1941-05-26

REPORTS OF COMMITTEES

[Stage Direction]
Third report of special committee on the Pension Act and the War Veterans' Allowance Act.-Mr. MacMillan.
Third report of standing committee on railways and shipping.-Mr. Howden.

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

Mr. LALONDE:: What is the total enlistment, since September 10, 1939, for the counties of Gatineau, Pontiac, and Temiscamingue, in the province of Quebec, and for the districts of Kenora, Rainy River and Thunder Bay, in the province of Ontario, in the following services, (a) active army;
(b)	reserve army?


Mr. RALSTON:: Mr. Speaker, this is the kind of question which has been asked in other cases. It asks in effect that we attempt to segregate the enlistments, in this case by counties, and give the record of enlistments accordingly. This would involve, as hon. gentlemen will realize, a tremendous amount of work. It would mean the examination of each individual attestation paper, not only those for the counties named but also those coming in from the rest of Canada, because men from these counties may have enlisted somewhere else. I would ask the hon. member if he will drop the question.
Question dropped.



MUNITIONS AND SUPPLY-CONTRACTS IN ONTARIO COUNTIES

['Dropped.\nQuestion dropped.']
Mr. HOWE:: See published "Record of
Contracts Awarded."



Mr. DIEFENBAKER:: 1.	What was the amount paid by the government for storage of wheat (a) in Canada; (b) in the United States, in each of the months from November. 1940, to April, 1941, inclusive?


Mr. MACKINNON (Edmonton West):: Amount Paid for Storage of Wheat (a)	(b)
Month	In	In the
1940	Canada United States
November.... $ 2,411,355	20	$	51,347	28December..	..	1,993,738	80	58,764	91January	1,840,201	71	61,784	07February	2,206,016	52	58,615	60March.. 1,733,891	04	167,996	36April.. 2,760,991	50	71,011	65

Questions

The information presented under (a) represents terminal, county elevators and farm storage paid in Canada. Column (b) represents terminal storage paid in the United States.


TORONTO ENLISTMENTS
Mr. CHURCH:: 1.	How many from the city of Toronto have enlisted in his majesty's forces, (a) the army; (b) the R.C.A.F. or R.A.F.; (c) the navy?
2.	Will a new system of records be established to enable a unit policy of enlistments to be recorded by municipalities?
3.	How many Toronto citizens have gone from that city and enlisted in other provinces in his majesty's forces?


James Layton Ralston: What I have just said
with regard to the first question applies also to this one. I see that the hon. member is not in his place to-day but I ask that the question be dropped and I will speak to the hon. member about it.


Mr. SPEAKER:: Dropped.
Question dropped.



MUNITIONS AND SUPPLY-ROBERT ANDERSON


Mr. CHURCH:: Will the department give consideration to allowing young trainees a four to six-day leave before sending them to advanced training camps?


James Layton Ralston: I can answer this question verbally. Consideration has been given to the question of granting leave to men between the period spent at the basic training centres and their being sent to advanced training centres, and the decision has been arrived at that it is not practicable to allow leave in that interval.


ROYAL CANADIAN MINT
Mr. POULIOT:: 1.	Were there annual reports of the Ottawa branch of the Royal Mint from its opening, in 1908, to its disestablishment in 1931, and of the Royal Canadian Mint from that date until 1937 inclusive?

2.	Since then, have there been any annual reports of the said Royal Canadian Mint?
3.	If so, when?
4.	If not, why?


Mr. ILSLEY:: 1, 2 and 3. The annual reports of the Ottawa branch of the Royal Mint from its establishment to November 30, 1931, were incorporated in the annual reports of the deputy master and comptroller of the Royal Mint in London. For the years 1932 to 1934 inclusive, reports on the year's operations were made to the Minister of Finance but these were only brief typewritten reports. From 1935 to 1938 more comprehensive reports were made in printed form. A report for the two years 1939 and 1940 is now being printed and will be available for distribution shortly.
4. There is no statutory provision requiring that a report be issued on the operations of he Royal Canadian Mint, and also no statutory provision requiring that a report be tabled in parlia*ment. However, it has been decided to depart from the practice of the Royal Mint and in future to table the reports in parliament. The report for 1939 and 1940 will be tabled as soon as it is available.


GOLD DEPOSITED IN CANADA
Mr. POULIOT:: What is the amount of gold, if any, deposited in Canada by any other country, since January 1, 1938?


James Lorimer Ilsley: This is confidential information much of which relates to war operations of other governments and it is not considered in the public interest to disclose it. Any disclosure of this information would be a breach of trust and some of the information would be of value to the enemy.



QUESTIONS PASSED AS ORDERS FOR RETURNS


Mr. POULIOT:: 1.	Is there on file at the Department of National Defence, several statements from Jardine McKerlie to the effect that he was in the British army service from October, 1914, to June, 1916?
2.	If so, what is the date of each one?
3.	Was he asked by the civil service commission to supply evidence to that effect, and, if so, how many times?
4.	Did he give it, and, if so, when?
5.	Did he write to the civil service commission on November 17, 1939, that "his original discharge certificate was destroyed by flood some years ago"?
6.	Did he specify the locality of such flood?
7.	Is there on file copy of a letter from him to the "Under Sec'y. of State, War Office,

Questions as Orders for Returns
Records Section, Arnside St., London, S.E.", dated February 7, 1940, which contains the following paragraphs:
In view of the fact that the writer's Christian name and surname are both especially rare, it is felt that any reference that you can make to an alphabetical file of the enlistments either in the Royal Field Artillery or the Border Regt. during the period of the last war would quickly bring to light the writer's name and it is felt sure that no other person of the same name would be likely to be found in the said files. ...	_
It is regretted that further information cannot be supplied to you in view of the importance of receiving a copy of the discharge or some other proof of service, so that it may be furnished to the Canadian govt, in connection with the writer's present employment as inspector of guns and carriages in the Dept, of Nat. Defence?
8.	Did he write to the civil service commission on June 11, 1940, that the war office had required an affidavit which he had completed on April 6 of that year, and forwarded to London?
9.	Did the civil service commission ask for that evidence on July 23, 1940?
10.	Did he answer two or three days -after that "everything possible is being done to complete the record"?
11.	From September, 1939, to date, did Jardine McKerlie give to the Department of National Defence or the civi-l service commission any evidence that he was in the British army during the great war?
12.	If so, what was it, when was it given and to what department?
13.	If not, why?
14.	Is it on record that he has ever proved his British citizenship by an authentic certificate of birth or by naturalization papers?
15.	If so, when and to whom?


Mr. POULIOT:: 1.	On September 20, 1939, was one Jardine McKerlie, taken in the Department of National Defence as examiner, mechanical transport, at $200 per month?
2.	On or about October 12, 1939, was he promoted as transport mechanical engineer (M.G.O. branch, D.C.E. & M.E. div., war staff) at $2,820 per annum?
3.	Was he reassigned as senior electrical engineer, effective June 1, 1940, at $3,720?
4.	Did P.C. 32/1905 of May 10, 1940, have anything to do with him, and, if so, w'hat was it?
5.	Did the treasury board authorize his reassignment as senior mechanical engineer in August, 1940, without any recommendation from the civil service commission?
6.	On September 5, 1940, was he recommended by Brigadier Carr to the civil service commission as technical assistant in electrical and mechanical engineering to the M.G.O. branch at a daily rate of $12 per week day in the year?
7.	Did the civil service commission reply that they could recommend no change at that time?
8.	Was he appointed director of technical training of ordnance training centre?
9.	If so, when and at what salary?
10.	Was he also employed as inspector of guns and carriages?
11.	If so, when, and at what salary?
12.	Who was the chief (a) of the branch and (b) of the division in which he was employed?
13.	Did he ever receive any payment, advance or refund besides his salary?
14.	If so, how much and for what?



MUNITIONS AND SUPPLY-CANADA PACKERS LIMITED-BUTTER

['For a copy of all reports, bills, statements of accounts and other documents exchanged between government officials and merchants of the county of Matapedia-Matane, from 1936 to date in 1941, relative to the bonus paid by the dominion government to the fishermen of the said county.']
Mr. CASGRAIN:: Return tabled.



Mr. HAZEN:: 1.	What property or properties have been purchased at Pennfield Ridge, Charlotte county, New Brunswick, for an airport site?
2.	What is the name of the person or persons from whom each property was purchased?
3.	What is the acreage of each property that was purchased?
4.	What amount did the government pay for each property so purchased?
5.	What amount has the government expended to date for field development, lighting, water and buildings on the properties purchased?
6.	To what use are the properties now being put to?


MOTIONS FOR PAPERS
Mr. COLD WELL:: For a copy of the letter from the auditor . general referred to by the Minister of Munitions and Supply in answer to questions 13 and 14 of sessional paper No. 84C. tabled on May 16, 1941.


BONUS TO MATAPEDIA-MATANE, QUE., FISHERMEN
Mr. ROY:: For a copy of all reports, bills, statements of accounts and other documents exchanged between government officials and merchants of the county of Matapedia-Matane, from 1936 to date in 1941, relative to the bonus paid by the dominion government to the fishermen of the said county.



BUSINESS OF THE HOUSE


[Stage Direction]
On the orders of the day:
Hon. R. B. HANSON (Leader of the Opposition):: May I ask the Minister of Finance when he will introduce the remaining bills arising out of the budget, and especially the one relating to succession duties? I have had, through the minister's courtesy, a copy of
Foreign-Language Newspapers

the draft. I realize that it is a very important bill and requires much study, but I think it ought to be introduced as soon as possible so that hon. members who are interested in the subject, especially members of the legal profession, may have a chance to study it.


James Lorimer Ilsley: I can introduce the succession duties bill if the rules are waived to permit me to do so. It does not appear under "Introduction of Bills" on the order paper.


Richard Burpee Hanson: The
minister can easily do that.


James Lorimer Ilsley: I believe it is ready. Perhaps the matter could stand until a little later, when I get the bill. I have gone over it myself.



DEFENCE OF CANADA REGULATIONS


[Stage Direction]
On the orders of the day:
Pierre-François Casgrain: Mr. Speaker, I should like to draw the attention of the house to a question which was raised on Friday by the hon. member for Parkdale (Mr. Bruce) with reference to the alleged communistic attitude of certain foreign-language newspapers.
Both the papers to which Doctor Kirk-connell referred are being constantly watched. Considerable material indirectly suggesting communistic sympathies, if not direct communistic inspiration, has been observed, but conclusive material has been avoided, by accident or otherwise. Each issue of both these weekly papers is closely examined by translators whose reports go to the press censors.
The Hungarian paper, published in Toronto, has been watched closely since the war started. It was quite often openly communistic until the communist party of Canada was declared an illegal organization last June. Since then it has been edited in technical accord with the defence of Canada regulations, although some suspicious material has appeared.
The Ukrainian language paper cited by Doctor Kirkconnell, published in Smoky Lake, Alberta, has a small circulation, confined to its immediate district. It is not as skilfully edited as the Hungarian paper mentioned. It may be said to be on probation at the present time, since a blunt warning was given its editor less than three months ago, February 26th. This warning brought from the editor assurances of future cooperation. Since then he has submitted some material before publication which he was

informed was of questionable legality. Suspicions regarding this paper remain, but it has stayed technically within the law.
The report is signed by the press censors.



DETENTION OF EMPLOYEE OF CANADIAN BRO.ADCASTING CORPORATION

[Stage Direction]
On the orders of the day:
Mr. M. J. COLDWELL (Rosetown-Biggar):: I should like to direct a question to the Minister of Justice. Last week Mr. James A. Murphy, an employee of the Canadian Broadcasting Corporation and president of the radio division of the Association of Technical Employees, was in Ottawa negotiating with the Department of Labour for a conciliation board to inquire into a dispute between the corporation and some of its employees. Upon Mr. Murphy's return to Toronto on Friday, and after he had reported for work, he was arrested in the Toronto studio under the defence of Canada regulations, according to the Globe and Mail of Saturday, May 24, 1941. Mr. Murphy's wife was told that she might see her husband on Saturday, but upon presenting herself, was refused an interview. No one, including his lawyer, has been allowed to see him, and no one has been notified of the precise charges against him.
The timing and circumstances surrounding the police action arouses grave suspicion as to the motives governing this arrest. Will the Minister of Justice inform the house of the charges and indicate why, if this man has been suspected of offences against the defence of Canada regulations, the arrest was made during the process of negotiations between the CBC and the union?


Right Hon. ERNEST LAPOINTE (Minister of Justice):: Mr. Speaker, the hon. member sent me notice of this question, which I desire to answer as follows:
James A. Murphy, an employee of the Canadian Broadcasting Corporation, has been detained under the provisions of the defence of Canada regulations on the grounds of his communistic activities. He is believed to be a member of the communist party and to have assisted in the construction and supply of the radio equipment used in a motor car on behalf of the communist party by one Parsons, who was recently convicted under the defence of Canada regulations in Toronto.
It was not known in the Department of Justice or to the Royal Canadian Mounted Police at the time of issuing the order for detention that Mr. Murphy was negotiating for a conciliation board with the Department of Labour, and, if he was so negotiating, his arrest was merely a coincidence, as at the time of the issuing of the order the Royal Canadian

Excise Tax Act
Mounted Police had merely carried their investigation to the point where it was considered essential that immediate action should be taken, and the negotiations with the Department of Labour did not enter into consideration in any manner.
Under the defence of Canada regulations a detained person, if he objects to his detention, is informed by the advisory committee of the grounds upon which he is detained, and he is further given the privilege of consulting his solicitor. Prior to that time it is not the practice to permit interviews with the detained person. The Royal Canadian Mounted Police did inform Mrs. Murphy that she might see her husband on Saturday, but when she went to the gaol she was not permitted by the gaoler to have this interview, as interviews on Saturday are contrary to the regulations of the gaol. The Royal Canadian Mounted Police, however, wrote to the gaoler requesting that Mrs. Murphy be permitted to see her husband to-day, Monday, and that she be not restricted to the usual three-minute interview. It is understood that this arrangement is being carried out.



INTERNATIONAL FORWARDERS


[Stage Direction]
On the orders of the day:
Mr. KARL K. HOMUTH (Waterloo South):	Would the Minister of National
Revenue give the house the assurance that the right to route United States motor carriers over Ontario highways in bond will not be given under the War Measures Act or any other act, without the approval of parliament?
Hon. C. W. G. GIBSON (Minister of National Revenue):: I cannot give any
assurance as to what will be done, but I may say that the matter is receiving the consideration of the government. No decision has been arrived at yet.



SIR JOHN A. MACDONALD REQUEST FOR UNVEILING OF TABLET AT ST. PATRICK, QUE., ON FIFTIETH ANNIVERSARY OF HIS DEATH

[Stage Direction]
On the orders of the day:
Mr. JEAN-FRANCOIS POULIOT (Temis-couata): May I ask my good friend the Minister of Mines and Resources whether he has some news regarding the unveiling of a tablet at the summer resort where Sir John spent his summers-I mean St. Patrick, Temiscouata county?
Hon. T. A. CRERAR (Minister of Mines and Resources):: I have inquired of the
department but have not yet received a report. I hope to have it to-morrow.


Jean-François Pouliot: Thank you.



EXCISE TAX ACT

[Stage Direction]
Hon. J. L. ILSLEY (Minister of Finance) moved the second reading of Bill No. 75, to amend the Excise Tax Act, 1934.
Motion agreed to, bill read the second time and the house went into committee thereon, Mr. Fournier (Hull) in the chair.
On section	1-Definitions-"Raw	leaf
dealer."
Richard Burpee Hanson: This is
rather technical, and so far as I can recall there was no reference to this proposed enactment in the resolution.


James Lorimer Ilsley: That is correct.


Richard Burpee Hanson: It really
sets up a new authority, if I may so suggest, and I should like to have from the Minister of National Revenue or his colleague a statement as to why the change has been made. Is it an eleventh hour idea? How many of these tobacco packers are there, and what is the present position as to granting licences?


Colin William George Gibson: The purpose of the bill
is twofold. The part I am dealing with, comprising the first seven sections, places raw leaf tobacco on the same basis as manufactured tobacco. The budget in 1940 placed an excise duty of ten cents a pound on raw leaf tobacco sold for consumption in its natural state, to be collected by means of stamps affixed to the packages. Persons engaged in its preparation for use were required to obtain a licence as raw leaf dealers, at a nominal fee of $2 per annum. There were 4,282 such licences during the period from August, 1940, to March 31, 1941. Considering the small amount of revenue involved and the numerous licencees, it has not proved feasible to provide supervision such as would result in the effective collection of revenue. Fraud and deception have resulted; hence it has been decided to place the processing of Canadian raw leaf tobacco on the same basis as the manufacture of tobacco by charging the same licence fee and requiring that the licencee operate under excise supervision in the same manner as the tobacco manufacturer.


Richard Burpee Hanson: That means that the nominal fee of $2 has been raised to $50?


Colin William George Gibson: That is right.


Richard Burpee Hanson: It is a substantial increase. Is it intended that the number of tobacco packers shall be materially reduced, giving them a new designation instead of "raw leaf dealer?" I understood the minister to say that there were over 4,000 of these

Excise Tax Act
dealers. Now they are to be called tobacco packers and simulated to tobacco manufacturers on the basis of $50 instead of $2. Will that not have the effect of eliminating a large number of licensees?


Colin William George Gibson: Yes, it will cut down the number so that they can be adequately dealt with and supervised.


Richard Burpee Hanson: Will that not tend towards monopoly? Combines, monopolies, trusts-does that ring in the ears of any hon. members of the house? I heard it in this house for ten years. The minister should give more justification than that. He alleges there has been evasion. I suppose there never was an excise act, a customs act, or indeed any prohibitory legislation-game laws, liquor laws, and other enactments of the kind with which we are surrounded-that was not subject to evasion. But that in itself is not an argument for this change. What I suppose the minister intended to convey by the written memorandum which he read to the committee was that it will be much easier to administer the law and see that the revenues from excise go into the treasury by this method than by the other. That is really what the object of the legislation is, is it not?


Colin William George Gibson: Yes. The position is very much as if we tried to collect a tax on the sale of cigarettes from the retailer, leaving it to the retailer himself to stamp each package before he sold it. Under the existing legislation dealers have been able to buy a few stamps and keep them in their shops, and whether they put them on or not was a matter which was very difficult to control. If they were selling to their friends they might not put on the stamps; if they were selling to strangers they might. There has been some leakage, and it was felt that the stamping should be done by some central body such as the packers. Licences will be freely issued to people applying to become packers.


Richard Burpee Hanson: I am glad to have the minister give that assurance. Fifty dollars will be quite a deterrent to the issuing of licences, and I suggest that the fee is too high. It is something that the dealer will have to absorb, and it is being raised from a nominal fee to a revenue fee. What is the justification for the increase? As to the argument made by the minister, on the question of evasion, I suggest that it constitutes a grand attack on the legislation of two of the provinces which have lately put taxes on a commodity that is almost of universal consumption, namely, tobacco. In Quebec and New Brunswick, which have adopted this, shall
(Mr. R. B. Hanson.]
I say, nefarious tax-I am speaking from the point of view of the consumer-they make the retailers collect the tax, and the tax is imposed in the guise of a hospital tax or a TB tax, if you please, when of course it is simply nothing but a revenue measure. It is disguised under the euphemistic name "TB tax." I agree with the minister that it is very difficult to administer that sort of tax. Evasions of the law will be numerous and there is no effective way to check them. The minister's argument of course is in favour of easier administration of the excise act, and to that extent I think it is to be commended.
Having received the minister's assurance that licences will be freely issued, I suggest to him that the only objection there can be to this legislation is the size of the fee for a licence. I ask the minister to justify the raising of the fee from $2 to $50.


Colin William George Gibson: This is the same fee as is charged to manufacturers of tobacco, and when these tobacco packers' plants are established we shall have to have an excise officer supervising the work of each.


Richard Burpee Hanson: He has to do that now. That does not mean any new commitments, does it, in the way of extra excise men? A tobacco manufacturer usually does business in large volume. Surely a tobacco packer, if licences are freely issued, will not be doing anything like the volume of business that a tobacco manufacturer does. Therefore a licence fee on the same basis is not justified. The minister is just trying to get a little more revenue; isn't that the idea?


Colin William George Gibson: No. There will be some very large packers and there will have to be an official spending his full time in each of these packing establishments, just as in manufacturing plants.


Mr. DESMOND:: I should like to congratulate the minister on this particular phase of his budget proposals. These raw leaf dealers, I understand, are a detriment to the tobacco trade of Canada, who produce approximately $55,000,000 of excise. I should like to record that.


Mr. McNIVEN:: The minister made some reference to cigarettes, and the leader of the opposition has indicated that the minister may be using the cigarette trade as a means for collecting additional revenue. I should like to know if there is any such plan that has peculiar application to western Canada. I hold in my hand a package of Sweet Caporal cigarettes made by the Imperial Tobacco company. This package contains twenty-two cigarettes. When I was home at Easter

Excise Tax Act
I found that the same package in Saskatchewan contains only twenty cigarettes but is sold at exactly the same price. That represents an increase in price'of 2i cents or 10 per cent in Saskatchewan as compared with Ontario. Is that due to an effort on the part of the government to collect additional revenue, or is it a device on the part of the manufacturer to collect an additional price from the people of Saskatchewan? It cannot be explained by freight, which is the usual excuse advanced by manufacturers for imposing an increased price upon those of us who live in western Canada.


[Stage Direction]
Section agreed to.
Sections 2 and 3 agreed to.
On section 4-Licence to carry on business of tobacco packer.
Richard Burpee Hanson: On the point of licences again, is this to be one fee for all time, or an annual fee?


Colin William George Gibson: It is an annual fee.


Richard Burpee Hanson: The bill does not make it clear.


Colin William George Gibson: The reason is that all excise duty licences expire on March 31.


Richard Burpee Hanson: The new section 277 seems to me to be a very large and comprehensive delegation of authority to the minister to make regulations. Is this necessary? I know we are in an age of delegation of authority. Parliament has delegated almost all its powers except that of levying taxation and the provision of ways and means. I am not in a position to say whether this is necessary or not; I do not know enough about the matter. But on the principle involved I want the minister to justify such a large and comprehensive delegation of authority to the minister. Could the regulations not have been put into the statute? I see the commissioner of excise gives a most emphatic "no". Of course he probably knows a good deal more about it than I do. But that little incident illustrates the point that has often been borne in upon me: I wonder if I cannot page some of the members of parliament who have been complaining that the deputy ministers are running the government, not the government running the departments. That remark, however, is made only facetiously; I know the Department of National Revenue is very well administered, but the incident that occurred a moment ago serves to illustrate what has often been said in that regard, not so much by me as by hon. members supporting the government. I note that they are all very quiet in their seats or
have disappeared from the chamber, and that I am not going to get any support on this point. But I would ask the minister to clarify the position. Why is it necessary to delegate these very wide powers to the minister?


