1946-07-24

[Stage Direction]
Sixth report of the standing committee on banking and commerce.-Mr. Cleaver.

[Stage Direction]
Twenty-fourth report of special committee on veterans affairs-Mr. Tucker.
37S6
Questions

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

Mr. CASTLEDEN:: 1.	How many Canadian army personnel have been returned to Canada in each month of the present year?
2.	How many dependents have been returned for each month of the present year?
3.	What is the number of (a) Canadian army personnel; (b) dependents, yet to be returned to Canada as at July 1, 1946?


Mr. LAPOINTE:: 1.
January 			 31,984	
February 			 31,000	
March 			 6,084	
April			 8,531	
May 			
June 			
Total 	
95,546	[DOT]2.	Wives	ChildrenJanuary 	
406	175February 	
517	323March 	1,302April 	
2,891	789May 	1,546June 	1,358Total 	5,493
3. (a) 11,352 as of 28 June, 1946; (b) Wives, 15,389; children, 4,238.


DISPOSAL OF WEARING APPAREL, BEDDING AND CAMP EQUIPMENT
Mr. KNIGHT:: What action is the government taking as to the ultimate disposal of the eighty-seven carloads of wearing apparel, bedding, and camp equipment referred to in sessional paper No. 248, tabled on Tuesday, July 16?


Mr. LAPOINTE:: Some items are required for use by the army and are being moved to the army distributing depot, Regina. Items not required by the army are being declared as surplus to War Assets Corporation for disposal.



QUESTIONS PASSED AS ORDERS FOR RETURNS


Mr. CASTLEDEN:: 1.	To what firms, corporations or individuals in, (a) Ottawa; (b) 'Montreal; (c) Toronto; (d) Winnipeg, have surplus, (1) scrap metal;

(2) plumbing fittings and fixtures; (3) electrical equipment; (4) Trucks; (5) passenger cars; (6) tractors; (7) machine tools and equipment; (8) aircraft engines; (9) non-ferrous metals; (10) clothing, been sold by War Assets corporation or War Assets Limited in excess of $4,000?
2.	What is the value of the sales made to each of such firms, corporations or individuals as of April 1, 1946?
3.	Which of the above firms, corporations or individuals are classed as "recognized dealers" by War Assets corporation?


INSPECTION BOARD-SALARIES
Mr. LENNARD:: 1.	How many people were in the employ of the Inspection Board of Canada on July 1, 1946, and what are their salaries?
2.	Who is the chairman of the board; who are the directors of the different departments of this board and what are their salaries?
3.	What are the duties at the present time?
4.	Have any new appointments been made to the board since the cessation of hostilities?
5.	If so, had these appointees seen service overseas?
6.	What was the total cost of operating this board from July 1, 1945, to July 1, 1946?


Hugues Lapointe: Return tabled.


NATIONAL FILM BOARD
Mr. FRASER:: 1.	How many different agencies has the national film board?
2.	Where are these agencies located?
3.	What are the functions of each of these agencies?
4.	How many workshops, or studios, are used by the national film board?
5- How many offices has the national film board ?
6.	What rent is paid for each of these offices, studios or workshops?
7.	How many employees are employed by the national film board?
8.	How many employees have been taken on
by the national film board since January 1, 1946?
9.	What amount is paid in salaries and wages per month, by the national film board?
10.	How many employees receive (a) $2,000 and over per year; (b) $3,000 and over per year; (c) $5,000 and over per year?
11.	What is the salary of each person who receives $5,000 or over per year?


Mr. CLANTON:: Return tabled.


EXCESS PROFITS TAX-REFUNDABLE PORTION
Mr. MCCULLOUGH (Assiniboia):: 1.	What is the total amount of refundable portion of the excess profit tax payable to Canadian companies for the years 1941-42-43-44-45?
2.	What companies will receive over (a) $500,000 as a refund on the excess profit tax; (b) what is the amount in each case?


Mr. McCANN:: An answer can be given to the first part of this question, but I do not think we can give an answer to the second

United Nations-World Health
part, because that is private business and should -not be divulged what companies will receive over $500,000 as a refund on the excess profits tax.


Mr. KNOWLES:: Why not?


James Joseph McCann: It is private business.



MOTION FOR PAPERS


Mr. DIEFENBAKER:: For a copy of all letters directed by the wartime prices and trade board or any of its officials to the head office of La Banque Provinciate du Canada or to senior officials of the said bank since the 1st of January, 1945, drawing attention to breaches of wartime prices and trade board regulations or other irregularities in connection with the rationing of sugar and butter, and a copy of all replies thereto.



VETERANS AFFAIRS


[Stage Direction]
Hon. DOUGLAS ABBOTT (Acting Minister of Finance) moved that the house go into committee at the next sitting to consider the following resolution:
That it is expedient to present a bill to authorize payment out of the consolidated revenue fund of losses, within the limitations therein provided, to banks incurred in respect of loans made to veterans resident and domiciled in Canada who have received or are entitled to receive a gratuity under the War Service Grants Act, 1944, and who have not elected to take benefits under the Veterans Land Act, 1942. Such loans to be confined to the purpose of establishing the veteran in business or professionally. Provision is also made for the payment of the necessary expenses of administration out of moneys appropriated by parliament.
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.


[Stage Direction]
Right Hon. L. S. ST. LAURENT (Acting Prime Minister): Mr. Speaker, on Monday the Final Act of the international health conference and the constitution of the world health organization were signed at New York by fifty-one of the united nations and by nine other nations. The signature for Canada was made by the Minister of National Health, and Welfare and the Deputy Minister of Health, Doctor G. B. Chisholm. There were also signed an intergovernmental arrangement

establishing the interim commission of the world health organization and a protocol designed to transfer to the world health organization the functions and duties now performed by the office Internationale d'hygiene publique.
I now table copies of these documents, and so that hon. members may have before them the text of the constitution, I ask the consent of the house to have it printed as an appendix to Votes and Proceedings.
A resolution will be introduced at this session if time permits to provide for the approval of the constitution.
At this conference Canada had as advisers, in addition to officers of the government, Doctor T. C. Routley, C.B.E., General Secretary of the Canadian Medical Association, and two former presidents of the Canadian Public Health Association, Doctor C. W. MacMillan, Professor of Public Health at McGill University and Doctor A. Groulx, chief medical officer of the City of Montreal. These distinguished representatives of the medicaL profession were in constant attendance throughout the whole period of the conference, and the government wishes to express its warm appreciation and thanks for services rendered in this way to their country and indeed, to humanity.
Doctor G. B. Chisholm, Deputy Minister of Health, acted as rapporteur of the technical preparatory committee which prepared the draft of the constitution. He was also chairman of the important committee of the conference dealing with administration and finance. The great value of his services in connection with the conference has been recognized by his selection as executive secretary of the interim commission of the new organization which will be charged with the task of setting up the new organization. This has necessitated his resignation as deputy minister of health, which has been accepted, and Doctor G. D. W. Cameron has been appointed in his place. Doctor Cameron saw service in the last war, graduated in medicine from Queen's University, holds the diploma of Public Health and has been director of health services of the department.
Canada has been named as one of the eighteen nations to constitute the interim . commission, which will carry on the work of organization until the required twenty-six states have ratified the 'constitution.
By these instruments the foundation has been laid of a single wmrld health organization, whose object is "the attainment by all peoples of the highest possible level of health." By the preamble the parties to the constitution declared that "the following principles are
United Nations-World Health
[Stage Direction]
basic to the happiness, harmonious relations and security of all peoples." The first principle was that "health is a state of complete physical, mental and social well being and not merely the absence of disease or infirmity."
The functions of the organization will be varied. There is a wide field where cooperative action between nations is necessary and where the organization itself through its executive board and general assembly can give leadership in the attainment "by all peoples of the highest possible level of health."
The conference was an outstanding success. It showed that in a matter of wide human interest like health, the nations could work together to establish a world organization on a sound foundation. The constitution of the world health organization, which has just been unanimously agreed to, is not a colourless compromise, but represents a constructive document of world-wide scope and immense human significance.
Stanley Howard Knowles: May I suggest to the
Acting Prime Minister that high priority be given to the resolution ratifying this constitution? I suggest that it be dealt with at this session, whether there is time or not.
Mr. ST. LAURENT: If want of time were [DOT]a physical obstacle, it could not be dealt with anyway, but it is hoped that this will be regarded by hon. members as one of the subjects that should have high priority in the .session.


Mr. GRAYDON:: May I ask whether the
interim commission to which the right hon. gentleman has just referred is carrying on its work now, and, if so, who is Canada's representative thereon?


Brooke Claxton: Perhaps I might be permitted to answer that question. The interim commission is actually sitting in New York and is carrying on its work there. Canada is represented on the commission to-day by Doctor T. C. Routley, who has stayed in New York for the purpose. Canada's permanent representation on the commission will be decided later, but it is hoped that Doctor Routley will be associated with it.


Gordon Graydon: May I say to the acting leader of the government that I am in considerable agreement with the hon. member for Winnipeg North Centre (Mr. Knowles) as to the desirability of early consideration of a matter so very important from the international point of view. I should think that this house would not need to take a great .deal of time in deciding that Canada desires IMr. St. Laurent.]
to have a part in what is regarded by many as the best testing ground and perhaps the best opportunity for international cooperation with respect to any subject in the international field.
Mr. ST. LAURENT:	When hon. members
will have had an opportunity to read the constitution I shall be glad to have a word with the leaders of the various groups and try to provide an appropriate moment to dispose of the matter without taking up more time than is really necessary.


Mr. COLD  WELL@: That is satisfactory.



TRAVEL ABROAD PASSPORTS TO EUROPE-CONDITIONS AFFECTING RETURN JOURNEY

[Stage Direction]
On the orders of the day:
Right Hon. L. S. ST. LAURENT (Acting Prime Minister): Mr. Speaker, I have looked into tibe question directed by the hon. member for Peterborough West (Mr. Eraser) on Monday last to the Minister of Mines and Resources concerning a certificate required) to be signed by persons applying for passports to enable them to go to countries outside the western hemisphere. As the issuance of passports comes within the jurisdiction of the Department of External Affairs, possibly I can answer the hon. member's question. The answer may help the public to understand why the formality is being required.
As the hon. member knows, the transportation situation was particularly difficult immediately after the war and travel beyond the western hemisphere was restricted to certain categories of applicants. As conditions abroad improved, these categories were broadened from time to time, and in June of this year the screening of applications for travel to countries beyond the western hemisphere was dispensed with. While there is now no screening process, transportation facilities will nevertheless continue to be limited for some time, and the government feels that it is only fair to warn all persons proceeding overseas that this condition exists. The passport office has, therefore, been authorized to endorse passports for any country on demand provided that the applicant signs a statement that he realizes the difficulty of obtaining transportation. The statement also acknowledges that the applicant realizes that the issuance of a passport does noit obligate the government of Canada to undertake any responsibility with regard to his transportation. It is thus made perfectly clear to the applicant that he will﻿JULY 24, 1946
have difficult travel conditions to face in connection with which the government may not be able to help him.
Mr. FRASER:: I thank the right hon.
gentleman.



NATIONAL FLAG


[Stage Direction]
On the orders of the day:
Mr. W. ROSS THATCHER (Moose Jaw):: Mr. Speaker, I should like to direct a question to the Acting Prime Minister. Is it the government's intention to have the house debate the recommendation of the flag committee this session? If not, will it give an undertaking that a Canadian flag will not be selected by order in council before the next session.
Right Hon. L. S. ST. LAURENT (Acting Prime Minister): I shall have to take the hon. gentleman's question as a notice. I have not had an opportunity of discussing the matter with my colleagues. It will be appreciated that the pressure on our time has been such that 1 need not apologize for not having had that opportunity. However, as soon as the opportunity presents itself I shall be glad to make a statement to the house.



LABOUR CONDITIONS


[Stage Direction]
On the orders of the day:
Mr. ANGUS MaeINNIS (Vancouver East): May I ask the Minister of Labour whether he has received the report of the conciliation board in the matter of the dispute between the Vancouver Daibi Province and the Vancouver typographical union?
Hon. HUMPHREY MITCHELL (Minister of Labour):: No report has come to my attention, and I think I can say, with the acting leader of the government, that I too have been under some pressure. As soon as the matter comes before me I shall be glad to inform my hon. friend.



WAYS AND MEANS

[Stage Direction]
The house in committee of ways and means, Mr. Macdonald (Brantford City) in the chair.

[Stage Direction]
2. That for the 1947 and subsequent taxation years the following deductions from income be allowed:
Income War Tax
(a)	$1,500 in the case of married persons and persons allowed a deduction equivalent to that of a married person and $750 in the case of all other persons;
(b)	$300 in the case of dependents not eligible for family allowances, $100 in the case of children eligible for family allowances and amounts not exceeding $300 contributed to the support of partial dependents.
The CHAIRMAN:: When the committee rose last night it was considering resolution 2 of the Income War Tax Act. Before the committee begins its discussion may I remind hon. members that this is one of the committees of the whole, and paragraph 2 of standing order 58 reads as follows:
Speeches in committee of the whole house must be strictly relevant to the item or clause under consideration.
It has been the custom in the past to allow general discussion on the first clause, but I would remind the committee that we are now on the second one, and all discussion should be relevant to that particular clause.


Mr. FLEMING:: Paragraph (b) of resolution 2 has to do with the allowance for dependents. I should like to mention particularly the provision in regard to dependent children under sixteen years of age. In explaining the purpose of this resolution the Minister of Finance said on June 27, as reported at pages 2915 and 2916 of Hansard:
I should like to make it clear that this proposal assumes the universal payment of family allowances to all taxpayers with eligible children from January 1, 1947. A taxpayer with a child eligible for family allowances will be assumed for purposes of income tax to have received family allowances, and will be given the deduction from income of only $100 in respect of such child. Taxpayers who are not now claiming family allowances for children eligible for them should make application for them to commence in the new year when the proposed measure will take effect.
I should like to submit to the Acting Minister of Finance that this is a harsh proposal for a number of people who prefer not to take family allowances. Surely it is arbitrary on the part of the government to say to them, "you must take family allowances or forego both your right to family allowances and your right to the deduction." Why should it not be possible for the department to continue the present basis, under which the taxpayer who is eligible for family allowances will take his benefit either in the form of family allowances or in the form of the larger deduction in respect of the support of the dependent child? It may be that it is easier for the departments concerned, National Revenue, Finance and National Health and Welfare, to do it in the way that it is proposed in this resolution; but the government should look farther than that.
Income War Tax

In actual effect, what does it mean? It means that some wage earners and salary earners from whose earnings deductions have not been hitherto made at the source will now become subject to deduction of taxes at the source, and those who do not pay their income tax on that basis-for instance, the man who is working on a commission or any basis other than salary or wages-will lose deductions he has hitherto enjoyed, in that the government will insist, in effect, on paying him his family allowances, and will take from him a larger sum in quarterly instalments of income tax. That seems an involved way of carrying on government business. In fairness to the taxpayers I suggest that the government owes them the duty to permit them the choice they now have of taking either the family allowances or the larger deductions.


Hon. DOUGLAS ABBOTT (Acting Minister of Finance):: Perhaps I had better say a word in answer to the comments which have been made by the hon. member for Eglinton. In the first place, of course, there is no compulsion on anyone to take family allowances. If the taxpayer is eligible to claim and receive family allowances, it is optional with him whether he does it or not; but under the system proposed 'by the resolution, if he fails to do it the exemption which he can olaim for his child will be only. $100. My hon. friend has pointed out-


Donald Methuen Fleming: That is in effect
compulsion.-


Douglas Charles Abbott: It is not compulsory. He forfeits a certain amount of money each year; the average is $72 per child-^that is perfectly true. There are serious administrative difficulties in adopting a system such as my hon. friend suggests-difficulties particularly for the employer, because he would have to have one deduction for those employees who receive family allowances, and another deduction for those who do not. There would be administrative difficulties for the tax department in ascertaining whether or not family allowances had been claimed. There would have to be a complicated exchange of information. In my view what is more serious is that it implies that there is something wrong in a taxpayer taking family allowances who is eligible to receive them. It is true that on balance in the higher income bracket the taxpayer derives no net advantage from claiming family allowances under the system as it stands to-day. Under our proposed system, of course, he does, and' taking into account all the factors, the greater ease of administration so far as the employer and the tax department is concerned, and the fact

that parliament 'has approved the principle of family allowances, has declared that it is a desirable principle, I suggest it is not imposing any heavy burden on a man who is receiving five or six or seven thousand dollars a year to make a claim and1 receive the cheque once a month. There may be some practical disadvantage in the fact ttha/t his wife receives it instead of himself, but that is beside the point.


Donald Methuen Fleming: I take it that the government has made up its mind on this matter.
' The minister says that there is no compulsion. I say there is, in effect and in practice, compulsion. The government is saying to any individual who has Children eligible for family allowances: Apply for and take your family allowances, or you forfeit both your right to family allowances and your right to $200 of deduction in respect to the maintenance of that child. That is in effect compulsion.
The minister also says parliament has approved the principle of family allowances, and he goes on to conclude that therefore everybody ought to take them. I say, Mr. Chairman, there ought to be a measure of freedom allowed in a case of that kind; but that measure of freedom is to be taken away from those who do not choose to accept the family allowances by the proposal now before us, and I submit that is a definite interference with reasonable liberty on the part of these taxpayers involved. The fact that parliament has approved the principle of paying family allowances to those entitled is no reason why parliament should say to every taxpayer in this country, "You must take the family allowances or you lose the benefit of a deduction of $200 in respect of each child of yours under sixteen years of age."
I make this observation on the administrative problem involved. In his remarks I think the minister has placed a high premium on the ease of administration.


Douglas Charles Abbott: Ease for the employer, too.
I emphasized that, as well as ease for the taxpayer.


Donald Methuen Fleming: All right. I am speaking now of the minister's remarks in reference to ease of administration in the department, and I may refer to the employer in a moment. The minister has placed a high premium on ease of administration in the department, when that ease is to be carried to the lengths proposed in this resolution. What does it mean in effect? It means the government is making people take a larger income by accepting benefits from the government, and making them pay higher taxes.	,

Income War Tax


Douglas Charles Abbott: It is not taxable.


Donald Methuen Fleming: In effect that is what it comes down to. The taxpayer is called upon to swell his income by accepting certain benefits from the government, and then to pay the government a tax on the amount he has received from it.


Douglas Charles Abbott: No.


Donald Methuen Fleming: Certainly that is what it amounts to. It means the taxpayer is being called upon to accept from the government on the one hand, and to give back to the government on the other, because his tax is going to be higher.


Douglas Charles Abbott: As my hon. friend knows, or should know, the family allowances are not included in the taxable income.


Donald Methuen Fleming: It comes down to this, that the taxpayer will be paying higher taxes because he will get a lower deduction in respect of his children. Surely the sensible thing to do is to allow the taxpayer the choice. Let him have the right to take the family allowance or the right to take the higher deduction in respect to the maintenance of the children. Surely if the government is going to say to the individual, "Take the family allowance and pay a higher tax, because your deduction in respect to your children is being lowered by $260," it is simply creating two transactions which I submit are unnecessary. It is carrying the ease of the department in simplified administration to the point where I think it is done with less than adequate consideration for common sense and for the rights of the taxpayers. I sometimes think, Mr. Chairman, if that proverbial man from Mars dropped down on this earth and heard the Canadian government saying to a taxpayer, "You accept this cheque we are handing you and then turn around and pay us higher amounts in quarterly instalments or by way of deduction from your salary or wage, and keep that circle going " he would prefer to return to Mars, thinking we were a pretty crazy people.
I have one final observation about the other point made by the minister. He touched on the simplification of the task of the employer in respect to making deductions. Well, Mr. Chairman, the government gets out forms; there seems to be no lack of them. Why should it be an insuperable obstacle in this instance? Why not say to the employer: If the employee chooses to accept the family allowance, this is the form to use. On the other hand if the employee choses not to take the family allowance but to take the deduction of $300 in respect of each child under sixteen years of age, form No. 2 should
be used. Surely there is no great load cast on the employer in that respect. I can only conclude that the ease of the department in respect to family allowances in administering the Income War Tax Act is being exalted above the fair rights of the individual taxpayer.


Douglas Charles Abbott: May I just comment on
that?


Mr. HACKETT:: I was going to add a
few words, and perhaps the minister could comment on the little I have to say when he offers his comment on what the hon. member for Eglinton has said.
My objection to the provision is not one of convenience but one of principle. I object to being put into a class of government annuitants whether I wish to be or not. I object to a government making me a beneficiary of the state whether I wish to be or not. It is the violation of that elementary principle of liberty that I object to here. If I am not content to become an annuitant of the state the penalty is that I lose a direct benefit to which I am entitled as the father of a family. That is significant of an era which unfortunately is not new to hon. gentlemen opposite. There was a time when we looked upon the Liberal party as a Liberal party, a party which adhered to the doctrine of Liberalism, freedom, and respect for individual liberty. To-day we find that doctrine violated in almost every measure coming before this house. When we are told that, whether we will it or not, whether we need it or not, we must accept money which the government offers us or be fined, I say that is a denial of the elementary principles of which we as Canadians have been proud and of which hon. gentlemen opposite have held themselves out as the great protectors and advocates. This instance in itself is not of grave importance, but it is indicative to me of an attitude which is contemptuous of individual freedom. I resent it and I object to it.


