1952-05-09

[Stage Direction]
Third report of standing committee on external affairs.-Mr. Bradette.


Hon. Stuart S. Garson (Minister of Justice) moved: the first reading of Bill No. 196 (from the Senate), to amend the Supreme Court Act.
Motion agreed to and bill read the first time.



INTERPRETATION ACT


Stuart Sinclair Garson: the first reading of Bill No. 197 (from the Senate), to amend the Interpretation Act.
Motion agreed to and bill read the first time.



GASOLINE AND OIL


[Stage Direction]
On the orders of the day:
Mr. E. T. Applewhaite (Skeena):: I desire to direct a question to the Minister of Defence Production. In view of the present situation in the United States, will the Minister of Defence Production make a statement on the gasoline and oil situation in Canada?


Right Hon. C. D. Howe (Minister of Defence Production):: The whole question of Canadian requirements of gasoline and oil is under constant review in the Department of Defence Production. It is not anticipated at the moment that the supply of petroleum products in Canada will be seriously affected by the current strikes of oil refinery workers in the United States, except the supply of aviation gasoline which is already a matter of serious concern.
This situation has resulted in a serious reduction in the production of aviation gasoline in the United States. The petroleum administration for defence, Washington, has issued its order No. 6 which temporarily
restricts the use and forces a reduction in the consumption of aviation gasoline within the United States. The order also prohibits export except under certification by PAD.
Because of the policy of close co-operation between Canada and the United States, and as United States companies and associates supply in excess of ninety per cent of all aviation gasoline consumed in Canada, it is deemed necessary that restrictions similar to those in force in the United States be placed upon the consumption of aviation gasoline in Canada in order that reduction in Canadian consumption may be in line with that in the United States. By order in council P.C. 2754 of today's date all grades of aviation gasoline have been declared an essential material under the provisions of the Defence Production Act.
Canadian oil companies have been requested to limit their deliveries of aviation grade gasoline during the 28-day period commencing May 6, 1952, to sixty-five per cent of the amount delivered during the month of April, 1952. Arrangements have been made whereby the petroleum division of the Department of Defence Production will be prepared to take under consideration cases of unreasonable hardships, such as problems that might arise in remote areas.
The departments of national defence and transport have already curtailed their flying operations. The Department of Transport, the air transport board, and the Air Industries and Transport Association of Canada are requesting aircraft operators to eliminate all non-essential flying.


Mr. Diefenbaker:: Would the minister say whether this will affect T.C.A. schedules in any way?


Clarence Decatur Howe: Yes. T.C.A. schedules have
already been curtailed; I understand that sixteen scheduled services have been eliminated already. T.C.A. is in the same position as the other aviation services, that only sixty-five per cent of the gasoline consumed during the month of April will be allocated during the month of May.


Mr. Adamson:: Can the minister say what aviation gasoline is made in Canada, and whether any steps could be taken to increase that production without incurring a very large expenditure.

Inquiries of the Ministry


Clarence Decatur Howe: High octane gasoline is made at Calgary in limited quantities, but about ninety per cent of our 100-octane gasoline is imported from the United States. To supply Canada a very large expenditure would have to be made; and since the trend is toward jet flying-and of course jets use low grade fuel-it is not felt that the very large investment involved is warranted at this time.


Mr. Green:: Can the minister say how long it will be possible to maintain even these reduced schedules?


Clarence Decatur Howe: I should think we would be able to carry them on indefinitely.



ANIMAL CONTAGIOUS DISEASES


[Stage Direction]
On the orders of the day:
Mr. A. Earl Catherwood (Haldimand):: Would the Minister of Agriculture state whether there is any truth in the report that the committee on agriculture, investigating foot-and-mouth disease, is not going to resume its sittings?


Right Hon. J. G. Gardiner (Minister of Agriculture):: We did spend a number of days in the committee considering the foot-and-mouth epidemic. That consideration required that quite a number of officials remain tied up at the committee meetings. At the moment the department is engaged in most trying activities, which require greater staffs than we have required at any time since the war. It was thought that we were really spending too much time in the committee at this time, and that the good resulting was not sufficient to warrant our being tied up for the next few days, in any case, until we get on with what is considered to be a very important job. While it is not altogether in my hands, I think probably there will be another sitting. I hope, if there is, it will not be necessary to have more than one.



VETERANS LAND ACT


[Stage Direction]
On the orders of the day:
Mr. G. K. Fraser (Peterborough West):: should like to address to the Minister of Veterans. Affairs a question I asked the previous minister some time ago. Has his department given consideration to allowing those under the Veterans Land Act with two-acre holdings on the outskirts of cities to sell all their property except the normal city lots on which their houses stand, so that to some extent they may be relieved of high city taxes?


Hon. Hugues Lapointe (Minister of Veterans Affairs):: The question was considered previously, and it has not been judged appropriate at this stage to acquiesce to this request.



ALBERTA TAR SANDS


[Stage Direction]
On the orders of the day:
Mr. Carl O. Nickle (Calgary West):: In view of the growing interest in Alberta's bituminous sands-


Some hon. Members:: Order.


Carl Olof Nickle: -could the minister advise this house of progress-


Some hon. Members:: Order paper.


Carl Olof Nickle: -in research related to these oil sands by scientists working under his direction?


Some hon. Members:: Order.


Mr. Speaker:: I could not hear the question. I do not know whether it should be placed on the order paper or answered now by the minister.


Hon. George Prudham (Minister of Mines and Technical Surveys):: I wish to thank the hon. gentleman for having given me notice of his question. I have a rather lengthy and technical statement which I think partly answers it. If it is your wish, Mr. Speaker, I can put it on the record.


Some hon. Members:: No.


Mr. Speaker:: There were so many interruptions I could not hear the question. I will leave it entirely to the minister to decide whether the question should be answered now or later.


George Prudham: I think perhaps it would be better as a return, so if the hon. member will put the question on the order paper I shall be glad to table the reply.



WAYS AND MEANS

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

[Stage Direction]
Resolved, that it is expedient to introduce a measure to amend the Income Tax Act and to provide, amongst other things:
1.	That for the 1953 and subsequent taxation years there be substituted for the graduated rates of tax and the defence surtax that are at present applicable to the income of individuals, the following graduated rates of tax:
(a)	17 per cent of the amount taxable if the amount taxable does not exceed $1,000,
(b)	$170 plus 19 per cent of the amount by which the amount taxable exceeds $1,000 if the amount taxable exceeds $1,000 and does not exceed $2,000,

(c)	$360 plus 22 per cent of the amount by which the amount taxable exceeds $2,000 if the amount taxable exceeds $2,000 and does not exceed $4,000,
(d)	$800 plus 25 per cent of the amount by which the amount taxable exceeds $4,000 if the amount taxable exceeds $4,000 and does not exceed $6,000,
(e)	$1,300 plus 30 per cent of the amount by which the amount taxable exceeds $6,000 if the amount taxable exceeds $6,000 and does not exceed $8,000,
(f)	$1,900 plus 35 per cent of the amount by which the amount taxable exceeds $8,000 if the amount taxable exceeds $8,000 and does not exceed $10,000,
(g)	$2,600 plus 40 per cent of the amount by which the amount taxable exceeds $10,000 if the amount taxable exceeds $10,000 and does not exceed $12,000,
(h)	$3,400 plus 45 per cent of the amount by which the amount taxable exceeds $12,000 if the amount taxable exceeds $12,000 and does not exceed $15,000,
(i)	$4,750 plus 50 per cent of the amount by which the amount taxable exceeds $15,000 if the amount taxable exceeds $15,000 and does not exceed $25,000,
(j)	$9,750 plus 55 per cent of the amount by which the amount taxable exceeds $25,000 if the amount taxable exceeds $25,000 and does not exceed $35,000,
(k)	$15,250 plus 60 per cent of the amount by which the amount taxable exceeds $35,000 if the amount taxable exceeds $35,000 and does not exceed $50,000,
(l)	$24,250 plus 65 per cent of the amount by which the amount taxable exceeds $50,000 if the amount taxable exceeds $50,000 and does not exceed $75,000,
(m)	$40,500 plus 70 per cent of the amount by which the amount taxable exceeds $75,000 if the amount taxable exceeds $75,000 and does not exceed $100,000,
(n)	$58,000 plus 75 per cent of the amount by which the amount taxable exceeds $100,000 if the amount taxable exceeds $100,000 and does not exceed $150,000,
(o)	$95,500 plus 80 per cent of the amount by which the amount taxable exceeds $150,000 if the amount taxable exceeds $150,000 and does not exceed $250,000,
(p)	$175,500 plus 86 per cent of the amount by which the amount taxable exceeds $250,000 if the amount taxable exceeds $250,000.
2.	That for the 1952 taxation year the graduated rates of tax applicable to income of individuals be the average of the present rates (including defence surtax) and the rates set out in paragraph 1.
3.	That with respect to income of corporations earned on and after January 1, 1952, the present rate of tax shall be increased from 15 per cent to 20 per cent on the first $10,000 of taxable income and from 38 per cent to 50 per cent on taxable income in excess of $10,000, and that the defence surtax be repealed.
4.	That there may be deducted from the amount of income tax otherwise payable by a corporation for a taxation year in respect of income earned on and after January 1, 1952,
(a)	the amount of income tax payable to the government of a province for that taxation year in respect of income earned on and after January 1, 1952, as a result of its operations in that province, or
(b)	5 per cent of the taxable income of the corporation of that taxation year under the Income Tax Act that is earned on and after January 1, 1952, as a result of its operations in that province, whichever is less.
Income Tax Act
5.	That for the 1952 and subsequent taxation years the maximum amount in respect of medical expenses that may be deducted in computing taxable income be increased
(a)	to $2,000 in the case of a person who may at present deduct a maximum of $1,000,
(b)	to $1,500 in the case of a person who may at present deduct a maximum of $750, and
(c)	to $500 for each dependent in respect of whom a maximum of $250 may at present be deducted, subject to a maximum deduction of $2,000 by a husband and wife between them or by a person in respect of all his dependents; and that there be included in the medical expenses that may be deducted in computing taxable income those medical expenses that at present are not included by reason only that they were not incurred in the appropriate twelve-month period in which they were paid.
6.	That crown corporations that are classed as proprietary corporations in the Financial Administration Act shall pay tax on income earned on and after January 1, 1952.
7.	That the special deduction from income to a taxpayer whose principal business is the production, refining or marketing of petroleum or petroleum products or the exploring or drilling for oil or natural gas or mining or exploring for minerals, be allowed for expenses incurred in the 1955 operations on the same basis as for expenses incurred in the years 1951 to 1954.
8.	That the special deduction from income and taxes of a taxpayer whose principal business is production, refining or marketing of petroleum or drilling for petroleum be allowed for expenses incurred in respect of deep-test oil wells in 1953 operations on the same basis as for similar expenses in operations of the years 1950 to 1952.
9.	That the exemption of the income from a metalliferous or industrial mineral mine for the first three years of production now applicable to mines coming into production during the years 1946 to 1954 be extended to mines coming into production during the year 1955.
10.	That a corporation resident in Canada whose gross revenue for a taxation year ending on or after January 1, 1952 derived from the distribution to or generation for distribution to the public of electrical energy, gas or steam is more than one-half its total gross revenue for the same period shall be entitled to a deduction from the tax otherwise payable by it under the Income Tax Act to the extent necessary to reduce to 43 per cent the rate of tax payable by the corporation under that act on that part of its taxable income for that taxation year that is derived on and after January 1, 1952 from such distribution or generation.
Mr. James Sinclair (Parliamentary Assistant to the Minister of Finance):: I was going to suggest, Mr. Chairman, that we follow the practice we followed yesterday and have a short general discussion on the principle of the entire resolution on the first item, then on the subsequent items stick to the actual subject matter of the items under consideration.
I think perhaps I should lead off this discussion on the first item by answering some of the points raised during the first stage of this debate when the Speaker was in the chair by certain members who dealt with tax matters in the budget debate. In his remarks the other evening the minister pointed out that many excellent speeches were made during that debate but that very few of them actually related to tax matters.

Income Tax Act
So I will confine myself to those points raised in speeches which related to tax matters coming under this resolution.
The one speech which I should mention which was entirely on tax matters, and principally on the tax matters in this resolution, was the speech by the hon. member for Hamilton West, so perhaps I could start by answering the various points which she raised. If there are further technical points which may arise during the discussion on the resolution and which may need some working out, then the minister will prepare suitable replies for delivery when the bill is before the house.
On page 1555 of Hansard for April 24, the hon. member objected to the fact that in calculating the defence surtax for 1951, taxpayers were required to take 10 per cent of the amount which was the tax before deducting the credit for dividends from Canadian taxpaying corporations. The defence surtax was also calculated before the calculation of the credit for any foreign taxes. By this arrangement the tax is increased or decreased by any surcharge or payment before applying any tax credit, and this arrangement is not new. It has been the existing practice.
I shall give an example of when we reduced the tax by a percentage, the very opposite of what was done in 1951. When the tax was reduced by 4 per cent in 1945 and 16 per cent in 1946, those percentage reductions were applied before applying the tax credits for foreign taxes. Those, of course, were the only tax credits we had at that time. The hon. member will appreciate that the effect of that was to give a maximum reduction, since it was on the larger amount. The arrangement of the 1951 form carried out the intent of the 10 per cent tax credit for dividends, which was that the total tax of the taxpayer be reduced by an amount equal to 10 per cent of the net dividend income from Canadian tax paying corporations. Actually, the observation applied only to tax returns for 1951, since we have now removed the surcharge, and it is not a problem which will recur.
On page 1556 of Hansard the hon. member referred to the recommendation of the Canadian Bar Association and the Canadian Institute of Chartered Accountants that the taxpayer be permitted to add dividend income of his spouse in excess of $250 to his own income and so receive the benefit of the same 10 per cent tax credit for Canadian dividends. The exemption of the taxpayer is reduced when his spouse has an income over $250 because the extent to which the taxpayer has to support his spouse is reduced if the spouse has extra income. The extent to which the
taxpayer has to support his spouse is reduced regardless of whether the spouse's income is from dividends, interest or wages. This suggested amendment would give special alleviation only to the couple where the spouse's income was from dividends.
On page 1556 of Hansard the hon. member referred to a case where the taxpayer supported a dependent sister in 1951. The taxpayer incurred heavy medical expenses in respect of this dependent sister in 1951, but was able to pay only a small part of them. Finally the dependent sister died in 1951. I think that is the situation. The member stated that the taxpayer is not allowed to claim an allowance against his 1952 tax for the medical expenses incurred and paid in the twelve-months period ending in 1952 because the sister, having died in 1951, is no longer a dependent of the taxpayer. This does not appear to be in accordance with the law. Section 26(l)(b)(iii) reads in part, "or any dependent in respect of whom he may make a deduction from income under section 25 for the year in which the expense was incurred." I am informed by the officers of the Department of National Revenue that they would like to have the details of this case from the hon. member.


Mrs. Fairclough:: May I ask a question? Do I understand the parliamentary assistant to imply that the subsequent amounts as paid will be allowed?


James Sinclair: If they are for the twelvemonths period ending in 1952, even though the sister is now deceased and is not classed as a dependent so far as the dependent exemption for this year is concerned.


Ellen Louks Fairclough: That is new.


James Sinclair: That is the interpretation which the officials have placed on section 26(l)(b)(iii). Once again, it is an administrative point. Perhaps if the hon. member would see the officials-


Ellen Louks Fairclough: I am wondering if that is because of the amendment which was made by the minister this year in withdrawing the word "incurred". Prior to the budget speech this year, the expenses were theoretically supposed to be incurred and paid in the same year, although that practice was not pressed in the district offices.


James Sinclair: Perhaps the hon. member could follow that up with the appropriate officials.
The next point was this matter about which I am quite sure we will hear a lot this afternoon, the 4 per cent medical deduction. On page 1557 of Hansard she said that the taxpayer who has medical expenses in excess
TMr. Sinclair.]

of 4 per cent of his income loses an exemption each year equal to 4 per cent of his income. Over ten years she said the total of this amount which could not be deducted could be $1,500, and this might be the factor in deciding whether or not one of his children attended university.
This is a common slip which almost everyone who is dealing with tax returns makes. It is certainly a slip I have made myself, in regarding the amount of income exempt from tax as being an actual tax saving. If in this case the 4 per cent of a man's income is $150, that means he has an income of $3,750. Presumably he has one child, since we are looking forward to a university education ten years from now. His exemption, therefore, should be $2,150 and his taxable income would be $1,600. He has to pay 17 per cent on the first $1,000 and 19 per cent on the next $600. The loss of a $150 exemption means an additional tax of $28.50. Over ten years this would amount to $285-quite a significant sum it is true, but $28.50 per year is not likely to mean the difference between university or no university.


Ellen Louks Fairclough: When I made that remark I do not think I called it tax; I think I called it tax basis.


James Sinclair: Yes, that is quite true. Then the member criticized the estimate I used in the case for eliminating the 4 per cent on medical expenses.


Ellen Louks Fairclough: I did, yes, but not as a
major objection-only as one of the minor objections.


James Sinclair: Subsequent to that I got a letter from a citizen in Hull also expressing grave doubts about my arithmetic, so I settled down and worked out sample cases which were then checked by the department. This citizen was thoughtful enough to send copies of the letter, not only to my minister but also to the member for Eglinton and to the member for Winnipeg North Centre. I was equally thoughtful, therefore, and sent them copies of my reply.


Mr. Knowles:: I shall be equally thoughtful and give you a reply today.


James Sinclair: I am glad that so much thought has been given to the matter.
The next case is a very difficult one which I think lawyers describe by saying that hard cases make bad law. The hon. member referred to the case of an immigrant who came into the country in November, and mentioned the impact of the family allowances. There are two situations. The first situation occurs when a Canadian child is born in November. In December the child
Income Tax Act
is eligible for family allowance of $5. Because of that the parent gets the exemption of $150 for the child in receipt of family allowance-that is the lower exemption- but they have only had $5 in family allowances. However, at the end of the family allowances for eleven months at $8, making $88. Because the family allowance is not payable in the last month. The taxpayer is now eligible for the larger income tax deduction of $400, so that averages out.
This case mentioned by the hon. member, however, does not average out because the immigrant family comes in here at the end of the year, and a year later the children become qualified for family allowance. They draw family allowance for just one month, but because of that the parent, the father, on his income tax return can claim only $150 instead of $400. It is a problem which is known. There is no easy answer for it. It has been suggested that perhaps we could pro rate both the family allowance and the income tax exemption across the months. That would be a fairly difficult problem as far as administration is concerned. Since this case is so rare,-and it is rare for one reason, namely that it is a fairly fortunate immigrant who at the end of one year is in a position to be paying substantial income tax-it has been decided not to change it, or not to make it, as the hon. member suggested, optional whether they take the family allowance or not.
That leads me automatically into the other comment which was made in connection with this particular item on the impact of taxes and family allowances. I refer to the now famous speech by the hon. member for Moose Jaw. I know he has been dealt with rather severely by some of his colleagues, so I will not say anything uncharitable about him; but I will deal with the proposal he makes purely from the point of view of the impact of taxation under item 1.
To be entirely fair to the hon. member I want to read his exact words as reported at page 1573 of Hansard:
The taxpayers are going to spend $332 million this year on family allowances. I say at once that most of this money will be well spent, but I cannot help wondering how badly my good friend, the hon. member for Comox-Alberni (Mr. Gibson), needs three family allowance cheques to make ends meet. There must be many other people in Canada in the same category.


Stuart Sinclair Garson: Would the hon. gentleman permit a question? Would he apply a means test to the baby bonus too?


Stanley Howard Knowles: Over my dead body.


Mr. Thatcher:: I thank the minister for his question and I should like to answer it. I wonder whether it is sensible to pay old age pensions or family allowances to those with an income say of $5,000 a year or more. I take that figure out of the air, as perhaps it should be $6,000.

Income Tax Act
I should like hon. members to keep especially in mind that figure.
I am referring to those people who have no need of them. If the minister adopted this suggestion my closest estimate is that he would save the taxpayers about $30 million.
The hon. member was not here when the first family allowance bill was passed, so perhaps he has forgotten the implication of it. When the bill was first passed it was designed to help the lower income families, families with less than $3,000. A man who paid no income tax got the full amount, and then the benefit tapered off so that at $3,000 a man with a family really got no benefit. The extra taxes he paid and the family allowance evened out.
One year's experience with that, however, showed that it had the same grave weaknesses that our former old age pension scheme had. There were two weaknesses. The first, so far as the public was -concerned, was that this family allowance then had, in the minds of many people, the stigma of charity, the stigma of almost poverty; it was only people who were poor who were going to get it. In this country we have a great many proud people-that is, proud in the good sense of wanting their own independence-and they are not going to take handouts from anybody. During that first year a great many people who actually needed these allowances and who qualified for them would not take them because of that consideration. At the end of the first year a change was made in the Income Tax Act.
I may say that the second point-and an important point as far as the cost of government is concerned; and I know that is of great concern to the hon. member-is this. If the parent had the choice of having the family allowance and the $150 exemption or of not taking it and getting the $400 exemption, every single income tax form would then have to be checked over with the Department of National Health and Welfare to see whether the child had got the allowance. That would involve an enormous amount of paper work or red tape for both departments. Consequently a better plan was worked out the next year by the income tax department and the Department of National Health and Welfare, whereby the same result was achieved through the use of taxation but not with an open, obvious means test-with the humiliations which go with a means test and the stigma of charity which led certain proud and independent families to say: no, we will not get it-and at the same time preserving this important point that this money was not going to families such as those referred to by the hon. member.

Let me show you quickly and easily just how this plan works out. The hon. member for Moose Jaw suggested as an example this innocent bystander, the -hon, member for Comox-Albemi. I think it is most unfortunate to use as an example somebody who had not participated in the debate. As a matter of fact, I have the same view as has the income tax department, namely, that the individual's personal income is a matter for himself. However, we are extremely fortunate this week in seeing, in a national magazine, an estimate of the income of the hon. member for Moose Jaw; and since he raised the question-


Mr. Gibson:: Work it out on his basis.


James Sinclair: That is exactly the basis on which I want to work it out. If hon. members will just follow item 1, they will find that the income attributed to the hon. member by this magazine, which prides itself on the accuracy of its research, -comes under item (k) of resolution 1, whereby the marginal rate is 60 per cent. If we had not this new family allowance scheme, the hon. member could claim a $400 exemption for his one child, but because this family allowance is now made applicable to everybody he is allowed only $150 and receives family allowance. We have therefore removed $250 and put it back in the taxable income on this 60 per cent rate, which means he pays $150 more tax, quite aside from his other taxes, for the privilege of receiving $84 a year in family allowances. Therefore, far from having no means test and giving these family allowances to the rich, we actually are making the rich pay toward this great social measure even more than they did under the first year's plan where there was this arbitrary-, open means test.
I could describe it as having a built-in means test where there is no public humiliation, where all may recognize that whether they take it or not, they are going to be assessed as having taken it; where the people who need the benefit get the most benefit; and where those in the upper classes-in the brackets to which the hon. member referred in his speech-not only get no benefit but have to make a fairly substantial contribution toward this fund.
Hon. members might ask me now where the breaking point is. It is an interesting breaking point. The hon. member, in his innocence-I was going to say in his ignorance, but "innocence" is perhaps a nicer word, and being charitable I will use it- suggested $6,000. The average family allowance across Canada is $6; that is $72 a year. Where, on this $250 difference between the income tax exemption given for a family

allowance child and a non-family allowance child, does the tax equal that amount? At the 30 per cent level 30 per cent of $250 is $75. Again, if hon. members will just follow item 1-and I am keeping deliberately to this item

you will find that the 30 per cent level starts with taxable income of $6,000. Hence we actually achieved four or five years ago the very purpose which the hon. member set out to establish in his speech, and I think it is a purpose which everybody interested in this legislation thinks is the best way out. We have no obvious means test. It is a solution which gives the maximum benefit to the people who are most deserving of it.
Curiously enough, exactly the same built-in provision now occurs in our new old age pension plan. You might expect that. The able Minister of National Health and Welfare had this experience with family allowances; we heard for many years the objection everybody made to the open means test that is contained in the former old age pension, and with that experience in mind we were able immediately to apply a similar provision through taxation-the taxation outlined in this schedule-to the old age pension.
Once again I want to be fair to the hon. member and not put words in his mouth. I will read the exact words he used in referring to the need for a means test in connection with the old age pension. This is again to be found at page 1573 of Hansard.
He said:
We have had this scheme now for four months and I cannot help doubting the wisdom of paying old age pensions to Canadians who are wealthy and have no need of them.


