1955-06-02

LABOUR CONDITIONS


Hon. Milton F. Gregg (Minister of Labour):: Mr. Speaker, on Monday last the hon. member for Comox-Alberni (Mr. Barnett) asked me a question to which I replied at the time. I should like to refer to the question and to my reply. The question was:
Mr. Speaker, I should like to direct a question to the Minister of Labour, of which I was not able to give him notice. He may wish to take it as notice. My question is, have any orders in council relating to the payment of the guaranteed annual wage been passed? If so, what is the nature of such orders in council?
The reply I gave was:
The answer is no, Mr. Speaker.
In giving that answer, Mr. Speaker, I understood from the question that my hon. friend was referring to orders in council that may have been passed during the last year or so since the guaranteed annual wage has been very much discussed. In view of the fact that my answer needs amendment, and in view of the discussions on this topic outside the chamber during the last few days, I would ask permission to make a brief statement.
The question of guaranteed annual wage plans is a matter for negotiation between labour and management, and the application of unemployment insurance benefits under any specific contract would have to be judged on the merits of the individual case.
In the newspaper story appearing in the Ottawa Citizen of June 1 reference is made to an order in council passed by the government which, in the words of the article referred to, "has only now come to light", the implication perhaps being that the regulation was suppressed in some way. It would appear that Mr. Swanson, who is widely known in this house as a newspaperman of the highest integrity, has received incomplete or inaccurate information on this matter.
Briefly the facts are these. The regulation in question was passed by order in council not in December of last year but on August 14, 1952. Second, there was no secrecy whatever about the order in council, since it was
published in the Canada Gazette of August 27, 1952 and has since been contained in every edition of the consolidated regulations of the unemployment insurance commission. In addition mention is made of this regulation directly or indirectly in both the employee's handbook and the employer's handbook published by the unemployment insurance commission.
The purpose of the regulation was to enumerate certain types of moneys paid by an employer which would render an employee ineligible for unemployment insurance benefits, such as holiday pay and so on. The reference to the guaranteed annual wage envisaged a situation in which the employer paid full wages to an employee during a period in which he was not actually working. It would obviously be absurd to pay unemployment insurance over and above full pay during a period of idleness.
I might say that this view was fully concurred in by the unemployment insurance advisory committee on July 21, 1952, which was attended by Mr. Percy Bengough representing the Trades and Labour Congress, Mr. S. Wolstein substituting for Mr. George Burt as the representative of the Canadian Congress of Labour, and Mr. Jean Marchand representing the Canadian and Catholic Confederation of Labour.
It should be made clear that all proposed changes in unemployment insurance regulations are discussed fully with representatives of both organized labour and management, and that it is the policy of the government to make no recommendations that will prejudice labour-management negotiations on questions such as the guaranteed annual wage, or on any other matter.



CUSTOMS TARIFF


Hon. W. E. Harris (Minister of Finance):: Mr. Speaker, may I table the resolutions to which I referred last evening, and make a short statement about them. These resolutions call for amendments to the Customs Tariff in addition to those amendments proposed in the resolutions which I tabled on the night of the budget. These are not changes in those resolutions but rather further amendments to the Customs Tariff.
The first resolution proposes that the Customs Tariff be amended as of tomorrow

Customs Tariff
to provide for the application of a special additional duty on imports of goods which have been state-subsidized. It is proposed that when goods of a class or kind made or produced in Canada are being subsidized by a government or government agency abroad an additional duty may be levied on imports of such goods equal to the amount of the subsidy.
Many governments are resorting to subsidies of one sort or another to solve certain domestic economic problems, and such subsidized products are entering international trade at an increasing rate. Such subsidized goods, if imported into Canada, might cause or threaten material injury to established Canadian producers. When our legislation was examined it was apparent that there was no clear authority to levy additional duties as a safeguard against the various forms of subsidy and state trading operations with which we might be confronted. The proposed amendment will give authority to levy an additional duty equal to the estimated amount of subsidy.
As hon. members are aware, we and other contracting parties to the general agreement on tariffs and trade have undertaken to limit the use of anti-subsidy duties. I can assure the house that the government intends to apply these duties in conformity with our international obligations.
The second resolution proposes further amendments to schedule A to the Customs Tariff. Members will recall that in my budget speech I stated that it might be necessary to introduce certain tariff changes later if it was decided to renegotiate certain tariff provisions which had been bound under GATT. The resolution proposes certain tariff changes as a result of renegotiation at Geneva. The main commodities involved are canned fruit and ethylene glycol.
It is proposed that canned fruit mixtures containing peaches, pears or apricots be dutiable at the same rates of duty as would be applicable to those fruits if canned separately. This has the effect of raising the duty on the product commonly known as fruit cocktail from 1 cent per pound under the most-favoured-nation tariff to 2 cents per pound. The most-favoured-nation rate on canned peaches is being reduced from cents per pound to 2 cents per pound. There will also be a reduction in the rate of duty on the melons covered by tariff item 95a, from 2 cents each to free.
We also recommend that we implement the report of the tariff board on ethylene -glycol, which I tabled the night of the budget address. It is proposed to establish a rate

of 10 per cent on ethylene glycol and mixtures of ethylene glycol used in antifreeze. Some of these glycol mixtures have been dutiable at 20 per cent and some have been duty free. Along with this adjustment of the rates on ethylene glycol to be used in antifreeze, there will be a reduction of the most-favoured-nation duty from 20 to 15 per cent on the finished antifreeze itself. Ethylene glycol used in explosives will remain duty free.
Our delegation at Geneva negotiated these tariff changes with the delegation of the United States. The rates on canned fruit and ethylene glycol were bound to that country under GATT. Before introducing these tariff changes it was necessary, therefore, to negotiate with the United States. The reduction of the duty on melons, on peaches and on antifreeze are amongst the compensations for the tariff changes on ethylene glycol and canned mixed fruit which we offered to the United States and which they have accepted.
The third of these resolutions proposes that the changes in rates of duty which I have just mentioned should come into force tomorrow.
The fourth resolution proposes that item 1019, which provides for drawback of the duty on bituminous coal for converting into coke for smelting, which was struck out in the budget of 1954, be re-established as of April 7, 1954. This will have the effect of validating coal subventions paid under the Canadian Coal Equality Act of 1930, which, by the terms of that act, depend for their validity upon the existence of item 1019. No change in effective rates of duty on coal is involved, for such coal has been duty free under tariff item 588(d) since the budget of 1952.


Mr. J. M. Macdonnell (Greenwood):: Is it
clear that the duty on ethylene glycol, as in the case of those previously mentioned, is the result of negotiations at Geneva, and comes with that sanction?


Walter Edward Harris: Yes, Mr. Speaker.



QUESTIONS


Mr. MacLean:: 1.	Has a property in the town of Souris, Prince Edward Island, been purchased for use by the Royal Canadian Mounted Police?
2.	If so, from whom was the property bought and what was the amount paid?


Mr. Garson:: 1. Property measuring 85 feet by 200 feet has been purchased in the town of Souris,

Prince Edward Island, for use by the Royal Canadian Mounted Police.
2. Purchased from Mrs. Edna St. John at a total cost of $2,265.


UNITED STATES TRADE
Mr. White (Middlesex East):: 1.	(a) What manufactured products are admitted to Canada from the United States of America duty free; (b) what manufactured products are admitted to the United States of America from Canada duty free?
2.	(a) What natural farm products are admitted	to	Canada	from	the	United	States of
America duty free; (b) what natural farm products are admitted to the United States of America from Canada duty free?
3.	(a) What processed farm products are admitted	to	Canada	from	the	United	States of
America duty free; (b) what processed farm products are admitted to the United States of America from Canada duty free?
4.	(a) What primary products other than food products are admitted to Canada from the United States of America duty free; (b) what primary products other than food products are admitted to the United States of America from Canada duty free?


Walter Edward Harris: Mr. Speaker, if I might speak to this, we can of course provide the hon. member with a consolidation of the Canadian Customs Tariff, which contains several hundred items not classified in the manner he has indicated in his question.
We could, of course, also provide him-by the courtesy of the United States embassy- with a copy of the United States tariff which contains several thousand items not classified in the manner indicated in his question. I regret that I am not able to answer any better than that.


Mr. Speaker:: Answered.



BUSINESS OF THE HOUSE


Right Hon. L. S. St. Laurent (Prime Minister) moved:: That on and after Monday, June 6, 1955, until the end of the present session, the house shall meet at 11.00 o'clock in the morning of each sitting day, and that in addition to the usual intermission at 6.00 o'clock p.m., there shall also be an intermission every day from 1.00 to 2.30 o'clock p.m.


Mr. Speaker:: Is it the pleasure of the house to adopt the motion?


Hon. George A. Drew (Leader of the Opposition):: Mr. Speaker, it is certainly our wish to facilitate the business of the house in every way this can be done with due regard for the efficient dispatch of public business. I would point out, however, that a number of committees are still sitting, and that they will be sitting in the mornings
Business of the House
next week. If this motion is adopted, it will be a practical impossibility for the members of this house to perform their duties both in the house and on committees in the manner in which public business demands.
This is a situation which should not be accepted by those hon. members who have due regard to the importance of committees. There are certain hon. members who have been suggesting-even within these past few days-that there should be greater vigilance and greater effort on the part of the members of the opposition who sit on the committees. I submit, Mr. Speaker, that there has been as much vigilance as is possible under the restrictions which have been imposed; and most certainly, in some of the committees where it has been possible to examine the facts, excellent work has been done.
I also think it appropriate that I should point out at this time that there has been permitted to be conveyed to the public an impression which is not entirely in keeping with the facts. Comments are made about absenteeism in this house without due regard to the number of committees which have been meeting every day. If it were possible to have a roll call of all members sitting in the house and in committees, at the same time, it would be found that the percentage of members attending to the daily business in this house is much higher than the percentage ordinarily attending to similar business at Westminster at any time.
I mention that fact because I have as high a regard as has any hon. member here for the traditions of the mother of parliaments, the sense of duty displayed there and the dispatch with which public business is transacted. I would remind hon. members here that frequently in a house of some 650 members at Westminster there will be not more than 50 members present dealing with the ordinary debates. That is a much smaller percentage than is ever sitting in this house, because we would not have a quorum if we had as small a percentage as that. I do not say that by way of criticism of Westminster. I say it by way of appropriate explanation of a situation which undoubtedly has been permitted to leave in the minds of many people in Canada an impression which is not consistent with the actual facts of the case.
I think the members of the committees- and I include members on both sides of the house-have been doing their duty in attending those committees. I am not going to introduce in this debate certain comments I might make on other occasions about the way I believe these committees could be operated to better advantage for the dispatch of public

Business of the House
business, but I certainly want to emphasize the fact that those who attend the committees and see what is done there will realize that great effort and preparation are involved.
If we proceed with morning sittings next week while a number of very important committees are still sitting there will then be on the one hand a strain imposed upon members which I do not think is consistent with the good dispatch of business either in the house or in the committees, and on the other hand there will be an impression conveyed by the sparse attendance in the house which will not be consistent with the actual effort being made by the members. There is also the fact that some of the most important business of the year, involving the responsibility of parliament to vote supply in the form of departmental estimates, will not be given the examination it properly should have.
I hope, therefore, the government will consider the points I have put forward and will not seek to commence morning sittings next week, but will postpone them for another week. We are quite ready to take part in morning sittings the moment the major committees have disposed of their business. I do not think it is in the interests of parliament to convey to the public the idea that we are prepared to accept hours which will deny appropriate attention to public business merely in an effort to get out of here by the end of June. If the public business demands that we stay longer, let us stay longer. Let us make sure, however, that we follow a course that is within both the physical and mental capacity of hon. members, having regard to the immense amount of work still before us. Let us also be sure that we do not disregard the impression that would be conveyed by a very sparse attendance while billions of dollars of public funds are being voted.


Mr. Clarence Gillis (Cape Breton South):: Mr. Speaker-


Some hon. Members:: Hear, hear.


Clarence Gillis: -hon. members are having some fun, and I appreciate it as much as they do. The members of this group have discussed this matter. As far as we are concerned we are prepared to sit here as long as is necessary to complete the business of the house.
I cannot agree with the Leader of the Opposition that because committees are sitting we should delay morning sittings one more week. The fact of the matter is that you will find as many committees have been meeting in the afternoon during the past month as will be meeting in the morning during the next week. I do not believe it would make any difference so far as attendance in the house is concerned.

I should like to join with the Leader of the Opposition (Mr. Drew) in the observation he made concerning the wrong impression that is created outside because there is not a 100 per cent attendance in this house. From time to time you see some sections of the press carrying headlines about absenteeism in the House of Commons. Many times visitors in the gallery have asked me, as well as other members, why all the members were not in the house. The impression, of course, is created that members are not here.
It should be recalled that during the session some 25 committees are set up in which we can bring together members regardless of party and take hold of the legislation that comes before us, making a pretty well nonpartisan examination of it. Some of the most important work of the house is done through these committees. If you can get a good look at the estimates in these committees you can get an understanding of them.
I am glad the Leader of the Opposition raised the point, because if it were raised by this group it would be said that we were defending absenteeism in industry. Coming from the Leader of the Opposition it is an important observation. We are very glad to join him in trying to clarify that point, at least for the benefit of some sections of the press.
We are quite prepared to support this motion, and if it is necessary to stay here until August the Prime Minister can be assured that we will stay with him. At the same time, we are quite ready to facilitate the work of the house, in conformity with the best examination we can make of the legislation.


Mr. Solon E. Low (Peace River):: Speaking for the group in this corner of the house, Mr. Speaker, I would say that we are ready to stay here and apply ourselves to the business of the country just as long as it is necessary to stay. We would not like to have anyone feel we are unduly rushing government business. But if the government feels it is essential and in the interests of good government, and only good government, to have us sit in the mornings, we are prepared to do that.
I feel, however, that the Leader of the Opposition has brought up a very important point. There are still quite a number of committees meeting in the morning, and certainly attendance in the house in the morning will not be very good if those committees should continue to sit and do their work. On the other hand, as the hon. member for Cape Breton South (Mr. Gillis) has so well said, there will be just as much absenteeism in the afternoon if the committee meetings

are held then. Consequently I believe we should leave it with the government to decide what they want to do, and we will support them.
There is one comment I should like to make; that is, if the changes in the rules that have been contemplated for some time could have been brought in earlier, I feel satisfied we would not need to start morning sittings next week. However, we are prepared to go along with the government if they feel, in their wisdom, that we should start morning sittings next week.


Walter Edward Harris: want to say a word on this motion. I feel the time has come when we should devote extra time to the business of the house. Whether this can best be done by sitting in the morning or extending the sitting in the evening is a matter of opinion. But I believe, sir, you will recall that a year ago we began morning sittings this week and did not conclude the business until June 26.
I recognize that all the Leader of the Opposition has said is correct, and that special care would have to be taken to see that the committee work and the house business were arranged in such a manner that the opposition would be accommodated and able to have their case placed before the public, either in committee or in the house, by those persons they chose for the particular business in hand. I would think we could do that for the one week he has in mind. If, however, hon. members feel that we can lengthen the sessions in the evenings so we can get in extra time next week, the government would of course consider it.


George Alexander Drew: Mr. Speaker, the observations I have made do not require addition as far as the point of view I have expressed is concerned. I would have hoped that we could continue next week on the same basis, in view of the committees that are sitting and the necessity of those committees preparing reports. I say that if it is a choice between morning sittings and extending the time in the evenings, I would certainly favour the addition of another hour in the evenings.


Some hon. Members:: No.


George Alexander Drew: I gather, Mr. Speaker, that perhaps I am more accustomed to late hours than some of the hon. members who have interjected. For my own part, and speaking without consultation, I would have thought that an extension for the one week might be better than trying to work out morning sittings and have committees at the same time, because of the fact that they will not
Business of the House
only be holding meetings but will be preparing reports, which in itself is an arduous and responsible task.


Walter Edward Harris: Well, sir, if we might have permission to make a compromise I would suggest that we might amend the motion to begin morning sittings on Thursday, and try to clear up as much of the committee work as we can in the meantime.


Some hon. Members:: No.


Mr. W. Ross Thaicher (Moose Jaw-Lake Centre):: I wish the minister would not proceed with this compromise. Many of us who come from western Canada have not been home since Easter. We are getting a little tired. We would like to spend longer hours each day finishing our work and then return to our constituencies. As far as I am concerned, we should be sitting Wednesday nights and Saturdays as well.


Mr. J. H. Ferguson (Simcoe North):: Mr. Speaker, may I interject this. I am sick and tired of listening to men from the west insinuate that they are slaves of parliament. Unfortunately, on many occasions members from the east, particularly those from Ontario and Quebec, must go to their constituencies at the request of their constituents. The trip has to be made every week or every second week, back and forth. It takes me 18 hours to go home and 18 hours to come to Ottawa from my constituency. I often envy those gentlemen from the west who sit and loaf over the week ends in Ottawa.


Mr. Claude Richardson (St. Lawrence-St. George):: Mr. Speaker, after a bit of hilarity may I ask a very solemn question. I suppose this kind of question could only come from a very simple, unsophisticated freshman like myself. I ask it with great deference of the leader of the house. Would it not be possible to have our committee work begin, not at eleven o'clock or 10.30 in the morning, but at nine o'clock?


Mr. Speaker:: Is it the pleasure of the housJ to adopt the motion?


Some hon. Members:: As amended?


Some hon. Members:: No.


Mr. Rowe:: As amended.


Mr. Fulton:: I understand the leader of the house suggested an amendment.


Some hon. Members:: No.


Mr. Speaker:: May I tell the hon. gentleman that I heard the suggestion made by the Minister of Finance, but I have not received any amendment. I presume that since he

Business of the House did not send it to me he has decided not to put his suggestion in the form of a written amendment.


William Earl Rowe: We did not understand that.


George Alexander Drew: Mr. Speaker, we have the right to know what is intended to result from the motion. I certainly understood, and I feel sure most hon. members understood, that it was the proposal of the Minister of Finance to defer morning sittings until Thursday of next week.


Some hon. Members:: No.


George Alexander Drew: That is what he said.


Walter Edward Harris: Mr. Speaker, what I said was "I am sure by way of a compromise suggestion", and I think I used those words. Apparently it did not receive very much support in the house; therefore I was not going to insist on it. If my hon. friend wants to move an amendment, that will be all right.


George Alexander Drew: No, Mr. Speaker. While I feel we could do a very much better job, we have not yet the responsibility of government, and I have no intention of attempting to provide an appropriate peg on which to hang an excuse for any member of the government not doing what he is supposed to do. In this particular case it was quite clearly my understanding that the Minister of Finance suggested that morning sittings be deferred until next Thursday.


William Earl Rowe: And agreed.


George Alexander Drew: There was an indication of agreement with that. In view of what I have said I certainly feel that it would not be appropriate to support the motion; and while I need not be reminded that in view of that unanimity which seems commonplace on the other side our opinion probably would not prevail, we definitely would oppose the motion to start morning sittings next week.


Walter Edward Harris: We do not want any misunderstanding. The government wishes to arrange the business to the satisfaction of all hon. members so we can expedite it and deal with it properly, and at the same time get out of here at about the time all of us would like to leave. The suggestion I made was a sincere one for the purpose of trying to meet the wishes of those who were not too certain of the attitude they ought to take on this motion. If anyone feels that he would prefer to begin morning sittings on Thursday and will say so, I shall make the motion so hon. members may have a vote as between Thursday morning and Monday morning.


George Alexander Drew: I have no hesitation in saying, in view of what I have said, that I would prefer to see morning sittings begin on


Thursday. Therefore the minister may take it that we would not oppose an amendment to the motion which would start the sittings on Thursday morning.


Mr. Speaker:: The motion would then be amended so it would read:
That on and after Thursday, June 9, 1955. until the end of the present session, the house shall meet at 11.00 o'clock in the morning of each sitting day, and that in addition to the usual intermission at 6.00 o'clock p.m., there shall also be an intermission every day from 1.00 to 2.30 o'clock p.m.


Louis Stephen St-Laurent: As the mover of the original motion I must say that I am glad to accept the suggested amendment, because I do not think this is a matter upon which the house should divide. There are various views as to what would be the best thing to do in the circumstances, and it is not possible to harmonize the divergent views; but it should be possible to arrive at a compromise that would partly meet the views that have been expressed.
If we could arrive at a solution that would not require any division of the house we would be apt to feel better disposed to cooperate with each other to dispose of the business of the house with all due consideration. We would take as much time as was required to deal with it properly, but I think we would be disposed to leave aside anything that it might not be necessary to have stated at too great length for the proper consideration of the matters we will have before us.
I would think hon. members might want to accept this halfway compromise and have our morning sessions commence on Thursday, to continue to the end of the session. We would count upon each other's good will and desire to be co-operative to bring about in a proper way the disposal of the business of the house perhaps as soon as if we started morning sittings on Monday, after a division of the house that left with any the impression that there was not a genuine desire to go along in a co-operative fashion.


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


[Stage Direction]
On the orders of the day:
George Alexander Drew: Mr. Speaker, I should like to direct a question to the Minister of National Defence based upon a report in the Montreal Gazette of today, in which it is stated that

the chief of the air staff in a statement made yesterday in Montreal said that the establishment of one supreme command for the defence of North America is inevitable. May I ask if that is a statement of declared government policy?


Hon. R. O. Campney (Minister of National Defence):: No, that is not a declaration of government policy. I interviewed the chief of the air staff this morning, and I understand that the article in the Gazette to which the Leader of the Opposition has referred is a synopsis of certain extemporaneous remarks the chief of the air staff made while conducting a group of Canadian and United States aviation writers through some of the installations at air defence command headquarters in Montreal. I understand that he was explaining the co-operation and integration which had taken place as between the air services of the two countries.
He assured me that he was careful to point out in his remarks, which as I say were not printed in full, that he was not making a prediction, that he was simply stating a trend in military thinking and that he recognized that it is not government policy to seek the appointment of a supreme commander. In fact his remarks as printed in the Gazette recognized that such a problem is purely a political one.
I may say in relation to this matter that there has been no pressure by our neighbours for such an appointment, and that our relations continue as they were when Secretary of Defence Wilson made a statement, I think it was in January, that we were working closely and harmoniously together and there was no need for any change.