Douglas Charles Abbott: Perhaps I might deal with one subject at a time. I have no desire to comment on my hon. friend's exposition of the principles of Liberalism, because I have never looked upon him as an outstanding expert in that field. On the question raised by the hon. member for Eglinton, there is one fact that perhaps he has overlooked: that is, that it may well be in the interests of the taxpayer to receive the family allowance rather than rely on the exemption. There are bound to be a good many marginal cases where it is impossible for a man to know in advance what his income is going to be for a particular year. If he were to follow the system we
Income War Tax

followed last year and exercise an option as to whether or not he receives the family allowance relying on his being in an income bracket which would mean that it would be of no benefit to him, in the result during the year it might well prove that his income would fall below that figure and it would turn out that he had made a choice that was to his disadvantage.
There is no greater compulsion exercised here than in asking a man to declare in his income tax return whether he has children of an age which entitles him to the exemption. In other countries in which family allowances are in force there is no option; family allowances are paid on a universal basis to taxpayers who are eligible to receive them. Taking all the factors into account the government has come to the conclusion that the system which is proposed under the terms of this resolution is one which is in the interest of the taxpayers and of the government, which after all is the government of the people.


John Thomas Hackett: Would the minister be good enough to mention the countries in which these allocations are forced upon people whether they wish them or not?


Douglas Charles Abbott: The United Kingdom,
Australia and New Zealand.


John Thomas Hackett: They all have socialistic governments.


Mr. PROBE:: Far be it from me to come to the defence of the present government, but I listened with some amazement and amusement to the professions of principle propounded by my eloquent friends to the right, when they said they were forced into the position of becoming annuitants of the state whether they wished to be or not. I should like to remind 'the house of what took place quite commonly throughout parts of this country in the early years of the war when the government was pressed for funds to prosecute the war. Many citizens in this and in other countries objected to taking interest on moneys lent for the prosecution of the war. I have many friends in that category. They lent their money to the government without any return of interest, because their principles were such that they would not permit themselves to receive profit from the war. My good friends to the right are not prepared to stand by their professed principles, when to do so would cost them a few dirty pennies. It seems to me that they are off on the wrong foot this morning.
However, I did not rise particularly to take issue with them on this matter, although I feel it keenly. I rose ito ask the minister what

constitutes married status. I receive letters from time to time from married men who are earning their incomes in this country, but whose dependents are abroad. Owing to circumstances beyond their control, during the war years they were unable to remit moneys to their families. I believe that under income tax regulations this prevented their considering themselves as married persons for income tax purposes. Would the minister explain what relief a married taxpayer might have in the event of his permitting someone else to assume temporarily the obligations for the support of his family abroad?


Douglas Charles Abbott: The regulations with respect to dependents of a class to which the. hon. member refers are found in rule 3 of section 2 of the first schedule to the Income War Tax Act. The section reads as follows:
A taxpayer may deduct $150 from the graduated tax otherwise payable by him in any year under this section if, during the taxation year, such taxpayer was-
(a)	a married person who supported his spouse and whose spouse was resident in any part of His Majesty's dominions or in a country contiguous to Canada, or, residing elsewhere, was a subject or citizen of a country associated or allied with Canada in the conduct of the war which commenced in September, nineteen hundred and thirty-nine, and was prevented by reason of such war, or prohibited by law, from entering or landing in Canada.
That covers the wife or husband who is in another country, the taxpayer residing here. Then, under the heading of "children," paragraph (b) refers to-
(b)	a person with a son or daughter wholly dependent upon him for support, if the son or daughter was, during the taxation year,
(i)	under eighteen years of age;
(ii)	eighteen years of age or over and dependent by reason of mental or physical infirmity; or
(iii)	under twenty-one years of age and a student at a secondary school, university or other educational institution.
This paragraph gives the same residence qualifications as apply to the wife or husband. I do not know whether that answers my hon. friend's question. If it does not, perhaps I might add that it would be a bit easier to discuss this question when the bill is before us. On the other hand, if he cares to pursue it further at this time, I shall be glad to try to clear the matter up.


John Oliver Probe: I should like to know whether the fact that it was impossible, because of exchange regulations, to send the money abroad, prevented such a married person from being classified as such.


Douglas Charles Abbott: I am advised that in cases where it was impossible to remit moneys to foreign countries-as, for example, in the case

Income War Tax
of China-the departmental practice 'has permitted a trust fund being set up here into which moneys can be paid, irrevocably. That would avail as justifying a claim for dependency, which of course would mean that some other arrangements would have to be made in the meantime for the support of the person abroad. I am informed that that is permitted under departmental practice.


John Oliver Probe: That regulation is in effect?


Douglas Charles Abbott: Yes.


Mr. LOW:: I have listened with a great deal of interest to the discussion which has taken place respecting the effect of family allowances in our income tax schedule. I am hoping that some hon. members are not taking this too lightly.
I have had experience in the administration of income tax regulations, and I believe I know something of what the minister and his staff would be facing. I do not blame the officials of the income tax branch for seeking some relief for themselves, as well as for the taxpayers. I know what the job is. But I know, too, that there are fairly large groups of people who, because of deep convictions, are not accepting family allowances. Their convictions will not allow them to do so, because they have always had a spirit of independence. Those same substantial groups of people have taken the same view with respect to relief. Over the years they have cooperated among themselves to remove their numbers from the relief rolls of the countries in which they live. As I have said, that was done to maintain so far as possible under existing circumstances that spirit of independence which, it seems to me, is of great importance in any people. Under the new income tax proposals we are going to kill that spirit, because we are going to force those who by conviction have refused to become wards of the government in any respect, to accept family allowances, or in the alternative to be penalized to the extent of $72 per child by way of extra taxation.
I point that out because to my mind it is important. I should not like to see anything done which would destroy the independent spirit of any group of people, I do not care who they are. I would rather by all means do everything in my power to assist the government or the administrators of the Income War Tax Act to find a way by which they could give those people a choice in the matter. If this is humanly possible, let us find that way.
I am not now speaking against family allowances, because I have always felt that they were a good thing. But I certainly do
not like to see anything done that would destroy such a splendid spirit as we find among several groups of people, with one substantial group of which in Canada I am familiar.


Mr. COLDWELL:: I find it difficult to
understand that argument, coming from my hon. friend, because, as I understand it, the theory of my hon. friend is that everyone in the country should receive a dividend from the state.


Mr. MACKENZIE:: Of $25 a month.


Major James William Coldwell: Both millionaire and pauper. I must confess I find it very difficult to follow his argument.


Solon Earl Low: You would, because you believe in compulsion.


Major James William Coldwell: I do not believe in compulsion. I say to the hon. member that his former leader stated categorically that dividends would be paid to millionaire and pauper; I remember the phraseology very well. Apparently the intention was that every millionaire would receive it as well as every pauper. However, I am not dealing with that at the moment.
It seems to me that the net result of this provision is that it does not make any difference whatsoever to the individual whether he accepts the family allowance or not. The point is that it places everyone in the country on a basis of equality, and on the basis of equality, not on the basis of compulsion, I believe it should be supported by hon. members
It is all very well to talk about interference with the liberty of the subject, but I get a little nettled when I hear people talk about the liberty of the subject who when they were in power compelled hundreds of thousands of people to stand in line and ask for pittances. There never was a time in the history of this country when people were so regimented and compelled to accept poverty as when my hon. friends were in power from 1930 to 1935. To hear this kind of thing about this budget seems to me to be fantastic.


Solon Earl Low: There are two things I think I must answer to-day. I can quite understand what the leader of the C.C.F. has said, because his whole programme is based on compulsion.


Major James William Coldwell: It is based on the liberty of the individual. These are the compulsory people on my right.


Solon Earl Low: In the first place, the Social Credit group has never offered a programme based upon compelling anyone to accept any-
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thing. Whether or not a person accepts the dividend is his own business. He must register for it, and he has to make known his readiness to accept it. If he does not want to accept and if he does not want to register, he will not have to take it


Douglas Charles Abbott: The same applies to family allowances.


Solon Earl Low: The second point is this. As to compelling people to accept poverty, that is quite a different matter from compelling them to accept any person's or party's formula for getting out of poverty. Our whole programme is based upon choice. The individual has complete freedom to choose whether or not he will take a certain action. We have always supported the principle of family allowances, but we certainly do not want to lend our hand to making them compulsory. I am not saying that that principle is exactly the principle the minister has in mind, but I do say that the arrangement now being worked out does not give the people any choice except on a penalty. That is the thing that counts.
We believe in the distribution of the tax load according to ability to pay-I think we can all accept that principle. But you are not arranging the tax load according to ability to pay if you force people to accept family allowances as a condition of receiving a tax reduction. That is the principle I take exception to. Does the minister not think it is a serious matter to force an apparently substantial group of citizens who have deep convictions against the acceptance of family allowances into the position either of registering for them against their convictions or, in the alternative, of losing $72 per child?


Douglas Charles Abbott: Perhaps I might just say a word on this question of compulsion. In the first place, under our income tax law as it now stands and as it has stood for some years, those of us with incomes above a certain level have in fact been receiving family allowances. I have received a tax credit each year on my income tax of $108 for each of my three children. That was a form of family allowance to me as a taxpayer of $9 per month. It was not called a family allowance, but I was given a tax credit which meant that I paid $108 less tax every year for each one of my three children because they were under a certain age.
In reply to the impassioned plea of the hon. member for Stanstead that he did not want to be forced to accept anything he did not want to accept, let me point out that hon. gentlemen opposite have advocated old age pensions at sixty-five years of age without 
a means test. The other day I read through the statement made by the leader of the opposition on May 15 of last year when he advocated just such a policy. I cannot see any difference between an old age pension at sixty-five without a means test, payable to millionaire and pauper alike, and the payment of family allowances for all Canadian children under sixteen years of age.
I am advised that at the present time there are approximately 3,350,000 children for which family allowances are being paid, and that the change will add only about 150,000 to 175,000 children to the rolls. I cannot agree with the hon. member for Peace River that this is an objectionable form of compulsion. I do not think there is any more compulsion in it than to ask a man to declare in his income tax return whether he has children under sixteen years of age in order to get a S10S tax credit for each child. I understand that my hon. friend's group have advocated that we should pay old age pensions to all people over sixty-five years of age without a means test. If one is in favour of the principle of family allowances, and it has been endorsed by the house-I have yet to see a single hon. member stand up in his place and oppose it-[DOT] then I say that no one should have any objection to filing a formal claim.


Solon Earl Low: May I have an answer to my question? I did not attack the principle at all, but I ask the minister, does he not think it a serious matter to force family allowances upon a substantial group of people who by conviction are against them, or put them in the position of being penalized to the extent of $72 per child?


Douglas Charles Abbott: I can answer that quite easily. Family allowances are part of the law of the land. If any citizen, by conviction or otherwise, feels that he does not want to accept this payment of $72 per year, that is his inalienable privilege as a British subject. However, he must be prepared to forfeit some monetary advantage because of his conviction. I do not think it is an improper use of government power to say that in common with millions of other citizens 'he should accept it, or if he does not, because of one reason or another, see fit to do it, that he should.


Donald Methuen Fleming: Some things have become clearer in the course of this discussion. Let us examine some of them for a moment. In the first place, the Acting Minister of Finance has said that family allowances are part of the law of the land, but I do not think it is the Jaw of the land that those who are eligible for family allowances must accept them or

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lose. Surely the basis of our present family allowances is that people with children under sixteen years of age are entitled to a monthly payment in respect'of each child if they choose to receive it. But now the government has tacked something on to that, and it says: Whether you like it or not, you must take that Benefit, you must apply for it and accept it from the government each month or you are going to lose certain benefits. The minister has said that after all there is no difference. He says, speaking for himself, "I in effect was receiving the family allowance". I controvert that principle entirely. The minister was not receiving a family allowance; the minister was enjoying a right given to him by the law of this land, either to accept the family allowance, and forgo certain deductions, or to take those deductions.


Douglas Charles Abbott: I had that right before there was any family allowance.


Donald Methuen Fleming: That right should be enjoyed by anyone. The minister is asking that parliament give to his personal judgment -his own preference, apparently, as it is now -the force of law for all citizens. He says: I think it is better that everyone should take the family allowance; therefore we are going to make everyone take the family allowance, and we are going to make everybody pay more income tax because we are going to reduce his deduction accordingly. I say that that is an evasion of the rights of the individual. It means that the government has made up its mind that everybody is to become the ward of the state-an annuitant, to use his own expression, whether he wishes it or not.


Douglas Charles Abbott: I did not use the word "annuitant"; that was your friend from Stan-stead.


Donald Methuen Fleming: And it does not influence me in the least to take a view in favour of a resolution of this kind to see the leader of the C.C.F. rise and give it such vociferous support. If we want any better proof of the fact that inherent in this resolution is compulsion, you need no better evidence of it than the support given it to-day by the leader of the C.C.F.


Major James William Coldwell: Oh, how ridiculous!


Donald Methuen Fleming: I do not know when gentlemen sitting to your right, Mr. Chairman, are going to wake up to the fact that they are being led down the path by the C.C.F., when they go on welcoming so enthusiastically, as they always do, the way in which the leader of the C.C.F. comes to the government's rescue, as he so often does.


Ian Alistair Mackenzie: The Tories favour
reaction; that is the whole story.


Donald Methuen Fleming: If the Minister of Veterans Affairs has now decided that he is going to talk in the same tone as his colleagues, and not talk in different tones as he was doing on housing not so long ago, perhaps we can pay some attention to what he is saying.


Ian Alistair Mackenzie: I was here long before you were heard of.


Donald Methuen Fleming: If the Minister of Veterans Affairs goes on speaking as he is doing on the subject of the "aftermath", somebody one of these days is going to write finis to his career.


Ian Alistair Mackenzie: Are you against family allowances?


Donald Methuen Fleming: I am in favour of a system under which people will be allowed to accept family allowances, or not to take them without having a club held over their heads.


Mr. MARTIN:: Tory reaction.


Ian Alistair Mackenzie: Go back to the eighteenth century where you belong.


Donald Methuen Fleming: It is too much to expect consistency from the Liberal party; and as for the leader of the C.C.F., he is living in the events of fifteen years ago. The Progressive Conservative party is living in modern times; it does not continue to live in the dark days of the ninteen-thirties.


An hon. MEMBER:: When your party
was in power.


Donald Methuen Fleming: The Liberal party was
also in office in those days, and hon. members opposite can take what happiness they can get out of raking up the misfortunes of the people who suffered in this country then, as they suffered in every country in the world during the depression. So far as we are concerned we have learned some lessons from the experience of this country along with other countries in those days. I wish my hon. friend the leader of the C.C.F. would learn some lessons too.


Paul Joseph James Martin: Are you still opposed to
family allowances?


Gordon Graydon: Get a new record.


Donald Methuen Fleming: Again we hear this question being parrotted by the Secretary of State.


Some hon. MEMBERS:: Oh, oh.


William Ross Macdonald: Order.


Paul Joseph James Martin: Are you opposed to family allowances?
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Ian Alistair Mackenzie: Are you for or against?


Donald Methuen Fleming: If that question is the only contribution which the minister is able to make to this debate-


Paul Joseph James Martin: Are you opposed to family allowances?


Donald Methuen Fleming: I should be glad to give the answer. I have repeatedly said that I am in favour of a system of family allowances; I always have been, but not on the basis of holding a gun to people's heads and saying to everybody: "You have got to take it-or else." For the benefit of the leader of the C.C.F., who is still living back in the early thirties, I should like to give him a quotation from a speech delivered by a man whom, perhaps, my hon. friend the leader of the C.C.F. may yet succeed as leader of the Liberal party.


An hon. MEMBER:: Hear, hear.


Gordon Graydon: There is a supporter
over there.


Donald Methuen Fleming: Frankly I think his
chances are about as good as anybody's.


Some hon. MEMBERS:: Oh, oh.


William Ross Macdonald: Order.


Douglas Charles Abbott: Which resolution are we
on?


Donald Methuen Fleming: The speech to which I
am referring was made by the present Prime Minister of Canada when he was still leader of the opposition, in a hectic election campaign, on October 1, 1935.
Mr. TOWNLEY-SMITH:	Away back
there in the thirties!


Donald Methuen Fleming: I am giving this for the
benefit of the C.C.F., who have thrown up references to that period. This speech was made in Winnipeg. Making all due allowances for the fact that the Prime Minister delivered this speech in the heat of an election campaign-and we know that his speeches in the heat of election campaigns do not always jibe with the things he has said in this house, or with some of the things his cabinet ministers have been saying and parrotting since-this is what the Prime Minister said, as reported by the Canadian Press:
"I say that in making these promises Mr. Bennett set an example-"
He was speaking of Mr. Bennett's reform legislation in 1935; and if any members of the C.C.F want to say that they are opposed to that legislation I shall be glad to give them the opportunity.
". . . in making these promises Mr. Bennett set an example that is thoroughly immoral and

thoroughly wrong and which, if it is followed in the future, will lead to the ruination of this country."
"Where is the difference," asked Mr. King, "between offering a great body of people $25 a month and going into a man's home and putting $25 into his hand in exchange for his vote?"
And then there was an interjection:
"Bribery," came a voice from the gallery.
"Someone said bribery," said Mr. King. "I say any party which seeks to obtain office by offering money out of the public treasury, whether in the form of cash or in the form of projects to benefit certain persons, is departing from the only basis on which you can keep a nation straight in regard to the administration of public affairs."
When you add to that, Mr. Chairman, the element of compulsion, I say that this government is trying to thrust down the throats of the people benefits which ought to be available to them if they want to take them, but as to Which they should have an opportunity of making a choice, as they have to-day, instead1 of being compelled to take these family allowances. It does not seem to matter one iota to hon. gentlemen opposite that they are going to continue with this apparently endless process of building up a bureaucracy, creating more transactions for the government, making people more dependent on the government. Here is what it comes down to. The Minister of Finance and the hon. member for Rosetown-Biggar have made up their minds that they prefer to see people compelled to take the family allowance-not given a choice. So far as I am concerned I insist that the principle is sound, and should be observed, that people shall still have the opportunity of saying whether they choose to take the deduction or whether they choose to take the family allowance.


Major James William Coldwell: May I just say one word? The hon. gentleman who has just spoken threw in an innuendo when he quoted from a former speech of the Prime Minister. Whatever I may think of the Liberal party,
I hope that among its own membership it could- find a successor to the Prime Minister and not have to follow the example of the Tory -party, who hunted from one end of this dominion to the other and then had to accept a gentleman who had always been opposed to them.


Gordon Graydon: A pretty successful hunt.


Ian Alistair Mackenzie: "Strike one!"


Gordon Graydon: The marriage is complete.


Mr. POULIOT:: I appreciate what the hon. member for Rosetown-Biggar has said about Tory leadership, [DOT]which must have reached rock bottom, because for the second time

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they have looked to the Liberal party to lead them. The two last leaders of the Tory party were former Liberals. However, that having been said, I rise as a peace maker for the second time in my parliamentary career, and I wish to absolve all my colleagues in the house, those belonging to all parties and groups. I will say that if they were not so careless at times we would not be in such a jam.
I have here a paper which was widely distributed during the election of 1935. It is entitled "Taxes." It was distributed by the Liberal party, and the one who was responsible for it was the member for Temiscouata, because he was asked by the member for Quebec South (Mr. Power) to prepare a list of taxes imposed by R. B. Bennett and his government, to serve as political propaganda during the election. It was my deep conviction that the Liberal party would come back to the taxation that existed before 1930 that caused me to prepare that list. The list gave all the taxes imposed by Bennett during the five years of his regime, and I expected them all to be erased, to be struck out by the Liberals, so that we would return to the happy days prior to 1930. That was my purpose, and the paper was widely distributed throughout the country. Those figures can be found in Hansard. If hon. members are doubtful about it they may go to Hansard of 1935, where they will find a list of the taxes imposed by the Bennett government from year to year, from 1930 to 1935 inclusive.
There was the sugar tax, and there were many other taxes. They were all to go, but none of them has gone. I will show what comes under this heading of taxes.


Ian Alistair Mackenzie: Why don't you read it?


