Direction]
Section agreed to.
Section 17 agreed to.
On section 18-Time limited for prosecution.
Richard Burpee Hanson: Is this not new?


James Lorimer Ilsley: Yes, and this is an important change. The limitation section stated that the prosecution must be brought within three years of the cause of action.


Richard Burpee Hanson: After the commission of the offence?


James Lorimer Ilsley: Yes. It will be understood that some of these offences are not discovered because they are concealed. The nature of the offence is that it is one of fraud, concealment or evasion. Sometimes it is not discovered until two or three years after it is committed, and this provision gives the crown six months after discovery of the offence within which to institute a prosecution.


Richard Burpee Hanson: I assume this is based on experience?


James Lorimer Ilsley: Yes.


Richard Burpee Hanson: Have there been many cases, or is provision to meet a particular case?


James Lorimer Ilsley: It is not to meet any particular case. There are a number of cases where the discovery of the fraud is delayed for a considerable length of time.


Mr. HANSON (York-Sunbuiy):: I am agreeable to the passage of the section, then.


George Hugh Castleden: Would it not be possible to extend the period to a five-year term? Concealment for three years is often done, and I believe quite easily.


James Lorimer Ilsley: The crown should not sleep on its rights. The department should not be permitted to sleep on its rights. If the department has three years from the commission of the offence, or six months after the discovery of the offence, whichever may be later, and in that time does not act, then I say there should be a change-


Robert Fair: Of government.


James Lorimer Ilsley: -in the administration.


Richard Burpee Hanson: There is nothing in the section which provides retroactive action in respect of certain offences, is there?


James Lorimer Ilsley: Certainly that was not the intention.


Richard Burpee Hanson: It does not appear to me to have that effect.


James Lorimer Ilsley: It is not intended to have that effect.


Richard Burpee Hanson: Then so far as the department knows this section provides no retroactive effect?


James Lorimer Ilsley: So far as I know that is correct.


[Stage Direction]
Section agreed to.
On section 19-Penalty or punishment not to be less than the minimum prescribed.
Richard Burpee Hanson: This is a new section; I suggest we should have an explanation.


James Lorimer Ilsley: A section similar to this is found in the customs act and the excise act. To that extent therefore it is not new. I believe it is a sensible provision. I understand there is some dispute among lawyers and a difference of opinion among judges as to the meaning of a minimum penalty. This section provides that there is no power to impose less than the minimum penalty. It also says that the court shall have no power to suspend sentence. For instance, if there were a mini-

Special War Revenue Act
mum penalty of, we will say, not less than *three months imprisonment, the court might say, "I sentence the accused to three months in prison, but I suspend sentence." This is a common provision in connection with revenue legislation. As a matter of fact both the customs act and the excise act provide that sentences cannot be suspended.


Richard Burpee Hanson: There is a similar provision in the criminal code in connection with thefts from the mails by officials of the post office department.


James Lorimer Ilsley: There is provision for a term of three years.


Richard Burpee Hanson: Necessity compelled the enactment of a severe penalty for theft from mail bags, or theft by mail clerks of money contained in letters. I used to think the penalty was too severe. There was provision for three years in the penitentiary, and no power to suspend sentence. But I changed my view when a good many cases came under my observation. In the present instance the principle is the same, and I have no objection to it.


Mr. CHURCH:: Has the department a legal branch of its own which undertakes these prosecutions? I have always understood that the enforcement of all federal laws is carried out by the attorneys general of the provinces. The Minister of Justice stated that in the house, although it is not the general rule that a minister of justice should give opinions. That has been the case since confederation. If the department has no legal branch, does it engage counsel in the various excise districts? Who pays the costs of this work? I notice that in certain prosecutions in the Toronto police court at times quite heavy fines are imposed, whereas prosecutions in other parts of Canada quite often end up with only the minimum fine being imposed. Toronto is the principal tax-paying district of the dominion, and that being the case I suppose it is felt that the maximum penalties should be imposed. There should be equality of treatment.
There should be some uniform system of penalties. Why should the maximum penalty be imposed in one part of the country, and the minimum in the other? The auditor general's report shows that large sums of money are expended by this department to retain lawyers all over the country. I look upon this as patronage. Has this and other departments a staff of lawyers to do this federal work? It runs into considerable money and the man who has to pay it is the taxpayer. I have read that the lawyer acting for the department has in some cases

suggested the maximum penalty. There should be a general rule to apply to the whole country.


James Lorimer Ilsley: The excise division has two departmental solicitors who supervise the enforcement of the provisions of the acts administered by the division. However, when prosecutions are undertaken it is necessary to retain counsel in the various parts of Canada, and the cost of this work is provided for by a vote to the Department of National Revenue. The prosecutions are carried out under the supervision and direction of the departmental solicitors, with the assistance of the Department of Justice. The Department of Justice selects the counsel who conduct the various cases.


[Stage Direction]
Section agreed to.
On section 20-Schedule I amended.
Thomas Miller Bell: I should like to point out again that this section confers a considerable advantage upon the manufacturers of lower-priced automobiles. We should consider ways and means of getting more revenue from these manufacturers than we have in the past. A short time ago I had occasion to refer to one of these companies, the Ford company. At that time I pointed out that this company had been given a real advantage by our Canadian legislation, and that it was not controlled by Canadians. That point was disputed and subsequently I asked some questions and received a return giving the names of the directors of this company. They are as follows:
Henry Ford, Dearborn, Michigan,
Edsel B. Ford, Grosse Point Shore, Michigan,
George E. Dickert, Detroit, Michigan,
P; E. Martin, Detroit, Michigan, and
W. R. Campbell, Windsor, Ontario.
This company, which receives a most valuable concession, is controlled from the United States. It is under the domination of a gentleman who refused, through his organization in the United States, to perform a most necessary service for Canada. I want to emphasize again that a valuable concession has been given to the manufacturers of lower-priced cars. We have been doing this for quite a number of years with interesting results and I should like to refer briefly to some of them.
The Ford company of Canada, which will receive considerable benefits under this provision, was organized by Mr. Ford, the shares of the company having a par value of $100. In 1929 there were 70,000 of these shares, and at that time a reorganization of the corporation was authorized by this parliament. To-day there are 70,000 voting shares,

Special War Revenue Act

over half of which are said to be owned by the Ford family and the Ford Motor Company of Detroit, Michigan. The hon. member for Essex East (Mr. Martin) shakes his head, but that is the information I have received. If it is inaccurate, I shall be glad to have him correct it. A total of 1,588,960 non-voting shares were also sold. Only one director is a Canadian, and yet under empire agreements and legislation of this description we have constantly given to this company and to other makers of lower-priced cars a distinct advantage. Here is the result. In 1905 a Ford company share was worth $100; to-day that same share, split up as it has been, is worth $10,800, even at the present low market price. The dividends paid on that original $100 share total $13,305. The total return on the original investment of $100 amounts to $415.78 per year since 1905.
I should like to take this opportunity to bring something else to the attention of the committee. When certain matters are discussed in the house, it seems to me that a defence of any criticism should be made here also. I have in my hand a document which was issued iby the government's director of public information for immediate release. It contains a report of a speech delivered by Mr. Lash, who I understand is one of the officials of the deipartment, in Calgary on Friday, July 5. I believe this was circulated to all the newspapers of Canada, and I want to take exception to this kind of thing being done. I should like to quote just a few words as follows:
In connection with the effort of our motor industry, I should like to say a word about the Ford Motor Company of Canada. This company has done and is continuing to do magnificent work in the service of the empire. No hard feelings which may have been caused in this country recently by the attitude of Mr. Henry Ford should be permitted to reflect themselves in unmerited criticism of or action against .the Ford Motor Company of Canada. To permit or to encourage any such expression of public disapproval of the attitude of an individual, would be to do Canada a great disservice. The president of the Ford Motor Company of Canada is Mr. Wallace Campbell.
This country has no finer public-spirited or patriotic gentleman.
May I interject that no criticism of mine has been levelled against Mr. Wallace Campbell. The point I am making is this. Here we have a matter before the house and while it is under discussion the director of public information circularizes all the newspapers of Canada and many others in defence of a company which is under fire. I have no objection to that being done after the matter has been disposed of in the house, when it might properly receive some such attention.

In my opinion the time has come when in the interests of our war effort we should see to it that every vestige of control that may be of a subversive character from the point of view of our war effort is removed from the management of every one of our industries and it should be removed without fear or favour. Of course we are met immediately with the cry: This is socialism. May I refer hon. gentlemen to some eloquent words I heard on Sunday evening from the lips of Miss Dorothy Thompson who, addressing herself to Hitler, said:
The plutocratic England you attack is to-day a socialist state, a socialist state created without class war, created out of love, and led by an aristocrat for whom England builds no eagle's nest or palaces out of the taxes of her people, a man who cares nothing for money or ever has, but only for Britain, and for the coming world that a free and socialist British society will surely help to build if ever it is built.
If we are going to enact legislation of this description, imposing taxes which are in some respects protective taxes-undoubtedly an additional tariff is placed on farm implements by another section of this bill-giving to the manufacturers of the lower priced cars an advantage in our market over the manufacturers of higher priced cars, then we should see to it that the benefits shall accrue not to individuals, particularly individuals like Mr. Ford, but to the Dominion of Canada, and we should be devising ways and means of securing for Canada any financial benefits that may result from action by parliament.


Paul Joseph James Martin: Mr. Chairman, this matter is too important to be allowed to go unnoticed. The hon. member for Rosetown-Biggar (Mr. Coldwell) is to say the least persistent. I suggest to him that a little reflection might have caused him to-day to decide not to persist in this matter. The Ford Company of Canada, like many another company, has its weaknesses and its disabilities, and I have been as strong in criticizing them in this house as any other hon. member. But the Ford Motor Company of Canada is such a large organization and employs so many working men who have been vitally affected since the last speech of the hon. member-


Major James William Coldwell: That is not true.


Paul Joseph James Martin: -that I could not sit in my place as the representative in this parliament of a constituency where for the time being that company happens to be situated and allow to pass unnoticed the remarks of the hon. gentleman.
What the hon. gentleman has said about Mr. Henry Ford himself will win the approval of every member of this house. That approval

Special War Revenue Act
already has been accorded. Since the debate that took place here some weeks ago I have followed the press of the United States and I may tell the hon. member that the views of Mr. Henry Ford are not shared by his own countrymen.


Thomas Miller Bell: I know that.


Paul Joseph James Martin: So that when I rise to
speak to-day I do not rise to defend Mr. Ford, of whom I can utter no words of stricture adequate to meet the case. I rise rather to defend what is nothing else than an allCanadian organization.


Thomas Miller Bell: What about the
directors?


Paul Joseph James Martin: I am coming to that. The Ford Motor Company of Canada is first of all in law a legal entity. The automobile industry in Canada has of course a close relationship with the corresponding body in the United States. That can be said of every automobile company in Canada. But if there is one company in the automobile industry in Canada that is more Canadian than any other company, it is Ford of Canada.
To illustrate the fallacy of the rhetorical kind of argument so ably made by the hon. member for Rosetown-Biggar, let me point out to him that the distribution of the shares of Ford of Canada is so all-embracing that its shareholders reside in thirty-four different countries.


Major James William Coldwell: Voting shares?


Paul Joseph James Martin: Voting shares. I am now talking about the class B stock, which is the voting stock. There are more shareholders of the Ford Motor Company of Canada resident in Canada than in any other country.
Furthermore, to say that Henry Ford or his family control the Ford Motor Company of Canada is to state something that is not the fact. No individual shareholder and no group of shareholders acting in concert owns an absolute majority either of the class B voting stock or of the class A non-voting stock of the Ford Motor Company of Canada. So that if Mr. Henry Ford and his family and his directors and his American company wanted to stop the war effort of the Ford Motor Company of Canada they could not do it, because they do not hold the majority of the voting stock or a majority of the nonvoting stock.
This gives to the whole picture a different light from that in which it was presented by the hon. member. Moreover, while it is true that Henry Ford was the founder of the business, that business has largely passed out 95826-117J
of his hands. The hon. gentleman has just as easy access as I have to the information that I have obtained and given this afternoon, and if he had taken the opportunity he would have found that a startling situation exists in that respect which I do not feel I have any right to describe to the house. Not that there is anything to hide, but it does reveal a startling picture, and it shows that Mr. Henry Ford is not the octopus that he is supposed to be.
With regard to the reorganization, I have simply this to say, that any shares that were purchased then-and I have made an investigation through the office of the securities commissioner'-were sold in the open market and were as readily available to anyone else as they were to those who bought them.
I am taking some pains, Mr. Chairman, to deal with this matter-.possibly this is the last time it will be brought up-because incalculable harm has been done to an industry which means so much to Canada. The automobile industry, in terms of its full accumulations direct and indirect, the thousands of industries in this country which depend upon it for their existence, is vitally affected by the discussion, well-intentioned, I know, by the hon. gentleman, but nevertheless one that is calculated to do tremendous harm and no real good.
So far as the war effort of the Ford Motor Company of Canada is concerned, what I say of them I might say of the automobile industry generally. There is, I submit-and I have taken some pains to ascertain the merit of what I am now saying-no company in Canada which has done as much in the prosecution of this war as the company which my hon. friend has so severely castigated. At the outset of the war the president of the company, Wallace Campbell said-and I am glad my hon. friend has this time not questioned the patriotism and the integrity of Mr. Campbell-


Major James William Coldwell: I did not do so last
time.


Paul Joseph James Martin: Well, I think he certainly did, by implication. I ask him to contrast with what Mr. Henry Ford said this statement of Mr. Campbell:
All the facilities, resources, man-power and equipment of the Canadian Ford company and the overseas affiliated Ford companies in Australia, New Zealand, South Africa, India and Malaya are now making, and have been making, every possible contribution to the defence of the British empire and the successful prosecution of the war.
There is no doubt that the Canadian Ford plant is particularly fitted for the production
Special War Revenue Act

of mechanical motorized transports which are being used so extensively at this very moment in the United Kingdom.
Long before war was declared the Ford Motor Company of Canada had loaned some of its technical skill not only to this country but to France and the United Kingdom, for the purpose of preparing for eventualities. At the present time the production of passenger cars is seriously curtailed to give way to war effort, with the result that to-day more than fifty per cent of the production in the Windsor plant consists of vehicles for military use. The Ford company of Canada is supplying the British empire with a total of approximately 35,000 of these units, and of this total nearly 10,000 are for the Canadian government and 25,000 for use by other empire countries such as South Africa, Australia and India.
Moreover at the moment the plant is being rapidly tooled for the production of universal machine-gun carriers. These will be supplied to the Canadian government in a considerable quantity per week.
To show how serious this situation is, having in mind the discussion which was initiated by the hon. member who has just taken his seat, let me point out that among the various types of equipment now being manufactured in the Ford plant at Windsor are the following, indicating how important this production is from the point of view of our share in the war.


Thomas Miller Bell: We are not interfering with that, though.


Paul Joseph James Martin: Well, you have, very seriously.


Major James William Coldwell: No.


Paul Joseph James Martin: Light two-wheel drive trucks, known as 8-cwt., which are used for carrying light stores, personnel or wireless sets; 15-cwt. units, used as anti-tank gun tractors, water tank carriers and to transport heavier loads, personnel, et cetera; 30-cwt. four-wheel drive, used as load carriers; three-ton units for heavy loads, for workshops, for wrecking equipment, et cetera; four-wheel drive gun tractors used to haul artillery; ambulances, as well as regular passenger cars and station wagons specially fitted and painted for army purposes.
Moreover, Ford engineers, and they are for the most part Canadians, have contributed in a very important way, although in a way which does not permit public exposition, to the design of certain army-type vehicles. My hon. friend has the opportunity of going into the appropriate department and determining
iMr. Martin.]
the great value of this work alone. I am advised that war orders have priority in the plant over all other production.
Over 8,000 working-men are employed in Ford motor plants throughout Canada. There are some 6,000 employed in Windsor alone.


John Ritchie MacNicol: Is the hon. gentleman
able to give us the number of employees in other factories throughout Canada which are supplying material to the Ford company, so that we shall have an idea of the tremendous amount of labour involved in that company's activities in Canada?


Paul Joseph James Martin: I thank the hon. member. Although I tried to get these exact figures, the situation has been put to me in this way. We say that wheat is our main industry in Canada. That is true only in a qualified sense. The automobile industry, having in mind the question which has just been put by the hon. member for Davenport, is the most important industry in Canada. The tire industry and the manufacture of all the parts which go with it, must be included, and altogether this industry means more to the economy of Canada than any other.


Major James William Coldwell: And we have paid more dearly for it.


Paul Joseph James Martin: That is another question. I am simply pointing out what it means to the economy of this country.


Mr. STIRLING:: Would the hon. member
permit me a question before he leaves that point? He has told the committee that the largest number of class B shareholders are domiciled in Canada. Would he be prepared to give the committee the numbers that are domiciled in other countries?


Paul Joseph James Martin: I have not that information. I have made the broad statement that the shares are held in thirty-four different countries.


Grote Stirling: Yes.


Paul Joseph James Martin: I have also made the statement that the largest number of shareholders are Canadians.


Grote Stirling: Could the hon. gentleman say what percentage of the total that is?


Paul Joseph James Martin: I cannot give the percentage, except that in fairness I should say this, that the geographical distribution of the shares is not consistent with the monetary value of the shares. In other words, I suppose that if the shareholders in all countries could get together they could easily outvote the Canadians.