Colin William George Gibson: We could have put in a blanket section which would carry the same authority. We have here detailed portions of the 'business that will be subject to regulations. The industry changes from time to time, and the requirements change, and the minister, on the advice of his commissioner, who is experienced in the working out of the details, puts the regulations into effect so that the act can be properly administered.


Richard Burpee Hanson: The effect of that statement is that by a system of trial and error the commissioner will finally arrive at a method of government by regulation which he thinks will block up every hole.


Colin William George Gibson: We certainly hope to block up every hole.


Richard Burpee Hanson: Let me call the minister's attention to section 6 of the bill, not by way of anticipating that section but by way of comparison. By sections 278, 279 and 280, regulations are embodied in the statute, as distinguished from the delegation of authority to the minister provided for by section 277. The two things do not jibe. Why the one and not the other? Why is the authority taken here and not sought there? It is true they do not deal with exactly the same subject matter, but all of them provide machinery for the enforcement of the law.


Mr. JACKMAN:: How many new excise officers will be required to administer this act, if every packer has to have an excise officer full time?


Colin William George Gibson: It is anticipated that we shall use our present staff almost entirely. A few more may be required, depending upon how many licences are necessary, but very few.


Harry Rutherford Jackman: In other words there is a full time excise officer on the premises of every tobacco packer in the country now?


Colin William George Gibson: I think the hon. member is referring to a dealer.


Harry Rutherford Jackman: The one who has to take out the licence. The minister said a full time excise officer would have to be on the premises of each packer. How many additional excise officers will be required to administer that part of the act, or is it possible to put the tobacco in warehouses and simply have an officer check on it from time to time?


Colin William George Gibson: At present officers are going around inspecting the tobacco dealers, of whom we have some four thousand. That
Excise Tax Act

is done, of course, with the help of the mounted police. Now, however, if we have all the domestic tobacco going into the hands of the packers, one inspector will be in charge of each plant, instead of having inspectors go around and inspect some four thousand dealers.


Harry Rutherford Jackman: That does not indicate, however, how many excise inspectors will be required. How many tobacco dealers will have to have their accounts checked under this new provision? In other words, this is a change, and according to the minister's own statement it will now be necessary to have a full time excise officer at each place. How many places are there, and how large an addition to the staff of the department will be required?


Colin William George Gibson: It may not result in any addition at all to the staff. Already we have inspectors going around to the dealers; and if the dealers are eliminated, the inspectors will be in the plants of the packers, who will pay the tax. We cannot estimate how many packers will demand licences. There might be forty or fifty, but as I said before it is not anticipated that there will be any great increase in the staff required.


Clayton Earl Desmond: In the opinion of the department what loss has been sustained by not having had a check on the raw leaf dealers of the dominion? Has any approximate compilation been made in that regard?


Colin William George Gibson: No, we have not been able to make any approximation of what has been lost. When we have found the law being evaded of course prosecutions have been instituted, but it is very difficult indeed to estimate what would be the amount of the loss.


Clayton Earl Desmond: Does the minister
anticipate that this legislation will result in holding to a minimum the number of independent raw leaf dealers?


Colin William George Gibson: We are not really trying to hold them to any number. We want to be able to supervise them and keep the whole thing under proper jurisdiction and control.


Richard Burpee Hanson: Why under section 4 is the minister given authority to do one thing, while under section 5 he has put the regulations right in the act? In section 277(a) it is provided that the minister may make regulations for causing accounts to be kept by tobacco packers, and so forth. Under section 279, however, it is provided in the statute that the packers shall render monthly accounts. These sections are both regulatory in the same category.
(Mr. Gibson.]


Colin William George Gibson: I do not agree with my hon. friend. The one section regulates trade and the way it is carried on, while the other lays down regulations with regard to the manner in which the dealers may operate. I draw to my hon. friend's attention the fact that section 278 provides:
Everyone licensed as a tobacco packer shall keep a book or books in a form prescribed by the commissioner, which book or books shall be supplied by the department and shall be open at all reasonable hours to the inspection of the collector or other officer.
These regulations are put in the statute since it is not expected that they may require amendment from time to time as circumstances may dictate, as may be the case in connection with some other aspects of the tobacco trade.


Clayton Earl Desmond: Just in case any hon. members should feel that the raw leaf dealer or producer is being penalized under this legislation, I should like to say that in my opinion that is not so. I believe this is a splendid piece of legislation. The seven manufacturers and packers in Canada dealing in raw leaf tobacco and processing it have played ball with the primary producer, and this legislation will not injure the producer one iota.


Richard Burpee Hanson: No one
has suggested that; but for the benefit of my colleague may I say that these provisions are new. They were not mentioned in the resolutions or in the budget itself. In a measure they are a new departure in the law; we did not know anything about them, and I am asking these questions for the purpose of clarification only.


Mr. McDONALD (Pontiac):: Am I right in assuming that the excise duty under these amendments will be paid directly by the packer instead of the stamps being purchased by retail dealers, as is done at present?


Colin William George Gibson: Yes, that is the purpose of the change.


Wallace Reginald McDonald: Then if a
dealer has on hand a quantity of stamps when this act comes into effect will he be given a rebate by the department?


Colin William George Gibson: This bill does not become effective until October 1, so that there will be plenty of opportunity for a dealer to dispose of his stock.


Clayton Earl Desmond: There will be no tobacco handled between now and October 1, anyway, so that that provision is meaningless. A moment ago I mentioned the fact that

Excise Tax Act
this would not affect the producer. I should like to add that the position of the consumer will not be jeopardized by this change, either.


[Stage Direction]
Section agreed to.
On section 5-Books to be kept by licensed tobacco packer.
Richard Burpee Hanson: Section
279 now is to provide:
Every tobacco packer shall render monthly
to the collector a just and true account, in writing, extracted from the books kept as by this act provided, which account shall exhibit such particulars as may be prescribed by departmental regulations.
What is meant by "departmental regulations"? Who will make them? How will they be sanctioned by law? Will they be made by order in council? Under what authority will they be made? I do not understand this phraseology, unless such regulations are made under the authority of the statute. Will they be made by the minister or will somebody else have power to make them? Will the commissioner make them? This is very loose legislation.


Colin William George Gibson: That is dealt with in section 2(f) of the act:
"Departmental regulations" means all regulations made by the minister under the provisions of this act and promulgated by the commissioner.


Richard Burpee Hanson: That clarifies the position; departmental regulations are to be made by the minister. Under what authority are they made? What section of the Excise Act gives the minister authority to make regulations? After all, the basis of the whole power is parliament.


Colin William George Gibson: Section 277 gives the minister that power.


Richard Burpee Hanson: The minister says section 277 gives him power to make the departmental regulations referred to in sections 278 and 279. Well, of course they are called departmental regulations, but I do not appreciate that they are the same regulations referred to in section 277. It may be any regulation made by the department or by the minister. In other words they are not referable by necessary implication to section 277.


James Lorimer Ilsley: I think they are.


Richard Burpee Hanson: All right,
but I have given my view.


James Lorimer Ilsley: Look at the internal evidence. Section 279 is as follows:
Every tobacco packer shall render monthly to the collector, a just and true account, in writing, extracted from the books kept as by this act provided, which account shall exhibit such particulars as may be prescribed by departmental regulations.
That refers to accounts. If the leader of the opposition will look at section 277 he will see that the minister may make regulations (a) for causing accounts to be kept by tobacco packers-


Richard Burpee Hanson: With
respect to certain things.


James Lorimer Ilsley: -of all Canadian raw leaf
tobacco received by them, and the stemmed and unstemmed leaf subsequently disposed of by them by removal, sale or otherwise. The regulations made under section 277 would govern the accounts which the tobacco packer shall render under section 279.


Richard Burpee Hanson: Perhaps
the minister is right, but I doubt it. One cannot be certain.


[Stage Direction]
Section agreed to.
Sections 6 to 9 inclusive agreed to.
On section 10-Coming into force.
Richard Burpee Hanson: Does section 2 come into force on the day the measure receives royal assent? The minister may notice that the word "two" is omitted from the first line of section 9. Then under section 10 of the bill section 8 of the measure is given special attention. Of course, when no provision is made it comes into force when royal assent is given.


James Lorimer Ilsley: That is when it does become effective.


[Stage Direction]
Section agreed to.
Bill reported.
Georges Parent: When shall the bill be
read a third time?


Some hon. MEMBERS:: Now.


Richard Burpee Hanson: Does the
minister wish to have it read now? Is it necessary to push this through to-day?


James Lorimer Ilsley: No, it is not. If there is
any objection to it, it can stand.


Richard Burpee Hanson: It is the
regular custom to let bills stand for third reading until the next sitting. Unless there is some reason for putting it through to-day- and I do not know of any-it should go in the regular order.


James Lorimer Ilsley: There is only this: the
senate is meeting to-morrow.


Richard Burpee Hanson: Oh, the
senate! I am surprised that a member of the government should even mention the fact that the senate is meeting to-morrow, when they come back here, and back here, and back here, day after day after day; and the public is
Customs Tariff

astonished to think that the government has not given them any business. But now, in the last week of the session, this is put forward as a reason for the third reading of a bill! I am astonished the government has even mentioned it.


Mr. MACKENZIE (Vancouver Centre):: It is customary to read a bill a third time at the same sitting when it is not amended.


Georges Parent: When shall said bill be read a third time? Next sitting of the house.



CUSTOMS TARIFF

[Stage Direction]
Hon. J. L. ILSLEY (Minister of Finance) moved the second reading of Bill No. 76, to amend the Customs Tariff.
Motion agreed to, bill read the second time and the house went into committee thereon, Mr. Fournier (Hull) in the chair.
On section 1-schedule A amended.
Richard Burpee Hanson: Does this bill follow exactly the provisions contained in the resolution, or is there anything new?


James Lorimer Ilsley: It follows exactly the resolution. There is nothing new in it.


Mr. REID:: Possibly this would be the proper place for me to discuss a matter I had intended bringing to the attention of the government. I am sorry the Minister of Agriculture (Mr. Gardiner) is not in his place to hear this also. A practice has grown up under which bills sponsored by the Minister of Finance are left afterwards to other departments to administer. In many instances representations made to the Minister of Finance have to be made also to the Minister of National Revenue and, following that, to the Minister of Agriculture.
On many occasions in the house I have appealed against the importation of potatoes into British Columbia, particularly when we have such a heavy surplus crop. My appeal is now made because under the customs tariff potatoes are permitted to enter British Columbia free of duty from southern United States, with the exception of about six weeks between June 15 and August 7. Only during that short period is there a tariff. British Columbia grows early potatoes, and the potatoes of that province are now on the market. In Vancouver, New Westminster and other points in the province they reached the market on May 23, which is the usual time for our early potatoes to be marketed. No protection is given the growers of early potatoes from importation south of the line, until June 15. My appeal to both ministers, and particularly

to the Minister of National Revenue, is that the date should be changed back, giving our growers a much needed protection.
I am not sure what procedure the Department of National Revenue follows, but I am wondering if its officials call into consultation officials of the Department of Agriculture as to when these dates are to be set. To-day we have in British Columbia a surplus of potatoes, over and above what will be required for normal consumption, of something like 3,000 tons. Yet potatoes grown in southern California-and, by the way, they have had a second crop this year-potatoes grown in irrigated land, on land producing up to twenty tons per acre, are appearing on the British Columbia market in large quantities. Further, the potatoes which are being imported are No. 2 quality, not No. 1; they are somewhat smaller in size. The result is that the early potato growers of British Columbia are being penalized.
I suggest that the date should be set back so as to give our growers more protection which, in my opinion, is required by them. I shall not at this time enter into a tariff argument, but I do appeal to both ministers, on behalf of the potato growers of British Columbia, to set the date back. We have a large surplus of old potatoes which have been kept in splendid condition and are perfectly good. In view of the quantities we have on hand, if a tariff is to be imposed I can see no reason why it should not become effective on May 15 instead of June 15.


Richard Burpee Hanson: What was the original date to which the hon. member has referred, aDd which was changed to June 15?


Thomas Reid: At the time of the signing of the last Canada-United States trade agreement a duty was imposed for one month against the importation of United States potatoes.


James Lorimer Ilsley: Six weeks.


Thomas Reid: Yes, that is correct; it was six weeks. It would operate from June 15 until the end of July. During the other months potatoes can come in free. We in British Columbia have contended that the present date is far too late, because it allows surplus potatoes from California to flood our market at a time when the grower of early potatoes in British Columbia should be given protection. At this time there is an abundance of home-grown potatoes on the market.


Richard Burpee Hanson: I understand all that, but prior to that the potato growers of Canada were given very much more protection than they are receiving to-day. I dare say the hon. member opposed that;

Customs Tariff
I do not recall. I think we ought to get back to the provisions that were in effect before the Canada-United States treaty, and I would support the hon. member in that.


James Lorimer Ilsley: With respect to potatoes only?


Richard Burpee Hanson: Not with respect to potatoes alone, but as to all kinds of vegetables-Florida-grown strawberries, for instance; I could mention a dozen others. It has cost this country $35,000,000 in United States exchange every year, including the cost of the products, express, and so* on. I support the hon. member's plea, but I fear it will fall on deaf ears. He was here last session and will recall that this same plea was made to the government, and time and again, but it was unheeded. If my hon. friend is successful he will have my congratulations and my blessings, if that is any good to him.


Thomas Reid: The minister interjected that I wanted protection only on potatoes.


James Lorimer Ilsley: No, I was not addressing myself to the hon. member for New Westminster (Mr. Reid). I was attempting to describe the attitude of the leader of the opposition, which was that he would support a reversion of the status quo ante of the trade treaty so far as potatoes are concerned, and I wondered whether he would support it on everything. Is it the policy of the hon. gentleman and his party to scrap this trade treaty?


Richard Burpee Hanson: No, I am dealing with potatoes now-one thing at a time. I have not examined the Canada-United States trade agreement with any degree of care. I was not in parliament when it was passed, but I know that the price paid by Canada was very great. I know that the price paid had a remarkable effect in peace time on the constituents of my hon. friend, who, under the empire trade agreements for the first time in their lives got a sheltered market for Nova Scotia apples, for which the hon. member voted, and he was the only member of his party to do so. That was scrapped as part of the price paid for this treaty, and if war had not been declared the apple growers of the Annapolis valley would to-day be in absolute competition with the apple growers of Virginia and other parts of the United States. That is part of the price we paid for this treaty.


Mr. KINLEY:: We had to.


Richard Burpee Hanson: We may have had to. It was thought we had to. But I do not think we ought to have been obliged to do it. I am all for what the hon. member
for New Westminster says. I think the fifteenth of June is too late; that the six weeks ought to begin earlier. The agreement may be so binding that sanctity of contract prevents any change, and I am afraid that that is the position; but why should we tie our hands to a provision which automatically reacts against our own primary producers?


Mr. MACDONALD (Brantford City):: It seems to me this is the wrong time to say that the United States is taking any advantage of Canada. To-day the future of the whole world is at stake. To-day the very existence of Canada and the British empire depends upon the help which we shall receive from the United States, and instead of mentioning what price Canada has paid in the past for some small trade advantage, we should to-day forget all about that. Our whole aim, Mr. Chairman, should be to develop a spirit of friendship, a spirit of cooperation between these two democracies on the north American continent. It seems to me that there are too many people who do not realize, not only that we are at war but that for us the issue means life or death.
We talk about leadership in this country. I say this with only the kindliest feelings for the leader of the opposition, but I thought he did not do himself justice the other night when he spoke on the radio. I thought he had a splendid opportunity to inspire the people of Canada. He spoke about the leadership of Churchill and about the leadership of Roosevelt. I would remind him that the leadership of Churchill is due to a very large extent to the leadership which is being given by the opposition parties in Great Britain.


Richard Burpee Hanson: There is no opposition in Great Britain.


William Ross Macdonald: That shows how uninformed the leader of the opposition is. There are still opposition parties in Great Britain, but they are not taking every opportunity to break down confidence in the government. They are taking every opportunity to build up confidence in the government, and that is what we need in Canada to-day. We have great leadership in Canada. But what happens? Whenever a member of an opposition party rises to address a public audience he does nothing but decry the man who is giving leadership, the man whom he should be praising.
I bring to my hon. friend's attention another great leader whom he mentioned. He mentioned that man in the United States whom we all admire, President Roosevelt.


Some hon. MEMBERS:: Hear, hear.

Customs Tariff


William Ross Macdonald: Why is President Roosevelt giving the leadership in the United States that he is giving? Because the leader of the opposition there is also giving him his support.


Mr. ROSS (Souris):: He also took opposition members into his cabinet.


William Ross Macdonald: Immediately after the election in the United States the leader of the opposition party, Mr. Wendell Willkie, threw himself heart and soul behind the president-elect and went up and down the country inspiring the people of the United States to follow the president who had been elected. But what happened in Canada? Immediately the election in Canada was over, a little over a year ago, the leader of the opposition and his followers stood on public platforms and took every opportunity, not to inspire the Canadian people to follow the Prime Minister, but to break down confidence in him. They tried to undermine him. If I may be permitted to give some advice to the opposition parties in this house-


Mr. MacINNIS:: Mr. Chairman, I rise to a point of order.


Some hon. MEMBERS:: Sit down.


Angus MacInnis: Just a moment. Remember, Hitler is not here yet. This is a free parliament. Speaking a few days ago, a member behind me who was not half as far away from the question before the chair as the hon. member for Brantford City was called to order when the Minister of Finance rose and took objection. His objection was sustained by the chair and my colleague was not allowed to proceed. I ask the Minister of Finance to take the same stand now and put a stop to a discussion that is not in any way germane to the question before the chair.


The ACTING CHAIRMAN (Mr. Fournier, Hull):: Nearly all the discussion that has taken place on section 1 has been out of order. There is no reference in section 1 to potatoes or changes in the tariff on potatoes. I gave hon. members some latitude in allowing them to speak of tariffs generally, but the discussion has gone far afield, and I must rule this discussion out of order.


Richard Burpee Hanson: Your ruling is, Mr. Chairman, that the lecture which I have just been receiving from the hon. member for Brantford City is entirely out of order and therefore uncalled for. I am prepared to defend my attitude against the

hon. member at any time and place. But let us get back to the bill. Do I understand that your ruling is, Mr. Chairman, that any discussion of the tariff on potatoes is out of order?


Alphonse Fournier: I have looked over section 1 and
over the schedule and I can see no mention of any change in the tariff on potatoes. Perhaps I am no expert but I must ask hon. members to confine their remarks to the subject matter of section 1.


William Ross Macdonald: May I say to the leader of the opposition that it was far from my intention to lecture him or any other member, but we are living in a very serious time, and I trust that the members of all opposition parties will endeavour to work for leadership and confidence throughout Canada.


Richard Burpee Hanson: May I ask the hon. member a question? Does he not think I am just as much inspired by a desire to help win this war as he or his leader?


William Ross Macdonald: I would think that-


Alphonse Fournier: Order. I have ruled this discussion
out of order.


William Ross Macdonald: May I not be permitted to answer the question of the leader of the opposition?


Alphonse Fournier: Order. I think I have given hon.
members sufficient latitude. If there is no more discussion on this section I shall declare it carried.


[Stage Direction]
Section agreed to.
Sections 2 and 3 agreed to.
Schedule agreed to.
James Lorimer Ilsley: Perhaps the bill had better have third reading. It is quite customary to have third reading when there is no objection.


Mr. HOMUTH:: That is quite all right, but to put it on the basis of giving work to the senate is ridiculous.
Bill reported, read the third time and passed.



EXCISE ACT

[Stage Direction]
Hon. J. L. ILSLEY (Minister of Finance) moved the third reading of Bill No. 75, to amend the Excise Act, 1934.
Motion agreed to and bill read the third time and passed.

Succession Duty Act

James Lorimer Ilsley: With the consent of the house I should like to move for leave to introduce Bill No. 79, to authorize the levying of duties in respect of successions. The leader of the opposition (Mr. Hanson) said that he would have no objection to waiver of rule so as to permit the introduction and first reading of the bill to-day, in order that it can be read the second time at the next sitting of the house.


Richard Burpee Hanson: Mr. Speaker, I certainly did
give consent so far as I am concerned. I would like to point out to hon. members who have not seen this measure that it deserves very comprehensive study on their part. I understand that it has just been printed. I have not yet received a printed copy.


James Lorimer Ilsley: There is one small change in the copy the hon. gentleman has.


Richard Burpee Hanson: As I said, it requires intensive study, and I commend it to members of the legal profession in this house. It is a very important bill; it represents an act which is here to stay, so that we ought to know what we are passing. It should not be passed like amendments to the Excise Act.


James Lorimer Ilsley: It will be printed and
distributed promptly, and it will not be taken up for second reading to-morrow.


Richard Burpee Hanson: That is quite fair.


James Lorimer Ilsley: It will be taken some time after to-morrow, so that hon. members will have ample opportunity to study it.


Richard Burpee Hanson: That is the only point at the moment.
Mr. ILSLEY thereupon moved for leave to introduce Bill No. 79, to authorize the levying of duties in respect of successions.
Motion agreed to and bill read the first time.



EXCESS PROFITS TAX ACT

[Stage Direction]
Hon. J. L. ILSLEY (Minister of Finance) moved the second reading of Bill No. 78, to amend the Excess Profits Tax Act, 1940.
Richard Burpee Hanson: This bill was distributed only at ten minutes past two to-day. At our office we receive these bills as early as anyone, and we did not receive it until after two o'clock. I have not had the opportunity to read it. If it is proceeded with to-day I shall have to
register a protest and let it go at that. I must confess that this is a very abstruse bill. I do not understand a number of its provisions; I doubt whether many hon. members, excepting the minister himself, understand all of them; and the bill is worthy of study. If the minister insists I shall have to leave it at that.


James Lorimer Ilsley: If any hon. member wishes to have this motion for second reading stand until another day, I will let it stand.


Richard Burpee Hanson: Is there
any other business to go on with?


James Lorimer Ilsley: There are the estimates.


Richard Burpee Hanson: There is
Bill No. 77, to amend the War Exchange Conservation Act.


James Lorimer Ilsley: I do not want to go on
with that, because I wish to give consideration to an amendment to the bill on second reading which I have not had the time to draft, and which possibly I shall not introduce after all.