Jean-François Pouliot: I have a French copy, but it was published in English as well. I will read part of it to show that before 1930 the government thought more of man-power, especially young man-power, than it did afterwards. I remember a speech which the hon. member for Peel delivered on March 3, 1943, when the social legislation was brought down. He spoke after the Prime Minister and said that when the war was over we would have to pay more attention to man-power. More attention should have been paid to manpower at that time, and always, because manpower is the greatest wealth of the country- not only gun flesh, bodies to be slaughtered, but brains with which to think, brains to help to get the country out of the hole in which it is. I have the greatest respect for my fellow citizens and I believe that all the gold mines in the country, all the inanimate wealth, all
the deposits in the banks, are as nothing compared to a brain that is working normally, the brain of a child or the brain of a grownup. Therefore I appeal to the brains and the intelligence of my colleagues when I speak to them now, and I hope that they will be conscious of their responsibility.
Let us see what happened. The exemption from income tax for married couples in 1930 was $3,000 and for single persons it was $1,500. In 1932 Bennett reduced the exemption for married persons from $3,000 to $2,400 and for single persons from $1,500 to $1,200. Then it became much worse from 1933 to 1935. The exemption was reduced for married persons from $2,400 to $2,000 and for single persons from $1,200 to $1,000, while for children it was reduced from $500 to $400. Hon. members must remember that until then the exemption for young children who were dependents was $500. To-day it is a miserable pittance compared to what it was then, because at that time man-power was better regarded than it is to-day.
Think of it-a reduction from $500 to $400. Everyone complained at the time. I said it was wrong, and I said so with sincerity because I hoped that my party, the Liberal party, would return to the old traditions which I knew before Bennett came to power. And now we have the same rule as when Bennett was in power-and I do not apply that reproach to Mr. Elliott, the deputy minister of taxation, or to the taxation branch of the government, but to the crazy fools who made the financial policies of this country, and who think only of destroying the purchasing power of individuals. I do not understand why the leader of the C.C.F. and the member for Eglinton, both well gifted colleagues, talk about compulsion. Each tax is a compulsion. Each tax destroys the purchasing power and destroys the personality of one man. Everyone will agree with that. Why single out any tax when all taxes are alike?
We must consider the cause of taxation, the foolish expenditures that are made. But we heard of extravagance in the amendment that was defeated yesterday, the amendment, proposed by the Progressive Conservative party. They are thrifty of cents but they are ready to waste billions by enriching other countries at the expense of their own. They do not see that. They do not see the foolish extravagance of giving away billions of dollars at the expense of our own people, but when it comes to cents and a few small dollars, they are economical, and they complain about extravagance.
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What hypocrisy! Why are we here month after month? It is more than two months since I decided not to speak, but I came here just to say a few words about the seven and a half billions that have not been accounted for. They may have been lost at Bikini and perhaps we shall hear about them to-day when the submarine bomb explodes. Perhaps it will come up to the surface. We hear much about active assets, and I was told that the $450 million that was given for the air force of Great Britain was an active asset. What is more foolish than that? And yet we hear intelligent people indulging in that idle talk day after day, discussing the effect without ever trying to remove the cause. The only way to remove the cause is for the members of the House of Commons to come to their senses and to see through the thick fog of prejudice and propaganda, to see clearly what is the interest of this country, and to make up their minds about it and decide to do something at last for the Canadian people.
The officials of the income tax branch are not responsible for these foolish expenditures; those who are responsible are the ones who have made the policies of the government, those silly policies which I condemn with all the power of my voice and the sincerity of my heart. Those who are responsible are those who have given us bureaucracy. Why should the members of any party complain about bureaucracy when we have so many Charlie McCarthy to the Bergens of the west block? There they are; they are marvellous people. We must listen to them. They are doctors honoris causa; they com? from Queen's; they come from Toronto. They have been to Oxford, they have been to Cambridge, and it gives them a lustre, a kind of satin finish which makes them acceptable to all. And any one of those fools has more influence on the Minister of Finance than any member of parliament. Their word is the word of the gospel. They have landed here; they were landed in Ottawa by Bennett, by flattering his vanity, his immense vanity, by telling him that the North American continent was not fair to him, that he should be doctor of laws honoris causa of all universities on this continent; that he should swell up, that he should be just as big as the greatest giant who ever lived, a giant physically, mentally, et cetera, et cetera, et cetera.
What has been done for the farmer? I am sick of hearing my colleagues complaining of bureaucracy and doing nothing to curb it. The way to curb it is not to take away young people or young girls or boys who are stenographers 
or minor clerks. The thing to do is to cut the head off the snake. I am like St. Patrick; I follow his example. The first thing he did in evangelizing Ireland was to expel the snakes. I want the snakes to be expelled from office in Ottawa, the dangerous ones, those who are responsible for bringing this country to the position in which it is, of destroying economy, of destroying private initiative. They shall go. It is because of social parties that they do not go. Mrs. So-and-So meets Mrs. So-and-So, the wife of this eminent cabinet minister, and Mrs. So-and-So, the wife of this indispensable deputy, is very friendly with Mrs. So-and-So, who is in the social and personal column every day of the year. That is that. And who has to pay for it? The farmer has to pay for it; the man in overalls has to pay for it. Everyone has to pay for it. Here we are listening to it and indulging in shadowboxing. Is it the C.C.F. who are responsible for compulsion? Yes, they are responsible for compulsion. Is it the Tory party? Yes, it is the Tory party. Is it the Liberal, party? It is the Liberal party, and it is the Social Cred-iters. They are responsible-


Solon Earl Low: No.


Jean-François Pouliot: No, it is not? I do not think anyone is responsible for compulsion, because I have absolved all my colleagues. I referred to the discussion which took place in the house. It is the constant drawing of the red herring across the trail. The red herring becomes the political football; so it goes; time marches on; hon. members are satisfied when they say something cruel to the other party, and it usually comes back like a boomerang. Time passes. There are no reductions in taxes because the expenditure remains the same. How long have I to repeat the same thing to my colleagues?-because I do not consider that they are bereft of intelligence. I boost them every time I have the opportunity to do so; I want to wake them up. How is it that the English speaking audiences whom I have the honour to address all over the country are ready to think their own thoughts? I do not want to convey any of my thoughts to my colleagues; what I want them to do is to stop and think of the tremendous responsibilities of R. B. Bennett when he installed in the Bank of Canada and in the west block these men who have the power of life and death over all Canadian citizens.
I am not bigoted; I am not against the Jews. I believe that the Jews who are Canadians should have the same rights as all others, but on the other hand I do not see why the Jew should have more rights than the Canadian. I cannot understand how it is that one

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Rasminsky, one of those who built up the bureaucratic structure, not long ago in a committee of the house refused to give information to members of parliament. He knew something that no one else knew with the exception of the Minister of Finance. Is it fair? I am not bigoted because I speak in this way; I am not to minimize -the rights of any Canadian citizen. I want them to be free and happy in this great country. But I do not see how it is that one man, whether he belongs to one race or another-if he were French Canadian I would denounce him just as bitterly as I denounce Rasminsky-how is it that one man is so secret, has a mystery which he will not give to others? These are the people who built up this chain of mountains of taxation, and we go on like that. What will be the way out? Did hon. members ever think of it? Our war expenditures amounted to $30 billion. We have to pay it, unquestionably so. Oh, we have to abandon our responsibility to all the debt.
I believe in private initiative; I believe in the savings of the people. Everyone remembers -the progress that communism made in France because of the devaluation of the franc. All -those who were receiving superannuation, cither government or otherwise, were ruined, as they were ruined. The only door open to -them was communism. They wanted to share the whole as theirs had gone with the wind. The example of France will be remembered -by all. There is something else that should be remembered by all. It is that in France the reason why scoundrels took power was the indifference of the good people. They were indifferent to what was going on in France. It is the same thing in Canada, because the Canadian people have their eyes on us, and those who are indifferent to foolish, silly, dangerous and indifferent Canadian expenditures are precisely the members of parliament who seem to be blindfolded, who do not see any clearer than the French citizens, the French men and women, did before the war When one asks them, "What do you think of politics?" they say, "I don't care; it is the job of politicians." Here we are not politicians; we are Canadians. I have the greatest admiration for my colleagues; I respect them, and I want them to keep the respect of my fellow citizens. I could easily raise prejudices when I go here and there-religious prejudice, racial prejudice-but I never do. I never do because in spite of all the trouble, in spite of all the humiliation, in spite of all the difficulties that we have in, this country, I still hope for a better future, but a future that is in the
hands of the House of Commons more than in the hands of the Senate, because the elected members of parliament who sit in the House of Commons are closely in touch with their constituents, while the Senate is independent, is appointed by the government and has not to run for office. But now the Senate puts the House of Commons to shame in spite of the fact that the senators are about the average age of-


The ACTING CHAIRMAN (Mr. Golding):: Order. The speech which -the hon. member is making is entirely out of order on the section now before the committee. The section we are dealing with reads as follows:
That for the 1947 and subsequent taxation years the following deductions from income be allowed:
Then it goes on to enumerate the deductions. I believe hon. members are anxious to get on with the business, and I should hope we would try to confine our remarks now entirely to these sections.


Jean-François Pouliot: Yes, sir.


Stanley Howard Knowles: Before the hon. member goes on, in vie-w of his last statement that he is most anxious not to raise any religious or racial prejudice will he make it clear that his references to Mr. Rasminsky were made of him as a Canadian and an official, and not because of his race?


Jean-François Pouliot: I shall do so gladly; and my hon. friend will remember that I said even if he were a French Canadian I would say the same thing.


Stanley Howard Knowles: My thought was that it would have been better for the hon. gentleman to refer to the official in question by name instead of bringing in the question of race at all, because it can be so easily misunderstood.


Jean-François Pouliot: Perhaps so, but my hon. friend knows I have never raised any racial or religious issues. What I cannot understand is that one man in the whole country should have a secret which he shares with the Minister of Finance but which we, as colleagues of the minister, cannot know. [DOT] That is my point.


Douglas Charles Abbott: I can answer that very
qu-ickly, if my hon. friend desires. It is considered advisable by the minister that figures with respect to foreign exchange holdings should not be disclosed until a period of six months has elapsed; and I think that is for obvious reasons. The bill which is now under consideration provides that the annual
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statement of the board will not be produced until six months after tihe end of the year. There is no secret or mystery about that; it is known to the minister, but there are other aspects of government administration, including the income of individual taxpayers, which are known only to certain officials and to the minister. But I want to say, in the case of the civil servant, the official of the Bank of Canada referred to, that the refusal to disclose the information asked for was on instructions of the minister, not on his own initiative. I want to make that perfectly clear.


Jean-François Pouliot: Well, sir, I blame the
minister for giving such instructions.


Douglas Charles Abbott: That is proper, but do not blame the civil servant.


Jean-François Pouliot: And I blame him very
strongly. When there is information which is not to be publicized the government should have enough confidence in hon. members to give it to them privately if it is not to be given publicly.


Douglas Charles Abbott: The government only asks for delay in publication of this information, that is all.


Jean-François Pouliot: I notice the acting minister is much more open-minded than t'he minister himself, and though of course he is bound by his duty to take a certain stand I give the devil what is due to him. My hon. friend is not the devil; he is a very good friend. Now, sir, I want to make myself very clear on that question. At the present time we hear a great deal about a higher standard of living. How is it possible for a family to have a higher standard of living with the present taxes? It is most absurd, because the cost of living has increased tremendously and we are in a worse position than in the thirties, when taxes were much lower. That is not taken into consideration.


William Henry Golding: Order. I hope the hon. member will keep to this resolution, which is No. 2.


Jean-François Pouliot: Yes, sir; that is exactly what I am doing now. I am speaking of the impossibility of a Canadian family achieving a higher standard of living under the pressure of our present taxation. I say it is the more absurd because the taxation is heavier than it was when the cost of living was much less. Fifteen or sixteen years ago the cost of living was much lower than it is now, and at the same time taxation was much less. Taxation is heavier now because expenditures are heavier, and I consider myself strictly in

order in mentioning the cause of the heavy taxation which is such a burden upon the people. It is my fervent hope that members of the house, all those who are liberal-minded whether they sit with the Progressive Conservative party, the Liberal party-because there are still some liberal-minded people in the Liberal party-the C.C.F. or the Social Grediters, will consider every measure upon its merits, without being influenced by propaganda of any kind from any source; and I hope they will not forget their own constituents when they take a stand on a matter of importance in the House of Commons. At times sentiment is a very fine thing. When young people are in love their sentiment is praised by all. Love may inspire fine sentiments, but here we are with a tremendous responsibility which is the collective responsibility of all members of parliament, to ensure and assure order and good government in this country. At the present time we have disorder; the strikes prove it. Why are there strikes? Precisely because the taxation on the working man is so high that he has not enough left to meet current expenses.


Stanley Howard Knowles: Because they do not have enough on which to pay taxes.


Jean-François Pouliot: Exactly, on account of the taxes. If the income of the working man was not cut as it is by taxation his standard of living would be much higher and he would not have to go on strike to remedy his difficulties and deficiencies. It is taxation that has reduced the salaries of the working men, professional men and everyone else. Here we are given a little relief, but it is not the relief that was expected by the Canadian people. If taxation were lower I know many strikes would be settled at once. The men engaged in our industries whitfh are the pride of Canada managed very well and had a good understanding with their employers previously. They made sacrifices during the war in the expectation that once the war was over the tax burden would be alleviated. Now they are disappointed; their cheques are reduced at the source, and they cannot get along on>
what they receive. So they ask their employers for higher wages. We have an example of that here, under this very roof. I am not in a position to say who is right, but I know the burden of taxation is so heavy because of the expenditures that have been approved by this house, and as a result we now have the difficulties that overpower us. My only hope, and it is the hope I express to my constituents when I visit my constituency, is that each member of parliament, whether he belongs to any party or any

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group, will do his own thinking about all the problems we have to solve. It is said that the consensus is the criterion of truth. I believe that is so, because when a man considers a matter objectively upon its merits, without being influenced by any propaganda, he may reach the same opinion that has been reached in similar circumstances by one who may be thousands of miles away, but who has used his intelligence to discover the truth-truth which may have been forgotten for a long time, and which must reign in this country if we want to have order and good government.	I


Mr. HAZEN:: I wish to bring to the attention of the minister a condition which I believe does not make for justice and which in my opinion should be corrected. I have reference to the taxes imposed upon domestic servants in different parts of the country. Domestic servants in the maritime provinces are charged $26 per month for board and lodging when they come to make up their income tax returns. In Quebec they are charged only S15 a month. I have not the figures for the other provinces and I am not trying to draw any distinction between Quebec and the maritime provinces. I refer to Quebec only because I have not the figures for the other provinces. This works a hardship on the domestic servants in the maritime provinces. Their incomes are figured out at $312 a year for board and lodging, while those in Quebec are figured out at $180. So when they come to completing their tax, domestic servants in the maritime provinces have $312 assessed against them as income, while those in Quebec have only the smaller amount. Domestic servants in the maritimes do not get better board or lodging than those in Quebec. Their board and lodging probably costs no more than it does in Quebec. I would ask the minister to look into the matter to see if it can be rectified. It seems to me it is a discrepancy which should be corrected.


Mr. ISNOR:: I support the hon. member
for St. John-Albert in what he has said. I have received the same complaint from persons living in Halifax and other parts of Nova Scotia. I would ask the minister to look into the matter. Parallel to that is the case of the railway porters, stewards and waiters who operate on the Atlantic region between Halifax and Montreal. They complain that whereas the operators in the central and other regions of the Canadian National system are not taxed on tips, those in the Atlantic region are taxed to the extent of $300. If this is so, it is a clear case of discrimination, and I would ask the minister to look into it.


Douglas Charles Abbott: I shall be glad to do so.
I agree with both hon. members that there should be no discrimination between servants employed in the maritimes and those employed in other provinces. I shall look into the matter and see what is causing this condition.


Stanley Howard Knowles: Under this section which deals with deductions from income I should like to ask a question about a matter I brought up two years ago. Looking through Hansard of that year I find the same minister was before the committee, acting as parliamentary assistant to the Minister of Finance. Therefore to some of us it seems only natural to have him acting as minister to-day. It is of particular interest too, in view of the rumours one reads in the newspapers from time to time.


Douglas Charles Abbott: Pay no attention to rumours.


Stanley Howard Knowles: The matter which I again draw to the minister's attention is that of the discrimination between train conductors and sleeping car conductors-and in the same class as the sleeping car conductors are the sleeping car porters. The relevant definition in the act states that-
5. (1) "Income" as hereinbefore defined shall for the purpose of this act be subject to the following exemptions and deductions . . .
(f) Travelling expenses, including the entire amount expended for meals and lodging, while away from home in the pursuit of a trade or business.
As a result of that wording, and the interpretation of it, sleeping car conductors and train conductors travelling on the same train find themselves in different positions in the matter of deductions for expenses incurred away from home. The sleeping car conductors and porters point out that as a matter of fact they are away from home more than other members of the crew, but because of the difference in the way they are paid, one on a mileage and the other on a monthly basis, the discrimination still holds.
When the matter was discussed two years ago the minister expressed sympathy with the representations made. Indeed on one occasion the Minister of Finance cited this as an example of unfairness cutting right across an industry, because of the hodge-podge way in which our income tax legislation has grown up. I had hoped that in this partial revision and simplification of the Income War Tax Act consideration would be given to the matter. I see nothing in the resolution to indicate that that is so. Has consideration been given to rewording the section so that these two classes of employees shall be on the same basis as to deductions allowable from income because of away-from-home expenses.
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Douglas Charles Abbott: I recall the occasion upon which the matter was discussed. I am informed that following that time the condition has been considered at four or five conferences which have been held between departmental officials and officers of the two employees' organizations involved. We are conscious of the problem. It has not been possible however to work out a solution, and there is nothing in these resolutions on which an amendment to the act could be based. The matter has been under consideration. It is a difficult and complex problem. There are others affected in addition to the two groups mentioned by the hon. member. As I say, both sides are fully aware of the position and of the complexity of the problem, and discussions are still proceeding. It will not be possible to do anything at this time.


Stanley Howard Knowles: I want to express once again the hope that the government will carry out what was expressed in the statement made two years ago by the Minister of Finance that this complex matter called for some solution. It is cold comfort to these people to be told that they are caught in a difficult situation. I think by next year we should get, not just a series of amendments to the Income War Tax Act, but a brand new income tax act which will take care of many of these anomalies.


Gordon Graydon: I should like to bring to the minister's attention a matter which I think affects a great number of taxpayers in Canada, the exact number of which can perhaps only be estimated because a question which I placed on the order paper was answered last week by the Minister of National Revenue who said that the government was not in position to give the exact number. I refer to Canadian citizens who operate self-contained domestic establishments but who under the present rule are not able to claim married status. I refer to those who are widows, widowers or who may be unmarried and who operate self-contained domestic establishments and are faced in many instances with expenses as great as or greater than those incurred by taxpayers having a married status. Many cases of inequality and hardship have come to my own attention.
I have in mind a neighbour, and perhaps I may be pardoned for bringing forward this personal example although I think the examples you know best are the ones you should bring forward. This man lost his wife some four or five years ago. He has a family and he tells me that he has not been able to claim married status. I am not sure how old the children are.


Douglas Charles Abbott: If they are under eighteen he can.


Gordon Graydon: I have watched them grow up and they still seem quite young to me, although I am sure they are over that age. In any event since his wife died his household expenses have been materially higher. I think his case could be multiplied all across Canada. I submit the minister ought to give some consideration to making a distinction in the administration of the act with respect to this class of taxpayer. There ought to be some distinction in the taxing field to take care of people who maintain self-contained domestic establishments. If there is some close relative who is being supported by the taxpayer he can claim married status and be allowed accordingly, but that leaves out I fancy scores of thousands of deserving taxpayers who have had to carry an undue burden of the load of the country's taxes when their expenses are higher than those of persons who, when they file income tax returns, are entitled to claim married status.
I have been asked about this by many people and I should like to have some clarification from the minister as to just why this regulation stands as it does and what reasons there are for not making a change to relieve this deserving and worthy section of our people from the unjust burden which they are now carrying. I should like the minister to indicate whether or not government policy will be changed to meet the wishes of these people on the grounds of equity and justice.


Douglas Charles Abbott: As my hon. friend will recall, this question has come up before on a number of occasions. I remember discussing it pretty extensively two years ago when the budget resolutions of that year were before the committee. If members of the committee would care to look at Hansard of that time they will see that I gave elaborate reasons for the present provisions of the law which have not been changed for some time. Briefly, the reasons are these:	an allowance is given to
married persons, and that relief is extended to certain other persons, widows or widowers or those who support dependents in a self-contained establishment. It was felt that under the circumstances there is an analogy between such persons and a married man who is maintaining a home and bringing up his children. The special consideration given to married persons is given to persons who support minor children related to them or other dependent persons in a self-contained domestic establishment. It was never the intention of this act or of any income tax act that I know of to extend to bachelors or to widows or widowers

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as such a special tax concession in order to enable them to live in a self-contained domestic establishment. Once they cease to have what I would describe as married status, that is, either actual married status where a husband and wife are living together, or constructive married status where he is maintaining persons who are directly dependent upon him for support, once they adopt a mode of life in which in my opinion is the same as that of any other unmarried man or woman they cease to have that special status. I do not think it could be justified under our taxing system to grant, the special concession to a widow or widower which is granted to the person possessing married status. A line must be drawn somewhere, and I think as a result of long consideration and discussion the line which is drawn in the present act is a pretty fair one.