CANADIAN NATIONAL RAILWAYS


[Stage Direction]
On the orders of the day:
George Alexander Drew: Mr. Speaker, I should like to ask the Minister of Transport if he will take steps to repatriate the management of the publicly-owned Queen Elizabeth hotel to Canada from New York; and further if the minister will say whether he proposes to end a humiliating situation which is an insult to the highly qualified men and women who have been trained in Canada for the management of Canadian hotels?


Mr. Speaker:: Order. I do not see any urgency in this matter, as I think it is one which could be dealt with when the estimates of the Department of Transport are before the house.
Inquiries of the Ministry


George Alexander Drew: Mr. Speaker, before you leave that as a final ruling I would point out that there might well be more urgency in this than in connection with a number of other matters which are dealt with before the orders of the day. We now know that people applying for reservations at the Queen Elizabeth hotel must have them passed upon in New York, and must deal with New York to find out whether they are going to have an opportunity to hold their meetings in a publicly-owned hotel in Canada. I do not think any time should be wasted in having an assurance that this disgraceful situation will be brought to an end.



THE MINISTRY


[Stage Direction]
On the orders of the day:
Mr. J. G. Diefenbaker (Prince Albert):: Mr. Speaker, I should like to direct a question to the Prime Minister arising out of the discussion during the last several days as to ministerial responsibility. Constitutionally is a minister in Her Majesty's privy council, or to use the ordinary expression the cabinet, a person employed in the service of Her Majesty?


Louis Stephen St-Laurent: I think the ministers, both under our statutes and under the traditions of the constitution, are servants of the sovereign.


John George Diefenbaker: I thought they were
advisers.


Louis Stephen St-Laurent: When we were invited as a special privilege to attend a cabinet meeting at 10 Downing street at the time of the coronation, we received a parchment informing us that the servants of Her Majesty would assemble at 10 Downing street at such and such an hour to deal with Her Majesty's business. I take it that was merely an expression of the constitutional tradition that the public business of the kingdom was the business of the sovereign, which was dealt with by the sovereign's servants whom we refer to as members of the privy council or members of the cabinet.


Edmund Davie Fulton: Would the Prime Minister perhaps give further consideration to the matter on this basis. He states that constitutionally the position is that they are servants of the crown rather than advisers, as I would have thought them to be. I am not asking for an immediate decision, but I should like the Prime Minister to consider the relationship between that position and the provisions of the Senate and House of Commons Act regarding offices of emolument under the crown. It seems to me

Income Tax Act
that this is a most important point which should not be decided quickly.


Mr.   Si. Laureni@: Until there was a statutory provision to the contrary, ministers upon accepting offices of emolument under the crown vacated their seats in parliament and had to go back to their constituencies for re-election. That was necessary in recognition of the fact that they were accepting positions of emolument under the crown.



WAYS AND MEANS

[Stage Direction]
The house in committee of ways and means, Mr. Robinson (Simcoe East) 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 1956 and subsequent taxation years each of the graduated rates of tax at present applicable to individuals be reduced by two percentage points, and that for the 1955 taxation year each of the graduated rates of tax at present applicable to individuals be reduced by one percentage point.
2.	That with respect to income of corporations earned on and after January 1, 1955, the 47 per cent rate of tax on income in excess of $20,000 be reduced to 45 per cent.
3.	That for the 1954 taxation year an individual may deduct from the tax otherwise payable by him the amount of tax on income paid to the government of any province in which he resided, was employed or carried on business, not exceeding 10 per cent of the tax otherwise payable by him.
4.	That for the 1955 and 1956 taxation years an individual who resided, was employed or carried on business in a province in which a tax on income was payable to the government of the province may deduct from the tax otherwise payable by him to Canada that proportion of 10 per cent of his tax otherwise payable that his income for the period during which he resided in the province or his income earned in the province is of his whole income.
5.	That for the 1955 and subsequent taxation years rental income from real property shall not be included in income to which the additional 4 per cent tax on investment income applies.
6.	That the right of an investment company at present to elect as regards its taxable status be repealed and that for the 1955 and subsequent taxation years an investment company be subject to a tax of 20 per cent on its taxable income.
7.	That expenses incurred in the 1955 and subsequent taxation years by a taxpayer in the course of issuing or selling shares of its capital stock or in the course of borrowing money used in the taxpayer's business (other than amounts in respect of commissions, bonus payments or discounts) be allowed as a deduction in computing the income of the taxpayer.
8.	That for the 1955 and subsequent taxation years proceeds of a sale or realization of inventory or accounts receivable of a taxpayer upon or after selling or ceasing to carry on a business be included in computing income, but that the taxpayer be given the option of paying tax in respect thereof at his average rate of tax for the three taxation years immediately preceding the year in which he sold or ceased to carry on the business.

9.	That a corporation resident in Canada that pays a dividend out of its designated surplus to a non-resident corporation or a person exempt from tax, by whom the payer corporation was controlled, be subject to a tax of 15 per cent computed by reference to the amount of the dividend, where control of the payer corporation was acquired after December 31, 1954.
10.	That for the 1956 and subsequent taxation years a corporation more than 10 per cent of whose gross revenue was derived from rents, be disqualified from being treated for tax purposes as a non-resident-owned investment corporation.
11.	That for the 1956 and subsequent taxation years a corporation any part of whose income was derived from leasing or operating ships or aircraft be disqualified from being treated for tax purposes as a foreign business corporation.
12.	That payments made after April 5, 1955, to a non-resident, computed by reference to the amount of timber cut or taken from a timber limit in Canada be subject to the 15 per cent tax on income from Canada of non-residents.
13.	That the exemption of income from metalliferous or industrial mineral mines for the first three years of production be extended to mines coming into production at any time hereafter.
14.	That the special deduction from income allowed for expenses of exploring or drilling for petroleum or natural gas in Canada and the special deduction from income allowed for expenses of searching for minerals in Canada be allowed for expenses incurred at any time hereafter.
15.	That a deduction from income be allowed to a corporation whose principal business is production, refining or marketing of petroleum, petroleum products or natural gas or exploring or drilling for petroleum or natural gas, and to a corporation whose principal business is mining or exploring for minerals, for expenses incurred in the 1954 and subsequent calendar years in exploring or drilling for petroleum or natural gas in Canada or searching for minerals in Canada, if such expenditures were incurred otherwise than on its own account, in consideration for shares or an option or right to purchase shares of a corporation on whose account they were incurred.
James MacKerras Macdonnell: Mr. Chairman, I wish to make a few remarks about income tax in general, but first I should like to reiterate to the Minister of Finance the request which has been made year after year for several years, namely that the items in this resolution, of which I think there are fifteen, might be considered separately. We have in these last several years been regarding the whole resolution as one and indivisible, and I am suggesting now that this question might be considered by the minister.


Walter Edward Harris: Mr. Chairman, I have looked over some of the past experiences in this connection, and I am quite prepared to study the problem that has been raised at various times on this very point; but I have not been sufficiently convinced that there ought to be a change in the practice to ask that it be done at this time. Therefore I think we ought to continue considering the resolutions as a whole, and I promise that between now and next year I will have a further look at it to

see if the business of the house could be dealt with more expeditiously by taking them separately.


James MacKerras Macdonnell: It could so easily happen- and indeed it has happened-that there might be an item in the resolution which many members wish to vote against, though they would not vote against the whole income tax resolution. That is the reason we ask that these items be dealt with separately. I am not going to press the point further at the moment, but our original request was that we should consider and vote on each item, so that if there was an item on which there was a feeling of opposition, that opposition could be declared in respect of that item and it would not be, so to speak, carried along on the backs of other items which we did not wish to vote against.


Walter Edward Harris: Mr. Chairman, I appreciate the point the hon. member has made, but the same problem confronts him with every resolution that is brought forward in this house. It usually has more than one feature, and he has to accept it as a whole. His point can be met by opposing a particular section of the bill which carries out the resolution to which he is opposed at the moment.


James MacKerras Macdonnell: I am not going to press the matter further, but it seems to me that the budget resolutions are quite distinct from the other resolutions-as the minister mentions; here you have definite topics and I should have thought it quite in accordance with the most ordinary method of doing business that we might deal with each one separately and individually. I cannot see that it delays or hampers the carrying on of business. However, I shall not go into it further at the moment.
Mr. Chairman, I wish to make some brief general observations about income tax. I am even going to suggest that there may be such a thing as a spirit of the income tax, though I understand that a learned judge in England said there was no such thing. It is hard to realize how short a time ago it was that the income tax was regarded as practically an intrusion on private life.
It was only a few decades ago that a certain board of trade-I might say, not in the city in which I reside-passed a resolution approving of the principle of the income tax, and aroused a good deal of irritation among the members of the board by so doing. One of my friends, in commenting to me on the resolution, said, "That was a bright idea you had; why didn't you pass a resolution that the telephone was a useful instrument?"
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But other people were definitely irritated and annoyed. I should like to recall that until a recent date the Income Tax Act used to be called the Income War Tax Act. I forget the date it was changed, but it was quite recent.
If the chairman would allow me to digress from income tax for a moment, I should like to speak on succession duties, and to mention an incident which happened in the city of Toronto, in the days when it certainly was regarded as an intrusion into private life. The following conversation took place when a certain well to do man in Toronto went to see his lawyer and complained about the enormity of the act. He said, "Think of it; when I die, 25 per cent of my estate is going to be torn away from my descendants and given to the university which I hate." In the early days of the succession duty act in Ontario the proceeds from the act went to the University of Toronto. I hope this will not be regarded as a remark made by a jealous graduate of another university. When he asked his lawyer, "What shall I do about it?", the answer was, "Don't die, Smith". That is advice, of course, which we would all like to take.
I should like to refer for a moment to the background of the Income Tax Act. I find it interesting to note that it goes back originally to the French revolution, to 1793, when they had something approximating it. Pitt introduced it in England in 1798 but it was repealed in 1816. Its use in its present form dates from the 1840's, and it was finally settled in England in 1874.
As I say, we have come to regard it as normal here. Anyone who suggested that the income tax was not a normal way of raising revenue would be regarded as mental. I should like to draw attention to the origin of the tax. In 1917 it was introduced by Sir Thomas White. He felt even then, in wartime, that it was necessary to soften up the opposition, which he feared, by commending it as a fair thing that people who had substantial income should be called on to bear a special levy because of the fact other people were risking their lives. He said:
Apart from this necessity, from a financial standpoint, there has arisen. . . . both in this house and in the country, a very natural and, in my view a very just, sentiment that those who are in the enjoyment of substantial incomes should substantially and directly contribute to the growing war expenditures of the dominion.
Then he goes on to say that "the adoption of such a measure is a distinct innovation in federal fiscal legislation". As we all know, the tax was accepted. It has become part of our normal way of carrying on business,

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and indeed the principle that taxation should be on the basis of capacity to pay is very firm in our minds at the present time. It is taken for granted.
Yet I should like to say a word of caution with regard to the income tax. I deprecate the feeling that exists in certain quarters that the accumulation of wealth is really a bad thing, and that if you can soak the rich people enough, particularly the large corporations, other people will get off very lightly; the idea that in itself it is almost a righteous act, the kind of thing every just man should be prepared to do, to soak these large organizations, to soak anyone who has a large amount of wealth.
Let me say at the outset that I do not think there is anyone in this house more prepared than I am to see the wealthy taxed in just proportion, but I might suggest that there is another aspect of this question which we should not overlook. After all, here is one of our great sources of income, and we should not regard people who are, either in their own right or as heads of corporations, custodians of large volumes of wealth, as people who invite punishment. We should regard them as people whose welfare is of the greatest importance to ourselves.
After all, what does the ordinary man want? The ordinary man wants a job. He wants somebody else to take the risk. He needs someone else who has the initiative. He relies on the energy of somebody else. He is ready and willing to take a job. I have to confess that is true of myself. I would feel a better man if I had organized and sponsored a business of my own. I feel that we tremendously need those men. Indeed, that is what we depend on. I am going to consider in a moment the alternative solution, which of course is the socialist solution, and I am going to dispose of it to my own satisfaction entirely. But at this moment I want to stress the fact-and it is an obvious fact -that most of us want somebody to provide us with a job.
I think the people who do that have every right to be regarded, not as philanthropists, not as benefactors except indirectly, but as people who are performing a most valuable and indeed irreplaceable service to the state. After all, they are the people who take the risks. They are the people who launch out. They are the people who have the energy. They are the people who create the wealth. The rest of us may just as well admit that, for the most part, we are not neck or nothing people. We are people who want security.
I am often disturbed in these days to find how widespread is that feeling, especially among young men who 10 or 15 years ago

were taking the most incredible risks every day of their lives. But now, on coming back to civilian life, they have this desire for security. Whether they feel they have had enough risks to last them for the whole of their lives, I do not know; but it is sometimes disturbing to find how large that desire for security bulks and, conversely, how often we seem to find little of the spirit of enterprise.
I wish here to deal for a moment with the contribution of those who are organized in corporations. There is often a feeling that they get an extremely undue return. I have regretted to hear in this house gross earnings brought forward and used as if that were the return which went to the shareholders of the company. I wish to put on record a few simple figures. These are from a brochure put out by the Canadian Manufacturers' Association. I feel quite sure, however, that they have been careful about their figures because it would be a gross error of judgment on their part not to be careful of them. I should like to read a few percentages of the income dollar. These cover some $7 billion of earnings in 1954. The percentages of this income dollar are these: wages and salaries, 22 1 per cent; materials, 46-6 per cent. Then I come down to these figures: depreciation, 3-3 per cent; taxes on income, 41 per cent; dividends, 2-4 per cent and retained in the business, 2-8 per cent.
I want to add the figures of "retained in the business" and "depreciation", making altogether 6-1 per cent. There you see the enormous importance to the rest of us of the success of these businesses, because that amount of money, which is more than twice as much as is paid out in dividends, is retained in the business. That means it goes to sustain and increase, we will hope, employment. Second, I stress the 4-1 per cent figure of taxes on income, which itself is well above the dividends figure. I mention that fact, Mr. Chairman, because when we are dealing with the taxes on these institutions I think it is desirable to remember the great part they play. It is a good thing the taxes have been reduced by the small extent to which that has been done. They are still very heavy, but it has been a step in the right direction.
A moment ago I said I was going to consider the alternative. We must consider the alternative. What is the alternative? The one alternative which I have been describing, and which I submit is what carries us along at the moment, is this. We rely on the energy, initiative and courage of a group in the community who go out and exercise those qualities and make a profit in so doing. I am

not going to suggest that they do not want to make a profit, but I am going to suggest that, in my experience, most of those people are not primarily interested in money. They are primarily interested in success. What does success mean to them? It means creating things. It means making two blades of grass grow where one blade grew before. It means creating better and better articles. It means extending their markets.
I am not going to pretend that these men do not want to make money. Money is, in a way, an imprimatur of success. If they do not make money they will go broke. But my experience is that those people are in there because in this way they find the fullest development of their creative instincts, their energy, their instincts, if you will, of service to the community. I do not want to be sentimental and make any preachment about the matter. To me the most hard-boiled man-the man, if you will, who thinks more about money than he thinks about anything else-nevertheless involuntarily in his success is making the greatest possible contribution to the building up of the country.
Why do I say this? Not because I do not believe these people should pay high taxes. Of course they must pay high taxes. I say it because I think it is important that all of us should try to have a just view of this matter, the government particularly. We have had years of boom during which these high taxes have been levied and paid, and when there have been good profits. I am admitting all that. But on the other hand, as we all know, there is a possible alternative when times are not so good and when taxes automatically become much heavier relatively, even though they remain actually the same.
I want to say a word on the alternative- the only alternative I see-which is that the means of production is not to be owned by individuals but is to be owned by the state. We have seen that system tried. We have seen it tried by people whom we respect, people like ourselves. I am thinking of Britain.
I want to read one or two comments which come from people who, I think, are entitled to be seriously considered. I want to remind the committee of what happened at the labour conference at Margate just a year ago last September, I think it was. I referred to it in this house somewhat more than a year ago. At that conference huge votes were recorded-not one, but several; vote after vote-against further nationalization. I was struck with that fact. There had been every opportunity for nationalization
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to show what it could do but the votes, I think without exception, at that conference were against nationalization.
I want to read one or two extracts which I have read before and which come from competent and, I hope, detached people commenting on the progress of socialism in Britain. One is from C. E. M. Joad. I am reading from page 405 of a book with an extremely interesting title. It is called "The Conservative Mind". I recommend it to you for study. It is by one Professor Kirk. At page 405 he quotes Joad as saying this:
"Socialism is no longer a creed to conjure with. It is like a hat which has lost its shape because so many wear it; rightly or wrongly, few of us now look to it to revivify our early hopes."
Then Kirk himself goes on to use serious words which I think are worthy of consideration:
Finding that the majority of men seem to lack motive for performing their duties in society, now that the ordinary rewards for ordinary integrity have been abolished or diminished, the socialists are dismayed; they begin to wonder whether their theory of human nature can be at fault.
I read that just for this reason. I believe that in this world in which we live-and I am not speaking of what it will be in 500 years- the number of people who will work without having a personal incentive is not a high proportion of society. I think that is what they have been finding in Britain, and I believe that is the reason the enthusiasm has waned.
I should like to read one other extract which I think it is fair to read, because it comes from a leading socialist and because I think it makes very clear the alternative we face if we pursue the socialist line. My objection to socialism has been twofold, first of all the economic objection, because I never thought it could work, and second and far more serious, I have never believed it could work with freedom.
It is for that reason I wish to read this statement by Mr. Gordon-Walker, former secretary of state for commonwealth relations in the Labour government. He uses very frank, straightforward language which rather shocks me, because it seems to indicate very clearly what a leading socialist regards as the way to progress. Incidentally, I do not believe it is the way of our socialist colleagues in this house. I do not think they would accept this view. My charge against them is that I think they do not face up to the implications of their own theories.
Perhaps there is no harm in interjecting here a little personal story. I do not see how there can be any objection to it. It refers to two men who used to be members of the house. It was told me by the late

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W. H. Moore, who was a leading Liberal. When he was a member of the house he belonged to a dining club of which J. S. Woodsworth was a member. I wish to say again that I had the greatest respect for Mr. Woodsworth as, indeed, I had for Mr. Moore. Mr. Moore made this remark on one occasion to Mr. Woodsworth. He said, "You have been a very useful member of the house because, although you have not had power, you have had influence, and things have been done in this house that would not have been done if you had not been here". Then he added, "But of course if your party ever came into power you could not be the leader of it any longer". Mr. Woodsworth said, "Why not?" Mr. Moore replied, "If your party came into power it would be a dictatorship, and you are not tough enough to be the leader of a dictatorship. You could not do the kind of things that dictators do".
I only mention that. 1 am sure it is not derogatory to Mr. Woodsworth and it is not intended to be. It came from a man who I think was a real liberal. There are real liberals in the Liberal party; I am not ashamed to confess that. Sometimes I think they are a rather small percentage, but in my view Mr. Moore undoubtedly was a real liberal who by some strange coincidence found himself still in the official Liberal party. Mr. Moore's remarks seemed significant to me, and I am sure they were made in good faith. With this digression, I wish to read now what Gordon-Walker said.


Mr. Blackmore:: Would the hon. member read a little more loudly?


James MacKerras Macdonnell: I shall try to. These are the words of Mr. Gordon-Walker, late secretary of state for commonwealth relations:
The new state will also directly augment authority and social pressure by new powers of punishment and compulsion. So far from withering away, as in theory, both the individualist and the total state should, the new state, if it is to bring into being and serve the better society, must create new offences and punish them.
Another writer whose name is not familiar to me, Mr. E. H. Carr, speaks rather along the same line. He is very candid indeed. He says:
The donkey needs to see the stick as well as the carrot ... I confess that I am less horror-struck than some people at the prospect, which seems to me unavoidable, of an ultimate power of what is called direction of labour resting in some arm of society, whether in an organ of state or of trade unions.
When I read these things, Mr. Chairman, I find myself more than ever obsessed-perhaps it is an obsession-at any rate, more than ever confirmed in my view that whether

or not they intend it the socialist way is the way of dictation and authority, that it cannot be otherwise.
I merely wish to add a word or two. I want to make very clear the reason for these remarks. It is not that I want to weep tears for those who pay income tax. We get a very large percentage of our revenue from it now and it is a fair tax, provided it does not become too heavy. But I do want to answer the view, which I think is held in certain quarters, that there really is almost no limit to what you can take by way of income tax. I want to put in a plea that we look at this thing in a fair way. I believe most businessmen are not working for the money. After all, they cannot eat any more than we do or wear any more clothes than we do, and a great many of them live with great simplicity. But they must have the incentive of being able to make their business a success, and it is with that in mind and in that spirit that I think we should approach this legislation.


