1944-07-13

Hon. J. L. RALSTON (Minister of National Defence):: Mr. Speaker, on March 6 I had the privilege of submitting to the house the names of almost five hundred members of the Canadian Army who had been awarded honours for deeds of gallantry in this war. With the unanimous permission of the house, these names were given a permanent record on Hansard. Among the names were two recipients of the Victoria Cross, Lieutenant-Colonel Cecil Merritt and Major Paul Triquet.
A few hours ago there was announced concurrently in the United Kingdom and in Canada that another officer of the Canadian Army has been awarded this highest honour for gallantry which can be conferred on a member of the armed forces by His Majesty the King. The recipient is Major John Keefer Mahony of New Westminster, British Columbia. His regiment is the Westminster Regiment (Motor). The award to Major Mahony is for great gallantry while leading his company in establishing and holding an important bridgehead across the river Melfa in Italy.
The citation appears in a special issue of the Canada Gazette published to-day, and I am sure the house would want it recorded in Hansard. The citation reads:
The King has been graciously pleased to approve the award of the Victoria Cross to: Major John Keefer Mahony,
The Westminster Regiment (Motor).
On the 24th May, 1944, a company of the Westminster Regiment (Motor) under the command of Major Mahony was ordered to establish the initial bridgehead across the river Melfa. The enemy still had strong forces of tanks, self-propelled guns and infantry holding defensive positions on the east side of the river. Despite this, Major Mahony personally led his company down to and across the river, being with the leading section.
Although the crossing was made in full view of and under heavy fire from enemy machine gun posts on the right rear and left front, he personally directed each section into its proper position on the west bank with the greatest coolness and confidence. The crossing was made and a small bridgehead was established on ground where it was only possible to dig shallow weapon pits. From 15.30 hours the company maintained itself in the face of enemy fire and attack until 20.30 hours when the remaining companies and supporting weapons were able to cross the river and reinforce them. The bridgehead was enclosed on three sides by an 88 mm. self-propelled gun four hundred and fifty yards to the right, a battery of four 2 cm.

Major Mahoney-Award oj Victoria Cross
anti-aircraft guns one hundred yards to the left, a spandau one hundred yards to the left of it, to the left of the spandau a second 88 mm. self-propelled gun and approximately a company of infantry with mortars and machine guns on the left of the 88 mm. From all these weapons Major Mahony'e company -was constantly under fire until it eventually succeeded in knocking out the self-propelled equipment and the infantry on the left flank.
Shortly after the bridgehead had been established the enemy counter-attacked with infantry supported iby "tanks and self-propelled guns. The counter-attack was beaten off by the company with its piats, 2-inch mortars and number 36 grenades, due to the skill with which Major Mahony had organized his defences.
With absolute fearlessness and disregard for his own safety, Major Mahony personally directed the fire of his piats throughout this action encouraging and exhorting his men. By this time the company strength had been reduced by sixty men, and all buit one of the platoon officers had been wounded. Scarcely an hour later enemy tanks formed up about five hundred yards in front of the bridgehead and in company with about a company of infantry launched a second counter-attack. Major Mahony, determined to hold the position at all costs, went from section to section with words of encouragement personally directing fire of mortars and other weapons. At one stage a section was pinned down in the open by accurate and intense machine gun fire. Major Mahony crawled forward to their position and by throwing number 77 smoke grenades, succeeded in extricating the section from its position with the loss of only one man. This counter-attack was finally beaten off with the destruction of three enemy self-propelled guns and one panther tank.
Early in the action Major Mahony was wounded in the head and twice in the leg, but he refused medical aid and continued to direct the defence of the bridgehead despite the fact that movement of any kind caused him extreme pain. It was only when the remaining companies of the regiment had crossed the river to support him that he allowed his wounds to be dressed and even then refused to be evacuated, staying instead with his company.
The forming and holding of a bridgehead across the river was vital to the whole Canadian corps action, and failure would have meant delay, a repetition of the attack, probably involving heavy losses in men, material and time and would 'have given the enemy a breathing space which might have broken the impetus of the corps' advance. Major Mahony, knowing this, never allowed the thought of failure or withdrawal to enter his mind and infused his spirit and determination into all his men. At the first sign of hesitation or faltering Major Mahony was there to encourage by his own example those who were feeling the strain of battle. The enemy perceived that this officer was the soul of the defence and consequently fired at him constantly with all weapons, from rifle to 88 mm. guns. Major Mahony completely ignored the enemy fire and with great courage and absolute disregard for personal danger commanded his company with such great confidence, energy and skill, that the enemy's efforts to destroy the bridgehead were all defeated.
The great courage shown by Major Mahony in this action will forever be an inspiration to his regiment and to the Canadian army.
I know, Mr. Speaker, that the house and the country will join very heartily in sincere congratulations to Major Mahony and to his family and to his regiment upon this worthy recognition of his superb soldierliness.


Mr. GORDON GRAYDON (Leader of the Opposition):: Mr. Speaker, on an occasion such as this a word of comment might properly be added to the congratulations which have been so eloquently paid to Major Mahony of the Westminster regiment. I am sure it is a matter of satisfaction and gratification to the province of British Columbia that two out of three of the Victoria Crosses which have been awarded to Canadians in this war have been awarded to men from the great coastal province. I would like to add the congratulations of His Majesty's Loyal Opposition to those which have been extended by the minister to Major Mahony and to his family and regiment.


Mr. THOMAS REID (New Westminster):: Mr. Speaker, with the permission of the house may I rise on this occasion to pay homage to one of Canada's great fighting men, Major John Keefer Mahony? The story of his gallent service has just been made public. Major Mahony has brought honour not only to New Westminster and British Columbia, but to all of Canada as well.
Since war started three gallant Canadian soldiers have been awarded the Victoria Cross: Lieutenant Colonel Merritt, of Vancouver; Major Paul Triquet, of Quebec, and now Major Mahony of New Westminster. It is not mere chance, Mr. Speaker, that two of Canada's Victoria Crosses have been won by men from British Columbia, and to us in New Westminster Major Mahony's achievement comes as a proud inspiration.
May I remind the house that it was a New Westminster company which was led by Major Mahony in the attack and victory obtained at the bridgehead; and so New Westminster shares a deep satisfaction in the deeds of Major Mahony and his valiant men. To gain a vital objective is a great thing; to hold on to that objective is still greater.
The achievement of Major Mahony and the men of the Westminster regiment should make those of us who remain in Canad&^more determined than ever to back up and support to the utmost of our strength and ability those who are fighting our battles overseas.
Briefly, I should like also to join with the people of New Westminster in congratulating
Questions

Major Mahony's family, and likewise the families of the men who fought with him and made his achievement possible. In acclaiming and recording the heroic deeds of the Westminster regiment we should not forget to sympathize with the relatives of those who fell in the battle, and likewise to wish the wounded a speedy recovery.



QUESTIONS

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

Mr. BENCE:: On what date was the W. R. Carpenter (Canada) Limited flax processing plant at Vancouver, B.C., completed?


Mr. MICHAUD:: The final payment was
made to the contractor February 8, 1943. The work was completed a few weeks prior to that date.


WAR SUPPLIES AND SERVICES-PROFITS ON CONTRACTS
[Stage Direction]
Mr. DIEFENBAKER
What have been the maximum and minimum percentages or rates of profit fixed by the Minister of Munitions and Supply in each of the years 1940 to 1944 inclusive, in contracts for, (a) the production of munitions or other war supplies; (b) the supply of services, wherein provision is made granting the minister the discretion of fixing same?
Joseph Enoil Michaud: A categorical answer to
this question would involve examination of several hundred thousand contracts and expenditure of time and staff which is not considered to be warranted at this time.
In the case of cost-plus contracts, which are those in which the minister fixes the percentages or rates of profit, the great proportion are at 5 per cent, with rates running as low as one-half of one per cent and as high, occasionally, as ten per cent, depending on a wide variety of differing circumstances. In general, this policy has remained unchanged since the inception of the department.
Services are bought almost invariably at a price fixed by competitive tender or negotiation.^^
Sefe also statements of Mr. Chevrier, M.P., Hansard for June 15, 1943, pages 3644, 3645, and 3646; and for March 23, 1944, pages 1757, 1758, 1759 and 1760.
IMr. Graydon.1


FLAX-PRICES AND BONUSES
Mr. DIEFENBAKER:: 1.	How many bushels of flax have been sold to the United States by the Canadian wheat board during the months of January to June, 1944, inclusive?
2.	What was the average price per bushel in each month?
3.	During said period have any bonuses on flax been paid to the processors of flax? If so, how much per bushel?


Mr. CRERAR:: 1.	January, 250,000 bushels; February, nil; March, nil; April, 2,998,000 bushels; May 88,168-44 bushels; June, nil.
2.	January, $3 per bushel; April, $3.30 per bushel; May, $3.30 per bushel. All basis No. 1 C.W. in store Fort William/Port Arthur, Canadian funds.
3.	By order in council P.C. 7325 of September 27, 1943, the Canadian wheat board is required to buy flaxseed at $2.50 per bushel for No. 1 C.W., basis in store Fort William/Port Arthur and to sell for domestic processing (to domestic crushers, feed, breakfast or cereal-food manufacturers and manufacturers of pharmaceutical products) on the basis of $1.64 per bushel for No. 1 C.W., in store Fort William/ Port Arthur. The board- is further required to fill domestic demands before selling for export.
CUSTODIAN OF ENEMY PROPERTY- MCPHEj: INVESTIGATION


Mr. BENCE:: 1.	On what date was the advisory committee, headed by Judge G. W. MeP-hee, appointed to recommend the mode and manner of the release, by tbe official custodian, of the properties taken over by the official custodian?
2.	Who were the members of such committee?
3.	When did they commence their work?
4.	On what date were their recommendations placed before the official custodian?
5.	What was the total cost incurred, as a result of the setting up of the said committee?
6.	How much was paid, by way of salary and expenses, to each of the members thereof?
7.	What has been done to implement the recommendations of the committee?


Mr. McLARTY:: 1.	October 20, 1943.
2.	His Honour Judge McPhee, Moose Jaw, Saskatchewan, chairman; George A. Campbell, Esq., Edmonton; W. Gordon Thomson, Esq., Windsor.
3.	October 25, 1943.
4.	The committee made interim reports and recommendations from time to time and submitted a more comprehensive report on February 16, 1944. Supplementary reports were submitted by the chairman on specific matters at later dates.

Questions as Orders jor Returns
5.	$15,435.24.
6.	Judge McPhee, travelling and living expenses, $3,913.35; George A. Campbell, Esq., fee $2,200; expenses $1,403.86; W. Gordon Thomson, Esq., fee $1,260; expenses $842.80.
7.	(a) As reports were received properties which had been under the control of the custodian were released in accordance with the recommendations of the committee. This included 143 parcels of real estate.
(b)	Claims for alleged damages to property were investigated and, in accordance with the recommendation of the committee, were allowed in an amount of $10,828.70, which amount has been paid.
(c)	Payments were made to municipalities for taxes in cases where the revenues had not been sufficient to cover taxes for the period the properties were under control. These payments, amounting to $16,834.40, have been made.


KINGSTON, ONT., COLD STORAGE
Mr. AYLESWORTH:: 1.	Has the dominion government paid any subsidies, loans or grants, for cold storage purposes in the city of Kingston, Ontario, since August 4, 1943?
2.	If so, to whom were they paid, and on what dates?


Mr. GARDINER:: 1.	Yes.
2.	Kingston cold storage; October 4, 1943; $280.11.


PRISONERS OF WAR
Mr. ISNOR:: 1.	Has the government knowledge as to the number of Canadian merchant seamen who are presently prisoners of war in Germany? If so, how many?
2.	Have any of the Canadian merchant seamen who were taken prisoners of war been repatriated? If so, what number?
3.	What steps, if any, are being taken to repatriate Canadian merchant seamen presently held prisoners of war?


Mr. MICHAUD:: 1.	(a) Personnel of ships of Canadian registry held captive in Germany, 94; (b) Canadian merchant seamen taken captive from ships of other than Canadian registry, 34.
2.	(a) Personnel of ships of Canadian registry repatriated from German prison camps, 26; (b) Canadian seamen taken captive from ships of other than Canadian registry and repatriated, 13.
3.	Everything possible is being done under the Geneva convention to repatriate Canadian merchant seamen detained by the enemy.



QUESTIONS PASSED AS ORDERS FOR RETURNS


Mr. FRASER (Peterborough West):: How much has been paid by the government and the national war finance committee to each daily newspaper in the province of Quebec in connection with the sixth victory loan campaign?
PURCHASE OF VESSEL "THE ARISTOCRAT*'


Mr. FRASER (Peterborough West):: 1.	Did -the government purchase a vessel named The Aristocrat ?
2.	If so, when and from whom?
3.	What was the total purchase price of the vessel ?


WOOL SUBSIDY
Mr. HATFIELD:: 1.	Is there a subsidy being paid on wool?
2.	If so, does it cover all grades of wool?
3.	Is the subsidy paid in all provinces?
4.	If not, why is it not paid in all provinces?


FARM PRODUCTS-PRICES AND SUBSIDIES
Mr. HATFIELD:: 1.	What are the farm products that can only be sold under a price ceiling?
2.	What are the farm products that are supported by a floor or minimum price?
3.	What are the farm products that Teceive a subsidy?


LAUNDRY SERVICE IN HALIFAX
Mr. ISNOR:: 1.	Did the government since the outbreak o{ war take over a civilian laundry plant in the city of Halifax? If so, what is the name of such plant and on what date was it acquired?
2.	What provision, if any, has been made to provide laundry services -for civilians deprived of laundry service ,by the action of the government in taking over this laundry?
3.	Is the government aware that there is an acute shortage of laundry facilities for civilians in the city of Halifax?
4.	Has the Department of National Defence contracts at present with any privately -owned civilian laundry operated in the city of Halifax? If so, with what laundries and what are expiration dates of present contracts?



SALARIES ACT


[Stage Direction]
Right Hon. W. L. MACKENZIE KING (Prime Minister) movedl that the house go into committee at the next sitting to consider the following resolution:
That it is expedient to amend the Salaries Act to provide that the salaries of the Minister of Veterans Affairs and of the Minister of Reconstruction shall be ten thousand dollars, respectively.
Morning Sittings
[Stage Direction]
He, said:	His Excellency the Governor
General, having been made acquainted with the subject matter of this resolution, recommends it to the consideration of the house.
Motion agreed to.


Right Hon. W. L. MACKENZIE KING (Prime Minister) moved:: That on and after Monday, July 17, 1944, until the end of the session, the house shall meet at 11 o'clock in the morning of each sitting day and that in addition to the usual intermission at 6 o'clock p.m., there shall also be an intermission every day from 1 to 3 o'clock, p.m.


[Stage Direction]
Motion agreed to.


[Stage Direction]
On the orders of the day:
Gordon Graydon: Will the Prime Minister take the necessary steps to make full inquiries through the protecting power into a report carried in to-day's edition, of the Globe and Mail written by Ralph Allen and' datelined "With the Canadians in France, July 11". A copy of this report I have already given the Prime Minister, but in order that the house may be aware of the subject matter of the report I shall read the first paragraph of it:
Two Canadians and "several" American prisoners of war who refused to work for the German war machine were killed by their guards at Stalag IIB near Hammeretein last February, .a repatriated French prisoner who was in the camp at the time of the killings said there to-day. The allied soldiers, all new arrivals from Italy, were shot in their beds when they refused to report for labour details, the French soldier asserted. A number of others, he said, were executed at various times by the staff of the same camp for trying to escape.
Anyone seeking to build a larger case around recent disclosures of the massacre of allied airmen in Germany could find plenty of evidence in Caen.
I should just like to make this remark, if I may, to the Prime Minister and to the government before the Prime Minister answers my question. AVhen one couples such a reported incident with the cold-blooded murder of Canadian and British airmen about which the Prime Minister spoke a couple of weeks ago, it makes one's blood boil and call loudly for the kind of punishment that these murderous vandals so richly deserve.
TMr. Mackenzie King.]


William Lyon Mackenzie King: Mr. Speaker, my answer to my hon. friend's question is that the report was noticed by the government when it appeared and inquiries were immediately instituted.



WAYS AND MEANS


[Stage Direction]
The house in committee of ways and means, Mr. Bradette in the chair.
2. That dependents as referred to in the said act be extended to include parents-in-law, grand-parents-in-law, brothers-in-law, si«ters-in-law, sons-in-law and daughters-in-law in the same circumstances and subject to the same conditions as parents, grandparents, brothers, sisters, sons and daughters respectively.
Gordon Knapman Fraser: The minister was going to make a statement on this.


Mr. D. C. ABBOTT (Parliamentary Assistant to the Minister of Finance):: I do not know about a statement, Mr. Chairman. I think some question was raised last night as to the inclusion of sons-in-law.


Mr. HANSON (York-Sunbury):: Yes. The minister said he would like to consider the inclusion of all these in-laws. I was merely indicating the position of sons-in-lajw. Perhaps we could go on with another item pending the decision of the minister.


Douglas Charles Abbott: He has considered it, but I have no objection to going on with the next resolution.


Richard Burpee Hanson: What is the minister's conclusion? We are widening out the scope of the aid given to taxpayers to include not only the direct progenitors and descendants of the taxpayer but also their collaterals and collaterals-in-law. How much demand has there been for this?


Douglas Charles Abbott: During the last two or three years in particular a good many representations have been received that an allowance should be made, as my hon. friend indicated last night, particularly in the case of the mother-in-law. The position under the law is that in respect of blood relations, that is to say, son, daughter, mother, father and grandparents, if they are wholly dependent upon the taxpayer, the taxpayer may claim the tax deduction set out in rule 3 of the first chedule of the act. If the son of the taxpayer were wholly dependent upon his father for support the taxpayer could claim a deduction from his tax with respect to that son, but if, on the other hand, the taxpayer were required to maintain his daughter-in-law, as is frequently the case, he could not claim a deduction.

Similarly if a man were called upon to support his own mother, who was completely dependent on him, he could claim a tax deduction, but on the other hand if he were required, as often happens, to support his wife's mother he could not claim a tax deduction. I am advised that in certain jurisdictions-I know it is the case in my own province of Quebec- there is a legal obligation on a man to support his in-laws under certain circumstances. The primary obligation rests on the blood relation, but if the blood relation is unable to give his support, or if there is no blood relation, there is a legal obligation on the in-law to support his wife's mother. It was felt after a good deal of consideration that, whatever the legal position might be, it was certainly equitable that a man who could claim a tax credit for supporting his son should be entitled to claim a similar credit for supporting his daughter-inlaw. So that the effect of the proposed amendment is to extend the tax credit not only to the blood relations but to the in-laws, though not to the collaterals, of course, as my hon. friend suggested.


Richard Burpee Hanson: I have never had any objection to extending this concession to the parents-in-law or to the grandparents-in-law, because presumably they may be in really dependent circumstances in a given case and they must be taken care of, although in the common law provinces there is no legal obligation I believe at all. But the extension of this alleviation to the collaterals is of course another matter. I wonder if there has been much demand for this. I understand that there was a very substantial demand to extend it to the parents-in-law and grandparents-in-law, but how much demand was there for extending it to sisters-in-law, brothers-in-law, sons-in-law and daughters-in-law? Has any estimate been made of the number involved and of the cost to the treasury?


Douglas Charles Abbott: I do not know that there has been any great demand on behalf of the other classes to which my hon. friend referred. On the other hand it was felt that in extending this to the mother-in-law, for instance, it was logical to extend it to the other in-laws. Let me give an illustration. Take the case of a man who is married and goes overseas and is killed. I suggest that in a great many cases the father of that boy would feel morally responsible at any rate to support his daughter-in-law.


Richard Burpee Hanson: I think the nation ought to support her.
Income War Tax


Douglas Charles Abbott: She would get some pension. Perhaps a better example would be that of a young man who marries and dies before he has had the opportunity to make full provision for his family. His father for a period supports his daughter-in-law. If the son had been disabled during his lifetime the father could have claimed the tax credit, but because the son had died he is not able to do so under the law as it stands. Mind you, this concession is subject to the same restrictions which pertain with respect to the other dependents, that they must be wholly dependent and so on. This is not widening in any unlimited fashion the claim which can be made for dependents.


Richard Burpee Hanson: Of course what the parliamentary assistant has said is an indictment of the inadequacy of the present range of pensions. That is exactly what it spells to me.


Douglas Charles Abbott: I was only citing that as an example. I could have given a better illustration.


Richard Burpee Hanson: The interpretation to be put on the illustration is this, that in the case of the soldier who gave his life for his country, leaving behind a daughter-in-law for his father to support, an inadequate pension is provided.


Douglas Charles Abbott: My hon. friend is quite correct. I am afraid that my example was unfortunate.


Richard Burpee Hanson: My understanding of the position was that the demand was in respect of the parents-in-law and did not extend beyond them downwards. It might include the grandparents-in-law but not the others. I understood from a remark made by the minister yesterday that brothers-in-law, sisters-in-law, sons-in-law and daughters-in-law, were put in to carry out the parallel in the present law, for the sake of uniformity. I would like to know if there has been any real demand or any real necessity for this. If there has been, if this is justifiable on the ground of necessity, I shall not oppose it. I am favourable to granting assistance in respect to the parents-in-law, because I have known of many cases where assistance would be absolutely necessary and a deduction should be allowed. But is not this based on the theory that the department thinks there ought to be a parallel?


Douglas Charles Abbott: There has been some
demand, I am told, in the case particularly of men who are maintaining a daughter-inlaw. That is perhaps the case which arises most frequently. But it was felt that as we are
Income War Tax

making this change in the law, it was both sound in principle and logical to extend it to all classes of in-laws. So far as I know, there has been no demand upon the government for it, but it was felt that in extending this to some classes of in-laws, which has never been done before, if we did not include them all we should inevitably create a demand from the others which it would be hard to resist on principle. They will say, "Well, you extend it to the father-in-law and the mother-in-law. I am obliged," a man will say, "to support a daughter-in-law; she has no other means of support. If she were my own daughter I could claim the tax credit, but because she is my daughter-in-law I cannot". It seems to me that that is what we should be faced with. But if the committee would prefer, we can let the section stand. The committee may prefer to have the views of the minister on it.


Richard Burpee Hanson: I am going to ask that the section stand. I am in accord with the principle of the parents' and grandparents' allowance, but I think these other collaterals stand on a different basis. I suggest to the parliamentary assistant that the government has made this proposal and it has to make a case in support of it. The only case I can observe is a desire to parallel the present law in respect to these in-laws.


Douglas Charles Abbott: Perhaps we might let it stand; or if we want to pass the resolution it can certainly be given further consideration when we come to the bill.


Richard Burpee Hanson: That is all right.


[Stage Direction]
Resolution agreed to.
3.	That the provision under which a tax credit is allowed in respect of a child of the taxpayer .be extended to include an allowance in respect of any person under eighteen years of age and dependent upon the taxpayer for support, including an illegitimate child.
Mr. COLDWELL:: I am glad that the government has granted the request which has been made by hon. members to make the definition of "child" wider than it was. For a number of years there has been hardship to persons who have children in their homes who have not been legally adopted. Also, of course, there is the case of the illegitimate child; some mothers with an illegitimate child have been penalized all through life. After all, the child cannot choose the circumstances under which it shall be born. This is a worth-while reform, and we approve it.


Richard Burpee Hanson: I am in accord with what the hon. member has said 
with respect to children under eighteen years of age dependent upon the taxpayer for support. That is quite right. With respect to the illegitimate children, I assume this will be granted or should only be granted to the mother who is a taxpayer, and that it would not go any farther than that.


Douglas Charles Abbott: Certainly that is the case it was intended to meet.


Richard Burpee Hanson: I hope the legislation will be so guarded that the father of such a child would never be given any tax concession.


Douglas Charles Abbott: I had not given that any consideration.


Richard Burpee Hanson: It is quite possible he might claim it, and I think he is the last man in the world who should get it.


Gordon Graydon: You might have trouble in finding him.


Richard Burpee Hanson: I don't know. The courts pin him down, you know.


Gordon Knapman Fraser: I wish to follow up what the hon. member for Rosetown-Biggar has said. Numerous representations have been received on this matter, and I am pleased that this proposal has been adopted. I have had many letters from welfare societies saying that it will be a real godsend.
Mr. HANSON (York-Sunbury)1: I suggest to the minister that when the legislation is framed it be made absolutely clear that this provision for the illegitimate child shall go only to the mother. Under this resolution it would be quite legitimate for one to argue that it covers both parents. I am sure the committee does not want to put a premium on a man who is the father of an illegitimate child. The mother cannot help herself, and I want to help her.


Douglas Charles Abbott: I will certainly give consideration to my hon. friend's observation. The provision is that a credit should be given to anybody who is supporting the child. In ninety-nine cases out of one hundred it would be the mother. I am not prepared to say at the moment that if the father was supporting the illegitimate child he should not benefit from this provision. However, that matter can be considered.
The hon: member for Peterborough West has indicated that there have been a great many representations from all sides of the house and from social service organizations throughout Canada that an amendment of this

Income War Tax
kind should be introduced. I want to point out, in view of the rather general terms of the resolution, that the legislation will provide in effect that the dependents must be in the custody of and wholly dependent on the taxpayer.


Mr. BRUCE:: I assume that this would cover British war guests. ,


Richard Burpee Hanson: Oh, yes.


Herbert Alexander Bruce: For several years we have pleaded that this exemption should apply to them, and I am glad to see that that has been done.


Douglas Charles Abbott: That assumption is correct- where, of course, they are wholly dependent on the taxpayer.


Herbert Alexander Bruce: Yes.


Richard Burpee Hanson: The parliamentary assistant said this would cover the case only of a child who is in the custody of the taxpayer. Does he mean actual custody or constructive custody?


Douglas Charles Abbott: I do not mean physical custody, no.


Richard Burpee Hanson: Actual or constructive custody?


