1956-06-14

[Stage Direction]
Eleventh report of standing committee on miscellaneous private bills.-Mr. Henderson.
Fifth report of special committee on estimates.-Mr. Nixon.


[Stage Direction]
On the orders of the day:
Mr. Clarence Gillis (Cape Breton South):: Mr. Speaker, may I address a question to the Minister of Mines and Technical Surveys. Has the minister been advised that the recent interim increase in freight rates granted to the railways will add 25 cents per ton to the cost of moving Nova Scotia coal? Is it the intention of the dominion coal board to add to the subvention a sufficient amount to offset the increase in freight rates?


Hon. George Prudham (Minister of Mines and Technical Surveys):: No consideration has been given to that as yet.


Clarence Gillis: The reason I ask is that it has been the practice in the past.



ATOMIC ENERGY


[Stage Direction]
On the orders of the day:
Mr. Stanley Knowles (Winnipeg North Centre):: Mr. Speaker, may I direct one question to two ministers, the Secretary of State for External Affairs (Mr. Pearson) and the Minister of National Health and Welfare. In view of recent statements by scientists concerning radioactivity and its effect on human beings, could these ministers tell the house whether any further consideration is being given

I put this to the minister to my right -to the Canadian government opposing further nuclear explosions and-I put this to the minister to my left-will a further statement be made as to the effect of such things as X-rays, and so on, on human beings?


Hon. Paul Marlin (Minister of National Health and Welfare):: Mr. Speaker, my colleague the Secretary of State for External Affairs (Mr. Pearson) suggests that I might
deal with both questions. With regard to the question addressed to him, as he has indicated previously, in the proposals which were recently discussed in the subcommittee of the disarmament commission in London and in the discussions which took place in that committee last fall at the United Nations, it was clearly demonstrated that the United States, Great Britain, France and Canada gave support to a plan which would provide for the banning of tests within the limits of a comprehensive scheme of disarmament which would work without prejudice to the security of the nations concerned under an adequate system of inspection and control.
With regard to the health aspects of the problem, the situation is that there is now in existence a special scientific committee, created by the United Nations, of 12 states, of which Canada is a member, represented formerly by the late Dr. Cipriani, and now by Dr. Watkinson of the department which I administer.
In addition to that, the Department of National Health and Welfare makes assessments, along with other departments of the government and with the United Nations agencies, to determine the extent of the levels of radioactivity normally produced or produced through recent atomic detonation tests. There is no reason for believing that the health of the people of this country or of other countries has been affected in a way that would cause serious concern. This matter, however, continues to receive careful study and assessment.


Stanley Howard Knowles: May I ask a supplementary question? I wonder whether the minister would consider making before the end of the session a comprehensive statement on this matter, bearing in mind the recent pronouncement made by scientists, not only with respect to atomic and nuclear explosions but with respect to the frequency with which some people submit themselves to X-rays of their feet when buying new shoes and other similar practices.



EXTERNAL AFFAIRS


[Stage Direction]
On the orders of the day:
Mr. J. G. Diefenbaker (Prince Albert):: Ordinarily I would direct this question to the Secretary of State for External Affairs but.

Inquiries of the Ministry in view of the fact that the Prime Minister will be attending the commonwealth prime ministers' conference and there is reference in the press to the effect that there will be a reappraisal there of the attitude of the several commonwealth countries towards the recognition of communist China, would the Prime Minister say what Canada's attitude before that conference will be in connection with that problem?


Right Hon. L. S. St. Laurent (Prime Minister):: I would not like to make any definite commitment. Of course, we have these conferences for the purpose of obtaining further information and endeavouring to increase such wisdom as we may have about what is best to do in the general interest of the free world. I doubt that we could reach the conclusion that there should be immediate recognition of the government of the republic of China.


An hon. Member:: We hope not.


PIPE LINES
[Stage Direction]
On the orders of the day:
Mr. George H. Hees (Broadview):: I should like to direct a question to the Prime Minister. Does the Prime Minister agree with what his colleague the Minister of Trade and Commerce (Mr. Howe) said on the television program "Press Conference" last night in dealing with the recent pipe-line legislation? I have his words: "We violated the rules."


Some hon. Members:: No.


Right Hon. C. D. Howe (Minister of Trade and Commerce):: I said no such thing.


Louis Stephen St-Laurent: My impression was that my colleague said that we violated no rules.


Mr. Rowe:: That is not the impression the public got.


Mr. Fleming:: A belated amendment. SUPPLY
The house in committee of supply, Mr. Robinson (Simcoe East) in the chair.
DEPARTMENT OF NATIONAL REVENUE Taxation division-
289.	General administration, $2,702,629.


Mr. McCann:: Before we begin today's discussions with reference to the estimates of the taxation division, I think it might be well if we were to clear up some of the points that were raised before we adjourned last evening.
[Mr. Diefenbaker.l
A question arose with reference to law costs, raised by the hon. member for Perth. In the two votes which you have to consider we are asking for a total of $335,000 for law costs, which represents an increase of $115,000 over what we asked for last year. However, $85,000, or 75 per cent of the increase, was requested to cover the probable maximum fee and costs we would have to pay in connection with the Anaconda appeal which was at that time pending before the privy council. The Anaconda case is one of the most famous cases that we have had to deal with and the final appeal in the matter went before the privy council. I might say that the decision rendered by the privy council was in favour of the Department of National Revenue with reference to the stand it had taken relative to the taxation of this company. If the decision in that case had been rendered against the Department of National Revenue the costs might possibly have been $100,000.
The remaining 25 per cent of the increase is requested in the light of actual expenditures at the time that our estimates were prepared. Careful consideration of the expected number of legal actions indicated that we should provide for an increase of about 10 per cent over the actual expenditures for the previous fiscal year. It is worth noting that last year in the district offices we spent more on law costs than was provided in our estimates. While I am dealing with that particular case, I might say that the total costs in the Anaconda case were $34,976, approximately $35,000. We have provided in the estimates for $85,000 so that we have provided for $50,000 more than we have been actually called upon to spend. It is my intention when we come to the conclusion of the discussion of the item to have one of my colleagues move that this resolution be amended so that item 289 may be reduced by the amount of $50,000.
With reference to legal agents, another point brought up by the hon. member, as hon. members know, litigation on behalf of the government is the responsibility of the Department of Justice, but actually when the Department of National Revenue requires an outside lawyer to take action or to defend it in some proceeding taken against the department it would request assistance from the Department of Justice. In this way the Department of Justice would choose the lawyer to act as its legal agent. The expenses incurred by the Department of Justice are charged against the department for which the work is done. That is the general procedure, so that we have to provide for those costs.
Another item was changes in the act. The hon. member for Perth has repeated certain

items which were mentioned in the hearings before the special committee where the operation of the law seemed to work hardship on certain taxpayers or where there was uncertainty as to its application. My officials are more or less in continual discussion with the officials of the Department of Finance on matters of this kind, and they are all carefully reviewed when the budget is being prepared. I have taken note of the items raised before the special committee and they will be brought to the attention of my colleague, the Minister of Finance, prior to the next budget.
With reference to the matter of net worth assessment, the member for Perth has again brought up the question of assessing income tax on a net worth basis. I have spoken on this matter from time to time over the years and I made a rather complete statement on it which is to be found in Hansard of June 23, 1954, pages 6597 to 6600. In his testimony before the special committee the deputy minister indicated that the department does not favour this method of assessment where an assessment based on actual facts is possible. However, the department does have a responsibility to see that all taxpayers discharge their proper liability and in the absence of books and records assessment on the net worth basis is often the only way open to the assessor. The assessor is instructed to use this basis only when all other methods of determining the correct income and tax liability fail and to explain the method to the taxpayers when it is used.
Another matter which was brought up had to do with capital gains. The hon. member for Perth and the hon. member for Moose Jaw-Lake Centre suggested that the department was improperly trying to tax certain profits commonly known as capital gains. First of all, I should like to reiterate that the taxation division has purely administrative responsibilities. It does not make law. It only applies the Income Tax Act and the Dominion Succession Duty Act according to the terms in which those two statutes have been passed by parliament. Naturally, in interpreting the wording of these statutes the law officers of the division must try to find the meaning that the courts would give to them. As cases go to the courts and decisions are rendered, they are given indications which assist them in their interpretation.
The distinction between capital gains and business profits has not changed over the years. The difference was well explained by Lord Justice Clark in the case of California Copper Syndicate v. Harris in the British courts in 1904.
Supply-National Revenue


Stanley Howard Knowles: Which Harris?


James Joseph McCann: He said this, and I quote:
It is quite a well settled principle in dealing with questions ... of income tax that where the owner of an ordinary investment chooses to realize it and obtains a greater price for it than he originally acquired it at, the enhanced price is not a profit . . . assessable for income tax. But it is equally well established that enhanced values obtained from realization or conversion of securities may be so assessable where what is done is not merely a realization or change of investment but an act done in what is truly the carrying on, or carrying out, of a business. The simplest case is that of a person or association of persons buying and selling land or securities speculatively, in order to make gain, dealing with such investment as a business and thereby seeking to make profits . . .
What is the line which separates the two classes of cases may be difficult to define and each case must be considered according to the facts; the question to be determined being-"is the sum of the gain that has been made a mere enhancement of value or realizing a security, or is it a gain made in the operation of business in carrying out a scheme of profit making?"
That is the end of the quotation. This quotation has been cited repeatedly in subsequent cases both by the English and by the Canadian courts. It has been repeatedly said that each case must be determined on its own merits. The courts take into consideration various factors which include the intention of the taxpayer, the number or frequency of the transactions, the relation of the transactions to the taxpayer's regular business, the nature of the transaction and the course of conduct of the taxpayer. None of these factors are deciding in themselves but all the circumstances must be regarded as a whole.
I do not think that the courts have had greater difficulty in deciding these matters than they have with other legal problems which are continually coming before them. Perhaps there has been more interest in the matter in recent years because the income tax appeal board has provided an easy method of settling differences between the taxpayer and the department and the period of high prosperity through which we have been passing has given many people an opportunity to make side profits in property dealings.
In that connection, Mr. Chairman, the Canadian Tax Journal of November-December 1955 has a very interesting article called "The Capital Gains Scare". It is written by Robert Tresilian who I presume is an anonymous writer. I am not going over the whole of the article, although it is very interesting reading for anyone who is interested in this particular subject. However, I should like to quote this much:
Some weeks ago the press reported that a case was to be heard shortly by the tax appeal board in which an appeal was to be made from an

Supply-National Revenue assessment on gains made in the stock exchange. Though no such case has yet been reported, the press announcement appears to have caused a minor panic.
I think most hon. members are familiar with the law of the United States where there is a tax of 25 per cent on capital gains throughout the year. I am not going to go through the whole of the article, but I am going to read the conclusion which is very significant to me at least.
To conclude, it would appear that the concern expressed by the press is unfounded. The few court decisions to which references have been made are merely evidence of the process of separating the wolves from the flock, the former- being those enterprising persons who attempt to wear the sheepskin of the ordinary investor, while carrying on the ordinary trading, businesses or ventures which the law has always declared to be taxable.
In addition, Mr. Chairman, there is the question asked by the hon. member for Dauphin (Mr. Zaplitny) with reference to the deductibility of donations for political purposes. I have announced the policy of the department, and that has been the policy of the department during the past 11 years I have been there. He referred to the question asked by the hon. member for Winnipeg North Centre, and the reason I gave the answer I did that day was that I did not hear the whole of the question. But that is the general principle which has been followed, and I have discussed it with every deputy minister I have had. It is the policy which has been carried out. After a firm has paid its taxes, if it wishes to make a donation for political purposes it is not my concern what they do with the money or to whom they give it.


The Chairman:: Did I understand the minister to say he had an amendment to send up?


James Joseph McCann: Yes, and I would ask the Minister of Finance to move it.


Mr. Harris:: I move:
That item 289 be reduced in the amount of $50,000.


Mr. Monieith:: I should like to take a moment or two of the time of the house by making a few remarks concerning this capital gains tax or supposed capital gains tax which the minister has been attempting to explain. I should like to read just a few lines from the evidence of the estimates committee appearing at page 779, near the bottom of the page. There is some preliminary talk about the possibility of the capital gains tax and then we come to this:


Jay Waldo Monteith: In the instance of, shall we say, a retired person. He has an amount of money, maybe a couple of hundred thousand dollars. He has it in stocks. He deals fairly frequently. Would you be curious about his transactions?


Mr. McEntyre:: Of course we are curious about every taxpayer, but I do not think in that case we would be particularly curious about that individual.


Jay Waldo Monteith: Do you think that if parliament should see fit to, shall we say, make better definitions as to what stock market transactions are, or what capital gains are, that it would assist you in your department with respect to whether or not you should investigate a certain person's stock market transactions, for example?


James Peter McIntyre: I think perhaps it would.


Jay Waldo Monteith: In other words, you might be inclined to think, or say that the law as it exists now does not sufficiently determine whether a transaction is a capital gain or not?


James Peter McIntyre: I think as we go along, and with the courts examining more of these cases, that more principles are laid down, and in that way the law is becoming more certain in that respect.


Jay Waldo Monteith: Of course, the courts and the appeal board, and so on, determine their cases according to how the law stands at the moment, do they not?


James Peter McIntyre: That is right, sir.


Jay Waldo Monteith: If the law were changed to
determine or to clarify exactly what a capital gain is, then the appeal board would naturally follow the law as it existed then?


James Peter McIntyre: Yes, sir.
It was clear in the evidence that the collecting department of the Department of National Revenue is not clear in its own mind as to how to determine the laws that exist, and in my thinking they should advise the Department of Finance as to how the act should be revised so that capital gain can be definitely specified.


James Joseph McCann: Mr. Chairman, in answer to that, there is no definition in the law of what constitutes a capital gain. On several occasions it has been brought up when we have had the preliminary meetings on the budget with the finance committee, and the best legal advice is that up to date they have not been able to define what constitutes a capital gain.


Mr. Viau:: In the discussion of this first item of general administration of income tax yesterday the hon. member for Dauphin, in his opening remarks, referred to the net worth statement as it affects farmers in the province of Manitoba and expressed his grievances with the attitude taken at times by the officials of the Department of National Revenue in dealing with farmers and in continuing at times to make a net worth statement which is not in accordance with the net return, I would say, of the farms in the previous three or five years. His remarks in respect to the net worth statement were very brief. I listened attentively to what he had to say, and in his first remarks and in the latter part of his speech which I read carefully this morning I notice that of the five columns of his speech four columns refer to the question which was asked by the hon. member for Winnipeg North Centre on April

9, which I shall read. It was addressed to the Minister of National Revenue and is recorded at page 2729 of Hansard, as follows:
Mr. Speaker, may I direct a question to the Minister of National Revenue? Will the minister re-examine the income tax files of the breweries of Manitoba to ascertain whether any of them claimed income tax deductibility for the contributions they made, as revealed in Winnipeg last week, to the Liberal, Conservative and Social Credit parties of Manitoba?
Then, of course, the hon. member for Dauphin continued his remarks on this question and he referred to the report which was discussed at Winnipeg at that time, which was issued by the royal commission established by the provincial government of Manitoba with respect to the liquor situation in that province. I shall quote the remarks made by the hon. member for Dauphin, as reported at page 5010 of Hansard:
In that statement you will find that the representative of the breweries stated that not only did the breweries of Manitoba make cash contributions to the political parties within the province of Manitoba but they made them also to the federal political parties.
I may say here that by using the plural "political parties" he does not include the C.C.F. party. I continue:
That immediately, of course, involves the consideration of this parliament.
In the last paragraph on the same page we find the following:
In case the minister or the committee is in doubt about what happened in Manitoba, may I refer them to some of the newspaper headlines. For example, the Winnipeg Free Press of April 4, 1956, carried this headline, "Breweries Bare Gifts to Three Parties; All But C.C.F. Shared $28,075 since 1945".
The remarks continue with respect to these gifts made only to the major political parties of the province of Manitoba. The members of the C.C.F. party stand up in this parliament and in the province of Manitoba with halos over their heads and rejoice that they receive no contributions from any corporation, either in Manitoba or throughout Canada. That is not a clear picture of the situation. We all know that political organizations have certain work to do and they have expenses to meet, and it is well known that contributions are received to help defray those expenses.
Our friends of the C.C.F. party are trying to set up a different picture. They say they receive no cash for their political organizations throughout western Canada. As I say, they go around with halos over their heads telling us that they receive no contributions from any corporation. But that is not the clear picture at all. The reason I rise today is to set out the situation that exists in Manitoba,
Supply-National Revenue especially in my own city of St. Boniface. I want to indicate the way in which the C.C.F. raise their political funds. They are now operating one of the largest gambling joints in the province of Manitoba right in my own city of St. Boniface.
A few years ago the C.C.F. party applied to the provincial secretary of Manitoba for a charter to operate what was called the commonwealth recreation society. This was being formed in order to round up all their friends. I call them their friends because the attitude they have taken in the past on public platforms in Manitoba is that they are the only friends of those Canadian citizens who are receiving social benefits, of the farmers and of labour.
We all know that members of the C.C.F. must contribute a certain percentage of their indemnity to the party funds, and no doubt in addition they receive contributions from individuals. But once this charter was obtained the picture was different. I should like to place on the record the names of the directors of that organization. I think I am fair in doing this because these names are taken from a public document.
One director is W. C. Leitkie, who is well known to the hon. member for Winnipeg North Centre. He has been an organizer for the C.C.F. and is an employee of Canadian National Telegraphs. Another is A. R. Paulley, member of the legislative assembly for Kildonan-Transcona. Another is Dave Mulligan, alderman for ward 1 in the city of Winnipeg. The last is none other than the Rev. Lloyd Stinson, the provincial leader of the C.C.F. party.
This recreation society was formed for the purpose of holding social evenings with their friends, but they operate bingo games. These were first started in the city of Winnipeg but the law officers advised the members of the C.C.F. that bingo or any form of gambling would not be allowed in Winnipeg. So they crossed over the Red river to St. Boniface and rented large quarters from an individual where they could operate this commonwealth recreation society. I might say that last year the individual from whom they rented these quarters was fined $16,000 for having made fraudulent income tax returns.
If the C.C.F. intended to operate this for fraternal purposes or as a social gathering they would probably have a bingo game once a week or twice a month. We all know that organizations in certain parts of Canada, particularly in Ottawa, service clubs and the like, operate bingo games possibly once a month. Valuable prizes are given, sometimes
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Supply-National Revenue amounting to about $10,000, but the Kinsmen or the Kiwanis clubs which operate these bingo games in Ottawa obtain large returns which they use for their social work.
The C.C.F. party did not operate their games in Manitoba once a week or twice a week; they operate thirteen nights a month. Last week the fire chief of St. Boniface made a complaint to the city council and asked that the necessary measures be taken-this was not within the power of the fire chief to do himself-to prevent these quarters being crowded with from 400 to 450 people thirteen nights a month. The fire chief claimed this created a fire hazard.
An entrance fee of 75 cents is charged, and if you multiply 400 by 13 by 75 you will see that the C.C.F. party in Manitoba is obtaining a large return from this recreation society. This money is not being spent for social or fraternal work, it is used primarily for political work in the province. I might use some of the words used yesterday by the hon. member for Dauphin when he referred to the contributions made by the breweries to the main political parties in the province of Manitoba and asked if these contributions were considered as being deductible for income tax purposes.
I believe I have stated clearly the situation that exists in the province. As I say, these people go around the prairies with halos over their heads saying that they receive no contributions from corporations, yet they tax their friends so much a night when they attend thirteen times a month at this recreation society. The total received would be far more than the $30,000 received from 1945 to 1955 from the breweries in that province.
I bring this matter to the attention of the committee because of the remarks yesterday by the hon. member for Dauphin. I do hope that the Minister of National Revenue-I am using part of the question asked by the hon. member for Winnipeg North Centre-will re-examine the income tax returns of the commonwealth recreation society of the province of Manitoba situated in St. Boniface to ascertain whether any claim has been made to a deduction for income tax purpose of these contributions received in the form of gambling.


