1941-05-30

[Stage Direction]
Hon. J. G. GARDINER (Minister of Agriculture) moved that the house go into committee at the next sitting to consider the following resolution:
That it is expedient to introduce a bill to amend the Prairie Farm Rehabilitation Act by empowering the minister, subject to the advice and representations of the advisory committees, to undertake certain minor rehabilitation projects and Schemes and enter into agreements with respect thereto, provided that if the total amount to be expended under any such single
project or scheme exceeds five thousand dollars in any fiscal year the approval of the governor in council shall be required; also to authorize the minister to pay administrative expenses and travelling and living expenses of officials and employees.
He said: Mr. Speaker, the amendments which are to be contained in the bill which will be based upon this resolution give the minister authority in respect of schemes and projects involving expenditures of less than $5,000; and beyond that amount the authority of the governor in council is required. This procedure is similar to that already provided in section 12 (1) of the act, with respect to the purchase or rental of equipment. Similarly the minister is given authority to pay administrative and travelling expenses, which were not hitherto provided for. Those travelling expenses and administrative costs have been paid, but it is contended by the auditor general that the act does not contain specific authority for such payments, and this amendment is designed to place that specific authority in the act.
Further, at present the act requires the approval of council for all agreements. In order that council may not be burdened with a multitude of minor agreements, such as those entered into with pasture patrons, illustration station operators, and tenants on irrigation projects, the amendment provides that the authority of council shall not be required unless the expenditure under an agreement is to exceed 35,000 in any one fiscal year. The procedure made possible under these amendments is similar to the practice now followed in respect to all ordinary departmental activities.
His Excellency the Governor General, having been made acquainted with the subject matter of this resolution, recommends it to the consideration of the house.
Motion agreed to.


[Stage Direction]
On the orders of the day:
Mr. G. S. WHITE (Hastings-Peterborough):: Mr. Speaker, I should like to direct a question to the Minister of National Defence. My question is in two parts: (1) Will the minister give the house a report on the recruiting campaign to date? (2) If the required number of 32,000 men for active service is not secured in this campaign, what does the minister propose to do in regard to this quota and future quotas?


Hon. J. L. RALSTON (Minister of National Defence):: As to the first question, I think it
Dartmouth Airport

is too early as yet to give a report on the recruiting campaign. My hon. friend will understand that the organization is just being completed, the adjutant-general having just returned from a trip to the west.
The second point involves a matter of policy which would be decided in due course.



DARTMOUTH, N.S., AIRPORT EASTERN PASSAGE AERODROME CONTRACTS- TILLEY REPORT

[Stage Direction]
On the orders of the day:
Mr. P. C. BLACK (Cumberland):: Mr. Speaker, is the Minister of National Defence for Air in a position to give the house a report respecting the eastern passage aerodrome at Dartmouth? It is now more than two weeks since the minister informed the house that he expected the report would be placed before the house- within the next few days. The matter has been before the department now for about seven months.


Hon. C. G. POWER (Minister of National Defence for Air):: I said I expected to receive a report within a few days. As a matter of fact I had a telephone message sent to Mr. Tilley the day before yesterday, and I have been promised that report either Monday or Tuesday.


Percy Chapman Black: Would the
minister lay on the table of the house a copy of the correspondence between his department and Mr. Tilley, who is carrying on this investigation or inquiry?


Charles Gavan Power: I shall consider that.



NATIONAL PARKS


[Stage Direction]
On the orders of the day:
Mr. J. G. DIEFENBAKER (Lake Centre):: Mr. Speaker, I should like to ask a question of the Minister of Mines and Resources. I have received a communication from the secretary of the board of trade of Prince Albert, Saskatchewan, pointing out to me that he had received a letter from the Minister of Mines and Resources, in which it was indicated that the bill to amend the National Parks Act, having particular reference to Prince Albert National Park, would not be proceeded with. Would the minister advise the house as to the accuracy of that report, and whether or not the bill will be proceeded with at this session?


Hon. T. A. CRERAR (Minister of Mines and Resources):: The expectation is that the bill will not be proceeded with.



WAR EXCHANGE CONSERVATION ACT

[Stage Direction]
Hon. J. L. ILSLEY (Minister of Finance) moved the second reading of Bill No. 77, to amend the War Exchange Conservation Act, 1940.
Motion agreed to, bill read the second time and the house went into committee thereon, Mr. Fournier (Hull) in the chair.
On section 1-Duties of customs, schedule two.
Mr. HARRIS (Danforth):: In the resolution stage Bill No. 77 received scant attention and consideration, although it is a most important measure. Under the circumstances I think an explanation is due the committee from the minister. Perhaps he would give a more exhaustive statement than was given on the resolution. The probability is that since the resolution was introduced on May 23, the day preceding Victoria day, he has received representations. If there are to be changes from what appeared in the resolution, the committee would like to know about them.


Hon. J. L. ILSLEY (Minister of Finance):: I do not know that I can add anything to what I have said before. The measure was discussed in resolution stage.


Joseph Henry Harris: It was only a short discussion.


James Lorimer Ilsley: It speaks for itself. I
explained when the resolution was before the committee what was being done under the measure. For the most part this bill consists in a reduction of duties on goods coming from the United Kingdom. That is its main feature. I explained the reductions proposed, and I do not know how I could go much further.


Joseph Henry Harris: Since the situation has not been enlarged upon by the minister, I should like to make some further observations, the first of which is that all hon. members are very anxious to do everything possible to bring in from Great Britain anything she can export in order that she in turn may be supplied with more Canadian dollars. That, Mr. Chairman, is the foundation for the remarks I purpose making.
At the same time, as we all know, the United Kingdom has suffered considerably from air raids and other conditions arising out of the war. Plant after plant, factory after factory,

War Exchange Conservation Act
has received direct hits. The operation of plants has been greatly disturbed. In the main, the machinery in bombed factories is still there, although a good deal of it has not been put back into service.
My point in mentioning these facts on the present bill is that many of the plants operating in England would like to remove to Canada the remaining machinery and other manufacturing equipment and establish branch factories here.
Speaking in reply to a question of the leader of the opposition the minister stated that this legislation is only for the duration of the war. The leader of the Cooperative Commonwealth Federation observed yesterday that once these changes are made they will remain. I hope the minister did not pay too much attention to that point raised by the hon. member, and I am hopeful that with the close of hostilities the war exchange conservation measure will be dispensed with.
This is a tariff which the minister has described as a tariff for revenue, but it is one which we all know has protective features as well. The minister himself knows that very well. He will recall that in 1932 there was passed in this house a certain British empire trade agreement which contained protective features. In fact, I rather believe he had the privilege or the honour of voting for that trade agreement. The features which were embodied in that, perhaps the greatest of all agreements between the United Kingdom and Canada, are pretty well nullified by this measure in respect of groups 1, 5, 6, 7, 8, 9, 10 and 11 of the Customs tariff. Those are really the main items in matters of trade between Canada and the United Kingdom. Taking that large group and giving them a duty discount of 50 per cent will not tend to encourage industry in the United Kingdom to establish branch plants in Canada if the minister and the government and all sections of the house do not adhere to the view that this legislation will be done away with at the cessation of hostilities.
I have in mind a large group of commodities in which the labour content is at least fifty per cent, such as non-metallic minerals. We imported about $9,500,000 worth of these from the United Kingdom in 1939, the duty being in the neighbourhood of 8500,000. There is an abundance of raw material in Canada, such as aluminum, copper, lead, and so on. All through my remarks I want to convey the idea that our fellow Britishers in the United Kingdom will be anxious now, as they were several generations ago, to move out to a new country. In the old country are many
artisans, technicians and men trained in these arts and trades. If we can stimulate this movement by encouraging the establishment of branch factories, we shall be doing a great deal to take care of the difficult situation which will face us when hostilities cease.
In connection with the other group, iron and its products, I do not suppose there are any better mechanics in the handling of iron than those who come from Scotland and the old country. Normally we import about $20,000,000 worth of these products each year. Many of the goods in this group have a large labour content, in some cases as high as sixty per cent. These goods are in universal use both here and in the United Kingdom, and their manufacture fits in with the establishment of branch plants in Canada. What obtains in that regard, obtains in respect of chemicals and chemical products. I am thinking of the salt deposits in the lakes of western Canada and the other basic chemicals which are available in Canada. I am thinking of the possibilities of using the coal to be found in the west and establishing manufacturing plants in Alberta where coal is plentiful. The manufacture of these articles requires a good deal of heat treatment, of fuel, and so on.
What applies here, applies also to the miscellaneous products which come in from the United Kingdom to the extent of $10,000,000 a year. All in all, the value of the manufactures coming in from Great Britain is well over $150,000,000. The United Kingdom is grateful and thankful for what Canada has done in this regard of its own free will. They have realized that we want to help them in every possible way. At the same time I hope that all those who have studied this situation will realize that we are anxious for them to locate here after the war. One thing that will bring them here is the hard, common-sense view that the Englishman takes of a problem of this kind, the pounds, shillings and pence view. If he knows that he is to be given some protection as between the mother country and this country in the days to come, he will feel more disposed to establish his branch plant in Canada.
I have a criticism in regard to something that happened in connection with this legislation. I have under my hand a cable which I received two weeks before the budget was brought down, before we knew that there was to be any change in the discount rate which would be allowed on goods coming from the United Kingdom, making a general rise in the British price of commodities equal to the concessions being given by this legislation.

War Exchange Conservation Act
I am not making any charge and I do not know whether our United Kingdom friends had an inkling that this was going to happen. I hope it was because they felt that their costs were going to be a little higher and they should raise their prices from ten to twenty per cent. I had hoped when the cables came in that that was the condition obtaining in the United Kingdom, that their costs were higher and they had to have more money. But the rise in the level of costs represented in the main by this $100,000,000 odd coming from Great Britain is given back by this legislation, and the delivered price in Canada is much the same.
The minister and the leader of the opposition have both said that they did not receive many representations from the trade opposing or criticizing this particular legislation, and I think in part that that is the answer. I am happy that the United Kingdom is getting an extra ten or fifteen per cent during this critical time. Our Canadian people are happy to pay this extra amount and I suppose they are grateful to the administration for increasing the discount rate and thus reducing the cost of the commodities so that the general situation in the price levels with regard to exports to this country is as the United Kingdom dictates, the United Kingdom getting the extra dollars from the increase they have made in their prices. But at the same time I want the administration to know that there is a possibility of something happening which enables the United Kingdom producer of commodities ordinarily exported to Canada almost to equalize the benefits which we have passed on under this legislation.
A moment ago I referred to the fact that this is another breaking down, as it were, of the British empire trade agreements of 1932 and the Canada-United Kingdom agreements of 1937. So much so that Australia and New Zealand, which have been shipping goods to Canada in conformity with United Kingdom shipments to Canada, more or less in agreement, by quota or otherwise, now find it difficult to make shipments to Canada by reason of this particular concession to the United Kingdom. I do not complain of that. Australia will have to take it, and New Zealand likewise. I just make the observation so that it will be realized that this bill is of great importance, far-reaching in character, and will have to be given very serious consideration when hostilities cease. I suggest to the minister that if those engaged in industry in Canada have no idea that something is going to happen, how do our friends over there seem to know that something is going to happen?


Mr. ISNOR:: Would the hon. member give us the name of the commodity mentioned in the cable to which he refers?


Joseph Henry Harris: I shall be glad
to cable England and get permission to release the information if my hon. friend so desires.
The other question I wished to raise was why there should be such a difference between the discount rates on different commodities. Just why was one group singled out for 25 per cent while the main body was given 50 per cent, and why were boots and shoes favoured? It seems to indicate that some of the trade had an idea as to what was going on. I am sorry that the Minister of Justice (Mr. Lapointe) is not in his seat. Years ago, whenever boots and shoes were touched in any way whatsoever or there was even a suggestion of it in the house, we used to get the undivided attention of the hon. member then representing one of the Quebec city seats, now the Minister of Justice. If that little item of boots and shoes from the United Kingdom does not amount to anything, why were our producers of boots and shoes not put in the 50 per cent discount class along with the other manufacturers? I do not ask that that be done. I am just wondering why some seemed to be favoured. Looking over the explanation when the bill was introduced, I see no particular mention made of boots and shoes other than that the trade was small.


James Lorimer Ilsley: There is just one point I should like to discuss briefly, and that is the suggestion that British exporters in some way had foreknowledge of these changes. That was impossible because the changes were not decided upon until a very short time before the budget was introduced

a day or two, I think, or two or three days.
The fact that some commodity prices quoted to importers here advanced about two weeks before the budget was introduced by the amount of duty reduction which came with the budget is easily explained. Prices have been advancing in Great Britain. If I understood the hon. gentleman correctly, he said that there was not much difference in prices there.


Joseph Henry Harris: No-if I may interrupt. There is not much difference now in the general level of prices because the amount by which they have raised prices is taken care of by the discount.


James Lorimer Ilsley: I do not think that is so. I have figures here showing price rises in some United Kingdom goods since September, 1939. Prices on these goods have advanced on an average 70 per cent between August 1, 1939,

War Exchange Conservation Act
and February 28, 1941. Following are indices for some of the more important materials, taking August, 1939, as 100:
(August, 1939 = 100)
Cotton	 156
Motor spirit	 135
Copper	 124
Spelter	 177
Coal	 134
Wool	 167
Rubber	 148
Lead	 156
Tin	 148
Farm crops	 166
These figures are taken from the Economist of March 29, 1941. So there is nothing to give ground for any suspicion of a price rise two weeks before the budget.


Joseph Henry Harris: While that is quite true, at the same time there has been a price rise in Canada, but not to quite the same extent.


James Lorimer Ilsley: Nothing like It.


Mr. HANSON (York-Sunbury):: Does the minister suggest that the two events have no relation to each other, and that it was just intelligent anticipation over there of what was going to happen?


James Lorimer Ilsley: I should think it was extremely improbable that those exporting the goods had anything in mind relating to our budget. Costs were going up and they were putting the prices up. This has been happening ever since August, 1939. This is what I said in committee of ways and means on May 20:
It is believed that a discount of 25 per cent from the British preferential tariff should be adequate to enable British woollens and boots and shoes to remain competitive. These products are not handicapped to the same extent as most with respect to either raw materials or labour, and due to their relatively high value in relation to weight they are affected less by increased transportation costs. Moreover, there has not been apparent any tendency for imports from foreign countries to replace British woollens and boots and shoes in the Canadian market.


Joseph Henry Harris: As I understand it, any change whatsoever in the United King-dom-Canada trade agreement affecting either the remnant that is still in the empire trade treaty of 1932 or the main portion of the Canada-United States trade agreement must, by clause 17, be made by consultation. The minister says that he decided on this only one or two days before the budget was brought down, but I should imagine there was consultation between Canada and the United Kingdom before this change was made.


James Lorimer Ilsley: You do not have to consult if you are reducing duties against the United Kingdom. Consultation is in cases where you
would be depriving the other party of something by reducing his preference. Consultation would take place if you were increasing the duties against the other party or reducing the duties on goods from other countries.


Richard Burpee Hanson: Is that
specifically mentioned in the covenant?


James Lorimer Ilsley: I do not know.


Richard Burpee Hanson: I do not think it is.


James Lorimer Ilsley: Just look at the reason of the thing. There never was a clause in any agreement by which one country said: We will consult with you before we lower the duties on your goods coming into our country. There would be no point in a clause of that kind.


Richard Burpee Hanson: The intention was that the status quo under the agreement should be preserved and that no change should be made without consultation. It was not limited to an upward revision; it contemplates any revision, if I understand the section.


Joseph Henry Harris: Perhaps the minister can answer in one word: Did he consult the United Kingdom?


James Lorimer Ilsley: No. There were representations made some months before by their trade representative here in Canada to the Department of Finance that certain concessions on certain commodities would be appreciated. That is a common thing.


Joseph Henry Harris: There really were some representations made some two months before the bringing down of the budget?


James Lorimer Ilsley: Some months before; I would not say two.


Joseph Henry Harris: No doubt the President of the Board of Trade in Great Britain, who enjoys cabinet rank, knew of these changes two months in advance, or knew that the trade representative here whom the minister mentioned had some suggestions that would be very welcome.


James Lorimer Ilsley: Probably he knew that representations had been made.


Richard Burpee Hanson: Has the minister anything to say with respect to the suggestion of the hon. member for Danforth that we should do what we can to bring out branch factories? It seems to me that that would be wholly desirable if we could do it. I should like to have a reaffirmation that these proposed changes, like those made a year ago or in the last budget, are for the duration, and not beyond.

War Exchange Conservation Act


James Lorimer Ilsley: That is covered by statute. Section 10 of the War Exchange Conservation Act provides that the act shall expire on the date of the issue of a proclamation under the War Measures Act declaring that a state of war no longer exists, or on such earlier date as may be fixed in a proclamation of the governor in council.
With regard to the moving of factories to Canada, I understand that the export of capital is not permitted by the foreign exchange control board; and I doubt whether we should attempt to take advantage of the situation in England by seeking the transfer of these industries permanently from Britain to Canada.


Mr. SLAGHT:: How could they spare their key men?


Richard Burpee Hanson: I am not suggesting that.


Mr. MacINNIS:: I have not very much to say on this section. Indeed, I have not very much to say with regard to any part of the bill. I wish, however, to state that this group is very much in favour of the principle of giving favoured treatment to exports from the United Kingdom at this time. For the life of me I cannot understand our friends to the right. At one moment one would think they had a monopoly of all loyalty and all patriotism, and the next moment they are haggling as to whether small concessions of this kind are going to continue after the war is over.


Richard Burpee Hanson: The hon. member had better take that view of the government. They advanced it first.


Angus MacInnis: Yes. But I wonder
whether they realize how much restriction on trade has had to do with the bringing on of the present war. If we are to have lasting peace in the future we shall have to concern ourselves with freedom of trade as well as with military matters. But this seems to be the philosophy of my hon. friends: we are to assist the British empire-in this instance, Great Britain-with all our might to win a military victory over Germany, and as soon as that victory is achieved we are to go back to the old system of trade wars, even as between the various parts of the British empire. Now, if, as is on everybody's tongue, We are to play a constructive part in the building of a "new world", we shall have to give up these old-fashioned ideas and be prepared to look much farther ahead than was evidenced, say, in the trade agreements of 1932.

I have before me a quotation from the London Times. No one can accuse that journal of radicalism, but I fear that in its progressiveness it is considerably ahead of my hon. friends on the right. In a recent editorial it says:
It has become a truism to say that we cannot put the European house in order unless we put our own house in order, too. . . . Not all the demands of war economy, which have already revolutionized many of our ways of life and thought, will come to an end at the moment when the cease-fire is sounded.


Arthur Graeme Slaght: What is the date of that?


Angus MacInnis: I have not the date, but it is quite recent. The book is entitled, "Dynamics of Democracy", by Philip Child and John W. Holmes, with a foreword by Sir Robert Falconer.
The hon. member for Danforth (Mr. Harris) suggested to the Minister of Finance that he should, not take much notice of representations made to him by members of this group. I do not know whether or not the minister has done so; that, however, is not important. We have approved as much of his policy as we found ourselves in accord with, and we have made certain suggestions and have hopes for the continuance of some of this legislation. The Minister of Finance may not have taken any notice of suggestions made by members of this group, but the minister will take notice of economic developments, and this house will take notice of economic developments; and if my hon. friends are not prepared to do the same, some other party will sit in the seats of the mighty in this country for many, many years to come.


Richard Burpee Hanson: That is
wishful thinking all right.


Angus MacInnis: Changes will come about, whether we like them or not, and if we allow our little vested interests to interfere with world progress, it is we who will suffer.


Joseph Henry Harris: It is quite true that I made the observation referred to by my hon. friend, with reference to the following statement of the minister as reported in Hansard, page 2980.
Mr. Ilsley:	I readily give the undertaking
that the matter is only for the lifetime of the War Exchange Conservation Act. It is an amendment to that act; it is not a change in the tariff itself. That act expires automatically upon the issue of a proclamation that a state of war has ceased to exist.
In discussing another observation of a like nature, the leader of the party supported by the hon. member for Vancouver East expressed the hope and belief that, once these changes were made, they would remain on the statute

War Exchange Conservation Act
book. I refute that. I have confidence in the assurance given by the Minister of Finance that these measures, which are put into effect now to help Britain for the duration of the war, will be subject to change when the war is over.
May I also take this opportunity to correct a misapprehension of the hon. member for Parry Sound (Mr. Slaght) as evidenced in his remarks a few moments ago. I have no intention of suggesting that any men, any equipment or any machinery should be moved from Great Britain during this war, or that anything else should necessarily be transferred here from the United Kingdom while the war continues. But when the war is over, if this legislation is not removed from the statute book, the hardheaded business man in England will think twice before he moves his plant to, or establishes a branch in, any country with which there is practically free trade with the United Kingdom-whether it be Canada, Australia, or anywhere else. Having that in mind, my view was that the removal of this legislation from the statute book at the close of the war would be a great encouragement to our friends from the United Kingdom to establish branch plants in this country-much as, during the last two or three decades, many branches of United States industries have been established in Canada, due to no other fact than that we do not permit free trade between the United States and Canada in the commodities which those industries supply.