Richard Burpee Hanson: Could the minister enlighten us as to whether it is anything new or as to what it refers? If it is not in order to do so I shall not press the.' question.


James Lorimer Ilsley: The amendment to the War
Exchange Conservation Act?


Richard Burpee Hanson: Yes.


James Lorimer Ilsley: Yes, I will tell the house
what it refers to. There have been strong representations to the effect that part 3 of the War Exchange Conservation Act should be amended so as to permit agreements with oil companies. These agreements cannot be made under the existing provisions of part III of the act, even for the encouragement of exploration and drilling, because these people are not exporters. Whether that amendment should be made or not, I am not prepared to say- There are reasons both for and against it. The chief reason against it is that it is of the nature of special legislation; it is much like legislating for the benefit of one particular industry. On the other hand it is very desirable that exploration in new areas- what is called "wild-catting"-should be encouraged in Alberta.


Richard Burpee Hanson: The minister is suggesting that it is not within the compass of the present legislation?


James Lorimer Ilsley: That is correct.
*3126
Excess Profits Tax Act


Richard Burpee Hanson: Well, I
think the minister should have all the time he wants to consider that. It may be that the suggestion has great merit.


James Lorimer Ilsley: Yes.


Richard Burpee Hanson: I have
heard something about it. We could go into estimates.
; Mr. ILSLEY: It is just as the house wishes. I am prepared to go on now with the amendment of the Excess Profits Tax Act.


Karl Kenneth Homuth: Do not go on with it now.


[Stage Direction]
Motion agreed to, bill read the second time, and the house went into committee thereon, Mr. Fournier (Hull) in the chair.
On section 1-"Profits" in the case of a corporation.
James Lorimer Ilsley: While I am anxious to proceed as fast as possible, perhaps it would be more desirable if I were to read the explanatory notes: as I read them, some questions may occur to hon. gentlemen, and I will try to answer them. I doubt whether we could make better progress in any other way.
'The explanatory note to section 1 reads:
This amendment removes from the profits *subject to the 75 per cent rate of taxation any constructive dividend received by a corporation as a result of the winding-up, discontinuance of 'business, or reorganization of another corporation. In order to prevent this exemption being used as a means of avoiding personal income taxes it is restricted to cases where the corporation receiving the dividend or the corporation paying the dividend is held or controlled by more than twenty-five shareholders.


Richard Burpee Hanson: What is
meant by a constructive dividend in this sense?


James Lorimer Ilsley: A constructive dividend is a distribution of surplus which is deemed to be a dividend for taxation purposes under section 19 of the Income War Tax Act. There are companies which have accumulated income and have an earned surplus. The time may come when they wish to distribute that surplus to their shareholders. That distribution is deemed to be a dividend for taxation purposes; that is, the shareholder is taxed as if it were a dividend and not a distribution of capital. That is what is meant by a constructive dividend. It is not deemed just to tax that constructive dividend at the high rate under the Excess Profits Tax Act. For instance, if corporation B is a shareholder in corporation A and corporation A makes a distribution of earned surplus, it will be seen at once that that might of itself put corporation B in the 75 per cent class. It might mean a very large tax if it were subject to the 75 per cent

rate of taxation. This section is for the purpose of making it clear that it is not so. It would be subject, however, to the 40 per cent rate of taxation, which is exactly what the law intended. That is the corporation income tax rate.


Richard Burpee Hanson: All corporations are paying that.


James Lorimer Ilsley: Yes. There are cases where it might be a temptation to a company to get its surplus out at the 40 per cent rate instead of distributing it to the individual shareholders at the personal income tax rates, which might be higher than 40 per cent. That could only be done as a device to avoid individual income tax if there were some degree of control, some relationship between the two corporations. Therefore the concluding provisions of this section are to make sure that in those circumstances the 75 per cent rate will apply, if they are in the 75 per cent class, notwithstanding the first provisions of the section.


Richard Burpee Hanson: Within
certain limitations. Why is the number of shareholders fixed at twenty-five? It is an arbitrary figure, I suppose.


James Lorimer Ilsley: If we take a small number we have what is called a closely held corporation. Both corporation A and corporation B would be closely held corporations, certainly, if each had only five shareholders or only ten, or if each had only fifteen, or even twenty-five. We have taken twenty-five as a fair measure.


Richard Burpee Hanson: After all, it is arbitrary.


James Lorimer Ilsley: It is arbitrary, but it is a fair measure of that condition which is described as "closely held". It is only when corporations are closely held that the device will be resorted to as a means of evading individual income tax.


Richard Burpee Hanson: Is there any opposition to this from the business world?


James Lorimer Ilsley: I do not know of any. In some individual cases representations have been made, but I would not say that representations have been made by anyone against this section.


Thomas Miller Bell: I suppose this is about as good a place as any for me to say what I wish to say with regard to the excess profits tax. I had hoped that the 1940 returns of the thirty-three companies to which I alluded last year might be all available so that one could make a comparison to see how the excess profits tax actually worked out in. practice

Excess Profits Tax Act
during the past year, but unfortunately I have not been able to get them all together. I have been working on a number of 'reports, and I find, taking twenty-eight- of these companies, that after the taxes had been paid for the last year, after income and other taxes had been deducted, of the twenty-eight companies the net income amounted to $124,286,000 as against $132,676,000 for the previous year. This would seem to indicate that even with our excess profits tax, income tax and so on, slightly less net profit was made by these twenty-eight companies, of the thirty-three to which I alluded last year, than in the preceding year.
I realize the difficulty of dealing with the excess profits tax to meet every type of company and every contingency that can arise, and when the final reports are in for the excess profits and other taxes of last year, the Minister of Finance and his officials may be able to come to a better basis and conclusion that we have yet arrived at. However, I am not being carpingly critical of what has been done by the minister up to the present time, because it is a new tax and I realize that only by trial and error, as it were, can we establish a satisfactory basis in imposing new taxes. My purpose is rather to bring two or three points before the committee in order that we may consider what ought to be done to bring about that measure of equality of sacrifice about which we are hearing so much.
May I say in passing that several newspaper editorials have been commenting on what they allege to have been a statement of mine to the effect that something like twenty new millionaires had been created so far during the war. The house generally understood that I did not make that statement. I drew it to the attention of the minister because the statement had been made-I had heard it on more than one occasion-and I said at the time that I could find no figures to substantiate it.
When I look at several industries that were engaged in providing material for preparedness before the war broke out, it struck me last year, and it has struck me again this year, that these companies are in a more or less favoured position because their hasis was that of relatively high profits before the war broke out. Consequently they are able to obtain virtually the profits they had before the war and some little excess as well, whereas a company which was doing badly before the war is not in that position. I speak of the twenty-eight companies, and I shall be glad to
let the minister have my computation if he wishes to check my figures afterwards, when I have them a little more complete.
The Consolidated Mining and Smelting company ends its year on December 31. In 1939' they made profits of $9,340,000, in 1940 after paying all taxes, they made $9,062,000-a little1 less. As we go down the list we find that Aluminium Limited made a profit of $15,800,000 last year as against $12,462,000 the year before. I could cite a number of other companies whose profits after paying all taxes were almost the same, a little less or a little more than the year before. I am not forgetting that the year before was the first year which comprised part of the war period, when industrial expansion commenced. Some system of taxation should be devised to see that these companies contribute to our war effort to the full extent of their ability. We are appealing to people of quite small incomes to surrender what to them is a very large amount of purchasing power, considering what they had before, and many of us feel that during this period of war there must be a closer approach to equality of sacrifice than we have yet achieved. I know it will be argued that in addition to the taxes paid by these corporations, the people who receive the dividends will also pay a personal income tax. Nevertheless we should endeavour to find a basis which will take from the companies and corporations that are making large profits a greater proportion of their profits than we have yet taken. The government through its Department of Finance, after examining the statements that will be available within a short time, should be prepared to bring before the house when we meet again an excess profits tax that will bring from these companies larger contributions to the war effort than have so far been forthcoming.
In the war in which we are now engaged we shall have to think not in terms of money but in terms of goods and services. We have perhaps failed in the past to grasp the significant fact that we fight a war not with money but with goods and services, that the figures in the ledger are merely symbolic of our ability to do certain things. If we are to attain to a maximum war effort, instead of viewing our industrial effort in terms of profiits, dividends, financial resources and accumulated wealth, we must view it in the light of the nation's need for every conceivable thing that we can produce; for I am still of the opinion that Canada's maximum effort ought to be expended in the provision of the tools for which Mr. Churchill called a few months ago. I had hoped, therefore, that the returns from the thirty-three companies I discussed last
Excess Profits Tax Act

year would all be available; without them one cannot make an adequate comparison, but as I have said, for twenty-eight of the thirty-three on which I have been able to do some work I find that the aggregate profit is only slightly less than it was last year.
Of course I recognize that during the past year there have been some extensions of plant and equipment, which mean further capital expenditures upon which a percentage of profit might be earned. But we must endeavour to *devise an excess profits tax which will do the thing that I believe most of us want to do more efficiently than it is being done at the present time.


Mr. TRIPP:: Might I ask the hon. member if he has a comparison of the volume of business done by these companies in 1939 and in 1940?


Major James William Coldwell: Not in all cases. I
have in some. As I have indicated, in order *to get a clear picture one might have to know something about the extension of equipment and buildings during the past year.


Jesse Pickard Tripp: And the volume of business,
too.


Major James William Coldwell: Yes, and the volume of business. Of course I am referring to net profits after all other taxes and charges have been paid.


Mr. SOPER:: Does the hon. member not
think it is a serious offence to make an assertion such as he has made, which led the press to attack him, that twenty new millionaires had been created in Canada? In my opinion such a statement leads to a great deal of discontent throughout the country.


Major James William Coldwell: I did not make that
statement. I do not know whether the hon. gentleman was in the house when I referred to it. I said it had been stated, but I could find no figures to substantiate the statement.


Bert H. Soper: But the hon. member left
the impression all through the country.


Major James William Coldwell: I cannot help what
impression someone outside this house got, but, as is often said, the written word prevails. If the hon. member will look up Hansard he will find that I stated the matter exactly as I have stated it now. And may I add that I did it because I thought the Minister of Finance, or someone who knew something about these figures, might be able to suggest how such an impression arose outside the house.


Richard Burpee Hanson: Would
the hon. gentleman give the source from which these impressions come? I think the government ought to answer the indictment of these
{Mr. Coldwell.]
three big companies. I do not know anything about it. As to the matter of the twenty millionaires, I understand the hon. member for North Battleford (Mrs. Nielsen) has said that she has been told that there are forty new millionaires in Canada. Where did she get that information? This is part of the propaganda of the "have-nots" against the "haves," and it is based upon the imagination of someone who wants to do a disservice to Canada in war time.


Thomas Reid: I believe a statement should
be made by the minister, because I know of nothing more disquieting than these allegations about the creation of new millionaires. I believe every hon. member is against the idea of anyone making profit out of the war. In British Columbia the statement is heard that millionaires are being made every day; therefore a statement should be made by the minister.


Richard Burpee Hanson: Statements made out of whole cloth.


Mr. FAIR:: The hon. member for Red Deer asked for some information in that connection but his request was refused. As a matter of fact I believe on several occasions the government has refused to make this information public. A statement should be made in order to allay any unrest there may be throughout the country.


James Lorimer Ilsley: I do not know how anyone can say how many millionaires there are in Canada, nor do I know how I could find out. The income tax returns, if gone over ever so carefully, would disclose only the amount of income. If that were broken down into investment income and earned income it might give some indication, but to do that would require an immense amount of research. I am morally certain and entirely satisfied that these statements, as to there being any particular number of millionaires in Canada, are wholly invented; that is, those making the statements have proceeded on nothing whatever. That remark does not apply to the hon. member for Rosetown-Biggar who, as he stated, did not make the assertion that there were some twenty odd new millionaires.


Richard Burpee Hanson: But he repeated the story.


James Lorimer Ilsley: He said he had heard it said, and he wanted to know if there was any information that could be given the house in that connection. Then the next day, if I remember correctly, he gave the basis for the statement, which I do not remember at the moment, but he admitted that it really was no basis at all.

Excess Profits Tax Act


Major James William Coldwell: The basis I was informed was the difference between the number of people getting more than $50,000 a year, as between the two years. In reply to someone who asked where the story began, the first time I heard the statement was during the Manitoba election, in and around the city of Winnipeg. I heard it there first; then I read it in one or two small newspapers. That really prompted my query in the house some days ago.


John James Kinley: Under the present taxation set-up I do not see how millionaires could be created in Canada. The hon. gentleman says certain companies have made millions of dollars. That may be so, but if they paid that money out to their shareholders those shareholders would pay most of it back to the government in income tax. If money is in the treasury of a company it must stay there or be heavily taxed a second time, and the government has it fairly secure. It is true- and this may be a weakness in our present excess profits tax-that companies which were quite prosperous during a certain period before the war may be making a good deal of money at the present time and escape excess, because our excess profits tax is based on the principle that you shall not get rich out of the war. A company which was prosperous during the four-years computing period can still make a great deal of money for the company, but not for the shareholders, without again paying heavy personal income taxes. In my opinion, when you take 75 per cent of the profits of a company which was not any too prosperous before the war; then when you add to that 75 per cent all the other taxes that are being imposed, and take that money in cash, you may place a company in a hazardous position. Profits do not consist entirely of cash. In part they may consist of accounts receivable, which may become bad debts; they may consist in part of stock on hand, which may depreciate. The actual cash you take out of a company must not be too great a percentage of the profits or you will place the company in a difficult position.
Hon. gentlemen in the far corner are very critical in regard to taxes. To-day private industry is assuming a new role in Canada's economic system. When we have nationalized industry we have work carried on by the government; and I should like to ask the minister how much the government gets from these companies for the purpose of carrying on the affairs of the country, under this taxation law which is so important. If a private industry is able to quote the same figure as a government enterprise, which is
usually exempt from municipal, federal and many other taxes, I should say it would be very much more to the benefit of the government to do business with private industry, even at increased cost.
There is one other matter that I believe will be discussed more or less as time goes on; that is, what might be termed exemptions from taxation. The other day, when we were discussing the gasoline tax, I spoke against exemptions. I have been reading in the financial papers that in western Canada there are wheat pools that are making large profits each year, and I suppose those profits will become greater as the wheat remains stored in the elevators and does not circulate as freely as it did in other years. I believe the income tax law was changed in 1929 for the purpose of giving what might be called cooperatives a chance to get started, by exempting them from the payment of income tax. Well, cooperation is a splendid thing; I believe the establishment of and assistance to small cooperatives is in the interests of the country, but in connection with income tax we are dealing with excess, not only under the excess profits provision but in all instances. A man is allowed an exemption to an amount considered to be the minimum sufficient for him to get along, before his income is touched at all. A company must pay all its employees as an expense before it pays profits or any income tax, because such payments must be made before any profit can be shown. The expense of running an industry must be considered before you can compute the profit, so that when you deal with income tax in all its phases you are dealing with excess. Why should anyone in this country, especially in these critical days, escape the payment of a tax on any excess? The wheat pools, which operate under the shelter of cooperatives, do not pay income tax. I am told they have a financial and shareholders' structure that is rather mysterious, and they are becoming a commercial dictatorship in the west. Why should they, because of their power, be able to remain free from the payment of this tax when private industry is paying to such a large extent?
We are told that there is a new order; that there is a new way to do business; it is said that there is an easy way to get along, so that everybody will be satisfied. Well, I am all for that way if it is along the lines of cooperation; I am for every man having the greatest possible share of the fruits and profits of his labour. But every company should carry its own load, and I do not see why these pools in western Canada, which have piled up
Excess Profits Tax Act

millions of dollars in reserves, should be exempt from the payment of income tax. There is an easy way, I suggest, for them to get clear of any such tax; that is, by making their services to the farmers less expensive. Let the farmers receive the benefit of these cooperative methods; then the pools will have no income tax to pay.
I want to bring this matter to the attention of the Minister of Finance; and I want to say to him and his executive staff that private industry in this country, in its new role, has the government as its senior and probably its controlling partner. That may be good for private business; it may help do away with selfishness and greed on the part of men who we are told are becoming millionaires. It may be that these men who have been making a great deal of money, will now be working and making it for the state. And all men are not equal in ability or performance. Some men have superior qualities which others do not have. To-day they are being regimented to work for the state. It may be a good tfung. It may help the capitalistic system; it may clean the system. But at the same time every corporate company, everything which deals with limited liability enjoys some privileges, and should carry its share of the load of taxation. We are told there is a new order, one which is in competition with and which, it is said, will supplant the present competitive system. Let us see to it that there is a fair road and no favour.


Alphonse Fournier: I have allowed several hon. members to wander to some extent in their observations.
I had thought that after listening to the leader of the Cooperative Commonwealth Federation we would come back to discussion of the section before the committee, namely that having to do with the definition of the term "profits" under the Excess Profits Tax Act. I would ask hon. members to confine their remarks to that section.


Richard Burpee Hanson: I agree with the chairman's ruling. But I suggest to the Minister of Finance that because three of the largest corporations in this country have been singled out by the hon. member for Rosetown-Biggar, and because in his observations he has indicated that they are making huge sums of money, some reply and defence of their position should be made by the government. No doubt these are huge corporations,
[Mr. Kinley.)
but they are giving a great deal of employment and they are huge taxpayers. Let us make no mistake about that. If hon. members could know what companies like Consolidated Mining and Smelting, International Nickel and Aluminium Limited pay to the treasury of Canada, they would be astonished.
These companies are attacked here because of their magnitude and because of their earnings, and I think that ought not to happen without some explanation respecting their operations. They are performing a perfectly legal function. I do not know about the details of their operations, but I have seen some of their balance sheets. In my view some defence ought to be made from the treasury benches, to show that these companies are pulling their weight in this war load. They are carrying their full weight, including a heavy taxation burden. Statements of the kind which have been made should not be permitted by the government to go unanswered.


James Lorimer Ilsley: Those companies were not attacked.


Richard Burpee Hanson: They were by innuendo.


James Lorimer Ilsley: No, they were not attacked. The hon. member for Rosetown-Biggar simply gave figures of profits after taxes had been deducted, and I do not know that his figures are correct. I have not had an opportunity to check them. He has pointed out that Consolidated Mining and Smelting had smaller profits after taxation in 1940 than they had in 1939, and that Aluminium Limited had larger profits. No defence is called for in reply to a statement of that kind, because no charge is made.


Richard Burpee Hanson: The
charge is made by inference.


James Lorimer Ilsley: I do not think so. But if I were asked to say anything about those companies I would say that all three have done a great deal to aid in the war effort, and I believe the country is fortunate in having such efficiently organized and well-disposed companies so far as our war effort is concerned.


Robert Fair: I expect to be ruled out of order in what I am about to say, but-


Karl Kenneth Homuth: Don't say it, then.


Robert Fair: I want to remind the
committee-

The ACTING CHAIRMAN (Mr. Fournier, Hull). I think ,the hon. member is not being fair to the chair.


Robert Fair: I was merely going to reply to the charges made by the hon. member for Queens-Lunenburg against the wheat pools.
I hope the chair will give me the right to make my reply, without ruling me out of order.


James Lorimer Ilsley: On a point of order, it may seem fair, if one hon. member speaks to a subject which is not germane to the discussion, to permit another hon. member to speak to it. But, after all, the discussion is strictly out of order, and I suggest we ought not. to let it develop into a discussion of the wheat pools and whether they should or should not be taxed. It would appear that the hon. member for Queens-Lunenburg believes they should; I assume the hon. member who is about to speak believes they should not. Why not let it end there? The question whether or not they are going to be taxed is not to be settled in this debate.


Alphonse Fournier: I must repeat what has been
said many times, that under standing order 68 speeches in committee must be strictly relevant to the clause under consideration. I suggest hon. members ought to help in having that standing order observed.


Mr. BLACKMORE:: What is mystifying
to me is why the Chairman did not apply that rule to the hon, member for Queens-Lunenburg when he was making his charge.


Alphonse Fournier: Possibly I might explain in this way: I allowed the leader of the Cooperative Commonwealth Federation to proceed, although I knew he was not in order. But since he is the leader of a group in the house, I thought I should permit him to make a statement.


Major James William Coldwell: I believe I was in order when I was discussing excess profits.


Alphonse Fournier: The definition of the term
"profits" was not touched upon in the hon. member's observations.


Major James William Coldwell: They dealt with profits, and this is a bill having to do with excess profits.


Alphonse Fournier: I will ask hon. members to follow the standing order from now on.
Excess Profits Tax Act


John James Kinley: On a point of order, the hon. member for Rosetown-Biggar was dealing with the money that the millionaires were making-


Major James William Coldwell: No, I was not.


John James Kinley: -and I was telling about the money that other people were making.


Alphonse Fournier: Shall section 1 carry?


Robert Fair: In connection with the wheat pool, and their excess profits, I would point out that they were driven to organize because the line or large companies were robbing them.


Alphonse Fournier: Does the hon. member believe he is in order when he makes that statement? Does that come under section 1 of the bill?


Robert Fair: I believe so, yes, in line with what has been said already.


Alphonse Fournier: My ruling is that the hon. member is not discussing the definition of "profits" under section 1 of the bill, and I would ask him to conform to my ruling.


Robert Fair: In that case all I wish to say is that the charge made by the hon. member for Queens-Lunenburg was false.


John James Kinley: I did not make any charge.


Donald Alexander McNiven: I am not at all clear as to the meaning of section 1. There is a provision in the income tax act that dividends paid by one corporation to another are not taxable. Under section 19 undistributed income is deemed to be a dividend and, by section 1 of this bill, such income becomes taxable if the number of shareholders is less than twenty-five. This provision is applicable to 1940 income. That would not be fair to an amalgamation or a reorganization completed in 1940, the dividends of which were paid over under the law as it applied at that time. Would the minister give an explanation?


James Lorimer Ilsley: This does not impose any new burden on a corporation. It is an amelioration. As the act now stands-that is, the Excess Profits Tax Act passed in June, 1940-the constructive dividends received by corporate shareholders are taxable to the extent of the full rigours of the act, both at the 30 per cent rate and the 75 per cent rate. The effect of this section is to say that the 75 per cent rate shall not apply to such

Excess Profits Tax Act

constructive dividends except in the exceptional cases of closely held companies referred to in the latter part of the section.


Donald Alexander McNiven: Would that apply to a corporation which had a wholly-owned subsidiary; for example, where 75 per cent of the stock was owned by the corporation and the remaining 25 per cent was held by four or five individuals as qualifying shares for directorates? It would be less than the number twenty-five.


James Lorimer Ilsley: If the parent is widely held and the subsidiary is closely held, then that part of the section which renders the profits subject to the 75 per cent rate does not apply. Both the corporation declaring the dividends and the corporation receiving the dividends must be closely held.