Douglas Charles Abbott: Custody, I am advised, is the language used in the corresponding section of the British act. I do not know that that will be the exact language used when we come to draft the legislation. That is the substance of the requirements.


Richard Burpee Hanson: Then if the child were being supported by the mother in another family, she would get it?


Douglas Charles Abbott: That is the intention.


Mr. GREEN:: Would the tax credit be allowed in a case where the child has been placed in the custody of strangers, people who are not relatives at all, but is being supported by them?


Douglas Charles Abbott: My understanding is that where a person supporting the child is, for instance, paying board for the care of the child, the person who is doing the paying would be entitled to get the tax credit. That is my understanding of the intention which will govern the drafting of this law.


Gordon Knapman Fraser: That is why this was asked for.


[Stage Direction]
Resolution agreed to.
4.	That the deduction in respect of unusual medical expenses be extended to include such expenses incurred outside of Canada.
Mr BENCE:: On this item,, I desire to make a representation to the administration in connection with the amount of deduction for medical expenses which is permitted at the present time. My understanding is that where the medical expenses are in excess of five per cent of the taxable income, so much as is in that excess may de deducted provided the total amount does not exceed $600, plus an additional sum of $100 for each dependent, provided also that the amount which is allowed for dependents does not exceed $400. In many cases people to-day are incurring heavy medical expenses over and above the $600 limit which is provided1 by this legislation If the principle is a correct one, that over and above the five per cent some relief should be given-and I assume that that relief was allowed in the first place because of the present high rate of income tax-the ceiling on these unusual medical expenses should be lifted, because in some cases of which I have personal knowledge men have incurred considerably more expenses than the $600, and find themselves in straitened circumstances.
Take for example the case of a man whose wife has become an invalid, or whose dependent is dying, and the time which elapses between invalidity and death is considerable, say months. During the course of that time doctors' and hospital bills are heavy; frequently trips have to be taken to other centres, particularly if the afflicted person happens to be living in an out-of-the-way place. Under such circumstances the expenses in many cases exceed the limit allowed by the law.	i
This matter, I understand, has been taken Up with the department; representations have been made to it, and the replies which have been received are that it is a matter which will have to be dealt with by parliament, that the department itself has no jurisdiction to create any extension.
In addition, we find men in receipt of what may be termed a reasonable income, but with no capital ahead of them, going very heavily into debt to provide for these unusual medical expenses, and then, because of the continuation in after years of the heavy rate of -taxation on their incomes, they are never able to get out of that debt.
In addition to considering seriously the raising of the ceiling, the administration should include the services of doctors, nurses and dentists and should also provide for drugs and medical necessities which are prescribed by the doctor. We might run into a great deal of difficulty because people might take advantage of this exemption if we allowed for every kind of expenditure, but certainly if it were confined to the type certified by the doctor
Income War Tax

attending the case, I suggest that we could reasonably add such, expenses to the amount permitted at the present time. Actually what happens now is this. The doctor's fee and the hospital bill are allowed but no incidentals in the form of medicine and X-rays and matters of that sort are permitted. If a person lives in an outlying district in Saskatchewan, say, and has to go to Winnipeg or Saskatoon for treatment, he or she is not allowed anything to take care of travelling expenses or the extra money spent in going to that centre to receive badly required services. I suggest to the parliamentary assistant that the whole matter be reviewed in the light of the experience which has been gained since the exemption was included in the Income Tax Act.


Mr. GILLIS:: I endorse what the hon. member for Saskatoon City has said. There is no necessity for repeating it except to suggest that this particular question requires a general overhauling. The only thing that is classified as medical expenses under the present regulations is what is purchased directly from the medical authorities. All the expenses outlined by the hon. member for Saskatoon City are incidental to persons getting to a centre where medical assistance can be provided. There are many other considerations also that must be taken into account. Suppose a man has an artificial leg. In the interests of his health the doctor orders him to have that leg changed, and he is obliged to spend $250 or $300 replacing it. That is a medical expenditure, but to-day it is not allowed for taxation purposes. Let me give another illustration which I have brought to the attention of the department on several occasions. A woman has an ear condition and her doctor advises her to purchase appliances costing $200. That is an order from her medical doctor, but there is no allowance for taxation purposes for a purchase of that kind. If we are going to do anything about this I think we must go the whole way or not bother with it at all.
The arrangement as applied to the lower income groups is far from satisfactory. Take a man with a $1,500 income. He is allowed to deduct if the medical expenses are in excess of five per cent of the total income. Five per cent is $75, so that he is allowed only in excess of $75, and then it is only for something that is purchased directly from the medical fraternity. I am far from satisfied with that provision, and I could elaborate on the disabilities that arise from it. It should be overhauled and made all-inclusive, or eliminated altogether. I do not think it serves much purpose in its present form. I am not

so much concerned about the man who can undertake a $1,500 expenditure to go to the United States, because a person with such an income is able to take care of his expenses and the hardship is not so great. But if this is designed to assist those in the lower income groups, then I repeat, it requires overhauling.


Mr. McILRAITH:: Considering the item
of unusual medical expenses, I would refer particularly to amputation cases. The section makes allowance only for unusual medical expenses if the payment is made to any qualified practitioner, and so on, and to one fulltime attendant upon the taxpayer in certain circumstances. As regards amputation cases, there is no provision for the purchase of an artificial limb or limbs required. It seems to put an unnecessary burden on this particular section of our population, a burden that should not be imposed on them. I have personal knowledge of one particular case. A married man without any dependent children has a salary of $1,500. He has two artificial legs and is required this year to have new limbs or he must cease working. He simply cannot carry on without them. The estimated cost of the equipment is $500, but there is not that amount of money available from his salary after he pays ordinary living expenses. If he does not buy these artificial limbs he cannot work. This and similar cases represent a genuine hardship, and I would ask the parliamentary assistant to consider widening the resolution with regard to this group of persons.


Herbert Alexander Bruce: I wish to say a word in
support of the remarks of the hon. member for Saskatoon City and the hon. member for Cape Breton South regarding this term, "medical expenses." I think the wrong impression may be given, that the doctor gets all this money. As a matter of fact his bill is very often the small end of the stick. If a person is seriously ill he may require special nurses, and under the present regulations one nurse is not enough because they work an eight-hour day and therefore it is necessary to have three nurses. Three nurses at $7 a day each means $21. There are a number of other incidentals such as those mentioned by my hon. friends. I suggest therefore that this should be more specific, and should cover a wider territory than is indicated by the term "medical expenses."


Douglas Charles Abbott: My hon. friend is aware
that nurses are covered.


Herbert Alexander Bruce: Under this?


Douglas Charles Abbott: Oh, yes. Hospital expenses include nurses.

Income War Tax


Herbert Alexander Bruce: Does it include special
nursing in the hospital?


Douglas Charles Abbott: Yes.


Herbert Alexander Bruce: I know it includes hospitalization.


Douglas Charles Abbott: It includes all special nurses in the hospital, provided they are registered. In fact it even goes further than registration.


Mr. HOMUTH:: Nurses in the home?


Douglas Charles Abbott: Yes.


Richard Burpee Hanson: What is
the limit under the present law?


Douglas Charles Abbott: Five per cent or $400 in the case of a single person and $600 in the case of a married person, plus $100 for each dependent.


Richard Burpee Hanson: It is not
proposed to change the limit?


Douglas Charles Abbott: The member for Saskatoon City has suggested that the limit should be raised. I would point out, with reference to the remarks made by the member for Cape Breton South, that this was introduced to cover unusual medical expenses. It was never intended that the income tax act should serve as a health insurance or a sickness insurance measure. Because the rates of taxation were put up very steeply in 1941 it was felt that in the case of unusual, exceptional medical expenses some measure of relief should be given to the taxpayer. Under ordinary circumstances a good many men who run into unforeseen and heavy medical taxes have either to dip into their capital, if they have any, or try to borrow money if they have none. It was not felt that the income tax act could be used as a vehicle to provide for universal health or sickness insurance. This was an alleviating measure to give some relief in exceptional circumstances; therefore I cannot agree with the hon. member for Cape Breton South that it should be wholly revised in order to take care of every possible case. Perhaps it does not go far enough, but I am not prepared to say that. Perhaps there should be some raising of the ceiling as suggested by the hon. member for Saskatoon, although my view is it is undesirable under existing circumstances. But with that reservation I do not think this section can be used to provide for all kinds of medical or hospital expenses.


Richard Burpee Hanson: Of course the opening of the door inevitably paves the way for all kinds of demands.


Douglas Charles Abbott: Right.


Richard Burpee Hanson: The decisions have to be pretty arbitrary, and in fact they are arbitrary. When the parliamentary assistant says this is for unusual medical expenses, I say to him that hospitalization is the order of the day-


Douglas Charles Abbott: When I said "unusual" I meant they have to be in excess of five per cent of the taxpayer's income, five per cent being considered normal medical expenses.


Richard Burpee Hanson: I am not at all opposed to the principle of an allowance of this kind, because persons who are ill have very heavy expenses. When they become ill their earning power ceases and they have to have some consideration. The question is how far it should go. Personally I am willing to see the limit raised and relief given; but that was not the purpose for which I rose to speak. I want to talk about the concession contained in resolution 4, as follows:
That the allowance in respect of unusual medical expenses be extended to include such expenses incurred outside of Canada.
I never could understand why, if it was a sound principle to grant to a taxpayer an allowance for unusual or usual medical expenses, there was a geographical limitation to its application. Take the case of people who live along the border near Boston or New York. In exceptional surgical cases in my part of the country it has been the usual practice to send patients not only to Montreal but to certain clinics in Boston and in the city of New York. Up to the present time there has been no allowance made to a Canadian taxpayer. Apparently the department has had a change of heart, and I am going to ask that they make it retroactive. It ought to have been done from the beginning. If the principle is good now, it was good last year, and those who have to pay unusual expenses should be given some consideration in the circumstances I have mentioned.
I am going to give a concrete case. I suppose concrete cases are those that come to our minds and impress themselves upon our memory. A lady from Charlottetown visited her brother who was a physician in New York. She was suddenly taken ill and had to undergo an intricate and expensive operation which cost her husband a good deal of money. While she was convalescent her husband, after a good deal of difficulty, was able to get enough money from the foreign exchange control board to go across the line to see her. I am not complaining about that, because he should have been able to get the exchange very easily in
Income War Tax

the circumstances if he had gone about it in the right way. The banker, I think, could have given him the money very quickly, but there was some delay. When he got there-it was in the winter time-the brother, who was a physician, decided that the lady should not return north, with the result that arrangements were made to take her south to spend the winter. When they came back in the spring, after having this expense for her surgical operation in the city of New York, the husband as a taxpayer put in a claim for the hospitalization of his wife, and was refused. There is an illustration of people who are just caught in a circumstance. If she had taken ill at home, her husband automatically would have had the allowance; but she was taken ill on a visit to New York, and he gets no allowance. The thing is not reasonable to me. I do not think the fact of where the surgical or medical attendance was given should be the determining factor as to whether there should or should not be an allowance. There is no answer to that. I know there will be an attempted answer, but there is no logical or reasonable answer as to why it should have been denied. It must have been because it was just a concession dragged out of the department at the time. It ought to be made retroactive and go back to the time when the principle was first acknowledged and established in the tax structure. I am going to ask that this be made retroactive. The government is making other things retroactive in these resolutions. They are making the question of charitable donations retroactive, and I consider that is definite breach of faith and reprehensible, just as reprehensible as-[DOT]


Douglas Charles Abbott: There is nothing retroactive about that. It was announced before it was made effective.


Richard Burpee Hanson: I do not care if it was announced. It was an ignoring by a departmental official or a minister of the crown of the law of parliament.


Douglas Charles Abbott: No.


Richard Burpee Hanson: I do not care when it was announced or by whom it was announced. It was the law on the statute book when the Minister of Finance made the announcement. It was announced without telling parliament that he was not going to carry out the will of parliament. It was a defiance of the law of parliament itself.


Douglas Charles Abbott: Let me correct my hon. friend on that. The minister announced that he proposed to recommend to parliament-
IMr. R. B. Hanson.1


Richard Burpee Hanson: Oh, well.


Douglas Charles Abbott: -an amendment to the act that after such-and-such a date a certain thing would be done. That has been done.


Karl Kenneth Homuth: And make it retroactive.


Douglas Charles Abbott: It is not made retroactive. It was made effective only after the date the minister announced it.
Mr. HANSON (York-Sunbury)*: We shall meet that when we come to section 32. I had not intended to speak about that at the moment; I was diverted into doing so. I am suggesting that if this is a good principle to-day, it was a good principle when adopted last year, the date on which the principle itself was first brought into legislation. I do not think it would amount to very much, but it would take away the rankling sense of injustice that a limited number of taxpayers feel when they think they are discriminated against because they happen to be taken sick over an imaginary line on this continent. I am asking that this be done.


Mr. KNOWLES:: First of all I should like to express support of what the government has proposed in this resolution by way of extending this principle to include expenses incurred outside Canada, which, of course, refers particularly to the United States. The hon. member for York-Sunbury has referred to people in his part of the country who on occasions find it necessary to go to the New England states. It is also true that in certain parts of the west people find it necessary to go to Rochester, Minnesota, to attend the Mayo clinic. I know that this matter wTas f'lt quite keenly by people in and around the. head of the lakes. Representations came from trade union organizations in Fort William to the government on the matter, and they are appreciative of the action that has been taken in this resolution. I feel, too, with the hon member for York-Sunbury, although I do not wish to say anything provocative, as perhaps he did-	*


Richard Burpee Hanson: Oh, don't be afraid. The hon. member is not usually afraid of saying something provocative.


Stanley Howard Knowles: I do not mind, if there is anything to be gained by it. Sometimes however, I find it pays to speak in appealing language.


Karl Kenneth Homuth: Honeyed words do not catch any flies around here.


Stanley Howard Knowles: I still hope that the department will give consideration to the idea

Income War Tax
of making this retroactive, at least to some extent. So far, the forms for 1943 have not been assessed, and I am not sure whether the department has completed1 the job of assessing the forms for 1942. It seems to me that at least to some extent the retroactive feature might be introduced with respect to this principle. As the hon. member for York-Sunbury has said, if it is right to do this now, then the principle was right a year or two ago.
There is another phase of this subject of allowances for unusual medical expenses upon which I should like to speak. I believe the point was raised this afternoon by the hon. member for Saskatoon City, and referred to by other hon. members. The expenses in connection with illness are by no means confined to the kind of expenses allowed under the act. Those include hospital, doctor and nursing bills. Every time a person incurs medical expenses of $100 that he can charge up under the act, he has at least $50 or $75 of additional expenses he is not permitted to charge. I realize that administrative difficulties are involved, and that it is always a problem to draw a line. I would point out, however, that the suggestion made . by the hon. member for Cape Breton South that the floor be lowered might take care of this situation. If the parliamentary assistant has not thought the matter through, he might feel that to reduce the percentage from five per cent down to three or two per cent would be getting down to a level of medical expenses which could not be described as unusual. My contention is that if the floor were placed at two per cent of the taxable income of the taxpayer, the government could rest assured that for all the .money for which exemption was being allowed there were other sums of money the taxpayer had to pay out for which no exemptions were allowed. It would help a great deal if some step along this line could be taken. By lowering the percentage rate from five per cent to two per cent the minister would not be changing the principle-if indeed it wishes to stick to that principle-of giving consideration only for unusual medical expenses. Expenses of such an amount are still unusual if one takes into consideration the incidental amounts already referred to.
There is one other type of case to which I should like to refer, and possibly the easiest way to bring the matter before the committee is to state a concrete case. This is one I have already taken up with the department, but, I regret to say, one concerning which they have not seen fit to make the adjustment I have suggested. A working man in Winnipeg has a family of several children. It is necessary for him to maintain one of those
children in a private nursing home. He receives for the son he maintains elsewhere the ordinary allowance for a dependent child. But as hon. members will readily recognize, his expenses in connection with maintaining that child elsewhere, paying his board and room, buying his clothes, and the other disbursements involved, are actually much greater than his expenses in connection with the maintenance of his own children in his own home. This taxpayer felt he was justified in putting in, as unusual medical expenses, the amount he expended in the care of that child over and above five per cent of his total taxable income. The ruling of the department in this case was that that was not a medical expense.


Douglas Charles Abbott: What kind of institution was it? Was it a private nursing home?


Stanley Howard Knowles: Yes. It was not a home organized as a hostel, but rather a private home where a private person has taken in a few people who are mentally deficient. Those people are being looked after and the expenses are being paid by the parents of the children concerned. One realizes that people in those circumstances face an unusual burden in more ways than one. When they accept and discharge that burden it seems to me they should be given every consideration, or at least they should be given the same consideration that is given comparable cases. My feeling is that the kind of case I have described involves unusual medical expenses.
The government would not be asked to take over all expense. All we are asking is that the expenses in excess of five per cent of the total income be allowed as an exemption against that income. I should be glad if the parliamentary assistant would do what he can to have that kind of case considered further.


Mr. McCANN:: I am in accord with the principle of allowing a tax deduction for unusual medical expenses. I believe in some instances this provision has shown considerable merit and has provided considerable relief for a number of families. But I cannot see any reason whatsoever for extending that allowance to include expenses incurred outside of Canada, except where expenses are incurred by reason of an illness which takes place when one is out of the country.
Many people have the obsession that when they are ill or require surgical attention they must go to some other country, and that in that country they can receive services better than those they can get in Canada. That is not so. This country is relatively as full of neurasthenics as is any other country, and when those people become obsessed with the
Income War Tax

idea that they must go to the Mayo clinic, or to Baltimore, or somewhere else, and that when there they will receive medical or surgical attention better than they could receive in their own country, I submit they are entirely wrong. This is borne out by the policy which has been followed by the foreign exchange control board. If one wanted to go to the United States for hospitalization or treatment it was necessary to apply to the foreign exchange control board to obtain the necessary funds, and those funds could not be obtained unless accompanied by a certificate from the assignment and procurement board in Canada to the effect that equally good services were not available in this country.
Perhaps no more crippling event than death could occur in any family which has been attacked by a great illness. In the case of death there are most unusual expenses which in many instances cripple men with small incomes and families. If the department wishes to extend exemptions for unusual expenses in connection with sickness, it is my submission that funeral and undertaking expense might well be included.


Douglas Charles Abbott: It may be unusual, but it certainly is inevitable.


James Joseph McCann: They are not provided for.


Mr. LEADER:: May I offer a word in connection with what the hon. member has just 6aid in allowing deductions for medical services incurred outside Canada? I have much respect for the hon. member, but what he has said strengthens my belief that we have a monopoly at the top of our medical associations in Canada. The hon. member is an experienced surgeon and he is mentioned as the possible minister in charge of the new department we are to create. I am sure he will perform his duties with credit to himself and the nation. However, he has declared on the floor of this house that he is opposed to any additional investigation into Doctor Davidson's work at Winnipeg, and he now gets up and tells us that there should be no deductions allowed from income tax for medical services incurred outside of Canada.


James Joseph McCann: On a point of order, I
never made any such statement, that no more investigation should be made. I took the stand which I think was perfectly correct, that the federal government were not warranted in making a further expenditure in carrying on that particular investigation when one had been made already by the provincial authorities.


Harry Leader: I think what the hon. member said was that the taxpayers' money should

not be spent on making a further investigation. But that is by the way. I commend the minister for bringing in this amendment to the income tax act to permit deductions for medical expenses incurred outside Canada. In the past I have made representations to the minister on behalf of people who have written me asking why this was not possible. The minister pointed out quite correctly that it was not done because it was not in conformity with the income tax act. No doubt he has received representations along the same lines from other hon. members. If my support is worth anything, I want to say that the minister has it wholeheartedly.


Mr. HOWDEN:: Mr. Chairman, I am in a peculiar position. I am a medical man myself but I cannot agree with the attitude taken by the hon. member for Renfrew South. I think the people of this country- have personal rights that should not be interfered with. This is a rather personal matter with me. I had a brother who required an operation last spring. He had plenty of money and he applied to the foreign exchange control board to obtain United States funds to go down to Rochester to be operated upon. He was denied that privilege, and he was operated upon in Winnipeg and died. Just as sure as I am standing here as a medical man I believe that if he had been permitted to go to Rochester he would be on this earth to-day. That is a good deal for a medical man to say, but I believe it is right. I do not believe this government or any other authority has the right to deny a man the privilege to go where he wants to go for medical attention; therefore I am bound to take issue with the hon. member.


Richard Burpee Hanson: It is a
question of the liberty of the subject.


John Power Howden: It is a question of the
liberty of the subject. I have something to say on the Davidson cancer cure, but I am not going to say it now because this is not the place.


Gordon Knapman Fraser: Does this deal only with medical expenses, or does it include dental expenses?


Douglas Charles Abbott: It deals with any expenses covered by the present section, which I believe covers dental expenses.


Gordon Knapman Fraser: It
would cover chiropractors and chiropodists and others as set forth in the section.


Douglas Charles Abbott: Yes.

Income War Tax


Gordon Knapman Fraser: They have to be registered the same as they are in Canada.


Douglas Charles Abbott: There is no change in the
law as it stands with respect to the class of expense which may qualify. The only purpose of this resolution is to authorize an amendment to extend1 the exemption to like expenses incurred outside Canada.


Richard Burpee Hanson: What
section is it?


Douglas Charles Abbott: Section 5, paragraph (n).


Karl Kenneth Homuth: I should like to give my
support to the several hon. members who have spoken on behalf of this resolution. I believe, along with other hon. members, that we could very well lower the ceiling in order to bring some easement to people in the lower income brackets. We usually think of members of the Liberal party as being potential free traders, and I was amazed this afternoon to see one get up and defend a very high tariff on his profession. I was pleased to see the hon. member opposite get up and take issue with him. People should be allowed the right to go where they will and get whatever medical attention they desire.


James Joseph McCann: This has nothing to do
with their right; this is a matter of tax exemption.


Alfred Henry Bence: When I asked a question a
while ago the parliamentary assistant said that this was an unusual departure in connection with income tax law in this country and that it was done because the rates were so high that it was felt that some relief should be permitted when the expenses were over five per cent of the income. However, I do not see why it should be limited to $600. If the principle is that expenses over five per cent should be exempted because of the high income tax rates, then surely as the expenses are increased the principle should be all the more applicable. A man finds himself in a much more difficult position When he has to pay $1,000 than when he has to pay $600. I should like to know upon what principle it was determined that the ceiling should be placed at $600, and not $S00 or $1,000. Why not make it unlimited as far as the excess over a certain minimum is concerned? I agree with those who have suggested that possibly the minimum is too high and should be lowered, but the point I was trying to make is that the principle had been accepted that unusual medical expenses should be exempt.


Douglas Charles Abbott: Not entirely exempted; that some measure of relief should be given.


Alfred Henry Bence: Why $600 and not $800 or


Douglas Charles Abbott: Some figure had to be taken, but at a given point expenses of this kind are really capital expenditure. As I said in my earlier remarks, the income tax act was never intended as a means whereby a man's total medical expenses, whatever they may be, should be covered by the other taxpayers of Canada. This was intended as some measure of relief in unusual circumstances, so that if the expenditures were such that they went far beyond what would ordinarily be incurred in a single year, some would be exempt. This is the type of expense to which all of us may be exposed at some time or other, but I suggest that we cannot expect the state to assume that type of capital expenditure for one taxpayer. The figure of $600 may be too low, but some figure had to be taken, and I suggest that this perhaps is not very far from the mark.


Richard Burpee Hanson: There
should not be any allowance at all if the parliamentary assistant is logical.


Douglas Charles Abbott: There is a considerable
amount of logic in what my hon. friend says. As I said, it was felt that in applying high rates of taxation rather suddenly some measure of relief should be given. It may be illogical, if you like.


Richard Burpee Hanson: Why this measure?


Douglas Charles Abbott: This measure was decided
upon after careful consideration as the measure which in the judgment of the government was the most satisfactory and reasonable one to put forward.


Richard Burpee Hanson: It is just arbitrary.


Douglas Charles Abbott: Of course it is arbitrary.
It could not be anything else.


Mr. JACKMAN:: What is the average
amount allowed in the budget for medical expenses? May we have that in order that we may see what reasoning was behind this fixation of the five per cent rate?


Douglas Charles Abbott: I am advised that investigations were made when this provision was under consideration and after looking into the budgets of working class and average income families such as are prepared by social workers it was found that five per cent per annum on the average was included in these
Income War Tax

budgets to include medical and dental care. Some arbitrary figure had to be taken. That is the answer to the question of the hon. member for Rosedale as to how the figure was arrived at.


James Joseph McCann: What amount of money in the last year of which the parliamentary assistant has a record was deductible for medical expenses?


Douglas Charles Abbott: That is not kept as a separate record. Perhaps it could be obtained, but certainly not before this committee will rise.


Richard Burpee Hanson: There are millions of returns to be looked through.


Herbert Alexander Bruce: We have had an illustration this afternoon of how there may be differences of opinion even in the medical profession.


Richard Burpee Hanson: Doctors differ, they say, and the patient dies.


Herbert Alexander Bruce: I was just going to say that the remarks made by the hon. member for Renfrew South in my judgment are perfectly proper, and that he expresses a view which I think would be supported by the majority of medical men in this country. I would certainly support what he said when he remarked that as good surgical work can be done to-day in Canada as in any country in the world, and that applies to other specialties. I do not think it is necessary for anybody in this country to go to another country to get surgical assistance. If the hon. member for St. Boniface finds that in a particular case better work could be done elsewhere in his opinion-


John Power Howden: I am sure of it.