Arthur Graeme Slaght: The hon. member suggested that he was construing what I was thinking, but let me assure him that I had no thought that any suggestion of his was intended in any way to indicate that there would be the slightest endeavour to have British industry harmed at all. I assumed his intense loyalty and desire to help, and only that. It occurs to me that when hon. gentlemen opposite, and perhaps some of us on this side, attempt to evoke from the ministry assurances that bill after bill, measure after measure brought down during this emergency shall operate only during the war and not thereafter, we are indicating a sensitiveness in that regard which is not being shown even by the people throughout the country. Surely by this time all hon. members have realized that most of the measures with which we have occupied ourselves this session are strictly war measures, and that no administration should be asked to say that they will become inoperative on the termination of the war. Surely we should not be so supersensitive as to require a declaration of the kind. Sufficient unto the day is the legislation thereof, when we are in a dilemma of this kind. I am sure the
hon. member who spoke a moment ago, with his studious mind, will at once recognize the analogy. I do not think we can assume that from now on most of the legislation brought down will be the result of present conditions; and leave it to the future, be it distant or near-we all hope it will be near-when all these measures may be reviewed by the parliament then entrusted with that task.


Mr. LEADER:: I am prompted by the remarks of the hon. member for Vancouver East (Mr. Maclnnis) to offer a word at this juncture. I hesitate to venture upon a discussion of anything so complex as fiscal matters. As a rule such things are difficult for farmers to understand, and even when they do understand them they find difficulty in discussing them as experts would. But speaking as a Liberal I want to say that I believe the vast majority of Liberals in this country will agree with members of the Cooperative Commonwealth Federation party that this is a step in the right direction. I believe in Liberal policies and Liberal traditions, and I believe the statement I have just made will meet with the approval of most Liberals in this house. Certainly it is the opinion of those whom I represent that these policies not only should be adopted for the period of the war, but should be continued after the war as well. Two or three weeks ago I had occasion to chide some of my Conservative friends who had said that some restriction ought to be placed on United States goods entering this country. At that time I said statesmen were not talking that way now.


Richard Burpee Hanson: Well, the government is acting that way.


Harry Leader: The tendency is entirely in the other direction.


Richard Burpee Hanson: Not according to the legislation.


Harry Leader: I heard over the radio the speech delivered by Mr. Anthony Eden yesterday afternoon, and if the leader of the opposition did not hear it I suggest that he read it. Mr. Eden agreed with the view that has been expressed by Mr. Bevin, Mr. Churchill, Mr. Hull and Mr. Roosevelt, that the time has arrived when we must remove the restrictions on foreign trade. I can always understand the viewpoint of the Conservative party. I remember that in this house, in 1924, I said we could easily appreciate the Conservative policy because in season and out of season, in office and out of office, they have advocated high protection. At that time I went on to chide the Liberals because when they were out of office they talked of lower customs duties, but invariably when they

War Exchange Conservation Act
assumed office they ke-pt the tariff at about the same level as the Conservatives had it when they were in power. Now that the party with whidh I am affiliated is willing to step out and reduce these duties, I want to encourage it in its action, and I think that should be done by every Liberal member of this bouse. Back up this administration. We want the trade barriers removed; we want justice in this country. This very war we are fighting to-day was caused by restrictions on international trade. Perhaps now we are learning what we should have learned twenty years ago, that these trade restrictions have caused unrest, distrust and misery among the people of the world. I have heard it stated that this war was caused by the interests of capital and the interests of the people coming into conflict. We must remove the causes of war, and one of the very best things we can do is to accept the advice of the great statesmen of England and the United States; and I believe we have some in Canada as well.
Now, Mr. Chairman, if you will not call me to order I should like to say something that I may not have an opportunity to say again, and it will not take me more than two minutes. I want to compare the Canadian manufacturer with the British manufacturer. Why can the Canadian manufacturer not compete with the British manufacturer, even without a customs duty?


Mr. MacNICOL:: Because he pays the men in his factory 50 per cent more than the British manufacturer pays.


Harry Leader: If they cannot compete
they should go out of business.


John Ritchie MacNicol: May I ask the hon. member a question?


Harry Leader: I do not speak in the house very' often, and I am sure hon. members do not begrudge me these few minutes. Perhaps I am out of order in these remarks, but as a farmer and live stock producer I think at this time the government should undertake to bring out from Great Britain as much as possible of the thoroughbred live stock at present in that country. Britain is the nursery for many of our best breeds of live stock, and the government should give consideration to this suggestion if they have not done so already, because it may be that millions of those grand animals will be slaughtered. We have plenty of room for them here in Canada; and as a live stock producer and breeder I am not afraid of competition from the old country.


Mr. JACKMAN:: Can the Minister of Finance or the Minister of Trade and Commerce say whether or not any disposition or desire

has been shown by the British manufacturers to establish branch plants in. Canada? Has there been any evidence of that?


Mr. MacKINNON (Edmonton West):: Undoubtedly a great deal of thought has been given in the old country to the establishment of branch plants in Canada, though war conditions and difficulties in connection with foreign exchange have practically put a stop to anything of the sort for the time being.


[Stage Direction]
Section agreed to.
On section 2-Items deleted from schedule 1.
James Lorimer Ilsley: Perhaps this is the stage
at which I should move an amendment I wish to propose, as follows:
1.	That the said bill be amended by inserting the following as clause 2 and by renumbering the present clauses 2 to 6 inclusive, 3 to 7 inclusive:
2.	Subsection one of section eight of the said act is repealed and the following substituted therefor:
8. (1) The governor in council in order to increase or conserve Canada's supply of foreign exchange may, on the recommendation of the Minister of Finance, enter into agreements with individuals, partnerships or corporations to grant assistance by way of special tax credits and/or special allowances for depreciation or depletion under the Income War Tax Act and/or the Excess Profits Tax Act, if, in the opinion of the governor in council, such assistance is necessary in order that an expansion of the exports of any individual, partnership or corporation receiving such assistance may take place or that the exports of any such individual, partnership or corporation may be maintained at levels .higher than would otherwise obtain, or, in the case of any individual, partnership or corporation operating an oil well or oil wells, if, in the opinion of the governor in council such assistance is necessary in order that sufficient drilling of new wells may take place to maintain or extend the production of oil in Canada and if the Minister of Mines and Resources certifies that such drilling is in oil-bearing areas which give reasonable prospect of yielding producing wells. The provisions of any such agreements granting special tax credits and/or special allowances for depreciation or depletion shall be effective notwithstanding anything contained in the Income War Tax Act or the Excess Profits Tax Act.
2. That clause 7 of the said bill be amended by substituting the word "four" for the word "three" in the third line thereof, and substituting the word "five" for the word "four" in the fourth line thereof.


Richard Burpee Hanson: What is
the effect of that last paragraph?


James Lorimer Ilsley: It has to do with the renumbering of the other sections.
I will explain this amendment to the committee. Under section 8 of the War Exchange Conservation Act, 1940, the governor in council may enter into agreements for increasing Canada's supply of foreign exchange by expanding exports. That does not permit agree-

War Exchange Conservation Act
ments for the conservation of foreign exchange by developing production here which would take the place of imports. It is not desired to take that power in a broad way, because it is a dangerous power and on the whole, I think, undesirable. I would not want to take it for the whole field, because probably it would be expected that the government would be entering into agreements with manufacturing industries and others to give them tax advantages in order to eliminate the competition of foreign imports, which would be protective legislation of a very extreme character.


Richard Burpee Hanson: In a word, it would be the bonus system.


James Lorimer Ilsley: Yes. It is not desired to do that. But there is an acute situation in regard to oil, and we have adopted the principle of treating gold and oil on a separate basis under the Excess Profits Tax Act. After much consideration I decided to suggest that we ask parliament for power to make agreements with those who may be drilling for oil, which would enable us to make the same sort of concessions that we can make under the act as it is at present, with a view to getting a greater production of oil in Canada. Gold, of course, is subject to this act now, because gold is an export commodity.


Richard Burpee Hanson: The minister was good enough to hand me a copy of this proposed amendment some days ago, and I have endeavoured to give it some study. The difference between the present section and the new section, as the minister has stated very succinctly, is that the present section gives the governor in council authority to enter into agreements for the purpose of increasing our supplies of foreign exchange. The additional power contained in the amendment is sought for the purpose of conserving our foreign exchange by an attempt to stimulate the production of a certain commodity, namely oil, to take the place of oil which otherwise would have to be imported. Of course I understand that the oil situation is acute at the moment, not because an ample quantity of crude oil is not available, but simply because transportation facilities are becoming increasingly difficult to secure. It may be said that this is entirely in the experimental stage; but can the minister tell us whether oil prospectors or producers have asked for it, or whether the suggestion emanated from the oil controller or from the governor in council. What was the genesis of the idea, and just what does the minister expect will result from it?


James Lorimer Ilsley: It came to me from the oil controller, through the Minister of Munitions
and Supply. I understand also that one or more of the companies made representations to the. same effect. I do not know; I did not see anyone acting on behalf of those companies, but the representations were to the effect that under the present taxation laws, with wildcatting for oil so uncertain in its character, it was practically impossible for the companies to undertake it, but that much more of this drilling would be undertaken if some power was given to make concessions.


Richard Burpee Hanson: I think I understand the theory, having had the benefit of a recent conversation with the oil controller. In effect it would appear that this is an indictment of the policy of excess taxation, in one limited field. The minister must know, I think, that the policy adopted with respect to gold mining has had the effect of freezing the business of prospecting. I am informed that this is so, that none of the promoters are willing to put out a dollar in prospecting for further gold ore, in view of what they consider to be the excessive taxation on gold mines. Personally I do not know whether or not that taxation is excessive. 1 am quite willing to see this go through as an experiment, to see what will result, but I hope the minister will be very careful in the exercise of the authority here given. With his native caution I have no doubt he will be careful, and it may be that no undesirable result will follow.
While we are dealing with this project, has the minister anything to report with respect to the powers that were conferred on the governor in council by the legislation now being enlarged, with respect to obtaining more foreign exchange by means of exports? What has been the result of that legislation? How many agreements have been entered into? Has there been any fruit in the way of increased foreign exchange, or is the legislation still in the experimental stage?


James Lorimer Ilsley: Six draft agreements have been approved by order in council. I think that is all. There may have been one or two more about which I have forgotten, but I do know of six. So far as I am aware none of these agreements has been signed. I am under the impression that some steps have been taken in the faith that the agreements will be signed, but the actual result to date in the production of foreign exchange would be very small, if any.


Richard Burpee Hanson: Would the minister care to indicate the type of business? If that is not desirable I shall not press it.


James Lorimer Ilsley: I did that before, in a general way, in answer to a question of the leader of the opposition. I believe the field in which

War Exchange Conservation Act
we have the most negotiation is the export of pulp and paper. But the applications are by no means confined to these products. They extend to some manufactured goods, depending on the United States market and on some other factories as well. There is a large number-I do not know exactly how many- of applications pending at the present time. As has been pointed out, it requires considerable caution on the part of the department, because the power is great, and the improper exercise of it would not be charitably viewed. It would look as if it were a private deal between the government and a private company.


Richard Burpee Hanson: On general principles this legislation, viewed from other aspects, is wholly undesirable, because there is a chance to play favourites. I am not suggesting that the minister will do anything of the sort. But in view of the rather critical situation as I understand it with respect to foreign exchange, and having regard to all our commitments, I believe the minister is justified in taking what I might call a flier in this field. I hope it will not be too detrimental to the treasury, and that it will be productive of some fruits for the foreign exchange position. We shall wait until another session to see what has happened. Was there not some provision, arrangement or undertaking whereby when these agreements are completed and become operative they will be made public?


James Lorimer Ilsley: They must be tabled within fifteen days after the next session.


Richard Burpee Hanson: They cannot be obtained until parliament is in session?


James Lorimer Ilsley: No.


Mr. ROSS (Calgary East):: Let us suppose a company has drilled a well in each of the four years 1936, 1937, 1938 and 1939. Each of the wells produces at the rate of one hundred barrels a day. On what basis would the standard of taxation be fixed?


James Lorimer Ilsley: The hon. member is talking about the Excess Profits Tax Act?


George Henry Ross: Yes, I am coming to that. I assume these agreements would deal with that act. I want to know the basis for the excess profits tax.


James Lorimer Ilsley: The standard profits are the average of four years. But there is a special formula relating to oil wells and gold mines. The principle of the special formula is that the excess that is taxed is not the excess earnings per dollar invested, but the excess
[Mr. Ilsley.l
earnings per unit produced. That rule is far more favourable to the producer than is the other rule. It would mean that if there is a large production in the taxation year, a production much larger than the average four base years, there is an assumed production of that increased amount in the standard period. I realize that this is a complicated matter, and I do not believe I shall be able to make it clear without spending considerable time on it. I should like to have the act before me when I am making the explanation. If the hon. member would like to see me about it later I should be pleased to go into it with him.


George Henry Ross: Yes, that would be better.


[Stage Direction]
Amendment agreed to.
The ACTING CHAIRMAN (Mr. Fournier, Hull):: Following this amendment section 2 becomes section 3.


[Stage Direction]
Section agreed to.
Section 4 (formerly section 3) agreed to.
On section 5-Schedule I further amended.
Joseph Henry Harris: We are now
dealing with the old section 4, having to do with part II of schedule I. The idea most of us have in our minds when we are considering war exchange conservation is to do everything possible to get hold of United States dollars, to save our Canadian dollars going to the United States for United States products, and to assist the United Kingdom by providing her with Canadian or United States dollars, as the case may be. This item is an attempt, and in view of all that has taken place in the last ten years, I would say it is a very feeble attempt, to exercise some control over a situation which has developed more particularly since the wrar started. The condition goes even deeper than that. Even before the war we had our friends in the United States initiating legislation of a kind which affected very seriously Canada's position with regard to the items enumerated in section 5 of the bill.
The situation in the last five or six years is that our friends in the United States saw fit to impose on the commodities mentioned in this section, and all other commodities in that group, whether they were of the vegetable or animal kingdoms, when entering the United States, an excise duty of three cents per pound. Before the war the producing countries of the commodities recited in the seetion were north Africa, Nigeria, Straits Settlements and, in respect of coconut products particularly, Ceylon and the Gold Coast. Those products found their way in the crude state to the United Kingdom, where they were processed

War Exchange Conservation Act
and whence they were exported to Canada. Brazil became an extensive producer of these commodities, and we know that China was perhaps one of the first producers in large quantities. Large quantities were obtained from the Dutch East Indies, British Guiana and the West Indies. These commodities were part and parcel of the empire trade agreement, and no change with respect to them could be made unless by special agreement. Later the United Kingdom-United States-Canada agreement carried a clause under which after consultation a change could be made and, as the minister mentioned, consultation was necessary only if the change was a revision upward.
In this northern Canadian zone the production of fats cannot be carried out as cheaply as in countries which produce fats from the palm and coconut trees and from pea or ground nuts, as they are called in India and China. In Canada fats are produced by raising hogs or cattle, whereas in these other countries they are produced from the palm tree, from ground nuts and copra, without the necessity of having to provide shelter or feed as in the case of fat from hogs and cattle. The result is that production costs are very low on vegetable oils.
In August, 1936, the United States imposed an excise duty of three cents per pound upon commodities of this type which had not been covered previously by processing taxes. The result was that there was backed up upon the world's markets a billion pounds of these commodities. Canada had free trade with the United Kingdom and other parts of the British empire and the market conditions in those countries were quite depressed. The result was that this depressed condition was passed on to Canada, and we found ourselves without any market for our animal fat production. Evidence was produced to show that we must take similar steps to those taken by the United States in 1936 to protect our primary producers. It was shown that if this were done the average return per animal would be from SI to $2 in the case of cattle production, and about the same return per head to the producers of some 8,000,000 hogs.
After a lengthy investigation, a recommendation was made to this house on April 13, 1939, showing that the revenues of the country would be enhanced by $4,700,000 if these measures were put into effect. The tariff board recommended a tax of three cents per pound on fats used for shortening and two cents per pound on inedible fats. This estimated revenue was based upon a consumption of 125,000,000 pounds of edible fats and 65,000,000 pounds of inedible fats. The second point is the fact that there would be an increased return to those producing cattle and hogs.
Another important consideration was the fact that there would be conservation of waste. Because there was practically no market for animal fats, the tendency to waste had grown up. The market used to be in Chicago, but we could not get into that market because of the imposition of the three cents excise tax.
This legislation is being introduced in an effort to conserve foreign exchange. Prior to the war these commodities were purchased largely from the United Kingdom and British empire countries. That practice had some merit because from $7,000,000 to $10,000,000 of Canadian funds went into the British market. When the war started we were all anxious that as many Canadian dollars as possible should go to the United Kingdom, and the adoption of the recommendation of the tariff board was not particularly pressed. Great Britain, however, soon required all the fats she could get and exports were stopped. In 1939 38 per cent of our imports came from the United Kingdom; in 1940 these had dropped to 14 per cent; in 1941 they had dropped to 2 per cent, and the minister has told us that they are now negligible. What obtains with regard to the United Kingdom, obtains also with regard to empire countries. The difficulty is that these products are still coming in to the tune of 208,000,000 pounds from Brazil, China and the Dutch East Indies. United States dollars must be found to pay for these commodities. Whereas $1,000,000 in United States funds was sufficient to provide for our imports in 1936 and 1937, I think I am safe in saying that to-day United States dollars are required for 95 per cent of the imports of these commodities.
The minister has said that he has not the figures for 1941, but we have the figures for 1940 which show that $7,000,000 in United States funds were used to pay for the imports of this commodity out of a total import value of some $8,000,000. To-day we are forced to provide United States dollars to pay for a commodity previously purchased from the United Kingdom and British empire countries.
The next point is the loss of a revenue of $5,000,000. When the hon. member for Rose-town-Biggar (Mr. Coldwell) was speaking in t'he house last night he said that our party had no alternative to offer. A definite alternative with regard to the raising of revenue is the putting into effect of the recommendation of the tariff board on reference No. 99, which was tabled in April, 1939. This would provide a revenue of at least $5,000,000 per year, and there would be an indirect benefit through the conservation of waste.
Why should we bring in 65,000,000 pounds of inedible fats from Brazil and China to provide for our soap production when the fat

War Exchange Conservation Act
production of this country is not being fully utilized? I was not at Petawawa this week when hon. members visited that camp, but one hon. member told me that he saw evidence of waste. He saw a bucket of fat going into the garbage can, from which no return could be had. The proper conservation of waste in this country would replace at least 20,000,000 to 30,000,000 pounds of this particular commodity. When this legislation is passed I hope that those charged with the responsibility of issuing permits will see to it that everything is done to conserve and use our own supply rather than to permit these commodities to come in without restriction.
The only excuse we have for not adopting this recommendation is that it would affect the United. Kingdom agreements. At a previous session my hon. friend said that our friends in the United Kingdom did not desire such legislation. There is no import from any of the British possessions, and we are in the embarrassing position of having to supply seven to eight millions of United States dollars, and also of sitting here as a parliament and, one time out of a hundred, not adopting a recommendation which came from a body which is a creature of this parliament, namely, the tariff board, which made its recommendation respecting the application in reference No. 99. I do hope that those charged with issuing the permits will give very serious thought to the permits they issue.
When it was asked in this house how many United States dollars were supplied to take care of the imports of these commodities the reply, in effect, was that the bureau of statistics kept the figures and the foreign exchange control board did not keep a duplicate set of figures on these different commodities. A little generosity on the part of the government, or a little consideration for the member who asked the question, would have resulted in the information being readily supplied. Only about five importers of any consequence import these commodities, and they import ninety per cent of the total imports. In fifteen minutes a clerk in the foreign exchange control board could run over the imports of these five large organizations, whose names are all on Hansard-I remember putting them on myself some years ago- and the government could have obliged the house by giving an answer without our having to criticize in these strenuous times and demand that the information be brought down. The answer given to that particular question was not fair to the house, Mr. Chairman. It might have been the truth that the bureau of statistics compiled the records, but the government could have obliged us by giving the main items. The minister knows them,

because he referred to them the other night when he introduced his resolution. Here is a good opportunity to save some foreign exchange and at the same time help our general economic position.


