1961-07-10

Hon. Donald M. Fleming (Minister of Finance) moved: the second reading of Bill No. C-120, to amend the Income Tax Act.
He said: Mr. Speaker, I think I need make no more than a very brief statement on this motion for second reading, because the bulk of the discussion on this bill will no doubt occur in the committee. I have already given the house notice of four amendments which will be introduced at the committee stage. I should like to mention one other that I am sure will greatly shorten the committee's labours.
One matter which has occupied a prominent place in the bill is a proposal to amend certain sections of the Income Tax Act in relation to personal corporations. To facilitate further study of the subject and the passage of this present measure, when we reach the committee stage I shall be proposing that the provisions of the bill in that regard be dropped. There have been some representations respecting this subject indicating that various groups would like further time to study the provisions in that regard; therefore I shall be proposing that they be eliminated from this bill. At the same time I shall be asking interested groups, the usual professional groups and others, to study these clauses and make their representations and suggestions based thereon after a careful study of the subject. Those representations will be welcomed and will be made use of in the future for the guidance of those concerned in considering proper legislative amendments affecting our present act.


Mr. Chevrier:: What clause?


Donald Methuen Fleming: Clauses 23 and 24 of the bill. There are one or two incidental amendments which follow.
I trust, Mr. Speaker, that these proposals will facilitate discussion of the bill. I may say the bill was introduced in the house a week ago. We have had the benefit of the usual conferences with representatives of the legal and accounting professions. We are always grateful to those groups for the assistance of their skilful examination of these legislative proposals and the benefit of discussion of them with such persons.
I think, Mr. Speaker, all other matters that are dealt with in the bill can more properly be discussed at the committee stage.


Mr. W. M. Benidickson (Kenora-Rainy River):: Mr. Speaker, the announcement just made by the Minister of Finance is something of a shocker, because when he introduced his budget resolutions on June 20 he indicated that among the considerations that had had most careful review were those that related to personal corporations. I would have assumed that because the amendments proposed in the bill before us relating to personal corporations cover many pages, the department would have given all the implications a great deal of study before bringing forward the amendments introduced on June 20.
In addition, we know that since June 20 the minister has announced three or four further amendments that will be before us when we are in committee today, all of them indicating changes of mind. But this one which involves many pages of this 36-page income tax bill apparently is the result of a decision that has been made over the week end. I say this is typical of the lack of preparation on the part of the government in the presentation of legislation to this session of parliament.
Apart from the very extensive legislation with respect to personal corporations, I take it that the amendments in the bill before us are chiefly concerned with proposals in respect of profit sharing plans. This, of course, is another matter upon which the government have delayed. They introduced a bill in 1960 and asked the public and those concerned to make comments upon the draft bill in the intervening period. We do not have a separate bill before us with respect to deferred profit sharing, but rather that matter is incorporated in amendments to the Income Tax Act this year. These appear to be desirable and acceptable, and a great many of the amendments in the bill appear to relate to changes consequent upon that decision. Apart from that, I must say that there is very little in the bill, lengthy though it is in text, that is argumentative.
I think the most significant thing is that in connection with incentives to industry, there is nothing in the bill particularly pinpointing incentives to exporters. In my opinion this is one place where anyone who was predicting

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what the minister might do this year might well have been disappointed and, indeed, distressed.
We know that the government appointed a productivity council this year. We have heard very little from that council with the exception of some speeches that have been made by the chairman, but we know that the chairman has been emphasizing the necessity of giving special tax incentives to those engaged in the export industries. There is no provision here for those producing for external consumption that goes beyond the depreciation available to them as well as to producers for internal consumption, and which would appeal to us as satisfying the statement made by Mr. de Young in London, Ontario, on May 29, when he said that Canada should seriously consider adopting tax amendments that would provide incentives to our export industries on a basis comparable with what we know is enjoyed by our competitors in other parts of the world, particularly in western Europe. What is the purpose of setting up this new organization, the national productivity council, if this government in a long delayed budget is not going to take advantage of advice of this kind, which is among the immediate advice that so far has been made public arising from the setting up of the council?
In addition, we had a valuable study in a committee of the other place. I refer to the special Senate committee on manpower and employment. In a summary of their long and excellent work they place very heavy emphasis upon the importance of taxation incentives, in particular to encourage exports. I refer to page 5 of the report, where the following is found:
Because of the immediate importance of such a new emphasis in industrial policy urgent consideration should be given to the possibility of establishing effective and practicable tax reliefs or tax incentives for the achievement of increases in the export of manufactured goods.
This government in its budget, rather than adopting a pinpointing effort such as has been prominently suggested for a long time particularly for export industries, has decided that its chief instrument in this field will be the exchange control fund. What have we to lose by giving special tax concessions to the export industries such as were suggested last year by the Leader of the Opposition, such as have been suggested by the Senate committee on manpower and employment, and such as have been suggested by the national productivity council? What have we to lose if the tax concessions relate simply to an increase in exports, something we have not experienced in the previous tax year?
In my criticism following the presentation of the budget on June 20 I indicated that we

had had an instrument that had proven successful in the expansion of our resource industries, namely a three year tax exemption applicable to industries that were to be established. What have we to lose in this kind of incentive if we are encouraging industry that has paid no tax up to now and has received no encouragement to become established?
In his budget speech the minister referred to the depreciation allowances that were to be provided to the so-called depressed areas under the terms of his baby budget. I remind hon. members of the house of the comment published by the Financial Post to the effect that this did not involve very much incentive. Hon. members will remember the pertinent statement that it was felt that the only labour that was likely to be created by anything as insignificant as the incentives involved in the baby budget would be labour created in the civil service in connection with the examination of depreciation allowances of this highly involved and complex type offered to new industry.
In the recent budget an increase was made in the depreciation allowances extended to persons who are investing in machinery and equipment beyond their norm and beyond what they did last year. I commend the minister for that. In addition, special advantages are now allowed to encourage research. Again I commend the minister for that. However, I say this. After so many people seem to agree almost universally that some very carefully directed incentives should be provided to those who might increase their exports, to me it is very striking and very distressing to find in the budget no reference to this matter. Having regard to the very well known activities of the Minister of Trade and Commerce in this field in recent months, this omission indicates to me that he apparently lost a fight with the Minister of Finance-


Donald Methuen Fleming: There was no fight.


William Moore Benidickson: -in cabinet. The Minister of Finance, facing a deficit, apparently won in the desire to hang on to dollars in tax revenues and the Minister of Trade and Commerce, who has wanted to increase exports from this country, has apparently lost in that internal fight. I say this is very significant.


Donald Methuen Fleming: There was no fight.


William Moore Benidickson: The minister then, in so far as export industries are concerned, is depending simply on what I call the main item of his budget, namely his decision to flip flop and somersault; to say that what he said

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last year was invalid; and to say that this year the proper thing is to gamble or speculate on the exchange fund and to depreciate the Canadian dollar, and that this is a policy to be preferred to that of some special tax incentives to the export industries.
I say that again we are in the dark. Last week's press indicated that this agency of the Minister of Finance, namely the exchange fund, seemingly is not operating in a complete spirit of harmony with the language of the budget when the minister said he wanted the dollar to go to a significant discount. There is evidence that the administration is doing the very opposite, that it is trying to prevent the dollar from going to a significant discount, and that it is using the funds of the exchange control board for that purpose. Inasmuch as we have not in the Income Tax Act the kind of amendments we were expecting fpr the encouragement of exports, I say that we are entitled to hear from the Minister of Finance some reference to this matter.
Then I think there is across the country great concern about the publicity that has been given to the administration of the Department of National Revenue in relation to assessing the proper deductions for church gifts. As recently as last week, on July 6, it was indicated in he Devoir-


Donald Methuen Fleming: Mr. Speaker, I rise on a point of order. There is in this bill nothing to which that subject is related. That surely is a matter for the estimates of the Department of National Revenue, if my hon. friend wishes to raise it. This bill has nothing to do with the Department of National Revenue. It is simply a bill to amend the Income Tax Act.


William Moore Benidickson: As Your Honour knows, when we receive an amending bill we are certainly entitled to consider those suggested amendments that are in the bill, but surely we are also permitted to comment upon the things which should be in the bill but which are not in it. It is in this respect that I say what is being done administratively, without an amendment to the act, which might be changing practice under cabinet order in council or otherwise gives ground to this kind of press comment.


Mr. Deputy Speaker:: Is the hon. member continuing his speech, or is he discussing the point of order now?


William Moore Benidickson: I was discussing the point of order.


Mr. Deputy Speaker:: If the hon. member has something to add I will hear him.


William Moore Benidickson: That is my point of order; that this is very important in connection with the revenues which might be raised as a result of our income tax statute. I suggest to Your Honour that when we find significant comments across the country-I could quote from a great number of newspapers which have been asking about this subject within the past two or three weeks-this is a time for the House of Commons to ask the minister what will be realized in tax revenue under our income tax statute by reason of the regulations which are passed by order in council under the act, and by reason of the policy of those who collect income tax for us in the Department of National Revenue. If there is to be a significant change in the maximum allowance with respect to gifts which will be counted as charitable donations, I say this is the time when the minister should be asked about it.


Donald Methuen Fleming: I say at once that there is nothing in this bill which touches on that subject at all. This is a bill containing certain amendments to certain clauses of the Income Tax Act. My respectful submission is that such subjects as the hon. member now proposes to discuss are altogether outside the realm of relevancy in this debate. The hon. member will have his opportunity to raise such questions on the estimates of the Department of National Revenue.


Hon. J. W. Pickersgill (Bonavisia-Twillingaie):: Mr. Speaker, I should like to make an observation or two before you make your ruling on this important point. My hon. friend from Kenora-Rainy River put the whole matter in a nutshell when he said that on an act to amend the Income Tax Act following the budget it is surely not to become the doctrine of the minister and certain hon. gentlemen on the treasury benches that we are not to be allowed to point out deficiencies, any kind of deficiencies, we think there are in the amendments that are being offered. The suggestion that the scope of our debate in this house should be limited to what hon. gentlemen sitting on the treasury benches think we are entitled to speak about and nothing else is preposterous.
I have in my hand, sir, something which I happened by sheer chance to have, and it is relevant to this very point. This is a report which appeared in the Halifax Chronicle-Herald of March 22, 1957 of a speech made by the present Prime Minister when he was leader of the opposition. It is headed "Parliament Puppet of Few Cabinet Ministers". The Minister of Finance, by saying we can only discuss what he in his wisdom thinks we should discuss and what he has chosen to put in this bill, is trying to make parliament a

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puppet of one cabinet minister and to abridge our freedom of speech. It is just another example of that same kind of dictatorship-


Mr. Deputy Speaker:: Order. The hon. member for Bonavista-Twillingate realizes, I suppose, that he is not addressing himself to the point of order at all.


John Whitney Pickersgill: Precisely.


Mr. Deputy Speaker:: The hon. member has not discussed the question of relevancy. He has discussed the attitude of the minister-


John Whitney Pickersgill: I have a few words to say on the point of relevancy.


Mr. Deputy Speaker:: I should like to hear the hon. member on that.


John Whitney Pickersgill: My hon. friend sought to say-and I was listening to him with care and attention-that certain administrative changes with regard to income tax appear to be in process without any legislative basis. He was contending that if such administrative changes were to be made there should be a legislative basis for them, and that this basis should be in the present bill. Surely nothing could be more relevant than that.


Mr. Erhart Regier (Burnaby-Coquiilam):: believe it has long been accepted in this house that at the resolution stage which in most cases precedes a bill such as this hon. members have the right to propose matters which in their opinion ought to be contained in the bill when it is brought down. I believe, also, that hitherto it has always been accepted that on second reading of a bill, the stage in which we are now engaged, members are permitted wide leeway to express their regret at the exclusion of matters which in their view ought to have been contained in the bill but which in fact are not contained in it.
As I understood the tenor of the comment of the hon. member for Kenora-Rainy River, it was an expression of regret that measures which in his opinion ought to have been contained in the bill are not to be found in it. I agree that when we reach the committee stage we are usually tightly tied to discussion of what actually appears in the bill itself, but if hon. members will recall such occasions as the famous pipe line debate, and many other occasions, they will realize that while we were discussing the principles of the bill we were also permitted to express our regret that certain other matters were not included in the measure before the house.


Hon. Howard C. Green (Secretary of Slate for External Affairs):: I should like to say a word or two on this point of order. It is perfectly obvious what the hon. member for Kenora-Rainy River is trying to do. He is

trying to drag in something which has absolutely nothing to do with the bill now before the house. Now the hon. member for Burnaby-Coquitlam tries to drag in the pipe line debate in support of the hon. member's contention that he is in order. I suggest this is going from the sublime to the ridiculous.
The house is now considering a particular bill, and if it were permissible for hon. members to raise any other points they pleased with regard to income tax, dealing with subjects not dealt with in the bill, there would be absolutely no limit to the scope of the debate. To allow a discussion of that kind would be to reduce the rules to a farce, and I submit to Your Honour that the statement made by the Minister of Finance in this regard is absolutely correct.
I do not know whether it is because at one time he was secretary to the late Right Hon. William Lyon Mackenzie King or whether it is because at one time he was clerk to the privy council, but the hon. member for Bonavista-Twillingate considers himself to be a great authority on the House of Commons, on the rules and on everything else in public life in Canada. I suggest that today he is going much too far, and that he would be wiser to get back in his proper place and not make such a show as he has made of himself today and on previous occasions in the last few weeks.


Hon. L. B. Pearson (Leader of the Opposition):: On the point of order, it certainly would be reducing the rules to a farce if those rules were interpreted in the way in which the hon. gentleman has suggested they should be interpreted, namely in a way which would prevent the discussion, on an income tax bill, of those matters which have traditionally been the subject of discussion on the second reading of such a measure. I cannot understand why hon. gentlemen opposite should be trying once again to limit and prohibit discussion of subjects which are appropriate for discussion on a bill of this kind.


Mr. M. J. A. Lambert (Parliamentary Secretary to the Minister of National Revenue):: I think the Leader of the Opposition and those supporting him would agree that if we were to follow their suggestion that the introduction of a bill containing, say, one clause dealing with the Income Tax Act would open the whole of the act to a general, wide ranging discussion, the house will be left in an impossible position. That has never been our practice. Certainly the rules of relevancy are being breached here, and I submit that only the items in this bill are capable of being discussed.


John Whitney Pickersgill: That is true in committee.


William Moore Benidickson: It is not true of second reading.


Mr. Deputy Speaker:: Before dealing with this point might I just mention that there is a tendency, when discussing a point of order, for hon. members to discuss extraneous matters. Also, I should like to indicate that it is the duty of hon. members to raise points of order so that the rules may be applied. I do not think it is appropriate to *criticize hon. members for bringing forward points of order assisting the Chair to apply the rules.
In connection with the point of order which has been raised, I have been attempting to find some reference in May which indicates that on second reading amendments are admissible to a bill which introduce matters which are relevant to the bill. Reversing that principle, I think hon. members will agree that a discussion in relation to matters which ;annot be the subject of amendments would ae out of order.
The principle of the bill before us is to be found in the various clauses of the Income Tax Act which are proposed to be amended. It has been decided on several occasions that an amending bill does not open a discussion in respect to the full act to be amended, but only a discussion in respect to the sections of the act to be amended.
Hon. members may feel that they would like to discuss other problems, but I should like to remind them that during the debate on the budget, for instance, there was occasion for such a discussion in relation to subjects which were not touched upon. When a problem arises as to the administration or insufficiency of an act, a further opportunity for discussion is afforded when the estimates of the particular department concerned are before the house.
While I do not suggest one should use a knife to draw the line, I would say that in respect to matters of relevancy such as this -I am not enunciating anything new-I think the hon. member for Kenora-Rainy River is going somewhat outside the scope of the bill in discussing provisions which are not proposed to be amended, but which he would like to have amended. I refer hon. members to a decision by Mr. Speaker Macdonald on November 14, 1949, as reported in Journals of the House of Commons for that year at page 237, which reads in part as follows:
On the second reading of an amending hill- (honourable members will notice that this is an amending bill)-it is the principle of the amending bill, and not the principle of the act to be amended, which is the "business under consideration". The discussion must therefore relate exclusively to the principle of the amending bill.
The principle of an amending bill may not be found in a section of the act which is not
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being amended. I also refer to a decision by Mr. Speaker Michener on December 13, 1957 during the consideration of a motion for second reading of Bill No. 232, to amend the Income Tax Act, as reported at page 2313 of Hansard for that year. It reads in part as follows:
This is an act to amend the Income Tax Act and it is relevant, as I understand the precedents, to discuss the sections of the Income Tax Act which are to be amended by this bill but not to review the act as a whole.
I therefore do not feel I need add anything further to indicate the general scope of the bill to hon. members, and I think the discussion should be limited to those subjects found in the bill proposing amendments to the Income Tax Act.


William Moore Benidickson: Mr. Speaker, I should like to address myself to your ruling, with all respect, in respect to the principle of the bill. I should like Your Honour to indicate to the house what principle can be found in the bill which is amending, helter skelter, a number of sections of the Income Tax Act.
I remind Your Honour that this amending bill was preceded by a resolution presented on budget night, and as a preliminary to the introdution of this resolution there is a statement which reads:
Resolved,-that it is expedient to introduce a measure to amend the Income Tax Act and to provide among other things-
It has been traditional that among the other things we will find when the bill comes forward, as we did only two weeks ago, there are items not exclusively connected with the enunciations made in the resolution on budget night. I find it impossible in this amending bill to find anything to which Your Honour refers as the principle. While I realize Your Honour's purpose, sometimes in an amending bill we find there is a principle involved, but can Your Honour indicate to us now any principle involved in this amending bill other than the principle that the Income Tax Act has to be amended once a year? When the act is being amended surely it is proper for us to comment upon those things which are not referred to and not being amended, particularly when there is no striking principle among the multiplicity of amendments that appear in the bill amending a statute which involves nearly 100 sections?


Hon. J. M. Macdonnell (Greenwood):: Mr. Speaker, would the hon. member permit a question. Supposing we had a bill with only one clause amending only one section of the Income Tax Act. Does the hon. member suggest that would entitle hon. members to range over the whole act asking questions about

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and suggesting recommendations to every section? That seems to be what he is arguing.


William Moore Benidickson: Mr. Speaker, I have been asked to answer a specific question by the hon. member for Greenwood. Perhaps he might define the principle contained in this amending bill. I suggest that we have never, to my knowledge at any rate, under the universal requirement of amending the Income Tax Act and making a great number of changes, many of which are not simply in respect to tax rates but relate to administration and interpretation of law with respect to the Income Tax Act, been prevented from discussing such matters. I suggest the hon. member's question is irrelevant because he knows, as a result of his experience during all the time he has been here, that there never has been an amendment to the Income Tax Act after a budget speech which has been confined to one section or could be regarded as involving one obvious principle. I suggest the bill presently before us involves a conglomeration of amendments. If the hon. member can tell me what the principle is which is involved, I should like him to do so.
For the reasons I have given I submit that omissions should be referred to. The parliamentary secretary to the Minister of National Revenue has intervened. I am glad to see that he is in the house, because he will have an opportunity to speak on second reading today in the absence of the minister, who we all regret is away due to illness. I think it is very important that when we are considering ways and means of amending the Income Tax Act, which affects our ultimate revenue, opinions as to how revenue should be raised should be considered in fairness to us all. When a statement is made indicating that the administration is proposing something new, which I think is consequential, and when it is reported in the press that income tax inspectors have set a maximum of $300-


Howard Charles Green: Mr. Speaker, on the point of order, the hon. member for Kenora-Rainy River is now going to make the speech he commenced to make, on which you made a ruling. I suggest he is now ignoring your ruling; that he has attempted to have you change your mind and has now reverted to his main argument. I submit that upon your ruling the point of order was dealt with, and that the hon. member has no right whatsoever to go ahead now dealing with this subject. Surely when Your Honour makes a ruling that should be final.


William Moore Benidickson: Oh, no.


Howard Charles Green: The hon. member should not be allowed to continue arguing about the point of order after your decision has been made.


John Whitney Pickersgill: Mr. Speaker, the Secretary of State for External Affairs has now raised a new point of order. It is interesting to hear the Secretary of State for External Affairs say that he remembers what happened in 1956, when his party was in opposition, and that the Speaker's decision should be final. That is a view I have always held, but it is not the view that hon. gentlemen opposite have held.
On the point that my hon. friend from Kenora-Rainy River made as to the principle of the bill, which was the point Your Honour was considering in the statement Your Honour made for the guidance of the house- and I did not understand Your Honour made a ruling; Your Honour simply indicated the lines on which he thought the debate ought to proceed-it seems to me that the hon. member for Kenora-Rainy River made a conclusive case that the only principle in this bill, and the only possible principle one could find anywhere, is that the Income Tax Act is not perfect as it is now and ought to be amended in a number of particulars which are set out in 36 pages. Surely the opposition, if it is to have any rights, has the right to say on the principle that these are not the right amendments, that there are other amendments which are more desirable than these. Otherwise, sir, what is debate? If we have simply to niggle about the clauses of the bill on second reading, why do we not just go into committee and have no second reading? Surely the purpose of second reading is to debate whether the bill itself is adequate. My hon. friend is seeking to show that in one particular respect this bill is inadequate, and shockingly inadequate; and the Minister of Finance, as is his habit in this house, is seeking to gag him.


Mr. Deputy Speaker:: Order. Is the hon. member speaking on the point of order?


Mr. H. W. Herridge (Kootenay West):: Yes, Mr. Speaker, I sat here very quietly but I could not resist rising and saying something in support of the previous speaker. I do not think in fairness the minister and the Secretary of State for External Affairs should try to narrow the discussion on second reading of the bill at this time, which is quite out of keeping with the practices of the past.
I agree with what the hon. member for Bonavista-Twillingate said with respect to the principle. You, sir, made reference to the principle of the bill, but there is no specific principle. This bill amends the Income Tax Act. I want to bring to your attention the fact that surely we must have the opportunity, in dealing with this legislation, to suggest that there are deficiencies here and there.

For instance, clause 9 provides certain exemptions for a spouse and dependents. Surely we have the right to say that aunties should be included as well. Certain business expenses are permitted to be deducted. I should like to see the travelling expenses of certain employees included. Surely we have the right to make suggestions as to further additions and amendments, and are not restricted to saying "amen" to each clause as it comes before the house.


Mr. Deputy Speaker:: I thank the hon. member for Kootenay West for his assistance. I think he has said something that is true, and I shall come back to this later, but 1 should like to deal first with the points raised by the hon. member for Kenora-Rainy River who asked what is the principle of an amending bill. Well, there may be as many principles in an amending bill as there are clauses amended or new clauses inserted in the act. For clarification of the point I would venture to say that it is not necessary to enumerate them all. For instance, there is a clause which would allow a deduction on account of expenditures for scientific research up to 5 per cent of the taxable income. That is a principle. There may be another one in the amendments which provides a new manner of taxation of shareholders of personal corporations.
In connection with these matters, the hon. member for Kootenay West has said that the house does not have to say "amen" to each clause. For example, in dealing with clause 25, if he said that we should allow up to 10 per cent instead of 5 per cent for scientific research, then he would be in order because he would be dealing with something which is in the act. But the hon. member for Kenora-Rainy River wanted to discuss clauses which are not amended, and say he is disappointed because the amending legislation may cover more subjects than the resolution did.
The subject matter before the house is certainly this bill and nothing else. There will be other occasions to discuss other matters. Only on Saturday I said the main difficulty is that hon. members do not want to discuss the problems at hand but always want to discuss something other than the business before the house. I think I have made myself clear, and I should be understood by all hon. members.


William Moore Benidickson: Mr. Speaker, I think that is rather a narrow decision. However, I will confine myself to it at the moment. I simply make the observation that this certainly was not the practice in the past.


Donald Methuen Fleming: It certainly was the past practice.
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Mr. Deputy Speaker:: Order. The hon. member should not discuss a decision of the Chair. Since he has brought up the point may I remind him that I quoted a decision of Mr. Speaker Macdonald.


William Moore Benidickson: Not on income tax bills.


Some hon. Members:: Order.


An hon. Member:: Are you questioning it?


William Moore Benidickson: Yes. I will say that here is a Minister of Finance who has said that he had not, when he was on this side of the house, adopted the style of debate that I have adopted. I say that is wrong. I recall very clearly when on an income tax bill he protested very vigorously that it did not include the exemption from sales tax of boots and shoes for children; that the exemption for married people should be $3,000.


Mr. Deputy Speaker:: Order. I hope the hon. member will come back to the bill. The point of order has been dealt with.


William Moore Benidickson: Mr. Speaker, I continue to say that certain other matters should be included. Before the minister concludes the debate on second reading we should hear from him about those matters.
In his budget speech the minister referred to a tightening up of certain exemptions, and I approve of this course. The reference was to the tightening up of certain exemptions that may have been claimed for business expenses and so on. Inasmuch as the minister dealt with these things in his budget speech, I would hope we might hear from him about them, because there is nothing in this bill relating to them. This is administrative.
The crown is employing legal agents to prosecute people for tax evasions, and this is vital to every clause of the bill. We have to know the type of enforcement that will be applied to make sure that the law that is passed by us here is going to be enforced in a certain manner. In connection with tax evasion in an important case-


Mr. Deputy Speaker:: Order. The hon. member cannot discuss the problem of tax evasion unless the amendments bring new problems in this respect. I do not know whether I am correct, but it seems to me that the hon. member is referring again to the problem which brought on the point of order and the decision of the Chair.