Mrs. Fairclough:: Mr. Chairman, the minister has reiterated the general tenor of his remarks in the committee when he said that his department was concerned only with the administration of the act and disclaimed any responsibility for the actual enactment of income tax legislation.
However, it seems to me that the minister must recognize that he, in his capacity as a


member of the executive, has probably more influence than any other member except the Minister of Finance himself with regard to the formulation of policy. I think this is borne out by some of the remarks of the Minister of Finance in his budget speech. On the evening when he presented the budget to the house, the Minister of Finance referred to the fact that he and the Minister of National Revenue conferred. I think he used the expression, "the Minister of National Revenue and I have given considerable thought" to certain aspects of the legislation. I do not doubt that that is true. It would be very odd indeed if they were not in conference almost continuously as to the administration of the department and also the policies that the government proposed to put into effect.
I have just been looking back on the budget debate. I cannot find the actual place but I remember that on that evening the Minister of Finance tendered his thanks to the Minister of National Revenue for the collecting of substantial sums, but I must say that I did not hear him proffer the same thanks to the taxpayers who paid those sums. No doubt it was an oversight, and possibly the Minister of Finance would permit me to make that correction in his remarks at this time. Because I believe that the Minister of National Revenue must have some influence on the forming of policy, I believe that there are some things that should be said in this debate on the estimates of his department. A few of the things that I wish to bring up now, I did comment on in committee, but I should like to have them on the record of this house. Now that the Minister of Finance is in the house also, I hope that he will likewise bear in mind the suggestions I make.
In the first place I should like to refer to the practice of the department of taxing rental revenue as investment income when it comes to the taxpayer from an estate or trust. I draw attention to the remarks I made in the committee, which were to the effect that it has been ruled in court on many occasions that income does not change its character by reason of passing through a trustee to a beneficiary. As a matter of fact, I think the rule is so well established that it scarcely needs to be mentioned, but I believe that that should be borne in mind when we consider the practice of the department of assessing income from trusts or estates as investment income without regard for the source of that income.
On the T3 form, the estate or trust return, in the section that deals with surtax on

investment income, there is a little note to which I drew attention previously in the committee. It says:
Rental income from real property and income from a business or farm operated by the executor or trustee are not subject to surtax in his hands.
Yet on the new T1 general form, the only place where you can report income from estates or trust is in the investment income space. That in turn is carried forward to be reported for the purposes of surtax on page 2. It seems to me that this is a matter which the government should consider.
Since the Minister of National Revenue disclaims responsibility for policy, then I appeal to other members of the government to consider this in the executive and, because there is apparently no foundation in law for this departmental practice, to see that steps are taken to have rental income assessed for tax purposes as it should be, without regard to whether or not it passes through intermediate hands before reaching the ultimate beneficiary. I suggest that that could be done simply by making space available on the T 1 general form for the reporting of income from rental accruing to a beneficiary from an estate or trust. It would be a very simple matter to arrange, and I suggest that consideration be given to it.
There was another question which I brought up in the committee and about which I wish to speak for a few minutes this afternoon. That is the apparent discrepancy in the allowance of charitable donations. In speaking on this particular aspect in the committee I drew attention to the fact that apparently in some sections of the country there had grown up a practice of allowing donations to the sum of $25 unsubstantiated by receipts. I admit that the minister and the officials of his department expressed surprise that this was the case but since the day when we discussed that in the committee, because of the surprise which was shown by the government minister and his officials, I checked into it again and I find that that practice has been adopted in certain centres. I fancy that bringing the matter to light in this way will result in a directive from the department to the effect that taxpayers in all parts of the country must be treated in precisely the same manner. If it is the department's desire to allow donations up to $25 without receipts, then that allowance should be made to all taxpayers. Whether or not a portion of their taxable donations is substantiated by receipts, they should be allowed to add to that amount $25 for sundry causes. I suggest to the minister that they should do one or the other; either they should allow it to everyone or they should allow it to no one. I do not
Supply-National Revenue believe there should be any discrimination with regard to these allowances.
There is another matter which was discussed in the committee and about which I should like to speak this afternoon. That is the interpretation that has been placed on clause 11 (1) (j), which resulted in the disallowance of alimony in a specific case which I cited in the committee. I do not intend to go into the details of this case. I merely wish to quote Mr. Fordham, a copy of whose judgment in this particular case I hold in my hand. In giving his judgment he set out clause 11 (1) (j) and he made these remarks:
Much to the taxpayer's surprise, however, the minister disallowed such deductions and ruled that they did not come within the purview of the provision set out above. At the hearing it became clear that this was because the word "alimony" did not appear after "divorce" in the fourth line of paragraph (j), above. An appeal to the board duly followed.
Then Mr. Fordham went on to say:
The matter reveals for the first time, where the board is concerned, what appears to be a remarkable and unfortunate oversight or omission in the drafting of the foregoing enactment. Although alimony, as such, is clearly deductible by the payer when a court has made an award of alimony in a decree, order or judgment for divorce, or a husband or wife have executed a separation agreement providing for the payment of alimony, subsection (1)	(j) does not take cognizance of an
action for alimony alone. No reference to such a proceeding is to be found in its wording. Hence, the unfortunate appellant cannot have the relief that is ordinarily afforded to those obligated to pay alimony periodically. The words "judicial separation" do not assist him, as the Ontario courts are without jurisdiction to entertain actions for judicial separation.
Those are the words of Mr. Fordham. You can no doubt look them up. However, the point which he makes is a point which I ask the government to consider, namely, whether or not clause 11 (1) (j) should be amended by insertion of the word "alimony" in that clause to permit the deduction of alimony where it is a matter of agreement and has been sanctioned by the courts without going through the formalities of divorce proceedings. I trust the government will consider that because it seems to me a grave injustice that people who accept their financial responsibilities in this manner should have such allowances removed from their list of recognized deductions for income tax purposes.
Over the past few years, Mr. Chairman, there have been a number of pleas made in the house for the removal of the floor on medical expenses, and I could not speak on the estimates of national revenue without mentioning this particular point and once more urging the government, as I am sure other members also will, to remove that floor. The arguments in favour of so doing have
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Supply-National Revenue been set out on numerous occasions. I do not intend to go into them at any length this afternoon. I would be merely reiterating arguments which I have made previously and which other members of the house have made. I still believe it would be a sound move and I think also it would be just simple justice to people who, in time of great need, are forced to pay out large sums which undoubtedly causes them considerable distress, and it seems to me they should be permitted to take all of these items as deductions and not just the portion in excess of a certain percentage of their income.
There is one other matter I should like to bring before the house this afternoon. I refer to the position in which the selfemployed person, whether in business or the professions, finds himself with regard to the building up of retirement funds. There have been a great many articles written on this matter as well as letters to the newspapers and presentations made to members of parliament and to the government. I have in my hand a letter written by a well known Hamilton doctor to the Hamilton Spectator in which he describes the situation in which a physician finds himself with regard to setting up some sort of scheme to give him security late in his life. He says in part that the physician in attempting to set up an estate invests in annuities or some other insurance scheme to ensure security later in life but because he is self-employed this deduction cannot be allowed. He draws attention in a personal letter to me to the presentation to members of parliament by the Canadian Medical Association which requested in part tax deferment on personal contributions to annuities or other retirement funds.
I want to emphasize once more that in speaking in this vein this afternoon I am not speaking solely on behalf of professional people because I think there are a great many businessmen, small businessmen particularly, who find themselves in precisely the same position as those who operate professional practices. In the letter from the Canadian Medical Association accompanying the presentation to members of parliament they draw attention to an article by Dr. T. James Quintin of Sherbrooke which appeared in the October 1, 1955, issue of the Canadian Medical Association Journal. In Dr. Quintin's article he made some very pertinent comments. He started out by quoting part of a statement taken from the Millar Tucker report to the British House of Commons on the taxation treatment of provisions for retirement, and I should like to read into the record two sentences that he quoted.


It has to be remembered that the law of income tax is not one of the laws of nature. It is purely man made and the principles governing the imposition of the tax therefore depend on the will of the creator.
Dr. Quintin refers to this statement taken from the Millar Tucker report and he comments that it is used in referring to the changes needed in the income tax law as it applies to self-employed persons. Dr. Quintin refers only to physicians, but as I said before I refer to all self-employed persons. Dr. Quintin goes on to say:
It is they, the self-savers, who suffer from this discrimination in our present Canadian Income Tax Act, as opposed to the pension savers who, because they work for a group or an industry, are allowed postponement of income tax on a portion of their income, if they are eligible for membership in approved pension plans.
I do not intend to read much more of what Dr. Quintin has to say but his remarks seemed to me to be so pertinent that I could not improve on them myself. Therefore, if the house will permit me, I should like to read one or two paragraphs. Dr. Quintin says:
The physician suffers with all the self-employed under the inequities of the present system, but he suffers more because he requires the longest training amongst the professional groups.
Some members might challenge that but nevertheless this is his presentation. He says:
His earnings are concentrated in a shorter period of time, and during these peak years he is often taxed in a higher income bracket than if he had had his income spread out over a longer tax period.
Then he goes on to point out the effect which this situation is having on the profession in general and he makes this comment:
Instances of the "old doctor" who has had to hang on to his practice because he has nothing on which to retire are too well known to all of us. Or the middle-aged physician who is ill and who has served his hospital, his patients and his community well, and yet can't take it easy or retire, as he was not able even at his peak years to save after paying his income tax.
Then speaking of the young doctor he says.
Where are the young graduates who could be our much-sought-after general practitioners or self-employed family doctors? They are to be found in the clinic groups or among the company doctors, where among other things they will have a certain security which appeals, and a guaranteed retirement income paid for by income tax relief allowed to them because they are not selfemployed.
To my mind, Mr. Chairman, this situation, apart from being unfair, does little to encourage individual initiative.
I should like to refer to another source, namely a brief, if such it can be called or rather a memorandum as they describe it, sent by the Canadian Dental Association to the government with respect to the deductibility of pension payments from taxable

income. In the first paragraph of this memorandum which is headed "Fundamental basis of Proposals", the dental association has this to say.
In making this presentation, we feel justified in claiming that we are not asking the government to consider any new principle for surely it is long accepted and incorporated in income tax legislation that is just, and desirable as a matter of public policy, that the individual who has laboured throughout the productive years of his life should be rewarded over a longer period than his actual service: that some of the income of the productive years should be deferred to the years when work is no longer possible.
I am sure the minister would agree with me, Mr. Chairman, and the Minister of Finance also, that this was, after all, the way in which people in this country have planned their lives for many years. The income tax is a comparatively new field. Years and years ago persons were able to save from income and lay aside their savings. Then when their years of activity had ceased they were able to have funds with which to support themselves for the rest of their lives. But in periods of high taxation it is almost impossible to save sufficient to guarantee a retirement income purely from personal savings. So there has grown up over the years the demand for an insured period of retirement and schemes have been promoted and have become popular in industry. Even the government itself has such a scheme which is available to purchasers. But I should draw attention here to the fact that a man who subscribes to a retirement scheme and who is employed in industry, where that scheme is recognized by the government, is permitted to deduct the premiums from income for taxation assessment. However, a selfemployed person can purchase precisely the same kind of annuity from the same source, pay the same premiums and be allowed no deductions. It just does not seem to add up to equitable treatment, and I trust that the government will give some consideration to this extremely important mattei.
In closing these remarks I should like to read again two short paragraphs from the brief of the dental association:
We believe the government desires, as a matter of good public policy, the maintenance of income as a stabilizing factor in the economy of the nation, contributing to the maintenance of employment and the general well-being.
Finally, we believe it contrary to good public policy that professional men, however able in their prime, should be compelled as a matter of personal subsistence, to continue practice after their faculties are impaired.


James Joseph McCann: Mr. Chairman, it will just take a moment to answer some of the criticisms offered by the hon. member for Hamilton West. She appears to be in the right church but probably in the wrong pew
Supply-National Revenue at the present time because of all the matters about which she has spoken, including rental revenue, charitable donations, alimony, medical expenses, pensions and all the rest, the only one that has to do at all with the administration of the department is that with reference to charitable donations. The others are matters which are very interesting but which may well be brought before the Minister of Finance either in committee or when he brings in his income tax act or before the next budget.


Ellen Louks Fairclough: May I suggest that I was making my remarks to the house and to the executive at large.


James Joseph McCann: With reference to charitable donations, I am only going to quote what the deputy minister of taxation said with reference to the complaint that there are rumours afloat to the effect that a person may claim $25 as donations without providing any receipts. The deputy minister said this at the committee meeting as reported at page 822 of the proceedings:
The policy certainly is, if a claim is made for charitable donations, that it must be supported by proper receipts. There is that principle of-
There are some Latin words here which I will have to have translated for me.
-deminimis non curat lex. Occasionally you get into the question of a very small adjustment which requires you to write the taxpayer a letter and ask if he has receipts for this amount of $5 or some small amount. When you think of the amount of tax involved, 20 percent of $5 it may be only $1, so we do overlook sometimes very small items that are not going to make any particular difference in the tax involved.
But the general principle and the administrative principle is that if any claim is made for charitable donations, it has got to be supported by proper receipts.
(Translation):


Mr. Dufresne:: Mr. Chairman, the study of the estimates of the Department of National Revenue gives me an opportunity to make a few remarks which I consider quite relevant.
It is worth noting that, despite a number of recommendations made by the official opposition over the years, the government has not seen fit to give the Canadian taxpayer the relief he is entitled to expect.
The war has been over for almost twelve years already and, although all public groups have kept asking for tax cuts, taxpayers are still staggering under the burden of excessive taxation. This cannot go on for ever and Canadians, as well as our most astute businessmen, realize that by keeping taxes at

Supply-National Revenue such a high level the government can only jeopardize the future of Canadian economy. Personal taxes, I think, particularly deserve the attention of the government, and a long overdue reduction should be seriously taken into consideration. The government is no doubt planning personal income tax reduction prior to the general election which is sure to take place early in 1957, in a fresh bid for the popular vote.
The people of Canada, however, want sizeable cuts right now. They refuse to play the game of those who take such action for the sole purpose of clinging to power. If the government is turning down the opposition's legitimate request that we go to the people, we may gather, convinced as we are that those who are now governing this country have lost the confidence of the Canadian people by their dictatorial and anti democratic attitude and by jeopardizing the very foundations of our parliamentary institutions, we may gather that they intend, before going to the people, to sweeten the pill once more and try, unsuccessfully that time, to have it swallowed by the Canadian taxpayers.
That is why, in spite of protests coming from all over the country, the government stays put and has no intention to give the poor taxpayer the relief to which he is entitled and which he hopes to get as soon as possible.
As the cost of living index has not changed since the end of the war, and has remained at a very high level, it is unquestionable that small wage earners are desperately trying, at the cost of many sacrifices, to provide for themselves and for their family.
To protect our own economy, it is more urgent than ever that the revenue of the wage-earner be raised substantially, especially in the case of the small wage earner whose family responsibilities are ever increasing.
The Canadian workers, both those with a small revenue and those in somewhat higher brackets, would like to have the opportunity to provide for their family. He would like the advantage of giving his children an education sufficient to ensure their future. How can he contemplate a brilliant future for his children if he is ruthlessly deprived by the government of that part of his revenue which he could use for that purpose?
If it is true that the government must collect the taxes necessary for the administration of the country, it is no less true that it must ensure the future, the prosperity and the security of the people. If the government does not take the steps necessary to that end, it is lacking in its administrative duties
[Mr. Dufresne.l
and, at the same time, it is taking an antisocial, anti-familial and anti-Christian stand.
A married man, with all the obligations of married life, can barely exist if he is allowed but $2,000 a year to keep his home, clothe and feed his family, pay for urgent medical care and think about. . .
(Text):


Walter Edward Harris: Mr. Chairman, on a point of order; I have no desire to interrupt the debate which has been most helpful in what has already been said this afternoon, but I really must say to hon. members that when we come to discuss points of policy, as has been the case, and in particular when we discuss the level of taxes as my hon. friend is now doing, those are matters which should be debated either on the budget or on my estimates and not the estimates of this particular department. I will be quite glad to do what I can to give such time as hon. members want on my own estimates to discuss these things, but we have had our budget debate and the level of taxation has been set for the rest of this session. I would hope hon. members could confine themselves strictly to the matters that really are of concern to the Minister of National Revenue and, for my sake, not interject questions I cannot really answer at the moment, and for the sake of the Minister of National Revenue hon. members should confine themselves to those things with which he has to deal. I accept the full responsibility for matters of policy and I would hope the hon. member for Quebec West, while I admit we allowed a certain amount of latitude to the hon. member for Hamilton West, would confine himself, if possible, to matters before the Minister of National Revenue and not the Minister of Finance.


J.-Wilfrid Dufresne: I have always felt that deductions from income tax were always under the Department of National Revenue.


Walter Edward Harris: No, they are not.


J.-Wilfrid Dufresne: I do not think any hon. member can contradict me when I say that the Department of National Revenue is getting the taxes.


Mr. Habel:: Collecting the taxes; they have nothing to do with fixing the tax.


J.-Wilfrid Dufresne: That is what I am speaking about; I am saying his department is taking too much out of the poor people, those who have only a small salary. The Minister of National Revenue can always refer what I have said to the Minister of Finance.


Walter Edward Harris: That is budgetary matter and perhaps it is one for my estimates. I do not know that until I examine what my hon. friend has said. However, it is a matter of financial policy, how much taxes we pay.


J.-Wilfrid Dufresne: Why did you get. up if you did not know what I said?


Joseph-Alphonse-Anaclet Habel: On a point of order, Mr. Chairman.-


J.-Wilfrid Dufresne: What point of order?


Joseph-Alphonse-Anaclet Habel: I am coming to that. In fact, Mr. Chairman, the hon. member for Quebec West was making a good political speech on behalf of his constituents but there is no doubt he is entirely out of order when he talks about the amount of taxes, the exemptions and so forth. I understand that those are budget matters and once the budget has been decided then all he can talk about on these estimates is the collection of taxes. The minister was quite right in his point of order.


J.-Wilfrid Dufresne: I believe that speech, as usual, is not too brilliant. I guess it cannot be otherwise since it is coming from the hon. member for Cochrane.


Joseph-Alphonse-Anaclet Habel: I will tell you any time you want.


William Alfred Robinson: Order. I was not able to follow the hon. gentleman's earlier remarks as closely as I would have liked as he was speaking a language with which I regret I am not yet too familiar. I was going to congratulate the Minister of Finance on his knowledge of the language until he admitted he himself would have to read the hon. member's remarks later.
However, I did follow enough of the remarks to know that the hon. gentleman was dealing with matters of financial policy rather than the collection of taxes, which comes under the purview of the Minister of National Revenue. I would ask the hon. gentleman not to deal with matters of fiscal policy, but with matters which more particularly come within the taxation division of the Department of National Revenue which, after all, is a collection department.


J.-Wilfrid Dufresne: All right, Mr. Chairman. I will agree, and I will wait until the estimates of the Minister of Finance come before us to bring to the attention of the committee the remarks I have just made.
(Translation):
However, Mr. Chairman, I would like to call the minister's attention to the blameworthy-to say the least-conduct of those who are entrusted with the inspection of the books of taxpayers supposedly in arrears in their payments.
Supply-National Revenue
I admit that the government has to claim its due, but I am opposed to certain brutal methods employed to ensure that result. It must be admitted that the people who are asked to pay taxes are no criminals, no dangerous bandits, and must therefore not be treated as such.
Let us make an end of this uncalled for intrusion in highly personal matters especially those directly connected with married life and the relationship between man and wife.
May I be allowed to read a letter which came to me recently from a prominent professional man in the province of Quebec. I hope I may dispense from giving his name.
(Text):


Mr. Lesage:: Mr. Chairman, I believe that, according to the rules of this house, when a letter is read in the house we must have the name of the man who sent it. The hon. member was about to read a letter after saying that he would not mention the name.


J.-Wilfrid Dufresne: Mr. Chairman, it is not the letter I wish to read; it is a copy-


Jean Lesage: That is what you said.


J.-Wilfrid Dufresne: It is a copy of some remarks made by a very prominent professional in the province of Quebec who wrote to me. Of course, the minister will not be surprised if I hide the name because some members on the other side might be glad to find out who is writing to us. I do not think there is any rule of this house, Mr. Chairman, that prevents me from reading a document that I am ready to table.


William Alfred Robinson: If, in the course of his remarks, the hon. member wishes to read a letter he must, of course, give the name of the sender of the letter.


J.-Wilfrid Dufresne: It is not a letter, Mr. Chairman. I just explained that it is a copy of a document which the gentleman had sent to a newspaper in the province of Quebec, and it was not printed.


Some hon. Members:: Oh, oh.


Mr. Pickersgill:: Unprintable.


J.-Wilfrid Dufresne: Like the minister's speeches.


John Whitney Pickersgill: I get my speeches printed; that is the trouble.


J.-Wilfrid Dufresne: Like the kind of speeches the minister makes here.
(Translation) :
Mr. Chairman, this document reads as follows:

Supply-National Revenue
(Text):


Jean Lesage: Oh, no; I am sorry. I am coming back to my point of order. The hon. gentleman is now endeavouring to read what he calls remarks made by a professional, which have been sent to him. He says it is not a letter; it is a document containing remarks. Well, a document containing remarks sent by a professional to the hon. member is certainly a letter, or some kind of a letter, and the rule applies to it. I do not believe the hon. member should start reading a letter without giving the name of the sender.


J.-Wilfrid Dufresne: Mr. Chairman, X shall just make my own remarks based on what I have in hand. I shall read them exactly as if they were my own. I do not think anyone will stop me. I will not use the copy that I have in hand.