James Lorimer Ilsley: There is one statement to
which I should like to take exception, and that is that there are no imports of vegetable oils now from the British empire.


Joseph Henry Harris: Four-tenths of
one per cent from the British empire.


James Lorimer Ilsley: No, it is about 18 per cent of the totai imports of 1940.


Joseph Henry Harris: I said 1941.


James Lorimer Ilsley: We are in 1941 now.


Joseph Henry Harris: Three months.


James Lorimer Ilsley: I see-the calendar year
1940.


Joseph Henry Harris: I gave these
figures: 38 per cent, 14 per cent, and this year 2 per cent.


James Lorimer Ilsley: Last year it was 18 per cent, and the value of imports from the British empire was 81,519,897 and from foreign countries $7,374,907. We were satisfied it would be useless to take up this question with the United Kingdom government, and it might have been undesirable to do so even if it had not been useless. It was useless because the United Kingdom government prizes exports from other parts of the sterling area practically as much, if not just as much, as it prizes exports from the United Kingdom itself.


Joseph Henry Harris: I quite agree
that the United Kingdom or the colonial office in London prizes trade on behalf of the colonies. With regard to the minister's observation about 18 per cent coming in, that was for the calendar year 1940?


James Lorimer Ilsley: That related to the calendar year 1940.


Joseph Henry Harris: The imports
are practically nil now.


James Lorimer Ilsley: I do not know.


Joseph Henry Harris: There is nothing in our relationship with the United Kingdom, or the British empire for that matter, which would preclude us from taking advantage of the ideas 'which the tariff board have with regard to imports from foreign countries. There is at present a tariff of 10 per cent against goods coming in from foreign countries, but

Special War Revenue Act
there is nothing, as I see it, to preclude us from carrying out the board's recommendation and imposing this duty on goods coming in from foreign countries. It would indirectly help the general economic situation by bringing into the dominion treasury from four to five million dollars.


James Lorimer Ilsley: The tariff board's recom-
' mendations were for an excise tax or processing tax on the oil content of soap and edibles. The foreign ones could not be segregated. If a tax like that were imposed it would mean the whole oil content, wherever the oil came from. It would be impossible to apply the board's recommendations to imported oil only, because no one could tell what proportion of the oil in shortening was imported from foreign countries and what was from the British empire. Therefore the recommendation in that form could not be applied to foreign oils only.


Joseph Henry Harris: There are practically no imports from the United Kingdom now.


James Lorimer Ilsley: That is true.


Joseph Henry Harris: The imports for the three months ending March of this year are practically negligible. I do not know why we cannot get the figures. What were the imports for January, February and March of this year?


James Lorimer Ilsley: I have not got them.
Section 5 (formerly section 4) agreed to.
On section 6-Schedule II amended.


Mr. HAZBN:: I was going to ask a question about section 5. A number of the items in schedule II are being deleted. Do they then have to pay a higher rate of duty? For example, there is item 228 in schedule II, soap powders, and so on. Under schedule II they paid a duty of 10 per cent. What duty will they pay now?


James Lorimer Ilsley: Schedule II is a schedule of items which come in from the United Kingdom free or at reduced rates.


Douglas King Hazen: What will they pay now? Formerly the duty was 10 per cent.


James Lorimer Ilsley: They are covered by a previous section of the act. I have here a column of schedule II rates and a column of the rates resulting from section 1. Section 1 is very comprehensive. It covers most of the goods which are imported from the United Kingdom, so that when we take a number of items out
of schedule II, they are covered by section 1. I may state the results, if the hon. gentleman is interested. They are as follow:
Item No.	Schedule Two Rate	Rate resulting from section one220a 	Per cent 	
10	Per cent 81220b 	
10	10228 	
10	10X284 	
15	10288 	
10	10429b	
10	74429e 	
10	74439 	
15	10439a 	
10	74445f	
10	74445g 	
10	74445k	
10	74451b 	
10	8|572 	
25	15573 	
10	74


Douglas King Hazen: In every case there is either a reduction or it remains the same? In no case is there an increase?


James Lorimer Ilsley: That is true.
Section 6 (formerly section 5) agreed to.
On section 7-Coming into force.


Alphonse Fournier: This section is numbered 6 in the bill; it now becomes section 7.


James Lorimer Ilsley: You will note, Mr. Chairman, that two words are changed; "three" becomes "four" and "four" becomes "five" in that section.


Alphonse Fournier: That is the second part of the amendment?


James Lorimer Ilsley: Yes.


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

[Stage Direction]
Hon. J. L. ILSLEY (Minister of Finance) moved the second reading of Bill No. 88, to amend the Special War Revenue Act.
Motion agreed to, bill read the second time, and the house went into committee thereon, Mr. Fournier (Hull) in the chair.
On section 1-"Minister."
Richard Burpee Hanson: The intention of this paragraph is to allocate the bettin tax to the Department of National Revenue


James Lorimer Ilsley: Yes.


[Stage Direction]
Section agreed to.

Special War Revenue Act
[Stage Direction]
On section 2-Tax on horse-race bets.
Richard Burpee Hanson: I have no objection to the proposed tax. But as to section 6 of the new part II, to whom are the returns to be made, and to whom is the tax to be paid? On the face of it the answer is not clear. Section 6 of part II says:
Every person liable for taxes under this part shall file each day a true return of the total bets made on that day and the amount of tax due by him.
Is the return to be made to the minister?


James Lorimer Ilsley: The Minister of National Revenue has charge of the administration of the measure, and the return will be made to whomsoever the minister designates.


Richard Burpee Hanson: That is the assumption, but where does it say that?


James Lorimer Ilsley: I do not think it is necessary to specify it, where the minister has the administration of the act.


Richard Burpee Hanson: That is by
implication?


James Lorimer Ilsley: It is provided in the national revenue act that the minister shall have the administration of the act.


Richard Burpee Hanson: Should it not be stated in the statute to whom the return and the payments should be made?


James Lorimer Ilsley: I do not think so. Perhaps it should be the local collector, the nearest collector. I think it would be.


Richard Burpee Hanson: If the
minister is of the opinion that the machinery is there, I am satisfied.


James Lorimer Ilsley: I think so.


[Stage Direction]
Section agreed to.
On section 3-"British company."
Richard Burpee Hanson: Does this affect Lloyds? I understand from the inspector of insurance that it does not.


James Lorimer Ilsley: That is correct. It does not.


Richard Burpee Hanson: I do not want to get into a discussion on a question of jurisdiction or anything of the kind. The conflict between the dominion and at least one of the provinces has been an old stand-by for almost as long as I can remember. What is the attitude of the Ontario government with respect to this?


James Lorimer Ilsley: It is not favourable, I am sorry to say.


Richard Burpee Hanson: That
seems to be the position we are drifting into, does it not? However, let us not get into

that discussion to-day. It is a wide subject to open up in any event, and I am certainly not taking any part in this family quarrel. But it is quite clear that this does not apply to Lloyds and that the deletion of the last section in the present law, that is to say,-British companies, will not include in the definition Lloyds or any similar organization, and policies issued by them will not be taxable under this section.


James Lorimer Ilsley: That is correct. When I said "not favourable" I had no reference to any attitude towards Lloyds.


Richard Burpee Hanson: I did not so construe it.


[Stage Direction]
Section agreed to.
On section 4-Insurance tax, British or foreign company or exchanges.
Richard Burpee Hanson: The elimination of the words "or of any province thereof" is consonant with the preceding section?


James Lorimer Ilsley: Yes.


Richard Burpee Hanson: That is the intention?


James Lorimer Ilsley: Yes; the two go together.


[Stage Direction]
Section agreed to.
On section 5-Tax on long distance telephone calls.
Richard Burpee Hanson: How much increased revenue is expected from this additional tax?


James Lorimer Ilsley: It is estimated that the increased rates will produce $600,000 additional revenue in the full year, $550,000 in the rest of the present fiscal year.


Richard Burpee Hanson: It is
understood that this is just an additional tax on business.


James Lorimer Ilsley: Not altogether.


Richard Burpee Hanson: The major part of it is. Let there be no misunderstanding about it, this is a tax on business. I suppose the government itself will pay something, but it is essentially an additional tax on business for revenue purposes.


[Stage Direction]
Section agreed to.
On section 6-New part V-definitions.
Richard Burpee Hanson: I am glad the minister has made this applicable to officers, clerks and servants of the government. It goes on to say, "or the government of any province." Does the minister anticipate any difficulty with the provinces over that?


James Lorimer Ilsley: I do not anticipate any.

Special War Revenue Act


Richard Burpee Hanson: Here the government is putting its own officers on exactly the same level as those of the provinces. It is not dealing in quite the same way in some other jurisdictions and in the taxing of some other sources of revenue.


James Lorimer Ilsley: These sections are in the act now.


Richard Burpee Hanson: The underlined parts are new, are they not?


James Lorimer Ilsley: Yes.


Richard Burpee Hanson: With
regard to buses, in many places buses in the city have taken the place of street cars. Is the tax paid in that case?


James Lorimer Ilsley: There is an exemption on tickets up to fifty cents.


Richard Burpee Hanson: The minister has not thought of taxing taxicabs?


James Lorimer Ilsley: No.


John Ritchie MacNicol: Under paragraph (b), the word "vessel" includes any ship or boat of any kind whatsoever whether propelled by steam or otherwise. Does that include a motor boat that might be carrying only one passenger or perhaps at the most five? I am referring to small boats that operate on the lakes or as small ferries.


James Lorimer Ilsley: Yes.


John Ritchie MacNicol: If "yes" is the answer in connection with (b), I notice that (c) eliminates the tax on any bus carrying less than ten passengers. "Bus" includes any automotive vehicle of any kind whatsoever adapted or adaptable for passenger use with seating capacity of more than ten persons. I am not suggesting that there should be a tax on passengers on small buses or taxicabs, but why exempt motor vehicles that may carry as many as ten passengers? There is no tax there, but there is a tax on any small boat that may be operating on the Muskoka lakes or elsewhere, carrying one, two, three or four passengers, and always less than ten.


James Lorimer Ilsley: The reason for the bus definition is to exclude passenger cars. I did not realize that there was a similar necessity in the other case. I do not think there would be much taxi work by small boats.


John Ritchie MacNicol: There is quite a lot of it on the small lakes around Muskoka and Parry Sound, and elsewhere. For instance, there is a good deal of it from Port Carling to some other small port, perhaps, where a motor boat would carry three or four passengers.


Richard Burpee Hanson: I should like to have some information in regard to commuters who travel on weekly or monthly tickets to and from the city from outside points. The single ticket would be less than fifty cents, but if the passenger bought a book of weekly or monthly tickets I presume he would have to pay the tax.


James Lorimer Ilsley: No.


Richard Burpee Hanson: Well, is that clear?


James Lorimer Ilsley: I think so.


Richard Burpee Hanson: That is the way you intend to administer it?


James Lorimer Ilsley: It is the way it is administered. The question arose as soon as the resolution was introduced and we straightened it out.


Richard Burpee Hanson: The department is collecting the tax now?


James Lorimer Ilsley: Yes.


Richard Burpee Hanson: But it is not charging on tickets that cover more than one fare, where one fare would be less than the exempted amount?


James Lorimer Ilsley: No.


Richard Burpee Hanson: Is that clear in the statute?


James Lorimer Ilsley: Yes.


John Ritchie MacNicol: In reference to paragraph (b) do I understand that a motor boat carrying on a passenger service, taking one or more passengers, is liable to the tax? Will those who purchase tickets to travel in such small boats be taxed?


Mr. GIBSON:: That is correct. Where the motor boat charge is more than fifty cents, the tax will be collected. In a great many of the smaller transportation companies, transportation on inland lakes is carried on by small motor boats, taking a small number of people considerable distances sometimes, and quite often they have not the capacity of even ten.


John Ritchie MacNicol: I have already planned a trip to the Northwest Territories, and it will require me at Waterways to engage a motor boat. For instance, I shall have to go down the Athabaska river twenty-five or thirty miles to make a survey of tar sands. I am quite willing to pay the tax, and I am not inquiring on behalf of myself; I am referring to myself simply by way of illustration.


Colin William George Gibson: The hon. member would
be purchasing a right to travel; it is the same thing.

Special War Revenue Act


Richard Burpee Hanson: In my
province there is one method of transportation which has not been drawn to the attention of the department. On the lower stretches of the Saint John river the provincial government operates, for the benefit of those communities, a ferry service in which round-trip tickets are sold, which will aggregate more than fifty cents for passenger and vehicle. Take the Gagetown ferry in Queens county. You buy a round-trip ticket, and it will cost you more than fifty cents. Will there be a tax on that?


Colin William George Gibson: If it is more than fifty
cents, the tax applies.


Richard Burpee Hanson: In any
event the tax will apply?


Colin William George Gibson: Yes.


Richard Burpee Hanson: That will be very popular in that part of the country!


Mr. STIRLING:: Does the minister mean that-where a book of tickets covers more than a score of round trips?


Colin William George Gibson: No; but where one round-trip ticket is more than fifty cents.


Mr. ROSS (St. Paul's):: Suppose you go to Timagami, going twenty miles down the lake, and you hire a motor boat from a transportation company. The minister knows what I am talking about. Do you pay a tax on that? I did not hear the minister say whether tickets bought by the month would be taxable, where the one-way fare would be less than fifty cents.


Colin William George Gibson: I was in Timagami last
week and I was assessed the tax. It was put into effect and was working there. As regards a book of tickets, the tax does not apply where one ticket is less than fifty cents.


John Ritchie MacNicol: How much did the minister pay? I ask so that I may be prepared.


Harry Rutherford Jackman: With regard to people
who commute from twenty-five miles outside the city, where the charge, even with a book of tickets, is in excess of fifty, sixty or seventy cents, these people, a number of whom work in Toronto, will be under a hardship. Many of the people who ride in these buses are girls working in offices or young men who hold junior positions. If they are subject to the tax it will be quite a hardship on them, because already transportation is one of the big items in their budgets. I wonder whether there is a strong reason for fixing the amount at fifty cents, because fifty cents would take one only about fifteen miles on the ordinary bus, whereas if the limit were a dollar, and there

would be no serious loss to the department, it would be a great help to a good many people who work in the larger cities, coming from points twenty-five or thirty miles distant. The fifty-cent limit will catch a good many people who have to travel of absolute necessity to their places of business, and some people cannot afford the additional burden. Could the limit not be raised?


James Lorimer Ilsley: I am surprised to learn that there are people with small means who are paying more than fifty cents or a dollar a day to get to their work. That must be a mistake.


Harry Rutherford Jackman: I am thinking particularly of Woodbridge, which is just nineteen miles outside the city. Sometimes I go six miles further and the single fare is seventy cents. I am sure the fare for many of these people must be more than fifty cents. There are people who go ten miles north of that point, commuting every day, and this tax will strike them hard. There are people who come from Aurora, and there are a number of small towns round Toronto that are twenty-five miles away.


Mr. GILLIS:: We have heard a great deal of controversy with regard to the application of the tax to members of the armed forces travelling on railways. Are all members of the forces exempted from this tax?


James Lorimer Ilsley: The hon. member will find a proviso on page four of the bill, at line eight, to the effect that the tax shall not apply to members of the forces proceeding on leave.


Richard Burpee Hanson: The minister may not be aware of it, but this question of commuters is one that affects a great many people. The hon. member for St. John-Al'bert knows more about it than I do, but there are many people in Hampton, New Brunswick, working in Saint John, coming in every day on round-trip tickets costing more than fifty cents. Under this provision they will have to pay 'the tax. This is a direct tax on employees. Could the fifty-cent limit not be raised?


James Lorimer Ilsley: I am informed that there has been no complaint.


Richard Burpee Hanson: I have heard about it. But even if there is no complaint, that is no reason why we should impose onerous taxation.


James Lorimer Ilsley: The complaints must be extremely limited. At the outset there was a complaint because people were under the impression that the tax applied to books of tickets.


Richard Burpee Hanson: But that has been clarified?

Special War Revenue Act


James Lorimer Ilsley: Yes, and since then there has been no complaint.


[Stage Direction]
Section agreed to.
Section 7 agreed to.
On section 8-When taxes not payable.
Richard Burpee Hanson: Under
section 6 a great many sections are dealt with. Does the minister think an annual licence will give more control?


Mr. REID:: Must everyone in a ticket office procure a licence?


Richard Burpee Hanson: Any person selling tickets may be required to take out a licence.


James Lorimer Ilsley: There is one licence for the Canadian Pacific and one for the Canadian National.


Mr. EDWARDS:: May I revert to section 6 for a moment? Paragraph (c) gives the definition of a bus as follows:
(c) "bus" includes any automotive vehicle of any kind whatsoever adapted or adaptable for passenger use with seating capacity for more than ten persons.
The Banff national park is in my constituency, and we are confronted with the situation that thousands of booking agencies are selling all-expense tours which include not only transportation by railroad but also sightseeing tours incidental to the stop-off at Banff, Lake Louise, Jasper or any other of those world famous resorts. It is the practice of those people to travel by bus from point to point within the parks.
The effect of this definition is an unfair differentiation in that a person who travels in a ten-passenger bus would be required to pay a tax, whereas a person who travels exclusively in a private car would pay no tax for that right. There is some unfairness there which should be cleared up. The tax ought to have general application, rather than single out only the ten-passenger bus. In other words, the poor person who travels in the ten-passenger bus must pay a tax, whereas the person travelling from Banff to Lake Louise in a private car pays no tax.


Richard Burpee Hanson: The hon.
member seems to assume that a man travelling in a private car does not pay any transportation charges at all. I understand it requires about thirty fares to have a private car- unless one is a cabinet minister.


Manley Justin Edwards: I have sent the minister
a memorandum on the point, and I should like to have it cleared up. I appreciate the fact that these booking agencies have already H873-2101
booked thousands of dollars worth of transportation by tourists, a traffic which we are so anxious to encourage. What will happen? Are we going to insist that companies and individuals who live by this means of conducting tourists through national parks, and who gain a most precarious livelihood, must assume the tax? Or, perforce, shall we go back to the United States tourists, for the encouragement of whom we are spending thousands of dollars, and say to them, "You must now come through with an additional ten per cent on your ticket"? We are spending large sums of money to encourage those people to see the beauties of this country, and to see it at its best. What will be the result on the very trade we are so anxious to encourage in every way possible?


Grote Stirling: Is it not a fact that
in connection with those very sight-seeing tours to which the hon. member has referred there are numbers of vehicles which do exactly the same service and do not carry ten passengers?


Manley Justin Edwards: Yes.


Grote Stirling: Therefore a distinction
is made between the large and the small vehicles?


Manley Justin Edwards: Yes, quite. Probably
there are more of the smaller than of the larger ones.


Colin William George Gibson: When tourists originate in
the United States, tickets would be sold in the United	States.	No tax	is	charged ontickets sold	outside	Canada. In the sameway, tickets	sold in	Canada	for	tours commencing in	Canada	but going	outside the
country are taxed here.


Manley Justin Edwards: That answers the difficulty so far as foreign tourists are concerned. But how are those people going to be identified? As I understand it, all they carry is a certificate from a booking agent. That is presented to the bus operator in the national park by the tourist, indicating that he has bought and is entitled to free transportation by bus.


Richard Burpee Hanson: Do they not give a transportation check which is collected, and then collect his money?


Manley Justin Edwards: No. I believe it is only a notification or advice that a person is entitled to such transportation. For instance, I have in mind the Rocky Mountain tour conducted by the Brewster company. A booking agency in New York will send advice after this fashion: "Mr. and Mrs. So-and-so will arrive at Banff at such-and-such a time. They will be entitled to transportation from Banff
Special War Revenue Act

to Lake Louise"-or Banff to Radium-"and they have paid the amount required, in accordance with your tariff." Those people may not have more than an advice slip. They have not a ticket, so-called.


Colin William George Gibson: In that event, if the tourist had an advice slip which at one point or another he would have to exchange for a ticket, the tax would be collected when the exchange was made, the exchange being made in Canada. If he has to exchange his ticket, or right, or whatever it is called, for a ticket in Canada, then at that point the tax would be collected.


Douglas Gooderham Ross: The same would apply to tourists visiting the inland lakes in Ontario. The tourist motoring to Timagami and then wanting to go down the lake would have to pay a tax. He would be in the same boat as the tourist travelling through the national parks of the west.


Manley Justin Edwards: Does the minister suggest that if there is passage of a coupon or warrant from a booking agent in New York, from the tourist to the bus operator in the park-and remember, there is no exchange of money; it is an exchange of a right in the form of an advice slip or coupon-a tax must be paid?