William Moore Benidickson: No, Mr. Speaker, I was not referring to the previous item. I am referring to an administrative application and enforcement of tax laws which will relate to every clause in this bill. Some of these clauses

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impose new taxation. We all know in connection with these matters that in a small percentage of the cases there is tax evasion. We want to know whether there is going to be something new in the matter of investigation, prosecution and other relationships connected with all the clauses of this bill which impose new taxation. A representative of the crown in a recent prosecution said it is very likely that prosecution by indictment, which carries with it a mandatory jail term on conviction, will be the procedure in the future in cases of tax evasion.


Donald Methuen Fleming: On a point of order, Mr. Speaker-


William Moore Benidickson: I think we are entitled to know whether that is going to be so.


Donald Methuen Fleming: -there is nothing in this bill that relates to that subject, and the hon. member is talking about something that was said in the budget. Everything that was said in the budget does not become relevant to this particular bill. We have already disposed of three bills that arose out of the budget. They cannot be discussed again, and there is nothing in this bill that touches on the subject that the hon. member insists, in defiance of your ruling, in trying to smuggle into this discussion.


Mr. Deputy Speaker:: Order. I was listening to the hon. member to see if he was going to be able to relate his remarks to any of the amendments but, as I think I indicated before, unless there is a new problem concerning evasion of tax which is brought in by the amendments, it would not be relevant.


William Moore Benidickson: Mr. Speaker, I submit with respect that my comment is relevant With regard to every section of this bill which imposes a new tax. We want to know whether the method of enforcement is going to be different. Is there going to be prosecution by indictment with a mandatory jail sentence in connection with tax evasion? Again you have ruled that is not in order, but I think it is something that the minister should very properly explain to the house when he replies to the general debate on second reading of an omnibus bill to amend the Income Tax Act. This is our best opportunity to get information on a subject of this kind.
I have indicated that we deplore the fact that many changes that we expected would have been made are not in the act. These relate chiefly to the export industries. I have indicated, and the minister took no objection to this, that as an alternative he was relying on a reference to the exchange fund. I want to say that the exporters association has

gone on record as saying that the uncertainty of reliance on an exchange fund that has no fixed rate is something of which they do not particularly approve. They approve, as we do, of a depreciated dollar which will give them some advantages in the export field.
I say that we could have had amendments in tax rates which would have applied to new businesses, just as we have depreciation rates changed with regard to greater than normal new plant purchases. I say that there is great alarm and uncertainty in the country about the future of the exchange rate, and it is rather distressing that the bill contains nothing to afford assurance to our exporters along the lines urged by the Senate manpower committee, by the Leader of the Opposition last year, and even by the chairman of the national productivity council.


Erhart Regier: Mr. Speaker, in the light of your ruling all I can say at this time is that this is the first time in my memory that in the debate on the bill to amend the Income Tax Act we have been unable to propose alternative ways in which we think the Income Tax Act should be amended. I must agree with the opening contention of the hon. member for Kenora-Rainy River that the amendments now before us are going to have a very limited effect indeed. I rather doubt the propriety of our even discussing the bill before us when I look at order No. 9 on today's order paper. That resolution is very closely connected in essence, if not in detail, with clause 13 of the bill now before us, and in my opinion we are being asked to approve a bill before the house has given its approval to a resolution that at least in essence is very pertinent to the measure now before us.
Under the particular circumstances in which we now happen to find ourselves, all I can say is that we will have to reserve our comments until we come to the discussion of each of the clauses of the bill in committee. However, the minister should know his own history well enough to appreciate that it is a rather unique situation that he should now ask us to abide by the rule he is seeking to have enforced, particularly on second reading of a bill to amend the Income Tax Act. I recommend that he read again all the speeches he made when he was the leading financial spokesman of the official opposition in debates on second reading of proposals of this kind.


John Whitney Pickersgill: Mr. Speaker, I have a few observations of a rather different character to make about the bill, the most striking of which is that on Friday evening in this house the house leader invited us to co-operate in concluding

this stage of the session with a view to adjournment on Saturday evening, and said that if that co-operation was forthcoming the government was prepared not to go beyond second reading of this bill.
Let us consider what that really means. Let us consider what is involved. Here we have a government that started this session of parliament on November 17, 1960, a government that seven months and three days later finally got around to bringing down its budget, seven months and three days after the beginning of the session.


An hon. Member:: Because you talk so much.


John Whitney Pickersgill: Hon. gentlemen talk about those who talk so much. I suggest that they read their leader's speeches and those of the Minister of Finance in a certain debate in 1956. Where are these great champions of the rights of parliament now? They are sitting here day after day trying to gag parliament. That is where they are.


Some hon. Members:: Oh, oh.


John Whitney Pickersgill: I say, sir that seven months and three days after the opening of the session, an unprecedented period of time, they brought down the budget.


Mr. Fulton:: The record is cracked and the needle is worn.


John Whitney Pickersgill: Never before in the whole history of confederation have seven months and three days gone by between the opening of a session and the presentation of a budget so often expected and so often not presented for reasons that nobody could ever discern until long after other events had happened.


An hon. Member:: Talk about the bill.


John Whitney Pickersgill: Then what are we told? We also had an advertisement of the budget for this year, something that has never happened before.


Mr. Aiken:: On a point of order, Mr. Speaker-


Mr. Deputy Speaker:: Order. I doubt very much that the hon. member is addressing himself to the bill at all, because he is discussing the budget and the time at which the budget was presented. If he could relate his remarks to the bill I think it would be more in order.


John Whitney Pickersgill: Mr. Speaker, I could quote May and I could quote Beauchesne but I am sure my paraphrase will be acceptable to you; that it is competent-I follow Your Honour's example given to us this morning -for us to debate anything which could be 90205-6-491
Income Tax Act moved in amendment. I am discussing the circumstances surrounding the introduction of this bill into the house and its progress in the house, about which I could offer an amendment, about which I wish to make some observations and about which I may offer an amendment before I conclude. In order to lay the foundation for a possible amendment which I may or may not move, I feel I am perfectly entitled under the rules to discuss the attendant circumstances.
It is a practice of the house that amendments to the taxing laws are not made until after a budget, so that the budget is one of the circumstances attendant upon the introduction of any tax bill in normal circumstances, and certainly in this one. What I am talking about at the present time are those attendant circumstances, the circumstances which brought this bill before us. Surely, sir, nothing could be more relevant than that, particularly since Your Honour has ruled that we cannot discuss the principle of the bill, which is that the Income Tax Act is not perfect and ought to be changed.
What I am saying is that a week before the budget, on June 14, we were given an advertisement of the budget, also an unprecedented act. The minister came into this house and said that he was going to bring in an expansionist budget.


Donald Methuen Fleming: No, I did not.


John Whitney Pickersgill: Oh, yes; the hon. gentleman had better look at his words. He said "I am an expansionist and Mr. Coyne is a restric-tionist; that is why Mr. Coyne has to go". That was what he said. This statement aroused the highest hopes, I think, that have ever been aroused in respect of a budget. This great balloon was inflated for a week. It was inflated after that statement; and as the Leader of the Opposition said, when the grand act was performed-and it was the longest, most tedious ever performed by any minister of finance-what happened? We found that the expansion was in wind, in words and in debt; that was the expansion we were promised.


Gordon Harvey Aiken: You are not helping it now.


John Whitney Pickersgill: Nobody could help it; nobody could help this budget. It has sunk almost without a trace.


Gordon Harvey Aiken: On a point of order, Mr. Speaker-


Edmund Davie Fulton: The hon. member is not doing badly at expansion himself.


Gordon Harvey Aiken: Since the budget debate has been concluded, I think the hon. member should return to a discussion of this bill. I

Income Tax Act
realize he has nothing to say about it, but surely he should try to relate his discussion to the bill.


John Whitney Pickersgill: I was precisely going to say that the tact that the government was willing to go on a two months' holiday before passing this bill, as the house leader told us on Friday, is clear evidence that the budget has sunk without a trace. They were so ashamed of it they did not even want to proceed with this bill until they were taunted into doing so. When they were taunted about it they realized how silly they would look in the country if they did not pass the main tax bill arising out of the budget. I suppose it is the main tax bill. I do not suppose their king size cigarette bill is their main tax measure. Certainly there was not very much in the other two tax bills to give the Canadian people any comfort, except the one item that was forced upon them by the hon. member for Essex East, the removal of the tax on automobiles.
This is the main bill, the main vehicle for expansion, and what were they going to do with it? They were simply going to let it lie on the order paper while the Minister of Finance, the Prime Minister and the other exponents of this new expansion took a two months' holiday; that is what we were told on Friday. This illustrates the faith, the confidence hon. gentlemen have in their own proposals. This illustrates how important they consider this bill to be.
This is the income tax bill. It is not a customs bill or a customs tariff bill which in most of its features comes into operation on budget night. There might have been some faint excuse, not much but some faint excuse, for delaying one of these other bills, because the things such bills would do would be going on in any case. However, the provisions of this income tax bill cannot come into effect until it is passed. They are so ashamed of it, they think it matters so little, that they were quite willing to take a two months' holiday before bothering to get it passed, until it was pointed out to them how ridiculous they would make themselves look. This is the reason we are called upon to consider it now.
When we seek to point out how puny, how inadequate, how unrelated to the great problems of the day this bill is; when the hon. member for Kenora-Rainy River seeks to do that and point out how the really important things should have been tackled in this income tax bill, the Minister of Finance got up and said, "You have no right to say our bill is not a good bill. This is against the rules of parliament as we lay

them down now. You have to talk about the things we have done and not the things that are not done."


Mr. Deputy Speaker:: Order. The hon.
member may not have intentionally reflected on the Chair but that is, in fact, what he did when he said the Minister of Finance was making the rules for the house. I can assure the hon. member that the Speaker is able to do his job in this respect, and I would ask him to clarify that remark.


John Whitney Pickersgill: When my words are examined, sir, I do not think it will be found that I made any such suggestion or insinuation as Your Honour has indicated. If I did, I of course will abide by the rules. I can remember great ministers of finance in this house. I can remember Mr. Ilsley; I can remember Mr. Abbott; I can remember Mr. Dunning; I can remember Mr. Harris, and I have watched the debates during the period all those gentlemen were ministers. Never, during all the time there was a Liberal government in this country which believed in free speech, did I hear a minister of finance get up on the second reading of a tax bill to try to throttle discussion.


Donald Methuen Fleming: I have. I heard Hon. Mr. Abbott raise the same point to the hon. member for Greenwood.


John Whitney Pickersgill: Well, the hon. gentleman is great at assertions, but he finds it very hard to prove his assertions, as recent events have shown, particularly when incontrovertible evidence of the hon. gentleman's failing recollection is brought to the attention of the house. If the hon. gentleman can find one such passage in Hansard I will apologize to him. However, I will be very surprised indeed if he will find that on the second reading of a bill, any of his great predecessors sought to prevent members from criticising the bill in respect of its inadequacies or deficiencies or those things that were left out.


Donald Methuen Fleming: You are hedging now.


John Whitney Pickersgill: No, I am not hedging. What the hon. gentleman has sought to do has been to say we have to confine our debate within the ambit of those things which he thinks are the proper subjects of amendment to the income tax law. We are not entitled to say what we think should be proper. It is not surprising, sir, because on Friday of last week we-


Donald Methuen Fleming: The hysterical
member.


John Whitney Pickersgill: The hon. member talks about hysteria. This, of course is just another of these attempts to smear people and divert attention from their arguments. I am not going to waste any time in discussing that.


Edmund Davie Fulton: Any more time.


John Whitney Pickersgill: I hear the Minister of Justice, for whom I have rather more respect than I have for many members on the treasury benches, talk about wasting time.


Edmund Davie Fulton: You were.


John Whitney Pickersgill: I remember the Minister of Justice when he was on this side of the house, and he did not talk that way then.


Edmund Davie Fulton: I did not talk the way you are talking, either.


John Whitney Pickersgill: What I am saying is, surely it is an affront to parliament to suggest that only the Minister of Finance can tell us how the Income Tax Act ought to be amended, and that our debate must be confined strictly to the-


Mr. Deputy Speaker:: Order. The hon.
member should realize that this point of order has been disposed of and that we should not revive that discussion. He is not guided by the Minister of Finance in the matter of relevancy but by the Chair, and so far as the discussion which took place is concerned, it is finished. The hon. member should now discuss the bill in accordance with the ruling of the Chair and not intimate that the Minister of Finance has decided what scope would be allowed in the discussion.


John Whitney Pickersgill: I must respectfully protest against any such suggestion. I did not criticize the decision of the Chair.


An hon. Member:: You did.


John Whitney Pickersgill: I criticized the Minister of Finance for raising the point of order which may have obliged the Chair-


Donald Methuen Fleming: And the Chair upheld me.


John Whitney Pickersgill: -to make a ruling with which I respectfully disagree.


Donald Methuen Fleming: Why do you not appeal it?


Some hon. Members:: Appeal the ruling.


John Whitney Pickersgill: I did not appeal the ruling.


Some hon. Members:: Oh, oh.


John Whitney Pickersgill: Is it now suggested that because we do not appeal every ruling of the Chair, we must agree with it? We must, of course, submit if we do not appeal, but that does not mean that we must agree. We 90205-6-491J
Income Tax Act
are now to have from the Minister of Finance thought control added to the other attributes of dictatorship.


Donald Methuen Fleming: Hysteria back
again.


John Whitney Pickersgill: I say it is not surprising that we should have from the minister the attitude we have had. We heard enunciated in this house on Friday a doctrine that those of us who heard it will never forget, namely the doctrine that the government was sovereign in this country, not parliament. That was the doctrine that was enunciated on Friday by the right hon. gentleman who heads the government, namely that the government of this country is sovereign, not parliament. It is no wonder they seek to gag us when they enunciate that kind of doctrine.


Some hon. Members:: Oh, oh.


John Whitney Pickersgill: I say that we have and have always had in this house a perfect right to point out that bills are deficient, and the reasons why they are deficient. That is the proper function of an opposition.


Gordon Harvey Aiken: In the budget debate.


John Whitney Pickersgill: When you have not even seen the bill? Really, Mr. Speaker, as to this trend to absolutism, to quote something the Prime Minister said in 1955, how rapidly it develops when hon. gentlemen get a taste of power. I would remind the hon. member for Parry Sound-Muskoka of one of the Prime Minister's favourite quotations, although he nearly always misquoted it. I refer to a famous quotation from Lord Acton that all power tends to corrupt and absolute power corrupts absolutely. That, Mr. Speaker, is what we are witnessing in this parliament in this session.


Mr. Deputy Speaker:: Order. Once again I invite the hon. member to address himself to the bill. He has been discussing points of order and he has even been discussing rulings of the Chair. This procedure is out of order. The hon. member knows it very well. I should not be obliged to remind him so often of how the rules of the house apply.


John Whitney Pickersgill: Mr. Speaker, I am saying that this bill is deficient, that it is not in any respect adequate to deal with the economic problems of the day. Yet this is the only tax bill that could have any really important and serious effect upon the economy. Surely even the Minister of Finance, who perhaps has no direct knowledge of the subject, does not think that the promotion of the king size cigarettes is going to end the recession and bring about full employment; although I should not be surprised if, in his disturbed state of mind, he may think-

Income Tax Act


Donald Methuen Fleming: The hon. member talks about a disturbed state of mind. He is hysterical.


Some hon. Members:: Oh, oh.


John Whitney Pickersgill: I just did that deliberately, Mr, Speaker, in order that we would have an example of how disturbed was the state of mind of the minister.


Donald Methuen Fleming: The hysterical
person is the hon. member.


John Whitney Pickersgill: I offered a little bit of bait there and it was snapped up, Mr. Speaker.


Some hon. Members:: Oh, oh.


John Whitney Pickersgill: I say that the changes in the tariff are surely not of a character to give us full employment. Let the minister say that they are. Let the minister who professes to be a great exponent of the expansion of trade say that these changes in the tariff-these little bits of protection, as he calls them, here and there-are sufficient to give us full employment. The tariff bill was not a very important bill.


Some hon. Members:: Order.


Mr. Churchill:: Speak to the bill.


John Whitney Pickersgill: Apart from the repeal of the 7J per cent tax on automobiles, neither was the excise tax bill.


Some hon. Members:: Order.


Mr. Deputy Speaker:: Order. The hon. member is now discussing the tariff.


John Whitney Pickersgill: I am not discussing the tariff, Mr. Speaker; I was discussing this bill.


Donald Methuen Fleming: You are not discussing this bill.


Mr. Deputy Speaker:: I have been obliged to intervene several times. I must refer the hon. member to standing order 34, paragraph 2, which reads as follows:
(2) Mr. Speaker or the chairman, after having called the attention of the house, or of the committee, to the conduct of a member who persists in irrelevance, or repetition, may direct him to discontinue his speech-


An hon. Member:: Good.


Mr. Depuiy Speaker:: I am not applying this rule, but I am warning the hon. member.


John Whitney Pickersgill: I submit, and again with respect, that all I was doing was pointing out that this bill must be the main instrument of the expansionist policy expressed in the budget, and that was my first sentence. In order to prove my point about this bill I was indicating that even the minister could not possibly argue that any of the others was

the main instrument. If that is irrelevant, it is hard for any ordinary mind to understand what would be relevant.
This is just a little mathematical proposition. We had four bills coming out of the budget, of which this is one. I say this must be the one that expresses the expansion because obviously the other three did not do so. I was merely making a casual reference to each of them, and very briefly, too, in order to show that they could not do it and that therefore by subtraction, by simple arithmetic, this must be the one that does represent expansion.
Yet what does it contain? It apparently contains nothing of sufficient importance that the minister himself can even find a principle in it. Indeed, Mr. Speaker, this bill is so disappointing to the country and so puny that the government itself is willing, as I said at the outset, to leave it lying here on the table and go off for a two months' holiday before asking us to bring it into effect. That is the kind of bill that we are now supposed to be debating, although what we can debate about becomes increasingly unclear.
(Translation):


Mr. Samuel Boulanger (Drummond-Arihabaska):: Mr. Speaker, I am sorry to disappoint the hon. member who has just interjected a remark, but I suggest that what I have to say about this bill is just as serious as what he may think of it.
I have some remarks to make following the introduction of Bill C-120, as well as some suggestions to offer to the Minister of Finance (Mr. Fleming), suggestions that could help stabilize our country's economy, which is shaky since the presentation of the last two budgets, the baby budget and the one recently introduced.
I want to discuss a theory to which I referred in a speech I made last December, and which has to do with a profit sharing plan. I had dealt rather at length with this matter but, unfortunately, neither the minister nor any member of this house has told me whether they approved or disapproved of that theory. I would have liked to know their views in order to be able to discuss it further, because I referred to it precisely in view of arousing the minister's. curiosity, as well as that of all the hon. members of this house.
The profit sharing plan has been-


Mr. Depuiy Speaker:: Order. Could the hon. member indicate to which section of the bill he is referring, or how he relates his remarks to the bill before us?


Samuel Boulanger: Mr. Speaker, reference is made in paragraph (a) of section 1 of this bill to a deferred profit sharing plan. Besides, it is referred to all through the bill. Well, I want to establish the relationship which exists between the profit sharing plan and the consequent tax. So, I believe I am not out of order in dealing with this.
In my opinion, a deferred profit sharing plan is a concrete form of a middle course theory between egotistical materialism, which is generally condemned, and exaggerated unionism, which is often the cause of trouble in our economy. In fact, such a middle course for employers and employees would help solve many of the problems we have to face nowadays.
It is a co-operative formula which enters in the solution of many a conflict. It ensures the welfare and security of the worker, on the one hand, and increases industrial production and improves the economy in general, on the other.
We are looking for new theories which deserve consideration, and very often the ones we adopt are ill-suited to our needs. For instance, various parties preach economic theories. Last week, we heard' the Social Credit party state its own theory, the implementation of which would be just as difficult, in my opinion, as it would be for me to go to the moon on a bicycle.
There is also the theory of the party which sits on our right, the C.C.F. party, the Socialist party, the New party-the name under which it hides itself is of no importance-which advocates a socialist theory not far from that of Marx.
How can this deferred profit sharing plan apply? As I have already indicated, it is not, of course, the government's responsibility to impose this plan to Canada's economy.


Mr. Deputy Speaker:: I was just awaiting this moment to make sure. Here the hon. member is suggesting or promoting a profit sharing plan, but not under the Income Tax Act. He is discussing a general problem which has no connection at this time with the amendments to the act. While the subject may be of interest, it would certainly have been much more appropriate in the budget debate, because the hon. member must realize that we are only dealing here with problems relating to the computation of income tax, and the hon. member has just mentioned that it is not for the government to take position on the matter.
Income Tax Act


Samuel Boulanger: Mr. Speaker, I was just going to mention that point. I was saying that it is not the responsibility of the government to apply such a plan, but that the government might co-operate by granting tax concessions to industries which already have such a plan, and also to workers who contribute to a pension fund. The point I wanted to make is the matter of tax concessions.


Mr. Deputy Speaker:: I will allow the hon. member to discuss the matter inasmuch as he relates his remarks to the provisions of the bill. If he wants to indicate that this should have been provided for in the bill, the hon. member must realize, in the light of the previous ruling I have made, that this would not be relevant. If he wishes to discuss certain relevant provisions of the bill, then I will certainly allow him to proceed. However, if he wants to deplore the absence in the bill of provisions on this matter, it is obviously irrelevant.


Samuel Boulanger: Mr. Speaker, it is difficult to discuss this deferred profit sharing plan without saying a few words on its principle and operation before adding our remarks as to the Income Tax Act.
Mr. Speaker, I know that many representations were made to the minister by some industrial and employers' organizations in view of obtaining tax concessions for industries which operate such a plan. I know that the minister has received a lengthy brief from the council of profit sharing industries of Toronto. I am not qualified to discuss it in detail, because I have not the same knowledge as the Minister of Finance. Yet, I must say that the recommendation of the council of profit sharing industries has been studied by renowned experts. I therefore have no doubt that when the various clauses of this bill are discussed, the minister will move the necessary amendments so as to include the point of view of those experts. They more particularly recommend the exemption of a greater part of the contributions paid by companies in view of creating a pension fund for the workers as well as of the share paid by the worker into this fund.
If we want to promote free enterprise and encourage the worker, we should give them a chance to effect savings, and the way to do it is to grant them reasonable tax concessions.
Those are the few remarks I wanted to make. I would have liked to deal at greater

Income Tax Act
length with the theory of profit sharing, but I shall limit myself to quoting these few lines from a speech made in this house by the worthy member for Richelieu-Vercheres (Mr. Cardin), on January 27, 1960:
Surely the government cannot possibly and will not refuse the invitation extended to it by the president of the Canadian Labour Congress to attend a meeting of government, labour and management. I am sure that the government can usefully use this opportunity offered to it in order to make a thoroughly objective and exhaustive study into the general causes of and possible solutions to our high cost economy. Also, Mr. Speaker, in this meeting the problems that are now facing those industries whose very existence is jeopardized by foreign competition might well be studied. X do not feel that the solution to the problem of these affected industries will be found among the traditionally accepted solutions of the past, high tariffs, quotas and restrictions which, to my mind, under present economic trends will become as obsolete as economic isolationism itself.
This reminds me of certain recommendations made not only by the hon. member for Richelieu-Vercheres, but by union leaders to the effect that the government should bring together labour and management representatives with a view to looking into this new theory on profit sharing which could not but improve the economy of our country.
(Text):


Mr. Arnold Peters (Timiskaming):: Mr. Speaker, I should like to ask a question of the hon. member before he resumes his seat. Did he suggest that hon. members of this group are opposed to this method of tax sharing?


Samuel Boulanger: I did not say that at all.


William Arnold Peters: I was of the opinion that the hon. member did not suggest that, but I wanted to make sure.
I am particularly interested in this matter in respect to profit sharing. I am interested in the application of this profit sharing to pension plans generally. The government on a number of occasions has similar types of problems. The government was faced with this problem when Mr. McCann was the minister of national revenue, and also in 1959 at a time when the present Minister of National Revenue was actively in charge of this department. The problem to which I refer involved the workings and application of this procedure because of the inability of the government and different companies to arrive at a suitable vesting proposal. In most cases-


Donald Methuen Fleming: Mr. Speaker, perhaps the hon. member will permit me to suggest that he is referring to an entirely

different subject. This bill refers to the introduction of provisions for a deferred profit sharing plan. What the hon. member is refer-ing to is a question raised in respect to the portability of pensions. That was discussed in the budget speech but is not touched upon in this bill. This bill concerns only the introduction of provisions for deferred profit sharing plans and has nothing to do with the portability of pensions at all.


William Arnold Peters: It seems to me there are certain problems involved here in respect to the effects of certain clauses of this bill, particularly clause 39, in relation to the vesting of profit sharing arrangements to the extent that they involve the Income Tax Act. I suggest the problem which faced the income tax department in relation to vesting is very similar.
Mr. Speaker, in some of our plants-I am not speaking of the extensive use being made of this profit sharing arrangement-there is co-operation between management and labour in the implementation of profit sharing programs, but these programs have involved serious difficulties because of the fact that employees have no control over the operations of the company, particularly in regard to the increase in capital. There is a serious difficulty in regard to the amount of money available for a profit sharing program. If the provisions of the present bill offer a solution, as apparently they are considered to do, I suggest there will be a problem similar to that which faced this and previous governments in arriving at vesting rights of employees participating in the fund, as well as the obvious inherent problem involved in the present change in the Income Tax Act.
I suggest the government should consider this matter very carefully, because in my opinion it involves an undesirable feature. The government is introducing legislation which I suggest it will have to withdraw because of the difficulties which will arise at the time it is put into effect. An example of this can be found by reference to the difficulties which faced the income tax department in 1959 in the operation of the accumulation fund of the pension program. It was found at that time to be unworkable, and I suggest the same difficulties will be experienced in regard to these present changes.
Mr. Speaker, if what I have suggested is not applicable to the present measure I am opposed to it, because I think this should apply to a portable pension program rather than strictly to a profit sharing one.
I hope I am not out of order under your ruling, Mr. Speaker, when I suggest there should be an amendment included in this bill

increasing personal exemptions for the purposes of income tax during the current year. I believe such a measure would accomplish at least some of the things the minister is attempting to accomplish by these changes. Presumably the minister is attempting to place as much money as possible in the hands of as many Canadian people as possible with resulting advantages to the economy as a whole. I suggest an amendment increasing these personal exemptions would have much advantage in that regard.