James Sinclair: You want a means test, in other
words.


Wilbert Ross Thatcher: Just let me continue.


James Sinclair: You want a means test.


Wilbert Ross Thatcher: I must say that I find it a little
ludicrous that the taxpayers of Canada, overburdened as they are, should be paying an old age pension-I take this gentleman only as an example -to the Prime Minister (Mr. St. Laurent). I cannot believe that a man in his financial circumstances needs it. I understand too that we are paying the pension to quite a few senators. I suppose even my old employer, multimillionaire J. S. McLean, now qualifies for the $40 monthly cheque, although I do not know whether he is collecting it or not.
Let me take his own example once again, and we will just see what the net return is to his friend Mr. McLean under the new old age pension scheme. The fact that Mr. McLean is referred to by my friend as a multimillionaire probably puts him in the class around $100,000 a year income. Again if hon. members refer to these schedules here they will see in schedule I that that is at the rate of 75 per cent. It is near the top bracket. Therefore, out of the $40 a month that Mr. McLean may or may not receive-I
Income Tax Act
do not know whether he takes it or not-we take $30 back, leaving him a net of $10 a month. Therefore on the year he is $120 better off because of the introduction of this means-test-free old age pension.
But this is not paid out of the general treasury. We have established definite methods of contributions, of payments from everybody, including those on pension, for this plan. The first is the 2 per cent tax with the ceiling of $60. This gentleman is obviously at the ceiling. During the course of the year he pays first of all $60 as that contribution. Second is the 2 per cent sales tax. I tried to get some estimate from the dominion bureau of statistics as to what the spending habits of a man in that income bracket would be, but I was unable to get it. I do not know myself. I would presume that a man in the bracket of a multi-millionaire would spend $10,000 a year on goods other than food, fuel and building materials; in other words, goods on which sales tax is payable. So he is paying at least $200 a year more because of the fact that he is now receiving means-test-free old age pension.
Third is the two per cent levied against corporations. The incidence of this is very difficult to assess. Economists and tax authorities can dispute at long length where the actual incidence is, where that burden is carried; whether it is carried by the shareholders of the company; whether it is carried by the ultimate consumer or whether it is carried by labour who get less of the share of the profits because of the extra tax burden. It is sure to be somewhere in between. This gentleman is obviously a substantial shareholder in many corporations, and a consumer. I will say that his contribution in that way would be at least as large as his contribution to sales tax. But suppose it is even less than his direct contribution of income tax as a consequence of the tax changes to bring in this old age pension. He is paying at least $300 more in taxes to net this $120, once again showing that this measure was very carefully designed to have precisely the effect that the hon. gentleman is advocating, so that the old age pension will be of maximum benefit to those who have most need for it, and will be not only of no benefit but a major charge on those who have no need for it.
I know that the hon. member made these suggestions in good faith. He also mentioned the Prime Minister.


Mr. Macdonnell (Greenwood):: May I ask a
question? I failed to follow the parliamentary assistant toward the end. I thought in his

Income Tax Act
consideration of this income that he had got to the point where he said that the recipient would have something like $120 left.


James Sinclair: Yes.


James MacKerras Macdonnell: Then he proceeded, if I understood him correctly, to say that would be cut down by reason of various taxes which the recipient would pay on that.


James Sinclair: No, that is the benefit he receives.


James MacKerras Macdonnell: May I just finish? If it is not cut down by taxes that he pays on it, I am not able to follow the argument.


James Sinclair: I am sorry if I have not made myself clear. I am comparing the position of this gentleman before we brought in this old age pension plan; that is, before we put on this extra two per cent sales tax and the extra two per cent income tax and the extra two per cent corporation tax. In those happy days, so far as he was concerned, he did not have these extra taxes to pay that he has to pay now. When he pays those extras he does get a benefit of $120 a year, but let us see the extra he pays for that. That $120 is the net. He actually gets $40 a month, $480 a year. Then, being at the top level, he pays a 75 per cent tax on that, which leaves him a net of $120, so he is $120 better off as far as receipts are concerned. Let us see what he did for this benefit. In my rudimentary calculation he paid at least $300 more than the tax he paid before this scheme came into effect, that is before he got this $120.


Mr. Coldwell:: On the 2-2-2 formula.


James Sinclair: Yes.


Wilbert Ross Thatcher: Will the parliamentary
assistant permit me a question? Would he not be paying that whether he got the pension or not? That is the law.


James Sinclair: That strengthens my argument, because if he does not care to take the $120, then he pays $300 extra and gets nothing back. I would not have used him as an example except that the hon. member wanted to use him as an example to strengthen his case. From the point of view of tax levels, he could not have picked a better case.


James MacKerras Macdonnell: May I ask a
question again? Am I not right in saying to the parliamentary assistant that by reason of putting this universal old age pension in we put on the 2-2-2 tax formula, and this man by reason of that pays this amount -I think you said $300; but surely that has nothing to do with it. He would be paying

this at the present time anyway. He would be paying it whether he got the old age pension or not. Surely it is not a fair argument to say that because we have created a tax as part of the institution of old age pension by reason of which these rich men will pay more than they receive therefore it costs nothing to pay them the pension. They would pay those taxes whether they got the pension or not. Surely in order to make your argument you have to figure what he pays on the exact amount of his allowance and not bring in other taxes which he pays.


James Sinclair: I think almost everybody in the committee except the hon. member followed my argument.


Wilbert Ross Thatcher: No.


James Sinclair: I will try once again. Before we brought in .this means-test-free old age pension this gentleman did not qualify for the old age pension because he did not come under the means test, nor did he pay any contribution over and above his existing income tax and sales tax. We decide that there is .to be a means-test-free old age pension. He now qualifies for that. We also decide that it is to be paid for over and above the existing tax rate which he pays. There is to be two per .cent more on personal income tax only for old age pension; there is to be two per cent more on sales tax on goods he buys for consumption, and there is a two per cent corporation tax, the incidence of which would have to be traced down with some care in differing companies. All these things are new. Then there is a new tax. On the one hand there is new benefit. The benefit he gets is $480 a year. Because of this gentleman's tax position he pays a 75 per cent rate on that, which leaves him out of this new benefit only $120. Now, let us see what he paid for that $120. I will not go through the argument again. Of these new taxes he has paid-


James MacKerras Macdonnell: And he
would pay those taxes whether he got the $120 or not.


James Sinclair: Just as ini the case of family allowances. That is the real reason why the stigma of charity that used, to attach-


Stanley Howard Knowles: If it were not for that benefit, the tax would not have been imposed.


James Sinclair: The hon. member has mentioned the real point, and that is the real significance of this scheme. The point about family allowances is that you cannot claim $400 allowance for your child who qualifies

for family allowances whether you claim family allowance or not-just $150. Then there is no stigma of charity, and most people say: Well I am paying anyway; I might as well take it. I think there is something that should be admired in this house. All of us who have elderly people in our ridings know of the difficulties they have had in recent years. I do not suppose there is any hon. member in the house who has more elderly people in his riding than I have on the southern coast of British Columbia where so many people from central Canada come to retire. Among that group there were people who could have qualified under the previous old age pension legislation, but would not because of the stigma of charity that was there. It was referred to as a handout from the public. Even with the new old age pension, there was still the hangover of that feeling. No better example could have been given to this country, to show that this new pension plan is the right of every Canadian because every Canadian is paying for it, than the example given of the Prime Minister.


James MacKerras Macdonnell: I wish to
make clear that I am not objecting to it. I am only trying to understand the illustration; and I still think you have not made your point.


James Sinclair: I am sure that if I were to take a vote it would show that almost every other member has understood it.


James MacKerras Macdonnell: I understand the argument made; but it does not cover the point.


Mr. Mclvor:: I would like to ask the parliamentary assistant -this question: Does that mean that every man who qualifies for an old age pension takes it whether he wants it or not?


James Sinclair: That is a matter which the Minister of National Health and Welfare will have to answer. As with family allowances, it is a matter of application. But whether he takes it or not, he will have to pay the tax- two per cent on income tax, two per cent on sales tax, and the extra two per cent corporation tax.


Major James William Coldwell: I follow the argument, and-I agree fully with the point of view expressed. But I wish to ask this: Would not the argument of the parliamentary assistant be strengthened if the government had not put the limit of $60 on the personal contribution?


James Sinclair: It is a matter of degree. I think the hon. member's argument illustrates best the fact that, quite aside from assessing this very heavy income tax on people of that range-the 75 per cent range at the top; despite all that, and the fact that he has already made a heavy contribution to the
Income Tax Act
exchequer, he is paying at least $300 for a benefit of $120. I think if we had applied the two per cent right across the whole thing he would be then paying about $2,300 for this $120 of benefit. And even for the very rich- 1 know the hon. member for Moose Jaw pointed out the way to soak the rich-even for them, I think there should be some measure of justice.
I think all hon. members have wanted to have this story on the record. I believe they will agree that tax matters are difficult; but any member who wishes to have information or help on any tax matter in preparing a tax speech is more than welcome. He may consult the deputy minister of finance, or the assistant deputy ministers. He may lay the matter before the deputy minister of taxation or the deputy minister of customs and excise. Or, he might even consult the parliamentary assistant-as the hon. member for Moose Jaw was accused of doing in the press, but which was not so. Had he done so, he would have been guided away from that error.


Daniel (Dan) McIvor: Then the hon. member for Moose Jaw was wiser than a lot of us thought he was.


James Sinclair: Other points have been raised. I have now gone through the major points which were discussed by the hon. member for Hamilton West. I have taken them first, and I have not done so because she is a lady- indeed, I know she wishes to be regarded ais the equal of other members in the house-but because her speech was the only one devoted entirely to taxation matters in the budget debate.
At page 1484 of Hansard the hon. member for Rosetown-Biggar (Mr. Coldwell) maintains that the tax to be paid in 1952-and he quite properly separated that from the old age security tax-will be higher than that paid for 1951. He gave two examples which he asked the Minister of Finance to check.
The examples, of course, were right, and they check with the tables. Nowhere in the budget speech did the minister claim that the tax for 1952 would be less than the tax for 1951. He did say, however, that the tax in 1952, disregarding the old age security tax, would be lower as a result of the proposed changes than it would be if no amendment were made to the present law. If changing the rate structure results in lower taxes than would be the case if no action is taken, surely the change must be called a tax reduction.
In this connection I wish to put three quotations on the record from the minister's speech. The first of these is found at page 1253 of Hansard, toward the bottom of the page, where

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he first opened up on the personal income tax field. This is what he said:
In the personal income tax field a new rate schedule will be introduced. Into this new schedule I propose to incorporate most of the weight of the present 20 per cent surcharge. There will be some over-all abatement although in saying this I should remind the house that the two per cent income tax imposed by parliament last session under the Old Age Security Act will be coming into force on July 1 of this year.
Then, at page 1254, he said:
I expect the revenue loss as a result of these changes to be about six per cent in a full year and this loss in revenue is a general indication of the average gain to the individual taxpayer.
And the loss of revenue is obviously money the taxpayer did not pay in.
In other words, the average taxpayer will pay six per cent less than he would otherwise have done under the income tax law as it now stands.
Finally at page 1255 he returns to the subject, with these words:
I think I should make clear that the reductions in income tax which I have announced will not be sufficient, for most taxpayers, to offset the effect of the old age security tax.
The hon. member for Peace River (Mr. Low) made an interesting statement, which is set out at page 1491 of Hansard, as follows:
What the taxpayers of this country want to know and what they are entitled to know is exactly, in
dollars, what they have to pay in income tax in 1952, and by how many dollars that sum is greater or less than what they actually paid in 1951.
This information I now have in a series of tables now before me. I have already given one example, in connection with that discussed by the hon. member for Rosetown-Biggar, namely the married taxpayer with an income of $3,000. But, since the hon. member for Peace River has asked for more detailed information, I have had prepared what I believe is a fairly complete set of tables setting out exactly what he asked for. I agree with him that it is not percentages about which his constituents are worrying, it is the dollars in their pockets. With that in mind I have had prepared information with respect to 1951, 1952 and 1953 personal income taxes, first of all for the single taxpayer, then for the married taxpayer with no children, for the married taxpayer with two dependents and not eligible for family allowances, and, finally, for the married taxpayer with two children who is eligible for family allowances. If the house wishes to have this information I shall be pleased to place it on record.


Some hon. Members:: Agreed.


James Sinclair: The tables are as follows:
1951, 1952, 1953 PERSONAL INCOME TAXES
Single Taxpayer
Income	1951 Tax	1952 TaxO) Payable Before Budget Reduc- tion	1952	1953	Income Tax	Old Age Security Tax	Total	Income Tax	Old Age Security Tax	Total$	$	$	$	$	$	$	$	$1,000	1,200	33	38	35	2	37	34	4	381,500	83	95	88	5	93	85	10	952,000	165	190	175	10	185	170	20	1902,500	259	297	274	15	289	265	30	2953,000	352	404	372	20	392	360	40	4003,500	457	523	484	25	509	470	50	5204,000	561	642	596	30	626	580	60	6405,000	770	870	820	30	850	800	60	8607,500	1,397	1,554	1,487	30	1,517	1,450	60	1,51010,000	2,156	2,382	2,301	30	2,331	2,250	60	2^31020,000	6,556	7,182	6,951	30	6,981	6,750	60	6^81030,000	11,726	12,822	12,371	30	12,401	11,950	60	12^ 01050,000	23,995	27,207	25,195	30	25,225	24,354	60	24^41475,000	40,990	44,747	42,965	30	42,995	41,554	60	41i614100,000	59,085	64,487	61,960	30	61,990	60,004	60	60,064200,000	139,055	151,727	145,880	30	145,910	141,404	60	141 * 464400,000	311,425	339,767	327,570	30	327,600	318,344	60	318,404
(') Includes old age security tax.
Note.-In calculating the above taxes it has been assumed that all incomes up to $30,000 are entirely earned incomes, and that incomes of more than $30,000 include earned income of that amount and additional investment income to make up the total. No account has been taken of the 10 per cent tax credit.

Income Tax Act
1951, 1952 AND 1953 PERSONAL INCOME TAXES
Married Taxpayer-No Children
Income	1951 Tax	1952 TaxC1) Payable Before Budget Reduc- tion	1952	1953	Income Tax	Old Age Security Tax	Total	Income Tax	Old Age Security Tax	Total$	$	$	$	s	$	$	$	$2,000	2,250	42	48	44	3	47	43	5	482,500	83	95	88	5	93	85	10	952,750	124	143	132	8	140	128	15	1433,000	165	190	175	10	185	170	20	1903,500	259	297	274	15	289	265	30	2954,000	352	404	372	20	392	360	40	4005,000	561	642	596	30	626	580	60	6407,500	1,133	1,266	1,206	1,236	1,175	1,23510,000...	1,826	2,022	1,946	1,976	1,900	1,96020,000 ..	6,061	6,642	6,431	6,461	6,250	6,31030 000 .	11,176	12,222	11,796	11,826	11,400	11,46050000 	23,390	25,547	24*565	24,595	23,754	23,81475 000 .	40,330	44,027	42,280	42,310	40,904	40,964100 000	58|370	63,707	61,220	61,250	59,304	59,364200 000	138^285	150,887	145,060	145,090	140,604	140,664403 000 .	310,600	338,867	326,690	326,720	317,484	317,544
(!) Includes old age security tax.
Note.-In calculating the above taxes it has been assumed that all incomes up to $30,000 are entirely earned incomes, and that incomes of more than $30,000 include earned income of that amount and additional investment income to make up the total. No account has been taken of the 10 per cent tax credit.
1951, 1952 and 1953 PERSONAL INCOME TAXES Married Taxpayer with Two Dependents not Eligible for Family Allowances
Income	1951 Tax	1952 TaxC1) Payable Before Budget Reduc- tion	1952	1953	Income Tax	Old Age Security Tax	Total	Income Tax	Old Age Security Tax	Total$	$	$	$	$	$	$	$	$2,800	3^000	33	38	35	2	37	34	4	383,500	116	133	123	7	130	119	14	1334,000	202	233	214	12	226	208	24	2325,000	394	452	417	22	439	404	44	4487,500	939	1,055	1,000	30	1,030	975	60	1,03510,000	1,597	1,772	1,701	30	1,731	1,660	60	1,72020,000	5,665	6,210	6,015	30	6,045	5,850	60	5,91030,000	10,736	11,742	11,336	30	11,366	10,960	60	11,02050,000	22,889	25,000	24,045	30	24,075	23,258	60	23,31875,000	39,785	43,432	41,716	30	41,746	40,368	60	40,428100,000	57,781	63,064	60,612	30	60,642	58,728	60	58,798200,000	137,652	150,196	144,388	30	144,418	139,948	60	140,008400,000	309,923	338,128	325,970	30	326,000	316,780	60	316,840
(l) Includes old age security tax.
Note.-In calculating the above taxes it has been assumed that all incomes up to $30,000 are entirely earned incomes, and that incomes of more than $30,000 include earned income of that amount and additional investment income to make up the total. No account has been taken of the 10 per cent tax credit.

Income Tax Act
1951, 1952 and 1953 PERSONAL INCOME TAXES
Married Taxpayer with Two Children Eligible for Family Allowances
Income	1951 Tax	1952 TaxO) Payable Before Budget Reduc- tion	1952	1953	Income Tax	Old Age Security Tax	Total	Income Tax	Old Age Security Tax	Total$	$	$	$	$	$	$	$	$2,300	2,400	17	19	18	i	19	17	2	192,500	33	38	35	2	37	34	4	382,750	74	86	79	5	84	77	9	853,000	116	133	123	7	130	119	14	1333,500	202	233	215	12	227	208	24	2324,000	296	340	313	17	330	303	34	3375,000	498	571	529	27	556	514	54	5687,500	1,060	1,187	1,129	30	1,159	1,100	60	1,16010,000	1,740	1,928	1,854	1,884	1,810	1,87020,000	5,913	6,480	6,275	6,305	6,100	6,16030^000	11,011	12,042	11,624	11,654	11,235	11,29550i000	23,209	25,349	24,376	24,406	23,574	23,63475!000	40,132	43,811	42,075	42,105	40^709	40,769100'000	58,150	63,473	60,998	61,028	59,094	59,154200'000	138,054	150,635	144,814	144,844	140,364	140,424400j000	1	310,353	338,597	326,426	326,456	317;226	317,286
(') Includes old age security tax.
Note.-In calculating the above taxes it has been assumed that all incomes up to $30,000 are entirely earned incomes, and that incomes of more than $30,000 include earned income of that amount and additional investment income to make up the total. No account has been taken of the 10 per cent tax credit.
The next point made by the hon. member for Peace River was that the total tax load per capita in 1938-39 was $69.12, and that by 1951 this had risen to $360. A comparison of the total per capita tax payments in two separate years is not a very good indication of changes in the total tax burden. A study of the national accounts shows that the total tax take of the federal, provincial and municipal governments from the Canadian people in 1939 was over 21 per cent of the net national income. In 1951 the percentage of net national income taken by the three levels of government was about 29 per cent.
I wish to comment on that figure. This is not a large increase, in view of the enormous costs of the war and the present defence program which must be met by increased taxation. The comparison between 1938-39 and 1951 covers not only six years of the most expensive war in history, but also extensive post-war defence operations. That is the point I wish to make, so far as that 29 per cent is concerned.
Furthermore, the hon. member for Peace River overlooks the extent to which taxes are now only transfer payments going back to

Canadians in such forms as family allowances, old age pensions, and interest on the public debt, various grants and subsidies to special groups, and payments to the provinces. This would include coal subsidies, and the like. Transfer payments of this kind to the provinces-subsidies, tax rentals and the like-are not properly speaking expenditures by the federal government, since they do not spend the money.
In the analysis by the Australian economist, Clark, to which reference has been made, he places the danger point on government spending at 25 per cent. That is exclusive of transfer payments. But transfer payments by the federal government last year amounted to about $1,500 million. I think those are probably the main points raised on item 1 of the income tax resolution.


Mr. Laing:: First of all I want to compliment the parliamentary assistant on the excellent presentation of these matters that he has made both today and yesterday. I hope that he can continue his good record with respect to the matter that I now want to bring to his attention. It has to do with the question of dependents allowances, and

has particular application to a subject he has just been discussing, the question of the old age pensioner. I hold in my hand a copy of the individual income tax form. This happens to be my own most recent tragic experience. I find at the top of page 2 a statement beside one of these orange asterisks, which the department likes so well, to the effect that one may not claim a dependent whose income was over $500.
I think a very unrealistic situation has arisen as a result of our no-means-test old age pension. I am sure we all realize that in every instance the old age pension is considered as income for taxation purposes. We are paying $480 a year to all our citizens 70 years of age and over with appropriate residence in Canada, but are only allowing $500, or $20 more, as a deduction for 'the children who in many instances support them. I think that is wrong. I think it is unrealistic in the light of our excellent Old Age Security Act.
There is another smaller but still very important group of people to whom I think my contention applies. I refer to people of junior age, particularly those who are attending university at the present time. The provision there respecting income is a limit of $500. There was a time in the very early twenties when the parliamentary assistant and I went to university together. It was a very rare occasion when a student could make $500 in a summer. At the present time if they are any good at all they do not have a great deal of difficulty making $500, and I think it is a good thing that they do not because universities have found that their costs have risen. In almost every instance they have had to raise their fees to a considerable extent. Today such fees are in the neighbourhood of $350 compared with the $75 that I used to pay. Having regard in the first instance to our old age pensioners and also having regard to the inflated conditions confronting our younger people today, I think we have an economic anachronism there. I have made representations on this matter to the minister already, and if he were to give it study I think he would see the justice and fairness of the claim. I hope that in the future he will correct the situation.


James Sinclair: The hon. member did raise this question with the minister. It is one which normally would not come to the attention of most citizens, and I suppose most members of parliament, until next spring when the sons and daughters who are supporting their parents will suddenly realize that they can no longer claim as dependents those whom they have been claiming up until
Income Tax Act
now because they are now in receipt of the means test free old age pension and their incomes are now over $500. The Minister of National Health and Welfare raised the matter on the ministerial level with the Minister of Finance. The situation is exactly as the hon. member for Vancouver South has outlined it. Everyone 70 years of age and over is now assured of $480, and if such a person has additional income of $200 his total income is now $680 and he is no longer regarded as a dependent.
The minister has taken the matter under consideration and has decided that in view of the situation the allowance for a dependent is going to be increased from $500 to $600 from this year on. The situation of the young university student will of course be covered to an extent, or any other child under 21 who is able to earn money in summer vacation. The situation however is not quite as rough on the borderline of the $500, or $600 as it will be, as some members think. There is in the Income Tax Act section 31 (8) which provides that if a dependent has an income over $500-it will now be over $600 -that does not debar the person from being claimed as a dependent if the income is, we will say, $620 or $625. It would be very unfair if an income of $599 was included and an income of $601 was not. Therefore we have a tapering off provision over $600 with which some hon. members will be familiar.
The claiming taxpayer can add the amount of the excess over $600 to the tax he pays and list the person as a dependent. There is a very quick and obvious ceiling on that. In the case of the example I used of $200 additional income that person would be $80 over the ceiling. The point is of course as to where the limit is, above which it is not profitable to add the excess over $600 to the tax. If we take the $600 first of all at the base rate of 17 per cent, which is the rate paid by the great bulk of low income people who pay taxes, 17 per cent of $600 is $102, so up to $702 the tapering off provision applies.


James MacKerras Macdonnell: I think on the whole it has been convenient to have this reply by the parliamentary assistant to the taxation questions that were asked. Perhaps it makes it a little difficult to go back and discuss more general considerations which I think should be discussed at this point in our study of the resolution, but nevertheless I wish to do so for a brief period of time. I hope I am not one of those people who like to go on repeating things over and over again, but I think our position with [DOT]espect to taxation at the present time is

Income Tax Act
something that should be dwelt on, that it is tremendously in the people's minds, and that now that the budget is nearly through we are going to be in great danger of getting into a situation like the weather. Everybody talks about it and nobody does anything.
Yesterday afternoon we talked for a few hours and in the course of the discussion passed resolutions covering about a billion and a half dollars. Today, if my arithmetic is good, when this resolution has been finished we will have passed a resolution covering approximately two and a half billion dollars. We do that in the course of a few hours, but when we have done it that is just the beginning. Then the millions of taxpayers throughout Canada begin to pay the taxes. I think they are terribly disturbed about the present situation. As I said before, I think they are angry about it, and I think we should spend some time considering their state of mind and why their minds are in that state. Of course part of their state of mind is caused by the fact that they were perplexed and troubled about the surplus of last year. I am not going to dwell on that. It is not surprising that when people who were already groaning under their taxes saw hundreds of millions of dollars piled up-


James Sinclair: I rise to a point of order. It was my understanding yesterday that the general discussion was going to be on the whole resolution as such, and that we were not going over the entire field of the main budget debate again. There is no reference in any of these items to the surplus, which of course involves not only ways and means but also supply. In my remarks I was very careful to stick entirely to the taxation matters which have reference to these various items. I would like your ruling, Mr. Chairman, as to whether we are again to cover the entire field of taxation on this specific income tax resolution.