Colin William George Gibson: Yes; it would have to be paid there, the reason being that the company which issues the ticket has to account for the tax on each ticket sold. If a company in Canada is issuing that ticket, it has to account to the government for the tax, no matter how payment for the ticket has been arranged.


Manley Justin Edwards: But the ticket was sold in the United States to a tourist in New York city, and he paid the money to the booking agency at that point. Then that booking agency in New York-or Chicago, as the case may be-gives the railroad ticket to the tourist who has purchased it. The agent may say, "That entitles you to a ride on a bus operated by one of the bus companies"-Brewsters, probably-"in our national park. You may ride from Jasper to Lake Louise, over the celebrated icefields highway."
There might be a possible evasion of the tax. It is inconsistent, because when a person rides in a two-passenger private car no tax is paid. If, however, ten or fifteen persons get into a vehicle on a certain day, and if Brewsters say, "You will travel in this sightseeing bus", a tax will have to be collected [DOT]from the passengers. It is manifestly unjust, .unfair and discriminatory, and I am afraid it [DOT]will be prejudicial. I am reliably informed ;that hundreds of thousands of all-expense tours Shave been bought and paid for, and booked

through our national parks. I am afraid this legislation will have a detrimental effect on the very trade we are so anxious to encourage. Therefore I recommend most strongly to the minister the advisability of either doing away with it altogether, so far as United States tickets are concerned, or-


Richard Burpee Hanson: Why
should they not pay it, if we pay it?


Manley Justin Edwards: Many of them have paid already.


Richard Burpee Hanson: In the United States they have a tax which is to some extent analogous to this. If you buy a ticket in Miami for Havana, they charge you a landing tax at Miami and at Havana, which must be paid in advance. Apparently you get no service in return for this tax. I paid it under protest, but my protest was of no avail.


James Lorimer Ilsley: I do not wish to leave the hon. gentleman unsatisfied as he obviously is, but I am afraid a complete answer cannot be given. It would be out of the question from the point of view of administration to start collecting a transportation tax from taxicabs or taxi-drivers. It is simply a matter of starting at the place where it can be done, and the line is drawn at ten-passenger vehicles. The same line is drawn in other legislation to make a distinction between passenger cars and buses. While there may be some inconvenience and irritation where tourists are using both types of vehicles, I do not see how this can be overcome. The amount would not be very great, and it is possible that it could be adjusted by the agency making some advance arrangement. It is a comparatively minor matter.


Manley Justin Edwards: I appreciate the difficulty. Our national parks are offered as an attraction for tourists, and I was wondering whether this tax could not be eliminated for this year when the vehicles are used within the parks. I am thinking of the possibility of building up irritation in the minds of the public of the United States.


Colin William George Gibson: The bureaux can adjust that by issuing a ticket instead of something to be exchanged for a ticket. They can simply go ahead and issue a ticket to wherever the purchaser desires to travel and by whichever route he desires to use.


Douglas Gooderham Ross: Are you not going to get into a great deal of difficulty in connection with motor boats? You define a bus as a vehicle which carries more than ten passengers, but I think you are going to have

Special War Revenue Act
a good deal of trouble in this connection. You may have a man with a boat with an outboard motor, and I suppose he will be subject to this tax if he takes a passenger for a ride?


Colin William George Gibson: Yes. Anyone who uses a motor boat for hire is subject to certain definite regulations as to the equipment he must have and so forth. He must buy a licence and carry out the regulations, and I do not think there will be any difficulty in collecting this tax.


John Ritchie MacNicol: I have travelled a good deal in the north country, by both motor boat and canoe. I have hired a motor boat with two Indians to go away for two or three weeks, for which I paid S25 a day which included tents, food, gasoline and everything. All I had to do was to walk across the portages. Would a motor boat used under such circumstances be taxable?


Colin William George Gibson: I would not say that it is a motor boat used for hire; I would say that you have rented the boat and are operating it yourself.


[Stage Direction]
Section agreed to.
Sections 9 to 12 inclusive agreed to.
On section 13-Interpretation.
John Ritchie MacNicol: I shall preface what I have to say by advising the minister that I know his problem. On the other hand, I have a duty to perform. I have in my hand a sheaf of telegrams which I have received, all protesting against this tax on amusements. I shall present them to the committee, and it will be for the minister to deal with them. The first, which is from Mr. McColgan of Toronto, reads:
I protest against proposed twenty per cent amusement tax on hockey. This game is a source of entertainment to millions of radio fans throughout Canada and the tax may force the closing of rinks and deprive the people of pleasure and also employment.
I have another one from Frank Ayerst of Toronto, and also one from Sylvanus Apps, who is, I believe, the manager of the Maple Leaf hockey team. The latter reads:
Although realizing the urgent need of increased taxation I feel that the twenty per cent tax proposed by the government on Canadian sport entertainment is too severe and would ask your cooperation with Mr. Conny Smythe in his efforts to have this prohibitive measure reduced.
Respectfully yours,
Sylvanus Apps.
I have one from Mr. Jack Gavin, one from the Toronto and associated skating clubs, one
from W. A. Hewitt, one from Walter I. Earle, and one from W. C. Moore. I am sure that my colleagues have all received similar telegrams.


James Lorimer Ilsley: All of us.


John Ritchie MacNicol: There is one particular case I have in mind, the circus which is put on each year by Rameses Temple in Toronto for the benefit of crippled children. This runs for a week or ten days, and the proceeds are handed over, I believe, to the Sick Children's hospital, for the benefit of crippled children. Would a circus of that kind be taxed?


James Lorimer Ilsley: It is for my colleague to rule on individual cases. We must be careful about these advance rulings. The matter is pretty fully covered by the exemptions to be found on page 9 of the bill.


John Ritchie MacNicol: I also received telegrams from people associated with horse racing. Not being a patron of this sport, I cannot say much about it, but I do know that considerable good is done by way of breeding high class horses, especially for military work, although this may not be so important in recent years.
I should like to say one more word about the tax on picture shows. I have received numerous letters and telegrams about this, but perhaps I had better leave the discussion of this matter to the hon. member for Prince Edward-Lennox (Mr. Tustin) who is more familiar with it.
We all know that hockey, in winter, is a great source of revenue, of United States dollars, which are brought back by Canadians playing in big-league hockey in the United States. Those who have written to me about this tax say that it will undoubtedly have some bad effect on our great national sport of hockey, which has done so much not only to promote the health of our young Canadians but to bring into Canada United States dollars. However, the problem is the minister's. I do not know enough about any of these sports to be able to speak with authority about any one of them except to say that all sport tends to develop health, strength and sportsmanship in our young Canadians, and also in Canadians who are not young.


Mr. BENCE:: I should like to say a word particularly from the point of view of how this tax will affect amateur sport in this country. I do so because I am strongly of opinion that this tax, if it should apply to the case of amateur sport, will have a detrimental effect so far as character building, health building and morale building of the young people of Canada are concerned. I notice that in the exemptions provided for on page 9 of the
Special War Revenue Act

bill, according to subsection 2 of section 122, the tax shall not apply to any performance held by a club for recreation provided that it is operated exclusively for non-profitable purposes and that no part of the revenue inures to the benefit or private gain of any person as proprietor or member thereof et cetera. There is a great deal of confusion with regard to this tax, in the minds of those public-spirited people who are sponsoring amateur sport in this country, football, baseball, and particularly so far as I am concerned, coming from the western provinces, amateur hockey. If this tax is not intended to apply to amateur hockey and other amateur sports, I think that should be stated clearly at this time.
I have particularly in mind the case in my own city, where the citizens banded together and by dint of very great effort managed to erect a rink. It is purely a community enterprise. That rink provides hockey for the various types of leagues in the city all the way from hockey for the very young boys, ten years of age, up to the seniors. We have our pee-wee league, our juvenile, junior and senior teams, and some commercial leagues. In addition, there is public skating, and fancy skating carnivals are put on from time to time. The junior and juvenile hockey, the general public skating and fancy skating could not possibly carry on if the rink did not raise revenue from senior hockey, and senior hockey has to be built up to the point where it will bring in enough revenue to carry the cost of operating the rink, so that it in turn can take care of these other activities for the benefit of the younger people and the general public, and these exhibitions which do not bring in much revenue. The senior hockey games draw fairly large attendances and the money is used, first, to provide for the general upkeep of the rink; second, to provide for expenses of the hockey team; third, to pay something on account of the capital indebtedness which was incurred as a result of the erection of that building. A great deal of the money was raised by public subscription in small and large amounts and we still have considerable capital expenditure to take care of.
Like the hon. member for Davenport, I have received quite a number of telegrams in connection with this matter, and I should like the privilege of reading one which was addressed to me by the president of Saskatoon Arena Limited, which succinctly puts the situation. He says:
Relative to 20 per cent tax on amateur hockey, this undoubtedly is going to cripple
IMr. Bence. 1
activities of the Saskatoon Arena Rink Company which you know is a community enterprise and is entirely backed by public subscription. We have a capital investment of over hundred fifty thousand and finding it difficult to make rink carry its overhead. Source of profit is that derived from hockey, and with this tax our receipts will undoubtedly be reduced. The other activities such as public skating et cetera are so small compared with receipts from hockey that if our hockey gates are impaired we will have to close the rink up, and if this restriction is on for a number of years your guess is as good as mine as to what would happen to the rink company.
If that rink has to close, it will stop all these other activities that have to do with skating and hockey in the city of Saskatoon, and I presume the same thing will happen in other parts' of the country. Hockey is undoubtedly one of our greatest national pastimes; and when we consider how it has built up the character and health of our young people until they are the fine type of Canadian that Canada is calling for to-day to fight our battles, I think we should consider the matter seriously before we impose a tax that will cripple these activities and hinder the development of that type of young Canadian.


Mr. TUSTIN:: I agree with what the hon.
member for Saskatoon City has said, and if the minister would reconsider this tax I feel sure that he would change his mind about imposing this tax on all forms of entertainment and sport. There is no reason why he should not be able to reduce this impossible tax. Within the last number of days I have received a number of communications, particularly from small theatres in country towns, and in almost every instance I am advised that the attendance since the 19th of May has decreased by approximately 50 per cent. I drew this to the attention of the minister immediately after he made his budget speech, and again a week or so ago, and I draw it to his attention again now to urge him to reconsider the matter and impose this tax on a sliding scale. I can see no reason why it could not be put on a sliding scale; there would be no inconvenience in the collection.
In my opinion, 20 per cent of the gross is an impossible tax. Has the minister ever calculated what that means in dollars and cents? A small theatre, taking in $400 a week, must pay to the federal government $80 a week, or over $4,000 a year, besides paying taxes to the municipality, to the province, and to the owners of copyright for the music used.
I do not know that much is to be gained by occupying more of the time of the committee, but I again urge as strongly as I can that the minister give further consideration to

Special War Revenue Act
this proposal before the bill is passed, and do something to relieve the plight in which many of the smaller sporting organizations and theatres will find themselves as a consequence of this tax. I do not believe there is any person in this country who is unwilling to be taxed, but it is impossible for a great many to carry on if 20 per cent of their gross receipts is absorbed in taxation. I wonder whether, upon further deliberation, the minister will not realize that he is going to kill the goose which lays the golden eggs.


Douglas Gooderham Ross: I wMi to say a few words on this matter, and at the same time request a little information. To my mind the tax is pretty severe, and I believe that the minister, if he insists upon it, will come up against the law of diminishing returns, and reap less from this high rate than if he had imposed a lower tax.
While I have been sitting here I have jotted down a few figures. Let us take the case of the Maple Leaf hockey club in Toronto. At the present rate of taxation, supposing there are thirty-two games a year and the average attendance is 10,000, the additional revenue will amount to $64,000. But if the minister reduced the rate of taxation by half and made it 10 per cent, he would get $32,000. By taxing all these amusements, more revenue will be obtained, but certainly some of the consequences will be unfortunate. I suppose that my constituency, located in the centre of the city of Toronto contains as many theatres as any riding in the dominion. I have received telegrams from a number of them, and they are apprehensive of a serious falling-off in attendance if the proposed rate of tax is adopted.
I notice that certain provisions are made for exemption. Let us say that a contest is staged by a club for the purposes of recreation, that no part of the returns inures to the benefit or profit of any person as proprietor or member thereof or shareholder therein or to the person or persons organizing, promoting, or managing such contest. I am reminded of the Argonaut rowing club. People hold shares in the club, and various sports are engaged in, but football is what they depend upon to pay their debts. As a matter of fact, just now they are in the red. On the other hand, there is no doubt that financial benefits inure to a limited number of people. I have in mind particularly the trainers. Then there are the holders of shares. I do not know whether there is any bond issue. I know that the rowing activities of the club are supported by the proceeds of the club's football. What will be the position of the club under these circumstances?
Or take the Toronto skating club. No member derives any personal profit from the skating operations, yet the club is a corporation which has issued a certain number of shares, and there are people, such as the professionals who train persons to skate, who obtain some benefit. The club puts on a carnival each year, part of the proceeds of which, I assume, go to pay off the bonds, and part is contributed to charity.


Alfred Henry Bence: Some has to go to the rink.


Douglas Gooderham Ross: A great deal goes to the rink. So-called amateur hockey to-day is amateur professional hockey, and under these circumstances the players benefit to a certain extent. But there is no manager receiving any benefit, and in many instances the citizens put up money to have these clubs carry on for the good of the sport. Under the clause as I read it, however, some sports are going to benefit.
While I am on my feet, let me say a word in respect of the legitimate theatre. Very few such theatres are now left in this country, and they have a hard enough time in carrying on, as they do, for the sake of art. Are they to be taxed or not? I do not suppose that they make any money.
A great many people are apprehensive about the effects of this measure. I have in mind the hockey situation in Toronto. It starts with the junior Midgets and goes right up the line to senior hockey. I do not know how many dozens of leagu'es have been organized. In some instances there are people, such as the men who train these boys, who derive benefit from the proceeds of the ''gate." But nobody else makes any profit. This tax will be a great detriment to organizations of this kind. I do not believe it should apply to them.
The minister should give us some idea of what will happen. Just what people will be taxed? After all, in his budget speech he said that he was going to increase the revenues of the country by $8,000,000. By cutting down the tax on theatres and, perhaps, levying a reasonable tax on such things as professional hockey, which will bring in quite a considerable amount, as well as such other things as it is proposed to tax in this bill, he will not be so far short of his $8,000,000.


Mr. BLACKMORE:: I should like to add my voice to those who are opposing this tax. I have spent a considerable number of years of my life-over thirty-in close connection with athletic work of all kinds, and I believe I can say, quite conservatively, that athletic sport is one of the most valuable things a
Special War Revenue Act

community can have. The development of the body, the mind and the spirit of the young people who participate in athletics- basketball, wrestling, boxing, hockey and so forth-is of such great importance that we can very well afford to deprive ourselves of a little revenue in order to encourage that form of culture.
The general morale of the people who enjoy athletic contests will be adversely affected if we do anything to discourage or to eliminate these activities. In the last war one of the reasons why our boys surpassed their opponents was that, through athletics, there had been developed in them an aggressive and a confident spirit. If this is to be a long war, we should be doing those things which tend to build up character and aggressiveness in our youth; but so far as I can see, this tax will have the opposite effect. It will make it impossible for athletic contests to be carried on.
I have spent a great deal of time in a basketball town, and I know that boys begin training when they are little fellows, around six or seven, and continue training all through the years in the hope of making the main team. If, however, the main team cannot play, that incentive is lost. It has always been a matter of great concern to me, as a community worker, to have boys placed in a good, wholesome environment so that they will not be loitering round dives and poolrooms. I am afraid the dive and the poolroom are the places they will go to if there is no means of directing their energies into the channels of athletics.
The athletic organization has to pay travelling expenses, heating, lighting; it has to buy uniforms and other equipment; the management are at their wits' ends to raise money for all these purposes. I know what it is. I am sure if there is any greater burden on high-school organizations, at least, they will go out of activity. That should not happen; but if it does, I am not sure that the minister will, in the end, have gained financially. The hon. member who spoke of killing the goose that laid the golden egg hit the nail on the head. The minister now gets a good deal of income from the sales tax on such equipment as uniforms, balls and so forth, which he is running the risk of losing.
I do not know what it will mean to this phase of our national life if the tax has the effect which I fear it will have. It may be said that it will not do much harm, but I believe there are many people engaged in such industries as the manufacture of base-
balls, basketballs and equipment of that sort who will not be able to find employment in any war activity; they will be out of work. I do not think it is wise to make the tax as high as it is. Except for a small tax on strictly professional sport, the minister would be well advised to take the taxes off all sorts of sports, such as wrestling, boxing, basketball, hockey and so forth. That is my earnest advice.


Richard Burpee Hanson: When the minister brought down the original tax on motion pictures I felt it was a gross discrimination, and I predicted in my own mind that the government would not carry through the policy they had adopted. Time has proved the correctness of that surmise. Motion pictures were undoubtedly singled out by the minister for taxation on the theory that this had become big business and that there was a field of taxation open to be exploited. The minister made a great mistake when he did not distinguish between big motion-picture business and little motion-picture business, and I am still of opinion that a flat rate of 20 per cent will work a great hardship to the industry, if you wish to call it that, in the smaller communities. This is the poor man's entertainment-I am not going to dwell on that aspect of it. There is no doubt that the great majority of the patrons of the motion-picture industry in the smaller towns, and even in some of the villages where they have pictures once or twice or three times a week, are people of the working class. How many times in the run of the year do I go to the motion pictures? I can scarcely recall how many times, and I am sure the minister does not go very often. In the first place, we have not the time, and perhaps our tastes do not lie in that direction.


James Lorimer Ilsley: I like them.


Richard Burpee Hanson: I like to go to the motion pictures occasionally, but I never look at the advertisements. Sometimes, when I am attracted by a particularly good picture, I go, but I never think of going when I am at home in the summer. This tax, therefore, makes no difference to me. I am not speaking from any personal point of view. But the smaller picture houses in a city like Fredericton, or in the smaller towns of New Brunswick, do draw a substantial clientele. The gross takings of the smaller houses are, however, relatively small; when you take into account municipal taxation, operating expenses, rental of films, which I suppose are obtained on a graduated basis-I do not know much about it, but

Ontario and Minnesota Power
I assume that more is paid for certain pictures than for others-royalties, corporation taxes, if they are incorporated companies, the net revenue is exceedingly small; and to impose a tax of 20 per cent without any discrimination between the larger and the smaller houses, between the greater and the lesser volume of business, is in my opinion a grave mistake. I do not think it will work out to put them on the same basis. It will not be equitable, and there will be no equality of sacrifice if that is the theory upon which this war taxation is to be based.
Progress reported.
At six o'clock the Speaker resumed the chair and the house took recess.
After Recess
The house resumed at eight o'clock. PRIVATE BILLS



ONTARIO AND MINNESOTA POWER COMPANY LIMITED

[Stage Direction]
The house in committee on Bill No. 26a, respecting The Ontario and Minnesota Power Company Limited.-Mr. McKinnon (Kenora-Rainy River)-Mr. Fournier (Hull) in the Chair.
On Section 1-1905, chapter 139 to apply to corporation.
Mr. CASTLEDEN:: It seems to me that this section contains the meat of the bill. It provides:
Chapter one hundred and thirty-nine of the statutes of 1905 shall extend to and its provisions shall apply to, and the rights, powers and privileges and obligations thereunder conferred or imposed on the said company shall inure to the benefit of and be binding upon the corporation formed by the amalgamation of the said company with Kenora Paper Mills, Limited, the Fort Frances Pulp and Paper Company, Limited, the Keewatin Lumber Company, Limited, and the Keewatin Power Company, Limited, and the successors and assigns of such corporation.
In chapter 139 of the statutes of 1905 this company was given power to construct, develop, acquire, own, use and operate the water power which then or thereafter existed on the Rainy river at or near the town of Fort Frances, and also full rights in regard to the development of the water power in that district. Other sections of that act provided for the use of the water power, and that all electrical development which took place at that point had to be developed equally on both sides of the river. Then it was provided that in the event of any dispute as to the price of power or electrical energy in use or to be provided on the Canadian side of the international boundary, or the conditions upon which the same should be furnished, such dispute should be settled by the board of railway commissioners, notwithstanding anything to the contrary in the Railway Act. Then there were certain regulations with regard to the diversion of any of this power for use in the United States.
So far as I can understand the position, all these privileges were given to a company in 1905, and in tracing the history of that company I find that apparently it was closely linked up with another company known as the Minnesota and Ontario Paper company. The company dealt with under this bill is the Ontario and Minnesota Power company. I should like to know the relationship between these two companies; whether they are linked in any way, and what has happened with reference to the rights of the shareholders.