Donald Methuen Fleming: Mr. Speaker-


Mr. Deputy Speaker:: I must inform hon. members that if the minister speaks now he will close the debate.


Donald Methuen Fleming: Mr. Speaker, so far as anything that has been said in the course of this debate is relevant to the bill, and there was very little that is, I think it can best be dealt with during our clause by clause consideration of the bill in committee. Therefore, Mr. Speaker, I propose to reserve to the committee stage anything further that it might be desirable to say in that connection.


Mr. Deputy Speaker:: Is the house ready for the question? Is it the pleasure of the house to adopt the motion?


John Whitney Pickersgill: On division.


Donald Methuen Fleming: Mr. Speaker, will you call the yeas and the nays?


Mr. Deputy Speaker:: All those in favour of the motion will please say yea.


Some hon. Members:: Yea.


Mr. Deputy Speaker:: All those against the motion please say nay.


Some hon. Members:: Nay.
Division
Fleming (Okanagan-	Milligan
Revelstoke)	Monteith (Perth)
Flemming (Royal)	Montgomery
Fournier	Muir (Cape Breton
Frechette	North and Victoria)
Fulton	Nasserden
Gillet	Nesbitt
Green	Nugent
Grills	O'Hurley
Hamilton (Notre Dame	Pascoe
de Grace)	Paul
Harkness	Pigeon
Homer (The Battlefords) Rapp	
Jorgenson	Ricard
Jung	Richard (Kamouraska)
Knowles	Rogers
Korchinski	Smith (Winnipeg North)
Lambert	Southam
Legere	Speakman
Macdonald, Mrs.	Spencer
Macdonnell	Starr
MacLean (Queens)	Stewart
MacRae	Tasse
McCleave	Villeneuve
McFarlane	Vivian
McGee	Webb
McGrath	Weichel
Martel	White
Martineau Matthews	Wratten-82.
 NAYS Messrs:
Argue	Habel
Badanal	Herridge
Batten	LaMarsh, Miss
Benidickson	Leduc
Boulanger	McHraith
Bourget	McMillan
Cardin	Martin (Timmins)
Carter	Mitchell
Chevrier	Nixon
Clermont	Pearson
Denis	Peters
Deschatelets	Pickersgill
Dupuis	Regier
Garland	Tucker-28.
Bill read the second time and the house went into committee thereon, Mr. Flynn in the chair.
On clause 1.


Mr. Deputy Speaker:: In my opinion the At one o'clock the committee took recess, yeas have it.


[Stage Direction]
AFTER RECESS

The committee resumed at 2.30 p.m.
John Whitney Pickersgill: Before we enter into any discussion on the specific content of the clause I think I will take advantage of what I described as the Howard Green rule, which was given an odour of sanctity by the present Secretary of State for External Affairs when he sat on this side of the house and which provided for a certain amount of general discussion on the first clause of a bill. You, sir, may not have been following what was going on this morning. This is a very peculiar bill. We have been told by a number of

Income Tax Act
persons it is a bill without a principle and, apparently, without much purpose.
Nevertheless it does contain provisions that are going to change the Income Tax Act, and it some of these changes are carried through they will have varying effects upon the Canadian people. This is provided the government does not change its mind, and perhaps in a few minutes the hon. member for Kenora-Rainy River will give us the statistics to indicate how many times they have changed their mind about this bill since budget night. If the government do not change their minds many more times, when their majority has dealt with these changes in the income tax they will have varying effects upon the Canadian people. We will, as we always do, consider each of these clauses strictly on its merits and the effect each of them will have on the Canadian people.
Notwithstanding the minister's great desire for a holiday, which the government leader expressed on Friday evening by saying the minister would be content to stop at second reading of this bill; notwithstanding that fact, the minister chose to take up the time of the house by having a recorded vote on second reading of the bill, we, of course, could do nothing else but vote against this bill, because we consider it hopelessly inadequate in ways we were not allowed to explain to deal with the present serious economic condition in this country. I do not want to attempt to revive the debate on second reading, but I want to point out that we regard this as a very puny expression of the great expansion that was heralded in this country on June 14 and is really ending in a whimper.


William Moore Benidickson: As the hon. member for Bonavista-Twillingate has said, there is nothing very devastating in the amendments here Which involve the average taxpayer of Canada. When we are looking at clause 1, perhaps the minister could explain the benefits that accrue under the deferred profit sharing plans. I think the minister would want to go beyond the explanation he made on June 20, and I invite him to do so.


Donald Methuen Fleming: Mr. Chairman, the main provisions of this bill concerning deferred profit sharing plans are to be found in clause 27. Clause 1 of the bill simply is consequential upon the introduction of a new class of profit sharing plans provided for by clause 27, which would bring within the provisions of section 5 of the act any contributions made on account of a profit sharing plan.


William Moore Benidickson: The minister will agree that he has had some hesitation in introducing

a bill into this House of Commons with respect to deferred profit sharing plans, because he introduced such a bill during the 1960 session and allowed it to lapse. I ask him to indicate to the committee the result of negotiations or discussions that might have taken place during this period. I hope he will do that.


Donald Methuen Fleming: Mr. Chairman, we received quite generous consideration from those to whom we appealed for their views with regard to amendments to the Income Tax Act in relation to such plans. It is in the light of the representations which we received in response to that appeal, following the draft bill which was introduced in the 1960 session, that our study of the matter has gone further and that, in accordance with the resolution which the house approved, Bill No. C-120 now contains extensive provisions in relation to deferred profit sharing plans.
The provisions of this bill, of course, are not the same as those of the draft bill of the 1960 session. The provisions of this bill have been prepared in the light of the representations that have been made to us. We think it is a very good and workable scheme that has been put forward. Whereas previously the only provision the act made was in relation to other classes of profit sharing, now we have provision made for the deferred profit sharing plan. Under this measure the contribution of the employer on behalf of the employees to such a plan is given exemption in relation to the employer's income. The benefit that will be payable to the employee on retirement-and this is the purpose of the deferment that is contemplated in the deferred profit sharing plan-will be taxable like any other income at that time. As I pointed out in the budget speech, there are special provisions in cases where the employee in such a case has chosen to take up residence outside of Canada. This we consider to be a well balanced scheme to give encouragement to deferred profit sharing plans. We think there is a great deal of social benefit in such plans and that the Income Tax Act should be so revised now as to encourage employers to establish such plans so their employees may benefit substantially at the time of retirement.


William Moore Benidickson: I have no over-all quarrel with the minister's objectives, but I remind the committee that last year he even introduced a bill which was supposed to take account of the opportunity for deferred profit sharing plan operations within a corporation as between employees and employers. The minister wanted a year of reconsideration for his officials. In this bill I find nothing that indicates to me that the year has brought any

useful information. I think we in the opposition, small as we are in numbers, are entitled to the complete consensus of the advice that has been given to the Department of Finance on that bill introduced by the minister a year ago. What were the objections to amendments of statutes that are suggested here? To what extent has the government changed its mind since it introduced its pilot bill a year ago in 1960? I think these things should be discussed with respect to the plan for deferred profit sharing of employees and the corporations concerned in Bill C-84 compared with the plan that is involved in clause 1 of this amending bill.


Donald Methuen Fleming: We had a score or more of representations from different sources. The professional groups made their representations. One organization that is particularly interested in these problems made representations. We had representations from the Canadian Labour Congress and from a wide variety of sources. The hon. member has had an opportunity to compare the provisions of this present bill with those of the bill introduced in 1960, and he will have had an opportunity to observe the differences that have been introduced. We think that with the assistance of these representations, as I said previously, we have an improved bill in this regard.


William Moore Benidickson: I have listened to the minister, Mr. Chairman, but I do not think he has indicated to all of us the differences between the opinions he had as expressed in the bill introduced by him last year and any action that is required by us in parliament a year later on this bill amending the Income Tax Act. I ask the minister to review for us what has taken place between March, 1960 and the present time. We would normally expect a budget, of course, in March 1961. We did not get it. There were three further months of indecision. However, I want to ask the minister whether he can tell us in summary just what has been the benefit of the advice he invited a year ago. I ask him to tell us what the changes have been as a result of the advice he received a year ago.


Donald Methuen Fleming: I think you will find, Mr. Chairman, that can most suitably be done when we come to page 22 of the bill, as that is where we find the detailed provisions in this regard. At that time I shall be glad to point out the differences between the provisions of this bill and those of the 1960 bill.


Mr. McMillan:: In connection with clause 1, subclause 3, subparagraph (VIII) which has to do with the honorarium or payment to 90205-6-492
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volunteer firemen, I might say that I brought this matter up on behalf of our party earlier this session


An hon. Member:: You are not the first one.
Another hon. Member: You voted against it.


William Hector McMillan: Somebody says I was not the first one. I think I was the only one who brought it up on the floor of the house.


Mr. Hamilton (Notre Dame de Grace):: He
says you voted against it today.


William Hector McMillan: I wish to thank the minister for including this $300 as an exemption from income tax. I know a number of fire companies in which volunteer firemen receive some $50 to $250 as an honorarium per year. Some contribute the whole amount, others part of this amount, toward the maintenance of quarters either over the fire hall or in close proximity to it. My question to the minister is this. Would these contributions made toward the maintenance of these quarters be exempt for income tax purposes?


Donald Methuen Fleming: I presume the hon. member is referring to contributions made by companies and not by municipalities?


William Hector McMillan: A municipality might pay each individual fireman an honorarium of $200 a year. If the fireman contributes $100 of that toward the maintenance of a club or rented quarters near the fire hall, will he be allowed to consider that $100 as an exemption for income tax purposes?


Donald Methuen Fleming: If this $200 is part of his earnings the $200, of course, is exempt. He is exempted up to $300 of earnings. What he does with that is, of course, up to him.


William Moore Benidickson: I take it that the minister is asserting in a general way that the underlined words in clause 1 amending this subsection of the Income Tax Act would put a deferred profit sharing plan reasonably well on the same basis as a pension plan and the the plan that was introduced by his predecessor, Mr. Harris, in 1957, a mutual fund opportunity for investment as a private enterpriser. I take it the minister has in mind that this is an ordinary change, in conformity with what has been provided by the statute to date; it is not a radical change.


Donald Methuen Fleming: It is in conformity with the provisions which will be found on page 22. It simply brings the exempting provisions of clause 5 of the act into conformity.


William Moore Benidickson: The minister would agree that this perhaps has the approval of people who have given leadership in this field, such

Income Tax Act
as the Simpsons-Sears organization and others who have taken an interest in deferred profit sharing.


Donald Methuen Fleming: I would say so.


Mr. Habel:: On subsection 2 I should like some information. I must admit that I am not a lawyer, and I am asking the minister for information. The amendment provides, in underlined words, that travelling and living allowances need not be included in income. Would that mean that a gentleman travelling from either Ottawa or Montreal to Quebec for lobbying and getting compensation for it would not have to include in any amount which he might receive, as a total amount his travelling and living expenses while he was lobbying in Quebec?


Donald Methuen Fleming: This clause, as I am sure the hon. member will realize on examination, relates to something altogether different. It relates to the expense allowance provided for any person whose services are engaged pursuant to the Inquiries Act. This clause is introduced for the purpose of clarification. It provides that per diem allowances paid to members of royal commissions to cover travelling or living expenses need not be included in income. These allowances have not been regarded as taxable income in the past, but in view of the fact that some doubt has arisen because of the language of the present act it is deemed advisable to ask parliament to clarify the law.


Joseph-Alphonse-Anaclet Habel: As I said before, I am not a lawyer. The minister will admit that my question was a fair one. I think it is only fair that we should know exactly what we are supporting.


William Moore Benidickson: In connection with subclause 2 of clause 1, I take it the minister is saying that the administration has up to now observed the law in a way which is in accordance with what was stated to the hon. member for Cochrane. The minister is saying there is no change in the law as far as this wording is concerned. I take it this provision means that we are rectifying or rationalizing what we have been doing for some time. Is that possible? We have had a large number of people appointed to commissions under the Inquiries Act in recent times. This government cannot make up its mind itself. The process involves the appointment of royal commissions all the time, and these are just delaying tactics before a decision is reached.
That is what is involved here. These people who are appointed by the government to royal commissions will receive certain concessions under this income tax bill. I do not object

to that. I think we need inquiries of this kind at times. However, I want to ask the minister specifically whether this implies anything different from what was allowed to those who sat on commissions appointed by this government in the last two or three years. Are commissioners now to receive benefits additional to those which were received formerly by reason of this subsection and, if so, why? Who is going to be appointed under the Inquiries Act to make for this government decisions which the government should make for itself? Will the minister give us a record of the per diem allowances which have been provided to those acting on royal commissions set up by this government under the Inquiries Act? Will he give us, per person and per inquiry, figures showing what will be involved if we pass this clause concerning travelling and living allowances which may be deducted from income for taxation purposes?
I believe this country owes a great debt to people who are ready to take the time to look at some of the economic, social and other problems which we face today, when invited by their government so to do, but we must regard this matter carefully. Twenty years ago we used to think that somebody of my profession, a lawyer, had no particular advantage if he was appointed a member of a commission under the Inquiries Act to perform services for which he received a per diem rate of pay. He was sneered at because he received a per diem rate of pay. I want to make sure we are doing nothing here which will be in any way a departure from a new attitude which is growing up, namely that people who are asked by their government to serve on inquiries are not likely to be profiteers. I hope we have reached the point where nobody who is required by his government to give his time to the tremendously important concerns which parliament may refer to a commission under the Inquiries Act may be challenged and told he has served there to his advantage in dollars and cents. I hope this amendment to the bill does not provide that opportunity.
As a young man, years ago, I had an idea that it was advantageous to serve in the depression of the thirties in one capacity or another for $100 a day. As I have matured I have grown to understand that this country can enlist and command the services of the most important people in this country if we make sure that we do so on the basis of personal sacrifice and national advantage. I question clause 3 because I do not want political heelers any longer to become connected with these national inquiries and commissions.


Mr. Garland:: Mr. Chairman, without delaying the committee, in connection with subclause 3 I wonder whether the minister has any figures readily available which would indicate the average annual allowance volunteer firemen receive from municipalities.


Donald Methuen Fleming: Mr. Chairman. I do not think there are any authentic or adequate figures available to indicate what is the average across the country. In many of the representations we have received it has been indicated that the sum received by volunteer firemen who are interested might be in the neighbourhood of $250 per annum. We have gone a bit beyond that in proposing a $300 exemption.


Erhart Regier: Mr. Chairman, I wonder
whether I might ask the minister to explain why clause 13 has been included in the bill now before us, when there are references to the same topic in other clauses of the bill. As I understand it, there may be amendments to the existing arrangements under the dominion-provincial tax sharing arrangements act, and there is a possibility that this act may be allowed to expire, and that the provinces will take whatever is decided by the federal government they will be allowed to take.
As I mentioned in my earlier remarks this morning, it seems a little inappropriate for us to be dealing with this bill when we have item No. 9 on the order paper, which deals with very much the essence of the subject, or at least with the very same topic. I have been given to understand that none of our ten provincial premiers, while recognizing the need for a revision of the existing dominion-provincial tax sharing arrangements act, are willing to accept the discontinuance of some of the basic principles underlying the existing act which has reference to the tax sharing arrangements as between the federal government and the provinces. In spite of that fact we have before us a bill which, under the terms of clause 13, as well as other clauses, is going to radically effect the levels of revenue of the federal government in years to come.
Does the minister not believe it is a little presumptuous on the part of the government to ask parliament to approve these amendments, regardless for the moment of the opinions of each of the ten provincial governments, until at least the house has agreed that there ought in fact to be a discontinuance of one of the most basic principles of this act; because I can see a difficult situation arising-


Donald Methuen Fleming: I will be very glad to deal with that subject when we reach the
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Income Tax Act
appropriate clause in the bill, which is No. 13. There is nothing in clause 1 which touches upon that question at all.


Erhart Regier: I think this situation is involved in a number of clauses, Mr. Chairman, and that it is most appropriate that I speak in respect to the over-all principles in clause 1 and that the minister should reply-


Donald Methuen Fleming: Mr. Chairman, none of the clauses before clause 13 have reference to that question.


Erhart Regier: Mr. Chairman, I appreciate the possibility of a recess before very many hours have passed, and I should therefore like to appeal to the minister to reply to this basic contention of mine, which is that it is a little presumptuous for us to be endorsing on second reading the principle of even clause 1 of the bill, which would affect very greatly the existing dominion-provincial tax-sharing arrangements act, and which would interfere with our decision in respect to resolution No. 9 as listed on the order paper.


The Acting Chairman (Mr. McCleave):: Shall clause 1 carry?


John Whitney Pickersgill: Mr. Chairman, before this clause carries I have a very specific question I should like to ask the minister in respect to paragraph (B) in subclause 2. The minister has indicated, and I think I am representing correctly what he said, that there is no change in the practice, and that this is merely a clarification of the practice and the law as it now is. I am sure the treasury board does not like to recommend changes in the law unless there is adequate reason for doing so. What kind of situation or situations arose which brought this matter into question? It does seem to me that before we venture to change a section of the act which apparently has stood for some time we ought to know if there is substantial reason for doing so.


Donald Methuen Fleming: Mr. Chairman, this matter has not arisen from any decision but arose out of a question that was asked of the Department of National Revenue. That is how the question arose. It was thought desirable that there should be clarification. There is no intention to depart from what has been the practice followed up to the present time.


John Whitney Pickersgill: I take it that these payments which are made under the authority of the treasury board are what might be called equations of the probable costs? If it involved accountable travelling or living costs the question should not have arisen at all. What the treasury board does from time to time, as I understand it, is to say that rather

Income Tax Act
than having accounts submitted, so much money per day may be paid and that will be deemed to be an expense equated to what the expense would otherwise be.
I might say that I am not criticizing this, as I am strongly in favour of the practice and was when I was a member of treasury board. I think there is a lot of waste of time and the taxpayers' money spent in checking small expense accounts, and it would be very much better and more simple to have a recognized per diem as an appropriate expenditure made in these circumstances so that it could be done quite automatically, saving a great deal of time, money, energy and bureaucracy. I am strongly in favour of this view and in favour of anything that clarifies it, but I just wanted to be sure that is what this is. If that is what it is, whatever comfort the minister can get from it, I am quite in favour of it.


Donald Methuen Fleming: That is what it is.


William Moore Benidickson: Having regard to the answer given by the Minister of Finance to the hon. member for Bonavista-Twillingate, the Minister of Finance has received representations from those engaged in railway and highway transportation, as well as other methods of transportation, to the effect that the average cost of a meal today is $1.50, including gratuities and so on. It has been suggested in those representations that the administration requires the individuals to produce, for 365 days in a year, a long list of individual receipts covering meal purchases.
What is the present practice in the Department of National Revenue with respect to those union employees who complain that they do forget? They are not businessmen. They have not got secretaries, and so on, and they do not take chits at all times. They forget about it, but on the average they are good eaters; they are entitled to be. They are husky men on the trucks and on the railways of our country. On an average they find that they spend not the arbitrary figure which the Department of National Revenue has in mind, which at the present time is $1.40, I think. They have investigated this and they say that on the average they spend perhaps $1.50 per meal per day when they are on the road. They say that the Department of National Revenue disregards this. The department has its own figure. Perhaps this could be referred to a parliamentary committee. Could we find out what the senior officials of the Department of National Revenue spend when they are outside of Ottawa on business for the Department of National Revenue?


John Whitney Pickersgill: When they visit Jean Talon
hospital, for example.


William Moore Benidickson: Perhaps they could indicate whether this is out of the way, having regard to what I call these big expenses for a transport worker which must, of course, include the tip.
Regardless of the protestations of the Minister of Finance, the cost of living has gone up. I say that the decision made by the Minister of Finance or the Minister of National Revenue four years ago with respect to the expenditure of $1.25 per meal for transport workers was standard and adequate in the absence of individual vouchers. I say that has been outdated by the increase in the cost of living which has developed during the time this administration has been in power. I would think that perhaps $1.50 would be a better figure for transport workers on the highway, on the railway, on the seaway or any place else. They have made representations to the government. There is nobody in this House of Commons-


Donald Methuen Fleming: This has nothing at all to do with this clause. It is not involved in this clause nor is it related to it in any way. If the hon. member is asking about rulings in the department, we shall have an opportunity to deal with that matter when the estimates of the Department of National Revenue are up for discussion. It has nothing at all to do with this clause.


William Moore Benidickson: Mr. Chairman, will you look at subclause 2 of clause 1 that we are discussing, and will you look at the words-


Donald Methuen Fleming: It relates to per diem allowances.


William Moore Benidickson: The paragraph refers to travelling or personal or living expense allowances. Does the minister say that I and other members of the committee are out of order when we say that this should be reviewed?


Robert Jardine McCleave: Order. The Minister of Finance has raised a point of order. In reference to the point raised by the hon. member for Kenora-Rainy River, if he can bring his remarks within (A) which deals with travelling or personal or living expense allowances expressly fixed in an act of the parliament of Canada, or those that are fixed under (B), he will satisfy the Chair.


William Moore Benidickson: Mr. Chairman, I know you are very fair, but I suggest you do not know the opportunities that are available outside the statute, the opportunities that are really pertinent and the opportunities that prevail with respect to changes that are made by

order in council, and they are made from day to day. This government used to complain about orders in council, but they pass more orders in council than any government I have ever known. In this respect I say there is jurisdiction, there is authority under the Income Tax Act to make decisions with regard to travelling or personal or living expense allowances. It was on that subject that I was speaking. I say that those engaged in the transport industry, who are under consideration at this time, have made representations to the minister. He has not indicated to us-


Donald Methuen Fleming: Mr. Chairman, this has nothing to do with the kind of allowances that are spoken of in this clause. This relates to:
(i) travelling or personal or living expense allowances
(A)	expressly fixed in an act of the parliament of Canada, or
(B)	paid under the authority of the treasury board to a person who was appointed or whose services were engaged pursuant to the Inquiries Act-
This applies to royal commissioners. The hon. member is talking about a subject that does not arise under this clause of the bill, or under the section of the act to be amended by this clause of the bill.


Robert Jardine McCleave: would ask the hon. member for Kenora-Rainy River whether the allowances to which he refers are expenses which come under an act of parliament. How do they arise? If he answers these questions it may help the Chair.


William Moore Benidickson: I can understand that an amendment to paragraph (a) of subsection 1 of section 5 of the Income Tax Act would be advanced by a Tory government to concern people under the Inquiries Act, but not the transport workers for whom I was just speaking. I conclude my remarks on that point in this way. In clause 1 of this amending bill we have reference to refunds. I should like the Minister of Finance to tell us-


Donald Methuen Fleming: Where?


William Moore Benidickson: I am thinking of the reference to refunds to volunteer firemen. I should like the Minister of Finance to tell us what other refunds have been made in the past to other taxpayers. He wants to go back to 1958. What refunds have been made to taxpayers whose taxes deducted at the source are in excess of their ultimate liability? Has the Department of Finance or the Department of National Revenue a better record in lower deductions at the source, monthly or weekly, or whenever the tax is deducted, than has heretofore proven to be the case? What is
Income Tax Act
the record of the volume of dollars paid back to poor taxpayers rather late in the game because there is not an adequate judgment of their responsibility for deductions, and so on, at the source?


Donald Methuen Fleming: There is nothing in this clause dealing with refunds. That is an entirely different subject. If the hon. member wants information about refunds it can be obtained by putting a question on the order paper. What we are dealing with here is the matter of exempting honoraria of volunteer firemen.


Erhart Regier: Mr. Chairman, I hope the minister will forgive me for referring to something again but I have a very important engagement later in the afternoon, and I am afraid that clause 13 and subsequent clauses may be passed when I am not here. In order to bring myself really into line with clause 1 I should like to ask the minister this question. Is it the wish or hope of the government that the bill now before us be passed before a mutually acceptable agreement has been arrived at with the premiers of the provinces with respect to the revision of the Federal-Provincial Tax-Sharing Arrangements Act?


Donald Methuen Fleming: I will be glad to take note of the hon. member's question and put an answer on record for him when we reach clause 13.


Erhart Regier: In that case I will have to
make my observations. They may have to be made in haste, but I can blame no one but the minister for that.


Donald Methuen Fleming: The hon. member is asking a question not dealing with anything in clause 1 of the bill, but a question having to do with clause 13 of the bill. Having regard to his engagement, if he is not here when we reach clause 13 I shall be glad, of course, to answer then the question he has asked now. I do not think it would be proper, however, to launch into clause 13 now when we are dealing with clause 1.