Mr. GREGORY:: On a point of order, Mr. Chairman, if I heard the leader of the opposition correctly a moment ago, I would ask for a correction of the statement which I understood him to make. I understood him to say that the member for The Battlefords had referred to forty new millionaires in Canada. Certainly the member for The Battle-fords never made any such statement. If the leader of the opposition was referring to the hon. member for North Battleford, I do not wish to be held responsible for either the views or the statements of the hon. member for North Battleford either in this house or elsewhere.


John Horne Blackmore: There is one thing that needs to be said with regard to the reference to the great number of millionaires reported to have been made in Canada. In my opinion, such references are a logical result of the disinclination of the government to publish the names of people making incomes in excess of 850,000 a year.


[Stage Direction]
Section agreed to.
On section 2-"standard period."
James Lorimer Ilsley: The explanatory note reads:
This amendment-
(a)	redefines "standard period" to mean the calendar years 1936, 1937, 1938 and 1939. If a fiscal period does not coincide with these calendar years its profits are to be apportioned to the calendar years;
(b)	provides for the exclusion of one calendar year in the standard period if the profits of that year were less than 50 per cent of the average of the profits of the other three (or two, if the taxpayer has been in business only three years) standard years;
(c)	enables the minister to designate the actual date of commencement of business operations rather than the formal commencement of business.
[Mr. Ilsley.l


Mr. STIRLING:: I understand this amendment to deal with and dispose of the difficulty about which the Mining Association of British Columbia wrote the minister. Am I right?


James Lorimer Ilsley: I do not think so.


Grote Stirling: Does the minister remember the letter?


James Lorimer Ilsley: There was one company in British Columbia, I remember, whose date of commencement of operations was very much later than its legal date of commencement of business, but I did not know that there were any representations made by any association.


Grote Stirling: Perhaps I might be permitted to read one paragraph of this letter addressed to the minister on May 9 by the secretary of the Mining Association of British Columbia.
This association begs to bring to your attention the fact that a number of mining companies in this province have fiscal years terminating at various dates in 1941, so that the proposed increase in the excess profits tax has the effect (if applied to their 1941 returns) of making this increase retroactive to the extent of anywhere from eleven months to one month of 1940 profit.
We submit that this is inequitable, and would ask permission to suggest that the increase should be made applicable only in proportion to the months of 1941 actually included in such fiscal period.
I am not aware what the minister may have replied to the association on that score, but he will remember that I raised the matter during the resolutions stage.


James Lorimer Ilsley: I had forgotten that the
letter referred to that point. It is only one of hundreds of representations to the same effect. The matter is covered, not by this section, but by section 18. This section relates to the standard period, not to the taxation year. The representations made have been favourably met by this legislation.


Grote Stirling: In section 18?


James Lorimer Ilsley: I think it is in section 18.


[Stage Direction]
Section agreed to.
On section 3-"standard profits."
James Lorimer Ilsley: I will read the explanatory
note:
This redefinition of "standard profits" effects three changes in the existing definition:
(a)	It enables the minister to decide on the facts whether the business of the taxpayer in the standard period is of the same class as the business of the taxpayer in the taxation year, and
(b)	it provides a minimum standard profits
of $5,000 and	V
(c)	provides for the apportionment of profits to the calendar-year basis in accordance with the amendment to the definition of "standard period".

Excess Profits Tax Act


Karl Kenneth Homuth: 
Mr. ROSS (St. Paul's):: Will loss to the taxpayer caused by damage from sabotage, for instance, or by enemy action be deductible from profits before the excess profits are taken?


James Lorimer Ilsley: I do not know. That is a question which would have to be taken up with the income tax division. I am not prepared to answer it. The damage might be such as merely to require repairs to be made, and repairs are charged against profits. On the other hand, there might be some replacement which, I should think, would not be chargeable against profits. I do not believe it is possible for me to answer that categorically here.


Douglas Gooderham Ross: There should be some provision in the bill to take care of that situation. Insurance can be obtained which will provide a certain amount of protection, but it seems to me that some arrangement should be made. Perhaps in some of the contracts with the department there is a provision whereby the contractor will be recompensed in the event of such an occurrence. The Minister of Munitions and Supply could inform the committee with regard to the matter. The question is an important one, and should not be left to guesswork or anything of that kind.
; 3134
Excess Profits Tax Act


James Lorimer Ilsley: I do not think it is relevant to the Excess Profits Tax Act. It is a broader ^question than that. Of course, if there were insurance, the premiums would be allowed as a part of the operating expenses.


Harry Rutherford Jackman: I asked the Minister of Finance the other day if he would give me an answer to a question which I posed at that time, with regard to the plateau of corporation profits in this country, using the years 1937 and 1929, compared with the experience in Great Britain where the base or standard profit period is 125 per cent of the 1929 plateau of profits, while in the United States it is probably about 66 or 67 per cent, using the 1937 earnings, as compared with the year 1929. In other words, it is of some consequence to industry and also, perhaps, of some consequence to our hon. friends on the left * to know just what base we use before we assess this excess profits tax.
I could never understand from a political angle why this government did not call this tax, not 75 per cent, but 79J per cent, which it certainly is if one makes the necessary calculations, because 79i per cent of every dollar of excess earnings above the somewhat low standard base, goes to the government, and in addition to that, in the two large indus' trial provinces, an additional 5 per cent is exacted for provincial revenues, making a total of 84^ per cent. That is quite substantial, and it is perhaps higher than now obtains in the old country, whose practices our hon. friends of the left are always citing, because there is now a 20 per cent drawback there in the form of a certificate to be used for corporate purposes after the war. If the minister has any figures, or if he con. siders that the proposal which I have suggested .regarding the levels of the corporate profits , in the respective countries is out of line with practical experience, I shall be very glad if he will let me know.
, Mr. ILSLEY: I have not any figures, and I do not see the significance of the comparison with 1929. The comparison with 1929 has quite a different meaning, I should think, in England, from the comparison with 1929 in ; the United States. I have not made a study of this, but I should think the level of earnings in the United States in 1929 was much higher than it was in Great Britain. I do not 1 believe there was any such boom in Great Britain as there was in the United States. Why is this year, 1929, being used as a base for comparison? The year we took is not 1929; we adopted the four years 1936, 1937, 1938 and 1939, whether they were high or low compared with 1929.
IMr. Douglas G. Ross.]


Harry Rutherford Jackman: I used the year 1929 because it was looked upon as an extremely profitable one practically throughout the world; for, as we know, good times are more or less universal. It is true, I think, to say that the level of prosperity because of control of inflation in Great Britain was not as high as in the United States, nevertheless it was a prosperous time. I should be willing to use the period 1926-29 or any other, and if I am asked why 1929 was singled out, I simply answer that it was customary to take that year. We find that when the Department of Labour fixed their index or freezing point for wage scales they used the period 1926-29, or any period since then, and allowed the highest wage obtaining during any part of that time as the level which labour might obtain before applying for an increase in consequence of the rise in the cost of living. In my opinion, the year 1929 in industry is not an unfair one, but I should be glad if the Department of Finance would use any other so that we might know whether or not the taking away of 841 per cent by the dominion and provincial authorities is a taking away after a fair allowance is made to the corporation.
I realize, of course, that there are other purposes behind the excess profits tax besides the taking of money out of the hands of shareholders, one object being to prevent inflation; and while it may not be entirely germane to the subject at the moment, it would be interesting to know-and I do not think it is entirely theoretical-whether or not the minister or his department looks upon the excess profits tax as anti-inflationary or definitely inflationary. There is unquestionably, on the one hand, a taking away of excess profits or additional earnings from shareholders so that they cannot spend them and thus tend to increase the prices of goods generally; and on the other hand-I know this view is held by some economists-it is considered that the management of corporations, knowing that an increase in wages, or an addition, or some expensive maintenance will in effect be borne to the extent of 84J per cent by the government, are not as prone to be as careful as if they themselves had a larger stake in the expenditures under consideration. Therefore we have the possibility of this very measure, which may have been designed as an antiinflation measure as well as one for the purpose of producing revenue, becoming something of a boomerang.
I realize, however, that that is a question to which some consideration will have to be given, and I shall not press for an answer

Excess Profits Tax Act
now. I suggest that these matters should come before the house from time to time so that hon. members might appreciate their significance. I cannot help recalling that when the excess profits tax first came up it seemed to every member of the house, or at any rate to 95 per cent of the membership, that it was designed solely for the purpose of preventing any war profiteering; and with that in view it received the unanimous approval of the house. In fact, certain members proposed a higher tax. But there was another reason behind it, namely, to put us under a controlled economy and to do away with the profit motive in the production of goods, which was an entirely different matter. I cannot help feeling that the minister has not taken the house into his confidence, and, if I may go so far as to say so, he has not used the utmost good faith in presenting the measure to the house, not letting us know exactly what the implications were; because it is a major step to pass from a free economy, where the profit motive prevails, to one where there is a controlled economy, everything being under the government and the instinct to better one's position is not the motivating one.


[Stage Direction]
Section agreed to.
On section 4-Adjustments to standard profits.
James Lorimer Ilsley: This amendment alters the basis of adjusting standard profits by reason of changes in capital employed by providing:
(a)	a fixed rate of 7$ per cent of the capital added or withdrawn;
(b)	a basis for taking full cognizance of changes in capital made during the standard period.
A proviso gives the right of applying to the board for a standard profits as a new business if new capital to the extent of 33$ per cent has been added.
There are two or three minor changes to be made in the section. They are purely verbal. My colleague will move the amendment.


Clarence Decatur Howe: I move:
That section 4 be amended by inserting the word "employed" after the word "capital" in line twenty-nine, and also by inserting the word "employed" after the word "capital" in line thirty-five.


Richard Burpee Hanson: With
regard to the 33$ per cent. Is that not a rather high percentage? Why not 25 per cent? Let them have something on the new capital put in. Why any limitation at all?


James Lorimer Ilsley: It is arbitrary, but I should think 33$ per cent would be more appropriate
than 25 per cent. It is advantageous in many instances for it to be regarded as a new business.


Richard Burpee Hanson: Therefore it brings it into another category.


James Lorimer Ilsley: Yes. New business can apply to the board of referees for a capital standards base, and the board is not limited to ten per cent in the capital employed. It can give them the return that is usual or normal in the industry. It is arbitrary, but 33$ per cent is more suitable than 25 per cent as a test of when an old business becomes a new one.


Richard Burpee Hanson: This applies only to new business, but on the general principle of additional capital they are not being penalized otherwise, are they? People will not put any new capital into a business, even though they go into a new category, unless they get some return.


James Lorimer Ilsley: If the new capital is put into the business and employed in the business in any of these taxation years, 7$ per cent of new capital for the time it is in is added to the standard profits. The reasoni for the 7$ per cent is that it is the average: between 5 per cent and 10 per cent.


Richard Burpee Hanson: They are-all arbitrary.


[Stage Direction]
Amendment agreed to.
Section as amended agreed to.
On section 5-Repeal.
Richard Burpee Hanson: What is the effect of this?


James Lorimer Ilsley: The paragraph repealed
reads:
(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.
The effect of section 5 is to repeal that subsection.


Richard Burpee Hanson: I understand that; that is the mechanics. But why is it repealed?


James Lorimer Ilsley: Let me repeat what I said
in the statement I made to the house just before Easter. In view of the difficulty which has been encountered in attempting to define the sort of charges in respect of which adjustments of standard profits might properly be allowed, it has been decided to repeal this provision entirely. Actually, the adjustments possible under the present provisions of the act,
Excess Profits Tax Act

if followed to their logical conclusion, would mean a complete equalization of profits in the taxation period as compared with the standard profits. In the absence of the present provision, extraordinary cases of hardship may be relieved by means of order in council under the Consolidated Revenue and Audit Act.
For instance, as the section now stands after the repeal, this may happen: a company may have been depreciating at a 10 per cent rate and for its own purposes, quite legitimately may wish to depreciate at 5 per cent in the future. That will have the effect of augmenting the profits, and the company will at once say to us, "we should not be taxed on that increase as if it were excess profits, because it was brought about merely by a change in our depreciation policy, the rate of depreciation, which we decided upon for our own purposes." That company might make a case for relief under the Consolidated Revenue and Audit Act, as I indicated in the statement I made to the house before Easter. We have had since last year a provision for d,h*t case written right in the act itself by this paragraph (d), but it applies not only do depreciation charges but also to other charges. The term "other charges" would permit of such a variety of claims that it would be impossible to say when the reduction in charges was one which should give ground for relief when it was not. It was also leading to an application for legislation to apply to a case of increased receipts or decreased expenses. Naturally, if that process went very far, the Excess Profits Tax Act would disappear; there would be no excess profits if every change in receipts and in expenses were to be brought to the level of the receipts and expenses in the standard period.


Richard Burpee Hanson: There
might not be.


James Lorimer Ilsley: There could not be, to take it to the extreme, which I admit is a ridiculous extreme. This section furnished a great opportunity for taxpayers everywhere to go over their books and see whether their increased earnings were not due to decreased expenses or increased receipts as a result of some change in conditions or circumstances which would bring them to us for relief and enable them to prove that they did not really have an excess in the true sense of the term. Therefore it was a most dangerous section and had to be removed. Probably in some instances relief should be granted under the Consolidated Revenue and Audit Act.
{Mr. Hsley.]


Richard Burpee Hanson: This cannot be said to be a measure for the relief of any company?


James Lorimer Ilsley: No.


Richard Burpee Hanson: Quite the reverse.


James Lorimer Ilsley: Quite the reverse.


Richard Burpee Hanson: It is a
tightening up of the law. Will there not be some hardship?


James Lorimer Ilsley: No; we can always afford
relief under the Consolidated Revenue and Audit Act.
Mr. HANSON (York-Sunbuiy); That leaves them at the mercy of the minister. Is that a desirable situation? Should it not be left to some judicial functionary, rather than the minister?


James Lorimer Ilsley: It is up to the governor in
council.


Richard Burpee Hanson: That
means the minister. He recommends it, and the governor in council passes it unless it is manifestly unjust. I question the merit of the method the minister has referred to as an agency of relief. I do not think any corporation or business ought to be left to the mercy of a political body rather than a judicial body. If a judicial body could be established that would be detached from any suggestion of the political element, it would certainly be preferable. That may not be feasible.


James Lorimer Ilsley: I do not think it is.


John Horne Blackmore: I wish to ask a question, but I am not sure whether this is the section under which it would come. How would the minister compute excess profits in the case of an industry just starting up, say in 1941?


James Lorimer Ilsley: That comes under the next section.


[Stage Direction]
Section agreed to.	.
On section 6-Ascertainment of standard profits by board of referees.
James Lorimer Ilsley: The explanation is as follows:
The reenactment of section 5 effects the following changes:
(a) It enables taxpayers whose businesses were depressed during the standard period to make a preliminary estimate of their standard profits and so proceed 'with the filing of their returns and payment of their self-estimated tax. The limitation of a maximum of 10 per cent on capital employed is retained, and the minister is given the right to refer any case to the

Excess Profits Tax Act
board of referees where he considers the selfestimated standard profits of the taxpayer to be too high;
(b)	the category of new businesses is enlarged to include those where the minister acting under section 2 of this bill has determined that the actual business operations of the taxpayer were not commenced prior to January 31, 1938;
(c)	power is given to the board of referees to deal with cases of exceptional hardship where a capital standard of earnings is inapplicable;
(d)	the provision that the decision of the board is not operative until approved by the minister is restated in a separate subsection which also adds a new procedure in cases where the minister disagrees with the decision of the board.
If the hon. gentleman will state his question again, I will try to answer it.


John Horne Blackmore: It has been stated to me by certain people that this bill would make it impossible for anyone to establish a new industry. I just wanted a statement from the minister to show that that is not the situation.


James Lorimer Ilsley: A new industry can apply to the board for the fixing of its standard rate of profits. The board of referees may fix the standard on a 'basis of the return on capital, such return as is normal or usual in the industry.
Mr. BLACKMORE; The question arose in connection with the possibility of establishing an alcohol producing plant designed to process potatoes. We have, so far as I am aware, no such plant in Canada. How would the minister proceed to fix the rate allowed in such a case?
Mr. ILSLEY; The company if it wished would apply to the board for the fixing of standard profits. If the company in the first year of its operation did not make more than that rate, it would not be liable to the excess profits tax. It would be liable to the minimum rate, the 40 per cent corporation tax, but it would not be liable to the 75 per cent rate unless it made more than the standard profits fixed by the board.


Richard Burpee Hanson: For the information of the hon. member for Lethbridge I should like to ask the minister how it is possible to establish a new industry in Canada to-day involving any large capital expenditure, and involving the setting up of a plant which might interfere with war work. It may be theoretically possible, but practically it is not, the restrictions being so great. The regimentation is so great that it cannot be done. I am not complaining about that, because the nation must have the right of way. Therefore the setting up of a new industry so
long as we have the present restrictions and licensing system is something that just cannot be done.


Karl Kenneth Homuth: Do none of the decisions of the board become operative until the minister has given his approval? The board has no power except to recommend to the minister? .


James Lorimer Ilsley: That is correct.


Douglas Gooderham Ross: The other day I suggested that probably it would be necessary to have boards of referees set up in different parts of the country. The minister replied that he thought in the meantime the board here would be sufficient. I suggest, however, that the referees should publish their decisions, omitting the names of the people involved. I believe that would assist the taxpayers and, as time goes on, the minister as well, in the .precedents that would be established in these decisions.


James Lorimer Ilsley: I will bring that observation to the attention of the board of referees.
I do not know how far they could go without giving away secrets or information, which they have obtained from one industry, to other industries.	,


Harry Rutherford Jackman: I presume that at the present stage the government does not want any more peace-time industries? In other words, we have almost reached the point where there is no slack in employment, and we do not want any more peace-time goods produced? Otherwise I must point out that if the maximum of 10 per cent is allowed a new industry, and its earnings are then subject to a 40 per cent tax, the company has a net of 6 per cent remaining; and it is hardly likely that any enterprise money will find its way into the development of new industry at that rate. If, however, we have reached that stage in our war effort where the economy of the country is so devoted and directed to war production that we do not want any new industries for peacetime purposes, then of course I am in accord with the policy of the government. If, on the other hand, there is a feeling that in some sections of the country there still may be room to pick up the slack of employment, which cannot be used advantageously in our war industry, I believe the government should give consideration to making it possible for some of these companies really to go ahead and take a chance on earning some money to justify the venture. As we all know, the great majority of new companies fall by the wayside before they get well started, and there must be some incentive beyond 6 per cent for a new company to launch itself in the commercial world.
Excess Profits Tax Act


Alphonse Fournier: Shall the section carry?


Harry Rutherford Jackman: No, Mr. Chairman. The question I have put deals with one of the most important matters this house has had to consider for some time, and I should like an answer.


James Lorimer Ilsley: I did not understand that the hon. gentleman was asking a question. I thought he was saying that if the government does not want any peace-time industry, this is the proper course to pursue; that if that is not the situation, further consideration should be given the matter. I thought that was the point of his speech, but apparently he was asking for an exact statement as to whether or not the government does want any more peace-time industry.


Harry Rutherford Jackman: I wish to know whether it is the opinion of the government that we have all the peace-time industries we want, that we cannot spare any more men for peacetime work or even for other war industries. If that is not the situation, I think these taxation proposals are all wrong.


James Lorimer Ilsley: I should not like to go the length of saying we do not want any more peace-time industries in any part of Canada; nor do I agree that our present taxation measures are such that none can be established. The hon. gentleman is inaccurate when he says that a new industry is limited to 10 per cent of the capital employed. It is the old, depressed industries that are limited to 10 per cent when a capital standards base is being constructed for them by the board of referees. A new industry may be allowed a rate of return on the capital employed that is normal in the industry, which may be more than 10 per cent.


Harry Rutherford Jackman: Which section does that come under, in connection with new industry?


James Lorimer Ilsley: The provision to which I have referred will be found near the bottom of page 4 of the bill, at lines 44 to 50:
. . . being an amount equal to a return on the capital employed by the taxpayer at the commencement of the first year or fiscal period in respect of which he is subject to taxation under this act at the rate earned by taxpayers during the standard period in similar circumstances engaged in the same or an analogous class of business. . . .


Harry Rutherford Jackman: I do not wish to press the point unduly, but that requires some clarification. Supposing we commence this potato alcohol plant; what will you allow; 10, 15 or 20 per cent, subject to taxation?


James Lorimer Ilsley: That will be for the board
of referees to decide.


Harry Rutherford Jackman: But are they going to pull the rate out of the air or are they going to get some direction from the ministry? Certainly I would not wish to direct any money into a hazardous new undertaking if it did not seem likely to pay 20 or 25 per cent. We should know what would be a reasonable rate; or is the board of referees allpowerful in this matter as to whether new businesses, which the minister says may be needed in the country to-day, shall be given life? This is a vital question.


James Lorimer Ilsley: The board of referees are given just as definite statutory direction as can be given. It would be their duty to ascertain the rate earned by taxpayers during the standard period in similar circumstances, engaged in the same or in an analogous class of business.


Harry Rutherford Jackman: Probably there has not been any potato alcohol produced. In that event would they go to the chemical business for a standard? I do not know how one would rate these things; it would be extremely difficult. I take it the minister means that the board of referees would grant a sufficient return on this new capital to make it worth while; that is, to induce new money to go into it, whatever that rate might be.


James Lorimer Ilsley: No; that is not necessarily the standard. This is a judicial matter; it is not a matter of policy. That is, you do not bargain with a company and say, "Now, what will you take to build a factory?" Then if they say, "We must have 25 per cent or we will leave it alone," you do not give them that 25 per cent; that is not the idea at all. The idea is for the board to ascertain the rate earned by taxpayers during the standard period in similar circumstances, engaged in the same or in an analogous class of business. They might or they might not go ahead on that basis.


Harry Rutherford Jackman: Then it is their worry.


John Horne Blackmore: Is there any provision for allowing the different provinces to be represented on the board of referees?


James Lorimer Ilsley: The board is selected.


John Horne Blackmore: The board is already selected, without reference at all to provincial interests?


James Lorimer Ilsley: I would not say that. The members are Mr. Justice Harrison of New Brunswick-which is a good province to have represented on the board, as the leader of the opposition will agree-Mr. Dalglish of Montreal, and Mr. Fell of Toronto.

Excess Profits Tax Act


Mr. BLACK MORE:: The reason for my question was that perhaps potato alcohol producing plants, for example, might be proposed in each of three provinces at the same time, and the board of referees might decide that there was room in Canada for only one such plant. The question would be: To which one of the provinces would they allow it to go?