Grote Stirling: The figures are not much good without the percentage of the total.

Special War Revenue Act


Paul Joseph James Martin: No. I have not the percentages.
Furthermore, just to indicate the type of person that is conducting the Ford unit in Canada, as compared with the viciousness, the narrowness, the stupidity-if you will-of Mr. Henry Ford in respect of the wisdom of supporting the allied cause: the Ford Motor Company of Canada provided, long before this matter arose, a course of instruction in the care and operation of motor vehicles to more than 7,300 Canadian women through the Women's auxiliary motor service.
Refugees have been brought to Canada in the past two weeks, some-I do not know the exact number-under the auspices of the Canadian Ford company.
Now, all this I have placed on Hansard because here is the centre, the focal point of all that may be regarded as good or bad by our public; it is from here that the statement of the hon. member went out, and I know, from the hundreds of letters I have received, that the impression which he sought to make he has succeeded in making. Nevertheless in making it he has done a great injustice not only to the executives but to the men who work in that plant, and who would not continue to do so if they believed for one moment that Wallace Campbell and his group were in any wise sympathetic to the views of Mr. Henry Ford.


Major James William Coldwell: It would surprise the hon. member to see the letters I have received from employees of the company, stating something entirely different.


Paul Joseph James Martin: What the hon. member has' received, it should be stated in all fairness, are letters such as I have received, and I do not say I disagree with them, in respect-


Major James William Coldwell: -to the inhuman conditions in the plant.


Paul Joseph James Martin: That is another point, and my views about that are well known.


Major James William Coldwell: That is what I criticized.


Paul Joseph James Martin: I have condemned that as vigorously as I could in this very chamber. But that is another question, and I say to the hon. gentleman that he has done a great injustice to an organization which has dissociated itself from Mr. Henry Ford,-


Major James William Coldwell: But not as to the conditions in the plant.


Paul Joseph James Martin: -to an organization which has but one purpose, a purpose shared by all of us, which is to bring about through every effort possible the winning of this war.


George Hugh Castleden: Will the hon. member contradict the statement of the profits and the
increase in the value of shares as given by the hon. member for Rosetown-Biggar?


Paul Joseph James Martin: Well, my hon. friend has asked two questions which are not related to each other, and the second of which is misleading, when he says "an increase in the value of shares". There is nothing sinister in that. With regard to profit, if that is the statement the hon. member has received, that is undoubtedly the case. I am not rising to defend the Ford motor company or to say that they are not being allowed to make too much. I have my own views on that and they are well known. I simply rose to meet one argument put forward by the hon. member for Rosetown-Biggar, and to say that because Henry Ford, an American, had expressed views that were not even shared in by his own son, that was no reason why a Canadian organization employing Canadian workmen should be sequestrated and have its property treated as alien property.


[Stage Direction]
Section agreed to.
Sections 21 to 27 agreed to.
Bill reported.
Mr. ILSLEY moved the third reading of the bill.
Thomas Langton Church: We have been discussing rates of duties on automobiles under section 20. I do not object to the Ford company in Canada but I certainly object to Henry Ford, the American who has made so much money in this country before the Canadian company was set up, doing business in Canada. What did he say, according to the press, when the allies entered the war? He said they were only bluffing, that Britain and France went to war to defend the financiers of those two great countries. He has all along been against the allies. The president said that the dictators should be quarantined and America would not stand idly by. Well, if this government would quarantine Henry Ford it would be better for the people of Canada and America, because he has been the chief isolationist against Britain and France in this war. His work has been pro-Hitler, with his ringside advice. He has done more than anyone else to contribute to the disaster which overtook that glorious country France, when all the French people needed was a supply of munitions. The minister is patriotic, and I believe the people of Canada would support both him and the government if they banned Henry Ford and his American concern. I am not referring to those patriotic people in Canada who are connected with the Ford company here; they should be allowed to do business as usual in Canada. I am referring to the parent company. I say .that they should
Excess Profits Tax Act

be banned for all time. Henry Ford is a menace to the freedom and civilization of the world to-day. His isolationism and pacifism is most provocative. He should be quarantined by this government and he and his works and products kept out of the country for all time.


[Stage Direction]
Motion agreed to, and bill read the third time and passed.

[Stage Direction]
Hon. J. L. ILSLEY (Minister of Finance) moved the second reading of Bill No. 104, the Excess Profits Tax Act, 1940.
Motion agreed to, bill read the second time and the house went into committee thereon, Mr. Fournier (Hull) in the chair.
Section 1 agreed to.
On section 2-Definitions.
James Lorimer Ilsley: There is an amendment
which I will ask the Minister of Public Works to move.


Mr. CARDIN:: I move:
That subsection 2 of section 2 be amended by adding thereto the following:
"and definitions contained in the said Income War Tax Act shall apply in this act."


Richard Burpee Hanson: The effect is simply to add the definitions of the Income War Tax Act to this bill. Are they to be superimposed on this one?


James Lorimer Ilsley: Yes. The Income War
Tax Act is the basis of this bill. The bill already provides that the expressions contained in it shall have the same meaning as in the Income War Tax Act, and it was thought by some draftsman who was reading it over that we should incorporate the definitions.


Richard Burpee Hanson: Would
they overlap?


James Lorimer Ilsley: Oh, yes.


Richard Burpee Hanson: Is there
no redundancy?


George Hugh Castleden: Could the minister
read the definitions?


James Lorimer Ilsley: They are very long; I do not think it would be possible.


[Stage Direction]
Amendment agreed to.
Section as amended agreed to.
Section 3 agreed to.
On section 4-Adjustments to standard profits.
James Lorimer Ilsley: I wish to make the following amendment:
(Mr. Church.]
That Bill No. 104 be amended by adding the following paragraph to subsection 1 of section 4 thereof:
"(d) adjust the standard profits by reference to any increase or decrease in depreciation allowances or other charges to such a basis that the said charges during the standard period are comparable with similar charges during the taxation period."


Pierre-Joseph-Arthur Cardin: I move accordingly.


James Lorimer Ilsley: This amendment is of some importance, and perhaps it is only fair that I should explain it. There are companies which had a particular basis of depreciation during the standard period and which may wish to change that basis during the taxation year. It is clear that if a company charges depreciation at a lower rate during the taxation year, that will increase the profits and perhaps make larger excess profits than otherwise might be the case. It might even create excess profits which otherwise would not exist. But that would not be a fair excess within the meaning of the bill; it would be simply a technical excess, and manifestly it would be unfair to tax it as such. Similarly a company might increase the rate of depreciation, in which event it could minimize or perhaps entirely wipe out any excess which otherwise would exist and be taxable. That also would be a technical point. This enables an adjustment to be made so that standard profits will be adjusted in reference to any increase or decrease in depreciation allowances or other charges to such a basis that such charges during the standard period are comparable with similar charges during the taxation period.


Richard Burpee Hanson: Is there
any similar provision in the Income War Tax Act?


James Lorimer Ilsley: No.


Richard Burpee Hanson: There is no provision such as this for making adjustments?


James Lorimer Ilsley: No. It does not make any difference there, because that act does not contemplate the taxation of the excess in one year as compared with that in another year. The Income War Tax Act provides that depreciation rates may be fixed at the discretion of the minister, and rates are fixed or allowed for certain industries.


Richard Burpee Hanson: They are more or less standardized?


James Lorimer Ilsley: More or less. The company can set aside amounts for depreciation up to the rate fixed. They are not obliged to go up to that rate; they may go below it if they wish.

Excess Profits Tax Act


Richard Burpee Hanson: The rate
fixed is the maximum?


James Lorimer Ilsley: Yes.


Richard Burpee Hanson: This may not be relevant, but I should like to ask a question at some stage in order to obtain some information with respect to the matter of adjustments under the Income War Tax Act. Perhaps I might ask the question now, if the committee will allow me to do so. Let us say that the accounting department of a firm employs a man who brings them out with a substantial profit for two or three years. They .pay the income tax on that profit. Subsequently it develops that there has been, shall I say, a dishonest report from the accounting department, and that instead of making money the firm actually has been going behind, if one could imagine such a state of affairs. If representations were made to the department and proof established, would that firm be entitled to any refund? In the circumstances I have endeavoured to portray, would the firm be entitled to have the whole position reaudited and analysed, and to have justice done, or is it considered to be a closed matter?


James Lorimer Ilsley: There is a short limitation period in the Income War Tax Act. That limitation period is a year, and only in rare cases does the department consider itself justified in recommending that an order in council be passed-


Richard Burpee Hanson: That is
necessary?


James Lorimer Ilsley: Yes, for refunds in cases
after the year has elapsed. Within the year, however, there is no reason why a fair adjustment could not be made. After that period it is, I admit, a little harder to get it.


Richard Burpee Hanson: I suppose in law the principle of estoppal applies in a degree, and there is the question of money paid under mistake of fact. I have forgotten just what is the distinction between money paid under mistake of law and money paid under mistake of fact. In the one case the money is recoverable, and in the other case it is not. My recollection is that money paid under mistake of law is not recoverable, on the theory that the party who pays is presumed to know the law, which I always thought an improper principle to apply. In the case I have in mind, both questions might be involved. At all events I am bound to tell the minister that only to-day information came to me concerning a case such as I
have mentioned. I am going to discuss the matter with the commissioner later, when I have the full facts. In the meantime a true audit is to be made by an outside auditor and the facts established as far as possible.
I have mentioned the matter in order that I -may not be proceeding improperly in even asking for consideration for the taxpayer.


Thomas Langton Church: This provision is based
on the budget, and it increases the amount of money being taken from business. In my opinion, if this keeps up, we are going to abolish all initiative in business in Canada. This seems to me quite a step towards state socialism, but it is far removed from the protestations of the government with regard to freedom of trade and commerce in this country. It simply means that he who sows shall reap nothing. With the money the government leaves him the business man will have a hard time paying his other taxes, dominion, provincial and municipal. It is said that this taxation is for war purposes. If that is so, why does Canada not go to war properly instead of preparing for home defence? The business men of the country would not object to taxes of this kind if they knew they were being used in order to help fight the enemy at the gate, but we are not doing that. We cannot fight Hitler at home; we have to fight him at the front. These taxes are not necessary unless they are for fighting overseas and speeding up our aid to Britain. The rest is just camouflage.


[Stage Direction]
Amendment agreed to.
Section as amended agreed to.
On section 5-Ascertainment of -standard profits by board of referees.
Joseph Henry Harris: Before the section carries, would the minister enlarge on the subsection dealing with depressed businesses? What principle has the minister in mind in connection with the definition of a depressed business? Has he in mind a comparative figure over a period of a decade prior to the four-year standard base, or has he in mind the element to which consideration would be given in connection with depressed businesses? I have in mind instances where businesses have broken even. They have not made money for, let us say, three years. Then perhaps in one of the four years they make a five per cent or a ten per cent profit over and above what is allowed.
For example, let us suppose that in one year a company made $40,000, and made nothing in the other three years. That is a profit on an investment of, say, $800,000, and would be a five per cent return. Nevertheless that $40,000 is to be divided by four. How much
Excess Profits Tax Act

more equitable it would be if it were divided by one, or the year in which the money was made. Would such a company be considered a depressed business, as described in section 5? Would it be a depressed business if in three years out of four it showed losses, but in the fourth year showed a normal profit? What principle is in the minister's mind?
Mr. IL8LEY: The company described by the hon. member would sound like a depressed business to me. However, the minister to be satisfied would be the one in charge of the department, namely the Minister of National Revenue. It is not possible to lay down any definite or comprehensive principle; rather it is a matter for the minister to decide.


Joseph Henry Harris: I am sorry to ask the question again. However, when I asked it before, the minister was, well, not exactly short, but left the impression on the committee that very few cases would come under section 5. That is the reason why I have raised the question again.


James Lorimer Ilsley: I understand.


Richard Burpee Hanson: This is an important section in the bill, and through it extensive powers are being vested in the Minister of National Revenue. Of course the minister may direct that an inquiry be made by a board of referees. We have not yet been informed as to the type of men who are to sit on that board. Directions are given as to what they shall do, and I think the minister ought to give some further explanation as to the principles which will be applicable in the carrying out of their work.
I notice that in paragraph (a) there is an alternative in connection with what is to be termed a depressed business. The paragraph states, in part:
(a) That there were no profits in the standard period because the taxpayer was carrying on business at a loss or that the profits of the standard period were so low that it would not be just to ascertain the standard profits of the taxpayer by reference to such profits because either the business is of a class which during the standard period was depressed or because the business of the taxpayer was for some reason peculiar to itself abnormally depressed during the standard period when compared with other businesses of the same class.
That opens up a wide field, and several alternatives are indicated. I shall set out a concrete case, and in that manner may place before the minister what is troubling me. I have in mind a company carrying on a large manufacturing and export business. Due to the depression the volume of business carried on by that company had been greatly

restricted. Everything possible had been done to cut down operating and production costs, but there was a large overhead and a heavy bond issue. In one of the four standard years, when there was an extension of volume, although the price began fairly low the company was able not only to break even but to make a profit. At the present time the war has had a direct effect on the business by way of restriction of importations into the United States from Europe, and as a result the volume of business has increased. Not only has the volume increased but, because of the law of supply and demand, the price has increased. Let us suppose that the company in question produces sulphite pulp, and products thereof such as sulphite papers, catalogue papers, and all that sort of thing. Let us suppose also that for ten years that business has not been doing well, due to lack of volume and low price. Now, in the year 1640, due to a rise in price and increased volume the business will show a substantial profit. However, in only one year of the standard period did it show a profit, and in the other three years it had losses. Presumably those losses were taken out of inventories or working capital-perhaps a little out of both.
My question is this: Is that business to be penalized by the imposition of this excess profits tax? That is one instance where some relief ought to be given. Will the losses sustained in three out of four years be taken into consideration? I do beg the minister to give consideration to these facts. Under the section now before us I assume it might be done, but we have had no statement of principle from the minister. I do not wish to name the company, because I believe it would not be proper to do so. However, it is not right that that company should be penalized on this year's operations, in view of the experience they have had in the four standard years. If the minister would say that the aggregate profit is to be divided by one, so that they may have the benefit of the one year in which they did make a profit- and upon which I would presume they paid income tax-I believe he would be fair. But to divide by four the profits of one year would leave them a very low base. There would be nothing at all for the shareholders, who have invested millions in the company, and have not received a dividend in ten years.
Some consideration will have to be given to companies of that kind. Is the scope of this section wide enough to give them relief, and would such power be exercised?


James Lorimer Ilsley: No undertaking could be given in reference to any particular company.

Excess Profits Tax Act


Richard Burpee Hanson: I would not ask that.


James Lorimer Ilsley: It is open to that company to apply to the minister for consideration. I believe in turn the minister would refer the case to the board of referees. That would be my assumption, because under this section it is open to the minister to be satisfied, if the facts justify it, that the profits of the standard period were so low that it would not be just to ascertain the standard profits of the taxpayer by reference to such profits, because either the business is of a class which during the standard period was depressed or because the business of the taxpayer was for some reason peculiar to itself abnormally depressed during the standard period.


Richard Burpee Hanson: What is meant by the expression "peculiar to itself"?


James Lorimer Ilsley: I can tell the hon. member what is meant. He has referred to a company producing pulp.


Richard Burpee Hanson: Sulphite.


James Lorimer Ilsley: Yes, sulphite pulp. If that business were depressed, then that business is of a class which during the standard period was depressed. Pulp companies were having a hard time, and the industry was depressed. That is one case. The other case is different; it refers to the individual company whose business is abnormally depressed when compared with other businesses in the same industry.


Richard Burpee Hanson: I do not think the company to which I referred would come in that category. They have done as well as their competitors and none of them has made any money.


James Lorimer Ilsley: It may be that the industry as a whole was depressed. If so, the first stipulation to which I have referred would apply. I do not know what the minister would say or do or what the board of referees would say or do in the case mentioned by the hon. gentleman, but it would certainly be open to that company under the provisions of the section to apply to have its base raised because of the fact that it had had three years of losses out of four.


Richard Burpee Hanson: The best the minister can say is that this company would have an opportunity to present its case and would have to trust to the fates.


Grote Stirling: If the four years are considered as standard years, would it not be possible to combine the pluses and the minuses in making the arithmetical computation to arrive at the total which is subsequently divided by four?


James Lorimer Ilsley: That would be exceedingly harsh upon the company. There are three ways in which it can be done. One is the way just mentioned by my hon. friend, that is, to set down the profits, subtract the losses, and divide the result by four. The second way is the one we have taken. We take the years of profits, add them together, consider the losses as zeros, and divide the result by four. This method is not so harsh upon the company.


Richard Burpee Hanson: You consider the losses as zero?


James Lorimer Ilsley: Yes. A number of representations, such as those which have been made by the hon. member for Danforth (Mr. Harris) and the leader of the opposition, were made to the department. It was contended that we should just take the years of profit because it should be considered that no company was ever organized to lose money. It was contended that there is something abnormal, something altogether freakish about a loss year, and that therefore the loss years should be disregarded. All kinds of representations were made to that effect. This method of averaging the profit years would be the most favourable for the company. We take the middle road.


Richard Burpee Hanson: You are a compromiser.


Mr. MAYHEW:: Will the board of referees be located in Ottawa, or will it hold sittings at different places? It will be annoying if a company has to wait for a decision.