Erhart Regier: If I may say a brief word on the point of order, Mr. Chairman, I do not intend to discuss clause 13 specifically. The minister-and I appreciate his offer-is willing to give me a reply when clause 13 is reached, but as I have indicated I must be absent from the house. I would not be able to make my argument at that time, so I will have to make it now. Under the rules I can do so under clause 1, because I am referring to the bill as a whole.
It would appear that the government is hoping that the bill now before us with all its clauses will become law before a mutually

Income Tax Act
acceptable arrangement as to tax sharing has been arrived at between the federal government and the ten provincial governments. This is a most amazing thing on the part of a government which had as a major election plank the ending of this business of centralization, which was going to recognize the intent of the British North America Act and was going to work in harmony with the provincial governments.
Now we are faced with a bill which, if it becomes law, will create a situation whereby the ten provincial governments will be confronted with a fait accompli. The federal Income Tax Act will have been amended. I should like to ask the government this question. What are they going to do if the ten provincial governments refuse to accept the offer of the federal government with regard to this matter? Are they then going to say to the provincial governments "Regardless of whether or not you buy our offer, this is it"? The situation now has all the appearances that the government may be faced with a very embarrassing and difficult situation that might even require a special session of the House of Commons to reverse a decision taken now; or in effect it may mean that the attitude of the government will be, the opinions of the provinces be damned; no matter what they say we are going to amend the Income Tax Act as if the whole proposition had already been mutually agreed upon. I recall the minister's own words as a member of the opposition about co-operation with the provinces. This is not co-operation.


Donald Methuen Fleming: As the hon. member has another engagement I know the committee will wish to be as accommodating as possible, but he is launching into the question of whether this bill should be proceeded with. The house has given the bill second reading and has referred it to this committee for clause by clause consideration. It seems to me that the remarks he is making now would have been out of order at any stage in the committee even without waiting for clause 13.


John Whitney Pickersgill: On the point of order that the hon. member has raised, may I say that for once I am afraid I have to agree very reluctantly with Minister of Finance. I am afraid that the hon. member for Burnaby-Coquitlam has been out of touch with the developments lately, because it was made perfectly apparent some weeks ago by the leader pf the government and by the Minister of Finance that this proposition to the provinces was not take it or leave it; it was take it or else. Therefore the point that the hon. member has raised rather skilfully under the guise of a point of order does not

arise at all because there is no question of the provinces being asked to agree. They are to take it or else.


Erhart Regier: That is all I wanted to know.


Mr. Nixon:: Mr. Chairman, I have been looking at subclause 4 of clause 1, which reads as follows-


Mr. Speakman:: Do it with a straight face.


George Ewart Nixon: It reads:
All that portion of paragraph (b) of subsection (1) of section 5 of the said act that follows subparagraph (vii) thereof is repealed and the following substituted therefor: "minus the deductions permitted by paragraphs (i), (ib), (q) and (qa) of subsection (1) of section 11 and by subsections (5) to (11), inclusive, of section 11 but without any other deductions whatsoever."
I wonder whether the minister could explain that. It seems very confusing to me, and I am sure it does to others.


Donald Methuen Fleming: The only change made by this clause is in the insertion of the letter "(ib)" in the provisions of section 5 of the act. That is all it does, and the effect is as stated in the note on the opposite page.


John Whitney Pickersgill: I think the clause the hon. member for Algoma West has just questioned is a triumph of clarity in drafting. It is pretty evident that the minister himself does not understand it, because he merely refers us to the explanatory note. Certainly no one can tell from the explanatory note what this means. When we are told that the only change in the clause is something involving the addition of "(ib)", how the taxpayer who is supposed to abide by this law is going to know what it means without hiring half a dozen Philadelphia lawyers is hard to understand. As the committee is composed mostly of laymen like the hon. member for Algoma West and myself, I think we are entitled to hear from a great lawyer like the Minister of Finance an explanation of what is really involved and what the "(ib)" really is.


Donald Methuen Fleming: The hon. member will see what the "(ib)" means if he will turn to page 3 of the bill. He will find it in the middle of the page. It has to do with legal expenses of an employee. Section 5 of the act deals with the definition of income, and section 11 of the act sets forth certain deductions. The provisions are to be amended so that, in conformity with budget resolution No. 7, expenses incurred by an employee in collecting his wages or salary will be deductible from his taxable income.


John Whitney Pickersgill: What does that mean?


Donald Methuen Fleming: The hon. member may know what salary means. He may know

what earnings are of an employee who is earning salary or income. If the employer does not pay him he will have to sue the employer, and if he sues the employer he may incur some legal expenses. If he incurs legal expenses this clause proposes that he should be entitled to deduct those legal expenses in determining his taxable income in respect of those earnings.


[Stage Direction]
Clause agreed to.
On clause 2-Deferred, profit sharing plan.
William Moore Benidickson: Mr. Chairman, I think the hon. member for Bonavista-Twillingate had a pertinent point with respect to clause 1 just a few minutes ago when he referred to section 1 (k) of the Income Tax Act, because it had a very great bearing. I think the minister should explain this particular amendment. I must confess I have not given this amending bill the attention I should have liked to give it. I would say, however, that this clause is important in connection with the addition of the new section 79 (c) which, in my judgment, might very well involve a change in the language of the Income Tax Act.
Despite what we hear, the clause relates to references to the word "and" and paragraph "(m)" as well as paragraph "(n)". It really refers to an important introduction in the budget of this year, namely a decision of the minister to advance legislation related to deferred profit sharing plans. Last year he was timid. All he did was to introduce his bill which enabled employees and employers throughout the country to criticize this proposal. We have no bill before us this year. We have here the result of that year's inquiry. We have amendments to the Income Tax Act. I assume that clause 27 of the bill is going to add section 79 (c) to the permanent law of this country which involves something new with reference to the pension laws and annuities for the self-employed, introduced in 1957 by the previous administration. I ask the minister to put on Hansard a full explanation of his intent under clause 2 of this amending bill.


Donald Methuen Fleming: Mr. Chairman, the full provisions in relation to deferred profit sharing plans are in clause 27, which we will be considering shortly. This clause simply has the effect of bringing into taxable income the benefits received by a taxpayer under the deferred profit sharing plan. This means that in the ordinary course, when he retires, the benefits he receives become income and consequently taxable.
Income Tax Act


William Moore Benidickson: Mr. Chairman, I believe it was in March 1960 when the minister introduced the budget he said he intended to introduce a special bill in respect of deferred profit sharing plans.


Donald Methuen Fleming: Not this year.


William Moore Benidickson: No, 1960 I said.


Donald Methuen Fleming: I did then, but I did not say the further provision this year would be in a separate bill.


William Moore Benidickson: My statement was that the minister wanted the advice of the country, so he introduced in 1960 a special bill related to deferred profit sharing plans. I say that those of us in the opposition are not likely to receive too much advice on these matters, but there might be people adversely affected. Our duty relates to them at all times. I think the minister has been too cursory in his examination of this problem. I say that this is the heart of the new program, in statutory form, which relates to deferred profit sharing on the part of employees. I think we should have from the minister at this time his objective review, having received from the country representations on profit sharing legislation consequent upon the introduction of the bill in 1960. We are entitled, therefore, to a little more information from the minister than he has given to us.


Donald Methuen Fleming: As I indicated
earlier, when we are dealing with clause 27 we will have the provisions before us and we can see what are the differences between the provisions of this bill and those put forward in the draft bill of 1960. There is no difference in respect of this particular matter. It is quite clearly indicated at all times that when the employee retires and then receives benefits from a deferred profit sharing plan, those benefits will be taxable income.


Lionel Chevrier: Why not give us the explanation now?


William Arnold Peters: Before clause 2 carries, I should like to say a few words. There are many references in this bill to profit sharing programs. I think the minister should give us an indication at this time what he is going to do with these accumulations which, if they related to pensions, would be called vestings. Many companies declare a certain amount of money available for profit sharing, and this may take two or three forms. Some companies put it in the form of shares in the company, other companies in the form of cash. In some companies, the money to which the employee is entitled is paid to him somewhat along the same lines as compulsory savings, that is paid to him on retirement.

Income Tax Act
I believe the minister should give us an indication of his thinking in relation to the charge that is made by the department when these funds are in the form of shares or accumulated savings for retirement. One of the questions that will be asked, of course, is what happens when the man is fired? Is his share in that year, if it is near the end of the year, given to someone else? What protection is to be given in order to dispel fear that will be in the minds of many Canadians who are directly interested in the welfare of the workers through union activity? There seems to be some reference to the elimination of the anti-union aspect in this which indicates that companies, rather than giving increases in wages will introduce profit sharing plans.
I think before we pass the first clause that refers to these plans, we should know what the minister's thinking is in regard to this aspect which would be mainly involved in vesting if we were dealing with pensions.


Donald Methuen Fleming: This has nothing to do with pensions or the vesting of pensions. That is a different subject altogether. This clause refers to deferred profit sharing plans, and when we come to clause 27 we will have the provisions before us.


Erhart Regier: I think without a doubt the minister will go down in Canadian parliamentary history as the outstanding man in the field for not answering questions by raising points of order and having other members ruled out of order when they attempt to obtain legitimate answers to their questions. The hon. member for Timiskaming pointed out, most adequately, that this was the first of many amendments contained in this bill. Before we signify our approval to even the very first item, we should know what the intentions of this government are with regard to protecting the interests of these workers in Canada who will agree, in preference to ordinary pension agreements as we know them, to participate in profit sharing arrangements.
As the hon. member pointed out, in the final analysis, as to its extent, this is always at the discretion of management at the end of the year. If the company have made a net profit of $100 million, they may decide to share $10 million of it with their employees or they may desire to share only $1 million with their employees. We are now beginning to grant concessions to the companies and these are not concessions being granted to the workers. Let us be very clear about this matter. This is the beginning of granting to companies the right to declare such profit sharing arrangements as part of their regular wage bill or as a substitution, if you like,
IMr. Peters.]
of a regular wage bill which ordinarily would be exempt under the terms of the Income Tax Act. Before we are prepared to begin granting this right to companies, and it involves millions of dollars in the case of a goodly number of companies I might name, I believe we are entitled to ask the government what are its intentions under this act with regard to protecting the rights of the workers. Far too many workers have had most regrettable experience when it came to a lack of vesting rights as far as their pensions were concerned and companies have repeatedly taken advantage-legally it is right, but morally most wrong-under the Income Tax Act. I feel that the minister owes us an explanation.


Donald Methuen Fleming: This, of course, is a first class example of the confusion that arises when we do not deal with the clauses of the bill seriatim in accordance with the rules. The clauses of the bill in relation to deferred profit sharing plans and the tax treatment of those plans and all questions associated with them are to be found in clause 27 of the bill. When we reach that clause there will be an opportunity for an orderly discussion. All that this clause does is to say that any benefits received under such a plan are taxable income and there is every reason why they should be so. To pass this clause does not preclude discussion.


Erhart Regier: On that very point, Mr. Chairman, may I say that the minister has just made it very clear that any benefit received under such a plan is taxable income. What I should like to know is this. Any benefit under such a plan accrues only to the company in that the companies now will be, as he has indicated, in subsequent sections granted very great concessions. I should like to know what concessions are provided in this bill for the protection of the legitimate interests of the workers.


Donald Methuen Fleming: The answer to that is in clause 27 when we reach it.


John Whitney Pickersgill: The minister said something which caught my interest. He said this was simply a provision that these benefits should be taxable income. Have they not been taxable income hitherto?


Donald Methuen Fleming: Yes. There has not been provision in the act up until the present time for a deferred profit sharing plan. Where there are profit sharing plans under which profits are shared at the time, then obviously they become taxable income in the hands of the employee recipient. We are now introducing provisions which will be found later in the bill and which contemplate

a new kind of plan, a deferred profit sharing plan, whereby the employee does not take out the profits at the time they are declared; instead they go into a fund and they will be accumulated there. He is not to be taxed on them while they are accumulating, even though payments are made into the fund on his behalf by his employer. There is a deferment of tax, because there is a deferment of enjoyment under the plan, until he takes out the proceeds. When the time comes under the terms of the plan to take them out, then of course they become taxable income just as they are now. Any profit sharing benefit now is taxable income.


John Whitney Pickersgill: Would that not be the
case under the present law even if this provision were not made?


Donald Methuen Fleming: Yes. That is what I am speaking of now. In relation to any benefit that is now drawn, the employee is taxable in respect thereof as taxable income. The purpose of the deferred profit sharing plan is to relieve him of any tax in respect of contributions made into the deferred profit sharing plan by his employer on his behalf. He is not going to be taxed on those while they are in the plan and accumulating there. When he takes them out on retirement, then under this clause they will be taxable.


John Whitney Pickersgill: I am not sure that I have this thing quite straight and I will try to put the point as simply as I can in order to see whether I have it straight. Is it the case now-if I may have the minister's attention-that even though they are paying into a deferred plan, they are taxed now?


Donald Methuen Fleming: Yes. That is the whole point.


John Whitney Pickersgill: Oh, I see. That is what I was seeking to get at. What this does is to treat them in the same way as contributions to a pension fund are treated-


Donald Methuen Fleming: There will be a deferment in respect of them.


John Whitney Pickersgill: Perhaps it would be a little bit easier if the minister would let me finish my sentences. I am really not seeking to make difficulties for him; I am seeking quite the reverse. What I am saying is this. As I see it now-and it is beginning to be quite clear-


An hon. Member:: It is beginning to dawn.


John Whitney Pickersgill: Yes; that is quite right. It is beginning to dawn. I do not apologize for that for unlike the minister I am not an expert on these matters. As I understand it now, if an employee receives a benefit under a profit sharing plan, even though he does not
Income Tax Act
get it in cash but it goes into a deferment which he will receive at some future date, he has to pay income tax on it in this tax year?


Donald Methuen Fleming: Yes.


John Whitney Pickersgill: Just as at one time I believe it was true that even though you put money aside in a pension fund, before a change was made some years ago in the income tax it was taxed. This is just treating profit sharing in the same way as contributions to pension funds are now treated with approved pension plans.


William Moore Benidickson: If it is deferred.


John Whitney Pickersgill: Pensions, of course, would be deferred. That is the situation if this is deferred, as the pensions are.


Donald Methuen Fleming: Yes. Anybody who draws a present benefit under such a plan will continue to be taxable, in other words, if there is a profit sharing plan effective now. But if there is a deferred profit sharing plan that comes within the scope of the act and is approved in accordance with the provision of the clause to which we will come later, then tax liability thereon becomes deferred too.


John Whitney Pickersgill: That is quite right; that is sensible.


William Moore Benidickson: I understand that the minister would prefer to make his statement when we come to clause 27 of the amending bill.


Donald Methuen Fleming: The hon. member asked for a comparison of the provisions of this bill with those of the 1960 bill. I would suggest we could do that when we come to the provisions of this bill in clause 27.


William Moore Benidickson: I am satisfied with that suggestion. I know that, in a statute that has more than 100 sections, even an amendment of this kind involves consequential amendments to a number of paragraphs. However, I take it that when discussing clause 27 which adds a very consequential new item to our Income Tax Act, namely section 79C, we shall have from the minister an explanation that is worthy of the new law that he is introducing in this amending bill.


Robert Jardine McCleave: Shall clause 2 carry?


[Stage Direction]
Clause agreed to.
On clause 3-Certification fee paid to bank.
Herbert Wilfred Herridge: I have just one question to ask the minister on this clause. On page 2, at the top of the page, the paragraph reads as follows:
-by a volunteer fireman from a government, municipality or other public authority for expenses

Income Tax Act
incurred by him in respect of, in the course of, or by virtue of, the discharge of his duties as a volunteer fireman, as does not exceed $300;
Would that include volunteer firemen-


Donald Methuen Fleming: Mr. Chairman, we passed that clause. We are on clause 3 of the bill.


Herbert Wilfred Herridge: I ask your pardon, Mr. Chairman. May I ask the minister this question just at this time? I was waiting for this clause. It mentions government or municipality. I know a volunteer fireman who is serving unorganized districts, with fire brigades with $50,000 worth of equipment and so on. Would the tax exemption apply to volunteer firemen not working for a municipality or a government?


Donald Methuen Fleming: If he is working for a public authority, it would apply.


Herbert Wilfred Herridge: These are purely unorganized districts without any incorporation whatever, villages inside provincial jurisdiction.


Donald Methuen Fleming: If he is working for a public authority, the clause covers it.


Herbert Wilfred Herridge: They would be working for the community?


Donald Methuen Fleming: If he is working for a public authority he is covered.


Herbert Wilfred Herridge: What is a public authority?


An hon. Member:: An incorporated town.


William Moore Benidickson: I draw the attention of the committee to clause 3, subclause (1) where reference is made to (cd). We see in line 35 reference to "not more than 90 days". As I understand it, this is a change in determination by the government. Why is this limited to 90 days?


Donald Methuen Fleming: Because that is ample scope for the nature of the acceptances which are in contemplation here. This deals with bankers acceptances-acceptances by the banks of drafts. This provision will result in a situation where a taxpayer who sells a bankers acceptance at a discount will be able to deduct the amount of that discount when computing his income. This period is the ordinary limit on the period during which these drafts may be deferred until the due date of payment.


William Moore Benidickson: This is an amendment to the Income Tax Act. We had a discussion earlier about amendments to the Income Tax Act about which we had advance notice either in the budget speech or in the budget resolutions. This was not considered to be one of those in respect of which advance notice should be given-or am I wrong in that?
IMr. Herridge.]


Donald Methuen Fleming: There was no specific resolution with regard to this provision of the bill.


William Moore Benidickson: No, Mr. Chairman. You sat higher up earlier this afternoon when I indicated to you that we had before us a great number of amendments to the Income Tax Act which we had no opportunity to debate during the general budget debate, having had notice thereof by presentation of resolutions which are normally presented by the Minister of Finance after he makes his budget speech. That is significant and I hope Your Honour, now sitting at a lower level, will take notice of it. I do not intend to press the point, but I am going to say that in subclause (2) of clause 3 there is a reference to the individual. If you will look at the explanatory notes, Mr. Chairman, you will see that it appears that this amendment might have reference to personal corporations. We heard the astonishing statement from the Minister of Finance this morning, 20 days after the presentation of the budget that he intended to delete from this amending bill to the Income Tax Act all references to personal corporations. I indicated then that references to personal corporations occupied a substantial part of this amending bill. I wish to ask whether or not the minister has in mind making an amendment, now that we are discussing clause 3-


Donald Methuen Fleming: No, Mr. Chairman. The first of the amendments will be reached-


William Moore Benidickson: I have the floor, Mr. Chairman. If I look at the explanatory notes on the righthand side of the copy of the amending bill, in the first line, referring to (da) I see that there is reference to a personal corporation there. I hope-


Donald Methuen Fleming: There is no reference to a personal corporation here.


William Moore Benidickson: There is, indeed. The statute is recited-(da), the former one, the existing one. The first line says:
(da) Where the taxpayer is an individual, such part of any loan-
And so on. It is on that basis that I ask the Minister of Finance, having regard to his statement earlier today that he proposes to withdraw about one third of the amendments in this bill which relate to personal corporations, whether there is any readjustment that we should make in committee now, having regard to the fact that we are dealing here with the relationship between an individual and a personal corporation as referred to in the explanatory notes.


Donald Methuen Fleming: No, Mr. Chairman. The paragraph (da) in the present bill refers to individuals or personal corporations. This

is now being broken down into two parts, (da) will relate to individuals and (db) to corporations.


William Moore Benidickson: Irrespective of the withdrawal of the changes?


Donald Methuen Fleming: Yes.


John Whitney Pickersgill: I wonder if the minister could give some explanation of the first subclause.


Donald Methuen Fleming: About bankers acceptances?


John Whitney Pickersgill: Yes.


Donald Methuen Fleming: The hon. member is familiar with bankers acceptances. They have not been dealt with specifically in the act hitherto, but they are a form of short term borrowing which is coming increasingly into use in Canada. This is the point involved here. A businessman draws a bill on a bank payable in 30, 60 or 90 days. The bank accepts it and certifies that it will be paid when it falls due. The taxpayer sells the bill to a lender at a discount. In this way, the businessman obtains the equivalent of a short term loan and the discount is in place of interest. This particular subclause provides that where a taxpayer sells a bankers acceptance at a discount the amount of the discount may be deducted when computing his income.


William Hector McMillan: What is meant, in clause 3, by the phrase "dealing at arms length"?


Donald Methuen Fleming: That is a well accepted expression. The definition appears in the act itself and the expression appears in various sections of the act. Broadly speaking, it signifies that there is no relationship between the two corporations or persons in question. It is a well established concept.


John Whitney Pickersgill: Has the hon. gentleman thought about drawing that definition to the attention of a certain school board?


[Stage Direction]
Clause agreed to.
On clause 4-Limitation re contributions under deferred profit sharing plan.
William Moore Benidickson: On clause 4, my inquiry would be directed to the phrase "an amount paid by an employer". What is the difference between an amount paid by an employer as contemplated in this amending bill and an amount paid by an employer hitherto?


Donald Methuen Fleming: I do not understand the hon. gentleman's question. This clause is consequential on the introduction of the provisions for the new class of deferred profit sharing plans under clause 27. It provides that no deduction shall be made for an amount paid by an employer under a profit
Income Tax Act
sharing plan which is not a recognized profit sharing plan or a registered pension plan. There is no interference here with the present provisions of the act in relation to pension plans.


[Stage Direction]
Clause agreed to.
On clause 5-Indirect payments.
John Whitney Pickersgill: Mr. Chairman, since we have heard very little discussion in the committee I do not think we should carry any of these clauses without having a very brief explanation from the minister as to what actually is involved.


Donald Methuen Fleming: There is a very simple change involved in clause 5 which is set out in the explanatory note. This amendment simply substitutes the word "property" for the expression "money, rights or things" in order to include real property.


[Stage Direction]
Clause agreed to.
On clause 6.
William Moore Benidickson: Mr. Chairman, in regard to clause 6 I must confess that I have not properly followed up a concern which has arisen in my mind on reading the explanatory note in regard to the expression "benefit under a deferred profit sharing plan". It is suggested in the explanatory note that this expression is defined by clause 39 to mean that portion of any amount received by a beneficiary under a deferred profit sharing plan which must be included in computing income.


Donald Methuen Fleming: Mr. Chairman, the hon. member is referring to the wrong clause. We are considering clause 6 which simply concerns the sale of depreciable property where the sale price consists of a mortgage. It has nothing to do with deferred profit sharing.


William Moore Benidickson: Perhaps the minister will refer to page 3 on the right where it-


Donald Methuen Fleming: We are dealing with clause 6 as it appears at page 5.


John Whitney Pickersgill: Mr. Chairman, I thought I might save a little time by not repeating my request in respect to each clause that the minister say a brief word explaining the clause.


Donald Methuen Fleming: Mr. Chairman, this amendment is related to the amendment provided in clause 3, subclause (7), concerning the sale of depreciable property where part of the sale price consists of a mortgage. This clause covers the situation where a mortgage is sold in the same year as the depreciable property. It will be noted, Mr. Chairman, that provision is made here that

Income Tax Act
where the principal amount of a mortgage or hypothec was included in the proceeds of disposition of depreciable property, in respect of which there are capital allowances, and in the same year the mortgage or hypothec was sold at arm's length for less than the unpaid balance of the principal amount, then the loss may be deducted from the proceeds of the disposition.


William Arnold Peters: Mr. Chairman, here again we see the expression "at arm's length". It appears a great number of times and sounds quite amusing to me. Is it a legal expression, and what is the definition of it?


Donald Methuen Fleming: Mr. Chairman, section 139, subsection (5) of the act defines the expression. It is a well established one and has been used throughout the act for a long time. The expression appears in various sections of the act so the controlling definition applies to them all.


[Stage Direction]
Clause agreed to.
On clause 7-Bond conversion.
William Hector McMillan: Mr. Chairman, could the minister explain this clause?


Donald Methuen Fleming: This is a provision covering the situation where one bond of a debtor is exchanged for another bond under a conversion arrangement which was provided for in the terms of the original bond. The new bond will be regarded for tax purposes as if it were merely a continuation of the original bond.


William Hector McMillan: Will the minister say how income tax is computed in connection with earnings from treasury bills? For instance, I understand that treasury bills bear the value that is to be received at the end of 90 days. Is that capital gain or is that earnings?


Donald Methuen Fleming: No, that is the equivalent of interest. Let us say that a treasury bill is sold at 99 cents, and when due, 100 cents are paid. That difference which really was a discount is the equivalent of interest on the 99 cents and accordingly is income.


[Stage Direction]
Clause agreed to.
On clause 8.
in the income tax amending bill each year since 1956. I think the hon. member himself piloted the first clause of this kind through the house in 1956.
William Moore Benidickson: Mr. Chairman, I wish to have stated for the record the amount available to the children of immigrants.


Donald Methuen Fleming: Well, it is the family allowance that is payable after-


William Moore Benidickson: Oh, no.


Donald Methuen Fleming: This is family assistance of $5 per month, and this clause, which has become standard now, simply carries into 1961 the same provision enacted first in 1956, that children in respect to whom such amounts are paid as family assistance to immigrants and settlers shall be classed as children qualified for family allowance for income tax purposes. In other words, the allowance is $250 for children under 16 years of age and $500 for children 16 years of age and over.


William Moore Benidickson: Mr. Chairman, if an immigrant arrives in September, shall we say, and receives this family assistance for three months of the taxation year, would he then deprive himself of the normal deductions for an allowance for a dependent child? Is that the effect of it? Would the minister relate to the committee the mathematics of this situation? What would the immigrant gain or lose if he arrived in Canada in September of 1960 and became taxable on December 31 as a taxpayer in Canada had he not received family assistance as an immigrant?


Donald Methuen Fleming: The taxpayer
would have the option in that case. If he thought it was to his advantage not to take the childrens' assistance then obviously he would decline it and claim the benefit of the higher deduction on account of dependent children when he pays his income tax.