James MacKerras Macdonnell: If I may
comment on that, today we are going to be asked really to take a second step in voting $2,500 million. I submit there are certain general considerations which arise. I propose, for example, to say something about the question of economy, because it seems to me that when we are discussing $2,500 million we are entitled to ask whether there is any possible way this amount could be reduced.


James Sinclair: I rise on that question immediately, and point out that in this very long procedure in connection with tax bills we have first of all the budget debate, on the motion that the Speaker leave the chair,

during which there is complete freedom to any hon. member to speak on any phase of taxation or otherwise. When we come to these resolutions we are supposed to discuss their principle, which is the increase or decrease in specific taxes. Once again I repeat that in ordinary language these resolutions are merely a warning to hon. members that tax bills are coming. The hon. member will have a wide-open opportunity to talk on any matters he wishes to raise as far as the general taxation policy is concerned, on the second reading of these various tax bills. Again I submit that I think it is helpful to have on the first item a general discussion on all the items of the resolution, as we did yesterday, and then proceed to specific discussion of individual items. I think in that way we can make the most progress and be in order.


James MacKerras Macdonnell: I submit that yesterday no such narrow or technical interpretation was given. We did discuss in a general way matters affecting the customs tariff, excise taxes and so on. Speeches were made indicating the effects of these taxes in various ways. I want now to indicate in general the effect of these taxes, and to raise the whole question of whether this huge amount of taxation is necessary.


The Chairman:: I think the hon. member will remember that yesterday I called the hon. member for Winnipeg North Centre to order because he proposed to discuss the sales tax generally. I cannot put my finger on the page in Hansard containing what I said then, but if I remember correctly it was to the effect that he could discuss generally the six or seven paragraphs having to do with sales tax, but that he should not go over the whole field. I think I also said that incidentally, in passing, he might make reference to certain suggestions having to do with sales tax which are not contemplated in the resolution, but merely as a passing reference.
In committee of supply or ways and means or of the whole I am bound to have standing order 58, second paragraph, observed. That standing order provides that speeches in committee of the whole house must be strictly relevant to the item or clause under consideration. It is true that in practice on the first item we do have a general discussion; but one must understand that it is a general discussion on the paragraphs of the resolution now before us. If the hon. member makes passing reference to other matters it must be no more than that.


James MacKerras Macdonnell: Well, Mr. Chairman, I bow to your ruling, not only in

a formal way but because I have respect for it. I would only comment that in spite of what may have been the wording of your ruling yesterday in connection with the hon. member for Winnipeg North Centre, actually I think he was allowed to take, in his usual way, a fairly wide range in what he had to say. I have been perhaps a rather simple soul and a little too frank in indicating what I was going to say. What I should have done was say it without indicating in advance.


Stanley Howard Knowles: Come up and see me sometime.


James MacKerras Macdonnell: I may learn when I am older. I would like to make reference to one thing which has to do particularly with paragraph 5, but which also has to do with the general question of taxation; that is the way the resolution passed: by this house was dealt with. I understand the Minister of Finance was asked some questions regarding it yesterday in North Waterloo, and no doubt if he were here he would be able to answer my questions with more gusto.
I want to point out that I think a most unfortunate situation was created when that resolution was passed. There is no doubt in the world but that everyone in the house considered that a resolution had been passed unanimously asking that the 4 per cent exemption be altered. There is no doubt in the world that is what happened. How the government was caught off base as it was, I do not quite know. Later on it was explained, of course, perhaps with certain intellectual validity, that all the resolution actually said was that the government should be asked to give consideration. In his speech I think the parliamentary assistant quoted the Minister of Finance as saying in a general way, "Why, yes, of course; we will consider what anybody says." That is not very flattering to the house. Though that may be the attitude which is developing toward the House of Commons, it is not always stated so frankly.


Louis-René Beaudoin: Order. I must remind the hon. member that this matter was fully discussed and dealt with. The C.C.F. party moved, as an amendment to the motion that the Speaker leave the chair, that this very matter be considered. During that discussion the whole question of the resolution which has been introduced in former sessions and the vote taken this session was discussed fully. That amendment has been disposed of. Now the hon. member is going back to a matter which has been discussed previously, and he should not make repetitions.


Stanley Howard Knowles: On the point you have just raised, Mr. Chairman, I respectfully suggest
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that more consideration might be given. First of all I point out that the parliamentary assistant made a passing reference to the matter this afternoon and said that he expected* a good deal would be said about it during the course of the debate this afternoon. I agree that it should not be dealt with in the general discussion unless it is related to a paragraph dealing with the matter; but there is such a paragraph in this resolution.
May I also point out that many times in a budget debate we have had an amendment or subamendment dealing with some aspect of the budget, and despite the fact that there has been a negative vote on that amendment or subamendment the matter dealt with therein has* been discussed in committee on the budget resolutions. The house may have turned down the motion, but the subject matter has not yet been disposed of by the committee of ways and means. If you wish to suggest that the discussion on this matter be confined to paragraph 5, that is a different point; but I respectfully suggest that you should not deny us the right to discuss the question of the floor under medical expenses. May I point out, as a matter of fact, that the changes being proposed in paragraph 5 are related to and inextricably tied in with the other question, so we will not be able to avoid discussing that phase of the matter.


Louis-René Beaudoin: If I may clarify my
remarks, I was not referring to the rule which provides that once a matter has been decided by a vote it stands as the judgment of the house and therefore no reference can be made to it. I had in mind the citation which has to do with self-restraint, and that hon. members should avoid discussing over and over again matters which have already been dealt with in former debates. In opening his remarks the hon. member said he would try to avoid repetition, that he was not a member who liked to indulge in repetition.
I was, therefore, bringing this to his attention.


James MacKerras Macdonnell: I am glad, Mr. Chairman, of the view you have taken, because it does seem to me that this question which I have been discussing does arise again of its own motion, so to speak, under the terms of this resolution. Actually, I have very little further to say on it except that I think the voters of this country, however moderate their opinions may be of the members that they send here, will be surprised that the members of this house can vote unanimously to have something done-which is the way they will understand it-and find out that it does not mean anything at all. It does not mean anything more than if the smallest village council in Canada sent in the samo

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suggestion, because as we were told the minister is ready to consider all views emanating from anyone. Apparently the views of the House of Commons are treated exactly the same.


Mr. Fournier (Hull):: The hon. member is repeating what he said on the main debate. He said that twice during his speech.


James MacKerras Macdonnell: The minister is wrong, because on the main debate I did not-


Alphonse Fournier: I thought he did not want to repeat.


James MacKerras Macdonnell: I shall correct the minister by saying that on the main debate I did not deal with this subject at all.
I believe he will find that out.
I just want to add one or two further comments, about the complexity in which we find ourselves in the first couple of resolutions. I believe that is due partly to the fact that the department-we never refer to the experts, but of course they are there-has had a most complicated task in trying to meet the political cycles which have been whirling around so rapidly. The result of that is that we had a special taxation period for the half of 1951, and now we are going to have a different one for half of 1952. We have to wait until we get to 1953 to really get going.
I believe that any other observations I wish to make can rest until later, so I shall not have to try your patience, Mr. Chairman.


James Sinclair: I should like to answer some of the points made. First, on this matter of consideration, there is no group of issues coming before the Canadian people in which every Canadian has so much interest as in taxes. I say that the Minister of Finance is quite right in saying that he will give consideration to any reasonable proposal put forward by any group in this country, from the House of Commons down to the smallest village council and on down to the smallest wage earner in this country.


James MacKerras Macdonnell: All I suggested was that the House of Commons might have a special position.


James Sinclair: I myself as a member of parliament want no more special position for representations on taxes than any of my constituents.
The second point concerns this matter of consideration, because the Minister of Finance is bound, and should be bound, to give consideration to all tax proposals. These motions that are moved by private members on material matters, and which start by saying

that consideration should be given to something, have a very special implication for the minister. It was for that reason the minister instructed me to say, as I did, that of course we would give consideration to this or any other proposal. When the hon. member, at the conclusion of his remarks, tried to imply by speaking very smoothly, as he generally does, that the house was giving assent to the proposal I jumped up and said, "No, no, we are recommending that the government should consider this proposal."
I want to say that in future, so far as the present Minister of Finance is concerned, if such proposals are going to be moved immediately before the budget, while the minister will give them consideration, they are not to be accepted in that sense. Obviously, if acceptance of a motion for consideration before the presentation of the budget means acceptance of the principle, then the whole principle of budget secrecy is gone. Every member would load down the order paper with every conceivable resolution on every phase of the tax structure.


James MacKerras Macdonnell: You are
really admitting my whole point. Thank you.


Stanley Howard Knowles: Will the parliamentary assistant permit a question on that point? Would he explain why that attitude is being taken with respect to a motion this year referring to the deductibility of medical expenses, when a year ago a motion respecting the deductibility of trade union dues was not accepted but was voted down.


James Sinclair: Obviously that was the right thing to do, and for the very reason I have been advancing, because in the end the thing was done.


Stanley Howard Knowles: In other words, the government does the opposite of what the house votes for. Is that it?


James Sinclair: What I was trying to point out was that, far from the government doing the opposite of what the house has voted for, if hon. members want to load down the order paper before the budget with every conceivable resolution on tax matters, and once the government said they would accept them for consideration it meant they were inevitably in the budget, then we would be in the position of having no budget secrecy. Under the British parliamentary system, budget secrecy is important so that no group shall have undue advantage by knowing of budget changes.
The second point is even more interesting, because if there was one thing I thought the hon. member for Greenwood would have

understood with his long experience in business, it was that the government is anxious to bring about as little disturbance in industry in this country, and to avoid as much unnecessary paper work as possible. In my budget speech I explained at some length the reason why we have this division in the middle of the year. It has nothing to do with the government. In the old days when income tax was paid in a lump sum in the spring, no such problem arose. Today, when we deduct the great bulk of income tax through payroll deductions, week by week or fortnightly or monthly, depending upon the way the employee is paid, we have to supply every employer in the country with a tax schedule to show at what rate he should make deductions from his employees, dependent first of all on their wage and secondly their marital status. These deductions are incorporated in every pay sheet for every industry in this country.
If we were, for example, to have incorporated the full 20 per cent surcharge in last year's taxes, it would have meant that we would have had a 40 per cent surcharge for the last six months of the year because the budget was not approved until June. Then, immediately after January 1 of this year, the surcharge would have been returned to the 20 per cent, because it would have been for the whole year. This would have meant a double change in the tax schedules and payrolls of industry. It is for that reason that every tax change we have had since we adopted this policy of deductions at source- a policy which is not only convenient to government but is a real convenience so far as the individual taxpayer is concerned because he does not have to find a large sum in the springtime-has resulted in this split in the year's taxation.
Last year, for example, the tax tables which were in effect for the first half of the year were the tax tables without the surcharge which was only approved and given the royal assent in June. During the second half of the year the 20 per cent surcharge went into effect, so the same schedule could be used this year if no tax changes were made. Those schedules are in effect now. We hope that the income tax bill will be approved and become law by June, so that on July 1 the new rates which are mentioned here can be incorporated. For the first half of this year, the deductions will have been made at the 20 per cent surcharge level.


James MacKerras Macdonnell: All I am
saying is that by chopping and changing you make it difficult.
55704-130i
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James Sinclair: That is a little different from the inference given. Now that I have explained that it is a convenience to both the taxpayer and industry, the hon. member is backing away from it.


Major James William Coldwell: I was going to say that, first of all, the parliamentary assistant has just said that a vote on a private member's resolution should be treated by the government in a manner different from a vote on a government measure. I have always felt that members of the house should be free to vote as they wish on a private member's resolution. This afternoon the parliamentary assistant made a statement that the government in the future will have to see that resolutions of the description of the one which we were discussing will not be approved by the house.


James Sinclair: On tax matters before the budget.


Major James William Coldwell: Yes, on tax matters by the government. I take it that is the decision of the government for future guidance. I think that is unfortunate. I think that, on occasion, we should have in the House of Commons opportunities for members of the house to vote freely. I know that I was criticized for a statement made in the same connection outside the house and repeated in the house.
I know that some members felt that I had been rather harsh in what I had said. But the statement made by the parliamentary assistant this afternoon would give colour and credence to what I said.
I think that there are two different sorts of resolution which come before the house.
I understand perfectly well that when the government brings down a motion in support of a policy which has been decided upon by the cabinet and has been thoroughly discussed by them, they expect their own members to support it. That is one thing. But when we have before the house a private member's resolution simply asking the government to consider something, I think that every hon. member should have the opportunity and the right to vote as he pleases in that connection, asking the government to consider something.
I quite agree with the hon. gentleman that the wording of such a resolution does not bind anybody. But there are no opportunities for members of the house to express themselves as a house, apart from party allegiances, if we consider a resolution moved by a private member, particularly from the opposition side of the house, to be one that the government members must of necessity vote down. I think that is an unfortunate position into which we are getting in this parliament and, as a matter of

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fact, in other parliaments as well. X dislike the congressional system in the United States where the party lines are somewhat more flexible, but in the interests of the expression of the opinion and the will of private members, I think that we in this house should give some thought to our particular problem.
I am glad that the parliamentary assistant dealt with the question of a means test; and I think he did it extremely well. I think he *confirms the opinion that most of us in this chamber hold, namely that the means test should have been abolished earlier; and we were happy when it was abolished. As I interjected, I think that the position would have been greatly strengthened if, in the 2-2-2 formula the government had not placed the ceiling of the $60 maximum payment by income taxpayers. It would then have been based more on ability to pay than it was. But on the whole, I think that the explanation he gave today is one that is acceptable to the committee.
I want to add this. I do not care where you attempt to put the means test, you are going to have two difficulties arise. You are going to make the people who come under the means test and get the pension feel that they are accepting something of a semicharitable nature. That illustrates one of the great advantages of abolishing it. The other thing is this. I think most of us in the committee know that a few people who normally were fairly honest sometimes stretched their consciences a little far in making application for the old age pension. I am indeed glad that no one is now compelled or invited to stretch his conscience. In dealing with taxation matters I think we should encourage our people to be honest in every respect and that we should see to it that nothing in the nature of deception is invited or permitted in connection with our income and other taxes. I believe that the government and the officials of the department have been trying to do this in all particulars.
What I really rose to say is this. The income tax is of course the fairest form of taxation. It is based primarily on ability to pay; and as we have it in this country, it is on a graduated plan. I believe, however, that it is a pity that the government did not consider raising the exemptions somewhat. The cost of living is extremely high in this country and the exemption of $1,000 and $2,000, which seemed satisfactory a few years ago, is no longer satisfactory on account of the high cost of living. I wish the government had considered raising the exemptions say to $1,500 for single persons and $3,000 or even
[Mr. Coldwell.l
$2,500 for married couples, in that way enabling a good many people to meet the increased cost of living more easily.
May I also add this thought. I do not know what the future holds, nor does any other member of this committee. But the very fact that the government felt constrained to reduce or remove the excise tax to the extent it did and to remove credit restrictions a short time ago, I think indicates clearly that there is some necessity for enabling people to buy more of the goods that are being produced. I do not want to go into this matter at all fully this afternoon because I do not believe this is the place to do it. But I want to remark that, from the study I have given to the recent trends economically, it would seem that our tremendously increased capacity for production, for turning out vastly increased numbers of goods-coupled with the fact that the Korean war perhaps has not meant that we have to produce as much in the way of war supplies as the nations thought they would have to produce and so on-is causing a piling up of goods and inventories, and people are unable to buy the goods. At such a time I think an argument can be made- and a good one-for increasing purchasing power, particularly in the lower groups, in order that they may relieve industry of some of the goods that industry is producing. I want to leave that thought with hon. members and with the government.
The other comment I want to make is this. A slight easement has been made in the corporation tax. I know that in this chamber from time to time a great deal of discussion has occurred regarding the corporation income tax. I know that from time to time the Minister of Finance and others have pointed out that our corporation income tax-particularly when you reckon in what has been done in two of the provinces-is a high tax. Indeed, it is sometimes said that it is one of the highest in the world. When we compare our corporation tax with that of the United States, for example, what I think we are overlooking, is that in the United States they have two other taxes that go with it. They have the excess profits tax, which has also been reintroduced in Great Britain. They also have a capital gains tax. As hon. members know and as you, Mr. Chairman, know, we believe there should be a capital gains tax in Canada.
At noon today, and quite at random, I happened to pick up a book on my desk and to open it at a page where certain facts were given in connection with capital gains in the United States. Here is one example that I saw. It is an outstanding one, I admit,

and not an average one but it stuck in my memory. Two hundred shares at $6 a share of the Pepsi-Cola Company in 1939 were, in 1945, worth $225,000. There is a capital gain of an extraordinary size. It seems to me that that capital gain should be taxed. The same is true of lesser capital gains where the individual does not turn a hand to do something to improve the economy of the country but takes advantage of the times in which we live. I could hardly credit that amount, but it was in a standard work on my desk today. Of course it may have been something in the nature of a misprint. There may have been a cipher in the wrong place or something or that sort. While that may not be a typical example to give, let me say this. Capital gains of enormous amounts have been made in the past few years on the stock market, in the increase in the value of land, the community creating the value of land, as Henry George used to teach us years ago. And certainly when the community creates a value it should get something from that value. We should have a capital gains tax. As for the corporation tax in our country, it is high, yes, but when we consider that other countries have an excess profits tax and a capital gains tax as well, as in the United States, then of course it does not seem as relatively high as it otherwise might do.
On the whole I want to say that in our opinion the direct form of taxation, that is, the income tax on a graduated scale, along the lines we have here-although I might, as I said, suggest a higher exemption; we might suggest too a steeper tax in certain of the brackets-is to be preferred to any other form of taxation that we know, because it is based to some extent on ability to pay.
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What I would like in the future, when the government is looking for new sources of revenue and reconsidering the income tax, in view of the necessity of having as much purchasing power in the hands of the lower income groups as possible, is to see the exemption raised. It will be noticed that I said "in the lower brackets", not in the higher brackets. I think they have enough purchasing power now. The corporation income tax should also be rounded out by a capital gains tax and excess profit.


James Sinclair: Income Tax Act
We have very much the highest income tax exemption on the basic single status and the married status.


James MacKerras Macdonnell: How do our
taxes compare?


James Sinclair: As far as our taxes are concerned, 1 think the minister put them on the record when he made his budget speech. I am sorry, he did not this year. As far as our taxes are concerned, my recollection from the tables I have seen-but we will have a table on income tax when the bill is before us-is that their rates in the lower brackets are higher. The point made by the leader of the C.C.F. party is that he would like perhaps a little more progressive rate in the top brackets. Well, item 1 finishes up with a top rate of 86 per cent on the top incomes. Before this provision it was 100-8 per cent. At 86 per cent it is still a pretty savage rate in the top income bracket. On top of that there is a 4 per cent investment surtax, making it actually 90 per cent.


James MacKerras Macdonnell: Were there any fatalities among the people who found they had 100-8 per cent tax?


James Sinclair: People with that amount of income are not easily disturbed. They do not have the worries that most of us have. The hon. member referred to the slight easement in the corporation tax. A little earlier in my budget speech I mentioned the fact that as far as the 2 per cent personal income tax and the 2 per cent sales tax paid to the government were concerned they were not properly taxes. They are actually a form of contribution to the old age pension system. However, with the corporation tax there is a little difference in outlook, because-


Mr. Browne (St. John's West):: Some who are taxed may not get any old age pension.


James Sinclair: There is a tax on everybody; that is right. But in the end the individual presumes he will be in receipt of the old age pension if he lives that long. No matter how long the corporation lives it will not receive old age pension, so the actual practical effect as far as this is concerned is that we have given this abatement of -6 per cent in the corporation tax level, but the actual final effect of that in Canada today is that the corporations pay 52 per cent in eight provinces and 54 per cent in the other two provinces.


Mr. Low:: They just pass it on to the individuals in prices.


James Sinclair: It depends. No absolute statement of that kind can be made. It depends entirely on the competitive position of the corporation.


Mr. Gillis:: Corporations get subsidies and subventions, though.


James Sinclair: Corporations are not alone in that, as my hon. friend knows. They are not alone in this matter of getting subsidies and subventions from the government. I think a considerable number of individuals across this country get subsidies and subventions in one way or another, and I think I can recall the hon. member not so long ago asking for an increase in the coal subvention.


Clarence Gillis: I will likely continue that.


James Sinclair: I do not think the matter of a capital gains tax need be discussed again. We had a full discussion on it last year. I think most people agree that in an established society in view of the accretion in value which comes because of community effort, the sort of thing which the hon. member for Rosetown-Biggar said was one of the principal tenets of Henry George's single tax, there is a good case for the capital gains tax. But in a pioneering country where so much of our capital is venture capital, -where it is true the amount made may be large but where a man runs the risk of losing not just his income but his capital- there is not the same case for a capital gains tax. I hear someone behind me say, "hear, hear." What I have said refers particularly to venture enterprises such as oil and mining, and enterprises generally in the northern part of this country.
The hon. member mentioned the unique case, the fantastic case, of the increase in value of the shares of a soft drink company. An increase like that is a surprising thing. So surprising is it that there must be some special reason for it. It has been suggested to me that at the time that the stock was almost worthless they were involved in a very difficult patent suit with their main competitor. Had that patent suit been lost even the $1,200 would have been down the drain. That is a very unusual case. At that time they actually ran the risk of losing their entire capital. I think these are the main points.


Howard Charles Green: The parliamentary assistant has mentioned the deductions allowed for children. My understanding is that in the case of a son or daughter attending university there is an allowance of $400, if that young person is under 21 years of age.


James Sinclair: That is right.


Howard Charles Green: Apparently there is also some administrative provision under which such university student may go out during summer months and earn up to $500 in any one year, without the father losing the right to claim the deduction of $400. As the parliamentary assistant knows, it now costs at least $1,000 a year for a student to attend a university; and it seems to me there should be some change in the administrative provision whereby the student would be allowed to earn more than $500 during the summer months.


James Sinclair: That change has been made. The hon. member was out of his seat when the hon. member for Vancouver South asked about this matter. The allowable earnings have been increased from $500 to $600, for this year's income tax.


Howard Charles Green: Is that in the budget, under the act?


James Sinclair: It is done by regulation under the definition of dependency. When the minister has the bill before the house he will explain it at greater length. Because of that factor, and primarily because of the old age pension factor to which reference was made, the allowance has been raised from $500 to $600. There is a provision in the act, called the notch provision, whereby there is a tapering off when income is earned in excess of $600.


Howard Charles Green: Would it not be fair to place that figure at the actual cost to the student per year? I do not think there can be any question that the cost runs to at least $1,000 a year, or perhaps more than that in some faculties-engineering and medical, for instance.


James Sinclair: That comes down to the point we discussed before, namely that of special exemptions for special groups. It is quite true that every encouragement should be given to students who want to attend university. But then there are other classes of dependents who are equally deserving, and there would be resentment if special consideration were given to university students, and not given to these other classes. It was thought that the extension of the earning power was the fairest procedure- fixing it at $600, and tapering off to $702, I believe it is. This gives leeway for extra earnings in the summer months.


