1952-05-27

[Stage Direction]
On the orders of the day:
Mr. L. T. Stick (Trinity-Conception):: Mr. Speaker, I should like to ask a question of the Secretary of State for External Affairs. Could the minister make a statement on the signing of the agreements concerning Germany yesterday and today, and how it affects Canada-if Canada is affected. I regret that I have given the minister only short notice.


Hon. L. B. Pearson (Secretary of State for External Affairs):: Mr. Speaker, I shall be glad to make a short statement on this important question of the signature of certain documents in Bonn yesterday and in Paris today, and their effect upon this country.
Today in Paris members of the North Atlantic Treaty Organization signed a protocol to extend the guarantees under article 5 of the treaty to the European defence community. The protocol was signed on behalf of Canada by Mr. A. D. P. Heeney, the permanent representative of Canada on the North Atlantic council.
Hon. members will recall that on March 21, when reporting on the Lisbon meeting of the North Atlantic council, I mentioned the approval in principle by the council of this extension of security guarantees, which means in fact that, if the international undertakings are all ratified, our guarantees will cover the territory of the Federal Republic of Germany and the forces of the Federal Republic serving in the European army when in the area covered by the North Atlantic treaty. The European defence community, for its part, gives a reciprocal guarantee to NATO. In other words, the European army, of which German forces will form a part, will be available for NATO defence in western Europe and, in fact, will come under NATO command.
The exchange of guarantees will be brought about by the ratification of a series of agreements. If hon. members will permit, I should like to mention the various related agreements, for although Canada is a party to only one of them, all these undertakings bear on the final result.
The first group of documents are commonly known as the contractual arrangements, and consist of agreements between the three occupying powers-France, the United Kingdom and the United States of America, on the one hand, and the Federal Republic of Germany, on the other. They are designed to replace the occupation statute because Russian tactics in the four power conferences have prevented agreement on a formal German peace treaty. The effect of these peace contracts, which were signed in Bonn yesterday, will be to restore West Germany's autonomy except in certain limited spheres which are reserved to the former occupying powers.
Today the second series of documents, the European defence treaty and its related protocols, have been signed in Paris by representatives of France, Italy, Belgium, Luxembourg, The Netherlands, and the Federal Republic of Germany. The main purpose of this treaty is to establish the European army, to which each of the signatory powers will contribute forces. Canada is not, Mr. Speaker, a party to the European defence treaty and our forces in Europe will not form part of the European army. One of the protocols to the European defence treaty, however, extends the security guarantees of the treaty to the North Atlantic Treaty Organization, of which we are a member.
Also today in Paris, as I have just indicated, NATO members have signed the NATO protocol to reciprocate this guarantee. This is the only document in this rather complex series of international undertakings to which Canada is formally a party. If hon. members are agreeable, I would suggest that the text of this protocol, which is quite short but which is very important, be printed as an appendix to Hansard. These international undertakings are, as I have said already, subject to ratification and in due course, before ratification by Canada, indeed I hope during the present session, parliament will be given the opportunity for a full discussion of this NATO-European defence community protocol.
Hon. members may wish when we are discussing the NATO protocol to discuss the other related documents which I have mentioned. Of course, they will not be before the house for approval. Nevertheless, as they have an important bearing on our commitments under the NATO protocol, I shall

Excise Tax Act
arrange for copies to be available to hon. members as soon as they can be obtained for distribution.


Mr. Gordon Graydon (Peel):: May I ask the
minister when it is expected that the legislative body of the West German republic will have this matter up for ratification?


Lester Bowles Pearson: I do not know whether I can answer that question. It is hoped that these documents will be submitted to all the parliaments concerned with the least possible delay and that ratification will be accomplished before too long. When that will be is of course in the hands of the legislatures of the various countries.
(For text of protocol, see appendix, page 2656.)



EXCISE TAX ACT

[Stage Direction]
The house resumed, from Monday, May 26, consideration in committee of Bill No. 206, to amend the Excise Tax Act-Mr. Abbott- Mr. Beaudoin in the chair.
On section 4-Repeal.
Mr. Fleming:: Section 4 refers to schedules I, II, and III to the bill. On page 8, as part of schedule III, there is reference to the four drugs which were added last year to the list. In view of the interest of the house in what I would hope will some day be an extension of that list, I wonder if the minister would acquaint the committee with the experience thus far of the department in connection with the administration of the act in so far as these four drugs are concerned.


Hon. Douglas Abbott (Minister of Finance):: The officials of the Department of National Revenue will be here in a moment, but so far as I am aware no difficulty has been encountered in administering the act with respect to those particular drugs. Possibly the Minister of National Revenue has some other information. He confirms what I have just said.


Donald Methuen Fleming: I think the information which the minister has given to the committee will help to dissipate the fears which some hon. members seemed to have or which apparently were entertained by the government in connection with exempting drugs of this kind. Without proposing to launch into a debate on the subject may I express the hope that in the light of the past year's experience with these four drugs the government will give serious and early consideration to an extension of this list to include other similar drugs.
There are many people who are under a heavy burden of expense as a result of being required under medical advice to take certain forms of drugs constantly. Some of these drugs are exceedingly expensive and in the case of chronic sufferers who are under heavy
[Mr. Pearson.)
expense it seems to me that there is a clear case for an extension of the exemptions in the field of drugs.


Mr. Macdonnell (Greenwood):: I should like to place on the record a short memorandum dealing with the operation of the Excise Tax Act. I am not doing this in the hope that anything can be done at the moment but simply to have it on the record for consideration. It points out an anomaly which exists according to the way in which merchandising is done.
Under the existing sales and excise tax regulations, the base upon which taxes apply is the price at which the merchandise is sold by the manufacturer. This is known as the ad valorem method of tax calculation.
Under this method a tire manufacturer who sells a special brand tire to a tire merchandiser accounts for his tax on the basis of his selling price which probably takes the form of a cost plus a profit factor. The special marketer then does not pay these taxes on his selling and administrative expenses or on his profit.
The manufacturer that markets his own name brand tire must account for his tax on the higher price at which he sells his merchandise to his dealer trade and thus must pay the tax on both his selling and administrative expense and his profit.
Just what this differential might be in terms of cost plus tax would work out differently but it is our opinion that the special brand marketer is handed about a 5 per cent cost advantage over the standard brand marketer simply as a result of the method of application of tax to the basic buying price.
Thus by the means of use of tax application, the manufacturer finds it actually cheaper to market his products through a marketer who uses other than his own name brand and this seems most inequitable.
As I say, I place this on the record, not in the hope that it will be dealt with today but that it will be considered by the department in due course.


Douglas Charles Abbott: I shall be glad to do that.


[Stage Direction]
Section agreed to.
On section 5-Coming into force.
Douglas Charles Abbott: There is a minor amendment to be made to paragraph 15 of schedule I which I will ask one of my colleagues to move.


Mr. Fournier (Hull):: I move:
That item fifteen of schedule X of Bill No. 206, an act to amend the Excise Tax Act, be amended by adding after the words "in dry form," in the last line of the said item, the following words:
"except where the mixture or product is advertised or sold for making soft drink beverages or imitations for sale."


Douglas Charles Abbott: The purpose of this amendment is to make the application of the paragraph more clear and to remove any misunderstanding and doubt. Since the first reading of the bill representations have been made by the trade for some such clarification. The additional words remove the doubtful possibility of the tax being applied to mixtures or products which are purchased by soda fountains and other dispensers for the making and sale of soft drink beverages or soft drink imitations. I think the section as it now stands is probably adequate, but we have agreed to the section being amended by the addition of these words.


[Stage Direction]
Amendment agreed to.
Section as amended agreed to.
Schedule I agreed to.
Schedule II agreed to.
On schedule III

Foodstuffs.
Mr. Gibson:: I should like to indicate to the minister that we appreciate very much the consideration which the government gave to representations made by the logging and lumbering industry in British Columbia with regard to tires and tubes under section 411 (a). I am sure it will be a matter of great importance to the industry. On page 8 we come to the schedule having to do with marine and fisheries. I note in the first paragraph the following words:
. . . articles and materials to be used exclusively in the manufacture, equipment or repair of such boats.
It becomes a matter of some concern whether the word "equipment" covers fishing equipment on fishing vessels.


Douglas Charles Abbott: I am not sure what sort of equipment my hon. friend has in mind. I do not know whether he means spoons, gear, plugs and that sort of thing. If that is the case, it is not covered by this section. That is not considered as equipment of the boat itself.


John Lambert Gibson: I see. The schedule also refers to rope and cordage of cotton, hemp, manila or other vegetable fibre. Has consideration been given to the inclusion of nylon fibre? That is a product that is coming into more frequent use so far as the employment of gill nets is concerned.


Douglas Charles Abbott: I am informed that comes under the description, "other vegetable fibre".


John Lambert Gibson: Not nylon.


Douglas Charles Abbott: I am informed that is the case.


Mr. Pearkes:: On page 7 of the bill there is a reference to nursery stock. Does that refer to plants, bushes and general horticultural nursery stock, or does it refer to animal stock?
Excise Tax Act


Douglas Charles Abbott: It refers to general nursery stock such as my hon. friend outlined in the first part of his question.


George Randolph Pearkes: Horticultural.


Douglas Charles Abbott: Right.


Mr. Knowles:: Schedule III on page 8 includes certain drugs which were being discussed a moment ago by the hon. member for Eglinton and the Minister of Finance. May I remind the minister that when this matter was discussed on the budget resolutions his parliamentary assistant indicated that certain precise drugs were being studied to ascertain whether or not the list of exemptions might be extended to include them. The drugs set out in the schedule as it now reads include ACT'H, cortisone, insulin and radium. The parliamentary assistant said, as recorded at page 1996 of Hansard lor May 8, 1952:
Some of the recent drugs which have been suggested for exemption include substitute blood plasma, aureomycin and streptomycin, and vitamins of high concentration. The minister is giving continual study to these requests and as the opportunity offers the list of drug exemptions is extended.
Will the minister indicate at what stage in this continual study he has arrived so far as these specific drugs are concerned and any others that he may be studying?


Douglas Charles Abbott: The stage is that generally speaking it is only the more expensive drugs which have been included here. We are advised by the Department of National Health and Welfare when there are drugs that it is desirable for people to have and which have got beyond the experimental stage and can properly be included in this list. I have forgotten which ones they were, but in the course of the budget preparation this year we did consider some other drugs. We have had representations with respect to a number but it was felt that no additions should be made this year.


Mr. Siuari (Charlotte):: I should like to ask the minister to have the officials of his department consider the item of rope and cordage of cotton, hemp, manila or other vegetable fibre. The only size that is exempted is rope not exceeding one and- a half inches in circumference. That would be rope half an inch in diameter. That rope is used to a great extent by lobster fishermen but it is of very small size. With modern fishing equipment there is a lot of rope of larger size that is used to the same extent as the smaller rope would be. I suggest that the size of the rope be increased. There is probably more of the larger rope used in the fishing industry than the smaller type. I am not clear on the question asked by the hon. member for Comox-Alberni. Would it be possible for the minister to give us some idea of the

Excise Tax Act
type of fishing equipment that would be exempt? It mentions boats and articles and materials to be used exclusively in the manufacture, equipment or repair of such boats. Then in the last paragraph it mentions sinkers, and floats including trawl kegs, when for use exclusively in the fisheries, not including these articles for sportsmen's purposes. I would think that particular section might be changed to cover any materials used exclusively in the fishing industry.


Douglas Charles Abbott: I will certainly see that my hon. friend's remarks are considered before the next budget. As he is probably aware, the language used in this schedule with respect to fishing equipment is the same language that has been in the act for a great many years. There has been no change. As he will see from the schedule, the addition this time is preservatives for use exclusively for treating fishing nets, ropes and lines. The committee will appreciate that, where a material can be used for a number of other purposes other than fishing, difficult problems of administration may arise. It is for that reason that it is necessary to be fairly precise in the language of the section in order to see that material which should be subject to tax is not exempt ostensibly because it is going to be used for fishing.


John Lambert Gibson: I gather from the minister's remarks that, so far as commercial fishing gear is concerned, it is general government policy to exempt it from sales tax since we are competing in the markets of the world.


Douglas Charles Abbott: I am informed that practically all of it is exempt now.


John Lambert Gibson: That is the general policy for which the government is striving?


Douglas Charles Abbott: As a general statement that is true, yes.


Andrew Wesley Stuart: Getting back again to cotton and hemp rope, would steel rope, which is used today in many cases in place of hemp, also be exempted?


Douglas Charles Abbott: I would have to look into that more carefully. I am informed it might be if it were a hawser on the boat and was carried as part of the equipment on the boat.


Leonard T. Stick: On page 7 there is a reference to internal combustion engines for farm purposes. The internal combustion engine is used extensively by our fishermen, and it is not included in the part of the schedule on page 8 having to do with marine and fisheries. Would the minister take into consideration making the same rule apply to fisheries as to farming?


Douglas Charles Abbott: I am informed it comes under the item in the schedule we were discussing a moment ago which reads:
Boats bona fide purchased by fishermen for use In the fisheries, and articles and materials to be used exclusively in the manufacture, equipment or repair of such boats.


[Stage Direction]
Schedule agreed to.
Preamble agreed to.
Title agreed to.
Bill reported.
Mr. Deputy Speaker:: When shall this bill be read the third time?


Douglas Charles Abbott: Now, by leave.


Douglas Charles Abbott: the third reading of the bill.
Bill read the third time and passed.



INCOME TAX ACT

Douglas Charles Abbott: the second reading of Bill No. 205, to amend the Income Tax Act.


Mr. J. W. Noseworthy (York South):: Before this bill is read the second time I want to make a few comments. This bill of course introduces amendments to the Income Tax Act in order to give effect to some of the budget resolutions. I think it would be well for us to consider for a few moments the terms of this legislation, in the light of Liberal party policy. During recent weeks we have heard a great deal of the way in which the government ignored the wishes of the House of Commons-I shall have more to say about that later. We have heard very few Liberal speakers during the past few weeks having much to say on the announced official policy of the Liberal party, possibly because of the extent to which fiscal policy is ignored in the amendment that is now before the house.
I have before me a copy of a resolution that was adopted by the national Liberal convention in 1948. I think it was No. 14 on the agenda. It is headed, "Sound fiscal policy." The resolution in part has this to say:
The tax burden should as far as possible be distributed equitably and in accordance with ability to pay. In reducing taxes first consideration should be given to easing the burden of the lowest income groups.
I want to contrast with that resolution the minister's consideration as expressed to this house on former occasions, and as exemplified in the amendments before us.
According to official Liberal policy, in reducing taxes first consideration should be given to easing the burden of the lowest income groups. When the minister was introducing his budget resolutions, as a matter of fact when he was introducing his budget, his first

consideration was not that of the lowest income groups, certainly his first expressed consideration was not for that group. The one group for which the minister expressed deep concern, as reported in Hansard at page 1252, was given in these words:
Quite frankly, I am concerned that conditions make it necessary to maintain in our tax structure rates as high as this on business profits.
If you read that budget speech you will fail to find anywhere in it any consideration for the income tax payer in the lowest income group, such as is expressed in these words for the tax on business profits.
In keeping with the minister's consideration, as expressed in his budget speech, he does provide some small measure of relief for a certain group of corporations. As a matter of fact, one tax reduction-if it can be called a tax reduction at all-that was proposed by the minister was not proposed for those in the lowest income groups, but was for a certain group of corporations. The measures proposed by the minister would place a ceiling of 43 per cent on the tax paid by that special group of corporations under the Income Tax Act.
I said earlier, and I repeat, that neither I nor any of us in this group feel the same concern for the corporations' need of tax relief as does the minister or as in fact do the members of the official opposition.
The statistics presented by the dominion bureau of statistics in a booklet entitled "National Income" show us that in 1951 corporation profits before taxes were paid were $2,850 million, the highest in Canada's history. These gross profits were $400 million greater in 1951 than in 1950, a percentage increase over 1950 of 16 per cent. The dividends paid to Canadians in 1951 amounted to a flat $300 million, again the highest dividends paid to Canadians in any year in our history.
The undistributed profits of all these business concerns are included in the dominion bureau of statistics figures. The undistributed profits in 1951 amounted to $710 million, and were exceeded by only two other years in our history, namely 1948 and 1950. The profits retained in Canada after payment of taxes and after the distribution of dividends outside of Canada amounted to $1,037 million, again the highest profits retained in Canada by Canadian business in the history of our country, the highest on record.
It is in the light of these statistics that we feel the minister's concern was slightly misplaced; that instead of being concerned for those who, according to the national Liberal convention, should have his concern, he was much more concerned for the interests of the corporations and their taxation.
Income Tax Act
Corporation taxes collected by the minister in 1951 exceeded his own estimates by about 12 per cent; and the minister himself admitted during his budget speech that much of his surplus, which has been so much criticized across the country, resulted from the excess of corporation taxes over the minister's own estimates.
If you compare the position of corporations in regard to taxes in Canada with that other great capitalist country to the south, the United States, you will find that Canadian business and Canadian corporations come off fairly easily. In the United States corporations pay a regular federal tax of 52 per cent, apart from their state corporation tax, plus an excess profits tax of 30 per cent. It is estimated that the average United States corporation pays a 60 per cent corporation tax, as compared with Canada's top federal corporation tax of 43 to 45 per cent, or a top of 52 to 54 per cent when provincial corporation tax and old age security tax are added.
It is in the light of those facts, Mr. Speaker, that I am of the opinion that the minister not only ignores the wishes of parliament, but feels sufficiently secure to completely ignore the resolutions by the national convention of his own party. There is no such concern expressed in the minister's speeches for those in the lower income groups as I have pointed out was expressed on behalf of the corporations. There was a phony decrease announced. At page 1254 of Hansard for April 8, 1952, the minister said:
. . . the average taxpayer will pay 6 per cent less than he would otherwise have done under the income tax law as it now stands.
That is at the time the minister was speaking. The minister did not feel that it was necessary to mention the fact that the Income Tax Act as it then stood had not been in effect for a full year, nor did he point out that the so-called 6 per cent reduction in the average income tax actually meant an increase in the 1952 tax over that actually paid in 1951. The minister's concern for corporations took the form of some slight relief granted, but his concern for the lower income groups, to whom his party's annual convention called attention, took the form of an increase in the 1952 taxes over those imposed in 1951, and that without taking the special social security tax into consideration.
As proof of that, of course, it has been pointed out that a single person with an income of $2,000 paid $165 in taxes in 1951, while in 1952 the same person with the same income will pay $175. A married

Income Tax Act
man with an income of $3,000 and without any children is in exactly the same position. Whereas his 1951 tax was $165, his 1952 tax will be $175. As though the minister wanted to add insult to injury so far as those in the lower income tax groups were concerned, he has not been content with raising the income tax for those groups but he increases the tax in the lower brackets at a higher rate than he does in the upper brackets. For example, a married man without children earning $3,000 of income finds his 1952 tax increased over his 1951 tax by 12 per cent. A married man without children in the $20,000 income bracket finds his 1952 tax increased only 6 per cent over his 1951 tax.
Before this bill is adopted, Mr. Speaker, I believe it is worth calling attention to these facts, and the extent to which the minister can ignore the so-called sound fiscal policy of the national Liberal convention. I submit that the minister's disregard of the policy expressed by that same convention may be seen in the 2-2-2 formula for financing old age security. We are told that 42 per cent of the funds necessary to finance old age security will come from the sales tax, a tax which is particularly burdensome to those in the lower income groups. It would seem to me that if the minister had the same concern for those in the lower income groups that he showed for the corporations, he would at least have made some concession, either in a reduction in the sales tax or in some other adjustment in his 2-2-2 formula. We are to Id that 16-1 per cent of the necessary funds to finance this old age security will come from the personal income tax, only 14-9 per cent from the corporation tax and 27 per cent from the general revenue fund.
The removal of the $60 maximum payment, and a graduated income tax for the support of the old age security program, would have been much more in line with the policy enunciated by the national Liberal convention than is the policy which the minister is following today. There is no reduction in the sales tax, but a slight reduction in corporation taxes. Apparently the wishes of the national Liberal convention can be disregarded by the minister with the same abandon as are the wishes of the House of Commons. I need only refer in passing to the minister's disregard of the express wish of the House of Commons in the matter of the 4 per cent floor on deductions for medical services.
At this point I might say to the minister that in my opinion the government made a mistake in rejecting the express wish of parliament in that matter. While the minister may argue that it was not a directive, that parliament merely suggested the minister

should give consideration, nevertheless there is no question in the world but that was the express wish of parliament and that it represented what parliament wanted done. The minister ignored them. Many of us who have followed the debates and the discussions during the recent by-elections must have been impressed by the fact that there was no single more telling argument against the Liberal government and the Liberal policy than the minister's rejection of the wishes of parliament in the matter of the removal of that 4 per cent.
It was unfortunate, of course, that the C.C.F., who introduced that measure, received little benefit from it during the by-elections. It would be just asking too much of ordinary human beings, of course, to give credit to political opponents during the heat of an election campaign. But during that campaign I discovered that the official opposition, from their criticism of the government for ignoring the will of parliament in the matter of that 4 per cent, were able to gain more effect than from their criticism of any other measure.
Possibly the government is still capable of learning something from the course of events. While it is asking too much to expect the minister to make any changes in the amending bill which is now before us, it may well be that we shall find-and we shall certainly hope to do so-some relief for those in the lower income brackets when the next budget is presented, particularly if that should be a pre-election budget.
(Translation):


Mr. Marcel Boivin (Shefford):: Mr. Speaker, I do not like to delay the progress of the house by dealing at length with the various legislative measures under consideration and therefore my remarks will be very brief.
I wish to say at the outset that I have always liked to comment on the subject of income tax, as a representative of the wage earner. You know that, from the time I have been elected to this house, I have always shown the greatest interest in the welfare of the wage earner and the problem of income tax.
Just lately, I happened to read the report of the 65th general annual convention of the Montreal chamber of commerce. One of the sections of the report, section 8, deals with matters of federal jurisdiction. Here is an extract from that section:
Revision of the Income Tax Act.
The chamber wishes the federal government to base the Income Tax Act upon the following princinles:
1. The taxpaver must benefit from an income tax exemption at least equal to the minimum amount required to insure his family's livelihood.