James Lorimer Ilsley: The question has not been decided, but I think the board will have to travel. Every effort will be made to ensure that applications are disposed of.


Mr. JACKMAN:: Unfortunately I was
unable to be present when this Excess Profits Tax Act amendment first came before the house, but I did make certain representations when the resolution was in committee. I made an estimate at that time that this excess profits tax so-called was caluculated to bring in about 8100,000,000 during a full year, and that some 875,000,000 would be derived from the increase in the corporate income tax from 18 to 30 per cent. Has the minister had those figures checked? I made the suggestion that it might be wiser to change the name of the bill to accord more nearly with its real purpose. Would the minister be good enough to let me know whether the calculation I made was approximately correct?


James Lorimer Ilsley: Some computations were made while the hon. gentleman was speaking the other night, but the matter was not
Excess Profits Tax Act

followed up. The memorandum appears to have been lost. If the hon. gentleman will just state his ease again, I shall endeavour to deal with it now.


Harry Rutherford Jackman: I contended that this tax aims to bring in 8100,000,000 in a full year and that 875,000,000 of that would be derived from the increase in the corporate tax from 18 to 30 per cent.


James Lorimer Ilsley: How is that figure obtained?


Harry Rutherford Jackman: When we were debating the resolution, the minister gave the key that the 15 per cent corporate tax brought in some 865,000,000. According to the estimates of the former Minister of Finance it is expected that there will be some increase in business and profits generally during the coming year. I do not think the figure of 875,000,000 will be found to be far off the mark, but naturally any figure must be in the nature of an estimate. At that time, to the amusement of the minister, I characterized the tax as being more in the nature of an excess tax on profits. I think this matter is of serious concern because the impression is gaining throughout the country that business is prospering almost unduly as a result of war expenditures. It is thought that this is a tax, not on the normal operations of business but on the excess earnings due to the war period. Under the perfect economy there would be no money made out of a war, but this tax and its title "excess" give the people the idea that there is a great deal in the way of extra earnings being made by these companies and that the government are going to collect some 875,000,000 or some 8100,000,000 as a result of these extra earnings. If these companies have no profit above the average of the four year base they are going to be taxed an additional 875,000,000. This provides the bulk of the whole tax. I suggested another name for the tax, that it be called an excess tax on profits, but I did not expect that that suggestion would be accepted. It might also be more properly called a corporation war tax or, better still, a shareholders war tax. This would convey the true meaning of the taxation.
In my brief experience in this house I have found that there is a great tendency to quarrel with our economic system. Had this nomenclature of "excess profits" been used by our hon. friends to my left, assuming that they formed the government of the day, it would have been looked upon as a stab at the economic system. The party in power to-day has never been accused of being particularly unfriendly to the economic system. This name is a complete misnomer and it creates a wrong impression throughout the country.
fMr. Ilsley.]
I do not think it would alter the government's policy at all if they called this tax by its proper name.


James Lorimer Ilsley: There is much in what the hon. gentleman says; there would seem to be an element of misdescription in the title. However, the hon. gentleman has made it clear and I am helping him in that effort. Perhaps having gone that far it will not be found necessary to change the title of the bill.


Harry Rutherford Jackman: Hon. members endeavour to be helpful in their criticism and not destructive. I think the point I have tried to make is one of some substance, and I believe the government would be well advised to give it consideration. It is a matter of serious consequence when we have so many attacks made on our present system.


Mr. DOUGLAS (Weyburn):: In discussing this matter on the resolution the minister said that the question of a luxury tax had been explored. Would he mind elaborating on that? I see that the British government have imposed a luxury tax of 33 J per cent, but whether they are doing it in order to shut out luxuries altogether or to gain revenue, one would need more than the newspaper report to determine. What was the result of the minister's investigation in the field of luxury taxes as a source of revenue?


James Lorimer Ilsley: The investigation was made by my predecessor.


Thomas Clement (Tommy) Douglas: But the officials of the department would know the findings.


James Lorimer Ilsley: Yes. A luxury tax was
imposed in Canada in 1920, I think, by Sir Henry Drayton as Minister of Finance, and I know that my predecessor had before him the schedules which were used by Sir Henry Drayton at that time. They consisted of many foolscap sheets of articles which might be called luxuries. In jewellery, for instance, the line was drawn at a certain price, and articles of jewellery that cost more than a certain number of dollars were called luxuries and were subjected to the luxury tax. There was a high degree of particularization. A distinction was made, for example, between ordinary umbrellas and umbrellas with ivory handles, and so on. That tax, if I am rightly informed, lasted less than a year. The evasion was so great, the cost of administration was so great, and the results of the tax financially were so disappointing that they had to get rid of it.
It is easy to say: Let us tax luxuries. But when an attempt is made to state what luxuries should be taxed, unless you select a large number of small articles and place a tax on them, in which event the cost of collection and

Excess Profits Tax Act
the opportunities for evasion are very great indeed, you do not get far. In this budget we have picked out high priced cars and put a tremendously heavy tax upon them. That is an effective luxury tax, effective largely by reason of its simplicity and by reason of the dimensions of the commodity itself and of the transactions affected. But it is difficult to find many such commodities; you have to drift into the field of a large number of odds and ends, and the results are not worth while.
Instead of imposing luxury taxes in that sense, in this budget we increase the income tax substantially. That is an automatic luxury tax and is designed as such. It does not give guidance, to use the words of my hon. friend from Toronto, as to what the taxpayer should buy, but his necessities will guide him before very long. If he finds that the government, by the national defence tax and by this heavy income tax, is cutting down the amount that he has to spend, he is going to reduce his consumption, and it will be his consumption of non-essentials, of luxuries, that he will reduce. After much consideration by the officers of the department that was deemed to be the soundest form of luxury tax which could be imposed.


Mr. ROSS (St. Paul's):: I do not quite agree with the minister. As I said before in the house, guidance is what is required in taxes of this kind. It is all very well to say that the heavy income tax will act as a luxury tax, but as I tried to point out before, we found it necessary in giving relief to designate what the people should buy, rather than give them cash vouchers. The heavy income tax which the minister has spoken of as a luxury tax is so heavy in comparison with what the tax was before that it is really not an income tax but a capital tax. It amounts really to a capital levy. There are other ways of getting the money which the government requires without imposing all of a sudden such a heavy increase in the income tax. There are luxuries which could be taxed. But the minister has decided to proceed in this way. It is a laissez-faire way of dealing with the matter. It is adopted because it is the easiest way, and all this talk about the cost of collection being high, and not giving direct guidance, is nonsense. Guidance must be given to the people. There are plenty of commodities that it is necessary for them to do without.
The minister also said that the government was trying to turn people from buying nonessentials to buying essentials. The very best way of doing that is to impose some of these luxury taxes on goods that can be done without. When I spoke on this question
before, I pointed out, as did the leader of the opposition (Mr Hanson) and the hon. member for Danforth (Mr. Harris), that fifty cents a quart on liquor would produce a tremendous revenue and the law of diminishing returns would not bother the government very much, because that is one place where the law of diminishing returns might be an advantage.


Howard Charles Green: This section deals with the tax on gold mines. The minister said, as
reported at page 1550 of Hansard:
Nothing could be more definite than the taxation that is to be imposed on a new mine. It is to be 75 per cent of the premium on gold, or 12 per cent on the profits of the mine, whichever may be the greater.
Apparently there is still some uncertainty about the manner in which the tax will be imposed. How would the tax be assessed against a mining operation of the type I am going to mention, and what would be the amount of the tax? In this hypothetical case the capital of the company is $500,000; that is actual cash paid in, and 10,000 ounces of gold are produced in the year.


James Lorimer Ilsley: What year, please? In the year of taxation?


Howard Charles Green: Yes; 10,000 ounces of gold are produced in the taxation year; $100,000 provision is made for depletion; $10,000 provision is made for depreciation; the net profit after providing for depletion and depreciation is $100,000.


James Lorimer Ilsley: I cannot give any answer unless I know what the history of the company is.


Howard Charles Green: It is a new company.


James Lorimer Ilsley: Perhaps the hon. member could give me a little time so that I can supply an accurate answer.


Howard Charles Green: Very well, Mr. Chairman. Also the question was asked, what would the tax be on a straight 12 per cent excess profit basis, in that case?


James Lorimer Ilsley: I will provide later a memorandum giving an answer to the whole thing.


Richard Burpee Hanson: We are still on section 5. Subsection 2 sets up, in case of a depressed business, the limitation of profits with respect to standard profits, and provides:
The standard profits ascertained by the board, as provided in subsection one, in the case of taxpayers mentioned in paragraph (a) thereof, shall not exceed an amount equal to interest at such rate as the board shall determine, not being less than five nor more than ten per centum per annum, on the amount of capital
Excess Profits Tax Act

of the taxpayer computed by the board in its sole discretion in accordance with the first schedule to this act.
I was not here in the last parliament, but it seems to me that this government committed itself to the principle of five per cent profit. Now, in the case of a depressed business, the government is raising it from five per cent to ten per cent.	Why the
change of heart? Is it considered that five per cent is too low? What was in the old excess profits tax act? There was an act anterior to that, was there not? In the last excess profits tax act, what was the provision with respect to this matter?


James Lorimer Ilsley: Last September?


Richard Burpee Hanson: I think so, yes.


James Lorimer Ilsley: The provision last September was that there was an option to the taxpayer; he could take rate A or rate B. Under rate A five per cent was allowed for taxation, but if the profit exceeded five per cent and was not greater than ten per cent there was a tax of ten per cent of the amount over five per cent; if it exceeded ten per cent and was not greater than fifteen per cent there was a tax of twenty per cent on the amount over ten per cent; and so on, until twenty-five per cent was reached, when there was a tax of sixty per cent on the amount over that. In a sense parliament adopted five per cent as the fair rate of return. It will be noted that parliament did not enact that seventy-five per cent of the excess over ten per cent was to be taken.


Richard Burpee Hanson: That is the other side of the picture.


James Lorimer Ilsley: In the other excess profits tax act there was a tax which crept slowly on the company; it did not pounce on the company, as this does. So here, if the board determines seven per cent to be the fair rate having conditions in the industry and other circumstances in mind, then seven per cent on the capital is regarded as standard, and anything running over that in the taxation period is subject to taxation at seventy-five per cent. The two acts are not comparable, because one is graduated and the other is not.


Douglas Gooderham Ross: I suppose the amounts of return of five per cent or ten per cent would depend on the amount of capital involved?


James Lorimer Ilsley: No.


Douglas Gooderham Ross: Then how would the board determine whether it is to be five per

cent or ten per cent? What factors are to be taken into consideration?


James Lorimer Ilsley: The only factor which occurs to me is the nature of the business. There may be other factors, but I should think that the predominant factor would be the nature of the business. For example, a public utility, where the business is stable and the market assured, would not deserve as high a rate of return as an extremely speculative mining venture.


Douglas Gooderham Ross: I suppose, taking another case, a company with a small capital and a large turn-over would be entitled to ten per cent.


James Lorimer Ilsley: It might.


[Stage Direction]
Section agreed to.
On section 6-Deductions from profits allowed to corporations, et cetera.
Howard Charles Green: Would there be an allowance in the case of a company taking out insurance on the life of an officer, say the president?


James Lorimer Ilsley: If the policy is payable to the company and the proceeds are taken in as revenue by the company, I would consider that that would be a proper deduction from the income. The case would have to be decided under the principles which are applied to the administration of the Income War Tax Act.


Richard Burpee Hanson: Has the
case arisen?


James Lorimer Ilsley: Not to my knowledge.


Richard Burpee Hanson: I think
that is a correct statement.


Howard Charles Green: Would it make any difference whether or not the policy were placed before or after the coming into force of this measure?


James Lorimer Ilsley: No, it would not make any difference.


[Stage Direction]
Section agreed to.
Sections 7 to 10 agreed to.
On section 11-Payment of tax.
Richard Burpee Hanson: Just what is the implication of this section? Was this in the resolution?


James Lorimer Ilsley: Section 11, it seems to me, is much the same as a similar section in the Income War Tax Act.


Richard Burpee Hanson: Mutatis. mutandis.

Excess Profits Tax Act


James Lorimer Ilsley: Yes.


[Stage Direction]
Section agreed to.
Section 12 agreed to.
On section 13-Board of referees.
Joseph Henry Harris: Would the minister give us some idea as to who will constitute the board of referees or from whom he will draw the members of the board? Will they be men from his own department? Will there be someone from the Department of Justice?


James Lorimer Ilsley: I assume that in all probability some or all of them will be taken from outside the service.


Richard Burpee Hanson: That is the intention?


James Lorimer Ilsley: Yes.


Richard Burpee Hanson: I suggest to the minister that when the government comes to appoint this board a first-class chartered accountant should be one of the members. He need not be the chairman, but he should be a capable man.
Another suggestion I desire to make to the minister, and to his colleague who sits behind him and who no doubt will make a recommendation, is that one of the board should be a man of judicial capacity, one who is accustomed to weighing evidence and that sort of thing. I need not enlarge on that matter. This is going to be a very important board. From what the minister said on a previous occasion I take it that there may be more than one board travelling around, or at least that the board may be divided.


James Lorimer Ilsley: It may be, yes.


Richard Burpee Hanson: If there are many applications under this statute, if many cases are referred by the minister to the board-that is the procedure, I believe?-


James Lorimer Ilsley: Yes.


Richard Burpee Hanson: -it will be necessary to have a more or less travelling board to go from one part of the country to another; that is, if the taxpayer is not to be obliged to come to Ottawa to make his case-and I do not think that, in a country as far-flung as Canada, it should be necessary that the taxpayer should come here, at great expense-the board might travel and arrangements be made to hear cases in a local centre, say, in each province. I view with a good deal of interest the setting up of this board of referees. There has never been anything in Canada quite comparable with it, has there?


James Lorimer Ilsley: There was one provided for.


Richard Burpee Hanson: But we have never actually set up a board of referees and therefore to a certain extent this is an experiment. I hope the minister will consider the suggestions we have made on this side of the house. I apprehend that a board like this, if it were actuated by anything but the highest motives and principles, could break a company very easily.


James Lorimer Ilsley: Or favour a company.


Richard Burpee Hanson: Yes.


Douglas Gooderham Ross: Would there be an appeal from the nding of the board?


James Lorimer Ilsley: No.


Robert Wellington Mayhew: If there is to be only one board for the whole of Canada, they will take an endless time in getting a good many disputes settled. I cannot see why there could not be a small committee in each province acting more or less after the manner of a county court, with appeals from their decisions to the central body. The company's auditor, a government auditor, and some other person could settle a good many of the minor disputes. It would be awkward for anyone in British Columbia to bring his case to Ottawa or to wait for any considerable length of time for a final settlement. Many cases could be heard by men of lesser ability, yet capable of giving a fair and reasonable decision, so that only the major cases need be referred to the main body.


James Lorimer Ilsley: The only objection to that suggestion is that undoubtedly there would be a lack of uniformity in the decisions. I suggest that the only means by which we could attain the objective the hon. member has in mind and at the same time preserve uniformity is to have a board divided into panels, the chairman keeping fairly tight control on decisions, so that there would be no lack of uniformity in the decisions. The hon. member for St. Paul's asked whether there would be an appeal and I said, no. That is technically true, but the minister has control over the decisions of the board, which is merely advisory to him. Any decision the board makes is effective only when confirmed by the minister.


Richard Burpee Hanson: I do not think the proposal of the hon. member for Victoria, B.C. (Mr. Mayhew) is feasible, although it was made in the utmost good faith. A local board, especially if appointed politically-and of course this board will be appointed by the government-might have a political character and be open to local pressure, and that ought to be avoided at all costs in dealing with taxation. I can see a number of reasons why the minister's view is
Excess Profits Tax Act

sounder than that of the hon. member. I hope that this board will be composed of men of a high type. I have taken that view since first reading the resolution and I hope that principle will be adhered to.


Joseph Henry Harris: I could not
hear the conversation between the member for Victoria, B.C., and the minister, one mari-timer to another, but I gathered that this was a maritime complex, one understanding the other. We in the central part of Canada are not so much worried about having local boards to look after our local interests. We are satisfied to take the findings of the department and abide by them. I agree with the other hon. member from the maritime provinces, the leader of the opposition, that it would relieve the department of a good deal of difficulty if we refrained from having local boards in different parts of the dominion. I hesitate to endorse the principle of establishing another board in our federal administration. The other day I saw a return showing that there were 97,000 persons in the civil service of Canada. That is a tremendous number of people working to provide democratic administration for a country with a population of twelve millions. I have no doubt this board will be set up in due course, because when the Minister of Finance brings in a bill he does not often dot an "i" or cross a "t," unless the idea comes from the government itself. He rarely takes a suggestion from any other side of the house, although it must be said in fairness to him that he gives such suggestions serious consideration.
I still have confidence in the department. There are in it some valuable commissioners, men who are doing excellent work for Canada. Their work is largely delegated to deputies, and the men in the higher brackets, charged with a great deal of responsibility in the department, have their tasks so laid out that they could take on these responsibilities until the close of the war. This will be a department of government. The board itself will be setting up offices, and I suppose there will be a deputy, a grade 2 clerk, a grade 3 stenographer, messenger service, with push buttons, telephones and so on, and the char service must see that the knob is polished on the big door before the officials can take their place. I visualize the addition to our services of another fair-sized department. When we come to the excess profits tax, which the hon. member for Rosedale termed a shareholders' profits tax, this board will be travelling and those who want to discuss matters with the department will have to come to Ottawa.