Herbert Alexander Bruce: He may be in that regard mistaken. At any rate I believe that there are excellent men in Winnipeg capable of doing any surgical work as well as it can be done by men in any other country. But if he thinks it is necessary to go out of Manitoba I suggest then that he come to Ontario, where he would find in Toronto surgeons equal to any in the world. If that is not sufficient, I suggest that he journey to Montreal, where he would find some of the leading surgeons of the world. The point that I think the hon. member for Renfrew South made was this. I would not oppose, and I do not think he would oppose, a deduction for medical services for a Canadian visiting in the United States who met with some emergency requiring immediate attention so that he could not get back to his own country. I think that would be a real case for relief from taxation. But for a Canadian to leave his own country and go to the United

States to have surgical work done which could be done just as well in Canada I suggest is not a case for relief.


Mr. GIBSON:: Who is going to judge that?


Alfred Henry Bence: Will the parliamentary assistant bring our representations in connection with the matter of raising the ceiling to the attention of the minister, and will they be considered before this resolution is finally passed?


Douglas Charles Abbott: I have said that I would bring the representations to the attention of the minister.


Harry Rutherford Jackman: When this clause was first before the committee a year ago I suggested that it might be well if the five per cent of the family budget, which we now understand is the average amount which the ordinary family is obligated to pay for medical expenses in a year, were based on the net rather than on the gross income as it is at present. In other words, there is no use in saying that a person is allowed five per cent of his income when perhaps thirty or forty or more per cent is taken from that income in taxation. If the administration would consider basing the five per cent on the net rather than on the gross income, that would help to solve some of the difficulties.	.


The CHAIRMAN:: Some of this discussion is out of order, because there are clauses dealing with these subjects. The committee should wait until we come to the proper clause.


Stanley Howard Knowles: Would the minister please answer one of my questions, that about a child who has to be cared for in a private home?


Douglas Charles Abbott: I will bring that to the attention of the minister. The language of paragraph (n) of section 5 is quite clear. It says that only expenses incurred "in a public or provincially licensed private hospital" shall qualify. As my hon. friend appreciates, if that were extended to include expenses on behalf of children who were cared for in private homes it would be exceedingly difficult to administer, and the department would have great difficulty in checking to ascertain whether these were bona fide medical expenses. The act as it stands restricts the provision to those who are cared for in some publicly supervised institution.


Stanley Howard Knowles: In the case I referred to, that would have been much more expensive for the father. As a matter of fact he submitted a doctor's certificate as to the

Income War Tax
necessity of the child being cared for, and it seems to me that that certificate should carry weight.


Douglas Charles Abbott: I will bring my hon. friend's remarks to the attention of the minister. But my hon. friend will appreciate that it would be exceedingly difficult to open the door quite as wide as that and allow expenses of this kind to be deducted on the certificate of a doctor that they were necessary.


Mr. COTE:: A few minutes ago I heard the parliamentary assistant admit that chiropractors and osteopaths were covered by this resolution and that expenses incurred with these practitioners were considered as medical expenses for the purposes of the resolution. I think that when this resolution came before the committee last year the practitioners in these groups were not intended to be covered. May I ask the parliamentary assistant if they have made a specific demand to be covered and whether that was the reason for the recent ruling of the department?


Douglas Charles Abbott: I am advised that they made a demand, but of course to come within the act they have to qualify as medical practitioners registered under dominion or provincial legislation. I am advised that an investigation was made and the charges of chiropractors and some others have now been admitted as medical expenses.


Paul-Émile Côté: Has the department received a similar request from the optometrists, and if so what has been the outcome?


Mr ABBOTT:: It is impossible for me to give an unqualified yes to that question, because I am advised that the optometrists fall into two groups, one the group that provide the glasses, the materials, and the other the group that prescribes whether or not glasses should be worn The second class is performing what the department considers a medical service, and these expenses are claimable as a deduction, but not in the other case. The question is perhaps of an academic nature, because expenses of this kind do not as a rule run into very large figures, and unless they were added to some other medical expenses it is unlikely that they would run ever the amount where a deduction could be claimed.
Mr. COTE The department has admitted the principle in the case of two or more groups of irregular practitioners, generally known as such; though without any specific standing in the whole country they may be recognized in one or two provinces, and that is all. The optometrists are now considered a
professional group, a scientific body of professional men, all across the country. They have in each province a statute law authorizing and governing the practice of their profession. All of them must be graduates of a university before being admitted to practise. So that rather as a matter of principle than anything else, because I agree with the parliamentary assistant that these expenses may not reach a very high amount, I am surprised that chiropractors and osteopaths are recognized for the purpose of this resolution and that optometrists with a statutory and nation-wide professional status are denied the same privilege.


Douglas Charles Abbott: I did not say that optometrists were denied the same privilege; I said it was a matter for the administration to decide as to whether, in common with the osteopaths, they were able to bring themselves within the language of the section, namely, a qualified medical practictioner registered under any dominion or provincial legislation; and in the case of the second class of optometrists to which I have referred, my own view, for what it is worth, is that they could bring themselves within the definition.


Paul-Émile Côté: So far as I know there is only one class of optometrist, consisting of those who have taken a special course in a Canadian university and are fully qualified to examine the eye and to prescribe and supply eye glasses or lenses. That is what an optometrist is. There may be a class of opticians, who are the ones who make the glasses; but when I spoke of the optometrists I had reference to university graduates who are authorized under a provincial statute to practise that profession as such. If no definite decision has been arrived at by the department I would ask that the minister give special attention to this, taking into account the fact that this group is recognized in the whole country and is rendering valuable services.


Gordon Knapman Fraser: Some little time ago it was asked that clause 4 be retroactive. The income tax form for 1943 has this to say with regard to medical expenses: "if the accident was incurred in 1943 or within one year prior to the date of payment" to a doctor, dentist, nurse, et cetera. That would mean it would run back to 1942?


Douglas Charles Abbott: If my hon. friend will look at resolution 5 he will see that we are making some change in that this year.


Gordon Knapman Fraser: That does not cover No. 4 then; it covers only No. 5?
Income War Tax


Douglas Charles Abbott: Let me see if I understand my hon. friend's question. The law at present is that a man may claim credit for medical expenses which were incurred and paid* within the taxation period or incurred within one year prior to the date of payment.


Gordon Knapman Fraser: He might pay his medical bill in January of this year after an operation he had, it may be, in January of last year. Am *1 right?


Douglas Charles Abbott: That is correct.


Gordon Knapman Fraser: Then you are changing it now in section 5, but you are not changing it in section 4?


Douglas Charles Abbott: Well, resolution 5 will authorize a change in section 5, paragraph (n) of the act, with respect to the condition as to the time of payment. We can discuss when we come to section 5, perhaps, the point my hon. friend is raising now.


[Stage Direction]
Resolution agreed to.
5.	That the deduction in respect of unusual medical expenses be extended to allow as a deduction in any taxation year such expenses actually paid in any twelve-month period ending in the taxation year.
Joseph-Arthur Bradette: Carried?


Gordon Knapman Fraser: No. We are to discuss No. 5 now.


Douglas Charles Abbott: We might discuss the two together and pass the two together. They are related subjects.


Gordon Knapman Fraser: Would the minister say what he intends to do on the matter I have just mentioned?


Douglas Charles Abbott: The law provides, as it stands now, that in order to obtain the credit the expense must have been incurred and paid within the taxation period or paid within the taxation period and incurred within one year prior to the date of payment; and the language used in the form, I am advised, is in order to obtain information as to just when the expenses were incurred and paid. The law is clear as it stands now, and the form is so drafted in order to obtain the necessary information to enable the minister or the deputy minister and assessors to determine whether the claim comes within the provisions of the statute. We propose to give some relief, as my hon. friend will see, in virtue of the provisions of resolution 5.


Gordon Knapman Fraser: It applies this year as in 1943, that if an operation was had in July of last year-


Douglas Charles Abbott: The rules are not being changed.
FMr. G. K. Fraser.]


Gordon Knapman Fraser: -and it is paid for this year, then you are covered?


Douglas Charles Abbott: That is right.


[Stage Direction]
Resolution agreed to.
6.	That in lieu of the deduction in respect of unusual medical expenses of the amount of salary or wages paid to a .full-time attendant upon a taxpayer who is totally blind, the taxpayer shall have the option of deducting $480 from his income in the taxation year.
Gordon Knapman Fraser: Will the minister explain this a little more fully? Also I should like to say, with regard to the reference to a "full-time attendant", that there are blind people who now have a fulltime attendant who perhaps will be getting a "seeing-eye" dog, which costs, I understand about a thousand dollars. That dog is a "fulltime attendant". Would that be included?


Douglas Charles Abbott: That is a new one, I must confess.


Gordon Knapman Fraser: I know the question will crop up.


Douglas Charles Abbott: The legislation contemplates, I think, human attendants.


Gordon Knapman Fraser: I know it does, but the blind deserve anything in reason.


Douglas Charles Abbott: I think the question might be determined if we could find out whether the "seeing-eye" dog is paid any salary or wages. I realize that a capital expenditure for the dog is required, but I take it that its upkeep consists of food, not actual salary or wages.


[Stage Direction]
Resolution agreed to.
7.	That the basis for taxation under the normal tax and the tax credit against the graduated tax allowed to an unmarried person who maintains a self-contained domestic establishment and actually supports therein a person wholly dependent upon him and connected with him by blood relationship, marriage or adoption, be extended to a married person separated from the spouse.
Mr. STIRLING:: May I on this clause make a plea once more for the simplification of income tax returns?
This is a matter which is very seriously bothering a very great number of income tax payers. It does not interest them in the least that an official of the income tax division says it is now quite a simple matter, that all they need is a pencil, and they have to sit down and answer some questions. That is not the way the public see it.
The minister referred to this in passing in his speech at the end of the debate, and drew attention to the fact that the complexity which

Income War Tax
has crept into the forms is largely due to the desire oi the minister to give as much equity to the taxpayer as he can. But that really does not give any hope for a further simplification. The fact that the compulsory savings are no longer to be followed, he considers, is going to be of very great assistance in this regard. Although it is going to help, I have no doubt, it comes near the end of the list of questions which have to be answered and statements which have to be made, and it does not seem to me that it will affect in simplification the whole questionnaire which each taxpayer has to answer.
Various incidents have been brought to the attention of members, and I have taken several of them up with the Minister of National Revenue. Let me cite one. In the city of Vernon an accountant, to assist in the difficulty of shortage of forms, handed some of his T-l forms to the postmaster on the understanding that another supply of these forms was on the way from Vancouver and he would have his forms replaced. These forms arrived on April 29, by which time the accountant had collected the facts and figures in regard to the cases of his clients and it was a physical impossibility for him to fill in the returns on these forms and get them in to satisfy the due date and avoid the penalty. He took the matter up in the form of a letter, I believe, to the minister. He received a reply that the penalty was mandatory and there would be no way of assisting him. If his facts are correct, this was a matter that was in no way either his fault or that of his clients. I remember, in discussing the matter with the Minister of National Revenue, he drew my attention to the fact that if in such a case the taxpayer would put in an interim return and, I presume, accompany it with a partial payment it would reduce his liability for penalty at least by that amount. But I wonder whether the taxpaying public are aware of the fact that they can avoid a portion of the penalty by filling in a partial return; or are the public aware that a letter to the department under these circumstances would suffice so far as the full penalty is concerned. That is one type of trouble which these accountants have to meet.
There is another one that came to my attention from another accountant who had considerable difficulty in completing the returns necessary for his clients and endeavouring to avoid the penalty. He makes the point that the taxpayer, if he falls short in what he ought to do, is mulcted in a penalty, but the taxpayer who has sent in by mistake too large a sum of money for his needs may have that amount returned to him one year
or two or three years after that. He argues that the government therefore has the use of that money of the taxpayer without paying interest, and he is of the opinion that this is just one of the instances in which the taxpayer is out of luck. He considers that it is not fair to those who may be endeavouring to fulfil the requirements of the income tax act.
I drew this matter also to the attention of the department and in the accountant's subsequent letter to me he says:
I note that he does not say anything about how long it takes his department to prepare the forms from the closing of the session until they are available to the public. If he would speed up the distribution of the new forms, lots of forms could be filed sooner.
I quite agree, as was pointed out to me by the minister, that in many of these cases the taxpayer is at fault by delaying the matter too long, and in many cases he delays it too long because he is not able to understand what is required of him, and then the accountant has the information from many clients lying on his desk and he cannot get the things filled up in time. He calls attention also to the fact that he reads in the newspapers that the national selective service does not consider that office help is a necessity and he has to do what he can to fill in these many forms. I continue with the letter:
If there was any truth to his statement as *to filing of these returns, I wonder why the department is still requesting information on 1938, 1939 and 1940 returns. A few 1942 assessments are trickling in, but any number of taxpayers have not yet received their 1941 assessment. I myself have received nothing since 1940. Possibly he could explain why there are no explanations attached to the additional assessments sent out on T-l general returns. No one will pay on something he does not understand, and this only means a letter back to the department for an explanation when the assessor has to look it up and prepare a reconciliation, an unwarranted waste of time for the assessor, a stenographer and the accountant who has the returns in hand and finds it necessary to request further information. According to the papers, the government officials have declared office help non-essential, so how do they expect to have the forms made out in time? Does the department intend to penalize the taxpayers the full five per cent of their assessments for late filing where they, the department, have had excess payments in hand for two and three years?
That is an amplification of the remark I made just now. I replied to the accountant and had a subsequent letter from him from Which I quote a couple of sentences:
I have just returned from Vancouver, where I spent the best pant of three days at the income tax department on various matters. While there I was advised that the 1943 returns of individuals-business returns-were
Income War Tax

not even filed, which was 'borne out by files produced. Apparently very few 1942 business forms have been assessed and the assessors appear loath to assess any particular one when asked, preferring to have them come in rotation.
With regard to the inability of the public to follow the requirements of the forms, it does not apply only to the general public, but is strikingly so in the case of agricultural returns. I have always been of the opinion that one of the reasons why so few farmers come into the income tax paying class, according to the statistics, is the fact that as they do not keep the books which a firm keeps they find it extremely difficult to supply the answers demanded of them in the questionnaire and make them fit in with the return they should put in.
I make my plea for further consideration of this difficulty, so that simplification may be arrived at which in the long run will be of great assistance to the minister in getting in returns for income tax.


Colin William George Gibson: I have not the letter that
the hon. member has been reading from, so that I may find it difficult to deal with all the points that he has raised. First of all, he dealt with the simplification of the tax forms. As the Minister of Finance has said, we can do little to simplify the forms further while our tax structure remains as it is. The department, in preparing the form, has to make provision for the numerous allowances made to ease the burden on the taxpayer, and every new form of relief granted the taxpayer must be included on the form; otherwise the taxpayer himself may not have the knowledge that he is entitled to such relief. That was brought to my attention the other day, when it was pointed out that we had not mentioned on the form that alimony payers were entitled to some relief. We have extended the relief this year granted to those who pay alimony, and I presume that this further provision will have to be added to the form. This year, while we are removing the compulsory savings feature, it remains for half the year. I conclude from that that it will also have to be provided for on the form for the coming year. That is the difficulty of the income tax department. We have had representations made to us-I think I have mentioned this before- that agricultural returns should be simplified. We had a meeting of agricultural representatives, representatives of the farm journals, the agricultural societies, the Department of Agriculture. They conferred for quite a considerable time in order to devise a simplified form that would be satisfactory to the farmer. As a result of their labours they brought in a 
form that was considerably more complicated than the one our own experts had already produced. That shows the difficulty. It is easy to criticize, but it is not easy to devise a form that contains all the information that must be included in it.
We now come to the question of the filing of the returns. Now that the tax structure has become more complicated, and there are a great many more taxpayers than in former years, many people have adopted the policy of going to an accountant to have their tax returns prepared and filed. The result has been that particularly just at the closing date for the filing of the returns the accountants find themselves flooded with work. They have far more clients coming in than they can deal with, and we get emergency calls saying, "For heaven's sake extend the time for filing returns." If that is done one year it would be expected every year. While we have endeavoured to meet the public as far as possible, and particularly in times when there have been changes in the tax structure and we have been late in preparing the new tax form, we cannot start the practice of setting a date for the filing of returns, and then extending the date when that date is reached. Where there is reasonable excuse for not having all the details of the tax return completed we have authorized the taxpayer to file an incomplete return which will act as a substitute for the final return when the full information is available. That has been done in order to avoid the incurring of a penalty through causes over which the employee may have no control.


Grote Stirling: Is that generally known?


Colin William George Gibson: I do not think it is generally known, and it is not the general practice. We do not extend that privilege to all taxpayers so that they may simply file a blank return and complete one at their leisure. There must be some reasonable excuse or a valid reason for not having the completed return filed when it is due.


Grote Stirling: Therefore the taxpayer must first of all get in touch with the district inspector and get the permission.


Colin William George Gibson: Give reasons.


Grote Stirling: Would a letter do?


Colin William George Gibson: No; we must file a form.
It has been mentioned that when we assess the taxpayer we do not always give details of the amendments that have been made in his assessment. We do give details where a change is substantial, but we realize that with the limited staff we have to-day in many cases

Income War Tax
details are not required if the change in the assessment is a dollar or two. If it is only a small amount we make the change in the assessment notice and we do not give details unless the taxpayer asks for them.


Grote Stirling: They are simply informed that they owe so many more dollars?


Colin William George Gibson: How many more dollars have been added to the income. If they want full details they are supplied.
Reference has been made to the fact that the income tax department is behind in assessing of the returns. I am sorry to say that that is true, and although we are doing everything we can to keep up to date, the very large increase in the number of taxpayers-it has increased from 200,000 to roughly 2,000,000- has created a tremendous load on the income tax department. At the same time we have not been able to secure the staffs that we require. It is necessary to secure qualified or experienced accountants, and unless we can get experienced accountants we cannot keep up with the assessing. No matter how many stenographers or clerks we have they are not able to go ahead with the assessing of the returns until they have been dealt with by the assessors; consequently we have had difficulty with regard to personnel. In many districts we have had difficulty in getting income tax premises. In some centres where we have district officers we have the greatest difficulty in securing space, and members of the staff are so crowded that they can scarcely move. These are some of the difficulties with which we have been contending, and that is the reason why practically all of our offices have fallen behind in the assessing of returns. They are certainly making every effort to pick up ground that has been lost, and as men, particularly qualified accountants, are released from the armed forces we are making every effort to secure them on our staffs so that the work in each district office can be proceeded with as rapidly as possible.


Grote Stirling: Would the minister deal with the question of no interest being paid on the amount of money the taxpayer has overpaid the government, whereas a penalty is exacted if he pays too little?


Colin William George Gibson: I understand that at one time-I do not know whether or not they still do it-the United States used to pay interest on overpayments of tax.


Harry Rutherford Jackman: Six per cent.


Colin William George Gibson: Yes, I think that was the rate. That became a very valuable form of investment, and there was nothing to prevent
a man from overpaying a tax by any considerable amount that he had available, and drawing six per cent on it. From that point of view it has not seemed to be a very wise measure. If we were keeping our work up to date, as we normally do, it would not take as long to make assessments and the taxpayer would not be without the use of his money for long periods.


Mr. TUSTIN:: I should like to urge upon the minister the necessity of seeing that the income tax forms are more simplified, particularly in regard to agriculture. At the back of the blue sheet which is attached to the farmer's return there is a paragraph which reads:
Produce raised on farm and consumed in the farm home.
The farmer is asked to estimate the amount that he takes from his farm to be consumed by his family. Another paragraph reads:
Produce used from "family garden" and small sums usually termed "pin-money" obtained by the wife, sons or daughters, by their own effort, need not be taken into account.
The other form goes on to say that the vegetable garden does not count. I have a particular case in my own riding where a family of four persons estimated that they had consumed $90 worth of produce from their farm in 1942. After making their income tax return to the district office they found themselves in this position. They were charged $500 for the produce that they had consumed from the farm, or a difference of $410. The point I should like to emphasize is this: Why ask the farmer to estimate the amount he has consumed from his farm if there is to be an arbitrary amount set? Why not tell him in the first place that he is to be charged $125 per person for the vegetables and the milk or whatever is consumed from the farm? If that is done he will know immediately. But to ask a man to estimate the amount he takes off his farm and consumes in his own household; then put an arbitrary amount, as in this case. $410 more, and then send an assessment to him and charge him interest at the rate of five per cent is not fair to any farmer, nor do I think is it fair to any person in the country.


Colin William George Gibson: Does the hon. member think the farmer made a fair assessment?


George James Tustin: I certainly do, and I have a list in my hand showing what he used off his farm. In the first place, he does not make butter in his own home; he purchased all of it. He does not kill his own meat; he purchased all of it. He keeps seven or eight hundred hens, and has for consumption in his own home all the eggs that are not salable.

Income War Tax
This form says that he need not estimate them at any cost. Yet in this case, the farmer did estimate that he used at least three dozen in his home every week, and put them in at the market price. He shows the amount of milk he used-two quarts a day, which I think the minister must admit is a fair amount. The form says that he shall estimate it only at the price for which he sells it wholesale. Well, when he appeared at the district income tax office and asked those in charge to make up a statement showing how he could possibly get 8500 worth of commodities for consumption in his own home, they took into account milk at twelve cents a quart, chicken at forty cents a pound, and so on all down the line.
There is certainly something definitely wrong somewhere. Either the form should be simplified, or some standard amount should be set for each and every person on the farm. There should be no attempt to make a fool out of a man by asking him to estimate what is used, and then, when he does it with perfect honesty, say to him, "You are all wrong; you are not even twenty per cent right."


Colin William George Gibson: But farmers do not all produce the same commodities. That is one difficulty.


George James Tustin: That is true. If the farmer knew he was to be charged $100 per person or $125 per person a year for commodities he consumed he would be privileged to consume that amount if he so desired, because he would know that he would be charged with it. But in this instance, and in every instance where the farmer has to make a return, he is asked to give an estimate. Then, after he makes the estimate, and that estimate goes to the income tax office, he is reassessed, and an arbitrary amount of, I believe, $125 per person is put on.
I urge the minister to see that this form is simplified, so that men who are honest and who are endeavouring to make their returns as farmers will not be faced with this condition.


Douglas Charles Abbott: I did not wish to interrupt the hon. member for Prince Edward-Lennox, but it did seem to me we were wandering far afield from resolution 7. I hope what has happened will not necessarily be taken as a precedent.


Joseph-Arthur Bradette: I agree with what the parliamentary assistant has said. There is no doubt that the discussion has been far afield and away from the resolution.


Mr. PERLEY:: I was going to associate myself with what the hon. member for Prince Edward-Lennox has just said. I know of

many farmers in the west who have found great difficulty in making out their forms, and evaluating the products used on the farm. Apparently no ordinary farmer can make out a proper statement, nor can any two farmers make out statements which will arrive at the same conclusion. I have had, I may say, the same difficulty.


Douglas Charles Abbott: I do not wish to rise to a point of order but while I refrained from interrupting the hon. member for Prince Edward-Lennox, because it appeared to me he was hanging his hat on the simplification of the form, I do not think the discussion should continue. The hon. member for Prince Edward-Lennox pointed out the difficulty farmers have in showing what produce they should account for as being part of their income. I understand that the hon. member for Qu'Appelle heartily endorses what has been said. The hon. member has placed himself on record, and perhaps that is sufficient.


Ernest Edward Perley: I have just arrived from a committee which is sitting this afternoon, and which has decided to sit mornings and evenings-and I hope it will decide to sit Saturdays and Sundays. It is impossible for anyone to keep track of what is going on. When I came into the chamber the hon. member for Prince Edward-Lennox was speaking on a matter concerning which I have considerable interest. I did not know whether the hon. member had covered the point I had in mind.


Douglas Charles Abbott: This discussion started when the hon. member for Yale referred to the simplification of the tax form. In doing so I believe he was in order. But to proceed from that point to develop the. difficulties of one class in the community in connection with estimating a particular type of income is, in my view, going too far, and something which should be discussed under some other [DOT]esolution, or under the bill itself.


Joseph-Arthur Bradette: The hon. member for Yale made it clear that he thought he was out of order. However, I would ask hon. members to keep to the resolution.


Gordon Graydon: With regard to resolution 7, would the parliamentary assistant indicate whether or not either he or his minister have given consideration to the problem of the widower who has a self-contained establishment?


Douglas Charles Abbott: That would be discussed under resolution 8.


Gordon Graydon: ' I do not think so.

Income War Tax


Douglas Charles Abbott: Perhaps it might come
under either resolution.


Gordon Graydon: I should think so. I believe most members from time to time have had this condition drawn to their attention, and no doubt it has come before the parliamentary assistant. What is the governing reason why a widower who must pay a housekeeper, and who has a self-contained establishment, is ruled out and finds himself discriminated against?


Douglas Charles Abbott: Well, as I had anticipated, that comes under resolution 8. However, perhaps we might discuss it now. My hon. friend will see that under resolution 8 the law at present allows a tax credit of $150 to a widow or widower with a son or daughter who is wholly dependent. But in claiming that $150 the widow or widower, as the case may be, cannot claim the $108 tax credit for the first child. That is the discrimination, if it may be so called, which has existed with respect to the widow or widower.
As my hon. friend has indicated, a number of representations have been made to us to the effect that this was a discrimination. Perhaps it was In any event, under resolution 8 it is now proposed, as the resolution states:
That, if a taxpayer maintains one of his children in a self-contained domestic establishment in which he employs a full-time housekeeper or servant, the tax credits of $80 against the graduated tax and $28 .against .the normal tax >be allowed to him in respect of the child, notwithstanding that he is entitled to the tax credit of $150 against the graduated tax in respect of that child.
As I have Said, in the past the law has been that the $150 was allowed him, not because of his status as a widower, but because he was supporting a child in a self-contained domestic establishment.


Karl Kenneth Homuth: It also means more than one child.


Douglas Charles Abbott: Yes. If the widow or the
widower had more than one child he got, in effect, $150 for the first child, and $108 for the additional children.


Gordon Graydon: And supposing he had no children at all?


Douglas Charles Abbott: Was my hon. friend raising that question, namely, that the widower or the widow living in a self-contained1 domestic establishment and who has a housekeeper, should get the $150?


Gordon Graydon: I was just inquiring as to what consideration has been given.