Stanley Howard Knowles: I feel the parliamentary assistant to the Minister of Finance has done a real service today in the analysis he has given of the relationship between the income tax on the one hand and old age pensions and
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family allowances on the other. All of us who were members of the old age security committee of 1950 will agree that it was the desire of that committee that, whatever financial arrangements were made, with the removal of the means test those in the upper income brackets would not benefit from it, but rather would pay back more than they actually received.
Most of us have known right along that that is the way it works out, and that fact is realized by most people. However there are a few throughout the country who are at times disturbed by the thought that we are using moneys of the taxpayers to make social security payments to rich people who do not need them. As I say, I believe the parliamentary assistant has performed a service today in setting out, as he did, figures to show the precise situation, which is that the wealthy pay back in taxation more than they receive in social security, and that is as it should be.
There can be no doubt that, with the exception of some modifications we might like to make-and I have in mind the $60 ceiling- the general principle of the relationship between income tax on the one hand, and old age pensions and family allowances on the other, is good. Indeed I hope the excellent statement in the matter made today by the parliamentary assistant might be read by those administering the Old Age Assistance Act, and also by members of the veterans affairs committee. We still have a couple of means tests affecting very important legislation, and I suggest that the request made by some of us from time to time for the removal of those means tests, is not wild-eyed at all, particularly in the light of the statement made this afternoon by the parliamentary assistant. It is time these other means tests were likewise abolished.
While I agree fully with what he said in that field, there was one section of his remarks with which I disagreed-and I am sure that fact will come as no surprise to him. I refer to what he had to say concerning the deductibility of medical expenses. Like my leader, I feel it is most unfortunate that the parliamentary assistant said what he did this afternoon. He has served notice, in advance, that any future private members' motions dealing with taxation matters presented in the house prior to the date of the budget will be defeated.
We have been told that there is no cracking of the whip on the government side. Well,

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here is a cracking of the whip even before motions of this kind appear on the order paper.


James Sinclair: Only because of the complete misunderstanding which happened in connection with that resolution. That is the only reason for it.


Stanley Howard Knowles: I submit that if there was any misunderstanding as to what happened in respect of this resolution, the fault lies on the government side. I need not discuss the matter in detail, as I did on April 23. No doubt the parliamentary assistant will recall what I said on that occasion, because I spoke shortly after he did on the same day. I pointed out that there have been a number of similar motions in the past asking the government to give consideration to certain propositions.


James Sinclair: Tax measures before the budget?


Stanley Howard Knowles: There was at least-


James Sinclair: Just one.


Stanley Howard Knowles: There was at least one tax measure before the budget; that was my own.


James Sinclair: And it was defeated.


Stanley Howard Knowles: And I pointed out to the parliamentary assistant not only tax measures before the budget, but other matters, some of which were quite innocuous, to the principles of which the government did not desire to be committed. Those resolutions have always been defeated, unless the government could persuade the sponsors of the motions to withdraw. I submit that if the government did not wish to be committed to the substance of my resolution of March 26 it should not have permitted the house to pass it. But it did permit the house to accept it; and in that instance it was the parliamentary assistant to the Minister of Finance who indicated that it was all right to carry the resolution, with the result that it was carried unanimously, and I believe the house and the country had the right to draw the conclusion which was drawn.
When my leader was discussing the matter a few moments ago, the parliamentary assistant made a point of interjecting that consideration could not be given to these motions if they were made prior to the date of the budget. May I point out to him the kind of restriction he is thereby imposing upon the House of Commons. I can tell him that in the fall of 1949, after the second budget of that year, I moved an amendment to a motion to go into supply which dealt with the deductibility of trade union dues. I had considerable difficulty in persuading Mr. Speaker

to accept my amendment, in view of the fact that budget matters were then before the house. It is a long story. It got involved with the flour milling report, so that eventually my amendment was allowed and was voted upon. I suggest that, however, to indicate the difficulty that a member has in bringing in a motion at any other time of the year than in the early part of a session. May I point out that the time for private members' motions is usually gone before the budget is brought down. Therefore what the parliamentary assistant has done is to serve notice on the House of Commons that the possibility of private members' motions with respect to taxation reaching a decision has been wiped out.


James Sinclair: May I interrupt the hon. member? Private members have never had any right to make decisions on taxation matters. That is purely and entirely the responsibility of the government, and in particular of the Minister of Finance. The hon. member has never had the right to make a decision on tax matters.


Stanley Howard Knowles: When I spoke on this question on April 23 I agreed with the position of the minister as the parliamentary assistant has put it now, but I also pointed out to him that the very same sections of the rule books which confine that right to the government also spell out the right of private members to bring in motions expressing opinions on matters that should be considered. The action of the parliamentary assistant today, which has been taken in the name of the Minister of Finance, is denying us the right to get a vote on a motion expressing an opinion. I submit that the parliamentary assistant is perfectly right in telling us what the position of the government is with relation to a matter like this, but I submit we are right in pointing out what the position of private members is as a result of the announcement the parliamentary assistant has made today.


James Sinclair: I quite agree with the position now taken. In every debate on tax matters that takes place before the budget, and in the course of which consideration is asked, every member of the house can put forward his view. Whether the motion for consideration is accepted, talked out or voted down, the government is then aware of hon. members' views on tax matters because they have been able to express them publicly, but they have never had any right of decision. Let me give you a personal case quite aside from the case which I stated on behalf of the government.


Stanley Howard Knowles: What is it, margarine?


James Sinclair: No, I am talking again on the 4 per cent. The hon. member has referred

to the margarine resolution. I recall earlier resolutions of mine on crown corporation taxation, something that has now come to pass under the present income tax resolution. I felt then and still feel that in putting forward such resolutions it would be helpful to have votes to show the opinion of members, but these tax considerations are in a very different category. With respect to the hon. member's motion to give consideration, he and other hon. members have repeatedly said that the house was unanimously in favour of the principle. I voted to give consideration, but anybody reading my speech of that day or who has heard me since will realize that I do not believe in exemptions of normal expenses, whether they be medical expenses or other things. I voted gladly for the motion that the minister should give further consideration to the matter, which was done.
What I am doing here is saying that we are going to revert to the practice which the hon. member mentioned in discussion of his resolution concerning the deductibility of trade union dues. It was the only one I could find in my limited research on these matters, and it is the best illustration I can give. It is quite true that we had a long discussion. Various members put forward their points of view. In the end the motion was defeated but the points of view expressed by members that day did have weight with the government. However, the government did not indicate that day whether or not they were going to do it any more than the Minister of Finance gives any other indication before the budget of what action he is going to take.
When the budget was brought down it showed that not only had consideration been given despite the vote in the house, which meant nothing, but favourable consideration had been given. In future exactly the same thing will be done with respect to the very narrow group of private members' resolutions which are introduced before the budget. However, if the acceptance of such motions for consideration were to be interpreted as meaning that the wish of the house had to be implemented by the government it would lead to budget changes being disclosed in advance.


Stanley Howard Knowles: Before the parliamentary
assistant interjected this last time I had just asked him to see our point of view as private members of the house contrasted with the point of view of the government. During the course of the remarks he has made he has pointed out that in his own experience he has seen the two sides of the case. He admitted in what he said that when he was merely an ordinary private 55704-131
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member he felt it was desirable, in connection with certain matters in which he was interested, to get a vote of the house if possible even if only on a motion that consideration should be given to certain matters.


James Sinclair: But never on a tax matter before the budget.


Stanley Howard Knowles: The hon. member referred to the question of crown corporations.


James Sinclair: Quite right.


Stanley Howard Knowles: There we are. The parliamentary assistant admits it.


James Sinclair: That matter was not raised before the budget.


Stanley Howard Knowles: But the parliamentary assistant admits that he felt in those days when he was just an ordinary private member that it would be desirable and would strengthen his case if he could obtain a vote of the house.


James Sinclair: No, the opportunity to air my views and the opportunity for other members to air their views in the house so the government could hear them.


Louis-René Beaudoin: Order. It seems quite clear that the two hon. members who are now speaking are not going to agree with respect to the treatment that might be given to the consideration of private members' resolutions in the future. I would ask hon. members to come back to the general discussion of the Income Tax Act.


Stanley Howard Knowles: I am prepared to accept your ruling. Obviously each of us could go on for a considerable length of time, and it is also obvious that neither of us is going to convince the other.


Alphonse Fournier: It has happened in the past.


Stanley Howard Knowles: Each of us thinks he is right on this matter.


Mr. Weir:: Would my hon. friend permit me to interject at this point? I understand he is going to leave the particular line of thought he has been following.


Stanley Howard Knowles: That is right. I have been told to do so by the chairman.


William Gilbert Weir: Perhaps I am going to get into trouble with the chairman.


Louis-René Beaudoin: Order. If the hon. member wishes to continue the discussion of this matter he is out of order. He should not speak on it. Sufficient debate has taken place on this question which was referred to in a very incidental manner by the parliamentary assistant and taken up by the hon.

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member for Winnipeg North Centre. If we are going to discuss it, then let us put aside the Income Tax Act resolution. What I have before me is the Income Tax Act resolution. I would ask hon. members to be reasonable and discuss the resolution.


William Gilbert Weir: I will accept your ruling. I was going to discuss the principle of the matter that the two hon. members were discussing. I think I had a better speech than either of them.


Louis-René Beaudoin: The hon. member may save it for another occasion.


William Gilbert Weir: I will forget it by then.


Stanley Howard Knowles: May I get back to the resolution now before us and to a point which the parliamentary assistant discussed in his opening remarks this afternoon. The parliamentary assistant said that following the debate on the 4 per cent question there had been correspondence between him and r citizen of the city of Hull, and that in all cases copies of the correspondence had been exchanged among the parliamentary assistant, the hon. member for Eglinton, and myself. When the parliamentary assistant referred to the matter this afternoon I told him that I would kindly oblige by answering one of the points he tried to make in this letter. He was good enough to send me a copy of the letter, and I should now like-


James Sinclair: If I may rise on a point of order, we have had a pretty general discussion entirely on item 5. Could we try to make a little progress? I also have material on item 5 and I suggest that we might confine ourselves to it.


Stanley Howard Knowles: I am prepared to agree. I seem to be having as much trouble as the hon. member for Greenwood.


James MacKerras Macdonnell: Oh no, you
are not. You are being allowed to go on.


Stanley Howard Knowles: There need not be any ruling, Mr. Chairman. I accept the suggestion as being quite reasonable.


Louis-René Beaudoin: But I would ask the hon. members if the discussion on paragraph 1 has terminated.


Stanley Howard Knowles: Oh, no. Without prejudice to the right of hon. members who still wish to engage in such general discussion as you will permit, I will defer any further discussion of the medical expense question until we reach paragraph 5 of the resolution now before us.
With specific reference to paragraph 1, I was pleased with something else the parliamentary assistant did this afternoon. It happens to be in line with something I intended
[The Chairman.]
to do myself; and even at the risk of repeating what he did I think I will still do it, for a reason I shall make clear. During the course of the main budget debate a number of us complained because the Minister of Finance gave the impression that there was a decrease in taxation involved in the rates now before us as compared with the rates of last year. That is not so; there has been an actual increase, even before one adds the social security tax. The parliamentary assistant was perfectly correct in what he said this afternoon, namely that if you closely examined the words used by the Minister of Finance on the night of April 8, what he said was that the rates of taxation for 1952 following these budget changes would be a little less than they would have been had there been no change. But he has also admitted this afternoon that the rates to be paid for 1952 are actually higher than the rates for 1951.
As the parliamentary assistant knows, when the Minister of Finance delivered his budget speech he followed his usual custom and put on Hansard three sets of tables showing what the income tax payments would be. Those tables are found at page 1254 of Hansard for April 8, 1952. I draw attention to the fact that the first column in each of these tables is headed "Income"; the next column is headed "Tax for 1952 at present rates"; the next column reads, "Tax in full year at new rates" and then there is a column dealing with percentages and a final column showing the tax in 1952, with six months at the present rates and six months at the new rates. What is missing from all these tables on page 1254 is a column showing the actual tax for 1951. I have taken the trouble-like the parliamentary assistant I like to go back and see what appears in Hansard of bygone years-to go back over quite a number of budget speeches, and I have quite a collection of them here on my desk. I find that every year the present minister has presented a budget involving any income tax changes, with one understandable exception, in his tables he has given the actual tax paid the year before and the tax to be paid during the current year.


James Sinclair: If I may help the hon. member, the tables I put on Hansard at the request of the hon. member for Peace River cover this whole field.


Stanley Howard Knowles: I recognize that. I said a moment ago the hon. gentleman had done something I had planned to do, and I was glad we were thinking along the same lines.


An hon. Member:: Why do it again?


Stanley Howard Knowles: An hon. member asks, "Why do it again?" The reason is that we have

different points of view about these matters. I have not yet seen those tables, and I want to make sure there is on Hansard a statement comparable to the kind of statement the minister has made before, showing these taxation changes from the perspective from which we see them, a perspective which I think is shared by people generally.
I was about to point out that on April 10, 1951, when taxation changes were made, the columns included the 1950 tax, the 1951 tax, the increase in 1951, and the increase in a whole year. There were no income tax changes in 1950, but if you go back to 1949 you will find the comparable tables at pages 1796 and 1797 of Hansard for March 22 of that year. In that instance there were reductions in taxation. Again the first column shows the income, the next column is the 1948 tax, the next column is the 1949 tax, and the last two columns are the reductions, first in dollars and then in percentages.
My point is that it has been the normal practice of the Minister of Finance to bring the tables before the house in that form: these were the amounts paid last year; these are the amounts which will be paid this year. But when he presented his budget on the night of April 8 this year he chose to depart from that practice. Instead of giving us the amounts that were paid last year and the amounts that will be paid this year, which would show the increase Canadians must pay, he gave as the first column the amounts that would have been paid this year under rates not being charged for this year, so that for a little while that evening he could make the suggestion of a slight decrease in taxation.
I took the trouble to work out a table, and I believe it will compare with one of the tables the parliamentary assistant has placed on the record. The hon. gentleman has now sent across to me some carbon copies of those tables. Naturally, since I am on my feet I have not had time to make a close comparison; but I would suggest-


James Sinclair: Just read the headings, and you will find they are exactly as you suggested.


Stanley Howard Knowles: I would suggest that the table I prepared and which I would like to put on the record is simpler, in that it is only one table. Since the committee was good enough to let the parliamentary assistant put four involved tables on the record, I hope it will let me put on the record one simple table which will read as follows-


James Sinclair: I want to raise this point, Mr. Chairman. At the request of the hon. member for Peace River-which request could have been made by the hon. member for 55704-131J
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Winnipeg North Centre in his budget speech- I put on the record these four tables which have been prepared by the officials of the department. In connection with putting tables on the record, of course, there is the matter of the accuracy of the calculations. If all the matter contained in my hon. friend's table, and much more, is in these four large tables I have submitted, I do not think it is going to be helpful to have the hon. member's homework put on the record as an addition to the facts and figures already there.


Stanley Howard Knowles: Before you reach a decision on that point, Mr. Chairman, I may say I have now had a chance to look at the tables prepared by the department, and my table compares with them except that it is much briefer in form. It is just one table showing the changes in the case of one taxpayer, namely a married taxpayer with two children eligible for family allowance. It will not take very long to read the figures, and if necessary I can put it on in that way. I thought I would save time by asking permission to put the table on the record.


James Sinclair: There is a complete table covering that very taxpayer, a married man with two children eligible for family allowance, right there. If as a check on the figures of the officials of the department the hon. member wants to put his own calculations on the record I suppose the committee might consent, but I cannot understand why we should duplicate the work of the officials.


Louis-René Beaudoin: The hon. member said he was prepared to read the table anyway. If he is going to put it on in any case, why not let him put it on the record and save time. Is it agreed?


Some hon. Members:: Agreed.


Stanley Howard Knowles: 
James Sinclair: May I make one interjection at this point? The hon. member probably recalls the very wise observation of the member for Peace River that, so far as the taxpayer is concerned, it is not the percentage increase or decrease but it is the dollar increase or decrease that is important. I think your table should include that as well.


Stanley Howard Knowles: I was trying to keep my table simple. The parliamentary assistant has put on the record tables that are complicated enough.


James Sinclair: Simply to prove your point, but not the other points. My tables are complete enough to prove anything you wish to draw from them.


James MacKerras Macdonnell: We had better stop right now, then.


Stanley Howard Knowles: As a matter of fact, after I had worked out these tables-I did them in pen and ink-I thought of the very point to which the parliamentary assistant has referred. I worked those figures out, too, in pencil, but I decided-and I am not at all reluctant to give some examples, if they are wanted-that it would complicate the picture to put in another column.


James Sinclair: Complicate your argument.


Stanley Howard Knowles: Not at all, because as the member for Cape Breton South has said, it is not the dollars you pay but the dollars you have left that count. It is one thing for the parliamentary assistant to say, if he had a chance to look at the pencilled figures on my table, that at the top bracket of $400,000 the increase is $16,073, whereas down in the lower brackets the increase may be only $7 or $13 or $17, but it is a lot easier for a person with $400,000 to pay that much of an increase than it is for some of those in the lower brackets to pay even a few dollars increase. It is not what you pay out, but what you have left that counts. A system of increases that become less in percentage as you get up into the higher brackets is contrary to the accepted practice in the field of taxation, where we believe in taxing according to ability to pay.
I agree that the government can be handed a little compliment once in a while for some things that it does. I have always been interested in the relationship between that portion of our taxes that are collected by the direct method and that portion collected by the indirect method. I am one of those who has been complaining across the years against the high proportion being collected by the sales tax and other indirect methods. I keep studying the figures and the fact is-I am free to admit it and compliment the government on it so far as it has gone-that the government has moved in the direction of a higher percentage from direct taxation and a smaller percentage from indirect taxation. If the government is acceding to some of our requests in that connection, I do not think it should hold back when it comes to the progressive nature of the income tax.
As I say, the figures I have given show that the percentage increase in the upper brackets is less than the percentage increase in the lower brackets. I have not even tried to work out what the picture is with respect to those who formerly were paying over 100 per cent. Such a calculation becomes very complicated. The parliamentary assistant knows that one of the reasons for incorporating the former defence surtax into the general income tax was to avoid that situation, so with respect to those who formerly had to pay slightly over 100 per cent their tax liability has been reduced. The highest rate in the new schedule is 86 per cent, plus 4 per cent surtax on investment income. Perhaps the parliamentary assistant knows offhand what top rate that could produce.


James Sinclair: It could produce 90 per cent.


Stanley Howard Knowles: Whereas formerly one could be required to pay 100 8 per cent on a top bracket.


James Sinclair: You are certainly wanting your pound of flesh now.


Stanley Howard Knowles: Pound of flesh nothing; what you have got here is an admission that there will be some people who will have an actual reduction in the amount of taxes that they will pay. They are in the very high brackets, but it is an actual reduction in terms of the percentages which the parliamentary assistant and I have agreed to be the case. Down in the lower bracket, however, the percentage increase is higher than it is in the upper brackets. I recognize that perhaps the amount of money to be obtained by adding a few per cent to the top bracket is not great, but I contend that in principle our income tax should be progressive right down the line. I object to the failure of the government to follow that course with regard to the taxation of those in the upper brackets.
I have made this speech a lot longer than I intended, mainly because of the difficulty I had over those tables, but at least I hope we have it clear now, in plain language that the man in the street can understand, that the income tax to be paid by Canadians for the year 1952 is greater than the income tax paid by Canadians for 1951.


Major James William Coldwell: May I speak on a point of privilege? This afternoon when I mentioned a certain figure I saw great surprise on the countenances of some members in the house. I ran up to my office to see if my memory had played tricks on me. I have before me a book entitled "The Nature and Tax Treatment of Capital Gains and Losses", by Lawrence H. Seltzer, published by the national bureau of economic research in the United States. The statement to which I referred is this:
A man who bought 200 shares of Pepsi-Cola Company common stock at $6 a share in 1939 could sell his holdings for more than $225,000 in 1945.
I appreciate the explanation that the parliamentary assistant made, but let me point out that in this case a man bought these in 1939 and sold them in 1945. An investment of $1,200 would yield a return of $225,000.


William Joseph Browne: Nobody had the money to buy them then.


Major James William Coldwell: Somebody had $1,200 and bought them. I could cite a number of other examples, but since that is the only one I mentioned, and I thought my memory could have played tricks on me, 1 should make sure it was put accurately.


Alphonse Fournier: Since we are speaking to points of privilege, Mr. Chairman, I have one. When the hon. member for Greenwood was speaking about the 4 per cent floor on medical expenses, I interrupted to say that
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he was repeating what he said in his speech on the budget. Since then I have re-read his speech and find that he did not mention this subject. I wish, therefore, to withdraw what I said and apologize to the hon. member.


William Joseph Browne: This afternoon the hon. member for Vancouver-Quadra raised the question of exemptions for dependents, but I did not think he developed it as fully as it might be developed. That is with regard to the exemption for children who are dependent and who are over the age of 21. As the act now stands, in order to get an exemption a child must be wholly dependent on the parent and under 21 years of age or 21 years of age or over and dependent by reason of mental or physical infirmity. It is quite obvious that under 21 the exemption is given because of the dependence of the child upon the parent. As regards the taxpayer, what is the difference whether the child is 21 or 22? The taxpayer is penalized if the child is not mentally or physically incapacitated but is a student at a university, and is costing the parent $1,000 or $1,500 a year.
I suggest that times have changed since this exemption was put at 21. I do not know what the origin of it was or why it was put at 21. I do not know whether it was because the child was supposed to become a man or woman at 21 and therefore ought to be working. If he is working, he is not dependent. But as long as he is dependent I think there should be an allowance especially with regard to university students.
Since the war and up until the past year it was difficult for a young man coming out of high school with matriculation to get into a university. I know of one young man who had to wait and take a degree at another university before he was allowed to go into medicine. The result is that he entered the medicine course at 24. He is dependent on his parents. It is true that he will be able to get some employment during the summer months but the amount that he would earn would be far from sufficient to take him through during the rest of the year.
The same thing applies not only to medicine but to engineering and to dentistry. In the universities today we have a pre-dental course, a pre-engineering course and a premedical course. By the time a young man can graduate in engineering, he is at least 23 or 24 years of age, and he is probably older than that before he can graduate in dentistry or medicine. I was speaking to a university man today and I asked him how old the students were in first-year dentistry; and I mean the regular course in dentistry.

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not the pre-dentistry course. He said that he was 25. I said: You must be much older than others. He said: No, not at all; most of them are about my age and some of them are as old as 30 or 32. As we know, a good many men came back from the war and entered on the financial arrangements provided by the government. They were, of course, much older students and they created such a demand for space in the universities that ordinary persons had to wait for two or three years.
It seems to me that it should be defined, at any rate, why is it that a person is regarded as a dependent until he is 21 but, as soon as he strikes this magic age of 21, is no longer a dependent and the taxpayer is no longer entitled to claim an exemption for him.
I have had a family of my own. Several of them have gone to university. One of them is attending the conservatory of music, which is not exactly a university. So I know what all this means. A person when studying music or medicine has no opportunity, as have other students, of earning money during the summertime to assist in financing him at university or in whatever course he is taking. I therefore feel that the government should give consideration to this matter.
I have heard parents ask about the matter. They have said to me: Why can you not get the Minister of Finance to make some exemption for our children over 21 who are attending university? They are really a dead weight or a dead load just at that particular time. If they were earning money, no parent would think of asking for that exemption. They could not anyway, because the law would not allow them to do so. I suggest that the Minister of Finance should give serious consideration to enlarging the exemption for students who are at university.


Mr. Herridge:: Mr. Chairman, I have been waiting for two hours to catch your eye. I am very glad that at last I, in this inconspicuous corner of the chamber, have succeeded in doing so. I was going to say a few words on the question of increased exemption but as the hon. member for Winnipeg North Centre in his speech has expressed the views of this group and the views of all of the members of the C.C.F. in Canada and of the millions of people who support those views, I shall not repeat them. I want to take the opportunity presented by this general item to bring to the attention of the parliamentary assistant what I consider to be a measure of injustice and to ask him a question or two. I must say that I love asking the parliamentary assistant questions. I must also say that he is extremely courteous

and usually goes to considerable trouble to answer questions asked of him verbally or when they are submitted in writing, and I appreciate that fact.
There is in my constituency a situation which no doubt is duplicated in many other places in Canada. I am now using my own personal experience or that of my constituents in order to illustrate my point. I am speaking again of the employees of the Consolidated Mining and Smelting Company who work in a defence industry and who, in many cases, have to travel up to 40 miles a day to and from their work. They are obliged to travel that distance in order to find accommodation for living, home sites and so on. Their services are necessary to the company and to the defence industry. That travel costs those employees from $10 to $20 a month in the way of out-of-pocket expenses depending on the distance. Those are expenses which they cannot avoid.
As I see it, Mr. Chairman, the working man or the salaried worker who has to accept a payroll deduction and the farmer who sells his crop through a marketing agency are the only persons from whom the government can be quite certain of collecting all the taxes that are due. In this connection I might point out that while these men at the present time are denied the opportunity to deduct these necessary and unavoidable travelling expenses for income tax purposes, a businessman can go to Vancouver and as long as he goes to wholesale and says: "How do you do?" and does some business he can charge up his expenses legally, or he can buy a few cross-cut saws or wedges and comply with the law. Or he can go to Toronto and do some business or he can go to New York. Any businessman can do that and enjoy a holiday as long as he does some legitimate business. The point is that he can take a business trip, combine it with a holiday, and properly charge up a considerable amount of the expenses to the operation of his business. There are other cases that I could give as illustrations of the opportunities for deduction. Once again I want to bring this situation at Trail to the attention of the parliamentary assistant because numbers of the employees have written to me. They are anxious that the government give consideration to this question.
I should like to ask the parliamentary assistant whether consideration has been given to allowing deductions in such cases. If so, why has the decision not been favourable?