William Alfred Robinson: The hon. member referred to this matter first as a letter which had been sent to him, and said that he wanted to read it.


J.-Wilfrid Dufresne: If you allow me, I said it was a document attached to a letter that I had.


William Alfred Robinson: It is a document which has been sent to the hon. member and which he wishes to read to the house. The situation is covered by citation 270, which reads:
An unsigned letter should not be read in the house. On the 16th May, 1928, a member stated during debate that a letter which he had been quoting was not signed. The Speaker said: "Such a letter should not be read into Hansard; all letters when read must be signed and they become part of the documents of the house."
The ruling is quite clear. The hon. member is quite at liberty to read the document into the record, but if he wishes to read it into the record, then he must of course indicate its source by giving the name of the sender.


J.-Wilfrid Dufresne: I think I will give the name of the sender because it will be very interesting even to those who do not speak my language to be able to read the translation tomorrow. This letter comes from Dr. Andre Legendre of Shawinigan Falls, in the province of Quebec. The document attached to the letter is the following one. It is entitled:
(Translation):
That letter was written by Dr. Andre Legendre, of Shawinigan Falls. It is entitled: "All they need now is a revolver in their hand."
Usually the work of the assessors and inspectors of the income tax division is not an easy one. Their task is not pleasant when they have to investigate mistakes, sometimes deliberate mistakes, made in a financial statement. But in


democracy there are, between civilized people, certain limits beyond which it is nothing less than abuse, which borders on sadism. Witness the following instance of a case recently reported in one of the cities of this province.
One fine spring morning, six or seven automobiles drove into town, each carrying a member of the R.C.M.P. and one or two accountants from the income tax division. At exactly the same time, a group calls simultaneously at the office and at the home of three professional people of the city; the man in charge shows to the wife or the secretary an authorization from the Deputy Minister of Finance and a search warrant signed by the president of the Exchequer Court. The two documents, requested by a French Canadian and concerning French Canadians, and authorizing a complete search of the home of a French Canadian, are drafted exclusively in English. But that is of no importance to those gentlemen who give a brief explanation of their significance, without bothering to make sure that the meaning of the document is fully understood, (French legal texts are already not too easy to understand, let alone the meaning of such a document for one who is not conversant with legal terms or with English) and they immediately ask to be led to the bedroom or the office of the boss. The moment chosen is of course one when the head of the family is away from his home and from his office. Then begins a complete search; those people even take upon themselves to read excerpts from the personal diary or the intimate correspondence of the husband or wife. Nothing can be done to avoid that search of one's treasures. If permission is refused, everything will be taken away and then . . . When the victim of such a brutal investigation arrives, having been advised by telephone, and tries to discuss the matter with them, the investigators, relying on their power and their position, reply politely, but without giving any definite answer, except the following: "We have been instructed to take with us anything that may pertain to accounting. We are entitled to see everything, to look everywhere and to examine all documents, whether personal or not." And search of the premises goes on; nothing is overlooked, not even the box of sanitary napkins or the garbage pails. The investigators take away all documents they see fit to seize, without giving any receipt for the items taken away, leaving it up to the owner to list them and make a claim (what chance would he have to be heard?) if everything which has been taken is not given back. Except for the use of a revolver and brutal treatment of women and children, one would think that we were living behind the Iron Curtain! It remains that such a method of investigation is unjustified, if steps have not been taken previously to obtain the required information and such attacks are led first against respectable citizens. Secret police methods and intimidation have no place in a true democracy; one is led to wonder whether all that deliberate and systematic campaign by the government against certain professions, does not aim to lower their prestige and give it a freer hand in taking certain political steps. But there is one thing that is even more serious, and it is the use in such cases of documents in English only. When the authorities force the door of a taxpayer, violate the privacy of his home, and take contemptible and despicable means to find fault with him and take away his money, that is already more or less democratic, but when insult is added to injury by the fact that no respect is shown for the victim's mother tongue, that goes beyond the limits and adds insult to brutality. That also shows the spirit which prevails in the income tax division, a contempt for the taxpayer, especially the French-speaking tax-

payer. Let us hope that one of our members of parliament will rise in the house and mention the fact.
I think this letter speaks for itself, Mr. Chairman, and does not call for any comments. However, I have another duty i.e., to tell the government, and more especially the Minister of National Revenue (Mr. McCann), to give strict orders to stop such abuse at once.
I now would like to touch upon another point, Mr. Chairman, a point I consider of the highest import and which cannot be ignored by this government.
The leader of the communist party in Quebec, named Gui Caron, has just applied to the superior court of my province for an order compelling the C.B.C. to grant him broadcasting time on the radio and television networks.


Some hon. Members:: Order!


J.-Wilfrid Dufresne: The leader of the communists approached the court with a mandamus.
(Text):


Some hon. Members:: Out of order.


Joseph-Alphonse-Anaclet Habel: The hon. member for Quebec West is out of order, and he knows it perfectly well. He is now talking about the C.B.C.


J.-Wilfrid Dufresne: Radio Canada is under the Minister of National Revenue.


Joseph-Alphonse-Anaclet Habel: You are out of order and you know it.


William Alfred Robinson: We are dealing with item 289, which has to do with the taxation division of the Department of National Revenue. There are subsequent items which relate to the C.B.C. and it has always been our custom to deal with them separately rather than under these items of the Department of National Revenue. The items in question are Nos. 54, 55 and 56.


J.-Wilfrid Dufresne: I will save those remarks for later on.
(Translation):
And now, Mr. Chairman, I should like to inform the Minister of National Revenue of a letter that I received recently-let not my hon. friend from Cochrane (Mr. Habel) worry, the rules allow me to read this letter-


Joseph-Alphonse-Anaclet Habel: As long as you are in order, you are free to speak.


J.-Wilfrid Dufresne: This is a letter from one of my constituents or rather a letter I wrote to the minister about one of my constituents who is afflicted by a most crippling disability. In order to go to work, he has to use some
Supply-National Revenue means of transportation which he could do without. So that hon. members may have an idea of this man's situation, I shall read the letter that I wrote recently:
Mr. J. C. Patenaude,
Taxation Division,
Department of National Revenue,
Jackson Building, 122 Bank St.,
Ottawa, Ontario.
Dear Sir:
Re: Mr. Hosea Cantin,
46 Christophe-Colomb West,
Quebec City, Que.
The above-mentioned has been suffering since birth from a very painful disability. In fact Mr. Cantin is barely 3 feet in height and must drag himself painfully on legs about six inches long. Even if you have not seen him you can picture to yourselves his condition and, like me, I am sure, you must have pity on his misfortune. A few years ago, some charitable people managed to find a job for Mr. Cantin at the Quebec parliament.
However, Mr. Cantin's sole means of getting to his place of work in the morning and back home at night is to hire a regular taxi for which he has to pay $1.20 a day. He even brings his lunch to avoid extra expense. I need not add that the taxi driver has to help him to get in and out of the taxi. Without this means of transportation, Mr. Cantin would have to rely on public charity since it is impossible for him to travel in any other way.
Being a bachelor, his tax exemption is only $1,000 while his annual salary is $2,000. Mr. Cantin is asking, rightly so, and I support him without reservation, that an amount of $360 a year be allowed to him for unavoidable expenses of transportation. Up to now, his request has been repected. In my opinion, this is a rather exceptional case and a spirit of humanity should prevail over normal bureaucratic rule.
I strongly urge therefore that permission be given to Mr. Cantin to deduct from his personal income tax his legitimate and unavoidable transportation expenses since this is the only way for him to avoid being a charge to the public.
I hope that this request will be granted without delay. I thank you in advance. Please accept the expression of my best wishes, dear Mr. Patenaude* Yours truly.
Mr. Chairman, I have read that letter in order that the minister may understand that there are exceptional cases-they are not very numerous-which deserve special attention.


Mr. Leduc (Jacques Carlier-Lasalle):: I
wonder if the minister of health and social welfare in the province of Quebec could not get a grant in a case like this, since it involves an employee of the Quebec government? Grants are made rather liberally in the province of Quebec, and I am sure he could get one.
5028	HOUSE OF
Supply-National Revenue


Some hon. Members:: Hear, hear.


J.-Wilfrid Dufresne: This applause could very
well be toned down, there being no call for it under the circumstances.
Mr. Chairman, the government of the province of Quebec is already contributing its full share in the case I have mentioned. This disabled man has been given a job for which he is paid $2,000 a year. On the other hand the federal government-this man is single-taxes his salary after $1,000. I agree that the government is acting according to the law, but it seems to me that, in such a special case, it would be only fair, as I said in my letter, if humanitarian considerations prevailed over standard bureaucratic practice. It seems to me that it would not harm anyone if this poor chap were allowed to deduct $360 a year for such absolutely necessary transportation, since otherwise he could not get to work at all.
I personally took it up with the minister; I was very well received, and he told me that his only responsibility was to administer the law enacted by the Minister of Finance (Mr. Harris). I agree.


Mr. Cauchon:: By parliament.


J.-Wilfrid Dufresne: By parliament. I raised that point this afternoon, in order to show that there are exceptional cases. I ask the minister to submit those cases to the authorities or to the cabinet. It should be possible, without harming anyone, to make the necessary changes or to grant the necessary exemptions in such pitiful cases as the one I just referred to.


Joseph-Alphonse-Anaclet Habel: You know very well that we cannot legislate for individual cases. It is a rather difficult case, but the government of Quebec could help that man by increasing his salary to cover the additional expense. The government in Ottawa cannot make special regulations for each individual case.


J.-Wilfrid Dufresne: Mr. Chairman, I am not here to discuss what the Quebec government should do. I stated what the Quebec government was doing for that man and I congratulate the said government for giving him some kind of employment, without which he would have been a charge upon the state. And God knows that one cannot live with the $40.00 monthly pension paid to invalids. One cannot live on that.
The Minister of National Revenue stated as follows in a letter he wrote me on March 14, 1956:


Such an expenditure cannot be authorized as a deduction for income tax purposes owing to section 12 (1) (h) of the Income Tax Act, which we must administer as it was passed by parliament.
I agree with the hon. member that we cannot legislate for individual cases, isolated cases, but I am convinced that without causing prejudice to anyone and without going against the act, the authorities could use common sense and logic; they could be led by some sort of humanitarian spirit in the case submitted to us. In fact, I believe that the department should grant the requested deduction.


Joseph-Alphonse-Anaclet Habel: Can the hon. member tell me what that tax reduction would amount to if that $360 deduction were granted?


J.-Wilfrid Dufresne: I did not calculate it.


Joseph-Alphonse-Anaclet Habel: $54 a year, for the information of the hon. member.


J.-Wilfrid Dufresne: I am not here to report on deductible amounts.


Joseph-Alphonse-Anaclet Habel: Yet you are making a great fuss about a deduction which represents only $54 a year.


J.-Wilfrid Dufresne: I would like to continue my remarks, Mr. Chairman, without being disturbed by the insignificant interruptions of the hon. member for Cochrane (Mr. Habel).


Joseph-Alphonse-Anaclet Habel: You are here to make speeches.


J.-Wilfrid Dufresne: Not insignificant ones.


Fernand Viau: When the time comes to make a speech, you are there!


J.-Wilfrid Dufresne: Sit down, I have the floor.


Joseph-Alphonse-Anaclet Habel: You do not want to pay any attention to my calculation.
(Text):


Stanley Howard Knowles: Six more days and the election will be over.
(Translation):


J.-Wilfrid Dufresne: Mr. Chairman, these were the remarks I wished to make. I hope that the hon. minister for whom they were intended will take them into consideration without paying any attention to the stupid interruptions from various points; I hope that he will be in a position to solve the problems I have put to him.
(Text):


William Alfred Robinson: I am sorry to interrupt the hon. member but I am obliged to advise him that his time has expired.


Mr. Quelch:: Mr. Chairman, I have just a few remarks to make on the question of net worth statements. I have spoken about this on a number of occasions in the past and I believe the minister has already made quite a lengthy statement and has given the pages of Hansard on which I could find it. But the point is that I have received a number of protests from farmers, and the protests they have made are not covered by the statement made by the minister. I should like at this time to draw these to the attention of the minister.
I am not complaining regarding the type of inspectors sent out to get these forms filled. As a matter of fact, the men that have been sent out to the part of the country I come from have been men with very great experience in agriculture. Farmers have said to me that they know all the answers and that you could not get away with anything. I am not saying that the government should not send out men like that. I think it is good that they know the full score. But I would point out that this is a situation where the odds are loaded heavily in favour of the Department of National Revenue. The inspector knows all about agriculture and he knows all about income tax; the farmer knows about agriculture but he does not know much about the income tax. Therefore it is possible for the inspector to put many things over on the farmer-I would not say intentionally- perhaps unintentionally. I think that often happens. It seems to me that too often the inspector is too much interested in trying to collect more revenue than in just collecting the amount of revenue that the government is entitled to obtain under the Income Tax Act.
I am going to give the minister a few illustrations of what I mean. First of all, it seems to me that, as soon as the farmer goes into the office, the inspector should immediately explain to him the purpose of the visit. The minister says that they do that, but unfortunately they apparently often enter into what might be called a friendly conversation. I have never been in myself and I have to depend on what farmers have told me but, in view of the fact that quite a number of farmers have told me a very similar story, I think there must be something in it. For instance, they say that when they walk in they are treated very courteously by the inspector. The inspector says, "I'll bet you have a difficult job with the prices you are called upon to pay now". The farmer agrees with him. Then he says, "I suppose you find
Supply-National Revenue the cost of living high these days". The farmer agrees. Then the farmer agrees that the cost of living has gone up to perhaps $2,000 a year or some other figure. Right then and there the farmer has two strikes against him. Then they get down to business, but the farmer has already put his foot in it. Then the inspector explains the purpose of the visit. By then possibly the farmer begins to realize that he has committed certain indiscretions.
It seems to me that the very first thing that should be explained to the farmer is that according to his income tax returns the increase in his capital seemed to be greater than his return of income would warrant. That should be explained at the very start. That is done, but unfortunately not at the very start. Very often the farmer is able to give a satisfactory explanation. He is able to explain that his father has given him some capital or made a loan to buy machinery, which accounts for the increase in capital that did not appear to be justified in the report of income; or it may be the result of a small legacy.
The inspector should be very careful to see that no item is included in the cost of living that is deductible or, if it is deductible, he should be very careful to see that it is actually deducted. I could give an example. This is a case that I brought up with the department in Ottawa and it was straightened out, but there must be many similar cases that have not been brought up, with the result that the farmer has been charged tax that he should not have been charged. In this case, a farmer having the cost of living expenditures made up, admitted that he had made a charitable donation of $240, and that was included in his cost of living. That should have been also allowed as a deduction. The farmer had never received a deduction for it, but it was shown as cost of living. The inspector should also have been very careful at that moment to see that that $240 was included as a deduction. Consequently, of course, the farmer had to pay an additional tax as a result of having that charitable donation shown as a cost of living expenditure, and without being given any credit for a deduction.
There is another point, and this is, I think, a little harder to deal with. From what I have gathered from farmers, if they bring this matter to the attention of the inspector it is allowed, but if they do not bring it up it is not allowed. In a case of this kind, where the inspector has all the experience and knowledge of the act, he has a responsibility to draw to the attention of the farmers where they can cut down their taxes by
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Supply-National Revenue giving certain statements which apparently they do not think are needed. I shall explain that. Take the question of machinery. At the beginning of the five-year period the machinery may be shown, we shall say, as $5,000 in the income tax return. At the end of the five-year period that machinery may have gone up to $10,000, with the result that there is an appreciation of $5,000. But that may not be the true picture. Actually the farmer may have traded in the old machinery and received a trade-in value of $7,000 for it. We know that during the past ten years farmers have been able to get very good trade-in values on machinery, but unless the farmer drew the inspector's attention to that, although the actual value of that machinery may be shown on the income tax return as only $5,000, he had traded that in on new machinery and received a trade-in value of $7,000-unless he draws the inspector's attention to that, he does not get the benefit of the extra $2,000. Consequently he has to pay income tax on that additional amount.
It is little things like that that could very well be brought to the attention of the farmer by the income tax inspector at the time the statement is being made out. The farmer has not a sufficient understanding or knowledge of the act to bring up points of that kind. I shall admit that, any time a matter of that kind has been referred to me ana I have referred it to the taxation division at Ottawa, they have been very good in taking it up in Alberta and getting the matter straightened out. But it should not be necessary to do that. The inspector should safeguard the interests of the farmer by seeing that something of that kind does not happen. So I would urge upon the minister that he give instructions to the inspectors to be very careful to see that at all times the interests of the farmer are guarded in matters of that kind.


Mr. Barnett:: The matter I wish to bring up is in no way related to what has just been said by the hon. member for Acadia, but while he was speaking I was reminded of an incident that came to my attention a number of years ago which affected not a farmer but a small storekeeper. One of the officials of the department to which he has been referring did act in accordance with the suggestion made by the hon. member for Acadia. I remember thinking at the time that that was a very right and proper attitude for officials and inspectors of the department to take- that their interest should be to collect the tax due, neither more nor less.
However, the matter upon which I particularly wished to rise for a few minutes at this time has to do with a question which I had answered by the minister on May 28 with


respect to arrangements for having income tax deductions made by Canadian civilians employed in Canada by the United States navy. I placed the question on the order paper asking whether income tax deductions were made by the United States air force and the United States navy from Canadian civilians employed by them in Canada. The answer I received indicated that such deductions were made by the United States air force but that that was not the case as regards those employed by the United States navy. The answer further indicated that certain negotiations had been going on between Canadian and United States authorities in Washington with regard to this matter.
I raise it briefly here to indicate my continued interest in this question and to ask the minister whether he is able to supply any additional information at this time with regard to the progress of the negotiations. I notice that the Minister of Labour also happens to be in his seat at the moment. I think he will realize that this question is one which affects the working people, those on salaries and wages, and is perhaps somewhat related to questions I have directed to him previously with respect to arrangements for unemployment insurance coverage for Canadian civilians employed by agencies of the United States government. Therefore I should like to find out at this time whether the Minister of Labour's department is aware of this situation and in particular whether the Canadian labour attache in Washington is concerned with it and is doing whatever he can to expedite the negotiations referred to in the answer I received to my question.


Donald Methuen Fleming: Is the minister going to answer that question now?


Mr. Gregg:: I think the hon. member directed his question to me. Perhaps I could take notice of the question and refer to it on my own estimates, if that would suit the hon. member.


James Joseph McCann: Just before the hon. member for Eglinton speaks, I have nothing further to add at this time to the answer which was given the other day.


Thomas Speakman Barnett: You will continue to look into it?


James Joseph McCann: The matter is being followed up.


Donald Methuen Fleming: There are two or three matters I should like to put before the committee in connection with the estimates of this department in relation to the taxation division. The first concerns a practice which prevailed in certain, at any rate, of the local offices of the taxation division of the department until

not long ago. It was the practice under which taxpayers could bring their returns to the office supported by their receipts, including receipts for charitable donations and other documents that might require to be filed, and could have a receipt given to them consisting of the stamping of a form of receipt on the duplicate return. I am informed that practice was abandoned some months ago. While it is not a practice that has ever affected me personally in any of the returns I have had to file in a professional capacity, I am told that it is a matter of concern to a number of those who file in various local offices, and questions have been asked as to why the practice was abandoned and why it cannot be restored. Does the minister wish to deal with that before I go on to the next matter?


James Joseph McCann: I am informed that we made that change a couple of years ago and we have not found any serious objection. Of course, it is a matter of trying to save some money and trying to save a lot of administrative work.


Donald Methuen Fleming: If the minister's answer is correct, I do not think he has grasped the point. It is to give some guarantee to the taxpayer that his documents have been received by the department. As it is, the taxpayer who sends his return through the mail, perhaps with a number of charitable receipts or other accompanying documents, does not know whether the documents have arrived. In due time he will receive his interim receipt form in respect of his payment but it may be some very considerable time before he has any communication from the department by which it is made clear that the department has received the documents.
The practice to which I have referred was one which enabled the taxpayer who chose to go to the local office with his supporting documents thereby to have a form of receipt from the department so that no question could arise afterwards as to the delivery of the supporting documents. I cannot for the life of me follow the minister when he says that this practice was discontinued to avoid expense and administrative difficulty. Surely there is no expense involved in the department in asking them to put a stamp on the duplicate return of the taxpayer who takes the trouble to go to the local office and deliver his return with the supporting documents.


