1941-05-16

BANKING AND COMMERCE

[Stage Direction]
First report of standing committee on banking and commerce.-Mr. Moore.

[Stage Direction]
On the order for motions:
Right Hon. W. L. MACKENZIE KING (Prime Minister):: As the orders of the day may not be reached for a short time, I may perhaps be permitted on motions to make mention of one or two matters of interest to hon. members.
As hon. members may be aware, the 6th of June of this year is the fiftieth anniversary of the death of Sir John A. Macdonald. The government has thought that it would be appropriate to have official recognition of that anniversary by a suitable ceremony, to take place at the graveside in the Kingston cemetery, either on the Friday, which would be June 6, or on the Saturday following-whichever date in the interval may be found as likely to be the more convenient. I have spoken to my hon. friend the leader of the opposition (Mr. Hanson) about the two of us joining together to see that arrangements are made befitting the occasion. With us there will be immediately associated the hon. member for Kingston City, my colleague, the Minister of Naval Services (Mr. Macdonald), and Mr. W. F. Nickle, of Kingston, who, as hon. members are aware, has always taken a special interest in matters concerning the public life of our country. The Under-Secretary of State, Mr. Coleman, will be asked to assist the committee in the working out of the arrangements.
I am making this announcement at the moment as, no doubt, suggestions may come from different quarters as to what may be most appropriate in connection with the ceremony.


William Lyon Mackenzie King: Might I be permitted to add a word to what I said a moment ago concerning the Kingston cere-

Consolidated Fire and Casualty Insurance
monv. My hon. friend the leader of the opposition has suggested that there should be added to the committee suggested the names of General Ross, a former member of this house for Kingston, and Mr. W. R. Aylesworth, the present sitting member for Frontenac-Addington. It will be a pleasure to the government to have these names added.


Mr. MacNICOL:: It has been the custom for some years for the Conservative Association of Kingston to hold a demonstration at Sir John's grave on June 6; I have been there myself on that day. I would suggest that before anyone proceeds with other arrangements, the association that has been in the habit of conducting that ceremony be consulted. It might wish to cooperate.


William Lyon Mackenzie King: My hon. friend will recognize by the government's action that it was our desire on the occasion of the fiftieth anniversary of Sir John Macdonald's death to have a ceremony which would be above party altogether, one in the nature of a national ceremony. I am sure he can count on the leader of the opposition and myself, seeing that all organizations which may desire to be represented on that occasion will be represented. We will wish to have all the cooperation it may be possible to have.


Mr. CHURCH:: There will be need of a memorial service for us if we go on getting away from any more of his principles.



CANADIAN LEGATIONS


[Stage Direction]
On the order for motions:
William Lyon Mackenzie King: Hon. members will be pleased to know that Mr. Paul Reading, of the parliamentary press gallery, has to-day been appointed attache at the Canadian legation at Washington, amongst other duties, to assist the minister there in following Canada's war effort and in answering inquiries in the United States in an authoritative way in respect to our war effort. Mr. Reading was formerly executive editor of the Calgary Herald, and before that was managing director of the Hamilton Herald. For the last fifteen months Mr. Reading has been with the Ottawa bureau of the Southam newspapers.



THE WAR


[Stage Direction]
On the order for motions:
William Lyon Mackenzie King: Possibly the house may
expect me to say something about developments within the last day or two in Europe, in the light of some statements which have been made. I think, however, it would be in every way prudent and advisable to await a statement from the Prime Minister of Great Britain before any communication is made in this house. For that reason I do not purpose making a statement at this time.



PRIVATE BILLS


[Stage Direction]
Mr. G. J. McILRAITH (Ottawa West) moved the first reading of Bill No. 62, respecting Consolidated Fire and Casualty Insurance Company.
He said: The Consolidated Fire and Casualty Insurance company was incorporated by chapter 61 of the statutes of 1930. Section 6 of the act of incorporation set out the classes of insurance which the company might transact. The main class of insurance was fire insurance, but there was authorization to carry on accident, automobile, explosion, guarantee, plate glass, sickness, sprinkler leakage, and tornado insurance, as well as certain other classes of insurance. Since the incorporation of the company, insurance practice has changed, and fire policies are now commonly written to include damage to the property insured caused by earthquake, falling aircraft, hail and impact by vehicles. In addition to this change in insurance practice, the regulations under section 2 of the Canadian and British Insurance Companies Act, 1932, as amended, and the Foreign Insurance Companies Act, 1932, as amended, dealing with the definition of classes of insurance, have been amended. These regulations may be found on page 3072, volume LXXIV, of the Canada Gazette. The bill now before the house is to take care of the changes in insurance practice and in the regulations to which I have just referred, and in addition to authorize the company to carry on certain new classes of insurance.
Section 7 of the act of incorporation dealt with subscription and payment of capital stock before the company could commence business in any particular class of insurance. The amending act provides for certain changes in this section to bring it into line with the proposed amendments to section 6 of the act.
The bill has been submitted to the superintendent of insurance and, I understand, meets with his approval.
Motion agreed to and bill read the first time.
2SS6	COMMONS
Roman Catholic Episcopal Corporation

[Stage Direction]
Mr. LIONEL CHEVRIER (Stormont) moved for leave to introduce Bill No. 63, to incorporate The Roman Catholic Episcopal
Corporation of James Bay.
He said: The object of the bill is to give
to the Right Reverend Henri Belleau and his successors corporate capacity. As the matter now stands, there are a large number of missionary services in the Roman Catholic Episcopal Corporation of James Bay. Most of these properties-there are certain exceptions-are vested in the name of the Right Reverend Henri Belleau. The object of the bill is to have the properties vest in the corporation so that it may do business pursuant to section 30, chapter 1 of the revised statutes of Canada. A similar bill was presented in 1938 in this house and in the other chamber and was approved by both houses. It was a bill seeking incorporation for the diocese of Hudson bay. This bill is an exact replica of the last one and contains almost word for word the same provisions. Motion agreed to and bill read the first time.

[Stage Direction]
Bill No. 30, for the relief of John Hubert Fox.-Mr. Abbott.
Bill No. 31, for the relief of Dorothy Jean Fletcher.-Mr. Whitman.
Bill No. 32, for the relief of Lillian Bald Ellison.-Mr. Bercovitch.
Bill No. 33, for the relief of Clavell Filliter Stroud.-Mr. Abbott.
Bill No. 34, for the relief of Mary Marion Grey McKay.-Mr. Abbott.
Bill No. 35, for the relief of Frances Goldberg Joseph.-Mr. Bercovitch.
Bill No. 36, for the relief of Alice Weill Sedlak.-Mr. Boucher.
Bill No. 37, for the relief of Marguerite Marie Rita Duchesneau Goulet.-Mr. Abbott.
Bill No. 38, for the relief of Edna Irene Yertaw.-Mr. Mcllraith.
Bill No. 39, for the relief of Gordon Alexander Cowan.-Mr. Bercovitch.
Bill No. 40, for the relief of Marion Cameron MacLaurin Nelson-Mr. Bercovitch.
Bill No. 41, for the relief of Kenneth Grier Thornton.-Mr. Abbott.
Bill No. 42, for the relief of Hubert Earl Roberts.-Mr. Macmillan.
Bill No. 43, for the relief of Annie Elizabeth Cunningham Wheatley.-Mr. Abbott.
Bill No. 44, for the relief of Dorothy Theresa Downard Street.-Mr. Abbott.
Bill No. 45, for the relief of John Greig.- Mr. Bercovitch.
Bill No. 46, for the relief of Lloyd Charles Edward Francis Fulford.-Mr. Bercovitch.

Bill No. 47, for the relief of Joseph Gaston Yvano Rene Dupuis.-Mr. Hill.
Bill No. 48, for the relief of Audrey Alexine Stephenson Smyth.-Mr. Bercovitch.
Bill No. 49, for the relief of Lillian Shapiro Denenberg.-Mr. Bercovitch.
Bill No. 50, for the relief of David Rain-ville.-Mr. Abbott.
Bill No. 51, for the relief of Hortense Bienvenue.-Mr. Bercovitch.
Bill No. 52, for the relief of Evelyn May Gray Ladouceur.-Mr. Mcllraith.
Bill No. 53, for the relief of Marie Jeanne Germaine Grenier Legendre.-Mr. Hill.
Bill No. 54, for the relief of Marie Adeline Alice Miron Lefebvre.-Mr. Bercovitch.
Bill No. 55, for the relief of Helenorah Keturah Donowa Harris.-Mr. Roebuck.
Bill No. 56, for the relief of Henry John Barrington Nevitt-Mr. Bercovitch.
Bill No. 58, for the relief of Pauline Myrle Barr Gauld-Mr. Mcllraith.
Bill No. 59, for the relief of Marie Alice Veillet Piche.-Mr. Boucher.

[Stage Direction]
Mr. H. B. McKINNON (Kenora-Rainy River) moved the second reading of Bill No. 26a, respecting the Ontario and Minnesota. Power Company, Limited.
Thomas Langton Church: On account of my old friendship w'ith the mover, I would much rather not oppose this bill, but there is a principle at stake. This company seeks now to usurp the powers of five companies in New Ontario that started away back in 1905, about the time the late Sir James Whitney and the late Sir Adam Beck were returned to office and almost caused a revolution in Ontario by trying to preserve these important water powers as a heritage for the people. At that time there was a great fight in New Ontario. New Ontario had been tied up to English and Montreal companies in the development of its great heritage of power and minerals, and in its transportation facilities.
The explanatory note to this bill does not give full particulars of its aims and purposes.. These magnificent powers in new Ontario belong to the people. According to the Canada Year Book we have a potential development of 42,000,000 horse-power in this country, of which only 7,000,000 horse-power, or less than one-seventh, has been developed, and part of it only for seasonal work. We opposed the handing over to any such corporation in