James Lorimer Ilsley: I would not depend upon what province it came from-at least I hope not.


John Horne Blackmore: While what I have said may sound rather inconsequential, yet it is a serious matter, at the present stage of deveopment of the dominion. I believe, really, that the provinces should have some way of having representation whereby they might be able to protect their interests in a situation such as I have indicated.


[Stage Direction]
Section agreed to.
Sections 7, 8 and 9 agreed to.
On section 10,-Diversified investments corporations.
Richard Burpee Hanson: Possibly on this section I might say something which ought to have been said on section 9. May I make a plea to the minister similar to the one I made the other day with respect to small businesses. I suggest that they are being unduly penalized. I suggest that the minister is not giving consideration to the success of small businesses, nor is he taking due regard of the importance of managerial ability.
I have many protests in my portfolio respecting this matter. I would urge the minister to give favourable consideration to the limitations he has suggested respecting small businesses. The capital invested may be only a small amount. That is the base upon which the action is taken. It is not sufficiently wide in the case of small businesses, and a real injustice is being done to some people in Canada. If the base could be widened it might take away some of their difficulties. They are, however, limited on the amount they may draw as salaries, and they are circumscribed in many ways. The result is that I do not believe they are receiving a square deal.


Douglas Gooderham Ross: A small business may go to the board of referees and say, "This is a terrible hardship on us. It would be better for us to start a new business." Or, they might just say that among themselves. Or they might go to the referees board and say, "We want to start a new business." To go back to another section of
the measure, one which we have just had explained, it would appear that the appeal board could then state whether 5, 10, 15, 20 or 25 per cent would be applicable, according to the nature of the business. It seems to me that an injustice is done here, because the profits in some of these small businesses have been very small indeed. There has been a great deal of competition, and I make my appeal on their behalf.


John Horne Blackmore: I would associate
myself with the leader of the opposition in this connection. Undoubtedly there is a marked discrimination in favour of large businesses. I do not believe the future welfare of Canada will depend upon the large business as much as it will upon the small business. In my opinion it will be found that decentralization of industry will be in the best interests of the country. With my meagre experience I would judge that all these regulations are of a nature such as to make it almost impossible for the small business to establish itself and to continue operations.


Harry Rutherford Jackman: I do not wish to labour the point, because I know the minister and his officials are conversant with it, but it is not often an hon. member rises and places before the government opportunities to bring in more revenue. That, in effect, is my proposal under section 10 of the bill. By the amendment moved last week, investment companies with senior capital were removed from this exemption from excess profits tax. I believe I should point out to the committee that investment companies are free, practically without restraint, to hold in their portfolios those forms of securities which they deem best. If they hold the stocks of other Canadian companies, a tax having already been paid by those corporations, the stock on which the dividend is paid is free in the hands of the investment companies.
With bond interest it is otherwise, because the debtor company has not paid a tax on it, and the interest, when it comes to the investment company, must be subjected to taxation. It works out, however, that in the management of these companies it is impossible to live with a 40 per cent tax-which is the minimum, if the excess profits tax applies-applied to income merely because it stops at a station along the line, before reaching the ultimate beneficiary. That particular station does nothing; it acts merely as a trustee in the collection and disbursing of the money.
Therefore, if the minister is interested in collecting revenue he will endeavour, if it is at all possible, to make an exemption of this
Excess Profits Tax Act

class of company having senior capital. He will find then that he will get more tax, because they will hold more bonds on which they will pay the 18 per cent, or the normal corporation tax to the treasury. He will get more in that way than he will receive if he simply applies the excess profits tax of 40 per cent, which they cannot stand. They would have to turn round, take their funds out of the bonds, and put them into preferred or common stock.
I believe the minister will see the force of the argument when he realizes that there are many good preferred stocks on the market which to all intents and purposes have the qualities of bonds, sell at comparable levels and bring in comparable yields. Therefore, while I know it may seem odd for a member to rise in his place to do as I am doing, yet I am in a sense endeavouring to make matters harder for the taxpayer. I do that because they simply cannot continue paying 40 per cent, but of necessity and by reason of the government's action would have to place their funds in securities which are not taxable. On the other hand, if they are permitted to pay the 18 per cent tax, they will feel that that is still a burden under which they can operate.
I feel quite confident when I say that the minister will receive more revenue if he does as I suggest than if he permits the measure to pass in its present form.
One other point. The limit of time before which 85 per cent of the net income for the year must be distributed is ninety days. Perhaps this is not a very important point, but may I add that when you distribute 85 per cent of the income of a company you do not leave much margin to go on. For instance, at the present time a company the fiscal year of which ends with the calendar year will find itself being audited, and the exact taxation may not be known. Therefore it is in a position perhaps of declaring a dividend which may leave insufficient available. If it makes no difference to the department I would suggest a period of one hundred and twenty days, which is the same length of time within which the taxes are returned, and after which a penalty must be paid.
I would also point out that there has to be an extra amount of time, on account of the provision of the foreign exchange control board respecting thirty days' notice after declaration of dividends. Therefore a period of one hundred and twenty days would not be unreasonable, and would simplify operations.
At six o'clock the committee took recess.

After Recess
The committee resumed at eight o'clock.


The CHAIRMAN:: Shall section 10 carry?


James Lorimer Ilsley: The hon. member for Rose-dale suggested that the word "ninety" in the first line on page eight of the bill be changed to "one hundred and twenty", and I would ask my colleague to move that this change be made.


Mr. McLARTY:: I move accordingly, Mr Chairman.


[Stage Direction]
Amendment agreed to.
Section as amended agreed to.
Section 11 agreed to.
On section 12-Limitation.
Richard Burpee Hanson: Does the minister want to make any explanation about this and the preceding section?


James Lorimer Ilsley: I am not anxious to do so unless the committee insist.


[Stage Direction]
Section agreed to.
Section 13 agreed to.
On section 14-Depreciation and depletion.
James Lorimer Ilsley: This is an important section. This amendment provides for the deduction from the original asset values of the depreciation or the depletion which on the facts can reasonably and properly be said to have been incurred by the taxpayer.


Richard Burpee Hanson: Was there no provision like this before?


James Lorimer Ilsley: Before, the depreciation
which was deducted was as follows:
A deduction of the total of the amounts which have been taken as a deduction from profits under the Income War Tax Act for depreciation and the total depletion reserve reflected on the books of the taxpayer.


Richard Burpee Hanson: This provision goes a little further.


James Lorimer Ilsley: It is more reasonable, more sensible, more logically based than the other. Before, only the depreciation which had been taken as a deduction from profits was subtracted from the original cost of the assets. If there had been several years of losses, even though the assets had been depreciating during those years there was no deduction for the depreciation during those years.


Richard Burpee Hanson: That was severe.

Excess Profits Tax Act


James Lorimer Ilsley: It was the very reverse; it was lenient because the company would be regarded as having more capital employed in its business than it really had, and if it were a depressed business it would, therefore, get too high a standard profit. This amendment is against the taxpayer, so far as depreciation is concerned.


Richard Burpee Hanson: And as to depletion?


James Lorimer Ilsley: So far as depletion is concerned, as it stood before, the deduction was the total depletion reserve reflected on the books of the taxpayer. That did not mean very much. The government should not be in the position of being entirely dependent upon the books of the taxpayer because anything might be in there for depletion. Therefore the deduction for depletion is now such amount on account of depletion as the board of referees deems fair and reasonable. That puts both depreciation and depletion on a logical basis. It takes the real depletion which has been allowed by the income tax division and such depletion as the board of referees finds to be fair and reasonable.


Richard Burpee Hanson: And the taxpayer has his opportunity to make a case?


James Lorimer Ilsley: Yes.


[Stage Direction]
Section agreed to.
On section 15-Debts and borrowed money. Mr. ILSLEY: The explanatory note on this reads:
The addition to this paragraph is the provision whereby if the facts so warrant the minister may recognize as permanently invested capital the amount of capital furnished by a parent to a subsidiary corporation which is of a permanent nature, and non-interest bearing, and otherwise qualifies as invested capital rather than borrowed capital.
Richard Burpee Hanson: That is
fair because advances to subsidiaries by parent companies, while they may take the form of a loan, are really an investment. I think the minister is doing the just thing in making that provision. As a matter of fact, I do not think he goes far enough. He should make some further allowance for capital invested by proprietors to keep the business going during a depressed period.


[Stage Direction]
Section agreed to.
On section 16-changes in capital during taxation period.
James Lorimer Ilsley: This section is really to
correct an obvious error. The explanatory note reads:
The amendment to this paragraph is a restriction of the direction that dividends constitute a diminution of capital employed to the extent
of one-half thereof to cases where such dividends are paid in cash; stock dividends do not constitute a diminution of capital employed.
It is clear that it should be limited to cash.


Richard Burpee Hanson: I agree.


[Stage Direction]
Section agreed to.
On section 17-Rate of tax on profits. '
James Lorimer Ilsley: I should like to say a word about this, because it was not covered, I believe, by the resolutions. The rate is 15 per cent as applied to persons other than corporations; the basis of the 22 per cent for corporations was the assumption that the provinces would go out of the field, and it was estimated that the provinces were imposing rates of corporation taxes, namely, ad valorem and specific and flat rates, amounting on the average to 7 per cent of the corporate profits.


Richard Burpee Hanson: They
varied, did they not?


James Lorimer Ilsley: Yes; they varied a great deal. Two provinces-British Columbia and Manitoba-imposed 10 per cent; two other provinces-Quebec and Ontario-imposed 5 per cent, and some of the maritime provinces are away down; but it was estimated that the average was about 7 per cent. Therefore, since the dominion government would be paying the provinces that 7 per cent or thereabouts in cash, we would have to cover the payment, and we took 10 per cent-


Richard Burpee Hanson: Therefore you took it out of the corporations?


James Lorimer Ilsley: And, of course, we did not aim, in this budget, to be lowering the taxes on the corporations.


Richard Burpee Hanson: From one taxing master to the other-that is what it amounts to.


James Lorimer Ilsley: Yes. That did not apply to non-corporate taxpayers; and therefore, since the net rate of increase on corporations was approximately 3 per cent, the difference between the 7 and the 10, it was fair that the net rate of increase on the unincorporated taxpayer should also be 3 per cent, and, therefore, that his excess profits tax flat rate should rise from 12 to 15 per cent.


Richard Burpee Hanson: To be on the same level?


James Lorimer Ilsley: Yes-as it was at first. Twenty-two per cent was placed in the resolution for the unincorporated ones, but that would be unfairly high.


Richard Burpee Hanson: This rise in the corporate tax is based on the theory that the provinces will retire from this field of taxation?


James Lorimer Ilsley: Yes.

Excess Profits Tax Act


Richard Burpee Hanson: If the provinces fail to retire from this field of taxation, the taxpayer is gypped that much more. That, of course, is not right. This should be held in suspense pending the outcome of negotiations with the provinces. That is only fair and reasonable. Otherwise the taxpayer may be confronted with paying the provincial taxes and this increased tax under this section, and that will 'be resented, and properly so. By the way, will the minister tell us what progress, if any, is being made in his explorations with the provinces? I was intrigued to read in the newspapers the other day exactly what I thought would happen, namely, that one province, at least, is holding back until it sees what the other provinces will do. I assume that the minister is endeavouring to treat with the provinces, not jointly, but severally, and more or less at the same time. Has he heard from Ontario?


James Lorimer Ilsley: No.


Richard Burpee Hanson: No word from Ontario. Then, unless he can get some response from, and some accommodation with, Ontario, does the minister think he ought to put this section into effect?


James Lorimer Ilsley: Yes.


Richard Burpee Hanson: I disagree with that. I think it is unfair and unjust, and it is not at all what we were led to believe from the minister's statement in the budget speech.


James Lorimer Ilsley: Oh, yes, it was.


Richard Burpee Hanson: Oh, no, it was not. It was on the theory, if I understood him-and I am sure the public so understood-that if the provinces would retire from this particular field, the corporation tax, they would be reimbursed under one of two alternative plans; and of course the minister did not tell us that in raising the compensation for the provinces he was going to increase the tax on the corporations. That was very skilfully left out of his speech. There cannot be a very great advantage in that to the corporations, except to relieve them from two taxing masters. I suggest to the minister that he add an amendment to the statute, withholding its operation until he knows what is going to occur with respect to the provinces. That can be easily done, because this tax will not bear any fruit for another year, will it? It will be some months at all events before this tax becomes operative.


James Lorimer Ilsley: Yes.


Richard Burpee Hanson: That would give him ample time. While I am on my feet I would ask the minister if, having

regard to alternative (b) of his proposals to the provinces, consideration has been given to the fact that one province, at least, has not been discharging its full obligations: I shall just leave it at that.


James Lorimer Ilsley: Yes.


Richard Burpee Hanson: Has consideration been given to what it is proposed to do under the circumstances? Is it proposed, by making a grant in that particular instance, to put the imprimatur of this dominion upon the default of one of the provinces?


James Lorimer Ilsley: I do not think it does that.


Richard Burpee Hanson: It may have that effect.


James Lorimer Ilsley: It is argued by certain
Alberta bondholders that we have condoned the action of Alberta in arbitrarily cutting its interest in half.


Richard Burpee Hanson: I would not put it in that way. I do not think you have condoned, but I think that, when you come to work out the position with that particular province, consideration should be given to what I have indicated. It may have the effect-depending entirely upon the action to be taken after these negotiations have been completed-of condonation. I hope the minister will not put himself in that position.


James Lorimer Ilsley: The offer to Alberta is very clear. The offer is, the actual debt service assumed by the province, or the proceeds of the taxes-whichever the province likes-and since the amount collected in taxes for 1940 is higher than the actual debt service, undoubtedly the province will elect to take the amount collected in taxes.


Richard Burpee Hanson: If they
do, that would eliminate the situation to which I have referred. There would not be in that event any condonation of the default of the particular province.


James Lorimer Ilsley: That is what I think, but__


Richard Burpee Hanson: At least, that would be my judgment. If, however, they should happen to accept the other alternative, the minister is faced squarely with this position: shall he, in consideration of their going out of the field, pay them a sum which would equal one-half of what, we shall say, they ought to pay if they keep their contract? That may be the alternative which the minister will have to face; and if he concludes an arrangement on that basis he will have said to the people who have invested their money in Alberta bonds, "We approve what has occurred in Alberta: we are going to pay

Excess Projits Tax Act
that, and no more." Then, God help the credit of these provinces, because it will be an invitation to some other provinces to do likewise.


James Lorimer Ilsley: I do not think it is. For example, we offer to Saskatchewan their debt service or their taxes, whichever is the greater; and Saskatchewan will undoubtedly elect to take their debt service.


Richard Burpee Hanson: I am not suggesting that Saskatchewan is even thinking of following suit. No word I have said is capable of that construction. We are, however, confronted with a situation which amounts to this, that if Alberta should elect to accept (b) instead of (a), and we agree upon the basis, the Dominion of Canada will condone what has occurred in Alberta, and that will not be a good thing to do.


Douglas Gooderham Ross: I think the corporation tax is altogether inequitable, especially as applied to small incomes. By taking it through the corporation the shareholder loses two-fifths of his income before he ever receives it. A better way would be to increase the income tax in the higher brackets and take it away after the income is received instead of deducting it at the source. The hardship would not be so great then to people with small incomes such as widows and retired persons whose income is derived from investment. As soon as it was announced in the budget that there was to be an increase of 10 per cent, capital values decreased. I suggest that it would be better to maintain capital values. When there is a decline in capital values, the effect is felt by such concerns as insurance companies. I am not suggesting that the tax should not be collected; I merely urge that it be collected after a person gets his income and not before.
Take the Consumers' Gas Company of Toronto. That company has had a hard time getting along all these years. As a matter of fact, it can just earn its dividends, and this means that one-tenth more is being taken from it. The result will be that dividends will be reduced and people will suffer. Why is the tax collected from corporations and not after people receive their dividends? Some means could be taken to prevent the companies from withholding money that was earned, compelling them to pay it out. If that were done, the tax would be collected after people had received their income.


Harry Rutherford Jackman: This is the section which imposes the tax on certain people not corporations. It is in addition to the ordinary income tax bracket into which their incomes would fall. I have received a great many complaints, some from insurance companies, some from partners who carry on ordinary business, the contention being that the senior partners could more profitably hire themselves out to other firms and receive a salary which would be free of the 12 per cent tax, now 15 per cent, instead of continuing in partnership and being subject to the tax. I have received complaints from commission brokers and other agents. They hold that their business is on all fours with that of other professional people such as accountants, lawyers and so forth, who are not subject to the tax. There is nothing in the nature of a continuing business if they withdraw their personal efforts. The minister probably explained the reasons behind the placing of insurance partnerships and so forth in a special classification, but I wish he would set forth those reasons, because it antagonizes some people and it seems to be an unfair imposition.


James Lorimer Ilsley: It is difficult to draw the
line between business and non-business. To show how difficult it is, fire insurance agents, for example, are regarded as being in business but life insurance agents are not, and one class is subject to the tax, and the other, not. I take that as a striking case. These are two groups that are closest to the border-line, but the line has to be drawn somewhere. For instance, if a man were painting pictures for a living he would not be subject to the excess profits tax if he earned twice as much in 1940 as he did in the average of the years from 1936 to 1939. We would not attempt to tax him because he had an increase in business earnings. The same would apply to the doctor and the lawyer. There is a long list on one side of the line, but when one gets into the brokerage business, such persons are classified as being in business. The Department of National Revenue issued a brochure in which they gave a list of those deemed to be subject to the act and those not subject. When the act was passed last year a considerable amount of time was taken in trying to compile a list of border-line cases on either side of the line; and I made up my mind this year, after I had heard representations from fire insurance agents and others, that I could not do better than leave the line exactly where it was drawn last year. The list is:
Excess Profits Tax Act

Within the exemption
i.e. non-taxahle
1.	Learned professions
e.g. clergy, lawyers, notaries, doctors, dentists, accountants, auditors, actuaries, teachers (e.g. primate schools or business schools unless owned by a company).
2.	Engineers
e.g. architects, civil engineers, mining engineers, chemical engineers.
3.	Artists
e.g. musicians, actors, radio entertainers, writers, artists.
4.	Professional athletes
e.g. golf pros, hockey players.
5.	Personal services
Life insurance agents (who are virtually employees of one life company), barbers, hairdressers, masseurs, chiropractors.
Outside the exemption i.e. taxable
Druggists and drug companies, business consultants (i.e. taxpayers engaged in the business of business consultants).
Builders, metallurgists and gold refiners, assayers and analysts.
Musical and dramatic agents and entrepreneurs, printers, advertising agencies, photographers, publishers.
Promoters, proprietors of arena, etc.
Insurance agents (other than life), brokers, commission agents, tailors, real estate agents, customs brokers, insurance adjusters.
That does not profess to be a complete list, but it is a compilation based upon the act, on the principles laid down in the act, which were carefully studied after a great deal of research and consultation with authorities.


Richard Burpee Hanson: The minister has not intimated his rejection; certainly he has not intimated his acceptance, of the suggestion I made that this section should stand until he has completed arrangements with the provinces. If he makes no arrangement with the provinces, I suggest that this should stand. There should be some provision for suspending the operation of this section until an adjustment or an arrangement has been made; otherwise these companies and businesses will pay the increased tax to no purpose, and it is not right.


James Lorimer Ilsley: That is so entirely inconsistent with the whole scheme I outlined in the budget that I could not agree to the suggestion.


Richard Burpee Hanson: It would do no harm to suspend the operation of this section until an adjustment was made.


James Lorimer Ilsley: The whole theory of the
provincial offer is that the taxes go on. We nust take responsibility for what we do. We lid it with our eyes wide open. If by chance any province does not come in, the taxes are not so high that both sets of taxes cannot be borne.


Some hon. MEMBERS:: Oh, oh.


James Lorimer Ilsley: But they are high, I will admit.


Richard Burpee Hanson: And going higher all the time.


[Stage Direction]
Section agreed to.
Section 18 agreed to.
Bill reported, read the third time and passed.
[Stage Direction]
The house in committee of supply, Mr. McCann (Renfrew South) in the chair.

[Stage Direction]
SJiO. Departmental administration, $126,480.
Richard Burpee Hanson: The
arrangement just before the dinner recess was that we would go into fisheries.


Ian Alistair Mackenzie: The arrangement on Friday night was that we would call two new departments.


Richard Burpee Hanson: What
supply are we going on with?


Ian Alistair Mackenzie: Fisheries immediately after this item.
Item stands.


Richard Burpee Hanson: How many departments are now in, and how many are there to come in?


Ian Alistair Mackenzie: The departments that have been called are: Agriculture, External Affairs, Prime Minister's office, Privy Council office, Governor General, Labour, Royal Canadian Mounted Police, Justice, Post Office, Pensions and National

Supply-Fisheries
Health, National Revenue, Mines and Resources, Public Works, Transport, and now Trade and Commerce.
Those not called are: Auditor general's office, chief electoral officer, civil service commission, Finance, Fisheries, insurance, legislation, national defence other than war, public archives, public printing and stationery, Secretary of State, soldier settlement of Canada, government owned enterprises, loans and investments.


Richard Burpee Hanson: This may be in accordance with what was stated on Friday night, but at six o'clock we were distinctly told by someone on the government benches that immediately after the excess profits amendment act was passed we would go into fisheries. Certain hon. gentlemen want to speak on Trade and Commerce, and they had no notice that we would go into Trade and Commerce to-day.


Ian Alistair Mackenzie: There is no intention of discussing Trade and Commerce this evening. I informed hon. gentlemen that we would call Fisheries.


Mr. CASSELMAN:: It is in now and it may be called on Thursdays and Fridays without a motion.