At six o'clock the speaker resumed the chair and the house took recess.
After Recess
The house resumed at eight o'clock.



TRADE AGREEMENT


Hon. J. A. MacKINNON (Minister of Trade and Commerce):: Mr. Speaker, I would ask that the house revert to the order of motions, to enable me to lay on the table a copy of the trade agreement between Canada and the Dominican Republic.



PRIVATE BILLS


[Stage Direction]
The house in committee on Bill No. 62, to incorporate Sisters Servants of Mary Immaculate-Mr. Lapointe (Lotbiniere)-Mr. Fournier (Hull) in the chair.
Section 1 agreed to.
On section 2-Head office.
Richard Burpee Hanson: I am not rising to oppose this bill, but I am wondering why it is necessary to come to parliament with a bill of this kind which has to do with operating schools in Edmonton, and so on. Perhaps the sponsor would give us a brief outline of the reason why this bill is here.


Mr. LAPOINTE (Lotbiniere):: This community has already been incorporated in three provinces, namely Alberta, Saskatchewan, and Manitoba. Now their activities are to be extended to other provinces, and they have seen fit to apply for a federal incorporation.


Richard Burpee Hanson: In other words, they are interprovincial?


Hugues Lapointe: Yes.


Richard Burpee Hanson: Very good; that is a complete explanation.


[Stage Direction]
Section agreed to.
Sections 3 to 9 agreed to.
On section 10-No liability for unauthorized acts.
Richard Burpee Hanson: Will the chairman please read this section?


The ACTING CHAIRMAN (Mr. Fournier, Hull):: The section reads:
The corporation shall not be legally liable or responsible for anything done or undertaken by an individual member unless such action was duly authorized by the by-laws of the corporation.

Private Bills


Richard Burpee Hanson: I am not going to oppose this, but I would point out that it limits the common law liability. I suppose that is why it is here.


[Stage Direction]
Section agreed to.
Sections 11 to 14 inclusive agreed to.
Bill reported, read the third time and passed.

[Stage Direction]
The house in committee on Bill No. 50, respecting a certain wharf of Saguenay Terminals Limited-Mr. Dubuc-Mr. Fournier (Hull) in the chair.
Richard Burpee Hanson: I should like the sponsor to give us some explanation.


Hugues Lapointe: This company was originally incorporated as La Com-pagnie Generale du Port de Chicoutimi. In 1917 it built a wharf on its property, but did not obtain the necessary permit specified by the Navigable Waters Protection Act. Later an extension was added to the wharf, at which time the permit was obtained. Eventually when going through the titles the company found that it did not have the first permit and that the department did not have jurisdiction to. grant it. They indicated that the only way to proceed in order to regularize themselves was to 'have a bill passed by this house.	_


Richard Burpee Hanson: I think that is quite clear from the preamble. This is in the nature of ex post facto legislation. If the facts are as stated in the preamble and by the hon. gentleman, I think this is the only way whereby they could regularize their position. Has the Minister of Public Works anything to say about this?


Mr. CRERAR:: I understand that it has been considered by the Department of Public Works, and they have no objection to it.


Richard Burpee Hanson: All right; neither have I.
On section 1

Governor in council may approve site and plans of works.


Richard Burpee Hanson: This means that they still have to go back to the governor in council for approval.


Douglas Gooderham Ross: I should like to know more about this. Why do they have to have this bill?


Thomas Alexander Crerar: The reason was given a minute ago.


Richard Burpee Hanson: The reasons are given in the preamble. I think it is all right.


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

[Stage Direction]
Bill No. 33, to incorporate the Stanstead and Sherbrooke Insurance Company.-Mr. Gingues.

[Stage Direction]
The house resumed consideration in committee of Bill No. 104, the Excess Profits Tax Act, 1940-Mr. Ilsley-Mr. Fournier (Hull), in the chair.
On section 13-Board of referees.
Joseph Henry Harris: When the house rose at six o'clock I was pointing out it was my feeling that our system of government was becoming badly cluttered up with boards of one kind or another, and that this procedure had had the tendency of lessening ministerial responsibility. The minister in charge of the Department of Finance is bound round by statute after statute and, in days gone by, I have seen the minister in charge of that department sit back and let the statutes, as they stand, take care of practically the whole department. Rarely did he give consideration to any matters coming to his attention which were not strictly within the confines of the rules and regulations laid down by the statutes. The net result was that a qualified minister had very little to do in matters of policy and in giving consideration to representations made to him.
I am strongly of opinion that the present minister, a new minister, and a capable, qualified and estimable gentleman who is anxious to get on with his work, might go beyond the staff immediately surrounding him. He might go not only to the commissioners in Ottawa, but to the inspectors at different ports across Canada, who are a high type of men. They are highly qualified to perform some duties, and he could give them something to do. Why do matters coming to their attention, in their individual ports, have to be sent to Ottawa in order that rulings may be obtained? Some of the brightest men in Canada are in the civil service to-day, but those bright minds have no scope or opportunity to do a job for this country. They have to send to Ottawa in order to find out whether what they do is satisfactory.
For example, if in the port of Montreal the inspector of income tax wants to employ a few clerks or accountants to look after the national defence tax, or to administer some part of the act, he will state that he wants a grade 2 or a grade 1 clerk, as the case may be. He will send a list of five names to the minister,
Excess Profits Tax Act

and the minister in turn hands that list to his political secretary. The political secretary may pick out No. 3 on the list, and as a result No. 3 gets the job. In other words, the inspector of income tax in the port of Montreal is relieved of any responsibility. All responsibility is held in Ottawa.
It is now suggested that a board of referees be set up to administer a small part of a more or less temporary measure. Once that board of referees is established, we shall not get rid of them. They will be here, and they will draw their pay. Others will be ready to succeed them. They will be taken out of productive enterprise in Canada. They will not be serving the nation or expanding Canada's production. These will be bright minds put to one side to administer a small portion of the measure.
The Minister of Finance who introduced the budget, and who is now Minister of National Defence stated that he wanted everybody in production to expand Canada's national income from 83,800,000,000 to 84,500,000,000. Yet in the present instance the government is taking bright minds out of production, and placing them in non-productive enterprise. It is going even further than that. The very fact that a board of referees is being set up invites those who think they might escape taxation to come before the board. Industries and corporations throughout Canada will be hounding the board for special consideration. On the other hand, if the matter were left with the commissioner, who is well able to shoulder that responsibility, and to the inspectors, I believe the condition would be better. The hon. member for Victoria, B.C., (Mr. May-hew) pointed out that there should be some local responsibility. Let the inspector in Victoria have some responsibility. Let him make out a report as to whether or not this should be such and such, or whether something should be done. Do not shift the responsibility from the inspector in Victoria to a board of referees in Ottawa. If what I suggest were done, deputies across Canada would have some measure of responsibility. The Minister of National Revenue would have some responsibility in connection with the conduct of his department, and he would not sit back and rest on the findings of a board of referees.
If there must be a board, then let there be one and one only. Do not split that board into a half a dozen panels and have them sitting here, there and everywhere. Do not have them travelling across Canada five or ten times a year. The tax is payable only once a year, and the trip should be necessary only once, if the department insists upon having a board.

The training which the Minister of Finance has had in the Department of National Revenue leads me to the belief that this section will carry, as is, without any change, and I can visualize a board being set up. But if there must be one, then let it be a small one of, say, only two men, one of whom might be a chartered accountant and the other having a judicial mind. Let those two men cross Canada. Increase the responsibility of the individual inspectors across Canada. This could be done because the tax is only exigible once. They could then spend the major portion of their time here in Ottawa. Very few of those in industry who are paying this tax will be able to stay away from Ottawa, the way we are regimented now. They will be here every two or three months. Let them carry an extra docket in connection with this particular item. We should try to have the minimum number of cases heard across Canada, and we certainly should not invite more cases by setting up a board of referees as is suggested in this bill. Apparently this section is going to carry, but I hope an effort will be made to keep the cases down to a minimum.
Over 13,000 people have volunteered their services in any capacity. Many of these are retired business men or professional people, well able to do work of this kind. If use could be made .of their services for the duration of the war, it would give the public some idea that this is only a temporary measure. I am sure these people will be willing to render some service to Canada by taking on this work. I offer this suggestion to the minister. I am sorry to see so many of our people being taken out of productive enterprise and added to the civil service. I am sorry to see some of the brightest minds in Canada in the service when they ought to be producers. I hope the ministry will see that fewer of these boards are established. I wonder where we are heading when I consider the 100,000 people in the dominion civil service, the other thousands in our provincial and municipal services, and all their dependents.


[Stage Direction]
Section agreed to.
Section 14 agreed to.
. On Section 15-Discretion given treasury board.
Richard Burpee Hanson: Will the minister explain this section?


James Lorimer Ilsley: This is similar to the section in the Income War Tax Act.


[Stage Direction]
Section agreed to.

Excess Profits Tax Act
On section 16-Coming into force.
Richard Burpee Hanson: I suppose there is to be no limitation of time in connection with this?


James Lorimer Ilsley: No.


Richard Burpee Hanson: If it is intended as a war measure, should there not be some provision as to time limitation? I realize that it will be some years after the war is over before operations under this measure are wound up, but I do hope we may get rid of this legislation some day. Does the minister not think some limitation of time should be in the bill?


James Lorimer Ilsley: I think it would be better to leave it to be repealed when the war is over, and when the need for the legislation no longer exists. I am informed that the act passed during the last war did have a time limit, but I do not see any reason why we should not pass this bill and then repeal it.


Richard Burpee Hanson: It would give the statute the appearance of a war measure if it were definitely stated that its application was not to apply beyond a certain stated time, say, three years after the declaration of peace. I think that ought to be done. If it is not repealed it might prove an invitation to some government to keep it going forever. We might get into such a state financially because of a heavy burden of debt that we would want to keep something like this, but if we do, there would be no point in asking people to try to make money in industry. If the government is going to take all the money, they just will not repeal the statute. I forget the time provision in the last act, but it seems to me that principle was sound.


James Lorimer Ilsley: The last act was called the Business Profits War Tax Act. It did not run three years after the end of the war.


Richard Burpee Hanson: I am only making the suggestion.


James Lorimer Ilsley: It had to be extended. I am informed that the British act does not contain any date of termination, and that might be considered as a precedent. Parliament can alter the provisions of this legislation because there is nothing contractual or binding in any of the provisions.


Richard Burpee Hanson: It is a question of policy.


James Lorimer Ilsley: This legislation can be
repealed at any time. Our discussion has been based upon the assumption that it is desirable to tax these excess profits because of the war.
I would anticipate that we shall get rid of it just as soon as we can after the war is over, and I think industry understands that.


Richard Burpee Hanson: Why should it not be made to apply for the duration of the war and a reasonable time thereafter? I think that is a sound principle, notwithstanding what they have done in Great Britain. The situations are not comparable because they have no company income tax in England. They are taking all the excess profits for the duration, but the positions are not the same. I think the minister ought to give consideration to adding a section stating that this legislation shall expire, say a year after the close of hostilities.


James Lorimer Ilsley: No one knows what the conditions are going to be after the war.


Richard Burpee Hanson: That is only evading.


James Lorimer Ilsley: No, it is not. This country may be armed to the teeth for a generation. The future is so uncertain that it cannot be visualized.


Richard Burpee Hanson: My colleague has just made what I consider to be a strong point. If this measure is left undetermined as it is now, it may prove a convenient method of obtaining revenue for the country. I press the point because I think it is worth while. If the statute were made to apply for a year after the cessation of hostilities and it was then found necessary to extend the time, this would raise the whole issue again in the light of conditions as then existed. The whole matter would really be opened up for reconsideration. The minister is adamant about most things, but I think this is one case where he could yield to a suggestion from this side of the house.


Douglas Gooderham Ross: I agree with the leader of the opposition. I have gone through the bill very carefully, and I can see nothing but trouble ahead for the government and the officials of the department. We are going to be saddled with a flock of people who will be needed to straighten out the difficulties we are bound to get into. I think the whole bill is badly drawn. It shows a lack of thought and a lack of judgment. The money could have been raised in a much better way. Just as I said with regard to the graded income tax, we might have put a graded tax on the share profit or something of that kind. But here we are leaving all kinds of things to a board of referees. We are going to have nothing but trouble.
I also agree with the leader of the opposition when he says that the bill should remain
Excess Profits Tax Act

in force for a definite period only, at the end of which time it should come under review. I cannot express myself too strongly about this whole situation. We have been told time after time that this bill follows the British practice and all that kind of thing. It does not. This is nothing more or less than a shareholder's tax. Not only that, but the way the tax is applied it will crush initiative. Again, some people are to be allowed a certain amount of leeway and others not. A graded tax on the share profit made by these companies would avoid all the difficulties I have mentioned. We would have something clear-cut before us and the department would then have no trouble in enforcing the provisions of the measure. As it is, many judicial committees will have to sit; there will be all kinds of pull exercised, and everybody knows what will happen. I repeat, the legislation should remain in force for a specified period only. It should not be indeterminate.
Mr. ILSLEY; I regret that I appear to be giving an impression of stubbornness to the jommittee. I did adopt two or three suggestions of hon. gentlemen opposite. One was in reference to non-commissioned officers and men not being subject to the national defence tax.


Richard Burpee Hanson: That was a gigantic thing.


James Lorimer Ilsley: A considerable amount running into millions of dollars of revenue was involved in that concession, and an unknown sum in the future. But we are talking now about this particular section. I really think the drafting of an amendment such as is suggested would call for quite a bit of consideration.


Richard Burpee Hanson: I will do it in ten minutes.


James Lorimer Ilsley: The hon. gentleman will do it in ten minutes, but with all due deference I would want to look over it for at least another ten minutes.


Richard Burpee Hanson: All you have to do is to say, "This act shall expire at a date twelve months subsequent to the declaration of peace," and in the meantime the legislation would be in operation and collections be made.


James Lorimer Ilsley: I do not know what my hon. friend would do about the fiscal period in the midst of which the measure expired. There is a carefully considered provision here with regard to the division of fiscal periods and

the apportioning of profits for fiscal periods. All these matters have to be carefully considered.


Richard Burpee Hanson: That could be covered by a tax on the profits for the three months' period as shown by the books of the company.


James Lorimer Ilsley: Important questions arise
with regard to these matters. But I come back to this: We know nothing about what conditions are going to be like in this country at the end of the war, and I think the only sensible thing to do would be to make the legislation run for three or four years certain and then extend it. Parliament can terminate it by its own act at any time, and whatever we might do here to-night cannot bind future parliaments.


Richard Burpee Hanson: If the
occasion arises for extending the measure, then the whole situation would be under review, but if no limitation is put in here, the measure will run on ad infinitum for the rest of our lives and the lives of our children. I leave it to the Minister of Mines and Resources (Mr. Crerar). I ask him if he thinks as a business man that this legislation should be indeterminate. It is not right.


Thomas Alexander Crerar: As my hon. friend has
invited me to express my opinion, I do not think there is any great weight in the point he makes. Parliament is always supreme.


Richard Burpee Hanson: The government.


Thomas Alexander Crerar: There is nothing to hinder my hon. friend or any other member from raising this question twelve months from now and seeking to have the measure changed.


Richard Burpee Hanson: How would he do it?


Thomas Alexander Crerar: By a resolution moved by a member.


Richard Burpee Hanson: It would only express a pious hope and the government could throw it out of the window. It could not be done unless the government itself moved ' the resolution. Nobody knows that better than my hon. friend, and if he does not know it he should not be where he is.


Thomas Alexander Crerar: I thank my hon. friend for
the compliment.


Richard Burpee Hanson: The minister does know it.


Thomas Alexander Crerar: Parliament is responsive to public opinion. No one in the house wants to wreck business. This measure has found favour throughout the country.

Excess Profits Tax Act


Richard Burpee Hanson: As a war measure.


Thomas Alexander Crerar: As a war measure.


Richard Burpee Hanson: Right.


Thomas Alexander Crerar: No one knows how long the war may last or what conditions in this country may be when the war is over. I come back to what I said a moment ago, that it is always within the competence of parliament to reopen these questions and to amend the law if a change is desired.


Grote Stirling: May I ask the minister how long it took the people of England to get rid of the Defence of the Realm Act known as D.O.R.A. We know perfectly well the strife that went on year and year and year after year until only a few years ago D.O.R.A. was finally buried. This is a similar case.


Mr. SLAGHT:: Does the hon. member not realize that that is what the people of England wanted?


Grote Stirling: That I did not follow, Mr. Chairman.


Douglas Gooderham Ross: I think there should be a limitation on the length of time this bill is to remain in force so that the opposition in this house will have an opportunity to review it, and the only way in which that can be done is to fix a definite period for the operation of the measure. Otherwise the matter may never be brought up again.


Richard Burpee Hanson: Once more on behalf of business in this country which wants to know where it stands so that it can feel free to go ahead and make capital investments and embark on new enterprises, I plead with the minister to limit the period of the operation of this legislation. Surely that is in the interests of business itself, which next to agriculture is the lifeblood of the country. I am serious about this. We have expedited this bill; and I would ask the minister if he would consult his colleagues. He could ask leave for the committee to rise and report progress and come back to-morrow when a decision could be given on this point. Surely that would give the minister time to consult his colleagues and so avoid assuming a personal responsibility which naturally he does not want to accept offhand. I suggest that that is what should be done. If it is the united opinion of the executive that this limitation should not be in the bill, we shall have to bow to their decision.