Mr. DIONNE (Beauce):: I do not want to repeat the speeches which have been made, but I should like to move, seconded by the hon. member for Portneuf (Mr. Gauthier):
That the ways and means resolutions of June 27, 1946. respecting the Income War Tax Act be amended as follows:
1.	That wherever in the resolutions the figures "1947" appear and relate to a reduction in taxation the figures "1946" be substituted therefor;
2.	That m paragraph (a) of section 2 of the said resolutions respecting the Income War Tax Act the figures "$3,000" and "$1,500" be substituted for the present figures of "$1,500" and "$750";
3.	That in compensation for the loss of revenue following the adoption of the preceding amendments a sales tax of ten per cent be imposed on retail sales of all merchandise at present taxed eight per cent on the wholesale price.


Mr. JACKMAN:: Did the hon. member
vote for the budget?


Douglas Charles Abbott: The amendment which has been moved is clearly out of order, because it is an amendment to a resolution which precedes the introduction of a money bill. I understand it was pointed out quite clearly the other day by the Minister of Justice that such a bill can be amended only by a resolution which has been submitted to His Excellency and has received his approval. I therefore ask you, Mr. Chairman, so to rule.


Harry Rutherford Jackman: May I ask the hon.
gentleman who moved the amendment if he and his seconder voted for the budget resolution?
Mr. ST. LAURENT:	The list of those
who voted is printed in Hansard.


Harry Rutherford Jackman: Will it be taken for
granted that he and his seconder voted for the resolutions?
Mr. ST. LAURENT:	Nothing will be
taken for granted which does not appear in Hansard.


Douglas Charles Abbott: The motion on the vote
was that we go into committee to consider certain resolutions. That was all the vote involved.


William Ross Macdonald: The motion made by
the hon. member for Beauce is beyond the jurisdiction of this committee, since it will increase the taxation of certain persons, and therefore I cannot put it to the committee. If it is to be considered by the committee, it must be moved by a minister of the crown.
At one o'clock the committee took recess.
The committee resumed at three * o'clock.


Mr. McMASTER:: The hon. member for
Eglinton, spoke of those who did not wish to take the family allowance but preferred to leave things the way they were and claim exemption. My objection has to do with another point. I pointed out last year that one department of government sends out the family allowance cheques while another does the collecting, the Minister of Finance being somewhere in between and bearing the burden of all departments. This is the condition of things as I see it. I do not see how the minister can say that a greater amount of work will be placed on the employer by his not being allowed to deduct for each married person. The employer must have a list of all his employees, and among them will be single men who are not affected by family allowances, married men who are not so affected, and other married men with children. It is necessary for the employer to ascertain before he makes deductions, which of his employees desire deductions to be made. I do not see any force in the minister's argument in that regard, but I do see this difficulty. Where an employee's wife receives a cheque for family allowance in the first part of the month, the employer deducts from the man'3 wages shortly thereafter, and the point which the member for Eglinton made as to those not in employment is an important one. Take the man on commission. His wife gets a cheque every month, and at the end of the year he not only has to make up the balance of the cheques but also to repay, if he makes more than 13,500, as a great many of them do, the full amount of family allowances his wife has received. It may
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be a heavy burden on him at that time. I do not suppose anyone likes to pay income tax, and I suggest that the government will lose a considerable sum by the method it is adopting in respect to those who do not have deductions made from their salaries but have to pay back the money at the end of the year.


Mr. QUELCH:: I have no doubt the
minister realizes that members on all sides of the house are disappointed that the government has not seen fit to increase the exemptions granted people in the low income brackets for 1946, and are dissatisfied with the amount of increase for 1947.
The Minister of Finance, when he spoke on the question, realized I think that the government's proposals would not meet with the approval of the people of Canada, because he went to some length .to try to justify the government's actions in this regard. I should like to quote what he had to say as reported at page 2914 of Hansard:
I am aware of suggestions, made by persons who may not be familiar with all the facts, that the exemption limits be raised to $1,000 for single persons and $2,000 for married, or even to $1,200 and $2,400. We have carefully examined these and other suggestions and have come to the conclusion that exemptions of $750 and $1,500 are as high as can be reasonably proposed under present circumstances.
In the first place, we must still raise very large amounts of revenue. Even if no tax reductions were made, our revenues will fall considerably short of our expenditures and far short of our total financial requirements for the current year. Moreover, as I have outlined, there is already a great excess of purchasing power and we must not add unnecessarily to it.
Secondly, we are all, I believe, agreed that the income tax is the fairest and best tax on which to rely for the bulk of our revenue. More than any other, it takes ability to pay properly into account. We must, I consider, rely upon it as heavily as we can, subject to the limits imposed by its effects on incentive and efficiency. This applies as well in the lower brackets as in the higher, We cannot secure proper equity and fair treatment if the exemptions from income tax are so high as to exclude most of those receiving incomes.
There are three points which I wish to deal with in this regard. The minister says, first, that we would not be justified in exempting this class from taxation; second, that we could not expand demand at this time owing to the shortage of'goods; and third, that to increase exemptions, as proposed by various organizations, would bring about a serious loss of revenue.
Dealing with the first of these points, I would remind the government that during the war when they were continually asking the people to make great sacrifices and to accept

the burdens of total war, they held before the people the hope that after the war the government would introduce a new social order. As a matter of fact they went beyond that, because the Prime Minister said that unless this new social order was well on the way before the end of the war we might look for it in vain. Several times during the war we in this group reminded the government that similar statements had been made repeatedly during the war of 1914-19. The government spokesman assured us, however, that the situation to-day was entirely different, that we could not compare conditions in this war with conditions in the last one, because we had now expanded production to the point where we could give everyone a decent standard of living.
I think the people are beginning to realize that the new social order is drifting further and further away instead of coming nearer. We must realize that we cannot hope to attain that order by following in the ruts of the past. If we are to attain it we shall have to blaze a new trail or we shall become bogged down as we were between the two wars.
The Minister of Finance, when he spoke, compared our exemptions with those given by other countries, and I admit that the comparison was quite favourable. But I think he overlooks one important point. The people of this country are not interested in what exemptions are allowed in other countries; they are interested only in what exemptions can be given here. Therefore the first important point for us to consider is whether or not these exemptions can at this time be raised higher than they are; and the second point is, would such a policy benefit not merely the people who are exempted from taxation but the people of Canada as a whole.
I do not think there is any doubt that the answer to both questions must be in the affirmative. First of all, in considering the question it is well to remember that we in Canada are blest with more resources per capita than the people of the great majority of other countries. We have an income of around Sll billion, which means an average of 83,000 for a family of four. The first step to be taken in any new social order should be, therefore, to raise the standard of living of people in the low income group. We should attempt to establish a minimum standard of $1,200 for single persons and $2,000 for married people.
To come back to the question, would exempting these low income groups benefit Canada as a whole, the minister will agree that the most important problem before us at the present time is to expand production as

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rapidly as possible, especially the production of consumer good9 so that we may have at all times a brimming pool of consumer goods from whidh the people may draw. I would say that one of the logical ways to help maintain production would be to maintain a contented people. The minister will agree that the high rates of taxation to-day are causing wide discontent among the workers of the country. One of the best ways to prove to them that we are really sincere in this matter is to bring about a substantial reduction of taxation to the people in the low income groups, thereby ensuring that they will be able to have a better standard of living in the future.
The next point of the minister was that we must not expand demand at this time because we already have a large volume of purchasing power in circulation. While it is true there is no actual lack of demand on balance to-day, largely owing to the fact that we have an accumulation of war savings and that large benefits are being paid out to the men of the armed services, nevertheless we must not forget that there are in Canada to-day many people in t'he low income groups who have no savings. I am well aware of the fact that some people will say that they Should have. They charge that had these people saved during the war they would now have savings. Bu't let us not forget that before the war many in this group were unemployed and probably on the relief rolls, thereby enduring a standard of living far below that which anybody should be asked to exist on; they were persons who had to do without things which most of us would consider to be absolutely essential. Within a year or two after the war started these people were able to jet a job, but even after they obtained jobs there were so many things they required that they were not in a position to save much; and just about the time that they might have been able to save something the government brought about the heavy increase in taxation in 1942. Therefore they were not in a position to accumulate savings.
However, if the minister is going to argiue that to increase exemptions at this time to $1,200 for single persons and $2,000 for married people will be inflationary, then I would remind him of what the leader of this group the hon. member for Peace River, suggested when he spoke. He suggested that we Should give to such persons tax bonds in return for the money obtained from them; in other words, that we should adopt a policy of deferred tax remissions for those in the low income groups. On several occasions during the war I emphasized the need for compulsory
savings. I pointed out that we were accumulating a large amount of debt claims. I know that during the war people sought to soft pedal the idea that the national debt would do the country any harm. As a matter of fact many said that in reality a national debt was a national asset, because everybody who had a share in it would be receiving interest, and therefore so long as the debt was owned internally there was nothing to be concerned about. That would have been true if the national debt had been distributed equitably amongst the people so that all the people would have had a claim against the debt or asset if you like to call it that. But unfortunately during the war the method of financing did not help to bring about an equitable distribution of the debt. I should like to remind the minister that during the war loan campaigns we generally found that approximately one-third of one per cent of the subscribers purchased sixty per cent of the total subscriptions, thereby bringing about an inequitable distribution. However, if at that time our proposals had been accepted whereby persons in the low income groups would have not paid any taxes but merely accumulated compulsory savings, then they too would 'have 'had a claim against those accumulated debt claims. Then at the end of the war, just as soon as production had increased to the point where it could take care of the demands of the people, the compulsory savings could -have been paid back to them, and in that way those in the low income groups would have been able to share in the benefits of expanded production at the end of the war.
Sudh a policy of deferred tax remissions or tax bonds instead of taxation would have been a partial insurance against a depression in the future. In that regard I Should like to quote from a speech made on October 7, 1942, at Montebello, by the deputy minister of finance, Doctor Clark, which reads as follows:
The same philosophy which has led to these very high taxes in yvar time is likely to dictate a reversal of that policy in the post-war years. To-day, demand is far in excess of supply. Consumer purchasing power is far in excess of the available supply of consumer goods and services. The taxing authorities therefore must, through high taxes, syphon off as much as possible of that surplus purchasing power if we are to avoid all the evils of inflation. On the other hand the post-war period is likely to pose ah entirely different set of conditions. If we may judge by the record of the past, we are likely to see, after a temporary period of dislocation and hesitation followed possibly by a consumer goods purchasing boom, a period during which unless the state acts aggressively and intelli-
3S06
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gently to prevent it, supply or potential supply may tend to be far in excess of effective demand.
What will then be needed is to safeguard against deflation, not to prevent inflation. If we are to avoid a long depression and mass unemployment, the policy required will be one of stimulation of the economy, one that will create expansionist tendencies, one that will provide incentives to expansion of production, one that will encourage the consumer to spend and expand his purchasing power. In short, one which will keep the national income from falling to abnormally low levels.
In his report of 1946, the governor of the Bank of Canada emphasized exactly the same point and said that in a few years our major problem will be to maintain an effective demand against the production of the country. Therefore, as I say, one method of helping to insure against lack of effective demand in the future will be to build up a reserve of purchasing power in the hands of those who are in the low income groups. Building up large reserves of purchasing power in the hands of those who are already well-off will not be any guarantee against lack of effective demand, because these people are already spending the money to buy the goods they require. On the other hand, those in the low income groups will not be in a position to spend unless they have a reserve of purchasing power. Such a reserve of purchasing power can be built up by the remission of taxes to the people.
The Minister of Reconstruction and Supply has suggested that a shelf of national projects should be built up to take care of the situation. I will agree that in part it may help to meet the situation. Building up a reserve of purchasing power by remission of taxes would also help to take care of a depression.
At this time I should like to emphasize the fact that, in the final analysis, in order to guarantee that this country may run on an even course without depression we shall finally have to come to the proposals which this group has made from time to time; that we shall guarantee to the people a minimum standard of living up to the full capacity of the country to supply by the payment of consumer credits directly to the consumer.
Once or twice the minister has twitted us on the point that during the war he has not heard much about social credit. Of course the reason is obvious. The purpose of social credit is to distribute surpluses. In war time, owing to the demands of war there are no surpluses to distribute, but from now on I can assure the committee that it will be hearing more and more on this point, because as our problems increase social credit is the only solution.
The last objection of the minister to raising exemptions was that it would cause a loss of revenue to the government. In that regard I 
should like to quote the minister's own words, to be found at page 3589 of Hansard:
So we are brought back to this, whether we like it or not and whether or not it is popular; we are brought back to the necessity of equating revenue and expenditures when we have high employment and a high national income.
Earlier he had said:	.
This question was raised by the financial critic of the opposition in the opening speech, when he asked: "Do we or do we not believe in deficit budgeting?" Well, Mr. Speaker, I must say I cannot see how a responsible government or a responsible minister of finance could possibly advocate a system of continued deficits in the Dominion of Canada, that is, deficits year after year, year after year.
First, I might refer to a speech made by the chairman of the advisory committee on reconstruction, in 1943, which appears at page 29 of the proceedings of the senate committee on economic reestablishment and social security. He was speaking of the need for national projects after the war, and it is interesting to note what he has to say on this question raised by the minister, in regard to lack of revenue:
I wanted to add one further point there, namely, that the recognition of that policy of public investment as a marginal factor to take up the slack of private investment at any period implies the necessity of a complete change in our budget philosophy. We should still have an annual budget for probable revenues and expenditures; but so far as public investment expenditures are concerned for the construction of all kinds of projects, it would obviously be necessary to have a budget which extends over a period of years. Mr. Churchill two Sundays ago suggested four years as the period for a plan. That may be perfectly right, politically thinking, but economically I prefer a period of seven or ten years. It may also be true-I mention this because somebody may think of it-that the adoption of that policy will mean a slight but continuous increase in the total public debt of Canada over the next hundred years.
In other words he suggested we would require to have unbalanced budgets for the next hundred years. My only observation in that connection is, why stop there; why not admit that you are bound) to go into debt year after year, as long as you continue under the present system? You have only to look to the past to see that since confederation we have had only fifteen balanced budgets, in a period of seventy-eight years, and to realize that we shall probably be doing the same thing in future. If we could not have balanced budgets when the national debt was only two or three billion dollars, is it likely that we shall have balanced budgets when the debt has increased to around sixteen billion dollars? No. My point is that even in the years when we had a balanced federal budget the public debt increased. For instance,

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from 1924 to 1929 we had balanced budgets, and the national debt decreased by $250,000,000. But the debt of the provinces increased by over $500,000,000, so that even in that period the public debt increased by over $250,000,000. Really what we did was this. By this government forcing the provinces to accept responsibility for certain payments it balanced its own budget but forced the provinces into debt. If it is a question as between the provinces or the dominion going into debt, I should say it would be far better for the dominion to do so because it has access to certain types of funds which are not available to the provinces; or, as we say, it can use national money and avoid going into debt in any shape or form.
The interesting point in the minister's speech was his statement that we must attempt to have a balanced budget. Just to show how much faith we can have in that proposal, I would suggest to the committee that we read What he said in September, 1939, in regai d to the financing of the war, and see how far short, he fell in carrying out that policy. Then have we any reason to believe he will be able to fulfil his promise in that regard in future? This is what he said in the budget speech of September 12, 1939, at page 140 of Hansard'.
All this is not to say that a small and carefully regulated amount of credit expansion may not be desirable in the early stages of the war in order to assist the increase of production and employment . . . However, as soon as the expansion of employment and production gets well under wajr and certainly before it approaches its limits, further expansion of the supply of money and credit must be stopped if the danger of progressive inflation is to be avoided.
When did the minister follow that policy? Just as soon as we had reached the position of full employment and high production, the minister said there should be no further credit expansion. In 1943, 1944 and 1945 we bad a high level of employment and a high income; yet in each of those years we had an expansion of credit to the extent of hundreds of millions of dollars. The reason is, of course, obvious, and I shall deal with that later on. In spite of the heavy taxation and large borrowings from the people, the government still lacked funds to meet its expenditures. In the last year of the war, 1945, the deficit was around one and three-quarter billion. How did we make up those deficits? Partly, as I say, by borrowing the savings of the people, and partly by the creation of new money. We borrowed from the chartered banks something in the neighbourhood of $3,000 million in new money. W'hy was that done? The minister knows the reason. We borrowed that money from the 63260-240
banks in order to maintain a maximum war effort. The Prime Minister promised the people time and again that no financial restrictions would be allowed to impede the war effort. If the people had been familiar with the social credit proposals they would have seen that even in war time it would be necessary to have the creation of money. I say the reason is obvious. We have emphasized the fact that owing to certain practices which are inherent within the system, industry can not maintain an effective demand against its own production; that is to say, it does not distribute sufficient purchasing power to maintain a demand against the goods it produces. That is in peace time. Then in war time the government became the greatest purchaser of goods and material in the country; and in spite of the fact that they taxed the people just as far as they dared tax them, in spite of the fact that they borrowed all the savings of the people that they dared borrow, still they were not able to get, enough money to buy the goods and services they required. Therefore, in order to make up that deficiency in their purchasing power, they had to create in the neighbourhood of $3,000 million during the war.
One of the main purposes of taxation during the war was to curtail spending, because fifty per cent of our production was going for war purposes. To-day the war is over and the total production of the country is once more available to the people. Therefore, as Doctor Clark suggests, in the very near future we shall have to bring about a considerable reduction in, taxation in order to maintain an effective demand against our production. In his book entitled "The World Crisis," Mr. Churchill warned of the aftermath of the war. The hon. member for Muskoka-Ontario began to quote it the other day but did1 not read the full paragraph, and I should like to put the whole statement on record. Referring to 'armistice day, November 11, 1918, which concluded ithe first war, Mr. Churchill said:
A requisition for half a million houses would not have seemed more difficult to comply with than those we were already in process of executing for 100,000 aeroplanes, or 20,000 guns, oi two million tons of projectiles. But a new set of conditions began to rule from 11 o'clock onward. The money cost, which had never been considered by us to be a factor capable of limiting the supply of the armies, asserted a claim to priority from the moment the fighting stopped.
It is sometimes surprising the way history seems to repeat itself. During the discussion on the health estimates the Minister of National Health and Welfare began the same old srtory all over again. When we were

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discussing old age pensions, advocating a pension of $50 a month at the age of sixty, the Minister of National Health and Welfare told us it would be impossible to do this because it would cost too much money and that- the government did not have the money. When an hon. member from this group suggested that national money could be used, the minister once again returned to the old story about turning the printing presses loose. I am surprised that the minister should insult the intelligence of hon. members by such an asinine remark, because, as I have said, during the war when we wanted to expand the war effort of the country we did) not hesitate to create $3 billion in new money for that purpose. When we created that $3 billion of new money, did we turn the printing presses loose? The government knows very well we did not. It is true that there was an increase in the amount of dominion notes. We increased them to the extent necessary to satisfy the requirements of the people in that regard. That was only a small percentage of the total amount of money issued. During the war did we ever hear the Minister of Finance say that we could not have tanks, ships or aeroplanes because no money was available? One thing and one thing only was taken into Consideration in connection with the war effort, and that was: What are our material resources? So long as we had the men and materials available there was no suggestion that we could not have ships, tanks and aeroplanes because we had not the money to pay for them.
To the extent that a fair and equitable system of taxation fails to meet government expenditures, national money must be created. Otherwise we are bound to have an expanding debt, as was suggested by Doctor James, chairman of the reconstruction committee advising the government. In the past we have urged that national money should be used by the government to make up the deficiency in revenue. In the past it was argued by the Minister of Finance that national money would be more inflationary than money issued by the chartered banks. I do not think the Minister of Finance would argue that to-day, because I know the officials of the Bank of Canada will not argue it. They take the stand that they are thoroughly capable of controlling the aetiqns of the chartered banks, even though national money is issued.


Douglas Charles Abbott: I hesitate to interrupt the hon. member, because I always listen with keen interest to his remarks. I must point out however that he has strayed a long way
[DOT] 
from resolution No. 2. He began in perfect order, 'but he has now launched forth into a subject which is foreign to the resolution.


Victor Quelch: Speaking to the point of order, may I say that the Minister of Finance attacked the proposal to raise exemptions on low incomes to $1,200 and $2,000 on the ground that it would result in a lack of revenue to the government, and that the government would not have money to finance its operations. I am showing a way in which it can be financed.


Douglas Charles Abbott: My hon. friend is doing it most ingeniously, then, because I think he is still out of order.


Victor Quelch: I shall conclude my remarks by summarizing what I have already said. The greatest need to-day is an expansion of production to meet demands. One of the greatest obstacles to such expansion is the high taxation of low incomes, because it causes discontent among the workers. As pointed out by Doctor Clark and the governor of the Bank of Canada, one of the greatest dangers in a few years will be the lack of demand for goods produced. Therefore we urge that in order to restrict demand now and to provide for a reserve of purchasing power later, tax bonds should be issued to people in low income brackets, instead of imposing taxation upon them. Then, to offset loss of revenue, national money should be used. There would be no danger of inflation, because money would be issued only to balance demand with supply. Therefore we in this group urge that the exemptions for single persons be raised to $1,200 and for married persons to $2,000.