Mr. Argue:: Mr. Chairman, I wish to confine my remarks at this time to that portion of the income tax resolutions providing for a reduction in the income tax paid by taxpayers in a province that does not sign a federal-provincial tax agreement. I refer to resolution No. 4, which reads as follows:
That for the 1955 and 1956 taxation years an individual who resided, was employed or carried on business in a province in which a tax on income was payable to the government of the province may deduct from the tax otherwise payable by him to Canada that proportion of 10 per cent of his tax otherwise payable that his income for the period during which he resided in the province or his income earned in the province is of his whole income.
I am afraid this resolution indicates very clearly indeed that the government has turned its back on the original principles it followed at the time of the federal-provincial conferences some ten years ago. The principles announced at that time included full employment, and the principle that in so far as it was possible within the federal jurisdiction, corporation tax and income tax should be the same in all parts of Canada. The proposal to reduce the income tax of taxpayers in a non-agreeing province not only means that the federal government is making a patchwork of its own taxes, but is an open invitation to the wealthier provinces now within the agreement to abandon it.
I have seen figures prepared by tax experts indicating that if the province of Ontario had a 15 per cent income tax on married persons with incomes above $3,000 and on single persons with incomes above $1,500,

the province would in fact gain some $3 million by pulling out of the federal tax agreements. If for no other reason than that this proposal weakens the whole concept of action by the federal government to maintain full employment through fiscal policies I would oppose it, but there are other reasons and other grounds why it should be opposed.
It is rather startling to me that I did not hear any reference by the hon. member for Greenwood, the official financial critic of the Conservative party, to this very important question before us this afternoon. I do not think this proposal squares with what, over the years, we have known to be the rights of the provinces in the field of taxation.
On behalf of the C.C.F. group I want to say that we support resolution No. 3, which provides that in 1954, in a non-tax agreeing province, namely in Quebec, income taxpayers will be allowed to deduct 10 per cent from the amount otherwise paid to the federal government. I believe there is a fundamental and clear difference between allowing a certain percentage of the tax to be deductible and providing, as in resolution No. 4, that taxpayers in certain provinces will pay an income tax rate different than taxpayers in another province.
We in this group support the fundamental right of a province to occupy the field of direct taxation. We know the people of Quebec value that right very highly indeed, just as they value their other rights of language and culture which the C.C.F. party has always supported to the fullest extent. When this problem was being faced by Canadians generally, the Quebec section of the C.C.F. gave a great deal of thought and consideration to it. It is public information that the proposals advanced by the Quebec section of our movement have been adopted by our national movement. Even though the C.C.F. have very little support in Quebec, and on the basis of results in recent elections we have no hope of winning many electoral victories in the near future, we nevertheless adopted a proposition that was eminently fair to all citizens of Canada, and a policy that we believe preserves all of the fundamental rights of Quebec. I suggest those rights are not preserved by resolution No. 4.
This resolution No. 4, I suggest, will provide a personal income tax structure that cannot help but contribute to national disunity. I believe it is inherently wrong; it is inherently unjustifiable for the federal government to set up an income tax structure that will be different in one part of Canada as compared with another part of Canada.
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I wish at this time to refer to the official position taken by the movement of which I have the honour to be a member at our national council meeting on January 17 of this year. It reads in part as follows:
At a time when farm prices are declining and unemployment increasing, it is essential that a solution to the tax rental dispute be found.
I might say that this was adopted and released before the position of the federal government was made known. It was not, therefore, something that was influenced by any stand taken by the government.
Provided federal responsibility for fiscal policy is maintained, and the financial advantages to the provinces are not reduced, there is no reason why adjustments cannot be made in the present agreements to satisfy Quebec's deep concern over her constitutional rights.
The C.C.F. national council has given careful study to the various alternatives that present themselves and has heard suggestions for improvements in the agreements from several provinces. It believes that a proper solution can be found based on the following principles:
(a)	Every province to have the option of imposing its own income tax with deductibility, up to but not exceeding, the amount it would receive from the federal government under the tax rental agreements.
This proposal, if fully adopted, would not cost the federal treasury any more than it is offering to the provinces that might sign tax rental agreements.
(b)	Should the provincial tax exceed or fall short of this amount in any year the difference should be adjusted, any deficiency to be made up by a federal grant and any excess to be returned to the federal treasury.
In other words, by following such a policy the federal government could implement all the essential fiscal policies necessary to deal with the problem of unemployment, and it would be making it possible for taxpayers in all provinces in Canada to pay the same income taxes. I feel that such a proposal is not only right because it would tend to bring about equality of income tax, but also because it would make it possible for a province to exercise a fundamental right namely to occupy the income tax field and obtain the same amount by imposing its own tax as it would obtain from the federal government under a tax agreement. Such a proposal would not impose any heavier tax burden on the people of that province. The proposal by the Liberal government that we are discussing today, while it appears in a monetary sense to help the taxpayers of Quebec, in fact is an insult to the people of Quebec who value their fundamental rights so highly. It is this proposal to which we are completely and unalterably opposed.
I do not believe this proposal can be justified on any grounds whatever. Would the government consider for one minute, I ask,

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imposing an excise tax on some particular article at a higher rate in one province or group of provinces than would apply on the article purchased by taxpayers in another province or group of provinces? Would the federal government consider for one moment placing a higher tax on automobiles sold in Ontario than on automobiles sold in Manitoba? It is such a ridiculous proposition. We all know that good Canadians who value national unity would not stand for such a difference in taxation. Yet in the income tax field that is precisely the proposition we have before us, and that is precisely the result that will flow from the adoption of resolution No. 4.
Would the government set a different sales tax, I ask, or any other tax, on electric refrigerators or electric stoves, so that the housewife in Newfoundland would have to pay more because of a higher federal tax on those articles than a housewife in British Columbia? I am sure again this illustration is so ridiculous that no member in this house would publicly support it. Yet-


Mr. Pickersgill:: May I ask the hon. member a question? If that is his view, why has he never opposed having different federal rates in different provinces in relation to the corporation income tax? It has been in effect for 5 or 6 years. Why is it right for corporation taxes and wrong for personal taxes?


Hazen Robert Argue: The answer to that question is pretty obvious. It is obviously wrong to impose a different tax on persons, and may or may not be wrong on an inanimate object such as a corporation. That question by the Minister of Citizenship and Immigration suggests that he is quite happy that the income taxpayers in one province will be paying a tax different from that paid by taxpayers in other provinces. I suggest that is a proposition no member in this house should support.
What value can there possibly be in this resolution? Had the Prime Minister brought in a proposition which gave more to the province of Quebec and to the income taxpayers of that province by allowing full deductibility of the provincial tax up to the maximum amount the province would receive under a dominion-provincial tax agreement, the C.C.F. party would have supported it completely. But this looks like a rather ill-conceived attempt to maintain the political fortunes of the Liberal party in one province. I do not think the people of Quebec, being good, honest Canadians, believing as they do in their fundamental rights, will appreciate this move and support it, any more than will

the taxpayers in any other province of Canada. As I have said, I believe this proposition is wrong in every respect.
The Quebec federation of industrial unions has given a great deal of study to this matter, and has found that the proposal by the government is wrong for four reasons. The first reason they list is that it is unilateral; that it is applied to one province and one province only because, of course, that is the only province that is not under any tax agreement at the present time.
The second reason they give is that it does not square with the cyclical ideas of fiscal agreements; that if this were carried on in a time of deflation, with provinces outside the agreements, a reduction in federal personal income tax could be met by a provincial government occupying the same field, and therefore the increased purchasing power in the hands of the public that the government might hope to provide by such a taxation policy-and that is the government's whole theory, as we have been told so often, of cyclical financing-would be abrogated.
The third reason they suggest as to why this proposal is wrong is that it is an injustice to the province of Quebec. I shall not further elaborate on why it is an injustice; as I think I have already very fully covered that point.
The fourth reason they give for opposing this measure is that it is a hindrance to national unity. When the bill is introduced which provides for the 10 per cent deductibility of income tax as provided in resolution No. 3, the C.C.F. party will give it its full support, but we shall oppose the proposition that the federal government should reduce taxes in any province below the level of income tax in any other provinces.
I hope with all my heart that the coming federal-provincial conference will be successful in every way, that there will be full agreement by all the provinces. I would hope that agreement will be so widespread that a year from now the government will, by action at that time, remove the inequalities and injustices that flow from the implementation of its present proposal. If that should not happen I hope the Prime Minister himself, who I know has given this problem a great deal of attention and consideration, will finally see that it is fundamentally wrong to have different rates of taxation applied by the federal government to taxpayers in different provinces. I hope during the present session he will yet withdraw this proposal and bring in a proposal of deductibility which will do more for the people of Quebec, and at the same time be a contribution to national unity in our country.


The Chairman:: Shall the resolution carry?

<Translation):


Mr. Gagnon:: Mr. Chairman, the speech just made by the hon. member for Assiniboia (Mr. Argue) is somewhat surprising, after the statements made both by his leader and the socialist premier of the province of Saskatchewan.
I have here before me some notes on this matter. However, before going any further, I should like to mention that while the present cabinet has given evidence of good intentions with regard to our province, we feel some misgivings about the day when the leaders in Ottawa, filled with ideas and feelings identical with those of the members of the C.C.F. party, will say, in answer to the requests of French Canadians, what the hon. member for Vancouver-Kingsway (Mr. Maclnnis) stated on January 22 last:
(Text):
We have no minority except those who made themselves a minority.
(Translation):
We do not want to be the victims of the ignorance and the fanaticism on which feed, for instance, certain religious organizations in British Columbia, and which, if carried over into the federal field, would be disastrous to our beliefs and our school system.
The Montreal Gazette of October 27 last, in a dispatch dated from Victoria, brought us a new sample of the narrow-mindedness of certain Protestant people on the Pacific coast. I quote:
(Text):
B.C. Urged not to Assist R.C. Schools
A brief was presented to the British Columbia cabinet today asking that no financial aid be given Roman Catholic schools.
It was placed before the cabinet by a three-man delegation of Protestants. One, Rev. W. M. Robertson of Vancouver Metropolitan Tabernacle,
said:
"The teaching in Roman Catholic schools Is against tolerance for any other Christian religion or church."
The Roman Catholic church operates separate schools in B.C. attended by 10,000 pupils. Full cost of operating the schools is borne by Roman Catholic families.
In June, a delegation of Roman Catholic bishops sought aid from the cabinet.
They asked: That school taxes go direct to the separate schools instead of helping pay for public schools, or, that financial aid be given by the government in grants for teachers' salaries on a per capita student basis, and leasing separate school buildings for a nominal fee to relieve the church of paying taxes.
The Protestants' brief demands that no aid be given the separate schools because the system in Ontario and other provinces has led to "the teaching of intolerance and national disunity."
(Translation) :
Fortunately, that is not the way of thinking of all the people in that province. For instance, I am happy to mention here the
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statement of a British Columbia educator, as reported in the Montreal Gazette of November 4, 1954:
(Text):
B.C. Expert Backs Quebec
Dean Henry F. Angus of the University of British Columbia has supported Quebec's stand in refusing to enter into tax agreements with the federal government.
Dean Angus is head of the university's department of economics, political science and sociology.
Writing in the campus newspaper, The Ubyssey, the dean said:
"Taxpayers in Quebec have contributed to the federal revenue out of which subsidies have been paid to other provinces. They feel they are unjustly treated."
"Quebec has refused to sell its constitutional birthright," he said, and has done "nothing illegal or unconstitutional" in refusing to allow the federal government to "buy control" of the province's right to levy income taxes.
(Translation) :
We also fear the fanatical Orangemen who would make of Canada a one-way nation, and I say it is a shame that there should be in Canada, in 1955, hundreds of people to listen, without raising any protest, to statements such as this one:
(Text):
And from the Globe and Mail of May 19, 1955:
Orange Leader Would Abolish Separate Schools
Gordon Keyes of Toronto, grand master of the grand Orange lodge of Ontario, today called on the provincial government to abolish separate schools.
In an opening address to more than 600 delegates at the lodge's 96th annual meeting, Mr. Keyes asked the government to "break down the wall of separatism" and encourage children of all citizens to learn together.
He said there is no place where citizenship is more closely cemented than within the public schools.
(Translation):
Utterances such as these are not conducive to national unity. The hon. member for Assiniboia just said that he deplored the fate of citizens of the province of Quebec. And yet his leader said over the radio, as reported editorially in Montreal-Matin on January 25, 1955:
. . . that he saw national unity in peril and went so far as to speak of a "bonus" to the people of Quebec, when that province has not as yet secured its right of not being deprived of the taxation fields granted under the constitution to our province as well as to the others.
Mr. Coldwell covers himself with ridicule when he speaks of Premier Duplessis' "one-sided decision" to levy an income tax. Is Mr. Duplessis under obligation to consult the premier of British Columbia or of Alberta, or of some other province, before exercising his rights and duties as leader of his government, when he has the support of the representatives of the people?
Does the government of British Columbia consult Mr. Duplessis before persecuting the school children of Maillardville and elsewhere?
A one-sided decision? But how could there be a two-sided decision of a provincial government in various fields which concern that government

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exclusively? And why should it be two-sided? Two-sided with regard to whom? To some other province? To the federal government? But these are things that do not concern them.
It is true that, for Mr. Coldwell, confederation is something too antiquated to be considered. He can disregard it if he chooses; that's his business. But the province of Quebec will never forget, because it knows that respect for confederation is essential to the survival of one of the two great races of this country.
When Mr. Coldwell said that, he was stressing what had already been done, in this house or elsewhere.
I have here statements by the hon. member for Vancouver East (Mr. Winch) as follows:
(Text):
Mr. Harold Winch, M.L.A., C.C.F. leader in the B.C. legislature, speaking at Calgary, as reported in the Calgary Herald of November 10, 1943, said:
We're going to scrap the B.N.A. Act.
The hon. member for Vancouver East (Mr. Winch) said in a speech at Forester's Hall, Vancouver, as reported in the Vancouver Province of February 19, 1954:
I did not say one thing in Calgary that I and other C.C.F. people have not been saying for eleven years.
(Translation) :
I also want to quote another statement by the hon. member.
(Text) :
Mr. G. W. Weaver, delegate to the 10th annual convention in British Columbia, as reported in the Vancouver Sun of April 17, 1943, said:
We ought to remember that the constitution was not made to bind the C.C.F. We are not concerned with capitalistic constitutions as soon as we can wreck them.
(Translation):
The following is the statement made last February, by the prime minister of Saskatchewan. I am quoting from an editorial in the Montreal Gazette, dated February 3, 1955, and entitled:
(Text):
Oddly enough, on February 1, the very day on which Mr. David Lewis issued his statement to Quebec on behalf of the national council, Hon. T. C. Douglas, the C.C.F. premier of Saskatchewan, was speaking also. He termed Mr. St. Laurent's restricted concessions to Quebec as being "the most abject surrender in Canadian history".
He went one better. It was also a "pathetic appeasement" that amounted to "favoritism". Nor was this all. It has also turned "the clock back a quarter of a century".
Perhaps Premier Douglas was also speaking for himself alone. But after all, he is scarcely a party nobody. He is the only leader of a C.C.F. government in Canada.
"Miserable comforters are ye all!" exclaimed Job. Perhaps those who came to soothe the Quebec C.C.F. in its discontents may yet be regarded as worthy successors to Job's comforters.

(Translation):
I said, Mr. Chairman, that it is not within the jurisdiction of Ottawa to subsidize our universities and even less to raise taxes for that purpose. That is the exclusive privilege of the provinces.
When the central government exceeds its rights, it does an injustice to the Quebec taxpayers who are forced to pay a large share of these grants which go more often than not to institutions who refuse to acknowledge the rights of my compatriots in the other provinces.
Some people wonder why Quebec refuses thus each year the millions offered by the federal government.
The reason is a simple one: we value more our rights than money.
No more than the rest of the citizens of Canada do we enjoy paying taxes. We know however that our survival, as an ethnic entity, is assured as long as we retain control over our educational system.
We are proud of our origin, of our French culture, of our history, of our customs and age-old traditions.
I take pleasure here in quoting an article written by Mr. Murray Ballantyne which has been published in pamphlet form by the Institut Social Populaire of Montreal. Here is what this English-speaking Canadian says about French Canadians:
(Text):
Have you ever wondered what it feels like to be a French-speaking Canadian? First of all they are in their own country. They are the senior Canadians. Long ago they reached that level of national, North American consciousness to which many of us are but now attaining.
In a great arc from the mouth of the St. Lawrence to the mouth of the Mississippi, the French were the first to explore, the first to trade, and the first to evangelize. Kingston, Toronto, Winnipeg, Detroit, Pittsburgh, St. Louis and New Orleans-all stand on sites discovered by French daring and occupied by French genius. It was the French tongue that was first heard here by the Indians, it was the blood of French missionaries that first rendered this soil sacred to French memory.
(Translation):
Further on, this distinguished professor stated, with regard to the situation imposed on our fellow citizens in the other provinces of the dominion, with regard to schools:
(Text):
The B.N.A. Act declares that the Protestants in Quebec shall have in education all the "powers, privileges, and duties" enjoyed by the Catholics in Ontario.
How has this compromise, this gentleman's agreement, been honoured? What do we find today? In Quebec the Protestants have the fullest possible enjoyment of their school rights. Nothing that they could ask has been denied them. But in Ontario, which was to have been the paragon.

Catholic schools can be carried beyond the primary level only at the cost of double taxation. And even at the primary level it is almost impossible for Catholics to enjoy their fair share of corporate taxes. As for the French tongue in that province, it is more than 40 years since regulation 17 forbade that language except as a subject of instruction. The English in Quebec are perfectly free to teach in their own tongue. The French in Ontario are not.
Admittedly what has happened to separate schools in Ontario is at least partly the result of judicial decisions. And admittedly the parliament and courts of Quebec are officially bilingual while those of Ontario are not. Still the French feel that Quebec has kept the original agreement in letter and in spirit, and that Ontario has not.
Out west. Manitoba was established by federal act in 1870 as officially bilingual and with full educational equality for Catholics and Protestants. Today the French tongue has been deprived of all recognition in that province, and Catholics who want their own schools have to pay taxes to the public schools as well. Thus the French-Canadians are once again made familiar with the penalty of double taxation.
In Saskatchewan and Alberta it is much the same story. Catholic schools have not been crippled quite as cruelly in these provinces as in Manitoba, but the French language has been deprived of all status. Sir John A. Macdonald opposed the move to make English the only official language in those parts. Speaking of this proposed suppression in 1890 he said: "I believe that it would be impossible if it were tried, and it would be foolish and wicked if it were possible."
Nevertheless in 1892 the legislative assembly of the then North West Territories carried out this "wicked" act.
New Brunswick is another province in which the minority feels that it has been deprived of its rights.
As for British Columbia, the French cannot claim that earlier rights of language or education have been abolished because so far as I know they never had any rights there. They never had any rights, that is to say, in positive law. But have they not natural rights, and are these natural rights not infringed as they see their children trudge to schools built at their own double expense while other children are driven to public schools in public busses to which the Catholics have had to contribute their full share of the cost?
(Translation):
I wanted to quote this article, Mr. Chairman, to show the position of French Canadians in the other provinces and to show how right we are to keep our money in the province and to levy an income tax, in order to be able to pay to our universities, seminaries and colleges the very same grants, in so far as that is possible, that the federal government wants to foist upon us by unconstitutional methods. I would like the federal government not only to grant us 10 per cent, but a complete deduction of the tax raised by the provincial government.
(Text):
I therefore have the honour to move, seconded by the hon. member for Lapointe, that paragraph 3 of the Income Tax Act resolution be amended by leaving out all the words after the word "business". It would then read as follows:
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That for the 1954 taxation year an individual may deduct from the tax otherwise payable by him the amount of tax on income paid to the government of any province in which he resided, was employed or carried on business.


The Deputy Chairman:: It has been moved by the hon. member for Chicoutimi, that paragraph 3 of the Income Tax Act resolution be amended by leaving out all the words after the word "business". The hon. member has read to the committee the resolution as it would then read.
In my opinion it would quite obviously affect the revenue which would be derived by the federal authority if his amendment were to be adopted. Therefore it is my opinion that the amendment is undoubtedly out of order. I have before me some-and I think the committee is familiar with many-decisions holding that it is not competent for a private member to introduce an amendment to a tax resolution which would have the result of-I believe this is the expression -affecting the balance of ways and means. Therefore I feel I have no alternative but to state that the hon. member's amendment is out of order.


Mr. Girard:: Mr. Chairman, I was a little amazed to hear what the hon. member for Assiniboia said about the rights of Quebec. I should like to congratulate him because there has been a great change. Ever since the Prime Minister stated the government were going to permit a 10 per cent deduction he and all the members of his party have said the government were going back on what they had already done. I quote what the hon. member said in January, 1955, at page 345 of Hansard:
The statement by the Prime Minister of Canada in which he said that the Canadian income tax law would be amended to reduce the federal tax by 10 per cent in Quebec means, in my opinion, a complete surrender by the federal government of Canada to Premier Duplessis in Quebec.
(Translation):
Mr. Chairman, some of the arguments put forth a while ago by the hon. member for Assiniboia (Mr. Argue), who said that a double taxation would be levied because the government of the province of Quebec had set a fiscal basis different from that of the other provinces, deserve some consideration.
The hon. member forgets that even though in the province of Quebec some taxpayers will pay less than those of other provinces, it is not through any favour of the federal government, but rather because the province has not levied through its legislation as much as the federal government allows. He cannot credit the federal government with results arising from provincial legislation. It is truly

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the outcome of the provincial government's generosity. I do not think that he can censure or congratulate the federal government on that score or use this as a pretext to oppose the 10 per cent deduction or say that it is another step towards surrender.
However, that 10 per cent deduction cannot be satisfactory to the province of Quebec, especially since it is not the only aspect to be taken into consideration. We have never mentioned any amount when we have asked for a full deduction. It would be foolish to fight for less money than was offered by way of the fiscal agreements. The essence of the matter lies in a principle and not exclusively on finance. It is the principle of autonomy, the respect of our various forms of government, and that principle forms the basis of Quebec's demands. That is why, even if the 10 per cent deduction means a step towards compromise, it does nothing as far as our rights are concerned, from the point of view of autonomy, even though from the sole political standpoint it may seem that the Prime Minister is not the loser and that the premier of the province is also the winner.
The C.C.F. party, which hides its dictatorial program under a socialist label, sees in fiscal agreements an ideal way of making its dream of centralization come true. That is why it considers that any encroachment upon the fiscal agreements is an attack on our most precious assets. That is why the leader of the party (Mr. Coldwell) so strongly opposed any amendment to the fiscal agreements, in which he was admirably seconded by the hon. Minister of Justice (Mr. Garson) and by several other of their supporters.
They want to safeguard the fiscal agreements, even if to that end they would have to destroy the constitution, as was so often done by spokesmen for the government who said at the time: "You must take it or leave it, even if you have rights, even if it should ignore the rights of the provinces".
People sometimes are concerned over the fact that the great majority of the people do not take any interest in politics, that people seem to have so little confidence in politicians. When the rights governed by the constitution are dealt with in such an illogical way, such a stand by the electors is not surprising.
How did the fiscal agreements come about? First of all, advantage was taken of the abnormal situation brought about by the war, to borrow the rights of the provinces. After the war, another pretext was needed and a very righteous one was found: it was necessary to ask rich provinces to help the poor provinces.