Douglas Charles Abbott: Where a man has no children, do you mean?


Gordon Graydon: In one of the complaints I hold in my hand it is pointed out that the man is a widower, whose wife died a short time ago, and whose establishment has been carried on. His is a fully self-contained establishment. He has had to hire a housekeeper to look after things and, in addition, he states that he is penalized, as against the single man. He finds himself in a position where he has an exemption only as a single man, instead of a position in which many people who are in the marital stage find themselves.


Douglas Charles Abbott: I apologize to my hon.
friend; I spoke too quickly. I assumed that the hon. member was speaking of a widower with children. In the case which he has cited, that would be a mode of life, as it were. The man has had married status and the exemptions which go with married status, but after the death of his wife, in effect he was in no different position from that of a bachelor who maintains an apartment or has a house with a housekeeper, and therefore he is given no special tax consideration.


Gordon Graydon: I was not clear from the letter I had in my hand as to whether he had children.


Douglas Charles Abbott: If he has children he will
receive additional relief as is proposed in resolution 8.


Karl Kenneth Homuth: Is that exactly fair? Many men in that category maintain homes simply because they want to have some gathering place for their children who have married and left the home. There is always that place for them. I feel that that type of man should receive some consideration under those circumstances. He does not maintain a home simply because he wants some place to live by himself; he maintains a home so that his children may gather there at times. There is a good deal of family complexion about that type of home.


Douglas Charles Abbott: It would be pretty difficult to give consideration in a case like that and not give it to the old bachelor who has a lot of nephews and nieces who like to gather around him in a family circle.


Karl Kenneth Homuth: There is no comparison.
The bachelor did not have those nieces and nephews; they just happened.


Gordon Graydon: With regard to the question of the simplification of forms there is one matter I should like to bring to the attention

Income War Tax

of the parliamentary assistant. This has been pointed out to me by a member of a group in a city on the west coast who have made a special effort to see what can be done to simplify the income tax form. He points out that one difficulty they have come across in their group discussions is the fact that item 17 on the income tax return asks whether or not the marital partner is in receipt of an investment income of over $660.


Douglas Charles Abbott: I do not wish to interrupt
my hon. friend; but while it may not be clear from the terms of the resolution, resolution 10 deals directly with the question of whether the wife has an income in excess of $660.


Gordon Graydon: The point I desire to
raise has nothing to do with the actual amount. My correspondent points out that in some circumstances there is no way by which the marital partner can ascertain the exact income of the other partner; and he thinks a justifiable complaint can be made about that question being asked. I simply draw the matter to the attention of the parliamentary assistant.


Douglas Charles Abbott: I suppose if the husband
cannot find out what his wife's income is he would have no alternative than to put in the form, "Unknown to me." I must confess that the point had never occurred to me, but it is well taken.


Gordon Graydon: Apropos of that, this
group which has been making a study of income tax matters held a miniature Gallup poll and found out that of those in the lower income brackets, sixty-eight per cent of the husbands did not know their wives' incomes and thirty-two per cent of the wives did not know their husbands' incomes. Of those in the higher income brackets, thirty-five per cent of the husbands did not know their wives' incomes and sixty-five per cent of the wives did not know their husbands' incomes. I only offer this as a matter of information for the parliamentary assistant. I have no recommendation to' make.


Douglas Charles Abbott: I am glad to have that information.


Karl Kenneth Homuth: When I referred to the widower who is keeping up a home the parliamentary assistant mentioned the bachelor, supposing a bachelor had an illegitimate child which he was keeping in his home, he would be entitled to exemption.


Douglas Charles Abbott: He would have to have a housekeeper.
[Mr. Graydon.J


Karl Kenneth Homuth: Depending on the age of
the child. Nevertheless the fact is that a bachelor with an illegitimate child in his home receives an exemption, while the widower who maintains a home because he wants it as a gathering place for his family, cannot get an exemption. I have no references to make.


Stanley Howard Knowles: Like some other hon. members, the hon. member for York South had to leave the chamber to attend the meeting of the banking and commerce committee, but he asked me if I would raise a point in connection with resolution 7. I understand that he has been in touch with the departmental officials about this and has been told that the matter is being looked into. As I understand it, the situation is this. A single person maintaining a self-contained domestic establishment and supporting therein, we will say his mother, is granted the status provided by this section only if that mother's income is less than $400. My colleague suggests that there seems to be discrimination as between that man and the married man whose wife's income does not exceed $660.


Douglas Charles Abbott: He does not get the $150 exemption if his wife's income is over $660.


Stanley Howard Knowles: The only point my colleague asked me to raise was the difference between the $400 and the $660. I do not suggest that the same allowance should be made widespread for all classes, but I think a single man maintaining his mother might be given the same status as a married man.


Douglas Charles Abbott: The language of the statute is that the dependent must be wholly dependent. I am informed by the income tax division that that is taken to mean if the income of the dependent does not exceed $400 per annum. I suppose under a strict interpretation of the law, if the mother had any income at all she would not be wholly dependent. There had to be some standard and I am advised that the $400 figure was fixed. In other words, a person may still be considered as a dependent although he has a private income of $400 a year.


Stanley Howard Knowles: I take it that no change is contemplated?


Douglas Charles Abbott: No change is contemplated under the present resolution.


Stanley Howard Knowles: There is one question I should like to ask under this item, with reference to tax forms. I spoke about this the other night in the general budget debate. The receipts issued by the income tax branch show the amount only in figures. I cited a

Income War Tax
case which had given the department some considerable difficulty in straightening it out, and I feel that that would not have happened if the receipt had showed the amount both in figures and in words. It may be that the work involved would be too great, but it seems to me that receipts for income tax payments might well be made up in such a way as to show the amount both in figures and in words.


Colin William George Gibson: I agree with the hon. member, but when millions of receipts are going out, if we had some, for example, for $2,222.15 and they had to be written out on the typewriter in full, it would slow down the getting out of receipts very considerably and we would not be able to get them out as quickly as we do by simply showing the figures only on the receipts. I agree that it would be preferable to show it both ways, but with the shortage of staff I do not think it is practical to adopt that method at the present time.


Harry Rutherford Jackman: How much income is a child allowed to have before it is no longer classified as a dependent, and does it make any difference whether that income forms part of the family budget or is allowed to accumulate for the child?


Douglas Charles Abbott: I am advised that the same rule is applied as is applied with respect to the mother, $400. There might be some modification in sheer infancy but, broadly speaking, that is the general rule. The child is considered as wholly dependent on the father.


Richard Burpee Hanson: Is the $400 applicable to the wife? I thought it was $660.


Douglas Charles Abbott: We are talking about
children.


Harry Rutherford Jackman: It makes no difference whether the child's independent income goes into the family budget or is simply accumulated on behalf of the child?


Douglas Charles Abbott: We do not distinguish.


Gordon Knapman Fraser: There are deductions allowed if the taxpayer has a child in a self-contained establishment and employs a housekeeper. He gets a tax credit of $80, plus $28, plus $150 for his married status.


Douglas Charles Abbott: That is covered by resolution 8. We are still on resolutiton 7, but the two really go together.


Joseph-Arthur Bradette: We are on resolution 7. I have called it carried.
Resolution agreed to
100-303i
8.	That, if a taxpayer maintains one of his children in a self-contained domestic establishment in which he employs a full-time housekeeper or servant, the tax credits of $80 against the graduated tax and $28 against the normal tax be allowed to 'him in respect of the child notwithstanding that he is entitled to the tax credit of $150 against the graduated tax in respect of that child.


Gordon Knapman Fraser: If a man has a housekeeper he is allowed a tax credit of $150, but if he is earning a salary and his wife has an income of over $660 they are both classed as single and do not get the $150 tax credit. That does not seem quite right. I think that the man and wife should be allowed that $150.


Richard Burpee Hanson: Both of them?


Gordon Knapman Fraser: Certainly.


Douglas Charles Abbott: Under the law as it stands and has stood for some time, if both husband and wife have an income, let us say the wife has the smaller income and that it exceeds $660, both then lose the $150 tax credit as having married, status. It may be arbitrary, but I assume that the justification for it is that the total income is so large that they should not have this special exemption. It is intended primarily for the spouse who is the entire support of his family.


[Stage Direction]
Resolution agreed to.
9.	That the basis of taxation under the normal tax and the tax credit against the graduated tax for a married person be limited to a married person who supports the spouse.
Richard Burpee Hanson: What does this cover?


Douglas Charles Abbott: At present the law by definition automatically allows a. married person as such to get $150 tax exemption.


Richard Burpee Hanson: Whether he supports her or not?


Douglas Charles Abbott: Yes. The husband can obtain this $150 tax credit although he may not have been contributing a dollar to his wife's support and the wife is supported by the son. This credit of $150 for a married person will go to the person who supports the spouse.


Richard Burpee Hanson: It takes it away from the man who does not do the supporting.


Douglas Charles Abbott: That is it; and as you realize, under the other section, the son would get the $150.


[Stage Direction]
Resolution agreed to.
4S24
Income War Tax
[Stage Direction]
10.	That individuals may reduce income for taxation purposes by the amount of gifts made in money to His Majesty in right of Canada if such gifts are made within the year when the income was received or within four months from the end thereof.
Gordon Knapman Fraser: Would this language, "gifts made in money to His Majesty in right of Canada if such gifts are made within the year", cover gifts of corvettes to His Majesty's Canadian navy?


Douglas Charles Abbott: No; they must be gifts to the crown.


Gordon Knapman Fraser: Outright cash?


Douglas Charles Abbott: Outright cash. As I indicated in answering a question by the leader of the opposition, this provision is really intended to give relief to a marginal case where the wife's income is, let- us say, 1665 a year, and as a result of having that $5 over S660 her husband has to pay an extra tax of, say $200. Under these circumstances there is no benefit to the husband and wife in having that extra- $5, and under this provision she can make a donation of $5 to the crown and the husband will then retain his exemption as a married man.


Richard Burpee Hanson: I suggest that that is a very funny formula. It is some amelioration. I suppose it is a difficult situation to meet by draftsmanship.


Douglas Charles Abbott: It was an extremely difficult situation to take care of.


Richard Burpee Hanson: If I give to His Majesty in right of Canada a Red Cross ambulance, do I get the benefit of this provision?


Douglas Charles Abbott: Perhaps I can illustrate it best by taking the case of a married woman who has an income of, say $1,000, and whose husband happens to have a very large earned income. As a result of the S340 of income which the wife has over the $660, her husband may have to pay a tax very substantial!}' in excess of the $340. It was felt that that was ' unfair, and) we have had a number of representations to that effect.


Mr. HANSON (York-Sunbuiy):: It is unfair.


Douglas Charles Abbott: In a number of cases the wife would convert her resources into cash, leaving her without taxable income, but where her income was received under a will or trust that might not be possible. It is now provided that if the wife wishes to do so she may surrender to the crown the amount of income she receives in excess of $660, and in that case her husband will be taxed as a married person

and get the tax credit and be taxed at the rates that apply to a married person. I think this is a fair and reasonable and justifiable concession to the class of taxpayer.


Richard Burpee Hanson: And the wife would escape taxation altogether?


Douglas Charles Abbott: She would pay roughly $300
in taxation.


Richard Burpee Hanson: I have no doubt that that is the objective, but this resolution is wider in scope than that. I put this to the minister. Let us say that I give $1,000 to His Majesty, and in the early stages of the war a good many people did donate whatever amount the army said was necessary to buy an ambulance. Under this resolution I could get a reduction in my taxation by the amount of that gift. Is that the law now?


Douglas Charles Abbott: I wonder if my hon. friend would just repeat his question? I was having a word with the deputy.


Richard Burpee Hanson: I understand that the objective is to give relief to the husband and wife where the wife's income is just a little over $660.


Douglas Charles Abbott: Primarily to give relief to the husband, or to give joint relief.


Richard Burpee Hanson: It gives relief to both, or it should at all events. But the scope of this resolution is wider than that. It is not limited at all. As I read it, any individual may reduce his income for taxation purposes by the amount of the gifts he made to His Majesty in the right of Canada if the gifts "are made within the year when the income was received or within four months from the end thereof." This is new law.


Douglas Charles Abbott: That is correct.


Richard Burpee Hanson: What was the position with respect to gifts before? Was there any allowance made?


Douglas Charles Abbott: They would have to be included under charitable donations and be subject to the limitation of ten per cent.


Richard Burpee Hanson: That clears my point up.


Grote Stirling: Under this wording suppose somebody makes a patriotic gift such as was suggested by the hon. member for York-Sunbury. He might give it in the form of a deduction from his capital; yet under this phraseology he would be allowed to reduce his taxable income by the amount of the gift he made in that year.


Douglas Charles Abbott: That is correct.

Income War Tax


Richard Burpee Hanson: That is fair enough too.


Stanley Howard Knowles: Resolution 10 represents a provision which has been drafted to take care of an anomaly which has developed in connection with the situation of a man and wife both having earned income. There is another anomaly in the case of a man and wife both having earned income which this provision does not take care of, and which I should like to bring to the attention of the parliamentary assistant.
I may say that we do not seem to be getting along very well this afternoon; we have made a large number of suggestions, but I am afraid our batting average is very poor.


Richard Burpee Hanson: You mean you do not get any concessions. You never do.


Stanley Howard Knowles: None of our suggestions has been accepted yet to-day. I hope we can change the rule. I realize that most of the suggestions we make one year are accepted the next year, but let us get this one this year.
Let me state the case to the parliamentary assistant in concrete form. Here is the case of a man and wife, both of them medical doctors; and the parliamentary assistant knows that medical doctors are needed in this country and should be encouraged to carry on their practice.


Douglas Charles Abbott: My own doctor is in that position; his wife is a doctor.


Gordon Graydon: Which one do you go to?


Douglas Charles Abbott: I said, my own doctor's wife is a doctor.


Stanley Howard Knowles: The purpose of the provision that a married lady may have earned income of any amount-is not that the case; at least it may go over $660, anyway, without its affecting the married staus of the husband- is to encourage them to work. Now, put the two together. We need doctors. The general desire of the government is to encourage married women to work. These two things add up to this, that the government, should encourage lady doctors to practise their profession. In the case I refer to

and maybe my hon. friend's doctor's wife is in the same position-here is the situation. The wife, who is a practising physician, has, as a great many doctors have, her own clientele and receives her fees individually from her patients. Because she receives her income in that way as fees from patients and makes over $660, her husband is put on a single status, on the ground that what she receives is not wages or salary, but something else.
As I understood it, the reason for drawing the line which was established was to distinguish between earned income and unearned income, such as invested income from various sources. But take again the case of the lady doctor. If the person to whom I refer was working for a clinic, supposing the clinic consisted of only two or three doctors and the fees were paid to that clinic as such; if she were on salary, even though she received more than she gets now, that would be treated as wages or salary and her husband would be given married status.
That is true not only for married lady doctors, but for married nurses. I think I am correct in this, because I have been in touch with the Minister of National Revenue about it, and I have his letter to this effect: if a married nurse goes on to the staff of a hospital and receives a monthly salary, no matter whether it exceeds $660 a year, her husband is allowed a married status, but if the married nurse takes special cases and receives her fees individually from the patients, either in hospital or in the home-and I put in by way of parenthesis again that we need nurses and that the government is anxious to have these married nurses practise their profession wherever possible-in that case the husband is forced to take a single status if his wife makes over S660. For the life of me I cannot see the reason for the department sticking to that technicality. The letters I have seen, both those addressed to me and copies I have had of letters which have gone to people who are affected by this ruling, simply say that the fees a married lady, be she doctor or nurse, receives on special cases are fees, not wages or salary as defined by the act, and that therefore the husband cannot have a married status. But it seems to me that this business of applying a rule and sticking to the line has been carried a little too far in this case; bearing in mind that the government time and again has said that one of the things it takes into consideration in formulating tax policy is its desired ends, bearing in mind that one of the ends is to encourage doctors and nurses to practise their respective professions, I feel that this line of discrimination should not be drawn, and that we should get away from the practice the parliamentary assistant has followed thus far of only receiving our suggestions and filing them; I hope something will be done with this suggestion.


Douglas Charles Abbott: On that point, this was a piece of emergency legislation, and it was introduced because it was found that we needed women workers in the factories pretty badly and for some reason or another they were not willing to go and work-per-
Income War Tax

haps we cannot blame them-if it meant that their husbands were going to be penalized by a somewhat higher income tax; they would stop when they got to $660 a year. So that on grounds of expediency, if you will, this measure was introduced last year. Incidentally it would appear to discriminate against the lady doctor, for instance-


Stanley Howard Knowles: And the married nurse.


Douglas Charles Abbott: -and the married nurse. But my view is that we probably should not have had it in the legislation at all, on the strict ground of principle. Nevertheless we have had to put it in so as to ensure the services of these workers. I will bring the remarks of my hon. friend to the attention of the minister, but my belief is that the principle should not be extended.


Stanley Howard Knowles: This is not a case of
intimidation, but I want to give the actual case in human terms of two doctors I know. The lady in question has indifferent health; it has been touch-and-go with her whether to continue in practice or not, and I am afraid that this may be the deciding factor. I do not say it is the whole cause which may lead her to discontinue her practice, but in the situation as it has been, the considerable difference which it makes to their total tax may be the deciding factor. If that is the case with the married lady doctor, I imagine there must be a good many cases similar to that so far as special nurses are concerned, because special nurses are in a little different situation from that of the lady doctor who has her office and an established practice. A special nurse might take cases or she might decide not to do so, because she would be in exactly the position described by the parliamentary assistant with respect to war workers. Once she gets up to $660 she may take the view that working will result in a loss rather than in a gain to her and her husband. She may decide that there is no point in doing it. We are dealing with human situations. The parliamentary assistant has admitted that this is a matter of expediency and I cannot see any sense in drawing the line where it has been drawn. I hone that when the parliamentary assistant takes the matter up with the minister and his officials they will give favourable consideration to my representations.


Harry Rutherford Jackman: I had hoped that the parliamentary assistant, who is new to his position, would bring a fresh point of view to bear upon it and not so easily succumb to the chill atmosphere, the love of theory and of easy administration, which to my mind has
permeated both these departments for some considerable time now. There is nothing anomalous about the situation mentioned by the hon. member who spoke before me. No wife will take on work in any field, whether in home nursing, in medical practice, or in a munitions factory if it will have such an effect on the joint income of husband and wife that the family as a unit will secure no return from her efforts. That situation will obtain whether in war or in peace, and this committee is not very much concerned with the theory of taxation as suggested by the parliamentary assistant. The question is whether iwe can get goods and services produced for the Canadian people; and in my opinion, instead of being bound by some slight technicality, as the department is permitting itself to be bound at the present time, the parliamentary assistant should take a broader view. Surely he is allowing himself to succumb to a technicality. Even if the whole rule were changed a year or so ago, after insistence on the part of the opposition, being finally adopted by the administration, even if it were changed as a matter of expediency, I believe the expedient is a sound one; even though it may be against some theory of taxation, it is one .which should be embodied as a principle of taxation under the laws of the country and carried into the post-war period. Otherwise we shall find our taxation laws keeping goods and services from being produced for the Canadian people. I maintain that the taxation laws should be made for the people and not the people for the taxation laws. The thing is entirely unfair, and I am not content to have the parliamentary assistant say that he will carry our grievance to the minister and perhaps obtain some redress. I simply wish to reassert what has been previously said, that suggestions made in this house one year, or two or three years ago, have been pigeon-holed and filed by the administration, and finally they are brought out as amendments to the income tax act, but long after the necessity for them has made itself felt-and, as my hon. friend says, on the eve of an election, although I do not think that refers to this particular case. Here we have an urgent need for more nurses in the field, more lady doctors, greater production of all types and more services; and yet the government is adamant about the matter, although it merely carries out an expedient which it adopted in a previous year and which, I submit, should be put into the form of a principle applicable throughout our taxation in Canada, in war time as well as in peace.

Income War Tax


Richard Burpee Hanson: What is the objection to going the whole way?


Douglas Charles Abbott: We want more workers in the plants. I suppose, if there are not enough nurses or lady doctors we may have to add additional financial inducements to get them, but somebody else will have to pay the taxes that they do not pay.


Harry Rutherford Jackman: Not at all. That is where the parliamentary assistant is wrong. He says that somebody else will have to pay the taxes; nothing of the sort. The money will not be earned because the goods will not be produced and the services will not be rendered.


Douglas Charles Abbott: My hon. friend takes a lower view of the professional classes than I do.


Harry Rutherford Jackman: I have the floor for the moment. These goods will not be produced, nor will the services be rendered because it will not be worth a person's while. It is no use advancing theories about morals and practicality. People must have some inducement. The minister himself said so. Why does he remove the compulsory savings? It is not to remove taxation at all; the object is that people shall have money. And they must have it in their pockets. That is the only effect which the removal of the compulsory savings provision will have so far as the people are concerned. In this case no one will pay the tax, because the value of these goods and services will not be created and therefore there will be no tax and no increase in the standard of living for the people. It is this sort of thinking that keeps the country behind, and it is high time that the income tax department and those who are supposed to be dictating the laws of the country in that regard, or presenting them to us for our consideration, decided to listen to what members of parliament have to say, speaking from their experience.


Douglas Charles Abbott: I am all for lower taxes, but I think it is a little too early to go at it too hard.


Harry Rutherford Jackman: I am asking the parliamentary assistant a question. If these people do not work, what will happen? We had it from my hon. friend that this is a definite question, from a practical case which he brought before the committee, of a nurse who, if her bus-band is reduced to single tax status, will not find it worth while. People do not work without making some sacrifice, and they must be given a reward for working in war time just as well as in peace time. The parliamentary assistant said that someone else will pay the taxes. 'If these people do not work, for the reason that there is no incentive for them to work by reason of the effect which this taxation will have, is somebody else going to pay the extra taxes?


Douglas Charles Abbott: Yes. Someone else is going to pay the taxes. We know what our budget will be. I do not believe that a concession of $150 to a married woman, or two per cent in the tax rate, will prevent any self-respecting doctor or self-respecting nurse from working under existing conditions when the country needs their services. My hon. friend may think so, but I do not.


Harry Rutherford Jackman: The parliamentary assistant does not understand much about life.


Douglas Charles Abbott: I think I understand as much as my hon. friend does.


Harry Rutherford Jackman: If a lady doctor or a lady nurse goes out she will have to get someone to look after the house. There are always expenses that must be incurred in earning income. I know situations where people have had to get someone else to look after the children. A woman may have left her profession for a few years and now decides to answer the call for nurses or doctors, but if there is absolutely no monetary incentive for her to do so she may not feel it worth while. I do not see what objection there is from the point of view of administration.


Richard Burpee Hanson: Strange as it may seem to the parliamentary assistant, human nature is very much as suggested by my colleague. Not many weeks ago I had an illustration of a lady residing in this city, who was a competent stenographer and who had an opportunity to take a position with the wartime prices and trade board, shall I say-M have forgotten exactly. She was in receipt of a substantial dependents' allowance because of the service of her son. She was in a quandary to know whether she should take the job and lose the dependents' allowance or not. I tried to figure it out mathematically to show that she would be better off, but she said, "What about the taxes I have to pay if I take the job? I can sit back quietly and live on the dependents' allowance, or I can work eight hours a day for the government and have them take from me so much out of my pay cheque-so much deduction for this, so much for deduction for war saving certificates, and what-not." She
Income War Tax

said, "I had better be an idle fool." I tried to controvert that frame of mind. It was a frame of mind. I am not sure that I was successful. Therefore there is something in what the hon. member for Rosedale has said. The parliamentary assistant cannot just toss it off by saying that people will be patriotic. People want an incentive. I think he will recognize that.


Douglas Charles Abbott: Yes, I recognize that. My contention is that the incentive is not completely removed.


Mr. NOSE WORTHY:: I am sorry that I
missed a part of the discussion. Do I understand that resolution 10 has a provision whereby an individual may make a gift of a small sum to the government in order to avoid paying a larger sum?


Douglas Charles Abbott: The hon. member's colleague, the hon. member for Winnipeg North Centre, is, I think, fully aware of the purpose of this resolution. It is to enable a wife, which is a typical case, to make a gift to the crown of the amount of income she has in excess of $660 in order to prevent her husband from losing the benefit of the tax rates applicable to a married person. In other words, it may happen that a wife whose income happens to run over $660, say $665, may involve her husband in the payment of some $150 or $200 additional tax. It was felt that was unfair. The wife, of course, could obviously correct that by selling something or by reducing her income to $660. It was felt that it was unreasonable to expect that sort of thing to be done.


Hugh Boulton Morphy: Is there anything to prevent a taxpayer from making a small donation to the government that would get him in a lower income bracket?


Douglas Charles Abbott: But I assume he would
derive no benefit from that.


Stanley Howard Knowles: I should like to call the
parliamentary assistant's attention to the language he just used in referring to what is now the government's own proposal. He said the government felt that what resulted from the working of the law was unfair. Because it was unfair the government has brought in this adjustment; and yet when we on this side bring up points which we feel are unfair the parliamentary assistant says we are trying to get concessions, trying to stop people from doing their patriotic duty and so on. I suggest to the parliamentary assistant that he take a more reasonable attitude. We are

making our appeals in the spirit of the third consideration the Minister of Finance gave to this house in his budget speech, that these high tax rates have brought out certain anomalies, certain cases of injustice, and so on. All we are doing is bringing to the attention of the administration some that they have not yet seen, and we urge that, if it cannot be done on the floor of the house, the department give some further favourable and reasonable consideration to these requests.