John Ritchie MacNicol: That was all brought out the other day. They all belong to the one company.


George Hugh Castleden: What happened to the shareholders of the original company? Can the sponsor of the bill give us that information?


Mr. McKINNON (Kenora-Rainy River):: This was all gone into in the committee the other day, and I thought all these questions were satisfactorily answered. It is, however, only because the Ontario companies act possibly does not affect rights granted by the dominion statute of 1905 that this application to parliament is necessary. As I understand it, this bill does not confer on this company any more rights than were conferred on the previous companies. All these companies heretofore were controlled and operated by the parent company, the Minnesota and Ontario Paper company. That is a Minnesota corporation which was formed after the reorganization of the main corporation of the same name, which went into receivership in 1931. The reorganization was carried out under the bankruptcy laws of the United States of America and, after receiving the approval of the interested groups of security holders of the predecessor United States corporation, and after submission to the securities and exchange commission at Washington, was confirmed by the federal courts of the United States.
The new United States corporation has outstanding, 112,200,000 of bonds and 1,344,544 shares of common stock. These bonds and shares were issued to secure the successor

Ontario and Minnesota Power

creditors of the predecessor corporation and its subsidiaries, it being estimated that such creditors number about 12,000. The bonds and shares of the new United States corporation are accordingly widely held, and the new United States corporation is not controlled by any individual corporation or group. The new United States corporation and the new Canadian company are not affiliated with any outside paper or power interests, and they certainly do not possess any monopoly position in the pulp and paper industry.


George Hugh Castleden: Was it the Ontario and Minnesota Power company, which obtained these rights in 1905, that went into bankruptcy in 1931?


Hugh Bathgate McKinnon: That was the company.


George Hugh Castleden: Why did it go into bankruptcy in the United States courts?


Hugh Bathgate McKinnon: That was where the parent company was. It was in Minneapolis.


George Hugh Castleden: What happened? As I understand it, the shareholders lost everything in that case. What happened to the shareholders in that company?


Hugh Bathgate McKinnon: There was a substantial Canadian investment in the predecessor United States corporation, it being estimated that 40 per cent to 50 per cent of the bonds of the predecessor corporation were owned by residents of Canada.


George Hugh Castleden: The bonds?


Hugh Bathgate McKinnon: Yes. It is at present estimated that about 40 per cent of the bonds and 40 per cent of the shares of the new United States corporation are held in Canada, these securities being largely held by individuals and insurance companies. The new United States corporation has a board of nine directors, the composition of which has been approved and eomfirmed by the federal courts of the United States. At the present time two of those directors are Canadians. The plan of reorganization of the predecessor United States corporation recommended that the five Canadian subsidiary companies mentioned be amalgamated. As indicated, this amalgamation has been effected, and the new Canadian company is a wholly owned subsidiary of the new United States corporation. The amalgamation has resulted in a much simpler financial structure for the Canadian undertaking.
The new Canadian company has outstanding 50,000 shares of a par value of $100 each and, subject to the passing of this measure, thereby
[Mr McKinnon.]
completing amalgamation, will have outstanding bonds in the reduced amount of $12,200,000. All the bonds and all shares, except the directors' qualifying shares, of the new Canadian company are held by the new United States corporation. The amalgamation also is expected to produce increased operating efficiency in the Canadian undertaking. The amalgamation has not the effect of decreasing production or closing down plants. The undertaking in Canada is being conducted on exactly the same scale as previously, but by one company instead of by five companies.


George Hugh Castleden: What is the name of the new United States company which has been formed?


Richard Burpee Hanson: The Minnesota and Ontario Paper company.


Hugh Bathgate McKinnon: I believe the new United States company holds the same name as the previous company.


George Hugh Castleden: The hon. member has not yet answered my question. What happened to the equity which the original shareholders held in the Canadian company which was granted these rights in 1905? I understand, from what the hon. member has said, that the bondholders received about 50 cents on the dollar in the formation of the new company, what happened to the shareholders?


Hugh Bathgate McKinnon: The shareholders lost out. But none of the shares of the Canadian company were sold to the public.


George Hugh Castleden: None of the shares?


Hugh Bathgate McKinnon: No.


George Hugh Castleden: Are the directors and the officers of the new company the same in any respect as they were in the old company? A Mr. R. H. M. Robinson of New York has been mentioned.


Hugh Bathgate McKinnon: Yes.


George Hugh Castleden: He was a trustee of the old company, was he not?


Hugh Bathgate McKinnon: Yes.


George Hugh Castleden: What is his status in the new company?


Hugh Bathgate McKinnon: Mr. Robinson is president of the new company.


George Hugh Castleden: From the Financial Post's review of corporate securities I find that the same companies mentioned here are

Ontario and Minnesota Power
also wholly owned subsidiaries of the Minnesota and Ontario Paper company, which became defunct in 1931. It seems to me that there is every sign that there has been a bankruptcy action here which has squeezed out many of the original shareholders. Then a reorganization has been effected under a new set-up. It seems to me that the rights and privileges of the original shareholders should still be taken care of in the new company. It has just reorganized. Now this company comes back, and it has the same rights, privileges and power, and almost a free gift from this country for the operation of the power on that river.


Hugh Bathgate McKinnon: Mr. Chairman, I should not like to express an opinion on what the United States courts have done. Apparently the arrangement arrived at was quite satisfactory to those courts. None of the stock has been sold to Canadian people. I think we might very nicely accept their decision as the appropriate one in the circumstances.


George Hugh Castleden: Does the company intend to pay anything to the Canadian government for the water-power rights on this river granted by the bill before the committee?


Hugh Bathgate McKinnon: I should imagine that they will most certainly carry on under the original agreement, because this legislation does not confer upon the new company any more rights and privileges than were enjoyed individually or collectively by the old company.


George Hugh Castleden: I understand that. But they have not paid anything for this water power which they have taken from the river.


Richard Burpee Hanson: The hon. member did not say that.


Hugh Bathgate McKinnon: Surely they have.


George Hugh Castleden: What is the power developed there?


Hugh Bathgate McKinnon: Approximately 30,000 horse-power.


Clarence Gillis: I should like to ask the sponsor of the bill one or two questions. I am concerned with the ramifications of the bill only from one or two angles. It is proposed under this merger that the Ontario and Minnesota Power company shall absorb four or five other companies. The reasons given are that it is more economical to have one administration take care of the whole organization, instead of having five do so. I 14873-2111
am concerned about the lives of the people employed in the companies which are being taken over.
We have had a great deal of experience in Canada with mergers of this kind. We know that smaller companies may be operating in small communities. Certain wage rates apply. Local management is in control. When the merger goes through, power is vested in the parent company, and local management no longer has jurisdiction. Wage rates are subject to fixation by the parent company. Concentration of production automatically follows. Certain smaller companies must fold up-we hear that that is good economics. As a result, we find that sometimes whole communities are wiped out.
This has happened, and it can be repeated in a set-up similar to this one. I should like assurance from the sponsor of the bill that the wage rates in effect in smaller companies will remain, that local management will continue to have the same jurisdiction, and that under this set-up there is no danger of forming a monopoly which would concentrate production in one company and wipe out communities which had been engaged in similar operations.


Hugh Bathgate McKinnon: The two towns directly affected by the bill are Fort Frances and Kenora. The mayors of both of these towns have telegraphed me approving this procedure. The province of Ontario has also agreed that it is a proper thing to do. The wage rates in the paper mills operating in these two towns are, I believe, the highest in Canada. There is not a chance in the world, so far as it is possible to see, for anything the hon. member has visualized taking place. The management makes its agreements with the various mills, and it has done so right along. I know of no reason why it should change. So far as I can see, or so far as anybody else can see at the present time, there is no possible chance of any of these communities being adversely affected by what is about to take place.


George Hugh Castleden: I am opposed to the granting of what I consider to be the natural resources of the country, and handing them over without fee or payment to a company to develop, to be sold back to the people for whatever they can get. In my opinion, the natural resources of a country are the birthright of the people, I do not care whether they are mines, water power, forests, asbestos deposits, the Alberta oil fields or lumber. All these natural resources belong to the people, and when they are handed over to a company in this way the people get practically nothing
3332	COMMONS
British Columbia Telephone Company
in return. Therefore I must voice my opposition. This sort of thing results in the common man having nothing which he can call his own. The oil of Alberta has been developed almost exclusively by the large oil companies; the lumber of British Columbia is controlled by a great combine, and the same applies to many other natural resources. Water power is even better than a gold mine because it is inexhaustible. The company get complete control of this water power; they may develop it and sell it for whatever they can get. The people of Canada should be getting a subsidy of some kind from all these companies. We should follow the example of Sweden, which is gradually becoming a 51 per cent shareholder in all its natural resources. Any profits obtained go back into the coffers of the nation to reduce taxation and raise the standard of living. I am opposed to this bill.


[Stage Direction]
Section agreed to.
Section 2 agreed to.
Bill reported, read the third time, and passed.

[Stage Direction]
The house in committee on Bill No. 27, respecting British Columbia Telephone Company-Mr. McGeer-Mr. Fournier (Hull) in the Chair.
Sections 1 to 4 inclusive agreed to.
On section 5-Wireless services.
George Hugh Castleden: I notice that one objectionable feature has been removed from this section, namely, that empowering the company to engage in the transmission of any-fhing which may be invented in the future, but I still object to that part of the section which empowers the company to provide service facilities for the transmission of sound, pictures, writing or signals. That is going too far into the realm of the future, and granting these rights may seriously interfere with the powers of a central or national broadcasting corporation. It would be well to delete that portion which has to do with the transmission of messages or pictures which are not at present transmitted.


Mr. CRUICKSHANK:: May I inform the hon. member that this is just legalizing what they are doing now. We could not operate the Canadian Broadcasting Corporation to-day or any day, if it were not for the use of these wires.


George Hugh Castleden: Are they transmitting pictures to-day?
IMr. Castleden.]


George Alexander Cruickshank: So far, in British Columbia there has been no demand for live pictures, but they are transmitting the other things, and this is merely to legalize what they are doing.


[Stage Direction]
Section agreed to.
On the preamble:
Mr. NEILL:: I should like to mention so that it will be on record, that an undertaking has been given-it is not printed in the bill-that none of this SI ,000,000 issue shall be put on the market before the 1st of September, so as not to interfere with the issue of the government's war loan.


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

[Stage Direction]
Bill No. 18, to incorporate General Security Insurance Company of Canada.-Mr. Fournier.
Bill No. 28, to incorporate the Ukrainian Catholic Missions of the Most Holy Redeemer.-Mr. Fleming.
Bill No. 29, respecting the Wawanesa Mutual Insurance Company.-Mr. Weir.

[Stage Direction]
Bill No. 62, respecting Consolidated Fire and Casualty Insurance Company.-Mr. Mellraith.
Bill No. 63, to incorporate the Roman Catholic Episcopal Corporation of James Bay. -Mr. Chevrier.
Bill No. 65, respecting United Grain Growers Limited.-Mr. Thorson.
Bill No. 66, for the relief of Vivienne Rhodes Whitaker Storey.

Mr. Emmerson.
Bill No. 67, for the relief of Dora Lemisch Boyer.-Mr. Bercovitch.
Bill No. 68, for the relief of Muriel Mary Murphy Carvey.-Mr. Bercovitch.
Bill No. 69, for the relief of Eileen Henrietta Seville Orchin.-Mr. Bercovitch.
Bill No. 70, for the relief of Edythe Gertrude Dover Schawl.-Mr. Bercovitch.
Bill No. 71, for the relief of Agnes Mary Johnson Messett.-Mr. Bercovitch.
Bill No. 72, for the relief of Manson Wilton Roach.-Mr. Bercovitch.
Bill No. 73, for the relief of Gertrud Kohn Storper.-Mr. Mellraith.
Bill No. 74, for the relief of Frederick William James Hobbs.-Mr. Bercovitch.
Bill No. 80, for the relief of Elizabeth (Elspeth) Brown Rattray Selkirk Morphy.- Mr. Bercovitch.
Bill No. 81, for the relief of Stanley Jackson. -Mr. Whitman.

Special War Revenue Act
Bill No. 82, for the relief of Vera Black Slatkin.-Mr. Bercovitch.
Bill No. 83, for the relief of Stella Cohen Baboushkin.-Mr. Bercovitch.
Bill No. 84, for the relief of Kate Abramo-vitch Reinblatt.-Mr. Bercovitch.
Bill No. 85, for the relief of Dora Catherine Sullivan Evans.-Mr. Bercovitch.
Bill No. 86, for the relief of Ilona Klein, otherwise known as Eleanor Klein.-Mr. Boucher.
Bill No. 89, for the relief of Ann Elsie Buckley.-Mr. Bercovitch.
Bill No. 90, for the relief of Leonard Moore. -Mr. Bercovitch.

[Stage Direction]
The house resumed consideration in committee of Bill No. 88, to amend the Special War Revenue Act-Mr. Ilsley-Mr. Fournier (Hull) in the chair.
On section 13-Interpretation.
Richard Burpee Hanson: When we took recess at the dinner hour I was making some observations with respect to the tax on amusements. I think I had proceeded to the point where I had endeavoured to convince the minister that a tax of 20 per cent on the gross takings of the small picture houses would constitute a very onerous burden indeed and, having regard to the other imposts on such small enterprises, would, in my view, perhaps drive them out of business. I am convinced of the truth of the observations which I have made. I do not think I should labour the point any further.
When the announcement was made in the budget speech that this form of amusement or entertainment was singled out for taxation, even as a war measure, it produced a strong protest in the country, not only from the proprietors and those immediately interested, but from the patrons of the business as well. The minister was well advised to change the base of the tax, although it is not usual for a Minister of Finance to do so. In peace time the proprietors of this class of business would have protested vigorously against the tax; but because we are at war and the money is needed, they have decided, as good citizens of Canada, to acquiesce in the principle of the tax provided that other commercial amusements are treated in the same way; and I believe the minister did well to adopt that point of view.
That, of course, opens up a very large field. I assume that the minister has received a number of protests with respect to commercialized sport-if I may properly use that term. If motion pictures are to be taxed, so should commercialized sport also. I see no
reason why amusements such as professional hockey and professional baseball should be exempted if the common people of this country are to be taxed on such amusements as motion, pictures. When I visualize one of my friends and fellow citizens travelling from Fredericton to Toronto to see a hockey match at the Maple Leaf gardens, I conclude that it must be a great spectacle and that the patrons of that form of amusement can well pay a tax, especially if, as I understand is the situation, the proprietors have the option of absorbing the tax or of passing it on to their patrons.
There is, however, a clear line of demarcation between commercialized sport and amateur sport as such; and unless the minister is of opinion that the exempt'ons contained in section 122, subsection 2 are sufficiently wide to cover the cases I 'have in mind, I believe that this tax is not well imposed. I believe that the draftsmen of this section had in mind what I also have in mind, that ordinary amateur athletic contests, when not operated for the benefit by way of personal gain of any private person or proprietor, should' not be taxed; and I am wondering whether the reservation contained in the subsection on page 9 of the bill is sufficiently wide to cover everything I had in mind.
The most pronouncedly amateur contest in the world cannot be run without money. In ordinary times, at all events in small communities, one will always find public-spirited men who put their hands in their pockets to support contests of this kind. But this is war time, and people's generous impulses to give money are diverted to the support of war-time activities, as, of course, it is proper they should be. While this is in a degree a war measure, we have no undertaking from the minister that this tax will not continue for ever. If it proves very profitable it will probably remain for, at least, a considerable time. I am not going to suggest or propose an amendment; but I hope that, in the administration of the measure, under the discretionary powers conferred upon the minister, the commissioner or whoever exercises these powers will look with great favour on anything which will help to conserve amateur athletics and all that is implied in that term.
One of the reasons why England has not been decadent in this war, as some predicted she would be, is that the Englishman still plays games, and while he is, of course, a follower of professional sport, the amateur instinct is well to the fore. Waterloo, it is said, was won on the playing fields of Eton. Well, this war may be won as the result of the athletic activities of the people of
Special War Revenue Act

England. I trust that the minister and those who are charged with the responsibility of administering this measure will exercise with great leniency their discretion in connection with amateur sports such as those to which I have referred. There may be occasions where money must be paid from the proceeds of these amateur fixtures to, we shall say, someone who owns the athletic field or the rink. This point was touched upon by the hon. member for Saskatoon City. My view is that the minister in exercising his discretion, ought to take into account such conditions as were stated here by that hon. member. You cannot have these facilities unless somebody provides them, and not many municipalities as such will provide expensive places for amateur sport. This is usually done by athletic associations, such as the one with which the minister is no doubt familiar, the Halifax Wanderers' grounds. The Wanderers Athletic association has been in existence for more than half a century. Some communities do not have these facilities, and I would ask on behalf of the youth of the country, that no tax be imposed on enterprises which are primarily amateur and for the benefit of the rising Canadian generation.


Mr. ROSS (Souris):: I concur in all that was said this afternoon by the hon. member for Saskatoon City, not only with regard to amateur hockey but with regard to amateur sports of all kinds. As the previous speaker pointed out, the well-being and health of the nation depend upon the development that comes from such sports, and therefore amateur sports should be fostered and developed among the younger people. I trust the minister will be able to exempt such sports. I do not see any particular harm in taxing professional sport. It is a commercial enterprise with many people, and they should make their contribution at this time. But it is most essential to the future welfare of the nation that we should at some cost develop amateur sport in Canada.
Let me also mention the moving pictures. As I have already pointed out, in Manitoba it will cost the people, in the majority of cases, an added 40 per cent on the admission fee, if we take the provincial tax into account. These people have not benefited by war industries and I submit that they should be given some consideration, even if they were taxed ten per cent. I do not see why horse racing, which is not essential at this time, should pay a tax of only 5 per cent, while these other people are asked to pay 20 per cent. It must also be remembered that sports of all kinds are essential not only from
CMr. R. B. Hanson.]
a recreational but from an educational point of view. I hope the minister will consider these two points.


Clarence Gillis: Like others who have spoken, I have received telegrams from theatre owners protesting against the amusement tax. They pointed out, however, that they were not averse to the tax provided other forms oi amusement were treated similarly. In taxing everything in the way of amusement, I think the minister has offset the contention of the theatre managers.
I look at these taxes in this way. Money must be raised if we are to go through with the job in which we are engaged, of prosecuting the war; and when we compare any of these taxes with the income tax imposed on low-income groups, those receiving as little as S660 a year, and the national defence tax-and remember that the sports are purely voluntary, things that we can do without-I suggest that this is the wrong time to quibble about such matters if we are serious in our prosecution of the war and in our effort to make some sacrifices. That is how I look at the amusement tax. I know it will hit the low income groups, the theatre tax particularly. It will hit them hard. But it will not hit them nearly so hard as if the people on the other side of the water who are trying to impose upon us their way of life succeeded. As I said a few nights, ago, the minister finds himself in the position of having to conform to certain rules with regard to the raising of money, and this is the way the rules compel him to raise this money.
What I am more concerned about is the point raised by the hon. member for Saskatoon City, not as regards the promotion of amateur sport alone, because in my opinion this is the wrong time to talk about these things; there are other matters that are more serious. The hon. member, however, did point out that in certain communities-and this applies across the country-people have organized community projects such as rinks. In my own section there are two large rinks which were erected a couple of years ago. For one of these the necessary funds were raised among the miners. They subscribed ten dollars a share, and there is no profit in it for them; they expect nothing. They sponsored the project in order to have a community enterprise whereby people could be gathered together and they could promote sports of all kinds, build up the younger generation and keep them off the road. That was the main object. As regards the promotion of amateur sports, I am not so sure that it is altogether amateur, but they do run hockey games and

Special War Revenue Act
so forth, and they depend upon the income from that source to liquidate the cost of buildings. No one expects any return from the undertaking. The proviso on page 9 of the bill reads:
Provided that the minister may, in his discretion, exempt any person from payment of the tax where the sole or chief purpose of the performance ... is in his opinion charitable.
The minister in that proviso has certain discretionary powers, and after the bill is passed, the matter mentioned by the hon. member for Saskatoon City-these community rinks that are absolutely community undertakings from which there are no profits to shareholders- can be dealt with as the minister sees fit. He has the power to exempt these people from taxation.


James Lorimer Ilsley: The proviso pretty well
speaks for itself. Something will depend upon administration, but perhaps I should say it is the intention that a fairly liberal interpretation shall be given exemptions. There are two parts to the exemption section. One is the part that does hot depend upon the discretion of the minister but exempts outright certain amusements, and the second part is that which authorizes the minister in his discretion to exempt others.


Douglas Gooderham Ross: Only charitable ones.