That all-powerful argument could be assimilated to that of a judge who would say to the crown attorney in a trial for robbery: "Well, that belongs to the plaintiff; he is entitled to it, but it does not matter whether he needs it or not, we have decided to use it to help someone poorer than he is".
In the meantime, it was costing the province of Quebec more than $30 million a year to adhere to that principle. It was undoubtedly thought that the cost would be so heavy that she would not be able to stand it very long and that sooner or later she would have to give up.
Last year, availing herself of her rights, the province of Quebec decided to levy her own income tax. At first the federal government was surprised and somewhat concerned, but on second thought they became reassured and said: Mr. Duplessis fell into the trap; he levied a tax and the federal government will see to it that he bears the onus of double taxation, which is always unpopular. However their satisfaction did not last very long, when they found that all the people of Quebec supported the provincial government and laid upon the federal government, where it should rest, that onus of double taxation.
The federal government found itself in a spot and the argument relating to the poor provinces lost its weight.
Following ultra-nationalist ideas, as they were accused last year of doing, independent members dared to move an amendment during the debate on the budget last year, which asked for the full deduction of the Quebec income tax. The then minister of finance (Mr. Abbott) rejected those too daring claims when he said-and these are his very words: "The federal government keeps the door open and would be ready to co-operate", adding however that no deduction greater than 5 per cent could be granted without straining overly the resources of the treasury.
The argument was not favourably received in the province of Quebec. The Prime Minister also made in the Reform Club a statement which had an extraordinary effect in Quebec. Then they apparently got together and thought of an offer which might be a political face-saving but which would do nothing to safeguard the principle we wished to uphold. With a surplus of over $13 million in 1953-1954, if my memory serves me right, the federal government was not in a position to grant a deduction of over 5 per cent. This year though, with a deficit of $160 million, it can grant one of 10 per cent. That is just another instance of the inconsistencies which are indulged in so as to maintain these fiscal agreements which are contrary to the rights of the provinces.

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I was listening a moment ago to the hon. member for Assiniboia who said that the deduction proposed was absolutely unjust for the other provinces, since it would mean double taxation for Quebec and that even the people of Quebec, if I heard him correctly, could not claim to be real citizens if they dared claim what other provinces did not have.
I do not wish to repeat the arguments already advanced by my colleague from Chicoutimi (Mr. Gagnon) but if one thinks of the double taxation for separate school purposes in the other provinces, it is easy to realize how it can hurt. In short, Mr. Chairman, the government was faced with a budgetary problem, in this, that if it were to give more to the province of Quebec and if the province of Ontario requested the same treatment, the federal government would no longer be in a position to fulfil its obligations. However, this argument can no longer be offered today, as, at last, all agree to claim from the federal government, not 5 per cent, nor 10 per cent, but a full deduction, providing, however, that the amount that we claim does not exceed that which is offered under the fiscal agreements. It therefore means that the budget balance is maintained, that neither the treasury argument, nor the argument to the effect that the other provinces allegedly are being wronged, can be advanced.
That is why I support the claims of my colleague for Chicoutimi asking the federal government to reconsider the situation and to allow the province to administer and collect the taxes that it needs to fulfil its obligations as determined by the constitution, provided the amounts offered under the fiscal agreements be not exceeded.
(Text):


Mr. Cameron (Nanaimo):: Mr. Chairman,
we seem to have ranged a long way from the budget resolutions on occasion in the last hour or so. I want to deal briefly with some remarks made by the hon. member for Chicoutimi because I think that a member from British Columbia must do so. I see the Minister of Finance holding up his hands in despair. I quite agree with him that if it is not out of order to do so, at least it is stretching a point of order somewhat; but as the matter has been raised, I think perhaps he will bear with me if I spend a moment or two on it.
We people in British Columbia may be peculiar-I suppose we are-as we are the only province in Canada apparently that maintains one school system. It is a school system that was established nearly 100 years
ago, and it was established on certain principles. One of those principles was that it should not be a divisive influence in our community, that the schools should be secular schools, and that the question of religious instruction should be left entirely to the churches and to the homes. That decision has been maintained for nearly a century. I myself, when I went to school in British Columbia, went to school with a number of Roman Catholics. I was not aware of that fact at the time. It was not until I left school and met them afterwards that I became aware of the fact that those boys and girls with whom I had gone to school had been Roman Catholics.
We in British Columbia feel that one of the purposes of a system of education is to create in the minds of the children a sense of their unity with all other Canadians, not to drive home to them a sense of their difference from other Canadians. It is for that reason that the people of British Columbia have maintained this school system. I may say this. We are not too happy when we have stigmatized as injustice to minorities this decision that has been made and has been maintained by a democratic majority in British Columbia.
Now, Mr. Chairman, we started off this afternoon with, shall I say, an even greater breach of the letter of this discussion when the hon. member for Greenwood was speaking. I am not at all sure that the hon. member for Greenwood and I would be in order to discuss the finer points of the socialist and capitalist theories on the basis of the budget resolutions. I would, however, make this comment. I do wish that the critics of socialism would read books about socialism written by socialists rather than read the second-hand comments of people who obviously have no conception whatever of the fundamental socialist principles.


James MacKerras Macdonnell: Would the hon. member permit a question?


Colin Cameron: Certainly.


James MacKerras Macdonnell: Would it not be fair for me to answer that I did at least cull from this source, of which he does not think so very highly, statements by people who are in the ranks of the sanctified and who are authorized as such to speak the pure word of socialism?


Colin Cameron: Well, I was just going to say that I knew quite well the hon. member would throw the Hon. Patrick Gordon-Walker at me. Indeed, Mr. Chairman, the hon. member for Greenwood-

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The Depuiy Chairman: Order. Before I allow the hon. member for Nanaimo to complete the sentence which I am now interrupting I think I should point out to the committee that the committee is not dealing with the question of minority rights, language, or education. Partly through my own fault, statements were made in that connection and I permitted them to be answered. I propose now, in so far as that part of the discussion is concerned, to regard it as concluded. The hon. member for Nanaimo considers that he is justified in replying to some remarks made by the hon. member for Greenwood. I shall permit him to make that reply because I did not hear that part of the debate, and I believe it is the duty of the Chair to allow replies to be made.
May I, however, take a minute of the time of the committee to point out that we shall quite probably be debating these taxation resolutions for some time and that, if I may say so, whether we are under a socialist or any other form of government, we are faced at the moment with certain amendments to be made to the Income Tax Act. May I warn all hon. members that in so far as any of us introduce matters extraneous to the Income Tax Act we are going to provoke somebody else to reply, and the danger is we will be debating the merits and demerits of socialism or segregated schools instead of the merits or demerits of the proposed amendments to the Income Tax Act which have been submitted by the Minister of Finance.
As I said, I will permit the hon. member for Nanaimo to complete his statement which I interrupted, and I trust he will be able to do so briefly. Then I trust that he and members who follow him will be able to relate their remarks to the proposed amendments to the Income Tax Act.


Colin Cameron: I will take only a moment or two. As I said, I knew quite well the hon. member for Greenwood would throw the Hon. Patrick Gordon-Walker at me. I would hesitate, however, to classify him as the hon. member for Greenwood classifies him. I do not wish to be disrespectful to a man who was a member of Her Majesty's government in Great Britain, but he is not very highly regarded as a socialist. As to the other gentleman, Professor Joad, before he went to his final reward he moved, shall we say, into the ranks of the unsanctified, to follow the definition of the hon. member for Greenwood, and renounced his socialist views at the same time that he embraced some rather fundamental religious views. I do not think they can be regarded as spokesmen for the socialist idea.

I do not intend to go any further with that matter except for one point. The hon. member for Greenwood laid great stress on the necessity for personal incentive. I do wish that he and people like him would look at the Canada Year Book and discover the number of people in Canada who are in a position to benefit by personal incentives. If he would look at the make-up of the Canadian population he would find that nearly 80 per cent, as he himself suggested earlier, are working for someone else, and therefore any personal incentives that may be offered to them now, working for private enterprise, would still be there if they were working under any other industrial organization. I think the hon. member tends to confuse, as so many of his way of thinking do, the position of the very small, minute and rapidly decreasing minority-who are able in a modern industrial society to exercise free enterprise and operate businesses of their own-with the vast majority to whom this argument is simply not applicable at all.
Coming to the budget resolutions, Mr. Chairman, I want to deal for a few moments with some of the changes that are proposed. First of all I want to deal with the first proposal to reduce the income tax by 2 per cent right across the board. It seems to me this is a fair sample of the type of fiscal policy this government has been pursuing for some time. I have looked up the income brackets and the appropriate taxes for them and I find, for instance, that a married man with two children and with a gross income of $2,900 a year will save 36 cents under this new provision, but on the other hand if we go to the other end of the scale and take someone with a gross income of $42,800 and a taxable income of $40,000 we find that he will save $324.
I know, of course, that the argument in favour of such concessions is that they tend to encourage investment in Canadian enterprises and the development of our country, which is a very laudable purpose, but unfortunately the record shows that they do not have that effect. I have before me two documents prepared by the Department of Trade and Commerce. I find that in 1952 there was invested by Canadian private enterprise in business enterprises $4,130 million. This figure dropped to $4,108 million in 1954, and it is estimated that for 1955 it will be down to $3,874 million. As a matter of fact, in 1954 it went down to $3,835 million, belying the optimistic estimate of the department the previous year.
That would seem to indicate that all these concessions to people with large incomes in the hope that they will reinvest the money in

the further development of our country are quite fruitless. They are vain hopes, and it is not taking place. It is, of course, the decline in investment that has caused the unemployment troubles we have had in spite of the fact that public investment has increased to some extent, but evidently by the results not sufficiently.
This is not the only field, of course, in which the government is being quite tender. In one resolution there is a further provision for mining companies. I should like to deal for a few moments with the concessions that were already being made to mining companies, and the further concession being made in this resolution. There is of course a fairly plausible argument for granting depletion allowances because the owners of mines are working a diminishing asset. But I have never yet been able to see why depletion allowance should be permitted beyond the total of the investment made in the mine. I cannot, for instance, see why if I invest $100 in a mine and get my $100 back I have a right, at the expense of my fellow Canadians, to insist that from then on until the end of that mine I am still permitted to write off depletion allowance. That seems to me to be rather dubious justice. I suppose the argument is the same, to encourage these people to invest again in mining enterprises.
We have another provision which exempts them from income tax for the first three years of productive life. I would point this out, Mr. Chairman: If a mine is not making profits in the first three years of its productive life, and it is not likely to do so in many instances, there will be no corporate income tax to pay anyway; if, however, it is a profitable enterprise, for the life of me I cannot see why it should not pay its fair share of taxation as soon as it begins to make a profit. Again it is an attempt to provide funds, I suppose, for further investment by those who have that risk capital about which we hear so much.
As I pointed out, unfortunately Canadian capital does not seem to be very fond of taking risks. It cannot have been, otherwise we would not have had the $700 million of United States capital that was poured into this country causing some rather difficult financial and fiscal problems for us. Had Canadian capital been prepared to make these investments instead of seeking safe, sure existing investments, I doubt whether our United States friends would have found so much scope. But we go on hoping, of course, that if we leave plenty of money in the pockets of people who make plenty of money, they will invest it for us in the expansion of our industry.
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In actual practice we find that what happens is that we have to rely on the people of the United States to do that. The only advancement we get is when the government does take the money off the people and invest it, in spite of the rather foolish way in which the government proceeds with some of its expenditures and investments. I suggest, Mr. Chairman, that today the government should very carefully reconsider this whole basic proposition that the economy as a whole is going to benefit by leaving as much money as possible in the hands of those who will not need to spend it all, and assuming that they are going to make the sort of investments that have to be made in Canada. As 1 say, the record shows they do not make them.
We have, in the first place, no means of directing that investment to desirable ends, to the sort of place that it requires to be put. We have no means whatever of controlling the volume of the investment. We have no means of preventing that investment from being made outside Canada, as it all too often is when more alluring investment prospects show up abroad. 1 should like, therefore, to see the government seriously consider abandoning this whole taxing philosophy that is based on the assumption that these savings are going to be invested in a way desirable to the people of Canada. Many of the sections of this resolution appear to be based on that.
For instance, we have a special provision with regard to the cost of financial promotion. I suppose there are arguments to be made for that if you follow this basic governmental assumption. But I suggest the whole assumption has not been borne out by history. It has been proven to be fallacious. While the hon. member for Greenwood is optimistic that the system of investing funds which landed us in the soup once before, brought us quite close to the threshold again and is apparently getting us to the danger point now according to the figures on unemployment, is going to work this time, I would suggest the wiser thing to do would be to listen carefully to the voice of history and admit the unpleasant fact that this method of investing surplus wealth has not been able in the past to ensure the continuous expansion of our economy, and has not been able to ensure continuous employment for our people. Until we have some direction of investment in this country, we are always going to be liable to that disastrous decline in production and consumption which has accompanied private investment in the past years.

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Mr. Monteith:: Could the minister explain just why item No. 5 is included here? I am assuming it means that rental income, after all expenses, depreciation and so on, is to be classified as earned income instead of unearned income. Why is the change made?


Walter Edward Harris: I shall be glad to answer the question, but I wonder if, since we are going to have a question period at this time, we could dispose of the first four resolutions and then I could answer the fifth.
Resolutions 1 to 4 inclusive agreed to.
On resolution No. 5:


Walter Edward Harris: The answer is just what the hon. member for Perth has in mind. We felt this would add some slight incentive, perhaps more than slight, to the person trying to retain or increase investment in rented real estate, by taking off the burden of the 4 per cent surtax. For that purpose, we are moving it into earned income.


Jay Waldo Monteith: I think it might even work the other way, Mr. Chairman. I know of several instances where real estate is held, and after depreciation is deducted there is actually a net loss. The real estate loss is deductible from other investment income, so I do not think it always works out that way.


Walter Edward Harris: I think you might see the bill.


[Stage Direction]
Resolution agreed to.
On resolution No. 6:
Jay Waldo Monteith: What is the purpose of putting an investment company on a straight 20 per cent basis instead of allowing an election?


Walter Edward Harris: We have had a great many representations, Mr. Chairman, from investment companies that the present provision permitting election under certain terms is not wholly satisfactory because of the nature of their income, and claiming to be tax exempt in every respect. This is an effort to alter what has been unsatisfactory from the standpoint of the investment companies. So far as we are concerned we think that they have an argument in that respect. We have adopted a more understandable form of common taxation for all investment companies, placing them at the lowest taxation rate for corporations.


James MacKerras Macdonnell: Is the minister saying investment companies have asked for this change?


Walter Edward Harris: I did not mean to convey that. They had asked for an alteration in the present law, and this alteration has been the one which we have devised. Whether

or not they are satisfied with it, I presume we will know after they have read the bill.


James MacKerras Macdonnell: Will the minister explain exactly what their taxation position is at the moment, that is before this new legislation comes into effect? My understanding is that in those cases where their income was largely from shares, they largely escaped taxation. But they did have a right of election. Can the minister explain to us what the situation has been? How many of those who did elect escaped taxation, and for what reason? What is their rough position going to be now that they are all to be subject to taxation?


Mr. Benidickson:: This is one of the most complicated and technical of the resolutions. Perhaps the hon. member would, therefore, permit me to read an explanation. Companies can qualify as investment companies if they meet the requirements of section 69 of the act. When the dividend tax credit for individuals was introduced a few years ago, shareholders of investment companies found they could not obtain this tax credit for dividend allowance. They were, however, able to elect to pay a tax. Investment companies have been considered as really just a funnel through which the investors, if they qualify-


James MacKerras Macdonnell: Will the parliamentary assistant permit a question? If they elect-


William Moore Benidickson: Then the shareholders would have got the 20 per cent dividend allowance; but it was thought that it would be better to make them all pay and make them all entitled to the dividend credit.


James MacKerras Macdonnell: Take the case of a company that had income, let us say, 95 per cent of which came from shares and 5 per cent from bonds. If they elected to pay, am I correct in understanding that they elected to pay so that the shareholders then would be entitled to claim 20 per cent?


William Moore Benidickson: That is right.


James MacKerras Macdonnell: As it stands now, they will pay, but of course pay only on their taxable income which would be their income from bonds, so that on the income that they get they would still be in a position to take the 20 per cent.


William Moore Benidickson: On the shares.


James MacKerras Macdonnell: What is the final result of that? There is no longer any option. Am I correct in thinking the situation now is what it would have been before if everyone had elected to pay the tax?


William Moore Benidickson: It is very small, Mr. Chairman. The estimate is that the revenues

would actually have a net loss of about $250,000 for the current year and in a full year about $400,000.


James MacKerras Macdonnell: I want to go back to resolution No. 5 and resolution No. 10 together. In resolution No. 5 the minister sets out that:
. . . rental income from real property shall not be included in income to which the additional 4 per cent tax on investment income applies.
In resolution No. 10 it says:
. . . a corporation more than 10 per cent of whose gross revenue was derived from rents be disqualified from being treated for tax purposes as a non-resident-owned investment corporation.
Apparently the principle here is that of removing rental income from the investment category and placing it in the category of earned income. The minister, in presenting resolution No. 5, stated in part:
In the case of rental incomes derived from the ownership and management of real estate, it has been found impossible to draw a consistent line defining the "carrying on of a business".
This conclusion has apparently been applied in resolution No. 10 in disqualifying the investment feature. My question is this. Section 68 (1) (b) and (c) describe a personal corporation as one who:
. . . derives at least one-quarter of its income from . . , rents, . . . and did not carry on an active financial, commercial or industrial business.
Then the application of the principle involved in resolutions No. 5 and No. 10 would apparently remove from the classification of personal corporation a company more than 75 per cent of whose gross revenue was derived from rents, or sources other than those mentioned in subsection 1 (b). That is a complicated statement. I am wondering whether that is the intention?


William Moore Benidickson: I think it can be said that neither of these paragraphs, 5 and 10, interferes with or affects the present legal definition and status of a personal corporation.
I would say that paragraphs 5 and 10 are each also quite distinct. Paragraph 5 refers to a Canadian taxpayer who has rental income, and the change is being made because it has been very difficult to draw a line between what would be income from carrying on a business and providing management and not subject to surtax or rental income that in some cases would be considered investment income and subject to the surtax.
Paragraph 10, of course, applies to a nonresident investment corporation, which has been exempt from regular corporation taxes if they meet certain conditions in the definition. An individual who is a non-resident and is receiving rents from Canadian sources has two things open to him. One, he may be charged the 15 per cent withholding tax
50433-275*
Income Tax Act
on the gross rental that is paid to him as a non-resident, or he could file a business return statement and show his expenses and his income and pay the regular graduated personal tax on the net income. At present a non-resident-owned investment corporation can own real estate in Canada and pay tax at 15 per cent on only the net return from rentals after deducting expenses.


James MacKerras Macdonnell: Where does that leave the personal corporation? Let me read the definition of it from section 68 of the Income Tax Act:
In this act, a "personal corporation" means a corporation that, during the whole of the taxation year in respect of which the expression is being applied,
(a)	was controlled, whether through holding a majority of the shares of the corporation or in any other manner whatsoever, by an individual resident in Canada, by such an individual and one or more members of his family who were resident in Canada or by any other person on his or their behalf:
(b)	derived at least one-quarter of its income from
(i) ownership of or trading or dealing in bonds, shares, debentures, mortgages, hypothecs, bills, notes or other similar property or an interest therein,
(if) lending money with or without securities,
(iii)	rents, hire of chattels, charterparty fees or remunerations, annuities, royalties, interest or dividends, or
(iv)	estates or trusts; and
(c)	did not carry on an active financial, commercial or industrial business.
My question is: Section 68 describes a personal corporation which derives at least one-quarter of its income from rents; has section 10 therefore removed from the classification of personal corporation a company more than 75 per cent of whose gross revenues were derived from rents, or sources other than those mentioned in subsection 1 (b)?


William Moore Benidickson: Paragraph 10 does not in any way affect the definition of a personal corporation because a personal corporation is defined in 68, and we are not disturbing that. Section 10 relates to a non-resident-owned investment corporation, and that is defined in section 70. I cannot see any relationship. I certainly will take my hon. friend's question as notice, and if there is anything I have missed I shall certainly give him a full explanation when we come to the statute.


James MacKerras Macdonnell: While we are on resolution 10 may I ask a further question? Will the parliamentary assistant explain the reason for that change?


William Moore Benidickson: The reason is that this puts a non-resident-owned investment corporation in a fairer position with respect to a resident corporation. My hon. friend will also note that it is not suggested that the

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change will come into effect in this taxation year. The non-resident corporations are thus given notice of our intention and they will have the opportunity-I think it is to the end of this year-to divest themselves of some rental income if it is consequential and so that they will get their rental income down below the 10 per cent if they want the low tax rate.


James MacKerras Macdonnell: I am still not quite clear. Am I correct in understanding that this is designed to remove a situation which gives an unfair advantage to the non-resident-owned corporation?


William Moore Benidickson: No, the other way around.


James MacKerras Macdonnell: As distinct from the domestic corporation?


William Moore Benidickson: It will make fairer the position of the resident corporation who has rental income as against the non-resident investment corporation. The non-resident investment corporation has been able to escape regular rates of tax with respect to substantial rental income earned in Canada.


James MacKerras Macdonnell: Then it is competition with the Canadian resident that is being considered. The non-resident has had an unfair advantage as against the Canadian resident?


William Moore Benidickson: Yes.


James MacKerras Macdonnell: That is what you are doing away with?


William Moore Benidickson: Right.


Colin Cameron: Could the parliamentary assistant give us some further explanation in connection with resolution 13, because I am a little puzzled to understand the wording. Presumably this provision is intended for mines in the process of development.


William Moore Benidickson: This is merely putting into regular statutory form what has been available for some time on a temporary basis and which was extended year by year. This makes the thing permanent until there is a change in the statute.


Colin Cameron: This gives the mining companies exemption for the first three years of production?


William Moore Benidickson: Which they enjoy now.


Colin Cameron: It is intended to permit a mine to get on its feet?


William Moore Benidickson: That is right.


Colin Cameron: Before it becomes a paying proposition. Why is this necessary?

In the case of a mine in the process of development with no net income there would be no corporation tax payable, but on the other hand where you have a mine that gets into production during the first three years there would seem to be no justification for exempting their income from taxation.


William Moore Benidickson: The three-year rule is simply a common rule being applied to all. Some might make a profit early or in the first year and some might not. It simply means that we are not stepping in as soon as a profit is made. The three-year exemption applies to everybody.


Colin Cameron: It states that it is to be extended to mines coming into production at any time hereafter. That would mean that the period during which they can claim exemption is extended until they come into production.


William Moore Benidickson: Now it will apply whenever they come into production in the future. It has been on a temporary basis, if perhaps they did not come into production before 1957. There was no assurance of the future. We are removing that limitation; we are saying, whenever they come into production in the future they will have tax exemption for three years.