[Stage Direction]
Resolution agreed to.
11.	That payment by an employer to an employee upon retirement, other than a payment out of a super annuation^or pension fund or plan, if the Minister of National Revenue is satisfied that such payment is in recognition of long service, be deemed to be income of the retired employee over a period of five years rather than income in the year when received.
Harry Rutherford Jackman: I think this resolution
is satisfactory as far as it goes and represents an improvement in what existed before. Nevertheless, if an employee, let us say, were to receive $5,000 or, in some cases $10,000 as a retirement allowance in a lump sum, which, I presume, is to keep him for the rest of his life, it will come into only five taxation years, not over the period of his whole life expectancy which may be fifteen or twenty years. I am wondering why the department is not taking this sum, say $10,000, and spreading it over his life expectancy. If he does not live that long I presume some adjustment could be made in the final year On the other hand, unless the employee receives it for a period of service the period in which it will be taxable has no relativity to the length of time he took to earn that amount. Why does the department fix the period at five years, which is by no means the period contemplated by the employer or the employee to receive the benefit of the superannuation fund?


Douglas Charles Abbott: If I have understood my hon. friend's inquiry correctly, under section 3 (c), as he is aware, where payments are now made out of a superannuation fund or a plan or a lump sum payment-maybe I had better read the section:
Any payment cut of any superannuation or pension fund or plan, provided however that in the case of a lump sum payment out of any such pension or plan which is paid upon the death, withdrawal or retirement from employment of any employee or former employee in full satisfaction of all his rights in any such fund or plan, one-third of such lump sum shall be deemed to be income.
That is the rule where it comes out of an established superannuation fund or plan, but a good many firms do not have any established

Income War Tax
regular superannuation pension or plan and on the retirement of an old employee they make a lump sum payment, not perhaps with the view that this payment will support him for the rest of his life, but rather in the nature of recognition of his service.
Mr. HANSON (York-Sunbury) * A gratuity.


Douglas Charles Abbott: In the nature of a gratuity. Lip to the present that would be taxable in its entirety in the year in which it was paid. The proposed provision would spread the payment over five years.


Richard Burpee Hanson: I suggest to the minister that the scientific method of handling this amount is the expectancy of life. That is easily ascertained. Five years is purely arbitrary. I would press strongly for the adoption of the principle of the scientific method of doing it.


Douglas Charles Abbott: I shall be glad to look into that. A good many of these payments are made to old or elderly men, and if they are over a certain age the mortality table does not apply.


Harry Rutherford Jackman: It always applies.


Douglas Charles Abbott: They may get it all in one year.


Richard Burpee Hanson: He would have to be pretty old to get it all in one year.


Harry Rutherford Jackman: They are retiring people at sixty-five now.


Richard Burpee Hanson: And they are going to retire them at sixty.


Harry Rutherford Jackman: You would be getting from four to ten times the amount by reason of this rule.


Douglas Charles Abbott: If the committee would care to have this resolution stand I am satisfied. I see some objections and some advantages to the suggestion.


Richard Burpee Hanson: Do you not see some merit in the suggestion?


Douglas Charles Abbott: Yes; I have indicated that I see some merit in it.


Harry Rutherford Jackman: The parliamentary assistant has gone so far with us; I wonder if he would grant that there is something in the suggestion that life expectancy is the principle that should be taken. A man may be employed in a business that has folded up, and he may be given a substantial amount in lieu of his expectation with the company, but he may still be a young man of only forty-five or fifty years of age. There are cases like
that. Why cannot we frame something which at least has a relation to the life expectancy of the man?


Douglas Charles Abbott: I shall be very glad to give
consideration to that. I can see, of course, where certain men would get advantages. An elderly man whose life expectancy was three, four or five years would have an advantage over a younger man whose life expectancy may be twenty years.


Harry Rutherford Jackman: I accept the amendment of five years as far as it goes.
Resolution stands.
At six o'clock the committee took recess.
After Recess
The committee resumed at eight o'clock.


Joseph-Arthur Bradette: We are on resolution 11. Mr. ABBOTT: Stands.
Resolution stands.
12.	That an employee be allowed to deduct from income the amount, not exceeding three hundred dollars per year, paid by him to an employees' superannuation or pension fund or plan approved by the minister with respect to service rendered previous to the taxation year when he was not a contributor to the fund or plan.


[Stage Direction]
Resolution agreed to.
13.	That a member of a trade union be allowed to deduct from income the amount, not exceeding three hundred dollars per year, paid by him in the form of union dues to a superannuation or pension fund or plan approved by the minister.
Resolution agreed to.
14.	That the refundable portion of tax in respect of which a taxpayer is entitled to repayment be refunded to a taxpayer when he reaches the age of sixty-five years in the ease of a taxpayer whose income is less than five thousand dollars.
Resolution agreed to.
15.	That, in respect of the taxation year 1939 and subsequent years, the time for serving a notice of appeal upon the Minister of National Revenue, in the case of members of the armed forces overseas, be extended to one year after the date of mailing of the notice of assessment or for such further period as the minister may allow.
Resolution agreed to.
[Stage Direction]
Income War Tax
[Stage Direction]
16.	That any amount paid pursuant to a decree, order or judgment made in an action or proceeding for divorce or judicial separation, or pursuant to a separation agreement, as alimony or other allowance for the maintenance of the recipient thereof or of children of the marriage, be allowed as a deduction from income of the payor and that he be not entitled to tax credits in respect of the wife or children to whom or on whose behalf the payments ar* made, and that the present provision whereby he is entitled to deduct from tax the tax paid by his spouse or former spouse on the amount so paid as alimony or other allowance be repealed.
Resolution agreed to.
17.	That exemption from taxation be granted to any limited-dividend housing corporation organized to construct, hold and manage houses built as a low-rental housing project and subject to conditions as to limitation of dividends set out in or pursuant to the National Housing Act, 1938, or any subsequent act of the parliament of Canada designed to encourage the building of houses or the providing of adequate housing accommodation at low rentals.
Resolution agreed to.
18.	That with respect to returns filed in 1944 and subsequent years the penalty for failure to file a return be reduced to a penalty of 5 per cent of the amount of the tax unpaid at the date when the return was due with a minimum penalty of $5 and a maximum penalty of $500.
Resolution agreed to.
19.	That the deduction in respect of tax paid to Great Britain or any of its self-governing dominions or dependencies or any foreign country for income tax in respect of income derived from sources therein, be made from the tax other than the refundable portion.
Resolution agreed to.
26. That the right of the minister to reassess or make additional assessments in respect of any tax year be limited to a period of six years from the date of the original assessment, except where the taxpayer has made any misrepresentation or committed any fraud in making his return or supplying information under the act
Resolution agreed to.
21.	That the interest payable on taxes not paid when due be reduced from five per centum to four per centum.
Resolution agreed to.
22.	That losses sustained in 1944 and fiscal periods ending therein and all subsequent periods by any person carrying on a business may be deducted from profits derived from the business either in the year immediately preceding or in the three years immediately succeeding the taxation year.
Resolution agreed to.
23.	That expenditures in respect of scientific research directly or indirectly related to the taxpayer's business, whether of a current or capital nature, be allowed as a deductible expense, in the case of expenditures of a
fMr Abbott.]
current nature, in the year when the expenditures are made and, in the case of expenditures of a capital nature, over a three year period commencing with the year of expenditure.
Mr. COLD WELL:: I have no objection to
proper appropriations or concessions being made for scientific research, that is a field in which we as a parliament, have been negligent to some extent. We have not encouraged scientific research in this dominion as we should have done.
Particularly I would say a word on behalf of our own national research council. As I said the other day, many young scientists who enter the employ of the national research council find the salary conditions unattractive. As hon. members know, the salaries paid are comparatively low. It seems to me that we might well consider a very much larger appropriation for the national research council, particularly to maintain the services of scientists who enter its employ.
I have put in a plea of this kind for several years, and I wish to do so again to-night, because this is a new country with undeveloped resources. In time of peace, before the war, we had resources which were not used as they might have been, because we had not made the experiments which would have enabled us to use them. I am thinking at this time of the manufacture of alcohol for industrial purposes from field! grains, and the distillation of oil and gasoline from coal, which has been developed to such an extent in Great Britain and some of the European countries. I make this plea again to-night, and say that we should not be bonusing private corporations to do this research work. We should be doing a great deal of it ourselves, through our own research council. It seems to me that we have been thoroughly negligent in that field.
The same applies to the field of medicine. The hon. member for Portage la Prairie brought before us very forcibly the other day the necessity for further inquiries into cancer cures. A great many scientific proposals are being made at the present time, and we are not using the facilities we have, nor are we building up facilities to inquire into such proposals, and to develop them for the good of the Canadian people. We should be urging the Department of Finance and the government to appropriate a much larger sum of money for research in Canada, and to build up, not only on a national but also on a regional basis, research enterprises directly responsible to the government., which would assist us in developing our resources, and in the use of many of the products we have not been able to use in the past.

Income War Tax


Richard Burpee Hanson: When the committee rose at six o'clock we were at resolution 11. I entered this chamber at three minutes after eight o'clock, having been detained temporarily in the elevator, and I find that we have jumped to resolution 23. I suggest thait that is railroading.


Some hon. MEMBERS:: No, no.


Richard Burpee Hanson: I object to it; you can call it what you like.


Joseph-Arthur Bradette: Order.


Richard Burpee Hanson: They were
passed as fast as they could be called.


Joseph-Arthur Bradette: Order. If I may be
allowed, as chairman, I must, object to the term "railroading."


Richard Burpee Hanson: I withdraw that, then. But I will say-


Joseph-Arthur Bradette: May I explain what
happened? I was in the chair at one minute to eight o'clock. The bells rang at eight o'clock. At one minute after eight o'clock we had a full quorum, and I called each resolution in order. I called all of them, and all were passed with the exception of resolution 11, which was allowed to stand. However, I did call all the other resolutions, one by one, up to resolution 23, and they were passed by the committee.


Richard Burpee Hanson: Mr. Chairman, you called them one by one and declared them carried before the members were really here to go to work.


Mr. MACKENZIE (Vancouver Centre):: No; there was a quorum.


Richard Burpee Hanson: Well, I
wish to speak to resolution 15, which refers to notice of appeal from an assessment. I should like to make some observations with respect to that resolution, and I would ask the committee to revert to resolution 15.


Douglas Charles Abbott: That is agreeable.


Joseph-Arthur Bradette: If it is the pleasure of the committee, we shall revert to resolution 15.


Richard Burpee Hanson: Thank you, Mr. Chairman.


[Stage Direction]
Resolution agreed to.
15. That, in respect of the taxation year 1939 and subsequent years, the time for serving a notice of appeal upon the Minister of National Revenue, in the ease of members of the armed forces overseas, be extended .to one year after the date of mailing of the notice of assessment or for such further period as the minister may allow.
100-304J
Richard Burpee Hanson: Under the provisions of the Income War Tax Act, if a taxpayer is dissatisfied with his assessment, within thirty days he serves notice of appeal directed to the Minister of National Revenue. That is not just the ordinary notice of appeal that one visualizes in connection with court proceedings. It is not only a notice of appeal; it is a statement of fact, and one has to incorporate with that the grounds of his appeal. In other words, it is equivalent to a factum on appeal, in the appeal courts of this country.
I am not objecting to that very much, because while it may have to be done rather hurriedly, there is a provision for a subsequent and fuller statement of facts and other grounds which may be submitted at a later stage. What I object to is that the notice of appeal, under the procedure laid down in the statute, is from Caesar to Caesar. It is not in accordance with the principles of British justice.
Here we have an assessment made by a Minister of National Revenue. That, of course, is notice to a taxpayer as to his position with respect to his income tax return as filed. Unless he takes action, of course that automatically goes into effect, and he is bound by the terms of the assessment. Should he be aggrieved, either on a point of fact or on a point of law, it is his inalienable right, under every principle of British justice, that he should have an appeal. The statute recognizes the principle, but sets out what I consider to be a non-British system of appeal. You appeal to the man who was your judge in the first instance, and you appeal on the same set of facts. Unless there has been a clear omission on the part of the taxing authority in the first instance, you appeal to the same taxing officer who previously assessed and judged. That is not an appeal at all. If it ended there it would be disastrous. As far as I understand, there is no opportunity to argue the appeal before the appellate court, if you can so call it; that is the minister. You are judged on the ' statement of facts and the grounds for appeal which you file in writing. As I said before, it is an appeal from Caesar to Caesar. That is bad in principle. If I have adequately stated the principle for which I am contending, I am sure the membership of this committee will agree with me.
I object that you are appealing to the tribunal which has already judged you, which has already imposed an assessment upon you.
It is not an appeal except in name. It is not even another trial, because there is no opportunity, except in the written submission that has to be made rather hurriedly, to argue your case on appeal. I say that to have that kind of appeal is a travesty on justice.
Income War Tax

Fortunately the administration of the day provided an additional system. When the minister gives his second decision, which he does ex parte, and' refuses the appeal-I assume that is done in 99-9/10 per cent of the cases- there is a provision that the appellant may file notice of dissatisfaction and ask that the case be set down for hearing before the exchequer court. I should like to know just how many appeals the minister has allowed.
I am going to give the minister a constructive suggestion. I have already intimated that I do not consider this to be an appeal at all. The appeal ought to be to a judicial body of some kind. I have discussed this matter with more than one person and have come to the conclusion that the appeal should not be to the Minister of National Revenue. He has already judged the case on the same material. The appeal should 'be to an independent body, judicial in character, which would have the right to hear the parties to the appeal, including the crown. 'In my view this body should consist of a judge of a high court with the necessary character and ability and capacity. He should be surrounded with what in shipping law we would call nautical assessors; that is, he would have one or more chartered accountants, men who were versed' in>
income tax law and who understood the principle of the income tax structure.
The appeal would be to a body which would be receiving de novo the proposals of the appellant and viewing them dispassionately in the calm light of the facts and the law applicable thereto, and in accordance with the allegations set out in the factum filed by the appellant. Of course consideration would also be given to the right of the crown to reply in writing and to have the matter argued. That is the only way by which I can see that we would have a proper appeal. To-day the position is really a travesty on justice. It may be that that is too strong a term- to use. There 'is no personal reflection on the minister, as he will understand, and if he objects to the term I will withdraw it. But to me it is not an appeal at all. It is not fair to the subject whose rights are in question. It is a loaded court. A decision has already been reached on the same set of facts that will be before the appellate jurisdiction. I think all I have to do is to state the facts and this committee will agree that we ought to set up a new jurisdiction this session to hear these appeals. I believe that if the minister will consult with his officials in the income tax division he will find that there is a volume of opinion there to support the position which I take.
I do not see how the provision can be defended. I cannot recall having discussed
this matter in parliament before when the provisions were put there. If I were in the house and did not do so, I would say that I was recreant in my duty as a member of this house in allowing that sort of thing to go on the statute books. The only parallel I can find is in the customs department. In days gone by I used to have a considerable experience in connection with customs assessments and what-not, and I would appeal from the decision of the commissioner of customs to the minister of customs. I can remember only one case in a long line of cases that I handled before becoming a member of this house where the minister of customs reversed the decision of the commissioner of customs; I was successful only once in a series of cases.
You have to have such an overwhelmingly strong case that it would be a denial of justice to do otherwise than to grant the appeal. That is the only parallel I can find in the laws of Canada. I am not suggesting that the minister does not give some consideration to these appeals, but I wonder just how much consideration he does give. Does he sit down calmly with his advisers in a judicial atmosphere and consider the merits of these appeals? I am going to ask the Minister of National Revenue to tell us how many appeals have come before him since he has been minister of that department. I am going to go farther than that and ask him how many appeals have come before the department since this procedure was placed on the statute books and how many have been allowed.
Why is it that the appellant has not the right to be heard? To me the very essence of an appeal is the privilege that goes with it for the appellant or his counsel to state his case and argue it, as he would before a court of justice. Otherwise it is just going through the motions and form of an appeal. I suggest that in a democratic coufitry like Canada that is not good enough. I hope I have not overstated this case because I do not want to do anything like that. I am arguing now for the revision of the procedure relating to appeals.
Let us have a real appeal from the decision of the minister. The only analogy I would draw is an appeal from the judgment of a trial court. To appeal to the judge of a trial court against his own decision would be to me just so much futility. Let us have a real appeal, and I suggest a method which commends itself to my judgment.
There may be other methods that are perhaps better. Why should there not be an appeal direct, we will say, to the exchequer court of this country from the original assess-

Income War Tax
ment? It is not easy to make an appeal. You have first to put up security for costs in the sum of $400. That will prevent frivolous appeals. I suggest that that is a substantial sum to put up for security for costs in an appeal. In the ordinary appeals in my part of the country from the judgment of the trial court of king's bench to the court of appeal you do not have to put up any security for costs. I realize that if there were not something in the nature of security demanded there might be all kinds of frivolous appeals in the hope that perhaps some of them would stick and the appellant might win. They would incur no risk, and it would cost them only their out-of-pocket expenses. But here you have to put up $400 as security for costs when you give your notice of dissatisfaction with the assessment after the minister has formed his own judgment. That is a substantial sum. It certainly prevents frivolous appeals.
I do beg the minister to give consideration now, at this session of parliament, to reforming the law-and reform is long overdue- so that there shall be an appeal that will be in fact an appeal, to the end that justice may at least have a chance to function. I do not want the minister to take any wrong interpretation from that statement. He is a lawyer, and those of us who belong to the legal profession know that you cannot have a real appeal to a man who has already decided the matters at issue. What kind of appeal is that? It is just a pro forma appeal. It is not an appeal in fact at all or in essence. We ought to have something better than that in this country.


Douglas Charles Abbott: The worst you can say of
it is that it is a piece, of waste motion.


Olof Hanson: Why should we have to go through empty motions and forms? I am glad that the parliamentary assistant has made that remark because I think his mind is following me sympathetically.


Douglas Charles Abbott: I did not say that I agree
with you. I said that the worst you could say of it was that it was a bit of waste motion.


Richard Burpee Hanson: That is
praising it faintly.


Mr. MARTIN:: And condemning it forcibly.


Richard Burpee Hanson: I appeal
to the hon. member for Essex East if I am *ot absolutely right.


Paul Joseph James Martin: I agree with you.


Richard Burpee Hanson: I am
delighted to hear that response. I should also like to get some response from the members on the treasury benches. I appeal to the Minister of Fisheries, an eminent lawyer, who *has no doubt practised in the high courts of his native province, if he does not agree with me.


Mr. BERTRAND (Laurier):: I am sorry,
but I came in too late to hear the hon. gentleman's argument.


Richard Burpee Hanson: I am sorry, too. I do not want to repeat the argument just for the minister's benefit, but I am sure that if I did I would have a sympathetic ear. I see the Minister of Labour looking at me across the way. He has been following me very intently and I am satisfied that he is 100 per cent with me. He is not a lawyer, but in most things he has a large share of common sense. I am going to pay him that compliment, making some reservations, of course.
To come back to my thesis, I earnestly implore the Minister of National Revenue to wipe out what I think is this blot on the administration of the income tax laws of this country. Eventually you get to the exchequer court, but you have first to go through such a lot of empty gestures as the parliamentary assistant has suggested. I want to see a real appeal put on the statute books. It is the right of a citizen to have an appeal. Let me go farther and say that it is a principle of law that the crown has no right to tax the subject unless by express terms in a statute. That is something we have retained since the days of Magna Charta. If there is any doubt about the right of the crown to tax the subject, the crown loses; the benefit of the doubt is given to the subject. But our taxation legislation is continually shifting the burden from the crown, which seeks to impose the tax, on to the subject to show that he should not be taxed. That is not the true principle of taxing legislation. What I have just said is really elementary and will be found in any work on the interpretation of statutes.
I ask the minister to give consideration to the important subject that I have brought up to-night, which it has been in my mind for some time to do, and I ask him that before the bill to be founded on these resolutions is introduced into this house he give consideration, and adequate consideration, to the proposals I have made to do away with what I believe to be a false kind of appeal and give us a real appeal in law. I am sure that any other jurisdiction, if it were brought to the attention of the people of this country,
4S31
Income War Tax

they would be shocked by the present kind of appeal. I earnestly request the minister to give consideration to what I have said. I believe that with his sense of justice and equity he will agree with the proposal I have made here to-night.


Colin William George Gibson: I am very largely in agreement with much of what the hon. member for York-Sunbury has just said. I do not agree altogether. He said that at present the appeal is to a man who has already decided the matter in issue. Theoretically that may be so, but in ordinary practice the assessments are made in the district offices and, while made in the name of the minister, they do not in the ordinary course come to his attention. When an appeal is made it is made to the minister. It is not altogether a happy situation, as the hon. member has suggested. We have dealt with other cases by the setting up of boards. We have, for example, the board of referees to deal with standard profits. That board consists of a supreme court judge, an accountant and a business man, and I think that throughout the country that board is highly respected. The taxpayers who appear before it have not always got exactly what they wanted, but they have felt that they had very fair treatment, and I have heard nothing but commendation for the work of the board.
Mr. HAjNSON (York-Sunbury): The public consider it an impartial tribunal.


Colin William George Gibson: Quite. I have given consideration and am at present considering the advisability of securing authority to set up a similar board which would advise the minister on appeals that are taken under the act. I think that- would, be a more workable solution than having an independent board set up to deal with the case after the original appeal has come before the minister. It would be just one more step if a board were set up to deal with the case after the minister had passed upon it.


Richard Burpee Hanson: That is not what I suggested. I suggested that there be no appeal to the'minister at all once the assessment is made.


Colin William George Gibson: It would amount to very much the same thing if a board were set up to advise the minister because, if the minister had confidence in the board, he would undoubtedly accept its recommendations. The taxpayer would then have the right to appeal further.


Gordon Graydon: If that is the case, then the minister and the Minister of Munitions and Supply are arguing exactly opposite.
[Mr. R. B. HansonJ


Richard Burpee Hanson: On
principle.


Gordon Graydon: The Minister of Munitions and Supply said absolutely the opposite to that.


Colin William George Gibson: I am just dealing with the income tax division at the present time. It has been suggested that while these appeals must be filed in writing the taxpayer has no right to appear in person. I would say that while the act does not say that he has the right to appear, actually in very many cases he does come down to state his case before the minister; and cases under appeal, in some of which the appeal had not actually been filed, have been dealt with by having a personal interview so that a hearing can be given to the taxpayer himself.


Richard Burpee Hanson: That is news to me. There is nothing in the statute which provides for that. Nobody ever told me that an appellant had the right to appear before the minister.


Colin William George Gibson: Many taxpayers do come down and ask for a hearing.


Richard Burpee Hanson: That is, by courtesy.


Colin William George Gibson: It is given by courtesy yes. but certainly it is given in a great many cases.
With regard to the number of appeals which have been heard, I could not of course state how many have been made in the past few years. That can be ascertained. There has been quite a large number, but I do not know offhand how many have been allowed and how many refused.


Richard Burpee Hanson: I am certainly encouraged bj' the frame of mind of the minister, because it shows that he at least is impressed with the injustice of the present procedure and wants to establish something better in lieu of it. I congratulate him upon that, because, as a rule, you do not find him very receptive to suggestions from this side of the house, and I must have great merit, I think, in what I am advocating to get that far. So that I am pleased with the minister and rather pleased with myself.
The minister says this, that in practice the assessment is not made by the minister. I suppose that is correct; he could not possibly attend to it. But the minister or the statute has designated a person to act for him, and of course the act is a ministerial act and is his act. I think he will agree with me that in law the making of an assessment itself is a ministerial act..


Colin William George Gibson: That is right.

Income War Tax


Richard Burpee Hanson: Therefore il is his act, and to go back to him is futile. I think we had better by-pass that, even though he has a good board of referees to assist him in making decisions. What I want to do is to get away from the atmosphere of the department, from q point of view which is already asserted when you are going to judge something a second time.
There is merit in this suggestion. We all know what the administrative mind is. The administrative mind is to conform as near as may be to what has already been asserted by the department concerned. We ought to get away from that. Let us avoid that atmosphere by putting the matter in the hands of an impartial and competent tribunal. It may very well be that, except on questions of pure law, there should not be any further appeal, to the Exchequer Court of Canada; but I should like to give consideration to that proposal even though I am making it at the moment, that on questions of fact the decisions of the tribunal to which I refer would be final, but that on questions of law, questions relating we will say to jurisdiction to tax, which is a question of law, there should be an appeal to the Exchequer Court of Canada.
I should like the minister to go a little farther than he has gone. He is thinking about it; I can see that. It has been a subject-matter of discussion in his department; I think I know that; and I am pressing for action at this session of parliament. It is not a very big job to draft amendments to the statute to take the place of those already existing. I believe I could do it myself very quickly if my ideas were allowed to prevail, or I would be glad to sit in and help draft an appropriate section. I am in earnest about, this, and I think I am right; I believe that thereby justice will prevail in a greater degree than it does under the present system. I say that, again without any reflection on the personnel; but I am impressed with the fact that you are appealing to the same jurisdiction, and that is not a good form of appeal. I would ask the minister if between now and the time these resolutions are finished with, before the introduction of the bill to be founded on them, the department will give consideration to amending the statute along the lines I have suggested. If we cannot agree on the details of what the new tribunal is to be, we can fight it out here in the chamber at a later date. But let us do something in the way of real reform. There is an opportunity to reform the procedure, an opportunity to do real justice, and I am going to ask any hon. member who has had experience in taxation appeals to give me the benefit of his views and let me know what he thinks of the principles I am trying to establish here
this evening. I feel that I am on very sound ground, and I am encouraged to think the minister himself, in his heart of hearts, believes that I am on sound ground and that a reform should be had.


Douglas Charles Abbott: May I say a word on this question of tax appeals? In days gone past I have had some considerable experience in this matter, and as my hon. friend probably knows I have a good deal of sympathy with the views he has expressed.
What he is suggesting is, in effect, that we set up something in the nature of a board of tax appeals, such as they have, I believe, in other countries. The Minister of National Revenue has indicated that he has been giving consideration to a form of advisory board to advise in connection with appeals to the minister. That is a new thought to me. It has some merit. The hon. member for York-Sunbury will appreciate that the question of cost is involved. If we set up a board of tax appeals before which counsel will appear as in the procedure upon a regular appeal, and there is a subsequent appeal to the exchequer court, there might well be some additional costs involved, but many appeals might be disposed of, satisfactorily by an advisory committee to the minister in the way he has indicated. To me the thought is a new one and personally I should like to give it some consideration. I cannot, of course, speak for the Minister of Finance, but I will bring to his attention the discussion which has arisen this evening. I know, as the Minister of National Revenue has already indicated, the matter will be given further consideration before the bill is brought in, and probably the hon. member for York-Sunbury and other hon. members who are interested in the subject might also give it a little more thought in view of the discussion which has been raised at this time.