Clarence Gillis: Mr. Chairman, I should like to get in my four cents' worth. I should like to support the hon. member for St. John's West

in tihe statement he has made with regard to consideration tor some exemptions while students are attending university. I think the cut-off age of 21 is an old formula which has outlived its usefulness. As the hon. member points out, across the country there are many students in universities today who are 25 to 30 years of age. I myself have run into a great many of them. That situation is due to the fact that the government embarked on a program of university education for returned personnel. That is particularly true with regard to dentistry. We are crying to high heaven for doctors. We are importing them for defence industries. I think that consideration should be given to any encouragement which the government can give to students in universities who are taking courses in medicine, engineering or dentistry. I think that cut-off age of 21 should be forgotten and that the formula should be "while attending university".
During the budget debate I raised a point that nobody else has taken up on the resolution. I should like to ask the parliamentary assistant whether any consideration was given to the matter of exempting, as a tax offset, the expenses of a person who is obliged to hire a housekeeper. I know that there is already an exemption of $1,000 for the wife; but where she is in ill health or is in an institution the man with a family is obliged to hire a housekeeper. He has to pay her wages. He has to maintain her, and he is up against the responsibility of maintaining his wife in an institution which is pretty costly in this country today. In my remarks on the budget speech I suggested that consideration should be given to permitting as a tax offset the expenditures of a person who is maintaining a home when he has to hire someone to come in and look after that home while his wife is in an institution or is ill at home. Has any thought been given to that matter?


Mr. Fair:: I am not a bachelor, but I would like to put in a word for bachelor farmers who are operating a farm. I understand- in fact I have had complaints-that they are not allowed1 to deduct as a farm expense wages for a housekeeper. That is one of the wrongs that should be righted at this session without any further delay, because, if that farmer took the time himself to do the work that the housekeeper does, it would cost him far more to pay the worker on the farm to carry on the work that he would do if he were not doing the work that the housekeeper would do.
I have listened to the hon. member for St. John's West and to the hon. member for Cape Breton South and many others speak
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on further exemptions for those attending colleges and such institutions. I think that exemption should be granted also.
There are programs undertaken by the government, and many of the students who are carrying on are not able to do justice to their studies because of the hardships brought about by financial difficulties.


James Sinclair: If I can recall the series of questions, the first one had to do with university students. As far as they are concerned, we have already had some discussion on it. I think the point was raised by the hon. member for Vancouver South and the hon. member for Vancouver-Quadra. It is a problem which is raised each year by correspondence either from parents or from members of parliament. The answer is neither a simple nor an easy one. It is again this matter of trying to do indirectly what is better done directly. The best way to handle it for university students is by bursaries or loans. Indirectly they are tax relief. When we exempt them from that tax relief again it is a matter of whether it is fair or whether it is progressive. After all, it has long been recognized that a person of 21 should be self-supporting-I am quite sure that the hon. member for Cape Breton South was earning his living long before he was 21-and if the family circumstances are such that the breadwinner of the family can support him when he wants to go on further to university, they are in much better financial circumstances than other families who may have equally deserving boys who, because they have not that financial support, must go out to work, as many members of this house have had to do, to finance their university careers. Therefore the first element of injustice creeps in. The less wealthy, who cannot support their boys, are going to get no tax relief.
The second point, of course, is that in such cases when a son who is a man is supported by his father to get a university education as a dentist, a doctor or an engineer, he is making a pretty large investment in his future. I would say that the recovery is made in most cases by the son paying back when he is finished and has got the better class of employment he has obtained as a result of that investment by his father. I do not think very many think they should repay their parents the cost of education provided when they were children; but certainly when an adult man is supported by his parents at university or a professional school I would imagine the recompense would come from the man himself when he is out earning his living in that chosen profession.

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The third point of course is, again, where are we going to draw the line? People have mentioned universities. Well, if we keep it strictly to universities then the example given by the hon. member for St. John's West does not apply. He used the example of a boy going to a conservatory. Is a conservatory a university? Then there are boys who go to schools, such as vocational schools here and in the United States, at the age of 21, 22 and 23. Generally they work and save to go to these vocational schools. Could they be classed as universities? The reason for the present attitude is the objection first of all that this is another case of trying to do indirectly in a minor way through tax relief things which should be done much better directly through bursaries or loans at the universities.
The next point was the matter of transportation for the workers. That again is a matter of one of those ordinary expenses which are embodied in the ordinary living costs of everyone. Unusual transportation expenses might be in the same class as unusual medical expenses; but in this case, especially with those workers who are in a bargaining position because they are highly organized in the plant to which the hon. member referred, if they have to travel this long distance to work, they know in their own minds that that is a cost of living to them and they bargain accordingly directly with the employer for a wage to compensate for that.
The hon. member referred to the fact that the individual businessman is allowed1 the cost of expenses of making business trips. I think he mentioned hardware particularly. I am not much of an expert on that; but again there is a great difference between a business operation and a salary or wage job. In securing a salary or a wage the workers must have in mind the cost of the ordinary or usual expenses, of food and clothing, transportation, ordinary medical expenses and the like, exemption for which is given in our basic allowance.
The other point was made by the hon. member for Cape Breton South. That is the matter of medical expenses. Quite a bit is done in this respect. In connection with the example of the widower who has to hire a housekeeper because he has dependent children, he has the right to claim married status as far as the income tax exemption is concerned. If on the other hand he has to have a housekeeper because his wife is at home bedridden and needs attendance the year round, then that could be claimed under the medical exemption class as part of
[Mr. Sinclair J	_____
his medical expenses. There is not as yet any provision for the other case he mentioned, namely, that of a man who requires to hire a housekeeper to take care of his house and children because his wife is a patient in an institution. His housekeeper then is not in attendance on the wife. However, that matter can be given consideration.
The last question is a most interesting one, namely, that of bachelor farmers. I might point out that our income tax rates are heavily weighted against bachelors in every respect, again on this very sound principle which has been enunciated earlier by hon. members that the income tax is the fairest and best tax because it is based on ability to pay and because it can be made progressive. Well, certainly, bachelors have a much greater ability to pay than men who have wives and are raising and supporting children. The second thing is that actually through taxes we are able to achieve or at least to encourage desirable ends, and I think as far as this country is concerned it is desirable that most of the bachelors settle down to a happy married life and make sure that this country is going to go on and expand in numbers. And if that measure of encouragement is given by the present taxation system I think it is a matter of general acceptance.
Perhaps these bachelor farmers in the end will marry their housekeepers and enjoy the benefits, both socially and through the tax return, of marriage.


Solon Earl Low: I just want to say a word about this matter of extending the exemptions for students who are attending university. I was very much impressed with what the parliamentary assistant had to say. I followed it with keen interest. Perhaps he had some good arguments. I wish to support the contention of the hon. member for St. John's West, and others, that this age limit of 21 should be raised, particularly for students who are attending university. Things are different today from what they were when "Clarie" Gillis was a boy, and quite different from what they were when I was a boy.


Herbert Wilfred Herridge: That was a long time ago.


Solon Earl Low: Very likely. But the young people in that day did not require the standard of education required today to be able to enter into the employment that would earn them a living. Every year since then- every five years, at any rate-the requirements have risen. That is, we are competing more in each five-year period.


Arthur Laing: The courses are longer.


Solon Earl Low: Yes, and there is greater competition for the jobs that do exist. That has

been proved, I think, by the fact that universities and schools across the country have increased the prerequisites, as well as the length of the courses. That fact in itself indicates that there has been quite a change since "Clarie" was a boy.
Today boys and girls complete their high school education at the ages of 18 or 19 years. They just get nicely started at university, and suddenly their parents are cut off from income tax exemption in respect of those children. The parents have to bear the extra tax as well as the cost of giving these young people the last year or two of their education. I believe the people of this country would wholeheartedly support the Minister of Finance in increasing the age, let us say, to 23 or 24, if they are going to university or college, or to some other training institution in order to complete the education begun before reaching the age of 21, in an effort to make themselves self-supporting.
There was one thing the minister did not say, and that was this, that, when boys and girls are encouraged to go on to higher education, if the Minister of Finance would give this further help to the parents so that these young people might become qualified through their education to earn higher salaries, the minister would get back, in higher returns these boys and girls would be able to earn, anything he might allow.


Arthur Laing: That is a long-range view.


Solon Earl Low: They would be in a higher tax bracket. We have to look at these things from the long-range viewpoint. 1 appeal to the parliamentary assistant to take into serious consideration the raising of the age limit to 23 or 24, if these people are going to university or to some other training institution to complete education begun before reaching the age of 21. If that sort of cutoff is arranged, I do not think anyone could take exception to it.
Resolution stands.
Progress reported.



BEEF AND PORK


James Garfield Gardiner: Mr. Speaker, I should like to revert to the order for motions.


Mr. Deputy Speaker:: Has the minister leave to revert to motions in order to make a statement?


Some hon. Members:: Agreed.
Trade-Beef and Pork


James Garfield Gardiner: Mr. Speaker, I stated yesterday that some arrangement had been entered into which we hoped would be satisfactory for the disposal of the surplus meat which is coming on to the market in Canada at the present time. The announcement I am about to make is that there has been agreement among Britain, New Zealand and ourselves. I am about to read the announcement to the house now. This is the statement regarding the meat agreement with Great Britain and New Zealand:
As a result of an outbreak of foot-and-mouth disease in Saskatchewan, Canadian livestock and meat which would normally be sold in the United States are not permitted entry to that market. Canada has therefore a surplus of beef and pork.
Agreement has been reached between the governments of the United Kingdom, New Zealand and Canada whereby Canadian meat will be shipped to the United Kingdom in exchange for New Zealand beef and pork which will in turn be sold through normal commercial channels in the United States. The Canadian meat to be shipped to Britain will not come from or through the affected area in Canada.
The United Kingdom will pay New Zealand in sterling at the existing New Zealand-United Kingdom contract rates and Canada will receive the proceeds from the sale of the New Zealand produce in the United States. As the New Zealand meat has to be exported frozen it will realize less in the United States than would have been received from the fresh Canadian product. Although there will be a net loss to Canada, Canada has expressed a willingness to recompense New Zealand for the trouble involved in implementing the exchange and the determination of a share for New Zealand in any excess there might be of net United States over sterling proceeds is under consideration.
That is the announcement as it is being made in the three countries.
I am sure the house will support me when I say that we greatly appreciate the helpfulness of the governments of Great Britain and New Zealand in making this arrangement possible. While we have naturally not asked them to bear any share of the cost, we do recognize that the arrangement has, to a degree, upset their normal plans for meat delivery. We hope that the British people will receive some compensation through earlier delivery and perhaps also by obtaining larger quantities of meat than might otherwise be possible.
May I also express a word of appreciation of the efforts of our own officers who helped to negotiate the arrangement and of the trade

Trade-Beef and Pork
commissioner service of the Department of Trade and Commerce which has been most helpful at every stage. I can assure the house that there has been the best of co-operation among all concerned, both in Canada, Great Britain and New Zealand, as well as with our friends in the United States.
In addition to the announcement I have just made, which has also been released in Great Britain and New Zealand, I am glad to be able to tell the house that we have today started moving quantities of beef to Montreal for early delivery to Britain. In other words, the meat is already moving. Freezer space on ships has been booked, and there is every indication that the movement can continue without interruption in so far as shipping and other facilities are concerned.
As is well known to members of the house, we have appealed to farmers to hold their cattle off the market in so far as they possibly could in order that the supply of beef might not greatly exceed the Canadian demand. That they have done so is proven by the fact that cattle marketings for the first eighteen weeks of this year are some 25 per cent below those of a year ago. However, in spite of decreased marketings the beef supply has been somewhat in excess of Canadian demand and considerable quantities have been accumulated in storage. It is because of this fact that it is now possible for us to have beef moving to seaboard for early delivery to Britain. As the program continues we have every reason to expect that our markets will be relieved of surplus beef.
I should like to emphasize, however, that it is still highly desirable for farmers who have grass and feed to hold lightweight and unfinished cattle rather than deliver them to the markets. If this is done we are confident that the floor prices can be maintained until the present emergency is past.


Mr. George A. Drew (Leader of the Opposition):: May I express the hope that the minister will regard whatever measure of success he may feel has been attained by the negotiations now completed as an encouragement to extend negotiations with Great Britain. I hope that the government will extend their negotiations and have the kind of commonwealth conference that we have been requesting for some time.


Stanley Howard Knowles: Would the minister permit one question? Will this result in the early lifting of the quarantine at Winnipeg?


James Garfield Gardiner: That is entirely in the hands of the Manitoba government.


Stanley Howard Knowles: I was not referring to the Manitoba embargo but to the federal government's quarantine at Winnipeg.


James Garfield Gardiner: Any quarantine the federal government has, whether at Winnipeg or elsewhere, is associated with the handling of the disease, and merely as a result of this action we cannot relinquish any of these restrictions.
At six o'clock the house took recess.


[Stage Direction]
AFTER RECESS

The house resumed at eight o'clock.


Mr. John Decore (Vegreville) moved: the second reading of Bill No. 185, respecting the board) of elders of the Canadian district of the Moravian church in America.


Howard Charles Green: Could we have an explanation by the sponsor?


John Decore: The purpose of this bill is to amend the original act of incorporation of this body, which was carried out by dominion statute in 1909. The first change proposed is to move the location of the head office from Strathcona to Edmonton. At one time Strath-cona was bigger than Edmonton, but it finally became incorporated into Edmonton; just as at one time Calgary thought it was a bigger city than Edmonton, and the time is coming when it will be incorporated into Edmonton.


Carl Olof Nickle: Or vice versa.


John Decore: I wish to assure the hon. member for Calgary West that we are not very fussy about having Calgarians in Edmonton, anyway; but that is the situation. The next important change is to increase the number of elders, the governing body of this church, from three to five. The next change is to increase the value of the real estate that may be held in Canada from some $50,000 to $500,000. Since the incorporation of this body in 1909 the number of members and adherents and churches has continued to grow, making it necessary to hold more real property and to expand the governing body.
I would like to give a very brief historical outline of this church. It claims to be the oldest Protestant church in the world and to have as its founder John Huss, who was burned at the stake in 1415. It takes its name from Moravia, which is a province of what is now Czechoslovakia. The church is noted for

its missionary work and was one of the first to have foreign missions in Labrador and Alaska. There are in my constituency a number of people who belong to this church, and I can assure hon. members that they are good Christians and good Canadians. I think this bill should be referred to the standing committee on miscellaneous private bills.


Mr. Cruickshank:: I would like the hon. member to understand that I am quite in accord with this bill, but why is the change being made from one minor city to another in western Canada?


John Decore: I am not sure that I understand the question. Why is the change being made from what?


George Alexander Cruickshank: As I understand it, the headquarters of this church are being changed from one city to another within the same province, which is more or less a subsidiary of British Columbia. Why is the change being made?


John Decore: There is no longer a city called Strathcona. It is now the city of Edmonton, which includes what was formerly Stratchona. If my good friend will visit Edmonton, as he should, he will find that it has expanded greatly and, as I said a moment ago, it may eventually take in Calgary.


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

[Stage Direction]
The house resumed, from Tuesday, May 6, 1952, consideration in committee of Bill No. 62, to incorporate Boundary Pipeline Corporation-Mr. Larson-Mr. Beaudoin in the chair.
On section 1-Incorporation.
Howard Charles Green: Mr. Chairman, this is a bill to incorporate a pipe line company to be known as Boundary Pipeline Corporation. The plan of the sponsors of the bill is to pipe natural gas from the province of Alberta to Winnipeg, and thence in due course to the central states of the United States, I presume having in mind more particularly such centres as Minneapolis and St. Paul and possibly Chicago. The applicants as set out in the bill are all described as residents of Regina, but behind them is a United States pipe line engineering firm known as the Fish Engineering Corporation of Houston, Texas.
Your Honour will remember that there was no debate on the second reading of this bill. It got through that stage, perhaps through the negligence of some of the members of the house, with no debate at all,
Boundary Pipeline Corporation and was referred to the standing committee on railways, canals and telegraph lines. This evening I wish to comment on one incident which took place while this bill was before the standing committee.
The main witness called on behalf of the applicants for a charter was a certain Robert R. Herring, of Houston, Texas, who is an engineer for this Fish Engineering Corporation. He was being questioned by the member for Calgary West who, without any question, is an authority on oil and natural gas matters. Before that member had finished his examination, some of the government members of the committee intervened and moved the following motion which will be found on page 73 of the proceedings of the committee. It reads:
. . . that sufficient evidence has been obtained for the committee to decide as to the economic practicability of the pipe line 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:
There follows a list of the names of the members who voted for and against that closure motion. All the Liberal members present at the time voted for that motion, with the exception of the member for Hastings South who voted with the representatives of the opposition parties; for that stand I am glad to give him credit.
I would point out, Mr. Chairman, that the member for Calgary West had not yet finished his examination, and that the passing of that motion also had the effect of preventing other members of the committee from carrying on an examination; each one of them had the right to question the witness. Again, I would point out that this was a private bill and supposedly not sponsored by the government. There was plenty of time available because we were not halfway through that particular sitting at the time this motion was brought forward. We could have sat again in the afternoon. There was absolutely no time to be gained by shutting off the hearing of evidence in that manner. There were no other bills before the committee except this pipe line bill. The result of this motion, of course, was that the bill could not be given full consideration in the committee, because Mr. Herring was the principal witness.
I would point out to Your Honour, and to the members of this house, that actions such as this by a government majority on a committee are unfair, they are unwise and they are contemptuous of the democratic procedure. In fact, they are against the best traditions of this House of Commons. I regret very much that such a stand should be taken by government members in any committee. They would not dare to do it in the house because of the adverse publicity that would

Boundary Pipeline Corporation be at once spread across the country. Yet it was done in a committee, and it is becoming a habit which has got to be stopped. This is one more example of the weakness of this present parliament in that it has such an overwhelming government majority. I would suggest to the Prime Minister and the members of his cabinet that they remind their followers that Canada still belongs to the Canadian people and not to the so-called Liberal party.
This bill raises the question of what is to become of the natural gas piped east from the province of Alberta. It is admitted by all concerned that there will be only one line to the east, just as there is to be but one line to the west. I would remind hon. members of the debates which have taken place in this house concerning the question of piping natural gas from Alberta to the west coast. In the fall session of 1949 we had a debate concerning the bills of two groups of applicants who sought to gain charters to enable them to pipe that gas from southern Alberta down into the state of Washington at the first convenient point, and from Washington to the state of Oregon with a branch line up to Vancouver and possibly another branch line up to the Canadian city of Trail. These private bills were talked out in 1949. They were re-introduced in the session of 1950 and, after considerable debate, were finally allowed to go through. The names of the two companies then granted a charter were the Alberta Natural Gas Company and Prairie Transmission Lines Limited. It is significant that the Fish Engineering Corporation, which is behind the bill we are now considering to incorporate Boundary Pipeline Corporation, was also behind the Prairie Transmission Lines Limited. Last year, in the spring session of 1951, a private bill was introduced which would have incorporated a pipe line company known as Border Pipeline Corporation. The sponsors of this bill also planned to pipe gas or oil, I forget now which it was, to the Pacific coast via the United States. That bill was talked out during that session.
In due course the various companies which had obtained charters applied to the Alberta petroleum and natural gas conservation board for permission to pipe gas from that province. In the month of March of this year a decision was handed down by the board authorizing a company known as West-coast Transmission Company Limited to pipe gas to the west coast from the Peace river district. This meant, of course, that they would pipe it through British Columbia first and then any surplus would go down to the states of Washington and Oregon. Of course, that was the route which we had advocated

throughout, or alternatively the route from Edmonton through the Yellowhead pass and so to Vancouver.
The board having handed down its decision, the Alberta government put through a bill granting permission for the exportation of this gas from the Peace river down to the western Canadian coast. The British Columbia government is, of course, willing to take whatever steps are necessary to assist in the construction of that line, because the legislature of British Columbia has repeatedly taken a unanimous stand in favour of a gas line to the west coast which served Canada before reaching into the United States. The company building this line to the west coast still will need the approval of the board of transport commissioners and of the Minister of Trade and Commerce, the latter permission being required to export to the United States. They will also need the permission of the federal power commission of the United States for such export.
It is interesting to note that with respect to this same Fish Engineering Corporation, which is behind the present bill, that when their company, Prairie Transmission Lines Limited, lost out in the race to get permission to pipe gas west, the president of the company at once announced that he was going to rush natural gas into the states of Oregon and Washington from Texas, and in that way prevent the Westcoast Transmission Company Limited from getting Canadian gas into those two states.
As to the export east of gas from Alberta, the Alberta board refused to give any direction for such export. It appears that in that province the exportation of gas is a hot political issue with the Liberals and, I think, the C.C.F. taking the position that no gas whatever should be exported from Alberta, while the Social Credit party has stood for such export. However, it is expected that permission will be granted later this year for the export of natural gas east from the province of Alberta. Hence the question of where that gas is to go is extremely important at the present time.
There are two possibilities. The first is that it will go across the prairie to Winnipeg, then south to Minnesota and other United States centres and possibly to Chicago. The second is that it will go to Winnipeg, then to Fort William, Port Arthur, Toronto, Montreal and possibly the city of Quebec, serving many Ontario and Quebec centres en route.
There have been two companies which have been active in preparing to pipe natural gas east from Alberta. One of them is Western Pipe Lines which was granted a charter in

the rush just before the election of 1949, before any of us except the Minister of Trade and Commerce understood what all this pipe line excitement was about. The other is Trans-Canada Pipe Lines Limited which was incorporated in 1951. The first of these companies, namely Western Pipe Lines, plans to follow the United States route, to Winnipeg and then down into the United States. The second one, namely Trans-Canada Pipe Lines Limited, plans to build the all-Canadian route. Both of them have spent several million dollars in making surveys of the respective routes, of the centres that will be served, and also in developing reserves of gas in the province of Alberta.
The applicants for this present charter now come along, and they have done practically no development work whatever. They have made no extensive surveys. They are trying to cash in on the efforts of these other companies. Their expenditures amount to $25,000. I asked that question in the committee on railways, canals and telegraph lines. Hon. members will find this at page 11 of the minutes of proceedings and evidence of the committee:
By Mr. Green:
Q. There is one other question I would like to ask you, Mr. MacTavish.
I may say that Mr. MacTavish is parliamentary agent of the applicants for this charter. The question continues:
How much money has been spent by the applicants to date in connection with this project? A. I think I can find that out for you immediately. X am instructed that about $25,000 has been spent.
They plan a very small pipe to Winnipeg, namely a 16-inch pipe, whereas Western Pipe Lines are planning a 24-inch pipe and Trans-Canada Pipe Lines Limited a 30-inch pipe. It was admitted, in effect, by Mr. Herring in the committee that all his people are trying to do is to get their toe in the door in Alberta; that is, to get a charter and get permission to put in this small pipe line and in that way get their toe in the door. In that way they would be in a preferred position because there is to be only one pipe line to the east.
Then in the committee they admitted that they plan eventually to pipe gas to the United States. At page 63 of the proceedings of the committee, in my examination of Mr. Herring, are to be found the following question and answer:
Q. Now, in this bill which you are sponsoring, which you are supporting, you are laying another plan to get Alberta gas down into the central states? A. That is correct.
They admit that they have no intention whatever of building to Ontario or Quebec. I would point out to hon. members that in
Boundary Pipeline Corporation section 6 of the bill we find that the applicants are asking power to build within the provinces of Alberta, Saskatchewan and Manitoba, or outside Canada. There is no mention whatever of Ontario or Quebec. We asked that question also in the committee of Mr. MacTavish. It will be found at page 7 of the proceedings. The question is:
Q. Mr. Chairman, arising out of the question just asked by Mr. Mclvor,-
I am hoping that the hon. member for Fort William will follow my remarks tonight because I shall try to set him straight on the views he expressed the other night.


Daniel (Dan) McIvor: Yes, Mr. Chairman, I am following the hon. member.