James Lorimer Ilsley: I think that is a reasonable request. I may say that this is the first representation to that effect that we have had.


Richard Burpee Hanson: Well, we got the bill just a day or two ago. I got it on Saturday.


Thomas Alexander Crerar: The hon. gentleman has had it ever since the budget came down.


Richard Burpee Hanson: Excuse me, we had no such thing. There is nothing like this in the resolution, and all the discussion has been on the resolution. This bill came to my desk on Saturday, at noon, when I was about to try to have a little breathing space over the week-end. I got all five bills at once;
I was able to read some of them; but I tell the minister honestly that until this evening I did not know of the existence of this section.


James Lorimer Ilsley: I was going to say that the act of last September did not contain any such provision, and apparently, although business men and industrialists have been making representations almost continuously about this measure to the Department of Finance, it never occurred to any of them that a provision of this sort would be desirable.


Richard Burpee Hanson: Of course that is not what they were interested in. They were interested in the question of taxation. I came here last October to find out about the excess profits tax, and we were told by the young gentleman who sits in front of the minister to forget about the statute, that we were going to have a new one; so we took about three minutes discussing the matter, because I was quite satisfied that that is what the commissioner would recommend in the end,


James Lorimer Ilsley: If the hon. gentleman asks that this section shall stand until to-morrow, that will ibe all right. I suggest that we should pass the other sections if we can.


Richard Burpee Hanson: That is fair enough. I am agreeable.


Alphonse Fournier: Section 16 stands.


Richard Burpee Hanson: And the minister will promise me that the government will take this suggestion into consideration?


James Lorimer Ilsley: Yes.


Richard Burpee Hanson: That is fair.
Section stands.
Section 17 agreed to.
On the first schedule-Capital employed at beginning of period.


Richard Burpee Hanson: I have read over this list of what capital includes and what it shall be subject to in the way of
Excess Profits Tax Act

deductions. It seems to me that this has been fairly carefully drawn, 'but I should like to know whether, from an accounting point of view, it has been submitted to reputable accountants, either in the department or elsewhere. Does it include in both categories all those things which ought to be included, in the one case as capital, in the other case as deductions from capital which should be allowed? It seems to me to be quite comprehensive, but I am not certain that everything is included that should be included.


James Lorimer Ilsley: It has been submitted to chartered accountants, both in the department and outside. It has been discussed for a. very long time. I may say for the information of the committee that for a considerable time during the preparation of this measure it was contemplated that we would take share capital as the test of the capital. Share capital is a liability, or is regarded as such by accountants; it is not regarded as an asset; and so many qualifications had to be added to share capital-


Richard Burpee Hanson: As a
standard?


James Lorimer Ilsley: -as a standard, that eventually we decided to discard share capital as the basis. If hon. gentlemen will look at the act of September last or the act passed during the last war, they will find that share capital was taken as the basis of the determination of capital within the meaning of the act. Finally that was completely discarded.


Richard Burpee Hanson: Under
advice?


James Lorimer Ilsley: Oh, yes, the most expert advice, and after a great deal of discussion The basis of this is net assets.


Richard Burpee Hanson: That is about right, if you have all the additions and deductions that should be there.


James Lorimer Ilsley: I think they are all there.


Richard Burpee Hanson: This
would appear to me to be a truer conception of what should be the basis.
First schedule agreed to.
Second schedule agreed to.


Alphonse Fournier: Shall I report progress?


Richard Burpee Hanson: Just before you report the bill, Mr. Chairman, is the first schedule, paragraph 3(c), debts and borrowed money, sufficiently comprehensive to take care of all the liabilities of that kind? It takes in everything except the amount of indebtedness represented by income bonds or income deben-

tures, and I am just wondering why, if they represent an indebtedness, that should not be allowed too. There is a point there on which we might have a little explanation.


James Lorimer Ilsley: These income bonds and income debentures are not treated as bonds proper are treated. That is, they are not regarded as debts so much as they are deemed to be shares; they are treated more as shares are treated than as bonds are treated; and therefore, as we do not allow the interest as a deduction, we do not think these should be regarded as debts.


Richard Burpee Hanson: My impression is that sometimes income bonds or income debentures are issued by companies which have been in financial difficulties-in the parlance of the street, have "gone through the wringer"-and are issued to classes of creditors whose holdings might have been a senior security and who under the terms of the reorganization have to take something in the nature of a junior security. Income debentures are always a junior security. Originally they did represent real money and real indebtedness. Because of the exigencies of the occasion and the reorganization of the company, these income debentures are issued as a sort of sop to a real creditor. The government is now not giving any effect to that. But it may represent capital, and I think it should be a proper deduction.


James Lorimer Ilsley: If the hon. gentleman would look at section 6, subsection 1, pargaraph (k) of the Income War Tax Act, the whole situation will become plain on a little reflection. The income bonds and debentures to which he refers are regarded as debts that we do allow under section 6, subsection 1, paragraph (k) of the Income War Tax Act.


Richard Burpee Hanson: What are these, then?


James Lorimer Ilsley: These are others, and it says so here; the section reads:
. . . the amount of indebtedness represented by income bonds or income debentures, the interest on which is not allowed as a deduction under paragraph (k) of subsection one of section six of the Income War Tax Act.


Richard Burpee Hanson: I wish I had one of these $19,000 a year counsel to advise me. I have not been able to look up the Income War Tax Act, and I stand corrected by the minister. If they are in the category I suggest, they should be allowed, but I confess I am not familiar with the type of income debentures to which he is referring.
I do not really know what they are.


James Lorimer Ilsley: I could read the section here.

Excess Profits Tax Act


Richard Burpee Hanson: Perhaps the minister would do so. I am glad I do not have any of these bonds. They are not much good.


Douglas Gooderham Ross: In the light of this whole bill, I am inclined to advise any young man looking for a job at the present time to get into the income tax advisory business: he should be able to make plenty of money.


Howard Charles Green: Will the minister answer
the question I asked this afternoon regarding the taxation of gold mining companies.


James Lorimer Ilsley: The hon. gentleman asked
me this afternoon what the excess profits tax would be on a new gold mining company with a capital of $500,000 and with profits of $100,000, producing 10,000 ounces of gold. He also gave figures with regard to depletion and depreciation, which are not relevant. The amount of the capital is not relevant either. The company is a new gold mining concern. The excess profit would be $3.50 an ounce, because the comparison that is made is between this new company and a company which is assumed to be in existence and selling gold at $35 instead of $38.50.


Howard Charles Green: Assumed to have been in
existence.


James Lorimer Ilsley: I am putting it that way.
That is the way the excess is arrived at. Ten thousand ounces at $3.50 is $35,000. That is the excess which is taxed. In the first place, there is the 18 per cent income tax on that, which is $6,300; $6,300 must be subtracted from $35,000, leaving $28,700. Seventy-five per cent of $28,700 is $21,525. That is the excess profits tax which applies to the earnings of that mine; but in addition there is the income tax payable on $100,000, provided it is not subject to the exemption in section 89 of the act. It may be, but if it is not the income tax will be $18,000 which, added to $21,525, comes to $39,525, which would be the total tax on the earnings of the mine. The reason why 75 per cent of the excess is taken instead of 12 per cent of the income is that the former is the greater. As the hon. member knows, we take the greater of the two, and 12 per cent of $100,000 would be only $8,000 odd, while 75 per cent gives $21,525.


Richard Burpee Hanson: The minister has referred me to paragraph (k) of subsection 1 of section 6 of the Income War Tax Act. This is under the heading, "deductions from income." It is provided:
In computing the amount of the profits or gains to be assessed, a deduction shall not be allowed in respect of-
Dividends on income bonds or income debentures.
The distribution of earnings by any corporation to holders of its income bonds or income debentures. Provided, however, in cases where such income bonds or income debentures have been issued or the income provisions thereof have been adopted since 1930, in consequence of an adjustment of previously existing bonds or debentures bearing an unconditional fixed rate of interest, which adjustment, to the satisfaction of the minister, was occasioned by financial difficulties of the debtor corporation or its predecessor and was intended to afford some relief to the said debtor corporation or its predecessor, then the provisions of this paragraph shall not apply.
That is allowable under the overriding provisions, but what class of income bonds or income debentures does the minister refer to as coming within the purview of paragraph (k) of subsection 1 of section 6? If the company issues income debentures and sells them to the public, conditionally upon income being earned, that money goes into its treasury and is used in its operations. It is like borrowed capital but is contingent upon the income being earned and paid out of earnings. I do not want to pose as an expert, which I am not, but I should like to know why income from these debentures should not be taken into account as a deduction in the operations of the company. They have to pay it out of earnings, and if they do not earn it they do not pay.


James Lorimer Ilsley: I may not be precise or
accurate about this, but I think the explanation is this:	Let us think of two words,
shares and bonds. We know that dividends on shares are not regarded as expenses of the company in arriving at the income of the company.


Richard Burpee Hanson: They are
the result of income.


James Lorimer Ilsley: Yes. On the other hand,
interest on bonds is deductible from income of the company in arriving at the taxable income of the company. There is an intermediate doubtful class of securities called income bonds or income debentures. Some of these are treated for taxation purposes as if they were shares and some are treated as if they were bonds.


Richard Burpee Hanson: How in
the world can an obligation like a bond or a debenture be so treated? A bond is an evidence of debt and it may be secured; a debenture is an evidence of debt and usually is not secured by trust deed or some other charge on fixed assets. They are both debts.


James Lorimer Ilsley: Oh, no. They are not debts as to the income.


Richard Burpee Hanson: Not debts in relation to the income. The income is contingent, but the body of it is capital. The
Debts Due the Crown

minister is talking about deductions. It is borrowed money and on the general strength of that statement they ought to be allowed.


James Lorimer Ilsley: No.


Richard Burpee Hanson: I will not labour the matter.


James Lorimer Ilsley: The hon. gentleman sees the point; that is why he does not want to labour it.


Richard Burpee Hanson: You think I am trapped.
Progress reported.



DEBTS DUE THE CROWN


[Stage Direction]
Hon. J. L. ILSLEY (Minister of Finance) moved the second reading of Bill No. 99, to amend an act respecting debts due to the crown.
Motion agreed to, bill read the second time and the house went into committee thereon, Mr. Fournier (Hull) in the chair.
On section 1-Indebtedness in respect of certain provincial taxes.
Richard Burpee Hanson: We are now income tax collectors for the provinces. That is the idea, is it?


James Lorimer Ilsley: For some of the provinces.


Richard Burpee Hanson: And now ve are undertaking to use the machinery of the federal authority in order to collect these debts. We were receivers of taxes; now we ire to be collectors of taxes. We are taking a long step in this bill, are we not? I do not know that we should do this. I object to this sort of thing. We had an arrangement whereby we collected income tax for the province of Ontario, and, I suppose, some of the other provinces that have income taxes, in order to avoid a multiplicity of officials. Now we are to become collectors of taxes and to employ all the duress and oppression of the tax collector in order to hand over the money to Mr. Hepburn. I object to the principle; that is all I am going to say about the matter.


James Lorimer Ilsley: I do not think it would be particularly creditable to us to allow our own employees-and those are the only persons to whom this bill applies-to defy us, whether we are collectors or receivers. Whether we are collecting taxes for the province or for ourselves, that should not be permitted. In

one of the provinces there are quite a number of federal employees who have not paid and apparently will not pay the taxes due that province. They are protected from garnishee proceedings because they are servants of the crown, and there is no machinery under which the taxes can be collected except something of this kind. I think it is only consistent with rectitude and proper dealing for such steps to be taken as must be taken to make these federal civil servants pay the taxes they owe.


Richard Burpee Hanson: All right; then why not go the whole distance and take authority to collect for the grocer, the butcher, the baker and the candlestick maker? You see where the principle leads. You are going to collect the income tax of the province of Ontario from federal civil servants, but you are not going to help out the butcher and the baker who probably need the money a great deal worse than the province needs it.


James Lorimer Ilsley: The situation I mentioned is not in Ontario.


Richard Burpee Hanson: Perhaps I should not have used the word "Ontario," but I do not care where it is; the principle is exactly the same. The government is becoming a tax collector for another jurisdiction, and handing over the money to that jurisdiction. I object to the principle. I shall content myself with that, because I want to get rid of the bill.


Grote Stirling: What provinces are
involved and what taxes are being collected?


James Lorimer Ilsley: The situation arose in Manitoba, but of course the statute applies to all the provinces for which we are acting as collectors of their taxes. Those provinces are Ontario, Prince Edward Island and Manitoba.


Grote Stirling: Those are the provinces in which these taxes have been collected?


James Lorimer Ilsley: We have agreements with those three provinces.


Richard Burpee Hanson: What
about the converse of the case? Will the provincial governments collect the national defence tax from their employees?


James Lorimer Ilsley: I do not know.


Richard Burpee Hanson: You see, that is the converse of this proposition. Are they to do that for the federal treasury? You cannot garnishee their salaries for the national defence tax.


James Lorimer Ilsley: I think they will do that. I am not sure.

Royal Canadian Mounted Police


Richard Burpee Hanson: You think they will, but do you know?


James Lorimer Ilsley: No, I do not.


Richard Burpee Hanson: You see where this thing leads. What is to happen to the country if everyone is to become a tax gatherer? We are all taxed. Everything we eat is taxed; everything we wear is taxed, and there is no place we can go to escape taxation, unless it is Timbuctoo. I think I shall have to go down to Nassau and join Sir Harry Oakes. That is the only thing left to be done.


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


[Stage Direction]
Hon. P. J. A. CARDIN (Acting Minister of Justice) moved the second reading of Bill No. 30, to amend the Penitentiary Act and the Penitentiary Act, 1939.
Motion agreed to, bill read the second time
and the house went into committee thereon, Mr. Fournier (Hull) in the chair.
On section 1-Subsections repealed and reenacted.
Pierre-Joseph-Arthur Cardin: The object of this bill is very simple. It has to do with the transfer of convicts from the Yukon and Northwest Territories to gaols in the provinces.


Thomas Clement (Tommy) Douglas: Has the commission for which provision was made in the Penitentiary Act last year been set up, or have any steps been taken to implement that proposal?


Pierre-Joseph-Arthur Cardin: No, not yet.


Thomas Clement (Tommy) Douglas: Is the minister in a position to say why.


Pierre-Joseph-Arthur Cardin: I shall have to ask the Minister of Justice to answer my hon. friend.


[Stage Direction]
Section agreed to.
Bill reported.


[Stage Direction]
Hon. P. J. A. CARDIN (Acting Minister of Justice) moved that the house go into committee to consider the following resolution:
That it is expedient to introduce a measure to amend the Royal Canadian Mounted Police
Act to provide statutory authority for rates of compensation to members of the force injured by accident, and for the payment of expenses under the act out of any unappropriated moneys in the consolidated revenue fund, and to cover the status of pensioners who may be reengaged by reason of the existence of a national emergency.
Motion agreed to and house went into committee, Mr. Fournier (Hull) in the chair.
Richard Burpee Hanson: Would the minister explain the reason for the proposed legislation?


Pierre-Joseph-Arthur Cardin: This resolution provides for the introduction of a bill to amend the law governing the Royal Canadian Mounted Police. On account of the situation created by the war, more particularly, the commissioner of the mounted police is of opinion that it is necessary to reengage into the active service of the force a certain number of pensioners of the Royal Canadian Mounted Police. If those pensioners are brought in, a rearrangement will have to be made with regard to their pensions.
The proposed measure will also provide for the disposition of certain moneys given to the force. I refer to gifts, for example, being given by certain people to the mounted police. Under the existing law the minister has not the authority to place the money in the funds of the mounted police.


Richard Burpee Hanson: Is that what is meant by the words "to provide statutory authority for rates of compensation to members of the force injured by accident"? Surely that is not so?


Pierre-Joseph-Arthur Cardin: No. As the law stands at present, members of the mounted police who are injured by accident are compensated under authority of an order in council. The legislation proposed will regulate the situation and provide that instead of having compensation paid through an order in council, it will be paid through statutory authority.
The bill will also give authorization to the mounted police authorities to negotiate agreements with the municipalities. At the present time the mounted police may make agreements with the provinces for the policing of those provinces. The proposed legislation will empower the minister, under authority of the governor in council, to make arrangements with municipalities. It is intended to extend to municipalities the advantage of having the mounted police replace local police systems. I am informed that already the mounted police are operating at Flin Flon, and in another western town. This legislation, therefore, will provide the necessary authority to permit the making of agreements not only with the provinces but with the municipalities.

Royal Canadian Mounted Police
At the same time it will provide for taking into the mounted police force those police forces already existing in municipalities, and it will provide for the pensions of those provincial or municipal police officials.
I am informed by the Department of Justice that it is not the intention to develop to any great extent the policy of making agreements with the municipalities. However, in view of the fact that in one or two localities the mounted police are giving service, it is desired to have the power to extend those facilities to other municipalities when it is thought advisable, and when circumstances justify.


Alfred Johnson Brooks: Do the pensioners who are coming back retain the ranks they held prior to the time they became pensioners? If so, is it anticipated that the ranks of men at present in the force will be changed? It has been rumoured that there has been some dissatisfaction in that connection, and I was wondering if the minister knew anything about -the matter.