DEPARTMENT OF FISHERIES

[Stage Direction]
69. Departmental administration, $128,480.
Thomas Reid: One matter I wish to draw to the attention of the minister has to do with the spawning beds on the Fraser river and its tributaries. In 1913 and before we had the catastrophe at Hell's Gate that blocked the salmon from getting up the Fraser river to spawn, there was in British Columbia a total pack of about 2,500,000 cases of what is known as the Fraser river salmon. That includes the salmon packed on the United States side as well as on the Canadian side but it all goes under the Fraser river system catch. The value of that pack was approximately $30,000,000.
Then we had the rock slide, and since that time and with the intensive fishing that has taken place, the runs have gone down each year. If we take the good years-and I quote 1934 as one of the good years for sockeye-the total pack of sockeye salmon in that year was about half a million cases of a value of about $7,000,000.
To bring the matter more vividly to the attention of the committee, let me say that in 1913 British Columbia packed 684,596 cases of sockeye salmon. This pack from fish caught
in the Fraser river was more than the entire United States and Canadian pack from the Fraser river system in 1940.
What I particularly wish to bring to the minister's attention is the fact that large power corporations in British Columbia have been allowed to build dams on certain tributary streams of the Fraser river, and that these dams have in some measure contributed to the depletion of our fisheries in the Fraser river system. Four dams in all have been built on tributaries of the Fraser. The first was built in 1898 on the outlet from Coquitlam lake in order to provide water for the city of Vancouver. The attention of the authorities of Vancouver was drawn at that time to the fact that this might interfere with salmon going up to spawn, and the authorities were requested to put in a fishway, to enable the salmon to get over the dam and so on to the spawning beds. Later improvements were made at this particular lake, but the dam was later built higher and so the fish-ladder was not made adequate and was pronounced a failure.
As I pointed out, there are, in all, four dams. But the one that I particularly wish to bring to the minister's attention is the Alouette dam built by the Burrard Power Company, a subsidiary of the British Columbia Electric. The Alouette dam is located in the south fork of the Alouette river at the mouth of Alouette lake. The construction began in 1924 and was completed early in 1927. It raised the level of the lake by about seventy feet and diverted the waters through a tunnel to Stave lake where the power-house was located. The plan operates under an authorized head of 125 feet and is automatically controlled from the Stave falls generating station. At the present time there is often little or no water flowing in the south channel of the Alouette river. In fact, for many months in the year the bed of that river is absolutely dry. Before the construction of the dam, all five species of salmon, and steelheads, entered this lake. For example, on October 16, 1923, Inspector A. P. Halliday visited Alouette river and lake and found chum and pink salmon very numerous. He also counted eight sockeye and four spring salmon in the south Alouette river within a period of forty minutes.
Following the erection of the dam, sockeye were observed by officers of the Department of Fisheries and of the biological board of Canada, one of whom was Doctor Foerster, later of the salmon commission staff. In 1927 the lake apparently was first blocked to the ascent of salmon. On July 3, 1929, the south Alouette was nearly dry when about two thousand sockeye were noted below the first
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falls in the north fork of the Alouette river. An attempt was made to transfer these fish above the falls by dip net, but those so transferred only fell back over the falls again. On July 6 the run had entirely disappeared from both the north and south forks of the river. In 1930 several thousand were seen in the north Alouette toward the end of May, and a little later many thousand tried to ascend the dam in the south Alouette, there having been a good overflow at that time. This was the last run of early sockeye salmon observed since this dam and the Coquitlam dam have cut off their spawning grounds. The dam after completion wras impassable to salmon, and no fishway was provided. It is not certain just why a fishway was not placed over the dam, but apparently it was believed that this was not feasible, and that the power from this project was more valuable than the Alouette fisheries.
I bring up this matter because I believe that before long the building of dams will reach serious proportions and greatly affect the salmon industry; for it should be pointed out that the Fraser river, with its tributaries, has been mapped for power purposes by engineers of the provincial government. Many companies, I believe, are seeking power sites there, and I have no doubt that before very long they will be asking for the right to construct dams across the Fraser as well as its tributaries. Here we have an instance of four dams having been built on streams up which sockeye and other salmon went to spawn. These salmon now have disappeared because they could not get over the dams.
At the time attention was drawn to this situation, and the statement was made that a fishway was not feasible. The great work that has since been carried on in the United States had not been commenced. I have in my hand to-night, however, a copy of the booklet put out by the government of the United States with regard to what took place with reference to the Bonneville dam on the Columbia river near Portland. There the authorities compelled the builders of the dam to put in a fishway so that salmon might ascend the river to spawn. In addition, I understand, they had to spend a considerable amount of money to provide a means of bringing the young fry down again, because they discovered that when the young fingerlings were allowed to come over the waterfall many of them were killed. I am told that the total cost of providing the fishway, and the method of bringing the fingerlings down again, was in the neighbourhood of 815,000,000. In any event the fishery officers of the state of Washington maintain that these fishways or fish-ladders are a success. At the Bonneville dam they 
raise the fish a height of two hundred feet, to the level of the lake system above, and there is a flume or pipe for bringing back the fingerlings. In British Columbia, however, we allowed the large power corporations to go ahead and construct dams on our rivers without protest.
At the outset of my remarks, Mr. Chairman, I pointed out the great value of that fishery in 1930 compared with the value to-day, and in order to emphasize my point I am going to repeat those figures. In 1913 there was packed something like 830,000,000 worth of canned salmon, whereas last year the total pack was valued at not more than 87,000,000. If this situation is allowed to continue, that fishery will become non-existent. At the moment I am not going to deal with the work of the international fisheries commission, of which I am a member, but this is the proper place to bring up the question of these dam obstructions. A number of years ago the Fisheries Act was amended to give the minister authority to compel companies or corporations placing obstructions on these rivers to provide fishways or dams to permit the salmon to ascend. That authority is contained in section 20 of the act. I am not going to read the whole section, but I should like to read subsection 7;
The minister may require the owner or occupier of any slide, dam or other obstruction to instal and maintain such fish stops or diverters, both above and below any dam or obstruction as will in his opinion be adequate to prevent the destruction of fish and/or to assist in providing for their ascent.
My appeal to the minister this evening is that he take steps to compel this company, if necessary, even at this late date to put in fishways in order that salmon may reach the upper streams and lakes to spawn. I know someone will say that this company was given the right to do these things in days gone by, and that it would be hardly fair to make it put in these fishways now. My reply would be that the power contained in this act was inserted for this very purpose, and I know there have been occasions in this country when action of this kind was taken after appeals had been made to the minister. I am not going to weary the committee at greater length in this connection, but I thought, . this was the proper time to bring this matter to the attention of the minister and to ask him to give my appeal every consideration.


Richard Burpee Hanson: What the hon. member for New Westminster has said with respect to obstructions across salmon rivers will find its counterpart in the history of every salmon stream on the Atlantic coast west of New Brunswick. There was a time

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when every river in New England was a salmon fishing river. There was a time when Penobscot salmon held the same place in the markets of New England that Gaspe salmon holds to-day in Canada. That is all a thing of the past now because of the construction of dams for power purposes without proper provision for the preservation of the salmon fisheries. Surely we have learned something in a quarter or a third of a century; and I am certain that our department, so far as it has jurisdiction, will not be unmindful of the lessons of the past.
I know nothing of the situation to which the hon. member has referred, but I have no reason to doubt that he has correctly stated it. Efforts have been made from time to time on the Atlantic coast to authorize the construction of dams on some of our salmon rivers. Such efforts have been valiantly opposed except when adequate provision was made for the propagation of this species of fish. I hope the minister will give heed to what the hon. gentleman has said. Great progress has been made in the scientific construction of fish-ladders. Years ago I was very much interested in this sort of thing; and if my information is correct, I am quite satisfied that there are now in service fish-ladders which will perform a useful function. They may not be one hundred per cent perfect, but they will go a long way toward meeting the situation.


Mr. FRASER (Peterborough West):: After the minister deals with salmon runs and dams on the different rivers, perhaps he might give the committee some information with regard to lobster control, about which there is a good deal of comment in the newspapers and on which a large amount of money has been spent. I understand that in the supplementary estimates $600,000 was provided for this purpose, of which $158,000 was spent.


Mr. MICHAUD:: The statements made
by the hon. member for New Westminster, and supported by the leader of the opposition are certainly of great interest and importance at the present time. In years gone by, facilities to aid the fish to get over dams had not been fully developed. We know that today some experiments have been made, and have been successful. That is particularly true in recent years in the United States. But the authority to permit the building of dams across streams in non-tidal waters is one which rests with provincial governments.


Richard Burpee Hanson: What
about international rivers?


Joseph Enoil Michaud: I believe the provinces have claimed autonomy and jurisdiction with respect to rivers without tidal waters and
within provincial limits. I believe the international joint commission controls the volume of water running in such rivers. The provinces, however, have always claimed jurisdiction over permits for the erection of structures or obstructions in non-tidal waters within their limits.


Richard Burpee Hanson: On the
theory that they own the bed of the stream, to the centre?


Joseph Enoil Michaud: Yes.


Richard Burpee Hanson: And what about an international river, such as the St. Croix? For instance, who authorized the dam at Woodlands?


Joseph Enoil Michaud: That was erected before my time.


Richard Burpee Hanson: That is so.


Joseph Enoil Michaud: The only control the
dominion government through the Department of Fisheries has maintained over these obstructions in rivers has been the right of insisting that proper facilities be provided to permit of the descent and ascent of fish. This is provided by the Fisheries Act, as amended in 1939.
Those who have given any study to the great industry of fishing know that the Fraser river is the most important of our salmon rivers in Canada. It holds that position because of the large number of fish travelling those waters, and resorting to them for purposes of propagation. The high value of the type of fish caught in that river gives added importance to it. It must be understood that in the main Fraser river there are no artificial obstructions or dams. Some years ago, however, three large dams were built on three streams in the Fraser river system. As the hon. member for New Westminster has said, the first dam, built on the Coquitlam river, was built in 1898. and was so built for the purpose of providing a storage of water for human consumption by the residents of Vancouver. A situation was faced whereby it became necessary to provide water for the large population of that city, and it was considered that the point I have mentioned offered the only possible storage facilities available. It was decided at that time that it was more important to provide water for the citizens of Vancouver and district than to leave the river open so that the fish might ascend it. It was considered that there were many other streams in the system which could be developed for fisheries purposes. In this instance the dam was built to a height of 100 feet.


Richard Burpee Hanson: That
could not be blamed on the power companies.
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Joseph Enoil Michaud: No, not that one. Then, a dam 130 feet high was built some years ago for power purposes on a stream or creek known as the Stave river. In 1934 another dam, 125 feet high, was built farther down the same stream. It was thought absolutely necessary at the time to provide storage for power purposes, and inasmuch as other streams or rivers were available to the fish, it was thought this one might very well be sacrificed. It was considered impracticable at the time to provide satisfactory fishways or ladders in that river.
Then, in 1927 the dam was built in the Alouette river. The records show that there was a great demand for power in that district from the cities of Vancouver and New Westminster. At that time public authorities, both provincial and federal, thought they might very well overlook the fishing interests and develop more power on that stream. Accordingly they erected a high dam, in which it was impossible to build a fishway. This dam raised by forty or fifty feet the water level above the dam, and it is impossible for the fish to spawn in that depth of water. Then, below stream, during most of the summer season the stream is dry, because the water is stored purposely to provide for emergencies. Therefore, even if a proper fish-ladder or fishway had been built in that dam, it would have been of no avail, because it would not have permitted spawning.


Richard Burpee Hanson: It could not have operated successfully.


Joseph Enoil Michaud: No; it could not have operated successfully. Those are the only three streams on the whole Fraser river system which have been dammed, and in which fishways have not been provided. Since that time, to my knowledge there has been no demand for more power which would bring further impediment to fishing on the streams of the Fraser river. If there were such demands I am sure the provincial authorities would consider the matter seriously before granting authorization to build dams. The Department of Fisheries would take every precaution to see that proper facilities were constructed, by way of fish-ladders or other devices, to permit of the ascent of the fish. Therefore I can assure the hon. member for New Westminster that when the occasion arises he may rest assured that the provincial and federal authorities will try to preserve the great asset of the Fraser river, because they realize that sockeye fishing is the backbone of the industry on the Pacific coast.


Thomas Reid: It is passing strange that when the first dam was built and built for water purposes for a city, the fisheries authorities

demanded of the city that a fishway be constructed for the fish; and yet when the power corporations come along and build their dam, no demand is made by the fisheries department that a fishway be placed on the dam so that the fish can go up. It is true, as the minister said, that one dam caused a great depth of water which prohibits the sockeye and other salmon from spawning. But the Fisheries Act contains a provision compelling the companies to build not only fishways but hatcheries. Hatcheries should have been built there at the expense of the company to look after the young fingerlings. These power companies, however, as was pointed out by the leader of the opposition, have gone ahead in a ruthless manner, their only thought being to develop power projects, with no thought of what disaster might take place in the fisheries when the dams are built.
One other thought I leave with the minister. It is true that at that time the fisheries authorities did not consider a fishway was feasible, but since then the United States has experimented with dams, as in the Bonny-ville dam where the fish are taken over a height of over 200 feet without injury at all. This is claimed to be a success, and in the light of that experience I think the minister should ask these companies for a statement of their intentions now. I do not think it is right to allow them to escape the responsibility which was certainly theirs two years ago. The damage can be proven. The minister should at least have an inquiry into the possible damage if my presentation strikes him as in any respect doubtful.


Richard Burpee Hanson: On the question 6f jurisdiction, it is quite clear that the federal authority has some jurisdiction. Even so it, cannot prohibit the erection of a dam in a non-tidal water. My understanding is, however, that the federal authority has jurisdiction with respect to the regulation of the flow of water for the preservation of the fisheries, which of course are under dominion jurisdiction. Therefore no one can with impunity build a dam without taking into account the rights of the dominion, even though the province should give authority. What is the policy of the department? Have they watched these applications carefully, and what happened?


Joseph Enoil Michaud: That has been the policy of the department for the last forty years, so far as I have been able to learn. The hon. member for New Westminster stated that when the dam was built on the Coquitlam stream the dominion government insisted that there

Supply-Fisheries
should be a passageway for the fish, but afterwards it did not insist when the power companies built their dams. I cannot answer for what was done forty years ago. After the first dam was built, it was found that instead of being useful it was a great detriment, not so much to the fish, as to the users of the water, the residents of Vancouver. It was found that quite a number of fish died in that basin, and the health authorities claimed that the use of the water was dangerous to the * health of the citizens of Vancouver.


Richard Burpee Hanson: Did they abandon the river?


Joseph Enoil Michaud: No; the fishway was abandoned.
As to the attitude of the Department of Fisheries, some years later when the other dams were built it was found that it was not practicable to insist on having fishways as they were then built, with dams a hundred feet high, because the automatic ladder was not then in use, I am informed, and accordingly the department did not insist on having fishways put in the dams. These are the reasons I find on record.


Mr. NEILL:: Mr. Chairman, I am sorry to think that among some of my friends at least there seems to be an idea that the introduction of these estimates is an annual opportunity for me to attack the department and all connected with it.	I assure the
committee that that is far from being my desire or my interest. My sole object is to preserve the fishing industry in British Columbia and to protect the interests of those concerned in it-the canners on the one hand, more or less in a position of antagonism, and the fishermen on the other. I think the day will come when they will realize that their interests can be brought together instead of suggesting that whatever the one class wants, the other must oppose. I do not need to protest often on behalf of the interests of the canners because the telescope through which British Columbia fishing matters are eyed from Ottawa contains an official lens manufactured in Vancouver through which the interests of the cannery men are reflected in such a favourable light that there is never any danger of their interests not being very much to the fore and very well looked after.
In connection with the general estimates of the fisheries department, considering this is war time-if it were not war time I would be asking for a lot more money to be spent- I do not think there is much to be found fault with in these estimates. Departmental
administration-that means the office holders -is down a little. The amount appropriated for fishery inspection, including fishery officers and guardians, and control is left as it was. It should have been increased. There is an increase for building fishways and clearing rivers. That is to the good. Therp is a reduction in the estimates for saltfish boards and so forth-all to the good.
There is one increase for which I commend the minister, namely, for obtaining a grant for a fishery bounty for the destruction of hair-seals. The bounty was stopped last year or two years ago, and a more false economy could not have been thought of, because, when you have spent money over a series of years to put down a pest like that, there is no more fatal thing than to give them an open period again. That was done in British Columbia with wolves. When they had sot the wolves down to a minimum, and a more liberal amount spent on the remaining wolves would have cleared them off for all time, a foolish economy stopped the bounty altogether and gave the remaining wolves a nice period in which they were practically preserved, thus giving them a new lease of life. The consequence was that the wolves increased in numbers and another bounty had to be offered. The minister has done well in these times, when money is so short, to put this bounty on again. It will be appreciated by the fishermen and by all branches of the industry.
There are just two items which I wish particularly to mention. My custom in the past was not to bring these matters up on the floor of the house unless I failed to get reasonable attention through the usual official channels. I mention these two items to-night not in any spirit of attack on the minister.
One is with regard to the pack. I am afraid that some mistake or misunderstanding has occurred which certainly needs to be cleared up, and cleared up speedily. There was the usual dispute last year between the cannery men and the fishermen about price. Hon. members can understand that the war deprived us of a great deal of the British market.
The British government had indicated that they were not going to buy the high class salmon, that is the sockeye; they were going to buy the cheapest grade, which had the same food value as had the higher-priced salmon. That, of course, cut the market from below the fishermen for their valuable and expensive fish, the sockeye, and there was a great deal of dispute about the matter. I suggested to the ministry that they should try to establish a policy or make an arrangement
Supply-Fisheries

between the two bodies, that the price of the fish should be at a certain standard, with the understanding that if the price went up in the fall the fishermen should get a part of the increased profit. But that was not attended to, and the result was that the fishermen had to go and fish at what was then, apparently, a very low price, because the canners said, and with justice, "We do not know whether we shall be able to sell the higher-priced fish at any reasonable price, and therefore we would be taking an enormous loss if we paid the usual higher price for the better fish."
I foresaw the possibility of what would happen. The fishermen had to go to work for this lower price; they were told it was their duty, that there was a war on, and that they would not get any more. But the price did go up, as I anticipated. The British or some other market developed, and the canneries made quite a killing, because they had made a bargain covering the whole year. Feeling became so intense, however, that they themselves agreed to a considerable increase towards the end of the season. This incident caused great dissatisfaction among the fishermen, who thought they had been gypped. I did not wish to see that happen again. Accordingly, last fall I wrote to the minister and suggested that he send, or take advantage of one of his officials going, to London and see if he could not arrange ahead with the British government to take what they required at a fixed price, and then they would be in a position to negotiate with prospects of a better price to the fishermen, because if the canners could dispose of the whole of their pack they would be relieved of brokerage and other costs of selling. That was not done; and now I go into the realm of imagination, because I do not know what took place. But some communication passed between the British government and this government early this spring. Judging by the newspapers-for that is the only method by which I can find out anything-the deputy minister went out to British Columbia, and it was reported in the newspapers that he went with the purpose of making arrangements with the British government to take the whole pack. Here are some headings in the Vancouver papers:
Ottawa to take over whole B.C. pack, is rumour.
Deputy fisheries minister interviews trade in Vancouver. Explains trip.
Proposed acquisition of the entire British Columbia salmon pack by the Canadian government to ensure food fish supplies for Canada's armed forces, while stabilizing exports to the United Kingdom, is reported to be the major reason for the present visit to Vancouver of Doctor D. B. Finn, Deputy Minister of Fisheries.

Another paper said that he was there for the purpose of-
-getting sufficient information in the matter of commandeering the salmon pack.


Richard Burpee Hanson: What time of the year would that be?


Alan Webster Neill: That would be April 24-
quite recently. The next thing we heard was that the deal had fallen through. I asked a question in the house, and the minister told me very much to the same effect, conveyed of course in rather vague language, that his deputy had been out with a view of looking into the subject and getting a basis for the purchase of the pack by the British government. Be it right or be it wrong, it is not my mistake; at any rate, that was the general impression created among the public out there. Later on we were advised that there was nothing to it; that the fish were going to be bought in the ordinary way by the British government if and when they wanted them, and at any price that they could arrange; in fact, it was all left up in the air.
This has made matters very awkward for the fishermen. They will have to go out and fish: a fisherman has to go out when the fish are running. The only chance of successfully conducting negotiations is by starting beforehand. Down the years we have begun to get a little better feeling between the canners, who had their organization, and the fishermen, who had various unions. They had begun to realize that getting together was the proper thing to do. Now they are all up in the air; the fishermen are sore, the canners are sore, and they do not know what it is all about. I see in the press evidences of dissatisfaction from their point of view; nobody knows where he is getting off at. The minister, I have no doubt, will explain; but what I would much rather have is some definite action in the future. There is no doubt that the British government should announce, as they appear willing to do, that they are buying a certain quantity. When they have stated what they require, and roughly how much they are willing to pay

or even without that information-we could go to the canners and to the fishermen and say, "Now, get together. You fishermen have a sure market for what you catch, and you canners have an assured market for what you can, and under these conditions you can both afford to take a lower price than before." Or. rather, the fishermen cannot afford to go lower than last year, because not only has the cost of living advanced, but the cost of gear has gone up very much. That is something about which I should like to see the minister give us an explanation.

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While I am on my feet I might as well deal with another matter. It is one with which the present minister and myself are familiar over long years; it is one with which previous ministers and deputy ministers who were in power in the years gone by were very familiar.


Richard Burpee Hanson: Old
friends, in other words.