2. All taxpayers must be treated alike with respect to the income tax levied on the income above that minimum amount.
Everybody will agree that I have always advocated these two principles for the benefit of the taxpayers I have mentioned.
Owing to the fact that the cost of living index, which had already hit the 125-1 per cent mark, still had a tendency to rise even higher, I asked the Minister of Finance (Mr. Abbott) as early as July 1946 to put the basic exemption back at the $1,200 level for single taxpayers and at $2,000 for married people.
I brought up the subject again the following year when expressing my views on the budget; the statement I made at that time is to be found on page 3344 of the English Hansard of May 22, 1947. I had then quoted figures to show that due to the exemption allowed at that time, much lower than the one in effect nowadays, the single person whose annual income was $1,200 had a deficit of $99 and that this deficit amounted to $215 when the taxpayer with an annual income of $2,000 was a married man with two children. At this time, the cost of living index was still rising; a jump of 8 per cent had brought it to 133-1 per cent.
And as before and for the same reasons I renewed my appeal to the government, in March, 1948, since the cost of living had by then reached 150-8 per cent.
Mr. Speaker, any member who belonged to the working class before he came to this house can much more readily understand that group's plight and that is why I made those comments in March 1949. On their behalf I asked the Minister of Finance to show greater consideration for that section of our population. I did ask for a higher basic exemption, namely $1,500 for the single taxpayer and $2,500 for the married man, and I dare say that those amounts would not have been excessive, considering the fact that the cost of living index had then reached the 159.2 per cent mark.
Mr. Speaker, the Minister of Finance looks upon the past year with great satisfaction. Our minister obviously is very busy and he cannot meet middle class people as often as he would like. On the other hand, he is in touch continually with his financial advisers and I am led to believe they know how to give him a rosy outlook on life.
I am the more convinced of the fact from having been made acquainted with the Income Tax Act and the exemptions it allows. There is no encouragement for wage-earners. With their family burdens and the 55704-165J
Income Tax Act
present taxation they can hardly contemplate with much satisfaction, in the light of this legislation, the past year and the year ahead.
The minister has stated once again that our difficulties stem from international affairs. We knew that and, as he pointed out, whether we like it or not, we must unfortunately bear with it for the sake of enduring peace.
Mr. Speaker, I have already indicated the deficit of these middle class people for 1947, when the cost of living index stood at 133 per cent. But at the end of 1951, the cost of living index had risen to 191 per cent. These people must also have been affected by the rise.
I do not wish to elaborate any further on the matter. I feel I have said enough. I dare hope our commitments will not be so heavy in the future and that at the next budget my remarks will be kept in mind with a view to allowing the wage earner of Canada a sufficient exemption to provide for the minimum of income required to sustain his family. This income, unfortunately, he has not today.
(Text):


Andrew Wesley Stuart: Mr. Speaker, I have been looking Bill No. 205 over carefully and have been unable to find an item which appeared in the Trade News of April, 1952. It is a short item and I will just put it on the record. It is headed: "Taxation Ruling" and reads as follows:
Canadian deep-sea fishermen, operating as coadventurers on a share of the catch have been authorized by the Department of National Revenue to average their earnings over a five-year period for income tax purposes, and also to deduct their away-from-home food and accommodation expenses. This applies to all deep-sea fishermen in Canada including captains, engineers and cooks, as well as those fishing on schooners, trawlers and draggers under the general form of agreement in common use in Nova Scotia, New Brunswick, Newfoundland and Prince Edward Island. This agreement provides for the sharing of catch returns. The individual fisherman will still be required to file his income tax return each year and at that time will pay the tax owing, but at the end of five years he can work out the average of his net earnings and obtain a refund if he is entitled to one.
The privilege to average earnings only applies if the following stipulations are made: the fishermen must file their returns for the previous year by April 30 for each following year, and in the last year of the five-year period they must file their election to average their returns for the previous five years by April 30 following the last taxation year.
I want to point out to the minister and to the house that among those who are selected for this consideration mention is made of captains, engineers and cooks of fishing schooners, trawlers and draggers. In the county of Charlotte from which I come we

Income Tax Act
have a class of fishermen called freighters of sardines. Many of those who are freighting sardines are at the same time engaged in the catching of sardines and in other branches of the fishing industry. For some years the department considered that they were bona fide fishermen, and they were given exactly the same privileges in the matter of averaging income as were the fishermen I have mentioned. But during the last two or three years it has been decided that they should not be given this privilege; and in the office in Saint John, where these men would file their income tax returns, they have been denied this privilege of averaging.
Also the away-from-home cost of living and accommodation has been denied them for two or three years, while it has been given to men in other branches of the industry. For the information of the house I should like to put on record a description of "farming" as applied to this measure. We find that farming includes-
-tillage of the soil, livestock raising or exhibiting, maintaining of horses for racing, raising of poultry-
And so on. When one considers that a gentleman like Austin Taylor on the Pacific coast can run all over the country with his hay burners, and the fact that he is being given the privilege extended by this bill, one wonders at once why fishermen of the description I have given are not considered at the same time.
This is a serious matter. As I said at the outset, consideration was given for some time to this problem; but under present-day conditions fishermen are being denied the privilege of averaging income or of deducting away-from-home living expenses. The men I have in mind operate usually two to a boat, and some of the boats are 50 to 100 feet long. They are big freighters, and usually carry a crew of two. These freighters are away from home nine-tenths of the time. Many of the crew were fishermen for years, and did nothing but fish. However, owing to their qualifications as navigators they have been chosen to operate in this particular branch of the industry. They work on a share basis; none of the men mentioned would be on wages or salary, but rather on a share of the profits.
I would ask the minister and his officials to give this matter serious consideration, because in the minds of those who have been denied the privilege there is the thought that discrimination is being shown. They are bona fide fishermen; their incomes fluctuate in exactly the same way and to the same extent as other men engaged in the industry. If the sardine catch is good, their incomes increase; if the sardine catch is low, their

incomes diminish. Over a five-year period their incomes would fluctuate to the same extent as those of the other fishermen I have mentioned.
Then, I have pointed out that their away-from-home expenses have been denied them. I was on the water a great many years myself, and I realize that away-from-home expenses are, as a rule, much greater than the expenses when one is at his own home. Perhaps only a very few of us are fancy cooks, the majority having to depend on food in a ready-to-eat state, which costs a great deal more than it would at home. I would ask the minister to give this matter his serious consideration, because these men should be given exactly the same treatment accorded the others in the industry.
As I say, when I see the definition of "farmer"-


Douglas Charles Abbott: That is only a loophole section, to prevent the hobby farmer from getting excessive taxation relief.


Andrew Wesley Stuart: I do not know what a hobby farmer would be.


Mr. Cruickshank:: E. P. Taylor.


Andrew Wesley Stuart: It uses the expression "maintaining of horses for racing".


Douglas Charles Abbott: I can assure my hon. friend that the purpose of the amendment is to plug a loophole, not to extend a benefit.


Andrew Wesley Stuart: I am not yet aware where this section comes in. As I said, there is comment in the Trade News of April 1952, and a very fine description of the ruling that applied a few years ago. However, that was changed two or three years ago with the result that there has been a good deal of dissatisfaction. I feel that the men I have mentioned, who make their living exclusively on salt water, should be given the same consideration as draggers and trawlers, and others who are mentioned in this item.


Mr. D. S. Harkness (Calgary East):: 
Mr. H. W. Herridge (Kooienay West):: Mr. Speaker, on the theory that the constant dripping of water will eventually wear away a stone I shall once again direct the minister's attention to a few observations I made to his parliamentary assistant. First of all, I must say that I was very interested in hearing the hon. member for Shefford (Mr. Boivin), a Liberal member, make a plea for the increasing of the exemptions to $3,000 for married persons. It is interesting to note the effect of by-elections on the succeeding day. I support the member in his plea and I am sure that many members on the opposite side of the house were also pleased to hear this first Liberal member make this plea. I fully expect to see him followed by a succession of hon. members before this debate is over.
I think there are sound grounds for bringing more equity into our income tax structure by doing what the great trade union bodies have asked the government to do and which great numbers of people in this country expect them to do, that is to raise the exemption for married people to $3,000 and for single persons to $2,000. I am not going to add much to what I said before, but I do think that when one realizes the cost of living and the circumstances that exist today with regard to housing, rent and all the things necessary to maintain the human body, it is a most reasonable request on the part of those who have made it. I have not the slightest hesitation in supporting it.
Once again I suggest to the minister that he give consideration to the expressed will of the house in the resolution that was adopted and which asked him to consider eliminating the four per cent floor under deductions for medical expenses. I think it was the hon. member for York South (Mr. Noseworthy) who said that a great majority of the people think the government and the minister acted improperly or wrongly in not recognizing the expressed will of the house and giving effect to the resolution moved by the hon. member for Winnipeg North Centre (Mr. Knowles). Many of my constituents have written to me on this particular point-not only members

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of my own party, but members of all parties
__and have expressed concern that the
minister should ignore the wishes of the house in this connection.
Before going on any further may I say that I was pleased to hear the hon. member for Calgary East (Mr. Harkness) make a plea for the granting of a deduction for the cost of maintaining a housekeeper in the case of illness and where a husband was left with dependent children. I know of a number of cases in my own constituency where the circumstances are tragic because of the burdens placed upon husbands. In several of the cases I know of, these men are working steadily at reasonably good wages but because they have to keep housekeepers and stand the additional expense of their maintenance they find the burden almost unbearable. I do think that consideration should be given to people in these circumstances. I know personally of three or four cases where men have used up their life savings in order to meet these costs and are now going into debt.
Once again I bring to the minister's attention a matter which I brought to the attention of his parliamentary assistant. I refer to the allowance of travelling costs incurred by workers at the Consolidated Mining and Smelting Company who live anywhere from five to twenty miles away from their employment. These men have no other option but to live where they do. If they want to find a house to live in, if they want^ to have a place in which to bring up their families, they must live at varying distances from the plant.
When I broached the matter before, the parliamentary assistant's reply was that the government considered these expenses as being normal expenses. As I said before, I do not think you can deem expenses which run as high as $20 to $30 a month as being normal expenses. These workers must bear this cost as they are forced to travel from ten to forty miles per day back and forth from their employment. I suggest that the minister give consideration to exempting transportation costs incurred in going to and from employment when they are in excess of 25 or 30 cents per day. That would eliminate the ordinary street car or bus fares or cases where only short distances are travelled by motorcar and would at the same time be fair to people who must travel as much as ten to forty miles a day.
I have personal knowledge of the fact that these men travel mostly in buses owned by co-operative societies which have been formed
[Mr. Herridge.l
by themselves. These successful transportation co-operative societies have large capital investments in buses, cars and things of that sort. These societies worked all during the war and they are now providing transportation for these workers at cost. They are performing a good service to the community and the country by reducing expenses to their present point. I am quite sure that if these transportation services were being undertaken by private companies the expenses of the men would be almost doubled. Through co-operative action, through rank and file action by the men themselves, everything possible has been done to lower the cost of transportation. It has been reduced practically to cost and I do ask the minister to give consideration to my suggestion that transportation expenses to and from work above 25 or 30 cents a day be allowed as deductions for income tax purposes.
When the parliamentary assistant was dealing with the resolution I brought up the question of the allowance as a deduction of expenses incurred in forest conservation work. I had proceeded for some time and then I was told that I was out of order. It was suggested that I should bring the matter to the minister's attention on the second reading. I refer to companies and individuals who have rendered great service to Canada by spending money for the benefit of future generations.
They have carried on forest conservation work by planting trees, by thinning timber, by building trails and roads for fire protection. This policy has been advocated by the dominion government and by the provincial governments. It is getting increasing support throughout the country and more and more companies and individuals are carrying on this work at this time. I know of many small holders of timber limits in my own district who throughout the years, have spent a considerable amount in maintaining their forest holdings.
I think companies and individuals should receive some consideration for what I would term an acceptance of their social responsibility. They are spending money now from which they will receive no return in their lifetime; they are making an investment for future generations. I repeat that that sort of social responsibility should receive some consideration and I do urge the minister to consider allowing deductions up to a certain point for money invested by companies or individuals in the work of forest conservation and the maintenance of a great capital asset of this country, our forest resources.
The argument that I am presenting seems so logical from my point of view, possibly

because I have lived in the bush all my life, that I cannot understand its not receiving consideration. When the minister replies I would like him to tell me if under the present law and regulations arrangements have been made with any companies to permit deductions for the cost of carrying on forest conservation work in the way of building roads and trails, planting of trees and so on. I cannot understand why any government would fail to provide the necessary incentives to this worth-while work.


Mr. Bryce:: Mr. Speaker-


James MacKerras Macdonnell: Mr. Speaker-


The Acting Speaker (Mr. Robinson):: The
hon. member for Greenwood.


James MacKerras Macdonnell: Mr. Speaker, I will not keep the hon. member for Selkirk (Mr. Bryce) very long from what he desires to say to the minister because I am not going to go over ground I have gone over before, however much the minister might like to hear me do so again. Passing the income tax bill is more or less like rubbing salt in the wounds, and I do not propose to drag out that pleasure unduly. I do not think it is necessary to argue any further that the public does not like the budget because I think even the Minister of Public Works (Mr. Fournier) would agree that what happened yesterday gives us a very considerable amount of evidence-


Alphonse Fournier: Don't take that for
granted.


James MacKerras Macdonnell: -that it is not the most popular thing in the world. However, I am not going to dwell on that. Indeed, I am going to stay with the minister for a moment by saying that when he tells us, as he does, that we have passed laws providing for the expenditure of large sums of money and that having passed these laws we have got to find the money, I do not think there is much answer to that except to be sure that the minister and those associated with him are keeping expenses down as low as possible. I do not propose to spend much time on that either.
Various figures have been mentioned, some of which seem to stand out, and I shall refer to a few in passing. There is a figure of $46 million for what is called removal expenses which seems to me atrociously large although I want to point out that a good deal of that is for the movement of the troops. Then there is another figure of some $17 million for publicity of various kinds, and I have not got language strong enough to express my feelings about that. It just seems to me to be
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out of this world because we all know what it includes and we are very critical of a great deal of what it includes.
Then there is a third item of $4,900,000, nearly $5 million, which I have mentioned more than once, for telegraphs, telephones and so on in the Department of National Defence. To me that is an outrageous figure. However, when we look at this thing objectively I think we have got to face the fact that if we want a really big saving-


Douglas Charles Abbott: I do not want to interrupt my hon. friend, but is he discussing the principle of the Income Tax Act?


James MacKerras Macdonnell: Oh, yes,
because one of the principles of the act is to be sure that you are not raising more money than you need to raise. I think the minister will agree with that.


Douglas Charles Abbott: I had no real thought that I could stop my hon. friend, but he has already delivered his lecture so many times that I thought I might be spared on this occasion.


James MacKerras Macdonnell: The minister does not know how lucky he is because my speech is only going to take five minutes instead of forty. It is really very ungracious of him to try to interrupt me because he may stimulate me to go on and on. I merely want to say that one place where there is a hope that a real saving can be made is in connection with defence expenditures.


Douglas Charles Abbott: I really think, Mr. Speaker, that it is stretching the principle to which I have alluded very far to bring in defence expenditures on the second reading of a bill to amend the Income Tax Act.


Alphonse Fournier: Far-fetched.


James MacKerras Macdonnell: The minister is very ungrateful because I am going to tell him where he can save some money.


Douglas Charles Abbott: My hon. friend will have at least a dozen opportunities later in the session when he will be able to discuss such matters. I respectfully suggest that he endeavour to keep himself within the rules of the house.


The Acting Speaker (Mr. Robinson):: Order. I rather think that the minister's point is well taken. I would ask the hon. member to attempt to adhere to the principle of the Income Tax Act.


James MacKerras Macdonnell: I will attempt to do so, Mr. Speaker, and I hope I will be more successful than you and the minister think I have been up to now. In any event, I am almost through. I merely wish to point out one thing, and I think perhaps the minister will agree with me because if I succeed

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I am sure he would be the first one to approve of it. We still have the defence estimates to consider, and I am going to suggest now, as an example of the kind of thing we should keep in mind, that when these estimates of hundreds and hundreds of millions and even billions of dollars come forward this year we should ask with more determination than ever before to be given a break-down of these things so that we shall be in a position to know whether these huge amounts, which if they have to be spent the minister is perfectly entitled to say have to be balanced by taxes, are all necessary. The minister will surely give me credit at any rate for making my remarks short.


William Scottie Bryce: I should like to take this opportunity to ask the minister to reconsider the matter of assessment of farmers' incomes. I know he has considered it and I hope that he will consider it again. The average farmer operates as a unit. In my own case I raised four children, and while they were quite small they were doing work on the farm. If they had not done those jobs I would have had to pay wages to a man to do the work. I think some consideration should be given to that factor in the assessment of farmers' incomes. There are so many jobs that boys and girls of twelve years of age can do in the hay field. I have a grandson who can go out in the field and plow. It would cost $120 or $130 a month to hire a man to do the same work. There is no compensation for what he does. The minister need not take time to reply now because both he and the minister sitting behind him have told me before that if such a practice is started they do not know where it will end. I am concerned about justice for the farmer. I should like the minister to give the matter consideration and see if something cannot be done for the farmer who is working as a unit. He is taxed for all the income earned by five or six people, and he should only be taxed on his own income.


Mr. J. W. Murphy (Lambion Wesi):: Mr. Speaker, I shall only be a minute or two in discussing a point I have in mind which I think comes under this particular bill. I do not think there has been any reference to it so far. Many in the house and throughout the country are concerned about the problem of erosion on the great lakes. I am not one of those who feel that the government is responsible to property owners for loss of property.


Douglas Charles Abbott: I hate rising to points of order, and do not do so very often, but I am convinced that the erosion problem on the great lakes, serious as it may be, has nothing
^Mr. Macdonnell (Greenwood).]
whatever to do with the principle of the bill to amend the Income Tax Act.


Gordon Graydon: Oh, yes.


Douglas Charles Abbott: My hon. friend must show in what respect it relates to income tax. I cannot see how it could be related to it.


Gordon Graydon: I can.


Joseph Warner Murphy: If the minister will take his seat for a moment-


Douglas Charles Abbott: I am going to ask for a ruling in a moment.


Joseph Warner Murphy: -I will try to convey the idea to him.


Douglas Charles Abbott: There is no use trying to change the rules if people will not observe them.


Joseph Warner Murphy: I think when I am finished the minister will see the reasonableness of my remarks, and it is because of the erosion that has taken place that I propose to make these remarks. Many people on the shores of the great lakes, whether they be farmers, fruit growers or other property owners, have been obliged to construct jetties, seawalls or embankments of one kind and another in order to protect their properties. Representations have been made to me by various property owners, and I am sure to other members on both sides of the house, that some consideration should be given to these people with respect to money expended to preserve their property in order that their revenues, for instance, may not be depreciated. I think it is only fair to bring this matter before the house because not only are fruit farmers and farmers generally affected but thousands of miles of lake and waterfront are involved.
The tourist industry is also affected so far as lake and riverfront property is concerned, and that is a matter of no small concern. My contention is that the minister should give consideration to the problem with which these people are faced. In order to preserve their property they have been obliged to build jetties, barricades or whatever may be recommended by engineers in order to prevent their property from being washed away into the waters of the various lakes or rivers. I know that applies to practically all the great lakes. To date the damage has amounted to millions. It is only recently that the property owners have realized that they themselves must do something and not be too dependent on the government. In any tax deductions that take place, consideration should be given to the amount of money that they have to spend, and consideration should also be given to the fact that they

will have to spend at least $500 or $1,000 this year and they may have to continue to do that for one or two years more.


Stanley Howard Knowles: The minister no doubt is getting a bit impatient at having to listen to remarks about the 4 per cent floor so often, but we continue to remind him of it in the hope that even yet he. might consider changing the bill now before us when we get into committee so as to implement the desire of parliament that that 4 per cent floor under medical expenses deductible for income tax purposes might be abolished.
The minister knows the history of this matter very well. He will remember the fact that the provision for allowing for medical expenses was brought in by his predecessor. He will recall that, in response to representations from the house, Mr. Ilsley reduced the floor from 5 per cent to 4 per cent in 1944.


Douglas Charles Abbott: I did that.


Stanley Howard Knowles: As a matter of fact, the minister is correct. It was as parliamentary assistant to Mr. Ilsley that he did it, but it was actually done on the floor by the present minister.


Douglas Charles Abbott: To cover the use of drugs. It was expressly said that that was why it was reduced from 5 per cent to 4 per cent.


Stanley Howard Knowles: It was reduced because it was recognized that 5 per cent would not allow for all the expenses that might be regarded in those days as unusual.


Douglas Charles Abbott: No; it was to cover the cost of drugs.


Stanley Howard Knowles: All right; but our contention is that the philosophy behind this deductibility, as it was announced in those days, needs to be revised. The idea in those days was that it should be for unusual medical expenses; and, as the minister now says, some slight margin was given in respect of drugs, and that was the reason the floor was reduced from 5 per cent to 4 per cent. But surely there is room for progress, and in my view the government should try to keep up with the thinking of the people in this country. There is growing more and more the feeling that it is common sense to try to deal with medical expenses on some co-operative or community basis.
The minister knows that I feel we should tackle that problem in a much more fundamental way, by a nation-wide program of health insurance, but we are having difficulty in persuading the government to move very fast in that direction. Meantime, here is one little step that could be taken to put medical
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expenses to some extent on a community or social basis. After all, that is what it would do if the 4 per cent floor were removed. The result would be that those who have heavier medical expenses would get a larger income tax saving, and those with lesser expenses would get a smaller saving, whereas those with no medical expenses at all would not get a saving against income tax in that respect.
There is no doubt, too, that the idea of removing that floor has won very wide support. After all, the motion asking that the government consider removing that floor carried unanimously in this house on March 26.


Douglas Charles Abbott: Because it was not opposed by my parliamentary assistant.


Stanley Howard Knowles: That is right. But the minister, I presume, permitted his parliamentary assistant to take the stand that he did, and that was accepted as a lead to members on the majority side of the house, a lead which they readily accepted, with the result that the motion passed unanimously. I remind the minister that not only did it pass unanimously in the house, but it was greeted with approval generally by the press of this country. The press welcomed the fact that in this instance a private member's motion had been passed by the house, and it particularly welcomed the fact that it was a motion dealing with this particular subject, namely, some relief to our people in respect of medical expenses.
In my view the case for it is unanswerable, and sooner or later the minister is going to have to make that change. I see no reason why he should not make it at this session, indeed right now while we are dealing with this bill. I had hoped, despite the fact that no change was made in the resolution when we were at that stage, that when the bill was introduced a change might be made. Now that we have the bill we find -that the 4 per cent floor is still in it. Nevertheless, when we get into committee and reach that particular clause of the bill, it would be possible for a minister of the crown to move the appropriate amendment, and I hope that even yet we may persuade the government to take this important step.
I dare to hope that the events of yesterday might suggest to the government that it was a mistake to oppose the wishes of parliament and of the people generally in respect of this matter. I would suggest that the government should give further thought to this question which is important on two counts. It is important in respect of the wishes of parliament and it is important in respect of its substance, namely, the question of helping our people in so far as we can in respect of medical expenses.

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When one proposes changes in the income tax legislation that may result in a loss to the treasury, it does carry with it the responsibility to suggest ways in which that loss might be overcome. I have tried to do that on former occasions. One cannot expect that the Minister of Finance would have read all of the debates that took place on the budget ,and on the budget resolutions during the time he was away, but one can always hope that the minister read one's own speech, and that it is not necessary to repeat-


Douglas Charles Abbott: If it would abbreviate my hon. friend's speech I can assure him that I read all the debate on the budget that took place while I was away.


Stanley Howard Knowles: I am very glad to hear that.


Mr. Martin:: Even your speech he read.


Douglas Charles Abbott: Yes, even yours.


Stanley Howard Knowles: Did the Minister of National Health and Welfare read it?


Paul Joseph James Martin: I go to bed with it. .


Mr. McCann:: And lie awake all night.


Douglas Charles Abbott: Stimulating as it was.


Stanley Howard Knowles: Now that we have this admission from two members of the cabinet that speeches from this side of the house are read, it is not necessary to repeat all that one has said but only to underline the high spots.


Douglas Charles Abbott: Only a stern sense of duty compelled me to do it.


Mr. Mutch:: It is the easiest way to take it.