Richard Burpee Hanson: I thank
the parliamentary assistant for so much; not much, but something. He raised the bogey of costs. Well, every appellant takes the risk of having his appeal disallowed; and in the present instance you have to put up security for costs in the amount of S400 if you go on to the exchequer court. I am satisfied, as I think I said, that in a bona fide appeal some security for costs should be given to the crown. That is to prevent frivolous appeals, and there will be frivolous appeals unless there is something at stake.
Mr. ABBOTT; That is a fine way to get away from paying your taxes too.

Income War Tax


Richard Burpee Hanson: Oh, they
carry interest, and fairly heavy interest. That ought to be penalty enough, I think, so far as the crown is concerned.


Douglas Charles Abbott: For the man who is financially uncertain it has great attractions.


Richard Burpee Hanson: Everyone knows if he has a bona fide case for an appeal or not; that is, if he is well advised, if he employs a 'competent lawyer or tax expert. Nowadays, with every provincial legislature setting up commission after commission, the lawyers have half their practice taken away. The business of the lawyers has been cut in two by reason of the actions of provincial legislatures in taking away from them the work they used to have. Have a heart so far as the lawyers are concerned.


An hon. MEMBER:: Or by a trust company.


Richard Burpee Hanson: Yes, or by a trust company. I do not sympathize with the point of view that the question of costs should be an issue at all. I dio not think that consideration should be mooted in parliament. It must be done on principles of justice and not on the question of expediency, because that is what the interjecting of this question of costs means.


Douglas Charles Abbott: My only thought was
whether we should set up a procedure which would necessarily impose considerable costs on the appellant when another procedure might give him the remedy without these costs. He has always recourse to the exchequer court, and I am proceeding on that assumption.


Mr. CHURCH:: There is nothing that is causing the soldiers overseas more worry and trouble, and their families at home as well, than the principle involved in the assessment and the notification of assessments as well as appeal to the minister. We have two ministers in charge of this bill to-night-the parliamentary assistant and the Minister of National Revenue, both distinguished soldiers. I was in hopes that now we have reached1 the end of the fifth year of the war there might be some more just and equitable way of dealing with this matter and sometimes at the base from the point of view of the men serving overseas. In the first place, the relatives at home get the assessment and they do not know what to do with it. A good many of them have come and asked me what they should do with it. This section does not go far enough, or in my opinion it should be struck out altogether. The municipalities have a different way of approaching the principle of assessment and appeal contained in this 
system so far as the soldier overseas is concerned. When it comes to the men fighting in Italy and in France, and in the invasion, under the circumstances that obtain now, how will you reach the soldiers by notice of assessment? The municipalities do not sell property or real estate in arrears of taxes for anything less than three years arrears of taxes. The larger municipalities, in fact nearly all the municipalities, have some provision, and in some provinces through provincial legislation in regard to the taxation of men overseas and the penalties imposed upon them. The principle of the assessment is an important matter, and the soldier whose income is less than $4,000 should in my opinion be exempt for the period of the war. We should have a more modern system of assessment for civilians and soldiers alike, and you would get as much money out of the taxpayers as you do now. We have an excellent commissioner, a man who is unexcelled anywhere, but he and his staff are given an impossible task to perform, under the provisions of this bill.
I object to the last four or five words of the section extending the time of notice. The last words give the minister power to make the extension and these words should not appear in a revenue bill. The executive should not be given power to make rules and regulations. It is the duty of the House of Commons to examine revenue and all other control bills, ' every line of them, especially when they take these matters out of the control of parliament and vest them in the executive power. The same thing appears in every piece of legislation that has been presented to the house in war time; powers of this sort are left to the executive. That in my opinion is most objectionable. I do not see why we do not abolish this whole method of taxation and adopt the old income tax methods of the municipalities. Take a man with a small amount, say $4,000. Why not tax him 5, 10, 15 or 20 per cent, or what, is for war necessary on a percentage of the net income. In my opinion this whole system is wrong. This tax system is too long. The creation of the world is written in less than 600 words, and the Lord's Prayer is contained in sixty words, but here we have this long bill amended year after year. I do not blame the officials. Parliament is to blame for the present complex act and system. In my opinion we should adopt the old principle we had years ago. If a man has an income of two or three or four thousand dollars you should put an aggregate tax of 5, 10, 15, 20 or 25 per cent, or what is needed, on him. You have to get the money in any event for war purposes, and about fifty-five per cent of the revenue is being obtained through the income tax.

Income War Tax
4S37
There should be a more reasonable method of assessment for men overseas because it worries the life out of them and their wives and relatives at home. Moreover, a lot of these men cannot pay. Where is a soldier to get money to pay as herein for taxes in arrears starting in 1939, all through 1940, 1941, 1942, 1943 and up to the present time? Where will the soldier get the money even, if he does get the assessment? It is going to be mailed to him overseas, but they do not get all the letters sent them by their families. I know the ministers and officials have laboured long and hard on this subject and know more about it than I do, but I have seen the application of some of these rules and regulations, and if lawyers at home cannot advise their clients how to make up their assessment, how will the soldiers in the invasion, with no one to help them, manage? There should be a stay for a year after the war so far as soldiers are concerned, to give them time to pay up arrears of taxes. A great many of them do not want to be in arrears because they will have to pay that money some time or another, but there should be some reduction in the rates charged men serving overseas, as compared with those who are not in the service. There should be some allowance in that connection, and a revision should be made all along the line. You could not have a simpler system of assessment than the old system we had years ago. There used to be three systems of taxation, federal, provincial and municipal, and I suggest that we should go back to the old method. Soldiers should not be worried in this way. In the case of those under 83,500 or
84,000	no interest should be charged until their return.


Colin William George Gibson: It is the policy of the
income tax division _ not to send notices of assessment to taxpayers when it is known that they are serving overseas. It does happen sometimes that notices are sent to men who have gone overseas without the knowledge of the department, but every consideration is given to men serving overseas.


Mr. ROEBUCK:: The hon. member for
York-Sunbury (Mr. Hanson) invited others in the house, who have some experience in the matter of appeals to the minister, to express themselves in this connection. I think the hon. gentleman has performed a service in bringing this matter before the committee, just as he did yesterday when he brought another matter to its attention. I have had some experience in the matter of appeals to the minister, and I may say to the hon. member for York-Sunbury and to my other fellow members that my experience has been entirely happy and satisfactory. I have taken as many
as four appeals to the present minister in a single day, where the clients all lined up outside the door and one after another was heard. And in every case, although they were not successful, the clients went away feeling that they had had a fair deal; that their case had been heard and judicially handled and decided quite satisfactorily. At the same time I am of opinion that the system is not satisfactory.
I do not suggest that we should abolish the appeal to the minister. For those who wish to take it, it is all right, but there are others who do not wish to take it. I think we should have some system of judicial decisions that is separated entirely from the administration of the department. No minister responsible for the administration of his department can entirely separate himself-he may do it in his own mind, but it is in his own mind only- from the conditions under which he approaches the question.
There is some talk of an appeal to the exchequer court. That is all right. There is only one official in the exchequer court who would be acting. There might be more than one judge in the court, but only one would be engaged and the expenses do not need to be great. I have no sympathy with this business of charging a litigant 8400 as security for costs as is done in the Supreme Court of Ontario in certain circumstances. I have no sympathy with that at all. The public has an interest in this matter and it is the duty of the crown to decide questions of this kind. The officials should not be so taxed with business that they cannot attend to the matter of appeals of this kind. I do not see any reason for charging a man $400 security for costs in order to have some dispute between himself and the department adjudicated by some judicial official. As far as costs are concerned, we can argue that in every infringement of the criminal law; and yet we set up officials all over this province, scores of them, in Canada hundreds of them, who hear disputes between the subject and the crown, usually the issue being as to whether the individual is guilty. We do that with small costs, and we never think of charging costs or security for costs against anybody who appeals to a police magistrate for a mere decision. We ought to be able to have a judicial authority to whom the minister can refer questions which he does not himself wish to decide or to whom those who have questions which they do not care to leave to the minister may appeal. Expense would be slight; the principle would be good. I am satisfied the work-out would be satisfactory, and I support the idea of a judicial appeal in addition to the appeal to the minister.
Income War Tax


Howard Charles Green: The hon. member for York-Sunbury has brought up a very important point to-night, and I think he has put the situation clearly before the committee. He was, of course, dealing with the customary type of appeal; but since this war began there have been hundreds of thousands of Canadians paying income tax for the first time; many, many more people are affected by the income tax to-day than there were before the war, and very seriously affected. Has any consideration been given to providing some sort of appeal for the small businessman or for the individual who perhaps is not taxed a great deal, looking ,at it against the background of our billion dollar budgets, but from his point of view it does look large? He is simply out of luck. He does not have this appeal, for he cannot raise $400 and pay his owp lawyer besides. It is an impossible situation for him. I mentioned it when I was speaking in the budget debate last week. I have had representations from men who feel that they have been unfairly treated in their assessments; they go before the assessor and complain and sometimes they are treated in a rather cavalier fashion. In the course of my speech I quoted from a letter from one of those small businessmen; he pointed out there were those who felt that they were getting a raw deal in some cases and yet could do nothing about it. He put it in this way:
And yet, after a short time, they paid the assessments so that they could get the worry off their minds and get on with their business, knowing well the difficulties and costs of appeal.
That statement shows a very unfortunate situation with regard to our Income War Tax Act. It is a very important act. It is an important act not only for the years of the war but also for far into the post-war years. The Canadian people should feel that they are being fairly treated under it. If they get what they consider a raw deal, then' they should have some proper method of appealing. I suggested that consideration be given to providing for a cheap and summary appeal where smaller amounts are involved; it might be to a county court judge, or perhaps to a judge of a superior court. Has any consideration been given to setting up some appeal court, making some arrangements for an appeal of that type?


Douglas Charles Abbott: Perhaps my hon. friend came in a little after the hon. member for Y ork-Sunbury-


Howard Charles Green: I know about the proposal to set up a board.


Douglas Charles Abbott: Yes.


Howard Charles Green: Would that be of a nature to help the small man?


Douglas Charles Abbott: As to that I am not prepared to say. As I mentioned a moment ago when I was speaking in reply to the hon. member for York-Sunbury, before I became involved in my present duties I did a considerable amount of this work. I know that in practice *-and no doubt this applies to a good, many other lawyers in the committee-what happens is this: a client who is dissatisfied with his income tax assessment would come in. I invariably took the case up first with the inspector in the local income tax office. 1 discussed it with him and in some cases would get an adjustment there and then.


Richard Burpee Hanson: He does not have much authority.


Douglas Charles Abbott: Would my hon. friend allow me to finish? After representations were made it was sometimes settled by the local inspector. If the case was important and I did not get satisfaction in the local office it would be referred to Ottawa. I would sometimes write or come to Ottawa and discuss it with the commissioner as he then was, the deputy minister as he now is, or one of the senior officials here, and finally if I could not get satisfaction, and felt that there was some injustice, shall we say, I would file a notice of appeal under the section which has been referred to, but now, of course, there are no costs involved for that.


Richard Burpee Hanson: Up to that point.


Douglas Charles Abbott: As the Minister of National Revenue has indicated, that would bring the matter to the attention of the minister himself.
I agree with the hon. member for York-Sunbury that it is not the ideal method of appeal, but it is an inexpensive method of appeal for the taxpayer.


Richard Burpee Hanson: It keeps the matter alive, anyway.


Douglas Charles Abbott: Yes. If his appeal is still disallowed he has the right to take it to the exchequer court, and it is at that point that he is obliged to put up the $400 security to which my hon. friend has referred. As the lawyer members of the committee no doubt realize, my own experience in appeals has been that in ninety per cent of those cases the question involved is one of law. It is rarely a question of fact; nearly always it is a question of law, shall we say, an interpretation of some provision of the Income War Tax Act,


JTJLY 13. 1944
[Stage Direction]
Income War Tax
4S39
and I frankly in my own experience do not recall any cases where I had a disputed question of fact involved in one of those appeals.
Arthur Wentworth Roebuck: Yes.


Douglas Charles Abbott: I am speaking of my own experience. I think the hon. member for Trinity will agree that in the vast majority of cases it is a question of law.


Arthur Wentworth Roebuck: As a rule one concedes the facts with the officials and argues the law. You have to concede the facts. But if you had a method of bringing out the facts, perhaps there would be more contest with regard to them.


Douglas Charles Abbott: That may be so. My only purpose in rising again was that I did not think the hon. member for Vancouver South was in the house when the hon. member for York Sunbury commenced his remarks.


Howard Charles Green: Yes; I heard them all.


Douglas Charles Abbott: Then I misunderstood the hon. member. There is at the present time this method of appeal, which involves no real cost. It has been suggested that the method is inadequate. Nevertheless that method exists, and the costs are not incurred until the appellant feels it necessary to take the case to the exchequer court.


Howard Charles Green: Why would it not be possible to provide a summary appeal, a cheap appeal that could be heard out in the districts? It is all right where a person lives in Montreal, and has to come to Ottawa to argue an appeal; but it is an entirely different matter when one has to come from Vancouver or Halifax. The result is that people in those more distant parts of the country do not have the same facilities for appeal. Why cannot something be done to provide for summary ' appeals?


Douglas Charles Abbott: I think the main reason is the desirability, at any rate, and probably the necessity of having some uniformity in decisions in these matters. I do not know of any advanced country where the ordinary county court, shall we say, or district court, hears these tax appeals. I know that is not so in England or in the United States. I do not know of any country where appeals of this kind are left to the lower courts. They are almost invariably decided either by special courts set up in the first instance, or by a high court. Here we have the exchequer court.


Howard Charles Green: Could there be a taxation
appeal board which would sit in different parts of the country? What would be the objection to that?


Colin William George Gibson: And they would move across the country?


Howard Charles Green: I do not mean the exchequer court. Why not set up a taxation appeal board?


Douglas Charles Abbott: That was suggested by the hon. member for York-Sunbury this evening, namely, that a special appeal tribunal be set up to hear tax appeals.


Richard Burpee Hanson: Some consideration ought to be given to geographical situation. It is all right in a big case to have counsel come to Ottawa to present their arguments. But I can imagine cases, minor in amounts, where it would be cheaper to pay than to proceed, if one had to come to Ottawa.
However, I did not rise to argue that point; I shall leave that to my hon. friend. One interesting point has been disclosed by this discussion to-night for the first time, namely, that appellants would have the right to, go before the minister, after having filed notice of appeal. That is news to me. I did not know it was the practice or the custom, or that that courtesy was extended to an appellant. Certainly there is nothing in the statute to provide for that.. It must be a matter of courtesy.
Of course, I can understand coming before the deputy minister, arguing out the matter informally, and trying to convince him that you are right. But I do not consider that an appeal. That is just a sort of preliminary interrogatory. Usually it is done in a very different manner, off the record, and usually one comes away just the same as when he started. If it is the custom of the minister to hear counsel, or to hear parties without counsel, then I think the public ought to know about it. I would suggest to the minister that if that became widely known he would be swamped. He had better not encourage it, because I can see where his time would be taken up completely by that sort of thing.
What I am arguing for is to get away from the .administrative atmosphere once the assessment is made. Then the function of the department is exhausted, the minister is functus officio, and the matter ought to go to some outside tribunal. I hope consideration will be given to the suggestion made to-day, and that something substantial will be done before the bill founded upon these resolutions is passed. I shall not labour the point further, because the position has been made clear.


Arthur Wentworth Roebuck: There is no secret about the procedure. It is necessary to file formal notice of appeal, lest your rights go by the board. That is particularly so in connection
Income War Tax

with income tax appeals, where the appeals are strictly limited. Therefore a formal document is filed. But that is not changing one's relationship in any way with the minister. The document stands, and negotiations continue.


Richard Burpee Hanson: But there is no right to go before the minister.


Arthur Wentworth Roebuck: Yes; it goes before the minister.


Richard Burpee Hanson: There is a no right for an appellant to appear before the minister. There is nothing in the statute about that.


Arthur Wentworth Roebuck: And there is nothing in the statute to prevent it.


Richard Burpee Hanson: It is
statutory jurisdiction.


Arthur Wentworth Roebuck: One does not proceed with it while the discussion continues before the minister. If the minister's decision is unsatisfactory you then reserve your right and proceed with your appeal in a formal way.
I should like it understood that what I have said at all events-and I think what the hon. member for York-Sunbury meant-was that this applies to income tax appeals and also to customs appeals, because customs appeals are in the same position. Many little questions arise, not big ones, where thousands of dollars are involved.


Richard Burpee Hanson: The same principle.


Arthur Wentworth Roebuck: There are little questions from little people, some of whom, as has been pointed out, may live long distances from Ottawa.	[DOT]


Stanley Howard Knowles: I take it that this resolution has to do with appeals by or on behalf of members of the armed forces in connection with income tax matters. I am not a lawyer, but I should like to make an appeal right now on behalf of one particular group of service men. They are a group for whom I have spoken in the house on perhaps half a dozen occasions this year. I imagine the answer to my appeal must come from the Minister of National Revenue. I am referring to the men of the Kiska force, and the argument which was made earlier this year in connection with the application of the taxation rules to those men.
The minister will recall that they were taxed originally, through the method of deduction at the source, at the fifty per cent rate, as though they were in the western hemisphere

but outside Canada. The appeal I made was that actually they were outside the western hemisphere, and that they were overseas, just as much as the men who had gone to England. I said that they should not be taxed at all for the time they were in Kiska or, according to the rules, for the period of six months thereafter.
After several appeals on this matter-with the hon. member for Vancouver South, who sits to my right, along with other hon. members, giving their support to my contention -the Minister of National Revenue made a satisfactory announcement in March, and at that time he tabled an order in council dated March 17-


The ACTING CHAIRMAN (Mr. Golding):: Order.


Stanley Howard Knowles: -advising us that-


William Henry Golding: Order; the hon. member cannot refer to a debate which has already taken place in the house.


Stanley Howard Knowles: I was not referring to a debate; I was referring to an announcement made by the Minister of National Revnue. However, I do not need to refer to that- at all, but rather to an order in council. Surely orders in council can be referred to in the house.
By this order in council the government decided to accept our representations and to treat these men as having gone outside the western hemisphere. So far so good; that was fine. Then came the question of applying that order in council. In the case of these men, so far as the six months of 1943 were concerned, during which time they were in Kiska, deductions had already been made. The decision made by the department apparently was that the rebate now coming to them under the order in council tabled on March 28 should be received by the men making out this year their 1943 income tax forms, and claiming such rebate. I understand that that has been done by the men who were taxed erroneously in 1943.


Colin William George Gibson: They were not taxed erroneously; the regulations were changed.


Stanley Howard Knowles: That is a matter of
opinion as to definition. At any rate the plan was that these men would file their returns. They have done so and in due course they should get their rebates. Under the present pressure on the income tax division it takes considerable time to get these forms assessed, and it may be some time in 1945 before the rebates are paid to these men for deductions

Income War Tax
made in 1943, which I claim should not have been made at all. I think I speak for these men when I say that they are prepared to accept that so far as 1943 is concerned. They do not like it, but they appreciate the administrative difficulties and those who have been in touch with me say that they are prepared to let it go at that as far as 1943 is concerned. But they feel quite differently about 19414.
When they came back to the Canadian mainland their income was still treated as subject to these deductions for the months of January, February and March of this year. After the order in council was passed1 in March the deductions were not made in April and the subsequent months. Representations which were made to me on behalf of these men, were made while many of them were still in Canada. Most of these men are officers who have now gone overseas and are participating in operations there. They feel quite keenly that it was not found possible to make the rebates to them on account at least of the amounts deducted in January, February and March of this year.
I have been in touch with the Minister of National Revenue, the Minister of Finance and I believe also the Minister of National Defence about this matter and, of course, administrative difficulties have been, presented to me in the correspondence I have received. But here is the position. The men feel that in the light of the decision of the government as evidenced by this order in council these taxes should never have been deducted. As I say, deductions were made in January, February and March of 1944. Apparently these men will have to wait until 1945 to file their returns and claim a rebate for January, February and March, 1944. It will probably be 1946 before their 1944 returns are assessed and the rebates paid to them.	*
I am fully aware of the many administrative problems facing the income tax division. I did not press one or two matters this afternoon because I was impressed by the minister's statement as to the problems they have to cope with, but I raise this matter because representations have been made quite frequently to me on behalf of these men. I think a special effort should be made to find a way of making the rebates for the deductions made in January, February and March of this year as quickly as possible. I appeal to the minister to do this.


Colin William George Gibson: The hon. member suggests first of all that the tax deductions were improperly made. I deny that entirely. The deductions that, were made, were made from men
who were taxable at that time owing to the fact Kiska is in the western hemisphere. I recommended an order in council which was passed, which provided that for tax purposes Kiska would be treated as being outside the western hemisphere.
When we talk about the Kiska force I do not want it to be assumed that all the men who took part in that action were subject to income tax deductions. It was only the officers and the senior warrant officers who earned over $1,600 a year who were liable to the tax. Arrangements have been made to make speedy rebate of the deductions that were made from the 1943 income after taxpayers filed their returns. The deductions that were made for 1944 are in a different position. The income tax department cannot tell what the taxes for each of these individuals will be on his 1944 income until the end of the year. We do not know what rebates he will be entitled to until the end of the year when he files his return. We can ascertain what deductions have been paid into his credit, but that does not say that all of those will be refundable. It will depend to some extent upon the private means of the taxpayer. Consequently we would just be making a guess if we refunded to the various officers of the Kiska force all the 1944 income deductions that were made during 1944.


Stanley Howard Knowles: Without arguing the point as to whether Kiska is in or outside the western hemisphere, I understand that the provisions are that when a man is overseas for six months or longer he is entitled to exemption from income tax for the first six months after he returns to Canada.


Colin William George Gibson: That is correct.


Stanley Howard Knowles: Am I correct in assuming that these men were entitled to complete exemption from income tax for January, February, March, April, May and June of this year?


Colin William George Gibson: If they came back at the end of December and had been away for six months.


Stanley Howard Knowles: That was the case. I have communicated with men of that force who are still in Canada and they cannot understand why these deductions were made.


Colin William George Gibson: They were liable for tax when the deductions were made, and there are still six months of 1944 in which they will be earning income.


Stanley Howard Knowles: According to the order in council no deductions of any kind should have been made for the first six months of 1944
Income War Tax


Colin William George Gibson: No tax would be payable on that income.


Stanley Howard Knowles: No deduction should have been made on the income earned by these men in the first six months of 1944. If no tax should be payable, why should there be any deduction? I hope the minister will give this matter further consideration. I have referred to the correspondence I have had from him in which he has indicated that it calls for some cooperation or getting together with the Department of National Defence in order to work it out.


Colin William George Gibson: These deductions are made on account of the 1914 tax that they will be due at the end of the year.


Stanley Howard Knowles: If the minister takes that attitude it means that you are asking these men to make payments in January, February and March on account of the taxes that they will owe from the period July to December, 1914. You are asking them to pay something on their income tax six months in advance because, as far as the six months after they came back from Kiska are concerned, that income wras free from taxation under the order in council. I appeal to the minister to give this matter further consideration.


William Henry Golding: I wonder if the hon. member is in order in bringing this matter into the discussion on this resolution. The resolution reads:
That, in respect of the taxation year 1939 and subsequent years, the time for serving a notice of appeal upon the Minister of National Revenue, in the case of members of the armed forces overseas, be extended to one year after the date of mailing of the notice of assessment or for such further period as the minister may allow,	*	.
I do not think the question the hon. member is now discussing would come under this resolution.


Stanley Howard Knowles: The subject-matter of the resolution has to do with appeals by members of the armed forces overseas in connection with income tax matters. I am making an appeal with respect to such a matter on behalf of certain members of the armed forces who are overseas. However, I will not argue with the Chair because, as a matter of fact, it will take only a sentence or two for me to finish the subject. It is really up to the minister to finish the matter, but I wanted to be clear on one point. The minister said that arrangements were made for a speedy refund of the deductions made in 1943. My information is that those refunds have not yet been received. What does the minister mean by arrangements for a speedy refund?


Colin William George Gibson: Get them refunded as quickly as can be arranged. The individual returns are filed in different districts throughout the country, and it was necessary to find out from the Department of National Defence who the men were and where they filed their returns, and obviously it could not all be done within two or three weeks.


Stanley Howard Knowles: In other words, these cases will be taken care of some time this summer ahead of the time when the normal cases will be taken care of?


Colin William George Gibson: Oh, yes.


Stanley Howard Knowles: I think that will be quite satisfactory to the men, so far as 1943 is concerned. But I hope that the minister will get to work on the 1944 matter too.


Ernest Edward Perley: Mr. Chairman, I do not wish to discuss this resolution, but I am looking for information.


William Henry Golding: This resolution has been passed but we reverted to it by consent, and we must not go beyond it.


Ernest Edward Perley: I think, Mr. Chairman, that you might permit a question for information. I can possibly discuss on this resolution what I want to say.


@Acting Chair(man)? of Committees of the Whole: The Chair would like the cooperation of members in sticking to the resolution.


Ernest Edward Perley: Then I will say what I have to say after the resolution is disposed of.


Howard Charles Green: May I ask the minister whether the members of the auxiliary services serving overseas are treated as being in the armed forces for the purposes of income tax? I refer to the men of the Y.M.C.A., Canadian Legion, the Red Cross, the Knights of Columbus and the Salvation Army. Until recently at any rate they were not given the same exemptions from income tax as the men in the armed forces. But now they are in Italy with the troops and in France with the troops, and I suggest that they should be treated on exactly the same basis as the men in the armed forces. Will the minister explain how they are taxed at the present time?