Alan Webster Neill: Old enemies-I do not mean
the deputies, but the question. What I have been agitating for many years is that the government should not allow herrings to be reduced. When you reduce a fish you turn it into meal and oil; you extract the oil from it, and then you turn the rest of it, bone and everything else, into meal which can be used for fertilizer, or, in other words, for manure for the land, or for feeding stock and so forth. I might explain that it would not pay to reduce herrings by themselves, because the amount of oil you get out of the herring is comparatively small. It is possible to do this only at the end of the reduction season for pilchards. The pilchard is a fish which comes from heaven knows where. It does not spawn in our waters, and therefore we cannot take too many of them. They are full of oil; they give two to three times as much as a herring would. I do not think it would pay to build and run a reduction plant for herrings alone; but when the fishing season for pilchards is over, and herrings come at the end of it, it is feasible for the plant owners to operate for two or three months and make something more than their expenses, so keeping down their overhead. The point is that when you are using pilchards for reduction you are using fish which can be utilized for very little else. Attempts have been made to can them, but the market is small, and it does not seem to be increasing. It would be practicable, I suppose, to sell them only in south American or Italian countries, where they call for very cheap and oily fish. At any rate they have been put up, but not very successfully; it is more profitable to use them for reduction purposes.
Herring, however, is a different matter altogether. The supply of pilchards is unlimited; if they happen to come your way they are so numerous that they are almost on your doorstep; if they do not, they are further out at sea, and whatever we do has no influence on them. But with the herrings it is different. They are a fish which should be used for human food. To use them for anything else is a crime and a shame, and that is being demonstrated now, when we need cheap food for our army and for the British army, and cannot get what we want, because they have been fished out to make manure
and cow food in days gone by. It has been said, "Herrings are unlimited; you find them all over the Pacific ocean; you cannot fish them out." But it is not so. Where you catch herrings is in the inlets, and places like that, where they come to spawn. I have seen, in an area not much bigger than from here to Wellington street, thirty huge seine boats, and so close that they could not all fish at once. They had to take turns, and when one boat pulled out with 30,000 fish, another came in. It was just one continuous drain on the fish as they came in to spawn. Herrings, however, are peculiar that way; you cannot fish them out, but you can harass them so that they will go away, and they will go away for twenty years.
I can name harbours, Nanaimo for one, and there are two or three in my own riding, where they quit, and it was from fifteen to twenty years before they came back.
Every fisherman will tell you, because it is a proverb, "No herring, no salmon." The reason is that the herring is the food of the salmon. There are scientific experts who would like to make it appear that the herring is not the food of the salmon; therefore they go to some place where herrings do not run, catch a salmon, open it, and examine the contents of its stomach, and when they find no herring in the stomach they profess to prove that herring is not the food of the salmon. Well, of course, they do not find any herring in the stomachs of salmon in that particular place. On one occasion, I believe, they found a piece of rubber tire in the stomach of a salmon. One wonders whether they would suggest that the salmon fed on rubber tires. The fact is that the herring is the main food of the salmon, in addition to a small plant known as lance.
The reduction of herring results in the diminution of salmon. It is not so much a matter of taking the herrings for canning alone; they could stand that. But when you superimpose on top of that the extra drain for reduction purposes, then the drain is too much and they go away. I recall an occasion -I think it is time for plain speaking-when it did not suit the officials in the past to agree with me on this question. Those officials are [DOT] not here to-day, and therefore it does not matter my mentioning this. They did not agree with me that the herring run on the west coast of Vancouver island was getting smaller, and consequently I produced a report submitted by the officials of their own biological board. Thej are known by another name to-day; there is, I believe, a fancy name for them now. At any rate, they said
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that the run was getting smaller, and they demonstrated by scientific means the extent to which it was decreasing. One of these men got a tip from Ottawa not to make such a report again because a report of that sort was not acceptable at Ottawa, for the simple reason that Ottawa did not believe, and in fact did not wish to believe, that the herring run was being depleted. But it was being depleted.
I have always contended that herring reduction alone was not profitable. You barely-get by under the conditions that I have indicated. The pilchard industry is the one in which you make money. There is a danger of the herring being completely eliminated, with the prospect of its ceasing to be the food of the salmon, and the salmon will stop going there. I can point to areas where you cannot catch a single fish now but where fish used to be caught.
The other day I wrote a letter to the minister-on May 9, to be exact-enclosing a copy of a letter I had received from a fisherman who, I said in my letter, I knew was a reputable man representing reputable peoplej In that letter I pointed out to the minister what this man had said, and I will summarize this fisherman's contention. He said that he had gone into a place and was cod fishing with a friend at a time of the year when it was necessary to get codfish because there was nothing else to live on. He had1 gone into this area to get herring bait for codfish and there were no herrings. There were boats there trying to catch fish for bait, but there were no herrings. He goes into details. He says that there were from eighty to ninety boats waiting for herring to come but none appeared, and he himself stayed there for several days. He complains that the seining of the herring for reduction has resulted in the clean up.
According to figures that had been given, the seine boats took out 4,722 tons. The fishermen say that if these herrings were used for domestic or canning purposes it would be all right, but they are used for fertilizer, a thing that should be stopped. The minister or his officials, in correspondence coming from the department, will suggest, "Oh, these things are not so; it is an exaggeration. The catch of herrings on the Pacific coast is increasing." Yes, it is increasing; why ? Because they are going further and further north. A quota was put on at one time. The local minister said that he would put on a quota that would forever settle the question, because he would allow only a reasonable amount of herrings to be used for reduction purposes. I wrote back and said, "You need not put on a quota because you 
will raise it every time the canners want you to". And that very season he raised it, because the local government has power, in connection with the regulation of canning' to raise the quota. The canner always gets the quota increased if he so desires. I have seen it increased, sometimes twice a year. When, therefore, it is said that the catch is increasing, I reply that the reason is .that the herring fishers are going further and further north. The fishermen went up north and discovered herrings which they had not suspected were there. No quota was put on them because it was not known what a fair quota would be, and unlimited herrings were taken before a quota could be put on.
I have been following up this correspondence for years and years. It has been alleged that there was a dispute between the provincial and dominion governments, and it was not known whether we had the power. The point was raised that section 29 of the Fisheries Act was rather ambiguously worded, and it was not clear whether the dominion government had any control over fish after it was caught. The idea was that we had control over the catching and taking of the fish and could prohibit this, but that once it was caught and in the hands of the fisherman he could do whatever he liked with the fish. The local government had the power of licensing reduction plants, and they could take such action in this regard as they wished.
With a fresh outburst of hopefulness, which experience did not at all justify, I took the matter up again last September, and the department and I have been pleasantly exchanging correspondence since. It was argued that the matter was not settled. It was taken up with the Department of Justice and a definite ruling has been given, which I presume will have to be accepted unless it is contested in the courts. We cannot control the fish after it is dead, after it is caught, but we can say that no fish shall be caught for reduction purposes. We can say to those who take these fish for canning purposes, "If your intention is to reduce the fish you shall not be allowed to catch it." That is all the power we need. The provincial government could stop them by refusing a licence, but they do not. But the dominion government can and,
I urge, should say, "We will not allow you to take herrings if it is your intention to reduce them. It is argued, however, that when you can herrings there is a lot of the fish-the offal, the guts, and head and tail-which is of no value. A certain quantity of fish is brought in in huge scows, 500 tons; some will be crushed so that they are unsuitable for canning; or they get stale. There will be a

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certain proportion that should go to the reduction plant, and for that reason, argued the department, it is necessary to allow these people to reduce all the herrings they like. But does not common sense suggest that it is and should be possible to allow them to can all the herrings they like and also to allow them to reduce the offal, or crushed or damaged fish? There could be an inspection of the scow to determine whether they should be allowed to reduce the fish, but these people should not be given the privilege of imposing a double drain on the fishing resources of the country by carrying on both reducing and canning at the same time.
In the last two years, since the war began, there has been a huge increase in the demand for canned herring. Too much of it cannot be got, and now is the time to take the necessary action in this matter. There is no reason why some provision should not be made so that while they could catch herring only for canning purposes, yet such portions as were not in a condition to be canned might be reduced. The department, something like Hitler-no, it is the Russians-have a five-year plan. Whenever you try to get the fisheries department to say or do something definite they always bring out of their hip-pocket a plan by which they are going to investigate for five years or eight years, and if you do not die in the meantime, they will look into it at the end of that time. But I am getting to be an old man; I would like some action; I have been at this for fifteen years pressing the government, and there is not a fisherman in British Columbia who is not of the same opinion. Even the canners are now seeing it. I would go on my knees to induce the minister, and would never worry him any more if he would stop the reduction of herring.


Joseph Enoil Michaud: As usual the presentation of the hon. member for Comox-Alberni is interesting. His long experience of the fishing industry on the Pacific coast makes his observations always helpful, and he always makes very good suggestions.
As to the matters upon which he desires information, first, his suggestion that the department should send someone to London to try to dispose of or find ways of increasing the sale of salmon packed in British Columbia, I may say that the facilities of the Canadian government and the department were offered to the British government within a month after the declaration of war. Since then, every opportunity has been taken to keep in close touch with British requirements, and communications through the usual channels have been going on regularly with a view to keeping Britain supplied with as much as possible of the products of the Canadian fishing
industry. Last winter we found that last year's pack of canned salmon was already disposed of. There was no difficulty whatever in disposing of last year's pack both on the home market and on the other usual markets, Australia, New Zealand, south Africa-


Richard Burpee Hanson: Was that through the usual channels?


Joseph Enoil Michaud: Yes, through the usual channels. The industry was satisfied and the British government was satisfied.
Later there were changes in Great Britain. The private buyers or distributors ceased operations, and the British government took over the control of sales of fish and other foods through the food controller. Then we asked what service this government could render to the British government through the food controller, and we were told that he would continue to buy through the ordinary established channels, which had been found satisfactory. Recently we were informed that the British people would require a larger quantity of canned fish because of the fact that, owing to lack of shipping facilities and the difficulty of handling on the other side, they had to stop the importation of frozen fish, such as frozen halibut and salmon and cod or fish of the cod family, which had been imported in large quantities. Information was asked of the Canadian government through the usual channels, and the department was requested to supply the information. We were told that it was possible that the British food controller might require a much larger quantity than usual. Therefore, in order to give correct information, the deputy minister was asked to go to the Pacific coast to meet those interested and to find out to what extent the pack could be increased without impairing the future supply. The deputy minister met the packers and the fishermen in private meeting and got the information required, and we passed it on to the British authorities. There our negotiations ended so far as the department is concerned.


Alan Webster Neill: Did they say anything about prices?


Joseph Enoil Michaud: Yes, naturally we ascertained the prices that the industry would demand for the coming season.


Richard Burpee Hanson: By "the
industry" the minister means the canners?


Joseph Enoil Michaud: I mean the canners and the fishermen, because they are both part of the industry. The best information we could get was communicated to the British government and the food controller. Whether we shall be asked to act in any capacity we do not know. For that reason it is impossible
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to give any more information than I have given. This statement appearing in the press did not emanate either from the department or the deputy minister, because the meetings between the deputy minister and the different branches of the industry were private meetings, closed meetings, and all that has appeared in the press as to what took place are surmises.
The hon. member for Comox-AIberni brought the matter to my attention on April 28 as reported at page 2303 of Hansard as follows:
Mr. A. W. Neill (Comox-AIberni): I should like to ask the Minister of. Fisheries a question. It is reported in the Canadian Press that the Vancouver Daily Province of April 24 carried a story that the major reason for the visit to Vancouver of Doctor Finn, the deputy minister, was the proposed acquisition of the entire British Columbia salmon pack by the Canadian government. This of course is a very important matter for the province, and I would be glad if the minister could make a statement.
And I replied:
Hon. J. E. Michaud (Minister of Fisheries): The hon. member for Comox-AIberni (Mr. Neill) was good enough to give me notice of the question. A little while ago we were informed that the food ministry of Great Britain would likely need, during the next production year, a much larger supply of canned salmon from Canada than it is customary for the industry to put up. The reason therefore for the recent visit to Vancouver of the Deputy Minister of fisheries was, first, to ascertain the possibilities of increasing the canned salmon pack to meet the requirements of Great Britain and, second, to study the best means of effecting its orderly shipment.
I am sure that if the British government ask the Canadian government to act as its agent or in any capacity to help to produce a larger supply of fish food for the British people, every facility will be offered. The cooperation of the government and of the Department of Fisheries has been assured from the very beginning of hostilities. If, in order to feed the British people, it becomes necessary to commandeer the British Columbia pack, I am sure the government would not hesitate to do so if the British people require it in the present crisis.
The question of the reduction of herring is one that has been discussed for years. Some people on the Pacific coast have thought it almost immoral to use fish for anything other than food purposes. Others have felt that the reduction of herring to produce fish meal and fish oil was detrimental to the salmon industry because it took away the food of the salmon. Others have thought that while the fish are there, advantage should be taken of their presence, and they should be used for the production of fish meal and oil, two FMr. Michaud.]
products which are in great demand. As hon. members are aware, fish oil is very much in demand and prices are fairly high. Fish meal is a product for which the demand is increasing every day, and it is used to produce other food products when fed to poultry, cattle and so forth as a protein food. The department has tried to satisfy both factions, and for years has established quotas in connection with the quantities of herring that could and should be reduced. Some people thought those quotas were too high; others thought they were too low, but every precaution was taken to maintain a proper supply of food for the salmon and at the same time meet the market demand for fish meal and oil.
The canning of herring on the Pacific coast has been started only since the outbreak of war. There was no canning to amount to anything before the war, but since then large quantities of herring have been canned and shipped to foreign markets, and to Great Britain; and probably, while hostilities continue, there will be a great demand for that product, having regard to the difficulties that exist in getting food to Great Britain. Therefore it seems that their requirements of canned fish of all kinds will continue to be large, and the Canadian industry is making every effort to make sure that it will have the necessary quantity to meet that demand.


Grote Stirling: Has the quantity been increasing in the last two or three years?


Joseph Enoil Michaud: Yes, very much. Last year 8,000 tons of canned herring were put up and sent to the United Kingdom. That is a large quantity.


Alan Webster Neill: There could have been 18,000 tons if they had not been fished out in years gone by, for reduction purposes.


Joseph Enoil Michaud: I suppose that is possible. This year, based on the information and inquiries already received, we believe the quantity will be much larger.


Richard Burpee Hanson: That is, assuming the fish are available.


Joseph Enoil Michaud: Provided, of course, the fish are available. Before the war there was no demand on the Pacific coast for canned herring; the demand was for fish meal and oil, and the industry did the best it could under the circumstances, with the limited quotas that were available. I think there will be very little, if any, herring reduced during the coming year because of the great demand for canned herring, which has to be put up whatever the cost, even though the return

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may be lower than would be the situation if the herring were reduced to fish meal and oil. Therefore I believe the present situation will cure itself, due to the great demand for canned herring for export.


Alan Webster Neill: I should like to finish my remarks. In large part the minister has corroborated what I have said; there is more money in canning herring-more money for British Columbia and for Canada-than in reducing them. You do not need to fish them all out; there are enough left. The minister spoke of putting on quotas. Yes, they did put on quotas in different areas. I recall one place where this was done; I forget whether it was Barkley sound or the area immediately west of it, but that is immaterial. When they put on the quota they also inserted a provision that if the fishery official thought too many fish were being taken, having regard to spawning and so forth, he could stop the fishing; and he did stop it when only 18 per cent of the quota had been taken. That was the action taken by the official, impregnated though he was with the view of the department that it was a good thing to reduce herrings; he was compelled to stop the fishing for that purpose in that area when less than a quarter of the quota had been taken. That may give the committee an idea of how wide of the mark the officials were in setting the quota, or it may be that the herring suddenly fell short of it.
As I said before, herring do not produce a profitable amount of fish oil and meal; it is only as a sort of hangover of the pilchard industry that it is profitable. The minister said there was a great demand for fish oil. That is true; but it is only true in time of war. In time of peace there was little sense in reducing herring; not only was it barely profitable to do so, but when you increased the supply you reduced the price. It was a rather tricky market; if you produced too much, the market went away down.
I should like to mention just two other points with which I forgot to deal before. In accordance with this same policy of giving a quota to anyone who wants it, a year ago and again this year the department have allowed the reducing of anchovies. This might well be a profitable industry with a little care and encouragement; they might be used to make sardines, or something like that. They never have been used for anything at all, and the government, perhaps rightly, said they could be reduced. I think that was a mistake. There was a possibility that we might have made an industry of the canning of these anchovies. But then another 14873-199
factor appeared. These anchovies are naturally small fish. I suppose they are three inches long, or somewhere around that. They had to be caught with a particularly small net. What was the result? Enormous quantities of young pilchards were caught. Millions, rather than hundreds of thousands of them were taken, because the net was so small that the little pilchards could not get out. Therefore, in their anxiety to catch anchovies and to make fishmeal of them they adopted this system which ended in the taking of enormous quantities of small pilchards, for which there was no need.
I listened to the minister's remarks about the visit of the deputy to British Columbia. There is a considerable misunderstanding somewhere. I hold in my hand an editorial in one of the fishing journals on the west coast, and I find in big letters the word "misrepresentation." Then it goes on to say, as I have said, that Doctor Finn himself would not deny that the canners and fishermen were asked to submit a slate of prices to the government in four days from the time of his first meeting, and by working night and day price lists were submitted. That seems to indicate that some action was going to be taken. The idea was "You get your price, and you get your price, and we will try to get them together, submit them to Great Britain, and something will be done." Then the editorial goes on to say that while these negotiations were going on, practically the same negotiations, or negotiations of a similar nature, were being carried on in the United States, and resulted in a huge sale of canned sardines. Apparently the same policy had been adopted there. Somebody from Great Britain was sent out, and the result was a huge purchase of sardines in the United States. Then the editorial goes on to say:
The question now arises as to how we can possibly continue to operate as a potential source of canned foodstuffs for the British people while we are to receive no assistance to protect the living standards of our own British Columbia men and their families. It is to be hoped that the disturbed and confusing situation now confronting us will be cleared away very shortly, and definite guarantees made to the fishermen before the season commences. So far, Doctor Finn's visit to the coast has certainly not had the effect that was expected of it and has done nothing to enhance the federal department of fisheries in the eyes of the fishermen.
Of course that is a matter of opinion, but I believe some effort should be made to clarify that situation. Something should be done to remedy this situation in the future. Try to get these people together-because apparently the original idea was to make some deal. That was a proper and natural thing to do. When the British government were no

Supply-Fisheries

longer willing or able to buy from the Japanese they would take a large proportion from us. Surely the best way to do this would be at a definite price. Cut out the middlemen, and the expenses for advertising, brokerage, labelling and so forth. Then both parties can sell profitably at a lower price. It will be better for the British purchaser and better for our own Canadian people.


Richard Burpee Hanson: What was the exact object of the deputy minister's visit to the Pacific coast? My second question is: did or did not the British government decline to deal with the dominion government, and express a preference to deal with private enterprise ?


Joseph Enoil Michaud: There is no mystery, contradiction or conflict in this matter at all. We were asked if the Canadian industry could supply a much larger quantity of canned fish.


Richard Burpee Hanson: Asked by the British authorities?


Joseph Enoil Michaud: Yes, through the usual
channels.


Richard Burpee Hanson: What are the usual channels?


Joseph Enoil Michaud: The Department of
External Affairs and the Department of Trade and Commerce. In order to give that information we had to meet the fishermen and the packers. We thought the best way to do it was to have a person in authority interview and talk with them, because the information was wanted within a few days.


Richard Burpee Hanson: That was
as to the question of supply?


Joseph Enoil Michaud: Yes.


Alan Webster Neill: And price.


Joseph Enoil Michaud: Price and quantity; we desired full information. When we ascertained from the packers what quantity they could put up, without adding additional equipment to their plant, and basing their figures on the prospect of this year's catch, the deputy asked them what their price would be. In order to get a definite reply the packers had to deal with the fishermen to find out at what prices the fishermen would sell their fish. They were told to get together, because we wanted the information. The deputy returned within a few days with the information which had been given to him, and that information was passed on to the Department of Trade and Commerce, the department of government which had asked us for the information. That is all there was to it. Then we were told it would be better for the government to commandeer the whole

pack. That would be a big job, because it is a S30.000.000 industry. In the past it has operated with a fair degree of satisfaction to both fishermen and packers, and has been worked along ordinary business principles. We are not at all anxious to step in and take charge of a large industry which in this year should be worth about $35,000,000. Further, we are not going to step in until we are told that we must do so, or until we are satisfied that it cannot run on its own feet. That is the present situation.


Richard Burpee Hanson: Has the
minister considered putting a floor on the price the fishermen are to receive? That has been done in respect of other products. Is there any complaint about the incomes of the fishermen?


Joseph Enoil Michaud: So far there is none.
So far no representations have been made to us that the fishermen are not going to get enough. Of course there are some who may claim that they should get more, and that whatever the British government is willing to pay, the fishermen should get what they think they ought to get out of it. The same applies to some canners. They will say, "Our cost of operation is going up, and the British government is not willing to pay enough to meet our costs, plus a fair margin of profit." It is urged, therefore, that the Canadian government ought to supplement the price. We have not given any thought to an appropriation of public money to supplement the difference between what the packers ask and what the British government will be willing to pay. So far we do not know what they will pay.


Alan Webster Neill: The minister would not go on record seriously as saying he is convinced that the fishermen are satisfied with the prices they have received in the last two or three years?


Joseph Enoil Michaud: Some are, but some are not satisfied, and never will be.


Angus MacInnis: I think the point raised by the hon. member for Comox-Alberni is a most important one. Last year at the beginning of the salmon season in British Columbia there was a dispute between the fishermen and the canners which held up fishing operations for a considerable time. I imagine the pack was not as large as it otherwise would have been if the fishermen had gone out when the season opened. I suggest that we ought to give consideration to this matter so that a food supply as important as salmon, and so great a factor in the economy of British Columbia, will not be held up this year. Let us not have the same situation as developed last year. It will be recalled that, before the

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winter was over, there was a good market at a good price, which permitted the canners and packers to make a very good profit. The Department of Fisheries and the government should be prepared to take a chance. It is not a big chance, because salmon is a valuable food at any time. Certainly in our war economy $35,000,000 is not a great sum. We must remember that we are operating in a war economy, and the government should have a plan prepared so that when the fishing season opens, every fisherman will be able to go out fishing. I think the minister should take that into consideration and assure the committee to-night that a plan of that kind will be put into effect.


Joseph Enoil Michaud: The relations of the fishermen with the packers under ordinary circumstances are a matter of provincial concern, not federal. Provincial laws have been enacted to establish and adjust the relations between the fishermen and the packers when conflict arises between them. We cannot treat present conditions as a war emergency because there is apparently a good market for the output of the industry, and any interference between the different interests under ordinary circumstances only makes for disturbance and disorganization without any beneficial results. I believe that these people can adjust their difficulties among themselves, and if they cannot, there is the machinery of provincial laws to assist them in adjusting their difficulties.


Richard Burpee Hanson: 
Joseph Enoil Michaud: Mr. Chairman, in answer to the request of the leader of the opposition I will tell the committee briefly what in my opinion is the situation both of the fishermen and the fishing industry on the Atlantic coast.
First of all, the war has had some good and some bad effects on the fishing industry as on other industries, but the effects of the war on the fishing industry on the Atlantic coast have been beneficial in this respect-


Richard Burpee Hanson: Beneficial?
315S
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Joseph Enoil Michaud: Beneficial in this respect, that they have eliminated a number of people who were classified as fishermen because they had no other occupation but who were fishing for only a few weeks of the year and who *were expected and who expected to live twelve months of the year on a few weeks' work in an industry producing low returns. They had poor equipment, and they were interfering with the legitimate fishermen who in the past had made fishing a calling, had made some kind of livelihood at it and had worked hard at that calling. On the Atlantic coast, with a few exceptions, the fishing season lasts from three to five months of the year at most. Outside of a very much limited number, the people who call themselves fishermen, and who are classified as fishermen fish for no more than five months of the year.


Richard Burpee Hanson: What the minister is saying is that there is very little winter fishing.


Joseph Enoil Michaud: There is very little winter fishing. In the past, many people depended for their existence upon the returns of five months in the year; they were supported for the remainder of the year by people who allowed them just enough to keep them alive. That is about the situation. In some sections -of the Atlantic coast there were so-called fishermen who never saw real money until we distributed some relief among them.