John Whitney Pickersgill: That is the same option, is it not, that the recipient of family allowance would have?


Donald Methuen Fleming: No, there is a difference.


William Moore Benidickson: Mr. Chairman, this Mr. Benidickson: It is obligatory in the case
clause has reference to family assistance of family allowance, payable to immigrants which could be
related to family allowances. What are the Mr. Fleming (Eglinton): In the case of amounts payable under the other statutes family allowance there is a provision that relating to the children of immigrants which the Parent is deemed to have received the might be related to this amendment?	family allowance. My understanding is that
there is no option extended to him. However, Mr. Fleming (Eglinton): Mr. Chairman, this that does not apply in the case under dis-is an annual clause which has been included cussion.


John Whitney Pickersgill: Mr. Chairman, I should like to have this cleared up. With my customary modesty I remind my colleague, the hon. member for Kenora-Rainy River that I was the minister responsible for establishing family assistance, and I certainly have no apology to make for that. The only thing I regret is that this government, which has done so much for social justice, according to its own claim, might have brought family assistance up to the same level as family allowance the next time it is considering doing anything about social justice, which I wish we could have done in the first place, but we were trying not to have deficits. The thing I wished to get clear is this. Does a person in receipt of family allowance, if he receives it for only one month of the year, thereby have to take the lower allowance under the Income Tax Act?


Donald Methuen Fleming: I take it in the case the hon. gentleman is putting the child is born-


John Whitney Pickersgill: On December 1.


Donald Methuen Fleming: -on December 1. Well, the provisions in the act are based on eligibility of the child for family allowance. Now, what the parent may lose in the one case he will make up in the year when the child moves off family allowance. There is equity in the long run.


John Whitney Pickersgill: But in the case of family assistance-


Donald Methuen Fleming: Section 139 (1) (f)
reads:
"child qualified for family allowance" means a child who, in the last month of the taxation year in respect of which the expression is being applied, was or might have been qualified by registration under the Family Allowances Act, so that an allowance under the said act was or might have been payable in respect of that child for that month or the immediately following month.


John Whitney Pickersgill: I think that fairly explains the point. The minister has said that in the case of family assistance it is at the option of the immigrant. If the immigrant does not in fact apply for and draw family allowance the income taxpayer in respect of that child would be qualified for the higher allowance under the Income Tax Act rather than the lower one.


Donald Methuen Fleming: Yes, the higher deduction.


William Moore Benidickson: In the case of a child of a Canadian resident, I take it whether or not the parent has announced the birth of the child and has applied, on the statement that he makes in his income tax return, whether he has received family allowance
Income Tax Act
or not, he will be presumed to have received the allowance. Is that the present effect of the law?


Donald Methuen Fleming: It is not quite that; rather the act says that the right to the deduction in respect of that dependent child depends on whether the child is qualified to receive family allowance. That is the test. If the child is qualified to receive family allowance, then the parent cannot have the benefit of the larger deduction in respect of the maintenance of that child that he otherwise would have.


William Moore Benidickson: I think the minister has somewhat evaded my question. I take it the child would be qualified by reason of the fact of birth and the date of birth. Is that not right?


Donald Methuen Fleming: Of course, there is more than birth involved; there are birth, residence, and the residence of the parents as well.


[Stage Direction]
Clause agreed to.
On clause 9.
William Hector McMillan: I am glad to see that the minister has included laryngeal speaking aids. I wish to ask the minister a question about certain orthopedic beds. I really do not know whether or not they are covered. I have in mind orthopedic beds for patients who are paralysed generally owing to motor accidents. I know one or two cases where they have to buy those expensive beds and they will be in bed for practically the rest of their lives. These are cases where the cord is cut. I wonder whether beds of the type I have mentioned are included?


Donald Methuen Fleming: The answer is no, Mr. Chairman. As the hon. member will see by looking at the present clause, provision is made for a rocking bed for poliomyelitis victims but not for other kinds of beds.


William Moore Benidickson: I have read and reread the remarks of the minister on June 20 when he in effect took off the ceiling on the expenses of a taxpayer for medical purposes. He certainly aroused our sympathy by some of the illustrations he mentioned on June 20. However, I recall that this was resisted in the past by those who had some regard for the revenue of the crown, not on the grounds of inhumanity at all, but on the grounds that it might give a special privilege to people who might misuse this right of tax deduction if there were not some regulations. I am getting a little aged myself. Can I be assured that I would not be permitted to go down to Florida with a nurse, in the interests of my health, and that after certification the expenses of the

Income Tax Act
beautiful nurse and, of course, the doctor's expenses that might be attributed to my requirements would not qualify under this clause that removes the ceiling? I think that was the attitude in the past.
I have regard for the fact that the purchasing power of the dollar has decreased considerably in recent years. The wages of those whom we employ and need for our medical health continue to go up. In the past our reason for having a ceiling here was to make it impossible for the ultra-rich to get a special benefit in so far as tax deduction was concerned by, as I say, going to health homes that were not open to the ordinary person but were open to the wealthy taxpayer where he could go with all the accoutrements that might be called specialized services. I wish to know whether the minister has looked into this and why he has departed from the judgment of his predecessors? I know that his predecessors had sympathy for those who had very high medical expenses but there was some justification for having a limit on the amount that could be deducted from taxable income. I wish to have the minister's assurance that he feels that abuses cannot be committed under a clause of this kind, abuses such as I have facetiously presented to the committee.


Donald Methuen Fleming: There is no change in the definition of what are admissible medical expenses. The clause simply removes the ceiling. As I suggested in the budget speech, one man as a result of misfortune may incur as large medical expenses in one year as another man may incur in a lifetime. Last year we invited the house to increase the permissible ceilings and the house responded. I think I may say that there was quite a measure of warm approbation of the proposal voiced in all parts of the house. This year we are asking the house to go a step further and remove that ceiling and, I think, to do so in the interests of fairness for all taxpayers who may have this misfortune.


William Moore Benidickson: I have the utmost sympathy for all taxpayers who have a very heavy burden of expense in connection with ill health, accident or otherwise. I just want to make sure that we are not creating here an opportunity for inequality in the tax advantage that is possible under our law in respect of this provision. I recall that in the past I supported a ceiling on the maximum amount of deduction that would be possible. I would support today a spreading or averaging of legitimate, unavoidable and unfortunate medical expenses in one year over perhaps three or four years.

I simply raise the question here whether this provision does not give people in a very high income bracket an opportunity deliberately denied them in the past whereby such people were not able to deduct as a medical expense the cost of a qualified nurse or somebody else to push around a sick person in a wheel chair in Florida. I raised this matter in past years simply on the ground of fairness in our income tax structure. I quite agree with what the minister said on June 20 with respect to the catastrophic results in the case of a taxpayer involved in an automobile accident, let us say, who has expenses going away beyond the maximum deduction that has been allowed up to now. Having regard to our progressive tax rates I simply raise the question of whether or not in fairness the amendment would not have been better if we had allowed, in the case of an excessive amount of medical expenses, a carryover from one year to the next so that a taxpayer having an excessive amount of medical expenses in
1961	could average them over the years 1961,
1962	and 1963. I am solely concerned with the facts of life here. This is a matter to which I paid a great deal of attention when I was on the other side and I was persuaded that such a move was not desirable because the complete removal of the ceiling on deductions with regard to medical expenses could result in unfairness between the rich and the poor.


Herbert Wilfred Herridge: I have one question on clause 9, subclause 1. The amendment adds the underlined words "laryngeal speaking aid" so that the cost of such a speaking aid can be included in medical expenses. Can the minister inform the committee whether there are other types of speaking aids than laryngeal?


Donald Methuen Fleming: This refers to speaking aids for those who have suffered cancer of the throat.


Herbert Wilfred Herridge: It does not provide for other types of speaking aids?


Donald Methuen Fleming: No. I am not aware of other kinds that enable individuals to speak. This speaking aid is one that is attached to the larynx in some way to enable someone who otherwise would not have the power to speak to be heard and understood when the apparatus is turned on.


Herbert Wilfred Herridge: Can we take it that it means any speaking aid that is required to aid a person to speak?


Donald Methuen Fleming: If it is a laryngeal aid, yes. It would not apply to a microphone or horn that somebody used to make himself heard in the great outdoors. It is one that is

related to the larynx in the sense that otherwise the larynx is not functioning in an audible way. The kind of speaking aid we are thinking of here is well known and it has brought back the power of speech to many who have suffered loss of speech through cancer of the throat.


Herbert Wilfred Herridge: I asked the question because there are other names used for different types of speaking aids and I wondered whether they were included.


[Stage Direction]
Clause agreed to.
On clause 10.
John Whitney Pickersgill: What is involved here?


Donald Methuen Fleming: Subsection 2 of section 31 of the act is repealed because it is no longer required. The matter is dealt with under the Canada-United States income tax convention.


[Stage Direction]
Clause agreed to.
On clause 11-Income from duties performed in Canada.
Jacques Flynn: I understand there is an amendment to this clause.


William Moore Benidickson: On clause 11-


Donald Methuen Fleming: Perhaps I might deal with the amendment first. On page 7 in clause 11 we come to the first of the amendments. I might say that the amendments are to be found in Votes and Proceedings of July 5, on page 1 of the appendix and in Votes and Proceedings of July 7, page 1 of the appendix, and then there are the further amendments which I have indicated today in relation to personal corporations. They are all set forth on the sheet which has been made available to the Chair and to hon. members. The amendment now proposed is that indicated as "(a)" on the sheet which you have, Mr. Chairman, and I would ask my colleague, the Minister of Mines and Technical Surveys, to move that amendment.


Mr. Comtois:: I move:
That Bill C-120, an act to amend the Income Tax Act, be amended by striking out lines 41 and 42 on page 7 and substituting therefor the following:
"the year in which it was received, from duties that shall be deemed to have been performed by him in Canada in that year, unless it can be established, by subsequent"


Donald Methuen Fleming: Perhaps I might say a word about the significance of the amendment. It adds the words "that shall be deemed to have been" after the word "duties" and it adds the words "in that year" after the words "in Canada". The words are added for clarification.
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William Moore Benidickson: I direct myself at the moment exclusively to the new amendment. Does it result from any representation from any other government such as that of the United States?


Donald Methuen Fleming: No, Mr. Chairman.


William Moore Benidickson: I look at the explanatory notes-


Donald Methuen Fleming: I might say that this did emerge out of discussions with representatives of the tax foundation last week.


William Moore Benidickson: I go to the end of subclause (d) and I refer to the words:
.. . unless it can be established, by subsequent events or otherwise, that the payment was made as part of a series of annual or other periodic payments payable throughout the lifetime of the payee.
I direct my inquiry to those words although there is a much longer part of the new section 31A preceding them. Does that mean that in the opinion of the administration it must be almost on the basis of a perpetual income, a lifetime basis, if a person receives a benefit of this type for performance of a service in Canada and then resides elsewhere?


Donald Methuen Fleming: This provision
draws a line of distinction between lump sum payments and pension payments. This clause 11 of the bill, Mr. Chairman, deals with lump sum payments to former employees. It is designed to close a loophole.


William Moore Benidickson: I think the minister is endeavouring to assure that a longtime resident of Canada who has earned his income in Canada is not going to get from his employer, on conclusion of his employment, a substantial lump sum and then vanish to another country. I am referring to a capital sum, a lump sum.
I am concerned with the qualifications in the last part of this clause which refer, as I described a moment ago, to taxable lump sum payments when he leaves the country, and that is all that we can regard as his reward. I am concerned about the periodic payments. Do they have to be regular or are they only periodic to qualify under the provisions of this clause? In other words, is it going to be necessary, to avoid this impost, in the case of a person who has earned an entitlement from his company to a lump sum payment or some form of retirement award, that that reward be paid regularly up until the time of the death of the employee or does the word "periodic" have reference to a series of annual or other payments, perhaps for two or three years and

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then we forget all about it? What has the administration in mind in introducing this protection? I am in sympathy with what the minister is trying to do.


Donald Methuen Fleming: If the hon. member will look at lines 44 and 45, I think he will see the answer to his question. There is reference there to a series of annual or other periodic payments payable throughout the lifetime of the payee.


William Moore Benidickson: I saw that, and I just wanted confirmation of the fact that the reward payable after retirement to someone in Canada, before leaving Canada, would not be an undue amount, but it would be related more or less to an annuity. Would it be related more or less to an averaging out through his lifetime of a benefit, as is the case in connection with a pension fund? Why does the act not state that?
Perhaps I have not stated it too clearly. Why is it not clear here that it must be what I, in my ignorance, would call a pension or annuity rather than periodic payments payable throughout the lifetime of the payee? I raise this question with the minister. Would it be possible for a senior executive of an important corporation to receive, at the termination of his employment, a very large lump sum payment, with the other part of the recognition of his lifetime service still payable in annual or periodic but nominal payments throughout his lifetime? The language disturbs me.


Donald Methuen Fleming: I am doing my best to follow the hon. member, but I am having some difficulty. This language, a series of annual or other periodic payments payable throughout the lifetime of the payee, clearly means a pension for life. It may be payable in annual instalments or it may be payable in quarterly amounts or in some cases in monthly amounts. These are periodic payments and they are payable throughout the lifetime of the payee.


William Moore Benidickson: In other words, I would imagine it was the intention of the draftsman that if there was a capital value, let us say, of $50,000 of a retirement benefit it would not be possible in the contemplation of the department for the retiring employee who left Canada to receive $40,000 in cash and then receive an additional $10,000 in cash on the basis of annual or other periodic payments payable throughout the lifetime of the payee.


Donald Methuen Fleming: In the case put by my hon. friend, 1 think there is no doubt that the lump sum would be taxable, but

the pension that is payable on a true life basis, of course, would escape taxation.


[Stage Direction]
Amendment agreed to.
Clause as amended agreed to.
On clause 12.
John Whitney Pickersgill: Has the minister anything to say about clause 12?


Donald Methuen Fleming: Again, Mr. Chairman, this is an amendment that is consequential upon the introduction of the provision for profit sharing. It simply provides that a benefit under a deferred profit sharing plan shall be classed as earned income and in that way it is in complete harmony with clause 2 of the bill of which we have already approved.


William Moore Benidickson: In clause 12 we are dealing with a matter which relates to another amendment we had when we were dealing with the supplementary budget in December. It relates to section 32 (5) dealing with earned income. I do not believe the minister has properly indicated to us the relationship of this amendment to what was contemplated then. We had the deferred profit sharing introduced, of course, in the spring of 1960, and I think the minister should explain what is involved in this clause.


Donald Methuen Fleming: This clause is simply the counterpart of clause 2 which has been approved. Clause 2 provides that the amount received by a taxpayer under a deferred profit sharing plan shall be included in computing income. Clause 12 proposes to amend section 32, subsection 5 (a) of the act so as to make it quite clear that a benefit received under a deferred profit sharing plan shall be classed as earned income. It is a consequential amendment.


[Stage Direction]
Clause agreed to.
On clause 13-Deduction from tax when resident, etc. in province.
Donald Methuen Fleming: I told the hon. member for Burnaby-Coquitlam that on clause 13 I would answer the question he asked when he was here and explained that he would not be able to be here when this clause would be reached. As the note indicates, this clause is to provide for a reduction of the personal income tax for the years 1962 to 1966 inclusive in accordance with new fiscal arrangements with the provinces commencing April 1, 1962.
The present Federal-Provincial Tax-Sharing Arrangements Act will expire or its operation will not extend beyond those payments provided for at the end of this present fiscal

year. Clause 13 is designed to lay the groundwork for certain reductions that will be provided under the federal income tax. The purpose will be to enable the provinces which desire to enter this tax field to occupy it to whatever extent they wish to occupy it. When we reach item No. 9 on the order paper I shall have something to say about the proposal made there by the federal government for the benefit of the provinces in relation to collecting provincial personal income tax and corporation tax. However, the purpose of this clause is to provide-and we have to do it this year in order to make it clearly applicable to next year and so that the provinces may make their plans this year accordingly-for the deduction from the basic federal tax. This could be done by way of an amendment each year in advance. We could have an amendment this year providing in 1962 a deduction of 16 per cent. We could have an amendment passed next year to provide that with respect to the year 1963 there would be a 17 per cent deduction and so on throughout the five year period. But it was in keeping with the wishes of the provinces that they should know clearly in advance by federal statutory enactment what the percentages would be, and so we are asking parliament to make this provision for the rising percentage of deductions from the federal income tax in favour of the provinces year by year for the next five years.


John Whitney Pickersgill: I do not intend to embark upon a debate upon item No. 9 on the order paper at this time. I do not think that procedure would be appropriate. However, we cannot possibly let this clause go by without pointing out what it is really seeking to do. If I sought for one word by means of which to describe this clause, I would call it the repudiation clause. We all remember that at the federal-provincial conference, not the last meeting but the one previous to the last one, the Prime Minister spoke and gave an unqualified undertaking that the principle of equalization would be maintained. This clause is a clear repudiation of the principle of equalization.


Donald Methuen Fleming: Not at all.


John Whitney Pickersgill: If the minister wishes to provoke a lengthier discussion, he can go ahead. However, I intend to say what I wish to say about this matter regardless of interruptions.
The principle of equalization is the principle that the revenues of the provinces from the three direct taxes shall be brought up to the level of the two top provinces-that is to say the two provinces with the highest per capita return from the income tax-in
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respect of the rate that is allowed to the provinces as an abatement or a reduction from the federal rate. That is not expressed as felicitously as it is expressed in the statutes but I think the meaning is very clear.
The effect of what is being done here will be that those provinces which have the highest per capita income, particularly Ontario and British Columbia and really in fact only Ontario, will get a larger and larger share and the national treasury a smaller and smaller share of the total income tax collected in this country. That is what is going to happen. The principle of equalization is not totally abandoned. However, the principle of equalization is not being carried on in the way in which the Prime Minister in quite unqualified language to the premiers said it would be carried on.
When the minister said that this was to carry on the new arrangement with the provinces, that is certainly stretching the word "arrangement" far beyond any definition that the minister could find in any dictionary. An arrangement suggests at any rate some understanding between the parties. Anybody who has read what the premier of Manitoba, a supporter of this government, has had to say about this subject, to say nothing of some of the things that are said by the premier of Saskatchewan and some of the other premiers including the premier of New Brunswick will have no doubt that there was no arrangement whatsoever. There was a "diktat" which was called a suggestion. But these soft words do not change the real nature of things. The provinces were told this: "You can go and collect your own taxes. If you fix them on our scheme without any deviation, and if your act is a direct copy of the federal act, we will collect the taxes for you, but you have got to impose them yourself and that is final. If you make any variation whatsoever in your scheme, then you collect them yourself too."
Of course there were two purposes in doing this. The hon. gentlemen who now occupy the treasury benches, and particularly the leader of the government, had promised Mr. Frost $100 million, and they could not find $100 million to give him by the front door. This is an attempt to give him an instalment of it by the back door without giving anything comparable to the other provinces. That is what it is. It is making a large area, which will ultimately be 20 per cent in the case of the present income tax available to Ontario and also, it is true, available to Newfoundland, Manitoba, Saskatchewan and New Brunswick as well but without any equalization to those provinces. Ontario will get indeed as a benefit into its treasury more than the amount under equalization, as it

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does now, of course, because equalization is based on two provinces, not one. But even in Ontario it is a great deal less than Mr. Frost was promised in those happy days of long ago in 1957.


William Moore Benidickson: Everybody was let down.


John Whitney Pickersgill: But Mr. Frost has been discounted only by 50 per cent or 60 per cent. Some of the other provinces are being discounted by 70 per cent or 80 per cent or more of what was promised in those days. However, as I say, I am not going to enter into an extended debate at this stage. There is another stage when that can be done. However, I just wanted to be sure that nobody in the committee was under any illusion about what this is. Of course, it is going to look good. The federal tax is going to go down; although the provincial tax will go up at least as much. But then they will be able to say, "Look at what we did for you". Then they will say "that wretched fellow out there in Alberta" or in Saskatchewan, perhaps they will not say "wretched fellow" in Manitoba but they will say "unfortunate fellow". Of course, the person whose body is really laid on the altar by this proposal is the premier of Manitoba. I imagine that every time the premier of Manitoba thinks of that slogan he used, namely "What Dief did, Duff will do" he undoubtedly wishes he had never said it because what Dief has done to Duff, Duff will never be able to undo. And this is where it is being done-right here in this repudiation clause of this bill to amend the Income Tax Act. Everybody in Manitoba knows it. Of course, it is being glossed over by various other provisions which would be beyond the scope of this bill, and I am not going to cause you any pain, Mr. Chairman, by dealing with those other things. The plain fact is that no concession is being made to anybody by this, not even Ontario. It is true that Ontario will receive a larger share of the personal income tax than the province is getting now. That is true. The share will be a little larger. But it will be nothing like what was held out with great hope and without requiring any action of the Ontario legislature four years ago.
Perhaps I was rash. Perhaps I should not have said that one word would describe this clause. This clause can be described as the repudiation and disillusion clause. It means disillusionment for Mr. Frost and deeper disillusionment for the premier of every other province in this country. Everyone knows that I am not normally a tremendous admirer of the premier of Saskatchewan but he has a capacity in this particular field, which he

understands very well, to express things exactly, and he says this is just a return to the tax jungle of the thirties. Well, we seem to be returning to the thirties in a great many ways in the sixties, and this is just another example.
There is one very important question which arises. These reductions are to come into effect on January 1. That means that unless every provincial legislature in this country meets later this year and imposes additional taxes there will be a period early next year when the total tax will be lower. Then the provincial governments, in order to get revenue, will have to increase their taxes and incur that onus because of this totally unnecessary and totally retrograde measure and because of the repudiation of the word given by this government to the premiers. The result is that we are going to have confusion, we are going to have a tax jungle, and we are going to see a great deal of unnecessary public misunderstanding.
Let no hon. gentleman on the other side say the government is decentralizing and returning to the provinces their rights. The provinces have always had their rights. The province of Quebec exercised its right and still exercises this right. One respects them for doing this, because they want to do it that way. But surely, when the government of Newfoundland and the government of Nova Scotia, the government of New Brunswick and the government of Manitoba do not want to have to go to the expense, trouble and annoyance of having a separate income tax and) are quite satisfied with the arrangements which have brought order into our national finances out of the chaos which Mr. Mackenzie King found when he came into office in 1935, the government of the day should not be considering so retrograde a step as this. Surely, this is a terrible thing to be doing now-to try to plunge this country, and particularly the poorer provinces, back into that chaos from which the wise and courageous policies of the Liberal government have carried us in the years between 1945 and 1957. We had reached the point where even the intransigent premier of Quebec, the late Maurice Duplessis, said, after the system of equalization was substituted for the system of tax rentals four and a half years ago, "It is still not what I want, but it is much better than anything we have ever had before." He said that, and, what is more, he took the money. He took the money and he was very glad to get it, because if he had not taken it the province would have been bankrupt. Those are the facts. They are incontrovertible, and notwithstanding the money which the province took in those last few years the pro-

vincial treasury was more or less bankrupt when, finally, his successors were defeated.
I say this is a retrograde step. It is a repudiation of the principle of equalization which has brought order into our national finances and into federal-provincial relations. This alone, if there were nothing else in this bill, would merit condemnation of this measure.


Mr. Argue:: Members of the C.C.F. group over the years have been strong supporters of federal-provincial tax agreements and the equalization which has flowed therefrom. We feel that the tax agreements, if continued, will enable the federal government to cooperate with the provinces to bring a greater measure of equality into the financial resources of the various provinces which make up our country.
We think this is a backward step. We think the government has not endeavoured in any way to get taxation agreements as heretofore but has gone to the provinces on a take it or leave it basis. The government, by this measure, is saying that it is ceasing to discuss with the provinces any alternative proposals. The premier of Saskatchewan, in correspondence with the Prime Minister, has asked that before a measure of this kind is undertaken there should be another federal-provincial conference-a final conference as he put it- to deal with the matter, the precedent for this being the 1956 arrangement of the St. Laurent government.
We are being asked to pass this particular clause before having had a general debate on federal-provincial financial agreements. We think this is putting the cart before the horse. We should have had an opportunity to debate the general agreements before being presented with this measure which, when passed, will be a fait accompli. It will mean that the provinces have no alternative but to accept it and that the debate on the general taxation agreements will take place after the government and parliament have committed themselves to a particular course.
We think this measure demonstrates that federal-provincial relations in Canada are at an all-time low. The provinces across this country have registered many objections to a proposal of this kind. The province of Ontario will, of course, be placed in a position to make a substantial gain, but the whole principle of equalization is being repudiated. People in certain provinces will have definite advantages, but the principle of equalization has gone down the drain.
Mr. Chairman, we shall have further speeches to make when we are on the resolution itself, but we state now that this is a retrograde, a backward step.
Income Tax Act


William Hector McMillan: Mr. Chairman, I am wondering what allocation will be made of this income tax to the provinces. I refer to a taxpayer who might live in one province and earn his living in another. Subclause (3) of clause 13 appearing at page 9 of the bill says "income earned in the taxation year in a province". Should that read "in the province", or what is the meaning of that?


Donald Methuen Fleming: Mr. Chairman, so far as this clause of the bill is concerned, we are dealing here with income that is subject to federal taxation. For this purpose it does not matter in which province the money is earned. The matter determining the time and place of the earning of the income as among the provinces is something we will be dealing with in another connection.
So far as this particular clause is concerned we start with federal tax, and there is provision for a reduction corresponding to the kind of abatement we have under the present tax rental system. It will be available in the case where the income is earned in the taxation year in a province, the purpose being to enable the provinces-those which wish to do so-to legislate for the purpose of applying a provincial income tax on the said income.


