1943-04-08

[Stage Direction]
On the order for motions:
Mr. GORDON GRAYDON (Leader of the Opposition):: Mr. Speaker on Tuesday of this week the chairman of the public accounts committee, the member for Northumberland, Ontario (Mr. Fraser), presented the second report of the public accounts committee and subsequently moved concurrence in the report. I rose in my place on that occasion and declined to give approval to the motion, pointing out that the customary notice had not been given and that the house must of course give unanimous consent to the matter then being proceeded with. I should like to ask, if I may, that the proceedings and the evidence taken before the public accounts committee up to the time the second report was presented to the house and concurrence in it moved be tabled so that it will be available for the convenience of hon. members, to enable them intelligently to discuss the motion for concurrence when it is again made.


Mr. MACKENZIE (Vancouver Centre):: On a point of order, Mr. Speaker, there is nothing before the house. I understand that the mover of the motion is not in his seat at the present time; and I suggest to my

Questions
hon. friend that the proper place and time to make his suggestion is when this motion is before the house. I doubt whether the house can ask that the proceedings of the committee be tabled until the motion for concurrence is made.


Gordon Graydon: May I say in answer to the Minister of Pensions and National Health that, I do not propose to set myself up as an expert in procedure, as he is; but I should like to read into the record rule 668-


Mr. POULIOT:: There is no such rule.


Gordon Graydon: -citation 668, which is as follows:
It is the custom not to report the evidence until the enquiry has been completed, and the report is ready to be presented; but where an intermediate publication of the evidence, or more than one report, has been thought desirable, the necessary power has been conferred upon the committee on its appointment, or the house has granted leave subsequently, on the application of the chairman, for the committee to "report its opinions or observations, from time to time," or to "report minutes of evidence" only, from time to time.
I suggest, Mr. Speaker, my request that the evidence and proceedings be tabled is not an unusual one, and if granted it would greatly facilitate the debate when the concurrence motion is finally moved. May I also say to the Minister of Pensions and National Health that there is before the house a motion for concurrence. True it stands, but the motion was made and stands up to the present moment.


Ian Alistair Mackenzie: No it does not. Unanimous consent was refused.


Mr. SPEAKER:: The remarks of the leader of the opposition (Mr. Graydon) with regard to the evidence being tabled relate to a matter which is not before the Chair at the present moment and can be dealt with only when a motion for concurrence is made by the chairman of the committee. The citation which the hon. gentleman has read would indicate that the granting of such leave would be on the application of the chairman. I assume that the hon. gentleman is giving notice to the chairman of the request for the tabling of the evidence and that it be considered; but in the meantime the matter is not before the house.


Gordon Graydon: My one concern is that the evidence shall be available to the house for the debate, and if this result can be attained in any other manner than I have suggested. I have no objection.



QUESTIONS

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

Mr. LECLERC:: 1.	Does the government conduct a restaurant or cafeteria at the Brownsburg, Quebec, shops?
2.	If so, what prices are charged to the workers for meals?
3.	Is the government obliged to refund to the shop management the difference between the prices paid by the workers and the actual cost of the meals?


Mr. HOWE:: 1.	No.
2.	Answered by No. 1.
3.	No.


CHARTERED BANKS-EXCESS PROFITS AND INCOME TAX
Mr. MARSHALL:: What sums were paid by way of excess profits or income tax by the Bank of Montreal, the Royal Bank of Canada, and the Canadian Bank of Commerce, in each of the years, 1935 to 1942 inclusive?


Mr. GIBSON:: Section 81 of the Income War Tax Act prohibits the furnishing of the information which has been asked for.


EXPORTS OF METALS
Mr. ROY:: 1.	During the year 1942, did Canada export metals of any kind to, (a) neutral countries; (b) to allied countries?
2.	If so, to -what countries?


Mr. MacKINNON (Edmonton West):: 1.	Yes.
2.	Owing to censorship regulations this information is not available for publication.



QUESTIONS PASSED AS ORDERS FOR RETURNS


Mr. GREEN:: 1. WThat timber licences, tracts and sawmills, or interests therein, in the province of British Columbia, have been sold by the custodian of enemy property?

Questions as Orders for Returns
2, What are the names and addresses of the respective purchasers and what were the purchase prices and other terms of sale in these cases?


Mr. McLARTY:: Return tabled.


JAPANESE NATIONALS IN BRITISH COLUMBIA
Mr. GREEN:: 1.	What persons of the Japanese race have been permitted to remain in the protected area in British Columbia?
2.	For what reason was a permit granted to the respective persons so remaining and where do they reside at the present time?


LIFE INSURANCE-ENLISTMENT IN ARMED FORCES
Mr. KNOWLES:: 1.	Are life insurance companies, doing business in Canada, discontinuing the policies of individuals insured under group insurance plans, when such individuals secure leave-of-absence from their employment, in connection with which such group insurance was obtained, for
'the purpose of enlisting in the armed forces?
2.	What steps has the government taken to prevent the above practice?
3.	What steps has the government taken to protect the individuals affected by the said practice?


UNEMPLOYMENT INSURANCE COMMISSION
Mr. BLACKMORE:: 1.	Of the 462 permanent positions established by the civil service commission for the unemployment insurance branch of the government service, how many have been allotted to each of the nine provinces, and how many have been filled in each of the provinces?
2.	On what date or dates did the civil service commission hold competitive examinations to fill these positions, and was competition limited to those already in the civil service, or were the examinations conducted in the public interest with any and all who desired to compete, being eligible to do so?
3.	Were any members of the staff of the former director of registration, national employment commission (Purvis commission), Jackson building, and of the director of national registration, 193 Sparks street, Ottawa, blanketed into the unemployment insurance branch of government service?
4.	If so, howr many, what are their names, previous classification and duties, and present classification and duties, previous salary or salaries, and present salary or salaries?
5.	What is the name and present position of the former director of registration, national employment commission (Purvis commission), and of the director of national registration, 193 Sparks street, Ottawa? What was his salary in 1937, and what is it now?



AWARDS UNDER EXCHEQUER COURT ACT

James Alexander Marshall: What awards were made under the Exchequer Court Act, R.S., c. 34, in the year 1942?
Mr. ST. LAURENT: I should like to have this made an order for return; and perhaps the hon. member would give me a little more precise information as to what he requires. The question is in very broad terms.



LABOUR CONDITIONS


[Stage Direction]
On the orders of the day:
Hon. GROTE STIRLING (Yale):: In the absence of the Minister of Labour (Mr. Mitchell) may I ask the government whether the statement is true that a thousand Canadians now employed by United States firms on northern war projects will gradually be replaced by United States citizens?


Mr. RALSTON:: I will refer the question to the Minister of Labour.



CANADIAN CAR MUNITIONS PLANT, CIIERRIER, QUEBEC

[Stage Direction]
On the orders of the day:
Mr. J. SASSEVILLE ROY (Gaspe):: I wish to direct three questions to the government in connection with the strike of employees at the plant at Cherrier, in the province of Quebec. The questions are: First, what steps have been taken by the government to settle that strike? Second, what are the means in the hands of the government or what is its policy in the effort to prevent strikes such as have occurred throughout Canada since the beginning of the war? Third, does the government think that such factors as wages being frozen at too low a level, or heavy income tax deductions from the workers' pay, or rationing and so forth, have anything to do with these strikes?


Thomas Vien: Order. The hon. gentleman has asked three questions. In the first question, as I gathered it from him, there was a degree of urgency. With regard to the other two, certainly they should be placed on the order paper. If the minister so wishes he can reply to the first question.


Hon. C. D. HOWE (Minister of Munitions and Supply):: Certain employees did

not report for work on three shifts yesterday. The government has received no advice that there is a strike in progress; the plant is operating normally, and there is no disturbance in the area. If there is a strike, or if certain employees think they are on strike, of course it is an illegal strike. Absolutely no action will be taken by the government in connection therewith until the employees return to work. A strike in a plant which is handling high explosives is a most dangerous thing. A plant of that type is safe only as long as every employee follows the safety regulations; it becomes very dangerous if there is any carelessness or disturbance such as would arise from a strike. I have made it quite clear to the management that if any disturbance should develop, either in the plant or outside, it will be closed down indefinitely.



QUESTION AS TO UNEVENNESS OF DISTRIBUTION

[Stage Direction]
On the orders of the day:
Hon. R. B. HANSON (York-Sunbury):: I should like to direct a question to the Minister of Finance as the minister representing the wartime prices and trade board. Has the attention of the board been drawn to a situation which has been represented to me to exist in connection with butter? It is said that in some communities there are large excess supplies of butter while in others there is a stringency in the supply. In other words the situation is spotty. What is the board doing with respect to the distribution of this important commodity? If the minister cannot answer now, I should like him to get the information later.


Hon. J. L. ILSLEY (Minister of Finance):: I shall do that.



REPORTED SHORTAGE IN FLIN FI.ON

[Stage Direction]
On the orders of the day:
Mr. M. J. COLDWELL (Rosetown-Biggar):: I have just received a telegram from Flin Flon stating that there is a very serious shortage of milk, and that infants are suffering. They report a shortage of other foods and complain of high prices that are being charged, but I am particularly interested in the milk situation. Will the Minister of Agriculture look into this?


Hon. J. G. GARDINER (Minister of Agriculture) :: I shall make inquiries.

Coal



WAR APPROPRIATION BILL


[Stage Direction]
On the orders of the day:
Gordon Graydon: I should like again to ask the Minister of Finance two questions which I asked him a couple of weeks ago. At that time I suggested that he have prepared a table of expenditures which would facilitate the discussion on the war appropriation bill. He will recall that I suggested that in addition to the break-down of items which he was good enough to have placed on Hansard some weeks ago, he should also give us wherever practicable the expenditures during the years in which there has been a war appropriation bill brought down. If this were done we would have a convenient means of checking expenditures which have been made with the estimates now before the house.


James Lorimer Ilsley: I spoke to one of the officials about that and he thought the information could be furnished, at least in part. It was my intention to go as far as possible in meeting the request.


Gordon Graydon: Can the minister give us any idea when we may have it? It will not be of much use if it is brought down just before the war appropriation bill is to be considered.


James Lorimer Ilsley: The war appropriation bill will not be reached until after the Easter recess, I should think. I will get it as soon as I can.



QUESTION AS TO MEASURES TO PREVENT DECLINE IN PRODUCTION

[Stage Direction]
On the orders of the day:
Mr. F. D. SHAW (Red Deer):: I should like to ask the Minister of Munitions and Supply (Mr. Howe) a question which arises from information released by the bureau of statistics indicating a recent sharp decline in the production of coal in Canada. Will the minister make a definite statement to this house at an early day indicating what the government or the government through the emergency coal production board are doing to prevent a decline in the production of coal during this spring and summer?


Thomas Vien: That question should be placed upon the order paper.

Canadian Forces-Farm, Leave



CANADIAN FORCES


[Stage Direction]
On the orders of the day:
Mr. J. G. DIEFENBAKER (Lake Centre):: I should like to ask the Minister of National Defence a question in connection with farm leave for men in the armed services. It has been brought to my attention that some commanding officers say that they have no authority to grant farm leave, that it is necessary to secure the consent of headquarters in Ottawa. Have the commanding officers authority to grant this leave without the concurrence of the district officer commanding or headquarters, and have they been so advised?


James Layton Ralston: As I remember it, the approval of the district officer commanding is required, but not the approval of national defence headquarters. I shall make inquiries immediately. As I stated the other day, instructions have gone out that these matters are to be dealt with promptly, because I realize that it is of no use to give farm leave after the seeding operations are over.


Mr. DOUGLAS (Weyburn):: Do the applications made by the men to the commanding officers have to be forwarded to the divisional board in the military district?


James Layton Ralston: As I remember, the
answer would be in the negative in connection with seeding leave. The provision with regard to the board is that the applications for compassionate leave for N.R.M.A. men who have not been in the army three months must go to the board. It is considered that they are not fully trained soldiers. The applications of fully trained soldiers do not go to the board.


Richard Burpee Hanson: I hope the minister will keep in mind the fact that the period of seeding in the east, especially in New Brunswick and Nova Scotia and Prince Edward Island, is quite different from the seeding period in the west.


James Layton Ralston: Yes.


Richard Burpee Hanson: Nothing could be done in April in New Brunswick, but May and June are seeding months. Seeding in New Brunswick is carried on right up to the latter part of June.
I Mr. Speaker.]



STATUTES FOR 1942 INQUIRY AS TO PRINTING AND DISTRIBUTION

[Stage Direction]
On the orders of the day:
Jean-François Pouliot: As a private Liberal member of this honourable house, may I ask the Secretary of State if he will be kind enough to tell us when the statutes for 1942 will be printed and delivered to the members.


Norman Alexander McLarty: As a result of the request made a few days ago by the hon. member for Temis-couata, I made inquiry of the king's printer and I understand that the bound copies of the 1942 statute's will foe available about the end of next week, when they will be forwarded to hon. members.



WAYS AND MEANS

[Stage Direction]
The house in committee of ways and means, Mr. Bradette in the chair.

[Stage Direction]
Resolved, that it is expedient to amend the Income War Tax Act and to provide:-
1. That in respect of the taxation year 1942 the income tax liability, of taxpayers other than corporations, under subsection I of section 9 of the Income War Tax Act, in respect of earned income and in respect of investment income up to $3,000 shall be one-half of the amount calculated according to the schedules therein specified.
Mr. FRASER (Peterborough West):: Yesterday the minister said that the balance of the 1942 income tax would not bear interest.
I should like him to explain what he means by that. Those who are paying their tax in quarterly payments paid one instalment on October 15, another on January 15, and the remaining tax will be due at the end of June. I believe the minister suggested last night that there would be no interest payable on that part. I should like to know when the interest starts. The department generally charges interest, and plenty.


James Lorimer Ilsley: The amount still due of the 1942 income tax may be paid one-third on or before June 30, and the other two-thirds on or before December 31. There is no interest payable if that rule is followed.


Gordon Knapman Fraser: No
interest until after December 31 as long as the rule is followed?


James Lorimer Ilsley: If one-third is paid on June 30.

Income War Tax


Gordon Knapman Fraser: But we are already supposed to have paid half the total for 1942.


James Lorimer Ilsley: Then there is nothing more to pay.


Gordon Knapman Fraser: But
on account of not having any income tax forms many people do not know what they owe. They may not know until they get the forms. When will the forms be ready?


Colin William George Gibson: They will be ready after the house approves the changes brought about by the budget. We cannot issue them before the resolution is carried.


Gordon Knapman Fraser: How-soon after the resolution is passed will they be ready?


Colin William George Gibson: The forms are set up, ready to be printed. We are awaiting confirmation by the house.


Mr. JACKMAN:: What is the total tax debt of the Canadian public in respect of the year 1942, assuming the January 15 payment included in 1942? How much will be collected on 1942 account in 1943?


James Lorimer Ilsley: I have not the figure, and I do not think anyone has. Is the hon. gentleman asking the amount that is still due assuming this proposal becomes law-after the fifty per cent forgiveness how much is still due?


Harry Rutherford Jackman: That is right.


James Lorimer Ilsley: I do not think anyone has the figure.


Mr. DORION:: In the application of the income tax the position of those who have many children to support should be taken into consideration. Speaking on the budget some weeks ago I expressed the view that the government should take more care of the heads of large families. I recalled that the essential elements that constitute the soeiety which we are now fighting to safeguard are not adequately protected as regards the burden of taxation imposed upon them.
Not long ago we read in the newspapers that there was in some quarters discussion of a project for bringing into our country after the war immigrants from European countries. But there is no doubt that the best way to increase the Canadian population would be by raising children in Canadian families. Therefore the first duty of the government should be to protect in every possible way the
large families now existing, and also to encourage the people to have as many children as possible. This way of increasing our population would be without any doubt the surest way to have a sound and right-minded population. In view of this I believe the government, in the matter of taxation, should give protection to (he heads of large families.
Referring to the revised table of tax deductions recently published by the Minister of National Revenue I should like to give one example of this deficiency in our Income War Tax Act. Taking an income of 83,000 a year, that is to say a monthly amount of $250, as shown at pages 26 and 27 of the revised table, one can readily see that for a single person without dependents the total monthly tax is $84.25, or an annual tax of $1,011. This leaves a balance of $1,989. For a married person with four dependents the total monthly tax is $35.80, or an annual tax of $429.60, leaving a balance of $2,570.40. According to these figures the married person with four dependents is entitled to only $581 for the maintenance of his wife and his four children, tl..,t is to say, the difference between $2,570.40 and SI.989. Is there anyone who will contend that this is just and fair? The example I have just given is an illustration of the whole matter, because if you look at the revised table you can take any figure and compare the tvo classes of people I have just mentioned and see that it is the same all over. Therefore my contention is that married people with dependents, and especially those with four or more dependents, are not adequately-protected but are penalized because they have too many children. The country needs large families, and it needs well brought up families. I suggest that to take $429.60 per annum from a family consisting of father, mother and four children, with an income of $3,000, is far from being a good way to get such families. We must not forget that besides the income tax there are many other taxes upon the citizens of one kind or another. Therefore it goes without saying that a man who has a wife and four children pays more taxes proportionately for the support of his family than a single person. In fact the burden of taxes is much heavier than the difference between the two figures just given.
I do not hesitate to declare that if the matter were submitted to expert economists they would report that something should be done to correct this situation for the benefit of the whole community. I submit that if our system of taxation continues to penalize those who have large families, the effect upon
Income War Tax

the future of our country will be very bad. Therefore I move the following amendment, seconded by the hon. member for Gaspe:
That section 1 of the present resolution be amended by adding the following words:
"Provided that in the case of a married person with four or more dependents, or any person granted an equivalent status under the act, whose earned income is less than $3,000, there will be no income tax liability in respect of the taxation year 1942.


James Lorimer Ilsley: At the conclusion of what I have to say I shall take a point of order and submit that the amendment is not in order. But I do not want to do that at the moment; I want to answer the argument of the hon. gentleman.
The hon. gentleman's argument is that the tax deduction allowed in respect to children i inadequate. He assumes, apparently, that there should be a tax deduction sufficient to enable a child to be supported out of that deduction. I listened very carefully to his speech, and there was a passage in it which is based upon that assumption.
I want to say very emphatically that in no income taxation system that ever existed in this or any other country has there been provision for the maintenance of children out of the tax savings. I will come back to that later and say why, but in the second place I want to say that the consideration given to persons with large families under our present taxation schedules is greater than ever before, so far as deductions and exemptions are concerned.


Harry Rutherford Jackman: Up to what income?


James Lorimer Ilsley: Up to about $2,500. As one moves into the higher incomes the consideration becomes less than it has been in previous years, but in the low incomes, the incomes of persons getting $1,200, $1,500, $2,000 and $2,500 -there comes a point which one cannot name precisely, because it differs with the size of families-the deduction from taxes on account of children is greater than ever before.
I want to prove that. The deduction in previous years, until the 1942 budget, or the allowance which a person received because he had a dependent child, was a deduction from his income for taxation purposes, amounting to $400 per child. In the lower income brackets the tax on the $400, had it not been deducted, would have been at 15 per cent. Therefore the tax saving per child was $60 in those incomes running up to $2,000 or $2,500. In addition, following the introduction of the national defence tax, there was an allowance made under that tax, which was 5 per cent of $400, if I remember correctly, or $20, making a total of $80 per child. Under

this budget, however, we make a flat deduction from the tax-not from the income, but a deduction from the tax-of $80 from the graduated tax and $28 from the normal tax, making a total of $108 per child. That makes it better for persons with low incomes. It does not make it so good for persons with high incomes. I have explained that repeatedly in this house; I have explained it in the country, yet the illusion persists that in some way or other, the $108 being less than the $400, this is an example of harsh treatment.
I want to go back to the first point. In our taxation system, should we provide that from his taxes a taxpayer shall have deducted an amount sufficient to enable him to support his wife and children? Well, I say it never has been done, and I do not think it ever should be done. When a person marries he expects and is expected to assume responsibilities. He does not expect the government to assume his responsibilities for him. The government makes some allowance in the taxation system, but never a complete allowance. The wage system of this country is this, that the single man gets as much as the married mam. If a single man gets married he must be prepared to support himself and his wife on the income he received before he was married. If there were no income tax at all on that person, what would he have with which to support his wife? He would not have anything but the salary he always had. As a matter of fact our system is that he supports his wife and his children out of his salary, not out of tax savings. He gets some consideration, but he never could be given the full amount necessary, out of tax savings, to support his wife and children.
I want to make it clear to this house, if I can, that this $108 per child is more than was ever allowed before. It is better than the $400 exemption, for everyone receiving up to about $2,500. Of course under last year's budget the rate was increased to 30 per cent instead of 15 per cent, but half or more is given back in compulsory savings. It would have been fair enough, I think, to take the 15 per cent rate and make the allowance $60 plus $20 or a total of $80, but we made the allowance $108. The public became confused as between the $108 and the $400 exemption and thought the government was grinding down the people with big families. We are doing nothing of the kind. This has been an encouragement to persons in the lower income tax brackets to- raise large families, instead of a discouragement.