Stanley Howard Knowles: The humour the day after by-elections is really refreshing.
I suggested on a previous occasion, Mr. ^Speaker, that one of the places that revenue might be obtained to make up for whatever it might cost to wipe out the 4 per cent floor would be from corporations. I raised the question as to the disparity between there being a graduated tax on personal incomes and what to all intents and purposes is a flat tax on corporations. That was discussed with the parliamentary assistant to the Minister of Finance, who of course defended the present position. It is still my view, and it is a view that is expressed in the writings of a number of economists, that the graduated nature of a personal income tax is vitiated, particularly in the case of those in the higher brackets, when you have a flat tax on corporation income which is lower than the rates that apply to the upper brackets of personal income.
After all, what counts in terms of personal income, so far as the wealthy are concerned, is not only the actual dollars they take out of a corporation with which they may be

connected, but the increase in their economic power. I submit to the minister that there is room for increasing the corporation tax, and there is room for putting it on a graduated basis more comparable to that which applies to the personal income tax. In my view that would be fairer, and furthermore it would be a means of raising additional revenue.
In connection with this whole question, may I remind the minister that the Monetary Times, in its issue of May 1952, carries a comment on his budget which indicates that corporations generally feel that they are lucky to have the present minister in his portfolio. This comment is entitled "Individuals Pay More", and reads as follows:
Until the rearmament program is completed there are no grounds for expecting reductions in the corporation and personal income tax rates. With this year's spending program nearing the $4-5 billion mark businessmen have reason to be thankful the Minister of Finance is a staunch free enterprise man, who recognizes that excessive taxation on industry can kill the goose that lays the golden eggs. Though corporate taxes at 50 per cent are high-Abbott thinks it's about the limit-they are not so high as the combined corporate and excess profits taxes in the United States.
Abbott had to get more money this year and he has chosen the unpopular policy of taking it from individuals rather than loading more on business.
That, of course, is a comment from business , which regards taxation of business as something to be avoided, and the comment is that businessmen should feel lucky to have one like the present minister who is a staunch believer in free enterprise in the finance saddle in this country.
Not only would it be possible to make up for what it would cost to remove the 4 per cent floor, or to raise the exemption levels as has been suggested this afternoon by my colleague the member for Kootenay West (Mr. Herridge) and the hon. member for Shefford (Mr. Boivin); not only could that be made up by an increase in corporation taxes or putting corporation taxes on a graduated basis, but I submit there is still room for a considerable increase in revenue if the Minister of Finance and his officials were to examine the whole basis of deductions that are allowed to those whose incomes are on a gross basis. Workers are in a very definite position. Their income is known, and when they have had it, they have had it. For the most part, the tax is deducted at the source, and if it is not all deducted there the chance of being able to claim any appreciable exemptions is on the whole rather slim. But those who earn an income that is described as gross, and who have the right to make deductions connected with the earning of that income, seem to be able to find a good many ways in which to claim deductions. In one

of the speeches which I made before-I shall not give it again-I gave figures from the United States as to the percentage of the various grades of income on which taxation is actually paid.
In connection with all this there recently appeared in the Winnipeg Tribune-it was on May 8 of this year-a news report which struck me as very significant. The story gave an account of a ruling given by Mr. R. S. Fordham of the income tax appeal board. Two Winnipeg gentlemen had appealed rulings of the Department of National Revenue, and had taken their cases to the income tax appeal board. These two gentlemen had cases that were more or less identical, so that to simplify the story I shall tell it in respect of just one of them.
This first appellant is a grocery broker and also the president of a company or a firm in Winnipeg. During two recent taxation years he made a fairly substantial sum of money on the side, and he made this money by buying conditional sales contracts from one of the finance corporations of the city of Winnipeg. The report said that this particular corporation was a little short on its bank credit, and wished to make a deal of this kind. This man, therefore, bought these conditional sales contracts and the result was that in the two years in question he made the sum of $12,503 on the side. Now, thinking of some of the interjections that are sometimes made from the other side of the house, that is not peanuts.
The income tax division of the Department of National Revenue regarded this as income, and insisted that this individual should pay income tax on this sum of $12,503 along with the tax that was to be paid on his other income. This particular individual felt that as the income tax law stood perhaps he could avoid paying a tax on this sum of money, so he appealed his case to the income tax appeal board. The Department of National Revenue was represented, of course, as was the appellant. The income tax appeal board ruled against the department and in favour of the appellant. The board ruled that this money which the man made on the side was to be considered as a capital gain, because it arose through a transaction which was not part of the regular business of the appellant. For that reason this individual was allowed to earn this $12,503 in two years without paying any income tax on it.
Part of what I have been saying is a paraphrased version of the report as it appeared in the Winnipeg Tribune. I wish to place on record a few words which I have taken from that report, and I may say that they
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appeared in the newspaper report within quotation marks. The ruling of the board was to the effect that the reason the Department of National Revenue had tried to tax this man on this $12,503 was that its position, and I quote, "evidently arises from the erroneous belief, still prevalent in some quarters, that whenever a taxpayer makes a financial gain of any kind in a commercial transaction it must be viewed as income".
Now, Mr. Speaker, that is a comment which the average income tax payer would find very interesting. Most of us assume that whatever money people make is income so far as the income tax department is concerned. In this case may I say on behalf of the Minister of National Revenue and his department, that they thought this was income and that he should pay income tax on it. The income tax appeal board says not to go away with the opinion that every bit of money a man makes is income for the purposes of income tax. So in this case this individual was given the right by the income tax appeal board to earn this $12,503 on the side in two years without paying any income tax on it whatsoever. Mr. Speaker, anyone who is making $12,503 on the side is not making just $25 or $30 a week as his principal income. Undoubtedly he is up in a bracket were he is paying 50 per cent or 60 per cent on his income; and it is taxes of that order that this gentleman probably saved as a result of the ruling of the income tax appeal board.
I wish to point out, Mr. Speaker, that it is not often that we get information of this kind, in these precise and specific terms. The newspaper reports even gave the gentleman's name, but I have not placed the name on the record. On a number of occasions I have tried to get the Income Tax Act amended so as to lift the veil of secrecy with regard to these matters, and hon. members will recall the difficulty I have had. In fact, my good friend the hon. member for Peel (Mr. Graydon) on one occasion called it peeping-Tom legislation. He did not like it.


Gordon Graydon: I did not want the farmers to have all their business brought into the house.


Stanley Howard Knowles: Yes; that is one of the usual answers. But even when I amended that bill so as to make it refer only to the income tax return of corporations, it still got nowhere in this House of Commons.


Gordon Graydon: We thought you were going to the farmers next.


Stanley Howard Knowles: I am just suggesting that we get little information of this kind. It is only when a case is taken to appeal and a judgment like this is given that we get the

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information. That leads me to ask this question: How much of this kind of thing is going on? How much income is made bycitizens of this country-those people who *are on gross-which is exempt from taxation? The amount was $12,503 in two years in the case of one man, and in that of the other man whose case was dealt with at the same time the amount involved was a smaller sum, but even it was $5,805.75. So I ask the question:	How many of these people are
there who are making this kind of money on the side and are not having to pay income tax on it? My suggestion is that if the law were tightened up in respect of sideline income made by people on gross incomes, there might be a considerable sum of money to be collected by the treasury.


Douglas Charles Abbott: That must have been held to be a capital gain.


Stanley Howard Knowles: Yes. That was the decision.


Douglas Charles Abbott: If my hon. friend will look through the reports he will find at least fifty cases, in somewhat similar circumstances, where the gain was held not to be a capital gain.


Stanley Howard Knowles: We do not know how many there are-


Douglas Charles Abbott: It is a pure question of law.


Stanley Howard Knowles: Just a minute now, with your talk of a question of law. We get back to that often enough. In mentioning that this is a capital gain the minister is, in point of fact, drawing attention to another of the suggestions that I should like to make.


Douglas Charles Abbott: Tell it to your socialist friends in England.


Stanley Howard Knowles: That suggestion is that we should have -a capital gains tax.


Donald Methuen Fleming: Oh, how horrible!


Stanley Howard Knowles: Here is my Tory friend to the right of me saying "how horrible!"


Donald Methuen Fleming: A terrible suggestion!


Stanley Howard Knowles: Yet he joins with me in my proposal that the 4 per cent floor under medical expenses should be wiped out. I do not agree with the parliamentary assistant to the Minister of Finance that it would cost $48 million; but whatever it would cost, it is our responsibility on this side of the house to make some suggestions as to how that money might be made up. I suggest that here is one field where real money might be found. As 1 said a moment ago, a taxpayer of this kind is probably up in a 50 per cent or 60 per cent bracket. If we knew all the facts-if there was not the secrecy provision like an iron curtain around this kind of

information-we might find that there is really a substantial sum of money available in this way.
The minister said that it is a question of law. I am sure he knows what is coming. A few years ago, when the income tax appeal board on a question of law-pardon me, it was the exchequer court. It was before the income tax appeal board was set up to deal with these cases. The exchequer court, on a question of law, ruled that trade unionists were entitled to deductibility of their trade union dues. The government took the view that that was not the intention it had in its legislation and it immediately changed the law accordingly. As a matter of fact, it changed the legislation within a few weeks after the case was taken to the Exchequer Court of Canada. It did not even wait for the decision to be handed down. If the government feels that it has the right to step in and change the law when the courts have given an interpretation which suggests that the government's intention has not been carried out, then I suggest that it can be done in cases of this kind.
The Minister of National Revenue (Mr. McCann) or at least his department thought that the intention of the law was such as to cover these cases. Let me be fair to the income tax appeal board and say that the income tax appeal board said that it was a borderline case; at least they used language of that kind. It said that if the man went on making sums of money like this from this particular sideline, it would probably have to be counted as income in due course. The inference was that if he made money from different sidelines year in and year out, he could make money of this kind without being taxed on it.
As to interpreting the law, one threat which the government made some months ago has now been washed out. I refer to the Nolan case. The minister knows that when the Minister of Justice (Mr. Garson) announced that this case was being taken to the privy council, he said that if the privy council ruled in a manner which was opposed to what the government's intention had been, they would bring in legislation to amend the law, so as to carry out the government's original intention. From the action of the Minister of National Revenue it would seem to me that in this case the government's intention was that this kind of income should be subject to tax. If the income tax appeal board has ruled, on a question of law, that the wording of the law is such that this kind of income is exempt, then I suggest that it is time for the law to be amended in respect of income of this kind.

1 urge that the minister go further than just tightening up the law to cover cases of the kind that the income tax appeal board has ruled on. I urge that he re-examine the whole question of the extent to which taxpayers on gross are able to claim deductions, the taxes on which must amount, during the course of the year, to many millions of dollars.
I come back again to what I said a moment ago. In the case of the ordinary worker, when he has had his income and has paid his tax, "he has had it". The deductions he can claim are few. He can claim his trade union dues now, thanks to the change that was made in the act last year. He can claim his donations to charity if he has receipts for them; but in many cases the contributions that a worker makes are not covered by receipts, and he does not get much relief in that way. He can claim his medical expenses if they are in excess of 4 per cent, not of his taxable income but of what amounts, in the case of the worker, to his gross income. That is just about all he can claim. He can make out his income tax return in half an hour. He pays taxes without question on his income. But in this other field, the field of gross income-if we could only get it all out; if there was not this veil of secrecy-I submit there is room for tremendous gain to the treasury.
I urge upon the minister that he do these two things that I have been talking about this afternoon. I urge that, on the one hand, he yet accede to the wish of parliament and of the people of Canada generally, and remove that 4 per cent floor under medical expenses deductible for income tax purposes. On the other hand I urge him to review the position of those who are on gross with respect to deductions that they are allowed, and in particular that sidelines such as those I have been speaking about in the Winnipeg case, with capital gains of that kind, should be subject to taxation.


Gordon Graydon: Mr. Speaker, I do not often raise my voice in an income tax debate, for the reason that I am not an expert on the subject.


Douglas Charles Abbott: That does not deter others.


Gordon Graydon: I know those who take part are professionals in the matter of income tax; but I wish to raise my voice only in a humble way in connection with one matter that has come to my attention through the years, and which I intended to discuss on previous occasions, but failed to do so.
I would direct the minister's attention particularly to small businesses in which perhaps only two or three persons are employed. I realize readily that the minister may have a
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complete answer to the point I raise, and no doubt has given consideration to it much more fully than I have. For this reason I shall await his answer with interest.
These people, who might be described as the small fry in the business world, are in my opinion being discriminated against in the matter of income tax. Not only are they charged income tax, but they are asked by the government to be the chore boys of the Department of National Revenue. It is bad enough to ask them to be chore boys, but it is worse when they are asked to be chore boys without charge.
I understand that these people are ordered by the federal government to keep extra sets of books, and to figure the amounts which must be deducted, always having in mind the family status of the people working for them. Then the returns must be sent in, and they must be accurate. I am sure the minister knows that the people engaged in these small businesses do not have many dollars to give away. Most of them are having a difficult time to make ends meet. It seems to me that when they are asked by the federal government to shoulder this extra load on top of the burden they are now carrying; when they are asked to be the collection agency for the government, free of charge, some further consideration should be given to this aspect of the collection of income tax.
I do not proceed to argue the point with a closed mind. I am anxious to find out upon what basis the government has adopted its policy, and how it justifies its position; because when it asks someone to do a job the person who does the job makes sure the government pays for it. This would seem to be the only instance where the federal government insists upon the work being done free of charge.
I have no doubt the minister will say that huge corporations and big business should not be relieved of this responsibility. He will point out that if we relieve the little fellow we must include the richer man. Those people in the upper brackets, so far as I am concerned, can speak for themselves. It is the little fellow who has to have someone in the House of Commons who will speak for him. He speaks to his member of parliament and others in the neighbourhood, and naturally comes to the conclusion that he should not have to bear this extra load.
I am not in a critical mood, but I am anxious to have the government consider what I have said. If it can be shown that my presentation lacks merit, I shall be the first to admit it. I do think, however, that there is a case to be made for the little fellow

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who has done work for the government without charge. An examination of the public accounts would seem to show that he is the only one working for nothing, and I suggest he should not be discriminated against in this way.
When the minister replies he may have a satisfactory answer because, after all, the problem is to place the burden as equitably as possible. I think, however, most hon. members will be struck by what would appear to be an injustice against those having small earning capacity, who have to shoulder all this bookkeeping and accounting work at the request-and, may I say, more than the request; the order-of the federal Department of National Revenue.


Mr. Robert Fair (Battle River):: Mr. Speaker, I should like to draw again to the minister's attention the matter of compensation paid to farmers in Saskatchewan for animals destroyed as the result of the foot-and-mouth disease outbreak. When the matter was before the house in March I asked that the compensation so paid be exempt from income tax, because this is not really a form of income in the regular sense. Many farmers will have lost their means of livelihood for the next few years, or until such time as they can build up other herds. On the earlier occasion the minister listened sympathetically to what I had to say, and said he would give the matter further consideration. I would ask him to give us any information he may have, when he speaks.


Mr. J. H. Blackmore (Lethbridge):: Mr. Speaker, in a general way it is my opinion, and so far as I can gather it is the opinion of my constituents, that the income tax structure is now far too high. It is time something was done to relieve the great majority of people-I would say probably 85 per cent of them-who are in the lower income tax brackets.
The vast majority of Canadian people are being progressively impoverished, and this at a time when the Liberals are pleased to tell us that we are more prosperous than ever before in our history. How anyone can put those two facts together and make sense out of them is beyond my understanding; because the prosperity of the people certainly depends not only upon the amount of money they obtain but also upon the amount they are able to keep and to use, either for saving or spending, for what they consider to be the needs of life.
Why should the people of Canada be penalized more severely, the more goods and services they produce? It is forecast that in the present year in the neighbourhood of $23 billion worth of goods will be produced

in Canada. No hon. member in the House of Commons, and few people throughout the country, will fail to realize that the amount of goods and services we produce constitutes the real acquisition of wealth of the nation, and should be the basis upon which to determine our prosperity, our well-being as a nation, or lack of it.
If we have reached the point where we are producing $23 billion worth of goods a year, why should something like 85 per cent of all the people in the country be absolutely at their wits' end to know how to get along? Why are they literally groaning with anxiety for fear they may not be able to get along? Setting aside all theories of income tax and all that sort of thing, all theories of revenue, we are faced with this bald, simple and easily understandable fact which I submit ought to be taken cognizance of by every responsible person in this nation.
It is commonly said by a good many people, and was repeated in this house during world war II, that whatever is physically possible ought to be financially possible. That is, the more physical well-being a nation can produce, the more financial well-being it should be able to enjoy. May I submit that the system' the minister is following under this bill does not make financially possible what is physically possible. As a matter of fact, many of the imposts which are being levied under this bill are of such a nature in their incidence that they actually tend to discourage production in the nation because they take away from so large a percentage of the people the very income they need to buy the goods industry can produce, thereby destroying automatically the market for the industry. Take the case of the cheese producers, to name only one of hundreds. Thus they tend to destroy production in this land of probably first-rate abundance, potentially. That is another matter which I think needs to be considered.
I do not suppose the minister will take the trouble to state whether he believes that what is physically possible ought to be financially possible. If he does believe that, then the only logical thing he can do is realign his whole system of raising money in this country. I just wished to raise that matter in passing.
I look with great alarm upon the increase of taxes in this nation. As far as I can see, if these taxes continue to increase as they have Canadians might just as well bid good-bye to freedom. If a man cannot have an income and have a little of it left that he himself can dispose of, I ask you in the name of common sense how you can say he has any freedom at all. The very things the hon. member for

Peel (Mr. Graydon) mentioned a few minutes ago are cases in point. If the government can say to a man running a little business and having the greatest difficulty making a living, "you have to do thus and so and thus and so and thus and so," and as a result of all those "thuses" and "so's" it costs the man, $150 extra for services in having his income tax returns made out, for doing the government's "chore-boy" work, as the hon. member well called it, for which he gets no return, you have to stretch your concept of freedom a long way to look upon that man as having any freedom in respect of the running of his affairs. So it is all through the economy as far as I can see.
It will be said that we have to have money. The minister will probably say that we are calling for bigger and better old age pensions, for bigger and better family allowances and so on, and that we have to have the money. I agree that we have to have the money, but my contention is that we do not have to get the money by stealing every dollar of it from the people's pockets. That is just where the moaning cry a few minutes ago of the hon. member for Greenwood (Mr. Macdonnell) is shown to be so hopeless. He says you cannot get money anywhere except by taking it out of the people's pockets; that when you have all there is in their pockets, you might just as well give up; it does not matter how rich your country is or how many things you can produce in the way of goods and services, you just cannot go any further; what is physically possible is not in his thinking financially possible, and that is the end of it.
I maintain that is a completely unrealistic attitude to take toward the whole business of financing our country at this time. It is well known, and I do not need to repeat it here, that I have argued time and time again in this house that under appropriate circumstances when there is adequate production in the country, adequate supplies, money can be created by the state debt-free and used for the benefit of the people of Canada. Up to the present time no argument has been adduced in this house to disprove my position. I maintain that no argument can be adduced by anybody in this house to disprove my position.


An hon. Member:: That is going a little bit too far.


John Horne Blackmore: I challenge the hon. member to take the floor the first time he gets a chance. There will be no more left of him than was left of the prairie chicken by the time the gatling gun got through with it. As we go into these trying times, and they are terribly trying,
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why not give thought to this all-important consideration? Why tax our people to the point where they are disheartened and bewildered and wondering whether they have a friend in the world? Why drive them to that position? Why not realize that by the adoption of proper measures, what is physically possible actually can be made financially possible. That certainly cannot be done by taxation.
This is the general statement I wish to make. I do not intend to argue at length, but I am sure that in speaking as I am now I am voicing the opinion, at least the desire, of no fewer than 85 per cent of all Canadian people.
Just one more little thing needs to be said and I shall close. The minister will say, "What you are proposing will bring inflation." Let me ask hon. members on all sides of the house to take the definition which the hon. member for Greenwood gave us a year ago, and which is a good one, as to the cause of inflation; namely, that it occurs when "we have too many dollars chasing too few goods". Is there any conceivable reason why in Canada you cannot have so many goods that you could not get enough dollars chasing them to cause inflation? I ask hon. members to go through the whole list of our products: potatoes, vegetables, fruits, fuel, dairy products, poultry products, livestock products, grain products. Is there any possibility of reasoning that under normal conditions Canada could not produce so many of at least 90 per cent of those products that no matter how much money the people had in their pockets there would not be enough money "chasing those goods" to cause a rise in price?
If the minister is afraid to use the device I have urged upon him because there would be danger of inflation, then let me say that it is all-important that he adopt such measures as will increase the production in Canada of any commodity in connection with which he thinks there is any danger of a serious shortage of supply developing.
I doubt very much if the minister can show that he has conscientiously taken any steps to increase the production of any commodity. The other day we did take steps to increase the production of gold. I wonder if the minister can point to any other single commodity produced in Canada in respect of which we are taking similar steps to increase production. If we were to take steps as striking, as palpable in connection with the production of anything else in Canada as those we are taking in connection with gold production we should get a production increase almost beyond our capacity to contain. Why not try it where necessary?

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When we have supply in Canada up to a point where we can feel positive there is no danger of a shortage developing with a consequent rise in price through scarcity, why not use this device of state-created debt-free dollars which I have been suggesting? I close by saying once more that in my judgment the income tax is far, far too high. I did not say very much about excise taxes. I felt like saying something then, but I thought what I had to say would be more appropriate on this bill. I thank you, Mr. Speaker, for the opportunity of speaking as I have spoken.


Mr. Hodgson:: I want to ask a few questions for my own information.


Mr. Deputy Speaker:: Order. Probably that could be done more properly in committee.


Clayton Wesley Hodgson: It will only take a few
moments.


Mr. Deputy Speaker:: That does not matter. At this stage we are discussing the principle of the bill. As soon as the motion for second reading is carried then we will go into committee of the whole.


Clayton Wesley Hodgson: That is fine.


Mr. Deputy Speaker:: If the minister speaks now he will close the debate.


Douglas Charles Abbott: I will be very brief. One or two points were raised in the course of the debate concerning which I want to say a word, particularly the question of the allowance for medical expenses. I have already said what I am going to say, but in view of the speech made this afternoon by the hon. member for Winnipeg North Centre (Mr. Knowles) I feel I must repeat it. I feel deeply that it is a fundamental principle of our Income Tax Act that no expense which is an ordinary living expense should be paid out of income before tax. I happen to know that view is fully shared by my predecessor who introduced this measure. That is the reason I have been unable to bring myself to conscientiously recommend to parliament and to the country that this particular type of ordinary living expense, which unfortunately because of human frailty is an expense that sooner or later is incurred by every person in the country, should be wholly deductible from income before tax.
When the measure was introduced early in the war a figure of 5 per cent was suggested, after investigation, as representing what the average family spent for medical, dental and allied expenses. In order to mitigate the hardship of excessive medical expenses, provision was made that expenses in excess of 5 per cent should be deductible, with certain ceilings which were necessary for obvious reasons

to prevent wealthy people getting undue benefit. As the hon. member for Winnipeg North Centre pointed out, that was lowered in 1944 from 5 to 4 per cent primarily to take care of expenditures for drugs which for administrative reasons it was difficult to include in the exemptions.
I do not say that it is, but it may be that the 4 per cent ceiling is too high. Perhaps it should be reduced. I considered that in the budget consideration, but I came to the conclusion that it was not. However, I did come to the conclusion that in the light of changed circumstances the ceilings might properly be raised. While I followed the direction of the house to consider the elimination of the floor and to allow all medical expenses to be deductible, those were the reasons I could not, as I have said, conscientiously recommend that course to the house and to the country.
Responsibility, Mr. Speaker, is a sobering experience. If others had had the experience that I have had of being Minister of Finance charged with the responsibility of raising very large sums of money and endeavouring to the best of my ability to spread the burden as fairly as possible over the taxpayers of Canada, I think they would come to the same conclusion I did. Some reference was made to by-elections. I put that view forward at a public meeting at the city of Kitchener in the constituency of Waterloo North, and that was one of the by-elections in which the Liberal candidate was successful.


Mr. Gray  don:@: I would not crow too much over that one.


Douglas Charles Abbott: I am stating it as a fact. I have repeated why I think it would be unsound, unfair and unjust to eliminate the floor with respect to medical expenses. Other points were raised in the course of this discussion but I think it might be more convenient if I were to deal with them when we are in committee. Members can then ask specific questions as to the points they have in mind.


[Stage Direction]
Motion agreed to, bill read the second time and the house went into committee thereon, Mr. Beaudoin in the chair.
On section 1-Loan to shareholder.
Clayton Wesley Hodgson: I should like to ask a few questions following up what was said by the hon. member for Peel. With respect to the collecting of income tax, excise tax, unemployment insurance and other things of that nature at the source, the cost of keeping the necessary books for small firms, and probably for some of the larger firms, has about doubled in the last few years. They are doing this work free for the dominion

government. What I am particularly concerned about is the expression "at arms' length". I should like the minister to outline what that term really means. Does it mean I cannot sell a business or property to my son or my brother?


Mr. MacDougall:: Your uncle or your aunt.


Clayton Wesley Hodgson: Or to my uncle or my aunt. Where is the line drawn?


Douglas Charles Abbott: I believe there is a definition in a later section, but since the question has been raised I might answer it now. My hon. friend will find the section on page 20 of the bill. Perhaps he might be good enough to look at it. He may not have read it. He will find it in subsection 2 of section 31 on page 20 of the bill. If he will read that I will deal with any specific questions he may have when we come to that section.


James MacKerras Macdonnell: Would the minister say a word or two about the interpretation of the words "bona fide arrangements"? I also want to ask what constitutes payment. Does the giving of a note constitute payment?