James Joseph McCann: There would be very few who would bring their return with them and take the duplicate home. I am familiar with the practice. I remember that in the old days you would present your form and get a receipt for your payment at that time. If you were giving a cheque you did not
Supply-National Revenue need it because your cancelled cheque is a good receipt. I presume the hon. member is talking about the actual date on which you make your return and whether or not you get a receipt for your return, for your hospital receipts, charitable donations, and your money, if there is any. As I say, that was discontinued a couple of years ago.
We have not had any complaints to amount to anything and it does cut down the work because the receipt would have to be stamped at the time, and if you go into any of the offices on the last days of filing returns people are lined up as at a football game, so that it all takes time. However, it is only a little thing and we will look into it. If the service can be improved by stamping them as they come in we will have no hesitation in re-establishing that practice.


Donald Methuen Fleming: Supply-National Revenue that estate, and that corporation has wide business dealings and I suppose at some stage or other comes in contact with government departments, no doubt such departments as defence production.
I wish to put before the committee this consideration. In an estate of such unparalleled size, where the Department of National Revenue presided over by the minister is faced with the duty of collecting the largest succession duty in the country's history, it is not right or proper that one of the executors of the estate, who represent that estate and its interests in negotiations vdth the department, should be a minister of the crown. There is here a question of duality of interests which should not be permitted to arise. The principle would exist in connection with an estate of any size, but it takes on a particularly striking form where the department is dealing with the largest estate in the country's history and where the responsibility cast upon the Minister of National Revenue is to collect the largest succession duty collected in the country's history.
This may not be the point at which to raise the question as to the extent of the business which that corporation is doing with the government. On the estimates of other departments there will be an opportunity to go into that question. But I submit, Mr. Chairman, that the position of the Minister of Trade and Commerce in this situation is untenable. He is a member of the government. He sits alongside a colleague whose duty, as a minister of the crown, is to collect an amount of succession duty unparalleled in the country's history. In a situation of this kind it seems to me that the minister's course is to make his choice either to be an executor of the estate or to be a minister of the crown, but that in a transaction of this kind he should not be in that double position. I do not think it is fair to his colleague, the Minister of National Revenue, among other things. I suggest, Mr. Chairman, that whether or not the Minister of Trade and Commerce is taking an active part in the detailed administration of the estate is something that does not matter. Here is his position.
There are other executors, of course. It may be that the fact that there are five other executors of the will of the late Sir James Dunn is sufficient reason why the Minister of Trade and Commerce should now relieve himself of the dual position in which he finds himself as an executor. But I say there is a duality of interests or a conflict of interests which can only be resolved if the minister chooses one course or the other. I say he cannot hold both positions in face of the fact

that shortly there will be approaching a situation where the executors must determine what their liability is to the crown, and where the Department of National Revenue must assess the liability of this estate for an amount of succession duty without precedent in the country's history. I therefore suggest that in this situation the Minister of Trade and Commerce must make a choice. I submit that there is here a conflict of interests which cannot be otherwise resolved.


Mr. Zaplilny:: Mr. Chairman, I wish to take only a few minutes in order to refer to the statement made by the hon. member for St. Boniface earlier this afternoon in reference to what I had to say yesterday. I regret, and I am sure he will also regret it on reflection, that the hon. member used the term he used in describing the recreational organization in his own constituency as a gambling joint. By doing so I am sure, whether he intended to do it or not, he has cast aspersions upon a great many organizations in our country, including Legion clubs, church organizations and service clubs which carry on exactly the same type of activity in order to raise finances for their various organizations.
I want to make it perfectly clear that even on the basis of what the hon. member himself said, his own description of the activities of this organization in his constituency, that organization is certainly operating strictly within the law. It is a non-profit organization. There is no question of income tax involved in the operations of this organization. With regard to their raising finances in order to support the political party of their choice, I would consider it to be one of the finest ways in which to do it. Certainly it is much better for the people who wish to support the party of their choice to get together in the form of an organization and voluntarily contribute toward that cause than for a party to depend upon large contributions by interested corporations.
The hon. member tried to slough off the donations made by the breweries to his party in the province of Manitoba by saying, "Well, it is a mere $30,000". He is aware, as is everybody else, that it is not a question of $30,000. The party to which he belongs receives millions of dollars from various corporations across this country. This is only an indication in our own province, and the reason it has drawn more public attention than usual is the fact, as he well knows, that here is an industry that operates under a price system set up by the government of Manitoba. Their product is all sold to the government of Manitoba or to the liquor commission at a price, and that government sets the price; and it has set a price which has;

resulted in a profit of over $18 million to four breweries in that province since 1946.
It is perfectly improper in my view, and I think in the view of the people of Manitoba, that an industry which deals so closely and intimately with the government of that province should offer financial contributions for political purposes to the party in power. That does not exonerate the other parties that participate in those contributions, but they do not have the same responsibility. The Liberal party in that province must bear the responsibility, because it is in power, of having received contributions from breweries which operate under a price system set up by that government. I regret that the hon. member tried to wriggle out of that position by attempting to cast aspersions upon a perfectly legitimate recreational organization that operates within the law, does nothing wrong and voluntarily makes contributions toward the party of its choice.
I would be perfectly satisfied if the Liberal party in Canada were to operate on the same basis. They could have any number of clubs set up for the purpose of raising finances for their party, and I would not have one word to say in objection because I think it is a legitimate way and a good way in which to raise finances. But it is not a good way when contributions are made by huge corporations that deal intimately with the government.
Perhaps the most classic example we have had in very recent days is Trans-Canada Pipe Lines. Here is a company that has, through the medium of the government, dipped into the public treasury in order to finance its operations. If that corporation is found to be making huge financial contributions for political purposes to the party in power, the people of Canada will have a perfect right to feel suspicious and to feel that they are being sold down the river.
Instead of trying to slough this matter off by saying, "What's a mere $30,000?" in a sort of pale imitation of the Minister of Trade and Commerce who said, "What's a million?" I think the hon. member might stop, think, and ask himself this question. Is it a good policy for his party to appeal for money to the rich and votes to the poor on the promise of defending one against the other. That kind of thing can lead to almost unimaginable kinds of corruption in this country.
I have no apologies to make for what I said yesterday. I still believe that there is a danger. I not only believe that the political parties in this country are likely to fall under undue influence by accepting contributions from corporations which, in themselves, might
Supply-National Revenue become a form of political bribe, but I believe that there is also the danger-and I am not yet satisfied on that point-that they are attempting to make these contributions by deducting them from their income at the expense of the public.


Mr. Nesbitt:: Mr. Chairman, I suppose one might say that the taxation division of any government is always the most unpopular branch of it, human nature being what it is. I might even go as far as to say that such has probably been the case ever since the days of Pharaoh, the Romans and King Herod. I think, therefore, that any observations a person might make on this particular item of these estimates should be of a general and a constructive nature to try to assist the minister and the officials of his department in correcting certain abuses that I think exist at the present time. The estimates of this department were before the special committee on estimates, and as a result there are certain general observations and recommendations I should like to make. I feel that these conclusions could be drawn from the evidence that was brought before that committee.
First of all, with respect to succession duties I should like to mention the question of the valuation of real estate. As hon. members know, the federal government has its own system of succession duties and certain of the provinces have their systems. As a result of having two different administrations frequently, not in all cases, Mr. Chairman, the provincial authorities and the federal authorities arrive at different valuations on the same piece of real estate. We can all understand how that comes about, because of course the federal department has no right to tell the provincial departments how to value real estate and vice versa. These niceties of distinction as between governments are not so apparent to the ordinary person on the street; and the general public can see no sense in the federal government valuing a property at $30,000 and the provincial department valuing it at $35,000. I think there is some justification for that attitude.
I know there are great difficulties in trying to arrive at uniformity in this matter, but one reasonable recommendation that might be made would be for the federal Department of National Revenue to try harder to work out some arrangements with the provinces whereby valuations could be uniform. I repeat that we all know there are difficulties, but the ordinary man on the street does not understand these things and it does not bring any government, be it federal or provincial, into better respect if we have this situation where one office values real estate at one

Supply-National Revenue amount and another office at another amount. Undoubtedly some arrangement could be worked out if a real effort were made and a common system of valuations, even common valuators, could be arranged in most parts of the country. Then one valuation for the provincial and federal succession duties could be arrived at.
The second thing with respect to succession duties is this. I feel that the department should issue new directives and instructions with respect to the procedure to be followed. I think these new directives and instructions should be complete, clear and concise. They should be uniform. They should leave no room for ambiguity, particularly with respect to certain matters which are as follows. First, disclosure to executors and legal representatives of estates should be made as soon as possible of the rules and regulations that the legal representative or executor should take into consideration before assessment of the assets is made by the department. In this respect I think it should be made clear also to the local officers that the government does not have the attitude, as the minister told us in committee, of "get all you can." This has been mentioned by other hon. members this afternoon. The minister made it quite clear to us in the committee that this was not the attitude of the government. There seems to be some misunderstanding in this respect, and if new directives were sent out it could be made quite clear that this was not the attitude of the government. Annoyance and difficulty as between the government department and the taxpayer could thus be avoided.
Another thing that should be made quite clear to the members of the department and the local offices-and again the minister pointed out very clearly in the committee that this was not the policy of his department- concerns their attitude that they are not missionaries. I have heard numerous complaints from reliable authorities that the local offices have the idea they are not missionaries and they will not disclose to executors or legal representatives of estates rules that might be helpful. As I have said, apparently the attitude of some officials in local offices is, "We are not missionaries". I think a directive from the department should make it quite clear to these local officials that this is not to be the case. The minister has told us that in the committee, and I think it should be made clear to these officials.
I believe it should be made clear to these officials as well that promotions are not the result of "getting all you can." The minister made it clear to us in committee that this was not the policy the department follows in


naming promotions. As I pointed out on other occasions I know a great many people, not only in the Department of National Revenue but in totally unrelated and non-government departments, who have the idea that they stand a better chance of promotion if they take this attitude. If the minister made it quite clear to the officials of local departments that they are much more likely to get promotion by giving all the information possible to legal representatives and executors and by doing everything they can to be helpful, further annoyance and further difficulty as between the department and the general public would be alleviated.
Those last two remarks of mine might also be applied to the income tax branch of the department. Another matter I should like to mention is this question of the valuation of what you might call the non-liquid assets of the estate. As hon. members know, when a man dies the assets in his estate are valued as of the date of death. There is no difficulty with things such as stocks, bonds, cash in the bank, mortgages and so on. Frequently the difficulty arises when you get fairly large estates, possibly between $50,000 and $150,000, where the assets are not liquid, in other words not easily disposed of. This situation occurs when you get large farms, and in the southern part of Ontario this applies to tobacco farms and fruit farms. Fortunately it does not often apply to dairy farms, but to the more specialized type of farming such as tobacco and fruit farming. It applies also to various types of businesses. You may have a small garage business or a merchandising business which may be worth $200,000 or $300,000. Even a specialized type of farm may be worth $50,000 or $150,000 under normal conditions when it can be sold without any rush.
However, as hon. members know the succession duty must be paid within a certain period of time. Very often while the valuation of the property is taken as of the date of death, when there is no ready cash available to pay the succession duties these farms or businesses have to be sold at a considerable sacrifice in order to raise the cash to pay the succession duty. As a result the estate, instead of being worth let us say $150,000, may only be worth $80,000 or $90,000; yet the taxes have to be paid on the higher figure. We all understand that there is to be a new act introduced this session, the estates act I believe it is to be called, and I hope when that act comes down this disagreeable stiuation will be remedied.
There is another item which does not come under succession duties but I will include it for convenience sake, and that is the matter of joint tenancy. I would say that a property

owned jointly by a husband and wife should not be taxable as a gift even if it amounts to over $4,000, in other words if the property is worth over $8,000, even if the wife contributed nothing, provided that all the surrounding facts show that the property was placed in a joint tenancy only for convenience in case the husband dies.
I may say that this is a very common procedure in Ontario, and I have no doubt elsewhere as well. A young couple get married and buy a house. The conveyance is in their joint names. In some provinces lawyers and conveyances will put the property in their joint names. As I say, this is a matter of convenience; it is a matter of protecting the wife. If the man dies the property will automatically go to her. Because of the present prices of houses it is not uncommon-in fact it is quite usual-for people to pay more than $8,000 for a house. If all the surrounding facts show that the property is in fact the property of the husband, that he pays all the taxes and carries out all the dealings in connection with the property, if it is in the name of the husband and wife only for convenience sake, then there should be no question of a gift tax.
The regulations require that today as a matter of policy. There is little doubt, Mr. Chairman, that policy and procedure cannot help but overlap to a certain extent. In fact, Mr. Chairman, I would go so far as to say that the family home-I repeat, only the family home-should be considered as jointly owned by husband and wife, if they so desire it, with no question of gift tax at all. I think that is a socially desirable thing. Young couples start out by buying a piece of property. After all, the wife does contribute to the value of the home. She looks after the children, cooks the meals and maintains the property. I do not think the Department of National Revenue or the government would be out very much money if the husband and wife could consider their home-and I say only their home, not any other property-jointly owned so that no gift tax would be payable at all.
I should now like to say a word with respect to income tax. I think it is rather a pity, Mr. Chairman, that the amendments to the Income Tax Act proposed by the hon. member for Kamloops were not adopted. That is past history now. We hope that in the future they may be considered more favourably by the Minister of Finance. However, I should like to recommend that directives be sent out to ensure uniformity of procedure in all local offices of the income tax division. Those directives should be clear 67509-319
Supply-National Revenue and concise. According to the evidence given recently in the committee on estimates that is not always the case.
Let me give one example. I refer to a matter which I mentioned in the special committee on estimates, which may be found at pages 820 and 821 of the proceedings of that committee. It was stated at that time, for instance, that medical receipts were returned to the taxpayers if they required them for record purposes, and so on. However, at that time I read into the record a letter from the London office which clearly showed that in that particular instance medical receipts were not returned. Although the department clearly stated it was the policy at that time to return them if they were required, yet I read a letter showing that medical receipts were refused a taxpayer. It would be wise if a complete set of uniform directives were sent to the various branch offices of the department.
Again on this matter of income tax, I would urge the officials here to see that the policy and instructions of the head office are carried out a little more closely than they have been. Again I refer to volume 20 of the proceedings of the special committee on estimates. At page 843 the hon. member for Middlesex East referred to documents that are taken by the department for purposes of investigation. The minister said, as reported at page 843:
They are released as quickly as we possibly can release them. Take for instance a doctor's cards that we seize, and the like of that. The way the doctors keep books nowadays they usually have a card system with the history of the patient on one side of the card and the account on the other side. When those are taken into the office, as I have said on one former occasion, we have photostat machines in every office throughout the country, and photostatic copies are taken of these different cards, and the accounts, and they are released as quickly as possible.
Then the minister went on to make other remarks in this regard. He said:
We think that we are within our rights in retaining them until that can be done.
No one questions or quarrels with the minister's policy in that regard. However, earlier this year, in remarks I made on the address in reply to the speech from the throne, I pointed out that one businessman in the city of Woodstock had the records of his business taken by officials of the department last July, almost a year ago. At the time I made my remarks on January 16 last those books had not been returned. That was six months ago and to my knowledge, Mr. Chairman, they have not yet been returned. I may be mistaken in that, but I believe they have not yet been returned. Certainly they were not returned six months ago. This is
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Supply-National Revenue a large commercial business in the city of Woodstock and the retention of those documents has caused a great deal of inconvenience. I mentioned also that the departmental officials had lost some of the records. It was an accident that could happen to anyone. I am not objecting to that; it was an accidental thing, but here is a case where records were not returned for at least six months, and so far as I know they have not been returned yet.
I have another matter that I should like to touch on briefly. These matters were not brought up in the committee. There are additional subjects that I should like to mention. The first has to do with investigation. The department, of course, has to make investigations in certain parts of the country. The department has to make spot checks and investigations to see that people are making just tax returns. We all recognize that. I think when the department are doing this they should follow some sort of impartial policy. In other words, if they feel that in a certain township a certain area has to be investigated, that is all right; investigate every farmer along the road.
But it is my information-and a great many people believe it, and I hope the minister will clarify it-that very often someone who has a grudge against a neighbour will write into the department and say, "I think Tom Jones has been getting away with a great deal of income tax; you ought to investigate him". The department then comes along and investigates the person who may or may not have been attempting to evade income tax. Regardless of what the situation is, I do not think it is good policy for the departmental officials to make investigations on complaints received by letter. On an earlier occasion I mentioned the situation at the time of the French revolution. If somebody wrote a letter the person was arrested and locked up the next day. This system might cause endless inconvenience to people. It is something that should be considered.
It is my understanding-again I hope the minister will give us some clarification on it or deny it-that very often the books of professional men, doctors, lawyers, accountants and so on, are taken and held for investigation, not for the purpose of investigating that particular doctor, lawyer or professional man but for the purpose of getting comparative records to investigate somebody else.


James Joseph McCann: That is not so at all.


Wallace Bickford (Wally) Nesbitt: The minister says that is not so. I am very glad to hear that. I shall not continue with my remarks.


James Joseph McCann: You cannot give one single instance of where it has occurred.


Wallace Bickford (Wally) Nesbitt: The minister says it is not so. I am happy to hear that. That is why I raised the question. A lot of people have suspected it. I am glad the minister has cleared it up.
With regard to keeping the books of professional people, the minister says they are returned as quickly as possible. That may well be, but I do not think so. I know of one case, and this is certainly not hearsay. A veteran was trying to get his medical expenses deducted. He was in receipt of a pension, and he had certain receipts from the doctor. He tried to get the receipts and could not get them because the Department of National Revenue was holding the books of this particular doctor and held them for months. Eventually the matter was cleared up. The inconvenience in this particular case was caused after the man was declared eligible for a pension but medical receipts had to be produced within a certain time and the doctor could not provide them. As I say, fortunately it was cleared up but there was some difficulty.
I have one last item to bring up, the matter of allowable deductions for entertainment costs incurred by commercial firms. As hon. members know, this deduction is rather elastic. It must be reasonable. The head of a company brought to my attention a case where certain entertainment expenses had been incurred. The department agreed that they were reasonable and wanted to know how many people had been entertained. This man told them five people, including himself. He was told that he could not deduct the cost of his own dinner. It was a trifling amount but it illustrates my point. I hardly think the department would expect the head of a company entertaining other men at dinner or luncheon to bring his own sandwich. I believe this is a matter that might very well be brought up. I see my time is moving on, and as other hon. members may want to say something, I shall terminate my remarks.


Mr. Herridge:: Mr. Chairman, I have been quiescent on these estimates up to now but I do want to make a few observations on a matter which will be of interest to people engaged in the mining and lumbering industries in British Columbia. Before doing that may I say that I appreciate the courtesy I have received from the minister's officials in Ottawa and in the district office in Vancouver. I have found them willing to go into all aspects of any case brought to their attention.

I am informed that after the war certain industries which were of a wartime nature and therefore temporary were allowed to charge the cost of plant, in some cases the cost of equipment and in other cases the cost of houses they had erected, to their operation costs. In some cases companies had made arrangements with their employees to purchase houses, and as a result of the arrangements made with the taxation department those employees received back certain sums which the company had been able to recover because the cost of the houses was considered to be a cost of operation.
That was a very proper thing to do, but we have another situation in British Columbia where mining or lumbering operations are brought to a close because resources have been depleted. As a result the investment made in plant, equipment and perhaps housing is of no value. I have received my information from several sources, and I am not sure if I am completely or accurately informed, but could the minister state if the government has considered applying this principle to mining or lumbering operations which are brought to a close because the resources being developed are exhausted and therefore the investment in plant, property, equipment and housing is valueless.


James Joseph McCann: Mr. Chairman, I am not
familiar with the matter to which the hon. member has referred and perhaps it would suit his convenience if I looked into it after I receive a report of what he has just said and give him an answer privately.


Mr. Michener:: Mr. Chairman, I should like to raise one question of administrative efficiency having to do with the deduction of income tax at the source and the liability of the employee for such taxes. In effect you have two parties responsible for the payment of the taxes, the employer whose duty it is to deduct and remit the taxes and the employee whose duty it is to pay the taxes. Perhaps the minister could tell the committee how this administrative problem is handled. I had noted some questions I should like to ask. Is there a file for the employer with respect to each employee? Is there also a separate file with respect to each employee? Which is the control file? How is information passed from one file to the other? Does the same member of the administrative staff have the responsibility for both files?
I ask these questions because there is a problem in connection with collection and not demanding the same taxes where two people are responsible. I have a case which I intend to cite to the minister. If the employer has paid, it is important that no demand should be made upon the employee 67509-3191
Supply-National Revenue for the payment of the same taxes. It is not only bad administratively, it is most annoying to the taxpayer to be asked to pay something which has been paid already.
Before the minister answers I should like to cite a particular instance which was brought to my attention. I do not expect the minister will know about it because this arose in Toronto. A Miss Marjorie E. Dixon was employed as a temporary stenographer in certain law offices, moving about from one to the other. In the case of employment at one office she had noted the amount of pay received and made her return on that basis, but her employer was in error in thinking that she had been paid $50 a week instead of $55 and he deducted and remitted her tax on that basis. When she filed her return there was an obvious discrepancy, as there was an amount which should have been paid by the employer. The employer was advised of this and he paid the amount promptly, but the officer of the department who was trying to collect the difference from the employee did not seem to know this and for a period of weeks when an exchange of information might have taken place, demands were made upon the employee for payment.