Harry Rutherford Jackman: What the minister has: said is true as far as it goes, but it does not tell the whole story. Up to a certain point-J

Income War Tax
think the minister put the deadline at 82,500- undoubtedly the new exemptions are better for the wage-earner, but above that level they become exceedingly onerous. This is particularly so in view of what the minister has said about the state not assuming any of the obligations a man undertakes when he gets married and raises a family. However I would point out to the minister that these people did not undertake to raise their families with the income tax rates at their present levels. The minister is placing a burden upon them which in many cases is hardly tolerable. Of course that is because of the war; we understand that, and we sympathize with the minister as far as it is possible to do so, but we do ask that there be fairness in regard to taxation in this country.
There is no doubt that when the change was made in the manner of granting exemptions; when instead of giving a flat exemption of $400 before arriving at the taxable income, the government adopted the policy of giving a stipulated credit on the tax, this made a very great difference. I have been sent a brief by a Toronto lawyer. I have not been able to check the figures, but he indicates just what the difference is in regard to a married man without children and a married man with four children, in the same income bracket. I should like to place a few of these figures on Hansard, in order to show how much more difficult the present taxation system is for a married man with four children as compared to a married man without children.
In the $2,500 bracket the difference between the method previously adopted, namely the deduction of $400 before arriving at the taxable income, and the new method of giving a tax credit, is as follows. The married man without children has to pay $165.80 more, while the man with four children pas's $155.80 more, so that he is still a little better off. Then we come to the $3,000 bracket, which includes the great majority of the professional class and the great under-managerial class in business, if you like. In this class the man without children pays $174.40 more by reason of the change in the method of granting exemptions, but the man with four children pays $351.40 more. In the $3,500 class the man without children pays $194.40 more, but the man with four children pays $439.40 more. Then we go on to the $4,000 class; the man without children pays $194 extra, while the man with four children pays $482 more. In the $6,000 class the man without children pays $245, and the man with children $621, by reason of this change, which works an iniquitous hardship upon those who are endeavouring to bring up families.


James Lorimer Ilsley: Do those figures include returnable taxes?


Harry Rutherford Jackman: It does not say whether any portion is returnable, or not.


James Lorimer Ilsley: Yes, it is.


Harry Rutherford Jackman: I rather gathered from the brief that it was assumed that the man would have full compensation, or would be allowed returnable taxes arising from mortgages and insurance policies. In the $8,000 bracket the married man without children pays $270 more, but the man with four children pays $745 more. In the $9,000 bracket the man without children pays $287 and the man with four children $767.
The brief goes on to point out the various items of expense carried by the man with four children-extra housing accommodation, extra clothing, food, medical and dental expenses, and so on. Education is not mentioned, but a small amount for summer vacations is included, something to which each child is surely entitled even under the stress of war. There is a strong feeling on the part of a large number of Canadians who are contributing to the building up of this country and to the carrying on of the war effort that the present method of granting exemptions for married men with children is an unfair one.
To summarize: I agree with the minister that up to $2,500 it was a better system than the one which prevailed previously; but after that level it is much harder on the taxpayer than it was before and I believe the minister should give consideration to some amelioration of that hardship.


Jean-François Pouliot: Mr. Chairman, I rise to a point of order. The minister has raised a point of order, and no one may properly discuss the merits of the paragraph before that point of order is decided. I have just a few words to say with respect to it.
It has often been said that members of parliament could not change anything in connection with any financial matter brought before the house by a minister. I believe a distinction should be made. In the old times, when there was no parliament, matters of taxation were decided by the king himself. He decided how much the levy was to be from his people, and by what ways and means it should be raised.
We now sit in a ways and means committee. It is my understanding that a member has the right to suggest by way of amendment that legislation should bring taxes not only to lower brackets, but even to higher brackets. Then it is the duty of
Income War Tax

the committee to decide whether that shall he done. In the present instance there is no suggestion to increase the taxation. The suggestion in the amendment of the hon. member is to reduce the taxation of persons who have a certain number of children, so that they will not be asked to pay the arrears for 1942. That is all it means. I submit the hon. member for Charlevoix-Saguenay was quite in order in moving that the change be made. Of course there may be other considerations, as the minister has indicated, but they are altogether different. They should be decided afterwards by a standing vote of the committee.
The point of order must be decided by you, sir. An hon. member cannot speak on anything else before the ruling has been given. At times, in discussions on parliamentary procedure and practice, there seems to be confusion in the minds of hon. members with respect to very simple facts. In my humble view nothing is easier to learn than parliamentary procedure and practice, provided that one is not afraid the ice is too thin to walk on, and provided further that he uses his good judgment in these matters.
I know very well that financial matters are within control of government, excepting the concession made to the king after his powers were taken over by parliament in the days of King John. That is an old practice. But after the assent of the governor general has been given to the expenditure of any amount of money, or to any form of taxation, there is nothing to prevent any hon. member from moving a change. Otherwise what would be the use of sitting here-merely to listen to the reading of a budget speech? What would be the use of arguing in respect of that speech, without having the power to change the provisions contained in it?
The issue at stake is of the utmost importance if the rights of parliament are to be maintained. If we are here only as rubber stamps, then let us take the few papers we have on our desks and go away. Members of parliament have the undeniable right to discuss these matters. We are not here simply to chatter like old women and gossip like spinsters after a church service. We are here to make decisions. The proposals of the Minister of Finance can be accepted only after they have the approval of the committee and, following that, the approval of the house.
You may find, sir, that I speak with animation. But this is a most serious question. If hon. members sitting in committee of way9

and means have not the right to move an amendment either to upper or lower brackets, then what is the use of our discussions?
I am speaking always to the point of order, mark you. The point in this instance is that hon. members expect to convince the minister and have his approval. That is not at all, sir, the spirit of the old British parliamentary tradition. Whether or not the minister agrees to a suggestion made by any hon. member, that suggestion becomes effective when it receives the approval of the majority of members of the committee. That is parliamentary tradition, and no one can deny it. How is it that in the past year everyone was going before the minister like the burghers of Calais, with ropes on their necks, to ask him: "Sir, will you kindly, please, agree to this humble request we respectfully make?" That is the attitude of the committee and that of hon. members who compose it.
Mark you, sir, I have the utmost respect for the Minister of Finance. He is one of the ministers for whom I have the greatest regard. But there is a thing that counts and on which the Canadian people rely. It is that parliament shall be true to itself. Therefore, whatever may be decided on the merits of this case subsequently, I ask you, sir, to decide not in favour of the false practice that has grown up like a poisonous mushroom but to decide in accordance with the purest British traditions that it is not for the minister to make himself the final arbiter with regard to suggestions made by members. It is the obligation and the duty of the members themselves to decide the matter according to their best judgment.
If I have spoken for a few minutes on this question, sir, it is because I believe that parliament will be worth something to the Canadian people only if we take advantage of the experience gained during the centuries by the British parliament at Westminster.


Richard Burpee Hanson: The amendment proposed by the hon. member for Charlevoix-Saguenay, to which the minister replied with a reasoned argument during the course of which he actually forgot to take the point of order he intended to take, raises the question of the right of a private member to interfere with the prerogatives of the crown- I suppose that is the principle which the minister will invoke-in regard to taxation. At all events the effect of this amendment would be to ease the income tax position of those who have large families.
I am in agreement with the principle underlying this amendment, even though I am afraid that it may not be possible under our system to give effect to it in this way. The hon. member for Temiscouata has endeavoured to put

the case before the minister in as favourable a light as possible, and I hope the minister will give some thought to affording relief to people with large families and incomes of SI,500 or less, in comparison with the position they previously occupied. I remember when we had an exemption of S500 for each child. My memory goes back nearly twenty years to the time we raised this question in the house. With such an exemption the position of the taxpayer with a large family would be much more favourable. I do think that the minister might give some consideration to the appeals of those who find themselves with large families and small incomes. Unfortunately I cannot include myself among them. But in these days the people living in my own community, the generality of them, have just these moderate salaries. Take the civil servants in the employ of the provincial governments. They are really a poorly paid lot. Not many of them have high salaries. They are not nearly as well paid as the federal civil servants, and they find it very hard to keep up their position in the community as they are expected to do. and as they ought to do, and raise a substantial family. The net result I fear will be a falling off in the size of families of people in that category.
Resolution No. 1 raises the whole question of the adoption and the application of the so-called Ruml plan. I made some reference to this in my speech on the budget on the 18th of March, and took occasion then to say that the minister had adopted the principle of the Ruml plan to make taxation current but had not adopted the Ruml plan itself, and I wondered why, because the minister's was only a partial implementation of the promise that was made in the speech from the throne. In other words the minister gave us half a loaf, but only half a loaf, and I asked him, when speaking on March IS. at page 1356 of Hansard, to give consideration to the question of wiping out the arrears for 1942 and making the necessary adjustments. I did that on the theory that if it were done I did not believe the treasury in the long run would lose anything. I am not going to labour that argument, but I have seen it raised many times in the public press and in discussions here and in the United States. The minister has not yet made any reference to that. This, of course, is a matter of principle, and I think it ought to be discussed on the floor of the house to-day. If the minister would wipe out the entire arrears and put everybody on a current basis in accordance with the Rum! plan, wipe out the deadweight of debt which the taxpayer has to pay-and this applies to the little taxpayer much more than to the
8, 1943	igeg
Income War Tax
big taxpayer; for it is harder for some to pay S100 than for others to pay $1,000- if all were put on a current basis as indicated by the Ruml -plan and you lifted from their shoulders the dread of being always in debt to the government, I venture to say there would be a much more cheerful compliance with the provisions of the minister's budget, The tax paying public of this country were treated pretty harshly by the minister last year. We had one raise after another in the rates of taxation, and one reduction after another in the exemptions. I can understand thoroughly the reason why. The reason was the necessity of raising more money for war purposes, and I do not imagine that any other minister of finance would have acted differently, because he would have been obliged by the exigencies of war to raise a large amount by taxation. The income tax field happens to be one of the most prolific sources of raising money on the theory of ability to pay. I have always said that the Canadian people would pay, and pay willingly, if they were satisfied that there was equality of service and sacrifice. M hether there is or not I am not going to argue. I have argued against the suggestion that there was equality of service and sacrifice. I think that some people were called upon to pay much more than others in certain income tax groups, but I am not going to labour that here. I do suggest to the min-istei. and I should like to have his reaction on this, that if he had adopted not only the piinciple of the Ruml plan for current payment, but the actual plan of making the payments current, the treasury in the long run v on Id not have lost a dollar, because we are paying out more money in this country to-day than we paid out last year. There is more governmental expenditure; the national income is higher; there is more money available which will flow into the treasury in the 1943 taxation period on which collections are now being made. Has any calculation been made, and if so what is the result of the calculation, if full effect were given in Canada to the Ruml plan? That is one query which I leave with the minister.
I am aware that there are extreme difficulties in putting the Ruml plan into effect, because of the action of the minister last year, in the budget he brought down, whereby he made us pay the full balance due on the
1941	income taxes and four months on the
1942	taxes out of twelve months' income, in the last six months of the calendar year. That is where the great pinch came. Personal income tax payers had to provide for

Income War Tax
payment of sixteen months' personal income tax in six months. This inflicted great hardship on most people. If the minister had it in mind to adopt any such plan as that he should not have delayed the budget last year until June 23.
What has happened since? This budget is brought down in March, and after we have paid two payments on the 1942 income tax-one in the fall, and one on the 15th January, which was practically paid in 1942- we are told, "You have to begin on your 1943 payments in March", and most of us have paid twenty per cent.	_
In passing I would call the attention of the minister and all hon. members to the form which we signed when we sent in our twenty per cent.. I wonder -whether everybody read that form through. You had to make your own estimate, and you had to make it at the end of the third month of the calendar year.


Colin William George Gibson: Or take last year's figures.


Richard Burpee Hanson: Yes, the minister is quite right; we had the alternative. And there was a notice that if you erred in your estimate you were going to incur a penalty. Is that British? I put it to the minister. What authority has he to do that? What authority has he to impose that penalty? If the minister has that authority, I denounce it.


Mr. MARTIN:: There is no way of
calculating.


Richard Burpee Hanson: There is absolutely no way of calculating what you are going to get. Let me tell the member ship of this house, with respect to investment income, that- that income is diminishing every day. Take the returns of corporations which are now publishing their financial statements; nearly every one of them shows reduced earnings. What is going to happen? Dividends will be reduced. There is a reduction in the value of capital of hundreds of millions of dollars by reason of overtaxation. I suggest to the minister that he ought to apologize to the Canadian public for having put that in a form which we had to sign and send in by the 31st of March.


Colin William George Gibson: Perhaps I might explain these points as we go along. The form which was issued permits people to estimate their tax from the income of last year. If people wish to estimate a lower income, and do so, and then find that their estimate is wrong, they pay interest on the underestimate for having taken that chance.
(Mr. R. B. Hanson.]


Richard Burpee Hanson: That is just what I object to.


Colin William George Gibson: Otherwise they have the right to pay the tax on last year's income.


Richard Burpee Hanson: You do not give the taxpayer a sporting chance. Most people try to do this meticulously. They are afraid of penalties, they are afraid of interest on unpaid amounts and all that sort of thing. But to tell a man that because he makes an error in an estimate he is going to be penalized by the government is going one step too far. I object to it, and I think the Canadian people object to it, and I ask the minister to withdraw that provision. If a man does not make a proper estimate and does not pay sufficient when the tax on his income is payable, charge him interest on the deficit if you will; but to impose a penalty by regulation-what have we come to in this country, when departmental officials can impose penalties on the people of Canada? It is tyranny, that is what it is, just tyranny. It is about equivalent to what the Minister of Labour has in some of his statutes-a denial of British justice. I demand in the name of the Canadian people the withdrawal of these penalties.
Now let me get back to the Ruml plan.


The CHAIRMAN:: Order. I must inform the hon. member for York-Sunbury (Mr. Hanson) that there is a point of order raised by the Minister of Finance (Mr. Ilsley).


Richard Burpee Hanson: He did not raise it. He said he w*as going to, but he did not.


Joseph-Arthur Bradette: Oh, yes.


Richard Burpee Hanson: With all respect to the Chair, he did not raise it.


Paul Joseph James Martin: It really comes under
No. 6.


James Lorimer Ilsley: Shall we get rid of the point of order? The amendment is this:
That section 1 of the present resolution be amended by adding the following words:
"Provided that in the case of a married person with four or more dependents or any person granted an equivalent status under the act, whose earned income is less than $3,000 there will be no income tax liability in respect of the taxation year 1942."
Under the present tax schedules the taxpayer with $3,000 income and having four dependents pays a tax of approximately $225, and in the majority of cases he has probably paid already about fifty per cent of that. The resolution proposes the forgiveness of the other fifty per cent.

Income War Tax


Mr. MacNICOL:: He will not have to pay the fifty per cent he has not paid.


James Lorimer Ilsley: Yes; assuming he has paid approximately fifty per cent the remaining fifty per cent is forgiven. This amendment would relieve him of taxation in 1942 on the whole amount, which would mean that the government would be obliged to refund to him the fifty per cent already collected, or anything already collected; in most cases something like fifty per cent has been collected at the source. I cannot give an estimate of the aggregate of refunds which would be necessary, but I have no doubt it would run into a great many millions of dollars. As to taxpayers who have not paid, it would mean that in many cases we would forgo our right to collect from them.


Richard Burpee Hanson: You could apply on the 1943 taxation what they have paid.


James Lorimer Ilsley: No, we would forgo our right to collect in respect to 1942 income. This takes away the government's right.


Richard Burpee Hanson: The minister is speaking of the amendment?


James Lorimer Ilsley: Yes. The government would have no right to any tax on the incomes of this class of taxpayers. The result would be that our estimates of revenues for the fiscal year 1943-44 would prove to be far too great; it would throw out of balance our ways and means, as the expression is.
In Beauchesne's Parliamentary Rules and Forms, third edition, paragraph 500, at page 1S2, I find the following:
Though it is the function of the committee of ways and means to impose rather than to repeal taxes, examples of the repeal of taxation effected in this committee are to be found upon the journals. Proposals for the variation or modification of taxation can therefore he made in the committee; but these proposals must be grafted upon the financial scheme submitted by the government, and must not affect the balance of ways and means voted for the service of the year. Amendments, therefore, can be proposed to substitute another tax, of equivalent amount, for that proposed by the government, as, for instance, a proposal to substitute probate and legacy duty on real property as an alternative for an inhabited house duty, the necessity of new taxation, to that extent, being already declared on behalf of the crown.
If this amendment were adopted it would mean the loss to the government of tens of millions of dollars in taxation or even more. The hon. member proposes no substitute tax, therefore his proposal affects the balance of ways and means voted for the service of the year and is not in order.


Mr. CHURCH:: If what the minister says is true about this budget and these exemptions, parliament might just as well be abolished. The minister is relying upon the principles of the budget and of the British constitution as they were in the days of the seven years' war.
I should like to say a word too about the first and second resolutions. In the Kingsley Wood budget in the old country, where they have no sales tax, they provided for hostels, for nutritional services-


James Lorimer Ilsley: On a point of order-


Thomas Langton Church: I have the floor and I cannot be interrupted unless I give consent.


Joseph-Arthur Bradette: The minister is rising to a point of order.


James Lorimer Ilsley: We are dealing with the
amendment proposed by the hon. member for Charlevoix-Saguenay to resolution No. 1. The second part of standing order 58 reads as follows:
Speeches in committee of the whole house must be strictly relevant to the item or clause under consideration.
The remarks of the hon. gentleman have no relevancy either to the amendment proposed by the hon. member for Charlevoix-Saguenay or to resolution No. 1.


Joseph-Arthur Bradette: Hon. members may
speak to the point of order raised in connection with the amendment moved by the hon. member for Charlevoix-Saguenay.


Thomas Langton Church: May I speak to the
amendment? .


Joseph-Arthur Bradette: The hon. member must speak to the point of order raised in connection with the amendment moved by the hon. member for Charlevoix-Saguenay. If no hon. member wishes to speak, I shall give my ruling.


Thomas Langton Church: I wish to speak in reference to what the minister has said already this afternoon.


Some hon. MEMBERS:: Order.


Joseph-Arthur Bradette: I shall have to rule first on the point of order. Hon. members who wish to speak to the point of order may do so before I give my ruling.


Jean-François Pouliot: I ask you, sir, not to forget what I said before.


Joseph-Arthur Bradette: Having in mind what the hon. member for Temiscouata has said just now, an amendment could always be moved in committees of the house by members
Income War Tax

of the committee, and I shall follow the statement made by the Minister of Finance who contends that the present amendment is bound to affect the financial scheme of the government in the raising of taxation. On that point and for the reasons already enumerated, I rule the amendment out of order.


Richard Burpee Hanson: I should like to resume where I left off when the minister suggested that we deal with the amendment. I was referring to the penalties that might be exacted if a taxpayer made an erroneous return of his 1943 income. Perhaps this would more properly come under resolution 6, and I should like to have it understood that I was just diverging for a moment because that came into my mind. I appeal to hon. members to my right and to hon. members across the chamber to support the position I have taken with respect to bureaus imposing penalties upon taxpayers. The principle is unsound and wrong. We shall have something more to say about this when resolution 6 is before the committee.
Coming back to resolution No. 1, and the failure of the administration to adopt the Ruml plan, I believe I asked the minister if he could make a statement as to what if any loss would be incurred had that plan been fully implemented. I hope the minister will give some consideration to this when he makes his reply. Under the taxes imposed in 1942 we have had to pay sixteen months' taxes with only six months' preparation, and by January 15 of this year we had to get in substantially, the taxes for four months of 1942. In most cases this would be half of the 1942 tax. The whole position is muddled, and I have no doubt that that had something to do with the government adopting the policy of forgiving only 50 per cent of the 1942 tax.
What this country is being asked to do is to pay two and a half years' taxes in two years in order to put into effect a pay as you go or pay as your earn plan. I suggest that it is mostly pay as you go. It has placed an undue burden upon the personal income tax payer. I hope the minister will reply to this point because I feel that the income tax payer has a real grievance against the government.
If the minister will be good enough to refer to page 1356 of Hansard he will find that I took up the question of annuities. I do not know whether there will be any other opportunity to refer to annuities under these budget resolutions, but I should like to know if the government intends to do anything about the suggestions I made. I should like to know also the position with respect to income tax collection generally. As reported on page 1357
[The Chairman.]
of Hansard, of March 18, I made this
observation:
We hear practically nothing about income tax collection except the quantum of the sum collected. The wide extension of the incidence of income tax in the last few years has undoubtedly led to a huge expansion of work m the income tax department. The view seems to be generally held that this department is grossly under-staffed, and that as a result the checking of income tax returns, both personal and corporate, is inadequate and very much behind schedule.
That was not an indictment; it was merely stating a truism, because everyone will agree that there has been a huge expansion of the work in that department. I want to know what the position is in that regard. I asked as the number of employees, say as of January 31, 1943, as compared with the same date two years before, and generally what plans had been made to cope with the huge increase in volume of business which must necessarily take place with the filing of this year's returns. I asked certain questions also with respect to the operations of the board of review. I hope the minister will give some information in regard to that. If we cannot get it on these resolutions I do not know where we can get it, because there is no resolution that is directly pertinent to this important question.
The delay in dealing with applications of certain classes of companies, covering their position as depressed industries, is holding back the closing of corporate accounts, because they do not know what their position is; they do not know whether they have set up adequate reserves to take care of their taxation. This state of things will affect the minister's position with respect to the coming victory loan. These companies will subscribe to the limit if you let them know what their tax position is, but they want to know that, and why should they not know it? Why should the decision with respect to the group of companies to which I refer-the minister will know what I mean without my naming them-be deferred for so many months, years one might say? Look at the returns of any of these companies to their shareholders and you will see it stated in so many words that they do not know what their tax position is. That is unfair.