Douglas Charles Abbott: I suppose what constitutes
payment depends upon the law of the particular province in which the loan is entered into, but I would not think the giving of a note, which would simply be the extension or renewal of a loan, would constitute payment within the meaning of the statute. As to "bona fide arrangements", that would be a question for interpretation by the courts if there were a dispute, but as my hon. friend knows it means arrangements made in good faith.


James MacKerras Macdonnell: That is not my point. The minister says it means a mutual arrangement made in good faith, but is that all it means? Usually in the case of a loan you have something much more than good faith. You have security.


Douglas Charles Abbott: My hon. friend will appreciate that there is a wide-open door here for evasion of tax by carrying through the form of making a loan. In order to protect the treasury against that there must be some provision such as this. In the event of a dispute it would be a matter first for the income tax appeal board and later the exchequer court to determine if in fact bona fide arrangements had been made for the repayment of the loan.


James MacKerras Macdonnell: I appreciate what the minister has said, but I am wondering whether in fact there has been
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sufficient experience in connection with the act so that precedents have been established which can be ascertained.


Douglas Charles Abbott: My hon. friend will appreciate this is a new provision which is extending the operation of the section. It is a relaxing measure. It is permitting loans to be made which up to the present time have not been permitted. We have to be pretty careful about it because it could be abused, and that is why this provision is put in here.


Gordon Graydon: On that same question, a shareholder gets a loan from the company. What difference does it make whether it is paid back that year, the year after or the year after that? There must be some instances where that would work great hardship, actually.


Douglas Charles Abbott: That would be the simplest way to avoid ever paying dividends. In the case of a company, as my hon. friend knows, when dividends are paid they attract taxes in the hands of the recipient, personal income tax. If there was no provision such as this in the act it would be the simplest way to avoid ever making a distribution of profits which should be subject to personal income tax.


Gordon Graydon: I quite appreciate that, and I quite agree with the motive that prompts that section of the legislation. But there must be cases from time to time where a genuine hardship is worked on that same basis, because after all the income tax department must, on numerous occasions, benefit very greatly at the expense of the individual taxpayer, and sometimes in what would seem to be almost a discriminatory way. I should think there must be some way legislation could be framed so that if the taxpayer did not pay the loan back, or part of it in any event during that current year, it could be paid back in another year without working the hardship that would seem to be imposed on the taxpayer in this instance.


Douglas Charles Abbott: As my hon. friend will recall, being a legal man, this is a section that has been in the Income Tax Act and the preceding act for a great many years. Formerly it prohibited loans to shareholders, with virtually no exception. That has been successively relaxed. This represents the last relaxation, and for the good reasons I indicated to the hon. member for Greenwood it has to be hedged about with some considerable safeguards. This section now permits a loan to be made for any purpose, provided it is repaid within one year from the end of the fiscal period of the corporation out

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of which the loan is made, that is the following fiscal year. So if it were made at the beginning of one fiscal'year the maximum period allowed for repayment would be two years. If it were made at the end it would only be twelve months. That I think is a pretty generous revision. The original act said no loans to shareholders at all. The companies which are not in the lending business are not supposed to be lending money. If a man wants to borrow money, under ordinary circumstances he goes to a lending institution, the bank. In other words, loans are not to be used as a vehicle for getting dividends out without paying income tax.


James MacKerras Macdonnell: Will the
minister not agree that there are other alternatives-


Douglas Charles Abbott: That is right.


James MacKerras Macdonnell: There are the bona fide arrangements referred to in (a) which could be paid over ten years.


Douglas Charles Abbott: That is right; that is for a limited purpose. The loan has to be for the specific purpose set out in (a).


Robert Fair: Can the minister tell us what the official position is with respect to compensation paid to farmers in Saskatchewan on account of the foot-and-mouth disease?


Douglas Charles Abbott: That will depend upon the Income Tax Act. If the receipt is income it will be taxed. If it is a capital receipt, it will not. There are complicated rules, as my hon. friend knows relating to basic herds, and all that kind of thing. The ordinary rules with respect to income will apply.


Mr. McLure:: I should like to get an explanation with reference to interest. A merchant doing business nearly always has to borrow money. I know of one merchant who borrows considerable money; in the period of a year his bank loan would run to $25,000, and the interest over the year would amount to a considerable sum. One man I have in mind paid $3,000 to the bank in interest. Would that be taxed or not?


Douglas Charles Abbott: I would think on the facts as outlined by my hon. friend that would be deducted from his gross income as a business expense, because the act provides that interest on money borrowed for the purpose of earning the income is an expense of doing business.


Winfield Chester Scott McLure: He could carry a smaller loan with that amount of interest year after year.


Douglas Charles Abbott: If the bank would allow him.


Winfield Chester Scott McLure: That was a question I wanted settled. I have another question in connection

with it. Suppose he is in a certain line of business and he cannot altogether prove that it is necessary for him to borrow that money to build up his business. Suppose the income tax people say to him: You have a frozen loan there, and therefore we cannot allow it. Is that not done in tax collecting?


Douglas Charles Abbott: I would not think so. I always dislike to give free legal advice because I have been out of the business for so long.


Winfield Chester Scott McLure: The reason I asked the question is that the hon. member for Greenwood asked what constituted a payment. Of course if the man were borrowing from two banks and they were going to charge him interest on the income he could pay one back by a note from the other and overcome it.


Douglas Charles Abbott: It sounds like high finance to me.


Winfield Chester Scott McLure: I do not think the minister answered the question of the hon. member for Greenwood.


Douglas Charles Abbott: I thought I made it clear.


[Stage Direction]
Section agreed to.
Section 2 agreed to.
On section 3.
Stanley Howard Knowles: Clause 3 has several subsections. May we take them one at a time?


Louis-René Beaudoin: Is it agreed?


Some hon. Members:: Agreed.


Stanley Howard Knowles: Will the minister comment on subsection 1 of section 3. In that comment will he indicate whether there is any limitation on the amount of money that can be paid out or put into a superannuation fund as a lump sum? I have in mind the fact that the basic section we are amending is section 11 of the act which does provide certain limitations in respect of comparable payments.


Douglas Charles Abbott: Yes. I should clarify that. I am not technically competent to explain what is known as a terminal funding plan but, broadly speaking, I understand that a pension plan will be set up by the employer whereby, instead of making annual payments to the fund as is done in the ordinary case, when the employee retires he pays into the fund, to a trustee, an amount which on an actuarial basis will be sufficient to provide that employee at the retiring age with a pension for the remainder of his life; and that amount which is actuarially appropriate to pay for that pension is paid into the fund at the retirement of the employee, and that is the amount which can be deducted.


Stanley Howard Knowles: Subsection (f) which appears in the act just before where this one will

be put in relates to a similar matter, namely an employer's contribution to a pension fund. There is limitation of $900. I should like to know why there is no limitation in respect of this kind of payment. To be specific and perhaps of a suspicious mind, I would like to know whether it is possible for a corporation to provide a healthy pension to some retiring official in this way and escape income tax in doing so.


Douglas Charles Abbott: The scheme has to be approved, and I am informed that the approval would not be given for any plan which is not fair and reasonable. In that connection, the limitation which is now contained in the act with respect to what I might refer to as an ordinary pension, or the more common type of pension plan, would be taken into account. The payment to which my hon. friend refers is of course the annual payment. It refers to payment year after year.


Stanley Howard Knowles: The minister referred to a plan as one that has been necessarily approved. Is it an approval that has been given by the department on some previous occasion or can a special case be submitted for some particular individual and approval be received?


Douglas Charles Abbott: Plans are not approved which do not cover employees generally. That has been standard practice in the department since the requirement for approval has been in force.


James MacKerras Macdonnell: I understand it is perhaps universal now that an individual who is a member of an approved plan gets an exemption on the payments he makes from time to time. On the other hand when he receives his annuity, that is taxable. There are still cases, I believe, where it may be paid in a lump sum, and my understanding is that in those cases the lump sum may be spread over three years. Am I right in that?


Douglas Charles Abbott: That is correct; it may be spread back over the last three years. In those plans the trustees can, if they so desire, pay to the recipient an annuity rather than a lump sum. If it were apparent that the three-year write-off would cause undue hardship from the point of tax liability, then no doubt the trustees would be prepared to have the annuity over the forward period rather than the lump sum.


James MacKerras Macdonnell: Then do I understand that the question I have raised is really academic, because no man could ever be put in that position? Is that a characteristic of the plan, that he may always choose an annuity, so the three-year difficulty would not arise?
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Douglas Charles Abbott: That would depend, of course, on the by-laws of the fund. There may be certain circumstances in which he would have the right to withdraw a lump sum, but in all the by-laws of that kind I have ever seen it is optional for the recipient. If he exercises his option, then he does it knowing what his possible tax liability may be.


James MacKerras Macdonnell: If it is
optional, of course I am completely answered.


Stanley Howard Knowles: Subsection 2 of section 3 relates to the amendment that was first enacted last year concerning the deductibility of trade union dues, and this amendment would include payments made by workers covered by what is known as the Rand formula. I should like to ask the minister whether consideration has been given to making any other what might be called administrative changes in connection with this provision. As the minister knows, the deductibility of trade union dues was a most welcome provision. He has had experience before with some of the things he has introduced being welcomed, but at the same time those who are affected can see room for improvement. In this particular case I find a number of trade unionists are concerned over the complicated nature of the formula that applies to these deductions.
The complication arises out of two main facts. On the one hand it arises from the fact that payments for trade union purposes generally and payments into trade union pension plans, where such plans are approved, are covered separately. In other words they are covered in separate sections of the act. In the end it amounts to the same thing in dollars and cents, but it is very complicated for trade union secretaries particularly to have to issue two separate receipts, and to break down the dues that are paid in a lump sum as between those that are for trade union purposes generally and those that may be for a pension plan. I would point out that at the moment I am talking only about such pension plans as are approved. There are same trade union pension plans, in addition to the supplementary one in Toronto about which I have talked to the minister so often, which have not yet been approved. At the moment I am saying that the division between the two creates complexities.
The other complication is created by virtue of the wording further on in the section we are now amending, which says that one cannot claim this deduction for any purpose not directly related to the ordinary operating expenses of the association or trade union to which they were paid. This means that many unions have quite a time determining just what percentage of the dues that are paid

Income Tax Act
comes under this provision. For example, I am told that if a trade union is renting office premises, the rent that it has to pay is regarded as part of the operating expenses and therefore the amounts paid by members thereto are allowed. On the other hand, I am told that if a trade union is setting aside money to build or purchase its own building, that is regarded in a different light and is not allowed. Similarly, what are sometimes called defence funds are not allowed. In some cases they might amount to quite a bit, but in most cases they do not amount to very much in terms of tax saving.
I can speak with some knowledge on this matter because I happen to belong to a trade union that is affected. The union to which I belong has a pension plan which is approved. If I were to read the minister the formula that has been sent out to the secretaries of the locals across the country for working this out, he would admit it is rather complicated. This complication arises from two facts. The first is the distinction between pension payments and ordinary payments, and the other is that of knowing what expenses of the union are allowed. I wonder if consideration could not be given to combining the two payments into one, at least where the pension plan has been approved. My other suggestion is this. Would it not be possible to simplify the whole matter by making it possible for the whole of the trade union dues to be deducted? If the minister wants to put some kind of limitation on that, something in the nature of a ceiling, I suggest it would be a lot simpler if he were to base it on a percentage of the taxpayer's income rather than in the terms I have already described.
There is one other question I should like to ask. Would it not be possible to arrange for the T-4 slips, particularly in a case where the Rand formula or some other form of union security is in effect, to show these deductions and simplify the work of the secretary of the union concerned?


Douglas Charles Abbott: I understand that the questions raised by the hon. member are now under consideration in the department. The returns are just coming in, and this is the first year in which this provision has been applied. It is another illustration of the fact that when one changes the act to achieve greater equity one introduces greater complexity. Every time we add one of these exemptions from income it does complicate the preparation and filing of returns, both by the taxpayer and by the tax department, but that is probably unavoidable.


[Stage Direction]
Section agreed to.

On section 4-Chief source of income.
James MacKerras Macdonnell: Will the
minister explain to me these negatives, which I find it hard to understand.


Douglas Charles Abbott: As the hon. member will recall, this was the section which referred to the principal source of income, and then section 13(1) was introduced last year as a loophole section to cover what, for want of a better term, I shall call the hobby farmers-


Donald Methuen Fleming: Gentleman farmers.


Douglas Charles Abbott: Well, gentleman farmers. The idea of the provision was to limit the deduction which a gentleman farmer may take for income tax purposes against other income as a result of farm losses. It was felt it was no longer necessary to have the definition of principal source of income as contained in the original section.


James MacKerras Macdonnell: Yes, but will the minister explain to me these two words. The section reads in part:
Where a taxpayer's chief source of income for a taxation year is neither farming-[DOT]
I think I can understand that. Then the next thing is "nor a combination of farming and some other source of income." Is that a single source? Because it goes on to say:
. . . his income for the year shall be deemed to be not less than his income from all sources other than farming . . .


Douglas Charles Abbott: Perhaps it is a little bit confusing, but almost invariably these gentlemen farmers never make money from their farms. They always lose money; and they write off that loss against income from other sources, such as salary or investment income. The section as introduced last year was of course to limit that write-off to the lesser of the two figures mentioned.


Gordon Graydon: They make money in the city and lose it in the country.


Louis-René Beaudoin: Shall the clause carry?


James MacKerras Macdonnell: No, Mr. Chairman. I am sorry to be so insistent, but I am still interested in this wording. I want to go back to line 3 of the new section 13 that is within clause 4 of the bill.


Douglas Charles Abbott: There is no change from the wording used last year.


James MacKerras Macdonnell: What I want to ask is this. I will cite a theoretical case. Suppose a man has an income of $10,000 a year from his profession. Then suppose he loses $10,000 a year on farming; the minister says they all lose money. I had a friend who, as he expressed it, supported a farm and as nearly as he could figure it out, it cost him a dollar to grow a cauliflower. Then let us

say that he has an income of $6,000 from some public office that he holds, such as membership on the international joint commission or something of that nature. I do not know whether they are paid or not. How does this thing work out in that event? I presume that he would be able to deduct one-half-it says "one-half his farming loss for the year"-of his farming loss.


Douglas Charles Abbott: Or $5,000.


James MacKerras Macdonnell: He could deduct his farming loss. I have put down his farming loss at $5,000, so he could deduct that.


Douglas Charles Abbott: He could deduct $5,000 from his gross income of $16,000. He has a loss of $10,000, of which he can deduct $5,000. He has income of $16,000. So his income for purposes of taxation would be $11,000.


James MacKerras Macdonnell: No matter how many other sources of income he has it would all apply in the same way?


Douglas Charles Abbott: That is correct.


Winfield Chester Scott McLure: I have one particular case on which I should like to get a little bit of information, namely that of a farmer who is specializing in poultry and sub aqua farming. As to the poultry and sub aqua farming, he does not keep any definite records. But this year he has been asked to pay something on his sub aqua farming which gave him a certain amount of income.


Douglas Charles Abbott: Will my hon. friend allow me to ask him what sub aqua farming is?


Winfield Chester Scott McLure: The growing of oysters.


Douglas Charles Abbott: Thank you.


Douglas Scott Harkness: "Sub" meaning "under" and "aqua" meaning "water".


Winfield Chester Scott McLure: I thought the minister was up in his Latin.


Douglas Charles Abbott: I am told that, under the act, he is fishing.


Winfield Chester Scott McLure: Other words are used in the legislation that I do not know, such as mutatis mutandis. I thought, however, the minister surely knew what sub aqua farming was. That is what it is always called, and it means the growing of oysters. That is really farming. Those two can be taken as a combination. This man has to make a report on his poultry farming just the same as on his sub aqua farming, and the two of them can be taken together and shown as the income from the farm. Am I right in that assumption?


Douglas Charles Abbott: Speaking subject to correction-and as I say, I am always diffident about giving free legal opinions-I am told
Income Tax Act
that he is farming so far as his poultry operations are concerned and that he is fishing so far as his sub aqua oyster operations are concerned.


Winfield Chester Scott McLure: He is not fishing; he is farming. The act says he is a sub aqua farmer.


Gordon Graydon: The minister is sub aqua.


Douglas Charles Abbott: May I quote to my hon. friend section 127 (1) (p) of the act:
"fishing" includes fishing for or catching shell fish, crustaceans and marine animals but does not include an office or employment under a person engaged in the business of fishing;
Therefore, by definition, sub aqua farming is fishing.


Stanley Howard Knowles: May I ask the minister to explain the real effect of this clause 4? The part that appears here in print is for the most part that portion of section 13 which is being retained.


Douglas Charles Abbott: That is right.


Stanley Howard Knowles: What we are actually doing by this is to eliminate the previous subsection 1 and subsection 2. Those subsections indicated that the income of a person for the taxation year shall be deemed to be not less than his income for the year from his chief source of income.


Douglas Charles Abbott: It is no longer necessary. I thought I explained that a moment ago. If you are running a grocery business and a drug business, you can offset the loss in the grocery business against the profit in the drug business. The only case in which we do not allow that is in the case of the gentleman farmer, who is limited as to the amount of loss. It therefore no longer became necessary to put in a provision that the income of a person for the fiscal year shall be deemed to be not less than his income from his chief source of income.


Stanley Howard Knowles: Are there no gentleman grocers or gentleman druggists?


[Stage Direction]
Section agreed to.
On section 5-Inadequate considerations.
James MacKerras Macdonnell: I should like to know the reason for this amendment. Apparently the effect is to change the yardstick which was outlined in the preceding section. Now we have nothing but the word "reasonable" to replace it. What would be the test? Is it considered to be better to leave the thing absolutely at large, merely with the word "reasonable" as a guide?


Douglas Charles Abbott: This is, of course, a loophole section. One purpose was to extend the ambit of the section to include payments as consideration for the carriage of goods or

Private Bills
passengers or for other services. It was not in the section as such. Then the phrase "reasonable amount" was put in. This, of course, is a question which, in the event of a dispute, can be determined by the courts and is not within the discretion of the minister.


James MacKerras Macdonnell: Yes; but
previously you had a test. Am I right in thinking that previously you had a test? But here you just say "reasonable".


Douglas Charles Abbott: It used to relate to people in the same line of business.


James MacKerras Macdonnell: That is right.


Douglas Charles Abbott: This section relates to people who are not dealing at arm's length.


Louis-René Beaudoin: Shall the clause carry?


Stanley Howard Knowles: Six o'clock.


Douglas Charles Abbott: Yes; clause 5 carries.


[Stage Direction]
Section agreed to.
At six o'clock the Speaker resumed the chair and the house took recess.
[Stage Direction]
AFTER RECESS

The house resumed at eight o'clock.


Mr. Alan Macnaughlon (Mount Royal) moved: the second reading of Bill No. 243, to incorporate the Great Eastern Insurance Company.


George Alexander Cruickshank: May we have an explanation of this bill?


Alan Aylesworth Macnaughton: Mr. Speaker, this is the standard type of bill calling for the incorporation of the Great Eastern Insurance Company. It is in the ordinary form as approved by the superintendent of insurance. I am informed, and I know, that it follows the regular routine. I might point out, however, that the name "The Great Eastern Insurance Company" does not conflict in any way with another insurance company called Great-West Life Assurance Company. We have already approached Great-West Life Assurance Company, which deals in life assurance, whereas we propose to deal in fire insurance. There is common agreement between the two companies that there is no conflict.
The capital of the company is set forth in section 3 of the bill. The incorporators are set forth in section 1; and one of them, whom I know, is from my own constituency. Another is a personal friend. The head office

is to be at Montreal. The types of insurance are listed in. section 6. And then, as in all these acts, section 8 says that the company will be subject to the provisions of the Canadian and British Insurance Companies Act, 1932.


George Alexander Cruickshank: have one further question, through you, Mr. Speaker.


Mr. Deputy Speaker:: Order. On second reading only the principle of the bill is discussed. The hon. member may ask questions when we reach the committee stage. After second reading this bill will be referred to the standing committee on banking and commerce. When it is reported from that committee it will go to committee of the whole, at which time the hon. member may ask questions of the sponsor. If the hon. member wishes to discuss the principle at this time, he is free to do so.


George Alexander Cruickshank: Well, I guess the principle is what I wish to discuss. I presume the principle of the bill is to carry on an insurance company along normal lines, as carried out by a similar company in Canada. I presume, through you, Mr. Speaker, that the same restrictions would follow in respect of this company, including those having to do with capitalization. That was the question I wished to ask, because I know one of these insurance companies was incorporated in one of the provinces; but unfortunately due to the failure of the Home Bank-and that was one of the few business failures, due to the good work of the federal government-it failed. If I am not permitted to ask questions at this stage, I shall have to wait. However, I am sure the sponsor of the bill would wish to tell me whether those who are sponsoring and financing the company are going to conform with all the regulations as they have been laid down, and as they have been carried out by similar companies in Canada.


Mr. Deputy Speaker:: Order. If the hon.
member for Mount Royal speaks now, he will close the debate.


Alan Aylesworth Macnaughton: That is right, Mr. Speaker.


[Stage Direction]
Motion agreed to, bill read the second time and referred to the standing committee on banking and commerce.

Mr. Arnold Darroch (Wellington North) moved: the second reading of Bill No. 244 respecting the Economical Mutual Fire Insurance Company.


Gordon Graydon: I happen to know that the sponsor of the bill is anxious to make a full

explanation, and I hope he will not be denied that opportunity.


James MacKerras Macdonnell: And when he is explaining it, would he indicate the special significance of the word "Economical" as applied to this insurance company, as distinct from all others?


Arnold Darroch: Mr. Speaker, I wish to thank the hon. member for Peel (Mr. Graydon) for his expression of good will, and his confidence as expressed in the thought that I might be able to make a speech.
The bill asks that the word "fire" be omitted from the official caption of the insurance company, so that instead of being known as the Economical Mutual Fire Insurance Company it would be called the Economical Mutual Insurance Company.
I understand this company has been in operation for 80 years and that when they began business they were a fire insurance company. Down through the years however they gradually branched out into other lines of insurance, until now the fire part of their economy or business is practically non-existent. For this reason they wish to have the word "fire" omitted from their official title. The explanatory note sets out all this information much better than I could give it.


Gordon Graydon: That is a most satisfactory explanation.


George Alexander Cruickshank: Mr. Speaker, may I ask a question at this stage.


Some hon. Members:: No.


George Alexander Cruickshank: I have several deputy speakers in front of me, giving me advice. I am simply asking a question.


Alphonse Fournier: One question only.


George Alexander Cruickshank: The hon. member has given an explanation of the bill in which he says the company is eliminating the word "fire" from its title; is that correct?


Arnold Darroch: Yes.


George Alexander Cruickshank: Then, if I am permitted, I should like to ask why they are eliminating the word "fire". Is it because it was not profitable to write fire insurance? If so, will the shareholders of the company be protected? Surely that is a fair question.


Mr. Deputy Speaker:: The point is not as to
whether the question is fair, but rather whether it should be asked at this stage. If the sponsor of the bill speaks now he will close the debate.


Arnold Darroch: The company has complied with all the rules.
Boundary Pipeline Corporation


[Stage Direction]
Motion agreed to, bill read the second time and referred to the standing committee on banking and commerce.

[Stage Direction]
The house resumed, from Friday, May 23, consideration in committee of Bill No. 62, to incorporate Boundary Pipeline Corporation- Mr. Larson-Mr. Robinson in the chair.
On section 1-Incorporation.
Mr. Cannon:: Mr. Chairman, on a question of privilege-


An hon. Member:: Hear, hear.


Charles-Arthur Dumoulin Cannon: Even in committee I can raise a question of privilege. I should like to refer to an article in the Financial Times of May 23 which in turn refers to an incident that occurred on April 24 in the committee on railways, canals and telegraph lines, when this bill was before that committee. This article reads:
What Mr. Cannon did in effect was to gag a committee from getting more evidence about gas pipe lines.
I have read the report of the debates on this bill and I know also that the Financial Times was not the only one that has made reference to the fact that I gagged the committee and prevented it from getting evidence which in the opinion of certain people should have been obtained. I think it is time I made a statement on these accusations.