Pierre-Joseph-Arthur Cardin: The hon. member will realize that such a situation may not have been brought to my attention. It will be understood that I am acting only in the absence of the Minister of Justice. However, the pensioners now returning to active service in the force will be subject to the regulations and conditions established by the commissioner. I feel quite certain that the present members of the mounted police force will not be prejudiced by the return to service of the pensioners.


Douglas Gooderham Ross: This resolution has my hearty support. Anything we can possibly do to help the Royal Canadian Mounted Police, or to make it a more efficient force, would certainly have my approval. In the last little while, in fact for the past couple of years, I have had something to do with that force, and I do not believe there is any finer force of men in this world. I heartily approve the way in which they operate. They have a tremendously difficult job to handle at the present time, and they deserve every help we can give them.
One has to know them a little bit to realize what a fine body of men they are. From day to day their occupations are becoming more hazardous, and I believe we should give them every credit for what they do. Certainly they are living up to their record, one which they have built up through the years.
They have a very difficult job to do. They have to discriminate; they have to be politic; they have to use careful judgment, and must show a high degree of efficiency. When we realize that in Canada we have about
2,500,000	new Canadians, we must understand

the job of the mounted police has become more important and more difficult. When it is understood that of the new Canadians at least seventy per cent are loyal, and that it is the job of the Royal Canadian Mounted Police to sort out those who are loyal from those who are disloyal, the magnitude of the task becomes evident. The police must see to it that those who are loyal are not persecuted, and I believe they are doing a marvellous job along those lines. I happen to know that, myself, and I cannot give them too much praise for what they are doing.
We must be careful in Canada not to permit that seventy per cent of our new Canadians to be driven into the arms of the fascists or the nazis, something which may be done very easily. For instance, there are some people who will say of their fruit dealer: "I am not going to deal with him any more, because he is an Italian." I have many of those Italians in my constituency, and they are just as loyal as they could be. But that is the sort of thing which will drive them into the arms of the nazis and the fascists, and because of that we must be most careful.
I repeat that there is not a finer body of men in the world than the Royal Canadian Mounted Police. The knowledge they have respecting subversive elements in Canada is only now coming to light. I wonder if the government really appreciate the tremendous dangers which exist in connection with vital points in Ontario and Quebec. Situated in several smaller points throughout those provinces we find the very lifeblood of our hydroelectric and power facilities. That is something we should look after. When we are attempting to build up our industries I think we shall find, once we get into real production, that the chances for sabotage will be increased. We must remember that the Royal Canadian Mounted Police cannot do all this work. There should be some help from the dominion government. Looking after these places should not be a provincial job. There are tremendous manufacturing plants in Ontario and Quebec which depend upon hydro-electric power for their operations, and the opportunity for sabotage is considerable. Sabotage would be quite easy, and there should be direction by the dominion government to guard against this peril. There should be cooperation between the mounted police and the provincial police. We shall need more guards to take care of these places. A mere handful of men cannot take care of the Chippawa development, of the power line and all that goes with it from the Gatineau to Toronto, from Niagara Falls to Toronto or from Beauharnois to Montreal. These men should be well armed to be able to take care of the situation.

Royal Canadian Mounted Police
The mounted police know what the situation is; they know it is this divided authority that is getting us down. There should be a single authority in connection with this matter. The other day the Minister of National Defence for Air said that we had police, but they are still going to be police; we have soldiers, but they are still going to be soldiers. I quite agree that we do not need martial law, but there should be some authority capable of taking care of these vital points. If a couple of sticks of dynamite were exploded in certain places in Toronto the whole city would be put out of business. If certain substations were put out of operation the results would be tremendous. We should have more guards and they should be armed. It is no use having men armed with bows and arrows or something like that, guarding these places. They should be prepared to shoot because that is what the other fellows will be ready to do.
As I said before, the mounted police are doing everything they can. They are a fine body of men and they have told us what we must expect. I ask the government to keep busy on this matter and realize that this job of guarding these provincial plants should not be considered as a provincial proposition. We must give the provinces assistance. Troops should be ready at a moment's notice to take care of these vital spots. I have the greatest regard for the Royal Canadian Mounted Police; I know what they are doing and that they are living up to the old record they have always had.


Thomas Langton Church: This particular matter was before the committee last year when the estimates of the Minister of Justice (Mr. Lapointe) were being considered. We all regret that he is not with us to-night, the gifted patriot that he is, beloved by the people of this country. I regret having to say anything at all, because he has been so kind to me. I have pointed out before, the number of federal acts and statutes which must be enforced by the civilian police forces of this dominion. A policeman in Toronto was shot and killed when executing a federal order. His wife and children had nothing, and the result was that the police commission established a widow's and orphan's fund which is supported by an annual beauty show and other things of that kind, which have very doubtful support in days like these of war when we do not know who may soon own this country. As the minister said, we have a great organization in the mounted police. They are respected and honoured throughout Canada for real worth and service to our 95826-1 IS
dominion. If a member of that force is injured or meets with an accident in the discharge of his duty he receives no pension, which situation is being corrected by this legislation.
The principle of this resolution should be extended to all police forces, provincial and civic, which have to do with the enforcement of federal law. If so, it would cost only a trifle. These laws must be enforced by the municipal police systems. This resolution is not wide enough. I agree with its principle, but that principle should extend to the whole police system of Canada. The police forces of our municipalities should be part of a federal plan to pay pensions to all systems that suffer by law enforcement. They have to do with internments and many other federal matters in peace and war alike, and the enforcement of all law. The provincial and municipal authorities should be paid their out-of-pocket costs for enforcing federal laws, and there should be pensions for the dependents of those who die. When a policeman is shot enforcing a dominion statute, such as a revenue or customs law, or some military matter, his widow and children should be taken care of. Last session the Minister of Justice promised that he would have a survey made. I am not opposing the resolution because I do not like the idea of speaking while our dear friend is sick. I want to see his resolution go through, but I think something should be done to coordinate our police systems, and pay the cost of pensions in respect of all police who die in the discharge of their duty. Peace has its heroes the same as war.
Resolution reported, read the second time and concurred in. Mr. Cardin thereupon moved for leave to introduce Bill No. 112, to amend the Royal Canadian Mounted Police Act.


[Stage Direction]
Motion agreed to, and bill read the first time.


[Stage Direction]
Hon. T. A. CRERAR (Minister of Mines and Resources) moved the second reading of Bill No. 31, to amend the Soldier Settlement Act.
Motion agreed to, bill read the second time and the house went into committee thereon, Mr. Fournier (Hull) in the chair.
On section 1-Exemption of mines and minerals.
[Stage Direction]
1S74	COMMONS
Soldier Settlement-Mines and Minerals
Grote Stirling: The purpose of this
amendment is to enable the director of soldier settlement to grant to the original soldier settler the mines and minerals acquired with his land. Can the minister give us any idea of the number of original soldier settlers who are still occupying their lands?


Thomas Alexander Crerar: I am afraid I have not that information. I have a note here to the effect that at the present time there are 8,606 active soldier settler accounts. I assume that is probably the number, but this information can be given definitely when the estimates of the soldier settlement board are before the committee.


Grote Stirling: Many of these properties have changed hands, sometimes more than once, and I was wondering to what proportion of the soldier settlers of Canada this bill would apply. Is it only to the original ones that it does apply?


Thomas Alexander Crerar: It is estimated that mines and minerals were acquired with the land by the board in about 1,200 cases where soldier settlers have repaid their loans. That would not necessarily mean that the minerals had been transferred in all those cases. As I explained on the resolution stage there were cases where land acquired by the director of soldier settlement for resale to a soldier carried with it the mineral rights. There were cases where the mineral rights were reserved by the vendor of the land. This legislation seeks to make clear beyond any question of doubt that where minerals were acquired by the director of soldier settlement from the vendor of the land, the minerals will pass to the soldier settler when he has acquired clear title by paying off his indebtedness to the director of soldier settlement.
The hon. member for Vancouver South (Mr. Green), I think it was-the good-looking gentleman in the gray suit-


Howard Charles Green: That cannot be me; you
must have the wrong man.


Thomas Alexander Crerar: My hon. friend asked
whether in the event of the death of the soldier settler the minerals would pass to his estate. I am advised by the justice department that they would. That is, assuming, of course, that the estate paid off the indebtedness on the land and that it did not revert to the director of soldier settlement. But in the event of the land reverting to the director of soldier settlement and being resold to a civilian, the mineral rights would not pass. But they do pass to the soldier settler or Bis heirs when his indebtedness has been paid.


Mr. DOUGLAS (Weybum):: Would the minister explain how it is that the director of soldier settlement has the power vested in him to dispose of these mineral rights? I took it for granted that they would be within the jurisdiction of the provincial government since the national resources have been returned to the provinces.


Thomas Alexander Crerar: If the land was acquired
by the director of soldier settlement in previous years and title to the land secured by the director to be transferred to the soldier settler when he had paid off his indebtedness, then the minerals would of course pass with the land. If the soldier settler leaves the land and it reverts to the director of soldier settlement, the director can resell the land to a civilian, and in that event the minerals do not pass but remain to be disposed of by the director.


Thomas Clement (Tommy) Douglas: They do not
revert to the province?


Thomas Alexander Crerar: No, not in that event.


Grote Stirling: What about the original
soldier settler to whom the minerals did not pass but who some years ago received clear title to the property, having paid off all his indebtedness? Will this legislation cover his position?


Thomas Alexander Crerar: No. Suppose, for illustration, that the director of soldier settlement purchased land from a vendor, and the vendor reserved the mineral rights. They did not pass; they remained with the vendor, and he makes what disposition of them he wishes. The land will pass to the soldier settler when he has completed his payments. He will receive clear title to the land in this case but not to the minerals. This legislation deals only with cases where the minerals were acquired by the director of soldier settlement from the vendor in the first instance, and when the soldier settler completes his payments he or his estate gets the minerals.


Grote Stirling: I quite follow that, but I am referring to the case where the director of soldier settlement acquired the mineral rights and the property was sold to the original soldier settler who, four years ago, completed his payments and received his title. Do these mineral rights pass to him under this legislation?


Thomas Alexander Crerar: Yes; the purpose of this legislation is to make clear that they do pass.


Howard Charles Green: Will the soldier settlement board convey these mineral rights to the soldier settler now?

Supply-Fisheries-Administration


Thomas Alexander Crerar: Yes; that is the purpose of the legislation, to make clear beyond any question of doubt that they have the power to do it.


Howard Charles Green: There will actually be conveyances to each of these soldier settlers?


Thomas Alexander Crerar: Oh, yes, they go to the soldier settler.


Mr. WRIGHT:: In the case of school lands in Saskatchewan, will the mineral rights go to the soldier settler?


Thomas Alexander Crerar: No. If the lands were acquired from the crown by the director of soldier settlement the mineral rights would not pass with those lands because they were reserved by the crown. This measure deals with cases where the lands were disposed of by the crown many years ago. As I stated on the resolution, prior to 1886 as I recall now, there was no reservation of minerals of any kind in the disposal of lands by the crown to private parties. Following 1886 for a period of years, precious metals were reserved but other minerals were not. Later on, all minerals were reserved, and subsequent to that time any lands alienated from the crown to private parties did not carry with them the mineral rights. But this legislation deals with cases where the lands originally disposed of by the crown carried the mineral rights. The soldier settlement board in the course of its operations acquired some such lands, and this, let me repeat, is to make clear that the director of soldier settlement can pass the mineral rights on to the soldier.


Howard Charles Green: Have there been any cases where the mineral rights have been conveyed to some third party although the soldier holds title to the land itself?


Thomas Alexander Crerar: I know of no case where the mineral rights were transferred to a third party, and I do not think there is any such case.


George Hugh Castleden: How many will be
affected by this legislation, and in what provinces?


Thomas Alexander Crerar: I cannot give that information at the moment, but I think I am correct in saying that practically all the cases are in the prairie provinces-with a limited number in Ontario.


[Stage Direction]
Section agreed to.
Bill reported, read the third time and passed.
95825-11SJ
[Stage Direction]
The house in committee of supply, Mr. Fournier (Hull) in the chair.

[Stage Direction]
77. Departmental administration, $129,300.
Richard Burpee Hanson: Would the minister be good enough to give to the committee and to the country a statement of the present set-up of his department. I understand that the late deputy minister died during the year, that a new deputy minister was appointed, and that there were certain promotions. I think we should have an extended statement of the whole set-up of the department.


Hon. J. E. MICHAUD (Minister of Fisheries):: Since the close of the last fiscal year there have been three changes at the headquarters of the department: First, the appointment of a deputy minister. The position has been vacant for over a year through the resignation of Doctor Found in the latter part of 1938, and the appointment of a successor was made as of April 1, 1940. Second, in the meantime the duties of deputy minister had been discharged by Mr. J. J. Cowie, director of fisheries promotion and inspection. Shortly after the beginning of this year, Mr. Cowie intimated that, on account of ill health, he could no longer continue	in	the service.	He	asked to	berelieved of his duties, and took his leave of absence pending final retirement, and when he retired the position of director of fisheries promotion and inspection was abolished. Third, Major D. H. Sutherland, who was supervisor of eastern fisheries with headquarters	at	Halifax, was	promoted to	theposition	of	assistant deputy	minister	and
director of eastern fisheries, and his duties will include those which came under the position of director of fisheries promotion and inspection, formerly held by Mr. Cowie.


Richard Burpee Hanson: Mr. Sutherland is made assistant deputy?


Joseph Enoil Michaud: Yes. The rules of the department require that there should be one assistant	deputy to take	the	place of	the
deputy in case of illness or other temporary absence from the department, and generally there is someone appointed or having that title and discharging the duties assigned to him under the departmental set-up and regulations.
The retirement of Mr. Cowie and the appointment of a director of eastern fisheries will enable us to make a reduction in expenditures, saving about $600 a year.

Supply-Fisheries-Administration
If I may be permitted, I should like to say a few words regarding the persons who have been appointed, and regarding Mr. Cowie, who has resigned.
First, in order, Doctor Finn joined the government service in 1925, after graduating from the university of Manitoba. After a short time attached to the then biological board of Canada at Halifax, he was sent to Prince Rupert in British Columbia where, in 1926, the biological board decided to establish a fisheries experimental station. At Prince Rupert, it was Doctor Finn's task to organize and to direct technical investigation into the fishing industry, and it was during his time as director that the major work in connection with the building and development of the station took place. The work brought him into close contact with all phases of the fishing industry, an experience which enabled him to gain knowledge of the fundamental problems connected with the operations, as well as giving him an intimate knowledge of the fishermen themselves.
In 1929 he resigned from the research board's staff to become the organizer and director of a scientific division for the British Columbia Packers, Limited, one of Canada's largest fishing companies. Later he went to Cambridge, England, and on returning to the dominion in 1932 he was reappointed director of the Prince Rupert station, where he remained until 1934, when he was transferred to the post of director of the Atlantic experimental station at Halifax.
While holding the Halifax position, Doctor Finn was seconded to the salt fish board in 1939, as the board's chairman. He was carrying on the duties of this latter post at the time of his appointment as deputy minister of the department in the spring of 1940.
His duties with the fisheries research board took him into the field both east and west and gave him an opportunity for a study of conditions on both coast-lines, as well as of becoming generally acquainted with the administration services on both coasts; thus 'being continually and closely in touch with questions of much importance to the fishermen and the fishing and processing companies, he became widely informed as to the industry's operations and needs.
Mr. J. J. Cowie has retired after nearly forty years' association with the service of the dominion in the Department of Fisheries. As a matter of fact, he was eligible for retirement some time ago, and for reasons of indifferent health he had intended to leave the service at the end of 1939. However, be continued on duty until the new deputy minister had been appointed and had reported for duty.
(Mr. Michaud.]
Mr. Cowie's first connection with our fisheries service was in 1903, when he came to Canada at the request of the Canadian authorities to look into questions related to the development of the herring fishery. He continued the investigations in this field for several years on a part-time basis, returning to his native Scotland during those seasons which were unsuitable for his investigational work. In 1909 he was appointed to the headquarters staff of the then Department of Marine and Fisheries and he has been continuously in the fisheries service since that time. He had an important part in the organization of the outside staff of fisheries officers and the development of the departmental statistical system, and he was in large measure responsible for the creation and development of the present system of fish inspection in the dominion. He also has had r, very important part in making the fisheries research board, formerly the biological board, an increasingly effective aid to the fishing industry, and for a number of years past he has filled the position of honorary secretary, one of the board's two executive offices.
Mr. Cowie, as will be seen, has had a long fisheries service and I am glad to be able to testify that his service has also been exceedingly useful. Hon. members who know Mr. Cowie-and I think most of the members from the sea fisheries districts, at least, have had contact with him-will know that he has contributed valuably to fisheries progress in Canada, and they will share my hope that he may thoroughly enjoy his years of retirement.
As has been pointed out above, the position formerly occupied by Mr. Cowie has been abolished, but the duties will become part of the new office, assistant deputy minister and director of eastern fisheries, to which Mr. D. H. Sutherland has been appointed.
Early in the last war Mr. Sutherland gave up his studies at Mount Allison university to enlist with the Canadian forces and served overseas throughout the duration of the conflict. For valiant service he was awarded the military cross. Following demobilization, he was appointed to the position of district inspector of fisheries. He was selected by the civil service commission for promotion to the new Ottawa position of assistant deputy minister and director of eastern fisheries as from July 1.
In addition to his general work as director of eastern fisheries, Mr. Sutherland will carry on some of the duties formerly handled by Mr. Cowie. It is probable that he will also assume the work of honorary secretary of the fisheries research board.
These are the only changes made at headquarters in the last few years. As I have already

Supply-Fisheries-Administration
stated, this reorganization will enable us to save $600 in salaries of officers and to make further saving by reason of the fact that the present deputy minister will continue to act as chairman of the salt fish board, without remuneration.