Paul Joseph James Martin: Does the hon. member
mean the final assessment?


Richard Burpee Hanson: The final
assessment. It is the paper companies I am talking about.


Paul Joseph James Martin: That is the situation not
only with companies but with individuals.

Income War Tax


Richard Burpee Hanson: I agree,
but I am speaking for the moment of companies. These people have been in a depressed business for years. They have kept their flags flying, kept their employees at work as far as they possibly could, and are doing a good job to-day in production, but they have never got to the point of knowing whether they are declared a depressed industry or not; they do not know what rate they are going to be allowed. Many of these companies have been through the wringer once; they cannot go through it again and live. Under the greatly increased taxation, companies which have just come through reorganization are at their wits' ends. The delay of the department is prejudicing their position; I will go further and say that it is prejudicing the position of the treasury in respect to subscriptions by these companies to the next victory loan. I am not going to follow that through. I did suggest that there must be an accumulation. Last year I made inquiries about this and to my surprise the minister told me there was no accumulation. If that is so, why all this delay? Nearly twelve months have gone by and these cases are not jrnt settled.
I referred to the question of income tax collection. The other day it was reported in the press of Ottawa that a crown writ of some kind had been issued against a night club in Hull-I was going to say tie exeat regno; it was an old writ that I had not heard of since I was a student at law. How many writs of that kind have been issued to collect a crown revenue? Here is a night club owing 320,000. If I did that, what would happen to me? I know that they want to collect the taxes; of course they do. What are the arrears in 1941? How many individual income tax payers are in arrears? Are these individuals, partnerships or corporations? We ought to know the amount of arrears in relation to each. I am not asking for the names of individuals, but I want to know how much the taxpayers of the country owe the government for income tax arrears. We are entitled to that information. I may be all wrong about this but I have an idea that the people would be startled if they knew just what the position is. I should be delighted to learn that it is not as bad as I think it is, but I am rather fearful. In the meantime I am told on the form I signed and sent in on March 31 that if I underestimate my tax for 1943, by the will of a departmental official I am to be penalized.


James Lorimer Ilsley: The hon. gentleman is indignant about the clause on the form which went out from the national revenue department regarding the March 31 instalment.


Paul Joseph James Martin: If the minister is going to discuss that now I think it should be open to the whole committee, because it really comes under No. 6.


Richard Burpee Hanson: Yes, it really does, but it just came to my mind.


James Lorimer Ilsley: Since it has been raised I think it is all right to discuss it now, and let everyone discuss it who wishes. We expected that the bill would become law before March 31. One reason why I was so anxious to have the budget resolutions and the act passed before March 31 was that I wanted to get this matter of income tax returns and the liability to make income tax returns on March 31 cleared up. Forms cannot wait; they have to go out. The notification on the forms that persons would be penalized if they underestimated the tax was unauthorized. I do not mean by the minister-I am not repudiating it; but it had no legal authority whatever.


Richard Burpee Hanson: The minister is not seeking to take it off the shoulders of his colleague?


James Lorimer Ilsley: I certainly am not.


Thomas Clement (Tommy) Douglas: The minister means that there was no statutory authority.


James Lorimer Ilsley: No statutory authority, nor could we get statutory authority, nor could we get action.


Richard Burpee Hanson: Why put it in the notice?


James Lorimer Ilsley: The form is for the other three quarters as well; it does not affect the March 31 quarter alone. The house can deal with that matter when we come to the act. If this goes too far it goes too far, that is all. We must not get the idea that -we are just playing, dealing with small matters here. These income tax proposals run into many hundreds of millions of dollars, and we have to make our plans; we have to get out forms, and do it in an orderly way. I introduced the budget, I thought, early enough to get it through by March 31, so that this whole matter would be dealt with. There would have to be some penalty. I do not know what the provision is in the act, but certainly it could not be left in this way, that any person could underestimate as much as he 'wished and not be subject to any penalty. That would mean that he need not pay anything until December 31.


Richard Burpee Hanson: But you would charge him interest on it.
Income War Tax


James Lorimer Ilsley: That is the penalty, is it not? Just as surely as human nature is what it is, if you put it entirely within the hands of people to estimate the four instalments, one due March 31 and the others due at three month intervals thereafter, and impose no penalty whatever for an underestimate, they would read it over and say, "Let us make it plenty low." They could even make it practically nothing, and there would be no penalty; they would pay the whole thing on December 31. Is the objection that interest is charged?


Richard Burpee Hanson: No, I do not object to that. Let me put this case to the minister, just as an example. Suppose I own 10,000 shares of Canadian Pacific Railway stock, which I do not; and suppose the Canadian Pacific pays a good dividend this year, which I hope it will, though it may not-for years it did not pay a dividend at all. Suppose the dividend on those 10,000 shares of stock comes to me in 1943; because I had not taken that into account when I prepared the estimate of my income on March 31, I am subject to a penalty. It just does not add up; it has no common sense; it is unjust; it is not British justice. I could go on ad infinitum, calling it names, but I will stop now.


James Lorimer Ilsley: I thought from hearing the hon. gentleman that there had been some utterance in terrorem appended to this document, but all I find is "interest is payable in respect of late or insufficient payments."


Richard Burpee Hanson: Is there not a penalty clause? I read somewhere, in some document I had, that if you underestimated your income you were liable to a penalty.


James Lorimer Ilsley: That is the interest.


Richard Burpee Hanson: It did not say that in the document I read.


James Lorimer Ilsley: That is a penalty, in a sense. Here is this terrible scandal-


Richard Burpee Hanson: If you
make an underestimate it is a false return, and then you are liable to a penalty in addition to the interest. There is a penalty for an underestimate, which is set out in some document I have seen.


James Lorimer Ilsley: Then the hon. gentleman had better bring the document here. This is all I can find, and this is what the hon. member for Essex East is complaining about-"Interest is payable in respect of late or insufficient payments."


Thomas Langton Church: I agree with your ruling, Mr. Chairman; I think it would be better if we stick to the resolution, which I believe acknowledges the dead hand of treasury control. What is the point to be considered? What is to be taken as earned income? Suppose a man receives an income of about $3,000; you must consider the cause and effect of the earned income, and you must consider this taxation which really amounts to confiscation. You must consider what has to be done with the earned income of a taxpayer in the lower brackets. He must pay insurance, mortgage, sales tax, real estate taxes, and all the rest of it. He cannot get a house now; the rents are so high they are prohibitive. People with children are living in basements and all that sort of thing. Yet we sit here considering resolutions included in the minister's budget, and we cannot change one line of them. This committee might just as well adopt the whole budget, holus-bolus, because under our system if one line is changed against the will of the minister, under the principle of responsible government he must resign. What about the merits of the earned income? Look at what the Prime Minister is proposing today. We have been talking about the paradise to come, from the cradle to the grave, and all that sort of thing, but it will never come about. Sir Kingsley Wood said the same thing in bringing down his budget in the United Kingdom. He said there was no use promising the people anything but a hard road to travel in the years to come, because of the taxation system made necessary by this terrible war.
I think we must admit that there is no such thing as earned income. Why, to-day $6,000 will not go as far as $3,000 went a year or two ago, and what is to happen? It will simply mean that the population of the country will decrease. We have school boards all over the country complaining that they cannot continue to educate the children because they have no money and the children are not able to get enough food. They have had to establish facilities in schools all over the country to give children milk and bread in the middle of the day, for some children who come to school almost starving. No budget should legislate against human nature but that is what we are doing here to-day. The minister may pass these resolutions as quickly as he likes; the quicker the better, because in my opinion the working people of this country will regard this as the most unpopular budget we have ever seen, for its lack of family exemptions. We have in this house members of the medical profession who can speak of the harmful effects of poor housing conditions, the effect of

Income War Tax
the high cost oi living on the poor and needy. And in connection with earned income, why, almost fifty per cent of a man's income goes to pay his lease and rent, and even at that many men cannot get rooms at the present fabulous prices. Here we have one man, a highbrow, a meat czar, Mr. Taylor, imposing taxes and penalties, with a plan in his pocket, as he said yesterday, for regulating food supplies and meat in a land of plenty. What does he know about food? Yet he can impose that burden upon the people, and he can drag them into the police court and have them fined up to $5,000, I am sorry to say. Yet we have some poor people who have no food, let alone a room in which to keep their children. I come from an industrial riding, from one of the largest soldier constituencies in Canada in regard to both the militia and the active forces. I have man}7 people who have lost their sons on land, sea and in the air during this war, and I can tell you the taxes are so high they are not able to buy the food or coal they need. Some of the food they do get is not fit for human consumption, though it is under the control of men like Mr. Taylor, with no training for such a job, and these others who travel around the country. It is costing for subsidies about $80,000,000 to maintain these ceilings. At the same time rates are going up while earned income less taxes has dropped to almost nothing; and still a man must feed his children.
At times I have confronted the auditor general about this matter. One must see the cause and the effect on earned income of the taxpayers. The auditor general might just as well not be in office at all; he can veto no expenditure. I want it understood that I am not criticizing the man; I am criticizing the principle. He is a good citizen and a splendid official. But we who sit here have lost to outside controls all control over expenditures, when we consider that under a system of taxation which takes half one's earnings we must understand the cause and the effect of such taxation.
WTe have before us the first paragraph of certain resolutions I have opposed from the start of the budget. We find that a long schedule is attached to it, and that not one line	of	i.t can	be changed.	How are	thepeople	to pay	these	taxes?	I fail to	seehow	it	can be	done.	The	principle seemsto be that "unto everyone that hath shall be given . . . but from him that hath not shall	be taken	away	even	that which	he
hath."
When I see this wild carnival of expenditure, everywhere I go across the country, I
am astounded. I did not vote for this budget. We see evidences of extravagance on the railway trains as we travel, and we know that throughout the country the taxpayers are groaning under the heavy taxation they cannot pay. On a five billion dollar budget we cannot seem to afford anything for the relief of people who have no income, or whose incomes are taken away from them, and no money for old age pensions. All the earned income of a man is taken away through the increased expenditures in connection with rent, taxes, insurance, food, clothing and so forth. He has to put up with a lot of bullying tactics imposed upon him by bureaucrats, because that is all they are. He must submit to the bullying tactics of these highbrow controls and subcontrols which for trivial or technical breach, are bringing people into the police courts. Some families which had never seen police courts before, even in the past three or four generations, have been dragged in, over our heads, and can be fined as much as $5,000. And that is done by people like these professors and highbrows, who are planning to reduce the earned income of the small-salaried man. They are cutting his pound of meat, which includes half the bone.
I do not blame the minister. He has to get the money. As I said yesterday, he is a conscientious man and a gentleman. I sympathize with him in his task. I sympathize, too, with the minister who sits beside him, and with the splendid officials in front of him. But let me tell them that the budget of Sir Kingsley Wood did not change the schedule or reduce exemptions. I shall not- quote from it in detail, but I must point out that fact with respect to the British schedule. Over there, no sales tax was provided.
We may stick to the paragraph as much as we like. I have raised this point before, and I will raise it again. It is most difficult for a man in the lower brackets to provide for his children the necessary food, clothing and shelter. W'e might as well give up all our hopes for freedom from fear and want. Fear and want will continue if we carry out the provisions of the resolutions now before the committee.
The medical profession, teachers and others are complaining about delinquency, lack of housing and nutrition. Delinquency dates back to the time when the small wage-earner found he had to provide all these things from his small income and at the same time pay high taxation. Judges, boards of education,
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magistrates and all public officials are complaining about the present state of delinquency. Never legislate against human nature, because "he that hath pity upon the poor lendeth unto the Lord." This is one of the most unchristian budgets I have ever seen in my life. Of course I do not blame the present minister for it but, as I said yesterday, the taxation placed upon the working classes is too heavy. I can tell the committee who is to blame for it; all hon. members know who is responsible. But I do say that under these resolutions the Minister of Finance is taking too much from the taxpayer and not charging enough to capital. Great amounts of money which should not be spent are being spent like water to-day under no public control whatever. One has only to travel about the country to see what is going on. The minister, who is in control of the treasury should put on the brakes and try to prevent these heavy expenditures.


Mr. GILLIS:: The longer I am in the house the more doubtful I become as to the sanity of some people, and the more convinced I am that the rules of debate require a thorough overhauling. Practically every hon. member made a general statement on the budget, after its presentation. Hon. members to my right were quite satisfied with it, and, indeed, voted for it. Yet they have spent the last couple of days in criticizing it, and tearing it to pieces. They emphasize the necessity for winning the war, but they do not want anyone to pay for it. I must say that this confuses me, and I am just wondering whether some people are crazy, or whether I am. Had I voted for the budget I would have sat down and kept my mouth shut, or would have helped the Minister of Finance to get it through the house.


John Ritchie MacNicol: If we did not speak about it, nobody would.


Clarence Gillis: Talking about it does no good. Actions speak louder than words.
I rise this afternoon to make an inquiry of the Minister of Finance. Last night in the ten o'clock news broadcast over the Canadian Broadcasting Corporation network there was an announcement to the effect that exemptions for members of the merchant marine had been granted to the extent of allowing some deductions for income tax purposes. I have read yesterday's Hansard and the newspapers, but I find no such announcement by the minister.
For the past three years I have been interested in this question, and have had some correspondence with the minister with respect

to it. I was surprised, therefore, to hear the announcement over the radio without first having heard the announcement in the house. My understanding of the radio comment was that war risk bonus paid to the men in the merchant marine and the board they pay 'while ashore would be deductible for income tax purposes. Would the minister make a statement as to whether or not there was any authority for the radio announcement, and, if so, why it was not made in the house?
If the statement given out over the air is true, in my opinion it is still far from satisfactory. Speaking in the house a few days ago, the Minister of Fisheries lauded to the skies the work of the merchant marine, and rightly so. He pointed out that about 642 merchant seamen had lost their lives since the beginning of the war. I have had correspondence from men serving in that capacity. For example, two second-class engineers point out to me that there is a monthly deduction of $42 from their salaries. That is a heavy tax, when we consider the work the merchant marine are doing. I do not think there is any service, on the land, on the sea or in the air, making a greater contribution to the winning of the war than is the merchant marine. The member of that service does not wear a uniform. No glory attaches to his job, and much of his time he spends on a raft, drifting around the Atlantic. He takes greater chances than any other man in the service of the country. Nothing short of total exemption, for income tax purposes, of the entire income of the man serving in that capacity will satisfy me.
There is another point I would bring to the attention of the minister. When the federal authorities invaded the provincial income tax field some citizens, particularly in New Brunswick-I have had letters from two men at least-were placed in this position. Previously they had been paying income tax to the municipality, but when the federal government entered the income tax field and people no longer paid income tax to the municipality they were disfranchised and were no longer permitted to vote in the municipality. I corresponded with the Secretary of State, and he informed me that the matter was not within his jurisdiction but that he was bringing it to the attention of someone else. I thought I would mention the matter in the house to the Minister of Finance because he entered into the taxation agreement with the provinces. I think provision should have been made then to protect the franchise of people who have been placed in the position I have just mentioned.
There is another matter on which I wish the minister would make a brief statement. I

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have had some correspondence with individual members of the commercial travellers' association who have pointed out to me that they pay to the association a yearly fee, contingent upon the payment of which their insurance is protected. They have made application to have such _ payments treated just as insurance premiums paid to insurance companies are now treated under the act.
Would the minister make a statement on the three points I have raised?


James Lorimer Ilsley: On the first point about merchant seamen, notice was given in Votes and Proceedings of April 6 of a resolution I shall propose exempting from taxation the war risk bonus and the value of any board and lodging on shipboard received by such a person while performing services in respect of which war risk bonus is payable. That must have been where the Canadian Broadcasting Corporation and the press got the item. That matter can be dealt with when the resolution comes up.
The second point my hon. friend raised was with respect to income taxpayers in New Brunswick. Whether they are permitted to vote or not is a matter purely for the New Brunswick authorities. The voting privilege at municipal or provincial elections is something over which we have no control. This parliament has nothing to do with it.


Clarence Gillis: It was because the federal
government entered the income tax field of the provinces that these people are disfranchised.


James Lorimer Ilsley: I do not know whether they are disfranchised or not, but if they are-


Clarence Gillis: I have letters to that effect.


James Lorimer Ilsley: [DOT]-we did not disfranchise them. We could not disfranchise them.


Clarence Gillis: Indirectly you did.


James Lorimer Ilsley: The third point was about
commercial travellers. I do not know the type of insurance policy to which the hon. gentleman has reference, but I suppose that the desire of the commercial travellers is to have the premiums they pay on some form of insurance policy permitted as an offset, to be counted in the compulsory savings portion of the tax. The premiums may not be on life insurance policies.


Clarence Gillis: I think it is accident policies.


James Lorimer Ilsley: We cannot permit that.
The matter was fully debated last year. It is not covered by our legislation and I do not propose to extend the legislation to cover it.


Paul Joseph James Martin: Mr. Chairman, the point
made by the hon. member for York-Sunbury deserves, I think, more than scant attention. On the whole, it deserves some support, and I propose to give it. The form in question, T.7-B, contains this sentence in black-face type near the bottom of the page, "interest is payable in respect of late or insufficient payments." The Minister of Finance and the hon. member for York-Sunbury have argued as to whether interest is a penalty. The hon. member for York-Sunbury has proceeded on the assumption that in addition to the payment of interest there is also a penalty payment. That apparently is not true. But the hon. member for York-Sunbury is right to this extent, that the payment of interest on both late and insufficient payments operates as a penalty. So that the principle of his objection still remains.
What is the situation? Interest is payable on late payments, and I do not think the committee could quarrel with that. If a man fails to make a twenty per cent payment on March 31, I think properly there should be an interest charge for his non-compliance with the law in that respect. But when it comes to charging interest on insufficient payments, it seems to me that there is the strongest possible case for not charging interest when a man is unable to determine what his income for 1943 will be. The minister has said: Oh, well, if we did not do this, individuals would take advantage of the situation, deliberately underestimate their tax payment, and pay possibly only a nominal amount on March 31.


Mr. McNEVIN:: Has the taxpayer not had the use of the money?


Richard Burpee Hanson: He has
not earned it all yet.


Paul Joseph James Martin: I do not quite appreciate how that has anything to do with what I am trying to say. Perhaps when I have finished the hon. member will reconsider his question. Here is the situation. Here is a payment required not under any statutory provision because the statute has not yet been passed. There is required a quarterly payment of twenty per cent of the income tax which the individual will have to pay on his income for the full year. That income cannot possibly be determined now. As I mentioned a minute ago, the minister has said: If the observation of the hon. member for York-Sunbury were to be sustained, people would take advantage of the situation and deliberately underestimate their income, and that would not be a fair and proper
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thing to do. What the minister has said is true up to a point, but only up to a point. In the case of individuals-take members of parliament-with a fixed annual amount of income the argument is sound, but in respect of income over a fixed, constant, yearly amount the point is not well taken. There is not a man in this house who comes within the provisions of this requirement who can say now what his income over and above a fixed annual amount will be, and yet if his twenty per cent payment based on his last year's income is insufficient in relation to what will be his full income for this year he has to pay a penalty. It is not called a penalty, but he has to make an interest payment of eight per cent, or whatever the rate may be, on the insufficient amount. By what principle can that be justified? In the case of individuals who know that this year they will receive a fixed amount by way of salary, there perhaps should be an interest payment as a penalty if they do not take that into account in making their return and the twenty per cent payment. But in respect of an incalculable income, surely it is not fair, and surely it is not intended. I put this to the minister: Suppose that an individual pays more than he should pay on March 31 and then finds at the end of 1943 that he has paid a greater amount than the law requires him to pay, will the crown pay him interest on the excess amount he paid? Surely, if the principle is correct in the one case it should be correct as a general proposition. I suggest to the minister that an individual may well take the position now, if he has made no payment at all on March 31 that since this is not as yet a statutoiy requirement there is no law which requires him to pay anything. I assume the bill will be retroactive to cover the period to March 31. What would then be the position? First, the individual would be penalized on something, which he could not fully and properly calculate; and secondly, he would be called upon to pay a penalty

a "penalty" within the generous meaning of that term-when the law at the time the payment was due did not cover the point.,
I had thought that this point had been settled. I discussed the matter with the officials of the department, and I had understood that there would be no penalties in respect to insufficient payments. I strongly urge the minister that, if that is not now the policy, he should reconsider it.


James Lorimer Ilsley: I think now the hon. gentleman might answer the question put to him by the hon. member for Victoria, Ontario

(Mr. McNevin): what unfairness is there about charging a person interest on money which he owes and has not paid?


Richard Burpee Hanson: He does not owe it under the law to-day.


James Lorimer Ilsley: Oh, not to-day, no; of course not. About this first payment, I do not disagree with very much that anyone has said. But that is not our fault; we have been trying to get this through since March 2. As a matter of fact, people did not legally have to put their form in by March 31, but we could not wait till March 31 before we sent out the notice, because that would be an irresponsible way for a government to act. But the argument of the hon. gentleman is general; it is not particularly about March 31; it is about every one of these quarterly dates; he is suggesting we should not have any interest chargeable on overdue payments. I do not see why not.


Paul Joseph James Martin: On insufficient payments.


James Lorimer Ilsley: On insufficient payments. I do not see why not. Otherwise you get discrimination between one person and another. One honest man estimates carefully and conscientiously the amount he owes, and he pays it. Then he runs across some fellow on a train somewhere who tells him he is a fool to have done so; that he himself put his return in for about half; and there is nothing you can do with him because there is nothing in the law. That is the result you would get. We will take into account the representations which have been made here. The hon. gentleman asks, if there is an overpayment will there be interest from the crown? I say, no.