Mr. Green:: Mr. Chairman, on a point of order, I submit that this is not a question of privilege.


Alphonse Fournier: The hon. member is going to speak on the subject matter of the bill.


Howard Charles Green: The hon. member is making a speech, not speaking to a question of privilege.


Alphonse Fournier: He is speaking on the bill.


Charles-Arthur Dumoulin Cannon: It concerns the bill.


William Alfred Robinson: I understand the hon. member is speaking on a question of privilege.


Howard Charles Green: May I inquire respectfully what the question of privilege is.


Alphonse Fournier: Let the hon. member tell you.


Mr. Low:: I hold that no question of privilege has been cited.


Alphonse Fournier: Wait until he explains the question.


Charles-Arthur Dumoulin Cannon: Since the hon. member
evidently was not listening, I will repeat it. The question of privilege I have raised is

Boundary Pipeline Corporation that I have been accused in this article in the Financial Times of having gagged the committee and prevented it from getting evidence about the gas pipe line. That is a serious accusation to make about a member of the committee and I think I am entitled to defend myself on the record of the committee and the record of the house. I should like to explain what went on in the committee.
The committee was hearing a witness by the name of Herring. This witness was before the committee on April 22 and all morning of April 24. Then in the afternoon a further examination of the witness was being conducted by the hon. member for Calgary West. I was of the opinion that the cross-examination going on was not relevant, but I was not the only one of that opinion. I should like to refer to page 61 of the minutes of proceedings of the committee on railways, canals and telegraph lines and quote what the hon. member for Winnipeg South is reported as having said:
The application before the committee at the present time has relationship to nothing east of Winnipeg. Although I have enjoyed it and I do not object, for the last half hour we have been arguing the whole question of exporting gas-a subject which has been argued ad nauseam and which will continue to be so argued. The fact is that the discussion has been informative but bears no relation to the responsibility put on this committee-that of dealing with a specific bill. Of course I am interested in what happens to the country.
The hon. member for Winnipeg South there expressed the opinion that the cross-examination and the discussion that was going on was not relevant to the issues before the committee. Then on page 77 of the proceedings of the committee we find this:


Mr. Cavers:: Mr. Chairman, if I may be permitted a word; I do not think anyone wants to cut out discussion here.


Louis-René Beaudoin: I do not think anyone wants to cut out discussion here and I think the hon. member will himself agree that at the last session of the committee probably a wider latitude was given than is usual in matters of this kind.
He was referring to the hon. member for Calgary West having been given wide latitude. Then I quote further from page 87 as follows:


Mr. Whitman:: At the last session of this committee, Mr. Chairman, we had a lot of irrelevant discussion carried on, and after we had finished, certain information was asked to be produced by the witness at the call of the chair; that evidence has been brought here today. Now we have Mr. Nickle coming forward with some information. The witness has gone to some trouble to get this evidence for us. Now, if we are going to carry on in this way, we can stay here all the rest of this day and the rest of next week and get nowhere, merely to satisfy someone who apparently is not in favour of the passage of this bill. For that reason I think, with the evidence we have, that this is the proper time to pass on to the bill.


There we have three members of the committee expressing the opinion that the discussion and the cross-examination that was being carried on were irrelevant. At that moment I made a statement, which appears on page. 87, which I should like to put on the record. It was as follows:


Charles-Arthur Dumoulin Cannon: Mr. Chairman, may I say a word
on that also? The other day Mr. Herring was heard at great length. One of the members at that time -Mr. Mutch if I remember correctly-considered that a lot of the evidence was irrelevant, that we were getting too far afield; nevertheless, we did hear the evidence given here the other day, and I was there, and I remember Mr. Nickle saying that if Mr. Herring produced the figures, the documents he asked for, as to the feasibility of the market, he would be satisfied. Well, Mr. Chairman, Mr. Herring has produced those figures here this morning and Mr. Nickle has continued his crossexamination on them. The only reason I make the motion I have made-
That was a motion I had moved already.
-is that I understand there is no other witness to be heard. Have you any other witness to be heard? I know of no other witnesses. I submit this witness has been sufficiently cross-examined and that any further cross-examination would be just a repetition of facts which have already been brought before the committee and a waste of the time of the committee. I object very strongly to Mr. Green's declaration that I am trying to cut off discussion or that I am trying to protect anyone. I am not trying to protect anyone, and I have no interest in the thing either; but, just as a member of the committee in view of the fact that the evidence presented to us has been very complete, I think that we have now reached the time when it is proper for the chairman to put the question on the preamble of the bill, and that is the reason I made the motion that has been made.
That motion read as follows:


Charles-Arthur Dumoulin Cannon: that sufficient evidence has been obtained for the committee to decide as to the economic practicability of the pipeline under consideration; and that the question be put on the preamble without further examination of the witness. After discussion and the question having been put on the said motion, it was agreed to on the following division:
The only motion I had made was that the question be put on, the preamble to the bill. I should like to refer now to page 2523 of Hansard of May 23 where the hon. member for Calgary West is reported as follows-


William Alfred Robinson: Do I understand that the hon. member has completed his question of privilege?


Charles-Arthur Dumoulin Cannon: No, this is on the same question.


George Alexander Cruickshank: It seems to me the hon. member is trying to talk out this bill.


Charles-Arthur Dumoulin Cannon: I am not trying to talk out the bill, but I might as well be taking up the time of the committee as somebody else.


Some hon. Members:: Hear, hear.


Charles-Arthur Dumoulin Cannon: The hon. member for Calgary West is reported on page 2523 of Hansard as follows:
So far as the Boundary company is concerned, that proof was not obtained by the committee; and, in fact, the Liberal majority on that committee rode roughshod over the minority party members to prevent the hearing of cross-examination and evidence that I believe would have clearly established that the Boundary project is not economic.
The point I wished to make in moving the motion I did was that we had heard sufficient cross-examination and it was time to go on to the preamble of the bill itself. The point is that the hon. member for Calgary West at that time was not in fact cross-examining at all. He was simply trying to get on the record, through the medium of that witness, figures that had been prepared by others. The witness said he knew nothing about them. What was going on at the time was not in fact cross-examination at all. The hon. member was just trying to get something on the record through the medium of so-called examination of the witness.


Howard Charles Green: On a point of order, quite apart from the hon. member's question of privilege,
I submit that he is now attacking the hon. member for Calgary West.


Charles-Arthur Dumoulin Cannon: I am not attacking the hon. member. I am answering him.


Howard Charles Green: If he wants to do that he should do so in the regular course of debate and not by way of a question of privilege.


Charles-Arthur Dumoulin Cannon: May I submit there are two questions-


William Alfred Robinson: Order. I understand the hon. member is still speaking to a question of privilege. I would ask him to be as brief as possible and as much to the point as possible.


Charles-Arthur Dumoulin Cannon: At page 81 the witness had the following to say in answer to some of the remarks of the hon. member for Calgary West:
Not being familiar with the nature of their survey,
I cannot answer that question positively; but the way we go about making a survey is to establish the economics of the pipe line, the load required, and whether or not it can meet the competition of the fuels available today.
The witness said in effect that he was not able to express an opinion on figures that were the result of other surveys and which the hon. member for Calgary West was trying to get on the record. At page 84 of the minutes of proceedings and evidence of the standing committee on railways, canals and telegraph lines we find that the witness said:
As previously stated, we cannot prove the basis of our estimate until such time as we have completed the installation and have confirmed it by
Boundary Pipeline Corporation the contracts. We submit them only as evidence, and we would not be put in a position before this committee that we can definitely acquire every one of those markets, although I personally think we can.
I said to the hon. member for Calgary West on that same day:
Is it fair to say, Mr. Nickle, that you are presenting another set of figures coming from competitive companies who wish to prevent this company from getting a charter so that it won't compete with them?
The hon. member for Calgary West did not deny that. He merely said, "Please let me explain".


An hon. Member:: Read on.


Charles-Arthur Dumoulin Cannon: I say one of the reasons I made that motion was that it was unfair to the witness, after the statement he had made, for the hon. member for Calgary West to continue to quote figures from other surveys that the witness knew nothing about, and to try to put those figures into the evidence of that witness who said he had no knowledge of the surveys that had been made.


Clayton Wesley Hodgson: Who was the witness?


Charles-Arthur Dumoulin Cannon: Mr. Herring. The hon. member for Calgary West was acting as if he was a witness, and that is a point to which I am *coming.


Clayton Wesley Hodgson: He was as much a witness as Herring was.


Charles-Arthur Dumoulin Cannon: If the hon. member for Calgary West wanted to get these figures on the record he had two very simple methods open to him. He could either have called the witness who had collected the figures and knew something about them or else he could have put them on the record simply by making a statement, something he did later on-


Clayton Wesley Hodgson: The hon. member for Calgary West was asked more questions in that committee than Mr. Herring.


Charles-Arthur Dumoulin Cannon: -because at page 103 of the
record we find that the hon. member for Calgary West put a letter on the record which he had received from the Winnipeg Electric Company, and which takes up a page and a half. The point I wish to make is that all these claims about my gagging the committee and attempting to prevent evidence going on the record-


Clayton Wesley Hodgson: Didn't you move the motion?


Charles-Arthur Dumoulin Cannon: Just a minute-are just a lot of hot air, a lot of gas, because if the hon. member for Calgary West had wanted to get those figures on the record all he had to do was to get up and make a statement in the same way that he read the letter from the Winnipeg Electric Company into the record.
2632	HOUSE OF
Boundary Pipeline Corporation


Clayton Wesley Hodgson: He couldn't do it for you fellows asking questions. He didn't have a chance.


Charles-Arthur Dumoulin Cannon: He had every chance had he wanted to convince the committee and bring proper evidence before it in the same way that the sponsors of the bill did.


Clayton Wesley Hodgson: You moved the motion to cut off evidence.


Charles-Arthur Dumoulin Cannon: Therefore I say on the question of privilege I brought up originally that the accusations that I tried to gag the committee-


Howard Charles Green: It is perfectly true.


Charles-Arthur Dumoulin Cannon: -or rode roughshod over the committee are not at all based on facts.


Clayton Wesley Hodgson: Didn't you move the motion to hear no more witnesses?


Charles-Arthur Dumoulin Cannon: If these people wanted to get any facts, figures or letters on the record all they had to do was to put them on the record.


Clayton Wesley Hodgson: He couldn't for you fellows asking questions.


Charles-Arthur Dumoulin Cannon: He did that later with respect to the letter from the Winnipeg Electric Company. There is one other question.


Gordon Graydon: Is this another question of privilege?


Charles-Arthur Dumoulin Cannon: It is another question of privilege with which I wish to deal, or the same privilege. At page 2401-


Clayton Wesley Hodgson: Read the same thing over again.


Charles-Arthur Dumoulin Cannon: Let me say what the question is.


Clayton Wesley Hodgson: Read the same thing over again.


Charles-Arthur Dumoulin Cannon: At page 2401 of Hansard the hon. member for Calgary West had the following to say about what had taken place before the standing committee on railways, canals and telegraph lines:
I regret that that took place because those two members,-
He was referring to myself and the hon. member for Notre Dame de Grace who was also a member of the committee and seconded my motion.
-in effect, have given their considered view, apparently, that the province of Quebec should not get natural gas from western Canada.
That, Mr. Chairman, is a statement which, to put it mildly, is entirely unsupported by the facts.


Clayton Wesley Hodgson: Didn't you move the motion?


Charles-Arthur Dumoulin Cannon: Yes, but if you will listen to me for a moment I am going to demonstrate so clearly that even the hon. member will understand that such a thing was as far away from our minds as it could be at the time.


Stanley Howard Knowles: May I rise on a point of order-


Charles-Arthur Dumoulin Cannon: This is a company which-


William Alfred Robinson: The hon. member for Winnipeg North Centre.


Charles-Arthur Dumoulin Cannon: This is a company-


Stanley Howard Knowles: You are not the hon. member for Winnipeg North Centre.


Charles-Arthur Dumoulin Cannon: No, I am not.


William Alfred Robinson: Order. The hon. member for Winnipeg North Centre on a point of order.


Stanley Howard Knowles: I did not intervene when some hon. members complained at the start that the hon. member for Iles-de-la-Made-leine did not have a question of privilege because I felt that when he was citing something that had been said outside the house regarding his actions as a member of parliament he did have a legitimate point of privilege. But when he gets down simply to an argument with another member of the house I submit that one has to consider the wording of citation 192 in Beauchesne's third edition, which reads as follows:
A dispute arising between two honourable members as to allegations of facts hardly fulfils the conditions of a privilege question . . .
Then there is citation 193 which reads as follows:
Members often raise so-called "questions of privilege" on matters which should be dealt with as personal explanations or corrections, either in the debates or the proceedings of the house.
There is no question but that the hon. member has the right, when the floor is his, to answer the arguments made by the hon. member for Calgary West and to dispute any facts on which there may be differences of opinion between them, but I submit he should not claim that it is a question of privilege when he is merely arguing over something on which they differ.


Mr. Poulioi:: If you will permit me, Mr. Chairman, the hon. member for Iles-de-la-Madeleine was not at all discussing a question of facts. He was demonstrating how false were the principles enunciated by the other hon. gentlemen. There is all the difference in the world.


William Alfred Robinson: Order. The hon. member for Iles-de-la-Madeleine has raised what in my opinion is a perfectly proper question of privilege. I would point out,

however, that points of privilege when raised should be as brief as possible. I would therefore ask the hon. member to cooperate by completing his remarks as quickly as possible.


Charles-Arthur Dumoulin Cannon: I shall do that, Mr. Chairman. I wish to say that the allegation that the members from Quebec were attempting to prevent gas from coming to eastern Canada is completely unsupported by the facts. The incorporation of this company, which is before the committee at this time, will not interfere in any way with the development of pipe lines to eastern Canada. The object of the pipe line which this company wishes to build is to bring gas from Alberta to Saskatchewan and Manitoba. The other company the hon. member for Calgary West is interested in, the Trans-Canada company, will have a much larger pipe line, if it ever gets built, and will go all the way to Ontario and Quebec.
There is a contradiction in the statement made by the hon. member for Calgary West because at one stage of his speech he said-


Howard Charles Green: Once again the hon. member is doing nothing more than attempting to contradict the hon. member for Calgary West. If he wants to do that, he should do it m the form of a speech in this debate, rather than using a point of privilege. I must ask you, Mr. Chairman, to give us your ruling on that point. If the hon. member can go on making a speech of this type, then anything can be raised on a point of privilege.


Mr. Croll:: It has been.


George Alexander Cruickshank: I want to speak to the point of order, and I want a ruling. I am asking you, Mr. Chairman, whether an hon. member can rise on a question of privilege and conduct what is commonly known as a filibuster. Many hon. members want to expedite this bill. There are some around me who want to expedite it, but they do not sit in this seat. There are others on the other side of the house who want to expedite it. Is it fair for an hon. member to rise on a question of privilege and make a speech which is commonly known as a filibuster? I want to know, Mr. Chairman. I could go on, on this point of order and make a speech for ten or twenty minutes.	*


Clayton Wesley Hodgson: Go ahead.


George Alexander Cruickshank: That would not be quite fair. I want to know whether on a question of privilege an hon. member can go on quoting from a newspaper article written 55704-166i
Boundary Pipeline Corporation by a man called Tempus. It is a most interesting article. The hon. member for Iles-de-la-Madeleine, that delightful little island somewhere out in the Atlantic, quoted part of the article. I should like to know whether on the point of order I am permitted to discuss this newspaper article which was used by the hon. member in discussing his question of privilege. I am sure none of us wants to unfairly delay the passing of this bill.


Mr. Gray  don:@: I should like to speak on the point of order. I am not going to make any suggestions that would convey the slightest thought that there is any motive in the mind of the hon. member who has been raising the question of privilege, other than that which he has mentioned. If it were some other hon. member, then he might have a different kind of motive, but I know the hon. member has not. What the hon. member is doing can be used as a device, Mr. Chairman, to stop the hon. member for Peace River from getting the floor and giving his opinion with respect to the pipe line. It is because this device might be used on some other occasion, and this could be looked upon as a precedent, that I am raising the point of order now. I do not think we should allow that kind of procedure or device to be employed in our committee work, because if we do we are going to upset the whole procedure and technique of debate on the second reading of bills generally.
None of us in the House of Commons was born yesterday, Mr. Chairman. We know pretty well that questions of privilege just do not develop into marathons like this. I think most of us understand it.


Charles-Arthur Dumoulin Cannon: Mr. Chairman, in answer to that particular statement I shall put an end to it now-


William Alfred Robinson: Order. I have listened carefully to the hon. member for Iles-de-la-Madeleine. As I said, I believe he brought forward a perfectly proper point of privilege. However, I do believe that the point of order raised by the hon. member for Vancouver-Quadra is well taken, and I would ask the hon. member to co-operate by closing his remarks on the point of privilege very shortly.


John Lorne MacDougall: Just say amen.


Mr. Murray (Cariboo):: Let the cannon roar.


Charles-Arthur Dumoulin Cannon: I should like to say that I have no intention of making a filibuster on this bill at all because, on the contrary, I should like to see it pass as soon as possible. Also, in answer to the hon. member for Peel, may I say that it was far from my thought
2634	HOUSE OF
Boundary Pipeline Corporation to prevent the hon. member for Peace River from making a speech. I regret if I have delayed him so far, but I reserve the privilege of taking part in the debate at a later time, Mr. Chairman.


Solon Earl Low: I think it was a nice type of running interference, and I must compliment the hon. member for Iles-de-la-Madeleine for doing it so smoothly and so nicely. I have no objection whatever to any person raising a question of privilege, but I always like to see a question of privilege put briefly and succinctly so we all understand it, and get it cleared away, then we can go on with our work.
When the adjournment time came at nine o'clock the other night I was dealing with the whole question of supply in the province of Alberta with relation to the pipe line that is now under discussion, and I believe I said then that whether or not this pipe line ever carried a cubic foot of gas or a gallon of oil would depend to a very large extent on two things: first, whether or not the province of Alberta discovered supplies of gas surplus to her present needs and to future needs for a period of some thirty years; and second, whether or not the psychology of the people of the province of Alberta was ever to come around to the point where they would consent to have gas exported.
The situation at the present time is fraught with grave difficulties and doubts, largely as a consequence of some very, very foolish speeches made here and elsewhere. In the course of his speech last week the hon. member for Lethbridge outlined very carefully the policy that had been followed by the government of Alberta in trying to produce a supply of gas and oil sufficient to take care of the needs of the Canadian people, and such as would justify the building of pipe lines to convey the oil and gas to other parts of Canada should it become the policy to export gas.
Well, the hon. member for Lethbridge pointed out how wise those policies had been, and he also made it abundantly clear to the committee that if it had not been for the wise policies laid down and carefully followed by the government of the province of Alberta there would never be supplies of gas and oil for export anywhere. I believe I said the other night I was not claiming, and I do not think the hon. member for Lethbridge was claiming, that the government of Alberta did it all. What we do say, sir, is that companies came to the province of Alberta upon invitation to risk their capital in searching for and developing oil and gas reserves when those supplies were found. We give credit to those


people who came in and risked their capital. It was a joint effort, but I shall tell you this, Mr. Chairman, that if it had not been for the very wise policies laid down and followed by Alberta, these people would not have come in.


George Matheson Murray: I am going to interrupt on a point of order, to say that the Imperial Oil Company spent $30 million in Alberta before the Social Credit people ever came in.


Solon Earl Low: I am grateful for the hon. member's impetuous interruptions, which he is always guilty of making. It is quite true, Mr. Chairman, and nobody has claimed otherwise, that the Imperial Oil Company did spend a lot of money. The question is, with what result?


George Matheson Murray: They lost $30 million before they ever brought in a producer.


Solon Earl Low: For 25 years that company had been fiddling around in the province of Alberta, without any policy and without any result. I am going to quote something for the hon. member's enlightenment in just a moment. After the hon. member for Lethbridge had finished his speech, the hon. member for Vegreville became hysterical as a consequence of something the hon. member for Lethbridge had said, and he proceeded to read some very wild statements. In fact, Mr. Chairman, he repeated the current line of drivel one hears at present throughout the province of Alberta from his colleagues, and particularly from his adolescent colleague the leader of the Liberal party in that province. The speech of the hon. member for Vegreville reminded me of nothing quite so much as some of the speeches that have been made in China and Russia recently by one Dr. Endi-cott. I would not say those speeches were designed to do harm to our own country, but I shall tell you this; they were designed to bring comfort to the enemy, no matter what they did to this country. The speech the hon. member made the other night was exactly in that class. Nothing could have done more harm to his native province of Alberta than the speech he read here in this chamber.


Mr. Laing:: We have heard some funny ones in British Columbia lately.


Mr. Decore:: Mr. Chairman-


Solon Earl Low: I have been interfered with sufficiently, and I want to continue my speech.


John Decore: Will you permit a question?


Solon Earl Low: I shall be very glad to permit a question later-


John Decore: You are afraid to answer a question right now.


Solon Earl Low: I shall be glad to answer any question anyone wants to ask at the end of my speech. The hon. member for Vegreville proceeded to read this very queer speech. I could not help thinking then, what a reward to the people of Alberta for choosing the hon. member to represent that constituency. What a reward it was!
Let us look at what he said. I want to set this matter straight. It is a matter that has to be set straight. The hon. member went on to say:
. . . that the Alberta Social Credit government has sold out the oil industry to big interests and foreign corporations.
Mr. Chairman, that is about as close to the truth as Dr. Endicott gets in his wild statements. It was definitely designed to do hurt to an industry that is struggling for the good of Canada, struggling to supply this country with the oil and gas it needs to make it strong. The Alberta Social Credit government has not sold one foot of any resource in that province since it came into power in 1935, not a single foot. The hon. member for Vegreville knows that what I say is the truth. I was a member of the provincial cabinet from 1935 to 1945, and I know. I was there and helped to lay down the policy. When the hon. member says we sold out I say to you, Mr. Chairman, that is a pure, unadulterated fabrication.
Companies of all descriptions, small ones, intermediate ones and big ones were invited to come into the province to risk their capital in the development of those resources, just as the hon. member for Lethbridge said in his very excellent speech the other night. When these people were invited to come in, policies were laid down to govern their activities in the province. I remember back as far as 1937 when the Hon. Mr. Tanner and I made trips to eastern Canada to see all the interests that could be seen, and asked them to come out and risk their capital in the development of that resource. We sent Mr. Tanner, the minister of lands and mines, over to Britain to see everybody he could see over there, and invite the British people to spend their money in Alberta. They did nothing. Since the British people have lost their Iranian oil fields, they have been looking down their noses and have wished they had come in. They wish they had the vision that other people had.
Further than that, there are a lot of people in eastern Canada today who wish they had some vision. There are a lot of people in eastern Canada who did put their money in the development of oil, gas and other resources in the province. We pay all honour to them. We say they share in whatever
Boundary Pipeline Corporation credit there is for the development of those resources. They are getting a decent run for their money, and they are secure. But when they did come in to risk their capital in the development of these resources, they did not buy a single foot of anything. They bought and paid a very heavy price for, first, the privilege of exploration over a wide area. After they had satisfied themselves in their exploratory efforts, then they were given, for a price, the right to select an area they could develop. They were given a lease on that area and nothing else, a lease which could be revoked at any time if the company did not fulfil every jot and tittle of the terms of the agreement.
The ownership of these resources stayed, and still remains, in the hands of the Alberta government. After the development took place, if the companies found oil or gas they began immediately to pay a top royalty to the government of the province. The starting point-at least when I had anything to do with the policy-was around 12J per cent. It has been raised now until the average over the province is 14-1 per cent. The ownership of these resources remains in the crown, in the hands of the people of the province of Alberta. The rates for leases or royalties or rentals can be adjusted at any time after due notice has been given of that intention by the government of the province. At various times the government has made such adjustments in the rentals, royalty rates and so on.
These resources are, therefore, still in the hands of Alberta, and they have not been sold out to anybody. Let me just remind the hon. member for Vegreville and others that in the course of inviting people into the province for the purpose of developing these resources, I recall quite well that when certain leases on crown lands were thrown open for auction-not ownership of the land or the property but merely the right to drill and develop, subsurface rights-a corporation called, I think, the Saskatchewan Co-operative Refineries came in and competed with all other competitors for a certain parcel of land. They got it for a price. They proceeded to drill. I understand since that they struck oil, and that oil has been sent through a pipe line to Regina and is being refined there.
Is that selling out to the big people? I remember quite well that when I was in Saskatchewan speaking at some meeting, the people were mad because Alberta made the Saskatchewan Co-operative meet competitors and pay too much for the right to drill on the property. They said: Just look what you did to our co-operative refinery here; you made them pay too much. Well, maybe they did, but I will tell you this. They paid
2636	HOUSE OF
Boundary Pipeline Corporation it in competition with all others, and every one of them-small, intermediate and large- had a chance to bid on any properties that were thrown open for offers.
The hon. member for Vegreville went on and carefully protected himself by using this term two or three times. As reported at page 2399 of Hansard he said:
My submission-and I challenge the hon. member for Lethbridge to disprove this-is that since the discovery of the Leduc field at least 75 per cent of the proven oil reserves in that province-and it may be as high as 90 per cent-are not in the hands of Albertans, not in the hands of Canadians, but in the hands of foreign corporations.
The hon. member for Lethbridge challenged him on two or three different occasions.