Mr. Winch:: Mr. Chairman, I have been told and I have learned on more than one occasion that the longer one is a member of parliament the less one should be amazed at what goes on. I must say I am somewhat astounded that we should now be discussing a clause such as clause 13 of Bill No. C-120. I have learned from reading clause 13 and the explanatory note what the minister has in mind, and I say bluntly that I think it is the height of audacity, hypocrisy and impudence for us to have before us now a proposed taxation change before we have discussed the principles of the resolution dealing with new dominion-provincial fiscal arrangements. Surely, Mr. Chairman, the procedure is to pass the principles first and then to proceed with the arrangements. This fiscal policy began in 1941 and continues until the end of March next year. A change is proposed in the contractual basis of the fiscal arrangements which surely should be made before we actually deal with the Income Tax Act, this week, next week, or at some future time. In other words, this is accepted now as a fait accompli without our having discussed the principles of the new agreement. I say that is wrong.


Donald Methuen Fleming: Mr. Chairman, with all respect, the hon. member is mistaken. That point was discussed earlier. The house gave approval to the principle of this

Income Tax Act
bill in adopting second reading at noon today. We are now in the committee stage dealing with the clauses of the bill. There is on the order paper a resolution dealing with the proposed federal-provincial fiscal proposals for the ensuing five years. I hope we will be discussing that very shortly. I intend to make a statement in regard to that subject as soon as the item is called.
By this bill we are simply carrying out an undertaking given to the provinces. The provincial governments all understand that they will have to call sessions of their legislatures this fall in order to enact the necessary legislation, and it is highly desirable that the provincial governments know precisely what parliament has enacted. There is no question here of jumping the gun or anything of that kind. There will be a full opportunity to discuss the principles of that proposed federal-provincial proposal. The principle of this bill was approved today by the house when second reading was given and it was referred to the committee.


Mr, Winch:: 1 understand that, Mr. Chairman, but I say that the basic principle of this clause is dependent upon the passage of that resolution and the resulting bill which we still have not before us.


Donald Methuen Fleming: Mr. Chairman, the hon. member is well aware that under the existing system legislated under the Federal-Provincial Tax-Sharing Arrangements Act there is provision for abatement in the case of a province which chooses to collect its own personal or corporation tax. The provision contained in clause 13 is the counterpart of that kind of abatement. It provides for the counterpart of that kind of abatement which will exist under the proposed new system.


Harold Edward Winch: It is dependent upon the other bill being passed, is it not?


Donald Methuen Fleming: If the hon. member is attempting to preserve his right to discuss the other measure fully, I might say that by the adoption of this clause his right to debate or discuss the other measure will not be abridged at all. Parliament can approve this provision and still decide not to approve the other resolution. It is dependent upon the will of the house.


Lionel Chevrier: Mr. Chairman, clause 13 deals with income tax arrangements. Where is a reference to that to be found in this bill? Where is there any reference to corporation taxes, because that too is involved in the arrangements between the federal and provincial governments.


Donald Methuen Fleming: Mr. Chairman, we will be dealing with that subject when we reach clause 19 appearing at page 12.


William Arnold Peters: Mr. Chairman, does the minister realize that if he continues the formula he is now putting forward, by the year 2046 we will no longer be in this field?


Donald Methuen Fleming: This provision runs up to and includes the year 1966.


John Whitney Pickersgill: Mr. Chairman, I shall be brief. Was the hon. member for Welland rising?


An hon. Member:: Get up and get on with it.


John Whitney Pickersgill: Mr. Chairman, I intended to pursue very briefly the question which the hon. member for Welland asked in respect to which the minister suggested it could be settled effectively when the other measure is before us. Surely these abatements which are laid down in this bill are going to be based on some appreciation of what province the tax is attributed to. I suggest there are going to be problems in this context. The federal parliament can say what its view is as to whether the income is earned in Quebec or in Ontario-that is taxable in Quebec or Ontario-but so long as the legislature of Quebec or Ontario puts on a direct tax, it can be put on any basis it likes.


Donald Methuen Fleming: It still has to be constitutional.


John Whitney Pickersgill: Yes, but the province can put on a direct tax in respect to anyone subject to its jurisdiction. There is no question whatever about that. It does seem to me that although it will not be as great in the case of individuals as in the case of corporations it is going to be a real problem in the determination of how much of the federal tax was in fact collected from taxpayers in Quebec, how much from taxpayers in Nova Scotia, how much from taxpayers in Ontario, so as to know what the value of the-


Donald Methuen Fleming: That is not a new
problem. We have that problem today. There are two provinces which collect taxes wholly or in part. This problem is not a new one.


Lionel Chevrier: Mr. Chairman, in respect to this matter, the minister seems not to have dealt with the charge made by the hon. member for Bonavista-Twillingate, that this was an attack on the principle of equalization. I should like to confirm what the hon. member has said by putting a statement on the record to that effect.


Donald Methuen Fleming: The fact is this does not touch that matter at all.


Lionel Chevrier: It does.


Donald Methuen Fleming: With respect to the hon. member, no.


Lionel Chevrier: Will the minister allow me to complete what I have to say and perhaps he could then comment on it.


Donald Methuen Fleming: It is really out of order here; it does not apply to this clause at all.


Lionel Chevrier: It is not out of order here. You say clearly that this new section provides for a reduction of the personal income tax for the years 1962 to 1966, inclusive, in accordance with new fiscal arrangements with the provinces commencing on April 1, 1962. Therefore there is of necessity a reference to the fiscal arrangements made between the federal government and the provinces.


Donald Methuen Fleming: Not the equalization; this has nothing to do with that.


Lionel Chevrier: It has been said that the principle of equalization has been abandoned and I simply wish to confirm that by reading a statement made by the premier of Quebec following the last meeting which took place and which is reported in the Ottawa Citizen of February 25, 1961 in an article entitled:
Premiers' reaction mixed to P.M.'s new tax proposal
This is the statement:
The equalization formula, of which Quebec is currently the biggest beneficiary, has been changed in such a way that it is no help either. Not until the fourth or fifth year of the new tax-sharing agreement, by finance minister Fleming's estimate, will the government of Quebec qualify for anything more than the guaranteed floor equalization payment.
On the same subject the Toronto Globe and Mail of February 24 carried an article under the heading:
Lesage calls plan smokescreen
The article reads in part as follows:
"We are offered a so-called national formula which is applicable only to Ontario," he said.
This is the premier of Quebec speaking: I continue:
The other nine provinces must rely on special guarantee clauses in order to prevent equalization income from falling, he explained. The guarantee clauses have become necessary because the proposed formula would include provincial revenue from natural resources and use the national average as a base instead of the average of the two richest provinces.


Donald Methuen Fleming: Nothing in this-
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Lionel Chevrier: The article goes on to say:
The Quebec premier accused Prime Minister John Diefenbaker of laying down a smokescreen by telling the provinces to assume their constitutional responsibilities and collect their own taxes. Quebec has been denying corporation and personal income taxes for some years.
"This is a smokescreen to allow his Tory members to come into Quebec claiming that they saved the constitution," he said bitterly.
Mr. Diefenbaker's insistence on constitutional responsibilities is startlingly reminiscent of the objections raised by Maurice Duplessis as regards fiscal proposals of the St. Laurent government.
There are other quotations from statements made by the premier which I shall not put on the record but those do give a clear indication that the principle of equalization, if it is not being entirely abandoned, is certainly being watered down to the point where it is of little or no use to the province of Quebec.


Donald Methuen Fleming: This is not the place for a debate on the question of federal-provincial fiscal proposals with respect to the coming five years. The hon. member for Bonavista-Twillingate and now the hon. member for Laurier are bringing in arguments about the equalization principle. There is no equalization principle involved in clause 13. This is where there is confusion on the part of hon. members opposite. Equalization, the matter that they have been discussing, is based on potential provincial revenue from the standard taxes; it is not a matter depending upon federal revenue, as they seem to think. This clause now under discussion simply deals with the federal tax and provides for an abatement, the counterpart of the abatement that exists under the Federal-Provincial Tax-Sharing Arrangements Act. We will have an opportunity to discuss these broader questions soon.


John Whitney Pickersgill: I agree with the minister that the proper place to discuss these other matters is on the resolution dealing with the federal-provincial tax-sharing agreement. I also agree with what was very well said by the hon. member for Vancouver East. This particular clause takes two things for granted; it takes for granted first that parliament is going to pass the other legislation. No doubt it is because of the majority that the government has behind it. But this clause if it is adopted in its present form really leaves us no room for discussion of the other because the two things fit together as a single piece. That is the whole point. Not a single provincial government has expressed satisfaction with this plan-this "suggestion", I think, to use the Prime Minister's delicate word-this take-it-or-else scheme. Though none of the provinces has expressed satisfaction with it

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hon. gentlemen opposite are just going ahead and legislating and the provinces can accept the consequences.


William Hector McMillan: I should like to know from the minister whether any arrangement has been made with the provinces as to the allocation of money. I am thinking now of the question of abatement of personal income tax covering a company such as Imperial Oil which operates all across the country. I think also of the Bell Telephone Company which operates in only two provinces.


Donald Methuen Fleming: They are corporations. We come to those in a later clause. This is personal income tax.


William Hector McMillan: I am thinking of personal income, the dividends which will be received by individuals on which they have to pay income tax. I am thinking of abatement in those cases.


Donald Methuen Fleming: This is all covered in the present arrangement. This is not a new question at all. This clause does not deal with that matter. We will have that question before us when we come to the other measures.


William Hector McMillan: There is no agreement with the provinces as to the allocation of such moneys? Is that right?


Donald Methuen Fleming: A system of allocation has been worked out. It has been in existence under the present system and we made some progress last year at the dominion-provincial conference in arriving at a better understanding with respect to the allocation of corporation taxation.


John Whitney Pickersgill: I trust that the minister is not presuming to tell us that there has been any system of allocation worked out with respect to personal income tax in respect of any province except the province of Quebec. No other province in this country has levied a personal income tax since the year 1941 and therefore there could not possibly be any understanding with any other province because there has been nothing about which to have an understanding. If I remember rightly, the province of Quebec has levied this tax only since 1951 or 1952, so that there may be some arrangement between the federal authorities and the province of Quebec; I assume there is. Has the minister any assurance that that arrangement is going to be acceptable to the other provinces?


Donald Methuen Fleming: The hon. member has completely overlooked the fact that under the present system there must be allocation as among provinces both of personal income tax, corporation tax and succession duties. It is very necessary under the present system.

That has been worked out. This is not a new system at all and it does not depend upon a province collecting its own taxes in such a situation.


John Whitney Pickersgill: What the minister is saying is that there is a notional arrangement at the present time.


Donald Methuen Fleming: It is more than that.


Mr. Bell (Carleion):: A real one.


John Whitney Pickersgill: How can it be more than that?


Donald Methuen Fleming: It is a very real one, to determine the provincial share in any situation of the yield from personal income tax or corporation tax.


John Whitney Pickersgill: I appreciate at once that there is a notional system; it is not based upon the actual collection of the actual taxes. While it is quite easy to agree upon a notional system which is what we have now, I suggest to the minister that there are going to be a lot of problems that have not been foreseen when he tries to fit a notional system into an actual system and he begins to get disputes about these matters, as he will.


William Moore Benidickson: To follow up what the hon. member for Bonavista-Twillingate has said, I direct the attention of the minister to his proposed amendment in the bill and in particular to subclause 3. Have the provinces agreed to a definition that income earned in the taxation year in a province and income earned in the taxation year outside a province mean amounts determined under rules prescribed for the purpose by regulations of the federal government? That means orders in council of the federal government. Have these orders in council been prepared? Are the provinces aware of them and are they agreeable to what would be involved in the amendment?


Donald Methuen Fleming: Of course there cannot be any order in council until this legislation has been adopted.


William Moore Benidickson: Mr. Chairman, we all have respect for our provinces and when there are two parties to an agreement I imagine we would think that the definition of income earned in the taxation year in a province was very important to each of our provinces. This gives the federal cabinet power to make regulations to define something as important as income earned in and outside a province. So far as the provinces are concerned, is this a case of take it or leave it or take it as you have it, or was this discussed?


Donald Methuen Fleming: This does not depend upon an agreement with the provinces at all.


William Moore Benidickson: I say it is essential to the amount of money that will subsequently be paid to the provinces or forsaken by the federal government under this clause of the bill. Then we look at paragraph (c) of subclause 3 which relates to the Old Age Security Act. Was this matter discussed at the last federal-provincial conference?


Donald Methuen Fleming: Yes, this whole matter was discussed at the last two conferences. In particular, the graduated withdrawal of the federal government from the personal income tax field in favour of the provinces was specifically discussed at the last of the conferences. The reference to the Old Age Security Act alludes to the 3 per cent payable into the old age security fund. The 16 per cent deduction next year relates to the balance of the federal tax, the true federal income tax.


[Stage Direction]
Clause agreed to.
On clause 14-Repeal.
John Whitney Pickersgill: Why is this clause being repealed?


Donald Methuen Fleming: This is consequential upon clause 10 of the bill which we have already approved by which section 31, subsection 2 of the act is repealed.


[Stage Direction]
Clause agreed to.
On clause 15.
William Moore Benidickson: This clause really relates to an obligation under the Canada-United States tax agreement. Is that correct?


Donald Methuen Fleming: No.


[Stage Direction]
Clause agreed to.
Clauses 16 and 17 agreed to.
On clause 18-Idem.
Donald Methuen Fleming: Mr. Chairman, we are on page 12, and clause 19-


John Whitney Pickersgill: Clause 18 is not carried. I would ask the minister to explain it.


Donald Methuen Fleming: Clause 18?


John Whitney Pickersgill: Yes.


Donald Methuen Fleming: This is a relieving provision dealing with associated companies. We had legislation at the last session of parliament in relation to associated companies. By that 1960 legislation we introduced new rules to prevent companies splitting themselves up into many small companies in order to obtain the benefit of the low rate
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of tax on the then first $25,000 of taxable income, now $35,000. It has since been found that one of these rules might result in two companies being associated merely because they were controlled by a single trust or estate upon the death of an individual, and this relieving provision is intended to provide that in the described circumstances the companies shall not be deemed to be associated.


William Moore Benidickson: Mr. Chairman, we are dealing here with matters that have been before us recently but I refer the minister to line 42 in clause 18. The minister has referred to two corporations. Possibly I have not given this matter adequate study but it occurs to me that it might read "two or more corporations". Has this been given adequate study?


Donald Methuen Fleming: I think the hon. member is overlooking the earlier provisions of the same clause. This sets out the terms applicable to one corporation and then the terms applicable to another corporation. I think the hon. member need have no fear that if there were any two out of two or more this will clearly provide that all pairs of corporations that come within the description contained in this clause will be deemed now not to be associated with each other in the year.


[Stage Direction]
Clause agreed to.
On clause 19-Deduction from corporation tax.
Donald Methuen Fleming: On clause 19 there is an amendment of which hon. members have received notice. I would ask my colleague, the Postmaster General, to move this amendment to clause 19.


William McLean Hamilton: move:
That Bill C-120, an act to amend the Income Tax Act, be amended by striking out lines 1 to 3 on page 12 and substituting therefor the following:
"19.	(1) Subsection (1) of section 40 of the
said act is repealed and the following substituted therefor:
'40. (1) There may be deducted from the tax otherwise' "


Lionel Chevrier: What is the meaning of this amendment?


Donald Methuen Fleming: I presume the hon. member wishes an explanation of the amendment rather than the clause?


Lionel Chevrier: Yes.


Donald Methuen Fleming: This amendment is necessary to repeal section 40, subsection 1, of the present act. The present wording of section 40, subsection 1, provides for a 9 per cent abatement for corporations in Ontario and

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a 10 per cent abatement for corporations in Quebec during the remainder of the present arrangements with the provinces. Accordingly, the present provisions of section 40, subsection 1, lapse at the end of the 1961 taxation year. However, at that time if it were not for this amendment the law would revert to the way it read in 1956 when it provided for a 5 per cent abatement.


Lionel Chevrier: I should like some further clarification of this matter. Under the agreement effective for the two income tax years of 1960 and 1961, and in its income tax bill of 1960, clause 12, which I now have before me, the government increased the provincial share of the corporation income tax from 9 to 10 per cent. That is to be found in clause 12 which reads as follows:
There may be deducted from the tax otherwise payable by a corporation under this part for a taxation year an amount equal to
(a) 10 per cent of the corporation's taxable income earned in the year in a province prescribed by a regulation made on the recommendation of the Minister of Finance that was, for the fiscal year commencing in the calendar year in which the year ended, a prescribed province as defined in section 9A of the Federal-Provincial Tax-Sharing Arrangements Act.
Provided that a province would undertake to make available to universities annual grants determined by conditions specified in section 9A of the Federal-Provincial Tax-Sharing Arrangements Act. This is chapter 13 of 8-9 Elizabeth II, which reads as follows:
"Foundation" means the Canadian Universities Foundation incorporated by letters patent dated the 4th day of February, 1959, under the seal of the Secretary of State of Canada;
This year, in the bill now before us we are amending the Income Tax Act so as to increase the provincial share of income taxes beginning January 1, 1961 in accordance with the proposal made by the government last February and to be embodied in a bill which has not yet come before the house, although the resolution is on the order paper. However, the clause inserted last year in the Income Tax Act to implement the agreement with the province of Quebec in respect of university grants, unless I am mistaken, is being deleted. The question which I should like to put to the minister is this: Is it true that this section as it appeared in the amendments to the Income Tax Act last as clause 12 is to be abandoned?


Donald Methuen Fleming: I think there is some misapprehension here. The clause that was introduced in1 1960 provided for an increase from 9 per cent to 10 per cent in the abatement in respect of federal corporate income tax applicable in what was known as a prescribed province. The only province that was a prescribed province was the province of 
Quebec last year, and this year the abatement to federal taxpayers in so far as federal corporate taxpayers in the province of Quebec are concerned is 10 per cent and not 9 per cent as in the case of other provinces. This legislation had a two year effect and it will expire at the end of this coming year.
Now, it was necessary because we have no provision made for what takes place in this regard beyond that time, to introduce this clause. If it is not introduced at the expiry of this year what we revert to is not the 9 per cent but the previous 5 per cent. This is the reason for the amendment and the effect of the amendment will be that on the expiry of this legislation that had a two year life, the percentage of abatement will be 9 per cent which will be general in all provinces, and as the hon. member is aware that is the extent of the abatement in respect of federal corporate taxes that is proposed in the general abatement. This whole matter out of which the 1960 amendment arose will have to be the subject of further discussion.


Lionel Chevrier: I take it that "the end of the year" means the end of the calendar year to which the minister refers?


Donald Methuen Fleming: It is the end of the taxation year.


Lionel Chevrier: I also take it from the answer which the minister has given that section 12 of the 1960 act is now being abandoned.


Donald Methuen Fleming: No, it expires.


Lionel Chevrier: It expires at the end of the
calendar year?


Donald Methuen Fleming: It will expire at the end of this year, so it is necessary now to make provisions in contemplation of that expiry so that the extent of the abatement in the province of Quebec in respect of corporate taxes will revert not to 5 per cent but to 9 per cent when the provision comes to an end.


Lionel Chevrier: So that in 1962 it will revert to 9 per cent?


Donald Methuen Fleming: Yes, under the amending bill.


Lionel Chevrier: Does that mean it is the intention of the government to terminate this agreement with the province of Quebec in respect of university grants?


Donald Methuen Fleming: There is a two year life to the amendment which was introduced at the 1960 session. It will be necessary by next year to work out some arrangement to meet this problem. The 1960 solution

had a two year life and on its expiry we will have to find another solution.


Lionel Chevrier: May I ask then, if that is so, whether the federal government communicated its intention to terminate this agreement to the provincial government of Quebec?


Donald Methuen Fleming: It was not a question of the termination of the agreement, Mr. Chairman. The federal legislation introduced last year had a two year life given to it by parliament. It was not a matter of confirming an agreement or anything of that kind. The federal legislation was given a two year life by parliament. The effect of this is known and understood by those who will be interested in it.


Lionel Chevrier: That is the point about which I wish to be sure, and I am not too clear. Perhaps the minister could clarify it a little further by answering this question. Were there any negotiations at all between the federal government and the government of Quebec in connection with this matter, either verbally or in writing?


Donald Methuen Fleming: We were asked to leave out of this year's legislation, whether income tax legislation or federal-provincial fiscal legislation, any reference to the kind of arrangement that was made in 1960 and to provide for an alternative arrangement in respect of the university grants.


Lionel Chevrier: May I ask the minister who asked the federal government to do this?


Donald Methuen Fleming: Premier Lesage.


Lionel Chevrier: I should like to carry that a bit further, if I may. If this section 12 of last year's Income Tax Act is deleted, does this mean the 10 per cent corporate income tax will not apply after January 1, 1962?


Donald Methuen Fleming: If the hon. member looks at the 1960 amendment he will see it was given effect to March 31, 1962 to make it coterminus with the five year period under the Federal-Provincial Tax-Sharing Arrangements Act. The abatement, as such, applied to the 1960 and 1961 taxation years, so that in this respect the plan of the 1960 amendment was in conformity with the plan of the Federal-Provincial Tax-Sharing Arrangements Act both with respect to the abatement that applied to taxation years and the operation of the general agreement with reference to fiscal years.


Lionel Chevrier: May I go just one step further? Since the present bill will apply in 1961, does this mean that the special arrangement with Quebec will not apply in 1961 also?
90205-6-493
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Donald Methuen Fleming: If it continues to be a prescribed province in 1961, as I understand it to be, the 10 per cent abatement will apply in the province of Quebec in 1961 because the legislation was given a two year life in a province that qualified as a prescribed province. A province could have opted out if it did not wish to continue. It was a prescribed province and my understanding is that Quebec continues in 1961 to be a prescribed province as it was in 1960.


Lionel Chevrier: If that is the case, is it not a fact that this appears to be a clear breach of the agreement-at least, it appears that way to me-which when made was supposed to apply to the years 1960 and 1961?


Donald Methuen Fleming: No. With respect the hon. member has not been following what I have been trying to say. The 1960 amendment introduced by parliament was given a two year effect and that provided, in effect, that in the case of a prescribed province it could have a 10 per cent abatement for its corporate taxpayers from federal corporate taxes if it chose not to have any university grants paid to its universities. The province of Quebec was the only province that qualified as a prescribed province; and so in the year 1960 federal corporate taxpayers in that province were entitled to a 10 per cent abatement. The same is true for 1961. So by the end of the year the effect of the legislation enacted in 1960 will have been spent. It is just a matter of the expiry of that legislation according to its terms. Then the question arises: What happens at the expiry of that legislation pending our working out with the province whatever arrangement may suit it if something of this kind were to be continued? By this amendment, in the case of a province that was prescribed in 1960 and 1961 we provide that at the end of this period it reverts not to 5 per cent abatement but to 9 per cent. In other words, it is putting the situation back as it was in 1959.


Lionel Chevrier: The minister said earlier that a request had been made by the premier of the province. Can the minister tell us when the premier made this request?


Donald Methuen Fleming: I may say frankly that I do not wish to go further into detail on this matter. This matter was discussed with the premier when he was here. He intimated this was his wish. That is the reason that in this legislation nothing is provided with regard to that subject. It will have to be considered on another occasion.


Lionel Chevrier: This was the conference that took place in February?

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Donald Methuen Fleming: Yes; the February conference.


John Whitney Pickersgill: It seems to me that this is not a matter that can quite be left in the nonchalant manner in which the minister has left it. It seems to me that the minister has either said too much or too little. The minister has told us that the premier of Quebec asked not to have continued this provision that was made last year. Surely this is a very important matter that is involved here. If we adopt this clause we are dropping a provision for which the minister took credit to himself a year ago and which would put the people of Quebec on a basis of equality with those in the other provinces; and he was very scornful of the attitude we took on this side of the house about this matter. He said he had solved this problem that the Liberals had been unable to solve. He boasted a great deal about that solution. Now he comes before us and just drops his solution and expects the House of Commons to regard this as a matter of no consequence or of no moment. If the minister felt as he said he did a couple of years ago, I cannot understand what is being done now?
We all remember his eloquent speech with which I agreed. I do not often agree with the minister but I agreed with that speech. He said it was intolerable, if that was his word; I have not the text of his speech before me. However, in effect he said it was intolerable to have this money that was collected from all over Canada paid in two thirds of the country but not in the other third. I agree completely with that statement. I think the minister for once was showing himself to be broadminded and statesmanlike. The minister said he was going to solve that problem and he brought in a solution last year that he told us would solve that problem for all time. Now he is just quietly dropping his solution and giving us no explanation at all. If this problem was as urgent as the minister said it was two years ago-and I think it was; I agree with the minister about that matter and I said that previously-what has happened to make it less urgent now?
When one considers all the time that has been spent in the last year in carrying on these discussions with the province, I would have thought that the minister would have taken some initiative in seeking to discuss with the government of Quebec how this matter was to be arranged and, if this particular provision was to be dropped and this particular solution was to no longer be a solution, what solution is going to be found. Before we drop this legislation and change it I think we should know what has happened. After all, as the minister pointed out,

if Quebec does not want to go on being a prescribed province, it will not matter that it is in our law; they do not have to be a prescribed province. However, I do not think the minister should so quickly drop this statesmanlike solution he found a year ago-just drop it into the sea-without having anything whatever to put in its place. That procedure does not seem to be consonant with that statesmanlike attitude the minister adopted a year ago.
After all, I do not think there is anyone in the House of Commons who does not wish to see the people of Quebec receive in one fashion or another out of the federal treasury their fair share of the money collected from all over Canada that is to be used for the support of the universities. That is a general proposition and I think everyone agrees with it. There are in some provinces some people who attach no importance to the way in which that money is paid. They do not care how it is paid as long as they receive it. In other provinces there are people who do attach importance to the method by which the money is paid, and who consider that it is very important that it should be done in accord with what is their view of proper constitutional arrangements. I certainly respect their views in that matter. I respect them completely and I have always respected them. I do not say I have always understood all of them but I have always respected them.
However, for us here in this parliament just quietly to drop this provision, to have nothing to put in its place and to be told by the minister that he is doing this because the premier of Quebec asked him to do it but does not wish to say any more about it, seems to me to be a little bit less than frank with us. I think we ought to be told whether this was just a casual reference made in a casual conversation or whether the minister received a formal communication from the premier of the province or just what happened.; and whether, when this was received, any overtures were made to the provincial government with a view to finding some other solution to the problem or whether this was just another case in which the government, because it has an awkward problem, is going to try to forget about it.
It seems to me that we cannot allow this matter to rest where it is now and adopt this amendment which just throws away the fruits of the minister's statesmanship of only a year ago. I think the minister ought to tell us whether he has taken any steps to find out what would be a method acceptable to the present government of the province of Quebec for dealing with this problem. The minister was at great pains to deal with the previous government of Quebec; he was very

anxious; he was very concerned; he went out of his way. Surely the minister is not going to say that, because the political complexion of the government of Quebec has changed, his zeal for justice and for fairness that he had a year ago has evaporated all of a sudden. I cannot believe that of the minister. At any rate, I should be very reluctant to believe it. I should hope that the minister would be able to tell us that he is in active negotiation with the government of Quebec and that he believes he has a solution of this problem, if he has one; or if he has not, I think he ought to tell us what he has done about it. It is a very serious thing. If we are going to maintain unity in this country we in this parliament, regardless of party, must seek to treat all parts of the country equally and fairly. I would hate to see us go back to that regrettable situation-


An hon. Member:: Which you were in five years ago.