Ontario and Minnesota Power
1905 of power rights in the Rainy River. The matter was extensively discussed in the legislature in that year.
Concurrently the Ross government gave away the last 10,000 horse-power in the Niagara river. Then there was an election and the people decided on a change, with the result that the great hydro-electric movement was started in old Ontario, spreading four years later to New Ontario despite all these private companies which obtained charters. The greatest mistake made by Sir James Whitney- and he did not make many-was that he did not have the government retain all the powers that were given the five companies mentioned in this bill; that he- did not utilize the Timis-kaming and Northern Ontario railway, and electrify it. If he had extended the privileges which were obtained by old Ontario to the mining camps of the north, the town of Cochrane and all the other communities of that district, right up to the head of the lakes, would have obtained their power at a great deal less than the $60 per horse-power they have to pay now. Had that been done, the production of gold, silver and other minerals in the north would not have remained at a low ebb for twenty-five years because of the high cost of power.
It is necessary to go to Houston's Annual to get the complete history of the power and paper companies and other subsidiaries which it is proposed to unite under this bill. It is said that the purpose of the bill is simply to ensure that the rights and obligations of the Ontario and Minnesota Power Company. Limited, under the 1905 statute, will extend to the amalgamated company. I wish to protest against the passage of this bill, for the reasons I have given. At the present time there is almost a revolution going on in the province of Quebec over the application of the very principle that is set out in this bill. Paper companies, power companies and all kinds of companies are being wrapped up and merged together, with the same directors interlocked, and subject to no control by this parliament or any other body. I say this company never should have been incorporated by this parliament. It was purely a provincial venture, but it was brought here because they had some United States affiliations. According to Houston's Annual for 1939, the head office of this company is in the Builders Exchange building, Minneapolis. Their plants are at International Falls, Minnesota, Fort Frances and Kenora, which latter plant is known as the Minnesota and Ontario Paper company. There is also some mention here about bankruptcy proceedings. The
trustees are given as C. T. Jaffray, R. H. M. Robinson and S. M. Archer, and Mr. Robinson is also business manager.
I should like to find out what is the position of the Ontario government with regard to this merger. I should like to find out the attitude of the Ontario hydro-electric commission towards this bill. After all is said and done, this is the same principle in connection with which we had the great fight in Ontario. Now that fight has spread to the province of Quebec, and we hope it will be won there also, in spite of the stand that has been taken by many newspapers in that province. The same thing happened in 1965. The late Sir James Whitney, the late Sir Adam Beck and I were all denounced because we sought to preserve the water powers of the province of Ontario for the people of this province. In my fight in this house I was ably assisted by the hon. member for Winnipeg North Centre (Mr. Woods-worth), who unfortunately has been prevented by illness from being in attendance this year. That hon. gentleman had a great deal to say in connection with the Beauharnois bill, the Sun Life bill and the Bell Telephone bill. As a result of the fight I made I lost my seat in this house; they got after me in my own district. I did not need to leave the constituency I represented at that time;
I could have remained there, but the gang behind those three bills did not want me in parliament, nor did some of the newspapers. As a result of the fight I put up at that time the forty minute rule was brought in. We got along without that rule from the time of confederation until these companies wanted special privileges; then it was all changed.
I should like to repeat the view that was expressed by President Roosevelt with regard to these power and paper companies:
The people of our country are threatened by a monopoly more powerful than has ever been seen, as it affects very closely their domestic and industrial life. Our next generation will witness a shortage of those natural resources, petroleum and gas. The price of coal will be such that hydraulic power turned into electrical energy will, owing to its cost, become the prevailing factor for transport, for manufacturers, for lighting and heating our towns. Our hydraulic power alone, entirely and judicially employed, would be adequate for the present needs of transport industries, municipalities and private individuals.
I wish to make my protest now in connection with this bill, because it is on second reading such protests should be made. I oppose this bill on the principles I have set out many times in this house, and as I have opposed similar bills in the past.


Mr. H. B. McKINNON (Kenora-Rainy River):: Apparently some of the old griev-
Ontario and Minnesota Power

ances, of many years' standing are being resurrected. I have not very much to say in connection with this bill because it does not confer any new rights on these companies. The rights conferred in the 1905 act were to construct, develop and operate a water power on Rainy river. The water power was constructed immediately and has been operated ever since. It services the mill at Fort Frances and also the town of Fort Frances, delivering power to the town for distribution by it.
The rights under the 1905 act ran in favour of the Ontario and Minnesota Power Company, Limited, and were not expressly stated to run in favour of its successors. With the amalgamation of this company with the four others, the Fort Frances Pulp and Paper Company, Limited; Kenora Paper Mills, Limited; the Keewatin Lumber Company, Limited, and the Keewatin Power Company Limited, one company now stands in the place of five. The amalgamation was carried out under the provision of the Companies Act, Ontario. The new act is designed to ensure that the rights and obligations of the old company under the 1905 act will extend to the new company. No new rights are involved. The new company is carrying on the undertakings of the five old companies. The operations consist primarily of lumbering and the manufacturing of newsprint, with the development of power as incidental thereto. The amalgamation simplifies the financial structure. The principal amount of outstanding bonds is reduced by 87,300,000, from $19,500,000 to $12,200,000 and substantial arrears of bond interest amounting to about $9,000,000 are eliminated. The new company has a share capital of $5,000,000, which is much lower than the combined capitals of the amalgamated companies.
The foregoing reductions were consented to by the parent company-Minnesota and Ontario Paper company-which held all the stock and bonds. The amalgamation is also designed to bring about increased operating efficiency.
Section 2 was added to the act to make certain that the company should be subject to the Electricity and Fluid Exportation Act. That act was passed in 1907 and the company is and has been licensed under it. The power developed on the Canadian side -at Fort Frances is used in part for a paper mill of an affiliated company at International Falls, Minnesota, across the Rainy river from Fort Frances. About 5,000 horse-power is thus diverted to the mill at International Falls, this being authorized by the licence under the Electricity and Fluid Exportation Act.

The rights granted under the 1905 act are vital to the undertaking as a whole.
The government of the province of Ontario is familiar with the amalgamation and has granted letters patent to the new company confirming the amalgamation agreement.
Mr.	MacNICOL:	Is the head office in
Minnesota or Ontario?
Mr.	McKINNON	(Kenora-Rainy	River):
Minneapolis, Minnesota.


John Ritchie MacNicol: It is really a United States company, and all these other companies are subsidiaries?
Mr.	McKINNON	(Kenora-Rainy	River):
Yes.


John Ritchie MacNicol: The power plants are a considerable number of miles apart, but they all belong to the same company?
Mr.	McKINNON	(Kenora-Rainy	River):
Yes.


Mr. M. J. COLDWELL (Rosetown-Biggar):: I assume that the bill will be referred to the appropriate committee, and studied with great care. That, I understand, is the proper procedure. Therefore, on the understanding that was given, and in view of the rule of the house which provides that we are not bound even by adopting the bill on second reading, I am not going to call for a division, or anything of that kind. On general principles, however, I support the hon. member for Broadview (Mr. Church). I believe we have alienated one of the most valuable resources of the country, namely water power. It is true that, more than any other province Ontario through its hydro-electric power commission has safeguarded its water power to a great degree.
In considering these companies which have their head offices in the United States, I would suggest to the house and to the committee to which the bill will be referred, that w.e find out with whom we are really dealing. The war, and the issues connected with it, have obscured many of our economic problems; but my recollection is that prior to the depression, beginning in 1929, attempts were made in the United States by the North American power trust of which, of course, the Insulls were the principal beneficiaries, to gain control of all the power in north America, and if my recollection again serves me correctly, the privately-owned water powers on the great lakes were under the control of the Insull interests at that time.
While the depression and the fall of the Insulls as great power magnates in the United

Ontario and Minnesota Power
States occurred afterwards, the people who were with the Insulls are still interested and powerful in the power business. This is a company with head office in Minneapolis, Minnesota, and I know from some matters in which I was interested some years ago that in the middle western states the amalgamation of power concerns was going on apace prior to 1930, and that every possible attempt was made to gain control of power facilities in the provinces north of the middle 'western states. I also believe that that influenced some of the prairie governments to establish power commissions, in order that they might protect the people of their provinces from coming under the control of the tremendous monopoly which was growing up.
I believe we have a duty to the people of Canada with regard to these resources. They are public resources; and where they have been developed foy publicly owned corporations they have been of inestimable benefit to the peoples in those localities. Even where steam is used to generate electric energy, we find the publicly-owned corporation can quite easily compete with and undersell anything the private corporation can do. Consequently, while we may not be giving any new powers, when we are granting privileges with respect to a new set-up in a company we have a right to go into every phase of the company's operations, and to find out what associations it has with power corporations which may be endeavouring to gain control of this valuable utility.
I believe the future of our country lies largely in the direction of the development of power. In our western provinces we are blessed with an abundance of coal. In Ontario there is an abundance of water power, and the same is true of Quebec. It seems to me that these two great resources, coal in the far west and the far east, and water power in the two older provinces, are the resources upon which we may build in the future for the welfare of Canada.
I am urging, therefore, that when this bill is referred to the appropriate committee, every phase of the company's operations and associations be carefully examined, and that the interests of the people of Canada be adequately and properly safeguarded.


Hugh Bathgate McKinnon: The hon. member for


John Ritchie MacNicol: The hon. member cannot talk again; that would be a second time.


Hugh Bathgate McKinnon: I wish only to answer a question asked by the hon. member for Davenport (Mr. MacNicol).


Mr. SPEAKER:: We are debating second reading, and the hon. member has already spoken.


Mr. HANSON (York-Sunbury):: Was the hon. member going to speak respecting the head office?


Hugh Bathgate McKinnon: Yes.


Richard Burpee Hanson: Where is it?


Hugh Bathgate McKinnon: The head office of the new company is now at Kenora, instead of Minneapolis.


Major James William Coldwell: There has been a
change?


Hugh Bathgate McKinnon: Yes, with respect to the new company.


Richard Burpee Hanson: Mr. Speaker, I had no idea there would be any extended debate with respect to this bill. Certainly I am not going to hark back to what happened in 1905, or in intervening years. The fact is, however, that a very large paper company owned and controlled by what were known as the Backus interests in Minneapolis got into financial difficulties. They had organized a Minnesota and Ontario paper company. That company went into the hands of a receiver, and remained there for many years. The bonds of that company were in the hands of the public, and many of them were held in eastern Canada, including New Brunswick. While I have never owned any of them, I have watched the history of the company, and the attempt to reorganize it.
After a great deal of travail, a reorganization plan was worked out by all the financial interests concerned, and ratified by the courts having jurisdiction over the company and by the shareholders and the security holders whereby all these subsidiary companies and the parent company are being merged-if that is the correct term-into one corporation which is now incorporated under the Companies Act of Ontario. Because of the fact that in the original Ontario statute, which gives certain public rights to the power companies, a subsidiary of the paper company is not capable of being legally vested in the new organization or the new corporate entity which has been set up, by reason of the defect in their powers and rights, and it is necessary, I think, that they come to this house, in order that those rights may be passed on to the new organization. That is, I believe, as far as this bill goes. It seems to me that it is a perfectly proper procedure. I had to do the same thing as long ago as 1917 in connection with the amalgamation of certain privately owned

Ontario and Minnesota Power
companies in New Brunswick. Therefore, so far as I can see, there is not the slightest objection to the bill; in fact, I think it is absolutely necessary that it should pass in order to give effect to the reorganization which will straighten out the affairs of this company and permit it to continue operating. I shall vote for the bill.