Richard Burpee Hanson: And without much labour.


Joseph Enoil Michaud: With considerable labour in view of the representations that are now being .made from the fishing districts. The new set-up will enable us to save $8,600 in salaries at headquarters. Apart from these changes, the set-up is what it has been for the last ten or fifteen years. There have been neither additions nor subtractions.


Richard Burpee Hanson: I am
obliged to the minister for the information he has given. The department either needed a deputy minister or it did not. Why was the vacancy left unfilled for a whole year, with Mr. Cowie in charge, a man long past the superannuation period? The department was practically without a head for a year. Why?


Joseph Enoil Michaud: Mr. Cowie had had a long experience in the department and was willing to carry on as deputy minister, and associated with him were some other officials who were willing to share the work. We carried on for over a year and might have continued longer had Mr. Cowie's health permitted him to remain in the department. On his retirement, however, we had to make some appointments, and in appointing a deputy minister who could fill two major positions, and with the promotion of Major Sutherland, we felt that the new set-up would be eminently efficient, and that we could have the work done with less expense than formerly. The new deputy minister's salary is $8,000 and the former deputy minister's was $9,000. The salary of the head of the salt fish board was $7,000. We are saving $8,000 by combining the two positions and $600 by abolishing the position formerly held by Mr. Cowie and appointing Major Sutherland as director of eastern fisheries.


Richard Burpee Hanson: The details of services given on page 88 of the estimates do not indicate anything of the sort. The only difference is a saving of about $700, and there are more officials in the head office than there were a year ago. The two stories do not gibe.


Joseph Enoil Michaud: That is correct. The setup which appears in the estimate is the set-up which existed on March 31, 1940. The changes I mentioned were made since then. The deputy minister was appointed after the
first of the fiscal year, taking office as from April 1. Mr. Cowie resigned on June 23 and Major Sutherland was appointed as of July 1. It is true that the set-up as it appears in the estimates does not show any material changes from that of last year, but conditions have kept changing practically every day and it is difficult to make a definite estimate of what the personnel may be.
For example, within the last month or two some of our men have enlisted. Their positions must be kept open. Some have been seconded to other departments because of their experience and ability. As a matter of fact, at present we are short seven of our employees at headquarters, through enlistment, loaning employees to other departments and some vacancies which have occurred. These positions are all established by the civil service commission, and we would be taking quite a chance if we decided to abolish them in these days, since some may return and others may not. and we may require further assistance. We have at least six established positions for which we must vote salaries, but I do not believe those salaries will be paid during the year unless those who have resigned or taken leave of absence decide to return. To provide for this situation we have asked a little more in the temporary vote in order to make sure that we shall have funds with which to pay any temporary help we may need to employ during the year, but the intention is to keep the cost as low as possible.


Mr. NEILL:: What has become of the
publicity agent?


Joseph Enoil Michaud: That position has been established for many years. The incumbent retired on superannuation, and the civil service commission appointed his successor who now is serving his probation period. The treasury board has placed him on the list of temporaries, pending issuance of his certificate of permanency.


Richard Burpee Hanson: Why do you need a publicity agent as well as a director of publicity? I know the director of publicity; he was an old school friend of mine. The job was created for him; there never was any such .position before he came here, and he won his spurs by writing political editorials. He did not know any more about fish than I did, perhaps not nearly as much Why do you need both these men? I do not think there is any necessity for them, and I think the position should be abolished.


Joseph Enoil Michaud: The position of director of publicity has been established in the department for a long time.

Suppl y-Fish eries-A dministra tion


Richard Burpee Hanson: Oh, no. I was in Ottawa when he came here. This was a new job created just prior to 1930.


Joseph Enoil Michaud: Shortly after 1930 another similar job was created, that of assistant director of publicity. I do not know what the purpose wras, but the salary was the same.


Richard Burpee Hanson: When was that? I do not remember anything about it.


Joseph Enoil Michaud: That was in 1931.


Richard Burpee Hanson: Who was appointed?


Joseph Enoil Michaud: Mr. Fisher.


Richard Burpee Hanson: He has
been superannuated since then.


Joseph Enoil Michaud: Yes.


Richard Burpee Hanson: Then I suggest that the minister should not fill the oosition at all. It is absolutely unnecessary.
While I am on my feet I should like to ask why the present incumbent was chosen as deputy minister. What administrative experience did he have? He is a technical man, a scientific man. The deputy minister of fisheries primarily is the administrator of the department. He should be a business man, an executive, rather than a scientific man. What experience did the present deputy minister have in administration, and why was le selected?


Joseph Enoil Michaud: The fact that a person
possesses some scientific qualifications does not necessarily mean that he has no administrative ability. The present incumbent has been in charge of important branches, of the department almost continuously since 1925, either on the Atlantic or on the Pacific coast, and he has shown ability as an administrator as well as a scientific man. I think we were most fortunate in finding a man possessing scientific and also administrative qualifications and ability. For that reason alone the present incumbent was selected, having in view his attainments both as an administrator and as a scientist.


Richard Burpee Hanson: He was an official of the biological board from the time he left university until about 1934. Later he went into the salt fish board, and I suppose the minister is aware of the protests that were made by certain interests with regard to his appointment to that position,


Joseph Enoil Michaud: No, I am not aware of any protests against his appointment.


Richard Burpee Hanson: What did the salt fish board accomplish with respect to the marketing of salt fish from the maritime provinces, and what is the position to-day?
rMr. Michaud.]


Joseph Enoil Michaud: The salt fish board was created to reorganize on the Atlantic coast the salt fish industry, which was absolutely disorganized. The board was set up under an act of parliament passed last year. The board had to act very quickly because the bill was passed only towards the end of last June, and they had to see to it that those engaged in the salt fish industry were organized in such a way as to enable them to continue in that industry and earn a livelihood. They had to instruct the fishermen; they had to encourage them, and they had to direct them as to where to market their products. Last year parliament voted $800,000 to help those fishermen, and it was the duty of the board to use that money to the best possible advantage of the fishermen.


Richard Burpee Hanson: In what
respect?


Joseph Enoil Michaud: In using that money-


Richard Burpee Hanson: To help
win the election?


Joseph Enoil Michaud: No, I would not say
so-to organize a foundation for that industry and pay those people enough money to enable them to live and continue their work. They organized the deficiency payment scheme which under the law they were particularly instructed to do and which I think has been profitable to those people in the last year.


Richard Burpee Hanson: Did the
board have anything to do with the marketing of salt fish? If so, is it true that that board went to New York for a marketing agent instead of selecting a Canadian for that purpose? I understand that is the case, and that the Halifax Chronicle, and a senator from another place, whose name I shall not mention, but who used to grace this chamber with his presence, his oratory, and sometimes his strong language-I shall not say anything more than that-condemned the appointment, and called the minister out. In fact, if I remember correctly, I think the senator demanded the minister's resignation. Did this salt fish board have anything to do with the marketing of salt fish? If so, how successful were they-or how unsuccessful, because I believe that is the better way to put it? There is no doubt about it, that the plight of salt fishermen in the maritime provinces is pitiful.
We hear a great deal of talk about the incomes of western farmers. H hon. members want to see real poverty, let them go down to the shores of Nova Scotia and New Brunswick, to Caraquet cove, and they will see poverty the like of which they never dreamed.

Supply-Fisheries-Administration
In some years those fishermen have a cash income of less than $120-and they have no farms to live on.


Mr. POTTIER:: That is why they should get the bonus, under the salt fish board.


Richard Burpee Hanson: They
certainly should get something. But what has been done, I should like to know.


Vincent-Joseph Pottier: They were given the bonus.


Richard Burpee Hanson: They were given a dole.


Joseph Enoil Michaud: Under the circumstances it was absolutely necessary for the salt fish board to act as they did. They received instructions from parliament to do so. Parliament voted money for a purpose, and it was expended for that purpose. In connection with the investigation of markets, and the engaging of a New York agent, may I read part of section 5 of the Salt Fish Board Act, which was enacted last year by parliament:
The board shall (a) investigate and report to the minister upon the marketing of salt fish in the export trade and explore all possibilities of opening up new marketing outlets; (b) devise and recommend to the minister a plan, or plans, which may be adopted for the orderly marketing of fish, salt or to be salted, with a view to improving conditions and bringing greater returns to the primary producer and the exporter.
One of the first things the board did, after organization, was to comply with the obligation imposed upon it under the terms of section 5 of the act. In other words, it proceeded to investigate the marketing of salt fish in the export trade, and to explore the possibilities of opening up new marketing outlets.


Richard Burpee Hanson: And what is the result?


Joseph Enoil Michaud: The result is this: In view of conditions which have developed since the spring of this year in countries where we usually marketed our salt fish, the salt fish board had to revise its recommendations. It is a well known fact that because of conditions which have developed in Europe and in the West Indies in the last two months, the purchasing power of prospective customers has been practically nullified, and economic conditions imposed by the blockade, conditions which are changing from day to day, have compelled the board to change its plans of marketing.
For example, there are large quantities of salt fish in existence to-day which were destined to go to European markets but which, in view of recent developments, have to be practically dumped on the West Indies
market, where we had hopes of regaining our position and of creating a new market for our people. So, in view of those conditions we have had to change our plans in connection with our marketing programme. We are practically in the same position as other industries. Because of recent conditions we cannot plan more than a few days ahead. Because of those conditions, naturally the salt fish board cannot lay down hard and fast rules to guide the industry in connection with the marketing of salt fish for the next year or the next two years. We have to accept conditions as they change from day to day, and try to do the best we can under the new circumstances.
But under the scheme of payments for salt fish we have paid the salt fish producers about $495,000, and in those payments there has been no discrimination. It has been done on a scientific basis, and with a view to reestablishing those people in an industry in which they have absolutely lost confidence and lost heart.


Richard Burpee Hanson: So far as
the marketing end is concerned, I understand the minister is telling us that the work of the board has been nil. That is about the effect of what the minister has said, is it not?


Joseph Enoil Michaud: No.


Richard Burpee Hanson: Then, we have not had a market in continental Europe since before 1935, except for canned lobsters and the like of that. For a long time salt fish has not been taken to the Mediterranean from the maritimes, Newfoundland, Gaspe or any of those places. It has not been taken in any quantities comparable with those taken some years ago. That market has been lost to us for a long time, because of exchange conditions, and their greatly depleted power to purchase. The war in Spain helped to wipe out that market, too.
I thought the salt fish board was going to open up a new avenue for sales of salt fish in the West Indies, Central America and South America. But from what the minister has told me I would understand that nothing has been accomplished in that respect. Is that right?


Joseph Enoil Michaud: No. The salt fish board
was organized to investigate and to formulate a plan. It was not organized to market the fish in the first year of its appointment.


Richard Burpee Hanson: What
about this man from New York?


Joseph Enoil Michaud: The man from New York was hired by the chairman to act as investigator. He was to help the chairman, and to furnish him with information he needed, which he had to have and which, in fact, he received.

Supply-Fisheries-Administration


Richard Burpee Hanson: And paid
for.


Joseph Enoil Michaud: Yes, and paid for.


Richard Burpee Hanson: Out of this grant.


Joseph Enoil Michaud: I am sure he paid for it.


Richard Burpee Hanson: I bet he
did.


Joseph Enoil Michaud: It is impossible in these days to get investigators in connection with salt fish to work for nothing.


Richard Burpee Hanson: Oh, we
have scores of dollar-a-year men here. The Minister of Munitions and Supply knows about that.


Joseph Enoil Michaud: But that is a new development.


Richard Burpee Hanson: Yes, with
the war.


Joseph Enoil Michaud: That is a new development. But I do say in all seriousness that so far the salt fish board has accomplished something. It has been appreciated by the fishermen, and I believe has been appreciated by most of those interested in the export of salt and dried fish. I have had no criticism of any kind levelled at the department or the board since it has begun to function.


Richard Burpee Hanson: Why was
it necessary to go to New York to get a man to advise the board? Are there not men in the fish trade in Halifax, Lunenburg and other parts of Nova Scotia who know about the marketing of salt fish? They have been in it for a long time.


Vincent-Joseph Pottier: And some wrecked the
fishermen.


Richard Burpee Hanson: I do not think they wrecked the fishermen.


Vincent-Joseph Pottier: You said that yourself.


Richard Burpee Hanson: I do not
think they will agree with the hon. member for Shelburne-Yarmouth-Clare, when he says that they wrecked the fishermen. I think there are men in the fish business in Nova Scotia who would have been able to advise the minister just as well as any man with a foreign name from the city of New York.
So far as aid given to the fishermen is concerned, I am in hearty accord with it. As a matter of fact, the fisherman has been the forgotten man in parliament. I am going to make a frank admission; he was the forgotten man in parliament from 1930 to 1935, too. And he has been forgotten since. That is a
lMr. Michaud.]
pretty frank statement. We did not do anything for the fisherman and his condition has become continually worse.


Mr. KIRK:: Confession is good for the soul.


Richard Burpee Hanson: I believe in telling the truth. His gear has been wom out; his nets are gone; his boats are no longer up to date and he should have complete new equipment. That was one of the purposes of this grant. I am heartily in accord with the principle; all I would say is that it probably is not sufficient. I am informed that there were farmers in Prince Edward Island who qualified as fishermen and obtained grants. They were not fishermen, but they decided to embark upon the business because there was a government hand-out going on. There have been a number of abuses there. Did this government contribute to the establishment of a new fish processing plant at Caraquet, and was that contribution made out of this grant?


Joseph Enoil Michaud: The federal government made what I would call an indirect contribution to the erection of the fish plant at Caraquet. This grant was distributed to the provinces. and the allotment to New Brunswick was $100,000. Last summer they asked for leave to use part of their grant to help to finance a fish plant.


Richard Burpee Hanson: That is the provincial government.


Joseph Enoil Michaud: The provincial government sent a delegation to Ottawa to establish the bona fides of the undertaking.


Some hon. MEMBERS:: Hear, hear.


Joseph Enoil Michaud: The applause is for the hon. member for Greenwood (Mr. Massey) who appears in the chamber for the first time in many weeks. I am glad to join with the rest of the members in offering him greetings.
The provincial authorities stated that in their opinion this was the best way to help the needy fishermen of that district, and we authorized them to use the money for that purpose.


Richard Burpee Hanson: Part of
the $100,000?


Joseph Enoil Michaud: 


Major James William Coldwell: Who owns the plant?


Richard Burpee Hanson: I will tell the hon. member who owns the plant; just leave that to me.

Supply-Fisheries-Administration


Joseph Enoil Michaud: I understand that this company has a contract with the province whereby it has undertaken to perform certain things.


Major James William Coldwell: What is the value of the plant?


Joseph Enoil Michaud: Between $150,000 and


Richard Burpee Hanson: It is supposed to be worth $250,000.


Joseph Enoil Michaud: That is possible. We had a certificate from the provincial authorities that the money which we had authorized them to use had been fully expended and that the capital investment was far more than what "we had undertaken to pay over to the province. We dealt with the province, not with the company.


Major James William Coldwell: Am I to understand
that out of a grant of $100,000 to help needy fishermen, $75,000 was granted to a company and that this represented roughly one-third of the entire amount spent by that company?


Richard Burpee Hanson: Yes.


Major James William Coldwell: And we have no interest in that plant now?


Joseph Enoil Michaud: No.


Major James William Coldwell: This government is making a pure gift.


Joseph Enoil Michaud: The $100,000 was originally a gift from the federal to the provincial government.