James Lorimer Ilsley: If in his discretion the performance, exhibition or contest is charitable rather than one of gain or profit to the person or persons organizing, promoting managing or sponsoring the same. "Charitable" has a rather wide meaning in English law, and there is considerable discretion in the minister.


Douglas Gooderham Ross: The minister's discretion under this section really extends only to the interpretation of the word "charitable". Like the hon. member for Davenport, I am having volume 1 of my telegrams bound, and I started on volume 2 this afternoon, although of course we cannot pay attention to all of them.
I am not entirely in agreement with the suggestion that consideration should be given only to amateur sport. Look at the history of the Maple Leaf gardens, the Maple Leaf hockey team and the Maple Leaf baseball team. When the new Maple Leaf garden was to be constructed I was one of those asked to subscribe to the stock of the company. It was not suggested that I should do so in order to make a profit; the idea was that I should help in this effort which it was thought would be beneficial to sport throughout the country. All the prominent men who have stock in that company are now to be left holding the bag. They have never made any
money out of the business; they have been motivated more by the idea of helping sport than by the idea of making money. It would be silly to put money into a proposition like that on any other basis.
There is one other point to be mentioned in connection with the Maple Leaf hockey team, and I imagine the same thing applies to the Montreal team. These are the people who are supporting amateur hockey to a very large extent. If it were not for these professional teams we would not have the class of amateur hockey that we see all over the country. I quite agree with the minister that we must get the money somehow; but as I suggested before the dinner recess, if we impose a tax as high as 20 per cent we are going to run into the law of diminishing returns. On the other hand, in a city like Toronto, if these concerns make more money, the government will be able to take more money from them under the excess profits tax. I do not think a tax of 10 per cent would make very much difference so far as professional hockey is concerned, but 20 per cent is altogether too much. We certainly should not take a chance on putting out of business the Maple Leaf hockey team or the Canadiens of Montreal, and I will tell the committee why. Teams like these are perhaps the best good-will ambassadors we have. They go to the United States and mix with the people there; there is keen rivalry between Canadian and United States teams, and that does a great deal to keep the two countries together. In addition, a great many people come here from the United States to see our hockey games, which brings more foreign exchange into the country, and it must be remembered that these two professional teams have developed many of the players on the other teams in the league. Therefore, I believe that a 20 per cent tax on all tickets will be so severe that it may defeat the very purpose the government has in mind, and it may interfere definitely with the game itself.
I do not think we wish to interfere with amateur sport, but before we discuss this at greater length I think the Minister of National Revenue should tell us just what this may mean as it will affect these various clubs. Just who will be taxed and who will not be taxed? What are the ramifications of the whole thing? Subsection 2 does not tell us very much, and I think it should be clarified. It has been said that there should be some difference between the tax on admissions to large theatres, and that on admissions to small theatres. As I pointed out before the dinner recess, already there has been a falling off in the attendance at the large theatres in my own riding. Therefore I suggest that if
Special War Revenue Act

the tax were reduced to perhaps 10 per cent the government would benefit in two ways. In the first place they would collect more under the excess profits tax, and in the second place the theatres would be filled and the revenue under this tax would not suffer. Do not empty the theatres; fill them up. Let the theatres make their profits; impose a reasonable tax on each admission, and then apply the excess profits tax to the theatres. To me that seems the logical thing to do.


Joseph Henry Harris: Perhaps, when the minister is replying to the hon. member for St. Paul's, he will give a specific reply to the telegram I had a page take to him across the floor some two or three days ago.
While I am on my feet I should like to suggest that in many instances a tax of 20 per cent on the gross is liable to close up the industry almost entirely. No doubt the minister has given thought to the possibility of taxing the net, and perhaps he might say a word about that. Then I would direct his attention to the fact that this tax may work a hardship as between different classes of amusements. In the case of a theatrical performance the costs are far greater than in the case of a hockey match, let us say. From that I draw the conclusion that in the one case the net return in relation to the gross would not be in anything like the same proportion as in the other. The general idea is that we want to get some of the revenue which the owners and producers of these amusements are receiving, but in doing so we must not discriminate against that amusement which finds that its net is in nothing like the same proportion to its gross as is the situation with another enterprise.
I hope I have made my point clear to the minister. To follow that thought a little further, this will work a hardship on many people and will probably put some of them out of business. As the hon. member for Prince Edward-Lennox said this afternoon, the government may kill the goose that laid the golden egg. I am satisfied that these organizations would feel disposed to operate their amusements and turn over 100 per cent of their profits for the duration of the war, rather than lose the investments that they have at the present time, through finding it necessary to shut down. I have in mind the small community in which a moving-picture theatre is operated. It may be that theatre finds that it is just able to balance its budget, and perhaps give the proprietor a fair living. He takes his gross of $400 a week, and finds that he is subject to a tax of $80. He adds that tax to the cost of the ticket, and finds that his returns are diminishing. I believe it 
has been found in Campbellford that since this tax was instituted the numbers of those attending moving-picture theatres have dropped by one-half. I am sure there are many places where the theatres will have to close up.
If there were some way of taxing the entire profits of not only the moving-picture theatres but also of skating-rinks and other enterprises of that kind for the duration of the war, I believe it would be found that the people operating those enterprises would be sporting enough and interested enough in our cause to give over all their profits, if they were permitted to operate in a way which would permit them to balance their budgets. I should like to see some discretionary power in this measure whereby the minister could permit a skating-rink, an athletic field or a theatre in a small community to carry on, they in turn agreeing to turn over their profits for the duration of the war. In that way the industry would be kept alive; pur people would be following their usual pursuits and resuming their usual small measure of amusement and small measure of athletic interest to which they have been accustomed in the past.
We must have money. I admit at once it would be very difficult to administer a taxation system on net income. I quite appreciate it is very simple when it is done on the gross. It will, however, work hardship in certain places, and the minister should have even more discretionary powers and, as the hon. member for Rosedale has said, take a charitable view of charitable enterprises, and a charitable reading of the measure when he comes to a decision as to what is or is not a charitable organization.


Harry Rutherford Jackman: I find that subsection 2 contains these words:
... no part of the revenue of which inures to the benefit or private gain of any person as proprietor or member thereof or shareholder therein-
And so forth. There are many organizations which I believe would qualify under the first part of subsection 2, but because of the nature of their corporate organizations, and because of the legal form they take, they would not qualify under the latter part of the subsection.
I have in mind the ordinary club which has no hope of making a profit for its members. Nevertheless, in order to qualify, the members may have to buy a share, and thereby they become shareholders. Therefore I should like to know if, because of the nature of that holding, and the legal possibility of a profit-

Special War Revenue Act
of course actually no such thing is contemplated-such a club is excluded from subsection 2, and must rely on the following proviso under which the minister must give consent.


Colin William George Gibson: It is difficult to give a ruling without having a specific case in mind. I may, however, assure the hon. member that a sympathetic view will be taken of cases such as that. We are not endeavouring to enforce taxation against organizations, societies and clubs which are obviously carrying on for the purposes set out in this section.


Harry Rutherford Jackman: Possibly I might give a concrete example. The Toronto skating club and the Minto skating club hold carnivals annually. They pay out substantial sums for star performers, but the majority of the talent is contributed voluntarily. I would assume that such organizations would not be taxable.


Colin William George Gibson: I would not tie myself down to a ruling offhand, without having all the particulars before me. I could not possibly do that.


Harry Rutherford Jackman: I tried to place the particulars before the minister, without going into great detail. Certainly, as the minister knows, no one would make a profit out of the operations of those clubs.
Another example would be that of the Argonaut rowing club. During the football season a football team operates under the name of that club, and admission prices are charged. The profits from the football games go to pay expenses for the rowing season. That sport is, I believe, fairly expensive, and not self-supporting. I take it that the members of the club are all shareholders, but I have never heard of a dividend being paid. I believe those are the cogent facts of the case, and I suggest that the minister should be able to let us know whether or not this section would cover a case like that. If not, must permission always be obtained from the minister before a game is held, or before people aTe permitted to enter without paying a tax? In respect of the Argonaut club one could hardly say that it is operated for charity, because it is operated for the benefit of the members of the club, and for the general advancement of amateur sports.


Colin William George Gibson: Almost every sporting organization in Toronto has been mentioned. We have heard mention of the Maple Leaf hockey team, the Toronto skating club, the Toronto baseball club, the Argonaut football club, and so on. I could not possibly give a decision offhand on the floor of the house as to whether they will be taxable or exempt, without inquiring into the set-up of each of those
organizations, and without finding out whether they comply with the provisions of the legislation. If they do, they will be exempt.


Harry Rutherford Jackman: Perhaps the minister will revert to the original position that it may have been unwise to have included them under the tax. That brings me to a further point. I have no doubt that when the moving-picture industry pointed out that it was being singled out for a 20 per cent tax, while the other forms of entertainment were being left scot-free, there was the hope in their minds that the heavy imposition of a 20 per cent tax would be reduced to something more reasonable. Certainly, while misery does love company, I do not think that was the attitude of the moving-picture industry.
Perhaps I might impress upon the minister the fact that we have heard in the committee to-day, and particularly from the hon. member for Prince Edward-Lennox, that certain moving-picture houses in small towns have been finding that their patronage has been reduced to half. I might point out that while in the larger cities the incomes of people generally, and particularly the working class, have increased, as a result of war expenditures, and while they can absorb the 20 per cent tax, nevertheless the tax is a substantial one. The other night I went to the Capitol theatre here in Ottawa, and on two 40-cent tickets I paid sixteen cents. That is a heavy tax. I believe the minister will bear with me that in the ordinary course of business, had it been possible to advance the prices of moving-picture tickets to the extent of 20 per cent, and get away with it, without losing patronage, the proprietors would probably have done so long ago, before the tax came into force.
I think the minister must realize that he cannot boost by 20 per cent the prices of an industry like the moving-picture industry, and think it will just go on in the same way. Certainly businessmen and farmers, if I have heard correctly in this chamber, want to obtain as high prices as the traffic will bear for their products. The same applies to the proprietors of the small moving-picture theatres. They have been charging about as much as the traffic will bear. If a 20 per cent tax is imposed, it will then be found that there is a good deal in what has been said this afternoon and evening about the patronage dropping off. In that event, as the hon. member for Dan-forth stated a moment ago, you kill the goose that lays the golden eggs and create a certain amount of distress among those who operate theatres, particularly in the smaller communities. The minister did not expect to levy a tax upon amusements other than motion

Special War Revenue Act
pictures. Now that he has included these other amusements, his budget is thrown out of gear, although on the right side, and perhaps he will consider reducing this tax. If at the end of the year it is found that the people are accustomed to paying it; if the increase in the national income has made everybody a little more prosperous, then the tax could be increased to 20 per cent. Any business which must raise the price of its product 20 per cent at one fell swoop is likely to face a disastrous condition.


Douglas Gooderham Ross: The only discretion the minister has is in deciding whether an amusement is being held for charitable purposes. Take the case of a boy who belongs to an amateur hockey league; under the rules he may be paid. But when the club plays a game and a gate is being collected, of necessity that club must pay this tax.


James Lorimer Ilsley: Does the hon. member want every hockey organization that charges an admission exempted? Hon. gentlemen have been talking about exempting this and that sport. I think it was only a week ago when the unanimous sentiment of hon. members on the other side was to tax all other amusements.


Richard Burpee Hanson: Commercial amusements.


James Lorimer Ilsley: The hon. member for
Waterloo South (Mr. Homuth) referred to the fact that motion pictures were the poor man's amusement; that we should tax these large hockey games which attracted the big attendances. Hon. members were deluged with telegrams urging that while no exception was taken to the tax, pressure should be exerted to have the tax extended to other forms of amusement.


Mr. HANSON (York-Sunbuiy):: Commercial amusements, for gain.


James Lorimer Ilsley: I have the telegrams here;
it was "other forms of amusement." If the views expressed by the hon. member for St. Paul's are accepted, as well as those expressed by other hon. members, there would be hardly any tax imposed. I have been listening for some hint as to what sport it would be proper to tax.


Richard Burpee Hanson: Commercial amusements.


Douglas Gooderham Ross: I do not object
to the taxing of professional hockey. I stated that it would cut down the attendance, and I was trying to show the minister the advisability of keeping up the attendance by lowering the tax and obtaining the revenue by way of the excess profits tax. I was pointing

out that if one boy on the team was paid anything, I suppose even if he were given an outfit, it would be necessary to tax the gate. Then there is the legitimate theatre which should receive some consideration. I think there is only one theatre of this kind in Toronto and they are having a hard time. In my opinion they should be exempted. Then there is the Hart House in Toronto, the Little Theatre here in Ottawa and one theatre in Montreal. Those are about all the legitimate theatres in the country. I know the problem is difficult, but I am objecting to the minister having discretion only with respect to charitable organizations. The section has not been made clear enough. If the minister can be given discretion in these matters, I would be ready to accept his decision. I am peculiar that way.


James Lorimer Ilsley: A draft bill was submitted to me which gave the minister unlimited powers of exemption, and I would not sponsor it. I knew what I would get from the opposition if I brought in a bill giving the minister unlimited powers of exemption.


Alfred Henry Bence: The minister said it could be given a wide interpretation.


James Lorimer Ilsley: I did not say that.


Alfred Henry Bence: Would he go as far as to say that it would include the promotion of amateur athletics?


James Lorimer Ilsley: I am not going to attempt to distinguish as between amateur and professional, because I am advised that there is no possibility of arriving at a line of demarcation. The hon. member for St. Paul's has been talking about paid amateurs and distinguishing them from professionals.


George Hugh Castleden: Is the purpose of this bill to raise money or to prevent people from spending money upon what might be regarded as luxuries?


James Lorimer Ilsley: I would say that the first object is to raise money. But there is a secondary object. If the money is not spent for this purpose it will prove advantageous in that it will not encourage people to build theatres. Something over sixty applications have been made for permits to build new moving-picture theatres. Plans were being completed to build a chain of theatres across Canada. I thought it would be most undesirable for this country to go on a theatrebuilding spree at the very crux of a most serious war. For that reason, among others, power was taken to prevent the building of these theatres. This throws the rapidly increasing theatre business into the hands of

Special War Revenue Act
the existing theatres. These theatres sent in many telegrams protesting against permission being given to build new theatres.
I think it is commonly known to many of us that theatres in a great many parts of Canada are being crowded. Last Saturday I passed one theatre in the afternoon and another one in the evening, and in both instances a long queue of people were standing on the sidewalk waiting to buy tickets. They were all paying the tax. I do not know about the afternoon admission price, but in the case of the evening admission price they were paying a five cent tax; the price was thirty cents instead of twenty-five cents. I thought it was quite a proper tax to impose under those conditions. It places some brake on the expansion of the theatre industry; there is no doubt about that, although I would hope it would not be a serious brake. It is a heavy tax and one which, in some instances, will be harsh perhaps in its effects, but this is not the only case in which our taxation measures and our other measures have been harsh. I think of some of the things which have been done under the War Exchange Conservation Act, a measure which received wide commendation from the public and still does. But many importers, if not put completely out of business, have been very nearly put out of business. We cannot run the country having in mind only the prosperity and material well-being of everybody in the country. That is not the first consideration. It is away down in the list of considerations. Therefore this heavy tax was imposed.


Harry Rutherford Jackman: But the fewer you hurt, the better. The object is not to put 'businesses out of commission because the war is on. You should not allow a business to go out of business, if it is not detracting from the war effort, if you can possibly save it. The minister must not take such a sadistic attitude toward some of these things.


James Lorimer Ilsley: What was the word?


Harry Rutherford Jackman: Sadistic.


James Lorimer Ilsley: Oh, that adjective was used in a newspaper reference to me on one occasion, and I was very much amused by it. There is nothing sadistic about my attitude.


Harry Rutherford Jackman: You came close to it a minute ago.


James Lorimer Ilsley: Not at all. I wish my hon. friend would give me suggestions how to raise money instead of continually pleading the case of special taxpayers against the case of the general taxpayers of the country.


Harry Rutherford Jackman: That is quite unfair. I gave the minister suggestions in my budget address. I suggested a measure of taxation which was fundamentally sound and which I thought might well be given consideration as an alternative method of raising money. Certainly the proposal which is now before the committee, with the exception of the movie end of it, is one which virtually came from this side of the house. There is no reason, as the leader of the opposition said a minute ago, why the movie industry should be singled out for taxation. The suggestion I made was that from the evidence we have had from the little centres, the movie industry has been seriously crippled. It is true that the attendance may not remain at 50 per cent of the attendance before this tax; it may go back to 75 per cent. Nevertheless it is a serious falling-off, and if a 10 per cent tax would not cripple the business too much I suggest that, if that rate of tax were imposed, then next year when the people have become more accustomed to the higher price, the tax could be raised to 20 per cent. All I am interested in is in not killing the goose that lays the golden eggs.


Mr. COLD WELL:: I do not wish to prolong this discussion; in fact, I should like to see it shortened if at all possible. 1 was looking through Hansard, which is always an interesting document, and I saw that we have already taken longer in discussing this sports and theatre tax than we took in discussing that very important tax, the national defence tax, which strikes hardest at the great masses of the lower paid workers in this country.


Richard Burpee Hanson: The hon. member has not heard us on the bill yet. That was only on the resolution. [DOT]


Leslie Gordon Bell: We have taken a greater time on this than we took on the resolution for the national defence tax, which bears so hardly on the poorer paid people of this country.
There are some things I do not like about this tax on sports. I do not like the idea of taxing amateur sport at all, but most of us realize that we must accept some taxation which we do not like. In this particular instance it seems to me that if the minister uses the discretionary power which is already in the measure and gives the word "charitable" the interpretation of which it is capable, in all probability many of the objections that have been raised can be met. I have been interested in sport all my life. I have trained many youngsters in football and other sports, and I am of opinion that we should get back to really amateur sport.


Some hon. MEMBERS:: Hear, hear.
Special War Revenue Act


Mr. COLDWELL:: I have no sympathy with the team that puts a player on and pays him, and still calls itself amateur. I believe that practice is undermining our Canadian sports, and consequently I would not make any special plea for those who are doing it.
I did not quite like this tax when it was confined to movie theatres because, after all, that is the poor man's pleasure in many instances, and I think the extension of the tax, although it may work a hardship in cases such as that mentioned by the hon. member for Saskatoon City this afternoon, makes it much better than it was originally. I should like to see the committee adopt this measure because I am quite sure of this. Judging from the minister's stubbornness-


Some hon. MEMBERS:: Oh, no.


Major James William Coldwell: -in connection with the gasoline tax, in which I was very much interested, and the national defence tax, in which I was greatly interested, we can talk to him all night on this tax, and we shall end up in exactly the same position we are in now.


Richard Burpee Hanson: Is that a sadistic attitude? I should like to give the Minister of Finance what a friend of mine wrote to me regarding this matter. He writes:
Why only the family entertainment of moving pictures? This includes the poorer classes, children and old folks. What about high-priced hockey, baseball, horse racing? Then again opera, "evening-dress" dramatics, festivals? Community bridge affairs, bingo games, circuses, etc.?
Finally, and I hope this is reached by the minister's taxation proposals:
The pernicious small travelling tent shows, with gambling?
Such as you get at the ordinary fairs in this country. Every year in the maritime provinces there comes a troupe or troupes of people from New England who spend nothing here and who take away immense sums, relatively, from our people. I would clamp the tax right on them.


Mr. ESLING:: Would the minister give
thought in this tax to an amusement centre which is wholly municipally owned? Let me cite the case of a city in my district which has issued bonds to the amount of $250,000 for the purpose of establishing a municipal centre. When times were better, it got by. Unfortunately, to-day the city is having to make up the interest. That is a case in which the taxpayers as a whole are taxed further. Unfortunately, conditions there were not so bright as they are in the picture business in this community of Ottawa. In fact, there were two picture houses in that city, and one of
[Mr. Coldwell.l
them had to close for lack of business. I must emphasize that it is a community with more than ordinary patriotic and ambitious spirit because, while it has only about 7,000 people, it has contributed more than a million dollars towards the war loans and war services, and it has given of its men in perhaps a larger percentage than any other community. To place a further burden of taxation, not on excess profits, but on a deficit for each year, makes their burden extremely difficult.


Alphonse Fournier: Shall section 13 carry?