James Joseph McCann: The case the hon. gentleman refers to indicates the small errors that can occur in any office or in any business. In the set of tables which are distributed before the beginning of the year are set out the deductions that should be made relative to weekly wages or annual salaries. Those deductions are to be made from the employee's salary and remitted to the district office before the 15th of the following month. The director of the district office is the person who has full charge of that, no matter which official or set of officials of the division it is referred to. At the end of the year he sends in a form which indicates the total deductions that have been made from the salary of that employee throughout the year or, if he has not been employed by the same person, the number and the amount of the deductions made. The employee himself fills in a form, his return, and he says that he has had deducted $10 per pay or per month, or a total of $120. Those two are put together in that district office, and if they do not correspond then we attempt to find out where the discrepancy has arisen.
It may well happen that there has been a change in the rate of payment. That employee may have worked for only six months, so he may have had three or four jobs in the one year. If so, then he has deduction slips from these different people. I may say that with the millions of returns-and it runs into millions-where money is deducted at
5038	HOUSE OF
Supply-National Revenue the source, we do not have very much bother with them, and in the matter of the sending in of the amount of money, we take into consideration where the employer is doing business. He may be a lumberman or he may be in a mining operation, and you cannot have that man sending the amount so as to reach the district office by the set date. We are very considerate of that, but if an employer persists in being dilatory in sending in his returns it is sometimes necessary to take into consideration what is in the law and what has to be done with that employer, and the penalty probably is inflicted in order to spur him up and have him conform with the law. I do not know whether there is any other answer I can give.


Mr, Michener:: I have followed the minister's answer so far, but can he carry it one stage further? In this case the discrepancy was discovered when the employee's return was received. Then it was brought to the attention of the employee, who went to the employer who had made the error. The employer then paid what he had failed to pay, plus the penalty that was charged. At that point there seemed to be a breakdown, because that payment was not communicated to the person who was demanding the same payment from the employee. Payment had been made by the employer, but there was nothing to let the left hand know what the right hand was doing.


James Joseph McCann: I get your point. A further slip should have come in that would make it known that the difference had been paid. That is where the employee had a right to protest. But the employer was not under obligation to pay that amount, because he had deducted on the basis of the wage that he thought that this employee was obtaining. The difficulty was that they notified the employee that he or she owed a certain amount of money that should have been deducted at the source by the employer. I presume the employer realized that it was his mistake, and rather than have a whole lot of negotiations he paid it.


Daniel Roland Michener: Yes, that was so; but what I was concerned about was the state of the communication or liaison in the office in Toronto, where you have the employer paying and the employee liable, so they are coordinated in some way. Does the control lie with the employee's file in a case of that kind?


James Joseph McCann: Yes.


[Stage Direction]
Amendment agreed to.
Stanley Howard Knowles: I wish to speak either to the amendment or to the resolution as amended.


Jay Waldo Monteith: Are we still on item 289?


The Deputy Chairman:: Item 289 as
amended.


Stanley Howard Knowles: It was my intention, Mr. Chairman, to comment on some of the matters that were discussed by the hon. member for Hamilton West, but I noticed that later the Minister of Finance suggested that she had been given quite a bit of latitude and I think the implication of the minister's suggestion was that he hoped others would not claim the same latitude. I assure him that I shall not do so. I should like, however, just to say in a sentence or two that I was glad that the hon. lady raised once again the question of the floor under medical expenses.
In spite of the fact that the house has made a decision on that matter at this session, and despite the fact that no change in that regard has been included in this year's budget, I hope the Minister of Finance will give consideration to it in preparation of that next budget which the Minister of Citizenship and Immigration reminded him earlier he might be making before the end of this parliament. Whether or not there will be another budget before the end of this parliament is not a certainty, but if there is one I hope he will do something about that floor. If he follows the practice of recent years he will reduce it another notch. That is better than leaving it where it is, but I hope that next time he will wipe it out altogether.
Now I turn to two or three things which I believe are administrative rather than in the policy field, though the first one may be on the borderline between administration and policy. On several occasions cases have been brought to my attention similar to one about which I received a letter a short while ago. This is the case of a taxpayer, a married man, who is contributing rather heavily to the support of a widowed sister in law who has a number of children. The taxpayer and his wife are both working now, although that gets away from the main point about which I am concerned, for the result is that the taxpayer in question has to file his return on a single basis.
However, what did disappoint him greatly when he went to the officer in charge-this was in Toronto, I may say-was to discover that there was not any way in which he could claim the deduction for the children of his widowed sister in law, who of course are his nephews and nieces. The officials whom he saw in the Toronto office read to him section 26 of the Income Tax Act. When he saw the part that refers to child or children without any reference to them belonging to the taxpayer, he was hopeful that since he was contributing to the support of these children

he would be able to claim $150 or $400 deduction tor them. I believe they are all of family allowance age in this case, so the amount he was seeking was simply the $150 each. However, the officials indicated to him that the reference to child or children is only in that part of section 26 which deals with the right of the taxpayer to claim $2,000 exemption as a person who is maintaining a self-contained domestic establishment, supporting therein a child or children under 21 years of age, and so on. It was pointed out to him, on the other hand, that later in the section, indeed in the subsections where his case has to fall, the reference is to a child or grandchild. The reason I say this might be a policy matter or might be a matter of administration is that the income tax official with whom this taxpayer dealt did use the word "interpretation". He said that as the law was now being interpreted, though nieces and nephews were not excluded in a case such as his, they were not included, and therefore the official who handled this case felt that this man could not be granted this exemption.
It has been indicated to me that it is not an unusual type of case where, as the result of the death of a brother, someone else in the family does make a substantial contribution to the maintenance of the fatherless nephews and nieces. I would hope that the minister might take a look at this and see whether it is a type of case that can be dealt with by a reinterpretation of the section, by regulations based on the section or in some other way. I appeal to him to attend to it as soon as he can if it can be done in an administrative way; but if after studying it he comes to the conclusion that the matter cannot be dealt with administratively and does call for an amendment to the act, I hope he will take the matter up with his colleague the Minister of Finance. In human terms it does seem that in a case like that, where a taxpayer is contributing substantially to the support of nephews and nieces, he should have the right to deduct the $150 or $400 allowance with respect to those nephews and nieces.
The next point I draw to the minister's attention is one I have raised on various occasions in the past, but I ask him once again to study the matter of including on the T-4 slips a place for amounts deducted for trade union dues, particularly in the case of some of the large employers who handle the payment of trade union dues under a checkoff arrangement. The employer is already doing the bookkeeping involved in the checkoff, and it does seem that it would be a matter of simplicity and a matter of fairness if the T-4 slip had on it, in addition to the other items such as income tax deducted at
Supply-National Revenue the source, pension fund contributions and so on, a place for the entry of the amount of trade union dues deducted in that way.
I know that one of the answers the minister may make is that the law with regard to the deductibility of trade union dues has certain qualifications. Not everything that is paid to a trade union as dues, though it may seem to the member of the union to be dues, is allowed as dues for the purposes of the act as it now stands. However, there are some cases where everything that is paid does meet the conditions of the law; and in those cases where it does not-in other words if this issue is also part administrative and part policy-I would hope the Minister of National Revenue would deal with it himself in so far as it is administrative and make appropriate strong representations to his colleague the Minister of Finance in so far as the matter is one of policy.


Clarence Gillis: Initiation fees.


Stanley Howard Knowles: My colleague the hon. member for Cape Breton South has mentioned the initiation fee as one of the items involved in joining a trade union which is not allowed for purposes of income tax deductibility. It seems to me that some less complicated way could be found than now obtains with regard to the portion of trade union dues that is allowed. Just as a suggestion I throw out to the minister that instead of the complicated set-up now existing, which requires some trade union secretaries to do quite a bit of arithmetic and establish the percentage of the dues that have been paid that is allowable -and sometimes it is a percentage that runs to at least two decimal points-some ceiling on the amount could be fixed.
I have heard the fear expressed that if there were no limitations of any kind some union members might decide to pay rather fantastic sums to their unions for benefits that might come back to them so they could get the benefit of income tax deductibility in that way. I certainly do not know of any instances where a practice of that kind has been tried but, as I say, a way to avoid that would be to survey the field as to the level of trade union dues being paid. It would work out as a certain percentage of the wages of the worker, and some reasonable percentage sufficiently above that figure could be set so that everything a trade unionist paid by way of dues might be allowed as deductible for income tax purposes provided it did not go over that reasonable percentage of his wages. It does seem to me that would be a far more practical and fairer way than the one that obtains at the present time. I am free to admit that this is in part administrative and in part

Supply-National Revenue policy; therefore I am glad that I have the attention of both the Minister of National Revenue and the Minister of Finance on this point.
I move on to another suggestion I should like to make to the minister. In the page of information that is attached to the T1 short form which was put out this year there is one paragraph which reads as follows:
Income from pension fund-If you received a lump sum payment out of a pension fund during the year, the amount must be included in your income for the year but may be subject to a reduced tax rate. For further information on this point, inquire at your district taxation office.
As the minister knows, this relates to the special treatment that can be accorded a lump sum that a taxpayer receives out of a pension fund by virtue of the terms of section 36 of the Income Tax Act. As the minister also knows, earlier in the session I inquired whether the department would not consider putting out some special forms to enable people to deal with a claim they might be in a position to make under section 36 of the act. The minister did not feel that that was necessary, but drew attention to the fact that there is this paragraph in the explanatory notes attached to the income tax form.
What I wish to point out is that there is more in section 36 than is referred to in this explanatory paragraph. If one reads section 36 carefully he discovers that it is possible to get the special treatment that is accorded payments of that kind, a treatment that involves comparing the total amount of tax you paid over the past three years with the total amount of income you had over the past three years, but what I was about to say was that in addition to it being possible to get that special treatment for lump sum payments out of a pension fund there are certain other lump sum payments than can receive the same treatment.
For example, if a person is dismissed from his employment and is given a lump sum in lieu of a period of time-weeks, months, or what have you-I am told that also is the type of lump sum that can be accorded special treatment. A person can receive money because he has been retired or laid off for other reasons than going on pension. What I am suggesting at this point is that this paragraph I read from the explanatory notes that are attached to the income tax form should tell the taxpayer more than it tells him at the present time. At the moment all it tells him about what is contained in section 36 is that he can get special treatment for a lump sum payment out of a pension fund; but since the section provides for special treatment for certain other lump sum payments as well I

think some reference to them should at least be included in the explanatory notes attached to the income tax form.
Mr. Chairman, I should like to draw one other matter to the attention of the minister. As he knows because of the sessional papers he has tabled this year in response to questions I have placed on the order paper, it is now common knowledge that the department has on hand a rather sizeable sum of money in refunds that have not got back to the people to whom they belong. I refer to sessional papers No. 106-C and No. 106-D, both of which were tabled on Wednesday, March 14, 1956, in response to questions I had placed on the order paper. One of them had to do with wartime compulsory savings refunds. It is quite a while now since those refunds were all to be paid back to the people to whom they belong. But apparently as of January 31, 1956, there were still refunds due to some 63,203 persons. The amount on hand for those persons was $2,923,951.48. In addition to that, it turns out as follows; if I may, I should just like to read one sentence regarding income tax refunds in general from sessional paper No. 106-D:
The total amount of income tax refunds outstanding as unpaid to individuals, as of January 31, 1956, was $2,501,393.05.
If you add those two sums together you will find they add up to something over $5,400,000 of money which is in the possession of the department and which rightfully belongs to individuals across Canada.
The minister included in the sessional papers his answers to my questions as to what steps the government has taken to get these refunds to the persons to whom they belong. He indicated that a certain amount of investigation has been carried on and that a considerable amount of advertising has been done. But it still seems to me that if the government were as anxious to get this $5 million back to those people as it would be to get in the money that the same number of people might owe to the government, it could make better headway than that.
I would appeal to the minister to give some more serious thought to ways and means of finding out where these people are and getting this money to them. In all probability these people who have wartime compulsory savings refunds coming to them are little people. The so-called big people seem to know their way around with respect to getting back refunds of this kind. I am sure that while many of these refunds will not be very large sums of money, they will belong to people to whom any sum of money would be a godsend. I would urge that some serious

thought be given to finding a way of getting this money back to the people to whom it belongs.
In that connection-and in part of what I am now going to say I shall make mention of the other side of the coin-I was also interested in the question of whether there are people who have had tax deducted at the source but who, through failure to file an income tax return at the end of the year, have not got back moneys to which they are entitled. Undoubtedly there will be people-* and this ties in with the discussion that was held just a few minutes ago between the Minister of National Revenue and the hon. member for St. Paul's-from whom deductions are made at the source during the year but with respect to whom, for one reason or another, perchance because they do not work the whole year or because they move from one job to another and the rate of pay changes, when the year is done the total amount deducted at the source can be greater than the amount which the taxpayer would really be obliged to pay.
There are many people who find it difficult to dope out income tax matters and who just do not bother to file their returns. There can be people-and I am sure there are-in that category who have overpaid their income tax during the year by means of amounts deducted at the source but who, because they do not file returns, do not get their money back. This was a question I put on the order paper. It is found at page 2587 of Hansard of March 23, 1956:
1.	For each of the last five taxation years for which the statistics are available, how many persons from whom income tax was deducted at the source did not file an annual income tax return?
The reason I asked that question was as I have already indicated. I am concerned about these people who have too much deducted at the source and who do not get it back. The answer to that question was: "No information available". My next question read as follows:
2.	By years, how many of such persons were found, or believed, to have a refund coming to them?
The answer again was, "No information available". That answer rather startled me for two reasons. First of all, it seemed rather strange that there could be people making payments through deductions at the source, and overpaying during the course of the year, with the government through this department having no information about those people. In other words, by virtue of not having that information, by virtue of not checking such files, these people inadvertently are left in the position of having paid more than
Supply-National Revenue they should have paid during the year, yet they do not get their surplus back.
But what I realized when I saw that answer -though I admit that this was not what I was out for when I put the question on the order paper-is that the reverse can be true if the answers here are correct. As I interpret these answers, they seem to be at variance with what the minister was saying to the hon. member for St. Paul's in another connection a moment ago. As I interpret these answers, no record is kept to ascertain how many people there are from whom deductions are made at the source but who at the end of the year file no return.
As I say, I started out concerned about the little fellow who pays in too much, but there may be some of the other variety. There may be people who have not paid enough through deductions at the source, and they just let it go. They just do not bother to file a return. The Minister of Finance said the other day that one of the jobs of the income tax department is to collect taxes fairly; he said it is just as important to collect the taxes that are due as it is to grant the concessions that are provided by law. Well, if this answer means what it says, I suggest it may well be that there are people who, whether through inadvertence or whether it is because they do not know how to fill out an income tax form or for any other reason, have not had enough deducted at the source but they do not do anything about it. They do not file a return.
The minister says there is no information available as to how many such people there are. I assumed that there would be some means of cross-checking between every person for whom a deduction at the source is made and every person who files an income tax return. Assuming that is done, it would seem to me that then if there are people who have deductions made at the source who do not make any returns, the government would know how many there are and would be able to ascertain whether that situation arose because the people concerned were paying too much or paying too little. The minister says, in reply to my question at page 2587 of Hansard, that no information is available as to how many people there may be in that category.
Now, the Minister of Finance and I will join in making representations to the Minister of National Revenue on this point. The Minister of Finance, I am sure, would want some checking done with regard to those people who have not paid enough, and the representations I make are for the other people who through deductions at the source pay in too much during the year but who through

Supply-National Revenue failing to file a return do not get a refund of the surplus they have paid. It seems to me there is an obligation on the department to meet the representations the Minister of Finance is making through my mouth-


Walter Edward Harris: But not exactly as you describe it; not as much as I can get but as much as the statute provides.


Stanley Howard Knowles: I am sure the minister would not disagree with what I said, that he wants what the statute calls for to be collected.


Walter Edward Harris: That is right.


Stanley Howard Knowles: That is the position of the minister. My position is that I do not want any more than that to be collected, through inadvertence or through the department not having the records and not having the information as indicated by the minister's answer to my question. I would hope, Mr. Chairman, that this matter, as well as the others to which I have referred in these remarks, will be looked into by the minister. I would be glad to have his answers during the course of the debate on any of the items I have raised. In so far as they may call for some research and some administrative changes, even after today, I hope he will give them serious attention.


Mr. While (Middlesex East):: Earlier in the session I made some remarks regarding the bill presented by the hon. member for Kamloops. On that occasion the amount of time available was limited, and I was not able to finish all I wanted to say to the house and to the minister.
It was my privilege to be a member of the estimates committee, and I just want to draw some conclusions from my experience on that committee for the benefit of the house. First of all we considered the estimates of the excise and customs branch. I was certainly very favourably impressed with the results of the work of that committee. All the questions and criticisms that were brought forward were very ably handled, and I think to the satisfaction of the committee. Very good explanations were given for the decisions and rulings that were made in cases dealing with customs and excise.
I was a bit, what shall I say, shocked at the change of pace and attitude with respect to the income tax division in that committee. It seemed apparent to some of the members -I will not say most of the members.-that there was not likely to be any admission by the department that any errors could possibly arise. In practically every case where a member brought forward a complaint there was evidence brought forward to show that somewhere along the line there was some 

mistake, and it just could not possibly be that way. There were a number of things I wanted to bring to the minister's attention in that committee, but I felt it would be futile and the result would be more or less an okay of the work of the department and discrediting, as far as possible, the member who brought forward the objections. Perhaps I am wrong, but I regret that is the feeling I brought out of that committee.
The hon. member for Kamloops introduced his bill, and I mentioned that it did not go far enough. His suggestion was that the returns should be finalized in a three-year period. I mentioned last session, and I mention it again now, that in cases involving $10,000 or less the department should be able to process the taxpayers' returns and give a final receipt-except in cases of deliberate fraud-within 12 months from April 30. The taxpayer is given 4 months after the end of the calendar year to make up his return, and surely if the department had one year from that time it would be adequate, if they are as efficient as they would like the public to believe. At that time I brought to the minister's attention the fact that many county councils signified their belief that that could be done and should be done.
The hon. member for Perth dealt very fully with the net worth statements. Therefore I shall not comment further except to say that I heartily endorse what the hon. member for Perth said yesterday. The hon. member for Hamilton West dealt with payments to retirement plans. I just want to point out here that self-employed persons are not allowed to deduct payments they may make to any retirement plan, yet self-employed persons are contributors to all these other plans because of the fact that payments become part of the costs of the things these particular companies make and sell. Consequently these self-employed persons are not allowed to deduct pension payments made on their own account but they are helping, in a way, to pay into these other retirement plans.
From time to time I have mentioned in this house the advantages of profit-sharing plans in industry and the good relations that can be developed through such plans.
These profit-sharing industries in Canada and the United States have made representations to the effect that until the profits that accrue to any employee are actually in the hands of that employee they should not be taxed; otherwise he may be taxed on funds he never will receive. Even the chambers of commerce recommended that the right to assess be limited to one year dating from the assessment, but that is not good enough because the assessment may be delayed one,

two, three, four, even five years or more, and consequently the taxpayer would not stand to gain under such a plan.
Just recently I listened to the minister, and I am going to quote what he said as recorded on page 820 of Hansard for February 2 of this year. That he of all men in the house should use these words and then have his department act as they do is something I can hardly understand. This is what he had to say:
As everyone knows from common knowledge, from time immemorial the Englishman's home has been his castle, and all matters pertaining to him and his family are protected by law from trespass or exposure. You cannot enter his house without his permission. You cannot ascertain his private affairs without voluntary disclosure. This right of privacy that every Englishman possesses is as strong in this country and in all the countries of the commonwealth as it is and has been from time immemorial in England, from whence we draw so many of our laws and so much of our tradition. This right of privacy that every Englishman possesses is, as I said, as strong in this country as in any other.
Then his department goes about denying all these things. Probably, after the furore of last week, I should not say a great deal about abuse of power, but all through history we find individuals seeking power. The more power they get the more power they want, and the more power they get the more glory they get. I would point out to the minister that power is fleeting. I need only mention a few names; Peron, Mussolini, Hitler, and all down the line. Power is fleeting, so be careful how you use that power.
The people with whom you are dealing are, in most instances, hard-working people. They are not acquainted with all the fine points of the law. In fact I intended to have on my desk the office consolidation of the Income Tax Act and all the amendments that have been added to it. The minister has heard, and I have heard, of Philadelphia lawyers, but all the lawyers in Philadelphia could not interpret them alike. Yet the taxpayer is expected to know just where he stands in connection with these many laws. Just while I am dealing with that may I say I have on my desk a letter from a constituent of mine dealing with the joint ownership of property. He says:
Six months after death of the wife income tax assessed for a few hundred dollars.
He said they had owned the property jointly for six years. He also said that a well-known firm of lawyers had advised him that no gift tax would be assessed in this particular case. Yet six months after the death of his wife he was confronted with a demand for an amount which he paid, and then of course he protested about it to me, but there he was. He goes on to say:
Supply-National Revenue When I confronted my lawyer with the statement he made to me, he said, "It is quite evident nobody knows just what the income tax department may do; nor can any ordinary citizen interpret their rules and regulations".
That is what the taxpayers are up against. They find that a rule that may be applied in one case does not apply in another. I am not blaming the minister too much. These things go on because the people in the different districts have a considerable amount of power, and perhaps these things go on without his knowledge. These usages and customs have grown up like Topsy over a period of years. I imagine the minister may admit that some of these questionable practices have gone on, but he will defend the system.
I want to point out that, on the other hand, knowing about the practices and allowing them to go on is a disgrace. If he does not know that they are going on, it is certainly time he did. We have heard a lot in years gone by about the four freedoms, the freedom from want, the freedom of religion, the freedom of speech and the freedom from fear. I mentioned this question of fear before. Not only the taxpayers, but accountants and lawyers do not want to take any part in it because they are afraid of what might happen.
Mr. Chairman, it is six o'clock.
At six o'clock the committee took recess.