Paul Joseph James Martin: Of course not.


James Lorimer Ilsley: It seems so obvious that a rule which works one way should work another. But the reason is that the crown does not know what a person's income is, whereas the person himself does know.


Paul Joseph James Martin: Oh, no.


James Lorimer Ilsley: Well, he knows better than anyone else, better than the crown would know.


Paul Joseph James Martin: Supposing the minister
were not minister of finance and his great and brilliant qualities were being exercised in the practice of his profession; would he, as a member of parliament practising his profession, be able to say what his income for this year would be? Obviously, no.

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James Lorimer Ilsley: When I was practising law I could estimate fairly closely. It was not very great, either. I think a great many of us could do so.


Richard Burpee Hanson: I do not agree with the minister there.


James Lorimer Ilsley: In any event I would know more about it than the crown would know, anyway.


Richard Burpee Hanson: And I do not think it is fair to impose this burden on the subject. This is taxation legislation. As such it should be construed strictly and, wherever possible, in favour of the subject. That is a primary principle of interpreting a taxing statute.


James Lorimer Ilsley: You have not any statute.


Richard Burpee Hanson: All right. The minister brushed that aside a moment ago; he stated that we ought to have one. Because this is a taxation statute it should be construed in accordance with the canons of construction applicable thereto; and the subject is entitled to every consideration. I have not before me the form I signed, but I have a form issued under the imprimateur of the minister, form T.D.l, Department of National Revenue, income tax division, for the calendar year 1942. This by the way is the form which members of parliament were obliged to sign, which states that to be a fact which is not a fact. I protest against it. The hon. member for Northumberland, New Brunswick (Mr. O'Brien) has protested against it on more than one occasion. The department, by compelling us to sign and use this form, is asking us to state that which is not true, namely, that we are employees of the government. I shall never cease to protest against that. It is an indignity imposed upon members of parliament to ask them to sign that. We are here as representatives of the people and not as employees of this government.


Mr. MACDONALD (Brantford City):: That is only for taxing purposes.


Richard Burpee Hanson: I do not care for what purpose it is. It makes you state as the truth that which is not true.


William Ross Macdonald: It is true for taxation purposes.


Richard Burpee Hanson: It is not true for taxation purposes. We are not employees of the government. But the government has the whip-hand over us, and what are we to do about it, because we sit supinely by and let it go. If hon. members on both
sides would rise in protest; I call on the hon. member for Brantford City (Mr. Macdonald) to help us out.


John Ritchie MacNicol: He will not help you out.


Richard Burpee Hanson: If each hon. member would say, "I object to it, and I will not vote for it", the government would back down; and we would be put in the category where we ought to be, that of elected representatives of the people. Tax us if you will, but tax us in the right category.
If you make an underestimate of your income tax for this year, that becomes a false statement, and there is a notice on this form which says that there are penalties for false declarations. I may not be strictly accurate in the statement which I made a little while ago, but I tell hon. members that penalties will attach to you and to me if we made an underestimate of our income tax on the form which we filed on March 31. I suggest that that ought not to be. Tax us by way of interest on the unpaid balance, but do not impose a penalty on a man-


William Ross Macdonald: Is
there a penalty?


Richard Burpee Hanson: -unless you can show that there is fraud. Fraud vitiates everything. If a man fraudulently makes a false return, something should be done to him.


Paul Joseph James Martin: As in the case of a man with a fixed income.


Richard Burpee Hanson: Yes, in the case of a man with a fixed income. He can, of course, anticipate what he will receive. But take the case of a medical practitioner or of a legal practitioner. How does he know what his income will be.


William Ross Macdonald: By the end of the year he will know.


Richard Burpee Hanson: Oh, yes, of course; anybody could answer that question then. But on the 31st of March he cannot tell what it will be. His business might dry up, as it did in 1931, when lawyers were on relief in this country.


James Lorimer Ilsley: He would be all right then.


Richard Burpee Hanson: He would not have underestimated, but he would have paid on an overestimate, and the minister grabs it all and will not give him any interest for having done so. These are taxing statutes. The canon of construction is that they should be interpreted as far as possible in favour of the subject. The operation of these statutes
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by the department is exactly the other way. The interpretation is always in favour of the crown; and I object to it. That is not a legal principle for the construction of taxing statutes.


Mr. HARRIS (Danforth):: If we are
through with this phase of the discussion, I should like to refer to another matter, of which I gave notice on March 8, and which has to do with absenteeism in industry. I would merely ask the minister under what item, if any, he would like to have that discussed.


James Lorimer Ilsley: Yes, I should like to have it discussed.


Joseph Henry Harris: I have gone through the schedule and I cannot see that it refers to any other item more particularly than it does to this resolution.


Richard Burpee Hanson: I hope the minister will not forget the references I made to the Ruml plan.


Joseph Henry Harris: Perhaps the minister would prefer that I hold this matter until we reach another resolution. I cannot find any place where it would be more appropriate than resolution 1.


James Lorimer Ilsley: I have not looked over the resolutions, and at the moment I do not know of any one that would be more appropriate. However, I suggest that we finish the discussion about the returns. Possibly it is not in order, but we got started on it and I agreed that it would be all right to finish it. Then I think we should stick as closely as possible to the resolution. The observations most in order were those of the hon. member for York-Sunbury in connection with the Ruml plan. When we finish this particular discussion I shall have something to say on that. I think it will probably be six o'clock by that time, and if I find a resolution under which absenteeism can be discussed more appropriately, we will discuss it under that resolution.


William Ross Macdonald: It would seem from the discussion so far that most hon. members are in accord with the charging of interest on payments which are underestimated.


Richard Burpee Hanson: No.


Harry Rutherford Jackman: It is just the opposite.


Richard Burpee Hanson: The hon. member for Brantford City can speak for himself.


William Ross Macdonald: I will express just my own views. I believe that most people can estimate their earnings

fairly well. I do not say that they can estimate them to the last dollar, but conditions in Canada are not changing greatly at the present time and not many people are making more money in the current year than they made last year.


An hon. MEMBER:: Making less.


William Ross Macdonald: Somebody says that they are making less. The average man knows whether he will make more money during the current year than he made last year.


An hon. MEMBER:: What about contractors?
Mr.	MACDONALD	(Brantford	City):	I
would think that a contractor would know what contracts are likely to be let.


An hon. MEMBER:: Nonsense.
Mr.	MACDONALD	(Brantford	City):	I
may be wrong because I do not know anything about the contracting business. If I knew' more about it I might be in that business and be doing much better than I am at the present time. There are exceptions, but generally speaking I think most business men know whether they will make more money this year than they made last year.
Mr.	HANSON (York-Sunbury):	No.Mr.	MACDONALD	(Brantford	City):	I
may be w'rong. So far as I am concerned I can make a fairly good estimate. If I underestimate, then I would have no objection to paying interest. Supposing a person found in September that he was making more money than he expected to make; is there any reason why he should not pay an increased amount? I think the reasoning of the department as expressed by the minister is sound^-if you have not paid what -vou should have paid, you must pay interest. Having said that, I would ask the minister whether or not there are additional penalties. The form read by the minister and referred to by the hon. member for York-Sunbury states that interest will be charged.


Gordon Knapman Fraser: He
does not say what the interest will be.


William Ross Macdonald: Perhaps the minister will tell us what the interest will be, and perhaps he will go further and tell us whether there will be any penalties in addition to the interest.


Paul Joseph James Martin: Why should that make a difference?



S, 1913

[Stage Direction]
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William Ross Macdonald: Can the minister tell us that?


James Lorimer Ilsley: We shall have to discuss that when the bill is before us. The observations of the hon. gentleman will be borne in mind when the bill is being prepared. I do not wish to go into the provisions of a bill when it is not before us.


Gordon Knapman Fraser: Can the minister tell us what interest rate will be charged?


James Lorimer Ilsley: No.


Mr. FAIR:: It seems to me that the committee is so badly cluttered up with lawyers that we cannot figure out where we are. I do not think they have figured out where we are. The Minister of Finance and the income tax commissioner are qualified lawyers, but it has taken the committee about two hours to find out about penalties and interest on underestimates of income. So far as the farmer is concerned, he cannot make any accurate estimate. Late in July or early in August he may consider himself to be a rich man and then wake up the next morning ready to go on the road.


William Ross Macdonald: He does not pay his tax until the end of the year.


Robert Fair: His crop may be destroyed by frost or hail or something of that kind. There is no possible way for a farmer to estimate what his income will be.


Colin William George Gibson: Farmers are not included.


Mr. ISNOR:: I should like to say a word along the line expressed by the hon. member for York-Sunbury.


Richard Burpee Hanson: I am glad to have some support.
Mr. ISNOR-: I can give some support, but I certainly cannot go as far as the hon. member. Form T.7-B applies to individuals whose income (a) is derived from carrying on a business or profession other than farming, (b) is derived from investment, or (c) is more than twenty-five per cent derived from sources other than salary or wages. The first payment of twenty per cent is due on March 31, and it is in connection with this that the question of interest or penalty is raised. Interest is payable in respect of late or insufficient payment. I do not believe that particular clause is new. We have always had to pay interest on underpayments. I contend that the department is justified in making this interest charge. Why should a business man with an income of, say,
$100,000 for the current year not pay interest if, with a tax of $20,000, he pays only $5,000? If he had to borrow the $15,000 from the bank to carry on his business he would pay interest, and I think he should pay interest if he withholds that amount from the government. As I say, I believe the department is justified in charging interest for insufficient payment.
I strongly urge the minister to take into consideration a readjustment, and I suggest that this readjustment take place at the end of the second period, namely, June 30. I say that because business men are not obliged to make their complete returns for 1942 until June 30, nor are they in a position, on account of the shortage of auditors, to have a clear picture themselves prior to perhaps April or May of the current year. I intend to speak of that later, or, if permitted, I include it at the present time, although, rightly speaking, it comes under resolution 4 or 5.
I ask the minister to take into consideration the plea raised by the hon. member for York-Sunbury last year in regard to private firms enjoying the same privileges as are enjoyed by corporations, namely, that the smaller or private firms, controlled by individuals, be not discriminated against in favour of a corporation, as occurs under the present regulations. Last year the minister accepted the suggestions of the hon. member along with others who supported him, and an amendment was brought in by which we were all treated alike. If that was sound last year it is equally sound and true now, but to a very much greater extent.


Richard Burpee Hanson: Correct.


Gordon Benjamin Isnor: There are fewer accountants; businesses are more complicated, and more returns are required. Private firms should enjoy the same benefits or have the same period of time in which to make returns as corporations.


James Lorimer Ilsley: If I may interrupt, we propose an amendment under resolution 4 changing the date from March 31 to April 30.


Richard Burpee Hanson: I am
very much obliged to the minister.


Gordon Benjamin Isnor: That is one month additional?


James Lorimer Ilsley: That is right. It may not
completely meet the desire of the hon. gentleman.


Gordon Benjamin Isnor: On behalf of the business
men I extend thanks to the minister for going that far, but I still contend that the adjustment period might be extended to June 30 as far as the actual returns are concerned under
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T.7-B for the current year. In other words, we are making a twenty per cent return based on an estimate. On June 30 we make a further return of twenty-five per cent, and it is at that time we should be able to readjust our returns without having to pay interest. I think that is a reasonable and fair request, and when it is considered by the minister and his advisers I hope he will accede to that suggestion.


Mr. McCANN:: In the case of a single
man, or a married man without dependents, who is a member of this house, on what basis are deductions made at the source from his indemnity? Is other income taken into consideration, and what sources of information have those who make the deduction to enable them to compute it when they have no knowledge of his other income?


James Lorimer Ilsley: Mr. Chairman, can we consider the matter of returns now finished? They properly come under resolution 6. If we can now' get back to resolution 1 we will take up this new matter. But I wish we could have it understood that the matter of returns is all over. Otherwise we shall just be weaving back and forth from one subject to the other all the time.
Mr. O'BRIEN:	Is it in order for me to
refer now to the form of return?


Richard Burpee Hanson: I think
we ought to hear the answer to the question of the hon. member for Renfrew South. I have made comparison with others, and I find my deduction is pretty high, and those of others pretty low. I wondered how it happened. They cannot tell you in the accountant's office. Someone supplies them with a formula or a table; they just operate on that, and they cannot give any explanation.


James Lorimer Ilsley: At the moment I am just interested in the orderly conduct of the proceedings of this committee. I made a mistake in agreeing that the matter of returns could be discussed under this resolution; that is quite obvious. Perhaps we can now get out of that and into what is in order under this resolution. I intend to raise points of. order repeatedly, because I do not see any other chance for orderly conduct of the business of the committee.
Mr. O'BRIEN: May I refer to form T.D. 1.


James Lorimer Ilsley: Yes, let us get through with the returns.
Mr. O'BRIEN: This is a form to be given by employees to employers. I have seen a good many in my own office. Is it not possible for the department to develop a simpler
[Mr. Isnor.l
form? For instance, I refer to item 12 on the reverse of this form where I find this language. Let me explain that I have seen hundreds of these forms in my own business, the lumber business, given out to employees who have very little knowledge of bookkeeping and probably none of legal phraseology:
... if such aggregate is not greater than an amount equal to one-half of the taxes otherwise paj'able by him under subsections one and three of the said section nine less the deduction provided by section eight of this act or the aggregate of
(i) an amount equal to eight per centum of his taxable income during the taxation year or eight hundred dollars, whichever is less, in the case of a person subject to tax under rule three of section one of paragraph A of the first schedule to this act, or, an amount equal to ten per centum of his taxable income during such year or one thousand dollars whichever is less in the case of a person subject to tax under rule one of section one of paragraph A of the first schedule to this act.


John Ritchie MacNicol: This goes to the average working man?
Mr. O'BRIEN: Not even a lawyer could unscramble that; it would take a magician to do so. The confusion there seems to create a masterpiece. I would respectfully suggest that if this form is to be given out to employees scattered across Canada it must be greatly simplified.


James Lorimer Ilsley: With regard to the resolutions under which matters can be taken up it seems to me that the present resolution deals with the 1942 tax, and at the moment we are talking about the 1913 tax. I suggest that the proper resolution under which to discuss 1943 tax is resolution 6. Then the answer to the question of the hon. member for Renfrew South could be taken up under resolution 6.
If we could get back now to the discussion of forgiveness of half the 1942 tax and stick to that we might make some headway. I wish to answer the hon. member for York-Sunbury. His suggestion is that instead of forgiving half of the 1942 tax we should forgive the whole 1942 tax. Is that correct?


Richard Burpee Hanson: That is the Ruml plan.


James Lorimer Ilsley: If we were to do that, with a half or something like that of the tax having been paid, it would mean an enormous number of refunds or credits on the 1943 tax, or on some tax. I think that would have been an irresponsible course for a government to take, and I do not see any argument at all in favour of it. As I said the other night when I introduced this resolution, some persons paid 30 per cent, some 40 per cent, some 50 per cent, some 60 per cent and some 70 per cent of

Income War Tax
their 1942 tax, but 50 per cent seemed to be the figure around which most of the payments hovered, and it seemed to be the appropriate figure to take. The payments in 1942, on 1942 income, were made in two ways. They were made by national defence tax deductions between January 1 and September 1, and they were made by deductions under the budget of 1942 from September 1 to the end of the year. For persons who were not subject to deductions they were made in quarterly payments, one on October 15 and the next on January 15. We have regarded the January 15 payments as though they were made in 1942; they were made in respect of the 1942 income. In these two ways about 50 per cent of the 1942 tax was paid in 1942 or in January, 1943. At a time like this, for the government to turn round and pay that money back would have been irresponsible, nothing more nor less. The Ruml plan is a plan for another country, where they did not have any payments to amount to anything in 1942 on 1942 tax, where the tax was payable in the spring of 1943. His problem, in thinking about it, was how to make the transition, and he could not see any way to make the transition except by forgiving 100 per cent of the 1942 tax. Here we had already made the transition to the extent of half the tax.


Richard Burpee Hanson: By doubling up the tax.


James Lorimer Ilsley: No. The hon. gentleman says that in twelve months we have paid or would have paid sixteen months' taxes, but that is not correct. In 1940 or 1941 I announced a voluntary plan of paying taxes by instalments, the instalments to begin in September and to end in September. I think that must have been in 1940, just on the eve of the second victory loan. I remember it distinctly; workers in the second war loan came and said, "If we could say something about the settlement of income taxes it would help in the loan", and after consultation with the Department of National Revenue I made a statement outlining some sort of offer, I forget now what it was, but offering some advantage if taxpayers would start making their payments in September, 1940, so they would be through paying their tax on 1940 income by August, 1941. Something of the same kind, perhaps modified from twelve months to eight months -I cannot just remember all the changes that were made-was offered under another plan in 1941, which carried it into 1942. So that the hon. gentleman always had the opportunity of starting his payments in September, 1941, and of finishing the payment of his 1941 income tax in September, 1942.


Richard Burpee Hanson: I did that;
I had to.


James Lorimer Ilsley: Then what is the hon. gentleman's kick? He did not pay sixteen months' taxes in 1942, then.


Richard Burpee Hanson: No, but I paid almost all.


James Lorimer Ilsley: The hon. gentleman paid about twelve months' taxes in 1942. He paid some of his 1941 tax in 1941, and some of his 1942 tax in 1942.


Richard Burpee Hanson: Generally speaking, people had to pay more in 1942.


James Lorimer Ilsley: No. For two years they had the chance to get on a twelve months' basis, starting in September of the current year and finishing their payments in August of the following year.


Gordon Benjamin Isnor: And it was a good plan.


James Lorimer Ilsley: Yes; it was a plan which commended itself to a very great number of taxpayers. So that there was nothing wrong in making compulsory what we were trying to get the people to do voluntarily in 1940 and 1941. We would have been consummate fools to have turned round this year and paid back the full 1942 taxes, or fifty per cent of them. We could not have defended that for one moment either in this house or in the country.


Harry Rutherford Jackman: Would the minister say whether or not it is a true statement when members declare that two and a half years' taxes have been paid in two years? I understood that was how the tax law worked, that in a two-year period we shall have paid two and a half years' taxes. Certainly I paid virtually a full year's taxes last March or April; I paid a quarter in September and a quarter in January, so that in one year I paid one and a half years' taxes. I do not see how anyone could pay less than two and a half years' taxes in two years.


James Lorimer Ilsley: The hon. gentleman could have done so if he had started the previous September, as he was invited and urged to do. If he had started the previous September, as the hon. member for York-Sunbury did, instead of waiting until April, he would not have had any complaint.


Richard Burpee Hanson: I still have the complaint that I paid two and half years' taxes in two years. There was a doubling up of one and a half years' taxes, and I say that was not a fair deal. You got more taxes than you should have got.

Income War Tax


Harry Rutherford Jackman: The minister says one could have started paying in September, 1940, and he would not have had the heavy load in 1941. But in 1941 we were still paying off the greatly increased percentages of the preceding year. We were always a year behind on this thing, and then we started catching up. I do not see how the minister can argue against the statement that the average citizen of Canada must pay two and a half years' taxes in two years. It must be so, because we were a whole year behind.
Mr. O'NEILL: For the past hour or so I have listened to the troubles of the business men. Now, if I am in order, I just want to call to the attention of the committee a matter in respect of the men who have to work. Many of them are paid on an hourly or piece-work basis. Take railway men, for instance. There may be one week, when a man on an extra board, when he may earn $50, while the next week he may not work at all. For the week he makes $50 he is taxed at a pretty high rate, but if business drops off or if there is not very much work in the locality in which he happens to be, which is probably the only place where his seniority will entitle him to work, at the end of the year he may find that he has paid taxes during several weeks or several months of the year but that during the whole year he has not made enough money to put him in a taxable bracket. How are^you to arrange to pay that fellow back? At the present time there are in this country men who have had the national defence tax taken away from them since January, 1941. At the end of 1941 they were not in a taxable bracket, but they have not had their money returned even yet. In some cases the government has held that money for more than two years. In a great many cases these men have not even had replies to their letters, let alone refunds of their money. I am wondering w'hat sort of arrangement is to be made. I am not so much blaming the government, but I am trying to call their attention to the fact that these conditions exist among the working classes of this country. Something should be done to make an arrangement under which they will not have to wait an unnecessarily long time, because, as the minister has said, if a man pays too great a tax there is no interest rate when he gets his money back; but if he is slow in paying, a penalty is certainly attached. Something should be done so that one would not wait an unnecessarily long time.


[Stage Direction]
Amendment agreed to.
Resolution as amended agreed to.

2. That in respect of the taxation year 1942 one-half the liability of taxpayers, other than corporations, under subsection 1 of section 9 of the Income War Tax Act in respect of investment income in excess of $3,000, shall be deferred and shall not be due until the date of death of the taxpayer.
James Lorimer Ilsley: I wish to move in amendment:
That resolution No. 2 of the resolutions to amend the Income War Tax Act be amended by adding thereto after the words "death of the taxpayer" in the last line thereof the following words: "Provided that such liability may be prepaid by him during his lifetime in a lump sum before April 30, 1944, at a discount, the discount to be calculated at the rate of 2 per cent per annum on the basis of a table of life expectancy to be approved by the minister."