Howard Charles Green: The question continues:
-as I read the bill you are not asking any power to build a pipe line in the province of Ontario at all. Is that correct? You are only asking to build in Alberta, Saskatchewan and Manitoba or outside Canada, so that obviously, it is not the intention of this company to build a pipe line in the provinces of Ontario or Quebec. Is that correct? A. That is correct, sir.
Here I should like to refer to the statement made on Tuesday evening in this house by the hon. member for Fort William. It will be found at page 1930 of Hansard. He spoke in favour of this bill, if you please, and he said:
I object vigorously to any measure providing for a pipe line that will come to Winnipeg but will not come to Fort William and Port Arthur.
Of course the one way to prevent Fort William from getting gas is to have this present company given permission to go ahead. The hon. member continues:
I supported this bill-


Mr. Hodgson:: It stops at Winnipeg.


Daniel (Dan) McIvor: -because the amendment I moved was carried. The purpose of my amendment was to eliminate the words "outside Canada" . . .
I now turn to page 74 of the proceedings of the committee. It so happens that the hon. gentleman did not move an amendment to strike out the words "outside Canada". That amendment was moved by the hon. member for Calgary West and the hon. member for Fort William voted against it. That vote is recorded here at page 74 of the proceedings. I only hope that the hon. member's constituents in Fort William will get the facts a little bit straighter than he did. I would point out further that in a return tabled for the hon. member for Winnipeg North Centre, in answer to a question asking whether any cities had requested that the pipe line should be built through Canada, the information is given showing that some had, and they are listed as the township of Nipigon, the corporation of the city of Fort William and the city of Port Arthur.


George Alexander Cruickshank: Mr. Chairman, I had not expected to speak in this connection, but I am glad to note that my hon. friend from New Brunswick is insisting that I do so.


Mr. Riley:: I hope you speak for an hour.


George Alexander Cruickshank: The hon. member for
Maple Creek, in a forty-two minute filibuster, has told us of what a great riding he has. I presume it is as great a district as he has said. He paid me the compliment-perhaps it was not due me-that last year I had led a filibuster in connection with an all-Canadian pipe line. Possibly I am not entitled to all that honour, because that discussion developed as a result of co-operation among a few of us from British Columbia.
Boundary Pipeline Corporation
Those of us who did lead the filibuster are proud of the fact; and we would like the hon. member for Maple Creek-which, I believe, is a small district in Saskatchewan-to know that we are proud of that filibuster. Already in British Columbia, in the municipalities of Richmond, Burnaby and other districts, contracts have been let to a value of $20 million or $30 million to expand the oil services in that province.
When I was home at Easter one of the greatest privileges tendered to me was that of having my picture taken. Like all politicians, even those who opposed the all-Canadian route, I like to have my picture taken. So it was not only a privilege but a pleasure to have that happen.
Near my farm is located the small station of Clayburn. Indeed, the siding is on my farm. I believe all members from British Columbia will know where it is. It was my good fortune to have my picture taken alongside two carloads of 24-inch steel pipe for the Trans Mountain Oil Pipe Line Company. The pipe was being unloaded at that siding.
We know that large contracts have been let for the expansion of refineries in British Columbia, although they are not located in my riding. But the fact remains that the main line goes right through the centre of Cruickshank's farm, and I got a real kick out of having that picture taken.
That pipe line goes through there because a few of us from British Columbia, despite the majority of members from that province, stated our position. I well recall that an agreement was made in my office, room 565 in this building, at seven-thirty in the evening, that those of us who had taken part in the so-called filibuster would withdraw our objection if it was agreed that the main line would be within Canada. I know those who supported me will agree with what I say in this connection.
I do not know whether all hon. members read the Ottawa Citizen, nor am I sure which party that newspaper supports. However, in its issue of Friday, May 9, there was an editorial with which I agree, and which I believe will receive approval of other hon. members, because it expresses the views of members from British Columbia. It is headed "Intelligent British Columbians" and refers to a Gallup poll. I do not find that any other province is mentioned. And though my father was born in Ontario, I must accept this statement in the Gallup poll which says that British Columbians are the most intelligent people in Canada.


Some hon. Members:: Oh, oh.

Boundary Pipeline Corporation


George Alexander Cruickshank: Well, it is right there in the editorial. That is what the latest Gallup poll says; it is not my statement.


Mr. Sinnott:: The biggest insult to Canada.


George Alexander Cruickshank: It is the Gallup poll that says that.


Daniel (Dan) McIvor: The Gallup poll makes mistakes.


George Alexander Cruickshank: It is not my statement, but that of the Gallup poll. And just to satisfy some of my colleagues who surround me, my colleagues from other provinces, let me say again that it was not my statement. However, judging from their stand in connection with an all-Canadian pipe line, when it was discussed at the last session, I doubt whether they would qualify. I do not have to take up the time of the house-


Daniel Aloysius Riley: You can have ten minutes more.


George Alexander Cruickshank: But I am sure my colleagues from Ontario and Quebec must be as interested in the development of their provinces and the economy of Canada as we were in the development of British Columbia. It will be noticed that I am not having as many interruptions from British Columbian or other western members as I had last year.
One of my colleagues from British Columbia says-


Louis-René Beaudoin: I would ask the hon. member to address the chair and, so far as possible, to speak to the bill.


George Alexander Cruickshank: I am definitely interested in the bill, because we won last time, and we now have this development out there. We have even had gas granted by Alberta, as will be admitted by the acting leader of the Social Credit party. That gas is going to the town of Trail and, in spite of what was done by the member from Trail, it will cut their costs in half. That is what we are trying to do for eastern Canada.


Herbert Wilfred Herridge: Pardon me, but did I hear you say, "In spite of the member for Trail"?


George Alexander Cruickshank: Oh, I beg your pardon; I should have said Kimberley, which is a suburb of Trail. We know that Trans Mountain has now let contracts and is actually building an all-Canadian pipe line into British Columbia, a fact of which I am sure the hon. member for Vancouver South is proud. They have made the contract, and they axe building it.


Mr. Byrne:: I supported it.


George Alexander Cruickshank: You did not. You supported nothing, so far as an all-Canadian route is concerned.


James Allen (Jim) Byrne: I supported it by my speech in the house on the pipe line bill sponsored by the hon. member for Vancouver South, for an all-Canadian route for the oil pipe line- not one for the gas.


George Alexander Cruickshank: Any support the hon. member for Kootenay East gave us was after we got the amendment through and not before. Gas is more important than oil to the town of Kimberley from which he comes.


An hon. Member:: Oh, oh.


George Alexander Cruickshank: The records will show what are the facts, and the people of your riding will read the records too. What we are trying to do-


An hon. Member:: Talk it out.


George Alexander Cruickshank: -is to ensure that this bill is not passed in order that the resources of Canada may be utilized for the benefit of the provinces of Ontario and Quebec and possibly the maritimes. We have no objection whatsoever to any surplus being exported to the United States as in the case of our pulp and anything else, but we believe that primarily our resources should be utilized within our own country. I have heard colleagues who sit not so far away from me advocate this very thing in connection with our great timber resources.


An hon. Member:: Don't point at me.


George Alexander Cruickshank: Let us utilize our
resources first to build up industry, create employment and provide security for the great labour unions that some members fail to represent at times. Let us build up that security and then send any surplus to the United States, our best neighbour and our best friend in this world next to Great Britain. We believe these resources should be developed primarily for the purpose of building up Canada, with the surplus being exported. That is what we are saying now, and we are rather surprised that members from Ontario and Quebec and even from the maritimes apparently by their silence give approval to the bill when obviously if permission is granted by the province of Alberta and the board of transport commissioners the gas will be exported to the United States. I have only talked for eighteen minutes.


An hon. Member:: And have not said anything.


George Alexander Cruickshank: Maybe I have not said anything yet but my colleague is afraid to get up and say anything for or against.


An hon. Member:: Let us have the Gallup poll.


George Alexander Cruickshank: I had better refer to that again.


Some hon. Members:: Order.


George Alexander Cruickshank: Order my eye. Those who are speaking now are not courageous enough to speak on behalf of their own province.


Mr. Richard (Ottawa East):: We do not need to have any lessons from the hon. member on anything else but what he is doing now.


George Alexander Cruickshank: If I am out of order I withdraw. The leader of the opposition has come into the chamber, and I should like him to note the editorial in today's Citizen.


An hon. Member:: He will not like it.


George Alexander Cruickshank: This includes Carleton county as well. According to the latest Gallup poll-


Mr. MacDougall:: He is not listening.


Daniel (Dan) McIvor: May I ask the hon. member a question? I should like to ask the hon. member if he thinks the Gallup polls are perfect and never make a mistake?


George Alexander Cruickshank: I do not think they are perfect. I have been asked a direct question, Mr. Chairman, and I would reply that the Gallup poll forecast that the Liberals would be elected at the last election and they were. That is as nearly perfect as they can be. I hope the hon. member for Carleton appreciates the stand taken by some of us from British Columbia. Perhaps I had better read the heading of the editorial again. It is headed, "Intelligent British Columbians". That is what we are. Some of us are naturally modest, but we got a pipe line with an allCanadian route which is under construction today. The right of way is being cleared and the pipe is being unloaded on sidings in Canada in spite of those who wanted an allAmerican route, including some British Columbia members. Apparently some of us qualify for the wording of the headline in spite of those who want to build an allAmerican route. Their remarks fall right off my back. I used to shoot ducks in the Kootenays years ago before some people were born.


An hon. Member:: You are not shooting ducks now.


An hon. Member:: You are shooting an owl.


George Alexander Cruickshank: Maybe I am shooting an owl but I shot it last year with the assistance of a few members, not including some of my colleagues. The result is that over 70 cars of steel pipe are being unloaded in the province of British Columbia to build an allCanadian pipe line. It will result in $30 million to $40 million being spent on new refineries in spite of opposition. My friend is very brilliant in some ways but he pulled a boner that time when he bucked the province of
Income Tax Act
British Columbia, western Canada, the economy of all Canada and the unions of Canada by trying to divert gas and oil to the United States before utilization to the fullest extent had been put into effect in Canada. I do not want to take up too much time.


An hon. Member:: Oh, no.


George Alexander Cruickshank: I have only spoken for some fifteen minutes and I have not read the articles I want to read. However, if this matter comes up at the next session I will read the remarks made on May 5, 1950, by no less an authority than the present Prime Minister of Canada, and I will also read what was said by the Minister of Trade and Commerce. No man in Canada knows more about industry and the development of Canada than the Minister of Trade and Commerce. I am going to take a great deal of pleasure next session in putting on the record what he said about the building up of Canada in spite of some of these minor obstacles from western Canada.
Section stands.
Progress reported.


Mr. Deputy Speaker:: It being nine o'clock, and the hour devoted to private bills having expired, the house will resume the business under consideration at six o'clock.



WAYS AND MEANS

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

Louis-René Beaudoin: At six o'clock we were considering the first paragraph of the income tax resolution.


Wilbert Ross Thatcher: I should like to rise this evening for the main purpose of supporting the request made this afternoon by the hon. member for Rosetown-Biggar for an income tax exemption of $3,000 for married people and $1,500 for single persons. The crux_ of these resolutions which parliament is being asked to consider tonight is that income taxes in Canada this year will be higher than ever before in peacetime. In view of the cost of living I feel that it is the people in the lower brackets who are going to be mainly affected. I think the time has come for this parliament, and particularly the Minister of Finance and his parliamentary assistant, to realize that income taxes in Canada have reached the saturation point in peacetime. I think the rates which are proposed in this resolution are going to cause real hardship in this country. After all, you can ask a man to carry a 300-pound load across a room, but if you were to ask that man to carry the same load around a

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city block you would break his back. That is just what this government is going to do as far as the taxpayers of Canada are concerned.
I believe income taxes in Canada are discouraging initiative. I know farmers in my riding who have come to me and said, "I am going to live in the city this winter. What is the use of my going out raising hogs, raising livestock, working hard throughout the winter, only to give the money to Mr. Abbott?" I know railroaders who have made perhaps twenty trips and then have said, "Thatcher, what is the use of my going out and making any more? I have to give it all to Mr. Abbott." I know businessmen who have said, "What is the use of my trying to go ahead any further? If I do make any more money I just have to give it to Mr. Abbott." So I repeat that in my opinion income taxation in Canada has reached the saturation point.
I was disappointed this afternoon when the chairman ruled that the hon. member for Greenwood could not propose savings. How on earth are we going to get the income tax down unless the government is interested in hearing some suggestions for savings. The hon. member for Greenwood was prepared to make such suggestions this afternoon. A few weeks ago I had the privilege of making a few suggestions. I must say those suggestions were received with some ridicule, perhaps a little contempt and certainly derision. No attempt was made by the minister to answer them in any way. The only one that was answered in the house was by the parliamentary assistant this afternoon. He answered one out of about fifteen which he thought might cause me political embarrassment. That was the only trouble he went to at all.


James Sinclair: I wanted to be in order, so the one I answered was the only suggestion which was relevant to the actual item we were discussing. I would also draw attention to the fact that most of the hon. member's observations are not in order as far as this resolution is concerned. That was the reason the remarks of the hon. member for Greenwood in regard to savings were ruled out, not that he should not have the right at the proper time to make whatever observations he wishes on that matter.


Wilbert Ross Thatcher: I can only assume that this government is not interested in hearing about savings. Perhaps any savings we might suggest would not be reasonable; I do not know. But at least as opposition members we are trying to make a few suggestions, and it seems to me the least the parliamentary assistant should do is make some attempt to analyse

them. Again I say that income taxes in this country are too high, and unless something is done in the next year to get them down we are going to run into trouble.


Louis-René Beaudoin: Has the discussion terminated on paragraph 1?


Some hon. Members:: Agreed.


Louis-René Beaudoin: Paragraph 2.


John Sylvester Aloysius Sinnott: I would like to say just a word.


Louis-René Beaudoin: I might inform the hon. member that paragraph 2 refers to paragraph
1.	Therefore if he wants to make only a few remarks we will consider the discussion on paragraph 1 as having been terminated.


Some hon. Members:: Agreed.


Louis-René Beaudoin: We are now on paragraph
2.	The hon. member may proceed.


John Sylvester Aloysius Sinnott: I was very pleased that the
hon. member for Moose Jaw got up enough courage to make the fighting speech he has made. I think he is known as the parlour socialist of Saskatchewan; and those few words he said just now were said simply because of the Saskatchewan election in the near future.


Stanley Howard Knowles: I would like to ask the parliamentary assistant a question with respect to the application of what is set out in paragraph 2. It is perhaps a technical question; if so, he may give me a technical answer. This proposes that for the year 1952 the rate shall be the average of the rates enacted by last year's budget and the rates being enacted now for 1953. I can see that it is a fairly easy matter to arrive at that average in certain of the brackets, because those brackets under the old scale correspond with the brackets under the new scale; but a point is reached where these brackets do not correspond. When that point is reached, how is the average arrived at?


James Sinclair: The problem here is the problem we discussed earlier in the day, arising from the fact that today the great bulk of personal income tax is deducted at the source weekly, fortnightly or monthly. For the first six months of this year the law which is in effect until this amending bill is passed will require deductions at the 20 per cent surcharge rate. We hope we will have royal assent to this bill by June and on July 1, starting the second six months, these new rates will come into effect. So the result for the whole year will be the average arrived at by six months' application of the present 20 per cent surcharge and six months' application of the rates in this schedule. Next year, of course, providing there are no changes, the entire year will be at the rates

in this schedule, and the deductions will be made according to the tables which will be used by industry after July 1.


Stanley Howard Knowles: I fully understand that, but apparently I did not make my point clear to the parliamentary assistant. If I do not get it across to him this time I shall not press it, at least not from the floor of the house. If he will look at part (m) of the previous paragraph he will note that it relates to an income bracket from $75,000 to $100,000. This does not affect anybody in Winnipeg North Centre. But if he will look at the brackets for the previous year he will see that there is no $75,000 to $100,000 bracket. How does a person affected by that situation arrive at the average?


James Sinclair: I get the point now, the fact that the brackets in the old schedule and the brackets in the new schedule, quite aside from rates, do not correspond in all cases.


Stanley Howard Knowles: That is it. They correspond in the lower brackets but there is a point above which they do not.


James Sinclair: Perhaps the easiest way for me to answer that question would be to say that when the bill is brought down the minister will give the explanation with actual examples.


Louis-René Beaudoin: Paragraph 3.


Agar Rodney Adamson: Dealing with paragraphs 3 and 4 together, there is quite a technical question which I discussed very briefly with the parliamentary assistant last night, but which I feel is of sufficient importance to deal with at a little length, because it affects a great many corporations in Ontario and Quebec. It has to do, of course, with the statement by the Minister of Finance in his budget address that taxation on corporations in Canada would not be increased by the present proposals. That does not agree with submissions which have been made to me. I must admit, Mr. Chairman, that I have worked on them at some length today, and they are still a little involved to me. I have tried to put down the questions as concisely and clearly as I could and I shall endeavour, by following the notes I have made, to present the case to the parliamentary assistant. While I realize that the Minister of Finance at least had no intention of increasing corporation taxes I am sure that, in fact, corporation taxes have been increased because of the provincial tax structure in the provinces of Ontario and Quebec.
I believe that the minister's statement that sections 3 and 4 would not raise the tax on
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mining corporations is open to question. Assuming that a province levied a 5 per cent tax similar to the federal tax they gave up, the result would be the same. But in Ontario the levy of 7 per cent does not affect taxable dividends, and therefore the Canadian income tax on such dividends is increased by 4-4 per cent. The royalty or mine profits tax assessed by the provinces of Ontario and Quebec is allowed as a deduction from income in calculating federal income tax. There are two taxes in both provinces, the corporation tax and the royalty tax mentioned above. The provincial authorities recognize that there would be an inequity if both levies were treated separately, and therefore the income subject to royalty is deducted from taxable income under the Ontario and Quebec corporation tax acts.
To correct the situation a change would be required in the federal income tax regulations to permit mining companies in Ontario and Quebec to deduct mines profits tax or royalty from the federal income tax rather than from earnings. Otherwise, the federal income tax is raised by an amount up to a maximum of 5 per cent. The minister has stated that there will be no net increase in the taxes paid by corporations owing to this administrative change. However, if the Canadian income tax is amended as indicated in the resolution, this statement would be far from correct for the following reasons:
(1)	To utilize this method of equalizing the income tax as between the provinces and the government of Canada, the basis of taxation in all jurisdictions would have to be the same or at least comparatively so.
(2)	For example, Ontario does not tax dividends received by one company from another, in accordance with section 14 (4) (e), Ontario corporation tax act. This is a common practice in many mining companies because they finance other mines and are, in part, holding companies. In the year ended March 31, 1952, one mine received $963,000 in dividends from United States corporations. This income is not taxed under the Ontario corporation tax act. The effect of section 4 of the resolution therefore would be to tax this income an additional 5 per cent under the Canadian Income Tax Act or another $48,000 per annum, although the minister has stated that there would be no increase in net taxation.
(3)	We should determine also what the status of mining companies will be. The tax paid on mining profits under the Ontario mining tax act is deductible as an expense under the Canadian Income Tax Act. The profit is likewise deducted from taxable

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income as determined under the Ontario corporation tax act. Is this tax now to be considered as an income tax payable to the province of Ontario? For, if so, the mine would gain in having the tax now allowed as a deduction from federal income tax. However, if it is not considered an income tax, then the mine profits as determined under the Canadian Income Tax Act would be subject to a further 5 per cent rate increase.
(4)	Under the Quebec corporation tax act a mining company which pays a tax under division 3 of the Quebec mining act is exempt from Quebec corporation tax on all its income. The same question arises as to whether the mining tax would be considered an income tax, but such a company pays no tax to the province of Quebec on its revenue derived from other than mining operations. Under the amendment as proposed, all of this income would now be subject to an additional 5 per cent rate under the Canadian Income Tax Act.
Now, Mr. Chairman, this affects a number of corporations which have other income. I hardly think there is a major mining company that does not have income from other investments. Under the present proposals in sections 3 and 4, apparently this income is subject to increased taxation federally notwithstanding the provisions of the Ontario and Quebec mining tax acts. This income, while not considered taxable under the Quebec and Ontario laws, is considered taxable at an extra rate of 5 per cent separate from the earnings of the mines. I have trie' to present the situation as clearly as I can. It is quite involved through these two regulations which, in effect, mean that these corporations will become liable for an extra tax which may be as great as 5 per cent. I bring this to the attention of the committee, Mr. Chairman, because I believe it is something that is of importance to the administration of the act.


James Sinclair: I am very grateful to the hon. member for letting me look at his file of letters last night, so I had an opportunity of doing a little study on this matter. As he very properly pointed out, paragraphs 3 and 4 of the resolution are very clear as applied to ordinary industrial corporations. There are, however, one or two groups of industries which, both federally and provincially, receive different treatment so far as taxes are concerned from ordinary industrial operations. One of those groups is the mining industry, for the reason that it is operating on a wasting asset and in a highly speculative field. This industry, both federally and provincially, receives special provisions not accorded to other industries, other than oil in Alberta and other oil provinces.

Because of that, there is a problem, which the member has outlined, that the ordinary corporation tax in provinces is not applied to these mines. The question arises as to just how these special rates will be recognized under these two items. As soon as the budget speech was made and the resolutions were brought forward, the mining industry of course recognized this point and have made representations to the department on this subject. The minister has told them that when the regulations for the new act are being drafted a sympathetic attitude will be taken so as to draft the regulations to fit these cases which were regarded as peculiar both in the federal taxation field and in the provincial taxation field.
I am grateful to the hon. member for putting the details on Hansard. Perhaps he might also supply the officials of the Department of Finance with further details, in anticipation of debate on the bill.


Agar Rodney Adamson: I will.


James Sinclair: Then, when the minister is piloting the bill through, at this point in the bill he will be able to say what has been done with regard to this problem which the hon. member has rightly raised.


Agar Rodney Adamson: I shall be only too pleased to do as the parliamentary assistant suggests.


James MacKerras Macdonnell: I wish to say just a word about this matter of corporation taxation in general. First of all, I want to say just a word to echo the warning given by the hon. member for Moose Jaw, because I sometimes feel that those who are in charge of our financial affairs get so accustomed to dealing with hundreds of millions and billions that they become a little bit dazzled by those large figures and find it difficult to get down to the level of those who do not deal in them. I read that the minister a day or two ago was moved to express most optimistic views, and I hope his views are correct. He says that he is an optimist by nature; he says that we are in a period of expansion, and that nothing can stop us unless there is another war and the world goes to pot.
I love an optimist. The only thing I should like to say in connection with that matter is that I hope our expansion will not be so largely based on inflation as it has been in the last few years, because that has not worked out to the advantage of everyone. A great many people in this country, without knowing just what is happening, are experiencing in their own lives the fact that inflation makes the rich richer and the poor poorer.
I want to say a word about the corporation tax in particular. The minister has very

piously, and I am sure very sincerely, said during the last two years that he became troubled as soon as the corporation tax got above 50 per cent. The trouble is, however, that he does not do anything about it. I think there is a Sunday School story to the effect that a teacher asked the children to define repentance, and one said that repentance means being sorry, but the next one said: No, it means being sorry enough to quit. I think it is right that the minister is sorry. He has told us that he is and we take his word. But we want something much more than that before it will do any good.
We expect to raise-as we did last year and no doubt will again-a fabulous amount from the taxation of corporations. I think it is some $1,200 million that we expect to raise. Of course we must remember that that is only the beginning. A large percentage-no doubt some of the gentlemen I see before me could give us the percentage; I cannot at the moment-of the personal income tax will represent income received from the corporations, so that in fact you get a double harvest. I am not objecting to that fact either. I am only pointing out the tremendous importance to our whole fabric-and particularly to the tax collecting fabric-of the welfare of corporations.
Last year, with the increased taxation the facts are-and no doubt they have been carefully pondered-that most corporations during the year, notwithstanding an increase in their operating income, were taxed so heavily that their income was actually less. In a good many cases, on the other hand, the increase in income was enough to pay the taxes and leave them something extra. I think every sensible person is troubled by, or at any rate takes a serious view of, the position of corporations at the present time. Along with the expansive views of the Minister of Finance, there are some indications that not everybody is booming ahead. It therefore seems to me to be a great pity that the minister was not able to do something about this matter, that he had to take out his repentance just in being sorry and not in being sorry enough to quit.
I do not know that there is anything that I care to add at the moment except that I feel-and I wish to stress the fear that I have in my mind-that, being dazzled by large figures of expansion, of large investments much of which is from money which comes from outside the country, the taxing authorities, the Department of Finance and the government, do not give sufficient weight to the burden which is being placed on the back of the individual and which the hon. member for Moose Jaw described so well.
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Louis-René Beaudoin: Shall we take up paragraph 5?