[Stage Direction]
AFTER RECESS

The committee resumed at eight o'clock.
Harry Oliver White: Mr. Chairman, when the committee rose at six o'clock I was dealing with the administration of the Income Tax Act and had pointed out to the committee a statement made by the minister on February 2, 1956, in which he upheld the traditions of British justice and the fact that the home of a Canadian as well as that of an Englishman was his castle. I pointed out what power was doing to and for these men.
I should have mentioned that during the years since the Russian revolution one thing that has been pointed out to us as something to fear as probably the greatest menace to the freedom of the individual was a knock on the door in the middle of the night by a member of the gestapo. These fellows do not wait for night; they do not even knock on the door. They just walk in. They do not take possession of your person but they take possession of your papers and you are lucky to get them back, as was pointed out by the hon. member for Oxford not only in committee today but in the committee on estimates. I do not want to dwell too long on
5044	HOUSE OF
Supply-National Revenue that aspect of the situation, but it gives us cause for thought as to how far we can go along this line.
When I was dealing with income tax problems earlier this session I brought a case to the attention of the minister. I did not mention the name then, but I shall mention it now. I pointed out that for some ten years a girl named Mary Vegso had worked for her father barefoot in the tobacco fields. When she was married her father gave her all her back wages, and in all some $1,900 was paid over, on which she was taxed. An appeal was taken to the income tax appeal board. At that time I neglected to point out that in order to justify his findings the assistant chairman of the board went back to Partington v. Attorney General, a case decided by Lord Cairns in 1869, two years after confederation.
I want to point out to all new Canadians that ten years from now they may find themselves in a very difficult position. I know of many cases where families have come to this country and purchased farms with small down payments. There may be some older children in the family who go into town to take positions and bring home a good portion of their weekly or monthly earnings in order to help the mother and father pay for the farm. What is going to happen ten years from now? The income tax department will come along and slam on a net worth statement, and the hard-working father and mother and children will again have to pay income tax. I warn all new Canadians to beware and so guide and guard themselves that they will not be caught in this trap a few years later.
When I spoke on this matter earlier in the session I mentioned the fact that Eaton's and Simpsons were able to service 50,000 mail orders within 24 hours, and in some cases have the order in the mails within 20 minutes. At that time the Minister of Finance questioned my statement and intimated that they must have many more employees. In the time that has elapsed since then I have found out that Eaton's employ 5,500 in their mail order departments. Simpsons would not give me the exact number they employ, for one reason or another, but I think we can assume the number would be about the same. A return in answer to question No. 442 in my name shows that the taxation division of the Department of National Revenue employs 7,454 people. It should be noted that these mail order houses handle 50,000 orders a day, not a week or a month or a year. Consequently they must operate much more efficiently than does the department.


I point out to the minister most seriously that an election is coming up in the not too distant future, and if he wants to hang on to the reins of power I think he should follow the suggestion I make that income tax returns for $10,000 and less should be processed within 12 months of April 30. If he did that he would gain himself a lot of favour. As far as I am concerned it is probably just as well if he does not do that, because then we would be sure of coming back.
Before my time expires I should like to draw the attention of the minister and the committee to an article which appeared in Saturday Night of September 4, 1954 dealing with the responsibility of ministers of the crown to the people and how they should act under certain circumstances. This article reads as though it were written only yesterday and not prior to a week ago. I quote:
When ministers refuse to share the blame for waste, inefficiency and worse in their departments, they are admitting that the job of government has grown too big for them; they are claiming, in effect, that while they should still be trusted with the direction of the nation's business, they should not be expected to worry about the people they have hired for the day to day handling of that business. If we condone this attitude, we must be prepared to accept the inevitable result: the end of our control, as electors, over the way we are to be governed.
I ask the minister to give serious consideration to this case. There are many people who after years of paying income tax may find that the whole thing is thrown open again and they may not know where they are at.
Many people think agriculture does a lot of howling, that our farmers are not too badly off, but such is not the case. With another round of increases apparently in the offing for labour and industry the farmer is going to find himself in a still tighter squeeze. I do not know how he is going to find money to pay increased taxes, and I think many of them will just throw up their hands and decide to get jobs with the government. They just will not be able to find the money with which to pay taxes. It is just that serious.
I want the minister to give this very serious consideration before the next budget rolls around.


Clarence Gillis: Mr. Chairman, I am going to try to give the minister a little advice. I would like to see him come back next time. The hon. member for Middlesex East has done his best in this regard.


James Joseph McCann: Don't be too worried over that.


Clarence Gillis: I have a few odds and ends which I have taken up with the department

in an effort to get them ironed out behind the scenes, but I was not successful. I want to follow up for a minute what the hon. member for Winnipeg North Centre was saying with respect to union dues. I took up with the department the matter of initiation fees. A new member going into a union may have to pay an initiation fee of from $50 to $200, and that is paid within the year.
The answer I got from the deputy minister was to the effect that the act as it stands at the present time only makes provision for annual union dues. Those words "annual union dues" constitute the crux of the situation. If the word "annual" was taken out items like initiation fees could be included. This is a much larger item than the annual union dues.
Second, there is not only the initiation fee that is contributed to the union; there are other special assessments. For example, some unions set up a yearly assessment on the membership for the purpose of creating a fund that would take care of indigent members of the union. That is a contribution of perhaps $50 a year on the part of the average member.
Third, there are times-and the Oshawa strike is an indication of this

when either a strike or a lockout occurs over which the average member has no control. That may run on for six or ten months, and during that period the union makes provision in many cases by providing credit with merchants and so forth for the membership. That organization may accumulate a bill for $300,000 or $400,000. When the men return to work a special assessment is put on the membership to pay off the bill that accrued during the period of the stoppage of work.
These are all union contributions. The wording in the act today, "annual union dues", prevents any consideration being given these other union contributions. I am suggesting to the minister that he might give consideration to changing the wording of the act so as to provide for these other legitimate contributions that take place from time to time.


Mrs. Shipley:: Would the hon. member permit a question?


Clarence Gillis: Surely.


Marie Ann Shipley: Would the hon. member suggest that the contributions made to the C.C.F. party for political purposes should be tax free?


Clarence Gillis: The union member as such makes no contribution to the C.C.F. party. In my own case, for example, I belong to the mine workers of Nova Scotia, who have always followed the British pattern. As far back 67509-320i
Supply-National Revenue as the 1900's, when we first formed our labour party in that province, the mine workers of Nova Scotia did exactly what the union membership in Britain does. They affiliated with the labour party. They paid 5 cents per month per member into the union treasury. That did not mean any special assessment on the membership. A member paid his regular dues, but the main union office, out of its share, made that contribution, so there was no additional contribution on the part of the member.


Marie Ann Shipley: May I ask another question?


Clarence Gillis: Yes.


Marie Ann Shipley: Am I to conclude that the contribution to the C.C.F. party on the part of unions in Canada is at the rate of 5 cents per member per year?


Clarence Gillis: No.


Marie Ann Shipley: Per week?


Clarence Gillis: Two cents per month per member at the present time. I said that 35 years ago it was 5 cents to the labour party. But, as I said a moment ago, there is no special assessment for it. The executive office makes that contribution from its share of the dues, so there is no additional contribution.


Marie Ann Shipley: On what basis?


Clarence Gillis: Two cents per month per member.


Marie Ann Shipley: At present?


Clarence Gillis: Yes. That is my own union.


Marie Ann Shipley: And that is tax free?


Clarence Gillis: Certainly not. The tax is
deducted at the source. None of these expenditures are taken into consideration until you file your tax return. But the question is not analogous to the argument I am making as to the other contributions to the union on the part of the membership, which are additional assessments. I leave that with the minister to look at some time in the future.
The second matter I should like to bring to his attention-and it is something I have done before on several occasions-is this. Today in Canada if a merchant, for example, puts in a new freezer he has a tax offset. If he puts in a new set of scales or spends money on anything to improve his business he can write it up for tax purposes. Now this question is with respect to the mine workers again. The money he has to spend in order to earn his living is not permitted as a tax offset. For example, he has to buy his explosives and the caps that set off the charges. That costs a good deal of money.

Supply-National Revenue The average miner will use at least six pounds of powder a day and perhaps half a dozen caps.
Second, he has to buy special shoes with steel toe caps. That is obligatory. The company enforces that rule. Third, he has to buy a special helmet to protect him while underground, and that helmet costs between $2.50 and $3. Perhaps he will buy two or three of them a year. He has to purchase an ax. Those are four items that are obligatory. On the one hand they are safety measures and on the other hand the explosive caps are necessary to knock down the coal.
I think permitting those items as a tax offset is just as legitimate as allowing the travelling salesman the car depreciation allowance that he gets, or giving a merchant an allowance for improving his business by buying a new refrigerator and so forth.


James Joseph McCann: May I correct you in regard to the cost of the supplies you mentioned? The expenditure on caps is allowed as an offset; all that the miner uses except his clothes.


Clarence Gillis: If it is allowed most of them do not know about it, because during this session I have received letters about it.


James Joseph McCann: It is right in the act.


Clarence Gillis: I am glad that will get on the record and they will find out that it is permitted and they will put in those expenditures. I know that during this session I have received letters asking me to take it up again. I hope the minister will take a look at the shoes, hats and so forth.
There is another item that has been in the sling for some time, and that is the superannuation contribution made by the soldier in the services. I have argued it with the Department of National Defence and Department of Veterans Affairs, and it is always thrown back to national revenue. It is a rather pathetic thing. Today the services are a career for many people, and will be for a long time. The soldier, airman or sailor may contribute to a pension fund for 10 or 12 years. I have heard of cases where it was 10 years. If he dies from natural causes while in the service the pension commission says no pension is indicated because it is not attributable to service. The war veterans allowance officials say the widow cannot get anything because she is too young but that the superannuation contribution is returned to her; and the Department of National Revenue then considers that as income. In the one case I had, where the serviceman was in the forces for 10 years, the contributions were returned to the widow,


who had three small children, and the income tax division took $600 out of that refund of contributions as income tax.
I believe the Department of National Revenue should consult with the other departments concerned. They tell me they are quite willing to consider the matter provided the Department of National Revenue will also consider it, and I think this is something that should be corrected. It is bad enough for the young woman to lose her husband and be left with a small family, no income and no pension rights because her husband died from natural causes despite the fact that he was in the services, but to have the pension contributions made over a period of ten years all assessed as income in one year when they are returned is most unfair.
The argument is advanced that the pension contributions were tax free. That is quite true, but only with respect to a very small percentage of the money. A lot of the money was still taxed because if he paid $100 into the pension fund during the year and he put in the $100 as a tax offset he was only allowed a percentage of that for income tax purposes, maybe 25 per cent or 30 per cent. Sixty or 70 per cent of that money was money that was taken straight away from him. It is not all tax free, just the percentage that is allowed for income tax purposes, and I think in a case of that kind there are extenuating circumstances.
To begin with, I cannot understand how the pension commission could take the position that the death of a man who had been in the service for ten years, who had seen combat service, who had gone through Italy and western Europe, who had come back here and remained in the service and had then died from a heart attack while in the service, was not attributable to his service but to natural causes. I think the wear and tear and the strain of war were contributing factors to the man's death.
Having regard to the circumstances in which this woman found herself, I thought it was a pretty callous and heartless thing to take $600 in income tax when the money was being returned. I have been arguing this matter for at least six or seven years. All the departments have considered it, and while I do not want the Minister of National Revenue to make a decision tonight I wish he would take a square look at it and at some time in the future give us a firm decision. I like to get either a yes or a no, and to date there has been evasion. The matter has been passed back to the Department of National Revenue.

That is all I have to say. I hope the minister will take a look at this matter and at some time in the future give a firm answer.


James Joseph McCann: In respect to what the hon. member has said about pensions, that was brought up in the house a day or two ago in a debate with the Minister of National Defence, and he promised that he and I would have a look at the matter.


Mr. Huffman:: Mr. Chairman, a great deal of information has come to the attention of the minister and his officials since these estimates have been before the committee. I am sure that after a full analysis of the information the minister and his officials have received, some benefit will accrue to the taxpayer.
I was very pleased to learn from the minister this afternoon that net worth assessments were the last resort of the department. I hope that every avenue will be explored by the assessors before resorting to the net worth method. A great deal of confusion is created by taking returns which have formerly been based on cash and converting them to a net worth statement. I think that is where many of the problems arise, because in rural areas most of the returns are made on a cash basis and not on a net worth basis.
There are two problems peculiar to my area and to southern Ontario that I wish to raise. One of them relates to tile drainage. In southern Ontario, which is rather flat land, under-drainage is almost essential for the successful operation of the farms. Over the years the municipalities have advanced money for the installation of such drains and the loans have been repaid over a normal period of 20 years. Some 40 years ago, when money was more expensive than it is now, it used to take $8 for each $100 to repay the loan over a 20-year period. The rate is not as high at this time.
People who kept account of the expenses of their farming operations had always put in their taxes in one sum, and in the tax notices the tile drain loans were included. I find now that with respect to summary assessments in my area the assessors are delving into the amount represented by the carrying charges of the loan. It does not amount to a great deal for any one farm. If you reassess one farmer who has his land tiled, then it is right that every farmer who has his farm tiled should be reassessed. I contend that the amount of detail that would be involved in reassessing all the returns would not warrant the expense and would not be warranted by the amount of money that would be returned to the department.
Supply-National Revenue
There is one other thing that is peculiar to my area, and it concerns a request from a number of people. We live almost halfway between two taxation offices, one in London and the other in Windsor. At the present time our area is in the London district. If an assessor leaves London and goes to the extreme western section of the country from which I come he must drive approximately 90 miles. I realize that the assessor must be compensated by way of a nominal and statutory amount for the use of his car and his mileage travelled. He also must be provided with accommodation while he is away from home.
Our people feel that accommodation for assessors should be provided in the new building being erected by the Minister of Public Works in the city of Chatham, and that the time now spent by assessors in driving from London to our area could very well be employed in making assessments of returns in the area. In addition, quite a number of succession duty returns could be handled in the same way. I am not fully aware of the procedure of the department but what we would like, if it is at all possible, is to have assessors located in the city of Chatham. We believe it would not add one more person to the personnel of the department, and in so doing we would have better public relations with the taxpayers. We feel that it would provide an excellent service. When a taxpayer must drive 80 or 90 miles to the tax office he is often tempted to do his business by mail, and it has not always been a satisfactory way of looking after his affairs. We feel that this would be excellent public relations, and I would commend it to the attention of the minister.
Only recently I noticed a civil service requirement for a number of assessors for the London office. The same thing is true in a number of the offices throughout this country. From the number of requirements that have been advertised from time to time it appears to me that there must be quite a turnover in the personnel of the department. I do not know what the reason is, but I would hope that the officials of the department would learn the reason for the excessive or seemingly excessive numbers who are leaving the service and going into private practice. I believe one of the reasons is that very often the assessor is not paid according to the responsibility he must assume. Under those circumstances I would hope that we could have in all our offices personnel who would remain with the department for all their years, so those who are fully acquainted with the problems could give the best service to the department.

Supply-National Revenue


Mr. Nowlan:: Mr. Chairman, I should
like to intervene in this debate very briefly because all the points which have been raised heretofore I think are common to almost every place in Canada and there is little one can say which has not already been suggested by some other hon. member.
Oh the other hand, as the hon. member for Oxford pointed out this afternoon, I think the tax collecting department is always the most unpopular department of any government. A member is justified, in my opinion, in expressing his opinion-and should do so -of a department which reaches into the homes of almost each and every constituent he has. I am going to speak for a very few moments entirely with respect to matters which affect every rural constituency or rural area in this country.
Much has been said about the net worth statement. I did not hear the minister this afternoon; I must have been out of the chamber for a moment. However, I was glad to hear the hon. member for Kent a few moments ago state that the minister had said this afternoon that the net worth statement was the last resort of the department in dealing with these matters. Frankly, I find it rather difficult to understand that statement, Mr. Chairman. Although I have not been very close to these matters during the last few years owing to the fact that we are here from January until July or August, at least in previous years one of my jobs was to deal with scores of these matters every year in my own office, and I know they are still going through the office with which I have some connection.
I may say that I do not think these net worth statements are entirely the last resort. You get farmers who file their income tax returns, and assume that everything is all right. Then suddenly, for no apparent reason, the inspectors appear, start investigating the affairs of the farmer and then a net worth statement is submitted to him. The farmer is faced with this situation.
I must say this. I think the inspectors who handle these matters are perhaps dealing more courteously with the taxpayers today than they did in the past. They are not as brusque. They are not quite as-shall we say, to use a polite term-dynamic as they were a few years ago. I think the complaints which have been raised in this committee during these years with respect to these net worth statements have had a considerable influence on the department. I want to compliment the minister for the progress which has been made.
After all, what is the situation with respect to these net worth statements? Yesterday


afternoon we had a speech by the hon. member for Perth who spent considerable time in this committee dealing with the net worth statements and complaining of the way in which they are sometimes administered. Last night we had the hon. member for Dauphin also reiterating those statements and emphasizing their importance. Then we had the speech by the hon. member for Kent. Although he did not commit himself in any way, I think it is a fair inference, when he expressed his pleasure that the net worth statement was the last resort, that he is not too happy about the way in which they have been administered. Then you have myself at the moment speaking for Nova Scotia on the same matter.
As the hon. member for Winnipeg South Centre said the other day in another debate, when you have reasonable men who are aroused or, as in this case, concerned about a matter, I think it is something which should impress itself upon the minister. You have these members from various parts of Canada who are still saying that the way in which these net worth statements are administered is something to which, to put it mildly, the minister should give very careful consideration.
What is the situation? A farmer is confronted with a net worth statement. He is told, "If you can prove we are wrong, we will accept it. You prove that we are wrong". How can that be done by a farmer whose records are usually somewhat incomplete-at least I am speaking for the farmers whom I know, namely those in Nova Scotia-and who does not purport to keep records over a long period of years? He is confronted with a net worth statement and is told that by the inspector, as I say, very politely and very courteously. It is somewhat different from what they used to say.
I emphasize that point again. There has been a change in the way in which they deal with these matters. Nevertheless, they say, "If you can prove we are wrong, we will be very glad to hear from you; otherwise this statement stands". What is the farmer going to do? As we all know, under the act the inspector goes back for six years without any question; and if there is an allegation of fraud-we will use that term-then he can go back to the inception of the act and we are back to 1917.
The farmer just cannot present details, invoices or anything of that kind which can meet that situation. I can speak with some feeling on this matter because, as I said, at least in earlier years I had to deal with scores and scores of these cases every year, and I felt that in many cases men whom I knew to be honest, men whom I knew were

trying to file a proper return, who thought they had filed it and who had paid the tax which they believed was due, were subsequently confronted with these net worth statements and were embarrassed and sometimes seriously penalized because of that procedure.
Again I repeat that I want to give the department full credit for the fact that there has been an improvement in this approach. I am only stressing the matter now in order to urge on the minister that he consider again this whole matter and try to improve still more the approach to it.
I read the evidence given in the committee, of which I was not a member. I heard the statement of the minister and the officials to the effect that there was no scrutiny of the taxpayer's affairs and that these net worth statements were made only because of investigation which had been made and when they found something irregular. Perhaps the farmer bought a brand new Buick when he reported a loss the year before, and therefore the department thought the matter worthy of scrutiny.
I can tell the minister that I have heard inspectors of his department say, "We were driving down the road; we saw where you were building a new fireplace on the outside of your house, so we came in to investigate and see what was going on". Another time I was told that they said, "Your wife was seen in Kentville and we saw her with a new fur coat. We did not know how you could buy a fur coat for your wife". Whether it was a Christmas present from her father did not make any difference. They said, "We did not think you could buy a fur coat for your wife. We therefore decided to have you investigated and we are now presenting this net worth statement".
As the hon. member for Perth emphasized last night, I realize and quite admit that there are times when net worth statements are necessary. I know that all farmers, 100 per cent of them, have no monopoly on virtue. There may be the odd one-I do not think there are many-who perhaps has been a little bit light on his pencil when he has filled in his income and a little bit heavy when he marked down his expenditures. That has been known to happen. I am willing to admit that it even happens with farmers, although I doubt if it happens very often. There may be the occasional justification for a net worth statement and a farmer being assessed on that basis.
I want to say to the minister with all the seriousness I can command that I do think, whatever may have been the improvement in the technique of his officials, the improvement in the approach to this thing,
Supply-National Revenue there is one phase of that net worth statement in which they have refused to face the facts of life, as was pointed out by the hon. member for Perth last night. That is when these inspectors continually and universally insist upon a cost of living being assessed against the farmer which is out of proportion with the realities of the situation.
I suppose in earlier days I have gone over scores and scores of these statements every year. In almost every case I know the farmer was assessed on a cost of living basis which was greatly in excess of that which he actually paid. You get his assets and you will find he has paid a little bit off the mortgage, a little bit off the bank loan or bought a new tractor. Then you say it costs him $2,400 or $200 per month to live. It did not cost him that. Very often it did not cost him half that. Very often he is assessed on that basis and the officials very generously say, "If you can prove we are wrong we will accept it".
From my own personal experience I have seen scores and scores of men whom I know have been treated unjustly on that net worth statement basis, and particularly the cost of living item. I hope that is something the minister will consider very, very carefully. I cannot join with the hon. member for Cape Breton South, who said a while ago he hoped the minister would be back here next year. Personally I hope he will not be back, and unless he reconsiders this matter of the net worth statement his chances of coming back are very dim indeed.
There is another matter to which I wish to direct his attention in connection with the rural economy, and that is the right to elect. I know that now possibly we are verging on the statute or on policy rather than on administration, but I think the dividing line in this case is so narrow the minister will not raise a point of order. As the hon. member for Moose Jaw pointed out last night, I think there has been legislation by administration in this department anyway in dealing with capital gains. All those who are interested in the rural economy have seen farmers who were selling property, some of whom have been assessed on a capital gains basis without any change whatever in this legislation, and they realize that the dividing line between administration and legislation is very narrow indeed. I am not going to develop that now because I am speaking mainly from an agricultural standpoint.
It always has nettled me that farmers who happen to employ an auditor like the hon. member for Perth or perhaps retain a lawyer
505$