Richard Burpee Hanson: That
amendment does not help much; it depends upon whether you live or not. However, I shall not discuss that aspect of it. I am wondering why in the first place there is a line of demarcation with respect to investment income below $3,000. Is it on the theory that these are rich people, and that, therefore, they can pay? I say that is putting a penalty on thrift. I commend to the minister an editorial appearing in his favorite home journal, the Halifax Chronicle, which, I believe, in season and out of season has supported him, and has supported his party for well over one hundred years. They are getting a little weary of this sort of thing, and I notice, too, that they have -been critical of the government's war effort in days gone by.
I hold in my hand the issue of April 7, in which the leading editorial is entitled "Penalizing Thrift", and states:
For the most part the taxation aspects of the 1943 budget are good. Many unnecessary hardships have been removed.
I would pause here to say that there are a few still to be removed, among others being the question of taxation of annuities, to which I referred about an hour ago, and to which I hope the minister will give consideration.


James Lorimer Ilsley: I answered the point last night, as a matter of fact.


Richard Burpee Hanson: I was not here. What did the minister say?


James Lorimer Ilsley: I said we wanted1 to do something, but that-


Richard Burpee Hanson: I congratulate the minister, and I am glad to hear it.


James Lorimer Ilsley: Well, the hon. member had better wait until I have said what I am going to say.

Income War Tax


Richard Burpee Hanson: My congratulations are too early, are they? Did the minister say last night what he intended to do about the matter.


James Lorimer Ilsley: No, I did not.


Richard Burpee Hanson: Then he just referred to it, and I am a little early in my congratulations. But when the minister placed that provision in the statute, under the guise of taxation he confiscated a lot of money. The article goes on to say:
But many still remain. Some are only now becoming apparent. One in particular calls for special consideration.
This is written in a section of the country where the majority of people are Scotch, and thrifty.
That hardship arises out of the somewhat unrealistic distinction which the minister made between earned income and investment income. That distinction was seemingly made on the assumption that persons dependent upon investment income are in a better position to pay taxes than persons dependent upon earned income.
One-half of all the 1942 tax-it will be recalled-is to be forgiven on all income except investment income over three thousand dollars per annum.
Then they go on to analyse that statement, and say:
How does this work out in practice? The man who earns $30,000 a year as a business executive is forgiven half of his 1942 tax. Well and. good. But the man with an investment income of $4,000 is not similarly favoured. He is "forgiven" only half the tax on the first $3,000 and his estate becomes liable for half the tax remaining on the other $1,000.
This is their conclusion on the point:
What it amounts to is simply this. The man whose income is earned gets the equivalent of a receipt in full for six months' 1942 taxes, while the man whose income comes from investments get a receipt in full for six months' taxes on the first $3,000 only of investment income, and the receiver-general, in effect, takes his I.O.U., payable at death for half the taxes on whatever investment income he has in excess of $3,000.
It is hardly fair to penalize the man who by thrifty living has accumulated a nest egg of investments from which he derives a modest retirement income, and to let the big business executive with a large salary get away, with six months taxes and no strings attached.
I should like the minister to scratch his head over that for a little while.


James Lorimer Ilsley: I have done that.


Richard Burpee Hanson: The editorial continues:
The man who practises self-denial and over the years saves part of his earnings is to be encouraged. The income from his nest-egg of
72537-125}
investments, some of them undoubtedly victory bonds, represents the fruits of his labour just as much now as when he was earning and put aside part of his earnings as savings.
The effect of this unreal distinction between earned income and investment income is to penalize savings at the very time when savings and thrift should be encouraged in every possible way.
I say "amen" to those words.


Mr. KINLEY:: Does the hon. member often say "amen" to the Chronicle?


Richard Burpee Hanson: I admit I do not say it often. But I hear that, with the passing of the years, the Chronicle has mellowed to some extent, and that it is not so fond of Liberalism, as exemplified in this house to-day, as it was of the Liberalism ini the days of Mr. Fielding.
The editorial continues:
The preferential treatment of earned income when it comes to "forgiving" back taxes breaks down because of the assumption that people with investment income are in every ease better off than people whose income is wholly earned.
That is an improper assumption, namely, that people who have investment income are better off than those with earned income. It does not follow as a matter of course; but that is the theory upon which this tax is based, namely, that people with investment incomes of 85,000 a year should be penalized, as against the man with an income of $14,000, such as the minister receives. The editorial continues:
This assumption may have been true once. It certainly is not the case to-day. Never in our history have earned incomes been higher and investment incomes subject to greater restrictions than they are right now.
At six o'clock the committee took recess..
After Recess
The committee resumed at eight o'clock.


Gordon Knapman Fraser: Before recess the minister read an amendment to resolution 2, and that amendment mentions a bulk sum if paid on or before the end of 1944, I think it was.


James Lorimer Ilsley: April 30, 1944.


Gordon Knapman Fraser: Would1 the minister consider dividing it? Suppose a man had a tax of $4,000 to pay and that he had only $1,000 that he could spare. Will that man be allowed to pay down $1,000, or, if he wanted to pay half the 1942 tax, would he be allowed to pay that instead of the bulk sum and still get the benefit of the discount?'
Income War Tax


James Lorimer Ilsley: I do not see an.y objection
to that. I do not know that it has occurred to anyone. Consideration can be given to that before the bill is introduced.


Gordon Knapman Fraser: I
think the minister will see what I mean when I say that it should be left to the taxpayer to break down the lump sum and pay one-quarter or one-half if that is more convenient to him. The government wants the money; it has to have it to carry on the war effort, but I think [DOT]the taxpayer should have the privilege of paying one-quarter or one-half and still have the benefit of the discount as long as he pays up before the due date.


James Lorimer Ilsley: I should think so. Offhand, I do not see any objection to< that. I would think it was altogether to the good. But consideration can be given to it before the bill is drafted.


Grote Stirling: In the case of a taxpayer who is not able to make use of this amendment, and where the amount is set aside until death, will the money so set aside in the estate of the taxpayer be caught by succession duties either dominion or provincial?


James Lorimer Ilsley: No. It is a debt owing to
the crown, and therefore can be deducted from the value of the estate.


Grote Stirling: Then, in the case of the 'S3,000, half the tax on which is remitted, at what rate will that tax be calculated on the $3,000? Will it be calculated on the total amount of that man's income, and will the proportion that $3,000 bears to that be the rate?


James Lorimer Ilsley: That is correct.


Mr. ROSS (St. Paul's):: Mr. Chairman,
there is a certain matter that needs to be taken up, but I do not know whether this is the appropriate resolution. The minister has said that some consideration is to be given to the taxing of term and life annuities. The matter on which I wish to say a few words comes within a somewhat different category. It concerns life insurance policies. Naturally a man wants to provide for his wife and family, and he has three ways of doing it. He can leave a lump sum; as an illustration, and for easy figuring, let us say that on his death he leaves $50,000. If he leaves that in a lump sum to his widow, succession duties are payable first to the dominion government and then to the province. Or he could leave to his widow this sum of money payable per month ior a term of twenty years. Third, he might 
leave this sum of money payable per month to his widow for twenty years certain and for life if she lives longer.
The situation as it is to-day is this, and I think something should be done about it. If we still take $50,000 as an illustration, that amount would produce in certain companies $275.50 a month for twenty years after the man dies. There is no tax on that. There are succession duties payable on it to the dominion government and to the provincial government. I gave the figures on that on a previous occasion. If we take that $275.50 a month for the twenty years, a calculation is made and it is found that the interest portion only of that which is payable together with the capital month by month for twenty years amounts to $67.87. That would not be taxable if the woman has nothing else. There would be no tax because there is not sufficient to tax.
I come back to the $50,000. According to the tables of this company, $50,000 produces $243.50 a month for life, with twenty years certain. Succession duties are payable on the $50,000 to the dominion government, and a smaller amount of succession duties is payable to the Ontario government. There is an income tax payable on $243.50. Look at the difference. In the one case, where provision *is made for $275.50 a month for twenty years, it means that the widow will have support for that length of time, and, after that, poverty if she lives longer. But where the man provides for her for twenty years certain and for life, income tax is payable on the $243.50. There is a lot of difference in the tax to be collected, and I would ask the minister if he thinks it fair that this sort of thing should happen, in the interest of general thrift and in the interest of a man taking proper care of his widow and family. In the case where the man provides for the widow for her lifetime and gives her $243.50 a month for life, she has to pay income tax, which on that amount is very considerable. On the other hand, if the man makes up his mind that his widow will live for only twenty years after he dies, there is no income tax payable. I would ask the minister whether he has taken that into consideration, and, if so, whether he will do something about it.
Take the case of the twenty years monthly payments produced by $50,000. It is very easy to work out the amount of the interest payment on that. Take two hundred and forty times $275.50 and the difference between that and $50,000; divide that by twenty, and that gives you $806 a year. That is $67.87 a month. Why is it not just as easy to work out the same thing actuarially in connection with the other proposition-the $243.50 a month? They

Income War Tax
know the life expectation of a woman at the age she has; all the necessary facts are available. In some cases there would not be any interest required; in other cases, for instance if the man died when she was very young, there would be large interest charges. The whole thing is not right. I ask the minister if something cannot be done.


James Lorimer Ilsley: The questiofi of annuities has been up two or three times, and apparently it is coming up under every resolution. I have already said it is my intention to introduce some amendment to resolution 3 (g). It does not have to be done on the resolutions, it can be done on the bill and can be discussed at that time. The house will have an opportunity to see the bill and time to examine the amendment.


Richard Burpee Hanson: That is
quite all right.


Harry Rutherford Jackman: I realize that this does not appeal to great masses of the people; but it strikes very hard at a relatively small class, politically of no consequence whatsoever, who have nevertheless in many cases been leaders in the building up of this country, in the organizing of industry and in the assumption of risks, thus making jobs for our people, and I suggest that, unless the state intends to take over full responsibility for giving every man or woman a job after the war, they should be encouraged in their endeavours and not penalized because they saved money and provided work for others in the past. As it is, they are subjected to a special burden of taxation. Everyone else is to be forgiven half of last year's taxes except those receiving this investment income. I suggest to the minister that it is an invidious distinction against a class, and even within the class there is an invidious distinction. A person who is very old and has a life expectancy of from one to five years may owe the crown virtually the full amount of his last year's taxes, namely, the part which is not forgiven; but a person who has an expectancy of thirty or forty years does not owe half or even a quarter as much as the person who has an expectancy of only five years. Where is the fairness in forgiving a man with S50,000 of earned income and taxing the man with S5,000 of investment income? There are many people who have retired from business in order to devote their time and ability to public service of one sort or another. These men are living on what income they have. Yet if they had stayed in business they would have continued to draw their salaries, and that part of their income "would have been entirely free of back taxes under the legislation the minister is bringing down.
May I point out something which may be rather small but which, nevertheless, is of some significance. Those who have an investment income now may not have any investment income five or ten years from now, certainly not in ten or twenty years. There is perhaps no place in the world where wealth changes faster than on the North American continent. As the minister well knows, it is a truism to say that one passes from wealth to poverty in three generations, "from shirtsleeves to shirt-sleeves in three generations," as the saying goes. It works much faster than that, particularly in times such as those we have gone through in the last twenty years. Salaries are a first charge on the earnings of companies, whereas dividends or interest is a last charge. The salaried man continues to draw his income even though the company goes into bankruptcy, whereas the man who receives investment income has to wait until

the wage-earner and the salary receiver get theirs. As I say, this is not a point of great importance, but it is something which I think should be brought up.
I do not think the minister should bear so heavily at every opportunity upon those who receive investment income. For instance, the interest rate on government bonds is 3 per cent to-day compared with 5 per cent in days gone by. The amount received for short-term money is almost negligible, less than 1 per cent. I will not say that the 3 per cent rate is a fictitious rate, but the fact is that the influence of our central bank has been felt in the establishment of that rate. The man who has retired, the man who attempted to provide for himself fifteen years ago, thought he would get a 5 or 6 per cent return, but he finds now that he is receiving only 3 per cent. The minister has boasted, and rightly, of the average rate the government is paying; it is now somethnig like 2j per cent. There are many adverse factors weighing against those who are in receipt of some investment income.
I have pointed'out that the man who owes taxes to the government and who has a short life expectancy owes actually one dollar, whereas the person in receipt of investment income with a life expectancy of fifty years owes only twenty-three cents on each dollar of tax, if we take 3 per cent as the base rate. Here we have the principle in the suggested legislation that the older you are, the higher your tax. I have never heard of that principle being applied to income taxation, but that is exactly what the minister is proposing here. He has intimated to-day that they will adopt the principle advocated by the hon. member for Peterborough West (Mr. Fraser) of commuting the tax payments, which will make it work out differently for every taxpayer in the country. You are going to use a 2 per cent base, and I shall say something about that at another time.
I suggest that this taxation is in the nature of a third succession duty. You do not have to pay it until you die. The minister said that the tax is definitely fixed, but only one of the components of the equation is fixed. The nominal amount is fixed, but the time element is uncertain, with the result that the value of the money when you die is not fixed at all. It is true that the minister is introducing an amendment which will permit commutation based on the life expectancy, but the life expectancy of everyone is different. It has all the earmarks of a succession duty. We have a provincial succession duty which is quite high, and two years ago we introduced a dominion succession duty. We are now to

Income War Tax
have what is tantamount to a third succession duty. Every estate of any size will owe two succession duties to the crown in right of the dominion.
The minister threw out the suggestion that the well-to-do person who owed money under this S3,000 limitation could take out life insurance. He has given us some alternative when he says that we may commute our payments. Most of the taxpayers will not have the physical condition to permit them to take out life insurance. If they do have insurance it will be considered part of their succession duty and be taxed. This will result in an almost impossible position for the taxpayer. The more he tries to provide for his taxes, the more he will find himself taxed.
This limitation applies more to widows and orphans than it does to men in active business. It is a well known fact that in many of the great companies in the United States-I suppose the same thing applies to Canada-a majority of the shareholders are women. These shares eventually get into the hands of women. When a man dies he leaves his holdings to his widow, or he may try to provide for her during his lifetime. It may be considered by some that these people are relatively well off if they have $3,000 less the tax, which will leave about $2,200, but the fact is that it will be a hardship on them to be treated in this way, especially in view of what may have been contributed to our society by the creator of the estate.
As has been pointed out already to the minister, the suggestion of forgiving only up to $3,000 of investment income will encourage a person to be a spendthrift; it will discourage thrift. The minister may think these are idle words, but I suggest to him that only a small percentage of the members of this house is composed of men who have not made their own way in life. In fact, nearly everybody in Canada has had to make his own way in life. Originally we all came here in order to better our condition. There is no great inherited wealth in this country such as exists in old Europe. The creation of wealth means that a person has saved, that he has done without things during part of his life.
One hesitates to be personal in this house, but I could name many things which some people have gone without-they may be considered luxuries by some-in order to try to get on in the world. Yet as soon as one saves a little capital and invests it, sometimes wisely and sometimes unwisely, as soon as one has a little income, when we enter into a time of great crisis, when we are ready tc bear our fair share of taxation according to
our ability to pay, there is no reason why the minister should endeavour to make it difficult; there is no reason why he should penalize those who are where they are to-day as a result of the sacrifices they have made in the past. I may say that other people have not made similar sacrifices. I have the utmost sympathy for those who have never been able to save, perhaps because they had not enough work or suffered during the great depression, but there are others who have made great sacrifices in order to save.
We have a liquor bill of $250,000,000, which compares with a net income from investment after taxation of about $400,000,000. This gives us some idea whether or not the average person in the country is anxious to try to get ahead and is willing to make the sacrifices he must make if he wishes to provide for his old age. I hope that the only reward of those who have made sacrifices in the past, who have carried out many economies, who do not look upon social security as being the best they are to have in old age; those who are anxious to get ahead, who are willing to strive for themselves will not be to have taxation so onerous that little or nothing is left to them. The minister must consider this. He gives me the impression that the people who have wealth inherited it, that seldom did they give any contribution in return for it. In fact I might read what he said in the budget speech in regard to the limitation of investment income to $3,000. He used these words: " .<. . whose investment income really represents the fruits of earlier earnings-If a person even believes in compound interest, which is sometimes regarded as the only magic in finance, an income of $3,000 is not a very large sum. If the minister will look at his compound interest table he will realize how easy it is to accumulate a fairly decent sum of money at compound interest over a reasonable period of years.
He said further,	. or the protection
against want which a man has provided for his dependents". In other words, is a man not to be allowed to leave more than $3,000 for the upkeep of his family? Certainly a man still in the prime of life, with young children, leaving $3,000 subject to taxation which will take $700 or $800, is not leaving much for his family to get on with. Let me remind my hon. friends on my left that labouring men do not consider $2,000 or $3,000 in many cases to be much money. If we take, I think, some fifteen thousand employees of the Canadian National Railways, as adduced in the committee the
Income War Tax

average wage was some $2,775 a year. That undoubtedly includes some clerks and others who get very small salaries, but there are others in the labour brackets who get very good salaries.
The minister's ideas seem to me altogether too small, I was going to say for decency, certainly for any kind of living, bearing in mind what people have been used to, and even making full allowance for the reduction on account of the war. So that I should like to know how the minister arrives at this figure of $3,000. Is it some arbitrary sum, or did someone advise him?


Richard Burpee Hanson: And why?


Harry Rutherford Jackman: And why was it made so small? May I point out here that this alleviation in taxation for which I am asking has nothing whatever to do with the war. If it had, the situation might be different, but it will not be payable until a person dies. True, a small percentage may die before the war ends, but the great bulk of the taxpayers who have to pay on that 1942 income will, we hope, live for years after the war is over. I do not know why the minister adopted this variation of the principle of the Kuml plan. If we are to be limited in this country to $3,000 a year income, then I suggest that the minister should do as Mr. Churchill said in regard to taking over certain private plants in the old country:
Mr. Churchill's reply was, first that there had been no decision, and second that he could not conceive that the government would embark upon such a policy, with all its implications, without consulting not only parliament but the country.
I do not think anyone in this country wishes to see such a limitation on incomes that they cannot rise above $3,000. President Roosevelt advocated a limitation of $25,000 across the border, after insurance policies, charitable donations and so on had been allowed for, but congress refused to agree to the limitation. I realize that our standards are not as high as those in the United States, but surely $3,000 is not to be the limit of what a man can earn and receive from investments which he will be able to gather during his life from the fruits of his savings, or a limit to the amount which a man may leave to his widow. That would give little recognition of past sacrifices or the willingness to assume risk and undertake business and give employment to others, which most of those people who have an investment income of over $3,000 have shown during their business lives.
I perhaps would not have said so much about this subject except that the minister gave me encouragement in his budget address in regard

to any matters on which this house might have ideas which will hold water and are acceptable. He said:
The financial programme for the coming year will be the government's programme only in the sense that the government has the responsibility of recommending it.
I think the minister looked over at the opposition when he made that statement, and I consider it an open invitation to us to make constructive suggestions where possible, so that the taxation system of this country will be more acceptable to the people and more equitable to the taxpayer.
It is almost impossible to come before the committee of the whole here and find out a great many facts which one must find out in order to be able even to think intelligently about budget matters. The implications are now so great that they require much careful study, and if we are to do that which our constituents send us here for we must have available to us experts so that we may know what alternative plans of taaxtion are available, instead of having brought down what has, heretofore at least, been a hide-bound budget to which no variation has been permitted. Yet the minister now says that this is the government's programme only in the sense that the government has the responsibility of recommending it. I am hopeful that I am not putting too broad an interpretation on the minister's words in believing that he is open to any suggestions for a more just distribution of the necessary tax burden. I ask my fellow members to support me in my contention that the refusal to forgive the tax on invested income in excess of $3,000 for 1942 is in essence a third succession duty and should not be allowed.


Mr. McCUAIG:: When the minister brought down his budget a few weeks ago there was general comment not only by members of this house but also throughout the country and particularly in the press that the minister was playing Santa Claus to the taxpayers with respect to forgiving half of last year's income tax. Many newspapers then made the suggestion that it must be an election budget. It it rather surprising now, when the minister seeks to have his budget approved by the committee, that we are having a continued debate asking him to reduce taxation in each item as it comes before the committee. We started yesterday afternoon with resolution 1; we did not finish that until shortly before six o'clock to-day; now we are starting resolution 2, and at the rate we are going it seems doubtful if we shall finish resolution 2 to-day.

Income War Tax
A year ago we had a great deal of discussion, particularly from the opposition, to the effect that there should be a total war effort. Now, when the minister is trying to raise the money to pay for that effort which has been achieved, we have a concerted movement from the same quarter asking him to reduce taxation here and there. We have had one question after another, and the same item referred to time and again. If anyone looks over Hansard he will see where the minister has answered the same question three or four times.
The last speaker raised the question of $3,000 invested income. The minister has already answered that; why should the same question be asked time and time again? Then some speaker said that there was no distinction between investment income and earned income. Take a person who is receiving over $3,000 investment income, sitting doing nothing. Am I to be told he is earning it, as much as the labourer on the farm earns the $500 or $600 a year he is paid? I say there is a difference between investment income and earned income, and we would do well if we gave the minister more support instead of asking him to reduce taxation in connection with every item that comes up.


Mr. NICHOLSON:: Mr. Chairman, this is the fourth session during which similar arguments have been heard from hon. members who sit to my right, and I have a great deal of respect for the patience shown by the Minister of Finance. Those of us who were at the Capitol theatre this morning were able to get some picture of what has happened in Canada since war broke out. I see the Minister of Munitions and Supply in his seat, and I wish to thank him for presenting in such a vivid manner the dramatic story of Canada's contribution in the field of production. If I remember correctly, we were told that the runways at the air training centres would be equivalent in length to a two-lane paved highway all the way from Winnipeg to Vancouver. Over 500,000 motorized vehicles have been made in Canada since the beginning of the war, and those of us who have been through the factories which have produced them will appreciate that perhaps three or four times as much work is involved in making one of these machines as is involved in making an automobile. In the production of tanks and aeroplanes-


John Ritchie MacNicol: What has this to do with resolution 2?