Stanley Howard Knowles: Mr. Chairman, I should like to say a word or two with respect to the corporation tax. Perhaps I might put it in the form of a question to the parliamentary assistant. I hope he will not mind if, having asked my question, I comment on it before I sit down and let him comment on it. My question is this. Why is it that the personal income tax is graduated progressively and rather steeply whereas the corporation income tax is really not a graduated tax? I admit that there is a one-stage graduation in that the rates proposed in paragraph 3 now before us are 20 per cent on the first $10,000 of taxable income and 50 per cent on all income in excess of $10,000. In view of the fact that there is only that one stage, I think I am correct in saying that the corporation tax is, to all intents and purposes, a flat tax as opposed to the principle of graduation that is applied in the personal income tax.
One of the reasons that I am interested in this matter is this. Like other hon. members,
I do some reading in these matters from time to time in order to try to find out what is behind taxation principles. I find that it is a subject of study on the part of some economists as to whether or not the personal income tax and the corporation tax should follow these divergent patterns or whether they should be integrated. Among economists there is, of course, a difference of opinion on the point. I am impressed, however, by the point that some writers make to the effect that when you have such a wide spread between the rates charged under the personal income tax on the higher brackets and the highest rate charged on the corporation tax, you thereby induce wealthy people to leave in the assets of the corporation what otherwise might be some of their personal gains.
The result is that part of what they have gained is, in effect, subject to a lower rate of tax than it would be if they took it out in personal income. Another result that follows is an increase in economic power on the part of those who are in a position to leave some of their wealth in corporations in that way. I could go on. As a matter of fact, the works that I have looked at are quite extensive. One can read and think about these things for hours on end. However, I have asked my question and I have expressed my opinion. I should be glad to hear from the parliamentary assistant as to why the one tax is graduated and the other is flat.


James Sinclair: The hon. member has raised an interesting question which is quite often

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raised by people who look at our two direct tax schedules and wonder why the difference. As he says, we could conduct a long discussion on the matter-and I hope we shall not do so-but I can quite easily summarize it by saying this. In the case of the individual, the individual with a small income is a poor man. The individual with a large income is a rich man. The income is for his own use, and so on it we have this very steeply progressive rate of personal income tax. When we come over to the corporation tax field, however, we are not dealing with persons; we are dealing with a legal person so far as the law is concerned, but so far as life is concerned, we are dealing with assets that are held and owned by a group of individuals.


Stanley Howard Knowles: Sometimes referred to as soulless corporations.


James Sinclair: Sometimes referred to as soulless corporations or soulless individuals. In general the small corporation is owned by the little man. That is why we do have this measure of progression which was introduced two or three years ago into the tax schedule for the first time to give a lower rate of tax on the first $10,000 of profit made by the corporation. The point was that a corporation smaller than that will enjoy the full value of the 20 per cent rate instead of the 50 per cent rate which is paid on profits in excess. To avoid a rich man owning a great number of these little companies and getting all the profits to himself and so actually getting the benefit of a low rate of corporation tax in the end result, we have of course the income tax provision against closely related) companies getting this special rate of taxation on every one. Only one of a group of closely related companies can get it.
When we turn to the big companies, however-first of all, the actual size of the profit as such is no indication whatsoever of the wealth of the company. One company may make a million dollars profit and be extraordinarily successful during that year because the capital involved in this operation is small. Another company may make a million dollars profit; for example, we will say that the C.P.R. in its year's operations made a million dollars net profit. It certainly would not have made a high rate of return on the very large investment which is in the C.P.R., instead an extremely low rate of return. That is the first point. The second point is the ownership of the company as far as the incomes of the shareholders are concerned. It may well be that the smaller company with a small profit is owned by three or four individuals alone, so when the profit comes back to them they have large amounts of 
individual income; whereas the company with the big profit may well be owned widely so the individual shareholders get only small amounts as dividends. The big companies, utilities especially, are very widely owned by great numbers of shareholders, many of whom have very modest means, and so the application of a violently progressive tax on corporations in the same way as we have on individuals would inflict undue burdens on them. However, we do compensate for that by the very point which was just raised by the hon. member for Greenwood, in that when these profits are paid out as dividends, after having paid corporation taxes, and then find themselves in the hands of people as dividends they are taxed again. And after all to get advantage from it people have to spend money. Companies as such do not get any personable pleasure out of spending money on themselves. It is when the dividends are paid out to individuals1 that the advantage of having money becomes apparent.
On these dividends we have the application of the progressive rate of income tax which we have just covered in the first two paragraphs of the resolution. In closing may I refer to the fact that it has been suggested that the lack of progression in the corporation rate may encourage payment out of profits which should properly be held for the companies' development. That is not actually borne out because-


Stanley Howard Knowles: I think I said it would induce the very opposite-


James Sinclair: The other way round.


Stanley Howard Knowles: Yes.


James Sinclair: This example stuck in my mind when I was home the last time, because the annual report of one of the largest British Columbia's timber operations had just been released. They made a profit of $31 million, a very substantial profit. Well, the first thing that they did was to pay $16 million corporation tax, so the people of Canada generally got the major share of these profits. That was to the government here, the federal government, because British Columbia is an agreeing province, and so we collected all the corporation taxes. That left them with $15 million net profit. Of that $15 million profit only $3 million was paid out to the shareholders as dividends, the remaining $12 million was plowed back into expansion of the plant, a most desirable thing. Of the $3 million which was paid out as dividends a large part went to the principal shareholder, a very wealthy man, who pays a very high rate of income tax. His share of these net company profits was then of

course subject to the high marginal rates of personal income tax at the bottom of the last resolution. On the other hand that same company has quite wide ownership by actual employees who work in the mills of the company, a share here and a share there. When their share of the $3 million was paid to them, it too was subject to personal income tax, but as they were little people on comparatively small incomes, it would come under the low rates at the beginning of the schedule, because that is the income tax bracket in which the individual of lower income would find himself.
The one other thing we do is to give some relief to this double taxation which results from corporation tax on profits and income tax on dividends. That relief was given by the amendment of two or three years ago. We give a tax credit of 10 per cent of the dividends received from Canadian corporations.


Agar Rodney Adamson: It must not be forgotten that corporations are merely groups of people. We are apt to forget that corporations are after all just people, and only people pay taxes.


Louis-René Beaudoin: Shall we now take up
paragraph No. 5?


Stanley Howard Knowles: With reference to paragraph No. 5, Mr. Chairman, we are back to a discussion which the parliamentary assistant initiated during the general debate this afternoon, and which we later agreed to defer until we reached paragraph 5. I shall not re-open the discussion on procedure with respect to private members' motions, into which we were getting involved when you, sir, stopped us this afternoon.
I shall deal rather with the disappointment that many people in this country felt over the failure of the government to remove the four per cent floor under medical expenses, and I shall also try to deal with the substance of our plea in the hope that we can yet persuade the government that action should be taken at this session.
I indicated yesterday that this was one point where I wished we could have the minister with us, and that is in no sense a reflection on the parliamentary assistant. He demonstrated yesterday and today, whether we agree with him or not, that he is well acquainted with the subjects involved in the handling of these resolutions, and he also knows all the arguments on the government's side. The difficulty is that even if I might, to my satisfaction, and even to his, persuade him that a change should be made he, not being the responsible minister, has no
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alternative but to stand pat. However, since the minister is not here we shall have to make our arguments with the parliamentary assistant and hope that we can wear him down so that he will in turn try to wear down the minister.
The main argument that on other occasions the minister and the parliamentary assistant have put forward for retaining the four per cent floor is the contention that that represents the national average spent on medical bills. I think he will agree with me-


James Sinclair: Medical, dental, nursing,
hospital and drugs.


Stanley Howard Knowles: Yes, all these items that come under that general definition. I think he will agree with me that that is stating his side of the case fairly. He argues that everyone spends on the average that much, and if you give an allowance for that amount you will have to make it up by raising the rate or by collecting it in some other way. As I see it, the fallacy in that argument is that there is no such thing as an average man. The average person is a statistical phenomenon that does not really exist per se. In other words, averages are deceiving. Four per cent may be the average that is spent on these various medical items, but every individual pays a different amount and a different percentage of his income. Many people in the course of the year are fortunate enough to have no medical expenses. Others may spend one or two per cent. Some will be somewhere around the average of four per cent. Then, there will be others who are away above the average.
As I see it, the aim of taxation relief in respect of medical expenses should be to assist, in so far as taxation relief can, in ironing out some of that spread. I firmly believe that there are better ways to do it. The parliamentary assistant probably agrees with me-but I am not asking for his comment just now-that a program of health insurance would be more desirable. However, at the moment we are dealing with this matter at the income tax level.
My contention, which I believe is well taken, is that to use an argument in respect of averages is to use an argument that is fallacious. What you have to do is to deal with an actual fact, that people's medical costs vary from nothing up to quite huge sums of money. So it follows that if you do grant medical expenses right from the first dollar up to whatever ceiling the government chooses to impose, as deductible for medical expenses, you do not thereby give a tax saving that is the same to everybody, whereupon you must collect that same amount from everybody, so that in the end

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your position is not changed. That is not what happens. Rather you give tax relief to those whose expenses have been in the higher reaches rather than to those who have been in the lower reaches, or who have had no medical expenses at all. And any loss to the treasury as a result of that relief which you have given in proportion to the medical expenses people have incurred is then made up on an across-the-board basis.
That is where I think the government needs to rethink this whole position through once again. I know that it was on the basis of unusual medical expenses that this deduction was first allowed when it was brought in by Mr. Ilsley in 1943. And when he changed the floor from five per cent to four per cent in 1944 he still based the whole idea upon the concept of unusual medical expenses, with reference to what he regarded as expenses above the national average.
I submit it is just possible that the finance department has been thinking in terms of that average concept for so many years that it has not stood off and taken a look at the problem in the different terms I am trying to portray now. I feel the point I am making is basic. I feel it meets the fundamental argument the minister and the parliamentary assistant have put forward, and I urge most strongly that consideration be given to changing the income tax bill based upon this resolution, even at this very session. I submit, as I have said on two or three occasions previously, that in asking that that be done I have a very good precedent. The precedent relates to this very question of the deductibility of medical expenses.
The parliamentary assistant knows this story very well now, namely that in 1944, at this very stage of debate, in committee of ways and means on the budget resolutions, we pleaded with Mr. Ilsley to drop the floor, which was then at five per cent, down to two or three per cent. It was a new idea, that the floor should be dropped. That idea originated on the floor of the house, mainly from the opposition side, but also with support from the government side as well.
Despite the fact that no such proposal had been forecast in the budget speech or in the budget resolutions, as a result of the discussion which took place at this stage of the debate Mr. Ilsley, when he brought in his Income War Tax Act amending bill, reduced the floor from five per cent to four per cent. It was not all that hon. members had asked, but at least it was something that had not been forecast in the original budget speech.
In this instance we will forget what happened on March 26, because every time we talk about it we get into an argument. Most 
of us recall the vote that took place that day. Then, since that time there has been another vote-the vote on our subamendment. It went the other way. That vote expressed confidence in the government, despite the fact that it had not removed the four per cent floor.
A year ago the house voted against the deductibility of trade union dues, and then the government turned around and brought it in. Probably we can have that precedent followed too. We have had a vote against this proposal a short time ago, so now the government could bring it in. I submit the government's confidence has been endorsed by the majority of the house; but, meantime, this whole question has been threshed out considerably, and a good deal of feeling has been expressed with respect to it. Indeed, some members who support the government, speaking in the budget debate did express the hope, despite their position on the subamendment before the house, that the government would yet give consideration to the removal of the four per cent floor.
I dare to hope that there will be other members now who will join in this plea, and that the government will give consideration to it. I am refraining deliberately from saying too much about how we felt concerning the failure of the minister to meet our expectations in that regard. Rather, I am putting it to the government now on a straight basis of the justice of our plea.
Another of the arguments the parliamentary assistant used against this change-although perhaps he will interject by saying that it was just a point he was making-was its cost. He pointed out that it would cost, in his view, $48 million; but he did not say that that was the sole reason for objecting to it. That estimated cost of $48 million was the subject of correspondence to which the parliamentary assistant referred this afternoon, and which I was beginning to deal with when we agreed to defer the discussion until we reached this item.
As both of us agreed, we have given copies of our letters to the others involved in this correspondence, so all of us have the whole story. The parliamentary assistant, in reply to the gentleman over in Hull who started this correspondence, emphasized his point that to remove the four per cent floor was to remove from the taxation base four per cent of the taxable income. The gentleman who started this correspondence sought to make the point that there would not be a loss of four per cent of the total take of income tax, but only a loss of a percentage on a percentage.

1 will agree that the parliamentary assistant made a good point when he made it clear that the four per cent has to be considered in terms of the amount of taxable income that it removes from the taxation base.


James Sinclair: And also where it is removed from.


Stanley Howard Knowles: Yes; the parliamentary
assistant dealt with that quite fully in the letter he wrote on April 30 to the gentleman on the other side of the river. In that letter, a copy of which I have because the parliamentary assistant was good enough to send it to me, he gave four examples of taxpayers in different income brackets. The point he sought to make by giving these different examples was that the loss to the treasury in every case would be determined by the rate applicable to the top bracket in which the taxpayer is located when he claims this extra 4 per cent. Having made a case that is strong to his satisfaction at any rate, and having pointed out that in some cases the reduction in tax payable is much higher than 4 per cent, he then goes on to point out that the rate of reduction declines as the income increases but that it will never decline below 4 per cent because the amount is based on net income, not taxable income. I merely want to say, so that we can have this all on the record, that in my last reply to the gentleman across the river I said in part: There may be something to his point-
1 was referring to the parliamentary assistant.
-that the 4 per cent relates to net income rather than taxable income: but by drawing attention to this aspect of the matter Mr. Sinclair has only emphasized the fact that the 4 per cent floor is very unfair. Indeed, the point that one has to reach before he can deduct medical expenses is not Just 4 per cent of his taxable income, but 4 per cent of what in most cases amounts to his total income. In other words, it is extremely difficult for the average person to get any advantage out of this supposed right.
As I see it, the major fallacy in Mr. Sinclair's argument is one that I drew attention to-off the cuff, as it were-as recorded in column 1 on page 1541 of Hansard for April 23. Even if Mr. Sinclair can assert that 4 per cent of total income is the average amount spent on medical expenses, surely he should know how deceiving averages can be. A great many people, even if the 4 per cent floor were removed, would still not claim a reduction in their taxable income by 4 per cent, so that I am satisfied that the alleged loss of revenue to the treasury would be considerably less than the $48 million indicated by Mr. Sinclair.
The point I wish to make is that the parliamentary assistant went to great trouble to show that the rate of reduction in the individual's income tax payment would vary from a high point down but that it would never get below 4 per cent. May I remind
Income Tax Act
him that the amount of income tax deductibility that persons would claim starts from zero and never gets over 4 per cent. That is the reason I suggest that the parliamentary assistant is wrong in assuming that to wipe out the 4 per cent floor would automatically take 4 per cent of the taxable income out of the taxation base and cost the treasury 4 per cent of what it otherwise would receive from the personal income tax.
Four per cent is the most of one's taxable income that could ever come into that calculation. In most cases it would be less than that, in some cases it would be none at all. I am not going to pursue that further. I tried to do it, as I say, a bit off the cuff on April 23 when the point was first raised in the house, but I suggest that to remove the 4 per cent floor really would not cost the $48 million that the parliamentary assistant suggested. But even if it did I come back to my previous argument that in terms of justice and fairness-no matter what it would cost-a civilized community should make an effort to iron out if we can the incidence of medical costs. On that basis it is only fair to grant to people their medical expenses as deductible from income tax right from the first dollar.
I emphasize again the fact that the kind of argument the parliamentary assistant has used about the national average is not applied to charitable donations. The argument might just as well be made there. It might be said that average donations of Canadians to charities of one sort and another are a certain percentage, and therefore we will not exempt charitable donations for income tax purposes until they get above that particular percentage. That argument is not applied there. Why apply it to medical expenses? So much for that phase of the matter. I press it as strongly as I can, and I hope that even yet the change will be made at this session of parliament for I am sure that the people of Canada feel now more than ever the justice of our claim that the floor should be wiped out.
The resolution before us proposes two or three changes concerning which I should like to get clarification. It proposes that the ceiling shall be raised. At the present time it is $750 for a single person and $1,000 for a married person. These figures are to be raised to $1,500 and $2,000. In addition, the present law provides for $250 for each dependent with a maximum of $1,000. In other words, you could not charge for more than four dependents. The proposal seems to be to raise that to $500. However I gather from what is said in the resolution before

Income Tax Act
us that the over-all ceiling of $2,000 which obtains in the act at the present time will still hold. I am not commenting on it. I am merely asking for clarification.
I am glad, however, to see the slight increase in the ceiling that is being effected by the resolution. Indeed, when we were debating this whole matter on March 26 the parliamentary assistant will remember that we got it straight between us that neither of us wants to see the ceiling abolished. The reasons for that were put on the record by the parliamentary assistant. However there is room for raising it, and I am glad to see that it has been done to this extent. I must point out, however, that this is more help to people who have money that they can spend on medical expenses than it is to the little fellow who just has the bills but does not have enough to get into the appropriate bracket.
I have one other question. In the latter part of the resolution before us it is suggested that another change be made, namely, that it will no longer be necessary for medical expenses to be both incurred and paid within the twelve month period. That is the way the law now reads. Expenses to be deductible have to be both incurred and paid during the twelve month period within the taxation year.


James Sinclair: That is the old law.


Stanley Howard Knowles: Yes. Under the new proposal it will not matter when the expenses were incurred. I should like to know whether that is of any assistance to a person who has a big bill that he cannot pay all in one year. If he gets a big bill in 1952, shall we say, can he pay part of it in 1952, then part of it in 1953, and claim the whole of it in 1953?


James Sinclair: No.


Stanley Howard Knowles: Or must the actual paying be done within a twelve month period? I see the parliamentary assistant nodding his head. If that is the case it is some help, but not a great deal. To take the problem I presented on March 26 when this matter was before us, the plight of the person who has a heavy medical bill he cannot pay off within one twelve month period is serious. If he has to pay it in two periods, in neither of those periods does he reach 4 per cent of his income, so though he has had heavy medical expenses he gains no benefit. The same is true of the allowance for cortisone, insulin and these other new drugs. That is a fine gesture supposed to help a great many people who have heavy medical bills; but it is

not sufficient to get them over that 4 per cent floor, so they are denied the alleged benefit of this proposal.
This may be one of the little things; the number of dollars involved is not great, but there is a principle here which is pretty important. I hope even yet the government will accede to the wish of parliament and the wish of the people of Canada as a whole and remove this 4 per cent floor.


Robert Fair: There is another matter in
connection with medical expenses which I have not heard discussed here so far. Take the case of a person in a district without a local hospital, or a person in a local hospital district who has something the matter with him that cannot be successfully treated at that hospital. He goes to Edmonton or Saskatoon; but because the hospitals there are not able to take care of all those who need attention, the patient has to pay hotel expenses in addition to his train fare while waiting to get into the hospital. I have had some letters in reference to this, and I wonder if the department would not also consider that as a medical expense.


Agar Rodney Adamson: If I might ask the parliamentary assistant one question, I think it would be interesting to know what percentage of the taxpayers made claims for medical expenses in the last taxation year.
I do not think that figure has been given.


James Sinclair: It would be a very difficult figure to give; but on page 112 of the taxation statistics of Canada is a breakdown of deductions and the amount claimed in each and every group, with the total amounts claimed. The total amount of income claimed was $31 million. That is according to the most recent statistics to be put out.
While I am on my feet I might answer the other questions which have been raised. I do not intend to again go over the ground which was gone over first of all when we had the debate on the hon. member's resolution, when the minister and I discussed the matter. Actually we first had a discussion of medical expenses in the budget debate. After the debate in the house the matter was again reviewed in the light of the observations then made. Then in his budget speech the minister gave the decision he had reached. After that, of course, we had the vote on the want of confidence motion moved by the C.C.F. party. Now we have the resolution which, as the hon. member said, I am piloting. Finally, when the bill is before the house, the minister himself will pilot it through.
As far as the actual calculation goes, I tried to make it clear in the speeches I made that the actual amount of revenue concerned was

a minor point, though as far as principles are concerned the business of giving any broad exemption which would apply to all groups of taxpayers in the end had the result that this lost revenue had to be recouped in some other way by a tax which had its incidence on the same broad group of taxpayers. The hon. member mentioned the very interesting correspondence we had with this gentleman in Hull who took an interest in this matter. I was out in making the rather hasty estimate I gave in the house. I corrected my first error when the hon. member for Hamilton West was speaking. That was the fact that I had not allowed in that the part already claimed, the part just referred to by the hon. member for York West, the part over the average which had been claimed, the $30 million in some $6 billion of income. However, on receiving this letter I settled down to break it down. As hon. members know, I have no legal training, but I did have pretty extensive training in mathematics. I have done a great deal of work, for example, on this very interesting mathematical problem of averages and the weighting which should be given to averages. The thing here, of course, which makes this problem out of proportion as far as ordinary averaging is concerned is that the deduction is not taken off at the average rate of tax paid, but off the very top limit. In working out the four examples I gave, I showed that the actual incidence of this tax is very much higher than 4 per cent, so the loss of revenue being compensated for, the excess already claimed would be that.
The officials of the department thereupon became interested in the problem and did the job which I suggested to the correspondent and to the hon. member, the real job of breaking down every tax category, examining the rate of taxation on that, and then aggregating the sum. Again this is based on the premise that 4 per cent is the national average. The original figures supplied by national health and welfare indicate that this is less than the national average, which improves the argument. The hon. member says, of course, that there will be some individuals who do not claim 4 per cent, who may claim only 2 per cent. If 4 per cent is the national average, that means there are other individuals who are claiming 6 per cent, and in any tax category that will average out.


Stanley Howard Knowles: But they are now getting the portion above 4 per cent.


James Sinclair: That is the compensation to which I referred. This is a very lengthy table; I do not propose to put it on Hansard, but it is certainly an accurate substantiation of the figures I supplied.


Stanley Howard Knowles: Could I see it?
55704-132J
Income Tax Act


James Sinclair: I shall be glad to send it to the hon. member. This also does not compensate for the excess percentage claimed, that $30 million not of tax but of income.
The next point was the meaning of the resolution as regards the maximum deduction which can be claimed by a husband, wife and family. That was $2,000. It is now $4,000, $2,000 for the couple and then the four dependents at $500 each. The hon. member rightly pointed out that an improvement has been made by allowing the exemption to be claimed not just as it was in the old act, in the twelve months which need not be a year but which might spell two taxation years, but in the twelve months in which the sickness occurred and the bills were paid. The special case which this legislation covers, of course, is the case of unusually heavy medical expenses. It may well be that the individual cannot pay off the heavy bill he has incurred in the one year. Under the old legislation he could not claim in the next year; under this he can. It is an advantage, too, in the case of a man who has an illness to such a degree that his expenses are more than even the present deduction, because if he then spreads it over two years he comes within the ceiling in those two years.
The last point, in regard to transportation, was raised last year and given consideration again this year. Again this is a matter which would be extremely hard to administer, because transportation would range all the* way from the taxicab or even the streetcar by which some people go to hospital to the ambulance, the train and the plane by which others go. Last year we had quite a discussion on that point with the hon. member for Macleod, I think it was. The government gave consideration to including transportation as a medical expense, and decided that it could not be done at this time.


James MacKerras Macdonnell: I want to add just one word to what I said this afternoon on this subject. I was bold enough to suggest that the people of this country do believe that suggestions made by their representatives in parliament are perhaps entitled to a little more weight than just any other representations. The parliamentary assistant rather just swept me out with the dust with the remark, as affecting as it was unexpected, that he did not wish to have his views considered more than those of any other person in Canada, if I understood him correctly.


James Sinclair: On tax matters affecting the individual citizen.

Income Tax Act


James MacKerras Macdonnell: That struck me as very unconvincing. I would, as a matter of fact, rate him higher than that.
I am not going to labour this point. I am just going to say that it is high-minded and quite unselfish for us to raise the point at all. Much the best thing for us to do is to leave it where it is, because I think the public is irritated by what was done. It is only because of our very high sense of duty that we urge the government to do something about it, in their own interest. I think that in this case the public feels that the government has disregarded parliament as if it were nothing.


Louis-René Beaudoin: Paragraph 6?