Mr. GOURD (Chapleau) (Translation):: Mr. Chairman, I intend to speak on taxation and on the gold mines of my constituency, in order to inform the government, in a spirit of co-operation, of the views of my constituents.
As everyone knows, the mines of Northwestern Quebec, more than anywhere else in the country, have been adversely affected by the decision to establish the parity of the Canadian dollar with the American dollar. Our mines have thereby lost a 10 per cent, premium and the price of gold fell from $38.50 to $35 per ounce. I have heard the opposition voice destructive criticism, inasmuch as they were attacking the masterpiece of the present government, its fight against inflation which has been successful up to now. In view of the tremendous increase in prices of goods in other countries, and even

Income. War Tax
in the United States, it is not necessary to expound lengthy theories to show the efficient administration and the foresight of our ministers, and especially the Minister of Finance (Mr. Usley).
Mr. Chairman, the people benefit by the maintenance of prices at a low level and, as usual, our government has taken steps in order to protect the people, over the protests of certain financial interests.
I wish therefore, on behalf of my electors, to congratulate the ministers for the fight waged against inflation during the war and during the difficult post-war period. The decision arrived at in regard to the parity of the Canadian dollar seems excellent, inasmuch as it is part of a series of measures necessary to control inflation. However, I deem it my duty to acquaint the government with certain disastrous results of this decision, in order to suggest new remedial measures not with a view to eliminate what has already been done but to supplement it.
The decision in regard to the parity of the dollar has affected the gold mines of northwestern Quebec especially in two different ways:
First, if gold sells for only $35 per ounce, those mines operating on a small margin of profit, and especially those having low grade ore, will show' a deficit, and will have to close down, particularly now that the prices of materials have increased and that they are facing demands for higher wages on the part of their employees. Other mines that may continue their operations will be forced to leave underground a large quantity of gold which they cannot mine profitably with gold selling for $35 per ounce but which they could extract when the price was $38.50 per ounce. Mr. 'Chairman, I wish to draw the attention of the government to the enormous loss of gold which will result.
Second, it has taken away the confidence of the public in our gold mines. The stock market went down to a point which we had not known for several years. Unless some countermeasure is taken immediately to remedy the situation, mines in the stage of promotion will be abandoned. I must draw the government's attention to the fact that all gold or base metal mines now in operation had to be promoted and without the help of the public who, in the early stages, had the courage and far sightedness to take risks inherent in all mining venture, Canada would now be a small country deprived of its mining industry, which is essential to its economy. If we force companies in promotion out of business, we shall deprive Canada of its future mining industry.
63260-240]
We must therefore ensure a reasonable profit to producers whose working expenses are out of proportion with the value of their production, and to mines being promoted so that they may one day operate. In addition, in ensuring the development of this industry, we must help prospectors in finding purchasers for those mine fields because, according to Mr. Dumulon, Chairman of the North Western Quebec Prospectors Association, they have been badly hit by the decision regarding the parity of the dollar.
I wish to insist on the fact that no commercial enterprise has any chance of success unless the profits are proportioned to the risks taken by the investors. There are exceptionally great risks in the mining industry and they must therefore be balanced by exceptionally large profits for those few who have the chance of succeeding. I wish to mention the report of the Senate's Natural Resources Committee where it is stated that, in the Province of Ontario, only one half of one per cent of all mining enterprises are successful. I also wish to refer to the statistics submitted to the said committee by the Western Quebec Mining Association, showing that the income on the average investments in mines, when the mining enterprise is successful, is not more profitable than investments in government securities at 3 per cent.
I shall give a brief summary of the importance of the mining industry-I shall however quote only statistics for the year 1941, as they
are more complete.
Production in Canada	 $866,293,000
Production in the province of
Quebec	 255,269,000
Salaries paid by mines in Canada	176,700,000
Salaries paid by mines in Quebec	29,600,000
Total amount of main taxes paid
by metallic mines in Quebec... .	8,601,809
Population of the mining counties of Temiscamingue and	Abitibi..	108,101
Farms occupied in the county of
Abitibi, 7,357; which shows an increase over 1931 of 204-9 per cent.
Moreover, Mr. A. 0. Dufresne, deputy minister of mines for the province of Quebec, has issued some statistics on the gold, copper, silver and lead mines of Quebec, practically all of which are in my northwestern Quebec area:
Value of products	 $59,581,000
Cost of fuel used	 8,767,000
Cost of electric power used	 2,097,000
Cost of goods supplied to mines.. ..	6,158,000
Cost of lumber used in mines, and for building purposes by mines..	528,000
If nothing is done, here is briefly stated what will happen: the development of the mining industry will come to an almost complete standstill; the future of northwestern
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Quebec and its important contribution to this country's economy will be annihilated, and within six months many localities in that district, which are now so busy, active and hopeful, will become ghost towns; Canada will lose right now and especially for the years to come an important gold and base metals production; the greater part of the employment resulting from the development of the mining industry will disappear; farmers, manufacturers and merchants will lose the important market afforded by a prosperous mining industry; the government will lose enormous sums in taxes; the stability of Canada from the standpoint of its trade and its monetary relations will (be affected, and instead of being a help in inflation control, that decrease in the production of the mining industry itself and of the industries that depend on it, and the resulting halt in the economic development will have the opposite effect.
Moreover, if ever the world price of gold decreases, Canada will have lost forever the opportunity to transform into salaries and other national wealth the gold ore that is now useless and unproductive.
May I quote again from the report of the Senate committee:
(Text):
Lack of understanding of the position and economic value of the gold mining _ industry m Canada would appear to l>e_ a major cause of the present situation of this industry.
(Translation):
I have had numerous interviews with my constituents; I have attended a large number of meetings of public bodies of all kinds and, moreover, I have received many letters, reports and telegrams. I wish to make the following suggestions in keeping with this first-hand information and on behalf of the mining profession:
First, the paying of a bonus for the promotion of prospecting, exploration and development work, especially in connection with low-grade ore mines.
Second, the raising from 33J to 50 per cent, of the depletion or capital reimbursement allowances for all mines, as recommended by the Senate committee on natural resources.
Third, the raising of the depletion allowance over the 50 per cent level in the case of low-profit mines dealing with low-grade ores; the increase in this allowance being inversely proportional to the profit margin.
Before resuming my seat, I would like to read a telegram which I received from the cooperative head office of my district, the Abitibienne cooperative society, because it reflects the feelings of the cooperators of my constituency:
IMr. Gourd.]
David Gourd, M.P., Ottawa
Still protest against taxing of cooperatives. Refer to difference between members and nonmembers. Protest against compulsion in paying patronage dividends within six months. Retroactive effect of legislation may result in serious trouble.
(Signed) L'Abitibienne.
The signature "Abitibienne" is that of the cooperative head office of my district.
I am happy to see that, as far as possible, the government has taken these feelings into consideration, in spite of the tremendous pressure brought to bear by adverse financial interests. After examining the proposals, I find that most of the cooperative associations of my constituency will not be called upon to pay such heavy taxes as I feared, because they are real cooperative associations rather than groups of tradesmen who, under the guise of cooperative associations, are attempting to avoid paying taxes to the government.


Mr. CHURCH (Text):: I am surprised to see this section 21(b) in the budget resolutions in this form. The government is legislating, as to income tax, not for this year but for 1947 and subsequent years. I come from a city which is now paying nearly one-third of all the cash income taxes paid in the dominion, and I object to this way of doing things. During the war we were promised two things. At that time the people were taxed to death and controlled to death, and now, fifteen months after the war, they are more taxed and more controlled than ever-so much so that we are on the verge of becoming a straight socialist state. Taxation is driving many of the small business men of this country out of business Just look at the paltry deductions allowed- only $300, $100, $300.
Two years ago family allowances running into hundreds of millions of dollars were introduced. We should consider the case of those who became ill. Take the working classes in your constituency, Mr. Chairman, or in the constituencies of Montreal, Toronto, Hamilton or Vancouver; how often the working people in those districts take ill and find that their doctors cannot get them into the hospitals or cannot get them any nurses or domestic help during the period of illness. They closed down two of the largest floors at Toronto general hospital-no nurses. The splendid Victorian Order of Nurses go around to the homes of the working classes for $2.50 a week but the sick get no help from the government in the way of deduction allowances. In many cases they have to borrow money from anybody they know. Any member of parliament knows that. There are

Income War Tax
hardly any nurses, but they have what they call practical nurses. I have five or six letters on this matter from my constituents. I wrote the wartime prices and trade board, and the secretary in reply informed me that there are no regulations with respect to nurses. I may say that the Quebec legislature has done something; it has decided that if nurses are to charge 86 a day they should have other capacities and qualifications than being able to help in the house, they must have a certificate from some hospital.
People are taxed and controlled to death, and they cannot get the services they need. If they need to get into a hospital there are no vacancies. Since the war was over, a year ago, a considerable body of workers in the industrial centres have remained in the cities and want to stay there, but they cannot find a place to live, and there is an extraordinary number of cases of evictions before the county court judges. I was talking to one of the judges last Sunday, and he told me about some people who were to be evicted, with no place to go.
The present high tax levels disastrously affect, with practically no deductions, all classes of our people. It was reported that the Minister of National Revenue made some promises in this direction, and though he denied that he said it, if he did not say it, others did. I have heard it in the Toronto district; I have read of it in the newspapers. I accept the word of the minister, but the fact remains that the statement attributed to him was publicized all over our city by the Globe and the Star. They made big headlines about it.
Our people were promised a year ago, after the war, "death to controls". Now they are controlled and taxed to death. Consider the position of the working man who has to pay $6 a day to a so-called practical nurse who may not know enough to give an injection. The law in Quebec is better than that, and I believe there should be a dominion-wide law requiring that a nurse must be qualified when required in the home. Enough qualified nurses are not available.
We are now legislating for 1947. The government did the same thing before, and then, when the year arrived that they were going to reduce taxes they changed the schedules around. The book of statistics with the green cover in the possession of my hon. friend contains a lot of statistics and we now have the new schedules for 1947, which is a matter for next year's ways and means committee. What we are doing now is just wasting our time; we have talked all day and have passed only one section; the second section, paragraph (b) is still before us.
I suggest that some protection be provided by deductions for the ordinary working man who has to get a nurse once in a while, and that some further allowance should be made. A reduction equivalent to only $300 is not enough; it would not last a week where a patient's condition is serious and getting worse. I know the case of a man in my constituency, where the doctor insisted that he get another practical nurse; one will not do to-day; he has to get two, at $6 a day, plus room, and meals must be provided as well. I sent his letter to the wartime prices and trade board. I hear now that another temporary nurse is wanted; and the man simply has to borrow money.
I do not know where all this is going to end. The other day in the reading room I was looking at one of our papers in which a plea was made for cash: everybody wants cash; especially the government wants cash to carry on the business of the country. To my mind there should be a halt. If we are to legislate for 1946 let us legislate for 1946 and pass the ways and means resolutions. Do not be tinkering with the supposed requirements of 1947 and the following year. The government may not be here then. The way they are carrying on now they probably will not be; since at times we are having some close votes.
I venture to say that the right hon. and learned member who is the leader of the house-an estimable gentleman-could himself give some information as to the extent that people in the city he so honourably represents are complaining about the same matters. I appreciate what the government has done in the sphere of family allowances, but when you pass all this you will have to go over the same story when 1947 comes. I urge that some additional allowance be made in these deductions for especially urgent, important and extraordinary cases such as I have suggested.
The hon. member for Temiscouata made a forty-minute speech this morning on the resolution. The other day one of the newspapers, noting that he and I sit at opposite ends of the chamber, called us "those two inimitable end-men" as if we were in a minstrel show. I am not going to imitate the other end-man to-day by making a forty-minute speech to hold the line, so that I have confined my remarks to four or five minutes; but I would conclude by pointing out that there is general complaint that it is impossible to get nurses or any kind of help, and that the deduction amounts to practically nothing; it might just as well be wiped out, What is the use of talking about $300? That does not pay nurses and medicine for one
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month. I feel that reasonable deductions and some allowances should be made for these urgent and most unfortunate cases.


Mr. HODGSON:: Further to the question of the hon. member for St. John-Albert, I understand that he mentioned domestic help, and income tax returns in respect only of domestic help. Does that take into consideration farm lelp and labour in camps, mines, et cetera, vhere labour is boarded on the job? There seems to be a difference when you make out the income tax return. For instance, in his return you add on S26 and you charge income tax on that; in Quebec it is $15 and you charge income tax on that. I should like to know what the rate is for Ontario and the rest of the provinces.


Douglas Charles Abbott: I cannot at the moment give my hon. friend the information. I am advised by the deputy minister that uniform rates are or should be in effect across Canada with respect to the amount which must be included in income as an amount in lieu of board and lodging. What the rates are in Ontario I do not know, but I can get that information and give it to my hon. friend a little later on in the course of the debate on the resolutions. But the general principle is that employed persons who receive as part of their remuneration board and lodging are obliged to account in their income tax return for the value or an ascribed value of that board and lodging.


Clayton Wesley Hodgson: I wanted to know if there was any set rate.


Douglas Charles Abbott: The same principle applies to men working in lumber camps, on farms or anywhere else as in domestic service, but whether the rate is the same I am not in a position to say. Section 3, paragraph (e) of the Income War Tax Act states:
(e) personal and living expenses when such form part of the profit, gain or remuneration of the taxpayer or the payment of such constitutes part of the gain, benefit or advantage accruing to the taxpayer under any estate, trust, contract, arrangement or' power of appointment, irrespective of when created.


Mr. HANSELL:: I desire to waste a little of the time of this committee in talking to this particular resolution, No. 2, involving exemptions of income tax. I desire to do so because I have received many letters and telegrams of one kind and another from individuals and organizations requesting that I support them in their demand for exemptions from income tax to the extent of $1,200 for single persons and $2,000 for married persons. I desire to do so now. I dc not know that I am going to discuss or to recommend to the minister how he should readjust the tax structure to

make this possible, because I realize that the present administration is working within the confines of certain financial rules and, I do not care what party it is, working within the confines of those rules they will never be able to alleviate the tremendous burdens of taxation that now rest upon the people. With our huge debt and expenditures the rules will not permit them to do it, and until they change the rules, the people must know that for generations to come, for ever and a day, they will be burdened with heavy loads of taxation.
I should like to ask the minister just what starting point the government uses to determine the exemptions the people of Canada should get from taxation. If my guess is right, and I think it is, they start somewhat in this fashion. They outline their year's programme. They say: We are going to do this, and we are going to do that, and it is going to cost us so much money; therefore we shall have to get that amount of money from some source; if we are to get that money from somewhere we must devise ways and means of getting it, and we have only one way of getting it, namely, to tax it out of the people. That seems to be the government's starting point. But what should be the proper starting point? It should be something like this. They should calculate what is a reasonably good standard of living for every individual, whether he be a single or a married man, and then say; We will refuse to tax anyone who does not come up to that reasonably good standard of living.


Stanley Howard Knowles: And take steps to
bring the people up to those levels.


Ernest George Hansell: Yes. That involves a
method of getting incomes for them, but at the moment I am talking about exemptions from taxation. Let them decide what a reasonably good standard of living is, and then say: We will not tax anyone below that. Is that not the common-sense way of looking at it? Let the minister answer yes or no, now.


Douglas Charles Abbott: What is the question?


Ernest George Hansell: Must I go all over my
speech again?


Douglas Charles Abbott: I was doing my best to
follow it, but was just a little bit confused.


Ernest George Hansell: I say, when the administration decides on how high an income should be before it is taxed-[DOT]


Douglas Charles Abbott: That is decided in this
resolution. That limit is suggested in the terms of the resolution.


Ernest George Hansell: I know, and that is what I am getting at. The limit is too low. I want to know how the government arrive at the figure. Is it not reasonable to suggest that the starting point should be the determination of what is a reasonably good standard of living? Let me ask this in the first instance: Do the government want every individual in Canada to have a reasonably good standard of living? Do they or do they not?


Douglas Charles Abbott: The answer to that, of
course, is yes.


Ernest George Hansell: Of course it is yes. Well now, what is a good standard of living?


Mr. LESAGE:: What is it? Have you
calculations for that? What is the average cost of living?


Ernest George Hansell: I think I have an extremely good calculation, and that is my common sense when I go to buy things and have to spend money in order to live. _ We have evidently a confession from the minister, because he must consider that $62.50 a month is a reasonably good standard of living.


Douglas Charles Abbott: No. I do not necessarily concede that.


Ernest George Hansell: 
Douglas Charles Abbott: Most food, I think, is
exempt from sales tax.


Ernest George Hansell: Perhaps the minister can put something on the record to indicate that. To my mind, of all criminal offences that can be committed none is so great as what I would call the confiscation of food from the people's mouths. One of the most vital foods for human existence is sugar, and that is taxed. The member for Edmonton East says that all foods are taxed.


Douglas Charles Abbott: Let him look at schedule 3 of the Special War Revenue Act, and. he will see that he is mistaken.
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Ernest George Hansell: Very well; we will look that up. However, $62.50 is not what a man has to live on after we have deducted all his taxes. I do not smoke myself, but I do not begrudge a man a smoke, and if he smokes, he is taxed. If he buys a chocolate bar, he is taxed. If his youngster goes to buy something-well, I do not see how he can have a youngster on $62.50 a month.


An hon. MEMBER:: In that case he would be single.


Ernest George Hansell: My friend is wrong. He has $62.50 a month for himself and $62.50 for his wife. Therefore they have $1,500 for both, which still leaves them $62.50 each.


Douglas Charles Abbott: Two can live as Cheaply as one.


Ernest George Hansell: If their youngster buys a chocolate bar he is 'taxed; if he buys a bottle of pop, he is taxed.


Mr. RINFRET:: He has family allowances.


Ernest George Hansell: If he uses electricity .he is taxed; if he uses a telephone he is taxed. If he has a car-and goodness knows how he can get a car out of $62.50 a month-he is taxed. If he wants to drive somebody else's car he is taxed.


Ian Alistair Mackenzie: Taxed in the pulpit?


Ernest George Hansell: If the Minister of Veterans Affairs will come to my church-


Ian Alistair Mackenzie: I shall be glad to.


Ernest George Hansell: I shall tell him that in
spite of the fact that he comes from the highlands he is going to put something in the collection plate. If these friends in the lower income brackets desire to get married they have to pay a tax. If the gentleman wants to buy his 'bride a ring he has to pay a tax, and at twenty-five per cent. If he wants to keep a dog, he has to pay a tax. Therefore, it does not make any difference what the man does, he has to pay a tax.


Mr. ASHBY:: Even when he is dead he has to pay a tax.


Ernest George Hansell: Yes. If he has any children my hon. friend across the way says that he would get family allowances; then we are all taxed. Therefore it does not make any difference to those poor people in the lower income brackets. Because they are exempted from income tax it does not mean that they do not have to pay any taxes. It must take all the wisdom that the Liberal party has to discover all 'the sources of taxation.
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Gordon Graydon: That is not a very broad base for taxation.


An hon. MEMBER:: They have not
taxed the air.


Ernest George Hansell: My hon. friend says they have not taxed, the air. Yes, they have; you cannot listen to radio broadcasts without paying a tax of $2.50 a year. I can tell the minister how he can get a nice little pile of money, and he will be doing a great service to the country. Whenever I go to a restaurant to eat a meal somebody is bound to drop a nickel into the juke box and blare into my ears some of our western and American culture. Let the minister put a little gadget on these machines so that the rest of us who do not like it can drop in a nickel that will turn the thing off. That is one tax I dhould be glad to pay.


Douglas Charles Abbott: I am glad to hear that, because we have taxed both the machine and the fellow who wants to turn it on.


Ernest George Hansell: Then you will get us coming both ways. You are now getting the tax from the one who wants the crooner's culture, and you will get a tax from the cultured gentleman who does not want it.


William Ross Macdonald: Order. Would the hon. member try to relate his remarks a little more closely to the resolution under discussion?


Ernest George Hansell: Yes; thank you for reminding me, Mr. Chairman. The questions which were asked me took me off the resolution.
I was discussing exemptions to the extent of $750 for single and $1,500 for married people.
I should like the minister to be able to tell us when on earth he expects to do away with such tremendous burdens of taxation as we have. We are paying $481 million a year to service the debt of Canada alone. Even though we did not go into debt another dollar, the people of Canada would have to turn out their pockets and pay $481 million a year. I shoiild like the minister to tell us when we can expect higher exemptions and less taxation and at the same time meet the interest on that debt alone, without incurring another dollar of debt. I should like any other party to tell me the same thing. I declare to you, Mr. Chairman, that it cannot be done within the confines of the rules of the present debttaxing game of finance. If it can be done, I want him to tell me how. It is time the people of Canada became aware of the fact that it cannot be done just so long as governments insist on financing by debt-taxation finance.