John Horne Blackmore: I want the hon. member to tell
us what he means by being "in the hands of." What do you mean by being "in the hands of?"
It is all very well to say "in the hands of", but what does he mean by that phrase?


George Matheson Murray: The Social Credit government of Alberta.


Stanley Howard Knowles: Too much oil.


Solon Earl Low: Yes, Mr. Chairman; too much oil and gas. If the hon. member for Vegreville meant that the right to drill and to develop the subsurface property in any area is within the hands of large companies or intermediate companies or individuals from the United States and other countries, perhaps he is right. I do not know.


John Decore: Mr. Chairman, may I say that I meant control, for the information of the hon. member.


Solon Earl Low: I am glad the hon. member has said "control", because now I have him just where I want him. I thought he would bite before we got through. As a matter of fact I am somewhat in the position of the hon. member for Cape Breton South a little while ago, in spanking somebody here in this chamber. If my memory serves me correctly, it was the same hon. member. He said at the time that the hon. member for Vegreville has not been here very long; he is sort of adolescent, and is new to this political game.


Stanley Howard Knowles: A tenderfoot.


Solon Earl Low: He tends to get himself into serious trouble every now and again. I thought the hon. member for Vegreville would have known better than to jump in with a foolish statement like the one he made the other night, because on two or three occasions he has made foolish statements and the hon. member for Red Deer has drubbed the daylights out of him. I thought he had learned something, but apparently he has not done so. In all kindliness I say to him that I think
fMr. Low.l

it is time he began to grow up just a little bit. When he says "control by foreign companies", I say that is absolute tommyrot.
The only control exercised over the resources of that province, which are in the hands of the provincial government today and which were in the hands of the provincial government in 1935, is by the provincial government of Alberta and nobody else. They control the leases, the rentals and the rates of royalties. They draw the contracts. It is they who can change those contracts. It is they who see to it that every term of the contract they make with any company is lived up to fully; and if it is not, the contract is cancelled. Any time the province of Alberta, through the conservation board, feels that it is desirable in the interests of conserving the resources to deal with the oil or gas in any of these , wells, they can do so, or even the pipe lines or gathering systems or any one of them. Who controls them? Yet we have the hon. member for Vegreville, a lawyer, a man who has had a chance to study the use of explicit language, getting up and making a foolish statement like that. I think he ought to go back to school and learn some more law, particularly how to describe, in terms that are exact, just exactly what he means.
I say to you, Mr. Chairman, that nobody controls those resources except the government of the province of Alberta; and they will continue to control them. For the benefit of the hon. member for Vegreville-who, by the way, probably was not born then-in 1935, when we first went into office in the province of Alberta, we found that when the federal government turned back the resources to our province in 1931 approximately 50 per cent of all the subsurface rights, subsurface minerals and wealth, had been alienated from the crown by deeds of gifts to various and sundry people including some close friends of certain governments.


John Horne Blackmore: At Ottawa.


Solon Earl Low: Yes, of governments at Ottawa. They had been alienated by deeds of gifts to companies like the Canadian Pacific Railway Company, Hudson's Bay Company and others, leaving, I am told, just less than 50 per cent of those subsurface rights in the province of Alberta. In 1935, when the government that is now in office in Alberta, namely the Social Credit government, went in, it began laying down a specific policy and it said this. Those resources that remain in the hands of the crown that have not been alienated by previous governments, we will preserve and keep as crown lands; and from that day to this they have been called crown lands. Not a single foot of them has been

given away or alienated from the crown since that time. There are certain lands there that are called freehold lands that were alienated, as I have already told you, and on those lands the province of Alberta has nothing much to say about the subsurface rights, with the one exception. In 1936 and 1937 we made a survey of the whole situation in the province and found that it was possible to apply a reasonable taxation to those mineral rights on freehold lands; and the government of the province of Alberta applied a reasonable tax on those lands.


George Matheson Murray: Mr. Chairman, the farmer gets no interest or no value at all.


William Alfred Robinson: Order.


Solon Earl Low: Mr. Chairman, the next time these private bills come up for discussion the hon. member from up in the north country will get his answer, I suppose. However, I want to complete this statement. I see it is about nine o'clock. As I said, when it was discovered by the province that they could apply a reasonable tax to the mineral resources on freehold lands, they did so. But that is the extent to which the government of any province can interfere with freehold mineral rights. As to the other rights-that is, those mineral rights on crown land-there has been laid down a definite policy of development, and that policy of development is adjusted to keep the control and ownership solely in the hands of the government; and no one else has any control whatever.
Section stands.
Progress reported.


Mr. Deputy Speaker:: The hour for private and public bills having expired, the house will resume consideration of the business which was interrupted at six o'clock.



INCOME TAX ACT

[Stage Direction]
The house resumed consideration in committee of Bill No. 205, to amend the Income Tax Act-Mr. Abbott-Mr. Beaudoin in the chair.
Louis-René Beaudoin: The first five sections have been carried. We will now proceed with section 6.
On section 6-New property deemed substituted.


Stanley Howard Knowles: Will the minister explain the purpose of this section, and indicate whether it is a relaxation clause or whether it plugs a loophole.


Douglas Charles Abbott: It plugs a loophole. The suggestion has been made that if the property substituted for the taxable property for which the provision is made in section 22 has been
Income Tax Act
substituted a second time, it might escape the provisions of the act. That was never intended, and this is to make it clear that substituted property means property which is substituted down through a series of substitutions.


Stanley Howard Knowles: No matter how many substitutions?


Douglas Charles Abbott: Correct.


[Stage Direction]
Section agreed to.
On section 7-Medical expenses.
Stanley Howard Knowles: This is the section that relates to the deduction for medical expenses. It provides one or two changes from the basis previously in existence, notably in that it raises the ceiling in two respects, and also makes a slight change in the wording of the preliminary part.
The wording as it now stands requires that, in order to be deductible, medical expenses must be both incurred and paid within a twelve month period ending in the taxation year. From now on it will be possible to claim those expenses, even though they are only paid within such a twelve months period. That change is a welcome one. It does not solve some of the problems I have suggested from time to time, particularly in the case of those who are faced with bills so heavy that it might take them two or three years to pay them off. Nevertheless this is some improvement and, because it is in that direction, it is helpful.
However, while I am on this section I feel I should say a few more words concerning the refusal of the minister to consider at this session the removal of the 4 per cent floor. This afternoon during the debate on second reading he indicated that he had considered the matter again, after my motion of March 26 was passed by the house, but he still felt that he could not conscientiously recommend the abolition of this provision. I believe I am representing faithfully what he said if I say he bases his position with respect to the removal of the floor on the ground that 4 per cent of one's income is the ordinary or average amount a taxpayer spends on medical expenses. If that is so, I take it that it is his contention that there is no great advantage in providing relief to everyone which, in turn, has to be made up by charging those same people taxation in some other form so as to make up for the relief given.
The fallacy in the minister's position is that it is based on the concept of averages. It is one thing to say that the people of Canada spend on an average 4 per cent of their incomes on medical expenses, but it is quite a

Income Tax Act
different thing to say that makes it an ordinary amount which everyone in Canada is paying. If the minister could claim that 4 per cent of one's income is an amount everyone actually pays, then I would say there is some point in his argument. He could claim that since everyone pays 4 per cent of income for medical expenses, the fair thing would be to provide tax relief for those who have to pay more than that floor which everyone has paid. But this 4 per cent figure trotted out as the average amount that people spend is not a floor; it is only an average.
There are many fortunate people in Canada who in the course of a year get by without spending as much as 4 per cent of their income on medical expenses. There will be some extremely fortunate people who get by in a year without spending anything on medical expenses. It may be that those who are fortunate one year will not be so fortunate another year. Part of what the minister said is correct, namely that medical expenses sooner or later catch up with all of us, but not every one of us every year. Again, thinking of all of us, in our lives as a whole, there is an average amount paid. But no one is right at that average point. And it is because of the wide variation between those who have to spend nothing at all on medical expenses and those who are called upon to spend large amounts, that it seems to me the 4 per cent figure for deductibility is unfair.
The minister may say I have admitted that those who are fortunate enough in one year not to have medical expenses do have them in another year. All right; let the income tax arrangements provide relief in the years when one does have medical expenses, and let the taxpayer forgo any such relief in the years when he is fortunate enough not to have those expenses.
There are other aspects of the matter I could discuss, but since we have brought this matter to the attention of the minister time and again, I shall not go into it at greater length this evening. In a sentence or two I would urge that the minister should remember that his definition of medical expenses does not include many things entering into the cost of an illness. That is another reason why, with that restricted definition, I feel there should be no floor at all. But the main basis upon which some of us rest our case for the abolition of the 4 per cent floor is as I have stated, that the 4 per cent figure the minister is using is merely an average; it is not a floor.
What one must consider is that people have these tremendous variations. I hope the minister will even yet reconsider this

position and make some change. I feel so strongly that the floor should be abolished altogether that I dislike suggesting any compromise by way of reducing it; but I would rather see it at, let us say, 3 per cent, 2 per cent or 1 per cent than to remain at 4 per cent. At any rate I still hope the minister will do something about the matter at this stage.


Mrs. Fairclough:: Mr. Chairman, as I have said on former occasions, I too feel that the floor should have been abolished. I was interested this afternoon in the minister's remarks. I feel he is sincere in his contention that a certain floor is equivalent to ordinary expenses, or what he calls ordinary living expenses.


Stanley Howard Knowles: Medical expenses.


Ellen Louks Fairclough: The minister called it ordinary living expenses. I feel there is a point that has probably been overlooked right along. Wherever you have even small expenses with regard to illness there are always extraordinary expenses to be met in the home. Those expenses cannot be called ordinary living expenses. They may be due to the need of extra help, to the necessity of buying luxury foods in order to tempt the ill person to eat, or they may be due to the necessity of travelling to the hospital or wherever the ill person may be. I contend; as I have contended previously, that these expenses amount to far more than the 4 per cent of income which the minister contends is reasonable for the average taxpayer to assume for medical expenses.
I do not wish to belabour this point because I have spoken on it on several occasions and I am sure the committee is quite familiar with my views; but in proposing the amendments to the act I think the minister might very well have made 26 (b) read, "an amount equal to the medical expenses paid either by the taxpayer or by his legal representative."
Most of us are faced with ordinary medical expenses, and I think we all realize that when severe medical expenses must be met any concession is of value. I urge the minister now, as I have on previous occasions, to reconsider this matter carefully and take into consideration the fact that in the last few years living costs have advanced to the point where former considerations are no longer current. We have passed from the era of a few years ago when taxes were low, when exemptions were higher and when the average family faced with illness did not have to contend with the high cost of the services rendered or of the medical supplies that might have to be procured. Under these circumstances I feel that despite the hours that have been spent

on this point by the committee, and I am sure also by the department, too little consideration has been given to it.
There is another point in connection with section 7 to which I should like to speak at this time. This was referred to this afternoon by the hon. member for Calgary East. I refer to the employment of full-time help in a home where illness occurs. This is covered by section 26 (b) (iv) and (v) where deductions are allowed for the expense of employing a full-time attendant for persons who are ill or who are totally disabled or blind.


Douglas Charles Abbott: I suppose my hon. friend is aware of section 26 (b) (iv)?


Ellen Louks Fairclough: I have not yet reached the point. I am making a comparison between the home which has lost its housekeeper, let us say, either through illness of the housekeeper herself or through her employment in order to earn a livelihood for her family because of the illness of the normal breadwinner in the home. The government has recognized that under certain circumstances deductions should be allowed for the cost of a full-time attendant for a person necessarily confined by reason of illness, injury or affliction to a bed or wheelchair. Then in the next paragraph reference is made to the remuneration for a full-time attendant upon a taxpayer who is totally blind.
That being so, the government should also give consideration to the household which has been deprived of the person who normally keeps house and takes care of the children in that home, either by reason of the illness of that person or the illness of the breadwinner in that home as a result of which the normal homemaker is obliged to seek some sort of employment which will provide her with the means of sustaining her family.
For that reason I support the contention which has been put forward in this committee, especially this afternoon by the hon. member for Calgary East, that a deduction should be allowed for the remuneration of one fulltime attendant required under these circumstances.


Mr.   Eowe@: Mr. Chairman, I find myself in full agreement with the hon. member for Hamilton West and the hon. member for Winnipeg North Centre. I do not wish to delay the committee because I have mentioned this matter before. I urge the Minister of Finance and the government to reconsider their position on this matter. I cannot understand their attitude with reference to it. I think it will be admitted that the whole committee is in favour of the elimination of this floor.
Income Tax Act
In these days when we are talking about social welfare, the welfare state, the necessity of doing so much for so many, surely this exemption is highly justified. If an hon. member wishes to contribute to a hospital he may deduct that contribution for income tax purposes. We are talking about establishing health programs and so on, and I do submit that the cost of illness within the family should be exempt from income tax. I do not think there should be a floor under that exemption.
I am sure we all know of many families who have suffered terrific losses. We must know of young men and young women with small families who have had their plans interrupted, who have had' to give up business enterprises, who have been stalled and stymied, who have had their whole lives changed because the wife or husband has been seriously impaired by illness. As the hon. member for Hamilton West says, it is not only the cost of the illness that bears so heavily, it is the complications that are involved in such illness. I would go even further and say that any person who is generous enough to contribute toward the cost of illness in another family is just as much entitled to exemption for income tax purposes with respect to such payment as if he had made a contribution to a hospital. Therefore I urge that the Minister of Finance reconsider his position. I know he is a sympathetic and kindly natured gentleman.


John Lambert Gibson: Be careful.


Leonard T. Stick: The elections are over now.


Mr. Rowe:: One of his supporters says the elections are over. They are not over yet. There will be more coming, and some important ones. Coming events cast their shadows before, and if you started to dream last night about the future you should have seen shadows of dangers to come unless you listen to the opposition, which evidently is more popular than you are at the present time. I do not want to embarrass the government. If I had been here last night I might have been impelled to embarrass them, but tonight I feel there is always a calm after the storm. I have seen the hilarious attitude of government supporters when they won one by-election, but they will observe the Conservative quiet when we win four or five.


Mr. Sinnoil:: You should have been here at three o'clock today.


William Earl Rowe: I am not disturbed by these rumblings. They are the anguish of pain rather than rejoicing. I am not going to chide the Minister of Finance about his misfortunes. He knows them better than I do, but in all

Income Tax Act
seriousness I urge the government to reconsider their position with respect to this matter. Like every other hon. member, no matter how long or short a time he has been in the house, I have had experience with the troubles of our constituents. Whether or not they are our supporters they come to us if we are in public life, and we sympathize with those who suffer from illness. I say again that I cannot see why the cost of illness should not be exempt from income tax without a floor. I think of labouring men who have been embarrassed by having to accept assistance from municipalities, women who have had cancer, children who have had tuberculosis, children with infantile paralysis.
Strange as it may seem, unfortunately I believe it is a fact that the percentage of illness is greater among those who can least afford it financially. I feel that if the Minister of Finance wished to help some unfortunate family in Dufferin-Simcoe his contribution should be exempt from income tax just as much as if he made a contribution to a hospital in Montreal, or a hospital in Toronto. I think it is only sound, and I urge in all sincerity that the minister reconsider his position. He is aware of the support this proposal has had from all corners of the house. If a proposal for health insurance or a welfare state has anything except a popular appeal for political purposes, then surely the exemption of contributions to the cost of illness is merited in the case of those who may wish to assist not only their own families but, if they are fortunate to have no illness in their own families, to assist other families. I think it should be carried that far. It should be just as legitimate and sound to exempt such contributions from income tax as if a person gave $5,000 to a hospital, for which he is exempted from income tax.
I am not going to detain the committee further except to say that to my mind the proposal is sound from every angle. From the way the house supported the resolution before it earlier in the session, I believe it is wholeheartedly in favour of the proposal. Therefore I urge the Minister of Finance to reconsider his position not because there is any political aspect to this proposal but because it has a sympathetic touch, economic soundness and humanitarian logic that no one can deny.


Douglas Charles Abbott: There is not very much I can add to what I said this afternoon, but I was interested to hear my hon. friend say that he supported the proposals made by the hon. member for Winnipeg North Centre. Knowing his views I was particularly surprised,

because the hon. member for Winnipeg North Centre quite properly said that when one suggests a loss of revenue, in this case of from $48 million to $50 million, one should suggest an alternative means of raising it, and he suggested an increase in the corporation income taxes. I was not quite clear whether my hon. friend was supporting that portion of the suggestion.


David Arnold Croll: He endorsed it in full.


Douglas Charles Abbott: I think he endorsed it in full.


William Earl Rowe: I might add that I happen to be the head of a little corporation from which the government now takes 56-4 per cent, and there is very little left. However, I will quite readily agree to take as much more as is needed to make up the balance in order to help people who are ill.


Douglas Charles Abbott: I wonder if my hon. friend's directors would confirm that statement.


Ellen Louks Fairclough: I submit that the minister has yet to substantiate his claim that it will cost $48 million to $50 million.


Douglas Charles Abbott: There is one matter I should raise in answer to a point brought up by the hon. member for Dufferin-Simcoe. The proposal to entirely exempt medical expenses from income tax only gives relief to income tax payers so far as medical expenses are concerned. There are a great many wage earners in this country who, by reason of marital exemption and so on, do not pay any income tax. I think it is quite proper that a wealthy man like the hon. member for Dufferin-Simcoe should make a contribution to the Toronto hospital and that I should make a more modest one to the Montreal hospital in order to assist those people in our communities who, by reason of lack of income, are not able to pay their medical expenses, and who perhaps are not income tax payers.


William Earl Rowe: Thanks for the compliment.
I did not have enough left to contribute to them.


Joseph William Noseworthy: Following the line of argument the minister has just advanced, the very fact that there are a great many wage earners in Canada, who, because they do not pay income tax-


Douglas Charles Abbott: About half of them.


Joseph William Noseworthy: -would not derive any benefit from the abolition of the 4 per cent floor, is in my opinion no good reason for retaining it for those who do pay income tax. The reason that half the people in Canada today have no health insurance and no protection against sickness is that the Liberal

government, which has been promising health insurance since 1919, has failed to keep its promise.


Douglas Charles Abbott: Do we have to debate health insurance tonight, Mr. Chairman?


Joseph William Noseworthy: Because of that fact the people of Canada today have no protection against sickness. That being the case, I would say it is all the more argument why the minister should relent with respect to the position he has taken. As the hon. member for Dufferin-Simcoe pointed out, it is granted that the minister may lose a few million dollars, but we in this group have pointed out how the minister can make up that loss.


Douglas Charles Abbott: You have the support of Dufferin-Simcoe now, too.


David Arnold Croll: And the hon. member for Moose Jaw.


Joseph William Noseworthy: The hon. member for Dufferin-Simcoe has offered the minister an alternative. He has said that as far as he is concerned he is quite willing to support higher taxation of corporations in order to offset the revenue-


John Lambert Gibson: How naive can you be?


Joseph William Noseworthy: -that would be wiped out by the elimination of the 4 per cent floor on medical expenses. What is more important, if the minister refuses to wipe out the whole 4 per cent I would urge that he at least consider a compromise. A man in the $3,000 income bracket must have a medical bill of $120 before he can get any relief at all. A man in the $2,000 income bracket must have $80. That is about as much as the ordinary working class people can ever afford for health and medical bills. If their bills are larger than that they will have to go into debt or go without medical service. They will have to keep away from the hospital when they need it. Even a reduction of 2 per cent would be some relief.
Then there is this further point. I doubt whether any measure that has ever come before this parliament has had more popular support throughout the country than the motion which this house unanimously adopted to eliminate the 4 per cent clause. These are the people who are concerned. The people who pay the taxes are quite ready to see that 4 per cent wiped out. I urge the minister to let this clause stand for the time being and give it further consideration. If he is not willing to wipe out the entire 4 per cent, then compromise and wipe out 2 per cent.


Stanley Howard Knowles: I was hoping the minister would agree to that request to let the clause stand.
55704-167i
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David Arnold Croll: Why?


Douglas Charles Abbott: I have given it the fullest consideration, as I said this afternoon.


Stanley Howard Knowles: I was hoping that a little further thought might result in the minister changing his mind. After all, some progress has been made. He did get the support of the hon. member for Dufferin-Simcoe in connection with the proposal I made. Surely the minister should not expect everybody else to make moves and for him to make no move at all. The house expressed its view on this matter on my motion of March 26. The hon. member for Dufferin-Simcoe is prepared to pay more taxes to make up any extra cost, and I suggest in all seriousness that this indicates the attitude of people generally toward this whole problem.
I indicated when I was on my feet earlier that I feel so strongly the floor should be wiped out altogether that I hesitate to suggest a compromise. But I said before, and my colleague the hon. member for York South has repeated it, that if the minister is not prepared to go all the way and wipe out the floor, surely he should reconsider reducing it to 2 per cent, or to a nominal figure of 1 per cent. I admit if he did that I would introduce a motion next year to wipe that out, but it would be progress in the right direction. If he is not prepared to consider that compromise may I ask him to consider another one that was sent to him-at least, I trust it came to his attention-from the Windsor chamber of commerce. That body on May 13, 1952, addressed a letter which I believe was sent to all members of parliament, in which they enclosed copies of a number of resolutions on taxation matters, and one of them related to this question of the deductibility of medical expenses for income tax purposes.
The specific suggestion made by the Windsor chamber of commerce was that the 4 per cent relate not to the total income of the taxpayer but to the taxable income. The minister realizes that this would lower the basic amount that the 4 per cent would produce, because the $3,000 taxpayer, to whom my colleague the hon. member for York South was just referring, must at the present time spend $120 before he starts to get any benefit from it. If on the other hand he was a married man with $2,000 exemption his taxable income would be $1,000 and 4 per cent of that would be $40. As a matter of fact, in the resolution submitted by the Windsor chamber of commerce a couple of examples were worked out, showing that such a change would be of greater benefit to those in the lower brackets. Those in the lower brackets in many instances would

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find their position improved doubly; whereas those in the upper brackets would find the relative improvement much less.
I can say with respect to that the same as I said with respect to lowering the floor to 2 per cent or 1 per cent, namely that it is only a compromise. It is, however, a move in the direction of wiping out the floor altogether, and I very strongly feel that should be done. But I wonder if as a compromise the minister has considered either of those proposals: reducing the floor to a lower percentage, or the proposal contained in the resolution of the Windsor chamber of commerce which was addressed to the Minister of Finance and, I presume, submitted to him.


Douglas Charles Abbott: I considered those proposals and, as I indicated this afternoon, I considered whether the 4 per cent figure should be lower, but I came to the conclusion that it should not be at this time. The proposals which are made in this section that is now before the committee represent the maximum which I am prepared to recommend at this time.


Stanley Howard Knowles: Will the minister comment on the point raised by the Windsor chamber of commerce?