Mr. Nicholson:: Mr. Chairman, the Minister of Finance was tied up with the provincial ministers of finance when I discussed income tax problems during my budget speech on April 28. I am sure the minister has been too busy since then to refer to those remarks, but I should like to have the parliamentary assistant make some comment on the few figures I gave then.
I might say that I was one of the very few members of parliament who did not cheer the night of the budget address when the minister announced a reduction in income tax. I feel that those in Canada who are fortunate enough to be able to pay income tax should not complain about the burden of taxation. In spite of all that has been said I do not think that the present Canadian income tax schedule can be classified as interfering with incentive.
On April 28 I referred to a table which had been prepared on the basis of information as to the distribution of non-farm income in Canada. According to this analysis 34-2 per cent of all families in Canada are in the position where they receive less than $2,500 per year. Then next we find that 63-8 per cent have incomes ranging from $2,500 to $9,999, while about 2 per cent have incomes of over $10,000.

I am sure that it must come as quite a surprise to hon. members in this chamber, many of whom have had the privilege of having taxable incomes, to realize that only 2 per cent of the families in Canada receive over $10,000. When one considers the schedule provided by the minister in his budget he will realize that when you get up to $50,000, $100,000 and $200,000 in the way of interest the percentage would be very small.
Taxation statistics for 1954 indicate that there are only 330 persons in Canada receiving incomes of over $100,000. It is true that they receive a very sizeable total of $48.1 million. Then in the group between $50,000 and $100,000 there are 1,510 persons. There are only 1,840 persons in Canada who receive incomes of over $50,000, and together those two groups receive $143 million. That very small group really should not complain about the taxes they have to pay. As has been stated so often, it is not how much you pay that really matters, it is how much you have left.
As I mentioned when I spoke before, a person getting $100,000 a year would have to pay a sizeable amount but after paying his taxes he would have left, on the basis of 300 days in the year, $163 a day to spend. The person getting $200,000 a year would have left $261 a day, while the person getting $400,000 would have left $419.38 per day.
I submit in all seriousness that before we give substantial relief to the persons in those brackets we should try somehow or other to get more people into the brackets where they would be paying income tax. It has not always been considered to be one of the responsibilities of the Minister of Finance to be concerned about the distribution of the national income, but I think the real objective of income tax has been to try to re-allocate the national income so that in the case of those who have not it will be possible for the federal government to have the resources available for family allowances, old age pensions, health and other desirable services.
I submit that in the next few years the Minister of Finance is going to have to worry about 34-2 per cent of Canadian families who have an average income of $1,500 a year. Anyone who has to go out to find living quarters on a rental basis, to pay for groceries, books, health and other services, will realize that it is just impossible to give his family the standard of living that we Canadians think we should have on an income of $1,500.
I submit that one of our fundamental problems is that 34 [DOT] 2 per cent who have to balance their budgets on $1,500. They are in the position where they are going into debt at
Income Tax Act
a most alarming rate. I put figures on the record with regard to credit buying and the expansion of small loan companies which I think supports my claim that somehow or other we have to find ways and means to provide greater income for these 34-2 per cent. Those people should be able to get their hands on more money so they can buy the goods in Canadian stores and put more people to work. I hope that between now and next year when the minister is bringing down his budget he will take more from the privileged few in the higher brackets. I do not suggest for a moment that he take all the income from the 1,840 people in the higher brackets and that would solve all our financial problems, but those people who are in those higher brackets really cannot buy all the consumer goods that are piling up in our stores. I hope the minister will make some comment on the table I placed on the record at that time and the fact that such a large percentage of Canadian families have to get along on an average of $1,500 a year. This distribution of farm incomes points out that we have a large number of families of two persons or more, actually 8 per cent, who get less than $1,000. You have another large group, 7 per cent, getting between $1,000 and $1,499; and another 8 per cent between $1,500 and $1,999. Some ways and means have to be found of seeing that we change this very large percentage who are getting an average of $1,500.


Jay Waldo Monteith: Mr. Chairman, item No. 7 states that costs of issuing or selling shares of capital stock of a company are to be exempt for taxation purposes. Does that refer to new incorporations or companies already in existence that are issuing further issues of shares?


Walter Edward Harris: It applies, Mr. Chairman, to all expenses of this kind, whether it is a newly incorporated or an existing corporation.


Jay Waldo Monteith: All incorporation expenses?


Walter Edward Harris: It is intended to cover corporation expenses, which again will be set out in the bill, legal expenses and the like.


Jay Waldo Monteith: Prospectuses?


Walter Edward Harris: Yes.


Colin Cameron: Mr. Chairman, I should like to ask the minister a question about section 2 of this resolution with regard to a reduction in the rate of tax on income of corporations from 47 per cent to 45 per cent. Am I right in suggesting that the idea of this reduction is the same as I mentioned before, that it provides funds for further expansion in industry? Is that the basic purpose of it?

Income Tax Act
If I am right in that assumption, then it seems to me that it would be more effective in producing new enterprises in this country to raise the exemption rate from $20,000 further up the scale rather than to provide the extremely massive tax reductions to some of the very large corporations in this country. I have in mind the largest one in my own constituency, which reckons its profits in the $15 million and $16 million a year category. This is going to be something really thumping for them. They do not need it. They have ample funds for all the expansion they can do. On the other hand, a higher exemption than $20,000 might very well provide the stimulus for an expansion of a smaller industry. Has the minister considered that angle?


Walter Edward Harris: Yes, there were the alternatives that the hon. member has stated. It was thought that the general across-the-board reduction would give the opportunity of expansion to every corporation to be used in such a manner as they, according to their best judgment, thought most desirable. On the other hand we could have done what my hon. friend suggests, increase the $20,000 figure; but we felt that on this occasion at least we should make the general reduction apply to all corporations.


James MacKerras Macdonnell: It is very pleasant for me to find myself in agreement with the hon. member for Nanaimo for once.


Colin Cameron: The devil can cite Scripture.


James MacKerras Macdonnell: What he said merits careful consideration and, without labouring the point, we might ask the minister if it is too late to consider that even now. After all, we all hope that little companies will become big companies in as large a number as possible. I feel that the step when it was taken was a good step. I believe it has been extended once already, and I wonder if it would not be possible to extend it again. I commend that to the minister because, notwithstanding the fact that I disagree with the hon. member for Nanaimo on many matters, I am conscious of what he pointed out, that we do want a larger number of smaller units and we do not want concentration in a few units. I feel strongly that whatever can be done to help the small fellow is doubly and triply worth while.


Walter Edward Harris: I am glad to find myself in the position, which I hoped I would be in at some time during the day, of having the two hon. gentlemen opposing me on something instead of fighting with each other. As a matter of fact, I sympathize fully with wha*
(Mr. Cameron (Nanaimo).]
has been said and, if I were in the opposition, I believe I would take precisely the same view. But, since I had to make the decision on one course or the other, I chose the one course, though I recognized the value and the virtue of adopting the other course. It is too late to make a change along the lines suggested by the hon. member, but I assure him the matter will be given full consideration.


James MacKerras Macdonnell: Is it necessary to remind the minister that he is neither a Mede nor a Persian, and, therefore, he can change and will not have to stay the same forever.


Jay Waldo Monteith: Paragraph 8 of the resolution mentions "sale or realization of inventories or accounts receivable." I wonder if we could have an explanation as to why this clause is included?


William Moore Benidickson: Paragraphs 8 and 9 are related; one, the sale of inventory and the sale of accounts receivable-inventories sold in the normal course of business-


Jay Waldo Monteith: It is both inventory and
accounts receivable in paragraph 8.


William Moore Benidickson: Yes, in paragraph 8. Inventories sold in the normal course of business must be taken into account in computing income. Similarly accounts receivable are normally included in income in the year incurred or the year the report is received, depending upon the taxpayer's method of getting his accounts. However, following a recent court decision it appeared that some sales of inventories might have to be regarded as capital transactions and left out of the computation of income. Some doubt has also arisen as to whether accounts receivable of a taxpayer recording on a so-called tax basis could be made as to the tax when these are sold or payment is received by the taxpayer after ceasing to carry on business. This is a loophole that is taken care of.


Jay Waldo Monteith: I believe I know the case to which the parliamentary assistant refers, which this is proposed to cover, where it had been granted there was a capital gain on the disposal of a business on inventory and accounts receivable. How does this operate as far as the fiscal year period goes? If it is an individual, it automatically means the calendar year 1955. If it is a corporation that, for instance, has a year ending February 28, 1955, and they happened to dispose of their accounts receivable and inventory in August 1954, are they affected?


William Moore Benidickson: Yes. While it has been past practice to require them to do this, and this will make it certain, it will be applicable

to a change that took place in August of last year. They will be required to follow this.


Jay Waldo Monteith: In other words, it is retroactive to last year.


William Moore Benidickson: In the case of a corporation with a year ending this year.


Jay Waldo Monteith: That does not seem to be quite equitable, does it?


William Moore Benidickson: Their return has not yet
been made.


Jay Waldo Monteith: It may well have been made by budget date. It is not required to be made for six months but it might well have been made. A company with a year ending January 31 would be in the same boat.


William Moore Benidickson: It is not out of line with recent practice. The department has been administering the act in this way. There were some uncertainties about it and it is just to eliminate that uncertainty.


William Alfred Robinson: Shall the resolution carry?


Jay Waldo Monteith: No, Mr. Chairman. I think that this provision is not working to the detriment of a corporation if a corporation's year ends December 31, 1955. It affects them the same as it affects an individual proprietorship, business partnership and so on. It certainly seems to me to be to the detriment of a corporation with a year ending before December 31, 1955. I mean he may have made his disposal in the previous income tax year. He has, if he made it last August.


William Moore Benidickson: Prior to bringing down the bill we shall have another look at the hon. member's remarks and see if the point should be met.


James MacKerras Macdonnell: Will this section apply in the case of an individual incorporating himself?


William Moore Benidickson: During 1955, yes.


James MacKerras Macdonnell: I am not sure yet that I understand exactly how this works out. May we have an illustration? Here we have this language:
8. That for the year 1955 and subsequent taxation years proceeds of a sale or realization of inventory or accounts receivable of a taxpayer upon or after selling or ceasing to carry on a business . . .
I suppose one can understand "upon ceasing"; that is to say he sells the business to some new entity or corporation. I am not quite sure that I follow the transaction through. Might we have explained to us step by step exactly what happens and how the transaction is going to work out practically from the point of view of the man who carries that through? Let us take the case of
Income Tax Act
a man who decides to incorporate his business and sells to the new company.


William Moore Benidickson: I think that transaction would be better shown if we had the statute before us. I would suggest to my hon. friend that I do that when we have the actual words that are going to apply in the statute.


James MacKerras Macdonnell: When we come to a study
of the statute I think we will be in a much better position if we have a better understanding now. I find these statutes difficult to understand when I get them, largely by reason of the highly technical wording which makes them more difficult to understand. Could we not have just a play-by-play account of what happens here so that we may know the exact transaction that is contemplated and the exact way in which it works out? I think we shall then be able more intelligently to study the statute.


Walter Edward Harris: I apologizp for intervening, Mr. Chairman, but I think the hon. member for Greenwood is making light of his knowledge of this situation. This is an effort to provide taxation for the sale of accounts receivable and inventory by a person or corporation in the manner which has been heretofore adopted. However, in every change in the law, in the sense of spelling it out, one has to put in many things. In the bill there are a great many explanations.


James MacKerras Macdonnell: Might I interject a question there? At this point would the minister tell us exactly what the evil is or what the gap in the legislation is which it is felt necessary to fill? What are the difficulties they have run into?


Walter Edward Harris: There is no evil whatever in any legislation that we have before parliament.


James MacKerras Macdonnell: It might have been passed so long ago that it was done by another party.


Walter Edward Harris: Even then I do not think I would apply that adjective. Actually, we are making sure that a person who sells his accounts receivable or his inventory should pay tax on the proceeds. As my hon. friend says, we have a situation where a business may be sold. It may be sold by incorporation and sale. The point is that at that time or subsequent to that time, the man will dispose of his accounts receivable and his inventory.


James MacKerras Macdonnell: May I ask a question
there? If I understood the minister correctly, that disposition would be made after sale by the purchaser.


Walter Edward Harris: I was trying to combine the two into one. It may be that in the sale the accounts receivable would not have passed in ownership from the seller to the purchaser

Income Tax Act
On the other hand the inventory might very well have done so under those circumstances if there was a sale of a complete inventory. But let us suppose the situation where on a sale occurring you had everything pass, including accounts receivable and inventory. So far so good. You may, however, have a partial sale and after the initial sale you will have a sale of the accounts receivable. The purpose of this resolution and the consequent bill will be to tax in the hands of the vendor the proceeds from the sale of the accounts receivable or the remnants of inventory, whatever they may be. As my hon. friend will see, there is a provision as to the method of taxation, spreading it over the three-year average.


Mr.   Mcnleiih@: Why is that done, actually? I refer to spreading it over three years. If a man has $100,000 of inventory and he disposes of his business, why should not that inventory be taxed at the rate in that year? He has paid taxes in the previous years on his profit in those years.


Walter Edward Harris: That is quite true. But I do not think my hon. friend would suggest that we ought to tax this wholly in the one year received because he would undoubtedly pay at a higher rate than that which we now propose to charge under this provision.


Jay Waldo Monteith: I am just wondering why the three-year period was picked. Why not five years, as is done in averaging farmers' income, or something like that?


Walter Edward Harris: One must fix a time. Three years looks like a good average which will permit fair taxation for what should be paid. But if my hon. friend feels that it ought to be one year or two years or five years, perhaps he can make a better argument than I can make for three years.


Jay Waldo Monteith: I just wondered what the purpose of it was.


William Alfred Robinson: Shall the resolution carry?


Jay Waldo Monteith: Mr. Chairman, I wonder if this is what is in the minister's mind. Suppose a company has $1 million of inventory at the end of one particular year and shows a $1 million profit; then say at the end of the next year it has a $1 million inventory and shows $1 million profit. Then in the third year suppose they sell the business and they happen to get $2 million for their inventory. The profit would be commensurate with that on the previous year's operations and so on. Suppose they sold just at the end of the year. There would be $2 million profit on that

basis. But this provision would put all the $1 million extra inventory over the three years.


Walter Edward Harris: Yes; because quite obviously the increased value has probably not occurred all in the one year. There has been a gradual build-up of profit in the inventory.


Jay Waldo Monteith: It is really a protection against somebody showing a deflated inventory which he eventually sells at an enhanced figure. Is that correct?


Walter Edward Harris: Yes. That is what occurs. But I prefer to put it on the other ground, namely that it is relief against high taxation if it were charged in the one year.


William Alfred Robinson: Shall the resolution carry?


Some hon. Members:: Carried.


Jay Waldo Monteith: I wonder whether the minister could give us an explanation of paragraph No. 9?


William Moore Benidickson: This is' another loophole provision of a rather technical nature. My hon. friend would probably like an explanation.


James MacKerras Macdonnell: This is not a defect in legislation, by any chance, is it?


William Moore Benidickson: No. We sometimes find that the act is deficient. This paragraph proposes a special tax of 15 per cent on corporations the control of which has been acquired by a non-resident corporation or a tax-exempt organization in Canada. The tax will be calculated with reference to the amount of designated surplus the corporation pays out by way of dividends to the non-resident corporation or to the tax-exempt organization. The general procedure for a company which has an accumulation of undistributed earnings is to distribute this surplus as dividends so that it becomes taxable in the hands of the individual shareholders, or the company may elect, under the appropriate provision of the Income Tax Act, to pay tax on it at 15 per cent so that it becomes what is called tax paid undistributed income. This of course may be capitalized under certain other provisions of the act well known to my hon. friend-section 105.
The present law also provides that if one Canadian company acquires control of another which has an undistributed surplus this undistributed surplus of the acquired company at the time control is acquired becomes a designated surplus as defined in section 28 (6) of the act. Dividends paid, therefore, out of the designated surplus to the company that has acquired control bear tax at the regular corporation income tax rates in the hands of the controlling company.

However, it was found that these taxes could be avoided if control of a company with undistributed income on hand was acquired by a non-resident corporation or a tax-exempt organization.


James MacKerras Macdonnell: If control was acquired by a non-resident corporation it would then escape tax?


William Moore Benidickson: It did, yes.


James MacKerras Macdonnell: And this says that a corporation resident in Canada which pays a dividend out of a designated surplus to a non-resident corporation exempt from tax will be subject to a tax of 15 per cent. You are putting yourself in the position of getting the same 15 per cent that you would get otherwise.


William Alfred Robinson: Shall the resolution carry?


James MacKerras Macdonnell: No. I should like an
explanation of paragraph No. 11.


William Moore Benidickson: Because of the difficulty of ascertaining just where and how income is earned in the operating of ships and aircraft most companies have exempted such income from taxation. However, the earnings might be exempt in the foreign land and also exempt in Canada. This is another loophole provision. We are just trying to avoid having Canadian companies become a haven for escaping taxation anywhere with respect to operations of this kind.


William Alfred Robinson: Shall the resolution carry?


James MacKerras Macdonnell: No. Could we have an explanation of paragraph No. 12?


William Moore Benidickson: This is new. It has been found that non-resident owners of certain timber reserves in Canada have been able to escape the normal tax that is payable on income of non-residents. I explained a little earlier how the non-resident would be subject to the withholding tax on his income from rents and so on. This provision will be similar. It is to make clear that on incomes from timber royalties a nonresident will pay the withholding tax.


Jay Waldo Monteith: You say "from timber royalties". The paragraph reads:
That payments made after April 5, 1955. to a non-resident, computed by reference to the amount of timber cut or taken from a timber limit in Canada be subject to the 15 per cent tax on income from Canada of non-residents.
That is the ordinary withholding tax. It refers to payments but that does not sound like income earned.


William Moore Benidickson: I referred to "timber royalties". That is a common phrase by
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which we would describe that kind of income, income calculated by reference to the amount of timber cut, stumpage and so on.


William Alfred Robinson: Shall the resolution carry?


James MacKerras Macdonnell: I want an explanation of paragraphs 14 and 15. In that regard I wish to refer to an editorial in the Montreal Gazette of May 9 which is based, I think, very largely on a statement made in the house by the hon. member for Calgary South with reference to the whole question of depreciation. The Gazette takes up the matter under the caption, "Handicapping Our Own." As hon. members know, the suggestion of the hon. member for Calgary South is that we are not giving a fair break to Canadian enterprisers. I am going to read briefly from the editorial in the Gazette and then I want to ask if we may be given an adequate statement showing us the approach of the government to this question of depreciation, because it seems to me one of very great importance. I shall read briefly from the editorial and then ask the minister or the parliamentary assistant to reply. It reads in part as follows:
The discrimination against the Canadian investor in Canada comes about from the different tax regulations in the two countries on the question of depletion. The importance of these differences was well set out last week in the House of Commons by Mr. Carl O. Nickle, member of parliament for Calgary South. Mr. Nickle drew attention to the fact that the depletion allowances in the United States are so much more generous that a United States company coming into Canada has a huge advantage over Canadian companies.
Depletion allowances are basically a recognition that a well or mine producing oil, gas, coal or any other mineral is a "wasting asset", strictly limited in the ultimate production it can yield. If the owner is to stay permanently in business, he must continuously explore for new wells or mines. Therefore an industry that must be seeking new reserves to prevent expiry incurs expenses that do not belong to a business that is not concerned with "a wasting asset".
This principle, to be sure, is recognized in both countries. The trouble is that it is recognized far more fully in the United States than it is in Canada. Here is the difference.
In Canada, for instance, operators of oil or gas wells are entitled to a depletion allowance amounting to 33J per cent of their profits. But they may claim such a depletion allowance only out of net profits, if any, after other taxes have been paid. And they can claim depletion allowance only after they have completed making all tax allowances for the expenses of exploration and development.
Under United States law, however, a company is permitted to make deductions for depletion before, not after, it has recovered the expenses of exploration and development. And these United States regulations apply whether the costs of exploration and development were incurred in the United States, Canada, or elsewhere. And. in addition, a company is permitted a choice of method in calculating depletion allowance, whichever may be the more to its advantage: either 27J per cent of gross production income, before other taxes: or 50 per cent of net income after other taxes.

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How do these differences work out in practice? Mr. Nickle shows how severely they discourage Canadian development by Canadian investment. In the first place, the huge expenditures in recent years have far exceeded gross production income. Only one-tenth of the Canadian companies engaged in exploration are in the position of having net production income against which to apply depletion allowance. The actual benefit of depletion allowance to date has been only about 1 per cent of the spendings made to replace and increase proved reserves. Therefore the conditions under which the depletion allowance is possible under Canadian tax law are so severe as to be inaccessible to most Canadian oil and gas companies.
In the second place, it is often better, under the Canadian tax law. for a Canadian company to undertake no exploration for new replacement resources but just to exhaust those already proved. In other words, the law encourages Canadians to abandon or curtail exploration at the very time when it should be encouraged. And in the meantime, the United States tax law is encouraging United States companies to do what Canadian companies are discouraged from doing.
There is no need to follow extreme policies of "Canada for Canadians". But surely there is no need to place our own investors at a disadvantage when competing in Canada with investors of the United States.
Now, that explains the argument and the criticism which is made, and I should like to have an answer.


Walter Edward Harris: Well, I am glad to know we are on the last item just before six o'clock. I would not want anything I say now to precipitate a long debate on this subject which I must say, with due respect, needs a great deal of consideration. I am prepared to make a short statement for the record. I had expected perhaps the hon. member for Calgary South would be here either now or when the bill is considered to deal with this particular point. If I do make a statement I would hope that he and others would consider it, and at a later time our views could be expressed at greater length. Perhaps the resolution could pass in the meantime, if that is agreeable to my hon. friend.


James MacKerras Macdonnell: I do not want the minister to read it on the understanding we are necessarily going to pass this resolution before six o'clock. I would doubt if that is going to happen. I do not want the minister to be misled.


Walter Edward Harris: Since it is still the last resolution, may I ask the indulgence of the house to continue after six and pass it, unless there is a great deal more comment about this resolution than it appears there might be.


James MacKerras Macdonnell: Could we wait until we hear what the minister has to say?


Walter Edward Harris: I did notice that the hon. member for Calgary South had made a rather lengthy and quite serious contribution to the debate some time ago on this particular point.

Of course, he is well qualified to speak about this particular business with which we are dealing. The fact I am not prepared to agree with his conclusion does not alter the fact his views are seriously considered on every occasion he presents them to the house. The whole burden of his speech seemed to be the same as that which was interpreted by the article the hon. member for Greenwood just read. It seemed to imply that foreign investment in Canada is given a better break than domestic investment. This is not so.
It is quite clear that companies operating in Canada, whether they be Canadian or foreign owned, are treated exactly the same by our laws. I think the hon. member for Calgary South would agree with that. It is true, however, that in the United States there are certain provisions with respect to depletion allowances which are slightly more generous than in our own country.