Patrick Harvey Ashby: I can answer that last question asked by the hon. member for Macleod. As hon. members know, I have been worried considerably especially since I left my parliament in session; I have not even prorogued it. In fact this whole debt problem has been of great concern to me, so much so that I actually went off my feed, as it were-lost my appetite. However, I made up my mind that I would go down to the hotel and get a lobster supper. Whether it was the result of this lobster supper or not, I am not sure, but during the night I had a vision, and I was able quite easily to solve the problem of all these debts. Whether it was the Angel Gabriel I saw standing in the dark doorway of my bedchamber, or whether it was the landlady in her nightie coming to see if I was ill, or whether it was natural for me to gurgle and rumble my tonsils in peaceful slumber, I shall never know. But it did occur to me, how can we solve this terrific problem of debt? Hon. members know that I am interested in the lowly pig; they also know that I am interested in that great and strenuous art of sheep shearing, but they did not know that I was interested in horses. One horse that I was always interested in was one owned by a fellow named Trojan. Since I was a little boy I always wondered what breed the Trojan horse was. I determined to find out, and indirectly I learned how to solve this debt problem. I was disappointed in the horse. When I went to find out what it was,
I learned that it was nothing but a hammerheaded, broken-winded, raw-boned, switchtailed, old Temiscouata pacing mare. On the other hand, Trojan was the very man for our next prime minister. My hopes rose immediately and then, fell when I learned that the poor fellow was dead; in fact, he had been dead for approximately two thousand years.
Two delegations waited upon Trojan. The first consisted of the minister of finance, the deputy minister of finance, the assistant to the deputy minister of finance and the assistant to the assistant to the deputy minister of finance, the deputy minister of taxation, the assistant deputy minister of taxation and the assistant to the assistant deputy minister of taxation, and two stenographers. They were not the kind of stenographers some hon. members are thinking of, but they did have this in common; they wore no stockings. These two stenographers were just a couple of elderly gentlemen, knock-kneed, bare-legged and baldheaded, with a saddle blanket thrown over one shoulder and loosely tied about the middle and a string of poplar leaves tied around their heads, carrying a great bundle of papyrus

Income War Tax
which they called the budget. They presented to Trojan the records of all the debts that had accumulated during the wars, which amounted to what were tremendous sums in those days. They also complained about the old soldiers of the Trojan wars, the old soldier settlers, and asked, "How in the world can we get them to pay up what they owe?" "Well," Trojan said, " What have you done?" " Well, we have taxed the people. We have foreclosed on homes, farms and factories. We have brought them to their knees and some of them we have under lock and key." " In prison? " asked Trojan. "Oh, no; we have them in insane asylums. We have driven some of them crazy." Well, Trojan just got up and went into the kitchen to get a great meat cleaver, whereupon the suspicious delegation went out through the window.
The next delegation to wait on him consisted of three old soldier settlers of the Trojan wars, worn, weary and haggard, who presented their case. Trojan placed his hand on their shoulders and gave them three pieces of silver, telling them to go to Jones' meat market and buy up all the wieners on sale. Next he sent for the records of all the debts, had them piled in the market place, set fire to them and had a wiener roast. That was two thousand years ago.


William Ross Macdonald: Order. I have been waiting for the hon. member to relate his remarks to the resolution. I would remind him that we are considering paragraph 2, which concerns the exemptions allowed to married and single persons, and the exemptions for children; and I would ask the hon. gentleman to confine his remarks to this paragraph.


Patrick Harvey Ashby: I thought I was on paragraph 2; I thought this had to do with taxation and methods of getting rid of it. What I have said is perfectly true; hon. members can go to the library and find out for themselves that this actually took place. When these debts accumulated in those days they were just, burned. Nobody cried about it except the deputy ministers concerned, and everyone knew they were just crocodile tears which soon dried up. Nothing more was said about it from that day to this. There is the solution to this debt problem.


[Stage Direction]
Resolution agreed to.
3.	That for the 1947 and subsequent taxation years the deduction of $1,500 from the income of a married person be reduced,
(a)	where the spouse has an income of more than $250 and less than $750 by the amount by which the spouse's income is more than $250, or
(b)	where the spouse has an income of more than $750, to $750.
whether or not the wife's income is earned income.
Douglas Charles Abbott: Following the practice when we began perhaps I might give a brief explanation of the legislation which is to be founded upon this resolution. The effect of the legislation to follow this resolution is to return to the basis of taxation for husband and wife each having an income in excess of S750 to the pre^l942 position, and also to provide for a reduction in the exemption granted to the husband when the wife has an income in excess of S250 but below the exemption limit.
Prior to 1942 the law provided that when husband and wife each had taxable incomes the husband lost the exemption granted a married person, and he and his wife were taxed individually as single persons. As a temporary measure to encourage married women to enter war work during the acute period of labour shortage the law was amended in 1942 to allow the husband to retain the married exemption when, his wife had a taxable income derived from employment. The proposal under the resolution we are now considering is that from 1947 onward this special exemption will be withdrawn in order to place their' position on a more equitable basis in relation to other taxpayers.
A further change proposed for married couples where the wife has an income below the taxable limits also removes in a large degree a privileged position previously enjoyed by married taxpayers. Under the present law a married man would be allowed to claim the full 81,500 exemption granted because of his wife's dependence on him, and at the same time the wife could have an income up to $750 completely exempt from tax, so that together they would have a combined exemption of $2,250 compared with a total exemption of only $1,500 granted to two single persons having the same income, or to married persons, the wife having no separate income. To remove a substantial part of this advantage we are proposing that when the wife has an income of more than $250 but less than $750 the husband's exemption will be reduced by the amount by which his wife's income exceeds $250. In effect a husband will be given full married exemption when his wife's income does not exceed $250 a year. When the wife's income exceeds this amount the $1,500 allowance given the husband is reduced in proportion to the excess of her income over $250.
In connection with this proposal I might perhaps point out to the committee that under the federal income tax in the United States a husband may claim full married exemption only if he includes all his wife's income with his own, which of course is more restrictive than the proposal contained in this resolution; and also that in the United Kingdom a husband and wife living together are compel-

Income War Tax

led to file a joint return, though I am advised the husband is allowed a small deduction in respect of his wife's earned income.


Gordon Knapman Fraser: The minister said a married man would have an exemption. I know of married couples where the man is a cripple and unable to work, and the wife earns the money. In that case she would have the exemption, would she?


Douglas Charles Abbott: This applies to the same extent to whichever consort has the income. I am sorry; I should have made that clear.


Harry Rutherford Jackman: I had some remarks to make on this section in the budget debate. To my mind it is one of the most foolish provisions of the present budget. I do not often use such strong words in this house, but certainly this resolution will have the effect of withdrawing from the labour supply of the country a great many married women who are in a position to render valuable service. Without doubt it will cut down the service they will give. If I were interested in the theory of taxation and were to do everything according to the book of rules, with little regard to the effect on humanity or on the economic welfare of the nation or on inflation or on production, probably I would do what the minister is suggesting under this resolution. Undoubtedly it is fair and equitable; if a man's wife is working and earning more than S750, then the husband should not be entitled to the marital exemption because both parties are bringing in income. But let us stop right there. What would be the effect of this new provision concerning earnings over S250, which is not a very large amount for a married woman? It will mean that married women without family responsibilities, whose children are grown up or who have not been blessed with children and who work during part of the year, for instance women who might have been domestics or who might do some nursing for thirty or forty or fifty per cent of the ordinary working year, soon find that their annual income exceeds S250. If it does, this provision immediately comes into effect, reducing the husband's income.


Douglas Charles Abbott: Reducing the husband's
exemption.


Harry Rutherford Jackman: Thank you; reducing the husband's exemption, which means that he pays more taxes. This discourages the wife from doing further work, and I am sure it will have a direct and immediate effect. There are also many women who work along with their husbands, as in the needle trades. The work is taken from the shop to the home, and the wife receives part of the income. But she

very quickly gets an amount larger than $250. I have had a number of letters in this regard from my own riding, and I know that it will apply not only to the needle trades and to domestic services, but also to the nursing profession and many other activities which hon. members may call to mind for themselves.
When he presented his budget the Minister of Finance stated that tlhe most important thing, from the point of view of running the economic affairs of the country to-day, was production; and if there was one thing the budget should make possible it was greater production-not only because production in itself is essential if we are to have a higher standard of living, realizing as we do that we can improve it only if we produce more goods and services, but because we are faced with the grave danger of inflation. Inflation is simply a condition caused by more money than goods available at prevailing price levels. If we want to help defeat this disaster of inflation which we are facing in a very real way, then the more goods and services we produce the greater is the tendency to defeat it. I do not say it will be completely defeated, but the minister has certainly gone on record as saying it w'omld be a help. I think most economists will agree that the more we can produce, the less likely we are to have a serious increase in prices. So while I agree with the minister that there is a certain fairness in this resolution, I believe this is the wrong time to change this part of the act from the way it stood during the war, the way it stands on the books to-day.
The budget is directed to increased production, but now we are asked to come back to a consideration of fairness as the predominant motive. I offer the suggestion to the committee-I hope it will be considered seriously-that this provision is one which should be on the statute book at one stage in a business cycle, and not at another stage. If there are more jobs than people to take them, then we should encourage married women to vTork, even though there might be a slight element of unfairness. It is not very great. It is almost a dog-in-the-manger attitude to take with regard to married persons both of whom are working. It is not a serious inequality. When, there are more workers than jobs available I would put in this restrictive measure. It is restrictive to production, perhaps, but it does help provide work, and it means that instead of two in a family working there will be a greater tendency for only one to work. Therefore I suggest to the acting minister and the committee that the resolution be changed so

Income War Tax
that at the present time we put the emphasis on, production, and at some later time we might put the emphasis on fairness.


[Stage Direction]
Resolution agreed to.
4.	That in respect of income earned after December 31, liMb, the ordinary income tax rate for corporation income be increased from 18 per cent to 30 per cent and from 20 per cent to 32 per cent in a case where a company and its subsidiaries file a consolidated return.
Donald Methuen Fleming: I am bound to say I
find it difficult to relate this resolution to those coming under the Excess Profits Tax Act, in the light of the statements made by the Minister of Finance on June 27. Will the acting minister clarify it?


Douglas Charles Abbott: I shall make a brief statement, as I have done with the others. The increase in the rate of corporation tax which is provided in this resolution is a counterpart of the reduction in the flat rate of excess profits tax which, together, have the effect of reducing the flat rate tax on corporations from 40 per cent to 30 per cent. The reduction follows from repealing the flat 22 per cent rate in the Excess Profits Tax Act and increasing the corporation income tax rate by 12 per cent-that is, from the present 18 per cent to 30 per cent. The consolidated rate which is now 20 per cent under the corporation income tax will be increased to 32 per cent. Does that cover the point?


Donald Methuen Fleming: Not completely. I may
be anticipating something the minister may intend to say later on the resolution dealing with amendments to the Excess Profits Tax Act, but I am still not clear as to what is proposed in the amendments to that act.


Douglas Charles Abbott: 
Mr. MACDONNELL (Muskoka-Ontario):: The minister spoke about a flat rate of 22 per cent. Was that not made up of two bits of twelve per cent and ten per cent? I do not know whether there is any significance in it.


Douglas Charles Abbott: That was changed last
year and made a flat 22 per cent. Originally it was in the form indicated by the hon. member.


John Oliver Probe: Can the minister enlighten
the committee with respect to exemptions on corporation incomes subject to taxation? I refer to the heading for advertising, contributions of various kinds, travelling expenses of officials and employees, and entertainment. Perhaps the acting minister would give a general statement on what is meant by depreciation allowances, capital gains and reserve fund taxes.


Douglas Charles Abbott: The general rule is found
in section 6(1) of the Income War Tax Act, which states:
In computing the amount of the profits or gains to be assessed, a deduction shall not be allowed in respect of
(a) disbursements or expenses not wholly, exclusively and necessarily laid out or expended for the purpose of earning the income.
Then follow a number of other paragraphs relating to depreciation and the like. A corporation or any taxpayer is entitled to deduct from his gross income expenses which are wholly, exclusively and necessarily laid out or expended for the purpose of earning the income. That is the general criterion. Therefore the test must be whether the expenditure for advertising comes within that description; whether , the travelling expenses of a commercial traveller, or a company officer or executive, or the employee of a company, come within that general description. This of course is administered by the Department of National Revenue. The taxpayer's accounts are examined to see whether the expenses claimed as deductions are properly claimed having regard to the provisions of the section I have just quoted.


John Oliver Probe: I would presume, then, that the minister provides some limits within which these expenses are chargeable. For example, surely he lays down a maximum which any corporation may charge for advertising, or a maximum percentage of income which will be allowable for travelling expenses or for the entertainment of convention delegates. Is it within the prerogative of an official in the income tax branch to set, according to his own judgment, what the limits would be? It
3818
Income War Tax

would seem to me that a corporation could argue reasonably successfully that political contributions, for example, were a legitimate business expense if they had reason to believe that the corporation would be benefited by such contributions.


Douglas Charles Abbott: No such claim would be allowed. It would not be a legitimate advertising expense and would not come within the provisions of the section, I quoted.


John Oliver Probe: I have reason to believe that such contributions have been claimed successfully as deductions.


Douglas Charles Abbott: They should be brought to the attention of the tax department. I am sure they will see that the situation is corrected.


John Oliver Probe: The minister states that contributions of that type for political purposes are definitely not proper deductions?


Douglas Charles Abbott: I state that without hesitation; there is no question about it at all. Section 6, subsection 2 reads:
The minister may disallow any expense which he in his discretion may determine to be in excess of what is reasonable or normal for the business carried on by the taxpayer, or which was incurred in respect of any transaction or operation which in his opinion has unduly or artificially reduced the income.


Gordon Knapman Fraser: As I understand it, the tax collector goes into a firm and checks the advertising account. If more has been spent than was spent in the year before he will ask the reason and perhaps will allow only part.


Douglas Charles Abbott: I think that is correct. Hon. members of the committee will appreciate that it is difficult to lay down a definite criterion for all companies. Some types of business require to spend a great deal more for advertising than others. During the war period, when the excess profits tax was in operation- and it still applies-there was a quota set for advertising purposes. Firms were not allowed to exceed an amount based on what they had expended during the base period. I do not want to be held to the exact details as to how the quota was arrived at, but one was set. That has now been discontinued, and the normal procedure is that the taxpayer must show that the advertising expense was incurred and was wholly necessary for the purpose of earning the income. However, that is subject to the control which the minister has under the subsection I have just quoted.


Stanley Howard Knowles: Is the minister aware that communications have gone out to some firms soliciting contributions-I refer in particular to letters over the signature of one Mr. Trestrail, in which he stated that he had reason to be-

lieve that contributions to the kind of thing he was doing would be allowed as a deduction for income tax purposes-which have made this claim?


Douglas Charles Abbott: I have no knowledge of the letters sent out by Mr. Trestrail, but I do not know that I would care to accept his interpretation of the income tax law as to what would be or what would not be allowed.


John Oliver Probe: The minister has yet to make a statement on depreciation deductions in connection with plant and equipment.


Douglas Charles Abbott: Section 6 provides:
6. (1) In computing the amount of the profits or gains to be assessed, a deduction shall not be allowed in respect of
(n) depreciation, except such amount as the minister in his discretion may allow, including
(i)	such extra depreciation as the minister in his discretion may allow in the case of plant or equipment built or acquired to fulfil orders for war purposes; and
(ii)	depreciation at not more than double the rates normally allowed in respect of plant or equipment built or acquired in a period to be fixed by the governor in council for the purposes of this paragraph, if the taxpayer is, in the opinion of the minister, making a new investment by building or acquiring the plant or equipment.
Provided, however, that the minister shall not allow a deduction in respect of depreciation of assets owned by an incorporated taxpayer from the income of the said taxpayer if he is satisfied that the said taxpayer directly or indirectly had or has a controlling interest in a company or companies previously the owner or owners of the said assets or that the said previous owner (which term shall include a series of owners) directly or indirectly had or has a controlling interest in the said taxpayer or that the said taxpayer and the previous owner were or are directly or indirectly subject to the same controlling interest and that the aggregate amount of deductions which have been allowed to the said taxpayer and/or the said previous owner in respect of the depreciation of such assets is equal to or greater than the cost of the said assets to the said previous owner or to the first of the previous owners where more than one.
There are other provisos but I shall not read them all. They were put in a year or two ago to prevent the possibility of undue depreciation being granted. As the committee will appreciate, the minister is given the discretion as to the rates of depreciation. The department has established recognized rates for various types of assets, movable and immovable, which I believe are applied in a uniform fashion to all taxpayers.


John Oliver Probe: I shall have to digest that
statement when I read it on Hansard. It is conceivable that over a number of years an entire plant and its equipment might be written off in the normal income tax practice, but the equipment might still have some value.

Income War Tax
Suppose that a corporation decided to dispose of an obsolete plant which had been written off and which conceivably could be written off according to the regulations. Would the purchase price received be considered as income for that year, or would it be treated as a capital gain which would not concern the income tax department?


Douglas Charles Abbott: If the corporation has had
normal write-offs based on the standard rates-none of this accelerated depreciation to which I have referred-and the plant is sold after it has been completely written off to a stranger, someone who is at arms length, that stranger is entitled to take depreciation on the cost of the property to him.


John Oliver Probe: That is fine for the stranger
who buys, but how about the seller?


Douglas Charles Abbott: It applies to both individuals and corporations.


John Oliver Probe: This obsolete plant has been sold, say for $100,000. What happens to that $100,000 as far as the income tax department is concerned? The plant does not exist but the corporation has had $100,000 of income. Is that considered as current income or as capital gain?


Douglas Charles Abbott: It is considered as capital.


Harry Rutherford Jackman: It might be a capital
loss.


Douglas Charles Abbott: A capital loss might exist
in other circumstances. My hon. friend will appreciate that these depreciation rates must be based on the law of averages. For example, if experience proves that machinery is worn out in ten years and a straight line system of depreciation is used, at the end of ten years the machinery would be written off. If some value still remains the owner is fortunate, but it may well happen that the machinery would be worn out and discarded in five years.


John Oliver Probe: The fact is that if your
officials are generous it is by accident only?


Douglas Charles Abbott: There are standard rates
which are applied to everyone and which, I understand, are based on long experience. I think they are just as close as one can get to what is a really fair rate of depreciation.


James MacKerras Macdonnell: With regard to the provisos on page 23 of the Income War Tax Act, as I understand it if a subsequent sale is made and the department is led to assume that its depreciation was too great, it may revise it. Does that work the other way, and would the department assume that it had not been generous enough if a loss occurred?


Douglas Charles Abbott: As probably my hon. friend knows that provision was inserted several years ago to meet the case of the special accelerated depreciation which was given on the recommendation of the board set up for the purpose of making recommendations in connection with the fulfilling of war contracts. Varying periods of write-off were given, some two years, some three years, some four years. This provision was inserted to provide that if that had proved unduly optimistic the matter could be looked into again. It is on the same basis, if you will, on which war contracts were renegotiated; it is on the principle that it was desired that no one should make undue profits out of war contracts.


[Stage Direction]
Resolution agreed to.
5.	That the exemption of investment income for purposes of the 4 per cent tax on investment income be increased for the 1947 and subsequent taxation years from $1,500 to $1,800.
Stanley Howard Knowles: Will the minister make a statement about this, and perhaps at the same time indicate what will be the loss to the revenue department as a result of the application of this change?


Harry Rutherford Jackman: Hear, hear; that is what I wanted to know.


Douglas Charles Abbott: The resolution is, of course, self-explanatory, and provides for an increase in the exemption from $1,500 to $1,800 under the four per cent tax on investment income. The surtax on investment income is and has been, I think, a feature of all income tax systems for some time. In the 1947 budget we are providing for some-fairly substantial -relief to all classes of taxpayers, and in accordance with that principle the exemption for investment income has been raised from $1,500 to $1,800. Some hon. members may suggest that that is insufficient. It is intended, broadly speaking, to give some relief to that large group of small investment income recipients, of widows who are living on inherited income, those to Whom their husbands leave insurance, and that sort of thing, and for that class of person the exemption is raised from $1,500 to $1,800. It does not give any substantial measure of relief to the richer man; I suppose it saves him $12. I am advised that no estimate has been made of what the net cost of this increased exemption
Income War Tax

will be to the treasury, but perhaps I can ask the officials to make such an estimate and give it later on.


Mr. MacNIOOL:: It is a step in the right direction, anyway.


Stanley Howard Knowles: While they are getting these figures-


Douglas Charles Abbott: I do not guarantee that we can give an exact figure, but we will do the best we can.


Stanley Howard Knowles: -will they also consider obtaining some estimate as to the number of these people who are the widows that my hon. friend refers to, and how many are the big fellows?


Douglas Charles Abbott: I can tell my hon. friend at once that that would be extraordinarily difficult information to get. It would mean examining all the returns and even getting information about some who may have filed no return at all.


Stanley Howard Knowles: Then I think it was unfair of the minister to use that argument.


Douglas Charles Abbott: I do not consider it at all unfair. I think it is perfectly legitimate to say you will exempt investment income up to SI,800 from this four per cent surtax. I say that the average retired person who is living on income from savings, or who is a widow -I did not intend to imply more than that there would be widows in the group-living on a return from savings, are exempt up to SI,800. I think it is perfectly legitimate to use that point, because that as the class it is intended to relieve, and I assure my hon. friend and other members of the committee that it is not intended or designed to relieve the man who has an income of $100,000; it does not make any appreciable difference to him.