Mr. G. H. CASTLEDEN (Yorkton):: Mr. Speaker, I should like to join with those who have expressed opposition to the principle of this bill. An amalgamation of this kind is, in my opinion, an indication of what is wrong with Canada. These mergers take in smaller companies, and a few men obtain control of the resources of the whole country. For a number of years Canada and the whole world have operated upon the basis of competition. When various companies were in competition with each other; when they were trying and vying with one another to provide the best service at the lowest cost, there were improvements in sendee and standards of living; the cost of living was lowered, and life in all countries, and in Canada in particular, was -much better.
But these companies amalgamate and competition is eliminated. Instead of competition, with service, we have control and dictatorship. The heads of these large industrial organizations are closely linked up with the financial institutions. I do not think there is an important bank director in Canada who
not also a director of from five to twenty such large amalgamated corporations. Through their power over the industrial life of the country these men control advertising; through their control of advertising, they control the press. In the past there have been many instances where they have paid tribute to political parties in order to obtain grants of large portions of the resources of this dominion. In my opinion this is what is wrong with Canada's effort, both in peace and in war.
In its final conclusions, this sort of thing strikes at the very heart of our democratic institutions which are supposed to govern in this country. The press is forced to do as its masters say, and the press is probably the largest factor we have in moulding public opinion, and I mean "mold" or "mould" in either sense. I am opposed to the principle of this bill. This represents what is wrong with Canada. Until such amalgamations are stopped, Canada will gradually sink lower and lower. Reference was made yesterday to the wealthy man being the goose that lays the golden egg. The man who produces wealth in this country is the goose that lays the golden egg. He is the man who toils in the factory, in the workshop, on the sea, in the

lumber camp, on the farm; he is the man who works long hours developing the resources of this dominion in order that new wealth may be produced. He is the man, too, who is standing the shock in the time of battle. He is the goose who Jays the golden egg, and it is this sort of thing that steals the golden egg from him.
Mr. T. J. O'NEILL (Kamloops):	Mr. Speaker, I am opposed to the principle involved in this legislation, the establishment of monopolies. That is what happens when legislation is introduced to amalgamate four or five different companies. The purpose of this bill is to ensure that the rights and obligations of the Ontario and Minnesota Power Company Limited, obtained under the 1S05 statute, shall be extended to the amalgamated company. It may be that some of the companies to be absorbed will have more rights than they have at the present time, and I am not so sure that the powers to be given to this Ontario and Minnesota power company may not be greater than those which they now possess.


Mr. J. H. BLACKMORE (Lethbridge):: Mr. Speaker, I, too, am opposed to the principle of this bill. I am not going to speak very strongly against it, provided it is to go to a committee where it can be investigated thoroughly. In that committee, however, I want the following questions answered. I wish to know what powers these companies now possess, who controls them and with what result. I wish to know what has been the result in the past and what will be the probable result in the future. Since I have been in this house, several bills have been introduced in a most unpretentious manner. One would think they were the most innocent and angelic things that ever were conceived by the mind of man, but it afterwards turned out that there was much that was unsightly under the innocent looking surfaces. I wish to know what new powers are being sought and what are the implications. I wish to know why the new powers are being sought. I wish to know why this company cannot carry on successfully and sufficiently at the present time.
If it must have these new powers in the interests of a majority of the Canadian people involved and affected, then I have no objection. But if this company is seeking new spheres of influence in order to sell a number of shares to and make a lot of money out of the Canadian people, then I shall oppose this bill. I should like to know what the Ontario government -thinks of this bill. I should like to know what the municipal governments whose people "will be affected

British Columbia Telephone Company
think of the bill. I should like to know what the government of Ontario and the other governments concerned think of the company itself. I should like to know who the men are who are behind this company.
One thing that is astonishing to me the more I learn about these matters is the way in which several overpowerful gentlemen in this country manage to get their fingers or their toes into everything that is going on. In practically every instance they exercise a pernicious influence that is in no way for the benefit of the people of Canada. Yesterday evening I expressed approval of the capitalistic system to the degree that, as I understand it, the capitalistic system involves private ownership of the means of production. I am, however, certainly not in favour of the control over a hundred different companies being in the hands of four or five men through their ability to have themselves appointed to directorates. This constitutes a super-government that manages the affaire of Canada contrary to the desires of the people who elect the government of the country. The influence of these men is entirely unwholesome, and it should be	curtailed or
eliminated. If this bill is designed to aid in the development of such evils as those of which we have already too much in this country, then I will oppose it to the very last.


[Stage Direction]
Motion agreed to, bill read the second time and referred to the standing committee on miscellaneous private bills.

[Stage Direction]
The house resumed from Friday, May 2, consideration of the motion of Mr. McGeer for the second reading of Bill No. 27, respecting British Columbia Telephone Company.
Mr. R. W. MAYHEW (Victoria, B.C.):: Mr. Speaker, on Friday, May 2, I moved the adjournment of this debate. I would now be expected to reopen the debate, but I understand from the sponsor of the bill, that he proposes to make certain statements with a view to amending it, which would enable it then to pass its second reading and go to the railway committee. It would therefore seem to be a waste of the time of this house if I were to prolong the debate at this juncture. I shall reserve what I have to say until later.


Mr. McGEER:: With a view to facilitating the business of the house I should like leave to make a statement which will, I believe, meet many of the objections, without losing my right to speak and without affecting the right of any other hon. member to speak.


Georges Parent: The hon. member is
asking for pel-mission to make a statement.
If he speaks now, the rules of the house require that that will close the debate. But if he has the unanimous consent of the house to make the statement, the house will have to understand that those who have already spoken in this debate may also wish to speak again on the proposal which is now to be made by the hon. member. Is the house willing to give unanimous consent to that course?


Some hon. MEMBERS:: Agreed.


Georges Parent: It is agreed, unanimously.


Gerald Grattan McGeer: In explaining the purpose of this bill on its introduction and first reading, I made the statement that technically the company did not have the power to redeem the preference and preferred shares already issued. That statement was incorrect. I should have stated that there was no technical procedure defined under which the preference and preferred shares, if redeemed, could either be cancelled or reissued.
The purpose of the amendment dealing with preferred and preference shares was to make available to the British Columbia Telephone Company the procedure defined in part I of the Companies Act, under which all companies incorporated under letters patent may redeem and reissue redeemable shares. However, there has been an assumption that the amendment might in some way change the contractual relationship existing between the holders of preference and preferred shares in the company. For the purpose of meeting that and other objections to the bill going to committee, it is proposed, when the bill reaches committee, to offer the following amendments:
With regard to section 2, to delete paragraph (c) and the words "or which are to be" in the second and third lines of subsection (3) of section 5. These deletions eliminate reference to preferred and preference shares already issued.
As regards section 3: the increase of the authorized capital to be reduced from $10,000,000 to $5,000,000. Provision to be made that no application for an increase of rates to be based upon any increase of the issue of the capital stock authorized. The wording of this clause to be worked out in the committee.
In section 5, to delete the amendment to the investment clause giving power to the company to purchase and hold shares of other companies.
In section 6, to clarify the section, giving power to the company to operate only wireless telephone and radiotelephone systems, and to provide service facilities for the transmission of sound pictures, writing or signals; and to
2892	COMMONS
British Columbia Telephone Company
delete the words, "by means of any device, apparatus, system or method of whatsoever nature, whether now in existence or which may be discovered or developed in the future."


Mr. GREEN:: What about the application for leave to issue shares?


Gerald Grattan McGeer: There is another statement which I overlooked. No application is to be made to the board of transport commissioners for an increase in stock issue before September 1, 1941. That, as I understand it, is a statement on behalf of the company, and is not to be included in the amendments.


Mr. A. W. NEILL (Comox-Alberni):: Might I be allowed to say a few words, although I have already spoken on the second reading?
In view of the statement made by the hon. member for Vancouver-Burrard (Mr. McGeer) respecting the willingness of the promoters of this bill to make the sweeping concessions indicated therein, I think the proposals are fair and just and I see no objection to the bill going to the railway committee for the purpose of having the amendments inserted in the bill, reserving, of course, to the fullest extent the rights of all those who opposed the bill in its original form to oppose the bill when it comes back from the committee, should the wording of the amendments not be suitable, or if any other amendments are inserted by the committee. Possibly also it might be fair, although I do not press the point, that there should be sufficient time allowed before the hearing comes up in the railway committee to allow delegates to come from Vancouver to be heard, if they so desire, although I do not think that is likely, in view of the changes made.
The statements made in the hon. member's memorandum, or some of them, are not, of course, phrased in legal terms, and there might be some difference of opinion as to the wording in which they are inserted in the bill when in committee. I do not anticipate any trouble on that point, and I am pleased to see what looks like a satisfactory agreement arrived at, and an adjustment which seems eminently fair to all parties concerned.


Mr. G. A. CRUICKSHANK (Fraser Valley):: I should like the privilege of saying a word, because I had occasion to object to the bill before. I believe that the telephone company has been very fair, and that so far as the Fraser Valley reeves are concerned, they have absolutely no objection to the proposed amendment; nor do I believe that in my own riding there will be any objection. In fairness to those who objected, I should like to point

out, as I said before, that a certain small number of us considered it our duty to make these objections, and I believe that the people of British Columbia will thank us for the fair concessions which we have so far obtained from the promoters of the bill.


Major James William Coldwell: There is one point which was not covered by the statement just read by the hon. member for Vancouver-Burrard (Mr. McGeer). It has to do with the question I raised when this bill was before the house on the last occasion, namely, that of public policy. It is true that the company now proposes to ask the public for one-half the amount which was originally suggested, that is, five million dollars instead of ten. But the question in my mind has been, and is, to what extent during the war should we permit private corporations to go to the general public and seek funds in large sums for operations not directly connected with our war effort? I am certain that, with all the good-will and all the assistance that everyone in the country may give, we are going to have great difficulty in raising the hundreds of millions of dollars which will be necessary during the coming year for war purposes. The government policy, I take it, is to fill in gaps between our taxation and our expenditure by the issue of loans. That is to say, they will be going to the same people as those to whom this company proposes to go, in order to get the money required for our national effort.
I am bringing this to the attention of the house again at this time because I believe it should be very seriously considered. The hon. member for Vancouver-Burrard may have some assurances to give along these lines; but, listening to the hon. member for Vancouver South (Mr. Green) when he began his opposition to this bill, I was impressed by the fact that, according to the figures he then presented, this company has resources upon which it might realize. A fairly high rate of return is being paid upon the investment in the corporation, and I was struck at the time by the argument that the company might reduce the rate of profit paid to the shareholders and thereby obviate the necessity of its asking for the large sums of money which it intends to seek.
The Minister of Finance should give some consideration to this aspect of the bill-the requirements of our war effort, and the question whether it would be wise, particularly at this time, to allow corporations not directly connected with the war effort of Canada to go to the general public and secure $5,000,000 of funds which in the near future we may badly need. Someone behind me interjects, "not

British, Columbia Telephone Company
now." I do not know that the company is not being authorized to go to the public now. It is authorized to do so at some time, and this war may last several years. Our difficulties of financing this year are great, and I am certain, since I believe the war will continue, that those difficulties will increase rather than diminish. I place the position before the Minister of Finance in order that the government may consider it. I think the house would welcome a statement of general policy in relation to financing industries and ventures which are not directly connected with the war effort.


Mr. HOWE:: Perhaps I can say a word in reply to the last speaker (Mr. Cold well), for the reason that it is the duty of my department to administer the provision of the last budget which is aimed at preventing unnecessary building. We can hardly say that a communication system is not an essential war utility. As a matter of fact, the communication business expands tremendously during war. Hon. members may have seen appeals that are being made both in Canada and in the United States for wireless operators, and they may know something of the intensive training that is being carried on to develop telegraph operators for war services. The telephone companies are being called upon to expand to meet war requirements. One expansion in which I know this company is involved is the matter of ship to shore telephones. A good deal of expansion has taken place there, and the burdens of long distance calls arising out of the war do call for extensive additional facilities.
The bill provides that any increase in capital must be authorized by the board of transport commissioners, who have jurisdiction over telephones. The house can rely on the assurance that the board will not authorize a new issue of capital until it is amply demonstrated to them that that capital is required for essential purposes.
Down through the years every telephone company, from time to time, has had to ask the public for more capital to keep up with the expansion of its business. The fact that the last dollar is required for war purposes, every last dollar that can be spared from peacetime pursuits, should not interfere with the passage of this bill, having in mind the safeguards that are contained in it.