Douglas Charles Abbott: I should be glad to do that, but I think we ought to adhere to your ruling, Mr. Chairman, since this matter has nothing to do with the resolution before us. Briefly^ the members of the auxiliary forces are now subject to tax on a special basis under an order in council which was passed some little time ago. They are treated on much the same basis as the merchant seamen, in that a

Income War Tax
portion of their remuneration, is treated as war risk remuneration and is exempt from income tax.


Howard Charles Green: Do they have to rely on the order in council? Have they no statutory protection?


Douglas Charles Abbott: That is so. They are a relatively small group, about 200.


Mr. LOCKHART:: The minister said that no notices of assessment had gone overseas at all.


Colin William George Gibson: No; I said that it was the policy of the department not to send notices of assessment to men serving overseas.


Norman James Macdonald Lockhart: When did that practice stop?


Colin William George Gibson: Some notices have gone because the department had no record of the men who had proceeded overseas. But we do not press a man who is overseas.


Norman James Macdonald Lockhart: What is the position of a man who has been overseas for two or three years and receives a notice of assessment? I know of men who have been over there for two or three years and have received notices of assessment. What will be the position of these men when they come back? The situation is confusing, and it seems to me that a large number of these men will be piling on to the minister when they come back and that it will be an endless task to straighten these things out.


Mr. GIBSGN:: Under this amendment a soldier overseas is given a year from the date of sending the notice in which to appeal and such further period as the minister may allow. An extension would undoubtedly be granted to the men who remained overseas.


[Stage Direction]
Resolution agreed to.
24. That the minister may allow depreciation at double the rates normally allowed in respect of bona fide new investments made after a date to be declared by the governor in council; and, in such event, the taxpayer will be required to charge in any subsequent year at least one-half the rates normally allowed: Provided, however, in the case of a sale of assets in respect of which special depreciation has been so allowed, the minister may revise the assessments of the vendor for the years when the special depreciation was allowed, by disallowing as a deduction a pro rata portion of the special depreciation allowed, to the extent of the excess of the selling price over the depreciated cost of the said assets, less the amount of the depreciation normally allowed on the said assets, and less the excess, if any, of the selling price over the undepreciated cost of the said assets: Provided further that the portion of any loss attributable to the allowance of special depreciation shall not constitute a loss for purposes of resolution number twenty-two.
Ernest Edward Perley: If I may proceed now; Mr. Chairman, the bells were just ringing when I was on my way down to the Chamber, and when I entered you had just carried resolution 23, ten or eleven resolutions having been passed very quickly. The hon. member for York-Sunburv was in much the same predicament and asked to be allowed to revert to resolution 15, which he was permitted to do. I should like to have said something on resolution 22, and to have got a little information from the minister. May we revert to resolution 22?


William Henry Golding: There was a quorum present when the committee resumed and the resolutions were called, and passed.


Ernest Edward Perley: There is no precedent for passing the resolutions so hurriedly, Mr. Chairman. Six or seven resolutions were passed in three minutes.


William Henry Golding: We can revert to resolution 22 only with the consent of the committee. Has the hon. member consent?


Some hon. MEMBERS:: Agreed.
Resolution stands.


William Henry Golding: We will revert to resolution 22.
22. That losses sustained in 1944 and fiscal periods ending therein and all subsequent periods by any person carrying on a business may be deducted from profits derived from the business either in the year immediately preceding or in the three years immediately succeeding the taxation year.


Ernest Edward Perley: This resolution gives the taxpayer the right to deduct losses from profits either in the year immediately preceding or in the three years immediately succeeding the taxation year. This resolution, as indeed all these income tax resolutions, are based on the budget presentation of the Minister of Finance and no doubt were printed at the time the budget was presented. I suppose the bill to be based bn these resolutions is also printed and ready to be considered. During the budget debate certain suggestions were made and an amendment was offered by the hon. member for Dufferin-Simcoe, and when the minister spoke in closing the debate he spoke quite favourably with respect to one of the suggestions that had been made to the effect that the farmer should not have to include the proceeds from dispersal sales as part of his income. The suggestion was also made that losses might be spread over five or six years instead of the three years mentioned in the resolution.
4S44
Income War Tax

Certain suggestions were also made that higher exemptions should be provided for those in the lower income brackets. The amendment proposed an exemption of $800 for single persons and $1,600 for married persons, and I made the suggestion that that apply particularly to single and married farmers.


Mr. ILSLEY:: On a point of order, Mr. Chairman, the hon. member asked for the consent of the committee to revert to this resolution and the committee consented unanimously. But he is not confining himself to the resolution at all.


Ernest Edward Perley: Do I understand that these resolutions and the bill to be based upon them are to be passed just as they are and that we cannot make any suggestions or offer amendments along the lines I am proposing? If that is the case there is no use in my continuing. As I said, the minister was quite favourable to one suggestion that was made with respect to the farmers. I should like to ask him, will there be any change in resolution 22 when the bill is brought down, and will provision be made for certain exemptions? Also, as I have said, will there be any change in resolution 22, or how shall we go about getting a change in order to have the average extended to five years?


James Lorimer Ilsley: If the hon. member wishes to oppose the resolution or suggest that it does not go far enough, that is a proper matter for debate on the resolution. The hon. gentleman was talking about exemptions, whether they should be higher, and so on. That has nothing at all to do with the resolution.


Ernest Edward Perley: I would suggest then that the "three years" in the resolution be changed to "five years". Is a motion required to that effect, or what is the procedure; and is the minister favourable to it? From what he said when he closed the debate I gathered that he was; he also referred to permitting the farmer not to have to account for dispersal sales, but I suppose it is too late to consider that.


James Lorimer Ilsley: Those are two different
questions.


Ernest Edward Perley: Well, on what resolution can that be discussed?


James Lorimer Ilsley: I am not just sure at what stage. I should think it would be when the chairman of the committee says, "Shall I report the resolutions?" Perhaps on the second reading of these resolutions. The hon. gentleman would then, I should think, have an opportunity of urging that we add to the resolutions. He certainly could do it on the
fMr. Perley.l	.
bill or the preamble of the bill. Of course he cannot himself propose resolutions; no private member can propose resolutions which increase public expenditure or affect the revenues, except within certain limits which are laid down in the rules; I forget just what they are; but it is all clearly set out.


Ernest Edward Perley: Would it be in order to move now that in resolution 22, the fourth line, the word "three" be changed to "five"? If it is in order I would do so.


James Lorimer Ilsley: I do not think what the hon. gentleman is suggesting carries out what he says is his intention. His intention, I think, is to suggest an averaging of profits and losses over five years.


Ernest Edward Perley: Yes.


James Lorimer Ilsley: But if he merely proposes the changing of "three" to "five," the resolution would then provide for the carrying forward of losses to the next five years. Perhaps that is what he would like to have done.


Ernest Edward Perley: That is what I want, and I should like it more particularly to apply to farmers.


James Lorimer Ilsley: I doubt whether that is in order. It is a matter for the Chair to rule upon. I should think that would have the effect of reducing the revenue.


Ernest Edward Perley: Then could the resolution stand until the minister considers it further to see whether it is in order to move a resolution of that kind, that this be changed so as to apply to the farmer for a five-year period instead of three years?


James Lorimer Ilsley: Well, I shall have to oppose that. If the hon. gentleman wants to propose it for the sake of putting himself on record, and if he is in order, of course he has the right to do so. But extensive consideration has been given to the proper period here, and we came to the conclusion that we should provide for the carrying of losses back one year and forward three years, and that that was far enough to go.
I notice that the hon. gentleman has a tendency when we propose a five per cent rate to suggest a four per cent rate, and so on, to shave it just a little all the time, as he says, in favour of the farmer. That is what he is proposing here. I do not know why he prefers "five" to "three," except that it is a little more advantageous; that is all. I do not know what principle he is going on.


Ernest Edward Perley: The minister suggests that I am proposing "four" instead of "five". I suppose he has reference to my amendment on another bill.

Income War Tax


James Lorimer Ilsley: The hon. member has done
it several times.


Ernest Edward Perley: With respect to this, I suggested it when speaking on the budget;
I suggested the same principle last year; and I am doing it again, because I think it is right and just, and if I had the time to go into the figures to show the number of years say over the past fifteen-year period, in which the farmer has sustained losses rather than profit, you would be able to judge whether I am sincere in doing it. But the fact that I did it last year is evidence that I am not doing it now merely for the reason suggested by the minister.


Grote Stirling: I am not sure that I understand whether this resolution 22 covers the case of the ordinary return to the farmer. Can I read from this that in future the farmer's taxation is to be computed on the average of his three years' revenue?


James Lorimer Ilsley: No; that is not correct. This provides that if in any year a farmer has a loss, that loss may be subtracted from the profit of the previous year for purposes of taxation in that previous year, or subtracted from the profit of any one or more of the three following years for purposes of taxation in those years; but it does not mean the averaging of the profits of three years. If the farmer is in profit all this time, every year, he is taxed on his profits every year without an averaging.


Grote Stirling: As the minister knows from his experience in fruit growing in Nova Scotia, it is a case that is continually arising in the fruit-growing sections of Canada.


James Lorimer Ilsley: Yes.


Grote Stirling: Some devastating pest of otherwise occurs and a man may very easily make a loss in this year and next year make a profit, and the next year make a profit From my understanding of it, it seems to me that it is possible for him to average the revenues of this year and next year and the following year and arrive at the taxation for those subsequent years with that in mind.


James Lorimer Ilsley: If he has a loss the effect is that, or very nearly that; I am not sure that it is exactly that. The only point I was making is that unless he has a profit there is no averaging or anything like averaging, but if he has a loss his loss may be deducted from the profits of the previous year or the profits of any one or more of the three following years.


Mr. BRYCE:: I should like to be clear before we leave resolution 22. Does this alter the present regulations now with regard, say,
to a farmer having an auction sale, where he has not paid any income tax previously; can he take that return for his auction sale and file a return for the previous five years. Is that done away with?


Colin William George Gibson: This resolution does not deal with that at all but only with the case where a man in business-a farmer or a businessman -has a loss in any one year. That loss can be applied against the profits of the previous year or any of the following three years, but it does not affect the regulations now in force.


William Scottie Bryce: The same regulations are in effect?


Colin William George Gibson: Yes.


William Henry Golding: Resolution 24.


Harry Rutherford Jackman: With the consent of the committee might I revert to resolution 20?


William Henry Golding: Unless the committee agrees, that cannot be done.


Douglas Charles Abbott: I am not quite sure, Mr. Chairman, but my understanding was that resolution 23 had not passed. The hon. member for Rosetown-Biggar had spoken on resolution 23. He made a few short remarks and, as he concluded, the hon. member for York-Sunbury, who had just come into the house, asked to revert to resolution 15. My understanding is that resolution 23 was not passed.


William Henry Golding: Resolution 23 was passed and the hon. member asked to revert to resolution 15.


Mr. CASTLEDEN:: I suggest that what the parliamentary assistant has said is in accordance with the facts. Resolution 23 had not been passed when we reverted to resolution 15.


William Henry Golding: I was not in the Chair when the resolution was passed but it is recorded as passed, and then a request was made to revert to resolution 15. I wonder how many times we are going to go back to resolutions that have already been passed?


Gordon Graydon: On the point of order which you have raised yourself, Mr. Chairman, may I say that those of us who have been in the house for a considerable time recognize that we do not make much speed by rushing at the wrong time. There are certain things that have to be discussed and if there are still some points outstanding, I suggest that the Chair might be especially lenient and allow some measure of latitude, because dis-
Income War Tax

cussion that does not take place here will perhaps take place at a more inappropriate time. These resolutions have taken perhaps the minimum time I have seen income tax resolutions take in the past, and I suggest that [DOT] the Chair be lenient, because there were special circumstances to-night which might readily deprive some member of his right to take part in the discussion.


William Henry Golding: I simply- -wish to repeat that these resolutions were passed-


Gordon Graydon: There is no doubt about that, technically.


William Henry Golding: Just a moment. It is not a matter for the Chair but for the committee to say whether we will revert to resolutions that have been passed.


Douglas Charles Abbott: I appreciate of course that the record shows resolution 23 as having been passed. I was in charge of the resolutions at the time, and I think that entry was made by mistake, because my understanding was that all the resolutions but 23 had been passed. The hon. member for Rosetown-Biggar had made a few-short rem'arks; before anyone else spoke the hon. member for York-Sunbury asked leave to revert to resolution 15; consent was given, and it was by mistake that the entry was made showing that resolution 23 carried. I suggest that in the circumstances we might delete that entry and revert to the consideration of the resolution.


William Henry Golding: It is understood then that we are considering resolution 23.


George Hugh Castleden: I wish to say a few
words with regard to resolution 23, which provides that expenditures in respect -of scientific research directly or indirectly related to the taxpayer's business, whether of a current or capital nature, be allowed as a deductible expense. I want to ask the Minister of National Revenue a few questions. Can he give the approximate estimated revenue derived from the Income War Tax Act and the Excess Profits Tax Act?


Colin William George Gibson: I could not do that.


George Hugh Castleden: Not even an approximation?


Colin William George Gibson: This resolution deals with expenditures of a capital nature; and I cannot estimate what expenditures of that nature will be.
(Mr. Graydon.]


George Hugh Castleden: I wanted to know what
was the estimated income to the department from these sources.


Colin William George Gibson: What sources?


George Hugh Castleden: From all this taxation. Under this particular resolution every business in the country can undertake scientific research, spend practically the whole of its profits on that work and thus deprive the department of tremendous revenues. If every business in the country is allowed to make expenditures for scientific research, directly or indirectly related to the taxpayers' business, and have that allowed as a deductible expense, then I suggest that the department will be robbed of eighty per cent of its revenue.


James Lorimer Ilsley: The taxpayer is robbing himself every time he robs the government in that way and he is not likely to carry it to excess. Moreover, he is doing a good thing for the country.


George Hugh Castleden: That is the point.
Suppose he has a business with an income of $13 million, with costs of operation amounting to $10 million, so that he has a profit of $3 million. His ordinary taxes are, say, $1 million. To what extent would that $1 million reduce his income tax?


James Lorimer Ilsley: If he were paying on the forty per cent rate it would reduce it $400,000 and reduce his profits $600,000.


George Hugh Castleden: That is, on the $200,000 excess profits.


James Lorimer Ilsley: If he is paying forty per
cent.


George Hugh Castleden: On his excess profits
he pays eighty per cent?


James Lorimer Ilsley: Yes. If the whole $1 million were excess he would lessen the revenues
SSOO.OOO	and he would deprive himself of a refund of $200,000.


George Hugh Castleden: And he would have a million-dollar research undertaking.


James Lorimer Ilsley: If the whole thing were excess it would be subject to 100 per cent excess profits tax.


George Hugh Castleden: That would be considered pretty good business by such a concern.


James Lorimer Ilsley: I think it might be very
good business for all concerned, for the country.


George Hugh Castleden: To what extent would it benefit the country. Take the various industries-steel, textile, tobacco, distilleries, cement and so on. If eight or ten of them

Income War Tax
undertook, each in its own way, research of this kind would there not be tremendous duplication, and would that be efficient? Would it not be better to allow the income to go to the government? The government will suffer loss of revenue.
Mr. ELS'LEY: It is to be spread over three years.


George Hugh Castleden: Just the capital expenditure is to be spread over three years.


James Lorimer Ilsley: Yes, that is right.


George Hugh Castleden: The ordinary expenditures of operating in each year are allowed; the running expenses are paid each year?


James Lorimer Ilsley: Yes.


George Hugh Castleden: The capital expenditures are carried over three years?


James Lorimer Ilsley: Yes.


George Hugh Castleden: It seems to me that
there is terrific duplication here. More than that, the benefits of the research will go more to the company than to the country. Because a particular company is carrying on research work it does not necessarily follow that the people are to get the benefit from it. It seems to me that if the same amount of revenue were brought into the consolidated revenue fund and spent on research enterprises such as we have in Toronto, or more money concentrated on research in Ottawa and the benefits of that research made available to companies, it would be not only more economical but a finer principle for the people of Canada as a whole. At the present time the benefits of research go largely to the companies themselves. Suppose research work results in the lowering of the cost of the manufacturing of a product. It does not necessarily follow that the people are going to get a lower priced article. If the government research people were to carry on that work and make the results available to a certain company, saying to them, "Here is a way of saving $2 on each article; go ahead and use that and reduce the cost of your article to the public by $1.60," the country would benefit from such research. In reading through the item it seems to me that it allows a tremendous leeway; it does not seem efficient, and the costs are to be borne by the government, because if it results in a reduction of revenue the people of Canada are going to pay for it. If that is the case they should be sure that they will get the benefits from it.


Clarence Gillis: I should like to say a word
or two on this resolution. I have no intention of elaborating on it, but I see the matter
in exactly the same way as does the hon. member for Yorkton. There is nothing in this particular resolution to stop every section of industry across Canada from setting up small pilot plants and carrying on research, with the result that there will be great duplication across the country, and then that will be all charged back for tax purposes. Personally I do not think a great deal of research in any direction is necessary in Canada. I think it has been done.


An hon. MEMBER:: No.


Clarence Gillis: On two occasions I had the
privilege of visiting the research council here. I saw the pilot plants in operation. I will say that they are understaffed, and that the remuneration paid to the capable people is too small. Because of that we lose a lot of these very capable people to industry. I do not think there is a formula necessary for pushing forward industry, agriculture or any other potential development in Canada. I think that has already been done. I think the formulae have been developed. But in the past we have been carrying on this work at government expense and making the results of that research work available to industry at no cost to it. This resolution, in my opinion, merely sets up machinery that will take advantage of the work which has already been done in the national research laboratories. Experiments will be handed over to them with the result that we shall lose revenue in the country. If we want to do something along the line suggested then we should increase the appropriation for our own research council, get an adequate staff and pay them a sufficient sum so that they could carry out research development at the central laboratories. The results of that research could then be sold to industry, to those who are going to make money out of it; that is, if we want to continue the system of private enterprise.
To-day they are getting the benefit of this research for nothing and have been for many years. Take fuel as an example. I am particularly interested in that and only a few days ago paid a visit to the research council. The low temperature carbonization formulae are all there; the high temperature carbonization formulae for coking are there. The hydrogenation pilot plant has been established. They know exactly what they can do with it. That work has already been done. It is merely a matter of making it available and applying it to our resources. Personally I think we are being fooled when we make a provision of this kind that reduces the revenue of the country on the assumption that industry has
Income War Tax

a job to do in research work with the object of pushing industry forward in the future. That job has been largely done. It is merely a matter of understanding what we have here and staffing our laboratories adequately, applying the knowledge to our resources. Those in industry who want to make profits from it should pay for it. We have a wonderful research council here. The plant is doing a good job under difficult circumstances. I think they have done a wonderful job, although short-handed. I am a little sceptical about this. I am not prepared to argue it at the moment. I think the government-owned facilities have everything necessary in the field of research if they would only control it and apply it to our resources.
Mr. ILS'LEY: This is a very important subject and I welcome discussion on it within limits. I should not like it to go on too long, but it is worth while discussing and I am very much interested in the views expressed. I do not think the government have the facilities, nor do I think they can furnish themselves with the facilities to do the kind of work they want done in this country in the next few years. If my colleague the Minister of Munitions and Supply were here, he could deal with this much more competently than I can; but I know in a great many lines of industry the facilities for research work are near the factories; and they are in a position to do research in certain lines more competently than the government can do it without an enormous capital expenditure, a large part of which has already been done by private enterprise.


Clarence Gillis: You already have it out here. I was amazed at what I saw.


James Lorimer Ilsley: Yes, just on certain lines, but on others we do not have it. There are thousands of lines, and industry can be very, very efficient in research and has been in the past. They have developed marvellous processes and made great technological advances, but they cannot do this even though it is really for the benefit of the business. It is in the line of their business. It is not allowed now as a deduction from income for taxation purposes, and the reason why it is not allowed is that on ordinary accounting principles it cannot be regarded as expenses wholly, exclusively and necessarily laid out or expended for the purpose of earning income. In many cases these research expenditures do not come within those words. The resolution does not cover many research expenditures which are naturally connected with the interest of the business, with the earning of the income, and which I think could properly be allowed. Of course we do go so far as to allow capital expenditures.

They can be spread over a three-year period, but what I should like to do is to have this provision about expenditures for research properly safe-guarded in the act, because I do not want to lose revenue any more than does my hon. friend-I was going to say, not as much-I certainly do not want to lose it any more. On the other hand it is most important that we take a leading place among the nations of the world in scientific and technological progress. This is one way in which we shall make quite a spurt ahead.


Mr. ADAMSON:: I wish to make one
observation on this resolution which deals with research. I am afraid hon. members to my left are not on a sound basis when they argue against research. If there is one thing in connection with which we are backward in Canada, it is research. Our annual expenditures on research amount to about fourteen cents per capita, whereas annual expenditures in the United States run to several dollars per capita for the same purpose. If we need anything in this country, certainly it is more research. That is one of the few things about which we are extremely backward.
While the national research council may be housed in an amazing and very large building, nevertheless the percentage of research done in that building, or by the national research council, is infinitesimal when compared with the terrific research carried on by private industry, and in our individual plants throughout the country. Those plants should be encouraged. I do not think any industry in Canada is fulfilling its function unless it does a certain amount of research work.
I was pleased to see this provision in the British budget, and this was one of the features which received the greatest amount of praise from the trades union council. The minister may correct me if I am wrong, but I think the English allowed actually up to sixty per cent of a reduction of gross revenue for expenditures on research. I have not the figures before me, but I believe the percentage I have given is correct.
If there is one thing we need more than anything else, surely it is research, and we are going to need it in the world of the future. We shall need it in connection with new light metals and1 plastics. Where would we have been if RDX (Radar) had not been invented? Where would we have been, had it not been for the invention of the new explosive now being used, by the united nations in their heavy bombs? These were both Canadian inventions; and I submit that while one of

Income War Tax
them was largely the subject of research at McGill university, nevertheless they were not discovered at the research council.
Let us consider the research being done in connection with plastics. Some of the pioneering work was done at the research council, but it dove-tails in with the work being done by Massey-Harris, by the Bakelite company, and a number of other companies. That is the essential part of the work, and private industry is face to face with the problem twenty-four hours a day.
These people in Ottawa are doing pure research, but the people in industry are facing the problems, and are right up against those problems every day. What we need is a dove-tailing of the work of the national research council with the work done in industry, and I am of the opinion that this resolution will go a long way toward doing that. We should have had it some time ago; I have advocated it before. This is the one thing in connection with which we are backward _ in Canada, and I believe that every individual and every company should be encouraged to take more interest in the matter.


Paul Joseph James Martin: This matter is one which deserves comment from several members, instead of being restricted to one or two. Actually, I do not think there is much real difference between the views of hon. members who have already spoken. The minister has recognized the need for a safeguard to avoid the possibility of abuse. I think all of us would agree that no industry should be allowed, in the absence of any real intention to promote research, to use that as a means to escape tax obligations. The minister now proposes to provide in the bill the necessary safeguards.
But I think the observations made by the hon. member who has just spoken and by the minister wth respect to research, on the part of both the government and industry, would generally commend themselves to hon. members. I live in a section which is highly industrialized, one which competes very closely with a great city having industry on a large scale, and just on the opposite side of the river. There tremendous research enterprises are undertaken, and to an amazing degree. If hon. members ever have an oportunity of visiting the General Motors Corporation in Detroit, for instance, and look through their research laboratory, they will be amazed. I doubt if any university in this country has anything to compare with those laboratories.
We have to compete, and1 will have to compete with that sort of thing. One must recognize, then, the great need for research in our own plants. I have seen many of our graduates from our universities forced to go across the river and to take jobs over there because there were no adequate opportunities in these lines for them in Canada. If we can encourage industry, and particularly industry where there would be opportunities to engage in research, and to hire many of the products of our own universities, nothing but profit can ensue.
The national research council has been supported by the hon, member for Cape Breton South, and quite properly so. I think we cannot spend too much on the development of research, through government agencies. But government agencies alone cannot do the job. In that connection I remember a statement made by Doctor Tory in one of his reports of the national research council, wherein he pointed out the need for coordination between the work carried on by the national research council and that carried on by industry. So that, with safeguards preventing anyone from escaping tax responsibilities, I strongly support this resolution.
My main purpose in rising, however, was to suggest this, that not only is there an opportunity for industry itself in this provision, but there will be an opportunity in another direction, because the resolution provides that-
. . . expenditures in respect of scientific research directly or indirectly related to the taxpayer's business . . .
-are to be made deductible. This affords to industry an opportunity to do something which industry in this country has not done, and that is an opportunity to assist in scholarship endowments and, through direct financial grants, to assist the research work of our universities.
There are in this country universities which are carrying on research of tremendous value to industry in Canada, but which receive no assistance whatsoever from industry. I have one large industry in mind which was approached within the last six months by a university in connection with a grant to cover a certain scheme of research. It was a type of research from which the industry in question had profited for a period of eight years.
Under this resolution many of our universities, none of which is over-heavily endowed to conduct studies of this kind, would be afforded an opportunity. I have received a communication recently from Dalhousie university, through the social science and labour school established there. Here an opportunity was afforded individuals who wanted to assist in the development of social science research. The labour school is something that would commend itself to anyone interested in labour.
Income War Tax

However, the department took the view that contributions made by individuals to assist in these efforts were not deductible.
I hope the minister will find it possible under resolution 23 to permit contributions by individuals, companies or otherwise, in connection with the prosecution of the kind of thing concerning which I have spoken, and as it applies to Dalhousie university. I should hope this might properly come under the resolution now before us. I trust the commissioner who has this matter in hand will bear in mind what I have said, and that in interpreting resolution 23 he will afford Dalhousie university in the setting up of its labour school something which I think it deserves by way of encouragement.