Harry Rutherford Jackman: I might say that I do not think the hon. member for Winnipeg North Centre understands this resolution, because the total amount of saving to the taxpayer through increasing the exemption on investment income from 81,500 to $1,800 is four per cent on a difference of $300, namely $12.


Douglas Charles Abbott: I said that.


Harry Rutherford Jackman: I think he will realize that if the administration were endeavouring to help anybody they were not trying to help any of his wealthy backers. Certainly as far as it goes it must be a measure for the alleviation of the very poor people who are endeavouring to live on $1,800 or $2,000, only it happens to be in the form of investment
(Mr. Abbott.]
income. They may be annuitants, or something of that kind. It is of no help, I am sure, to the class at which my hon. friends endeavour to aim their arrows. I may say this, that in view of all that has happened to the person who is in very moderate circumstances and whose income does happen to come from investments this is a meagre form of relief, and I should think the Minister of Finance might well have been ashamed to offer as little as he has. What has he done to the small person who has an income from bonds or other securities? First of all, government bonds, instead of yielding 4| or 5 per cent, are down to 2f per cent on the investment of their money, a substantial cut. Taxation has gone up substantially also. So that between the two millstones of very much smaller income and very much higher taxation, some of these relatively poor people, receiving $1,500, $2,000 or perhaps $2,500 a year, have been ground so that they have extraordinarily difficult times, and many of them are widows and elderly retired men. It is a class which is deserving of the support of every party of this house without exception; and the administration grants them only $12, True, the wealthy man will also get the $12, and I do not think anyone is going to worry very much about that. There are not many wealthy men anyway. I think the government might well have given some further relief to the particular class at which this resolution is aimed. It is my personal opinion that any minister of finance should be thoroughly embarrassed to offer a measure of relief amounting to only $12. It is no wonder that the department have not estimated the total amount of taxes which will be lost by this measure, because it is probably so small that one could not see it, in relation to the total budget.


Douglas Charles Abbott: Just on that point, perhaps I should point out that the proportionate relief of this tax is just about the same as the others. The exemption for married persons was raised from $1,200 to $1,500, and that is a 25 per cent increase; this represents a 20 per cent increase. It is in line with the increases in other exemptions.


Harry Rutherford Jackman: Twelve dollars!


Douglas Charles Abbott: And the same class benefit from the general reductions. I think it is fair to say that it would not have been proper to have given relief to the other classes and not have given proportionate relief to this group.


Stanley Howard Knowles: Is any distinction made between those to whom this is their only income and those to whom this is an addition to other income?

Income War 2 ax


Douglas Charles Abbott: No.


Stanley Howard Knowles: I really think that the minister and the hon. member for Rosedale hardly expected their implication to go unchallenged that we are dealing here with a great mass of poor people.


Douglas Charles Abbott: I did not say "a great mass of poor people".


Stanley Howard Knowles: The hon. member for Rosedale talks about the great class of poor people who are living on only 11,500 to $1,800 a year of investment income. People who have sufficient investment to have that much income on it a year do not stop there. They do not come from the ranks of those in the lower income brackets.


Harry Rutherford Jackman: It may be an annuity which will represent all their capital. Are you against a man leaving his widow $1,500 or $1,800 a year? Certainly your party has not been in the past.


Stanley Howard Knowles: Not at all; I am simply asking that a distinction be made between those to whom that is their only income and those to whom it is an addition.


Harry Rutherford Jackman: Twelve dollars distinction.


[Stage Direction]
Resolution agreed to.
6.	That a deduction from tax be allowed in the 1946 and subsequent taxation years to a taxpayer who resides or is ordinarily resident in Canada during only a part of the taxation year of a portion of the tax that would otherwise be payable upon his income during the taxation year that bears the same relation to the whole rax as the period in the taxation year during which he is not resident or ordinarily resident in Canada bears to the whole taxation year.
John Ritchie MacNicol: I desire to say a word or two on this.


Douglas Charles Abbott: I have been making a little explanatory statement in respect to each of these clauses, so that perhaps my hon. friend will allow me to do it here. The situation at the moment is that under the charging provisions of the Income Tax Act as it now stands the tax is imposed on the whole income, no matter where derived, of a person resident in Canada at any time in the tax year. Credit is given against the Canadian tax for income tax paid to another country or income derived from sources outside Canada, and in the normal circumstance the credit is sufficient to offset the Canadian tax imposed on the same income. Representations have been made, however, that in some instances there is no credit for foreign taxes because in some countries no income tax is imposed, or else the credit is quite inadequate because of the very low tax in the foreign country. To overcome this objection to the present law, it is proposed that a person resident in Canada for only a part of the year will continue to be taxable on the whole income, but a credit against the Canadian income tax will be allowed based on the proportion which the number of days in which the taxpayer was not a resident of Canada bears to the total number of days in the year. In other words, in effect, under the proposal which is indicated in this resolution a person resident in Canada for a part of the year will pay a Canadian income tax proportionate to the period of residence in Canada.


John Ritchie MacNicol: I have not in mind the particulars of the case with respect to which I now wish to say a word, but a year ago- perhaps the deputy will recall the circumstances-I brought to the attention of the department the case of a gentleman who had been in the United States, working there, who then came back to Canada, and who was bitterly angry over the assessment in this country. Apparently, although he had earned much less in Canada than in the United States, the income tax he paid was very much higher. I have forgotten the exact circumstances of the case, and all I wish to inquire now is as to what the situation is if a man earns $3,000 in the United States and returns to Canada and earns $1,500 or $2,000 in this country. What, will be the relation of the tax payable in Canada to the amount earned in Canada?


Douglas Charles Abbott: The answer is this. The tax payable in Canada would be a proportion of the tax on his total income which, in the case which my hon. friend mentions is $4,500. The tax would be calculated on the $4,500 as though that amount had all been earned in Canada, after taking into account the appropriate exemptions. After that result had been arrived at there would be a determination as to how many days he had resided in the United States and how many in Canada. Assuming for the sake of argument that he had spent two-thirds of the time in the United States and one-third in Canada as a resident, the tax payable to Canada would be one-third of the income tax on the $4,500, and presumably he would be taxed on the two-thirds in the United States. The tax would first be computed on his total income for the year, but he would be taxed only in respect of the portion which represented the period during which he resided in this country in that year. I think it would cover the case to which my hon. friend has referred. I remember his bringing it up.


Joseph Arthur Lesage: Suppose the tax on the total income of the taxpayer for 1947 is $365 and
Income War Tax

this taxpayer spent 200 days in the United States. He can deduct $200, which will leave $165 which he will pay in Canada.


Douglas Charles Abbott: That is correct.


William Alexander McMaster: This resolution, I suggest, has implications that none of us thought of in the first instance. First of all, it ignores the law of domicile. Is it applied to wages as well as to investment income? Let me give an example. A man ordinarily resident in Canada may draw a salary. Can he evade some of his ordinary income tax by going and living in some other country for three months of the year, assuming that he had a job which did not require his continued personal attention here? I could understand it if it were investment income, but even there I would seriously consider whether this was a wise resolution to put into force if the man who takes advantage of it were a domiciled Canadian.


Douglas Charles Abbott: I think the answer is this. Under our income tax act, as under the British act, the test for income tax liability has always been residence, not domicile. That has been the principle in our act from its commencement. The United States system is slightly different. Some taxes are imposed on the basis of citizenship and, perhaps, in respect of domicile. I do not know. In any event, under the Canadian and the British law, the main test of liability for income tax has always been residence. Taking the specific case which my hon. friend has cited, if I understood him correctly, an American resident or a domiciled American comes to Canada-


William Alexander McMaster: It is the other way around. I am speaking of the domiciled Canadian who has a job here that does not require his personal attention all the year round, and who, for the purpose of evading our somewhat heavy taxation, decides to spend four months of the year in the British West Indies.


Douglas Charles Abbott: My hon. friend, as a
prominent legal light, knows that residence is a question of fact. It would be a question of. fact whether the individual to whom he refers had retained his residence in Canada, though he might spend eight or nine months of the year, in Florida, for his health, or for some other purpose. If his bona fide residence were in Canada he would continue to be taxed here. But this proposed amendment is to meet the hardship involved in the case of a man who bona fide changes his residence during a taxation year, the man who is an executive of a Canadian concern for the first four or five months of the year and then transfers to the American parent company.

I cite that as an example. He changes his residence from Ottawa or Montreal, as the case may be, to some place in the United States. Under the law as it stood, he would have been obliged to file an income tax return in Canada and be taxed on the total income for that calendar year, and would be entitled to claim a credit against that tax for any tax he might pay in the United States with respect to taxes paid to that government. But in some cases that was found to create injustice. One such case was cited by the hon. member for Davenport. This section is, therefore, a relieving measure and is intended to provide an equitable basis for taxation of individuals who bona fide change residence during the course of the taxing year.


William Alexander McMaster: The resolution is wider than the minister has stated.


Douglas Charles Abbott: Possibly when, we come to the section my hon. friend will see how we provide for it in the legislation itself.


Donald Methuen Fleming: The outline which the minister has given suggests that the resolution has a good deal of merit, but I think the committee would welcome some further clarification, particularly in reference to the extent of the proposed change. Are we to understand that the section has no application at all to the present provision in the act about sojourning in Canada?


Douglas Charles Abbott: It has no application to
that. In other words, it is only in the case of bona fide residence that it applies.


Donald Methuen Fleming: It has no application to the sojourn clause, 9?


Douglas Charles Abbott: Tha/t is correct.


Donald Methuen Fleming: Will it have relation to the case where the taxpayer, while normally resident in Canada, draws income from sources outside Canada as well as from sources within the country, and Who may take a trip abroad for a short time? Is this proposed amendment confined simply to the case where there is a complete change of residence during the year, without affecting-the case of taxpayers who maintain residence and draw income from sources both within and outside Canada?


Douglas Charles Abbott: My hon. friend's interpretation is correct. It affects simply cases of bona fide change of residence. The other individuals to whom my hon. friend refers will continue to benefit from the provisions in the act which allow them to take credit for taxes paid abroad with respect to income received from sources abroad.

Income War Tax


Donald Methuen Fleming: There is no change in
the law?


Douglas Charles Abbott: There is no change in the
law there.


James MacKerras Macdonnell: Has the minister considered whether this conflicts to any extent with article IX of the agreement with the United Kingdom which is attached to bill No. 300? I have it here if the minister would like to look at it. It seems to provide that anyone who is resident in Canada for more than 183 days must pay the full year's taxation. That is the way I read it. Section 3 of the bill says:
In the event of any inconsistency between the provisions of this act or of the said agreement and the operation of any other law, the provisions of this act and the agreement shall, to the extent of such inconsistency, prevail.
It may be that that is the answer, if there is a conflict.


Douglas Charles Abbott: I am advised that this is
supplementing the provisions of the agreement to which my hon. friend refers rather' than opposing it. I am also informed that the United States have a similar provision in their law.


[Stage Direction]
Resolution agreed to.
7.	That there be established, with provision for the expenses thereof, an income tax appeal board consisting of a chairman and two assistant chairmen having specified legal qualifications and not less than three nor more than nine other members appointed by the governor in council, as a court of record, to hear, in any part of Canada, appeals from assessments made by the Minister of National Revenue in respect of the 1946 and subsequent taxation years and that an appeal may be taken from a decision of the appeal board to the exchequer court of Canada.
Donald Methuen Fleming: I made some remarks on this proposed legislation when I spoke in the budget debate, and I shall not go over them again, but I suggest to the minister, as earnestly as I can, that if this resolution is to have any real value it must be amended. As hon. members know, at the present time assessments are coming out three years and sometimes longer after the return on which they are based has been filed. If this proposed income tax appeal board is to begin its work on assessments for the taxation year 1946 and subsequently, it is not going to go to work until about 1950. The need for an income tax appeal board is implicit in the submission of the resolution. In the first place, if that need exists-and surely no one will question that-then I suggest the board ought to go to work at once. I fail to see what objection there can be to giving this board jurisdiction as to assessments which are in the course of being made so long as the returns
on which the assessments are made have been filed. Otherwise this board is either not going to come into existence until about 1949 or 1950, or it is going to be set up now under this resolution and have nothing to do until 1950.
In the spring of 1947 we shall be making our returns on 1946 income, which is the first year in respect of which this board is to have any jurisdiction. In another three years or thereabouts the assessments will be made. This means that it will be 1950 before there is a tap of work for the income tax appeal board to do. I take it that the committee is not going to contemplate seriously putting the board into a position like that, which I suggest is almost farcical. I would urge on the minister that the assessment with respect to which this income tax appeal board is to be given jurisdiction ought to relate back for a period so that they can go to work ncfw.


Douglas Charles Abbott: I have taken a note of my hon. friend's suggestion, and I shall make some comment on it when we come to the section of the bill which provides for this board. As he will appreciate, as well as anyone else, there is a question as to whether a new board of this kind which is being set up should start off with a large accumulation of back appeals. However, I shall give the whole question some consideration, and will make a statement when we come to the section of the bill.


James MacKerras Macdonnell: May I add one word to what the hon. member for Eglinton has said, merely to emphasize as strongly as I can what he has said and to remind the minister that the Minister of Finance made a very strong statement last October as to what would be done? May I underline as heavily as I can what the hon. member for Eglinton has said as to what seems to me to be the great unwisdom of not doing anything for three or four years? This is something that the people of Canada are exercised about.


William Alexander McMaster: That reminds me of something that I intended to say. I do not want to urge the government to hire any more employees; rather I would urge them to get rid of some in every department. When they have to fire three in any other department I suggest that they take on a good 'one in the income tax department to catch up on these arrears. If the arrears are caught up the very objection which we have made will be overcome.


Douglas Charles Abbott: I agree.


William Alexander McMaster: I suggest to the minister that if he waits too long he will not recover a lot of this money. I read in the newspaper
Income War Tax

that a concern not so very far from the parliament buildings has got into difficulties and that it owes the government a large sum of money. Probably if these returns were checked up a little sooner recovery would be made while these concerns are solvent. It may be that some of them go insolvent purposely to avoid liabilities. I do not suppose they would feel badly if the government were one of the large creditors.


Gordon Graydon: I should like to say a word upon a matter which has been brought to the attention of the committee by the hon. member for Eglinton and the two subsequent speakers. What I have to say is not a reflection on the income tax department but simply to get information with respect to the arrears of assessments for the various years. I appreciate the tremendous volume of additional work which came to the department during the strenuous and critical days of the war. I take it that there must be serious arrears because, I suppose, accountants, auditors and those who are qualified to do this sort of work are in short supply. I have no doubt that the income tax department has had a great deal of difficulty in recruiting the necessary type of men and women to handle the greatly expanded work which the department was called upon to perform under the new income tax provisions.
I should like the minister to put on record the exact position with respect to the arrears of assessments for the various years. That is important to the committee's work, and perhaps it might give us a truer picture of what the income tax department is really up against.


Douglas Charles Abbott: I shall make every effort to do that, but if it so happens that it should not be available before we finish the resolutions I am sure the Minister of National Revenue will give that information when his estimates are before the committee. The deputy minister assures me that every effort will Ire made to get that information as quickly as possible. My hon. friend has pointed out, as iit has been pointed out before, that the number of income taxpayers has increased from somewhere between a quarter to half a million before the war to well over two million to-day. Therefore the committee will realize that a tremendously heavy administrative job was thrown on the Department of National Revenue at a time when it was extremely difficult to recruit competent personnel even for other activities. Therefore it is perhaps understandable that returns have not been assessed as promptly as it is desirable, but I can assure the committee that every effort is being made to correct

that situation as quickly as possible. I agree *with the remarks made by the hon. member for High Park that we should endeavour to get as high a class of personnel as possible in that department.


Mr. BOUCHER:: Resolution 7 makes provision for the appointment of one chairman, and two assistant chairmen having specific legal qualifications. Further on, it makes provision for not more than nine other members appointed by the governor in council. The need for having an income tax appeal board is important, but I believe the minister should make a statement as to what specified legal qualifications he intends to impose upon the chairman and the vice-chairman, and also whether or not the same qualifications will be imposed on the other nine. I say that particularly because it would be advantageous to see that the people who sit upon a court of appeal on income tax are not the people who make the assessments or from whose rulings the appeals are made.


Douglas Charles Abbott: I agree with that.


George Russell Boucher: Will the minister give an explanation.


Douglas Charles Abbott: I agree completely with the last part of my hon. friend's remarks. As the resolution indicates, this appeal board is intended to be in effect a tax appeal court. It was felt that the chairmen should be men with legal training because important questions of law will be involved in the interpretation of the Income War Tax Act.
As to the legal qualifications required, I should prefer to deal with those when we bring in the bill, which of course will be very shortly. As the committee knows, the legal qualifications for judges of a high court are that they should have been practising for not less than ten years at the bar of the province in which they are appointed, and I think some similar limitation will be required for these three gentlemen. I do not know whether the hon. gentlemen raised any other points-


George Russell Boucher: What about the other six?


Douglas Charles Abbott: I might just give my personal view for the moment, that the others would be accountants or perhaps outstanding businessmen. In any event they would not be officials of the Department of National Revenue. The point is that they would be laymen; they would not of necessity have to be members of the legal profession. They might be accountants or men with business experience, or something of that kind.


Mr. FAIR:: Perhaps it would be a good thing if on that advisory board we had men who did not belong to the legal profession. Prob-

Income War Tax
ably the common man, the working man would have a better show if he had some of his own people on that board.


Douglas Charles Abbott: I am all for the working man, too, and we shall do the best we can with this board.


Robert Fair: I was going to suggest that each occupational group be represented on the board.


Douglas Charles Abbott: I do not know that I could agree that every group in the country should necessarily be represented on this income tax appeal board. It is in the nature of a court, and I think the committee may rest assured that we shall endeavour to set up as competent appeal boards as we possibly can. The chairmen will be men with legal qualifications, but aside from that we shall try to get the best men we can- for the job that has to be done.


Donald Methuen Fleming: I should just like to say that if the minister can get men for this appeal board of the type who functioned on the board of referees under the Excess Profits Tax Act he will have gone a long way to set up a satisfactory and competent board.


Douglas Charles Abbott: I agree with my hon. friend on that.


Harry Rutherford Jackman: May I ask why the court which is to be set up under resolution 7, or the board, will not have power to review assessments where the minister's discretion is concerned? As we all know, the minister has discretion in perhaps 150 or 250 cases under the present Income War Tax Act and Excess Profits Tax Act, and that is one of the reasons why there is so much confusion in determining just what is the law of the land. The resolution does not say so, but the minister's remarks in the house clearly implied and the following resolution clearly indicates that this board which is to be set up is not to have power to review matters of discretion. What we have always complained about in this case, as I recall the words of Hon. Mr. Hanson, is that when you appeal from the ruling of the income tax depart-men you appeal from Caesar unto Caesar; it goes back along the same channel and the minister simply acts on the advice he receives. As I understand it, the decision of a trial judge may always be appealed on questions of discretion, as to whether or not he has exercised a reasonable amount of discretion or whether he has exceeded his jurisdiction, and I see no reason why we should place a deputy minister in a category higher than that of trial judges throughout the country.


Douglas Charles Abbott: We do not, but I shall
deal with that in a moment.


Harry Rutherford Jackman: That will be splendid,
because we are interested in ascertaining why matters of discretion cannot be reviewed by the board which is to be set up under resolution 7.
While I am on my feet I should like to say that if the provision still exists and is to be continued under which an appellant must put up a bond of S400 in order to have his case reviewed, I believe the amount should be substantially reduced or done away with entirely.


Douglas Charles Abbott: On the matter of discretions, of course that is something on which a good deal has been said in this committee.
I must confess that if hon. members look far enough back in Hansard they will see that I had something to say about it myself four or five years ago. The general rule of law, as members of the bar know, is that where a discretion is given to a person under a statute and that discretion is exercised bona fide by the official or deputy minister or whoever it may be who is called upon to exercise it, the courts will not interfere with such exercise. The very words themselves, "the exercise of a discretion" imply that the individual to whom the discretion is given exercises that discretion; and the courts do not review it. The same thing applies in municipal law, for instance, where a city council is granted discretion to issue or refuse a permit for certain purposes. The courts will not issue a writ of mandamus to compel them to do so and will not review the exercise of that discretion unless it is shown that it has been influenced by improper motives. There has been a good deal of criticism of the discretionary powers given under the income war tax act to the minister.


Harry Rutherford Jackman: It is riddled with them.