Richard Burpee Hanson: I think I can give the committee a good deal of information about this matter. The plight of the Caraquet fishermen was bad indeed; no one denies that. They had lost their markets, and the provincial government of New Brunswick was being pressed to render assistance. Not only had these fishermen lost their markets, but their boats and gear had become obsolete. After the Canada-United States trade agreement had been entered into, it was decided to try to establish in New Brunswick a fish processing plant which would take care of a large part of the catch along the Caraquet coast. The Gorton Pew Company of Gloucester, Massachusetts, are a large corporation with an excellent standing financially. They could have carried out this whole undertaking on their own without the assistance of any government if they had been so disposed. They were not particularly interested in this matter until representations were made to them by representatives of the province of New Brunswick. I think these were made
in absolutely good faith. I know the gentleman who started this proposal, and he finally put it through. I believe he was actuated by the best motives, but he approached this corporation in the spirit of a mendicant and I say that without wanting to put any improper interpretation on the word. He begged them to come up there and do something.
The result was that a contract was entered into between the province of New Brunswick and a New Brunswick subsidiary of the Gorton Pew Company of Gloucester. This subsidiary was set up, all the stock being owned by the United States concern. I have not the terms of the contract before me, but I understand that the province of New Brunswick undertook to contribute seventy-five per cent of the total capital cost of this plant. If the Gorton Pew subsidiary company of New Brunswick do certain things and fulfil certain conditions, after a time the whole plant becomes theirs. I ask hon. members to bear that in mind. I do not think it was ever intended that this plant should be given over to this smart crew -from Gloucester. The government of New Brunswick were probably quite smart; they knew that this vote for the fishermen was going through this house. They got this government, through the minister, to switch $75,000 of this money and thus relieve the province of a capital obligation which they had entered into. This money which has gone into this plant was a gift to the province of New Brunswick, presumably to help out the fishermen.
I am not going to condemn the proposition from a business point of view. The plant has been in operation for only a few months, and its success has yet to be proven. But I *have been hearing some strange stories about -the construction of the plant and I am going to ask the minister certain questions. I am not going to embarrass him by expecting answers to-night because I do not think he can give immediate replies, but I want him to get the information before this item passes. First of all, I want to know the total capital cost of the plant. I think it was in the vicinity of $250,000. I want him to find out from the province of New Brunswick what the arrangement is with the Gorton Pew Company. I have never seen the contract; I suppose if I were in the provincial legislature I could get it, or perhaps I could get it now if I asked for it. The minister ought to know the terms of the contract. I think he will find that the province has paid seventy-five per cent of the total capital cost, including the contribution from this government, and that if certain conditions are fulfilled in connection with turn-over and so



Supply-Fisheries-Administration
forth, this wholly owned subsidiary of a United States company will be given this plant after a period of time. The minister has told us that $75,000 was the contribution.
The next thing I want to know is whether any architect or firm of architects was engaged to draw plans for the plant. I am informed that a local man with no experience whatever in drawing plans for factory construction of this type was engaged. He was a local architect who could build a house or a brick block but he knew nothing about factory construction. In other words, he was engaged on a hand-out basis from the provincial government.
Next, were any difficulties encountered in the construction of the plant? I am not holding the minister himself responsible for this, although in a sense he is responsible if he did not take due precautions to see that federal moneys were properly expended.
This is what I have to say about this plant, on the information that has been given to me. I have already spoken about the architect having no previous experience in factory construction. Second, the foundation of the building is at least three feet too low. Third, no provision was made for ventilation in the basement, and that part had to be done all over again. The ventilation had to be installed in the basement at a greater cost. It will be understood by the committee that this is a freezing plant using chemicals, and there is an escape of vapours and gases. Prior to the installation of the ventilation, and due to the absence of it, a young man was overcome by gas fumes while working in the basement and almost lost his life. That was the reason vhy they had to put in a ventilation system.
Next, after the building was finished, part of one of the brick walls had to be torn down so that some necessary machinery could be installed in the building. They built the wall before the installation of the machinery, when they must have known that machinery was coming in, and then afterwards they had to tear down the wall to get it in.
Next, the first cement floor is a disgraceful job, not providing enough slope to force the water and offal into the gutters. That is the architect's fault, if he did not draw the proper plans. I am not blaming the builder at all.
Next, additional sewerage had to be installed after the contractor had been paid. There was not sufficient sewerage to carry off the flow of water and offal from the fish plant.
The steam engines are not of standard build, and they began to heat after being in operation for a short time, and had to be taken down and repaired.
Next, the drying and fertilizing plant broke down on its first trial, and is not giving satisfactory service.
[Mr. R. B. Hanson.)
I want to know if any additional cost was incurred as a result of the difficulties which I have described, and if so, how was such cost borne? Was it borne by the contractor, or was it borne by the provincial government, or did this government bear any part of it? I assume from what the minister has said that there has been nothing further from this government beyond the contribution. But did the Department of Fisheries at Ottawa have a fully qualified representative or inspector examine the plans of the architect before construction of the plant began? The answer is no, I assume.
Next, during the construction of the plant, into which we are putting $75,000 of public money from this treasury, and much more from the provincial treasury, did the federal government have a fully qualified representative or inspector examine and report from time to time on the quality and efficiency of the work being undertaken? Did the provincial government have any such official examine the work as it was being done?
I propose to leave the matter there and to give the minister some time to investigate and report. I am not going to attribute any misconduct at all to the minister. The fact is that he gave a hand-out to his friends in the provincial government of New Brunswick. They expended the money I think rather extravagantly. I know that the whole proposal is uneconomic. If we have to subsidize a fish processing plant in the maritime provinces to the extent of seventy-five per cent of the capital cost-yes, the Minister of Mines and Resources (Mr. Crerar) may look askance at that statement but that, I believe, is the position-if we have to pay 75 per cent of the capital cost to establish this plant, the whole thing is wrong, uneconomic and ought not to have been done, and we ought to devise some other means of helping the fishermen, because God knows they need it.
I am going to ask the minister if he will investigate this matter. I make no charge of dereliction of duty on his part, but I should think that before he would hand out over $75,000 he would take some precautions to see that the money was properly expended. Did the minister understand when he made this contribution that it was to be a free gift to a group of Americans who would not invest their own money in the plant, or was it just an indirect form of hand-out to the Caraquet fishermen?
It may accomplish its purpose. I hope it will. I hope something will be done for the people down there because I know something of their condition and I sympathize with them. They have been in dire straits, and if it had not been for the huge amount of

Supply-Fisheries-Administration
money spent by the provincial government on the construction of highways in the last three years, every one of those people would have been on relief. I am afraid that a great many of them have been on relief. What they are doing this year I do not know because there is no relief and no road work in New Brunswick, and the municipality is not able to grant them any relief. I hope that this plant has taken a reasonable amount of fish, that the processing of the fish and the marketing are going on and that it may be of assistance to the people down there.
I hope that the fishermen are paid decent prices for their fish. That is an important consideration. What control is there over this American-owned company to see that the fishermen of the Caraquet coast are paid a living wage for their catch? That is a query in my mind. I do not know but I think the minister ought to tell us, and I am putting this on the record so that he will have it before him and be able to give us the information. What relief will there be for the fishing industry on the Caraquet coast as a result of this expenditure? I do not see how from an economic point of view the venture can be justified, but if the thing works out well in the end, if it produces the results of taking these people off relief and giving the fishermen a market for their catch at decent prices, I would be willing to forget the uneconomic aspects of the whole transaction.
I think I have been fair in the criticism I have made. I am looking for information. I hope the minister will get it for us before parliament prorogues, and then we shall know what the exact position is. No one I think can justify on public grounds contributions of this kind to a company well able to finance such an undertaking on their own. There is no question that they were well able to do this, but they just would not go into it until the government of the province, already debt-ridden, came forward. The highest revenue in the history of the province now goes in the main to pay interest on the provincial debt, and forevermore we shall have to pay interest on our share of this plant. How can anyone justify this kind of public expenditure? But as I have said once, perhaps twice, if this plant will relieve the plight of these fishermen I shall be willing to forget the uneconomic aspects of the whole thing. I am charitable in my disposition. If a thing will work, we can perhaps forgive and forget; but if it does not work, believe me, the provincial government will hear about it.


Joseph Enoil Michaud: There are some questions which the leader of the opposition has asked, the information about which is not before 85826-ll9i
me now. But my hon. friend states that if this project is not economically sound it should never have been undertaken. It was because of the unsoundness of economic conditions in that district that this project was undertaken. Had not this expenditure been made in that district at that time by the provincial authorities, it is probable that they would have paid in direct relief just as much last year, and twice as much in the present year.


Richard Burpee Hanson: Oh, but they declared there was no necessity for relief, and they cut it off, arbitrarily cut it off, and gave the impression to the whole world that New Brunswick was off relief, that we were in such a 'wonderful condition that we did not need it.


Joseph Enoil Michaud: That is possible, but it does not remove the fact that unhealthy economic conditions have existed in that district for the last twelve years-


Richard Burpee Hanson: About ten years.


Joseph Enoil Michaud: -ten years, and that all governments, all authorities have tried to cope with the situation, with very little success until this last venture was started. I feel that it will enjoy a certain measure of success. I understand that already it has contributed to raising the morale of these poor people- that is one good effect-and that the company operating that plant is achieving some success and the fishermen are going to reap some benefits.
For the time being that is all the information I can give. The grant was made just as every other grant was made to the provinces, to assist in the relief of unemployment or of unsatisfactory economic conditions.


Richard Burpee Hanson: But I can take it from the minister's statement that there was absolutely no supervision over the expenditure of the money?


Joseph Enoil Michaud: I do not say that.


Richard Burpee Hanson: Well, was there? That would be within the minister's knowledge.


Joseph Enoil Michaud: Yes, I know there was
supervision.


Richard Burpee Hanson: What was it?


Joseph Enoil Michaud: I know there was some supervision. I know there was some inspection. Whether it was efficient enough to satisfy my hon. friend or the critics of the project, I do not know.


Richard Burpee Hanson: Was there any federal supervision or inspection?

Sup-ply-Fish eries-A dministra tion


Joseph Enoil Michaud: There was some federal inspection of the work before the money was paid over.


Richard Burpee Hanson: What
was it?


Joseph Enoil Michaud: It was made by officials of the department who were asked to go there and inspect the premises.


Richard Burpee Hanson: Who were they? Barry?


Joseph Enoil Michaud: I know that Colonel
Barry was one of them, and I am told that he had some information to guide himself in the matter.


Richard Burpee Hanson: That is
the limit.


Joseph Enoil Michaud: I doubt if I could satisfy my hon. friend.


Richard Burpee Hanson: Well, you would not think that, he would be competent to inspect a technical plant like this, would you? I have not anything against Colonel Barry. He was a gallant soldier in the last war; he is forming another unit in this war, and he got his position because he was a returned soldier. He has learned a great deal about the fishing industry since that time, but to send him there as inspector of a technical plant like this, is a joke.
Mr. POTT1ER: Whom would the hon. gentleman send? A lawyer?


Richard Burpee Hanson: No, I
would send a technical man. You might do worse than send a lawyer, but in this case I would send somebody who knew something about the business.


Joseph Enoil Michaud: We must assume that the provincial authorities, who are responsible for the project-[DOT]


Richard Burpee Hanson: Oh, that is a horse of another colour.


Joseph Enoil Michaud: Well, it is fair to assume that they exercised ordinary judgment and saw that the thing was properly executed. I know there is some difference of opinion in the community as to the location and as to the company. There will always be divisions of opinion in such matters, and sometimes people magnify what they think are defects and faults with regard to projects, especially when they are not altogether sympathetic to the project.


Richard Burpee Hanson: I think everybody is.


Joseph Enoil Michaud: I think everybody is, and I believe everybody will admit that it is a pretty good job.
'Mr. R. B. Hanson.]


Richard Burpee Hanson: And cost a great deal of money.


Joseph Enoil Michaud: And we hope it will serve its purpose.


Richard Burpee Hanson: Yes.


Joseph Enoil Michaud: My hon. friend referred also to part of the money which was voted to help the salt fish industry having been paid to Prince Edward Island farmers.


Richard Burpee Hanson: Who are not fishermen.


Mr. KINLEY:: It was paid on a production basis.	.


Joseph Enoil Michaud: I might ask the question, who is a fisherman? That is pretty hard to define, especially in the east, because "fishermen" are those who fish, and when they do not fish they are not "fishermen".


Richard Burpee Hanson: Perhaps this was under another act. I may be wrong as to what the assistance was, and I am willing to admit when I am wrong.


Joseph Enoil Michaud: Perhaps they farm six or seven months, and work in the lumber woods two or three months. Whether they can be classed as fishermen, farmers or lumbermen is pretty difficult to determine, and there is no act of parliament which defines who is a fisherman.
With regard to the New York agent, my hon. friend thinks it is a crime to employ a gentleman from New York to help in investigating foreign markets in South America, the West Indies and Central America.


Richard Burpee Hanson: That is
not putting it fairly. Why should w'e not employ a Nova Scotian?


Joseph Enoil Michaud: I will answer this question by explaining why we employed this particular individual who happened to live in New York. He was recommended to us as a marketing agent, possessing marketing qualifications, experienced in investigating markets in those countries, and, what was very important, having a knowledge of the languages spoken by the people living in those countries.


Richard Burpee Hanson: What did you pay him?


Joseph Enoil Michaud: He has not been paid yet.


Richard Burpee Hanson: Oh, but he will be paid. What is his bill?


Joseph Enoil Michaud: I am informed that he has not been paid yet.


Richard Burpee Hanson: What is his bill?

Supply-Fisheries

Administration


Joseph Enoil Michaud: About $3,000, fee and
expenses and everything concerned.


Richard Burpee Hanson: How much time did he put in?


Joseph Enoil Michaud: Over five weeks.


Richard Burpee Hanson: Pretty
good!


Joseph Enoil Michaud: Including fares and
travelling expenses and his report.


Thomas Miller Bell: Is he a lawyer?


John Ritchie MacNicol: Does the $3,000 include
expenditures?


Joseph Enoil Michaud: Yes, everything, including a tour of Central America-


Richard Burpee Hanson: He could not tour much in five weeks.


Joseph Enoil Michaud: -the northern part of South America, and the West Indies.


Richard Burpee Hanson: I suppose he flew down and flew back.


Joseph Enoil Michaud: He flew part of the time.


Richard Burpee Hanson: In order to cover that 'in five weeks, he had to.


Joseph Enoil Michaud: The agent was selected because of his qualifications and his ability to do the work which was required of him.


John James Kinley: I should like to say a word about this item. The leader of the opposition has been rather critical with regard to the appointment of the deputy minister. After the deputy minister was appointed I wrote the minister and said that I thought he had made a very good appointment.


Joseph Enoil Michaud: Everyone so far has
said so.


John James Kinley: The fishermen and the fishing interests in my part of the country had considerable correspondence with and advice from Doctor Finn. Last year an extensive plant was built there. Doctor Finn gave valuable services in just the kind of work which the leader of the opposition said would be necessary on the Caraquet shore. The result was that a fine plant was built out of private funds, without assistance from the government. In view of Doctor Finn's experience on the Pacific coast and at the experimental station at Halifax, and having regard to his academic attainments, we thought the minister did a very good job in the selection of the deputy minister. The Department of Fisheries has always been a kind of Cinderella of the government. No government seemed willing to spend money to get the
officials who are needed. I was very much pleased to see Major Sutherland, who was supervisor of fisheries in Nova Scotia, a competent official and a gentleman highly regarded in that part of the dominion, brought to Ottawa as assistant to the deputy minister. He has done valuable work. That is a splendid thing. The minister has supplemented his staff so that he can render better service, and the minister can be assured that he is receiving the advice of one who not only is intelligent but has the interests of the fishing industry at heart.
With regard to the fish board, it was first provided that the board should be constituted of fish dealers and fishermen. The senate amended the bill, advantageously perhaps. Their view was that the board should be composed of a chairman who was an official of the Department of Fisheries, and fishermen producers. Accordingly Doctor Finn, who was in charge of the experimental station at Halifax, was appointed chairman, the members of the board being Mr. Mclnerney, secretary of the cooperative association in eastern Nova Scotia, and Captain William Deal, a skipper from Lunenburg. This board had to deal with the estimates granted by parliament last year to provide deficiency payments in the industry. The leader of the opposition said they did nothing for marketing, and he added that we had lost markets in Europe. That is true, but it only means that Newfoundland, which usually markets fish in Europe, invaded the markets we had in the West Indies and South America, and to that extent our marketing situation was much worse.
The idea of the deficiency payment was that the merchant would buy fish from the fishermen at a certain price and perhaps invade the market at a low price. He would buy the fish, and the fisheries board would give the fishermen enough to bring it up to the set price which they had pegged for the salt fish of the maritime provinces. The board's action saved the cod fish industry in Nova Scotia last year. It saved the salt fish industiy in my county and we were grateful to the government for what it had done. There was a little delay owing to the innovation, and there was some impatience; but it was the first year. This must be remembered. The mackerel fishermen also received a deficiency payment, and the only criticism I would offer, if I offered any at all, would be that the herring fisheries should have been included in the payment. On the whole the board did a good job. We have $400,000 in the estimates this year for the same purpose.

Supply-Fisheries-Administration
The board will function again and if fish do not yield a price to give the fishermen a decent living, the board must make a deficiency payment to take up the slack.


Richard Burpee Hanson: Call it
a subsidy.


John James Kinley: We do not like to call it
that on account of international entanglements. Let me tell my hon friend that Newfoundland and other fish exporting countries are doing the same thing. The salt fish business is after all the back-log of the whole situation, because the fresh fish industry is carried on by the same people at different times of the year. Their business is increasing. and if you can keep the salt fish industry' going by means of a little stimulation, I submit that is a proper thing to do. Where we have a tariff, I think it is only proper to stimulate a primary industry, because it is the start of everything. We deserve some stimulation. The money was paid on production of fish, and a large part of the money came to my county, because we produced the greatest quantity of salted fish.
With regard to New Brunswick, my hon. friend says that the minister subsidized a plant in that province. He says that a United States company was subsidized, a concern that came there and, in conjunction with the province of New Brunswick, built a plant. The people who came there were, I believe, the Gorton Pew Company. Much of our fish are marketed in the United States and the Gorton Pew Company have command of a large part of the business in that country. So far as my own riding is concerned, we do not like subsidized plants there, but no one will say that it is not advantageous for New Brunswick. It was a help in that province, because the fishermen of New Brunswick had poor facilities to market their fish, and there was provided for them, in their midst, a company that commanded the markets of the United States. One thing I would say is that the government should see to it that the company pays a fair price to the fishermen for their fish and does not compete unfairly with Canadian firms at the fishermen's expense.


Thomas Vien: It is eleven o'clock.
Item stands.
Progress reported.


[Stage Direction]
At eleven o'clock the house adjourned, without question put, pursuant to standing ordeT.

Wednesday, July 24, 1940