Supply-National Revenue like the hon. member for Digby-Annapolis-Kings, and get advice, can just file a statement about electing and thereafter can average. If they do not file that statement then they cannot average. I realize that the right to average applies to others than farmers. It applies to businessmen and to people in other walks of life. They always have their auditors or solicitors to give them continual advice.
However, I think the thing is perhaps somewhat outmoded today. I believe most of them today know about the right of election, but I can say from my own small experience in a very limited area that I have seen hundreds of farmers treated unjustly because they were not advised of the fact that to average they had to elect before the first day of May or whatever it was. Not having done that and having had one good year and four bad years, two before and two after, but not having averaged, they were ruined. I have always thought it could have been part of the act that they should have been given the right to elect and to average. The question may be somewhat academic today because I think the practice is fairly widespread, but certainly it is purely a matter of administration.
I had a case before the officials here within the last six months in which a farmer had not averaged so that a gross injustice was being done to him as compared to his neighbour across the street, who had averaged. I say that from the standpoint of administration, you should consider these cases and perhaps legislate by administration by saying. "We can assume that you averaged". However, the officials always say, "Well, it is too bad you did not put that in; it is not date stamped on the first day of May. Therefore your election is out." That is something which, as I say, has nettled me because I have felt it was an absolute injustice.
Then the third thing and the only other matter I shall bring to the attention of the minister tonight, again from a rural standpoint, is the matter of the gift tax in so far as it affects farmers' sons in this country. Again I am speaking of my own area, the only area of which I have intimate knowledge. In Nova Scotia a farmer may have one son or perhaps if the farm is large enough two sons who remain with him on the understanding that when the farmer retires or dies they are going to take over the farm. The farmers there being economical and sometimes afraid of legal fees-I do not know why they should be afraid of lawyers in Nova Scotia, but some of them are perhaps a little bit afraid of lawyers

or the probate fees because they think they, are astronomical when we all know they are not-perhaps five years before they die deed the farm over to the son or to the two sons.
I can recall several years ago when the Minister of National Revenue and this government took great credit for the fact that they were raising the ceiling on succession duties. Thereafter you would only have to pay succession duties on X dollars instead of as heretofore on Y dollars. That sounded wonderful. What happened? In my constituency within three months after that change had been made there were at least 10 different farmers sons in my office- when I say "sons" they were not youths but some of them were 35 or 40 years of age- whose fathers had died and they had taken over the farms. The Department of National Revenue came along and said they owed a gift tax, sometimes of $2,000 or $2,500 or $3,000. This was the gift tax on this farm which had been deeded by the father to the son.
Now, with an expert or fairly competent legal advice, it is an easy matter to meet that situation. You can always bring forth an agreement of some kind, and I do not think the department insists that it be in writing. There can be an agreement whereby the son stays on the farm, and so forth. Some farmers who could employ a lawyer and spend quite a lot of money could perhaps beat that.
But I know scores of farmers' sons who have had to pay substantial gift taxes simply because the farmer deeded the farm over to them before he died instead of willing it to them. Certainly that was not the intent of this act and that certainly is more than a matter of administration. I know the provisions of the gift tax act provide for a gift of $4,000 to one person, per annum $1,000 to each child or 50 per cent of the difference between your income tax and your taxable income. Those matters can be applied in gifts of securities and various other things. But when you are dealing with a father who has deeded his farm to his son, who has lived on that farm from the time he was born until he was perhaps 35 or 40 when his father died and he took it over, you find that the department comes back and says, "Two years before your father died, unfortunately, instead of deeding this farm and taking back a mortgage he gave it to you." The father could have written off $4,000 per year; there are other things that could be pulled off-perhaps that is a slang expression-a dozen other legal expedients

which all of us know and which the department would welcome, but instead of getting legal advice they fall into that trap and are penalized. I know of one man who, before he got legal advice, had been assessed and borrowed $3,500 from the bank to pay the government tax, which he certainly did not owe morally, and thereafter was broke.
That is a matter of administration. As I see it, I think the department should scrutinize these transactions much more carefully in the future than it has in the past, and when it comes to that particular type of transaction, a transfer between father and son of a farm, I say the administration as such should not even suggest that a gift tax be paid.
These are all the matters I want to bring up at the moment. There are a whole host of matters that I could deal with. I am speaking from the standpoint of a member for a rural constituency and of problems with which I have been associated personally during all the years I have been in practice.


Jay Waldo Monteith: Before the item carries, I understand the hon. member for Oxford asked the minister whether in certain instances an inspector ever went into another business similar to one which he was inspecting to get an average concerning the type of income that should be accountable in that business. The minister said no. Is that correct?


James Joseph McCann: I think the question was, did we ever seize the records for the purpose of getting information. My answer to that was no.


Jay Waldo Monteith: I beg your pardon. I think the minister will admit that they do use averages for comparison purposes to come to their own conclusions, and that sort of thing.


James Joseph McCann: That is right, we do, and we use averages for another purpose. We get from the bureau of statistics the average cost of living of farmers in a community, and that is very often the basis we use in a net worth statement; whether the farmer has a family of two or three, or what is his average cost of living. Not only do we take his statement but time after time it has been reduced. He has given too much. When he was making his statement as to what it cost he thought the higher it went the better it was for him. That is not the case; it is exactly the reverse. We have used the average given by the bureau of statistics and to my personal knowledge, in a great many cases, his cost of living and his net worth statement have been greatly reduced.


George Clyde Nowlan: I have never seen it.
Supply-National Revenue


Jay Waldo Monteith: There seem to have been a great many complaints made during yesterday afternoon and today in the debate on these estimates. After all, where there is so much smoke there must be a small bit of fire. I think the minister should consider closely all the good advice that has been given to him in the last few hours. I feel the administration of the department could well benefit from that advice. I would also take considerable satisfaction from the fact that vote No. 289 has been amended and reduced by $50,000. I am quite sure this would never have happened and would never have been brought to light, had it not been for the very close examination of these estimates by the Conservative members in the estimates committee.


James Joseph McCann: That is perhaps an overstatement. We accept your advice and are very glad to have it, and also your criticism. I may tell you it has been my practice in the last 12 or 13 years to review meticulously the debate that goes on here with reference to taxation and the other part of the department, and that is considered not only by myself but by a committee of the taxation division. We try to work out recommendations to the Minister of Finance, or administrative conditions within our own department, that will take into account the recommendations that have been made.
I did not intend to speak any more. It is good advice, but I cannot meet all the arguments that have been put up here tonight. In the first place, I cannot remember them all. But I want to refute one argument of the hon. member for Digby-Annapolis-Kings with reference to having the most unpopular department in the whole government. That is not so. In justice to the people who work for me, let me say that we receive thousands of letters of commendation on the way in which we have handled cases. They have come from the Canadian taxation society, from corporations, from individuals and all the rest. Don't forget this-


George Clyde Nowlan: The opposition has done a good job in helping to improve your department.


James Joseph McCann: I will give you credit for that if you wish to take it. Don't forget this. We took in 4,900,000 returns last year. What other departments, or all the departments put together, have contact with as many citizens of Canada as has the Department of National Revenue? I work at this job 12 months of the year in the busiest department, on a day to day basis, that exists in the whole government. It is comparable to a trust company,
5052	HOUSE OF
Supply-National Revenue for which I was castigated a year ago, and it is comparable to good business.
I ask hon. gentlemen when they cross Canada to look at the type of offices we have set up. They are some of the finest business offices in the whole of Canada. I have tried to put the department on a business basis and to make it look like a business office. I ask you to look at our office in London and the new one we are building in Toronto. Right here in Ottawa we have the poorest office in the whole of Canada. Look at the one down in your country, at the one in Saint John and the new one we are building in Halifax.
I contend and I submit to this house that this department has improved greatly, probably as a result of the criticism and the suggestions that have come in, but there is no better critic of the whole department than myself. I criticize them and try to put the business on a business basis. I submit that we are doing the most important business in Canada, and the collecting of the taxes of Canada is Canada's biggest business.


Mr. Trainor:: How about the comparison of the minister's department and Eaton's that was mentioned by the hon. member for Middlesex?


James Joseph McCann: There is a lot of difference between taking 100 pounds of salt off the shelves and sending it to somebody and examining income tax returns. I do not think the two things are comparable at all.


Mr. Charlton:: As I was about to say, the minister was very careful this afternoon to explain that he had nothing to do with policy; he had to do only with the administration of the act. I think most hon. members would agree-and I think the minister himself will agree-when I say there are hundreds of regulations under the act for which the minister himself or some of his officials are responsible. Of course that is partly administration. Under the rules and regulations of the act and with respect to many sections of the act the minister knows very well that he has his own discretion as to what interpretation he puts upon the wording of the act.


James Joseph McCann: I do not know whether the hon. gentleman was here-probably he was- in 1945 when an investigation was made of the national revenue taxation division. At that time we had I think about 27 discretions. The accountants and all the rest of them who gave evidence took all these discretions away. I have heard many times since that they wished they had not gone so far; that the minister who knew his business was much fairer and probably more lenient with them than a strict interpretation of the law 

would allow. The law is handed to me to administer, and I have not the discretion to vary it. A lot of the criticism and a lot of the suggestions might rightly come before the Minister of Finance when the Income Tax Act is being revised or when the amendments to it are being put to the house.


John Alpheus Charlton: The minister seems to think he has a halo around his head. If he will recall section 113, I believe it is, he will see that he has discretion as to what is the major portion of the income of a taxpayer and what it comprises. He can classify that taxpayer as he wishes. The minister may check that. It used to be section 113. There have been various occasions under that section when the minister has used his own discretion. That is partly policy. I want to make it clear at the outset that I do not want to be misrepresented.


James Joseph McCann: I think the hon. member is referring to section 13, which reads:
Where a taxpayer's chief source of Income for a taxation year is neither farming nor a combination of farming and some other source of income, his income for the year shall be deemed to be not less than his income from all sources other than farming minus the lesser of
(a)	one-half his farming loss for the year, or
(b)	$5,000.
That was to deal with what they called hobby farmers who wanted to write off losses, either real or fictitious, against their incomes. We changed the law so that such a man could not write off more than $5,000. If I were free to mention names I could give the names of people who contended that they were doing a great thing for this country in the way of stock breeding and special lines of farming and wanted to write off their losses. One instance I remember was for $189,000. In fairness to the rest of the taxpayers that could not be allowed, and I suggested that the law should be changed and we now limit that to $5,000.


John Alpheus Charlton: It still does not alter the fact that the minister has discretion in some of these cases. As I said, I do not want to be misrepresented as condoning wrongdoing. I realize there are some people across the country, farmers and others, who probably evade paying their proper income taxes, but I do not condone that practice. There are many farmers who do not keep books, and a farmer may think he does not have to make out an income tax return if he is not taxable. He may go on that way for some time, and then he becomes afraid to make out an income tax return. He delays doing it because of fear from year to year, and what might happen to him I do not know.


James Joseph McCann: He is already breaking the law because he is not keeping some kind of record.


John Alpheus Charlton: I admit that. There are not many farmers who are able to keep accurate records, especially small farmers. If the minister were looking after a small farm I imagine he would not be keeping many books, because he would be too tired at night to sit down to look after a lot of books. In the main that is the reason they do not do it. A farmer cannot carry a pencil and piece of paper around with him to jot down every time he spends a nickel or a dollar.
As the hon. member for Digby-Annapolis-Kings said, unless you can prove the assessor to be wrong, you have had it. I submit that every assessor having anything to do with farm assessments should have a farming background, and I know that is not always the case by the questions they ask farmers and by the statements they make. It is quite obvious quite often that they have had nothing to do with farming. I know of cases where an assessor has gone to a farm and tried to charge $2.50 for a chicken which the farmer's wife has used on the table because that is what he had to pay in the market in the city. Perhaps I should not use the word, but at times these assessors use a form of trickery to get information and quite often assess the farmer or someone else more than he should be assessed for income tax purposes.
Obviously farm costs have gone up, as has the cost of living. An assessor may question a farmer as to what it costs him to live. He may ask leading questions like, "It costs you more to live now than it did five years ago?" and the farmer agrees. Then the assessor might go on and ask, "Does it cost you $2,500 or probably $2,600 or $2,700?" The farmer may think he is getting something off his income tax and he agrees with that figure, and he is caught.


James Joseph McCann: In most cases he is told he is wrong. He is told the average cost of living in that particular section.


John Alpheus Charlton: I am interested in seeing
that the Minister of National Revenue is taking cognizance of the fact that the bureau of statistics puts out figures which are accurate when his colleague, the Minister of Agriculture, does not think too much of those figures. I hope the Minister of National Revenue is not getting individual figures from the bureau of statistics, because they are supposed to be confidential.


James Joseph McCann: The bureau of statistics will not give us individual figures.
Supply-National Revenue


John Alpheus Charlton: I know of cases where notices of extra taxes due have been sent out stating a particular amount, but when the department was asked, either by letter or personal interview, to justify that figure they would not do so and the matter was dropped. I wonder if those figures are just taken out of the air. It makes one rather suspicious.
I know of one chap who had done very well in business. He had expanded considerably, and he had an employee of the income tax department make out his income tax returns after office hours. They have now come back on that particular man and have assessed him for some tens of thousands of dollars. He will have to sell one of his farms or go out of business. The hon. member for Kamloops brought in a bill which would have limited the department to a period of three years in which to go back and assess. I think the department should give more consideration to that.
A farmer must keep books until he receives permission from the minister or the department to destroy them. If the records kept piling up a farmer would not have room in his house for all his files. He might have to keep them in perpetuity. The books kept by a farmer are not based on any special accounting system; generally they are pretty rough. It is a terrific job to keep these books for a number of years. The fear is always there that you should not destroy anything or you may get into trouble. They can come along any time and reassess you, even after eight or ten years.
There is one more thing I should like to bring up which concerns not only this particular item No. 289 but the whole department. It seems strange to me that telephones and telegraphs should cost so much. It would appear that people do not want to write letters. The Post Office Department do a very good job in providing mail service, but when one considers that in this department alone these items amount to $290,600 he must realize that it is a tremendous item. That is over a quarter of a million dollars for telephones and telegraphs. Apparently many officials in the department consider it is much easier to pick up a telephone, and I agree with them; but I would suggest that while the average telephone call probably costs $1 a postage stamp costs only 5 cents. A considerable amount of money might be saved if more letters were written and fewer telephone calls made. Imagine; $290,600 just for telephones and telegraphs in one department. No wonder the Minister of Trade and Commerce asks, "What's a million?" when a quarter of a million dollars is spent just on telephoning for that department alone. So I
5054	HOUSE OF
Supply-National Revenue would suggest that when the minister criticizes his own department he ask them to get a secretary and write the odd letter instead of picking up the telephone and using it whenever they want any information.


James Joseph McCann: Don't forget that this amount of $150,000 for telephones and telegrams covers 30 offices.


John Alpheus Charlton: I have admitted that. I said that it was for the whole department. The $11,000 is for customs cases and the $150,000 for the income tax branch offices.


James Joseph McCann: That is what I am quoting; $150,000 for the district taxation offices. We have 29 district offices.


John Alpheus Charlton: Twenty-nine district income tax offices. That is over $5,000 per office.


James Joseph McCann: That is right.


John Alpheus Charlton: That is $5,000 per year. Does the minister not think that amount to be a little excessive?


James Joseph McCann: That is not all for long distance calls. That is also telephoning within the communities in which we have the offices.


John Alpheus Charlton: The minister does not have to explain that to me. I have a telephone too, for which I have to pay as well as anybody else. These are telephone services. It is the telephone that he has in the office. There are the extensions, of course, but I suggest that most of it is for long distance telephone calls.


James Joseph McCann: No.


John Alpheus Charlton: Then I should like the minister to give me a breakdown of what the service is costing and what the long distance telephone costs are in the various departments.


James Joseph McCann: We do not have a breakdown of it, but that is about $5,000 in an office.


John Alpheus Charlton: That is $100 per week.


James Joseph McCann: I do not consider that is too much when you have an office with 400 or 500 employees. Take the Toronto office or the Montreal office; those are the ones that cost a good deal of money. Almost every official or every division would have a telephone in that particular spot. I figure that for my own personal telephone in my own home it costs $200 or $300 per year.


Mr. While (Haslings-Fronienac):: I would ask the minister if he would make any comments on the remarks made by the hon. member for Digby-Annapolis-Kings about the cases of injustice in regard to the gift tax on the transfer of property from father to son. Would he care to comment on that?


James Joseph McCann: No, I have no particular comment to make on it at this time. We shall look into it. I will say this, that it is in accordance with the act.


George Stanley White: When the minister says he will look into it, does he mean that he periodically checks the various registry offices or wherever the registrations are made to get this information, or how does it come to his attention?


James Joseph McCann: I am told that we occasionally look at the registry offices, but most of that information comes to hand when they are making returns with reference to the succession duties. It might be a case where there is no succession duty payable federally because there is an exemption of $50,000, but we have an exchange of information between the different provinces and the federal succession duty division, and it is in those instances that much of the information comes to our attention.


George Stanley White: Taking the province of Ontario, I would ask the minister how he gets the information from the registry office of any county about what is registered in regard to mortgages and things of that nature. Do they make a periodic check, or do the registrars of these offices make a periodic return to the minister's office giving that information, and so on, or how does he get that information?


James Joseph McCann: We have no arrangement that the particular information that they would have in the registry office comes to the succession duty office, but our officers occasionally- and probably with some regularity-follow up these cases in the registry office.


George Stanley White: I am not
speaking about cases that come to the minister's attention through a mistake in the succession duty office, but I myself have observed on various occasions that within a very short period after a document such as a mortgage or something of that nature is registered in the registry office for the first time, somebody goes to the office to see about income tax. I have always been curious as to how this information gets to the department so quickly from the local registry office-not that I am saying there is anything wrong with it.


James Joseph McCann: We have a good system of keeping records within the department. When we see notices of deaths of people we investigate whether or not that particular individual has been up to date and, if he has died in the middle of the year, say in July, he is taxed for that period of that year.