Richard Burpee Hanson: There are a large number of sections included in section 13. I wish to take just a moment to talk about the operations under the new sections 127 and 129. Under the former, a person authorized by the minister may examine records, books, accounts and vouchers which shall be open to the inspection of officers authorized by the minister, and if it appears to such person that there has been a violation of the provisions, he may without any warrant or legal authority "seize, take away and retain and hold the said records, books, accounts and vouchers until they are produced in any court proceedings." That is a drastic power to give to anybody who is only an auditor. I suggest that at least there should be some written authority from the minister to the man acting under those circumstances. I do not know what the practice is with regard to excise, but this looks to me like a Hitler method in connection with taxes.
Then, under section 129:
If any person liable to maintain records and books of account for the purposes of this part, has, in the opinion of the minister, failed to maintain adequate records and books of account, the minister may assess the tax payable by such person under this part, and the taxes so assessed shall be deemed to be due and payable forthwith.
Who is to judge whether the records are adequate? That is a drastic power to give to the minister without any right of appeal, or even a hearing. If the man comes along and says that my records are not adequate, he is to be constituted to be the judge, I suppose, under this section?


James Lorimer Ilsley: Yes.


Richard Burpee Hanson: Then the minister, without hearing the other side, may assess the tax; the tax shall be forthwith due and payable, and the other fellow is not permitted to say a word about it. The tax is assessed without a hearing and with no right of appeal. I object to it on principle. I am not going to labour the point.

Special War Revenue Act


Alphonse Fournier: Is section 13 carried? Carried.


Richard Burpee Hanson: Well, there is no defence? The minister is just going to have the section carried.


[Stage Direction]
Section agreed to.
On section 14-Automobiles.
Mr. GREEN:: A portion of this section deals with automobiles. What is the present position with regard to the control of manufacture and importation of automobiles? I raise that question because there seems to be some doubt whether the restrictions as they stand are exactly fair and equitable.


James Lorimer Ilsley: The hon. gentleman is, I think, asking about the War Exchange Conservation Act.


Howard Charles Green: There is also involved the control of Canadian-produced cars by the controller of motor vehicles.


James Lorimer Ilsley: Perhaps it is relevant. I am doubtful. The only ground for arguing that the matter can be brought up here is that these taxes are imposed as part of the control of automobiles. In the War Exchange Conservation Act, which was passed, if I remember correctly, on December 2, the import of automobiles was prohibited and heavy taxes were placed on domestic automobiles. It was found, of course, that dealers of imported automobiles would be out of business so far as the sale of imported automobiles was concerned, although in most instances they had garages and businesses connected with the actual selling of automobiles, which enabled them to go on. Therefore the matter was reconsidered, and it was decided to allow a small importation, upon a quota basis.


Richard Burpee Hanson: Twenty per cent.


James Lorimer Ilsley: For the first three months of 1941, 20 per cent of the number of automobiles imported during the first three months of 1940 were permitted. At the same time a motor vehicle controller was appointed; and since it was not desired that manufacturers of automobiles in this country should be enabled to take advantage of this prohibition of importations to increase their sales, merely taking up the slack created by the prohibition, statistics were obtained and conferences held, and the Canadian manufacturers were placed on quotas. What those quotas are I do not know.


Howard Charles Green: Eighty per cent, I think.


James Lorimer Ilsley: Roughly, it is 80 per cent of the previous year. There are many refinements of those figure*


Howard Charles Green: Does that include 80 per cent of the cars they were producing for export in 1940?


James Lorimer Ilsley: I do not think so. That was for domestic consumption, if I remember correctly.
I believe that is the story in its main outlines. There is one question about the cars which might be assembled in Canada if assembly were permitted, if it was decided to put the assembly of cars on the same basis as imported cars.


Howard Charles Green: It is impossible for these firms to set up plants in Canada now, is it not? Was there not some prohibition?


James Lorimer Ilsley: I think that is so. Either that, or they get no advantage by doing so; if they do, they are deemed to be importers so far as the quota is concerned. It is either one or the other.	[DOT]


Howard Charles Green: For all practical purposes it is prevented. I suggest to the minister that the size of the quota be reconsidered to determine whether it is fair in all respects. There are many people in this country who are suffering as a result of it. They are, I think, mostly retail dealers, and some of them are in a very, very difficult position.


James Lorimer Ilsley: I realize that.


Richard Burpee Hanson: Does the minister hold out hope of any relief for them, because what has been said is too true? Firms with substantial investments in the shape of warehouses, showrooms and service garages are finding the going very difficult; some of them will have to go under. The minister knows of one case which he was good enough to hear at my request. I do not suggest that that gentleman will go under, but he is going behind, It is a great hardship, and I do not know what the answer is.


James Lorimer Ilsley: No.


Richard Burpee Hanson: On the one hand, we must conserve the exchange position; yet, if we do, we shall work grave injustice upon some of our best citizens. It is a, problem with which the minister has to deal.
I have not any solution.


James Lorimer Ilsley: I think the hon, gentleman is very fair about it. Hon. members have no idea of the number of representations which have been made to the government, and made to myself as Minister of Finance, since the passing of that War Exchange Conservation Act. There were representations from young and middle-aged men who had gone into the newsstand business and were relying on United
Special War Revenue Act

States periodicals for a good part of their income. It is all right for members to rise in their places and say that we should shutout the "pulps," and it is probably the right thing to do. As a matter of fact, it is what we are doing with many of the "pulps." But it infringes upon the security and the welfare of people who are engaged in importing and vending these things.
The same applies to dealers in imported automobiles. It might perhaps be said that they knew, when the war came on, it might be necessary for them to adjust themselves and they should have done so. They should have adjusted themselves to the change that was coming, and some did. Some had it in mind and got adjusted and others did not.
Numerous industries, small for the most part, underwent the same experience. The Canadian Importers' association have been making representations continually. I do not know how vigorous or strict the house or the country would like the response to be, but I have taken the view that this was a desperately serious situation and that we had to take such action as we proposed. Undoubtedly, if we wanted to do the popular and easy thing, we would let these dealers bring in their cars, the young men in the newsstand business bring in their "pulps" and the members of the Canadian Importers' association bring in their imports. There are hundreds of articles the importation of which is prohibited, and that has broken right into the living of a great many importers. If we could coast along in a humane and merciful way for the time being we could relax these restrictions and get back to normal, but I do not think we can do that. We have to go along the course we are following.
There may be some adjustments from time to time as in the case of motor cars. The purpose of that quota was not to enable dealers to continue in business on a profitable basis as dealers in motor cars. The quota was not high enough. The purpose was to prevent their cars from disappearing, the names of their cars from being lost to the public, so that they might maintain a connection, keep [DOT] the names of their cars, and sell the odd one during this temporary period. That is not enough to make a living on except where they have garages and other means of income.


Richard Burpee Hanson: There is a possible solution, but I do not know whether we should discuss it. The effect of the restrictions has been practically to give to the big three the whole Canadian market. It is true enough, the quota came on afterwards and to a degree cut in on that. But the big three have their agents in particular communities.

If an arrangement could be made by the motor vehicle controller with any reputable dealer who had credit or cash, he could go to one of the big three and purchase on terms similar to or equally advantageous with those of recognized agents; he would have a chance to sell through the domestic production, and in that way these people might be kept in business. That, I admit, is something of state socialism, but it is the only solution that has entered my head with regard to this problem. But they will not look at the man who has been frozen out. Take General Motors or any of these big corporations. They have good dealers in their communities and can pick and choose because they have the cars the public want; yet here is another man who may have equally good credit facilities, who has been selling the Packard or the Studebaker. He is put out of business. If some arrangement could be made by the motor vehicle controller so as to have this business spread round, that might be a solution. I do not urge it; I merely suggest it.


John Ritchie MacNicol: The average soft drink
is five cents a bottle. How can 25 per cent be applied to a five-cent bottle and the retail price be suitably arranged?


James Lorimer Ilsley: The tax is on the manufacturer, and if he has to raise the retail price as a result of the tax, I suppose he does so.


[Stage Direction]
Section agreed to.
On section 15-Sugar.
Richard Burpee Hanson: I have
something to say on this section. After what I heard in this house in 1933 from certain hon. gentlemen opposite, many of whom are absent, I never thought I would live to see the day when the Liberal party would impose an additional tax on sugar. The tax on sugar in 1933 was put on by the Bennett administration not because they wanted to put it on; it was put on to raise and support the revenues of the country at a time of dire economic necessity when, as a result of the stress of a world-wide economic depression, our revenues were visibly falling. Sugar was singled out because it was an article of universal consumption which the common people and the rich people alike use, and it was thought it would bring in an estimated revenue of $20,000,000. There was a war on then.


George Alexander Cruickshank: Isn't there now?


Richard Burpee Hanson: Yes. What was the attitude of hon. gentlemen opposite? That was a world-wide economic war. I wonder whether the Minister of National Defence was through it? He was not in the

Special War Revenue Act
house at the time, but we went through it. How much assistance did we get from hon. gentlemen opposite?


James Lorimer Ilsley: My hon. friend means the
Minister of National Revenue.


Richard Burpee Hanson: Yes, the
Minister of National Revenue. How much assistance did we get?


John Ritchie MacNicol: Nothing but abuse.


Richard Burpee Hanson: Absolutely nothing but abuse. I have here excerpts of some remarks made, perhaps from this very seat, by certain hon. gentlemen opposite. They condemned us in no uncertain terms for putting a tax on the poor, common people of the country, about whom they were so much concerned, and in the election of 1935 they pledged their party to the repeal of the sugar tax. But they never did it. We reduced the tax to a cent a pound before 1935, but these gentlemen went up and down the country to the housewives and condemned the Bennett government for the sugar tax, which was imposed at a time of great national distress. But they did not keep their word; the tax of one cent a pound on sugar remained.


An hon. MEMBER:: They never do.


Richard Burpee Hanson: I will not say they never do; but they seldom do. They do not when it does not suit their convenience. Among the most vociferous at that time was the present Minister of National Defence who was then financial critic of the opposition. What did he say? He was as bitter and as picayune as I ever heard him in my life, and he could be picayune when he wanted to. As reported at page 3372 of Hansard for March 24, 1933, he said:
Let us consider for a moment the other taxes. There is to be a tax of two cents per pound on sugar, and I understand that molasses is taken from the exempted list under the sales tax. We are told that $20,000,000 is expected to be raised from the tax on sugar.
This is the appeal against the tax.
That amounts to $2 per head for every man, woman and child in this dominion and I submit, Mr. Speaker, that this tax, bearing as it does upon a necessity of life that always has been regarded as an essential, coupled with the removal of molasses from the list of exempted goods under the sales tax, imposes a very great hardship on the poorer people of this dominion.
I pause there. That was the text for the whole band-I was going to say of outlaws- who traduced this party from one end of Canada to the other. My opponent in 1935, a millionaire, made the sugar tax the basis of his attack on me, and I have no doubt that it helped defeat me.


An hon. MEMBER:: Was he a sugar
millionaire?


Richard Burpee Hanson: No; he
was a man who all his life had farmed the farmers of this country. He is still living; he is still farming. I venture to say that this statement of the present Minister of National Defence was the basis of the most violent attacks ever made on any government; and the present Minister of Finance himself voted against that tax. I know the answer will be that we are at war, and that is true; but I say to hon. members that in 1933 we were also at war, an economic war, which had dire consequences on this country. The statement I have read was made by the financial critic of the Liberal party, and it was the text for the whole gang of wolves who were on our trail all over this country. At that time the Liberal party was not quite so close to the sugar industry as it is to-day; it did not have the backing of certain people that it has to-day. The present Minister of National Defence went on to say:
So far as the sugar industry is concerned, I have no fault to find with my hon. friend. That industry is well protected; in fact it is too well protected-
Well, it is still well protected; that is the only observation I have to make.
[DOT]-but this tax is not going to be paid by the sugar industry. This tax of two cents a pound will be paid by the individual householder who, with sugar at the present price, will have to pay a fifty per cent tax on all the sugar going into his house.
Do you see the insidiousness of that appeal: a fifty per cent tax, and this was at a time when sugar was probably at the lowest point in its history.


Mr. WOOD:: And everything else, too.


Richard Burpee Hanson: Yes, I
regret to say that is true; and things were even lower in the United States than in Canada. I remember that after we entered into the Ottawa agreements I motored from Winnipeg to Toronto, passing through the United States. Just outside Hillsboro, North Dakota, we had two punctures, and the farmer came down to see us. He told us that he was a hog raiser, and what do you suppose he was getting for his hogs on the Chicago market in the spring of 1934? He was getting two and a quarter cents a pound, as opposed to eight and a half cents a pound here.


Mr. ROWE:: What did the hon. member
for Brant get that year?


George Ernest Wood: I got three and a quarter
cents.
Special War Revenue Act


Richard Burpee Hanson: Then you had better go back to your dealer, because you have something more coming to you. Those two statements by the present Minister of National Defence formed the basis for the attack that was made upon us in this house. Then Mr. Howard, who at that time was the member for Sherbrooke and' who now has gone to his reward in another place, proclaimed himself a great friend of the common people and said:
I want to protest in the strongest words I can use against this tax of two cents per pound on granulated white sugar, a commodity which perhaps is in greater demand than most any other product in Canada. At least, it has a wider distribution than any other product I know of. The tax is an enormous one. . . .
Then there was a gentleman here representing the consituency of Lisgar, Mr. Brown by name. Do hon. gentlemen remember him? I am not going to say anything about him or what he said, because I understand that now he has gone to his reward.


Thomas Reid: No.


Richard Burpee Hanson: No? All right; he is gone out of this house. I thought he was dead, but apparently he [DOT] is only politically dead. He still has a chance for repentance, because he will never come back. As reported at page 4478 of Hansard he said in that budget debate:
The fact is that the tax is a very heavy burden on the people of Canada, and the magnitude of that burden can be to some extent appreciated when I recall the fact I mentioned in the budget debate that about fifty million bushels is the amount of wheat that is consumed by the people of Canada. At fifty cents a bushel that would mean $25,000,000, and I believe the estimated revenue from the sugar tax is $20,000,000, or only $5,000,000 short of the total value of the wheat consumed by the people of Canada. That comparison shows the magnitude of the burden that is imposed upon the consumer by this sugar tax.
I could quote many more statements by that same gentleman. Then there was a member from Hamilton East, Mr. Mitchell, who is not now in this house, but who has received his reward elsewhere. He had this to say:
... it represents a taxation upon every man, woman and child in Canada, and places a further burden upon the 1,300,000 people drawing relief.
Then there was the hon. member for Willow Bunch (Mr. Donnelly), who I am sorry is not in his seat to-night. He had a great deal to say about that tax. I could go on right through this long list of extracts, but I really have not the heart to detain the committee for that length of time. There was the member for Melville, Mr. Motherwell. What gems he used to get off in this house! I understand that after 1935 his shafts were not always aimed at this party, but were sometimes
[Mr. Wood.l
directed towards his own friends. That may have been a case of sour grapes, I do not know; at all events I must confess to always having had a very warm spot in my heart for the former member for Melville. He certainly was a picturesque figure in this house, and he certainly knew something about agriculture. Of course, I could not expect that he should know as much as the present hon. member for Melville (Mr. Gardiner), his successor in office.


Mr. GARDINER:: More.


Richard Burpee Hanson: But I
certainly had not, and have not to-day, any antagonistic feeling toward the then member for Melville. He said, as regards the sugar tax:
I do not see how I can allow this to go by without protesting. After hearing-
Just listen to this.
-some of the letters read yesterday on behalf of the women and children of the country-
The poor women and children!-when sugar was down, we shall say, to two cents or four cents a pound, and a tax of two cents was being put on.
-and listening to the protests that came from every quarter on this side of the house, yes, and the silent protest of the rear-guard supporting the government-because I know they entertain such protests-I am wondering whether the minister is not considering the advisability of abandoning this tax. Before I go any further I would ask him whether he has seriously considered this matter.
Then there was the member who then represented the constituency of Prince, Prince Edward Island. I shall not say anything about that gentleman, because he has gone to his reward. And I shall skip over the former member for Middlesex West.


John Ritchie MacNicol: He has also gone to his reward.


Richard Burpee Hanson: Yes, he has. I valued his friendship, too, while I was in the house with him, and I am not going to say anything more about him. Then there was Mr. Euler-and he has gone to his reward, too!


Some hon. MEMBERS:: Hear, hear.


Richard Burpee Hanson: This is what Mr. Euler had to say, as it appears at page 4517 of Hansard for May 2, 1933:
This tax of two cents on sugar amounts to practically 50 per cent of the value of the article, a very heavy tax indeed-
He took his cue from his colleagues.
-it strikes at everybody, and this is an article of food. I think it is very regrettable, though perhaps in some degree necessary, that we should have taxation on food.

Special War Revenue Act
Then, as reported at page 4520 of Hansard of May 2, 1933, the present Minister of National Defence said:
While I am on my feet let me say that this is not the only tax that strikes at the masses of the people, because when we come to the sales tax the food of the people, which is now exempt from the sales tax, has to bear a six per cent tax which the masses of the people have never paid before.
Wha-t does he now think of the 8 per cent tax?


George Alexander Cruickshank: Two per cent higher.


Richard Burpee Hanson: Then there was the hon. member for Temiscouata (Mr. Pouliot), a picturesque figure in this house. He was against it, too.
Then there is only one further extract I shall read, that from the speech of the hon. member for Vancouver Centre (Mr. Mackenzie). He is the only one of these hon. gentlemen I now see in the house, in front of me. He felt it his bounden duty-and I can just see him now, standing up straight and throwing out his chest, the great champion of the common people!-to say:
I feel it my duty to lodge a complaint against the tax of two cents a pound on sugar. . . . People cannot even buy sugar at present prices, let alone at the increased prices as a result of this tax.
What a demagogic appeal for a responsible citizen of this country!


John Ritchie MacNicol: He got his reward, too.


Richard Burpee Hanson: Yes, he has his reward.


Major James William Coldwell: I believe all of us, in this comer of the house at least, are opposed to the increase in this tax. It does work a hardship on people who cannot afford to bear that hardship. I feel particularly opposed to this tax, and I agree with everything hon. members opposite said when the tax was first introduced by a Conservative government. I feel that a tax of this description is a tax on a luxury of the children of the nation. After all, sugar is not only something that children enjoy; it is something necessary for their health and welfare.
Having said that, I think we should probably have some information as to the entire sugar business of this country. I see the Minister of Trade and Commerce in his seat, and I can tell him that there is a good deal of misgiving about the sugar industry. The minister should make a statement regarding it to the committee. To-day we are importing sugar, and yet on the other hand we have a possibility of increasing our own production of sugar, through a development of the sugar
beet industry. I should like to see the whole matter thoroughly discussed in this chamber, but this is not the time or the place to do it.
I wish to register on behalf of this group an emphatic protest against the increase in the sugar tax, and the imposition of taxes on other sweetening materials. In my opinion, this is one tax which might very well have been left out of the budget.
As I have said on several occasions in the last few days, I have a great deal of sympathy with the minister in his job of having to raise this huge sum of money for purposes of war. I believe, however, that a tax of this description, like the sales tax-and we would have opposed any suggestions for an increased sales tax; we much prefer the succession duty tax-. is one which does work a hardship on the poorest home in the land, and the sugar tax ought not to have been increased at this time.


Harry Rutherford Jackman: I am opposed to the
increase in the sugar tax. The minister made an accusation against me which I think was most unfair, and I should like to speak on behalf of some of these "special interests" for which he says I sometimes try to have taxes reduced.
In the constituency of Rosedale, which I have the honour to represent, there were just one year ago no fewer than 10,000 people who were forced to accept relief in order to live. Those people obviously did not have adequate incomes. In that constituency there are returned soldiers living on the so-called "bumt-out soldier's" pension of $40 a month, and yet the minister believes that this tax on sugar is not going to be a substantial burden to those people. It will amount to $5 or $6 a family. When a man's work is very uncertain; when he is unable to do a real piece of work because of his physical condition; when he has to pay an extra $6 or $7 throughout the year, and when he receives only $40 a month, a tax of this kind is a substantial hardship.
I agree with the hon. member for Rosetown-Biggar when he says that this tax might easily have been left off, and the money raised elsewhere. I should also like to point out to the minister some of the other "special interests" whose taxes I endeavoured to have reduced. In the last few days I have endeavoured to have reduced the succession duties on the estates of soldiers who might die overseas. I felt that the amount was severe, and that something should be done to lessen it.
Another of the "special interests" I have been representing has been the soldiers who were taxed 10 per cent on transportation fares, a tax which was subsequently eliminated. If
Special War Revenue Act

at times I speak about subjects about which I know, and with which I come in contact in my daily life, I believe it is only right that I should do so. I know about those subjects- and I am not like the Minister of Finance who put a tax on Canadian bonds payable in United States exchange, and subsequently withdrew the tax. Then, when an hon. member asked why he had put on the tax and then subsequently withdrew it, he said, "I must admit that it was due to my inexperience."