Richard Burpee Hanson: That is
& pretty serious statement.


Joseph Enoil Michaud: We have statements from fishermen to that effect.


Richard Burpee Hanson: All truck?


Joseph Enoil Michaud: All truck, barter. They
were w'orking for three or four months in the year, or at most five months, dropping the products of their work into the warehouses of the dealers, getting credit on the books for the weight and quantity of fish, and receiving from the dealers a few bags of flour, a few gallons of molasses, sometimes lard-never butter-and enough clothing to keep the body covered. That is the most that the majority of them were getting. That went on for some time.
Then came the depression and prices tumbled, markets disappeared. The reserves of many years, sometimes generations of work, were in the hands, not of bankers, but of people who had invested in property, or sometimes, after dealing on the stock exchange, lost everything. All the reserves of the fishermen had gone, and they had to resort to relief. Consequently the situation had to be changed.

Socially-minded people were made aware of the conditions and became interested in the fishermen. Many suggestions w'ere put forward, but I believe the best which was offered was that the fishermen should be educated to look after themselves, to cooperate, and to try to become independent of those who had failed them in the past. That work was started by the fishermen and by the extension department of the St. Francis-Xavier university of Antigonish, Nova Scotia, who have been carrying it on now' for ten years.


Richard Burpee Hanson: As a
cooperative movement?


Joseph Enoil Michaud: As a cooperative movement.


Richard Burpee Hanson: Good.


Joseph Enoil Michaud: Recently that movement has been supported financially to a limited extent by the government, also by socially-minded private citizens, people of wealth in the maritime provinces and outside Canada, who make it their duty each year to collect sufficient funds to pay the costs of the work of the extension department of St. Francis Xavier university.


Richard Burpee Hanson: That is
educational?


Joseph Enoil Michaud: Educational, yes. With
regard to the economic aspect, of course many people are finding more profitable employment in war work and have quit the fishing industry. This makes it more advantageous to those who are in the industry as a vocation; the market available to each fisherman is so much larger. Also, the price of fish has been increased through many factors. There is a bigger demand from the United States market and better prices are being paid. Also the home market has expanded and the prices have improved.


Richard Burpee Hanson: Just on
that point-the minister is making a general statement-what is the increased domestic consumption of Canadian-caught fish, this year, we shall say, compared with last year? Has he the figures?


Joseph Enoil Michaud: We have figures on the
general increase of fish consumption in Canada, and it is our estimate that within the last five years the consumption per head has increased from seventeen pounds to twenty-eight pounds.


Richard Burpee Hanson: Does that include importations from the New England states?

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Joseph Enoil Michaud: We have no fish importations of any account from the New England states.


Richard Burpee Hanson: Where
does this so-called sole which we have at the hotel, come from?


Joseph Enoil Michaud: It comes from the
Atlantic ocean, through-


Richard Burpee Hanson: I know.


Joseph Enoil Michaud: -through Canadian
fisheries.


Richard Burpee Hanson: What part?


Joseph Enoil Michaud: From the Grand banks, from the fishing banks, to which Europeans used to resort to get their supplies of fish.


Richard Burpee Hanson: There is no importation of fresh fish into Canada, then?


Joseph Enoil Michaud: No, not to any extent.


Richard Burpee Hanson: Good.


Joseph Enoil Michaud: There was some importation in the past of canned sardines from Norway and of pickled herring from Holland, the latter in very small quantities. Of course, all this has ceased. There has been a large increase in consumption by Canadian consumers of all kinds of fish, a big increase of exports of fresh and frozen fish to the United States, and some increase in the export of canned fish.


Richard Burpee Hanson: Take the increase in the exports to the United States; is that raw fish, or processed fish, or cured fish, or what?


Joseph Enoil Michaud: It is processed fish. It is frozen fish.


Richard Burpee Hanson: Chilled?


Joseph Enoil Michaud: Chilled, and frozen; but mostly frozen. It is pretty hard to place chilled fish with the exception of lobster, on the United States market. It is mostly fish treated by the modern process called "quick freezing".


Richard Burpee Hanson: Fillets, or whole fish?


Joseph Enoil Michaud: Fillets.


Richard Burpee Hanson: Altogether?


Joseph Enoil Michaud: Oh, yes. Another factor, besides the increased consumption both on the United States and Canadian markets, is that Norway and Newfoundland, both of which were competitors of the Canadian fisherman, have been eliminated as such, Norway wholly
and Newfoundland in part. Therefore the Canadian industry has less competition and a chance to dispose of larger quantities of fish, and naturally it gets better returns.


Grote Stirling: Has the export to the United States of fish taken in internal waters
increased ?


Joseph Enoil Michaud: White fish from the
interior of Canada?


Richard Burpee Hanson: Winnipeg gold-eye, lake trout and so forth. .


Joseph Enoil Michaud: We are maintaining our average, and the large increase is on the Pacific coast in frozen halibut, fresh halibut, frozen and fresh salmon, and on the Atlantic coast, cod products, haddock and lobsters.


Grote Stirling: The export of internal
fish is not dropping?


Joseph Enoil Michaud: No; it is maintaining a stable market, which is fairly good in the middle states. There is not much interference on the part of other sections of the country with those markets in the middle states which are exclusive to inland water fish.


John James Kinley: Is it advisable to increase production in the inland fisheries?


Joseph Enoil Michaud: That is a matter of provincial concern. The provinces have control of their fisheries, which they regulate pretty well.


Richard Burpee Hanson: What is the plight of the codfish industry, which was once the back-bone of the whole industry?


Joseph Enoil Michaud: We have had competition from Norway and the other Scandinavian countries which we had not before the first war, and there is competition from Newfoundland.


Richard Burpee Hanson: Which we have always had.


Joseph Enoil Michaud: Yes, in a lesser degree, because they were not subsidized. When the British government began to subsidize the fisheries of Newfoundland they could compete with our fishermen, with the result that they invaded our best markets. Our industry was not subsidized. The same applies to competition with Norway, which was highly subsidized. After the last war they used their fishing vessels to full capacity and came into close competition with our fishermen, and they also invaded our markets. This competition from Norway and Newfoundland was the main reason for the falling down of our salt-fish industry. Conditions are, however, getting better. The monthly reports from our trade agents everywhere are optimistic. Orders for
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dried fish exceed the available supply and a good season is anticipated. The fresh fish markets are brisk, and the increased domestic sale of canned and live lobsters to the United States during the past season has offset the loss of the British market. From month to month these business reports are practically along the same line.


Mr. MacNICOL:: Has the department any control over fish in fresh-water lakes?


Joseph Enoil Michaud: No.


Richard Burpee Hanson: Where is the present market for dried salt-fish? Where is our export trade?


Joseph Enoil Michaud: The Caribbean area.


Richard Burpee Hanson: Are we selling anything in Cuba? Our sale must be small.


Joseph Enoil Michaud: It is increasing. We had competition in Havana from Norway.


Richard Burpee Hanson: That is eliminated now. What is the department doing to explore that market further at the moment?


Joseph Enoil Michaud: We are keeping in close communication with our trade agents in these markets. Last year we explored the possibilities. We know the conditions; we know the traders, and we are keeping in touch with the agents of the Canadian government. Our trade agents see that the interests of the Canadian industry are well protected. Our sales are increasing in these markets. The salt-fish export industry is limited to a small number of dealers and we have a good system of checking. We can also judge fairly well by the price factor. When prices increase it is a sure sign of an increased demand in foreign markets. When the dealers are active it is an indication that demand and prices are increasing.


Douglas Gooderham Ross: What is the price of cod and haddock to the fishermen?


Joseph Enoil Michaud: Between one and three-quarter cents to two and a half cents a pound, depending upon location.


Richard Burpee Hanson: Where are they getting two and a half cents for raw cod?


Joseph Enoil Michaud: I do not know how many weeks ago it was, but in Halifax they were getting that.


Joseph Sasseville Roy: Mr. Chairman, may I ask the Minister of Fisheries (Mr. Michaud) what steps he intends taking to cope with the serious situation existing in the Magdalen islands and to assist the fishermen in marketing their cured mackerel and canned lobster? I was deeply moved on hearing the minister refer a few moments ago to the dire poverty of the fishermen who never see any cash, but receive only a few bags of flour, a few gallons of molasses, some lard, once in a while a little butter, and just enough clothing to keep their bodies covered. But even this does not tell the full story of the distressful condition of the Magdalen islands' fishermen. The Minister of Fisheries, possibly out of consideration for the feelings of the house-and I do not blame him-has merely scratched the surface of the hardships endured by these poor people. For the past year they have not always managed to obtain enough flour, fuel and other indispensable articles for the bare maintenance of their families. Whatever fish they caught they had to sell at a loss. Their first activity in the spring is lobster fishing. The minimum price of $17 a case for No. 2 and SIS for No. 1, fixed by the government or the salt-fish board, represents only 5 or 5-| cents a pound for lobster delivered alive to the canneries. This price of 5 or cents a pound, I found following an inquiry which I conducted during a fortnight last year among the inspectors and the interested parties, is not sufficient to cover operating costs. At 5i cents a pound, the fisherman who catches less than 6,000 pounds of lobsters does not cover his costs which average $300 a year for the maintenance of the necessary equipment. A catch of over 6,000 pounds yields a small income, but as very few reach or exceed this amount, the great majority of fishermen find themselves in debt. Not only do they not see any money, but many of them are reduced to starvation.
Recently, the minister pointed out the advantages which we have enjoyed on the United States market for the disposal of frozen live lobster. He said that the price obtained for lobster thus sold had been more remunerative. The mainland fishermen have been able to take advantage of this new market, but not those of the Magdalen islands, because of lack of organization and difficulties of transportation.
If the fishermen who have been the most successful in the sale of their lobster have not obtained any money, but only a small quantity of flour, etc., those who were less successful must have suffered terribly.
After lobster comes mackerel fishing, the next in importance of the fisheries. I learned

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recently from reliable persons, one from Pictou and the other, Mr. Labrie, the deputy minister of fisheries in the Quebec government, that mackerel had sold a short time ago at Pictou and Halifax at $6.50 and $7 a barrel and that this would put an end to the distress of the Magdalen islands' fishermen. Well, it is not the fishermen who received the benefit of these prices, but, as I already stated in this house, an outside dealer who, as the minister is aware, bought up this fish in the autumn at $3.50 and $4 a barrel. As a consequence, the merchants have not been paid for the goods they supplied to the fishermen and the latter are deeply in debt.
I therefore ask the government what they intend doing to relieve the distress of the fishermen of the Magdalen islands. These people should get as much for their catch as the fishermen of other parts of Canada who are better situated and enjoy more profitable markets. The Magdalen islands' fishermen should enjoy the same treatment as the mainland fishermen. Measures should be taken to guarantee them a minimum price for their mackerel. Last summer they asked for $7 a barrel, which would permit them to meet their obligations. That is all they ask of the government. Give them that price and they will no longer complain. Their request for $7 a barrel is quite reasonable. We should not allow these fishermen to be exploited by outside dealers as they have been last autumn and last spring, when the price they obtained was insufficient to cover their operating expenses. Otherwise they will continue to suffer as they have suffered physically and morally last winter, and it is wrong to allow such a state of affairs to persist. I ask the government whether these people have not the same rights as other categories of producers and other classes of society. Parliament has voted all the money requested by the people of western Canada to help them in their difficulties. The people of the Magdalen islands, the fishermen, are asking the government; to come to their aid. These citizens have perhaps contributed most to Canada's war effort, and we have no right to ignore their plea and still less to ignore their distress. The government's attitude in the matter is extraordinary. In spite of all the consideration, all the respect, all the esteem which I have for the Minister of Fisheries-and this is the reason for the moderateness of my remarks-I cannot help saying that the government's bahaviour in this matter is really iniquitous. It is strange beyond measure that aid has been refused to these people. Public opinion has been moved by the pleas made on their behalf by the newspapers and by some of the most eminent personalities in the country. In spite of all, nothing has been done for them here. Not a dollar of help has been given to them.


Mr. BONNIER:: Did the Conservatives do much better when they were in power?


Joseph Sasseville Roy: These people were not complaining then. When the Conservatives came into power in 1930, they gave assistance to the unemployed and to all those who had reason to complain. I find it extraordinary that the minister, that the government, has not complied with the requests of these sorely tried people. It is inconceivable. It seems to me that in this time of crisis and of struggle for the survival of democracy, when we are appealing to all classes of the population to fight for the good principles for which it stands, we should endeavour to put them into practice. It seems to me that if we cannot all intervene with our bodies between democracy and its ferocious assailants, we can at least protect it at home by applying the principles of charity, of justice and of humanity on which democracy rests. I ask the minister what he intends to do for these fishermen. They are not requesting charity; they seek only what the government grants to the other people of Canada. They ask for the same treatment as the people of western Canada. Thus, they ask the government to fix a minimum price based on normal years-$7 a barrel for mackerel, $25 a case for lobster. This is less than what they obtained in good years. Mackerel once sold as high as $36 a barrel. At that time, no complaints were voiced by the people of Magdalen islands. For the first time, they now ask that something be done for them. In spite of all the hardships they have to bear, they keep a level head. They respond quickly to every government appeal for help in the struggle against the common enemy.
They merely demand justice, and that is what I claim on their behalf. They do not want direct relief or charity for, in spite of their poverty, they are self-respecting. They only ask that a reasonable price be guaranteed for their fish and that they no longer be exploited for the benefit of outside traders who take advantage of their straitened circumstances. They want to be guaranteed a minimum price of $7 per barrel for mackerel and $25 a case for lobster. They merely wish that the government help them to sell their production when good prices prevail. Let the government meet their request and there will no longer be any distress among the Magdalen island fishermen.
I would be grateful if the minister kindly took my suggestions into consideration. I know that he sympathizes with those poor people, as evidenced by a letter which I have
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received from him. I hope he will be able to touch the hearts of his colleagues and that the government will consent to help.
Having mentioned the colleagues of the Minister of Fisheries, I wish to state how strange it is that the estimates of the Department of Fisheries have decreased to such an alarming extent, at a time when the position of the Magdalen islands fishermen is so serious on account of the peculiar geographical situation of those islands and owing to the character of their production. In 1939-40, the minister's estimates amounted to $3,535,145; this year, they have been reduced by one-third, or $1,260,145. Including the supplementary estimates recently voted, the Department of Agriculture now has a total appropriation of $48,122,738.53. In addition, the country will have to meet the deficit resulting from the minimum price which the government have fixed for wheat. Last year, this item amounted to $60,000,000, as mentioned by the Minister of Trade and Commerce (Mr. MacKinnon) in a statement made at the end of March. The estimates of other departments have considerably increased. Yet, the fishing industry, like agriculture, has its place in our war effort. Nevertheless, the government have reduced by one-third, as compared with 1939-40, the estimates of the Department of Fisheries. It should be noted, by the way, that a federal election was held during that year, as well as a provincial election in Quebec.
I "wonder how the minister will be able to carry on with such a reduced, and even insufficient, appropriation, unless further supplementary estimates are provided. As a matter of sympathy and justice and in conformity with the democratic principles which we are upholding, let the government treat the people of Magdalen islands fairly and alleviate the physical and moral sufferings they have had to endure for more than a year.


Joseph Enoil Michaud: Mr. Chairman, I have
listened with the greatest attention to the remarks of the hon. member and his appeal on behalf of the fishermen of Magdalen islands. We should not forget that those worthy people are in a peculiar position in relation to the dominion government. Magdalen islands are included in the province of Quebec, although the administration of their fisheries has remained under the control of the dominion government after the agreement of 1922.


Joseph Sasseville Roy: But do they belong in any
way to the province of Quebec?


Joseph Enoil Michaud: The islands?


Joseph Sasseville Roy: Yes, geographically.


Joseph Enoil Michaud: Geographically, the
Magdalen islands are part of the province of Quebec, and their inhabitants are also included in the population of that province. Until 1936 or 1937, the fishermen of Magdalen islands had not received any special consideration from governments, particularly from the dominion government. From 1930 to 1936, whatever the hon. member may say, not a single word was spoken and absolutely nothing was done on behalf of the fishermen of Magdalen islands no more than for those of other parts of the country. And it was during that period that the fishing industry touched bottom, if I may use an expression that is quite appropriate as applied to fisheries and nautical matters. It was not till 1936 and 1937 that the fishermen of Magdalen islands, like those of other parts of the country that are under dominion jurisdiction, began to receive some form of help, and especially relief in money and in kind. The fishermen of Magdalen islands have been treated like those of New Brunswick, Nova Scotia and Gaspe. I may even say that, in 1937 or 1938, they were granted preferential treatment, on account of the peculiar conditions then prevailing in the islands.


Joseph Sasseville Roy: By the provincial government.


Joseph Enoil Michaud: By the dominion government.


Joseph Sasseville Roy: By the provincial government as well.


Joseph Enoil Michaud: No, by the dominion
government. During that year, the dominion paid two-thirds of the relief granted to the fishermen of Magdalen islands. Everywhere else, the government paid only 50 per cent of the cost of relief, and they afterwards continued to pay on the same basis.


Joseph Sasseville Roy: As regards the bonus to fishermen?


Joseph Enoil Michaud: As regards the bonus to fishermen, which "was direct relief. That contribution amounted to $50,000 and the province contributed nearly $25,000. I believe two-thirds were paid by the dominion and one-third by the province.


Joseph Sasseville Roy: In other fields the provincial government paid five times more.


Joseph Enoil Michaud: Quite possibly, I do not deny it. Besides, the province was in duty bound to do that, because those people were under her jurisdiction.


@Acting Chair(man)? of Committees of the Whole: The committee is discussing fisheries estimates and any mention of contributions by governments in other fields is out of order.

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Joseph Sasseville Roy: I merely wished to make my point clear, Mr. Chairman.


Joseph Enoil Michaud: Last year, the appropriation for relief to fishermen was discontinued by the dominion government in all parts of eastern Canada. In New Brunswick, Nova Scotia, Prince Edward Island, Gaspe and the north shore of Quebec, no relief has been given to fishermen. We could not give any to the fishermen of Magdalen islands, either, because the dominion government had no appropriation for that purpose. They had abandoned their policy of giving relief directly or through provincial governments. On the other hand, the fishermen of Magdalen islands have had last year an almost miraculous catch, as regards quantity. For a great number of years the average yearly production of mackerel had varied between 8,000 and 10,000 barrels, while last year it reached 23,000 barrels. As a result of such an increase in quantity, prices fell in importing countries and the fishermen of Magdalen islands requested higher prices based on their needs. It was only natural that they should do this, and we cannot blame them for it.
As a result, however, last fall, the buyers and fish dealers have refused to pay the Magdalen islands fishermen the prices asked for cured mackerel and consequently these fishermen have had to keep the greater part of the whole production throughout the winter. They communicated with the department of fisheries and I suggested that they sell their mackerel at the market price offered them last fall. If additional money were required by them to maintain a reasonable standard of living; if help were needed, the matter should be referred to the proper authorities, but they could not expect, for their fish, a very much higher price than that paid to other producers. This year, they have sold to a dealer unknown to me and they claim that they only received from $3.50 to $4 a barrel. It is unfortunate, for, a short time after the opening of the shipping season, the market price of cured mackerel increased considerably and they could have obtained a much higher return.
Let us now examine the conditions regarding lobster. Last year, the lobster catch in the Magdalen islands was negligible, claims the hon. member. Statistics show that, last year, one-third of the total lobster catch of the Magdalen islands was sold alive for 10 to 12 cents a pound, while the other two-thirds were bought by the canneries at a minimum price of 5| cents a pound, this price being fixed by regulation of the department of fisheries. According to my information, in the past fishermen have been getting for 14873-200
canning lobsters a price ranging from 2 to 4 cents a pound, this being the average paid to fishermen by lobster canneries. Last year we fixed a minimum price of 5i cents a pound. Four thousand cases were packed which should have brought an average of from $17.50 to $18 a case. In previous years the fishermen had been getting only $14 a case from the buyer or exporter. Last year they should have received from $16 to $17 and if they did not care to sell to the exporter at that price, they only had to sell to the government buyers. As a matter of fact, last year the federal government bought lobster from fishermen or canners who could not find a market through the usual trade channels due to the fact that the British market was closed to them.
Mr. Chairman, last year's fish catch for the Magdalen islands has been practically normal. However, it is known that the market for cured mackerel has not been as good as it should have been and as we had a right to expect.
The hon. member wants to know what measures the government intends to adopt for the benefit of these fishermen. They are exactly the same that apply to fishermen throughout Canada. This year, as previously, we secure for them a higher price than they usually obtained for canned lobster. To-day, according to information available, fishermen should get a minimum of 6 cents a pound for canning lobster and from 12 cents to 14 cents a pound for live lobster on both Canadian and American markets. While the price obtainable last year for canned lobster was from $17 to SIS a case, this year fishermen can get from $19.50 to $20 a case and this barely three weeks after the opening of the fishing season. This means that the demand for lobster so far is reasonably high and that great market possibilities are expected. Magdalen islands fishermen should benefit from this condition in the same degree as other members of their trade. Furthermore, if the ordinary buyers and exporters do not offer fair prices, they have the option of selling to the govenment buyers who will pay maximum prices as they did last year.
We shall continue supplying all available information in order to help them market better quality products. I believe our inspectors have already reached the Magdalen islands to start their educational work in order to help the fishermen help themselves. We call their attention to the best market possibilities and, besides, we have paid them, this spring, a sum of $40,000 to make up for low prices of cured fish, including cod as well as mackerel. We have spent, during February and March, over $40,000 to help

Wednesday Evening Sittings

Magdalen islands fishermen. Therefore, I suggest that they have no ground to complain of favouritism or of discrimination on the part of the Department of Fisheries. They get and will continue to get the same treatment that it is possible for us to grant to all fishermen of eastern Canada. If there has been any discrimination, it has truly been to the benefit of the poor Magdalen islands fishermen.


Joseph Sasseville Roy: Mr. Chairman, with your
permission, I should like to ask another question. If I understood the hon. minister properly, he said that the fishermen could hold their catch until spring when the price paid for cured mackerel is more attractive. How can they wait when they have no flour wherewith to make bread? How could they wait a whole year before marketing their catch? Would it be possible to guarantee an average price to allow them to hold their fish until the price is more advantageous?


Mr. DUPUIS:: The hon. minister has just proved that the Magdalen islands fishermen have received twice as much under the Liberal administration as they have under the Conservative government.


Joseph Sasseville Roy: That annoys you.
Item stands.	[DOT]
Progress reported.


[Stage Direction]
At eleven o'clock the house adjourned, without question put, pursuant to standing order.
Tuesday, May 27, 1941.