John Whitney Pickersgill: Yes, which we were in five years ago. That is right. It was a regrettable situation as the hon. gentleman knows well, because he follows matters of this kind very closely. The hon. member knows well why we were in that regrettable situation. When the Massey commission recommended the university grants in the first place they were established by the St. Laurent government. The hon. member for Greenwood recalls those events very well, because he pressed the St. Laurent government to do that. He expressed great appreciation of it when it was done and gave the warmest possible support to it. The first year after those grants were established the premier of Quebec accepted them. Perhaps I should not say that he accepted them, exactly, but he entered into an arrangement with the then minister of finance whereby they were accepted by the universities in Quebec for one year. Then, for reasons which those of us who are not privy to the mind of that gentleman have never been able to understand, what was perfectly acceptable one year became totally unacceptable the next year.
For several years the people of Quebec lost the benefit of these payments. Then, in an effort to find another solution, my right hon. friend, Mr. St. Laurent, back in 1956, I think it was, or 1957, found a method by which these grants would accumulate until such time as a means could be found to make use of them. In other words, notwithstanding the intransigence of the government of Quebec the government of Canada said: we must find a way to be just, and we will save up the money. Of course, we had money to save in those days. We did not have deficits. We said: We will save up the money until some 90205-6-493J
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means can be found by which the universities can receive it. And a means was found. A means was found by the present minister, and I give him credit for his zeal in that matter. I have praised him for it, and I praise him for it again. A means was found a year ago which was acceptable to the then government of Quebec. Under that arrangement the universities of Quebec have benefited. Now we are going to have that stopped cold and nothing put in its place.
It is not for me to say anything about the government of Quebec, and it is not, really, for anyone else in this house to say anything about it. That is their business. But the solution of this problem is our business, and it is a very important business. If we are going to maintain the kind of country which I am sure all of us on both sides of the house would like to have, it is very important that we bend every effort to find a solution to this problem which will be an effective solution in every province. This means we have to maintain the kind of relation which every province, whatever its political complexion, which makes such an arrangement possible. I hope the minister does not press us to take his statesmanlike solution of last year off the statute books until he is able to come in here and offer us an acceptable alternative.
This is not imposed upon the government of Quebec, as the minister has rightly said. It is not imposed on the government of any provinces. This is a voluntary arrangement which a province can accept or not as it likes. Why take it out of the act at all? If it related exclusively to Quebec, that would be another matter but, as I say, unless the minister-


Donald Methuen Fleming: We are not taking it out of the act. It was put into the act by parliament for two years.


John Whitney Pickersgill: I know what the minister is going to say, and the hon. gentleman is right in a technical sense. It was put in for two years and it will expire unless something is done to keep it alive. If the minister has not done anything about this before, perhaps I can make a suggestion. It is almost six o'clock now. We know the minister does not take much time for meals. We know he has no other worries at the present time. I suggest that the minister go into his room, which is not far from this chamber, and telephone Mr. Lesage and say to him: We have reached this point-


Donald Methuen Fleming: I think you will be doing that.
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John Whitney Pickersgill: That, of course, is a characteristic intervention by the minister. He has so much knowledge of what others do. I am merely suggesting it would be a statesmanlike thing for the minister to go to his room and telephone Mr. Lesage and say: We have reached this point in the consideration of this bill and I should hate to drop this; I wish to do something about it; I wish to make sure that Quebec continues to get a fair deal. Is there something we could do about it? I think this would be a very constructive way in which the minister could spend the next half hour of his time. Then, perhaps, the minister could come in here as he did so proudly a year or so ago and tell the house-you know how modestly he would say it, too, sir-Mr. Chairman, we have a solution to this problem which is really going to work. What is more, I have caught these Liberals napping and we have the problem solved.


Donald Methuen Fleming: They are always napping. One does not have to catch them.


John Whitney Pickersgill: Well, the minister always says that but I thought this time I would save him some trouble by putting it on record in Hansard for him.


An hon. Member:: That's right. Keep it going.


John Whitney Pickersgill: I am seeking to be very serious about this. I am sure no one in this parliament wishes to see this problem remain unsolved. I note that some of my remarks seem very palatable to some hon. gentlemen behind me. It does seem to me that there must be good will, and active good will, on both sides for its solution.
May I, sir, observe that it seems to be six o'clock?
At six o'clock the committee took recess.


[Stage Direction]
AFTER RECESS

The committee resumed at 7.30 p.m.
Jacques Flynn: Shall the amendment carry?


Lionel Chevrier: Mr. Chairman, just before six o'clock we were discussing clause 19 of the bill and I had posed some questions to the minister. I should like to make quite sure that I have understood properly the matter which is now before us.
In clause 12 of the bill introduced last year the arrangement made was for two years, as I understand it. In the bill which I have now before me the explanatory notes relating to clause 12 indicate that this amendment which deals with the deduction from income 
tax allowed the corporations in certain provinces implements paragraph 2 of the income tax resolution as follows, and then in quotations it says that for 1960 and 1961 taxation years the deduction from tax allowed to corporations in respect to income earned in a province which imposes an income tax on corporations and in which arrangements exist for the replacement of federal grants to universities by additional provincial grants in accordance with the proposed amendment to the Federal-Provincial Tax-Sharing Arrangements Act be increased from 9 per cent to 10 per cent in respect of income earned after December 31, 1959.
It is clear from the legislation introduced last year that the arrangement referred to therein was for the two years 1960 and 1961. However, if I understand the explanation of the minister properly this arrangement will not apply in 1961 because we are now deleting that provision from the act, and this bill now before us will not apply in 1961. Am I correct in that assumption?


Donald Methuen Fleming: No, Mr. Chairman. If the hon. gentleman will look at subclause (2) of clause 19 he will see that this section is applicable to the 1962-1966 taxation years.


Lionel Chevrier: I am sorry; where is the minister reading from?


Donald Methuen Fleming: That is stated in line 14 on page 12 of this bill in subclause (2) of clause 19.


Lionel Chevrier: That says that this section is applicable to the 1960-61 taxation year, not the 1962-1966 taxation years, as the minister has said.


Mr. Drysdale:: You are looking at the wrong bill.


Donald Methuen Fleming: Mr. Chairman, I am afraid the hon. member is looking at last year's bill rather than the one before us now.


Lionel Chevrier: I beg the minister's pardon; that is right. The minister is then saying that the arrangement will apply for the year 1961.


Donald Methuen Fleming: That is the effect of the law as it stands today. There is no change being made by this clause in the law as enacted by parliament in 1960.


John Whitney Pickersgill: Mr. Chairman, would the minister point out where it says in this bill that we are repealing the old clause and inserting a new one, and that the old clause applies to the whole of the year 1961?


Donald Methuen Fleming: That is provided by last year's bill which is not being modified by this clause in that regard at all.


Lionel Chevrier: Yes, but it is being taken out.


Donald Methuen Fleming: All that is being done by the proposed amendment now before us is to say what happens at the end of this two year period, which ends at the end of the year 1961. All we are dealing with is the situation which arises on the expiry of the two year period for which provision was made by the legislation of 1960. All we are saying is at that time we do not revert to the 5 per cent but to 9 per cent as the statutory percentage of abatement in the province of Quebec for federal corporate taxpayers.


Lionel Chevrier: Before we recessed the minister had stated that he was asked to remove this (a) portion of clause 12 in last year's bill by the premier of the province of Quebec.


Donald Methuen Fleming: I do not think that is quite the way I expressed it. I was asked as to what this arose out of, and I pointed out, I thought quite clearly, that we were asked not to bring into the scope of these new arrangements any new provision in relation to the university grants or the tax arrangements in lieu thereof which took the form of an increased federal abatement in respect of federal corporate taxpayers in prescribed provinces. We have kept that out of the scope of the legislation that parliament is now being asked to deal with, whether in the income tax bill or the new bill of which notice has been given on the order paper in resolution form. This matter as to what happens in regard to university grants will have to be a subject of further discussions between now and the end of this present fiscal year.


Lionel Chevrier: Let me use the minister's own words. He was asked by the premier of the province of Quebec to not bring this matter into the scope of the new arrangements. I should like to ask the minister when this conversation took place. He has already said that it was during the course of the last federal-provincial conference in February. Could the minister be a little more specific and say whether it was at the opening, during the course of, or at the end of the conference?


Donald Methuen Fleming: It was not during the course of the conference proper. It was a discussion held outside the conference.


Lionel Chevrier: Was there anyone present?


Donald Methuen Fleming: No, not at that time.


Lionel Chevrier: Could the minister say
whether it was on the first or second day of the conference?
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Donald Methuen Fleming: I can locate it by saying to the hon. member that it was during the evening of the governor general's dinner.


Jacques Flynn: Shall the amendment carry?


John Whitney Pickersgill: Mr. Chairman, before the amendment carries I should like to ask the minister whether he did telephone Mr. Lesage at my suggestion between six o'clock and 7.30 o'clock this evening? Since it was my suggestion it is probably superfluous for me to ask that question.
What I should like to ask the minister, and it is perhaps a question that is meant a little more seriously, is this. Has the minister made any attempt, or has anyone in the government made any attempt-perhaps the honourable and persuasive Secretary of State would have done so-to approach the government of Quebec with a view to finding a means of dealing with this problem?


Donald Methuen Fleming: Not yet, Mr. Chairman. We think we had better dispose of this major matter of the new fiscal arrangement before we come down to that specific matter.


John Whitney Pickersgill: That is a very odd answer indeed for the minister to give because last year he went to the extraordinary length- we on this side thought it was a rather extraordinary length-of including this arrangement that he is now terminating in the Federal-Provincial Tax-Sharing Arrangements Act. It did seem an odd place to put it, but that was the way it was done and we wonder why, if it was not to be an integral part of that arrangement, it was done that way at that time because up to that time, of course, the statutory basis of the university grants had been quite different. Can the minister give any reason why this subject was not also discussed at the federal-provincial conference along with the other subjects discussed there in view of the fact that the government itself had taken the initiative of bringing it within the ambit of those arrangements?


Donald Methuen Fleming: Nobody chose to introduce the subject in the conference.


John Whitney Pickersgill: Well, that, sir, seems to be very odd, too, does it not, because it was the federal government that took the initiative in this matter. According to the minister, it was the federal government that last year, finding a more receptive premier of Quebec than Mr. Duplessis, opened up this subject, first with Mr. Sauve and then with Mr. Barrette. Why, after last year's zeal, are they so coy this year? It is a little difficult to understand.


Donald Methuen Fleming: Not if the hon. member has regard to the view that was

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expressed. I make it quite clear that we are not terminating anything. The hon. member talks about our terminating something. We are not terminating anything. We take account of the fact that the legislation which was passed by parliament last year was given by parliament a two year life. It will expire at the end of the present fiscal year. And all that we are doing here, pending the making of some new arrangement, is to make some provision for what happens at the expiry of that two year term. It expires with the legislation that parliament enacted in 1960. I am not attempting for one minute, Mr. Chairman, to prejudge what may be done in relation to this problem as from April 1, 1962.


John Whitney Pickersgill: The minister did a lot of prejudging last year when he brought in his great statesmanlike solution to this problem. Last year the minister told us that this was to be a part of the general settlement that the government was seeking, the new arrangements, the new deal; this was to be an integral part of it. The minister says, "Oh, no, we did not bring it up because nobody else did". Well, that is a very odd attitude indeed to take. Is this government now taking the view that it is afraid even to speak to the provinces about these problems, even to talk to the provincial governments about them? It does seem more than strange that no attempt has been made to seek a solution of this problem.


[Stage Direction]
Amendment agreed to.
Clause as amended agreed to.
Clause 20 agreed to.
On clause 21-Dividends received by brokers.
William Moore Benidickson: In this clause we have a reference to withholding tax. Indeed in the explanatory note there is a reference to the fact that perhaps there had been what is called a serious error. In what year did this occur? My investigation indicates it was perhaps 1952 and 1953. Has there been litigation since with respect to the amendments proposed in clause 21? I think it is appropriate to ask the minister whether he has consulted with his colleague the Minister of National Revenue and has ascertained up to date information as to what collections of income tax collected at source may exceed the liabilities of the taxpayer in the last two or three years?
I recall that the minister used to be one of those who objected to a system operating in the Department of National Revenue under which the maximum liability was collected in the department but was subsequently found to be excessive. I should like the minister to 
inform us, as we revise the Income Tax Act, whether this policy has been reviewed. Can he tell us to what extent income tax deductions on the wages of the low income tax group in the country have been reduced to the equivalent of the ultimate tax liability? This would reduce the refunds ultimately paid to these people, representing the amount that the department had taken in excess of the amount due the department in income tax.


Lionel Chevrier: Will the minister agree to the committee reverting to clause 19 so that I may ask one question?


Donald Methuen Fleming: Ask it on this clause.


Lionel Chevrier: All right. I think I understood the minister clearly to say a moment ago that this bill would apply to the year 1961.


Donald Methuen Fleming: No.


Lionel Chevrier: I had put the question to the minister that the arrangement would not apply in 1961. I understood him to say that it would apply in 1961. Am I fair to him?


Donald Methuen Fleming: No.


Lionel Chevrier: Let me put it this way. In section 12 of last year's bill the arrangement was for two years, namely 1960 and 1961. That is correct, is it not?


Donald Methuen Fleming: Yes.


Lionel Chevrier: Having obtained that answer, I put this additional question to the minister. This will not apply in 1961?


Donald Methuen Fleming: What is the "this"?


Lionel Chevrier: This will not apply in 1961, "this" having reference to clause 19 of this year's bill.


Donald Methuen Fleming: That is right, as I said before, because clause 19 deals with the situation that arises on the expiry of the legislation which was given a two year life when enacted in 1960.


Lionel Chevrier: Then am I correct in saying that the arrangement referred to in clause 19 will not apply to 1961 because the clause has been deleted in the income tax bill for 1961?


Donald Methuen Fleming: No. If the hon. member will look at the record, I think he will see that I have made that very clear. He may find it a bit complicated but I think that when he looks at the record he will see it is quite clear.


Lionel Chevrier: I do not want to pursue it unduly but after having read this carefully during the recess I was clearly under

the impression that clause 19 which is now before us will not apply for the year 1961 and the minister has said-


Donald Methuen Fleming: That is right.


Lionel Chevrier: The minister gave the opposite answer earlier.


Donald Methuen Fleming: No, no. I suggest that the hon. member look at the record and he will see that it is clear.


Lionel Chevrier: Then the minister says that for the year 1961, having regard to the way the clause now appears, the arrangement will not apply?


Donald Methuen Fleming: The hon. member is going around. I have dealt with the matter and I think he will find it very clearly on the record.


Lionel Chevrier: May I just put it this way, that the arrangement as referred to in clause 19, section 40(a), (b) and subclause 2 will not apply in 1961 because the clause has been deleted from the 1961 bill.


Donald Methuen Fleming: Nothing has been deleted. I agreed to answer a question of the hon. gentlemen without reopening the clause. He is asking questions now that have been answered before and I think when he sees the record he will find that the information is there and it is quite clear.


Lionel Chevrier: I do not think it is. However, I am not going to pursue the matter ad infinitum.


Jacques Flynn: Shall clause 21 carry?


William Moore Benidickson: No, Mr. Chairman. I think I raised a very valid question in connection with clause 21. I had in mind the vast number of taxpayers whose taxes are deducted at source. We have a reference here to a comparatively small number of taxpayers in whose case it is being suggested that there be a withholding tax deducted at source related to dividend or interest receipts of income. This is not political. I recall that when 1 was on the other side of the house we were rather worried that we collected more at the source than they were really obliged to pay from some people who earned less than those at the top of the totem pole. I wonder whether this situation has improved. I take full blame for the former situation, but what is happening now?


Donald Methuen Fleming: I did not bring that statistical information here on a bill of this kind. It is within the knowledge of the Department of National Revenue and if the hon. member is interested in this matter I
Income Tax Act
suggest that he put his question on the order paper and the information will be forthcoming.


William Moore Benidickson: This, of course, is related to the tax at source on the wages of employees. This is a withholding tax with respect to people who might have taxable income from dividends and interest. I would ask the minister to look at the explanatory notes, particularly those with reference to subclause 2 of clause 21. Will he explain in a better form than is done here what was the previous error that this amendment is endeavouring to correct? Has there been some litigation in recent times and, if so, what was it?


Donald Methuen Fleming: Very simply, the word in line 21 which will now be "on" was "or" when it should have been "on". The "r" should have been "n".


[Stage Direction]
Clause agreed to.
On clause 22.
John Whitney Pickersgill: I think the minister should give us some explanation of this clause.


Donald Methuen Fleming: This amendment concerns donations by charitable foundations to governments and municipalities. It arises out of budget resolution No. 4. The particular amendment has been requested to permit a foundation to make donations to a municipal agency such as an art gallery.


William Moore Benidickson: This amendment is interesting. Some of us are a bit credulous with respect to those who would donate on a charitable basis for the purposes referred to in the resolution and in the amending bill. What kind of offers have been made in this regard so far that would warrant this amendment to our income tax laws? Has the minister knowledge of offers that have been made by way of gift to Her Majesty in the right of Canada or a province or to a Canadian municipality? If so, has any substantial amount been involved in recent times?


Lionel Chevrier: Is the matter sub judice?


Donald Methuen Fleming: There is no litigation about this.


Jacques Flynn: Shall clause 22 carry?


William Moore Benidickson: The minister is proposing to parliament that we amend the Income Tax Act to provide that there will be clear tax-free protection for a donation by an otherwise taxable person if he is giving something to Her Majesty in the right of Canada or a province or to a Canadian municipality. Maybe I am naive but I am not aware of many people who do this kind of thing. Something must have prompted the Minister

Income Tax Act
of Finance to amend the Income Tax Act to provide that under such circumstances such a gift would have the tax advantages proposed in the bill.
I recall that the Minister of Finance rather looked askance at the attitude of a former administration which felt that they had received from one or two estates a very substantial tax advantage which might be diverted to unusual purposes for the advantage of the public. Here we are concerned with the matter of a gift by a taxpayer to a government. In the former case it was a matter of the government deciding that these were receipts rather unexpected and unanticipated in times of great prosperity when it might be possible to divert equivalent assets in another way to something like the Canada council. There was no thought on the part of taxpayers who were passing away that they were making a gift to Canada, to a province or to any other area of public ownership. This was fortuitous and accidental. I think we should know from the Minister of Finance what prompts him to suggest that an incentive could be granted to people who might, in a way in which I have never known about before, wish in the future to make an outright tax exempt gift to a government, whether federal, provincial or municipal. I am not quarrelling with that principle. However, I think we are entitled to information as to what has led up to this. Why does the minister recommend this? He has information that we in the opposition do not have.
If there are people who want to donate, in a taxation year, their income to a government agency such as the Canada Council, I think we should have information concerning that.


Donald Methuen Fleming: I have already said, Mr. Chairman, that this amendment was requested to permit a charitable foundation to make a donation to a municipal agency such as an art gallery. This clause is to amend section 62 of the act, and section 62 deals not with charitable gifts by individuals but by non-profit corporations such as a charitable foundation. This provision is designed to remove any limitation in respect of gifts by such non-profit corporations or charitable foundations to Her Majesty in the right of Canada or a province or municipality, such as the particular occasion to which I have referred.


William Moore Benidickson: Have we, in the past, suffered by the absence of this amendment? If so, could the minister indicate under what circumstances we have suffered, perhaps, from the charitable inclinations of anybody in Canada because we did not have this proposal in the act before?


Donald Methuen Fleming: The hon. member asks if we have suffered. It depends on whom he means by "we". The fact is that unless such an amendment as this is passed the particular foundation in question will not be able to make a gift to the municipal art gallery in question.


Herbert Wilfred Herridge: I see the two postilions of the minister are smiling when the hon. member continues to ask this question. It is an interesting point, however, and I think the committee is entitled to know whether the minister has received representations for this amendment to the Income Tax Act.


Donald Methuen Fleming: Yes, Mr. Chairman, I have indicated that.


William Moore Benidickson: This is a matter to which all of us wish to be sympathetic, but the minister has said this is an individual foundation to which an opportunity might not have been possible if this amendment were not passed. He said "a foundation". I should like to know which foundation, whose foundation? How desirable is this? I think the minister should be frank with us. I think all of us desire to encourage those who have wealth and who plan that this wealth, after their death, will be devoted to cultural and social purposes. We want to be sure that they have a full opportunity to do so. The minister referred to an individual foundation. Will he name which foundation indicated to the minister that our law was inadequate up to now?


Donald Methuen Fleming: I was asked if representations had been made to this end, and I said yes. I referred to the fact that they had been made on behalf of a particular foundation. It is not customary to disclose the names in such cases.


William Moore Benidickson: No, but the minister did use the singular.


Donald Methuen Fleming: This provision is of general application, Mr. Chairman. Its purpose is to give encouragement to charitable foundations to make suitable gifts to municipalities for art galleries organized by municipalities.


John Whitney Pickersgill: There is just one observation I should like to make before the clause is carried. It must have been rather painful,
I would think, for the minister to put this clause in this particular language because what it does is to make Her Majesty a charity or, more particularly, to make the treasury of Canada a charity. In view of the present state of the treasury of Canada, I would have thought the minister would have been quite sensitive about doing that.


Donald Methuen Fleming: This is not a new
provision. There has been such a provision in this act for many years in relation to gifts to Her Majesty and these qualify for the purpose of reducing taxable income, Mr. Chairman. It was written in, as a matter of fact, in 1950.


William Moore Benidickson: Would the minister look at page 15, subclause (b) of subsection 4? I want to say that this perhaps worries me more than some other items in the clause to which I have referred. It says:
There shall be included in computing a corporation's income all gifts received by the corporation and all amounts contributed to the corporation to be used for scientific research.
I have already commended the minister for some of the amendments he has introduced in his budget in respect of scientific research. I am concerned about whether or not a gift would necessarily be, in layman's language, a gift of a capital nature. As I read this paragraph, once one of these research corporations has been established and I were to give it a gift of $100,000 in 1961, which I could not do, I take it that would be regarded as income in that year and 90 per cent of it would have to be spent in that year. Perhaps I would wish my gift to be regarded as a capital grant, and perhaps I would be more concerned about the interest on my capital grant over the years being used by this nonprofit research corporation, rather than have my gift regarded as income after the establishment of the corporation so that 90 per cent of it would have to be disbursed in that year. Am I wrong in my review of the amendments that are here?
I admire what the minister is doing here. He is encouraging corporations and individuals to invest in research. However, unless I misjudge the interpretation here, I question the requirement that 90 per cent of the funds received in a current year must be disbursed in that year. I wonder whether or not that requirement prevents a bona fide research corporation from receiving from anybody in Canada what is called here a gift, without the necessity that such gift be disbursed to the extent of 90 per cent in the year of receipt.


John Andrew W. Drysdale: Before the minister replies, I wonder whether I might make a brief comment. First of all, I should like to commend the minister for bringing in this particular amendment covering scientific research. Many of us who serve on the research committee find it extremely encouraging that we have some tangible evidence of the government's interest in our operations and activities. When the minister is giving his reply I wonder whether he could indicate the scope of 90205-6-494
Income Tax Act
the definition of "scientific research". We in the research committee, perhaps loosely, have kept it to the one word "research". I wonder what effect the addition of the word "scientific" has. I wonder whether it tends to narrow the scope or whether a broad definition is being given of "scientific research".


Donald Methuen Fleming: The expression "scientific research" is defined by the Income Tax Act, section 72, subsection 4,
"scientific research" means any activity in the field of natural or applied science for the extension of knowledge,
Then in the same section 72 there are other provisions that have a bearing on the scope of those words. So far as the question of the hon. member for Kenora-Rainy River is concerned, I think his interpretation is correct.