James MacKerras Macdonnell: Would the minister permit a question? Would it not be fair to say the hon. member for Calgary South was basing his argument on the over-all position of a United States company, including its treatment in the United States?


Walter Edward Harris: Yes, I quite agree. But I should like to point out, sir, that when the Paley commission in the United States came to look into the whole pattern of tax laws, both in that country and in our own, they came to the conclusion that the United States tax law was slightly more generous-I emphasize the "slightly"-in its treatment of the oil industry and slightly less generous in its treatment of the mining industry than Canadian law. I am ready to concede there are certain technical provisions in the United States law which are more generous than our own, but it should be pointed out at the same time that at the present time our corporate rate will be 47 per cent whereas it remains at 52 per cent in the United States.
I am inclined to think my hon. friend has been working on a rather slim basis if he is trying to show that on the over-all competitive position there is a factor weighted against the Canadian oil and gas industry. It is always easy to point out, of course, the more favourable factors in other countries while overlooking the unfavourable factors in those other countries. After dealing with the international competitive aspects of taxation, the hon. member attempted to show that our method of allowing depletion operates to discourage exploration.
I must say I found that difficult to understand, just as I have found all other presentations that have been made to me by the

various interested groups difficult to understand. The argument, as I understand it, is that a company, alter having achieved substantial production, is to a large extent deprived of its depletion allowance if it continues to explore. I am not prepared to accept that conclusion, nor am I prepared to accept the illustration he gave in the course of his remarks earlier this session. Every dollar of expenditure on exploration frees a dollar of profit from tax. This is the essence of the deduction for exploration expenses. The depletion allowance, so-called, frees only one-third of the profit dollar from tax. It seems to me it is quite obvious that the company which undertakes to explore is not discouraged therefrom, having regard to the fact that if from further exploration greater production is secured and he receives his one-third exemption on the profits therefrom at that time. His immediate depletion allowance is postponed because he has already secured an exemption from the deduction of exploration expenses. I have never felt the argument the hon. member has made-I must say that this goes as well for those associations who approached me last fall in this connection-is doing justice to the oil industry and the problems it has to face.
I believe I have stated fairly generally the position. If my hon. friend wants to consider it in terms of dollars, of course it is obvious that under certain conditions a greater tax benefit will accrue to Canadian corporations if we follow the proposal made by the hon. member. This does not mean it should be granted. All of us can think of special arrangements which would result in lower taxation for corporations, but it is not conceded that if they do not get them their exploration activities should be curtailed.


Mr. Fleming:: There are several points about which I should like to ask the minister, not related especially to this last item.


Walter Edward Harris: We have gone through them all.


James MacKerras Macdonnell: May I say that we have gone through them in a way, but we have ranged all over creation. We did not take them up, as I originally suggested, item by item. It seems to me fair that the hon. member for Eglinton, who has been kept at a committee meeting, should be allowed to make what comments he wishes.


Walter Edward Harris: I have no objection, except I thought the hon. member for Greenwood and the hon. member for Perth had been working through the resolution systematically and I thought they were representing their party.
50433-276i
Income Tax Act


Donald Methuen Fleming: These are individual points, Mr. Chairman, which I think are not related to any main argument. I do not intend to discuss them at length.
Regulation No. 1000, passed under the provisions of section 26 of the Income Tax Act, makes provision for exempting the income of nurses-in-training. It provides that for the purpose of the section income does not include income from employment as a nurse-in-training. This relates to the dependent of a taxpayer, the dependent being the nurse-in-training. I fully support the provisions of the regulation so far as they go, but I am wondering why a similar provision could not be made in other cases.
At the moment I am thinking of the case of the social-worker-in-training who, from the point of view of public policy, could well receive the same type of consideration as is accorded the nurse-in-training. Perhaps we should say rather their parents, on whom they are dependent, should receive the same consideration. I should like to bring that to the attention of the minister and ask him if he will not give consideration to an amendment to the regulation to include within the scope of the exemption the case I have mentioned of the social-worker-in-training, and put her on the same basis as the nurse-in-training.


Walter Edward Harris: I am afraid I am slightly prejudiced on this particular point at the moment. We had not considered it in the light in which the hon. member for Eglinton has placed it, and I would be glad to do that. I think I know some of the difficulties which in previous years have rather restricted the class of persons and led eventually to the opening up to nurses-in-training. I must say that I am not too familiar with the principle on which the decisions are made. I shall certainly consider the case of the social-worker-in-training.
Before my hon. friend came in I made a special appeal to continue until these resolutions were disposed of.


Donald Methuen Fleming: I am ready to go on. Some one called it six o'clock.


William Alfred Robinson: Shall we continue?


Donald Methuen Fleming: There are two other points, Mr. Chairman. The first concerns the large number of taxpayers who, at the present time, by reason of deductions at the source, are obliged to file claims for refunds. It seems to me that consideration should now be given to some change in the provisions of the act so that the rate of deduction at the source shall not be so high that so many taxpayers will be required to file claims for refunds.

Income Tax Act
At the present time, as I understand it, more than half of those who filed returns for the calendar year 1954 will be eligible for refunds totalling $146,000,000. The figures I have before me indicate that in Ontario alone 2,010,000 taxpayers are expected to file returns and that refunds will be payable in about 1,040,000 cases. This is rather typical of the position across Canada.
The method of deduction at the source in the case of persons whose incomes consist of wages and salaries is well recognized. I remind the minister that the percentage of deduction was increased several years ago. At that time the point was raised as to whether the increase was not so great that many people would be obliged to file claims for refunds. Now we have arrived at a situation where the government is taking, by way of deductions at the source, money from more people who are entitled to refunds than those who will find themselves having some further payment to make at the end of the year. That is a situation that should not be allowed to continue. Taxpayers whose income is drawn from other sources are not in that position. The position is accepted that in their case they pay the balance which remains owing on April 30, after they have paid their quarterly instalments during the income year. For that reason, it seems to me the time has come when the percentage of deduction at the source should be eased somewhat so that so many taxpayers will not be required to make claims for refunds.


Walter Edward Harris: The fact that the numbers claiming refunds appear to be increasing, as my hon. friend has said, would be an indication perhaps that the percentage being deducted might have to be reviewed. The hon. member made reference to this in his speech on the budget. I am making inquiry, sir, and shall continue to do so.


Donald Methuen Fleming: The other point I should like to raise arises out of a Canadian Press dispatch of March 17. I presume this has already been drawn to the attention of the minister, but I raise it for his comment. The dispatch is datelined Kitchener, March 17, and reads as follows:
An income tax official last night described as "vicious" a section of the federal Income Tax Act which gives civil servants power to seize property without a prior court hearing.
H. R. McGrogan of the income tax department in Ottawa said that to his knowledge no other government department, person or corporation in Canada has such power.
He told a meeting of farmers that under the section, a department assessor can at any time make an assessment or re-assessment. Whether or not the taxpayer owes the money, he must pay it

to the Department of National Revenue within 45 days. If he does not, the department has the right to seize all his assets to satisfy the assessment, Mr. McGrogan said.
I do not think I know the official mentioned, and I cannot vouch for the accuracy of his description in all respects, but I would ask the minister to comment on this matter. I am sure it must have come to his attention before.


Walter Edward Harris: As a matter of fact, Mr. Chairman, this is the first time I have heard of it and without appearing to postpone the issue may I say that that also would be a matter of administration to which the Minister of National Revenue might make an answer. In the light of that, at the moment I am sure that I am aware of the practice and of the law which permits the seizure of documents and the like for the purpose of establishing assessments, if that is what my hon. friend is referring to. I think he will agree with me that such a power is necessary, though I admit that one does not want to have to exercise it unnecessarily.
If on the other hand he is referring to seizure of property for the purpose of satisfying a debt, then I shall be glad to look at the appropriate section, if it can be drawn to my attention.


Donald Methuen Fleming: The press dispatch refers to the latter case. The seizure of documents is not mentioned. The taking into custody of documents in the course of investigation is a well-recognized procedure in the act and is not mentioned in this dispatch. I take it that the official is referring to the provisions of the act permitting the department to enjoy extrajudicial rights in the matter of the seizure of property. I have in mind the use the department makes of its right to attach wages and salaries for arrears without any judicial finding on the subject and without those restraints that normally attach to the execution of judgments.


Walter Edward Harris: I am informed that this arises after a certificate has been granted by the courts as to the amount owing and that, acting upon that certificate, certain seizures may be made. However, I am told by one of my officials here that the particular matter is known and I shall be glad to see that the whole details are given to my hon. friend. I am assured that it is in consequence of sections 119 and 120 of the act which do provide for seizure after certificate, and that the press report does not disclose the full story.


James MacKerras Macdonnell: There is just one final point that I want to bring to the attention of

the minister. It is a matter that has been up here more than once. It has to do with the self-employed person's right to participate in a scheme of retirement benefits. The minister's predecessor turned this down and emphasized a good deal the mechanical difficulties. I am not taking the time of the committee now to go into it, but I do ask the minister to give this whatever consideration he can because it is obviously a matter which, if it can be arranged, is of vast importance to a very large number of serious citizens of this country.


Walter Edward Harris: I have read all of the past debates on this subject, and I have received many deputations and I have spent considerable time with my officials discussing it. I think I should only say it is true that my predecessor did emphasize the administrative difficulties and perhaps placed the onus on the public generally to find a way around these difficulties. But we have given consideration to it, and will continue to give consideration to it, having in mind that Mr. Abbott did place on the record some of the difficulties and at the same time suggested that while the principle was not precisely that which was placed before the house by those who were representing the arguments that there should be such a deduction, nevertheless we know that a great many people feel that something along this line should be done. With that in mind we shall continue to study the problem.


[Stage Direction]
Resolution agreed to.
William Alfred Robinson: Do I understand we are to continue with the excise tax resolution at eight o'clock?


Walter Edward Harris: Yes.
At six o'clock the committee took recess.


[Stage Direction]
AFTER RECESS

The committee resumed at eight o'clock.

[Stage Direction]
That it is expedient to introduce a measure to amend the Excise Tax Act and to provide amongst other things:
1.	That the excise tax on automobiles adapted or adaptable to passenger use be reduced from 15 per cent to 10 per cent.
2.	That the excise tax on tires and tubes for automotive vehicles of all kinds be repealed.
3.	That the sales tax on the following goods be repealed:
(a)	materials to be used exclusively in the manufacture or production of feeds for poultry, cattle and other stock and fur-bearing animals;
Excise Tax Act
(b)	creosote oil and other wood preservatives when for use exclusively in the treatment of timber, poles or lumber;
(c)	material to be used exclusively in the production of terrazzo flooring;
(d)	perforated bituminized fibre pipe for drainage purposes not to exceed four inches in diameter;
(e)	rims for kitchen sinks;
(f)	floor tile;
(g)	wallpaper.
4.	That any enactment founded upon this resolution be deemed to have come into force on the sixth day of April, nineteen hundred and fifty-five.
Walter Edward Harris: Mr. Chairman, on a point of order. This may be the best time to announce the business for the rest of the evening. Should the excise tax resolution pass, it is not our intention to go on with the Customs Tariff changes but to go into supply and take the Department of Agriculture.


Donald Methuen Fleming: Mr. Chairman, it is undoubtedly a welcome occasion when a resolution under the heading of the Excise Tax Act proposes reduction in or repeal of excise taxes on certain commodities without at the same time proposing increases or new taxes. Therefore, as far as this resolution goes, I am sure it commends itself to the favour of the house.
However, in accepting the proposal for certain reductions and the repeal of certain taxes and before going too far in our enthusiasm it might be well to remind ourselves that it was this government which imposed the taxes which the committee is now asked to reduce or repeal.
There are several aspects of the resolution and of the excise and sales taxes broadly that I should like to comment upon briefly this evening. I suppose the leading feature of the proposal now under discussion is the proposed reduction in the excise tax on passenger automobiles from 15 to 10 per cent and the repeal of the excise tax on tires and tubes for automotive vehicles. The reduction in the excise tax on automobiles from 15 to 10 per cent is indeed welcome, but I should like to submit to the minister and to the committee that this tax is still too heavy.
This tax was applied in the first instance and presumably continues today as a luxury tax; it was introduced under that guise. In my submission it can no longer be defended as such. To a vast majority of the owners in Canada a motor car can no longer be regarded as a luxury, but in the light of modern conditions must be regarded as a necessity. However, our tax legislation takes no account whatever of that fact. The burden which this tax has placed upon the automotive industry in Canada, and indeed the acute way in which it has been making itself felt latterly, are well known to every hon. member of the house. We have on every hand

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evidence of the increasing state of disorganization in motor car sales right across Canada.
The automotive industry is a major employer of labour in Canada. Any reduction in the unfair load of taxes now borne by that industry is bound to reflect itself not only in a more equitable distribution of the burden of taxes but also in increased employment of Canadian workmen. While I do not propose to protract my comments on this subject I wish to emphasize that while this modest reduction in this tax is welcome it points to the necessity of a more resolute approach by the Minister of Finance and a more effective grappling with the problem and the realization of the need of further reductions or the removal of the tax which has become to an ever-increasing degree an unfair imposition.
The position in which many motor car dealers have found themselves since the minister introduced his budget resolutions is also worthy of note. I am sure that all hon. members have had representations made to them by motor car dealers concerning the position in which they find themselves as a result of the budget proposals, leaving them in so many cases with large inventories of motor cars on which they had already paid the 15 per cent excise tax. With the public expecting to receive immediately the benefits of the reduction announced by the minister, the dealers have been called upon to bear the full burden.
The attitude taken by the minister when this question was raised originally in the house was, I suppose, the traditional one. In effect the minister said that he could not consider making any adjustment either in regard to the effective date of his proposal or in the tax-paid position of motor cars held in stock by dealers. He seemed to imply that these were the same dealers who had derived some benefit in earlier years when the tax was being imposed or increased. It may be that when these taxes were imposed or increased in earlier years some people would derive benefit in so far as they had stocks on hand, but it is entirely unfair to assume that those same people are in business today in the same way and are now simply being called upon to part with the equivalent of some of the benefit that they received in earlier years in consequence of the introduction or increase of this tax. This is a very different situation.
The matter was raised later on May 18 when a question was put to the Minister of Finance on the orders of the day asking whether he was prepared to give further consideration to the matter. At that time the

Minister of Finance indicated in effect that he would consider the matter. It seems to me that the time has come when the Minister of Finance must make his position abundantly clear. If he had no intention of affording any measure of relief to these dealers who are in the position I have described, then I am afraid it was a cruel way in which the minister may have given them some hope of relief when on this recent occasion he intimated that he was giving consideration to their problem.
On the other hand, if the minister has given serious consideration to the matter and if he is going to afford any relief in this situation it is time that he announced what the government proposes in that respect. If there is to be any measure of tax relief in this regard it must be proposed now because otherwise the administrative difficulties in calculating any claim for tax refund are bound to multiply as the days pass. Therefore the matter calls for an immediate announcement on the part of the minister.
When the government is announcing a reduction in the excise tax it is easy enough to content ourselves with welcoming it, but I ask the house to observe the commodities upon which it is proposed that the tax be reduced. All of these are commodities upon which a reduction in the taxes is justified and indeed overdue. But let us remind ourselves at the same time, Mr. Chairman, that there is a long list of commodities more closely and intimately related to the necessities of life than any of those on the list before us now, upon which no reduction of indirect taxes is proposed by the government. Do hon. members of this house keep adequately in their minds and on their consciences the fact that this government goes on levying under the Excise Tax Act taxes upon the very necessities of life, upon our clothing, our boots and shoes and household furniture, certain prepared foods, and indeed on many drugs and medicines that are essential to those who require them?
I do not know how long this government thinks it can justify the continued imposition upon the Canadian people of a 10 per cent sales tax on commodities as essential as these to the average Canadian family. Think of it-the government deriving revenue by an imposition upon clothing, boots and shoes, household furniture, drugs and medicines. I hope that members of this house will in their might and in their indignation make it abundantly clear to this government and to the Minister of Finance that they will no longer tolerate heavy impositions of this kind that add so grievously to the cost of the necessities of life.

It is well that we should remind ourselves also that these taxes are levied at the manufacturer's or producer's level and, as everyone knows, as these goods pass from hand to hand, to the wholesaler, to the jobber, to the retailer, and finally to the consumer, they attract mark-ups. Concrete cases have been given to the house on similar occasions without number in the past, to demonstrate beyond all challenge or question that a tax that begins as a 10 per cent tax at the manufacturer's level will in most cases become a tax of 20 per cent or more when the goods are sold by the retailer to the consumer. The consumer, in the case of these indirect taxes, is never told what portion of the price he pays for goods goes to pay these taxes. They are hidden; and because they are hidden they are popular with a government that chooses to go on levying these taxes and avoiding as far as it can the wrath of the taxpaying public, by not letting the taxpaying public know what portion of the price is collected by the government in taxes.
A tax of that kind as applied to the type of commodity of which I am speaking is doubly iniquitous. It is bad enough that there should be taxes upon these basic necessities of life, but far worse that they should be applied in such a manner as to go on attracting mark-ups, mark-ups on mark-ups, and marks-ups on mark-ups on mark-ups, all at the expense of the consumer. That is another feature of this tax which in my submission this house can no longer tolerate. The government is not going to remove these taxes from the necessities of life, nor substitute a fairer system of collecting taxes than through the medium of indirect taxes in the way I have described, unless hon. members of this house, aroused and indignant, make that demand.
One could go further. Do we stop adequately to ponder upon the effects of these taxes as applied to purchases made by municipal governments or boards of education across Canada? It is a fact that there is no exemption in favour of municipal councils, school boards or boards of education; and the municipal taxpayer, already bearing a crushing burden of taxation under the present condition of unfair distribution of tax revenues as between the various levels of government, has his burden increased by reason of federal impositions on purchases made by his board of education, school board or municipal council.
This is no small matter. Many municipal councils and boards of education have made representations to the government about it in times past. The increasing gravity of
Excise Tax Act
the revenue position of the municipal governments is emphasized by the degree to which municipal governments and school boards are expressing themselves firmly on this subject. Many of them have passed more resolutions in recent times than ever before. I should like to read a resolution that was passed a few weeks ago by the municipal corporation of my own city of Toronto, conveyed in the following telegram from His Worship Mayor Nathan Phillips:
For years Canadian municipalities through Canadian Federation of Mayors and Municipalities have sought to have supplies and materials purchased solely for municipal purposes exempted from federal sales tax in the same way as exemption now granted to provincial governments, their boards and commissions, as well as hospitals. Government indicated that such exemption too involved, notwithstanding that other governmental bodies and hospitals were exempted and similar exemption given on books, newsprint and other materials used in newspapers and magazines. Municipalities now bearing crippling financial burdens and exemption from sales tax would provide some measure of relief at comparatively little cost to federal treasury. Earnestly solicit your support of such exemption when budget before house for consideration.
Similar communications went to all the members from Toronto, and I am looking forward to hearing something said on this subject by Liberal members from Toronto constituencies. It is time indeed that they made their voices heard on this subject in this chamber and that they declared themselves on this important matter of federal taxes on purchases made by municipal governments and boards of education. It is grossly unfair that in the face of the burden being carried by these municipal bodies the federal government should be collecting taxes on purchases of goods made by them for their use, which means for the use of the municipal taxpayer.
There is one final matter upon which I should like to dwell briefly. It is also a matter of high importance. Surely the time has come when steps should be taken to exempt welfare and philanthropic organizations from the burden of sales tax on goods purchased by them for use in welfare work.
This matter has been raised in the House of Commons before. For my own part, I have raised it every year for a good many years past. It is becoming more urgent than ever for these worthy organizations. There is not one of them that is not faced with serious financial problems in meeting the growing demands made upon such organizations. There are abundant evidences that they are now more alive than ever before to the unfair burden that is cast upon them when the federal government taxes them on their purchases of goods for use in their beneficial work.

Excise Tax Act
Let it not be said that the administrative difficulties in the way are too great to be overcome. Adequate safeguards could be attached to the type of exemption for which I am pleading here tonight. Safeguards have been proposed by many of these organizations in their submissions to the government. There are four in particular which I have found in some of the communications on this subject submitted by such organizations. The four are as follows: First, that the social welfare organization in question should be certified by the Department of National Health and Welfare as a bona fide social welfare agency, organized and operated exclusively for charitable purposes, the proceeds of which are used in the public interest and not for the benefit of any special individual or group. The second is that they should be qualified as a charitable organization permitted to issue receipts for donations which exempt them from income tax. The third is that the organization should be incorporated as a non-profit organization for charitable purposes; and the fourth is that it undertake an annual audit of accounts by a chartered accountant. With those safeguards there need be no fear of administrative difficulties or of improprieties on the part of those seeking this needed exemption.
Mr. Chairman, these are but a few of the urgent problems which this budget, in relation to the Excise Tax Act, has ignored. It is deplorable that, in the face of urgent problems like these, the Minister of Finance has chosen to ignore not just one, but all of those that I have mentioned. It will remain for hon. members of the House of Commons to make known to the government in firm and resolute terms that they will no longer tolerate a continuation of its imposition of the burden of these indirect taxes in the cases that I have mentioned.
The Minister of National Health and Welfare is in the house.


Mr. Martin:: He is always here.


Donald Methuen Fleming: I think it is time that he should make his voice heard by his colleague the Minister of Finance in pleading for consideration for welfare organizations. The bulk of welfare work in Canada is not carried on by government departments. It is not carried on by the Department of National Health and Welfare or by the corresponding provincial departments. The bulk of welfare work in Canada today is carried on by organizations of the kind I have mentioned. Why then should they be handicapped by federal tax impositions? They are not asking for any favour. They are simply asking that the burden that has been unfairly placed upon them by the federal government should be

removed from them. I hope the committee will have the opportunity tonight of hearing from the Minister of National Health and Welfare some statement to indicate that, as far as he is concerned and as far as his department and its policy are concerned, they seek urgently at the hands of the Minister of Finance consideration for this problem and an early removal of a burden of taxation which cannot be justified.