Howard Charles Green: When this bill first came before the house for second reading I opposed it and gave the reasons for my opposition. While drastic changes have been made in the bill somewhat along the line I suggested at that time, I wish to make it clear that I am reserving my right to criticize the bill when
it returns to the house from the railway committee. Meanwhile I do suggest to the Minister of Finance'and to the Other members of the ministry that under present conditions the people of Canada in a case such as this are entitled to look to the government to see to it that there is the most careful control over the investments that are made by the utility company from funds which may be acquired by reason of the issuing of new capital, and also control over the actual issue of any of the new shares. The Minister of Finance has the power to take these steps and that certainly should be done.
It should be pointed out clearly that inasmuch as the capital required is for war expansion-much of it is for war expansion, apparently-that should not be allowed to result in the people who live in British Columbia being called upon in two, three or five years' time to pay increased rates on the basis of capital supplied now for war expansion and not for telephone facilities directly for the use of the people in the province. That is why it is some protection to have the statement made on behalf of the telephone company to-day to the effect that they are willing to have an amendment put in, that no application for an increase in rates is to be based on any increase in the issue of capital stock authorized by the bill. Such an amendment is essential, and it is only fair for the protection of the people of British Columbia. The committee in considering the bill should make sure that a proper amendment is added to meet that particular purpose.
Then, as the hon. member for Comox-Alberni (Mr. Neill) has said, we ask that representative people of the province be allowed to come here and make their representations before the committee. Some may wish to come and others may not, but it is of the utmost importance that they be given the opportunity to appear.


Mr. MacINNIS:: Just a few words to associate myself with the statement made by the hon. member for Comox-Alberni (Mr. Neill) in connection with this bill. It seems to me that the arrangements arrived at are generally reasonable. The prime purpose of the bill was to give the company authority for the raising of capital to expand its business. It may be that the company asked for a little too much, considering present conditions; but that the capital is required, and that that was the main purpose of amending the act, is indicated by the fact that the increase in capital now asked for is reduced by half. If, as the hon. member for Comox-Alberni said, the statements made by the sponsor of the bill, the hon. member for
2894	COMMONS
British Columbia Telephone Company
Vancouver-Burrard (Mr. McGeer), are implemented in committee and the amendments incorporated in the bill, I see no reason for opposition being carried any further. It is quite clear to me that adequate communications are, as the Minister of Munitions and Supply (Mr. Howe) has said, an essential war factor. If the company itself were not able to raise the capital for these extensions, undoubtedly the government would have to perform that function. In the circumstances I think the arrangements arrived at are fair and reasonable.


Mr. A. M. NICHOLSON (Mackenzie):: 
Clarence Decatur Howe: Before these bills are introduced in the house the}' are carefully examined by the appropriate ministers, and, if contrary to government policy, they are opposed by some one on the front benches here. It used to be my task as Minister of Transport to look after some of them.


Gerald Grattan McGeer: Before the question is
put-


Georges Parent: If the hon. member speaks now, he will close the debate.


Gerald Grattan McGeer: That is what I understood I was doing. When the bill first came to me the first questions I asked were: What is the attitude of the city council of Vancouver? What is the atttitude of the government of British Columbia? What is the attitude of the union of municipalities of British Columbia? My reason for asking these questions is that this is a province-wide operation. I was assured by all those bodies that no objection was being raised to the bill or any of the amendments.

On coming to Ottawa I forwarded a typewritten copy of the bill to every member of the House of Commons and the Senate from the province of British Columbia. I forwarded a copy of the bill to the Department of Finance, to the Department of National Revenue and to the radio branch, and subsequently took the matter up with the Secretary of State. I assure hon. members who have spoken on this bill that I am just as much concerned as they are about the conservation of the finances of the dominion for war purposes and for the needs of the nation to-day, and I believe that the men who are in charge of the British Columbia Telephone company are similarly concerned I believe that there is a need, and a particular need, for sustaining an efficient communication service on the Pacific coast. The requirements of this company to-day are, first, to maintain in that area an efficient long-distance service which connects with the other portions of the long-distance service of this whole continent. It is equally necessary that they attain to a higher standard of efficiency even than they have to-day, although that is very high, with their wireless and radio telephone system.
It is true that the Department of National Defence has its own communications along the coast of British Columbia, but to some extent the communication system of the Department of National Defence, the air service and the naval service of Canada are tied in to the British Columbia Telephone company's system.
I believe that the powers asked for are not going to involve any conflict between government finance and the company's finance. As a matter of fact I am satisfied, from my discussions with the departments, that they realize that the maintenance of this operation is essential to the defences of the Pacific coast of Canada.
I apologize for perhaps not having given as much explanation as was necessary in moving the second reading of this bill. My idea was that it would go to committee and be fully investigated there. I have not done much speaking in this house in the last two or three years; in fact I think I have perhaps taken up less of the time of the house than any of the other hon. members who are naturally inclined to speak when any occasion arises. I have the feeling that it might be better at this time to cut down on speaking and get on with the work of getting things done, and that is why I did not speak then but had the hope that the bill would go to the committee and come back and make another contribution to what we are all trying to do to-day, achieve success in the one and

Wawanesa Mutual Insurance
only thing that is of concern to every Englishspeaking person, namely, the winning of this terrible struggle.
Motion agreed to on division, bill read the second time and referred to the standing committee on railways, canals and telegraph lines.



WAWANESA MUTUAL INSURANCE COMPANY

[Stage Direction]
Mr. W. G. WEIR (Macdonald) moved the second reading of Bill No. 29, respecting the Wawanesa Mutual Insurance Company.
He said: This bill is asked for by a mutual insurance company located in a village of the same name in Manitoba. There are three small amendments asked for: first, to repeal chapter 73 of the statutes of 1934; second, to authorize the company to make contracts for additional classes of insurance, and, third, to alter the voting power of holders of automobile policies, and then to clarify the wording of one section.
On pages 2 and 4 of this bill .the types of insurance that the company wishes to add to its present list are indicated by the words underlined.
I may add that this application is primarily to give the company power to transact the business of the classes of insurance ordinarily transacted by7 fire, marine and casualty insurance companies. The management of the company7 advise me that they7 have been requested to enter these fields of insurance, and they are asking for the right to do so.
When the company secured its act of incorporation in 1929 it was a farm mutual insurance company solely, doing business in the four western provinces. At the present time the company7 is canying on business in all the provinces except Prince Edward Island. It has increased its fire business and has also undertaken accident, automobile, burglary, hail, inland transportation, personal property, plate glass and tornado insurance. In undertaking these additional classes of insurance it has had the consent and approval of both the Minister of Finance and the superintendent of insurance, and must obtain such consent before commencing business of any other class. Consent is given by a certificate of registry being granted for each class.
The application also asks for a change in the voting power of the members, and probably this is the most significant change that is sought. Under the original act of incorporation, each member has one vote at the general meetings of the company for each $1,000 of insurance he carried in the company. Since the act was passed and other classes of insurance undertaken, it was found that the above provision was satisfactory in all but
one class, namely, automobile insurance. In the other classes the premium increases in proportion to the amount of the risk, but in automobile insurance in respect of the item "public liability" this is not so. A member obtaining a policy insuring against public liability in the usual amount of $10,000 for one accident pays a premium of $14 for an average car. If he insures the same car in the amount of $50,000, which is not unusual, he pays $17.08, and if he insures in the amount of $100,000 against liability for one accident, he pays $17.50. In these instances he receives 10, 50 and 100 votes respectively, while his premium has increased only $3.50 for the highest risk. Under the amendment he will have one vote for each motor vehicle insured, which seems equitable. It is also made clear in the amendment that a member who ceases to hold a policy ceases to be a member.
The change in section 11 is a correction of the phrase "on the mutual system" to "on the premium note system." The reason for the correction is that the words "on the mutual system" might refer in the case of a mutual company to all its members instead of only those who insure by giving premium notes. . This correction is not made in respect of section 5 for the reason that this section is no longer in effect.
This bill has already passed the senate; it has been approved by the superintendent of insurance and the Department of Finance, and it is hoped that it may be sent to the proper committee for further consideration and any detailed information that may be required.
Richard Burpee Hanson: Just for purposes of information, would the hon. member tell us why the legislation passed in 1934, chapter 73 of the statutes of that year, was, according to the explanatory note, never brought into effect? What was that legislation, and why was it never brought into operation?


Mr. WEIR:: I am sorry I cannot give my
hon. friend that information. I really do not know the reason.


George Hugh Castleden: Would the hon. member give us some idea of the amount of insurance this company is carrying at the present time?


William Gilbert Weir: I could not say, but no doubt that information can be given in committee. This company is now doing business in all the provinces with the exception of Prince Edward Island, so its insurance business is quite extensive.
Motion agreed to and bill read the second time.
2S96
Ukrainian Catholic Mission



UKRAINIAN CATHOLIC MISSION OF THE MOST HOLY REDEEMER

[Stage Direction]
Mr. G. J. McILRAITH (Ottawa WesG-for Mr. Fleming) moved the second reading of Bill No. 28, to incorporate the Ukrainian Catholic Mission of the Most Holy Redeemer.
Richard Burpee Hanson: Would the hon. member who is sponsoring this bill give a brief explanation as to the necessity for it and what it purports to do?


Mr. McILRAITH:: In the absence of the hon. member for Humboldt (Mr. Fleming), I shall endeavour to explain the bill, although I do not know that there is a great deal I can usefully add to what was said on the motion for first reading. The bill provides for the incorporation of a society or order of priests known as the Ukrainian branch of the Redemptorist order. That order was first incorporated in 1900, and the Ukrainian branch was incorporated in Saskatchewan in 1917, by a provincial statute. Since 1917, the work of the order has been extended to other parts of Canada; at the present time they carry on their work in Ontario, Quebec and other . provinces in eastern Canada. The headquarters of the order are at Yorkton, and the necessity for this bill arises from the extension of the activities of the order. If any further information is desired I should be very glad to obtain it and give it when the bill is in committee.
Motion agreed to and bill read the second time.
be submitted to this house very shortly either by the Prime Minister (Mr. Mackenzie King) or by myself.


Richard Burpee Hanson: And made here, rather than given to the press?


Mr. MacKINNON (Edmonton West):: I think it will be made simultaneously here and in the United States congress.



AMENDMENTS TO WHEAT BOARD ACT- SUPPLEMENTARY ESTIMATES

[Stage Direction]
On the orders of the day:
Mr. E. E. PERLEY (Qu'Appelle):: It is now getting rather late in the session, and I think we all hope to adjourn soon. Does the minister propose to bring in any amendments to the wheat board act, and will there be any supplementary estimates? In his main estimates I do not see any provision for the financing of the wheat board. Will there be any supplementary estimates to provide funds to enable the wheat board to carry on, and will there be an opportunity for a general discussion of the whole wheat problem before the house adjourns?