Douglas Charles Abbott: The hon. gentleman says it is riddled with them. The fact remains that in any income tax act I have ever seen it has been necessary in the interests of reasonable and propter administration to give certain discretions to the responsible minister.
I prefaced what I had to say by stating that there had been criticism of the wide . discretionary powers which were given. It was felt that you could not give to an appeal court the right to substitute its discretion for tlhe discretion of the minister on whom that power is conferred under the act; but it was desired to avoid as far as possible the feeling that those discretionary powers were exercised
Income War Tax

arbitrarily and that the taxpayer had no recourse against what he might believe to be an arbitrary exercise of that discretion. Perhaps I might repeat to the committee what the Minister of Finance said in his budget speech, at page 2923 of Hansard on the question of this proposed advisory board:
There is some complaint about the existing provisions of the law in so far as these discretions are concerned. After careful consideration, the government has concluded that an advisory board, separate altogether from the appeal board to which I have referred, should be set up to advise the Minister of National Revenue upon the exercise of certain of his discretionary powers. The house will recall that under the Excess Profits Tax Act a_board_of referees was set up to advise the minister with regard to standard profits.
The minister was given- a discretion with respect to that.
The government's proposal is -to establish an income tax advisory board, consisting of a chairman and not less than two and not more than six other members, to which a taxpayer may require the Minister of National Revenue to refer for hearing, consideration and advice, decisions made by the minister in the exercise of specified discretionary powers. I may add that instructions are being given to the interdepartmental drafting committee to explore carefully the possibility of reducing the^ number of discretions now vested in the minister or at least of providing for their exercise under regulations approved by the governor in council.
If I may say so, I think 'the setting up of this advisory board is a forward step. Let us see how it operates and how it functions before we condemn it; that is the suggestion I make. My main point is that you cannot and dhouldl not set up an appeal court which would exercise powers of discretion vested in a minister of the crown-.


Donald Methuen Fleming: I understood thait matter was to he discussed under resolution- 8. What is your ruling on that, Mr. Chairman-? I have some observations I dhould like to make in connection with, the advisory b-oard.


Douglas Charles Abbott: I apologize if I have jumped the gun. Perhaps it mi#it be convenient if bon. members were to take these two sections together; they are closely related and hon. members may want to comment on both at the same time'.


Donald Methuen Fleming: I should like to offer this observation, that while -I -think the income tax appeal -board suggested in resolution 7 is a great step forward, its success will be to a large extent vitiated if the powers assigned to it over assessments are too much confined. The effect of resolution 8 is to narrow greatly the scope of the jurisdiction assigned to the appeal board under resolution 7.

May I remind the committee that the committee which sat in another place and investigated at great length the working and the provisions of the Income War Tax Act made one recommendation with respect to appeals, namely that the appeal board to be sfet up should have the power of review of the exercise of discretionary powers, as well.
That is not the line taken by the government in these resolutions. The income tax appeal board proposed in resolution 7 will have no power whatsoever to review the exercise by the minister of any of his numerous discretionary powers under the Income War Tax Act and the Excess Profits Tax Act.


Douglas Charles Abbott: It will have, as my hon. friend realizes, the same power that the exchequer court has to-day.


William Henry Golding: Resolution 8 has not yet been called.


Douglas Charles Abbott: We are dealing with them together.


William Henry Golding: It has not yet been called; but if it is satisfactory to the committee to deal with both resolutions at the one time, I shall call it now.
8.	That there be established, with provision for the expenses thereof, an income tax advisory board consisting of a chairman and not less than two nor more than six other members appointed by the governor in council to which a taxpayer may require the Minister of National Revenue to refer for hearing, consideration and advice a decision to which the taxpayer objects made by the minister in the exercise of specified discretionary powers in respect of an assessment for the 1946 and subsequent taxation years.


Donald Methuen Fleming: Thank you, Mr. Chairman. The committee to which I have referred -which sat in another place was a competent committee, and pointed out that under the Income War Tax Act there are eighty-eight discretionary powers conferred on the minister, and under the Excess Profits Tax Act no less than twenty-four.
It is -obvious that when the Minister of National Revenue on the one hand and the taxpayer on the other are pitted against each other in a dispute under which any of these discretionary powers can be exercised, the taxpayer just has not a chance. He does not enter the contest on an equal footing. Folium it is a hopeless contest.
The government in drafting its budget resolutions ought to have given effect to the recommendation put forward by the committee in the other place. The same objections now taken on behalf of the government to that recommendation were before the committee in the other place. They called the

Income War Tax
officials, heard their objections and reported that, notwithstanding those objections, they still felt there should be power of review of the exercise of discretionary powers, and that the appeal board should not be deprived of the power to review such exercise of power.
At page 382 of the report the committee says:
Your committee has given consideration to these submissions of the deputy minister and has concluded that they represent a direct conflict of opinion with the suggestion advanced by other witnesses in briefs and examinations, with which suggestions your committee agrees in principle as will be hereafter shown.
It must be clear to this committee that there are some serious defects in the scope of resolution 8 in relation to the law as it will continue to exist if the resolution is confined to its present scope.
In the first place, there is no real power given to the income tax advisory board. As its name implies, and as the resolution clearly demonstrates, it is advisory only. There is no obligation whatsoever upon the minister to accept the advice of this advisory board. The minister refers, as did the Minister of Finance on June 27, to the fact that boards of review which operated under sections 4 and 5 of the Excess Profits Tax Act did not have final power, but had power only to advise the minister. We have not had any statistics from the minister as to those cases, if any, in which the minister chose to reject the advice given him by those boards of review.
My experience with those boards of review was that they were most competent. They had on them some distinguished members. In one instance there was a chief justice acting as chairman, and there were economists and accountants making up the remainder of the board. They gave a good hearing. It was not one confined to too technical procedure. Business people appeared before it, as well as persons represented by counsel. I believe there was no fault whatsoever to find with the procedure.
But unless the minister is prepared to say that the minister took advantage of his power to reject the advice tendered to him by those boards of review, then I say the minister might as well tell us now that such boards ought to be given power, not simply to advise, but to overrule or to vary assessments.
There is the position. Unless these boards are going to make mistakes; unless they are going to go astray, if they are boards which will be composed of competent men, then I suggest that there is no reason why their functions should be confined to the tendering of advice to the minister.
The second qualification as to the scope of resolution 8 is, as I said earlier, that there is still no appeal from the exercise of discretionary powers. But those two qualifications are not the only ones which are objectionable. The third is this, that there is still no attempt being made 'this year to whittle down or to reduce the number of discretionary powers.	That is a serious
situation.
I do not need to repeat what I said earlier about the unfairness of a situation in which a taxpayer entering a contest against the Minister of National Revenue is beaten before he starts, so long as the minister can invoke one of these discretionary powers. He is just licked before he starts, if the minister is permitted to invoke one of these eighty-eight discretionary powers given him under the Income War Tax Act. I do not think any government can justify placing itself in a position of such vast superiority over those individual citizens who are called upon to pay taxes and who think they have been unjustly assessed.
That is a situation which, I submit, is so acute that it should not have to wait for another year for remedial action on the part of the government or parliament. It is just as important as those matters with respect to which the government, under resolutions 7 and 8, is proposing to take action-in resolution 7 a good step, and in resolution 8 a most inadequate one.
I urge upon the minister that it is not too late for the government to reconsider resolution 8 and, combining it with resolution 7, to give to the income tax advisory board power to review the exercise of discretionary powers by the Minister of National Revenue; to make it more in that respect than simply an advisory power; to give it real powers.
In the third place, the government should get down to business with respect to this problem of discretionary powers, because it is a problem which is so urgent that it cannot be left deferred. That is my appeal to the acting minister.


Douglas Charles Abbott: On the first point raised
by the hon. member, I have already answered by saying that to create this appeal court with powers to review the discretion of the minister would be a negation of the doctrine of ministerial responsibility. It was for that same reason that the special board on war contracts depreciation and that on excess profits were made advisory boards.
In the same way this question was given most careful consideration by the government, and it was decided that it could not
Income War Tax

depart from the principle of ministerial responsibility, where discretionary power is given under the act. This board, therefore, as were other boards, must be an advisory board. As I said earlier, the exchequer court of Canada or any other court cannot and would not to-day review the exercise of discretion conferred upon a minister of the crown under a federal statute.


Donald Methuen Fleming: That is w'hy I said something must be done to confine these discretionary powers.


Douglas Charles Abbott: On the other point, I
pointed out what the Minister of Finance said in his budget speech, that every effort would be made by the committee which, I understand, is proceeding with the revision of the Income War Tax Act, to reduce the number of discretionary powers. The committee must realize that with a complex income tax structure such as we have, efficient administration requires that a considerable measure of discretion be given to the executive branch of government.


James MacKerras Macdonnell: I am not going to continue to argue the legal point about the minister's discretion, in connection with which I have no doubt he is correct, but I want to ask him one practical question. It seems to me that resolution 8 does not produce very much. As I understand it, the minister exercises discretion and then, if objection is made, the board comes in.
-Mr. ABBOTT: That is correct.


James MacKerras Macdonnell: They are going to advise whether he was wrong?


Douglas Charles Abbott: That is right.


James MacKerras Macdonnell: I do not think that is going to produce anything. After all, no minister is likely to admit that he was wrong.


Ian Alistair Mackenzie: Oh, yes, we do.


James MacKerras Macdonnell: Not in this lower world. It seems to me that this is locking the door after the horse is stolen. I really do not think anything is going to happen under resolution 8. I have never been a minister, and I have no doubt that when one does become a minister he puts aside many of his lower qualities. I take it that when the minister has exercised his discretion it will take some drastic action to make him change. I am putting this forward seriously and not in an effort to make difficulty. I think we all want to bring about 
something practicable. I maintain that this board will be coming in too late, after the minister has exercised discretion. It would seem to me to be much more sensible if the board were to come in at an earlier stage. I do not take such a favourable view of this board as does the hon. member for Eglinton. The minister said in his speech, as reported on page 2923 of Hansard'.
The proposed board will decide questions of fact and law in the same manner as any other court.


Douglas Charles Abbott: That is the appeal board.


James MacKerras Macdonnell: I am talking about the appeal board.
It will not, however, have the power to exercise or review the discretions vested in the Minister of National Revenue by the Income War Tax Act.
There again, if the minister has exercised discretion, unless he has been palpably wrong, will the findings of the board have any effect upon discretion that he has already exercised? Is he going to go back and say that he was all wrong?


Douglas Charles Abbott: The powers of this board with respect to the discretionary powers exercised by the minister will be exactly the same as those exercised to-day by the exchequer court of Canada, or any other court for that matter. If it happened to be a federal matter it would come to the exchequer court, but in the province of Quebec, where discretion is given to local authorities by a number _ of statutes, the power would be exercised by the superior court with appeal to the court of appeal. The point which I made earlier, and which I think my hon. friend appreciated, was that the court does not review the discretion exercised by the person to whom it is entrusted. It deals with the question of whether the discretion was properly exercised. This board will have that, power and there will be further appeal to the exchequer court.


James MacKerras Macdonnell: As I said a moment ago, it seems to me that this is all too late; it is locking the door after the horse is stolen; it is acting after the discretion has been exercised.


George Russell Boucher: If a taxpayer asks the
minister to submit his problem to this income tax advisory board, will the decision of the board, whether it be in approval or disapproval of the minister's discretion, be a matter of record so that it may be taken as a precedent for other cases? Will it be a matter of public information, or will it be considered as merely departmental advice and not for public use?

Income War Tax


Douglas Charles Abbott: I must confess that I have not given my hon. friend's question any consideration, but offhand I would think the report should be available as a precedent.
I should like to give the matter some consideration and perhaps deal a little . more fully with it when we come to the section of the bill providing for the creation of this board.


George Russell Boucher: The tax appeal board is
to be a court of record and all the decisions given will be available and useful for the future, but here is a board dealing with the discretion of the minister. A taxpayer may complain and ask the minister to place his case before the advisory board. He may then not be able to find out the reaction of that advisory board unless its decisions are made a matter of public record.


Douglas Charles Abbott: One of the questions that
would have to be considered is the matter of secrecy. At the present time, when a case is taken to the exchequer court a taxpayer may ask that the general proceedings be not made public. Of course the judgment has to be.


William Alexander McMaster: I had in mind the very thing the hon. member for Carleton has spoken about. I am afraid we are making too much of this matter of secrecy. It is quite all right not to publish to the world a person's private business, but where a matter is of such importance that it has to go before the minister or before a court it becomes a matter of public concern. The law is quite clear. The minister is really the judge in the first instance. He exercises discretion and that discretion becomes law. That law can be changed only by this parliament. As the hon. member for Carleton says, it is important that everyone knows what that discretion is so that he may be governed accordingly. Take the discretion in connection with double depreciation as an example. You will have to consider whether or not that should be made public so that people will know how to act. It is important to everyone to know how the government of Canada, through the minister, is exercising this discretion.


Douglas Charles Abbott: That can be done so long
as it is not revealing the private business of the taxpayer.


Stanley Howard Knowles: That is the provision of section 81 of the Income War Tax Act, which is already part of the legislation and provides for secrecy with regard to income tax matters. The government seems to consider that provision as being sacrosanct, instead of realizing that here is a case where the validity of the section is being challenged.


Douglas Charles Abbott: It does not challenge it at
all.


Stanley Howard Knowles: I have never accepted
the validity of the section. As a matter of fact, several times I have moved an amendment to have it changed. It seems to me that the suggestion of the hon. member for High Park is a valid one. When a matter is contested the public show know the facts of the case.


Douglas Charles Abbott: The public is entitled to know the principle which is decided by this appeal board the same as it is entitled to know the principle which is decided by the exchequer court, buit all the facts which may concern the private business of the taxpayer have no general interest. I think it is perfectly proper that the secrecy rule Should be observed. The public is entitled to know the finding on the question of principle, the disposition of the appeal, whether the taxpayer is held liable or not and the reason why, but I do not think the public should be entitled to pry into private affairs.


Stanley Howard Knowles: Two or three years ago the Steel Company of Canada was involved in a labour dispute. I am not referring to the one now being considered by the standing committee on industrial relations. During the course of the dispute large advertisements appeared in newspapers across Canada over the name of the company, attacking the position of the union. Members of the union were anxious to know whether or not the cost of that advertising, which I submit was antiunion, was allowed as a deduction. I made an effort to secure the information, but was told that because of section 81 of this act it could not be given.. I submit there are cases like that where merely to be told the principle is not good enough; the public is entitled to know what interpretation is being made of that principle. I suggest that this whole question of secrecy should now be reviewed.


Mr. BLACKMORE:: I wonder whether the minister could tell us the attitude on this point. What steps are contemplated to enable the ordinary taxpayer to know of the existence of this advisory board? Is any provision made whereby the ordinary taxpayer can obtain skilful assistance in presenting his case to the board? I think every hon. member has had a number of these matters brought to his attention, and he himself -has become more or less the advocate of his constituents before the Department of Finance. I am wondering if there is any provision, other than
Income War Tax

by a member of parliament, whereby a taxpayer can have his case presented and know just what to do?


Douglas Charles Abbott: I think the measure when adopted, as I anticipate it will be, will be given wide publicity through the press. As to what steps can be taken to assist taxpayers in preparing appeals, I am afraid I am not in a position to make any statement at the moment. Possibly that can be considered a little later on.


John Horne Blackmore: The trouble is that the ordinary taxpayer, like the ordinary farmer, is utterly bewildered by the complexity of this whole income tax situation, and he does not know where to go to get scientific advice or assistance to present his case. The result is that he is just haunted and driven. I wonder if it is not time that we had some means of giving a little assistance to the ordinary taxpayer.


Douglas Charles Abbott: I suppose it would be indelicate for me to suggest that he should go and see a good lawyer.


John Horne Blackmore: The trouble with respect to going and seeing a lawyer is that there is expense involved, and the ordinary taxpayer has enough expense without going to see a lawyer.


An hon. MEMBER:: The lawyers have to live too.


Donald Methuen Fleming: Would the minister give the committee, not necessarily to-day but perhaps to-morrow when the bill comes up, a report on the number of cases that were heard by the board of referees under section 5 of the Excess Profits Tax Act, the disposition by the minister, and the advice given to him by that board in these cases'? I think it would be interesting to the committee to know in how many cases the advice was accepted, in how many it was rejected, and in how many it was varied.


Harry Rutherford Jackman: And how many cases are yet pending.


Douglas Charles Abbott: I think these figures could oe obtained, and, as I said in reply to a similar question before, if they are not available when we are considering the resolutions they may be available when the Minister of National Revenue presents his estimates.


Harry Rutherford Jackman: When an appeal is taken to the exchequer court, are not all the facts published in the reports of the court?


Douglas Charles Abbott: No. It is open to the taxpayer to ask that the proceedings be held in camera.


Harry Rutherford Jackman: I may say it is not very often that I find myself in agreement with the hon. member for Winnipeg North Centre; but it seems to me that secrecy is a bit overstretched in these cases, and in the public interest I think we must, to some extent at least, if not entirely, waive the delights of secrecy in order that we may build up a body of case law, of precedents, so that taxpayers throughout the country will know where they stand, and what the decision was in any case, so that they may judge their own case accordingly.


Douglas Charles Abbott: That information can be revealed in the judgment and findings of the court without indicating names or particulars which would identify the particular parties involved. As my hon. friend probably knows, that practice is followed in the United Kingdom, I think in the United States, and probably by our own courts here.


Harry Rutherford Jackman: I am not a "good lawyer"; I do not know.


Douglas Charles Abbott: In other words, the necessary facts can be indicated in the finding of the courts to enable a proper appreciation of the judgment, without indicating the identity of the persons involved. My own feeling is that that is a proper and necessary protection. Quite a number of people might be reluctant to take an income tax appeal on a perfectly proper matter if the whole of their private affairs had to be laid before the general public; and I can see no useful purpose which would be served in doing that. I think all that is necessary is that the court should render its judgment in such form as to make clearly evident the principles on which it has proceeded in arriving at that decision; and, granted that that is done, I think that is all the public interest requires.


Harry Rutherford Jackman: After listening to the explanation of the minister, which seems very satisfactory, I shall never again be tempted to agree with the hon. member for Winnipeg North Centre.


Douglas Charles Abbott: It is a bad habit.


Stanley Howard Knowles: That proves I was right.


Ian Alistair Mackenzie: It proves you were both wrong.


Mr. ADAMSON:: Is not the principle of secrecy one of the main planks of the income tax law? It is required that your return shall be kept secret. The minister made a facetious remark which I think had a certain amount of merit in it; he said, why not get a good lawyer to make out your income tax? Well, I, like many members of this house, have had the

Questions Dropped jrom Order Paper
pleasure of meeting civil servants employed in the income tax department, and there I had a real complaint brought to my attention, as no doubt it has been to several other members of the house, as to the amount of extra and difficult work they have to do with regard to making out the extremely complicated present income tax reforms, despite all the efforts at simplification. These people are greatly overworked, and I suggest that some consideration be given to a deduction from the income tax to enable taxpayers to employ, I will not say a "good lawyer", but counsel to make out their income tax return. It would greatly simplify the work of the Department of National Revenue.


Douglas Charles Abbott: Speaking as a lawyer I find my hon. friend's suggestion interesting. I do not know that it would be practicable.


George Russell Boucher: I think I must be drawn into this fray. Many people come to me and ask me to help them make out their income tax returns because, I believe, lawyers as a rule do not want to take the time and trouble of making these out.


James Joseph McCann: The form is so simple now that anybody can make it out.


William Ross Macdonald: Carried.


Douglas Charles Abbott: Do I understand that resolutions 7 and 8 are carried?


William Ross Macdonald: They are carried.
Resolutions 7 and 8 agreed to.
Progress reported.



PRIVILEGE


Mr. W. A. TUCKER (Rosthern):: Just before we adjourn, I have been instructed by the special committee on veterans affairs to raise a question of privilege. The Ottawa Journal in its leading editorial of July 24 has this to say:
Job Preference for Veterans
Against the considered advice of Mr. Charles H. Bland, chairman of the civil service commission, and Mr. Walter S. Woods, Deputy Minister of Veterans Affairs, a majority of members of the veterans affairs committee of the commons favour extension of the veterans preference for government jobs to men whose service has been confined to Canada during the war years. Since before the end of world war I this preference lias applied only to men and women with overseas service.
I suppose that is based on a report in the same paper of Monday July 22, which has a
subheading:
Would include Crown Companies, Government Agencies.
C.S. Chairman and Deputy Minister Oppose Move.
The move to extend the preference to crown companies and government agencies was not opposed by the chairman of the civil service commission and the deputy minister, and it was actually embodied in a resolution reported to this house in Votes and Proceedings of Tuesday, July 23. Our committee recommended as follows:
that the present civil service preference for disabled veterans and veterans who served overseas be extended to cover all employment both temporary and permanent, by dominion government agencies, inclusive of crown companies.
That was not opposed by the deputy minister or by the committee. The report says, however:
The committee while delaying its decision to the final report, favoured such action.
That is, widening the preference to include all home service personnel who joined the armed forces on a voluntary basis. The report states that our committee favoured that action.
The point I wish to make is that the only decision which we arrived at was reported to the house. We made no decision to extend the preference to those whose service had been confined to Canada during the war. No decision in that regard was made by the committee. That matter is still under consideration, and it is felt that this correction should be made for fear it might be thought that the committee has already come to a decision on the question. The committee felt that the newspaper reports have so far been accurate and satisfactory, and it is quite distasteful to us to draw attention to this apparent misunderstanding.


[Stage Direction]
At six o'clock the house adjourned, without question put, pursuant to standing order.
Thursday, July 25, 1946