Colin Cameron: Mr. Chairman, I am sure we will all agree with the hon. member for Eglinton that one of the most deplorable features of the sales tax is its cumulative effect in what he has described as markups on mark-ups on mark-ups. But it occurs to me that it is hardly fair to blame the government for this particular feature of the sales tax situation because the government, like my friend the hon. member for Eglinton, is firmly committed to the maintenance of what is humorously known as free enterprise. This cumulative sort of racketeering is merely one of the features of the capitalist system.


Mr. Siuder:: You should make that speech in Saskatchewan.


Colin Cameron: I should be delighted to do so. I should be delighted to come and make it in your riding.
I am more heartily still in support of the hon. member for Eglinton in his attitude with regard to this imposition of sales tax on municipal purchases. For the life of me I cannot think what argument can be brought forward in favour of it. I think it is a vicious principle that a senior government should impose taxation on a junior government. When one bears in mind the fact that many municipalities-and many municipalities in my part of the world suffer badly on this score-suffer from the effects of federal crown property within the limits of the municipality, with the consequent very deteriorating effects on municipal revenue, that consideration would seem to me to be an added argument for the abolition of the sales tax on all municipal purchases. It is a fantastic proposition that the taxpayers as municipal taxpayers are obliged to dig into their pockets to pay revenue to the federal government while at the same time being obliged to pay the ordinary federal taxes. I think that is something that should be made one of the items on the agenda of any provincial-federal conference that is to be held in the future; I refer to the removal of this quite irrational and quite unjust form of taxation.
I now want to deal with the items that we have before us in this resolution on the

Excise Tax Act. I can see that in the first two items there is a certain rationality. When the decision was made to reduce the tax on passenger automobiles, logically enough it followed that the tax on tires and tubes for automotive vehicles of all kinds should be repealed. There is a certain logic in that decision to exempt this particular class of commodity with perhaps foreseeable effects on the economy. There is also a certain logic in the first two items of the section headed No. 3 which reads: "That the sales tax on the following goods be repealed". I can see some logic in the decision to repeal the sales tax on materials to be used exclusively in the production of feeds for livestock. There is some sort of reason to that decision, namely that it will stimulate, I presume, that section of our economy. The same argument can be used for section (b), creosote oil and other wood preservatives when for use exclusively in the treatment of timber, poles or lumber. There again there is a reason, namely for the encouragement of more economical use of wood. But when we move on to (c), (d), (e), (f) and (g) we simply seem to sail into the wildest flights of irrationality. I am almost forced to the conclusion that whoever drew this up blindfolded himself, took a pin and stabbed it into a list, and wherever it hit decided that would be the thing that would be exempted. Why in the name of heaven do we decide to remove the sales tax on material to be used exclusively in the production of terrazzo flooring while on the other hand if you want a wooden floor or a cement floor you pay the sales tax? If you want a terrazzo floor then you are going to have the relief that this provision offers.
Then we have subsection (d) which refers to perforated bituminized fibre pipe for drainage purposes, not to exceed four inches in diameter. Why should four inch pipe . be exempted and six or eight inch pipe not be exempted? Why decide to exempt four inch pipe? Then we come to something that to me is quite utterly daft. Why pick out rims for kitchen sinks? Why not rims for bicycle wheels or rims for eyeglasses? Why not soap dishes or kitchen faucets? What is the rhyme or reason for this? Then we have floor tile. Floor tile is going to be exempt in addition to material used in the production of terrazzo flooring. Then we have wallpaper. Why is wallpaper selected?


William Moore Benidickson: Because paints and varnishes are exempt.


Colin Cameron: Why not roofing paper or any other type of paper-


An hon. Member:: Toilet paper.
Excise Tax Act


Colin Cameron: Somebody said "toilet paper"-or tar paper or cigarette paper, any kind of paper? Why select one thing? If you have selected wallpaper as a building material, then why do you not exempt all building materials and be done with it? If, on the other hand, you are exempting it as a wood pulp product, why do you not exempt all wood pulp products? Where is the rhyme or reason to this? It seems to me an example of complete irrationality.


Irvin William Studer: In Saskatchewan the socialists not only tax building material but actually tax the building of hospitals.


Colin Cameron: We should be very glad to hear from the hon. member for Swift Current-Maple Creek later, I am sure. Seriously, I should like an explanation from the government of these last five items that are to be exempted from sales tax in order to get some idea of what formula has been used in selecting one material and rejecting another. They are not grouped into any logical categories in the way that the first items in this list have been grouped into more or less logical categories.


William Moore Benidickson: If I may answer the hon. member for Nanaimo, first of all let us take terrazzo flooring. Instead of being inconsistent we are trying to be consistent, and I think I can show the hon. member that we are. Every item that goes into the construction of a terrazzo floor is exempt, so all material under the embracing term "terrazzo flooring" is being exempted. As to fibre pipe, hitherto we have had a restriction as to the length of the pipe. It was only exempt if it was under 12 inches in length. A new process in manufacturing has resulted in the development of longer pipe, and we are extending the exemption to be consistent.


Colin Cameron: It is not the
length you have referred to but the diameter.


William Moore Benidickson: Up to now four inch pipe has been exempt only if it was not in excess of 12 inches in length, and now that limitation as to length is being eliminated. I suggest that is consistency and a broadening of the field in respect of a related type. So far as rims for kitchen sinks are concerned, rims are the only item mentioned in this particular change because the sink as a whole, if it does not have a metal rim, is exempt already. We are simply making sure that we are not going to exempt sinks and then tax rims simply because a few kitchen sinks are built in this manner. With respect to floor tile, because we already exempt hardwood floors, it seems consistent that in that competitive

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group all floor tiles should be exempt and not just certain floor materials. As far as wallpaper is concerned, wallpaper is being added here to be consistent. It is in the same competitive field as paints and varnishes for decorating rooms. Paints and varnishes are already exempt and it is felt that there should not be a tax on wallpaper, a competitive type of interior decorating material.


Colin Cameron: I have listened with interest to the parliamentary assistant's explanation, but it still seems to me that the much more logical thing to do would have been to decide on a blanket exemption for all materials used in the construction of dwellings instead of going at it piecemeal in this way, adding one material this year and next year presumably something else. There must be some purpose behind this, and presumably the purpose of all these exemptions is to enable dwellings to be built more easily and economically by the people of Canada. Therefore why not do a job on it and exempt all materials that are going to be used in the construction of dwellings?


John Horne Blackmore: Mr. Chairman, Social
Crediters will welcome these reductions as, I am sure, will all other members of the house and the people of the country. It is natural that people in the opposition should so do because they do not have the responsibility for raiding the money to take care of the difficulties which need to be looked after in the country.
I should like to associate myself almost word for word with the remarks of the hon. member for Eglinton. I thought his case was accurately and admirably put. I think every member of the house would say amen to his sentences if he were free to do so politically. Of course all members in the opposition are free to do so.
I should like to draw attention to one important matter which, in the interests of clarity of thinking in the house, is of vital importance. Within the last two days a prominent member of the Conservative party made a speech in which he termed as inflation all the increases in prices that have taken place since the end of world war II. I thought that was one of the crassest pieces of ignorance I have heard since I have been in the house. May I urge that the hon. member for Eglinton and all other members of the Conservative party get together and try to find out, if they possibly can, what inflation really means and then talk from now on as though they knew. To call inflation, increases in prices which are a direct result of government imposition of taxes and to insinuate that they have come about
[Mr. Benidickson.l
because of a surplus of money in circulation in Canada is simply to confuse the people of Canada beyond all possibility of accurate thinking whatsoever, and certainly to confuse the Conservative party and all who listen to them and even reflect subconsciously on what they say.
That was one matter I wanted to get up and say something about after the Leader of the Opposition finished his address the other night, but I thought I would hold my remarks until a more appropriate time. If there is any one word which we as a parliament and a country must get the definition of clearly it is inflation, if we are going to think our way at all through the maze of confusion, difficulty and anxiety which hangs over our future. Certainly inflation is not a rise in prices which results from government taxation, from a strike of employees to raise their wages or from the deliberate manipulation of the prices of commodities upward by a company that finds itself strong enough to do so, as was done in the spring of 1946 by the steel companies of Canada with the connivance of the government, thereby forcing up the cost of production of practically every commodity in the Dominion of Canada. Now, we have certain stupid Conservatives calling that inflation.


Mr. Harkness:: We consider the source from which all these remarks come.


John Horne Blackmore: I think people will do that. But unfortunately, there are some who still believe in the fairy name "Conservative", and while they are getting over their affliction they will be led astray.
There is one more matter I should like to speak about briefly. While the hon. member for Eglinton condemned the government for taxation on various commodities, and I agree with him completely, and implied undoubtedly that such taxes, for example, as those on goods used by the municipality and on books and other supplies required by educational authorities-


William Moore Benidickson: Books are exempt.


John Horne Blackmore: Perhaps the hon. member for Eglinton was slightly in error, but to the extent he was not in error I agree with him completely. There can be no doubt that there are taxes being levied upon goods and supplies required by educational authorities throughout the country, so in the main the hon. member's case was well taken. While he urged by implication that all these taxes should be removed, he offered no alternative. Since the opening of parliament this year

we have listened to Conservative after Conservative clamouring for a reduction of taxation, but they have never offered even a hint of a suggestion as to how revenue should be raised if that particular type of taxation were removed.


Donald Methuen Fleming: We want reductions.


John Horne Blackmore: The important thing is that responsible men and women, elected by the Canadian people, could, in this portentous year of 1955, be held accountable for being able to offer some sort of a suggestion as to how the country may raise the finances with which to discharge the responsibility which rests upon the government. If they have no alternative, they should at least have the decency to hold their peace concerning the matter.
Now then, what would the Conservatives do as an alternative in order to obtain the money? They should get off in a series of huddles, and finally get their huddles together and come to a decision as to what could be done. Social Crediters make no bones about offering the suggestions which they have to offer. We will see immature men like the hon. member for Notre Dame de Grace, who the other night flippantly talked about funny money. I do not believe that if he had a six months' course he could tell the difference between funny money and not funny money. He spoke of funny money, thus showing a sort of detachment from reality, a detachment which I must confess no member of this house has any right to manifest.
We are faced with an unemployment problem, for example. These people have no jobs. We cannot afford to sit here and flippantly talk politics while they suffer and their numbers increase. The Social Crediters do not hesitate a minute to declare that in a country like Canada it is possible to create a great deal of money on the national credit, just as was done under the Finance Act of 1914, thereby providing a very substantial increase in the national revenue of Canada available for the discharge of all governmental responsibility. Up to the present time there has not been a member in this house for the last 10 years who has attempted to rise in his place and offer to show the fallacy of our contentions. All they do is use this silly little kiddish remark about funny money.
I maintain it is time, Mr. Chairman, that sort of irresponsibility on the part of members, even if they are members of the C.C.F. like the hon. member for Nanaimo or Conservatives like the hon. member for Notre Dame de Grace or Liberals like the hon. member for Temiscouata, ceased. They are
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all expected to be responsible men and women when they get here. Now, we Social Crediters offer that as an alternative and I challenge anybody in the house who thinks he can get up and in a 20-minute speech or a speech of any other length show the fallacy of our position. The challenge will hold right from now on until somebody takes it up, and when he gets through I shall take him on. I must say I will not be the only member of the Social Credit group who will be quite ready and happy to do that little job.
Now, Mr. Chairman, I know that complaint has been raised time and again in this house concerning the effects of this drop in excise tax on automobiles. The hon. member for Eglinton reviewed the matter adequately, I believe, in a general sort of way. I think it is only fair I should tell the house something about the incidence of this manoeuvre in my constituency. I shall deal only with the city of Lethbridge. I am going to quote small passages from certain letters that have come to me showing how seriously this is going to hurt my constituency. I start with a letter from the United Service garage in Lethbridge, from which I read the following:
The loss to this firm is small compared to most of the dealers but the percentage is still the same whether large or small, makes just the same kind of a hole in our profits. Our actual loss on five cars in stock and in transit was $461.53.
That does not sound like very much money, but if the $461.53 cannot be made up there is another bankruptcy to be added to the bankruptcies in Canada. This is the sort of thing which I believe too few people in this country take seriously.
I quote further from the letter:
One of the above units has been held up through road bans for almost a month, but the tax has been paid and it is costing us finance charges until such time as it reaches us and is sold.
We will also take a loss on the used cars in stock because the price drops accordingly, but as this is an everyday occurrence we cannot complain other than to point it out as an added loss.
Now, if that kind of thing is multiplied by several times, then this whole matter is not quite so inconsequential as the Minister of National Revenue has endeavoured to imply.
I turn now to a letter from the Lethbridge Automobile Dealers Association, a letter written on April 19:
A local survey indicates that the Lethbridge dealers alone suffered a loss in excess of $14,000 on the new vehicles they had on hand at the time this reduction was made, and this does not take into consideration the loss they will have to absorb on the large stock of used cars they had in stock at this time . . .
Your co-operation and assistance in having this matter receive proper consideration and action will be greatly appreciated.
When it is borne in mind that in that particular area, and the area contributory to

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that city, the farmers have not been able to deliver any more than just so much of their grain, then if the payment which the farmers make to the garages is not large because of that fact it becomes more serious still.
I turn to a letter from the Alberta Automobile Dealers Association, dated April 11, from which I quote the following excerpts:
We do feel that in view of the fact there was no protection given on dealer inventories, this is an unfair burden beyond the capacity of the dealers to absorb.
These are solemn words, "beyond the capacity of the dealers to absorb". This is another excerpt:
We respectfully request that you will make a recommendation to the Minister of Finance and the cabinet that rebates be given on new units in dealers' hands as of midnight, April 5.
I turn now to another automobile company in my own constituency, Marquis Motors. I quote from their letter dated April 15:
We feel that some representation should be made to the- proper authorities to have a refund made to the dealer on the automobiles which the dealer was holding in his inventory on his new automobiles and on which the tax has been paid and was subsequently reduced. If this is not done, in a good many of cases, the dealer will be financially crippled or may find it necessary to go out of business.
I know what is involved. I sympathize with the Minister of National Revenue and with the Minister of Finance, but nevertheless there are a number of people who have fought their way through for 20 years, all the way through the depression, all the way through the war and all the way through the vicissitudes that developed during the outlandish rise in prices that took place after the war, and now they receive this blow! I ask the Minister of National Revenue to take another look at this matter.
It is not my purpose at the present time to say any more relating to this resolution. I am quite sure I shall find it necessary to make further observations at a later time.


Mr. McCullough (Moose Mountain):: I am
sure all hon. members welcome the tax reductions that were announced by the Minister of Finance. However, I join with the hon. member for Eglinton and the hon. member for Lethbridge in the representations they have made with respect to certain reductions in the excise tax on automobiles. I feel sure that automobile dealers from coast to coast have been adversely affected by the 5 per cent reduction in the tax.
While I am sure that everyone welcomes the reduction, the fact that it became effective on April 5 without the automobile dealers being able to save themselves from having heavy inventories has resulted in a heavy
[Mr. Blackmore.l
loss. There are in my own constituency situations similar to those outlined by the hon. member for Lethbridge. The dealers in my constituency are hard hit owing to the fact that up to the present time the minister has not seen fit to introduce any measure by which the automobile dealers could be recompensed for the tax which they have paid on the automobiles they had on hand at the time of the tax reduction. I know of one dealer who had 9 automobiles on consignment. His total tax bill will amount to $3,859. That includes the sales and excise tax that he has paid. He stands to lose a great deal of that unless the government see fit to introduce a measure which will permit the purchasers of these automobiles to obtain a rebate of the tax they have paid. Automobile associations across Canada have indicated that there are about 35,000 cars in the inventories of dealers. If one were to take the average reduction in tax as at $100 the total will amount to $3,500,000. This is the amount that the automobile dealers across the country will have to lose. Cars are in a different category from a lot of other goods which are held by dealers. There should not be any great difficulty in administering a policy which would correct this situation.
Like all other taxpayers, I welcome any tax reduction. I listened to some of the interruptions of the hon. member for Swift Current-Maple Creek. I am always interested in his interjections and in what he has to say. I was also interested in what the hon. member for Lethbridge said. He thinks that he and his party have some method by which the people of Canada could have the services they want, and at the same time not pay taxes, or the government could get the money to finance the various programs. The hon. member for Swift Current-Maple Creek and I come from the same province. We do not say that our Saskatchewan government is without fault, but I can tell him that under the C.C.F. policy we could reduce taxes and at the same time give ourselves certain services. As long as any government wishes to maintain the capitalist system and permit all the remunerative and profitable enterprises to remain in the hands of private business, and at the same time take all the responsibility of giving our people services, in my opinion there is no way in which that can be done unless the people are ready to pay taxes.
In the province of Saskatchewan we have been successful with the few small crown corporations we have there. In a few years we have been able to give employment to over 4,400 people. In addition, we have paid into the consolidated revenue fund over $5 million profit. While that may be small

when compared with the national income and what could be done in some of our big projects such as our fertilizer industries, yet it is a step in the right direction.
While I welcome these reductions, I should like to point out to the government that, with respect to the reduction in tax on automobiles in the dealers' hands, because of the representations that have been made the government in all fairness should do something about it.


Mr. Hansell:: Mr. Chairman, I am not going to prolong the debate on this particular subject of retail sales of automobiles; but I do wish to add my voice to what my colleague, the hon. member for Lethbridge, has said. I do not suppose I am in a different position from that of most hon. members in respect of having representations made by dealers in our own constituency. In fact, most of us from western Canada represent rural constituencies where there are a good many automobile dealers who might be regarded as more or less small dealers. These small dealers who have half a dozen cars consigned to them are suffering losses of anywhere from a few hundred dollars to $2,000 or $3,000. That may not sound much to the Minister of Finance who is accustomed to thinking in astronomical figures, but $500 to $1,000 or $2,000 or $3,000 is an awful lot of money to many a small dealer. As the hon. member for Lethbridge has said, for some of them it meant coming well-nigh to bankruptcy.
This situation is also accentuated by the fact that the cash position of farming communities in western Canada is bad. When the cash position of farming communities is bad it has an effect upon all other types of business, which means that generally speaking things in western Canada are not good. Since the prospects for the sale of cars are not as good as they might be, the effect of having cars on consignment becomes even more serious to the retail dealer.
I understood the Minister of Finance the other day to give some hope to the retail car dealers when he said that the matter was under consideration. I should like to ask the minister or his parliamentary assistant if that matter is still under consideration and if he can offer any hope to the retail automobile dealers. I do not think they should be left dangling in the air. As the previous speaker has said, the total loss throughout the country may be a couple of million dollars or so. If that represents the over-all picture it should not be very difficult for the government to compensate.
I urge the minister to do this. I think this is the proper time for the parliamentary
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assistant to state whether this matter is still under consideration and whether there is any hope for the retail automobile dealer in this regard.


William Moore Benidickson: Mr. Chairman, in answer to the hon. member for Macleod, I confirm that the minister has been giving this matter continued consideration. Representations continue to be received, but this is a most difficult decision to make. Probably the final answer will be given by the minister after he brings down the bill.
While it is true that there is a relatively small number of units involved when you are dealing with a large and expensive product like an automobile and therefore it may be administratively possible to rebate the tax on this particular product, the hon. member for Eglinton was good enough to recognize that it is contrary to tradition to rebate a tax reduced by a budget.
If a rebate is given in connection with one product, even though it can be done administratively without too much inconvenience and if one is willing to forget the revenue, hon. members will understand how difficult it would be to follow this same pattern with practically any other product. There is no question in the world that if the traditional pattern were departed from in this instance it would be a precedent that would certainly be pointed to any time there was a budget change that affected inventories of goods upon which taxes had been paid.


Donald Methuen Fleming: Mr. Chairman, I am wondering when this question was raised recently why the minister did not deal with it then as definitely as his parliamentary assistant has dealt with it now. One can readily understand the argument which the parliamentary assistant has made. Undoubtedly a problem is created by the precedent which may be set up, but if the hon. gentleman will look at page 3881 of Hansard, of May 18 he will see that the Minister of Finance did not meet the question on that basis at all. May I read the passage from Hansard. It is as follows:


Edmund Davie Fulton: Mr. Speaker, I
should like to ask the Minister of Finance if he has received a brief from the motor car dealers' association of British Columbia asking for his consideration of their request for a refund of the excise taxes paid on cars in stock on April 5? Would the minister say whether he will be able to give further and favourable consideration to this admittedly difficult problem, and whether he is able to hold out any encouragement to that association?


Walter Edward Harris: I
received briefs not only from the British Columbia motor car dealers' association but from the national body. I think from all of the provincial bodies, and from quite a number of individual dealers.

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Of course we accept these representations along with all others and give them our best consideration.


Edmund Davie Fulton: Consideration is always welcome, but how about encouragement?


Walter Edward Harris: Encouragement is a word which I think is used on every occasion by this government as to its intentions with respect to the Canadian economy.
I repeat what I said when speaking earlier, that if the Minister of Finance had full knowledge of the difficulties which his parliamentary assistant has just outlined and if he meant to follow the traditional rule and not give any rebate on tax-paid cars as of the date of the budget, then he ought not to have made the statement which I have just read. If he did not mean to give any consideration to the matter, if he did not mean to entertain the request, then it seems to me that in all fairness and frankness he should have said so. Why did he not rise and point to the difficulties which the parliamentary assistant has just outlined? That would have been fair; that would have been frank. Those who had made the representations to the minister and to which the minister intimated he was going to give his best consideration would not have been misled, as I am sure many of them must have been, into thinking that there was some hope that they would receive remedial consideration at the hands of the Minister of Finance.
At the time the minister answered the questions asked by the hon. member for Kamloops I heard a remark made that if he did not mean to give some form of rebate to these dealers he should have said so then and there. It was nothing short of cruelty to buoy up their hopes by allowing them to think that their representations were being considered and there was a chance that some form of relief would be coming to them as a result of that consideration.
I think that there has been a lack of frankness in this matter. Whatever difficulties exist, as described by the parliamentary assistant, certainly did exist on May 18 and were fully known then to the Minister of Finance. If he did not mean to give consideration, if he did not mean to do anything for these dealers, then he owed it to them and owed it to this house to be frank in the answer he made to the question then put.


William Moore Benidickson: I said that the minister was giving this matter consideration and would give the final advice to the house when the bill comes up, probably early next week.


Donald Methuen Fleming: In the face of what the parliamentary assistant has said I would think that there was much room for consideration.


William Moore Benidickson: I just pointed out some of the obstacles.