Alexander Malcolm Nicholson: I am coming to that in a moment. The hon. member who has interrupted me and others seems to think we can carry on a war such as this and still
allow people in the high income brackets to go through life as though nothing were happening. A year ago the hon. member for York-Sunbury complained that he was compelled to dip into the saving of a lifetime-


Richard Burpee Hanson: Hear, hear.


Alexander Malcolm Nicholson: What a pityl


Richard Burpee Hanson: Yes; it is a pity, as long as it does not come out of your pocket.


Alexander Malcolm Nicholson: At the time the hon. gentleman spoke he was receiving from the exchequer of Canada $14,000 a year, with an extra $2,000 as car allowance.


Richard Burpee Hanson: And the government took it all back from me.


Alexander Malcolm Nicholson: Just a moment and we shall find out about that. Let us leave out of consideration any other income the hon. gentleman may have had. With a taxable income of $14,000 a year his monthly income would be $1,166, and the government would take away from him $505.04. So that, with the extra $2,000 for his car, which was not taxable, he would have left $827 a month, after the government had taken from him the most severe taxes ever known in Canadian history.


Richard Burpee Hanson: Oh, you are wrong.


Alexander Malcolm Nicholson: In other words, he would have $27.50 a day. If I am wrong I hope the hon. member for York-Sunbury will put me right. The figures I have quoted are from the table published by the Minister of National Revenue for last year, 1942, and I am calculating on the basis of $1,166 a month, which is the monthly income of a man receiving $14,000 annually. I understand the $2,000 car allowance is not taxable. How sorry we should feel-


James Lorimer Ilsley: If I may be permitted to interrupt, it is hardly fair to take that table of deductions because, in addition to the amount that would be deducted under that table, a taxpayer would pay his national defence tax, which would amount to a very considerable sum between January 1 and September 1. In addition, the table of deductions provides for the payment of only about ninety per cent of the tax; and even if the hon. member's sole income were $14,000, he would pay much more in the course of a year than twelve times that monthly deduction.


Alexander Malcolm Nicholson: These are last year's figures.



Income War Tax


Richard Burpee Hanson: It is hardly worth while to explain to the hon. member; he would not understand it. I will, however, say this, that this takes no account of my municipal taxes, and I can say that I had hardly enough left to pay my board here in Ottawa. The hon. member would not understand it if you did tell him; so why argue?


Alexander Malcolm Nicholson: I have invited the hon. member for York-Sunbury to place on record exactly how much was left of his income from the federal treasury, leaving out of consideration entirely any other income he may have had.


Richard Burpee Hanson: I do not propose to expose my private business to the curiosity of the hon. member for Mackenzie.


Alexander Malcolm Nicholson: I have not asked the hon. member to expose his private business; I am asking him to correct the figures I have just given.


Richard Burpee Hanson: The minister has corrected the hon. member.


Alexander Malcolm Nicholson: The minister has not placed on record exactly w'hat the figures would be. The minister has his assistants with him, and I would appreciate it very much if he would calculate how much a citizen of Canada with a taxable income of $14,000 plus an additional $2,000 that is not taxable would have left. I was going by the figures contained in this table.


Richard Burpee Hanson: I rise to a point of order. I think this discussion about my income tax is entirely out of order and not germane to the matter under discussion. I appeal to the sense of fairness of this committee, if I cannot appeal to the sense of propriety of the hon. member, not to indulge in this kind of talk.


Joseph-Arthur Bradette: On the point of order, I feel that the hon. member has been making statements that come very close to the borderline of personal matters, and I think he should not make further statements concerning the personal and intimate affairs of an hon. member.


Alexander Malcolm Nicholson: I merely referred to a complaint that was made previously by the hon. member for York-Sunbury, in discussing this question. I am selecting his category to discuss, so that hon. members of this committee may decide-


James Joseph McCann: Select your own category.


Alexander Malcolm Nicholson: I am quite prepared to do that. The point I wish to make is that
rMr. Nicholson.]
this administration has not gone nearly far enough in taxing those with incomes of $14,000 a year or more.


An hon. MEMBER:: What about those getting $4,000?


Alexander Malcolm Nicholson: Yes; the hon. member for Rosedale wanted sympathy for those in the $3,000 category. According to this table a married man with two dependents, and with an income of $250 a month, would pay a tax of $44.02 a month.


Gordon Knapman Fraser: That was for last year.


Alexander Malcolm Nicholson: Yes; the new tables have not reached me yet. Under last year's taxation he would pay $44.02, which still leaves him more than $200 a month. If we are to have a million and a half of the young people of Canada in uniform and in our munition factories; if they are to be fed, clothed and equipped, it is as plain as A, B, C that the citizens of Canada must make some adjustments in their way of living. I submit that those who are in the highest income groups certainly should not complain in this house. For my part I hope the minister, instead of listening to the representations which have been made by the Progressive Conservative, party, will adhere to the decision at which he has arrived and next year go even further than the present legislation, because those who are in these categories are still able to go into the market and buy consumer goods, thus maintaining pressure on the price ceiling. They cannot really complain about having to tighten their belts and make tremendous sacrifices.


Mr. NOSEWORTHY:: I listened intently to the hon. member for Rosedale, and just in case the minister might be inclined to relent after hearing that impassioned speech on behalf of those receiving investment income, I wish to remind the minister that there is no reason to believe that those receiving investment income are not as capable of earning their income as are those who have to do without investment income. There is no reason to believe that they cannot subsist on the mere pittance they receive from investments. In other words, that is not necessarily the only income on which they have to live.
In the second place, the hon. member complained of $3,000 being a comparatively small amount even for a widow to have to live on. I would remind him of our old age pensioners, widows of veterans of the last war and widows of soldiers in this war by

Income War Tax
whom a S3,000 income would be considered a very tidy income. I would also remind him that $3,000 a year is just twice as much as eighty-three per cent of the wage-earners of Canada received by way of income in 1942.


Gordon Knapman Fraser: I
wonder whether the minister would have to make an amendment in the second resolution to the same effect as the one he made in the first one. I should think that after the word "corporations" he would have to insert the same amendment with respect to trustees, and that the same would apply to resolution 3.


James Lorimer Ilsley: I a.m not just clear as to whether it should be in there or not.


Gordon Knapman Fraser: The minister cannot very well have it in the first one, and not in the second one.


James Lorimer Ilsley: I am now told it is doubtful whether it was necessary in the first one.


Gordon Knapman Fraser: The minister should not have it in one unless he has it in all three.


James Lorimer Ilsley: We will look after that in the bill, anyway. We will be careful about that point when the bill is drafted.
Mr. HAN.SON (York-Sunbury): I have been straggling with a problem in connection with income tax which perhaps I might ask under this resolution. I have in mind a taxpayer with an earned income of $5,000 and an investment income of $7,000. He has charities amounting to $1,000, leaving a net income of $11,000. What is his tax, and how much must he pay, under this resolution? A man from the income tax branch is still struggling with that problem; at least I assume he is, because I have not heard from him. Perhaps he has not had time to solve it.


James Lorimer Ilsley: I do not think it could be answered right now.


Richard Burpee Hanson: Perhaps not. However, it is now on the record and it can be answered later. I realize it is a complicated calculation.


[Stage Direction]
Amendment agreed to.
Resolution as amended agreed to.
3.	That the returns of income in respect of the 1942 taxation year for taxpayers other than corporations shall be due on the 30th June, 1943, together with payment of one-third of the taxpayer's unpaid income tax liability not otherwise provided for herein, the remaining two-thirds to be due and payable on the 31st December, 1943;
Joseph Henry Harris: I am under the impression that the minister indicated we could discuss under this resolution the matter of absenteeism.


James Lorimer Ilsley: I thought it was to be under resolution 6. We are still taking about 1942 income.


Joseph Henry Harris: And 1943, as well.


James Lorimer Ilsley: No; that is just the date of payment. The hon. member is talking about 1943 income when he talks about absenteeism. I do not care very much, although we should stick to one or the other.


Gordon Graydon: It might be more convenient to the hon. member for Danforth if we had the discussion now.


Joseph Henry Harris: Yes, it would, because, as a matter of fact, I have occasion to be out of the city to-morrow.


James Lorimer Ilsley: All right, we shall have the discussion now.


Joseph Henry Harris: I thank the committee, very much, now that the minister has extracted my confession as to why I wish to go ahead with the discussion now.


James Lorimer Ilsley: But let us have it understood that all of this discussion must take place on resolution 3, and not part on resolution 3 and part on resolution 6.


Joseph Henry Harris: I am content.


Joseph-Arthur Bradette: Then the discussion will take place on this resolution. Yesterday I was called upon to make a ruling, and to point out that the onus really rests upon individual members in the committee for following the rules of the committee. I know that once an agreement is arrived at, hon. members will abide by it. I shall apply the effect of this understanding, just as I would any rule in committee; and I know hon. members will support me in that procedure.


Joseph Henry Harris: Already the matter of absenteeism, one of great concern to industrial life in Canada, one which should be a matter of great concern in our war effort, and which has a bearing on taxation, has been placed on the record. I have made the statement definitely that the rate of taxation of employees who work full time, and who want to work overtime, could be reduced, provided the taxation were spread over the whole field of those earning more than the costs of subsistence. The base could be spread and the rate reduced. I gave a few examples, and this evening I shall give one mo'c example.

Income War Tax
Before proceeding to do so, however, I should like to point out that the present income tax on employees who earn, we will say, $5 a day and work six days a week is double for the sixth day what it is for any one of the first five days. In other words, if an employee works five days at 15 a day, making $25, his [DOT]contribution to the treasury is practically nil. If he works a full six days he finds that he must pay from $2 to $3 a week, all of which comes out of his sixth day of work.
I have before me some information which came to my attention only a day or two ago, and which illustrates the point I am trying to place on record. In this instance we have [DOT]a group of 180 employees who have been working seven eight-hour shifts, with one hour off In each shift, making seven shifts of seven hours each. They are being paid for the eight hours, and are actually working forty-nine aours a week, a period of time which is not i hardship to the ordinary employee.
'They met together at their regular monthly meeting on the first Monday in April and resolved among themselves from that day forward to work only six shifts, or forty-two hours in the week. They would be paid for the eight hours each day, one hour being allowed off for lunch. What is the result, so far as the money flowing into the treasury of Canada is concerned? I have the figures in front of me. During the week they were working forty-two hours they paid an income tax of $384.40. During the week they worked forty-nine hours they paid into the treasury, by deductions, $858.40, a loss to the treasury of Canada and a loss in man-hours work in industry of appreciable proportions.
If we put it on a weekly basis they earned on the average, when they worked the forty-nine hours, $34.20. Their deduction on the average, according to the table of deductions, was $4.77, which was received by the treasury of Canada. It is true that the following week when they worked only the forty-two hours their pay was a good deal less, namely $28.35, but their income tax paid into the treasury was on the average only $2.13 per man for that period of forty-two hours, as against forty-nine hours. In other words, on the last *seven hours that the man worked during the week there was deducted and paid into the treasury of Canada $2.64. In other words, the man paid more into the treasury of Canada for working that extra shift than he paid on all the six preceding shifts. He feels that he is penalized, therefore, for working beyond the average week. He feels he is penalized when he works overtime. Some of those in the higher income brackets will actually lay I Mr. J. H. Harris.]
off work on that sixth day, will not come in at all. They say: Why should I earn $5 on the sixth day to give that $5 back to the treasury of Canada? The result is that absenteeism is running riot in industry. The majority of the employees are worried about the situation, just as much as the minister and the rest of us are. It is only the odd percentage of individuals in an organization who will take advantage of this situation. I would say that ninety per cent of the workmen of Canada would like to see this situation remedied, so that the other ten per cent would be brought to a sense of their responsibilities and not absent themselves from work just to avoid paying income tax. It could be avoided if it were possible or mandatory to deduct the income tax on a daily basis, and the rate could be reduced. It ought to be reduced, and if it were spread over on a daily basis it would make for a good deal more contentment among the workmen themselves.
It is quite common in industries with 100 employees to have as many as ten or twenty absent themselves on a Saturday. I am speaking of employees earning wages in excess of $23.04, which is the dividing line. I am speaking of those earning more than that and up to $30 or $35 a week. I brought this matter to the attention of the minister and the house some weeks ago, and I had hoped that something would be done to remedy the situation. I look forward to hearing from the minister now what he thinks might be done.


Colin William George Gibson: The suggestion that was
made by the hon. member has been given consideration. First of all, as the hon. member pointed out, when a man stays away from work one day he earns less in that week and is therefore entitled to pay a lower rate of tax. The question has come up on several occasions. For instance, I had a letter not long ago from a man who explained that if he worked a 44-hour week and got paid $1 an hour, he has to pay a certain amount of tax, but that if he worked an 88-hour week and earned $88, while he was getting double the amount of pay, he was required to pay considerably more than double the amount of tax. That, of course, is explainable. It is due to the fact that we have a sliding scale of income taxation, the tax rate going up with the income.
The hon. member for Danforth suggests that a worker should be taxed at a daily rate, that if he works only one day in the week he should be taxed for that day at the rate of tax that he would be charged if he were working every day of the year.

Income War Tax


Joseph Henry Harris: And the rate of tax should be reduced.


Colin William George Gibson: It would be very difficult to do that. There would have to be separate tables of deductions for men who work one day a week, other tables for men who work two days a week, three days a week, and so on. The man is taxable in the long run only on what he earns throughout the year, and if we deducted from his daily or weekly pay more than the amount he was called upon to pay at the end of the year, we should have to make refunds in the end. Consequently the table of tax deductions has been worked out, having regard to what the man will be called upon to pay throughout the year. The suggestion that we deduct at a higher rate for men who are absent on certain days of the week would mean that we would have to make a refund to those men at the end of the year.
There was also the suggestion that these tax deductions have a great effect upon absenteeism. We do not gather that from the Department of Labour. The opinion that has been expressed by them is that tax deductions at the source are not a great factor in causing absenteeism.
My hon. friend suggests taxing at a daily rate. He suggests that a man who works four days a week pays a tax of $2.77 a week. But if the deductions were on a daily basis he would pay considerably more. The deduction would be, in that case, at the rate of $3.32 a week. I doubt very much if the difference would be sufficient to discourage a man from working an extra day if he was inclined to do so otherwise.


Joseph Henry Harris: The minister
has not answered my question to my satisfaction. I will limit it to this one day that the man remains off duty, the sixth day, on which, according to the table of deductions, he has to pay a tax of $2.64 for working on that particular day, whereas for the other five days of the week he pays only $2.13. I am of opinion that the honest employee who works on that sixth day, who works a full week, should not find himself taxed five times as much for working on that sixth day as he finds himself taxed on any one of the previous five days. The taxation for that sixth day, that overage or overtime, should be reduced. It is not fair to the employee who puts in full time to penalize him for working that sixth day by deducting from his pay one-half of that day's earnings, whereas on the previous five days he pays the regular amount. In other words, when he works the full six days he pays five times as much taxation on the
sixth day as on any one of the five previous days, while his mate at the next bench who absents himself on that day does not have to pay the same amount of taxation. I quite agree with the minister that when the man works the sixth day, while he has to pay $2.64 in taxation for working that day, he has $2.36 more in his pay envelope than his mate at the next bench who did not work on that day. But it is not much compensation to the honest employee who works a full week, that his partner lays off and absents himself on the sixth day. There should be some method worked into this taxation system which would not tend to encourage absenteeism, would not tend to encourage blocks of men saying-to-take the case of shift workers-"We shall *work only six days because when we work the seventh day half of our pay is taken in the form of taxation." A weak effort was made by the Department of National Revenue to overcome the situation by suggesting that the employer should, when he found employees were absenting themselves, deduct on a daily basis. But there is nothing mandatory about that clause, and no employer of labour will take it on himself to carry out that regulation under such circumstances. I am sure that the experience of the department is that very few employers anywhere are paying any attention to this suggestion which came out in its memorandum to employers.
I appeal to the administration to give some thought to reducing the income tax on employees who work full time, and also on employees who work overtime. Let the others bear the portion of the tax which they should, in fairness bear under the present system.


Mr. ROSS (Souris):: I wish to add a word to what the hon. member for Danforth has already said. In these difficult times absenteeism is having a serious effect on the nation as a whole. I know of a coal firm in Winnipeg who, last September, were behind in their orders to the extent of over a thousand carloads of coal, and I believe that this firm made representations to the government that on account of the income tax regulations it was difficult to get the miners to work the* last day of the week. I know that this firm still had many orders unfulfilled two months-after this date in September, and they tell me it was the result of difficulties about getting the miners to work the last day of the week because they felt they were penalized for so doing. I believe the same sentiments are prevalent in many important industrial plants throughout the country, and I think the minister should give serious consideration to this fact.
Income War Tax

The Minister of Munitions and Supply said last year that people could have purchased fuel had they gone about the matter in time. I know that many people in my district were not able to lay in fuel before the snow came, and that this was on account of absenteeism in the mines on the last day of the week. Representations to this effect were made to the government last fall. I trust the minister will be able to recommend some change in order that these workmen may work full time, which is most desirable in connection with our war effort at the present time.


James Lorimer Ilsley: I should not like the hon. member for Danforth to think that I did not pay respectful attention to the suggestions he made in his speech on the budget. I thought his observations with reference to absenteeism were a constructive contribution to the debate, and I certainly appreciated it.
Any steps to be taken along the line of changing the scale or table of deductions can be done administratively and do not require an amendment to the act. But we have been extremely busy. I have started to discuss the matter several times with my colleague the Minister of National Revenue, and he has given some thought to it.
Absenteeism is a disturbing element in the life of the country. It is surprising to me that absenteeism should develop as a result of the income tax provisions. No doubt, however, there is some on that account. At the same time it is undoubtedly true that there is a danger of overemphasizing the income tax *effect. Absenteeism takes effect also as the result of other causes. I point to the United States. In the United States they have no such income tax incentive to absenteeism as we have here; either they have no tax, or a flat tax is deducted. I think they have a tax which they call the victory tax, which is five per cent, and is deducted. Yet one has only to pick up United States papers and periodicals to see that absenteeism in that country is rampant. I have no reason for supposing that it is not just as prevalent there as it is in Canada. As to the causes of absenteeism, I would not care to enumerate them, though I have some ideas about them. But in so far as our income tax structure contributes to absenteeism it is a source of great worry, and if there is any way in the world we can overcome it we will do so, administratively.


[Stage Direction]
Resolution agreed to.
4.	That the date of filing annual returns of income by taxpayers other than corporations shall be the 31st day of March in the year .following the receipt of the income.
James Lorimer Ilsley: There is an amendment which we wish to propose, to change the 31st day of March to the 30th day of April.


Colin William George Gibson: I move:
That resolution No. 4 of the resolutions to amend the Income War Tax Act be amended by deleting the words "the 31st day of March" and substituting therefor the words "the 30th day of April".


Mr. NEILL:: Does that refer to the 1942 incomes?


James Lorimer Ilsley: That does not apply to 1942 income; it applies to 1943 income and thereafter.


Alan Webster Neill: Perhaps the minister would advise me-I have heard many people debating it-when does the 1942 income return have to be put in?


James Lorimer Ilsley: The 1942 income tax return must be filed on or before the 30th day of June, 1943.


Alan Webster Neill: No matter what class?


James Lorimer Ilsley: That applies to taxpayers other than corporations.


Alan Webster Neill: Regardless of whether they belong to the class where they pay quarterly, or where it is taken off at the source?


James Lorimer Ilsley: Yes, that is correct.


[Stage Direction]
Amendment agreed to.
The ACTING CHAIRMAN (Mrs. Cassel-man):: Shall the resolution carry?


Gordon Knapman Fraser: No, Madam Chairman. I have a letter before me with regard to payments by sole proprietors, and I think it is relevant to this resolution. What people are complaining about is the way in which payments have to be made. Before this amendment was adopted just now, they figured out that a man in business either as a sole proprietor or partnership would make payments in 1943 as follows:
March 31, which will now be April 30, he estimates his income tax and pays the first instalment of 1943 tax.
April 15, he pays his third instalment of 1942 excess profits tax.
June 30, he pays his estimated second payment of 1943 tax.
July 15, he pays his final payment of the 1942 excess profits tax.
September 30, he makes his third payment on his estimated 1943 tax.
October 15, he again estimates his 1943 income and pays the first instalment of 1943 excess profits tax.
December 31, he pays his fourth instalment of estimated 1943 tax.
January 15, 1944, he pays his second instalment of 1943 excess profit tax.

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The writer ends rip by saying that the business man in general simply gives up because he cannot figure out when he has to pay his taxes and how he is going to pay them. I think that should be made as clear as .possible.


James Lorimer Ilsley: I think the best way to handle this is to have my colleague look at the information the hon. gentleman has put on Hansard and see what remedy, if any, should be applied. I am informed by the officials that something will have to be straightened out because there seems to be a clash.


Gordon Knapman Fraser: There is a definite clash. I never finished this. It goes on:
March 31, 1944, pays his fifth and final instalment of 1943 tax. Pays his first instalment of 1944 tax.
Then again on April 15, pays his third instalment of his 1943 excess profits tax.
Sounds rather confusing, does it not, but nevertheless a fact. However, the argument might be advanced that the excess profits tax is a profit on the business, but in the vast majority of cases the business and the individual are the same, and then we wonder why the average business man simply says: "I give up".
I will send this over to the minister, and he can have the matter looked up.