Douglas Charles Abbott: It is exactly the same proposal that is made by the hon. member for York South. In effect it is reducing the 4 per cent, and the principle on which the 4 per cent is based is that it represents the average expenditure by a person of his total income on medical expenses. And as I said before, the principle on which this section is based is that no ordinary expenditures should be paid out of income before taxes. It is only exceptional or unusual expenses, and the logic and the reason behind the provision in the act is that it is only expenditures that are in excess of this national average that are unusual or exceptional medical expenses.


Stanley Howard Knowles: We will try again next year.


George Matheson Murray: This brings to mind that all hon. members are anxious to assist those who are in distress, the widows, the orphans, the poor; but a time will come when this house will have to decide between Marxian socialism, the gospel of Karl Marx, and that of comfnon sense.


Louis-René Beaudoin: Order. The various doctrines to which the hon. member has referred are not included in the clause under study, therefore I do not think he should refer to them.


[Stage Direction]
Section agreed to.

On section 8-Dividends not deductible.
James MacKerras Macdonnell: Clause 8 is highly technical. I wonder whether the minister will explain in a general way what is behind the deduction and also refer to the limitations that are introduced.


Douglas Charles Abbott: There are a number of subsections here which relate to different matters, as the explanatory note indicates. The first, that is subsection 1, is a relieving provision. It extends the provisions under which a corporation receiving dividends from another corporation may deduct such dividends in computing taxable income to include dividends from certain foreign business corporations. There are not very many of these, but the situation needed correcting. I shall ask to have an amendment moved in a moment to make part of the section effective from 1950. As I say, it is a relieving section. We have had representations from tax foundations and others that this should be made effective from 1950, when the section first came into force. We have looked into it. We feel sure there can be no possibility of abuse, and before the section passes I shall ask that these subsections be made applicable from 1950.
The subsections referred to relate to the block provision which was inserted in the act when we enacted section 95 (a) permitting the payment of a 15 per cent rate on accumulated surplus, and was put there in order to prevent the transfer of surplus of one corporation to another corporation and thereby avoid the payment of tax on this accumulation.
These subsections, which are long and rather technical, are intended, as the explanatory note explains, to clear up an anomaly in the present law where shares of a company have rights to dividends upon winding up which differ from those existing prior to winding up. It is to take care of shares nominally known as class A, class B or some other type of share, which has different rights, depending upon whether distribution is made while the company is in existence or whether distribution is made when the company is being wound up.
I am reminded that the hon. member asked for this or a similar provision last year. I told him that consideration would be given to it, and the officers of my department have studied the matter in the meantime. This long and rather involved section is the result of that examination. The main section, as the committee appreciates, is a loophole section. It is a section to prevent the avoidance of tax, but these amendments are to

make sure that in certain special cases such as I have indicated, there will not be any unfair operation of the section.


James MacKerras Macdonnell: In the last subsection-


Douglas Charles Abbott: I am not speaking about subsection 4 now. I should have covered that.


James MacKerras Macdonnell: It is that subsection I wanted to ask about.


Douglas Charles Abbott: That again is a technical section; it is a relieving section. The hon. member will recall that one is allowed to offset losses, but the effect of this section is that the corporation must have owned the share 365 days or longer before the loss was sustained, and the corporation must not, at the time the dividend was received, have owned more than 5 per cent of the issued share capital of the corporation.
The committee is aware that it is possible for what is known as a trading company, trading in securities, to deduct losses on securities from its income, whether that income is derived from profits on securities or from interest and dividends. I am informed this is a relieving provision.


James MacKerras Macdonnell: How is the
5 per cent determined?


Douglas Charles Abbott: It is 5 per cent of the issued share capital. It is just to make sure there is not any semblance of control of the corporation from which the dividend is received.
Perhaps my colleague would move the following amendment:
That subclause 6 of section 8 of Bill No. 205 be amended by deleting the figures "1952" therein and substituting therefor the figures "1950."


Alphonse Fournier: I so move.


David Arnold Croll: How will that clause read with the amendment?


Louis-René Beaudoin: It will read as folows:
Subsections two and three are applicable, where the receiving corporation acquired control of the payer corporation after May 10, 1950, to the 1950 and subsequent and taxation years.
Shall the amendment carry?


[Stage Direction]
Amendment agreed to.
Section as amended agreed to.
Sections 9 to 14 inclusive agreed to.
On section 15-Election.
James MacKerras Macdonnell: This section provides that section 39 is to be amended by adding section 39A, and it appears that this section 39A is amending section 20 and seems to deal entirely with the subject matter of section 20. Why is it attached to section 39?
Income Tax Act


Douglas Charles Abbott: I am told that it is not attached. It would appear to be the appropriate place to put it because it just precedes the division which relates to returns, assessments, payments and appeals. It is under the heading "Rules applicable to all taxpayers", and as the explanatory note indicates it extends the spreadback allowance to corporations as well as to individuals.


[Stage Direction]
Section agreed to.
Section 16 agreed to.
On section 17

Where property owned for non-resident persons.
James MacKerras Macdonnell: I find that section 17 (4A) reads:
Where all the property of a trust is owned by the trustee for the benefit of non-resident persons or their unborn issue-
Will the minister explain how that arises?


Douglas Charles Abbott: There are certain trusts the beneficiaries of which are non-resident persons, and which receive income from nonresident owned investment companies. The hon. member will recall that these companies are taxed on their income at a special rate but the dividends are exempt from tax, so this section is designed to prevent double taxation on those revenues.


[Stage Direction]
Section agreed to.
On section 18-Armed forces regulations.
James MacKerras Macdonnell: How is this section actually going to work out?


Douglas Charles Abbott: This is the new system of taxation with respect to the armed forces which was introduced last year. The committee will recall that, speaking very generally, the pay and allowances of the armed forces were considered as though they were completely separate income from anything else. Provisions were worked out with allowances for charitable deductions and so on, deductions were established, and a soldier had no further obligation to file any income tax return. The system has been well liked by the armed forces, but as the legal members in the committee will appreciate there were some very serious technical difficulties involved. The officials of national revenue, the armed forces and my department have been trying to get this system codified, but frankly up to the present time we have not been able to do it.
This section gives a discretionary power to establish regulations setting out these details. The alternative would have been to abandon the privilege entirely, which no one wanted to do. The section sets out the principles upon which the tax is to be assessed. The regulations, which I hope we shall have ready within the next month or two though

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I shall not make any firm promise on that, will be tabled and published as soon as they are available. I would propose to incorporate the rules which are set out in these regulations in the act next year when they are ready. This is an interim provision to enable the system to be carried on this year until we can work out the full details of the system. The principles are well established, but there are so many quirks that we have not been able to get them all spelled out in detail.


[Stage Direction]
Section agreed to.
On section 19-If personal corporation's chief source of income neither farming nor combination of, etc.
James MacKerras Macdonnell: Will the minister give us an explanation of this section?


Douglas Charles Abbott: This is a loophole section again. By reason of the description of a personal corporation it might be possible for one of these hobby or gentleman farmers to incorporate a company, put the farm in the company and put enough securities in the company to pay the full loss on the farm. In that way he could circumvent the provisions of the section we discussed earlier, that such losses should be limited to $5,000 or half the loss, whichever is the greater.


[Stage Direction]
Section agreed to.
Sections 20 to 23 inclusive agreed to.
On section 24-Mining companies.
James MacKerras Macdonnell: I am trying to tie this section in with the budget resolution. Section 74 (1) (b) reads:
An Industrial mineral mine certified by the Minister of Mines and Technical Surveys to have been operating on mineral deposits (other than bedded deposits except sylvite)...
Will the minister explain that amendment and tell us how it ties into the resolution on which it is based?


Douglas Charles Abbott: It is extending the period within which mines may qualify for the new three-year exemption. Sylvite, I am informed, is potash and is a special type of mineral which I am informed is obtained at present in Saskatchewan at considerable depth. That is not to be included under the heading of bedded deposits.


James MacKerras Macdonnell: The result of this amendment is that you exclude all the so-called bedded deposits except this one.


Douglas Charles Abbott: Except potash; that is correct.


Herbert Wilfred Herridge: I just want to ask the minister a question under this heading. I do

not know whether it is quite in order because these are mining deductions. On item 1, I should like to ask if it is possible under the present law for a lumber company or persons promoting sylviculture to make arrangements to receive exemptions for money expended for future generations?


Douglas Charles Abbott: I am speaking offhand, but I think it would be for roads or that sort of thing. But it would have to be governed by the general rule that the expenditure was wholly or necessarily incurred for the purpose of earning the income. There would also have to be the usual distinctions between what was an expenditure to get revenue and what was a capital expenditure.


[Stage Direction]
Section agreed to.
On section 25-Application of part to crown corporations.
Howard Charles Green: Will the minister explain the meaning of the new section 25 of the Income Tax Act? I presume that is the provision to help certain public utility companies. There seems to be some uncertainty as to what effect that will have in so far as the general public are concerned. For example, in Vancouver there has been a question as to whether the British Columbia Electric Railway Company Limited should reduce its transit fares by reason of receiving this income tax benefit. Judging from the press reports no one is clear as to whether or not that will be the effect. It would be helpful if the minister could give some explanation of the way in which this amendment will benefit the general public.


Douglas Charles Abbott: It is a little difficult to do that except in general terms, as my hon. friend will appreciate. The net effect of this section will be that the effective rate of income tax on the earnings of certain corporations from certain types of activity-that is, the generation, distribution and sale for delivery in Canada of electrical energy, gas and steam-will be taxed at that rate, but only the earnings from that portion of its activities. If a company were carrying on varied activities-running a railway, running a street railway line, running a mine and doing a lot of other things-it is only the earnings from these particular activities which will be subject to the reduced rate of tax. The reduction is for the reasons I gave in my budget speech, which I do not suppose I need repeat here. The effect would be different with respect to different companies. Broadly speaking it parallels the provision which the committee will recall was contained in our general offer to the provinces in connection with the tax rental agreements, namely that we remit to the provinces

one-half of our tax revenues from these sources. That was accepted as being the test. It was the same group of earnings that we considered should be subject to this special rate. The rate can be down to 43 per cent; I am now speaking over-all.


Howard Charles Green: The money which was turned over to the provinces under the previous scheme would, in effect, be the same as if they had taxed the companies. ,


Douglas Charles Abbott: No; not quite that. We turn over half of our income. In other words, if we get $2 million, let us say for the sake of an example, from the electric earnings of the British Columbia Electric Company-I just use that as an example; I do not say that we get that amount-we would just turn over $1 million to the province of British Columbia.


Howard Charles Green: But in this particular case the British Columbia Electric Company will have to pay a smaller amount of taxes. In the earlier case it did not.


Douglas Charles Abbott: Of course. The British Columbia Electric Company-taking that company as an example-would pay a 43 per cent rate on its sales to the public of electricity, gas or steam. It is quite obvious that since we were turning over half of whatever we got from that company, the amount which would be turned over to the province of British Columbia would be somewhat reduced.


Howard Charles Green: I am not worrying about the amount that would be turned over to the province of British Columbia.


Douglas Charles Abbott: I know that.


Howard Charles Green: What worries me is whether the people who have to pay for this light and gas will be entitled to any reduction in their rates.


Douglas Charles Abbott: I could not express any opinion on that matter until I saw what the amount of the tax saving, if any, amounted to. I suppose it would be a matter to be taken into account by the public utilities board of British Columbia which fixes the rates of these companies. That was one of the reasons which prompted this rather modest and temporary-I hope and believe-tax concession. It was thought that it might prevent some further applications for rate increases in this type of concern.


Howard Charles Green: I am glad the minister has made this point clear because from his statement in his budget speech what it was taken to mean, or what I believe the company is arguing, is that this was for the purpose of enabling the company to raise money more
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readily than it had been doing, and that there was nothing to be passed on to the general public.


Douglas Charles Abbott: That is a matter for the company to fight out, of course, with any rateregulating body. The essential thing is that any privately-owned public utility must be in a position to raise a portion of the capital it needs for expansion, as equity capital; and it can only do so if it is able to show a reasonably good earnings record. Otherwise it cannot. I think it is generally recognized that it is unsound to have a capital structure-in the case of public utilities or in that of any other company-which is top heavy so far as borrowed capital is concerned. The question as to whether the earnings on equity capital are so great that they justify rate reductions or are so low that they justify rate increases is a matter for the regulating bodies; for the provincial rate-regulating body if it is a utility under provincial jurisdiction, or for the board of transport commissioners if it happens to be a utility that is subject to the jurisdiction of that board.


Howard Charles Green: But this reduction will in effect result in greater income to these companies?


Douglas Charles Abbott: It should result in greater net income. How much more I am not in a position to say.


Howard Charles Green: It will result in greater net income; and as far as the minister is concerned, there is in the section nothing which would prevent the companies from giving lower rates.


Douglas Charles Abbott: That is a matter that is entirely within the control of the companies and the rate-regulating bodies. It is not in my control.


Ellen Louks Fairclough: This clause will have a tendency to bring more nearly into line the activities of privately-owned utility corporations and those of publicly-owned corporations, I presume.


Douglas Charles Abbott: It is bound to have that tendency.


Ellen Louks Fairclough: It is just one step. It is a small step, but nevertheless it helps.


Douglas Charles Abbott: That is true. The turning back of half the earnings to the province has a similar effect, of course.


Ellen Louks Fairclough: Although it is no concern of this government, you still have the taxes that are paid by privately-owned corporations to municipalities and to provincial bodies and so on.


Douglas Charles Abbott: That is true.

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James MacKerras Macdonnell: This section 25 is stated to be giving effect to paragraph 6 of the resolution.


Douglas Charles Abbott: And paragraph 10.


James MacKerras Macdonnell: Yes. I am reading paragraph 6 for the moment, which says that crown corporations shall pay tax on income earned. Where are the operative words to be found? As I read section 74A, I wonder whether it is a follow-through from some previous wording in the act which controls. I do not find any operative words there.


Douglas Charles Abbott: Subsection 2 says:
Paragraph (d) of subsection (1) of section 57 of the said act does not apply to a corporation specified in schedule D to The Financial Administration Act.
Section 57 (1) (d) is the section which now exempts them.


James MacKerras Macdonnell: One other
question. Section 74A (3) says that when the company makes a fresh start and is beginning business as a taxable corporation its capital cost is to be the book value at the commencement of that year.


Douglas Charles Abbott: Yes, for the purpose of calculating capital cost allowances in the future.


James MacKerras Macdonnell: But supposing the book value is different from the real value; what happens then?


Douglas Charles Abbott: That is true of any corporation, is it not?


James MacKerras Macdonnell: Yes. Perhaps my question is academic, and if so I shall not pursue it. However, the minister says it is to be the book value. Book value sometimes has reserves set up against it, and so on, and may be quite different from true value.


Douglas Charles Abbott: Yes, except all these crown corporations have been under government audit since they were started, and it seemed appropriate to take the value at which they are now carried on the books as the value which should be used for depreciation.


James MacKerras Macdonnell: It may be
the practice is such that no inconvenience will arise; but it occurred to me that, as a statement without any further explanation, it could amount to an unreal situation.


Douglas Charles Abbott: We can take a look at it. I would not think it would cause any serious difficulty; but if it did we could correct it.


[Stage Direction]
Section agreed to.

On section 26-Disposal of appeal.
David Arnold Croll: I would ask the minister to give me his views concerning section 26. I have particular reference to paragraph (c) in which it refers to "allowing it", and to "restoring the assessment". What is the significance of that?


Douglas Charles Abbott: That is the case where the income tax appeal board would have set aside an assessment, and the exchequer court may restore the assessment.


David Arnold Croll: It is an appeal by the government, in other words?


Douglas Charles Abbott: Yes, the minister's appeal.


[Stage Direction]
Section agreed to.
On section 27-Application.
David Arnold Croll: That is new, is it not?


Douglas Charles Abbott: That part of it is new, yes.


[Stage Direction]
Section agreed to.
Sections 28 to 33 agreed to.
On section 34-Mining or exploring for minerals.
James MacKerras Macdonnell: The explanation states that this clause also implements paragraph 7 of the resolution and provides a revised working to bring this allowance into conformity with that granted to the petroleum industry. What is the meaning of the reference to a revised wording?


Douglas Charles Abbott: I am told it is in the same language as section 53, which is a section we pass annually and does not form a permanent part of the act, with respect to the petroleum industry generally.


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


Douglas Charles Abbott: the second reading of Bill No. 275, to amend the Canadian Farm Loan Act.


[Stage Direction]
Motion agreed to, bill read the second time and the house went into committee thereon, Mr. Beaudoin in the chair.
On section 1-Member of board.
James MacKerras Macdonnell: Has the
minister any comments to make on this section?


Douglas Charles Abbott: I do not think so. The explanatory note is clear.


John Lambert Gibson: Has the minister ever given consideration to similar legislation for the fishing industry?


Douglas Charles Abbott: There is similar legislation. The Canadian Fisherman's Loan Act is the corresponding legislation.


John Lambert Gibson: Does the volume of business under that act compare in any way with that in connection with farm loans?


Douglas Charles Abbott: There has not been much lent under it.


John Lambert Gibson: It has not been pressed to the same degree.


Douglas Charles Abbott: It is a good bit newer.


John Lambert Gibson: But the need is there.


Douglas Charles Abbott: Perhaps so.


[Stage Direction]
Section agreed to.
On section 2-Initial capital.
James MacKerras Macdonnell: What amount has been raised by the issue of bonds?


Douglas Charles Abbott: When the board borrows from the government or the public it issues bonds. As shown by the report tabled for the year ended March 31, 1951, bonds outstanding amount to $18,700,000.


James MacKerras Macdonnell: And those are bonds of the farm loan board, guaranteed?


Douglas Charles Abbott: No, they are just bonds of the farm loan board. It is a straight crown agency. It is just the form in which the promise to pay is given.


Mr. Quelch:: Who holds the bonds?


Douglas Charles Abbott: The Minister of Finance.


Victor Quelch: What is the interest rate?


Douglas Charles Abbott: The interest rate on both series D and E is 3 per cent. I will see if I have a more up-to-date figure.


Victor Quelch: What are the present rates
charged for farm loans?


Douglas Charles Abbott: Five per cent on first mortgage and 5J per cent on second mortgage loans.


William Scottie Bryce: This provision is to double the
amount?


Douglas Charles Abbott: It is to give an increase in the amount as I indicated the other evening.


William Scottie Bryce: Where there was provision to borrow $5,000 I understand $10,000 can now be borrowed?
Canadian Farm Loan Act


Douglas Charles Abbott: Yes; and where it was $6,000 it goes to $12,000.


Andrew Wesley Stuart: The minister has mentioned the fact that there is similar legislation for fishermen. Is that administered by the federal government or by the provincial legislature.


Douglas Charles Abbott: By the federal government.


James MacKerras Macdonnell: I would like to ask the minister what the difference would be if the board should borrow, as compared with a direct government obligation?


Douglas Charles Abbott: Does my hon. friend mean the spread between the rate at which the board borrows from the government and the interest rate paid by the borrower?


James MacKerras Macdonnell: The explanatory note says that the board now raises money for lending by the issue of bonds.


Douglas Charles Abbott: In the past the board has obtained its funds for loaning purposes by the sale to the Minister of Finance-this is in addition to capital which I need not go into-of its interest-bearing bonds. The amount of outstanding bonds so issued cannot at any time exceed twenty times the paid-up capital stock subscribed for by the government of Canada. The Minister of Finance is authorized to purchase such bonds, but may not hold in excess of $50 million at any one time.


James MacKerras Macdonnell: My question is answered.


Douglas Charles Abbott: The sole purpose of this section is to have the borrowing done through the Minister of Finance without going to the unnecessary trouble of issuing a formal bond. It is simply one form of evidence of indebtedness. Advances can be made on simple promissory notes, as is done in the case of other crown companies.


James MacKerras Macdonnell: I misread this. I was surprised to read it as meaning that the farm loan board had obligations in the hands of the public.


[Stage Direction]
Section agreed to.
Sections 3, 4 and 5 agreed to.
On section 6-Security.
Mr. Lennard:: In the past the advertising by the banks has not mentioned the amount that could be loaned, and in many cases this has caused confusion to farmers who have gone through the process of going to the bank and then finding that they could not receive as much as they required to finance the proposition they had in mind. If the department has any control over the advertising by the banks

Tariff Board Act
perhaps they could have them put in the maximum amount a person could borrow provided he had the value to support the loan. There may not be this trouble now that there has been an increase.


Douglas Charles Abbott: I will see that my hon. friend's suggestion is brought to the attention of the board.


[Stage Direction]
Section agreed to.
On section 7-Advisory board.
James MacKerras Macdonnell: To what extent have these advisory boards been made use of, or has the work been left mainly to the operating officers?


Douglas Charles Abbott: It has not been found practical to set up provincial advisory boards and they have never functioned. In reviewing the operations of the act it seemed sensible to create a national board on which would be a representative of each of the provinces. That board would examine lending conditions generally, lending policies and make recommendations and suggestions to the board.


William Scottie Bryce: Would the farmers' organizations be represented, or would it be made up only of financial men?


Douglas Charles Abbott: I would not want to tie myself down to any particular occupation, but I think the provincial representative should be someone conversant with the needs of farm financing in the province and who would give the board useful information and advice as to the procedure to be followed. He could be a farmer or even a lawyer.


James MacKerras Macdonnell: Has the
minister considered whether this advisory board might not turn out to be a great nuisance? What are they really going to do? Obviously they are not going to consider the validity of this or that loan.


Douglas Charles Abbott: No.


James MacKerras Macdonnell: Are they just going to talk about general conditions? Where are they going to sit, and when?


Douglas Charles Abbott: That will have to be worked out. I would think we would arrange to have meetings of such a board once or twice a year. It is not the sort of board that would need to meet weekly or monthly or even quarterly. I think we will have to proceed on the basis of trial and error. There will be no salaries attached to the board, though there will probably be some travelling expenses.


Mr. Caiherwood:: The minister has suggested that there would be one representative from each province, but the section provides that the board shall consist of not less than five and not more than ten members.
[Mr. Lennard.l


Douglas Charles Abbott: We shall have to see how it works out. The membership of ten would allow for one representative from each province.


James MacKerras Macdonnell: The board has done a pretty good job without this advisory board, and I hope the minister will forget to appoint it.


Douglas Charles Abbott: I have no strong views on it myself. It has been suggested by those who are charged with the responsibility of administering the affairs of the board that it might be helpful.


James MacKerras Macdonnell: May I point out to the minister what I understand was once said in a case at law, that nominal damages may mean very real costs. This absence of salaries is no guarantee that there may not be a lot of expenses.


[Stage Direction]
Section agreed to.
Sections 8 to 11 inclusive agreed to.
Bill reported.
Douglas Charles Abbott: the third reading of the bill.


James MacKerras Macdonnell: I just wish to reiterate my objection to the advisory board.
Motion agreed to and bill read the third time and passed.



TARIFF BOARD ACT


Douglas Charles Abbott: the second reading of Bill No. 276, to amend the Tariff Board Act.


[Stage Direction]
Motion agreed to, bill read the second time and the house went into committee thereon, Mr. Beaudoin in the chair.
On section 1.
James MacKerras Macdonnell: Will the
minister say something about this?


Douglas Charles Abbott: As was indicated during the resolution stage, this section is now covered by the Combines Investigation Act. There has been no necessity to invoke this provision in the Tariff Board Act, and in opening up the act we decided that it should be repealed.


[Stage Direction]
Section agreed to.
Section 2 agreed to.
Bill reported.
Mr. Deputy Speaker:: When shall the bill be read a third time?


Ellen Louks Fairclough: I should like to remark that this bill has just come into our hands.

While on its face it is a fairly innocuous looking document, nevertheless members of the house have had very little time to study it.


Douglas Charles Abbott: It was distributed yesterday, anyway.


Ellen Louks Fairclough: Yesterday; and how many bills have we studied since yesterday? We have had very little opportunity to put any amount of study on it, and before the bill is given third reading-


Douglas Charles Abbott: I have not the slightest objection. The motion requires unanimous consent, and I have no objection. Next sitting of the house.