Mr. Knight:: Mr. Chairman, coming as I do from a city constituency it was natural that the automobile dealers there would approach me to make representations to the minister. However, other members of our party have done this and up to the moment I have not repeated those representations. However, there are one or two comments I should like to make.
I am not rising tonight because I was approached by these dealers; I rise because I feel that there is some injustice in this particular measure. I remember the last time when taxation was removed-I think it was 10 per cent on that occasion-a large dealer in our city told me, and I have no reason to doubt his word, that he lost some $7,000 at that particular time. I think they took some warning at that time and I must say in fairness that the dealers on this occasion, when 5 per cent of the remaining 15 per cent was removed, were careful not to be caught with large numbers of cars in their inventories, either in transit or at their selling place. They raised with me one point which I do not think has been discussed tonight, and I might ask the assistant to the minister for his opinion on that. They reported to me that this was actually a consumer's tax. It has been the consumer, the person who buys and drives a car, who has been paying this tax, and the government has been using the dealer simply as an instrument of collection. The dealers rather resent this. When the government has used them as tax collectors they find themselves in the position that, instead of the tax being passed on, as is usually the case, to the consumer, they are just a few men having to pay the tax which under ordinary circumstances would be spread over many. I should like a comment, perhaps from the minister's assistant, in that regard. Is it not actually a consumer's tax in that sense, that those dealers have actually no responsibility to pay it except the responsibility now put on them by the minister's decree?


William Moore Benidickson: Mr. Chairman, according to the language of the act, I believe it could be said that it is a tax on the manufacturer. It is at that level that the tax begins. As to what competitive conditions will cause in a business subject to a tax, we can each only form our own opinions. My hon. friend from Saskatoon referred, of course, to another drop in a tax that occurred in 1952, when the excise tax went down from 25 to 15 per cent. It is now going from 15 to 10 per cent.
I remind him that even since the end of the war there have been a few increases. What the trade did at that time, he knows as well as I do.


Robert Ross (Roy) Knight: In any case, Mr. Chairman, I would point out to the minister, through Hamard. if he is not listening to me, that there has been a considerable protest in this house in regard to the matter, sufficient protest to make me think that there is at least a general interest. Whether that has been prompted by the fact that those who have suffered have made themselves particularly vocal, or whether they are like myself-and I have no doubt that is so in many cases-imbued with the idea that this is an unjust measure, we have had protests raised by members of every party in this house, including a good many members of the government party as well as those who sit on the opposition side. Tonight we have had protests from the Conservative, C.C.F. and Social Credit parties. I have not heard any of my Liberal friends speaking tonight, but I certainly did on a recent occasion when they were discussing the budget provisions generally after the minister had produced his budget in this house. I hope that the minister may still, at this late date, take the matter under advisement and perhaps reconsider his decision.


Claude Sartoris Richardson: Mr. Chairman, I do not know that I want to deal with the question that has been occupying the attention of the committee, with respect to automobiles, but I should like to subscribe wholeheartedly to a point made by the hon. member for Eglinton. That is not, of course, when he referred to the imposition of sales tax, by implication, as if the party which is presently in government was the only one that subscribed to sales tax. For the moment it might be worth while to recall that taxation on sales was introduced in 1920, and at that time there was the most unusual situation in Canada that the Liberal party was not in the seat of government. Coming back to the point to which I should like to speak and on which I am in full sympathy and cooperation with the hon. member for Eglinton, it seems to me that, when a sales tax is imposed upon basic foods and almost all the items that are described as foods-and I specify only a few of them now such as milk, fruit, bread, butter, vegetables, rice, sugar, soups-


William Moore Benidickson: Is my hon. friend pointing out the things that are exempt or the things that are taxed? None of those things which he mentions are taxed-*


Claude Sartoris Richardson: These are food products but, it seems to me, food products which are so common now as tea and coffee might also be subject to exemption. It may be that all these other items would be subject to exemption.
2.	1955	4383
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William Moore Benidickson: They are.


Claude Sartoris Richardson: But certainly an item such as tea or coffee, like an automobile, may perhaps be no longer regarded as a luxury but as a necessity in this modern day. I would suggest that consideration might well be given to bringing tea and coffee under the list of exemptions.


James MacKerras Macdonnell: I wish to add just one word in regard to one point made by the hon. member for Eglinton-taxation on charitable institutions. That seems to me to stand in a class by itself. It has been pointed out that it does not really make sense to tax the other levels of government; we are just taking money from one pocket and putting it in the other. But when we come to the charitable institutions, it seems to me that they occupy a position different from everybody else. They are maintained by voluntary subscriptions of individuals, and they are doing work which cannot be done by other people. Whilst the parliamentary assistant might say, "We actually charge our sales tax to other departments of government", that does not matter so much; it may be just good clean fun. But when it comes to the charitable institutions, I submit that this is a case by itself. I just wish to add my voice to the appeal for consideration of this question.


Edward Turney Applewhaite: Shall the resolution carry?


Donald Methuen Fleming: I would have hoped that the parliamentary assistant would have something to say tonight concerning what hon. members have said about the continued imposition of sales tax on purchases made by municipalities and school boards and the same form of imposition on goods purchased by charitable and philanthropic organizations for use in their welfare work, and about the continued imposition of the sales tax on clothing, boots and shoes, household furniture and certain prepared foods. Surely the parliamentary assistant has something to say on these matters.


William Moore Benidickson: My hon. friend knows that these matters are always considered at each budget time, and in the light of revenues that can be forsaken and having regard to the things that the administrators of our statutes say that they can do safely and without undue expense in proportion to the benefits being extended, these are always reviewed. Most of the items referred to by my hon. friend were again considered this year. Something was said tonight about its being a vicious policy-I think that was the extreme phrase-for one government to impose taxation on a junior government. Of course, his

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reference was made particularly to the lowest levels of government, the municipalities and school boards. Our contact with those levels of government, of course, in much more removed than in the provinces. Some five or six of the provinces impose sales taxes of their own.


Robert Ross (Roy) Knight: They are not hidden taxes.


William Moore Benidickson: Very few if any of the provinces, in spite of the close relationship they have with these bodies, exempt even their so-called children in government from the sales taxes imposed in the provinces.


Donald Methuen Fleming: Mr. Chairman, two wrongs do not make a right. If some of the provinces have a sales tax and impose the sales tax on municipalities in respect of the purchase of goods by the municipalities, that is no justification for the federal government's doing it. We have this clear distinction drawn between sales tax imposed by the provincial government on the one hand and sales tax imposed by the federal government on the other. In the case of the federal government the tax is imposed at the manufacturers' or producers' level, it is hidden, and the consumer does not know what he is paying. In the case of the provincial sales' tax it is imposed, as it must be constitutionally, at the consumers' level and the consumer at least knows what the tax is that is being imposed upon him. But, Mr. Chairman, even if half a dozen provinces impose a sales tax on purchases made by municipalities, that is no justification whatever for the federal government's doing it.
With respect, Mr. Chairman, may I say that it seems to me that this committee is still left completely in the dark as to why the federal government has made no effort this year to bring remedy or relief in the cases that have been under discussion. We are left to guess whether it is a matter of policy on the part of the government to continue this tax or whether they see certain administrative difficulties involved, or whether it is for some other reason. We are given no clue in the very brief remarks that have just fallen from the lips of the parliamentary assistant. In matters as serious as this, Mr. Chairman, surely the House of Commons is entitled to something more informative than what we have heard tonight.
Here we have taxes on the basic necessities of life. When this question is raised as a serious issue in the House of Commons it receives what can be described as, at the very best, mere cavalier treatment at the hands of the government. No reason is given as to why the government ignores these pleas
IMr. Benidickson.]
and continues to impose these taxes upon the basic necessities of life. Only in the case of the plea for the repeal of the sales tax on purchases made by municipalities and school boards has the parliamentary assistant vouchsafed to the committee any form of explanation, and even then it is not an explanation. It is simply an attempt to justify this tax on the basis that some provinces do the same thing. To the minds of reasonable men, it seems to me that will be no justification at all.
We have yet to hear one word from the government by way of attempted justification of the continued imposition of the sales tax upon goods purchased by philanthropic and welfare organizations doing work in the field of philanthropy which is basic and essential to organized life in this country. Instead of helping them the federal government imposes handicaps and burdens upon these organizations which are trying to do their work for humanity in this country. I do not believe that there is in the House of Commons one member who, if he were asked privately if he could justify federal exactions or federal handicaps being placed upon philanthropic and welfare organizations, would in conscience attempt to do so. Then in this chamber, when we meet here as a House of Commons, how can hon. members sit back and condone the continued imposition of these burdens upon philanthropic and welfare organizations and at the very same time condone cavalier treatment of the problem on the part of the government? They do not even mention it. They think they can ignore it when the question is seriously raised in the House of Commons.
I hope, Mr. Chairman, that hon. members are not going to tolerate that kind of treatment of a serious problem at the hands of the government. We have not heard from the minister. He has left this resolution tonight in the hands of his parliamentary assistant. The parliamentary assistant owes to the committee the same serious consideration of matters of this kind as the minister would owe to the committee if he were present himself and were piloting through his resolution. I hope that hon. members are not going to tolerate the way in which this problem is being ignored and sidestepped on the part of the government tonight.


Edward Turney Applewhaite: Shall the resolution carry?


Some hon. Members:: Carried.


Edward Turney Applewhaite: Shall I report the resolutions?


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


INCOME TAX ACT
Right Hon. J. G. Gardiner (for the Minister of Finance) moved: for leave to introduce Bill No. 417, to amend the Income Tax Act.
Motion agreed to and bill read the first time.


EXCISE TAX ACT
James Garfield Gardiner: for leave to introduce Bill No. 418, to amend the Excise Tax Act.
Motion agreed to and bill read the first time.

The house in committee of supply, Mr. Applewhaite in the chair.
DEPARTMENT OF AGRICULTURE Administration service-
1. Departmental administration (including advisory committee on agricultural services), $496,998.


Edward Turney Applewhaite: Hon. members will recall that resolution No. 1 is to be found at page 4 of the book of main estimates, the details at page 83.


Mr. White (Middlesex East):: Mr. Chairman, when the minister made his statement last week the intention was that the hon. member for Brant-Haldimand would reply and present to the house and the country the feelings of the opposition as far as the estimates of the minister's department are concerned. It happens that the hon. member for Brant-Haldimand is at home today, and so I am in the position of being more or less of a pinch-hitter. Pinch-hitters are, of course, supposed to hit the ball and score, but I am not so certain that is going to be the case tonight. However, I welcome the opportunity to make a few observations with respect to agriculture in Canada. When the minister introduced his estimates he was as optimistic under the circumstances as he usually is, but regardless of the way the facts were presented by the minister it is pretty difficult to make the farmers back home believe that everything is all right.
It has been said that most of the reductions in agricultural income have been caused by the difficulties in marketing our wheat crop, but may I point out that, while a great deal has been said in the house and in the standing committee on agriculture in the last few
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days about the west, I am amazed at how little is said about the problems of the eastern farmers. I suppose it is probably because of the conservatism of the Ontario members that we allow the western members to monopolize all the time and to create the impression that the problems of the Canadian west are the only problems that agriculture faces in this country. But such is not the case.
In most of Ontario last year harvesting conditions of the cash crops were difficult indeed, and there was a considerable amount of waste. Thousands of acres of crops were not harvested last fall. Some of them were harvested during the winter and some this spring, particularly last year's corn. But there was tremendous loss through wastage and depreciation in grades and quality. We in the east also suffered considerable losses, but I am going to say that we have taken them with better grace than the western farmers.


Edward George McCullough: I do
not think that is called for. We appreciate your problems.


Harry Oliver White: We never hear anything about them.


Edward George McCullough: That is up to you. We try to co-operate with you.


Harry Oliver White: I am presenting now the problems of the eastern farmers. We have heard about the problems of the western farmers for weeks and months.


John Horne Blackmore: We are listening. Go right ahead.


Harry Oliver White: In the past few years agricultural producers' costs have risen while the prices of many of the products they sell have gone down and in some cases are still going down. I have before me the statement of the Canadian Federation of Agriculture. In 1951 net farm income amounted to $2,154 million, but by 1954 it had decreased to $1,357 million, or nearly $800 million less in the hands of the farmers to spend. Is it any wonder, therefore, that in the last two years, particularly during the winter months and even later, there have been as many as 600,000 people unemployed? Until the farmers have more money in their pockets to spend there are going to be marketing problems in connection with many of the things that industry and labour produce.
Hon. members will recall that through the war years-I am going to reiterate it-our farmers were told that if they would sell to Great Britain at lesser prices then they would have a guaranteed market when the war was over. Ceiling prices were placed on agricultural products, and if some farmer was caught

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selling a cabbage for five cents more than the ceiling price his name was blazoned in papers all over the country and he was regarded as more or less a traitor to his country. But our farmers were told in the same breath that by means of the price support act, with $200 million behind it, steps would be taken to see that they did not suffer losses when the war was over. Not many farmers are taking such statements today with the same grace as they did during the war years. We were all prepared to make sacrifices then but now, as far as agriculture is concerned, nobody is prepared to go very far in making such sacrifices.
Our farmers, having produced in abundance, now find themselves faced with surpluses and are being penalized because they have produced in abundance at a time when consumers the world over should probably be thankful that they have. I am not saying there are not dairy farmers in all the provinces, but in my opinion the dairy farmers in the east in particular have probably taken as great a beating as any branch of agriculture. We have the fact that 2j million pounds of cheese were imported into Canada when we had a surplus of cheese. Oils for the production of a substitute for butter are also coming into the country without duty. For years the farmers have heard it said that tariff protection was a good thing for our manufacturers and for the people employed in our industries, but apparently it is only a good thing for our manufacturing industries and not for our farmers. They have to compete in the markets of the world, and that is particularly the case today so far as the dairy industry of the country is concerned.


John Horne Blackmore: Very well said.


Harry Oliver White: I wonder sometimes whether the farmers should complain bitterly in view of the fact that many of them voted for the government. Maybe they should blame themselves as much as the government. I hope they will think that over before the next election rolls around. But another issue will be brought up and they will be soft-soaped. But will it be successful? I doubt it.
I have before me a clipping from the Farmers' Advocate of February 26. The subheading of the article is "The Prosperity of Agriculture and of Industry are Interlocking", and the article reads in part as follows:
The reason given by our government for this move is that it is necessary to balance our trade with New Zealand which has been buying more from us than we have been buying from that country. In order to make up the deficiency in our purchases, we buy their cheese. The question that a lot of people are asking is, why was it

necessary to pick on cheese? Was there not some other commodity that could have been bought- something that we are not already loaded with? Could it be that the expected feeble squawks of the cheese producers would carry less weight at next election than would be the case were the pinch to have been applied elsewhere? Well, anyway, the dairy farmers in these parts are really hot under the collar.
I think that expresses quite plainly the feeling of the dairy industry across this country. I mentioned the drop in net farm income. In the past the minister has been quoting the gross income of farmers but the gross income of any industry or any business does not mean a great deal unless you know what the expenses are. In the year 1954 net farm income has been reduced by $453 million.
Some assurances have been given by members of the cabinet that further importations of cheese were not expected in the future. I am just going to point out that these assurances are not too reassuring. The farmers are taking them with a little grain of salt. They are not sure whether or not it is in the book. It seems to depend a lot on other factors apparently, such as who the government's friends may be.
Then, there is a policy which affects the westerner just as much as the easterner and that is the policy concerning freight assistance on feed grain. I am one of those who believe that subsidies are an evil, but because subsidies in the form of tariffs have been a part of our policy for many years, subsidies to agriculture in lieu of some tariff protection I would say are a good thing. What is sauce for the goose is sauce for the gander, so I would say freight assistance on feed grain is probably one of the best subsidies this government has ever introduced. It allows the western producer of grain to sell his product to the farmer in the east who is in the poultry or dairy business. This enables these farmers to buy feed a little cheaper so that when they sell their products in competition with the world, in some years they can earn a living. At a time when net farm income is down $453 million it is difficult to understand why the government would decide to change this policy in so far as freight assistance on feed grain is concerned. I reiterate, I believe that it should have been incorporated as a permanent policy.
I have a question on the order paper which the Minister of Finance spoke about today, indicating that it was almost impossible to answer because of the dozens of items involved. I will give you an idea of what I had in mind. I am just going to take one product as an example, potatoes. Except for

about a period of six weeks, potatoes enter Canada duty free. When Canadian potatoes are sent to the United States there is a 37-5 cent per bushel duty on the first 3-5 million bushels, and over 3 [DOT] 5 million bushels the tariff jumps to 75 cents per bushel. Yet potatoes from the United States enter Canada duty free except for a period of six weeks.
To change the subject for a moment, may I say it is my considered opinion that the agricultural institute of Canada and the federal Department of Agriculture should be asked to assist the Minister of Northern Affairs and National Resources in working out a practical plan of soil and forest conservation. The problem of such a plan in the northern areas is far different from what it is in the agricultural areas, particularly in central and western Ontario. I believe that in my county of Middlesex only 3-5 per cent of' the land area is under forest. We are, therefore, suffering from soil erosion as a result of rains during the winter and spring months, and soil erosion by wind if there is a dry windy season. We are suffering also from a shortage of water in many farm areas during the summer season. In many areas the farmers are finding that the cities are encroaching upon the country areas; the residents are drilling deep wells and putting in pumps that are capable of pumping enormous amounts of water. As a result, farm wells that have served families with sufficient water for 100 years are going dry. In many cases the farmer has to either give up or spend up to $1,200 or $1,500 to drill a well. These city residents are stealing the water from under the farmers' land.
At the moment, not a great deal can be done about it. This presents a very serious situation. Then, too, we see some of the finest land in the world in the Niagara peninsula going out of the production of fruit, vegetables and canning crops and used in the development of cities and industrial sites. In my opinion that is a serious situation, although as I said a moment ago we do have farm crop surpluses at the moment.
There is another problem from which agriculture is suffering and that is the problem of education. The farmer, just like any other Canadian, wants to pay his fair share towards education. We are not educating acres, we are educating children, and yet the tax in the rural areas of Ontario is based on acreage in many cases. Many farmers say that every acre they own should have a university degree, yet neither they nor their children have such a degree. The costs are based on acres, and I think that is one of the things that should be surveyed. It is one of
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the reasons for the request for federal aid to education. I realize, of course, that education is primarily a provincial problem.
Some years ago, I am not quite sure what year, the Ontario government set up a commission under the chairmanship of the minister of agriculture, the Hon. F. S. Thomas. I believe the commission made a complete survey of the province so far as services are concerned, and tabled a worth-while report. There was a meeting of the commission held at the University of Western Ontario, and as one of the invited guests I listened with considerable interest to the briefs and statements presented to that commission. At that time I suggested to the commission that ways and means should be found of providing water for the whole of western Ontario from the lake Huron area. Since that time the C.C.F. group in Ontario jumped on that bandwagon, and claimed it as their own. The premier of the province and many of the members from western Ontario have also claimed that as their own. I wish to point out that long before that time I had suggested that very idea to the commission that sat under the chairmanship of the Hon. F. S. Thomas. Since that time I have had the opportunity to discuss this with a high-ranking engineer in the city of London, and he has worked out two or three alternative plans that would and could supply water to the western Ontario area.
Not long ago I was talking to the hon. member for Essex South, and he described to me the problems of the cash crop growers in Essex and the need of water for irrigation from the lake Erie or the lake St. Clair area. These are things that, with the co-operation of the Department of Northern Affairs and National Resources, the federal Department of Agriculture and the Canadian agricultural institute, could be worked out in a plan that would be of mutual benefit not only to Ontario farmers but to all Canadians. We hear about these projects in the west. For less money more people could be served right here in the thickly populated area of western Ontario.
Yesterday it was my privilege and the privilege of the hon. member for London to join with 275 of the leading businessmen from the city of London in a visit to this House of Commons and to the Ottawa district. They are all conscious of the conservation and water-supply problem. We read in the press of the needs of the county of Waterloo. They are so short of water that they hesitate to encourage new industries to come to the cities of Waterloo and Kitchener. Therefore, they are facing a very difficult problem.

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I hold in my hand the policy declarations of the Canadian Chamber of Commerce as they relate to agriculture. I find the following:
Seventeen per cent of Canada's population live on farms. These people not only constitute about one-sixth of the domestic market for all the various goods and services produced by Canadian workers in every type of occupation but are also the source of food and other farm products for the rapidly increasing urban populations. Food industries, which are wholly dependent upon farm production, rank among the 15 largest of all industries.
Farther on in the article they say:
Loss of soil fertility and erosion by wind and water are among the most important problems facing agriculture in Canada.
The Canadian Chamber of Commerce are to be complimented on their fundamental interest in the basic industry of this country.
It is a minute to ten o'clock, Mr. Chairman, and I think we had better call it ten o'clock.


Edward Turney Applewhaite: Is it agreed that we should call it ten o'clock and that I should report progress and ask leave to sit again?


Some hon. Members:: Agreed.
Item stands.
Progress reported.



BUSINESS OF THE HOUSE

Walter Edward Harris: Mr. Speaker, tomorrow we shall take the departments of agriculture, labour and fisheries. On Monday, we shall take legislation beginning with the international river improvements; Canadian National Railways resolutions; the resolution with respect to the fishermen's loans; second
reading of the Prisons and Reformatories Act. Should we complete that, then we shall take any other legislation that may appear on the order paper. I would imagine that the item after that would be the Municipal Grants Act, but, as I say, we may have to take anything to fill in the rest of the day. The first item on Monday of course will be the third reading of the Prairie Farm Rehabilitation Act.


Alexander Malcolm Nicholson: I understand that the
Minister af Agriculture has made an engagement for the dinner hour tomorrow night. Do I understand we are to go on with agriculture until six o'clock and with some other department after six o'clock?


James Garfield Gardiner: I hope, of course, the estimates will be through by six o'clock, but I have made arrangements with regard to the other activity.


Alexander Malcolm Nicholson: I do not think we shall be through by six o'clock, and I should like to be here for the estimates. I understand the minister is to be the main speaker at the Saskatchewan jubilee function which is to take place sometime after 8.30 o'clock. If we do not finish agriculture by six o'clock, will there be a change?


James Garfield Gardiner: I should like to say that the chairman of that function telephoned me this afternoon, and he has made arrangements which do not make it necessary for me to leave here until ten o'clock, if I have to sit here until that time, which we shall see about later.


[Stage Direction]
At ten o'clock the house adjourned, without question put, pursuant to standing order.
[Stage Direction]
Friday, June 3, 1955