James Angus MacKinnon: It is not the intention to bring in any amendments to the wheat board act, nor do I anticipate that there will be any supplementary estimates. I imagine that my estimates will provide an opportunity for the discussion of any of the matters referred to by the hon. member for Qu'Appelle.



REPORTED DISCUSSIONS WITH RESPECT TO SHIPMENT OF CANADIAN WHEAT TO THE UNITED STATES

Richard Burpee Hanson: It will be open to hon. members, then, to discuss the board's financing?


James Angus MacKinnon: Yes.
On the orders of the day:


Ernest Edward Perley: I should like to direct a question to the Minister of Trade and Commerce (Mr. MacKinnon) based on a report appearing in the press yesterday to the effect that United States officials were conferring with government and wheat board officials of this country concerning the export of Canadian wheat to the United States, now that the spread in price has widened sufficiently to make it possible for Canadians to ship wheat to the United States, pay the duty of 42 cents a bushel, and realize more than they would if the wheat were sold at home. Will the minister make a statement to the house with regard to this conference and what arrangements if any have been arrived at?


James Angus MacKinnon: I have just been dealing with that matter, and I believe a statement will



QUESTION OF GIFT OR SALE OF WHEAT TO SOUTH AFRICA

[Stage Direction]
On the orders of the day:
Ernest Edward Perley: I have another question, based upon an editorial which appeared in yesterday's Ottawa Citizen, headed "Canada Could Sell More Wheat". The editorial refers to the situation in south Africa, where they are now using soya beans in order to make a brown bread. The question is will the government consider making a gift of wheat to south Africa-, or will it consider a sale of wheat on terms reasonable to both countries concerned?


James Angus MacKinnon: Mr. Speaker, I
had intended saying something respecting the various proposals which have been made about gifts of wheat to China, south Africa

Income War Tax Act
and other countries. I do not wish to make the statement now, although I could do so.
The main difficulty in connection with this whole matter, including shipments to Great Britain, is the question of shipping. Gifts of wheat to some of the countries to which reference has been made have been affected not so much by what might be described as hesitation on the part of the government as by the inability to get bottoms to deliver the wheat.


Ernest Edward Perley: I appreciate that, but I
thought it was time we had a statement with respect to it.


James Angus MacKinnon: Quite recently an hon. member opposite suggested in the house that we should teach the Chinese to eat wheat. I would point out that China grows far more wheat than we do. The records show that it grows annually between 600,000,000 and 800,000,000 bushels of wheat, and that all of it is consumed within that country.


Ernest Edward Perley: What is the population of
China?


James Angus MacKinnon: It is much larger than ours.


John Ritchie MacNicol: That would not be fair
to the rice producers.



AVAILABILITY OF REGULATIONS GOVERNING DELIVERY OF 1941 CROP

[Stage Direction]
On the orders of the day:
Mr. T. C. DOUGLAS (Weyburn):: Mr. Speaker, will the regulations governing the delivery of the 1941 wheat crop be made available in the house before the adjournment?


James Angus MacKinnon: I do not think it
would be possible to make public the regulations regarding the delivery of the 1941 wheat crop. Quotas will depend on the nature of the crop in western Canada, that is, whether it is a large or a small crop. Such factors will have a great deal to do with the date on which final regulations regarding quotas will be announced.


Thomas Clement (Tommy) Douglas: That would
govern the quota, but not the regulations. Will the general regulations be brought down?



ST. PIERRE AND MIQUELON STATUS OF ISLANDS IN WESTERN HEMISPHERE CONTROLLED BY VICHY GOVERNMENT

[Stage Direction]
On the orders of the day:
Major James William Coldwell: When the Prime Minister (Mr. Mackenzie
King) makes his statement early next week regarding the war situation, as he said he would, will he be good enough to inform the house as to the position with respect to the islands of St. Pierre and Miquelon, particularly in view of the statement made yesterday by the President of the United States regarding islands controlled by the Vichy government in the western hemisphere and adjacent to the United States. I would ask the Prime Minister to give a complete statement in that connection.


Right Hon. ERNEST LAPOINTE (Minister of Justice):: I shall bring the question to the attention of the Prime Minister.



WAYS AND MEANS

[Stage Direction]
The house in committee of ways and means, Mr. Fournier (Hull) in the chair.

[Stage Direction]
8.	That the rate of tax imposed by section 9B (2) of the act on all non-residents be increased from 5 per centum to 15 per centum and that the exemption in respect of interest payable in a currency other than Canadian be repealed.
9.	That the rate of tax applicable to nonresident-owned investment corporations be increased from 9 per centum to 22J per centum.
10.	That the tax of five per centum on nonresident persons, other than corporations, in respect of the total amount of the royalties, rentals or similar payments for the use in Canada of patents, real or personal property, or for anything used or sold in Canada, be increased to 15 per centum.
Richard Burpee Hanson: What is the position with respect to resolution No. 9? I understood from the minister that some abstruse question was involved. I did not pretend to understand it.


Hon. J. L. ILSLEY (Minister of Finance):: It is not as difficult as I thought. I believe the rate is correct, provided we make an amendment to one section of the Income War Tax Act and provide not only that the income tax shall be computed on two-thirds only of the dividends received from Canadian companies but on two-thirds only of the interest received from Canadian sources. If we do that, the effective rate will be 15 per cent on non-resident-owned investment corporations. That is the intention of the resolution.


Richard Burpee Hanson: And would place them on a parity with the others.


James Lorimer Ilsley: Yes, it will put them on a parity with non-residents.
Just before eleven o'clock last night I said it was the original intention at the time the section was enacted, to make the income tax
Income War Tax Act

five per cent on the incomes of non-resident-owned corporations. The companies whose representatives were interviewing the government at that time apparently held no bonds in Canada. So far as Canadian investments were concerned, they included only shares. Therefore as regards those companies an effective rate of 5 per cent was provided in the legislation of 1936. But the hon. member for St. Antoine-Westmount brought to my attention the fact that there are non-resident-owned investment companies who hold quantities of bonds, and that with regard to those there is no deduction, as there is with respect to dividends. So that an amendment to the Income War Tax Act making the one-third deduction apply not only to the dividends received from Canadian corporations, but also to the interest received from Canadian debtors, will effect the end we have in view.
Of course there is the other question, whether we are justified in imposing a 15 per cent rate on these corporations. However, I believe we ought to do so. As I said last night, I am not aware of any undertaking with these corporations, either express or implied, that if we raised the non-resident rate their rate would not be raised. We got slightly out of line with that principle in the fall of 1939 when we raised the effective rate from five to six per cent-that is, for those which owned only shares in Canadian companies. We did it by making the rate one-half the corporation rate. The corporation rate on the ordinary Canadian company was raised to IS per cent, and, owing to the manner in which the sections were drafted, nine per cent became the corporation rate applicable to the non-resident-owned investment corporations. That was really an effective rate of only six per cent, because they paid only on two-thirds of the income derived from Canadian corporations. So that for companies in this position, the effective rate has been six per cent instead of five per cent. But the original intention was to set this rate at the non-resident rate, and to keep it there

the non-resident rate rising to 15 per cent. I see no reason why it should not be raised in this instance, and that is what is intended and what will be done by the amendment which I would ask my colleague to move.


Mr. MACKENZIE (Vancouver Centre):: I move:
That resolution No. 9 be amended by adding thereto the following: and that the following deduction be allowed: one-third of the interest received from Canadian debtors.


James Lorimer Ilsley: The section would then read:
That the rate of tax applicable to nonresident-owned investment corporations be in-
[Mr. IlsIey.J
creased from 9 per centum to 22J per centum, and that the following deduction be allowed: one-third of the interest i-eceived from Canadian debtors.


Alexander Malcolm Nicholson: Could the minister tell us what difference this change will -make to the revenue?


James Lorimer Ilsley: I have no computation with regard to the revenue. It may be, as others have said, that these companies will fold up, but I cannot tell. I was surprised to find that the amounts collected by these companies were so small; I gave the figures last evening. Whether this amount will be increased or decreased I do not know, but the amendment I am proposing will make a slight difference. Last evening an hon. member stated that some of these companies own some bonds and as the resolution stood without amendment the. interest on those bonds would be taxable at the rate of 22$ per centum per annum. With the amendment it will be 15 per centum per annum, the same rate as is applied on dividends received from corporations.


Major James William Coldwell: Just before we adijourned last evening there was some discussion on these sections. I must confess that I am not satisfied that the changes now suggested are in the public interest, particularly in connection with section 8 where the words "and that the exemption in respect of interest payable in a currency other than Canadian be repealed" are being eliminated from the section. This means that bond interest and so on, payable in a currency other than Canadian, will be relieved of our domestic tax or the tax to the higher amount.


James Lorimer Ilsley: The whole of it.


Major James William Coldwell: Yes, the whole of it. In my opinion people who own property in Canada and are deriving income from the activities of this country ought to be prepared to accept a levy of this sort. While the war is being fought to protect our democratic institutions, it is also being fought to protect property. That is unavoidable under our economic structure, and we are quite justified in asking people who do not happen to reside in Canada but who derive some income from this country to bear a share, with the Canadian people, of the burden of the war. I rather suspect that the minister had that in view when the budget was brought in; that he and his officials thought that it was a just thing to ask and to expect. I agree thoroughly with that point of view, but I know that strong representations have been made by the premier of Ontario and others againt this proposal. I am sorry the minister announced that this would be deleted before

Income War Tax Act
there had been discussion in committee, because the opinion is held by many other than those who belong to this group that the original proposal of the government was justified.
There is one other phase of this matter about which 1 should like to get some information. I think it was in 1936 that I raised a question in the house with regard to personal corporations which, in order that British death duties and other taxes might be avoided, were being formed in some of our provinces, in Prince Edward Island for example, by prominent people in Great Britain, some of whom I could name and some of whom are holding high office with the British government at the present time. I believe that two or three years ago the British budget plugged up some of these holes, if I may call them such. At the same time I drew attention to the fact that some of our citizens-again I could name one or two who are millionaires-had transferred their domicile to the Bermudas, the Bahamas or to the isle of Jersey in order to escape certain Canadian taxes. I wonder if those holes have been plugged? So far as Jersey is concerned that matter has been settled by Hitler, and the people who transferred their wealth there have paid a much higher toll than they would have had to pay had they remained in their own country.
Can the minister tell us whether this matter has been satisfactorily ironed out? I remember Mr. Dunning saying that the matter would be looked into; he thought ways and means would be found to meet the situation as it then existed. Since we are at war and require every available dollar that can be obtained for that purpose, if there is any leakage of this kind I think we would be perfectly justified in going after it one hundred per cent.


Richard Burpee Hanson: This refers to securities held in the United States.


Mr. COLD WELL:: I brought the other up as a supplementary matter.


James Lorimer Ilsley: There has been no change in the principles which have been applied throughout the years. If a Canadian becomes a non-resident of Canada he ceases to be subject to the Canadian income tax.


Richard Burpee Hanson: There is a lack of jurisdiction.