Mr. QUELCH:: I have said very little up to this time on the whole question of taxation, and mainly for this reason, that I believe in the pay-as-you-go policy. If we are going to have a pay-as-you-go policy, we must have heavy taxation. Up to the present time I have voiced very little criticism of the heavy taxes which have been imposed upon the people. When we compare the tremendous sacrifices being made by the people overseas with conditions in Canada, we cannot say that the people of this country are having to make any very great sacrifice. '
I should like to draw the attention of the minister to the fact that in the past he has laid down a definite policy with regard to war finance and taxation. I must admit frankly that I find it hard to follow that policy in connection with some of the taxes being imposed to-day. I should like to quote what he said last year:
3. That the task of finance is not only to provide the funds which are used to pay for the war services but more fundamentally is, by taxing and borrowing, to restrict the civilian demand for economic resources in order that they will be available to the defence or supply-departments when required.
And again:
6. That taxation should be imposed upon, a basis of equality of sacrifice, having regard to ability to pay.
I find it hard to understand how the tax on sugar, how the tax on gasoline used by farmers, how the national defence tax on people in the $660 income bracket, come within that definition. It certainly is not according to ability to pay, and we should not desire to restrict the consumption of these lines. I voiced no protest in connection with the higher taxes on income. As a matter of fact, I believe we could go still further. I voiced no protest regarding the excess profits tax. I should like to see it made one hundred per cent. I voiced no protest regarding the succession duties. I believe that these are all just taxes at a time like this, but I cannot see any justification for increasing the taxation of people who have not the ability to pay. This
[Mr. Jackman.l
is not in line with the principle laid down by the minister, and it certainly is not necessary to restrict consumption in these lines. Speaking the other day in connection with the gasoline tax, the minister suggested that apparently some hon. members were more interested in getting votes than in supporting a necessary war policy at this time. The minister's words were:
I do not blame him altogether, but he places a loyalty to the financial dollar and cent interests of his constituents above practically every other earthly consideration.
I thought that statement was addressed only to the hon. member for Rosthern; but according to the newspapers, the minister was referring to me and to other hon. members. I did not understand that then, or I would have replied. Apparently he was referring to all hon. members who were defending the tax on gasoline. I should like to have the minister justify at this time an increase in taxation which is not based upon ability to pay and which is not necessary for the purpose of restricting consumption of a particular article. Those are the two principles which he laid down and stressed in his speech on November 21. First of all, the main purpose of taxation was to restrict spending, restrict the purchasing of commodities, and, second, it was to be based upon ability to pay. I should like the minister to explain how these taxes meet those requirements.


James Lorimer Ilsley: It is always a pleasure to engage in a discussion Of fundamental principles with the hon. member for Acadia. I do not think this is a particularly good tax. It is an easy way of getting quite a lot of money. I would not say that that is the only virtue it has, but that is a great virtue under present conditions. There is this further thing to be said about it. For the most part, the sugar used in this country must be brought in in ships and shipping is exceedingly scarce. To an extent this tax on sugar will discourage consumption and place that much less strain upon shipping. However, I would not say that that was the major consideration in the imposition of this tax.
I think I stated1 in my budget address that this was the only tax which was purely a consumer's tax based upon the financial needs of the administration. The budget is remarkably free from these consumer taxes. Sugar is a necessity, but it is not purely a household necessity. It is used in connection with many things which are a little beyond the description of necessity. I am not prepared to stand here and say that this is an ideal tax; it certainly is not. I am not prepared to say that it will always be possible to impose ideal

Special War Revenue Act
taxes. In fact, I think every one of these taxes has been opposed by some hon. member. The necessity for taxation is admitted, but the undesirability of each tax has been stressed. There may have been a few exceptions to that, but an argument has been made against nearly every tax.
We must have taxes, at least according to our views. I think I said, in the speech to which the hon. gentleman referred, that he would have us print money, to which he took some exception. I think, however, that is what he advocates, and all I can do is disagree.


Victor Quelch: I was wondering why we have not taken steps to increase the production of sugar within Canada, especially in view of the difficulty in connection with shipping to which the minister has referred. The production of sugar in the west could be expanded tremendously, and this would help solve the problem of wheat production. It would be possible for many farmers to go into the production of sugar beets, and instead of producing a commodity which is now a surplus, we would be producing a commodity which is scarce at the present time.
The last time I spoke I suggested that we could very well place a tax on advertising, and I cannot understand why the minister has not done this. This would be a profitable form of taxation. I consider it a detriment that we should have these large advertisements in our periodicals and papers. What are they doing? They are trying to get people to spend more money, and the minister is trying to get people to spend less money. They are working against the minister; their efforts are subversive. This would be a good place for a really heavy tax.
As I said before, with the exception of one or two items I have not opposed any of these taxes. The minister himself admits that this is not a good tax. Even yet, I think we could safely increase the income tax and the succession duties tax, yes and even the liquor tax and the excess profits tax up to 100 per cent. I should like to see all these taxes increased during the war. On the other hand, I am opposed to floating at this time a bond issue of $600,000,000. If the purpose of that is to restrict spending, then I contend that the proper way to do that is by taxation and not by the issue of bonds. If the purpose of these bonds is to raise revenue, then I contend that the proper way to do that is through the Bank of Canada.
The minister referred to the printing of bills, but I do not think that is a fair statement. Last year, when we borrowed $490,000,000 from the Bank of Canada from May 1 to June, did we print $490,000,000 worth of bills? I do not
think we did. When we borrowed $250,000,000 later on in the year, did we print another $250,000,000 worth of bills? I do not think we did. It is nonsense for the minister to suggest that, when I urge that we use the Bank of Canada, that means printing money to that extent. All it means is increasing the cash reserves of the chartered banks and the amount of money they have on deposit with the Bank of Canada. We can very well prevent, by the means I have suggested in the past, the chartered banks from taking advantage from this increased cash reserve to expand their loans. Therefore I do not think the minister's talk about printing bills is based upon fact. He knows it is just common talk to scare the people. I challenge the minister to prove that the $490,000,000 which we borrowed last year brought about an issue of $490,000,000 of new bills, or that the $250,000,000 borrowed last January meant the printing of $250,000,000 of new bills. It did not. We can use the Bank of Canada without printing a single dollar bill, unless those bills are required in circulation.


Mr. GERSHAW:: I should like to draw to the minister's attention a subject I have mentioned before, namely, giving some encouragement to the beet sugar industry in this country. There are large irrigation districts which are having a hard time getting along and other areas which could easily be irrigated if there was the prospect of expansion of the beet sugar industry. At the present time we are using only about 12-4 per cent of sugar from our own home-grown raw materials. If we could increase this amount by, say, reducing the tax on sugar produced from homegrown raw material, it would help to expand these districts, help to give employment, help the live stock industry, and be a real effort towards getting away from relief and providing employment for a class who have had a very hard time in the past.


John Horne Blackmore: This is an important matter, too: that every sugar factory which would be established would be a source of revenue from a dozen different points of view. There would be the revenue from the gasoline tax, from the sales tax, from customs duties, from excise, and from many other sources; there would be revenue directly and indirectly.
There is one thing I aim never to do in my life, and that is to say, "I told you so," but I am going to come close to it to-night. Ever since I came here, I have on many occasions risen in my place and told the government that the time would come when we would need sugar and that, therefore, we ought to expand
Special War Revenue Act

our own sugar industry. But never a thing done about it! The only thing ever done was the attempt last spring to destroy it.
Let us do some realistic thinking here. There is in this country, as the hon. member for Acadia and the hon. member for Medicine Hat have said, almost an unlimited capacity to expand our sugar production. If we are having trouble now over shortage of ships, what do hon. members imagine our condition will be a year from now and perhaps a year from that? There is going to come a time, as I hinted the other night, when we may have to send three pounds of sugar from Canada to get one pound to Britain. What condition shall we be in then in order to measure up to our responsibility of delivering the goods? I do not believe there is on the face of this earth a group of people more absolutely foolish in Itheir mismanagement of their country than the Canadian people at the present time, and I am going to take occasion to say a little more about that by and by. We are neglecting, for instance, the development of our sugar industry. We could produce every year right here in this dominion twice as much sugar as we could consume in a year. Every man who will take the trouble to face the facts would be more comfortable in his mind if he knew there was a full year's sugar supply in Canada for Canada, and if in the next two or three years he would know where Britain might get her sugar in case of need.
Who would have imagined a year ago that the Germans would be where they are now? Who would have imagined two years ago that they could possibly get where they are now? Who can begin to surmise where they will be a year from now? I do not think I shall say any more on the expansion of the sugar industry just now.
I feel personally that we are making in this tax a bad mistake. I have just come into the chamber from an errand on which I had to go, and I think the minister was holding forth that this was not a sound tax. I agree with him. I compliment the minister, too, upon the fact that he has built a budget in which there are very few consumer taxes. I recognize that, and it is a good point.
I should like to turn for a minute to the question of the creation of money. I do not wish to go into this too far. I have been wondering whether the minister was bound by some considerations external to the country in this matter of creating money, but the remark he made just now indicates that he is bound by considerations within his own mind and in the minds of the people who advise
**Mr. ftlarkmore.]
him. He may not agree with this, but let me tell him and the members of this administration that if, in this crisis, they neglect the capacity of this dominion to supply funds by the application of their power, authority and responsibility given under items 14 and 15 of section 91 of the British North America Act they will be responsible for Canada's deficiency in the war effort such as it may be. They are taking for granted that expansion of money is impossible and would cause inflation. That is a serious thing to take for granted. I do not think I will say anything more on that except to point out that if it is possible to create money without causing inflation-and' beyond a shadow of a doubt it is up to a certain point-and since we have price control in Canada without which prices would go up out of sight in a very few years, we can hold prices down with an expansion of money just as well as we are holding prices down now. If the principle were adopted that a good deal of money can be created-I am not saying a great deal, but two or three hundred million dollars-we could remove a lot of these nuisance taxes from the people. That is where I hold the minister and the administration responsible for a great deal of unnecessary taxes.
When I was talking to the Conservatives last night and suggested to them that they did not have any alternative proposal, some of them misunderstood. Let me make it explicit. The only proposal I have heard them make is some other kind of tax. They do not want this ox gored but some other ox. It is the same thing; it is the goring of another ox. If they can suggest a means whereby money can be obtained in this country without additional taxation and without borrowing, they will be doing something that is worth doing in this countiy at this particular time. I maintain that just so long as the government imagines that Canada's capacity to exert herself financially is governed by her ability to tax and her ability to borrow, she is making a grave blunder and we shall, as surely as we sit here, be held responsible by generations yet to come. If disaster should come to our cause to-day, the administration that sits here will have their names written in black in history if they neglect to use the financial and economic capacities of this country which are right in their hands to-day through the British North America Act.
As to printing bills, there is no need to print bills. The minister has the idea, as have several Liberals who have spoken with me within the last few days, that the social credit proposals involve having huge rolls of bills with printing presses running all over this

Special War Revenue Act
country, but they have no excuse for thinking that, because there are men here in this house who know just what the social credit proposals are, and any man in the Liberal party can get information from these men if he does not want to carry away a lot of nonsense in his head. To the extent that the Liberals are neglecting to inform themselves and use the sources of information right here at their disposal, they are going to be held accountable by future generations. Social eredit does not envisage the printing of a great number of bills.
To illustrate: Suppose for a minute or two, that we wished to construct a sugar factory. Social credit would cause the banking institutions of this country to advance credit to an organization to build a sugar factory. There might not be a dollar bill involved; it would merely be a call on the credit of Canada, and it could be done through the institutions we have. Similar action coidd be taken all over the country to promote industries in every direction, greatly increasing the actual goods-producing power of the nation. I do not wish to go into detail; it is not in order to do it.
It is to me one of the strangest things that, with people here who are so sincere, so well informed on the matter of money, and so confident they know the way, as the group with which I am associated, not a single member of the administration has approached at any time any one of us asking to be given any idea as to what the possibilities are with respect to social credit. The assumption is that we just do not know. That is the most fatuous assumption that any group of governing men could possibly make. There is always a chance that any movement such as the social credit movement might be right. I will at this time delay the committee no further.


Mr. POULIOT:: I always listen with the
deepest attention and the greatest interest to the remarks of my hon. friend the leader of the Social Credit group. This is not the first time that he has expounded those theories in this chamber. But he has his own way of expressing them, and they seem always new. When I list'en to him, it is as though I had not heard these theories before, because he has the gift of making each time a new presentation. I know he speaks with great sincerity about the problem of money. It seems to me, however, that he overlooks one fact, namely, that money is not the principal; it is only an accessory, and it must be considered accordingly.


Mr. KUHL:: Can you get along without it?


Jean-François Pouliot: Very often I do.


John Ritchie MacNicol: But your credit is good.


Jean-François Pouliot: But here we are discussing taxation, and I have already told my hon. friends of the Social Credit group that the best way to get information about currency and monetary business is to read quietly the reports of the various chartered banks and trust companies, the Canada Gazette, and other publications of the same kind. What I find most interesting are the tabulations which appear from month to month in the Canada Gazette. They are the monthly reports of our chartered banks. To my mind, it is impossible to discuss currency without having that kind of information in mind.
Of course there are learned doctors of philosophy-PhJDs-learned economists, and learned So-and-so's who have written on the same topic; but, strange as it seems, I have enjoyed the reading of official papers much more than those lucubrations, because with a little patience we can understand something of the contents of official publications, when we cannot understand a word of what is [DOT]written by economists, sociologists, and others of the same kind.
Therefore, sir, I speak to you not as a learned man-I confess I am not-but just as an ordinary man, a layman. On these questions I will agree with the leader of the Social Credit group only when he is able to satisfy my mind by giving me a clear explanation of his system. I have the greatest regard for him, but until now I have not had that pleasure.	[DOT]


Walter Frederick Kuhl: None so blind as those who do not wish to see.


Jean-François Pouliot: I regret very much that I am a little hard of hearing.


Walter Frederick Kuhl: There are none so blind as those who do not wish to see.


Jean-François Pouliot: Of course, you see, I am not blind, 'but I am a little hard of hearing, and that is why I do not catch what has been said. I may be also a little hard of understanding-I say that in all humility-and I do not pretend to teach anything to anyone, I just try to explain when I understand something, and when I do not understand anything I do not try to teach others, because I know very well that the result of my teachings would be an awful mess.
Now, sir, to come to the point; there is something in high finance which I do not understand any better than I understand the theories of my hon. friends of the Social Credit group. On this point, at all events, I
Special War Revenue Act

assume that we shall be in accord. In the first place, I have never believed in the Bank of Canada. I find it the fifth wheel of the coach. I shall not now enlarge upon the reasons why I am not enthusiastic about that expensive organization; I shall merely indicate why I am not satisfied with it.
In the first place, it is a mystery, and in my humble view there should be no monetary secrets from the members of the House of Commons. I have said this under other circumstances. What help would it be to Hitler to know what is the extent of any expenditure which is made here in Canada? When I am told that it would be a bad thing for the prosecution of the war to give us some information about the Bank of Canada or the foreign exchange control board, I am not satisfied with that answer. It is quite a long time ago that an ex-Minister of Finance told me that it was impossible to give the members of the House of Commons definite information about the doings of the Bank of Canada. In my humble view, the responsibility of finance should be now, as it was in the past, in the hands of the Minister of Finance.	.


John Horne Blackmore: Hear, hear.


Jean-François Pouliot: It was with the utmost
regret that I saw that our securities, which were in the east block under the guard of the Minister of Finance, were being transferred to the Bank of Canada; and it was with still deeper regret that I learned from the press that these securities were transferred from the Bank of Canada to the foreign exchange control board, which does not issue our bank notes. What guarantee, therefore, is there for the bank notes? Our securities, which are the pledge for these bank notes, are in the hands of a body other than that which issues the bank notes. We have inflation, of course. If the issuance of bank notes is made by a body that is distinct from the one that holds our national securities, the bank notes are not covered when they are issued. Of course, it is the suggestion of the intelligentsia, and it was done before the time when the present Minister of Finance took charge of that department. I have, however, sufficient confidence in him to expect that he will put things in order in his department and that he will be strong enough to correct abuses.
Is it not my definite right as a member of parliament to ask for information with regard to this matter, which is of national importance? There is a question which has been on the order paper since May 23 and is now the first of the questions on the order paper today. The question has been there for some

time, and I want some definite information in answer to it. I have been refused information about the gold held by other countries and now in the vaults of the Bank of Canada but not in the possession of the Bank of Canada. I may tell the minister I have information that the transfer from the Bank of Canada to the foreign exchange control board was not authorized by the board of directors of the Bank of Canada. I shall say more, that when the Bank of Canada was instituted it was set up as a privately owned corporation, but now it is publicly owned, since the Dominion of Canada has purchased all the stock of that bank. As it is a publicly owned organization, how is it that we members of parliament are denied information with regard to it? We should be the first to know about it.


Alphonse Fournier: Order.	*


Jean-François Pouliot: I regret very much that the Chairman says I am not in order. I always respect the Chair and I will not insist. I know, sir, that what I am asking is essential to an understanding of finance, and finance is not a complicated matter. It is most simple, and the explanation given must satisfy the mind. When we think of this as Canadian citizens, who expect that the future of this country will be bright after the sombre days through which we are passing, and that the sun of dawn will shine again after a very dark night, then, if we want that to happen, if we want the future days to be happier than those in which we are now living, we must be very careful about the financial structure of the country. Of course, the comparison about structure can be applied to many matters. It must be applied to the financial system. The basis or foundation of the financial system must be strong if we wish to build upon it. 1 shall have other remarks to make later on, but I would point out that we cannot give too deep study to this matter. I appreciate the fact that hon. members feel as I do, that this matter is serious and that we cannot give it too much thought and foresight-foresight for the future, so that the future shall be better than the present.


Victor Quelch: I wish to ask the minister a question which he can answer on some other item. On the war appropriation bill I asked the minister how the lag between total expenditures and total revenue would be made up. In the budget speech he said that there was a lag of one billion dollars. It is proposed to make up S600,000,000 of that by the sale of bonds. How does he propose to make up the balance? Will it be by means

Questions
of bond issues or through borrowing from the chartered banks? That is, by monetary expansion.


James Lorimer Ilsley: I do not know whether I can give such a statement before the session ends. One cannot tell.


Victor Quelch: Would the minister also, on some other item, say why he considered it undesirable to raise money by taxing advertising? I do not think he has answered that question.


James Lorimer Ilsley: It is not relevant here. It is not in order to discuss alternative taxes at a stage like this.


Victor Quelch: But the minister himself has accused us of attempting to do away with certain taxes without suggesting some other source of revenue.


Alphonse Fournier: Order. I allowed the leader of the Social Credit group to discuss questions not relevant to the section, and he was followed by the hon. member for Temiscouata, who also was out of order. Now the hon. gentleman is continuing a discussion which is not relevant to section 15.


Victor Quelch: Surely I am in order in asking whether there should not be an alternative way of raising revenue by placing a tax on advertising instead of on sugar. If the minister does not wish to answer that question now, he can do so on some other item. The committee is entitled to know why the government refuses to tax advertising.


James Lorimer Ilsley: I do not think I should like to give that undertaking. Perhaps it would be relevant on some item of my estimates, or something of that kind-


Victor Quelch: Name the item. You choose the item.


James Lorimer Ilsley: I do not know whether there is an item or not.


Victor Quelch: Does the minister mean to say that in a budget debate it is not relevant to ask such a question? That is nonsense.


James Lorimer Ilsley: We are talking about sugar. If I were to undertake to go into the merits and demerits of alternative taxes I do not know where we would end. I have been giving some consideration to the question of advertising, perhaps not as extensively as I should have done, and I can see great difficulties. But is there anything to be gained at this stage of the session, or this stage of the debate, by entering into a discussion of the pros and cons of some alternative tax, selected at random? I will take the hon. gentleman's
suggestion into consideration; it may be that we shall have to impose taxes on many things before this war is over; but why enter into an academic debate on some item that is not before the committee?


George Hugh Castleden: I should like to ask one relevant question. What would be the expected revenue from (a) and (b)?


James Lorimer Ilsley: For both of them-


George Hugh Castleden: I should like them separately, if possible.


James Lorimer Ilsley: We do not have them separately for the coming year, but we have the figures for last year. For 1940-41, the revenue from sugar was $11,637,094, and from glucose, $257,333.


George Hugh Castleden: What is expected under the increased rate?


James Lorimer Ilsley: In a full year there will be about $12,000,000 additional.


[Stage Direction]
Section agreed to.
Progress reported.
It being five minutes after eleven o'clock, the house adjourned, without question put, pursuant to standing order.
Monday, June 2, 1941.