James MacKerras Macdonnell: I should like to say a word on this paragraph. I welcome this measure, and I should like to ask a question with regard to municipal taxation. Can the parliamentary assistant tell us whether there is any principle, and also what the practice is, with regard to the payment of municipal taxation by crown corporations?


James Sinclair: That was covered in the statement made by the minister some years ago when the federal government, as such, first began to pay grants in lieu of municipal taxes to municipalities other than Ottawa. For many years, because of special circumstances, Ottawa was paid a grant. Again it is a matter of a national average. It was estimated that across Canada the average federal holding of property in the various municipalities was 4 per cent. Those municipalities which had an unusual concentration of federal property, which is of course exempt from tax, were given relief through the payment of grants based on three-quarters of the tax above that national average. However, that just covered the departments of government and the agency corporations. These corporations, the proprietary corporations, which are-


James MacKerras Macdonnell: Were they excluded?


James Sinclair: They are definitely excluded from the original Abbott formula. At that time he said that since those were, to all intents and purposes, commercial businesses it would be up to them to make their own arrangements with the various municipalities. So far as I know, that has been done. I can get a report as to the extent to which this has been carried out. I know that most of them have now completed such arrangements, and I know that such arrangements go a little beyond the list here of proprietary corporations.
There are some agencies of the federal government-I think of the national harbours

board for example-which are not proprietary corporations but which have also made separate arrangements with the municipalities for payment of grants in lieu of taxes for services they get from the municipality.


James MacKerras Macdonnell: Then, would it be correct-


Louis-René Beaudoin: Order. I doubt very much that it is in order to discuss the payment of municipal taxes by crown corporations on this resolution. The hon. member asked a question, and I allowed the parliamentary assistant to reply but I do not think we should get into a prolonged debate.


James MacKerras Macdonnell: Could I ask one more question?


James Sinclair: I think this is interesting because the principle is really the same in payment by federal corporations of both municipal taxes and federal taxes, and since we are breaking new ground, ground which most of us who are not socialists will agree is right ground, perhaps we might continue.


Louis-René Beaudoin: Perhaps I might point out that I am not concerned in what might be of particular interest. I am interested in having the discussion relevant to the paragraph which is under study. The hon. member for Greenwood has just asked me if he might be permitted to ask another question. That is quite convenient to me, provided other hon. members will not follow the example and begin a long debate on matters having to do with the payment of municipal taxes by crown corporations.


James MacKerras Macdonnell: May I suggest that, after all, the situation of the companies in respect of municipal taxes will affect their capacity to pay federal taxes. I just want to ask this question. Do the crown companies deal with the municipalities just as any other organization does? They are not in any privileged position?


James Sinclair: That is correct.


Agar Rodney Adamson: I gather that these are corporations such as Eldorado, Polymer-


James Sinclair: I am sorry, I should have given the list.


Agar Rodney Adamson: I think it would be of interest to us if we could have a list, and if the profits are available I think that might be of interest.


James Sinclair: Of course, this is only going to be applicable for the first time to the profits which will be made in this year. The corporations are those set out in schedule D to the Financial Administration Act which we passed last year, the new financial control act of this federal parliament. Those in

schedule D are the following:	Canadian
Broadcasting Corporation; Canadian Farm Loan Board; Canadian National (West Indies) Steamships, Limited; Canadian Overseas Telecommunication Corporation; Central Mortgage and Housing Corporation; Eldorado Mining and Refining Company (1944) Limited; Export Credits Insurance Corporation; national railways, as defined in the Canadian National-Canadian Pacific Act, 1933; Northern Transportation Company (1947) Limited; Northwest Territories Power Commission; Polymer Corporation Limited and Trans-Canada Air Lines.
Members who will recall the debate of last fall will realize that this includes all the proprietary corporations, with perhaps one exception, the Bank of Canada. It is such an unusual position, and in any case its profits in the end are turned over to the crown, that it was not included in the Financial Administration Act.


Agar Rodney Adamson: I was going to ask about the Bank of Canada and the other bank, the Industrial Development Bank.


James Sinclair: It is a subsidiary of the Bank of Canada.


Agar Rodney Adamson: Its profits, if any, are paid to the Bank of Canada?


James Sinclair: The Minister of Finance has the power to transfer that portion of their profits which he decides should be part of national revenue from their account to the consolidated revenue as he has, mind you, for all these other proprietary corporations under the Financial Administration Act. The Bank of Canada is in a unique position in that it is not competing with any privately owned banking institution in Canada. It is not in competition with the chartered banks, whereas these other proprietary corporations, for the most part, are in active competition and are compared with their private competitors so far as profit and loss statements are concerned.


Agar Rodney Adamson: Just one more question-I hope I do not trespass in asking it: Will they be also subject to provincial taxes?


James Sinclair: No, they will not be subject to provincial taxes, nor will the provincial crown corporations, of which there are a fair number-I think for example of Hydro-be subject to this taxation. We would hope that perhaps, if this pattern worked out satisfactorily, the provinces might copy it. The effect on their revenues will be exactly the same, because the profits of those provincial crown corporations go in the end to the provincial treasury. Such a program provincially will do the same thing, and put these
Income Tax Act
provincial crown corporations in a position where a better or more accurate comparison can be made of the relative efficiency of publicly-owned corporations and privately-owned corporations competing in the same fields.


Louis-René Beaudoin: It appears to me as though paragraphs 7 and 8 and paragraph 9 could well be discussed together. Perhaps they might be taken together.


Herbert Wilfred Herridge: Since we are taking paragraphs 7 and 8 together, I should like to make a few remarks in this connection and they apply, to some extent, to paragraph 9. Paragraph 7 reads as follows:
That the special deduction from income to a taxpayer whose principal business is the production, refining or marketing of petroleum or petroleum products or the exploring or drilling for oil or natural gas or mining or exploring for minerals, be allowed for expenses incurred in the 1955 operations on the same basis as for expenses incurred in the operations in the years 1951 to 1954.
I can see the purpose of that resolution, and Nos. 8 and 9 whose purposes are very similar. I presume it is to promote the exploration for gas and oil and the prospecting for minerals and things of that sort. I think that is a worth-while thing to promote. in this country at this time. But, Mr. Chairman, you will remember that during the budget debates of 1950 and 1951 certain representations were made I think on sections similar to this one-they may not have been numbered the same, but they had the same purpose-by the hon. member for Comox-Alberni and myself urging that similar consideration should be given to those who are practising conservation in the forest industry.
There is a tremendous need for the conservation of our forest resources in this country at this time. That procedure is being preached in every provincial legislature and it has been preached in this parliament. This worth-while purpose is being supported across Canada by many important and recognized organizations. I think it is generally accepted that anything we can do to promote the conservation of our natural resources is something that should be done, and done now for the future.
I happen to know that many large lumber companies in recent years are developing policies along these lines; they are spending large sums of money to conserve our timber and to provide timber for future generations by tree planting in some cases, by the building of fire guards, by the building of trails and by the building of roads. That type of policy is being adopted by more and more companies and also by quite a number of smaller owners. I have a knowledge of quite

Income Tax Act
a number of smaller owners of forest resources in British Columbia who are doing this, and farmers at this time are being urged to do the same.


James Sinclair: Mr. Chairman, I do not like to interrupt the hon. member but there is no conceivable connection between the cost of conservation and the cost of reforestation, and these concessions which are given to mining and oil, because mines and oil wells, unlike forests, are wasting assets. The argument which the hon. gentleman is making is one as to whether the cost of reforestation should be regarded as an operating cost or a capital cost; but it certainly has nothing to do with these three resolutions. It has been raised on other occasions. It is a matter which is now before the Minister of Finance for study. But as to the individual items here, it has no conceivable connection at all.


Herbert Wilfred Herridge: Mr. Chairman, I should like to ask just two or three questions. I had practically finished. I think there is some relation, because these items provide for the development of natural resources and what I am suggesting provides for the development of natural resources and the conservation of them. I want to ask the parliamentary assistant whether, as a result of representations made by members of this house and, I believe, by corporations and some individuals outside the house, consideration has been given to making provision for income deductions on account of expenditures in connection with forest conservation policies by companies or by individuals. If so, why has not favourable consideration been given to that matter at present?
Just before I conclude, Mr. Chairman, may I say this. I may be off the beam a bit. It may be possible, under the present law, for companies to charge these expenditures legitimately against the expenses of their operations. If that is so, I should like to know it. I should like the parliamentary assistant to advise me whether it is possible to charge against operating expenses moneys expended for the conservation of forest resources in any operation by a company, a farmer or any individual owning timber.


James Sinclair: Mr. Chairman-


Louis-René Beaudoin: The question is whether this discussion is relevant to these three resolutions.


James Sinclair: i do not want to be out of order.


Louis-René Beaudoin: It seems to me that these questions might more properly be asked of the minister when he is dealing with his estimates. These three items have to do with
CMi. Herridge.]
special privileges to the mining industry, and the metalliferous or industrial mineral mine industry. You cannot expect the parliamentary assistant, who is prepared to reply to pertinent questions on these resolutions, to cover the whole field of whatever other questions hon. members may want to have a reply to. I think that on the estimates the hon. member might put to the minister any question that is unanswered now. When the minister comes before the house with his estimates, the hon. member might remind him that he wants an explanation with regard to this question that he has put on Hansard today. I think that he might wait until that time for a reply.


Herbert Wilfred Herridge: I gladly accept your ruling, Mr. Chairman, and will accept your advice.


James Sinclair: Thank you.


Agar Rodney Adamson: Mr. Chairman, I want to ask a question. I am sure that item 7 has reference both to oil and to mining. I had hoped, and I would hope, -that these provisions might become a permanent statute rather than be a matter for reintroduction every year under the budget resolutions. I feel that they are valuable and desirable; in fact, they are absolutely necessary. Particularly in view of the rather precarious state that certain parts of the mining industry now find themselves in, I feel that consideration should be given to making them a statute.
I have also seen statistics to the effect that it has been our experience that only one well out of seven drilled is a producer of either gas or oil. I think that information shows to the committee more than anything else the absolute necessity for having a provision like this with regard to the extremely hazardous business of drilling and prospecting for petroleum and natural gas.
I wonder whether the parliamentary assistant has any figures with regard to the expenses in connection with the drilling and exploration for natural gas and oil or as to the claims made under those regulations? If he has, I wonder if he will give them, because I think it is of enormous importance to the country to do everything possible to assist the industry. We like to talk about our greatly expanded petroleum industry; but when it comes down to the facts, when you really see how hazardous the whole business is and how many times you have a failure, you appreciate the situation. A company that I unfortunately have been interested in has, I think, drilled 47 dry wells. I think that may be a record. Perhaps that is just my luck. But I believe that this provision is absolutely vital and I should like to see it made a statute. I wonder whether the parliamentary assistant has any statement to make on its operation.


James Sinclair: Mr. Chairman, these three items are very closely connected, of course. They are nothing new. They are extensions for another year of these special deductions. Both mining and oil are unusual industries in that mines and wells are operating on wasting assets. If any company is going to sit tight on its present ore body or on its present well, in the end it is going to be out of business. They therefore have to go out, explore and try to find new ore bodies or new oil fields. They are unlike the farmer or the forester who can, by conservation of his present operation, have his new crop develop on the same holding. That is why this special deduction has been given, namely to allow these companies in this special position-and this is item 7-to charge against their operating costs the cost of exploring away from the mine or well to find other ore bodies or oil pools. It is a very valuable concession to these industries as the hon. member for York West has pointed out. The industry would like to have it permanently in the statute. Up till now it has been on a yearly basis, but to give some measure of security it is projected ahead three years. In the last budget we told the industry that we would permit this concession at least as far as 1954, which gives them confidence in planning an exploration program for the next three years. This year we have extended that period for another year, until 1955. This may not be quite as satisfactory to the mining and oil companies as permanency, but it is much better than the old way to just leave them another year ahead. That is the situation in that case.
Now with respect to paragraph No. 8, which has to do with deep test wells, which are wells drilled to an unusual depth: In that case an even greater special concession is given, in that oil companies are allowed to deduct from their revenues the cost of this exploration, and in addition from their tax payable 30 per cent of the cost of drilling these very deep wells. The record has not been quite as dismal as the record of the hon. member's company, but naturally the hazardi on these deep test wells is greater, the cost is very much higher; and so this encouragement was given. It is a very much more valuable encouragement than the previous one, and that is why we still have it on a year to year basis, on the recommendation of the head of the geological survey.
The last one is another special exemption given to mining companies. It illustrates the point we both made a little earlier, that mining corporations are treated quite differently because of the speculative hazard, and the fact that they are working on wasting assets. They are given exemption from income tax
Income Tax Act
on the first three years of production. Here again the industry would like it to be permanent. Until recently it was on an annual basis. In the budget of a year ago we projected it forward three years. The last budget provided that they would have this concession up until 1954 so could plan accordingly. A year has passed, so we are now advancing it to 1955. The companies coming into production this year will now know that the first three years of their production are going to be exempt as far as income tax is concerned.
These are three concessions to these very special industries which are very highly valued1 by the industry.


Agar Rodney Adamson: I realize they are valued, and I entirely approve of them. The only point I wish to make is the one about making them statutory. My other point is that today the expenses involved in bringing a mine to production, any type of mine, run into, instead of thousands of dollars or hundreds of thousands of dollars, as in the old days, millions. And instead of being a matter of possibly a year or so before profitable production might reasonably be expected, the average is in the nature of five years, even though a mill begins to operate very frequently on exploration ore, or exploration rock, comparatively early in the life of the mine. I am not going to press this point at the present time, Mr. Chairman, but I feel that under the somewhat changed circumstances there is a good reason, and a good case, which can be made for even an extension over the three years, particularly with regard to base metal mines where the mill may start to operate in order not to have a large dump or a large rock pile, and also in order to begin possibly to pay exploration costs at an early date. Frequently that test or exploration mill has to shut down and the ore body may not be proved. But because once the mill starts operating the three-year period begins I feel that under the new technique there is reason why this three-year period might be extended.
However, I do not wish to press this at the moment; I would merely bring it to the attention of the minister as an example of the sort of thing that is happening today in mining.


Louis-René Beaudoin: Is there any discussion on paragraph 10? Shall I report the resolution?


Some hon. Members:: Agreed.
Resolution reported, read the second time and concurred in.

Treaty of Peace (Japan) Act



Alphonse Fournier: for leave to introduce Bill No. 205, to amend the Income Tax Act.
Motion agreed to and bill read the first time.


EXCISE TAX ACT
Alphonse Fournier: for leave to introduce Bill No. 206, to amend the Excise Tax Act.
Motion agreed to and bill read the first time.


EXCISE ACT
Alphonse Fournier: for leave to introduce Bill No. 207, to amend the Excise Act.
Motion agreed to and bill read the first time.


DOMINION SUCCESSION DUTY ACT
Alphonse Fournier: for leave to introduce Bill No. 208, to amend the Dominion Succession Duty Act.
Motion agreed to and bill read the first time.


CUSTOMS TARIFF
Alphonse Fournier: for leave to introduce Bill No. 209, to amend the Customs Tariff.
Motion agreed to and bill read the first time.


TREATY OF PEACE (JAPAN) ACT PROVISIONS FOR CARRYING TREATY INTO EFFECT
Hon. L. B. Pearson (Secretary of State for External Affairs) moved: that the house go into committee to consider the following resolution:
That it is expedient to introduce a measure to provide that the governor in council may do such things as to him appear to be necessary for carrying into effect the treaty of peace between Canada and Japan; and for that purpose the governor in council may make appointments, establish offices and make orders or regulations; and to provide further that any expense incurred in carrying out the treaty shall be defrayed out of moneys voted by parliament.
Mr. Cold well: Is the minister going to give us some explanation of what seems to be a rather comprehensive resolution?


Lester Bowles Pearson: Possibly I might make a short statement on this resolution at this time. The house will recall that a resolution approving the ratification of the Japanese peace treaty by Canada was adopted by both houses of parliament before the Easter recess, and the Canadian instrument of ratification of the treaty was deposited in Washington on April 17.
[The Chairman.]
As hon. members are no doubt aware, the treaty came into force for those countries which had ratified it on the deposit of the United States instrument of ratification of April 28, in accordance with the provisions of article 23 of the treaty. So the treaty is now in effect. The ratification of a treaty by Canada makes it legally binding upon this country, under international law; but such ratification does not alter the domestic law of Canada and does not, of course, impose obligations on Canadian citizens.
In the United States when a treaty is ratified it becomes part of the law of the land, and automatically thereby imposes obligations on United States citizens. But under our system, though governments may bind themselves, it requires legislation to impose obligations upon our nationals.
The resolution before the house is the first stage in the introduction of a bill which will be necessary to enable Canada to implement the provisions of this treaty. Those provisions which will require implementation by legislation in this country are rather narrow, and not of political but rather of legal importance. Article 14 of the treaty, for instance, makes provision for the liquidation and disposition of Japanese property in accordance with the laws of the allied powers concerned. This article enables the Canadian government, for instance, to apply the Japanese property vested in the custodian for the benefit of Canadians having claims against Japan or Japanese nationals, and will prevent Japanese nationals from suing in Canadian courts to recover property vested in the custodian. For both of these purposes under the treaty legislation would be required in Canada. It would also appear necessary for there to be legislation to enable Canada to carry out the provisions of the protocol to the treaty which regulates the question of contracts, periods of prescription and negotiable instruments, and questions of contracts of insurance.
It is for carrying out legal provisions of that type that we require a resolution, and legislation of the type envisaged in the resolution.
The bill which will be based upon the resolution, and which is envisaged in the resolution, will be drafted along the same lines as the Treaties of Peace (Italy, Roumania, Hungary and Finland), Act, which was assented to on June 30 1948, and which some hon. members will recall. That act was substantially the same as a group of statutes passed by the Canadian parliament following the first world war, with reference to the treaties of peace with Germany, Austria, Bulgaria, Hungary and Turkey.

Under the 1948 act to implement the Italian, Roumanian, Hungarian and Finnish treaties, two orders in council only have been required. One provided that certain provisions of these treaties should have the force of law in Canada. The other in 1951 was known as the war claims (Italy) settlement regulations. It is not anticipated, therefore, that any extensive action under this resolution-or the act, if it becomes law-will be required.
Neither of the orders in council passed under previous legislation in connection with other peace treaties contained any provision for penalties, and it is not likely that any orders in council passed under any legislation to implement the treaty with Japan will require a provision for penalties in addition to those contained in the trading with the enemy regulations which were continued in effect under the Trading With The Enemy (Transitional Powers) Act, 1947.
Nevertheless it has been considered desirable, as it was considered desirable in similar bills previously, to avoid any uncertainty in the matter and to provide in any bill for the prescribing of fines and other penalties by the governor in council. Such a bill based upon this resolution will be legislation to make effective upon the nationals of Canada obligations contracted by the government of Canada with the approval of the parliament of Canada. And I believe it is usual in such cases to make provisions for a penalty, if there is a violation.
I do not think there is anything more I can usefully say at this time. If the resolution is concurred in, a bill will be introduced. And when that bill is introduced, at the appropriate time it will be moved that it should be referred to the standing committee on external affairs, where it can be given very detailed consideration by members of the committee. That might also provide an occasion for discussion on Japanese matters generally. Then, if members so desired, the bill could be referred back for final discussion here.


Howard Charles Green: It is almost eleven o'clock. I am not just clear as to what arrangement was made concerning this matter. Would he have objection to adjourning the debate?


Alphonse Fournier: If I might interrupt at this stage; I discussed the matter with the hon. member for Peel (Mr. Graydon) last night, and he had no objection. Otherwise I would not have put it on. He knows this bill is going before the committee on external affairs, and is anxious to see it go there. That is why I brought it on tonight. He even went further than that. He told me to tell your leader that he agreed that it should go to 55704-133
Treaty of Peace (Japan) Act this committee. That is where they discuss these important matters, I understand-and I would like to please the hon. member for Peel.


Howard Charles Green: The Minister of Public Works always makes a very persuasive argument. I understand the intention is not to move that the bill go tonight to the committee?


Alphonse Fournier: No; probably Monday.


Major James William Coldwell: That is all right, if the bill is going to the committee on external affairs. That was the understanding. I think it might be well to let the resolution go through, bring the bill down and then send it to the external affairs committee, where we can go into it clause by clause. I do not know what arrangement was made with representatives of the official opposition but, so far as I am concerned, if it is agreeable to the official opposition, I think that is probably the procedure that would be best.
Motion agreed to and the house went into committee, Mr. Beaudoin in the chair.


Agar Rodney Adamson: In the minister's remarks tonight he said that immediately the United States ratifies a treaty it becomes law, the law of the land, whereas in Canada, to become law, a treaty must pass through parliament, under normal circumstances. Do I understand from that that when the secretary of state, or whoever signed for the United States, signed the Japanese treaty at San Francisco, it became the law of the land? Does it not have to go through the senate and the congress?


Lester Bowles Pearson: The signature of a treaty by the United States does not of course automatically make it the law of that land. The signature has to be followed by ratification, after approval by the senate foreign relations committee and, by two-thirds of the senate itself, before it comes into effect in the United States. But once ratification has taken effect in the United States it becomes a part of the law of the United States and automatically imposes the obligations of its provisions upon United States citizens. In that respect the legal and constitutional situation in the United States is different from that in Canada.


Major James William Coldwell: There are certain clauses of this treaty that are of great interest to the fishermen of British Columbia. Is that matter going to be discussed by the fisheries committee before the external affairs committee deals with it? What is the situation? I believe the fisheries committee expects to go into the matter of the clauses dealing with

Treaty of Peace (Japan) Act fisheries. I heard that, and I wondered what the procedure was with two committees sitting on the same treaty, as it were.


Lester Bowles Pearson: It is the intention to submit to the fisheries committee the fisheries agreement.


Mr. Pearkes:: It has been done already. The committee is considering it now.


Lester Bowles Pearson: It is before the committee now. I am not sure whether it has completed its consideration of the agreement.


George Randolph Pearkes: No, it has not. It is waiting for certain evidence.


Lester Bowles Pearson: There are no particular fisheries questions that I can think of that would be involved in this particular measure to implement the provisions of the peace treaty generally.


Major James William Coldwell: Except there is a clause relating to the Japanese promise that they will consider a treaty.- Is that not right?


Lester Bowles Pearson: That is right, but that does not involve any legislative action that would be required by the parliament of Canada to carry it into effect. That was an undertaking between the governments concerned, and that undertaking has been discharged by the Japanese government in the signing of the fisheries agreement which is now before the fisheries committee.


Major James William Coldwell: So that really will not enter into the discussion in the external affairs committee.


Lester Bowles Pearson: No, it should not.


George Randolph Pearkes: Article No. 9 of the treaty is the most-favoured-nation clause. I believe last July the United Kingdom parliament said that they were got going to extend the mostfavoured-nation clause to Japan. Is Canada according to Japan most-favoured-nation advantages?


Lester Bowles Pearson: Although that is not a matter coming within the scope of this resolution, nevertheless I think I am right in saying that
we have not extended any rights under that clause to Japan as at this time.
Resolution reported, read the second time and concurred in.
Mr. Pearson thereupon moved for leave to introduce Bill No. 210, to provide for carrying into effect the treaty of peace between Canada and Japan.
Motion agreed to and bill read the first time.



BUSINESS OF THE HOUSE

Alphonse Fournier: On Monday we will move to go into committee of supply and call four departments, defence production, citizenship and immigration, fisheries and justice. Then we will take up the following resolutions and bills: The resolution in the name of the Minister of National Defence to amend the National Defence Act; the resolution in the name of the Minister of Mines and Technical Surveys concerning the Emergency Gold Mining Assistance Act. If the hon. member for Peel is ready and in the house we can then take up the bill to provide for carrying into effect the treaty of peace between Canada and Japan.


Howard Charles Green: Is it available for distribution?


Alphonse Fournier: If it is not available we will postpone it. I said we would bring it up on Monday but I will not insist on it. It may come up a day or two later. Then there is another bill, Bill No. 63, to amend the Prisons and Reformatories Act; Bill No. 93, to amend the Export and Import Permits Act; Bill No. 193, respecting the New Westminster harbour commissioners; Bill No. 194, to amend the Aeronautics Act, and Bill No. 195, to amend the Government Employees Compensation Act, 1947.


Howard Charles Green: Are you expecting to prorogue Monday night?


Alphonse Fournier: I should like to.


[Stage Direction]
At eleven o'clock the house adjourned, without question put, pursuant to standing order.
[Stage Direction]
Monday, May 12, 1952