James Lorimer Ilsley: In previous years the discussion has been on the question whether we should draw a distinction between persons who never have been Canadian residents and those who have been Canadian residents but are non-resident at the moment. I remember that Mr. Bennett, when he was leader of the 14873-183
opposition, said that he could settle the matter immediately. I communicated with him afterwards and asked for his suggestions. In the meantime I had explained the difficulties in the house at considerable length; Mr. Bennett became convinced that it was not so easy, and I received no suggestions as to how to solve the difficulty. I do not blame Mr. Bennett, but I was sincere in asking for suggestions.
At the time I felt that it would be necessary to draw a line between persons resident abroad who had formerly been residents of Canada and those who had not been residents of Canada. I do not think it would be possible to place a very high income tax upon residents of the United States who have never been residents of Canada. We would have no jurisdiction. Whether the fact that a man had once lived here, had perhaps made money here, would be sufficient reason for imposing a withholding tax of, say, 45 per cent, while a tax of 15 per cent was imposed against the person who had never lived here, is something which I could not decide at the moment. This would impose restrictions upon change of residence which I think would be incompatible with a person's freedom. I do not know that it could be done, and I never got any further than that with the matter.


Major James William Coldwell: The elimination of the clause with regard to non-residents will assist these people if their funds are payable in a currency other than Canadian.


James Lorimer Ilsley: Yes. The persons whom the hon. gentleman is thinking of are probably to a large extent those who are in receipt of dividends from Canadian corporations. These persons now will pay fifteen per cent instead of five per cent.


Major James William Coldwell: The point I would make regarding these particular people is this. I believe that the premier of Ontario said a short time ago that he had a list of 300 persons who had made fortunes in Canada and who had left the country, largely in order to escape high taxation. I did not know that there were 300, but I do know that some of them have been prominent in the dominion, and the names are known, or believed to be known, to a good many people. I certainly believe that, if we can, we should devise ways and means of dealing with these people who made their money in Canada, who derive their income from the money they made in Canada, and who have deliberately stepped outside the country in order to escape our taxation. As I recall, that matter was dealt with under the British budget of 1939 by the chancellor of the exchequer. I have forgotten just how he did it, but I distinctly remember

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that reference was made to it in speeches in the British house, and my understanding is that they were able to get at the people who were doing that kind of thing. It would be well if our Department of Finance would again look into this matter and see if we cannot get some revenue from these gentlemen-I will call them gentlemen-who left the country, perhaps for their country's good.


Mr. ABBOTT:: With regard to this question of the tax on non-resident loan and investment companies, the minister said that it was always the intention that the tax rates paid by these companies should be the same as those paid by the individual non-resident. The amendment which he is now proposing will in part accomplish that; but in order to make it effective it should include provision for the deduction of interest paid on Canadian bonds or bonds guaranteed by the dominion, because those bonds in the hands of an individual non-resident are not subject to the fifteen per cent tax or to the existing five per cent tax. It strikes me that if we are to put these non-resident companies on the same basis as the non-resident individual, the amendment should include a provision for deduction of interest received by such corporations from Dominion of Canada or dominion-guaranteed bonds. As a matter of fact, it should also provide for deduction of interest received from bonds payable in currency other than Canadian.


James Lorimer Ilsley: What I said was that it
was the intention at the time to make the effective rate the same as the then non-resident rate, and the only companies with which I was dealing were companies whose sole income were dividends on Canadian corporations. We made this rate having that case in mind. The hon. gentleman now suggests that we let them out altogether. I do not think I can concur in that.


Douglas Charles Abbott: The minister said yesterday that the government felt it was improper to issue bonds to non-residents and then take back five or ten or fifteen per cent of its own funds. That applies with equal force to the case of companies which are non-resident. They simply hold their bonds through the medium of a corporation. In effect, the government is taxing the non-resident holder of Canadian funds 22i per cent under the original resolution, and now fifteen per cent under the suggested amendment. It seems to me that, to be logical, we should in any event allow these non-resident owned corporations to deduct from their taxable income the revenue received from Dominion of Canada bonds.
IMr. Coldwell.]


James Lorimer Ilsley: Well, they are a little different from non-residents in that they are here; the companies are here in Canada.


Mr. JACKMAN:: We have them, for the moment.


James Lorimer Ilsley: The hon. gentleman has made a pretty good case on what I said; I will admit that. But I would not feel that I could go that far.


Douglas Charles Abbott: Well, fifteen per cent is a fairly drastic distinction to make between the non-resident who holds Canadian government securities in his individual name, and he who holds them through a Canadian corporation on which he pays ordinary Canadian corporation taxes. It seems to me that that is unfair, and that it will give rise to complaint. In fact, I am sure that it will arouse dissatisfaction on the part of these holders. They are discriminated against because they have seen fit to form a Canadian company to hold their bonds, instead of holding them in their own names.


James Lorimer Ilsley: The theory, I think, is that they were to be put in the same position as if the dividend from the non-resident owned corporation had been remitted abroad and taxed, which is a different matter. That would have been taxable at five per cent at that time. But there was, I believe, no withholding tax. Instead of that, we imposed an income tax, which was equal to the holding tax.


Douglas Charles Abbott: Last night we were labouring the point that the real effect of this resolution was to put these companies on the same basis as an individual; that, by reason of the deductions for foreign taxes paid, they in effect were paying a five per cent rate. If that is the situation, we should now put them in the same position when we raise the rate.


John Ritchie MacNicol: As we are dealing with resolutions 8, 9 and 10, may I ask if it is desired to dispose of the amendment, or may I say a word now with reference to resolution 10?


Harry Rutherford Jackman: I should like to move a further amendment to that, or at any rate to suggest a change. I understand that, under the present wording of the resolution, any of these non-resident companies whose year-end is not the same as the calendar year-end, but at the end of January or February, will have to pay at the higher rate rather than at the old rate. Would the minister consider making the necessary alteration so that the amount of tax could be pro-rated for that

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part of the fiscal year which jibes with the calendar year, in order that fairness may be had by all?


James Lorimer Ilsley: I announced the other night that I would propose an amendment, in respect of the ordinary companies, under the excess profits tax, and I will propose a similar amendment when I come to resolution 17, which will read as follows: If the hon. gentleman will follow it I believe he will agree that it meets his case:
That resolution Mo. 17 of the Income War Tax Act be amended by adding thereto the following words:
provided, however, that in the case of resolution No. 9, if any fiscal period ending in 1941 does not coincide with the calendar year, then that proportion of the profits shall be subject to the 224 per centum tax which the number of days of such fiscal period in the calendar year 1941 bears to the total number of days of such fiscal period, and the balance at the previously existing rates.


Harry Rutherford Jackman: That would seem to meet the case entirely. I thought, when the minister read it the other night, it referred to excess profits tax.


James Lorimer Ilsley: I think it did. That will have to be moved when we come to resolution 17.


Harry Rutherford Jackman: That is justice all round.


Alexander Malcolm Nicholson: Before resolution 8
carries, may I say that I was on my feet last evening at eleven o'clock, and I wanted to say at that time that I thought the minister and his advisers were well advised when they originally drafted the budget and planned on canying out resolution 8 as it appeared in the budget. As I stated last night, those who make investments outside their own country should always be prepared to face the risks which result from their not being in a position to determine the policies of the governments in those other countries. I have never been personally in the position where I have contemplated investments outside my country, nor have I represented people who have made investments in Canada; but our institutions are all being challenged, and those who have large amounts of capital invested in Canada should be prepared to make very generous contributions at this particular time to ensure that their investments are protected. The budget as planned proposed to collect, according to the statement the minister made last night, between eight and ten millions to protect investments of nonresident Canadians.


Richard Burpee Hanson: Would
the hon. member say that again?


Alexander Malcolm Nicholson: Between eight and
ten millions-


Richard Burpee Hanson: I heard
that part.


Alexander Malcolm Nicholson: -would have been collected from non-resident Canadians according to the budget as originally planned, and it would have been a good investment for those whose interests are challenged. It would have been a good investment for them to pay from eight to ten millions to assist in Canada's war effort in order that they might have an equity in these securities in this country in the future. I appreciate the reasons advanced by the minister, but a serious mistake has been made.


Richard Burpee Hanson: Has the
hon. member never heard of sanctity of contract?


Alexander Malcolm Nicholson: I am familiar with
the phrase, "sanctity of contract," but a great many Canadians are not going to be in a position to observe the sanctity of contracts as a result of the commitments of this war.


Richard Burpee Hanson: Is that
any reason why we should break faith with the man in the next country?


Alexander Malcolm Nicholson: It might be better to break faith with him to the extent proposed in the budget, in order to fulfil the remaining terms of the contract, than to fail in this respect with the result that in the future his contract might not be honoured as he expected it would be.


Thomas Clement (Tommy) Douglas: If we are
licked he will not get anything.


Richard Burpee Hanson: Yes, that is true; but until we are licked, let us be honest men.


Alexander Malcolm Nicholson: Our first job is to
collect from those who can contribute the wherewithal to win the war. The minister was well advised in planning to collect from eight to ten millions from the group covered by resolution 8. Would he give us some information as to the policy followed in Great Britain with regard to payments made in currency other than sterling?


James Lorimer Ilsley: I cannot answer the hon. gentleman's question definitely. I am not sure, but I understand that Great Britain does impose a withholding tax in that case. I am not prepared to say positively.


Harry Rutherford Jackman: I would point out to the hon. gentleman who asked the question, because it is of some significance to Canada, that to a great extent we are a debtor countiy.
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I checked the figures this morning, and I find that, while the latest figures are for 1937, there are in this dominion British and foreign investments amounting to $6,765,000,000, whereas the amount of investments held by Canadians in other countries is only $2,800,000,000. Therefore the policy which a debtor country must pursue, a country which wishes to attract more capital in order to provide more employment and create industries after the war, may be entirely different from a policy which a creditor country might pursue. I know nothing of the policy of Great Britain at the present time, but, as we all know, Great Britain has been and perhaps still is to some extent a creditor country. The United States does not want to attract more funds into its borders and is justified in putting on whatever tax it likes, because it is not interested in securing further investments from foreigners.


James Lorimer Ilsley: In answer to the hon. member for St. Antoine-Westmount (Mr. Abbott), I believe he suggested that I have practically committed myself to this idea, or at least that if I were consistent I should have to say, that the income from Dominion of Canada bonds was entirely exempted from taxation. If we were to treat these non-resident owned investment corporations exactly as non-resident individuals; that is to say, if we went on the theory that their position was analogous to that of non-resident individuals and that they should be treated for taxation purposes like non-resident individuals, we would exempt that part of their income which comes from Dominion of Canada bonds, because that interest going to non-resident individuals wmuld not be subject to the tax.


John Ritchie MacNicol: Would the same thing apply to Ontario bonds?