George Hugh Castleden: Will this be available to farmers? Will farming be considered a business?


James Lorimer Ilsley: Yes.


George Hugh Castleden: There is no limitation suggested by the department with regard to the amount which any person can deduct in this manner?


James Lorimer Ilsley: Consideration will be given in the bill to providing safeguards and restrictions. I do not know just how far we should go. In Great Britain one of the reasons given by the chancellor of the exchequer for making a similar provision, going at least as far as this, was that he wanted to provide for buoyancy of revenue in the future. It is by no means a total loss of revenue when you engage in industrial research. You are casting your bread upon the waters.


George Hugh Castleden: I agree with that.


Clarence Gillis: As I pointed out to the minister, I am not going to argue this at all because I do not know enough about this. Our research laboratories have been practically at a standstill since the outbreak of the war in so far as research into peace-time requirements are concerned. They are doing a wonderful job on war -work for national defence, the army, the navy, the air force and munitions and supply. They are handling practically everything in that field that they are asked to do. But their staff is small, and attention should be focused on the necessity of staffing our research laboratories and getting ready for peace-time requirements.
When a private company develops anything new it may be put on the market, but it is sold at a price at which ninety-eight per cent of the people of this country cannot buy it. When anything is turned out by a private company it is sold at a price which does not

permit the great majority of the people to benefit. I have worked in one industry for thirty years, and what research have they carried on? What improvements have they made? None.


An hon. MEMBER:: It would have been better if they had.


Clarence Gillis: It would have been better if they had. They are carrying on a little research now at the Sydney steel plant. The federal Department of Agriculture has an appropriation for the development of a fertilizer and the provincial government is assisting. However, I noticed the other day that one of the provincial men who is working with them had to spend three or four days with our national research people getting the necessary information and polishing up on the thing in order that it might be completed. In the final analysis the real work is being done here.
I do not see any solution of the future of this country in research. No doubt a lot of it has to be done. We are in an age where we are in the hands of the scientists. But if these things are to be developed in such a way that they will not be available to the majority of the people, we shall be wasting our time. I do not think the people of Canada- realize the extent of our research facilities in Ottawa, and they should be extended and expanded so that we could make these things available to the people.
TTiese private companies tie up the patents after they develop these things. They would not release the method of processing fuel. A senate committee in Washington is trying to break the monopoly of the oil companies in this connection. This research was done many years ago, but the patents are held internationally by the oil companies and will not be used until those companies are ready to make them available. I have no intention of delaying the minister any longer, but I just wanted to make that one point. These-things should be made available to the people in order that they can use them, but if you depend upon private industry they will lock them away in their vaults until they are ready to release them.


Harry Rutherford Jackman: With the consent of the committee I should like to revert to resolution 20, which reads:
That the right of the minister to reassess or make additional assessments in respect of any tax year be limited to a period of six years from the date of the original assessment.
I wonder if the minister would consent to making that six years from the date of filing the original return.


James Lorimer Ilsley: Oh, no, I do not think so.

Income War Tax


Harry Rutherford Jackman: It is a long period, 6ix years of uncertainty. I think it is a condemnation of the department if the minister does not accept the situation. I had occasion to look at a company circular recently, and I think the return had not been returned or the assessment made final by the department going back to 1938 or 1939. After five or six years they may finally get the assessment from the department, and then there will be another six years during which the assessment can be considered and before it is made final. That would make a total of ten to twelve years. Surely six years after the filing of the return should be adequate for the department to make any necessary check-up, subject always, of course, to any fraud or the other reservations in the section. Otherwise I think it stands as a shocking condemnation of the department.


James Lorimer Ilsley: My first reaction is not favourable, but the hon. gentleman may think that is temperamental. This is a problem for the Department of National Revenue rather than for the Department of Finance.


Harry Rutherford Jackman: The resolution is brought forward for one particular reason, to give some certainty to business. I am pointing out that there is tire possibility of defeating the whole purpose. In the case I have mentioned, they are already six or seven years behind and now they want an additional six years before the assessment will be considered as being final. The department need never give an original assessment unless they see fit. This is one of the outstanding matters of administration in connection with our act and one of the cases where there is, shall I call it a loophole against the taxpayer and in favour of the government. This does not occur in the British and United States acts. We have never had a limitation in our act and now it is proposed -to make it six years from the date of the original assessment. The Minister of National Revenue has stated that his department is not so far behind, and if he is correct then there should be no harm in saying that the tax return shall be final six years after filing, and not after the date of the original assessment.


James Lorimer Ilsley: I can think of cases, perhaps not numerous, where litigation has extended over several years and you could not make a ne,w assessment. However, I do not think that is the main argument against the hon. gentleman's submission. At the present time there is no limitation; the Department of National Revenue could go back to the beginning of the Income War Tax Act and make
assessments if facts came to light which showed that a tax was payable. We are taking a long step in advance when we put a limitation on.


Harry Rutherford Jackman: You are catching up with other countries.


James Lorimer Ilsley: It may be. But we are taking a step in advance and I think we had better go a little slowly about this. We had better try the six years at any rate, and then if we can get the assessing machinery which can function very promptly, possibly the time could be counted from the date of the return. But we have not that, machinery at the present time. It is impossible to get the staff and it is impossible to make the assessment with great promptness.


Harry Rutherford Jackman: There has not been much pressure brought upon the Department of National Revenue because the same delay was in existence before the war. Then we had unemployment and accountants were seeking jobs. There is now the excuse that you cannot get additional accountants. Evidently there has been no pressure on the department up to date and it is high time that it should not longer be administered like a country grocery store.
24.	That the minister may allow depreciation at double the rates normally allowed in respect of .bona fide new investments made after a date to be declared by the governor in council; and. in such event, the .taxpayer will be required to charge in any subsequent year at least one-half the rates normally allowed: Provided, however, in the case of a sale of assets in respect of which special depreciation has been so allowed, the minister may revise the assessments of the vendor for the years when the special depreciation was allowed, by disallowing as a deduction a pro rata portion of the special depreciation allowed, to the extent of the excess of the selling price over the depreciated cost of the sand assets, less the amount of the depreciation normally allowed on the said assets, and less the excess, if any, of the selling price over the undepreciated cost of the said assets: Provided further that the portion of any loss attributable to the allowance of special depreciation shall not constitute a loss for purposes of resolution number twenty-two.


Harry Rutherford Jackman: Would the minister explain this?


Douglas Charles Abbott: As explained in the budget speech, the general purpose of this proposal for depreciation up to double the ordinary rates is to allow companies to proceed with planning for post-war expansion or conversion of existing plant to peace-time needs. It is impossible for the government to state at this time when the excess profits tax will be removed, but this feature will enable the income from peace-time projects to be applied
Income War Tax

against the cost of making the new investments at a time when the excess profits tax may still be in force. This, of course, does not mean that the profits from such new investment will escape taxation. It merely means that depreciation charges which are a proper charge against profits before tax may be taken at an accelerated rate from the beginning of such investment.
The measure is safeguarded by requiring an adjustment in profit and loss account in the event of subsequent sale of the assets in respect of which speedy depreciation has been allowed. Furthermore, any loss shown in profits and loss account as the result of this depreciation in excess of normal rates shall not be carried backward or forward as provided in resolution 22. A company is not compelled to take the double rates, although it must take at least half the normal rate allowed.
A similar provision exists with respect to accelerated depreciation granted by the war contracts depreciation board.


Paul Joseph James Martin: The minister always has the power of revising his assessment?


Douglas Charles Abbott: The point I am making is 'that if accelerated depreciation is approved by the minister, there is a provision that if the assets depreciated are sold, and sold before they would have been fully depreciated under the ordinary basis, then a portion of the special depreciation which has been granted is taken back into profits.


Harry Rutherford Jackman: What is the full import of that clause in regard to subsequent years, that it must take at least half the ordinary depreciation? I do not understand just what bearing that has.	*


Douglas Charles Abbott: Inasmuch as depreciation is going on anyway, you must start with something, and a business should not have the option of waiting four or five years until it has a profitable year and then plugging it all into that year. It must take some depreciation in each year.


Harry Rutherford Jackman: Even though they operate at a great loss they must take at least half the ordinary depreciation?


Douglas Charles Abbott: Yes, and they have the option of taking double.


Harry Rutherford Jackman: At the present time, without this section being in force, if a corporation does not show any profit at all what is the ruling as to taking depreciation? May they take it or not?


Douglas Charles Abbott: They must take half the
rates.


Stanley Howard Knowles: I shall not discuss the resolution at the length at which it might be discussed. As the minister and his assistant realize, it touches very closely the basic issue between the economic philosophy represented by the party to which my hon. friends opposite belong and the economic philosophy of this group. During the course of my speech on the budget debate I joined with others in offering certain congratulations to the Minister of Finance. I believe that he was not in his place, at the time so that I might repeat one of the things on which I congratulated him quite sincerely, and that was the clarity with which I feel he states his position so far as his economic philosophy is concerned and as regards what he feels should be the postwar policy of this country. He made it clear during the debate on the budget and in the debate on the second reading of the Bank Act that he feels that post-war Canada should be founded on the principle of strengthening private enterprise. It is an old idea-at least that is the way we characterize it-that if assistance is given to private enterprise, somehow or another the benefits of that assistance will filter down through to the community as a whole. The position we take is that that system has been tried and found wanting, and that the time has come, particularly in view of some of the experiences which this government and other governments have had during this war, to turn to the principle of wider public control of industry and of our economic life.	_ _
Further, I want to congratulate the minister on his consistency in this respect. From the position that he takes, this resolution represents a perfectly logical course to pursue. It is, as the parliamentary assistant has pointed out, very similar to the course that has been pursued during the war in the granting of huge amounts for special depreciation to certain firms about which we have spoken in this house from time to time.
I rise at this point only to say that we in this group feel that the country is taking a backward step if it is still held that we can depend on private enterprise or that assistance of this land can give us progress in the postwar world. I hope that the day will come when we shall have a government that will follow a different policy.
The minister when he referred to these resolutions in his budget speech on June 26 said that this provision would permit private industry to transfer some of its income from a period when war-time tax rates may still be in effect to a later period when the taxpayer may expect normal taxation. In other words, I think the minister will agree that it is correct to say that private industry is being

Income War Tax
given a chance to gamble on lower tax rates at a later period. That gamble has to be within certain limits, in that the depreciation may not be greater than double the normal rates nor can it be less than half the normal rates. But within those limits private industry is given this chance to gamble that tax rates are much higher now than they will be later on, and to say, "therefore let us get as much depreciation now as we can, while the tax rates in effect are quite high." I confess that from the minister's viewpoint that is at least consistent; it is a consistent way of encouraging private enterprise to try to build this new Canada which we hope will come after the war. My contention is that private industry has been tried and found wanting, and that, consistent though this may be with the minister's philosophy, it will not do the job which needs to be done in the post-war period.


James Lorimer Ilsley: I do not want to undertake now to reply to the hon. gentleman. He has, I think, made a fair statement of the issue. We are doing this to encourage investment by private enterprise; that is right, and we think the country will need it. He thinks the investment should be made by government, I presume, or some agency other than private enterprise.


Stanley Howard Knowles: Substantially that is so


James Lorimer Ilsley: We will not pursue that. But his leader made a speech on the budget to which I just want to refer. He said this, as reported in Hansard, at page 4351:
Here _ is another instance of the familiar subsidizing of private enterprises that cannot stand on their own feet. Its plain meaning, as I take it at least, is that the taxpayer is to put up one-half of the new investments but will get nothing in return.


Harry Rutherford Jackman: That is as far from the truth as possible.


James Lorimer Ilsley: The statement is incorrect, and I do not need to elaborate its meaning. The hon. gentleman (Mr. Knowles) who has just spoken knows the meaning of these matters pretty clearly, and I do not think he will contend that that statement is correct.


Harry Rutherford Jackman: I might point out that the statement of the hon. member for Winnipeg North Centre is entirely wrong, because he talks about these alleviations of hardship on business in some cases, and in other cases about certain incentives, as being something handed out to business. To me it has always been amazing that business has been able to stand the taxation put upon it, because business does not eat or consume the product which it has or it gets; it is simply an aggregation of people, who have got together
in the form of a cooperative, if you like, and have pooled their resources and created work for other people.


Stanley Howard Knowles: Aluminium Limited.


Harry Rutherford Jackman: Certainly if it had not been for United "States enterprise coming over here we would never have given twenty-five thousand Canadian workmen jobs, and as one of my colleagues on the committee said, all you could see was that there was a lot of water going to waste up there. No raw materials were taken out of Canada, but we have given twenty-five thousand men employment in doing a great job. One of the most wonderful contributions in the world has been made to the production of aluminum, and the water is still flowing down to the sea. It is a wonderful job which the Aluminum company has done. I do not think it would have been possible for either the Canadian government * or the people of Canada to have accomplished that great project without the assistance of this United States company. I may tell the hon. member that the company can produce in three days enough aluminum for Canada's requirements; the rest is all for export. What right would the people or the goverment of Canada have to go into that business under such conditions? However, I do not want to be drawn aside on that particular topic. We have talked about it before; we may talk about it at another time.
I wish to point out that business in this country is not left to itself; it is very heavily taxed; and in many cases there are-I will not call them penalties-exactions made upon business which make it almost impossible for business to go ahead. It was the purpose of this government, when war broke out, so to intensify taxation that it was impossible for any business dealing with civilian production to go ahead or expand. It was meant that these should be throttled, and they were throttled by the rate of taxation we have to-day. No measure could be more socialistic in peace times than a continuance of the taxation policy of the present government and I assume that it will not be continued. But I want to point out, contrary to what was said by the hon. member for Rosetown-Biggar, the leader of the C.C.F., in his remarks on the budget, that these are not a hand-out to business; they are a certain measure of relief because business is very heavily taxed in this country. To my mind it is wrong to tax tools. Business is simply a tool, and you cannot have employees unless you have employers.


James Lorimer Ilsley: Perhaps I misunderstood the hon. member for Winnipeg North Centre.

Income War Tax

I did not understand he was contending that we were making a hand-out to business, but if he was so contending I would not have agreed that that is what we are doing.


Clarence Gillis: That is not what he said, either.


Stanley Howard Knowles: No. The minister understood me correctly, but the hon. member for Rosedale did not quite get it.


James Lorimer Ilsley: If the committee will permit me for just a minute, the hon. member for Rosedale is correct in saying that we have put on very heavy taxation; and we have certain rules about depreciation which may be regarded as normal rules applicable to business as a whole. In cases of new investments there is a relaxation of these rules to some extent. That is not a hand-out to business.
The attitude taken by the C.C.F. generally is that when you get heavy taxes on business, no matter how heavy they are you should keep them there; you should1 never relax. We are always criticized, I think, by the C.C.F. whenever we relax taxation on business, and that is consistent with the policy, as I understand it, of the C.C.F. party, because they regard it as in the public interest that burdens on private business cannot be too heavy because private business is old fashioned; the way to build a new country is to have an entirely different organization of business; therefore it is in the public interest to make the burdens very, very heavy, and it is always against the public interest to lighten those burdens in any way.
It is not making a hand-out to adjust your taxation to some extent in order to encourage the expansion of business, and I do not think the hon. gentleman accused us of trying to make a hand-out here. But that is what I understand to be the issue between us. I do not complain about the C.C.F. when they come along and say, as the leader of the C.C.F. did in his budget speech, that we should not lighten those burdens no matter how brutally heavy they are, that they should stay there; that these people should not be functioning in that way and that the heavier the burdens the better. That is the belief of my hon. friends of the C.C.F. party. It is not mine.


Stanley Howard Knowles: I want to say, despite
such disagreement as there may be between the minister and myself, that his understanding as to the issue between us is quite clear. But there is just this change in emphasis in whi he has said now by way of describing C.C.F. policy in this respect to which I should like to point. The minister spoke as though

our only interest so far as taxation of business is concerned is to impose upon it the heaviest possible burden. Now, so long as you have the system of private enterprise, capitalism, in effect as we have it to-day, we feel that the taxes should be sufficiently heavy to drain off to the community as a whole the wealth of the community which in the first instance is getting into private hands.


Harry Rutherford Jackman: It does not get into
private hands. It is double taxation.


Stanley Howard Knowles: That policy must be distinguished from the positive policy which we feel should be taken under the kind of government we ourselves advocate. In power, our concern would be, not with what the minister feels to be negative forms of taxation, but with positive means of developing the economy of this country and increasing production. The difference between the minister and me, between the Liberals and the C.C.F., is that he and his party feel that production can be encouraged and employment increased by assistance to private industry such as the minister consistently provides; whereas we feel that these things can best be accomplished by the government itself in the name of the people taking the initiative, somewhat after the pattern which has been followed during the course of this war.


[Stage Direction]
Resolution agreed to.
25.	That the provision permitting a taxpayer to deduct from tax the amount paid to any foreign country for income tax in respect of the income of the taxpayer from sources therein, be amended -by deleting the requirement that such foreign country in imposing tax allow a similar credit to persons in respect of income thereof from sources within Canada.
Resolution agreed to.
26.	That the provision whereby a special payment by an employer to make up a deficiency in an employees' superannuation or pension fund or plan may be deducted from income over a ten-year period be amended to permit annual payments of one-tenth, or less, of such deficiency to be deducted from income in the year of payment.
Stanley Howard Knowles: I appreciate the arguments which the minister made about the taxation of annuities and also exemption from taxation in regard to payments into annuity funds, and I noted with interest his intention to set up a commission to study the whole matter. In the meantime, employees who make payments into superannuation funds find it difficult to understand the line of distinction drawn between some of these funds. For example, in the Canadian National Railways set-up, according to the information I have, payments into some of the pension funds are allowed as exemption from income before

Income War Tax
taxation, while payments into some other pension funds of the Canadian National are not allowed. I understand from a large group of electors I represent in Winnipeg North Centre, men employed in the Weston shops of the Canadian Pacific Railway Company, that payments they make into their pension fund, although they were allowable in connection with compulsory savings when that provision was in effect, are not allowable as deduction from income before taxation, and employees who are denied that right know that certain other employees who apparently are paying into the same kind of funds enjoy that right, and feel that there is an unfair distinction there. Can the minister give some explanation? While he is speaking on that point, he might give us some information as to his intention to have that commission set up.


James Lorimer Ilsley: With regard to the setting up of the commission, that will be done at the earliest possible date. I cannot say more about it than that, but we intend to get ahead with it. With regard to the distinction between the treatment accorded certain groups of employees and that given some others, roughly speaking it depends upon their own election. The best way for the hon. gentleman to get information is to apply to the Department of National Revenue, because the provisions are complicated. The general principles, however, are these. If the payments in are free from tax the payments out are taxable, and if the payments in are taxed the payments out are free from tax. That is the general principle and it is up to the employees to make election as to which they prefer. In this city the payments into the superannuation fund of the Bank of Canada are taxed and the 'payments out are free of tax, but the reverse is true of payments into the superannuation fund of the civil service. There the payments in may be deducted from income of civil servants for taxation purposes and the superannuation payments out are taxable.	Apparently, one group of civil
servants preferred the method applied to them, whereas the employees of the Bank of Carada, or the authorities of the bank, I do not know which, perhaps both, preferred the other plan. It is a question which is the more advantageous.


Stanley Howard Knowles: Do employees in all cases have a say in the matter? Take the Canadian Pacific employees to whom I refer.


James Lorimer Ilsley: It is the trustees of the fund that make the election.
100-305J


Stanley Howard Knowles: A difficulty arises from the fact that most people live in the present, and the employees in one railway shop who are paying taxes when the rates are high feel that it is quite a discrimination against them that they do not get exemption where some employees in some other shops do. I suppose the best one can hope for is that the commission will get to work soon and iron out some of these differences which are perplexing to the people affected, and which they feel to be quite unfair.


[Stage Direction]
Resolution agreed to.
27.	That dividends paid by a wholly-owned subsidiary non-resident company to a Canadian parent company be exempt from tax when received by such parent company.
Gordon Graydon: I do not wish to revert to a previous section, but I should like to inquire with respect to a particular matter and I am not sure that it is covered by any section so far as the resolutions are concerned. I have no desire to take up any considerable time, but could the minister indicate the present situation with regard to the commuters of Windsor district? This is a matter that has been drawn to the attention of a number of members of the house. There are 2,500 or 2,800 of these commuters.


Paul Joseph James Martin: Three thousand.


Gordon Graydon: My hon. friend knows
that better than I do. I should like an explanation from the minister as to why the government has seen fit up to the present time to refuse application for some adjustment with regard to these people who are working in Detroit and living in Windsor. I take it there are other districts that may be similarly affected, but my information comes entirely by correspondence and the minister will be able to clear the matter up quickly.


James Lorimer Ilsley: I do not see how in fairness we can permit the introduction of questions that have no relation to the resolution before the Chair, even by so distinguished a member of the house as the leader of the opposition. This may be brought up on other occasions. I, too, have had correspondence. I do not know that I can recall from memory the points at issue, but certainly they have no relation to this resolution.


Gordon Graydon: I was called out on some business for a moment when resolution 25 was being passed, and I felt that perhaps resolution 25 had a closer relationship to the subject
Income War Tax

which I wish to discuss than any other resolution, and it was with that that I was about to deal.


Paul Joseph James Martin: I had hoped-


William Henry Golding: Order.


Paul Joseph James Martin: I was speaking to the point of order. I simply wish to say I desire very strongly to speak on this matter, and I should like to know under what resolution it may be discussed.


James Lorimer Ilsley: What is the point at issue?


Paul Joseph James Martin: The point at issue, among others-


William Henry Golding: It has nothing to do with the resolution we
are now discussing. I think we should try to keep to the resolutions as they are.
That dividends paid by a wholly-owned subsidiary non-resident company to a Canadian parent company be exempt from tax when received by such parent company.


Stanley Howard Knowles: This is related to the resolution that I spoke on a while ago, resolution 24. I shall not take undue time, but I should like to make a brief statement and I will be concrete about it. Last year some of us had a good deal to say about the Aluminum Company of Canada and the provisions made to that company under the terms of P.C. 11745 of December 31, 1942. The Aluminum Company of Canada is part of the Aluminium Limited set-up, which owns to the extent of 100 per cent the Demerara Bauxite Company of British Guiana. It owns many other companies as well. I believe that comes exactly under the terms of this resolution which reads: "wholly-owned subsidiary non-resident company to a Canadian parent company." The Canadian company is Aluminium Limited, the wholly-owned subsidiary non-resident company is the Demerara Bauxite Company Limited of British Guiana.


Douglas Charles Abbott: If that subsidiary were in Canada its dividends would be exempt from taxation when received by Aluminium Limited?


Stanley Howard Knowles: Yes, I understand that; at least I know that the law provides exemption in certain cases.


Douglas Charles Abbott: Of company dividends.


Stanley Howard Knowles: Whether this one would fit the details of the act I am not too sure myself. What I wish to point out is when the special depreciation allowance was made under the order in council to which I have referred it provided for $117,000,000 which covered items of expenditure in Canada and IMr. Graydon.]
also items of expenditure in Newfoundland and in British Guiana for the Demerara Bauxite Company Limited. The schedule attached to P.C. 11745 lists those works in considerable detail, but it does not give the cost of each one. Therefore it is impossible to compute how much of this depreciation was for construction of works in British Guiana, but I made a dead reckoning sort of computation. I simply took the total number of items and set against that the number of items in British Guiana. In using that as the proportion, recognizing that it might be some millions of dollars out, it would seem to indicate that somewhere around $45,000,000 of this depreciation was allowed for the construction of works in British Guiana. Now, the works constructed down there with the assistance in this form include some pretty extensive items.


Douglas Charles Abbott: It is not assistance.


Stanley Howard Knowles: We are right back on last year's argument on that point.


Douglas Charles Abbott: They did not build whatever they built in British Guiana out of taxes that had not yet accrued, did they?


Stanley Howard Knowles: They built it with money that they were going to get and some of which they had already got in advance on contracts that were due to the war and that were being paid for by the people of the united nations.


Douglas Charles Abbott: Not by money provided by the people of Canada.


Stanley Howard Knowles: Then in turn they were permitted to deduct from their profits the total cost of this construction. I want to point out that this construction in British Guiana included some pretty extensive items, a great number of railroads and bridges, and the main item of course is the plant and equipment to produce 1,500,000 tons of bauxite per annum. Last year I checked on this matter in the library and found that that figure is more than three times the total annual production of bauxite in British Guiana before the war. In other words, through this means we have helped to make possible the building in British Guiana of a very extensive plant which is the entire property of Aluminium Limited, the parent company in Canada. Up to the present I take it the dividends on the operation of the Demerara Company which have come to Aluminium Limited have been taxable and yet, despite that arrangement Aluminium Limited has got along very well in the profits that it has been able to pile up year by year, and the dividends it has been able to pay. Entirely apart from any argument there may be between us as to the theory behind it, I cannot see the necessity

Rules oj the House
for granting relief on this point to a company such as this, particularly in view of the kind of assistance it has received. I say that recognizing the difference there is between us as to the definition of that word. I see that the Minister of Mines and Resources is interested in this. He and I had some arguments about this very subject last year relating to the question as to what the Canadian government eould do about the bauxite company since it was outside Canada. I now call to his attention the fact that it is wholly owned in Canada by a Canadian company and that these extensive developments were financed by this arrangement that we have detailed several times.
My point is that with all that assistance, with the arrangements that we have behind it, I feel that it is going a little bit too far to add to that this further relief from taxation, which, apart from whatever theoretical differences there may be between us, apparently is not necessary because of the profits that Aluminium Limited has been able to show on the old basis.


Douglas Charles Abbott: Only relief from what in effect is triple taxation. This is not relief to shareholders of Aluminium Limited from taxation.
Progress reported.


[Stage Direction]
At eleven o'clock the house adjourned, without question put, pursuant to standing order.
Friday, July 14, 1944