James Lorimer Ilsley: I will read what the hon. member has put on Hansard.


Gordon Knapman Fraser: If the minister can straighten it out, I think the business men of Canada will be very much .pleased.


[Stage Direction]
Resolution agreed to.
5.	That the date of filing annual returns of income by corporations shall be six months after the close of the corporation's fiscal period;
Gordon Knapman Fraser: I
think when the minister is trying to straighten out the dates, he will find that that has some bearing on this resolution.


[Stage Direction]
Resolution agreed to.
6.	That in respect of the taxation year 1943 and for each year thereafter sole proprietors (other than farmers) and taxpayers whose income from sources other than salary and wages exceeds 25 per cent of their total income, shall pay by quarterly instalments as follows:
20 per cent on the 31st March,
25 per cent on the 30th June,
25 per cent on the 30th September, and 30 per cent on the 31st December.
Gordon Knapman Fraser: The largest percentage, thirty per cent, comes due on December 31, which is the wrong time of the year. Is there any chance at all of the minister dropping, say, five per cent, and
making it twenty-five per cent instead of thirty per cent; forgiving five per cent? That would work out much better, especially foT the working people'.


James Lorimer Ilsley: They are not affected by this resolution.


Gordon Knapman Fraser: Some of those who are hot working for corporations or .plants, who are storekeepers and people like that are affected by this.


James Lorimer Ilsley: Yes.


Gordon Knapman Fraser: This comes due at Christmas time when many of them have no money. Many of these storekeepers carry their customers over that period, and they do not get their money until later.


James Lorimer Ilsley: The point was made under another resolution that the taxpayer who paid an instalment on January 15 is obliged to make another payment on March 31, which is rather close to January 15. The first payment was made twenty per cent in order that the burden in the early part of the year would not be too heavy. Then the payment at the end of the year was made thirty per cent, with two payments of twenty-five per cent in between.


James Arthur Ross: I think it was finally decided that the question of business people estimating their incomes for the current year could be discussed on this resolution. I was not able to follow much of the discussion that took place this afternoon. It was argued that most business men should be able to estimate their incomes pretty accurately, but I know that the business man operating in a grain growing country has no idea to-day whether he will lose money or will make money during the current year. That fact has been proved by past experience. A whole district may be hailed out, and a business man may lose a good deal of money.
If a man is charged interest on the balance owing at the end of the year, I think it is only fair that if he has overpaid, the government should pay him interest. I think it would be good business for the government to encourage these people to pay all they thought, was due, or even a little more, and then allow interest on overpayments. A point was raised this afternoon by the hon. member for Renfrew South (Mr. McCann) in connection with deductions on indemnities paid to members. Many members carry on businesses of their own, and I know they have a great variation of deductions. I think it was agreed that the question would be answered under this resolution.
Income War Tax


Colin William George Gibson: The indemnity is considered as being paid throughout the whole year and on the assumption that it is the only income, and the tax is worked out upon the basis of that income. However, it is actually received in less than twelve months, and consequently there have to be adjustments because deductions must be made during the period in which these payments are being made to the member. However, allowances were made for offsets for marital status, dependents and compulsory savings, the details of which had been filed with the treasury. After the total tax has been estimated, a proportionate part is deducted from each monthly payment.


James Arthur Ross: Supposing a member *who was in business had a large loss? Would he have a rebate?


Colin William George Gibson: He would have a rebate coming to him in that case.


Gordon Knapman Fraser: Has the Minister of Finance anything to say with regard to the payment of interest on overpayments?


James Lorimer Ilsley: It is a fairly fundamental principle that the crown does not pay interest. I am not impressed with the hardship the hon. gentleman is seeking to show. It may be that the taxpayer cannot estimate his income accurately, but he can come pretty close to it. Let us say he overpays a little on March 31, June 30 and September 30, or on one or more of those dates; then he pays just that much less on December 31, because by that time I think he will know pretty well what his income is. All he has to complain about is that the government has had for a few months a little more in instalments than it was entitled to. In order to cure that, it is proposed that the government pay interest. Well, the bookkeeping, the administrative difficulty would be out of proportion to the hardship it was designed to alleviate.
Of course it may be said that he would not know his income at the end of December, that his books would not be audited for three or four months after that. I suppose that would be true in a good many businesses. But I think most taxpayers will keep pretty close to their real income and not overpay very much.


Grote Stirling: Then what about the
other side of the picture? Suppose he underestimates and pays too little?


James Lorimer Ilsley: The point there is not so much the value of the interest to the government as the salutary effect of there being interest payable, tending t,o keep them up to a proper estimate.
CMr. J. A. Ross.]	r';illl5&1


Grote Stirling: What about the penalty?


James Lorimer Ilsley: I am assuming that the only penalty would be fair interest. The act is not drafted and is not before the committee, but I would assume that we could not go much further than that. If we make the interest too low, no doubt we shall be lending a good deal of money to the taxpayers; if we made it nothing, as suggested this afternoon, we would be lending a great deal; taxpayers would be underestimating and paying up at the end of the year. So that it takes some judgment to know just what the interest or the penalty should be.


John Ritchie MacNicol: Has the change in resolution 4 from March 31 to April 30 any effect in connection with the twenty per cent?


James Lorimer Ilsley: It has nothing to do with it at all.	.


Gordon Knapman Fraser: These forms T.7-B when sent in with quarterly payments sometimes come back signed by the receiving officer, at other times they come back with perhaps just one initial and a number. How should they be signed? Should they not be stamped at the office?


Colin William George Gibson: Usually there is a date
stamp and the initials of the accountant who receives it.


Gordon Knapman Fraser: Sometimes there is not even a date stamp; it is just marked in pencil.


Colin William George Gibson: In addition, the taxpayer gets a receipt for the amount paid. This is a record that comes back to the taxpayer and is supposed to be sent in with each payment. It shows the amount of the tax paid, and the date received is stamped on by the office and the initials of the accounting officer are put on the form. But besides that the taxpayer gets his interim receipt for the amount paid.


Gordon Knapman Fraser: Would it not be more businesslike if they put a stamp on this form showing that they got the money?


Colin William George Gibson: This is not a receipt. Our
receipts are serially numbered. We would not want to have two receipts for the same payment.


Mr. COLD WELL:: The hon. member for
Souris brought up a point which I think the minister should consider. I have thought of it, but I cannot suggest a way out. He mentioned the position of the professional and business men on the prairies particularly, who

Income War Tax
have to pay their quarterly instalments in June and September. Those of us who come from the prairies know well that doctors, lawyers, dentists and small business men have to carry the farming community very often from the spring until the fall. There is no income on many of these farms, and no matter how you try to arrange the law that accounts must be paid within, certain times, it is impossible for people on the farms to meet their obligations during those months. It will be difficult for the business and professional people in the prairie towns to meet their obligations under this proviso. All I can suggest is that persons on the prairies who are liable under this resolution will of necessity have to make rather a low estimate of their income for the year in order to protect themselves, because, as has also been noted, we often find that in May or June there is a good prospect of a yield which will enable farmers to meet their obligations, but by the fall hail or frost will have entirely wiped out their ability to pay. I am thinking of the area around Rosetown. Two years ago when we had every prospect of a crop the farmers expected to be able to meet their obligations; then the crop deteriorated and the returns did not come in. I know one or two storekeepers who had thousands of dollars out that they could not collect that autumn. The method of delivery this year will also make it difficult for debtors to meet their obligations. Perhaps it will not be difficult for some business men to estimate; they know what deliveries will be, but it will be a difficult situation for the prairie creditors and also, I believe, for collectors. I do not know how you will get around it, but I wish to support the hon. member for Souris in the views he expressed, and I hope the department will give consideration to this problem.


James Lorimer Ilsley: Under our system of taxation as it existed up to two or three years ago these taxpayers would be paying last year's taxes through this very period.


Major James William Coldwell: I see that point.


James Lorimer Ilsley: They would be paying last
year's taxes beginning in April, two-thirds by the end of August.


Major James William Coldwell: They would not be
guessing and estimating though.


James Lorimer Ilsley: No; they would know. But they would not be paying any more because they were guessing than if they knew. If anything, it makes it, I think, easier for them. Normally that person with the forgiveness of fifty per cent will be paid up for last year
by this time, and then he starts to pay one year's taxes in the present year. Had there been no transfer to the pay-as-you-earn system, he would be paying last year's taxes in the present year. Instead of that, he is paying this year's taxes this year, and those taxes are being strung out throughout the year.


Mr. ESLING:: In past years the minister has recognized the necessity of giving three months in which to file the income tax return for the previous year, but I understand that the return for the 1943 tax must be in by December 31. Is that correct?


James Lorimer Ilsley: No; payments on estimates must be made during the year, and the fourth payment is made at the end of December. The return, however, for the year 1943 is made on or before April 30, 1944.


William Kemble Esling: Does that mean the adjustment in connection with the 1943 taxes nust be made by April 30?


James Lorimer Ilsley: The complete and final return, in which the taxpayer says what his income was, in which he declares his income after he knows it, must be made on or before April 30, 1944.


Mr. LOCKHART:: I wish to add just a word in connection with another class of people who will be definitely under a disadvantage by reason of these regulations. I believe these people were referred to this afternoon by the hon. member for Brantford City, who mentioned the people engaged in the construction industry, but I do not think the hon. member had very much knowledge of the situation. I should like to point out one or two of the highlights in that connection, in order to show the difficulties facing this large group of people of whom I am speaking. I am not referring to the large contractor, the mam who is building factories and airports. I am referring to the man who at the present time is sending in applications for permission to build those urgently needed homes in our larger urban centres, where the Minister of Munitions and Supply has so definitely requested that such construction be stepped up as much as possible.
It was stated to-day that these men can estimate their income. In the first place they are definitely at a disadvantage because they do not know even yet what materials they can get. Many of us know of home builders' associations which have been organized in many of the large centres in an effort to protect this particular industry and prevent Wartime Housing Limited from taking away the benefits of private enter-
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prise. Just to-day I had two applications come forward for houses of the type prescribed by the controller of construction, who has placed a limit on the sort of accommodation that may be provided. These men of the construction industry across Canada are only now sending in their applications. These applications must be approved and permits issued; the need for the materials must be established; all those small details must be cleared away before they can even commence to build these small houses. They are unable to make any sort of accurate estimate by April 30, even with the extra month, because just now their work is only in the embryo stage. I suggest to the Minister that these people will be discriminated against because, unless they can get the materials and are allowed to continue their work- and rumours would rather indicate that they may have some difficulty-by the end of the year many of them may have but very little income to declare. Therefore I would point out to the minister that it is most unfair to require this large number of construction men to file their returns by April 30.


James Lorimer Ilsley: There is no return made on April 30.


Norman James Macdonald Lockhart: They must estimate their income.


James Lorimer Ilsley: No; it must be on March 31; there has been no extension of that date.


Norman James Macdonald Lockhart: That is what I mean, and I say it is impossible for that large number of people in this country to estimate with the faintest degree of accuracy the income they may have during 1943.


Clarence Decatur Howe: Since my name has been mentioned, perhaps I may be allowed to say a word. The position of the construction man is no different from what it always has been. He has a fluctuating income; he can estimate high, or he can estimate low. If he estimates low, he borrows money from the government at an interest rate which may be a bit high; that is the only penalty. If he estimates high, he puts out a little money before it is due. But the small builder, and the gentleman referred to by the hon. member for Rosetown-Biggar, is accustomed to borrowing money in hard years and banking money in good years.
I think too much is being made of the fact that he may not be able to estimate his income exactly.


Mr. GLADSTONE:: I wish to bring up the matter of improved facilities for assisting taxpayers to make out their returns at other than income tax centres, if it is appropriate to 	, \
bring up that point under this resolution. There are many centres which do not have an income tax office. There are also numerous customs offices and ports all over the country, far too many, I am sure, in view of the fact that only a limited number of citizens ever have occasion to visit a customs office. I should like to invite the cooperation of hon. members who live in centres where there are income tax offices, such as Windsor, London, Hamilton, Toronto, Kingston, Montreal and so on, right across the country. The making out of income tax returns is becoming more complicated each year. I understand that some effort is being made this year to simplify the form, and that should be helpful. Nevertheless, many new income taxpayers are being added, and they find difficulty in understanding the forms and arriving at what they should pay. In this parliament I have been one who has stood against mounting expenses, and waste of every description. I want it to be understood that will always be my attitude. But I raise this question: Would it not now be almost a good investment for the government to improve the facilities for numerous people throughout the country who will now be faced with the problem of making out income tax returns.
Some of the larger cities will be affected. My own city of Guelph, for instance, with a population of around 23,000, is the centre of a large farming community. There are many other towns north of it, and others extending, I should imagine, almost to the lakes, that have to report to Hamilton. Guelph is twenty-eight miles from Hamilton, and some other places would be probably a hundred miles away. For instance, I understand Sault Ste. Marie has to report to Toronto. In respect of applications and misunderstandings the taxpayer is often at a loss to know just what he should do. He has difficulties in that connection. Under the system of gasoline rationing our people cannot travel to Hamilton to the income tax office in the same way as they used to, in order to get assistance there.
What is the situation in the cities? People in Ottawa and Toronto who do not understand how to make out their returns simply walk down the street and get assistance. The same applies in Hamilton, and in other cities. I would hesitate to recommend the opening of new income tax offices in every town, or even in some of the smaller cities; but I am wondering if the government could not work out a system whereby it could give assistance even in the smaller places by some form of itinerancy of experts from income tax centres. In some places I do believe income tax offices should be established throughout the year.

Income War Tax
Guelph city council has sent a resolution to the Minister of National Revenue making this request.
Then there are other places where, while it may not be possible to have income tax offices open the year round, the department might find it possible to have experts present at least one day a week. Such experts from established income tax centres would be quali-field to assist taxpayers in their difficulties. I have a feeling that this would be money well spent, and certainly it would be rendering a great service to many people. While the minister may not be able to give an immediate answer-and I would not expect him to do so-possibly some other hon. members will express their opinions, so that the department may give consideration to the request now coming from Guelph. I am sure a similar service would be helpful in many other places.


Gordon Knapman Fraser: On April 1, I asked the Minister of Finance if it would not be possible to open an income tax office in Peterborough. He said he did not feel that the government should do so at the present time, but that he would bring the matter to the attention of the Minister of National Revenue. On that date I said this, bearing out what has been said by the hon. member for Wellington South:
Even if you do not establish an office in Peterborough, would it not be possible to have a man there at certain times during the year to explain the income tax forms to those desiring further information? Ottawa has an income tax office; Kingston has one: Belleville has one; so have Toronto and Hamilton, but Peterborough has none, and it is a large city. In fairness to the taxpayers themselves, I think some representative of the income tax division should be there, even if he were there only at certain times of the year before payments have to be made.


Colin William George Gibson: I think the problem mentioned by the hon. member for Wellington South will be cured to some extent by the new simplified form, being produced this year. That will take care of about eighty per cent of the individual taxpayers. The suggestion has been made from time to time that more district offices should be opened. AVhile the matter has been carefully considered, it is not one which can be readily approved, on account of the difficulty in getting qualified and experienced accountants, particularly in these days of war. Consequently it has been found more efficient to concentrate the work in fewer offices, where such work can be distributed among the staff who have varying degrees of experience, the more difficult work being handled by those with greater experience.
In the past we have had requests from Guelph for an income tax officer to help the
residents to fill in their returns, and I believe an officer from Hamilton has on former occasions gone to Guelph about the time the returns were to be filed. I believe that practice can be continued. I do not think any such request has come from Peterborough, but I shall look into the matter and see if some arrangement can be made for that point.


Gordon Graydon: There is always the danger of those connected with income tax work, or, indeed, with any kind of governmental work, not being close enough to those who make out the various forms now required by so many departments of government. I am not raising any particular criticism of those in the departments. I realize the tremendous amount of work they have to do, and the further fact that we have in Canada a shortage of men accustomed to doing something. This condition is no doubt brought about by the additional burdens now placed upon qualified accountants by war. Coincidental with the whole matter of taxation is that of accounting. I am sure the minister would be the first to admit that there is a shortage of trained men to take care of the filling in of forms and the making of computations now so complicated with respect to taxation. I sometimes wonder whether income tax officials, and others who have charge of various taxing methods so necessary to-day to raise money for our war effort, realize just what it means when a man on a farm has to prepare a return. The managing of a farm is difficult work, but it becomes much more difficult when at the same time he must be an expert accountant and bookkeeper. I do not know what other hon. members representing farming constituencies may feel in this matter, but it has been my personal experience to find that the keeping of books on a farm is a most difficult procedure. There are many farmers who do, but the average farmer has so little time at any season of the year that even if he were able to keep books, he would have little opportunity to keep his books in order. I am sure that members representing rural sections can recall at a moment's notice many instances of farmers who with their wives have come in to see them, perhaps in a legal office or in some place familiar with bookkeeping methods.


Mr. CASTLEDEN:: Has this resolution to do with farmers or with other than farmers?


Mr. WOOD:: Other than farmers.


Gordon Graydon: I thank the hon. member for Brant and also the hon. member for Yorkton, so that he will not feel offended.


George Hugh Castleden: I agree with what the hon. gentleman is saying.
Income War Tax


Gordon Graydon: Farmers and their wires will come in, and when they see the income tax forms they are required to fill out they will throw up their hands-I have seen them by the dozens-and say: There is no way in which I can possibly make out this form and still come within a reasonably accurate statement of my income. The farmer cannot do it unless he is to have someone on the farm to keep track of all that he sells and of all that remains by way of inventory. He is in an entirely different position from the ordinary businessman because his whole mode of living is entirely different from that in the urban centres.
I am glad to hear that the minister is to simplify some of the income tax forms because, if they are continued as before, it seems to me that the farmer will be faced with an almost hopeless situation in making out his income tax return. There must be a simpler way of doing it. There must be some means provided whereby the average farmer can readily calculate his income tax.


Colin William George Gibson: The trouble is to calculate his income.
Mr. GRAYDON r That is the point I was about to make. I understand that the Minister of National Revenue is to provide some form of assistance for those with incomes of less than S3,000 in making out their income tax forms. Some assistance is to be provided, or they are to have their income tax forms filled out for them, I understand, free of charge.


Colin William George Gibson: No, the tax will be shown on the form for incomes up to $3,000, within ranges of ten dollars.


Gordon Graydon: Then I misunderstood. No one receiving an income of less than $3,000 is to receive any assistance in filling out the forms other than the information that is to be given on the back of the form in a table?


Colin William George Gibson: The table on the form will show what the actual tax is on incomes above S660 for single persons, and $1,200 for married, those being the exemption levels, and up to incomes of $3,000, within ranges of ten dollars. The tables also show the tax for different classes of taxpayers according to the number of dependents, so that a man with a certain number of dependents will be able to see from the table the amount of tax he must pay on his salary.


Gordon Graydon: That may be a help, but it does not go very far in helping the average person to make out his income tax return. It is of no help to the farmer.


Colin William George Gibson: The farmer's trouble is to find out what his income is.


Gordon Graydon: That is the point I was trying to make, and I am quite sure that the minister will be one of the first to recognize the difficulty the farmer has in that respect. When I hear people saying here and there that the farmers are not making out any income tax returns I want to tell them and the minister that many people in other walks of life would almost throw up their hands if they had the same difficulties in calculating their income that the average farmer has. My experience in agricultural sections has been that the farmer wishes to pay to the government every five-cent piece that the government asks him to pay. On the other hand, I think the government ought to provide some simpler method, if at all possible, and there should not be one standard form applicable to the farmer just the same as to everybody else. The minister mentioned that there is to be a simplification in the form for salaried workers. Their income is much simpler to calculate than agricultural income. Once the salaried or professional man has figured out his income there are certain calculations to be made so that he can easily arrive at the tax. But I think the minister ought to give consideration to providing some simplification by which the farmer might more easily arrive at the income upon which his income tax is based.
Having in mind the suggestions which were made by the hon. member for Wellington South, I think we sometimes forget that there are other places besides the large centres of population. The difficulties in meeting the requirements of government taxing bodies and government offices generally are, I believe, more difficult the farther you get away from the large centres. The whole thing boils down to a matter of inconvenience. A farmer in the constituency of my hon. friend the member for Wellington South comes from north of Guelph, we will say. He has to go to Hamilton to see the income tax inspector, and there is a whole day lost. But a man in the city of Ottawa can take half an hour off at lunch time or half an hour off from his business, go into the income tax office and complete his form in a comparatively short time. The same is true, of course, of Montreal and Toronto. The question of convenience enters into the picture so far as rural Canada is concerned.
I have some sympathy with the suggestion made by the hon. member for Wellington South, but I am afraid I cannot follow him the whole distance. I am not sufficiently familiar with the circumstances he described. But,

Income War Tax
generally speaking, I think we should carefully guard against setting up an extensive system of offices all over Canada, although somewhere in between there must 'be a happy medium which would help to meet to some extent the problem of the rural man and the man in the small town. This is something to which I believe the minister might well give consideration. I have seen this thing worked out from a practical aspect so long that I should like to see the minister look at the matter from the point of view of the average rural dweller, and, having gained. that perspective, find out if the position cannot be reviewed and something done. I realize the difficulties which face him. On the other hand, we have surmounted many difficulties-in days gone by. I will add nothing more at the moment, but I submit the suggestion for his earnest and serious consideration.