James Lorimer Ilsley: No; it is Dominion of Canada bonds. It may be that I am changing my position. I am not just sure what a literal interpretation of my words last night might mean, but it is probable that I said just what the hon. member for St. Antoine-vVestmount declares that I said. If so, I was putting it on slightly wrong ground. The distinction is not great, but it is a real distinction. The point was that these companies, not being subject to the withholding tax, should pay income tax equal to the withholding tax that would be imposed if they were subject thereto. If the dividends on the shares of these companies went abroad, if they were subject to the withholding tax, they would be subject to fifteen per cent; but not being subject to the withholding tax under the terms of the Income War Tax Act, the theory of this taxation is that they should

be subject to income tax equal to that. That means that they would be taxed on all income, whether from dominion government bonds or not. If we had to go into their portfolio and weed out the securities upon which no withholding tax could be taken, we might have to take out quite a lot of securities, not only Dominion of Canada bonds but United States securities, foreign securities of one kind or another. In some companies we might take out nearly all. That was not the intention, and it would be putting myself and the government in a most vulnerable position if I yielded to that suggestion step by step.


John Ritchie MacNicol: Is there any discrimination between Dominion of Canada bonds and Ontario government bonds or any other provincial government bonds?


James Lorimer Ilsley: The hon. gentleman is on another point.


Douglas Charles Abbott: It would not be a question of our going through their portfolio. The principle is the same as that whereby we now allow them to deduct a third of their income from Canadian dividends. They would be allowed to deduct income from Dominion of Canada or dominion guaranteed bonds. I realize that so far as foreign securities are concerned, that might be going too far; but in fairness to these non-resident corporations, I think they should be put as nearly as possible on the same basis as non-resident individuals.


James Lorimer Ilsley: If I were to adopt that suggestion it would relieve them of a lot of taxation which they now pay.


Douglas Charles Abbott: Up to the present they have paid five per cent on their revenue from Dominion of Canada bonds, and to that extent they were on a different basis from the individual. But if we treble that tax, then it seems to me that we should give consideration to the fact that, in effect, they are only non-resident individuals holding their securities here in the form of a corporate structure.


James Lorimer Ilsley: My hon. friend has made an excellent debating point there. He has taken something that I said and applied it, but we could not possibly do that. They have been taxed on all this income at the five per cent rate-six per cent, as a matter of fact. Just because we put it at fifteen per cent, we are not going to relieve a large part of their income from taxation altogether. We could not defend that.


Richard Burpee Hanson: On the
question of the discrimination between the dominion and the provinces, the minister read

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the telegram of the premier of Ontario last night, and he indicated in a general way what his reply would be. Has that communication been sent yet?


James Lorimer Ilsley: No.


Richard Burpee Hanson: But
notice has been served. I assume that is a correct statement.


John Ritchie MacNicol: A pretty vigorous
statement.


Richard Burpee Hanson: No; the
vigour was the other way; the vigour was in the protest.


John Ritchie MacNicol: That is what I mean.


Richard Burpee Hanson: Just once more, and in a word I want to say that rather than injure the credit of the provinces by this discrimination and procedure, I would hope some accommodation might be found. We are now seeking accommodation from the province of Ontario with respect to the question of income tax. How is the government going to help that accommodation if it pursues this course? When we come to deal with the resolution relating to succession duties I shall ask the minister to seek some accommodation with the provinces with respect to that matter of double and perhaps triple taxation. How can the minister approach the provinces if in this matter he discriminates against them qua the dominion? It is slapping them in the face and then going back and asking for a favour. I suggest that is a poor way of approaching the provinces.


Harry Rutherford Jackman: And the people get two
slaps.


Richard Burpee Hanson: This discrimination is bad in principle; I do not care who started it. Last night the minister was very quick to tell me that the Bennett government started it, but two wrongs do not make a right. Holders of dominion government bonds should, on general principles, be treated exactly the same as holders of provincial government bonds. There may be occasions when an exception should be made to that rule, but on the general principle I am satisfied that I am right. How can the minister go to Premier Hepburn and ask him to vacate the income tax field, in the light of that telegram which he sent the day before yesterday and in the light of the notice the minister has said he is going to send in reply? I am not questioning the tone or tenor of the minister's statement, but I am questioning the policy of the thing. You cannot get accommodation from people if you
treat them in that way. The same question will arise in respect of succession duties, although, judging from what the minister says with regard to succession duties, he is convinced that there is a whole wide field open for double taxation there, and he does not intend to go to the provinces at all. I suggest that he review that state of mind.


John Ritchie MacNicol: Or people will stop
laying up estates.


Richard Burpee Hanson: Of course, what incentive will there be for anyone to be thrifty? Thrift is one of the great virtues, but the minister is going to penalize estates right down to the $5,000 limit. However, what I have to say about that I shall say later on.
I know the minister must raise the money. Of course he always falls back on the doctrine of ex necessitate; he must have money. All right, let him balance that against discrimination if he will. Do not seek the easiest way out; let us endeavour to be just before we are generous to ourselves. I do not quite understand the position of these non-resident holding companies, and I have withheld my comment about that. But I venture to suggest to the minister that, even with the modification he has to-day indicated he will make, capital will leave Canada. We are a debtor nation and want all the money we can get; we want to encourage people to come in and help us build up this country.


John Ritchie MacNicol: Build factories.


Mr. DIEFENBAKER:: I agree with what the leader of the opposition has stated, that in adopting this tax and this policy we are penalizing those who invest in provincial government bonds. I should like to know the extent of the investment to-day by non-residents in Canadian provincial government bonds. How much is owned by non-residents? We should know that so as to be in a position to understand whether the arguments advanced are as serious as they might be. The matter of principle still remains, but the amount is an important consideration.


James Lorimer Ilsley: I am not sure that the hon. gentleman realizes that this discrimination has not been created by me. It has been in existence since 1933; there is just a difference in the rate.
Second, I am not sure whether he understands that it is not limited to provincial and municipal bonds but extends to industrial bonds as well, to all bonds issued in Canadian currency with the exception of dominion government bonds.
Income War Tax Act

Mr. DIEFENBAIvER: The statement made by the minister is entirely unnecessary. I understand what the provisions of the statute are, having the statute before me. The question still remains. The minister is too prone to hide behind what happened under another government. The question I am asking is, how many provincial government bonds or securities are held by non-residents?


James Lorimer Ilsley: We have no record of that, and I do not know that a record could be obtained.


Richard Burpee Hanson: The income tax department must know about that. No coupons can be cashed without ownership certificates.


Harry Rutherford Jackman: The bureau of statistics would have it.


Richard Burpee Hanson: Yes, they know it. Within two years the province of New Brunswick, when they could not sell anything in Canada, sold bonds in the United States, a whole issue. I am sure that those bonds to-day have dropped in value hundreds of thousands of dollars.


James Lorimer Ilsley: The commissioner of income tax tells me that while I could give the amount of tax withheld, that applies not only to bonds but also to dividends, and that there are no separate figures available for bond interest.


John George Diefenbaker: Possibly we can get the figures as to how many securities of all kinds are held by non-residents. Those figures must be in the possession of the minister. He was able to tell us that a considerable increase in revenue would be secured by the increased tax.


James Lorimer Ilsley: There are estimates, probably pretty good ones, of our investments abroad and of United States investments in Canada, but I do not think they are separated into bonds and shares. I have never seen any figures in which they were. The classification is always in two categories; direct investments, and security investments, called indirect. That would not answer the hon. gentleman's question at all. Our direct investments in the United States are investments in property. A typical instance would be the Canadian Pacific Railway company's line through Maine, or Canadian National lines in the United States, factories owned by Canadian residents in the United States, and so on. Those are direct investments. Then there are the security investments, which are the indirect investments in United States property. I do not think they are separated into bond and share holdings; nor is that the situation

in connection with United States investments in Canada. I understand that the hon. gentleman wants the United States investments in Canada broken down into investments in bonds, investments in shares and direct investments in property. I imagine he would be satisfied if he could get that information, with a further break-down between Canadian pay and foreign pay. I assume he is trying to get at the value of the Canadian bonds which are held by non-residents and which are being subjected to the increased tax. I am informed that this information is not available.


Richard Burpee Hanson: That is,
not available to the dominion government?


James Lorimer Ilsley: Right.


Richard Burpee Hanson: I think all the provinces have pretty accurate information on that point. Of course that would not be available here, not at the moment in any event; but I believe the province of Ontario has full information as to where its bonds are held as between Canada, the United States and foreign countries, and I am sure the province of New Brunswick also has information of that kind. I am not, however, so much concerned about that. What I am concerned about is the discrimination as between, on the one hand, dominion government bonds, which under this legislation are occupying a favoured position, and, on the other, bonds of our provinces and municipalities. Certainly this is going to make it absolutely impossible, even without regard to the war, to sell any more bonds in the United States. What about shares and bonds of Canadian companies owned by parent companies in the United States?


James Lorimer Ilsley: If they are wholly owned they are exempt.


Richard Burpee Hanson: Would that be the situation with the bonds of the Saguenay Power company, which is owned by the Aluminum company? I understand they have a large portion of that issue, or perhaps the whole of it. Of course that is payable in United States funds, and I assume it would be brought out from under this provision by the amendment.


James Lorimer Ilsley: If the bonds are payable
in United States funds, that would be so.


John Ritchie MacNicol: I should like to say a word with regard to the statement issued by the premier of Ontario. This is the province from which I come, and naturally I am interested in that statement; and because of the important part Ontario plays in this country

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I should like to know if the statement made by the premier of Ontario is correct. The newspaper report is headed:
Discrimination Avers Hepburn.
Attacks Ilsley Plan to Tax Non-Residents.
I need not read the whole statement, but Mr. Hepburn's telegram concludes with these
significant words:
If the dominion can levy a tax on Ontario bonds and at the same time except its own, such policy, if unchallenged, would make it impossible for the treasury of Ontario to carry on its ordinary financing. Our treasury officials question your authority and the legality of your proposal. I maintain that the action is rank discrimination and the situation should be remedied immediately.
Would the minister tell me whether the statement of the premier of Ontario is correct, or whether it is based on an assumption that is not correct?


Richard Burpee Hanson: The minister admitted it last night, and justified it by saying that Mr. Bennett did the same thing.


John Ritchie MacNicol: That would not be any
answer at all. Anything done ten years ago has no bearing whatever to-day. I do not see how this government can discriminate against the great province of Ontario, which raises almost half the entire taxes of Canada. I do not believe the government can legally discriminate against the greatest taxpayer in this country, as the premier of Ontario says, to the extent that this province will not be able to sell its bonds and carry on its ordinary financing. I assume that applies also to the other provinces, but they can speak for themselves.


Mr. KINLEY:: Then why complain about
Ontario?


John Ritchie MacNicol: The other provinces can
speak for themselves.


Thomas Miller Bell: Does the hon. gentleman say the greatest taxpayer or the greatest accumulator?


John Ritchie MacNicol: The province of Ontario does not need any defence on my part, but from time to time it has been attacked from all corners of this house because of the thrift of its business men. It is true that they live in a province where there are natural resources which can be developed. God has given this province water powers and natural resources. I do not see why Ontario should be picked on; after all, it has been a most generous taxpayer, and much of its wealth has gone to compensate the province from which my hon. friend comes.


John George Diefenbaker: I am going to try to get this information from the minister in another way. Will he tell the committee how much was collected during the last fiscal year under section 9B (2) ?


James Lorimer Ilsley: It was $12,282,259.11.


John George Diefenbaker: What is the anticipated revenue this year? Would it be three times that amount?