George Stanley White: The minister misunderstands me. I am not speaking about estates and so on, but ordinary business transactions with regard to the sale of property, the loaning of money and things of that sort. It has nothing to do with an estate. How does the department keep track of all these sales? How does it get the information that so and so has taken out a mortgage or bought a farm, and things of that nature?


James Joseph McCann: We follow in addition the transfers of properties. They will be found in any newspaper. You find them here in Ottawa.


George Stanley White: You do not
find that in the country.


James Joseph McCann: I do not know about your particular region, but there are many important towns in the province from which we get the information we need in carrying on our business.


Wallace Bickford (Wally) Nesbitt: I have one last question. This afternoon I made a number of suggestions as a result of the hearings of the special committee on estimates. I do not expect the minister to pay attention to all of them, but there was one in particular about which I should like to have a reply from the minister if I could.
The minister told us in the estimates committee on one occasion that, as a matter of practice in the department, when books are taken over from any individual or small business for the purpose of investigation they are photostated and returned as quickly as possible. This is a point of administration, and the only one I know from personal knowledge in regard to which there is something seriously at fault. I was wondering whether the minister would give an undertaking that when books are taken from businesses and individuals such as lawyers, doctors and accountants, they should be photostated and returned just as soon as possible and that possibly a new directive could be sent out to the offices.


James Joseph McCann: Yes, I shall give that undertaking. I know quite well the case to which the hon. gentleman has reference, or I can make a pretty good guess at it, and there were two truckloads of books and documents that were taken. It takes some time to go over that and have photostatic copies made of the important documents. I may say that the policy of the department is to do that work as quickly and as expeditiously as possible. With some of these investigations, we do not know how important they are or the length of time they will take. Some of them take a couple of years. We have all types.
Supply-National Revenue
This is confidential and I am not going to give any names, but I will give some of the types of offences. Here is a case of omitting payments and diverting cheques. The tax in that instance was $29,000. Here is one of diverting limited company receipts to personal use. In that case the tax and interest were over $50,000 and the assessment was over $186,000. Inventory suppression, fraudulent vouchers and non-recording of sales, the tax and interest were $225,000 and the evasion was $581,000.
Then we have suppression of equipment rentals, falsification of donation receipts, suppression of sales, preparing and selling false refund claims. In the last instance the man was sent to jail for nine months. Then we have suppression of sales and inflation of expenses, suppression of sales, suppression of sales, suppression of sales. Here is another one, suppressed sales. Then we have falsification of T returns, diverted rebates, suppression of income payments, diverting part of fees of audits. I could go on for a long time.
Let me give you a couple of nice ones; fictitious credit notes, suppression of sales, suppression of log sales and machinery. The tax and interest were $136,000 and the assessment of suppressed sales was $363,000. Here is one I referred to the other day, forged donation receipts, suppression of $100,000 in ticket sales, fictitious donation receipts, suppression of sales by means of duplicate invoice numbers. The tax and interest were $411,000 and the amount was $503,000. Here is another one, false purchases, falsifying statements, suppression of sales. Here is one where there were false purchases. This had to do with a fellow who was buying stuff and putting out something else. The tax and interest were $80,000, the fine was $20,000 and in default a total of 14 months in jail. The amount suppressed was $593,000.
I want to tell you that by carrying on the work of revision, reassessment and prosecution we took in last year over $89 million above the regular assessments, three to four times as much as it cost to administer the whole department for a year.


Harry Oliver White: I suppose it is safe to assume there were no farmers prosecuted?


James Joseph McCann: In this whole file there was not a farmer who was prosecuted.


Wallace Bickford (Wally) Nesbitt: We are certainly very interested in the recital of naughty deeds the minister has just given us, and I am very glad they are so successful. The only thing I mentioned had to do with the taking of books and photostating them. The minister


Supply-National Revenue said with respect to the case I had in mind-[DOT] I am pretty sure he and I know which one it was-that there were two truckloads. Of course trucks do vary in size. I had another case in mind of a doctor's books that were taken and held for a long time. I am satisfied as long as the minister has undertaken to have his department hurry up with the photostats.


Mr. Cardiff:: I should like to ask the minister a question with regard to some complaints I have had in my section of the country. Is it a common practice of the department to send two assessors around to make investigations?


James Joseph McCann: Yes.


Lewis Elston Cardiff: For what reason?


James Joseph McCann: Not necessarily, but in most instances two are sent.


Lewis Elston Cardiff: For what reason?


An hon. Member:: One to watch the other.


James Joseph McCann: Yes, they do. In some instances it takes two men to do the work. However, if you have one man who can substantiate the statements of the other you are in a much better position than if one man goes alone.


Lewis Elston Cardiff: I agree with that, but the complaint I have is that the two of them get hold of a man and take statements from him, and if they want to bring the matter up in court or make an investigation of any kind there are two against one with regard to whatever the man happens to say if he is foolish enough to open his mouth and say anything, and the people complain about it.


Stanley Howard Knowles: I wonder whether the minister has obtained answers to any of the questions I put to him this afternoon. In particular, I wonder whether he can explain what I thought was a rather strange answer to certain order paper questions, particularly when I asked about people from whom deductions at the source are made during the year which exceed what they would have to pay but who fail to make any return at the end of the year and hence do not get any refunds coming to them. As the minister will recall, the answer he gave to several questions along that line, as recorded at page 2587 of Hansard for March 23 of this year, was that there was no information available.
May I put it this way. Are records kept of all those from whom deductions are made at the source and is a check made at the end of the year to see that every person from whom deductions were made at the source files a return? If so, why was an answer not


available to my question? If not, the minister can take it from there.


James Joseph McCann: The hon. member for Winnipeg North Centre asked a lot of questions. Of course that is not unusual, but he gave the answers to most of them himself. He put in the proviso that they might have to do with matters of policy rather than with matters of administration. I did make a few notes with reference to some of the questions asked but I do not know just where they are at the moment. However, I think there was only one that had to do with administration. It had to do with the matter of spreading a pension under section 36 over a period, and I believe he asked whether we could not put something on the form.


Stanley Howard Knowles: I asked whether a special form could not be provided, but I also asked whether the note on the explanatory page should not include the kinds of payments other than pension payments to which special tax treatment can be accorded.


James Joseph McCann: The great percentage of forms that are filed are short forms, and we have as much crowded on that form now as we can possibly put on it. A few years ago there was a demand to reduce the length of the general form. We were able to reduce it to a size that has saved a lot of money and a lot of work on the part of taxpayers. I would hate to think that we had to go back now to the old, longer form.


Stanley Howard Knowles: I am not complaining about the shortness of the form. Let me say it again. I have not the sheet here now because it has gone up to the Hansard office, but the sheet of explanatory notes that is attached to the short form has on it one short paragraph telling the taxpayer that if he received a lump sum payment out of a pension fund he can get special tax treatment and he is advised to consult his district taxation office.
My point is that section 36, which provides for that special tax treatment, provides that it can be accorded not only to lump sum payments out of pension funds but to certain other lump sum payments. If I can boil my suggestion down to its simplest form, I am simply asking whether that explanatory note could not include as another phrase in the key sentence the fact that there are certain other kinds of lump sum payments about which the taxpayer might be well advised to consult the district taxation office. If the minister feels he cannot answer now I hope his officials will look into the matter.


James Joseph McCann: 
Stanley Howard Knowles: That is fine. Can the minister answer the last of the questions which I put to him this afternoon and which I suggest is not policy but is a matter of administration? My question was based on the answers he gave to my order paper questions which appear at page 2587 of Hansard for March 23, 1956. The answers to those questions, in so far as they say "no information available", seem to suggest that no checking of the records is done to ascertain how many persons there are from whom deductions are made at the source but who do not file a return at the end of the year.
As I said this afternoon my chief concern -and the minister can understand that-is for people who have paid in too much and who since they do not file returns do not get their refunds. The Minister of Finance must also be concerned about those from whom not enough was deducted at the source. But if no return is filed it could be that a person did not pay the amount he should pay.
I took it for granted that there would be some system in the minister's department whereby in the case of every taxpayer from whom deductions were made at the source a check would be made as to whether each of those taxpayers filed his return at the end of the year. I should like to know whether that is being done. If it is not being done how do you take care of the two situations I have described, namely the taxpayer who overpays through deductions at the source but files no return at the end of the year, and the taxpayer who, through deductions at the source, underpays but does not file a return at the end of the year?


James Joseph McCann: Mr. Chairman, I think I understand the problem. For the taxpayer who is overdeducted, there is a refund given to him and he gets that refund.


Stanley Howard Knowles: Is that not true only if he files a return and claims it?


James Joseph McCann: Yes, that is right.


Stanley Howard Knowles: All right. Let me ask it again. What about the taxpayer who, through deductions at the source overpays but who does not file a return? What happens to his case?


James Joseph McCann: In the first case he is breaking the law by not filing a return; and in the second place, if he makes application for his refund he will get it provided that he puts in a return. There is another question the hon. member asked. He asked what steps the government had taken to get such money back to the persons to whom it belongs. The answer is as follows:
Supply-National Revenue
The prompt issuance of refunds to all persons from whom overpayments of tax have been collected is a constant objective of the taxation division. This objective is one of the aims of an extensive annual publicity campaign employing newspaper, radio, T.V., newsreel and street car advertising. Persons entitled to refunds are advised frequently by such means to make application for their refund and to provide the department with the information necessary to enable a refund to be issued.


Stanley Howard Knowles: Now that the minister has read that, I know he is looking at the answers to the questions to which I have been referring. I ask him to look at the answers to questions 1 and 2 of the same set where the answer given was "No information available".


James Joseph McCann: Exactly. I am telling you that our statistics are not kept in such a manner that we can give you those answers. There are twelve million slips that come in with reference to this matter in a year.


Stanley Howard Knowles: If the answer as given is correct, that no information is available, does that mean that, in the case of the taxpayer who the minister said is breaking the law, you do not check on him? You fail to check on the taxpayer from whom too much is deducted at the source but who does not file a return at the end of the year? Similarly, do you fail to check on the taxpayer from whom not enough is deducted at the source but who fails to make his return at the end of the year?


James Joseph McCann: I am told by the officials that we do not make a full check. We make what is called a spot check on them.


Stanley Howard Knowles: That means, Mr. Chairman, that there probably are some people, whether they are wilfully breaking the law or whether they are doing it inadvertently, who through deductions at the source are overpaying and because they do not file returns they do not get their money back. They are not caught in the spot check. Likewise there are some other people who through deductions at the source fail to pay what they should pay and they fail to file a return, whether wilfully or by inadvertence. They are not caught in the spot check and they get by without paying their full share of income tax as prescribed under the law. I recognize that it is a huge problem with these twelve million slips that the minister refers to, but it seems to me that the efficiency on this point should not be on a spot check basis but rather should be on the basis of a complete check. I think you should go down the line and make sure that all these deductions at the source are checked to see whether the people from whom these deductions are made make a return at the

Supply-National Revenue end of the year and either pay what is still owing or get whatever refund is coming to them.


Some hon. Members:: Carried.


Edward Turney Applewhaite: Shall the item carry?


Ellen Louks Fairclough: No.


Stanley Howard Knowles: Mr. Chairman, I shall not pursue this matter any further, since the minister does not seem to have an answer to it. However, I hope that he and the officials of his department will give consideration to the point I have -been making.


Ellen Louks Fairclough: Pursuing the same point, may I ask the minister to say whether or not these slips are cleared through a central office or whether they are kept in the district office to which they are originally sent by the employer. What I am getting at is this. Suppose a man works in Toronto for three months, then goes from Toronto to Ottawa and works there for three months, and then goes on from there to some other centre and works there for three months. I wonder whether these slips are all brought together in one place. I realize that it may not be indicated, from one place to another, that he has left town. But are any steps taken to try to bring these slips together in one spot?


James Joseph McCann: It is common practice to
transfer the files to where the taxpayer is at the end of the tax year.


Ellen Louks Fairclough: Provided that he lets you know where he is?


James Joseph McCann: Yes.


Ellen Louks Fairclough: What I mean is this. Is there any pooling of these slips?


James Joseph McCann: Pooling of the knowledge?


Ellen Louks Fairclough: Yes. Any one of the district offices is bound to have at the end of the year a number of slips for taxpayers for a portion of the year, where it is obvious that either the man has had some other employment because he has not worked a full year in that place or he has moved to another place. Is there any check-up on those slips? Is there any attempt to bring them together in a central place to determine whether or not the taxpayer has moved around from place to place?


James Joseph McCann: Yes; and more particularly if a request is made for a refund. If a taxpayer makes a return and he states that he worked in Toronto for three months, and has worked in Ottawa and then moved to Montreal, they are brought to one central office from which his assessment will be made.


Ellen Louks Fairclough: But only if he requests it himself or makes a return?


James Joseph McCann: Yes, I think that is correct. We have different methods of attempting to trace him and we do it through the office that is most convenient to him, which would likely be the office in the district in which he was working or employed at the end of the year.


Ellen Louks Fairclough: I know that at the time claims were being made for refunds of compulsory savings, in some cases it was extremely difficult to trace the matter back through the district offices. Sometimes a taxpayer had forgotten just where he was in a certain year. I had two or three cases in which it was very difficult to trace the matter back. It led me to believe that they did not forward these slips to a central spot. Incidentally, now that I have mentioned the matter of compulsory savings, may I ask whether there is still an amount which has not been returned?


Stanley Howard Knowles: Nearly three million dollars.


Ellen Louks Fairclough: If so, how much is it?


James Joseph McCann: Yes, there is. In reply to the previous question asked by my hon. friend, may I say that our biggest problem is with women who change their names. They get married, and it is hard to locate them when they have changed both their name and their address.
With reference to the refundable compulsory war savings, $515 million was collected. The number of taxpayers who participated was 4,222,000. The number of cheques yet on deposit are 63,000. Of the $515 million we have repaid $512 million. It therefore leaves a balance of $2,922,481, which is deposited in the consolidated revenue fund. When people make application and give proof, the cheques are immediately issued.


Ellen Louks Fairclough: Are claims still coming in?


James Joseph McCann: Through the press, through radio, television and every other medium we can use, we try to indicate to the people that these cheques are available to them and are on deposit. You will read every year, though I have nothing to do with it at all, about unclaimed deposits in banks. You wonder why people, if they are alive, do not take an interest in the matter and make a request for the payment of that money. The same thing obtains in this department. People seem to get very careless about small amounts of money unless they need it very badly. They do not take the pains to make a request for it. We have used every method we can to try to locate them.


Ellen Louks Fairclough: Have the requests for these refunds practically ceased or do you still get them? Do you get them in any quantity?


James Joseph McCann: We get a few every month. This number of 63,000 has been brought down very considerably in the last few years.


Ellen Louks Fairclough: That is 63,000 refunds?


James Joseph McCann: That is the number of cheques on deposit, and the 63,000 cheques divided into the $3 million would give about $50 each.


[Stage Direction]
Item agreed to.
Taxation division-
290. District offices, $24,835,694.
Mr. Dinsdale:: I should like to ask the
minister a question on item 290, concerning the possibility of establishing an income tax office in the city of Brandon. I asked him this question on the orders of the day and he told me to be patient and wait until the estimates came along. The reason I bring the matter up at this time is that, as the minister knows, a new public building is under way in Brandon and it would provide ample office space. This city is the heart of the agricultural area of Manitoba. I know from personal experience that people communicate with me constantly for information concerning income tax problems. In every case we have to make a pilgrimage to Winnipeg to obtain that information. We do not mind going to Winnipeg, but we would much rather stay in Brandon if it were possible.
During the month just preceding the final date for filing income tax returns there are two officials who come out and establish themselves in the lobby of the post office. They provide a very worth-while service. It is the feeling that if that service could be spread over the 12 months it would be much more useful.


James Joseph McCann: Mr. Chairman, I can well understand the hon. gentleman's desire to have a public office in his community. It adds a little to his prestige, but do not forget these things cost quite a bit of money. It costs about three times as much to collect $100 in a small office like Brandon as it would in a larger office. Our average rate for collecting money is about 87 cents per hundred dollars. We know, from the experience we had with one small office in the west at Prince Albert, that it costs between $3 and $4 to collect $100 in these small offices. We have to take into consideration the costs. We believe we can do the work more efficiently in the city of Winnipeg than we could if we had three or four offices.
We have difficulty in getting assessors of the right type. In order to man an office in
Supply-Labour
Brandon we would have to have corporation assessors, individual income tax assessors and a full staff even in that smaller office. It is for that reason we have concentrated our offices in the larger cities and in places where we believe the best service can be given. The hon. member will criticize me for that statement when I tell him that we are establishing an office in Penticton. It is a long way from Vancouver, with difficult transportation facilities and all the rest of it. But I will give you a very frank answer. I think Brandon can be equally well served by Winnipeg and at much less cost than if we had an office in your city. I can conclude by saying we are not putting an office in Brandon at this particular time.


Walter Gilbert Dinsdale: With regard to the question of cost, it might mean a slight additional expense to the department; but I should like to point out to the minister that it also represents a considerable cost to the farmers who have to go all the way to Winnipeg to settle any income tax problems they might have. I was not thinking in terms of an office staffed with complete income tax assessing facilities. If there could be some service established, particularly for the farmers, I think the purpose would be served, because western Manitoba is an agricultural region and Brandon is the urban centre for that agricultural region. I think if the service were designed particularly for the farm population it would not be too costly and it would certainly save the farmers a lot of expense and inconvenience. It would avoid this rush of people climbing over one another, as I have seen them, in the post office lobby when the two assessors come out for a few weeks prior to the final date of filing.


[Stage Direction]
Item agreed to.

[Stage Direction]
179. Departmental administration, $702,905.
Milton Fowler Gregg: Mr. Chairman, I should like to say a few words before this item is dealt with. First of all I should like to say how much I appreciate the fact that the committee on estimates has had a chance to review the estimates of the Department of Labour proper, and has completed that task. I am sure that the discussion there has been valuable. I should like to pay tribute to the keen interest, to the fair appraisal and the helpful discussions that took place with reference to items 179 to 195 inclusive. This afternoon those items were referred back to the committee of supply. Those items include matters related to the Department of Labour as distinct from the unemployment insurance

Supply-Labour
commission. The items covering the unemployment insurance commission are two, namely 196 and 197.
The committee on estimates considered that those two items I have just mentioned might stand before that committee for the present time. It was felt that discussion of those two items, either in the estimates committee or the committee of supply, would be perhaps somewhat unrealistic without knowledge of the government's policy regarding any changes in section 45 (2) of the Unemployment Insurance Act.
I made it clear to the committee on estimates this morning that at this moment I was not in a position to give details on this matter because the commission itself, the actuaries and the unemployment insurance advisory committee have not yet quite finished their analysis of the effect of possible amendments. I undertook to have this work pressed forward to a conclusion as rapidly as possible. At today's sitting of the estimates committee it was agreed that we might proceed this day, if there were time, with the items starting at 179.
Now, arising out of the earlier discussions in the committee on estimates, very interesting discussions were held on the question of professional and technical manpower. At that time it was pointed out that many of the factors relating to that very interesting topic had to do with the unemployment insurance commission, the dominion bureau of statistics, the department of immigration and other government agencies, and I undertook to get together as much information as could be obtained at this time on so important a matter. I have done that. I could not dispose of it in the six minutes that remain. I am in your hands, sir, as to whether to proceed with it at a later sitting or not.


Edward Turney Applewhaite: Is the minister moving that we rise and report progress?


Walter Edward Harris: Mr. Chairman, in the circumstances I assume the committee ought to rise and report progress.


Edward Turney Applewhaite: Is it agreed that I rise and report the resolutions, report progress on others and ask for leave to sit again?


Some hon. Members:: Agreed.
Progress reported.


Stanley Howard Knowles: Should not one of the resolutions have been reported as amended?


Walter Edward Harris: Yes.


Edward Turney Applewhaite: I think the hon. member will find that money resolutions amended in committee are regarded as having originated in the committee and are not reported as amended.
Resolutions adopted in committee of supply this day reported and concurred in.



BUSINESS OF THE HOUSE

Walter Edward Harris: Tomorrow we shall take the estimates of the Department of National Health and Welfare and then the resolution in the name of the Minister of National Health and Welfare with respect to certain payments on relief.
I move that the house do now adjourn.
Motion agreed to and the house adjourned at 9.55 p.m.
[The following items were passed in committee of supply]:



DEPARTMENT OF NATIONAL REVENUE

[Stage Direction]
Taxation division-
289.	General administration, $2,702,629.
On motion of Mr. Harris item reduced by $50,000.
290.	District offices, $24,835,694.
Income tax appeal board-
291.	Administration expenses, $80,580.
[Stage Direction]
Friday, June 15, 1956

[Stage Direction]
Eleventh report of standing committee on miscellaneous private bills.-Mr. Henderson.
Fifth report of special committee on estimates.-Mr. Nixon.