Mr. Deputy Speaker:: Perhaps the hon. member for Hamilton West did not hear what the minister said. I asked whether the bill might be read a third time now by leave. If the hon. member for Hamilton West objects I will say that the bill will be read a third time at the next sitting of the house. Apparently that is her wish.


Ellen Louks Fairclough: Very well; I object.


Douglas Charles Abbott: Next sitting.



CANADA ELECTIONS ACT


Hon. F. G. Bradley (Secretary of State) moved: the second reading of Bill No. 277, to amend the Canada Elections Act.


James MacKerras Macdonnell: Mr. Speaker, I observe that the bill is in a form that follows the resolution of last evening. I thought the Secretary of State told us last night that it was to be amended. Am I right in thinking there is an amendment to be moved?


Frederick Gordon Bradley: No, the hon. member is not quite accurate. What I did last evening was to undertake to amend the section during the committee stage.


[Stage Direction]
Motion agreed to, bill read the second time and the house went into committee thereon, Mr. Beaudoin in the chair.
On section 1-Rank, powers, salary and tenure of office of chief electoral officer.
Frederick Gordon Bradley: Last night while in committee on the resolution I undertook to have an amendment made to section 1 of the bill under which the salary of the chief electoral officer would be set specifically at $12,000. I will now ask my colleague the Minister of Public Works to be good enough to move the necessary amendment.


Alphonse Fournier: I move:
That the following words be struck out: "not less than eight nor more than" in the thirteenth line and "to be fixed by order of the governor in council" in the fourteenth and fifteenth lines.
Canada Elections Act


James MacKerras Macdonnell: I think that amendment carries out exactly what I understood the Secretary of State to undertake, and I feel grateful to him. We objected strongly last night to this important official being left with his salary to be fixed by the governor in council. We discovered that it had been done in the past, but that did not make it any more palatable to us. Therefore I am grateful to the Secretary of State for this change, which I think carries out exactly what we asked.


[Stage Direction]
Amendment agreed to.
Section as amended agreed to.
Preamble agreed to.
Title agreed to.
Bill reported.
Mr. Deputy Speaker:: By leave, shall this bill be read the third time now?


An hon. Member:: By leave.


Frederick Gordon Bradley: the third reading of the bill.
Motion agreed to and bill read the third time and passed.



NATIONAL LIBRARY


[Stage Direction]
Right Hon. L. S. St. Laurent (Prime
Minister) moved the second reading of Bill No. 245, respecting the establishment of a national library.
Mr. Drew:: Is the Prime Minister going to make a statement in addition to what has already been placed before the house?


Mr. St. Laurent:: I do not intend to make a statement at this time. I shall be glad to answer any questions in the committee stage that I am in a position to answer. I think the reception this proposal received from the house at the resolution stage shows that there is nothing controversial about it and that all members of the house are happy that at least this initial step is being taken at this time, and are hopeful that further steps may not be too long delayed.


[Stage Direction]
Motion agreed to, bill read the second time and the house went into committee thereon, Mr. Beaudoin in the chair.
Section 1 agreed to.
On section 2-Interpretation.
George Alexander Drew: Is the Prime Minister in a position to state what minister is contemplated as the minister who will deal with this act?

National Library


Mr. Si. Laurent:: At the present time the act will be under the administration of the Secretary of State. At some later stage another minister may be put in charge of this and other like activities of the Canadian government, but for the initial stages it is intended to have this measure, like the archives, under the administration of the Secretary of State.


[Stage Direction]
Section agreed to.
Section 3 agreed to.
On section 4-National librarian.
James MacKerras Macdonnell: My question really deals with sections 4 and 5. I should like to ask whether it is proposed to appoint a national librarian immediately and also an assistant national librarian.


Louis Stephen St-Laurent: It is intended to appoint immediately as national librarian Dr. Lamb, who is now in charge of the archives, and to have him organize the preliminary steps. An assistant librarian would not necessarily be appointed immediately. That would be done as and when Dr. Lamb recommends that sufficient advance has been made to require the services of an assistant librarian.


Ellen Louks Fairclough: Will Dr. Lamb be able to retain his present position as archivist?


Louis Stephen St-Laurent: Yes. I explained at the resolution stage that, although the Massey commission recommended that ultimately there be separate heads for the archives and the national library, they also recommended that initially the archivist should have charge of the organizational stages of the national library.


[Stage Direction]
Section agreed to.
Sections 5 to 7 inclusive agreed to.
On section 8-Establishment of advisory council.
George Alexander Drew: In section 8 there is a reference first of all to the establishment of an advisory council. Then in subsection 2 there is a reference to the constitution of the advisory council. It speaks of the national librarian being the chairman, and then it speaks of the general librarian and the parliamentary librarian. I see that their positions are not defined elsewhere in the bill. Should there not be some definition of their positions?


Louis Stephen St-Laurent: I do not know that there is a statutory definition, but it is under that designation that the librarian of parliament and the general librarian have occupied their offices for many, many years. Because of the close connection there will necessarily be between the library of parliament and the

national library it was felt that these two officials should be part of the advisory council.


George Alexander Drew: I agree with the proposition that they should be members of the council. The only question that arises in my mind is as to whether any uncertainty could occur at any time with respect to what these positions actually were. I recognize that it relates to positions that we understand at the present time. I wondered whether there should be a reference to the positions so they would be established in statutory form in relation to this legislation.


Louis Stephen St-Laurent: The law officers had not considered that was necessary. Their salary is provided for in the appropriations that are voted every year under the titles that are used here, and they are the only officials for whom salaries are voted annually by parliament under that designation. I assume that is why the law officers did not feel that it was necessary to provide a statutory definition in this bill. I think if the hon. gentleman will refer to the appropriation acts he will see that each year salaries are provided for officials described in these terms, and they are the only ones who are thus described.


George Alexander Drew: I do not wish to press the point because I do not think any problem is going to arise in connection with it at this time, but I would point out that the fact that some names were shown in the appropriation acts does not of necessity give the same effect as a statutory definition. I leave the matter now, having called attention to it. I think if any question should arise at a later date we can then return to the subject at a time when the national library will have taken form.


James MacKerras Macdonnell: I have a question to ask. I know the parliamentary librarian very well, in fact perhaps better than he likes me to know him, I fear, because I give him a lot of trouble, but I should like to know who the general librarian is.


Louis Stephen St-Laurent: Dr. Desrochers is the general librarian. The two have equal status, one being the official whose mother tongue is English and the other whose mother tongue is French.


James MacKerras Macdonnell: Then I do know him, but I did not place him under that heading.


[Stage Direction]
Section agreed to.
Section 9 agreed to.

On section 10-Powers and duties of librarian. .
George Alexander Drew: I recognize that it is not possible in advance to place too exact an interpretation upon provisions that are adopted at this time, but I do recall the point that was made by one of the hon. members when this was in the resolution stage. I would hope this would be the appropriate time to point out that it would be highly desirable that there should be no attempt to exclude from the library books dealing with subjects that might not ordinarily be regarded as subjects that we would wish to have dealt with too generally throughout the country. I am referring, for instance, to the possibility of the books published with relation to systems of government with which we very strongly disagree, or matters of that kind, being excluded. Not only should they not be excluded, but we should do our best to obtain them because we should make available here as complete documentary records of other systems of government and other matters of that kind as we possibly can. I merely make this observation now because I realize that this is going to provide the preliminary setting for the establishment of a national library.
May I for the last time in. relation to this point indicate that there may be some possibility at a later stage of defining the positions with greater accuracy, because I am sure the hon. member for Greenwood uses the library as much as any member in the house; and when I find he does not know which officials are described under the terms employed here, then it does suggest to me the desirability of defining these official positions.


James MacKerras Macdonnell: You are
rubbing it in.


George Alexander Drew: I am not rubbing it in, because I know the hon. member does use the library very extensively. I am using him as the strongest argument I can use to suggest the desirability of defining these positions fairly clearly. I simply want to say what I said before, since we are dealing with the last section of this bill. The officials who are described in this legislation as the parliamentary librarian and the general librarian have been performing a very great and very efficient service on behalf of hon. members, and for that reason on behalf of the people of Canada. I most certainly feel that they should be brought most actively into association with all the preliminary stages in setting up the structure, the indexing and the general plans of the national library.
National Library


Louis Stephen St-Laurent: The remarks made by the leader of the opposition will be a part of the record, and I am sure that both the law officers and Dr. Lamb will take those remarks into account. Doubtless at some early date further legislation will be required as the work of organizing the national library proceeds. At that time I am sure the law officers will take into account the remarks made by the leader of the opposition with respect to having the librarians of parliament associated in some permanent way with the work of the national library.
I am sure also that Dr. Lamb will recognize the views expressed in this house as to the desirability of having available, for perhaps only limited use but having available there, books that it might not be desirable to circulate widely to the public, but which should be available for those who are specially interested in problems on which those books will have a bearing. I am sure it will be the desire of those responsible for the content of the library to have it a reliable reference library where students will find the books that it may be difficult for them to secure elsewhere.


Mr. Stewart (Winnipeg North):: I should like to deal for a moment with paragraph (e) of section 10. I think the wording is unfortunate, but there may be some explanation for it. We are told that the national librarian may:
Generally supervise and direct the work of the national library in such a manner that the facilities of the library may be made available to the government and people of Canada-
Perhaps they might also be made available to the opposition. Perhaps it would be advisable to put in the word "parliament" instead of "government".


Louis Stephen St-Laurent: I think here the word "government" is not used to describe the executive; it is used to describe the whole machinery of government which comprises His Excellency the Governor General and the two houses of parliament. That is the official status of the houses of parliament, the members supporting the executive and the members opposing the executive. I am sure it was certainly not intended to make it available exclusively to those who happen to constitute, for the time being, the advisers to the representative of the sovereign. The wording is used to describe in a rather wider sense the whole social organization for the government of the country.


Alistair McLeod Stewart: I accept the Prime Minister's explanation, but I must say that I have said some very nasty things about His Excellency if we accept this connotation.

National Library


Howard Charles Green: Is there any reason for including the words, "to the government and the people of Canada"?


Louis Stephen St-Laurent: I do not think there is, but it was to follow out the idea that there would have to be transferred almost at once from various government departments books which are now in those separate departments. They are all being catalogued so they may become available to the general public through this catalogue. I think that was the reason the expression was used here.
It is not intended to duplicate, for instance, the collection of scientific books that are in the national research council; but they will form a part of the union catalogue, and when inquiry is made the national librarian will be able to secure them from wherever they are and make them available to those who have reason to consult them. It was not intended to imply that the members of the government, any more than the members of the opposition, were not a part of the people of Canada.


Howard Charles Green: Perhaps it is intended to imply they need the books more.


[Stage Direction]
Section agreed to.
On section 11 -Deposit of books with librarian.
James MacKerras Macdonnell: Is this section patterned on the practice elsewhere? As I read it, it winds up with a penalty of a fine on summary conviction, which seems a little severe. I understand the requirement of getting books into the library, but I just wanted to ask whether the section in its present form is usual or whether there is a precedent for it. I presume it is common sense to get a copy of every book sent in, and perhaps if it is you need to wind up the section with a penalty.


Louis Stephen St-Laurent: I am informed that this provision is usually in all the statutes creating national libraries. The requirements here are not nearly as onerous as those which exist under the corresponding statute in the United Kingdom, where there is a requirement that books be supplied to the national library, to the university of Oxford, to the university of Cambridge, and I think there is one other university which has the right by statute to have books supplied.
This section is a repetition, perhaps in more precise form, of what is already in the Copyright Act. Section 11 of chapter 8 of the statutes of 1931 provides:
The publisher of every book published in Canada, within three months after the publication thereof, shall deliver or cause to be delivered, at his own expense, to the librarian of parliament, who shall give a written receipt therefor, two copies of the

first edition and two copies of each subsequent edition if such subsequent edition contains additions or alterations either in the letter press or in the maps, prints or other engravings thereto belonging.
When there is no sanction expressly provided, there is a general provision in the Criminal Code that is much more severe than the one provided here. Anyone who wilfully violates a statutory requirement for which violation no special penalty is provided is liable to prosecution-I do not know the number of the section, but under a section with which the hon. member is as familiar as I am-under a section which provides much more severe penalties than those provided here. I believe the reason for including this section was to have the act self-contained, and not have to rely on this provision of the Criminal Code in case there was a violation.


James MacKerras Macdonnell: My fear
was really that the person who would actually have to provide the money would not be the wealthy publisher but the poor author. I suppose the answer is that these expensive books that are referred to here will probably be the exceptional case, and the two copies provided will not be impossible even for a poor author writing his first book.


A. Earl Catherwood: This section apparently covers books published in Canada, but what policy is adopted to acquire books from the United Kingdom and the United States from outstanding authors and publishers?


Jean-Paul Stephen St-Laurent: If the book is published in Canada-it does not necessarily have to be printed in Canada-or if it is distributed in Canada by a Canadian publisher, he would be required to supply these copies unless exemption was provided. During the resolution stage I explained that it was intended to require the deposit of books by Canadian authors, whether printed in Canada or elsewhere, and also of books which dealt mainly with matters of Canadian concern, so the Canadian national library might become the most complete collection of books published by Canadians or books dealing with matters of special concern to Canada.


George Alexander Drew: I do not want to appear to be splitting hairs about the wording of this act, but I am somewhat concerned about the provision requiring two copies of every book that is published. In looking at the definition of the word "book", it seems to me this would cover every conceivable kind of thing that is printed in this country which could be regarded as reading material. In the definitive section of the act the word "book" is described as including library matter of every kind, nature and description. I should

think that even the smallest periodical publication, whether it be a daily, weekly or monthly, would be library matter of some kind. Certainly libraries do include that material, but I do not know whether this section would be wide enough to oblige every publisher of some of these scandal sheets, tipster sheets or publications of that kind, which are all too numerous, or even much more serious publications of a very simple nature to be filed in this way.
I should think this would present a very serious problem for the librarians and their staff if it should be that wide. I think we should carefully consider whether or not that is the effect of the combined wording of section 11 and the definition in section 2. It gets back to the inquiry that was previously directed to the Prime Minister (Mr. St. Laurent) as to whether this follows the general pattern of similar statutes in other jurisdictions.


Louis Stephen St-Laurent: I was informed by Dr. Lamb that it was a less stringent requirement than those in the United Kingdom or in France. There is a provision that the minister may make regulations respecting the quality of the copies required to be delivered to the national library of any book the copies of which are not of uniform quality; prescribing generally the classes or kinds of books in respect of which one copy is required to be delivered to the national librarian; and prescribing the classes or kinds of books in respect of which no copies are required to be delivered. That is within our regulations that will be made under statutory authority, which will require to be published under the Regulations Act.
It may be that experience will show that there should be something more specific in the statutory provision. I compared it with the requirement in chapter 32 of the revised statutes with respect to the Copyright Act and this definition did not appear to me to include	as	much	as	was	included	in	thedefinition in the Copyright Act. I relied upon the	advice	of	Dr. Lamb as	to	thepropriety of defining a book in this manner. It was	his feeling	that	this would	notinclude	as	much	as	was	included	in	the
definition of "book" in the Copyright Act.
It was pointed out to me that we certainly did not want to provide housing space for copies of everything that was published or issued in Canada in writing or picture form. It was for that reason that the provision of paragraph (c) of subsection 4 of section 11 was inserted, namely to prescribe generally the classes or kinds of books of
National Library
which no copies are required to be delivered to the national librarian.


James MacKerras Macdonnell: I should
like to add a word, Mr. Chairman. I was impressed by the point made by the leader of the opposition. I am just wondering whether there might be something invidious in describing the classes of books of which no copies are required and whether it might not have been better to do it the other way and describe the classes of books of which copies are required. I raise that point for consideration. It seems to me that if a list is produced some time, describing the kinds of books of which no copies are required, that might be open to a certain invidious interpretation.


George Alexander Drew: I do not intend to labour the point following what has just been said, but I would point out this situation. We are dealing with an act which lays the foundation for the delivery to the national iibrary of publications in Canada which are described as books. I would be inclined to think that with the passing of this act anyone who was publishing even the smallest kind of periodical of any kind and was aware of this requirement-and who, quite apart from the possible fine of $25, did not want the nuisance involved in a thing of that kind-would make inquiries as to whether, in the absence of any specific regulation against his type of publication, he might not be called upon to deliver it.
I must confess that if the Prime Minister were consulted as a lawyer he would likely say: Unless there is some exemption, you are required to deliver it, having regard to the definition of "book" in section 2. If that is the answer the Prime Minister or any other lawyer would give, we are immediately confronted with the fact that until such time as the exemptions have been adopted, defining books that are not to be delivered, the moment this act goes into effect everyone who publishes anything that could come within the wide definition in section 2 would immediately be called upon to deliver it to the librarian unless he wanted to take the chance of getting into some difficulty at some later date.
I am not going to labour that point unduly. I recognize the fact that we are still in the preliminary stages; but it seems to me that this is a good time to avoid any unnecessary piling up of useless material in the hands of the librarian here in Ottawa.


Louis Stephen St-Laurent: I would have to tell him that his obligation was no greater than it had been at any time since the adoption of the Copyright Act of 1931, because that was

National Library
an amendment of the Copyright Act of 1921 in which the word "book" was defined, as follows:
"book" shall include every volume, part or division of a volume, pamphlet, sheet of letterpress, sheet of music, map, chart, or plan separately published.
I would have to point out to him that in 1931 parliament decreed that the publisher of every book published in Canada, within three months after the publication thereof, shall deliver at his own expense to the librarian of parliament, who shall give a written receipt therefor, two copies of the first edition and two copies of each subsequent edition, if such subsequent edition contains additions or alterations either in the letterpress or in the maps, prints or other engravings thereto belonging.
I would have to say to him: You are not required to deliver to the national librarian anything that you are not required to deliver under the Copyright Act. But under the Copyright Act you see what the definition is.


George Alexander Drew: I am afraid it has been largely honoured in the breach.


Mr.   Si. Laurenl@: I am sure it has been largely honoured in the breach; and I am sure there will be no prosecutions required by Dr. Lamb for failure to produce anything that it would not be in the interests of the Canadian public generally to have become a part of the national library collection.


[Stage Direction]
Section agreed to.
On section 12-Purchase account for acquisition of books.
Alistair McLeod Stewart: There is provision that all bequests and donations shall be credited to this national library special operating account into which they shall be accepted. What would be the position of a person who wishes to donate, or to give as a bequest, a capital sum, the interest on which only could be used for the national library purposes? Would there be any provision made for this person to have his capital left there and for the revenue only to be used?


Jean-Paul Stephen St-Laurent: I am sure there would be. It would still be used for the purposes of the library. But if the bequest was accepted, it would have to be accepted with the conditions which it bore under the will. It would have to be used for the purposes of the library but in a manner governed by the conditions stipulated by the testator or by the donator. It could not be accepted otherwise.


[Stage Direction]
Section agreed to.
Section 13 agreed to.

On section 14-Coming into force.
Stanley Howard Knowles: Just before this last clause carries, may I ask the Prime Minister to indicate what clause of the bill deals with a matter about which I questioned him when we were at the resolution stage? In particular I asked whether the legislation provides authority to go ahead with the selection of the site, the appointment of an architect and the construction of the building itself. The Prime Minister replied as follows, as reported at page 2386 of Hansard:
The legislation now proposed would give authority to go ahead when parliament will have appropriated funds. The only further requirement would be a vote by parliament of the funds required to carry out projects for which there would be authority to make proposals to parliament in the present legislation.
Will the Prime Minister indicate where in the bill that type of authority is provided?


Jean-Paul Stephen St-Laurent: Section 3 states that "a national library is hereby established". That is a decision by parliament, that a national library is established. Now it will be the responsibility of the government to recommend to parliament whatever may be required to carry out the decision that a national library be established; and the only way public works are authorized is through the estimates, and voting the money required to provide them.
No statute is passed saying there will be a post office in a certain locality. That is provided by an item in the estimates which makes the money available for that purpose. I do not think, for example, that the hon. member will find any statute making provision for the erection of the supreme court building. That was done by way of an item in the estimates making the amount of money available for that kind of building in the national capital.	'


Stanley Howard Knowles: In the case of the national gallery, for example, I take it that no statutory authority was required to go ahead and invite the submission of various plans. All I wish to be sure of is that we can get along with this project without further legislation having to be brought in apart from a vote for the necessary money.


Louis Stephen St-Laurent: The hon. member is right. The competition for plans for the national gallery was by way of a vote in the estimates of last year for that purpose. Because of that vote the national gallery of Canada competition was organized and is now under way for the choice of an architect to prepare the plans. That is the traditional way in which public works are provided for. If the object is one parliament has sanctioned, then parliament is asked to vote money for such and

such specific purpose. The vote is the only other authority required to proceed.


Donald Methuen Fleming: I presume it is clear that the erection of the building will have to await the voting of money by parliament. But I take it that it is clear that the proclamation of the act, once it is passed, would not have to await plans for the construction of the building. The act could be proclaimed at any time. When does the Prime Minister expect it would be proclaimed?


Jean-Paul Stephen St-Laurent: It is intended the act will be proclaimed within weeks or months- almost at once, or just as soon as the preliminary preparations can be made. It is intended that it shall be proclaimed, and that Dr. Lamb shall be appointed national librarian. I would hope he would have a report for parliament at its next session, advising as to what further steps in his opinion can be taken at that time.
Business of the House


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

Alphonse Fournier: Tomorrow we will take up first the third reading of Bill 276, to amend the Tariff Board Act, if you have no objection. Then we will proceed with Bill No. 194, to amend the Aeronautics Act. This bill has come back from the committee. Then we will have Bill No. 246, to amend the Canada Grain Act, and I understand this bill will be referred to a committee after second reading. We will then go into supply, and take up the estimates of the privy council and justice.


[Stage Direction]
It being five minutes after eleven o'clock the house adjourned, without question put, pursuant to standing order.
26S6

[Stage Direction]
North Atlantic Treaty Protocol

[Stage Direction]
The parties to the North Atlantic treaty, signed at Washington on 4th April 1949,
Being satisfied that the creation of the European defence community set up under the treaty signed at Paris on	will
strengthen the North Atlantic community and the integrated defence of the North Atlantic area, and promote the closer association of the countries of western Europe, and
Considering that the parties to the treaty setting up the European defence community have signed a protocol, which will enter into force at the same time as the present protocol, giving to the parties to the North Atlantic treaty guarantees equivalent to the guarantees contained in article 5 of the North Atlantic treaty,
Agree as follows:
Article I
An armed attack
(i)	on the territory of any of the members of the European defence community in Europe or in the area described in article 6 (i) of the North Atlantic treaty, or
(ii)	on the forces, vessels or aircraft of the European defence community when in the area described in article 6 (ii) of the said treaty,
shall be considered an attack against all the parties to the North Atlantic treaty, within the meaning of article 5 of the said treaty, and article 5 shall apply accordingly.
The expression 'member of the European defence community' in paragraph (i) of this article means any of the following states which is a member of the community, namely, Belgium, France, the German Federal Republic, Italy, Luxembourg, and The Netherlands.
Article II
The present protocol shall enter into force as soon as each of the parties has notified the government of the United States of America of its acceptance and the council of the European defence community has notified the North Atlantic council of the entry into force of the treaty setting up the European defence community. The government of the United States of America shall inform all the parties to the North Atlantic treaty of the date of the receipt of each such notification and of the date of the entry into force of the present protocol.
Article III
The present protocol shall remain in force for so long as the North Atlantic treaty and the treaty setting up the European defence community remain in force and the parties to the latter treaty continue to give, in respect of themselves and the European defence forces, guarantees to the parties to the North Atlantic treaty equivalent to the guarantees contained in the present protocol.
Article IY
The present protocol, of which the English and French texts are equally authentic, shall be deposited in the archives of the government of the United States of America. Duly certified copies thereof shall be transmitted by that government to the governments of all the parties to the North Atlantic treaty and of all the parties to the treaty setting up the European defence community.
In witness whereof, the undersigned plenipotentiaries have signed the present protocol.
Done at	the
day of
1952.
[Stage Direction]
Wednesday, May 28, 1952