James Lorimer Ilsley: The estimate given in my
budget speech was $30,000,000 from the increase, which included the deduction from the interest payable in foreign currency. That is being taken out; and my estimate of the loss due to taking it out was from $8,000,000 to $10,000,000, which would leave an estimate of from $20,000,000 to $22,000,000 for the tax on the interest and dividends payable to nonresidents in Canadian currency.


[Stage Direction]
Amendment agreed to.
Mr. BENCE:: Does resolution 10 apply to royalties, rentals and similar payments which may have accrued due before this change became effective?


James Lorimer Ilsley: Yes.


Alfred Henry Bence: Then I should like to point out the discrimination that is brought about in connection with those non-residents who have invested their money in western farm lands. Under the wheat board regulations last year, all the wheat taken off a farm could not be sold, because of the quota restrictions, and in most instances the portion of the crop due to the landlord has not yet been sold; in any event all of it has not been sold. The first proceeds had to go to the tenant in order to provide him with sufficient funds to pay his expenses and carry him over the winter. As a matter of fact, in most instances the landlord was quite pleased to allow him to get his proceeds, because the indications from the wheat board and the government were that all of the crop could be sold by the end of the crop year. If it affects crop proceeds which accrued last fall these non-residents will have to pay the increased tax. Because of their sympathy toward the tenant, or because they simply were not allowed to do so, the tenant having charge of the quota book, these landlords were not able to sell.


James Lorimer Ilsley: All I can do is take note of the hon. member's observations. I do not know of any way in which the situation can be met.


Alfred Henry Bence: In this way, may I suggest: it could be applicable at least in connection with agreements of sale of land, or pay-
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ments of rent in respect of land which
accrue due only after the change becomes effective.


James Lorimer Ilsley: I do not know how in the world we could investigate that. The operation of this provision is almost automatic. It applies on the money that goes after a certain date. There is no doubt about how much is due the government. But if the deductibility of this amount is to depend upon a question of fact and of law, which will have to be checked, administration will be very difficult. You could not hold it to payments due on western farm land. It would have to apply to the whole range of payments. And I am sure many mistakes would be made. There has to be some definiteness about these things. Very often there will be cases where persons would have escaped the tax had they acted differently.


Alfred Henry Bence: In this instance I suggest it is the government which might have acted differently.


James Lorimer Ilsley: The hon. member is saying that these people will be penalized for their kind-heartedness. That often happens, unfortunately. There is no intention to be unfair to anybody, but if we do not stick to the simple question whether money is going or not, we will get ourselves into deep water.


John Ritchie MacNicol: I may not have a right perception of the meaning of resolution No. 10. I notice that in the second line it refers to rentals. Would that apply to real property, such as a house?


James Lorimer Ilsley: Yes.


John Ritchie MacNicol: I have in mind a case- probably it is too small to mention, but I bring it before the committee because of the principle involved. I knew a family, the parents of which are now dead. They lived in a small Ontario town north of Toronto. They had one daughter. The daughter married an American-well, I do not know whether he was an American, but at any rate he lived in the United States. She and her husband now live in that country, and have been there for years. When the parents passed away they left her their small house. From it there is an income of $8 a month, or $96 a year. I am told the taxes are approximately $32 a year, leaving a balance of some $64 from the total rental. Do I understand that before that $64 could be sent to the United States, fiften per cent would be deducted from the rent?


James Lorimer Ilsley: The 15 per cent would be taken from the total rental.


John Ritchie MacNicol: Off the whole of the $96?
[Mr. Bence 1


James Lorimer Ilsley: Yes.


John Ritchie MacNicol: That makes it far worse than I had thought. I think I shall stick to my figures, because they do not seem so bad. Taking 15 per cent off the net of $64 would bring the net down to $54.40. When the money is sent across the border the person who looks after the estate will have to pay 10 per cent exchange, which will bring the total down to $48.96. Now, the owner has to call in a plumber once in a while, and she will have to make other repairs. There will be nothing left for her. I am not speaking for the big corporations,- because they can afford to pay. I am speaking, rather, of a small house owner who will have little left if the 15 per cent is taken off the total amount, which in this instance is $96. Fifteen per cent of that amount would be roughly $14, and that sum added to payments for taxes and repairs would leave very little. It seems to me that this provision is unfair to the small house owner.


Howard Charles Green: I should like to discuss further a point I mentioned yesterday. On the Pacific coast there are many instances in which, after the tax is levied on the gross rental, there is no net rental left; in other words all the rent is eaten up, and the owners have to provide a portion of the tax from capital account. That is unfair, and I repeat that the minister ought to consider incorporating in the resolution an exemption providing that when there is no net rental left, in the imposition of the tax, no further tax should be imposed. In other words, do not go beyond the net rental. Allow the owner to deduct his taxes, repairs, insurance, and charges of the kind.


James Lorimer Ilsley: This is a matter of administration. If we have to have an accounting of these cases to get returns from persons resident in the United States and Great Britain, we have very little control over them, and cannot send in our auditors, or anything of that sort. The only way to control such a situation is to take a proportion of the gross. I do not think it should be computed on the net basis. In my opinion it should remain on the gross basis. If the hon. member were suggesting a rate of five per cent, or stating that it should not go up to 15 per cent, his contention would be administrable and practical. But I do not think it is desirable to move from the gross to the net basis in regard to this class of payment of non-resident. As I said last night, the United States does not do it, and I believe for the same reason we are not doing it.


Howard Charles Green: I am not suggesting the minister should leave the gross basis. If he

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wishes, let him continue on that basis; but do not take more than the net rent a man receives. The department collects this tax on rentals anyway, from the agents in Canada.
I understand that is the way the money is collected. The agent has to pay it to the government, so that there could be no further administrative difficulty in getting a statement from the agent as to the expenses. Let the agent claim for certain expenses-for municipal taxes, insurance and repairs which have to be paid out in connection with a property. There is no reason why that information could not be obtained.


James Lorimer Ilsley: We would have to go into the amounts paid by his principal as well as the amounts paid by himself. That is, we cannot take merely the amount that he happens to pay out personally, and assert a sort of jurisdiction over the agent. We have to deal with the person in interest, the owner of the property. And if we are going to move to this other basis we have to see what he receives from the house and pays out in respect of it. That would include many things, possibly, that the agent does not pay.


Howard Charles Green: You find that out now from the agent. You find out what rental is paid, and you make the agent responsible for paying five per cent of the gross rental. If the regulation goes through it will mean that the government will collect IS per cent from the agent on the gross rental.


James Lorimer Ilsley: Yes.


Howard Charles Green: Why can the department not find out from the agent the expenses in connection with the property, and then make such provision that the owner will not have to pay the tax out of his capital?


Richard Burpee Hanson: There is jurisdiction here over the property. This is an income tax to be collected from the owner, whether it be a corporation or an individual, and the minister has jurisdiction because the properties would be within the territorial jurisdiction of the country. He could place restrictions against the agents and they would have to conform with the regulations before they could pay anything to the owner. I do not see that there is anything wrong with that from the administrative standpoint. However, I think it is objectionable to take 15 per cent of the gross rental or gross income. I should like to know anyone who is getting 15 per cent on his real estate to-day. I have some, and I would be delighted to have half of that left after paying the carrying charges, the taxes, and for all the other things that tenants want. If I could get four per cent 14873-184
net after allowing proper depreciation, I would be happy. We used to try to get six per cent, but you cannot get that to-day. You cannot raise rents, and the cost of everything you put into a property has gone up, including taxes. The minister is taking 15 per cent of the gross rentals on real estate, which is just robbery.


James Lorimer Ilsley: The hon. gentleman is talking about the percentage on the value of the property, whereas this is concerned with a percentage of the rental.


Richard Burpee Hanson: If you take 15 per cent of the rental you take all th6 cream and leave the owner just the skim-milk.


Harry Rutherford Jackman: This will work a hardship in many cases. I know of a house in Toronto which is being rented for $60 a month. In one year, after mortgage interest and other carrying charges had been paid, there was a net return of $14. The total rental at $60 a month would be $720, and 15 per cent of that would be $108. I do not think we have jurisdiction to tax something which is not income. Property is under the jurisdiction of the provinces, and in order to pay this tax it might be necessary to dispose of the property.


Angus MacInnis: It is not very often that I rise in my place to say something in support of property holders, but I must say I am surprised at the attitude taken by the Minister of Finance in view of his concern on other occasions for certain vested interests. It is obvious that this is not a tax on income, it is a tax on revenue. If we cannot tax these people on their ordinary income, surely we cannot tax them on the revenue received. It seems to me that that is quite unfair. The function of a tax is to tax the income of the people, to take that which they are not using for living expenses or to maintain a reasonable standard of living. A non-resident of Canada gets a certain rent and it is quite possible that that rent is eaten up in the upkeep of the property, yet you are charging a tax on the rent received. I do not think it is fair.


Howard Charles Green: Subsection 4 of section 27 of the Income War Tax Act provides for payment by the agent of the non-resident. Would it not be possible to provide for a return by the agent showing the proper expenses in connection with the maintenance of the property?


James Lorimer Ilsley: In many cases the non-resident owner of the property will himself pay the mortgage interest and insurance. The

Income War Tax Act

agent would have no power to compel his principal to give him that information, and we would have no power to penalize the agent for giving wrong information because it would be information which he would receive from someone else and of which he would have no personal knowledge. It is fairly easy to administer an income tax upon persons within the jurisdiction, and we do it; but it is quite difficult to administer such a tax against persons outside the jurisdiction and that is why we are imposing this one on the gross payments.


Howard Charles Green: Why not leave the rate at five per cent in this case? Would that affect the revenue to any great extent?
Mr. 1LSLEY: If an exception is to be made here and the rate is brought down to five per [DOT] cent, the same thing will have to be done with certain other clauses in this section. Just as sure as I am standing here, if I proposed an extension of the five per cent rate to other forms I would be attacked just as strongly as I am being urged to take this action now. I do not think that I had better consider that. Undoubtedly there will be cases of hardship, but there is one escape, by incorporation in the country.
Mr. JACKMAN; Provided it is a big enterprise.


James Lorimer Ilsley: I suppose it would be pretty hard to get around it in some of the smaller cases, but small companies can be formed. If we made a breach in our 15 per cent rate, the same rate would have to be applied to other remittances made under this section. It would have to be applied all along the line, whereupon I would be attacked most strongly by those persons who are so anxious about the national defence tax and so on. I think the only thing I can do is to leave it alone.


Howard Charles Green: Could provision not be made for an owner to apply for a rebate? In other words, he could pay the tax on the gross rental and then apply for rebate.


James Lorimer Ilsley: I do not think we could stop here. Has the receiver of rents a better right to file a return and set up deductions, expenses and so on, than the receiver of interest, the receiver of royalties, or the receiver of any other form of payment? That would put us into the business of controlling, checking and auditing the affairs of non-residents.


Howard Charles Green: The position is different, because the man who receives interest or royalty payments does not have to pay out

any money; it is a net amount that he receives.
Progress reported.
On motion of Mr. Lapointe (Quebec East) the house adjourned at 6 p.m.
Monday, May 19, 1941.