Mr. FURNISS:: I happen to be a farmer, and I agree with what the leader of the opposition has said regarding the bookkeeping of farmers. I do not suppose one in five hundred keeps track of his costs of production or of what he gets for the products he sells. The reason, as I see it, is that there is no object in the farmer doing so. In business, bookkeeping is done for the sake of estimating costs. To the costs the business man adds a profit, and in that way he arrives at his selling price. But no matter what pains the farmer goes to in keeping his costs of production, he has no ability to add to them a profit, so that there is no object, as far as money making goes, in keeping books on the farm.
I might suggest to the minister that if, when these income tax forms are simplified, a simple book were prepared and sent out with them, so that the farmer would have it handy to mark down what he sells and what he gets for it, that would enable him to arrive at his income. So far as expenses are concerned, the greatest difficulty the farmer has is in estimating depreciation on his buildings and equipment. The first year that the farmer pays income tax is the most difficult, for upon what he makes his return that year depends his depreciation for years to come. The biggest difficulty I see in connection with his paying an income tax is to estimate a proper value of buildings and equipment. The higher the valuation is, the longer the depreciation lasts. The only suggestion I have to make is that some simple form of book be sent out which the farmer would find handy to mark down his receipts.


Major James William Coldwell: Since the leader of the opposition has introduced this particular phase of the discussion-


James Lorimer Ilsley: Yes; but could we not put these matters under their proper headings? It takes me all my time to keep them under their proper headings. The right place for a discussion of the farmers' situation is the next resolution.


Gordon Graydon: May I say to the hon. member for Rosetown-Biggar that I came in at the middle of the address of the hon. member for Wellington South, and he was speaking about the problems of rural people in connection with taxation. If I have transgressed, I am very sorry.


[Stage Direction]
Resolution agreed to.
7. That taxpayers whose chief business is that of farming shall in respect of the year 1943 and for each year thereafter pay two-thirds of their income tax liability for the current year on or before the 31st day of December and the remaining one-third on the following 31st March;
Major James William Coldwell: May I say a word on
this?


Joseph-Arthur Bradette: I saw the hon. member for Qu'Appelle.
Mr. COLDWELL; I gave way just before, purposely. It is immaterial; I do not mind.
The CHAIRMAN; The hon. member for Rosetown-Biggar will follow immediately after the hon. member for Qu'Appelle.


Major James William Coldwell: I do not mind; but I think, having given way before, I have precedence at this time. I am, however, willing to forgo it.


Mr. PERLEY:: We have been listening to a discussion which has got a little out of order. The leader of the opposition stole some of our thunder; however, he put the case on record so well that I hardly think it is necessary to repeat much of it.
Resolutions 7 and 8 deal in the main with people whose chief business is farming. In speaking on the budget, the minister made the statement, dealing with the farmers, that the department were somewhat lenient this year, that they were making it a little easy for the farmers, not only by extending the period for making out the forms and paying the tax, but by providing, under resolution 8, that they can cany forward the loss in any one year for even two years. As I said when speaking on the budget, I think the minister was quite right in saying that this does ease the position of the farmer to a great extent.
There are one or two matters I wish to have straightened out. I agree with what the leader of the opposition and the hon. member for Wellington South have said with respect to
Income War Tax

forms. Farmers and ranchers have been making out form T.l-A. It is certainly complicated, and I favour the adoption of a much simpler form so that it may be made out by the farmer much more readily. Numbers pf farmers come to me from time to time with the complaint that they cannot prepare a statement by filling out the form. They do not keep the very best system of books, we know, and I think it is a good suggestion that the forms should be simplified.
I wish the minister would tell us just where the farmer members of this house stand with respect to the deduction which has already been made from their indemnity. This point might have been raised even on the first resolution. Some farmer members make out form T.l-A. They cannot possibly estimate yet what will be their income for 1943. They may be hailed out and have a total loss on their farming operations. If in the end, when they make out their tax form, a loss has developed on their farming operations, will a return be made of the tax which has already been taken from them monthly by deduction from their indemnity?
I myself make out form T.l-A. I went to the office in Regina and filled it up to the satisfaction of the income tax inspector there, but I could not possibly estimate my operations for the 1943 season.
Speaking on the budget, I made one or two suggestions, and I ask the minister if there is any possibility that he will consider them favourably. In view' of the man-pow'er difficulty which the farmer is up against at the present time, when his w'ife, his daughters and his young sons of necessity have to work to take the place of other labour, the other sons being in the armed sendees, and the farmers themselves being unable to compete with the wages of industry, will consideration be given to making some allowance to the farmer, in respect of his cost of production, for the services of his wife and children?


Mr. MAYBANK:: As wages, the hon.
member means?


Ernest Edward Perley: Yes, as wages. I think it would be only fair and right to make some allowance in this respect.
When speaking on the budget, I also remarked on the fact that only 1,488 farmers out of 780,000 made returns and that all together they paid only S150,000. I think under the circumstances they should be given greater exemptions.
The form provides for depreciation on buildings, implements, machinery and so on. The allowance varies according to the number

of years depreciation has been allowed in the past. The period of depreciation will soon expire or has already expired in connection with many buildings in the west, and where this period has expired I think further consideration should be given. The same should apply to machinery.
These are just one or two matters that I wished to bring to the attention of the minister. I shall not dwell upon the difficulty the farmer has in making out his return because the previous speaker has covered that point quite thoroughly. Will the minister explain just where the fanner members stand when they have losses on other operations? Will any consideration be given to an allowance for wages to the wives and daughters of farmers?


James Lorimer Ilsley: There is a good deal in that speech to answer, and I think I had better let it stand for the time being because it would be embarrassing to give a wrong ruling on the spot.


Major James William Coldwell: In making out his form, is the farmer to enter what I might term the perquisites of the farm? This would cover income received from butter, eggs and other produce of that description. In my opinion some allowance should be made for the labour of the family of the farmer who often produce these side-lines without receiving any payment. When a farmer makes up his income tax form he places on record not only the income he has made by his own labour but the income produced by the labour of the whole family. In my opinion some allowance should be made for the labour expended by the family on the farm. I do not think it is fair that the product of the labour of the farmer and his family should be lumped together as the income of the farmer. The farmer ought to be entitled to estimate the value of the services of the farm family and be able to pay to the members of his family who helped him with his production an amount for their services, or he should be allowed to charge that as an expense.
I am thinking particularly of the farm wife who is frequently the farm baker, who raises the poultry, attends to the garden and, at times in the west, even drives a tractor or rides a binder. I have seen them working on the combines. In my opinion this is something to which serious attention should be given by the minister and his advisers and by this house. A questionnaire was sent out to the farmers in Saskatchewan. I discovered that this was not sent out by the Department of Labour; it apparently was circulated by an organization fostered by the provincial government. One question was: "What help have you in your family over the age of twelve years?" I have

Income War Tax
no doubt that this year many children over the age of twelve will be working in Saskatchewan. They should be paid. This money should be placed in an account for them to use later on. I would add that I disapprove taking these children out of school and going back to the use of child labour, but if it is done, an amount should be allowed as wages for such children. Certainly some consideration should be given to the production by the woman on the farm. It should not all be lumped as farm income. I should like to know if this matter has been considered and if any policy has been adopted. Will the minister give consideration to the point I have raised?


Ralph Maybank: I do not oppose the suggestions which have been put forward, but I would point out that there are other cases where a similar situation exists. I am sure all hon. members will support what has been said by the last three or four speakers with reference to the difficulty faced by the farmer. Certainly, as one coming from the city I would not oppose that point of view. However, I find that a considerable number of people in the cities have a similar problem. I am thinking of the small corner grocery store run by different members of a family. In my city they are known as "pa and ma" stores. In these cases the wife nearly always works just as long hours as the husband, and quite often other members of the family work as well. As I stand here I can picture some twenty, thirty or forty of these stores on corners throughout Winnipeg. I am entirely sympathetic with what has been said about the farmer, but I feel it is my duty to point out that there are others in the cities of whom account will have to be taken by the minister when he is figuring some way round this difficulty.


Mr. WRIGHT:: As a farmer from western
Canada I must say that the first problem of the farmer is to get enough income on which to pay an income tax. This is borne out by figures which have been tabled in the house and which show that only 1,488 farmers out of 700,000 paid income tax on their 1941 incomes. However, when the farmer has reached the point where he is paying income tax there are several matters which should be taken into consideration. The hon. member for Rosetown-Biggar brought up one, namely, the allowance of some wages to the farmer's wife. I am in agreement with the other hon. members who have spoken with regard to simplifying the forms. That is essential.
There is also the matter of depletion of capital assets. If I am a storekeeper, carrying
a stock of $10,000 and have a turnover during the year which makes a profit of $3,000 and I have depleted my stock in that store by $2,000, thereby receiving $5,000 for the year, that $2,000 is not income; it is depletion of a capital asset. But if I am a farmer and have 100 head of beef cattle and during the year I sell, say, $3,000 worth of those cattle from the increase, and deplete my herd by selling an additional twenty head, with the result that I obtain an income of $5,000, I pay income tax on the $5,000, although $2,000 is, in reality, depletion of capital assets. That is not fair.
Another matter has to do with depreciation of special equipment which farmers have to buy at this time in order to obtain the increased production that is required of milk, cheese, et cetera. Many farmers have increased their herds and are buying milking machines. They are also farming more land and buying combines, so that they can grow the things that are needed. If I am a contractor and buy special equipment to fill a government contract, I am allowed special depreciation on that equipment, the government taking the view that after the war I may not get contracts and that the equipment may not be of value. I maintain that special depreciation should be allowed to farmers who buy special equipment in order to produce the larger amounts of things the country needs at this time.
There is also the matter of additional buildings. In western Canada there has been extensive construction of piggeries in order to increase pork production. No special depreciation is allowed on those buildings, although, if an addition is built to a factory to produce additional war equipment, special depreciation is allowed to wipe it out in perhaps three years' time. Some special allowance should be made to farmers on special equipment which they had to buy for a similar purpose, and on special buildings. If a man is operating a cheese factory and has to put in special equipment, he is, I understand, given a government grant to put it in and allowed special depreciation on it.
There is also the allowance made for board to men working on farms. For income tax purposes I believe $15 a month is allowed for board and lodging. This was the amount allorved prior to the war, and I think it should now be raised to at least $20 a month. I hope the minister will take these matters into consideration because they are matters which have to be reckoned with in fixing farm income.
Income War Tax


James Arthur Ross: I should like to support the request of the hon. member for Qu'Appelle, the hon. member for Rosetown-Biggar and the hon. member for Melfort who spoke before me. When I was speaking on the budget on March 11, I mentioned these matters, pointing out that women and teenage boys and girls should be allowed to be placed on the payroll of the farm in reckoning income tax. The point raised by the hon. member for Melfort has been a problem for me for some years past. I have discussed it with the income tax officials. Take the case of a farmer who is not able to take his inventory at the end of the year, for instance where he has been building up a good1 herd of live stock over a period, and happens to sell them in one year. That was treated as income for that year; at least it was in past years. That is very unfair. That pure bred herd should be considered as a capital investment. It was not a matter of purchasing feeder cattle and fattening and selling them. If that has not been changed this year, I hope it will be. I have discussed the matter with the officials in Winnipeg, and they say it is the fault of the farmers who do not want to keep books. But it is most unfortunate and most unfair.
When I was speaking on the budget I think I also asked that depreciation should be allowed on new power machinery on the same basis as is allowed in' industry, writing off depreciation during the war, because unless something develops in the near future, of which I have not seen much sign yet, to create a parity for the future, agriculture will not have the demand for its products that there is during the war. We are required to purchase expensive equipment, on account of lack of efficient help as much as anything, in order to produce this necessary food. Then I think power machinery should be depreciated over three to five years rather than as in the past when we were allowed twenty per cent the first year and ten per cent a year for the remainder of its life. Agriculture should be placed on the same basis as industry in that respect; its production of foodstuffs is just as essential as that of industry. I trust the minister will give these requests serious consideration, because it means a great deal in the production of essential foodstuffs as well as for the welfare of farm families in the future.


Stephen Joseph Furniss: The hon. member for Rose-town-Biggar brought up the very subject about which I had intended to say something. Perhaps he expressed it in better terms than I can, but I believe that in the computation

of the income tax that the farmer has to pay some tangible recognition should be given to the work that farmers' wives are doing. Today farmers' wives are doing almost every kind of work that in ordinary times would be done by men, and would be now if men were available. Last summer, at various times and in different places I saw women doing almost every kind of work that men are accustomed to do. I have seen them working in the harvest field; I have seen them coiling hay, driving almost every implement on the farm, building loads, and I even saw one woman driving a walking plough, getting land ready for planting.
I can produce a few figures that will show the result of women's work on the farm. Poultry raising falls to the lot of the women nearly all the time. I have here the figures showing the number of poultry on the farms in 1939 and 1942. In 1939 the number of poultry on our farms was 62,405,000, while in 1942 that had increased to 73,805,000, or an increase of 11,400,000. That increase is reflected also in the production of eggs, which in 1939 amounted to 221,000,000 dozen, and in 1942 to 265,500,000 dozen, or an increase of 44,763,000 dozen. In addition, there are the poultry meat products produced on the farm, which in 1942 amounted to 251,000,000 pounds. The figure for 1939 is not given.
I understand that there is a provision in the income war tax regulations whereby a woman doing war work, say in a munition factory, may earn up to $660 without affecting her husband's income tax. I believe the women on the farms are equally important to the war effort; yet, on account of the fact that a farmer cannot pay his wife any wages, there is no method by which he can obtain the benefit of her work in connection with his income tax. I understand this regulation in regard to war work was passed in order to keep women in the munition factories, but the thought just comes to my mind: what would be the result if the fanners' wives should say, "If we cannot get some recognition for our work, we will quit."
I wish to offer a suggestion to the Minister of National Revenue. I do not know whether it would be workable or whether he will consider it, but in this return there is one item, under the general heading "income received during the calendar year" which reads, "produce raised on the farm and consumed in the farm home."


Gordon Graydon: Is that the new return?


Stephen Joseph Furniss: No; I understand this is just a sample. I would suggest that this item be

Income War Tax
obliterated and forgotten, in recognition of
what the women do on our farms. I do not say it should be taken off the form altogether, but a line should be drawn across it and the explanation given, "This is in lieu of what the wife does on the farm." I think that would please the farmers very much indeed.


Robert Fair: I have listened attentively to all the remarks that have been made, and I note that a number of hon. members were in such a rush to get to the question of the farmers' income tax that they jumped a resolution in order to do so. I have heard several suggestions made, and I wish to offer one also which I hope the Minister of National Revenue and the Minister of Finance will take seriously into consideration. I made the same suggestion on March 15 while speaking on the budget, and I believe that we shall be giving the farmer only a little bit of that to which he is entitled if we take him out of the income tax group entirely.
Before going further, let me read some figures contained in a return brought down for me on March 5 last, giving the number of farmers who have paid income tax each year since 1930, together with the amount of such income tax paid. Before reading these figures, let me state that we have more than 700,000 farmers in Canada, and this might be borne in mind as I give the number of farmers who have paid income tax:
No. of	Amount of
farmers	income tax
1930	
2,626	$123,9091931	
2,276	131,9101932	
653	36,3791933	
249	27,6201934	
262	22,3341935	
416	24,0831936	
694	46,6091937	
921	76,3951938	
1,000	78,0811939	
1,309	124,8361940	
1,721	151,5491941	
1,869	204,3191942	
1,488	150,102
Therefore we find that an average of 1,191 farmers paid an average of $92,163 each year. If the government wish to save a little money, they might cut out the salaries of those who look after the collection of these taxes, and they would be money ahead right there. I am satisfied that directly or indirectly the farmer is paying a very large share of the income taxes of every other class in Canada. The company that manufactures farm implements includes in the prices of those implements provision for its income tax, and the same applies to all the others right down the line to the retailer of the machine. They all include their costs, and the farmer pays the whole shot. I wonder whether anyone can successfully refute that argument. On the other hand, when the farmer takes his produce to the elevator or to the market he goes in and asks what they will give him for this or for that, and the actual cost of production of the commodity is never taken into consideration. Some sort of gambling market is usually devised and set up, and the farmer has to accept what the gamblers want to offer him.


John Ritchie MacNicol: I agree that the farmer
does not get a square deal.


Robert Fair: I am glad the hon. member agrees with me on that. At the present time we are having brought forcibly to our attention the question of farmers' debts. I will not deal with that question to-night, but I am quite satisfied that the farmers are in debt through no fault of their own. During one of the first sessions I was here, we on the farms were accused of being extravagant. One hon. member had the-I do not know what you would call it; I know what I would call it if I were out on the farm, but that might not be the thing to say here-nerve, I will say, to tell us that because we had a radio, a car, or something like that, we were extravagant. In describing his own position, he said that he did not have a car; that he did not have a radio and did not have a bathtub; that if he wanted to have a bath he could use the wash basin. Let me say that no man in Canada is more deserving of a bathtub than the farmer, who has to be out in the fields all day. If you are a real dirt farmer, working out in the field, you are bound to collect some dirt.


John Ritchie MacNicol: Rain or shine.


Robert Fair: Yes, rain or shine.


Gordon Graydon: Did you ever stook barley?


Robert Fair: No man needs a bath more than a farmer, and there is no class in Canada which has less bathtub accommodation than has the farming community. So that the farmer may have the kind of life enjoyed by the average citizen I am asking that the government free him from this added penalty of paying income tax. To make him do so is simply adding insult to injury.
On one occasion after another we have asked that farmers be given the cost of production. Not very long ago we were told that the present price on wheat is 54J cents below the 1926-29 price; that the price of oats is nine cents lower; that the price of barley is 11-2 cents lower and that of rye, 38J cents lower. If those in authority will see to it that the farmer is given back those increased prices for his grain, then I would be content to have him pay the income tax. The present situation is, however, that receipts of farmers
Income War Tax

are not satisfactory, because they are paying off the mortgages plastered on their farms in the years of depression, particularly between 1930 and 1939. That which would be classed as income is not real income, because it goes out by way of expenditure in payment of debts.
Prices now fixed by the wartime prices and trade board in accordance with government policy do not permit the farmer to receive the prices to which he is entitled. Until farm prices are on a proper basis I fear the farmers and the Department of National Revenue will have their troubles. There is no way out of it. As I said before, we had in the past and we still have our prices fixed, not at cost of production but at a level which satisfies someone else, someone who is getting a nice living off the farm, but who does not contribute anything to farm production.
There is a way out of this difficulty, if the farmer wishes to take it. Therefore, with costs increasing as they are, and the other inequalities the farmer must put up with, I feel quite satisfied I am not asking anything out of the way when I ask that they be exempted from payment of income tax.
It has been said that the farmer should be allowed to include in his cost of production wages for his wife and those members of his family who work on the farm. If the government does decide-and I hope it does not-to have the farmer pay income tax, then I do not see why the farmer's wife and those of his family who work should not receive wages. It has been pointed out by the hon. member for Muskoka-Ontario that the wife of a man living in the city can work in a factory, from which she collects wages. Against those wages her husband is exempted to the extent of $1,200, and I understand the wife can also claim the exemption of a single person, namely, $660, making a total exemption of $1,860. If that is allowed in the city, why not extend the same privilege to the farmer in the country? It is just one more case of adding a little more insult to injury.
Another reason why the farmer should not pay income tax is that, on the average, he works time and a half, or one and a half times as many hours as any other class of workers in Canada. In some instances farmers work twice as many hours; and when they work on the farm they certainly do not fool around. I can make that statement clearly to the committee, because after twenty-nine years of experience in western Canada I know something about it.
I should like to commend the Minister of Finance for his policy with respect to the collection of taxes from farm help. In 1941

farmers were asked to collect the national defence tax. I know of some farmers who collected that tax, and then lost their help to those who did not collect it. If a tax of this kind is imposed, I would ask the Minister of National Revenue not to ask the farmer to collect the tax from his help.
Possibly I should not say anything further until I hear from the minister as to what he intends to do about leaving the farmer out of the income tax class. In connection with bookkeeping on the farm, it is my belief that books are not kept on more than one per cent of farms. On the average, the farmer is not trained to keep books; and if he did keep them, I do not think he would stay on his farm more than a year, because only a very small percentage of farmers can show an actual profit.


Gordon Graydon: He has not the time to keep books, anyway.


Robert Fair: I know that. But that is one more penalty being imposed upon him. After the minister gives his reply I may have something further to say.


George Ernest Wood: Mr. Chairman, I wish to say-


Ernest Edward Perley: How about the bathroom?


George Ernest Wood: Farming is such a clean life I do not need one. Is it eleven o'clock?


Joseph-Arthur Bradette: Shall I report progress?


Alexander Malcolm Nicholson: The Minister of Finance has pointed out that my figures were not accurate. I wish now to make a correction in the figures I quoted from the pamphlet. The amount left for a person with a $14,000 income is


Some hon. MEMBERS:: Order.


Alexander Malcolm Nicholson: I am simply making a correction before eleven o'clock.


Joseph-Arthur Bradette: The hon. member for Brant will have the floor to-morrow.


Colin William George Gibson: Before the committee rises I move the following amendment:
That resolution No. 7 of the resolutions to amend the Income War Tax Act be amended by deleting the words "31st March" in the last line thereof, and substituting therefor the words "30th of April."
Resolution stands.
Progress reported.


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

Consulate General in New York
Friday, April 9, 1943