William Moore Benidickson: Is incorrect?


Donald Methuen Fleming: Is correct.


Jacques Flynn: Shall clause 22 carry?


William Moore Benidickson: Having heard from the minister that my interpretation is correct, if we pass the section I think we should have second thoughts. Having given credit to the government for encouraging in a new and substantial way the devotion of funds for research that will sustain some acceleration owing to tax laws, may I say this. If we have set up a corporation that is in all the sense of the act a truly and wholly desirable nonprofit research corporation, I cannot see that we should legislate to say that any taxpayer who subsequently makes any gift-I think the word is "gift" in the section-to that very worthy corporation is, in making his gift, debarred from insisting that perhaps only the income of his gift rather than the capital would be included in income on the 90 per cent basis for the taxation year under consideration. I think this is an important matter. I have already commended the minister for his enterprise in this sphere. However, I think corporations will be established where the donor does not want necessarily to make a gift or, in fact, perhaps would not make a gift if he felt that 90 per cent of his gift had to be expended in the year following the gift. I think he would prefer that there were some continuation relative to his important capital donation. I wonder whether that result is what is defeated by these words.


Donald Methuen Fleming: There is really nothing I can add, Mr. Chairman. The hon. member correctly interpreted the clause in his previous remarks. The donor can adjust his gift accordingly in order to suit the absorptive capacity of the donee charitable trust or corporation.

Income Tax Act


Robert Jardine McCleave: Shall clause 22 carry?


William Moore Benidickson: I simply predict that, whatever government is in power in a year or two-and I have some opinions upon that matter-this is legislation that will not likely stand. I do not think that people who have the kind of assets that we want to be devoted to this kind of worth-while entirely non-profit research enterprise are likely to make gifts-and I emphasize the word "gifts" -if the law says that those gifts must not be expended with relation to the return of the capital given to them but must be expended 90 per cent within the period of the taxation year within which the gift has been made. I say that provision will be discouraging to people who are likely to make gifts to the kind of research corporations which are given some encouragement under this amending bill. I have congratulated the minister for what he has done; but with regard to a corporation which he has set up here as being entitled to some tax exemption, I say that he has made a very great mistake in saying that a gift which, on the part of the donor may be regarded as capital, must be expended to the extent of 90 per cent in the year in which the gift was made.


[Stage Direction]
Clause agreed to.
On clause 23-Distribution of income.
Donald Methuen Fleming: On clause 23 and clause 24, Mr. Chairman, here we have an amendment, the third one on the list, to strike out clause 23 and clause 24 and renumber clauses 25 and 26 as clauses 23 and 24 respectively. I would ask my colleague the Minister of Mines and Technical Surveys to move that amendment.


Paul Comtois: I so move.


Some hon. Members:: Carried.


William Moore Benidickson: As I said earlier, this covers a number of pages of the amending bill. Having brought in approximately six amendments to the income tax proposal since June 20, is the minister sure that all the consequential amending clauses are covered when he has changed his mind about dealing with personal corporations which he said on budget night was a subject that had given him and his department a great deal of concern for over a year and upon which he was prepared to come to the country and make some announcement? Are we sure that all the consequential amendments in a hundred or more sections of the Income Tax Act are taken care of in the amendments which are before us tonight? I ask that question because four times within the last week since 
the Income Tax Act was introduced we have had amendments from the minister, not including this one.


Donald Methuen Fleming: I have full confidence in the competent draftsmen who are responsible for drafting the bill and amendments. It is usual, indeed, almost customary, one might say, for amendments to be introduced in measures of this kind during their passage through the house. In the 16 years in which the hon. member for Kenora-Rainy River and I have been here, there was not one occasion, I am positive, when the income tax bill went through the house without there being a number of amendments made.


William Moore Benidickson: I do not wish to prolong
debate tonight. The minister is completely wrong in that assertion. Not only is he wrong in his main point, but I point out that the budget resolutions relative to the Income Tax Act have always been introduced much earlier in the calendar year than the hon. gentleman has been prepared to introduce this one.


Donald Methuen Fleming: That is what you said before.


Robert Jardine McCleave: Shall the amendment carry?


Some hon. Members:: Carried.


[Stage Direction]
Amendment agreed to.
Robert Jardine McCleave: Shall clause 25 renumbered, now, as clause 23, carry?


John Whitney Pickersgill: I think the minister should give us some explanation before this is carried.


Donald Methuen Fleming: This clause 25, renumbered 23, provides for deductions in respect of amounts contributed to non-profit organizations established to promote scientific research. This is in keeping with paragraph No. 3 of the budget resolution.


John Whitney Pickersgill: Has the minister knowledge of any serious intention on the part of taxpayers to take advantage of this position or is this something which has been generated entirely within the government in the hope that it will have some effect? Is this the result of proposals which have been made to the government by corporations, or is it part of the policy of the government?


Donald Methuen Fleming: It is, of course, part of the policy of the government to encourage scientific research, but we have some hopes that this new provision will be used.


John Whitney Pickersgill: The minister says "hopes". What I was really asking about were not hopes but expectations. In other words, have

there been representations from any corporations that this legislation would be desirable and likely to be productive?


Donald Methuen Fleming: We have had some representations. I am not going to say that any particular corporation has committed itself to making donations for this purpose if the legislation is passed.


William Moore Benidickson: The minister has indicated that a substantial portion of this amending bill is to be forgotten or deleted because, contrary to his boast, he is not ready to deal with a proper set up for the taxation of personal corporations. But I have found on page 20 of the amending bill a subclause, I refer to subclause (2), with respect to subsection 4 of section 139 of the Income Tax Act which means that this subsection would simply be eliminated very quietly. I am neither defending it nor supporting it, but I think we did not have enough information before us with respect to the intention had we proceeded tonight with the bill as presented to us by the minister. I refer to the subsection which, I take it, is to be appealed. I could not see that it was related very closely to some other clauses in the amending bill but it referred to farming, or a combination of farming, as affecting certain taxpayers. As I say, I am not quarrelling with the minister's original proposal but I say it represents a back door effort; or perhaps it is thrown out in a front door effort, because the minister is discarding all his proposed amendments with respect to personal corporations. Inasmuch as this was not very strongly emphasized on budget night, perhaps when the minister is reintroducing his proposals with respect to personal corporations he would give just a little more prominence to this little matter which I saw indicated-the elimination of a provision which might be of importance to some taxpayers but which was not referred to in the minister's budget speech.
This subject, I take it, is not considered worthy of discussion tonight because the minister has abandoned it together with a whole section of the bill to which the minister said he had given extensive consideration and upon which we thought he had reached solid conclusions. I asked the minister not to throw out of the window on some other occasion, perhaps, a provision such as subsection 4 without warning the taxpayers involved.


[Stage Direction]
Clause agreed to.
On clause 24-Personal corporation defined.
Robert Jardine McCleave: Shall clause 26, renumbered clause 24 carry?
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John Whitney Pickersgill: No, I think the minister should give us an explanation of this clause.


Donald Methuen Fleming: This clause 26, renumbered 24, is consequential on the introduction of the provision for deferred profit sharing plans.


John Whitney Pickersgill: In what way is it consequential?


Donald Methuen Fleming: There has to be a
provision dealing with the taxation year of the trust. That is why we have a provision in clause 26 amending section 79 of the act.


Robert Jardine McCleave: Shall the clause as renumbered carry?


William Arnold Peters: Does the minister intend to say anything about the regulations which will be passed to protect the funds under this new clause?


Donald Methuen Fleming: We shall be dealing with that under the next clause.


[Stage Direction]
Clause agreed to.
Donald Methuen Fleming: We have renumbered clause 26 as clause 24.
I am proposing now, Mr. Chairman, that we introduce a new clause to be numbered 25. It is among the amendments already referred to. Perhaps I should ask my colleague the Minister of Mines and Technical Surveys to move it at this time.


Mr. Comiois:: Mr. Chairman, I move that Bill No. C-120 be amended as follows:
By adding thereto, immediately after clause 24 as renumbered, the following clause:
25. (1) Paragraph (b) of subsection (3) of section 79B of the said act is amended by striking out the word "or" at the end of subparagraph (1) thereof, by adding the word "or" at the end of subparagraph (ii) thereof and by adding thereto the following subparagraph:
(iii) to any person by way of an annuity, to be increased or reduced depending upon the increase or reduction in the value of a specified group of assets constituting the assets of a separate and distinct account or fund maintained in respect of a variable annuities business by a person licensed or otherwise authorized under the laws of Canada or a province to carry on in Canada such business;
(2) This section is applicable to the 1961 and subsequent taxation years.


Donald Methuen Fleming: Perhaps the committee would like-


William Moore Benidickson: I should like to ask the
minister-


John Whitney Pickersgill: Could we have copies of the amendment?


Donald Methuen Fleming: They were distributed this morning.


John Whitney Pickersgill: I suppose we must keep track of these things.

Income Tax Act


Robert Jardine McCleave: This proposed amendment will be found in Votes and Proceedings of Friday, July 7 at page 1.
On clause 25.


Donald Methuen Fleming: Mr. Chairman, perhaps I might say a word of explanation in regard to this amendment. Section 79B is the section that deals with registered retirement savings plans. The committee will not require any comment in respect to registered retirement savings plans in general. These were introduced several years ago.


John Whitney Pickersgill: Could the minister say precisely when they were introduced.


Donald Methuen Fleming: They were introduced in the year 1957.


John Whitney Pickersgill: Could the minister say in what part of that year?


Donald Methuen Fleming: It was done by chapter 29 of the statutes of that year.


John Whitney Pickersgill: I did not hear the answer.


Donald Methuen Fleming: I said it was done by chapter 29 of the statutes of that year.


John Whitney Pickersgill: Could the minister say at what stage of the year they were introduced?


Donald Methuen Fleming: I think it was at the usual stage.


William Moore Benidickson: This was introduced by Mr. Harris.


John Whitney Pickersgill: The minister finds it very difficult to say that this was introduced by Mr. Harris but that happens to be the fact.


John Andrew W. Drysdale: Is that the last time you saw Harris?


Donald Methuen Fleming: Isn't this just lovely? The hon. member has answered his own question.
If I may proceed with the explanation which I think the committee would wish, the kind of provision by way of benefit under registered retirement savings plans which have been contemplated under this section have fixed periodical payments. By amendment to the insurance acts made at this present session we have opened the way now for the writing of what have been called variable annuities. As hon. members will recall this was one of the features of the revisions this year to both the Foreign Insurance Companies Act and the Canadian and British Insurance Companies Act. We have a new concept now under which payments of the so-called variable annuities will have variable benefits based on the return from

equities. This is a departure from the concept of the periodical payments of precisely fixed amounts determined by the contracts at the time they are written. As it is likely that the new type of annuity will be written perhaps extensively in view of the interest shown in it by some of the major insurance companies it is necessary now to ask the committee to amend the provisions of section 79B of the act to bring variable annuities within the scope of registered retirement savings plans.


William Moore Benidickson: Mr. Chairman, has this proposal generally met with the approval of those concerned on both sides of the contract basis?


Donald Methuen Fleming: This was asked for by representatives of the life insurance companies.


John Whitney Pickersgill: Could the minister say how it happens that this was not included in the bill originally? Was this something that was proposed after the budget was brought down or was it something that was overlooked?


Donald Methuen Fleming: It had not been
possible up to the time this bill was introduced to devise a clause that would meet the points of view of both the government on the one hand and insurance companies on the other. Further discussions were necessary and this clause is now being considered. I am told it meets with the satisfaction of the Canadian life insurance officers' association.


John Whitney Pickersgill: I should like to ask the
minister if he has no notion of how extensive the use has been of the scheme as it exists now, which we are now seeking to amend? Is there any record of the extent to which the taxpayers are taking advantage of this particular scheme? Are statistics kept of a general character that would enable us to tell what extent self-employed perosns without salaries or wages are using this retirement plan?


Donald Methuen Fleming: I am informed that the Department of National Revenue has not attempted to keep such statistics in respect to registered retirement savings plans.
(Translation):


Samuel Boulanger: Mr. Chairman, I wish to ask the Minister of Finance a question and so he will understand me better, I shall ask it in English.
(Text):
Is the contribution of an employee to a deferred profit sharing plan to be allowed as deduction from income as in the case of any registered pension plan?


Donald Methuen Fleming: No, Mr. Chairman. The ordinary profit sharing plan does not contemplate contributions by employees but contributions on the part of the employer. It is a plan for sharing the profits of a business with the employee. This legislation which we will be coming to, will cover that item. I think we should wait until we reach the next clause before launching into a discussion in this regard. I suggest the hon. member is one clause ahead of us. (Translation):


Samuel Boulanger: Mr. Chairman, I think that matter is covered in the clause we are dealing with. I am simply asking-
(Text):


Donald Methuen Fleming: Mr. Chairman, the hon. member is asking me about deferred profit sharing plans which we will be discussing when considering the next clause.


Samuel Boulanger: Did we not change clause 25 to clause 27?


Donald Methuen Fleming: We are now dealing with an amendment inserting a new clause to be numbered 25 after clause 26 which has been renumbered clause 24.


William Moore Benidickson: Mr. Chairman, we are having trouble with these renumbered clauses because the government keeps changing its mind. It has changed its mind at least four times as shown by the amendments made since June 20, and has again announced a major amendment which takes out many clauses of this amending bill. This confuses the hon. member for Drummond-Arthabaska as well as others.


Donald Methuen Fleming: This amendment would be much less confusing, Mr. Chairman, if we can reach the next clause.


William Moore Benidickson: With respect to the taxation year there seems to be some necessity in regard to registration as covered by clause 26. I wonder whether the minister can tell us what it is?


Robert Jardine McCleave: Shall the amendment carry?


John Whitney Pickersgill: Mr. Chairman, I think my friend the hon. member for Kenora-Rainy River was referring to clause No. 26 which is No. 24.


Mr. Bell (Carleton):: That clause has now been carried.


William Moore Benidickson: They have all been
changed.


Donald Methuen Fleming: We are now dealing with an amendment to insert a new clause 25.
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John Whitney Pickersgill: Mr. Chairman, I have another query I wish to make in respect to clause 25. Have any representations been made on the extent to which taxpayers are likely to avail themselves of this additional opportunity for saving?


Donald Methuen Fleming: On variable annuities?


John Whitney Pickersgill: Yes.


Donald Methuen Fleming: Only time will tell, Mr. Chairman. They have been written on a very limited scale by one or two provincially incorporated companies that are not under federal jurisdiction. This is the first time that the companies under federal jurisdiction have been writing them, and this new type is just in its infancy. I think it is quite impossible to say, but I have been led to understand that the large life insurance companies, or at least some of them, expect the variable annuities to be sold on a considerable scale.


John Whitney Pickersgill: Are the large life insurance companies going into this field?


Donald Methuen Fleming: I know two of them that have made such announcements; I presume others will.


John Whitney Pickersgill: Is this something that was primarily prompted by the government, or is it something that the companies brought to the government and the government felt it was a good thing?


Donald Methuen Fleming: Oh, companies have been asking for this for some time.


[Stage Direction]
Amendment agreed to.
Clause as amended agreed to.
On clause 27.
Donald Methuen Fleming: I have an amendment here. You have it before you, Mr. Chairman. May I ask my colleague, the Minister of Mines and Technical Surveys to move the amendment.


Joseph-Roland Comtois: I so move.


Robert Jardine McCleave: Mr. Comtois moves:
That the bill be amended by renumbering clause 27 as clause 26 and substituting for the word "employee" the word "employer" in line 37 on page 22.
Is it the pleasure of the committee to adopt the amendment?


[Stage Direction]
Amendment agreed to.
Robert Jardine McCleave: Clause 27.

Income Tax Act


Donald Methuen Fleming: It is on this clause that the hon. member for Drummond-Artha-baska asked me about the contributions of employees to deferred profit sharing plans. I repeat that no provision is made for employees contributions to deferred profit sharing plans. The essence of such a plan is that the employer sets aside some portion of his profits not for immediate distribution among his employees but puts them in a fund. Into the fund he will make his payments periodically according to the provisions of the plan. The employee does not draw anything out until a stated period, presumably on retirement. Now, in the meantime benefits are accruing on his behalf in the fund, but under the legislation as it has been hitherto he was taxed in respect of the sums accruing to him under any such plan. Under the present amendments there will be a deferment of tax during the period when these sums are accumulating on behalf of the employee, and then when he retires and draws out benefits he will become taxable at that time on the benefits withdrawn.
There are extended provisions here dealing with the various aspects of the plan. We have the definition of the deferred profit sharing plan, what is meant by a profit sharing plan; and we have provisions for registration of such plans. The minister is not permitted to accept for registration any of these profit sharing plans unless they comply with a considerable number of conditions which occupy most of page 22 of the bill. Provision continues on page 23 for acceptance of such plans for registration by the minister. They are given a registration date, and no tax is to be levied under subclause 6 while the trust is governed by the plan.
Then there is provision in subsection 7 for setting a ceiling on the employer's contribution which may be deductible from his income for tax purposes, and here the ceiling is the lesser of either the aggregate of each payment paid by the employer in respect of the individual employee or $1,500 minus the amount, if any, that is deductible under another clause, so that we are working here broadly speaking under the same kind of ceiling as applies to registered pension plans. The employer, up to this ceiling of contributions, may deduct them from his income for tax purposes. In this way encouragement is given by the law to the establishment of deferred profit sharing plans.
Page 24 of the bill deals with the provision for limitation of deductions, the portion of receipts that are deductible, and page 25 deals with the appropriation of trust property by the employer and for the revocation of registration in the cases there stated. Page 26 of
[The Acting Chairman (Mr. McCleave).]
the bill sets forth the rules applicable to a plan that has been revoked.
The hon. member for Kenora-Rainy River asked me earlier to deal with the differences between the provisions in this bill respecting deferred profit sharing plans and those in the 1960 draft bill. Perhaps I might review these briefly, if hon. members are interested in them, Mr. Chairman.
First, in regard to the definition of the plan, the present bill provides that the employer must join in the application to register a plan as a deferred profit sharing plan. In Bill No. C-84, which was the 1960 bill, only the trustee was required to make application.
Second, also in relation to the definition of the plan, the present bill deletes a restriction which existed in Bill No. C-84, where a plan covers the employees of more than one employer. In Bill No. C-84 contributions could be made only for the benefit of "employees of the employer or of a corporation with whom the employer does not deal at arm's length". The present bill provides that contributions may be made for the benefit of "emplo3'ees of that employer or employees of any other employer".
The third difference is in relation to withdrawals for cause. The present bill removes a restriction which existed in Bill No. C-84 concerning withdrawals from a plan. Bill No. C-84 provided that a plan could not permit a payment of proceeds to any employee or beneficiary, except for a reasonable cause, before death or retirement of the employee or the winding up of a plan. The present bill removes this restriction and will permit plans to pay out proceeds at any time to employees if they choose. Such proceeds will, of course, be taxed when received.
This change means that the Department of National Revenue officials will not have to judge what is "reasonable cause" for a payment under a plan. This decision will be left to those who manage the profit sharing plan.
The fourth difference relates to capital gains and losses. The present bill provides that net capital gains made by the trust while a plan was an employee's profit sharing plan may be received tax free when paid out as proceeds. This concession was not contained in Bill No. C-84.
Only capital gains, less capital losses, made while the plan was an employees profit sharing plan qualify for this concession. Proceeds from a deferred profit sharing plan attributable to capital gains made by the trust while the plan was a deferred profit sharing plan are not exempt. This is in conformity with the tax treatment of capital gains made by

the trust of a pension plan. If a taxpayer is to enjoy the benefit of tax deferral on income he must be prepared to pay tax on all the proceeds accumulated during the period the plan was a deferred profit sharing plan.
The fifth difference relates to the date of registration. This present bill is much less restrictive concerning the date of registration of a deferred profit sharing plan. It permits the date of registration to be the date of application or any later date specified by the applicants. Bill No. C-84 provided that a plan would be deemed to become registered as a deferred profit sharing plan on the first day of the year immediately following the year in which the application was made.
The sixth difference relates to income of the exempt trust. The present bill adds a requirement that the trust for a deferred profit sharing plan must receive 90 per cent of its income from sources in Canada. This is in conformity with a similar requirement introduced in the December supplementary budget for trusts for pension plans. This requirement did not exist in Bill No. C-84.
The seventh difference relates to the notice of revocation. This present bill requires that notice of revocation of the registration of a plan as a deferred profit sharing plan must be mailed to an employer of employees under the plan as well as to the trustee. Bill No. C-84 required only that notice be sent to a trustee under the plan.


William Moore Benidickson: Mr. Chairman, I am very glad that the minister has given us this explanation because Bill No. C-84 was introduced by him last year. He has indicated some seven changes in the amendments to the Income Tax Act now before us which were not provided in the original bill presented by him last year, namely, Bill No. C-84. We have all received the submission to the minister from the Canadian chamber of commerce relating to profit sharing legislation. The minister will be familiar with page 38 of their submission. I believe that this has been adhered to in the bill now presented to us. I should like to know the contrary or adverse representations that may have been made to the minister which are not recognized or reflected in this legislation.
We have had presented to us tonight an amendment to paragraph (d) of subclause 2 of clause 27 which seems to be merely a substitution of the word "employer" for the word "employee". Be that as it may, I have a simple question I wish to ask the minister because I think this is a very important section of the amending bill. I refer to the question of at least 50 per cent of the property consisting of notes, bonds, debentures or similar obligations of an employer which I
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take it could not be in the resources of the plan. Is that not a very essential part of the legislation that is before us and does the amendment change that? In other words, no part of the funds of the trust governed by the plan may be invested in shares of a corporation at least 50 per cent of the property of which consists of notes, et cetera. Does this amendment completely upset that? I was satisfied, I think, with the original proposals.
I see no objection to employees investing in profit sharing assets that involve the business to which they are devoting their attention but with this amendment are we completely altering what was originally proposed by the government as presented to us on page 22 of the bill?


Donald Methuen Fleming: No, Mr. Chairman. The provision to which the hon. member has been referring in relation to the 50 per cent reference is to be found in subclause 2 (d) of the clause with which we are now dealing.
(Translation):


Samuel Boulanger: I thank the minister for his information.
I am pleased to welcome the hon. member for Roberval (Mr. Tremblay) who, as usual, is unable to make an interjection from his seat.
I asked the minister a question and I thank him for his answer. However, I would like to go further and submit the following point to him.
In some industries there is both a deferred profit sharing plan and a pension plan.
In the deferred profit sharing plan, the worker contributes a certain amount, and so does the employer.
Would that contribution of the worker be taxable with regard to income tax?


Donald Methuen Fleming: Yes, Mr. Chairman, the worker's contribution will be taxed.


Samuel Boulanger: In the case of the pension fund, to which the worker contributes, I think his contribution is not taxable. Now, I ask the minister why the worker's share in a deferred profit sharing plan is taxable, whereas his contribution to a pension fund is not?


Donald Methuen Fleming: Mr. Chairman, we are discussing two different things. The pension is one thing and the deferred profit sharing plan is another.
The legislation has different provisions for those two plans.

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Samuel Boulanger: If there is in one industry both a pension plan and a deferred profit sharing plan, do you not think that the fact that the worker's contribution is taxable in one case, that of the deferred profit sharing plan, creates a discrimination in respect of the other plan? It is not an encouragement to contribute to the deferred profit sharing plan, since contributions to such a plan will be taxable. This is why I am putting that question.
I realize that as far as results are concerned those two plans are different. But still I would like the worker's contribution to a deferred profit sharing plan to be non-taxable like his contributions under a pension plan.


Donald Methuen Fleming: Mr. Chairman,
there is no discrimination here. As I said, they are two different matters. The worker's contribution to a pension fund is non-taxable, but his contribution under a deferred profit sharing plan is taxable.
The industry may have both plans, but different provisions as far as taxation is concerned.


Samuel Boulanger: I have here a brief from the council of profit sharing industries.
It was prepared by various financial organizations composed of experts on that subject who made many recommendations to the government.
Here is one of their proposals:
(Text):
The council strongly recommends employee contributions be permitted as deductions from income for income tax purposes.
(Translation):
I based my argument on that brief.
Since contributions by the employee to a deferred profit sharing plan are taxable, there is discrimination in fact against that plan.
That is why I urge the minister to provide that such a contribution will not be taxable, just like the contribution to a pension plan is not taxable.


Donald Methuen Fleming: If the worker wishes to contribute to a plan where his contribution will not be taxable, it must be a pension fund, as this deferred profit sharing plan has nothing in common with a pension plan. It is an entirely different thing.


Samuel Boulanger: I know quite well the difference between a pension fund plan and a deferred profit sharing plan, because both have been in force in my own industry for several years and-


An hon. Member:: You can bury them.


Samuel Boulanger: In discussing such plans, I think I can enlighten the hon. member for Roberval (Mr. Tremblay) who does not seem to know what it is all about.


Mr. Tremblay:: Do they provide benefits for the dead?


An hon. Member:: Even those in Roberval.


Samuel Boulanger: I should also like to ask the minister a question dealing with the employer's share of the $1,500. In fact, it is the same question in another form. In an industry where both plans are available- take the case of my own industry where employees can contribute to a pension plan and to a deferred profit sharing plan-if I were to contribute two amounts adding up to the total of $1,500, would the tax exemption apply to both?


Donald Methuen Fleming: The employer
can deduct $1,500 for tax purposes, but he cannot deduct it twice.


Samuel Boulanger: This means, then that the amount paid by an industry to a deferred profit sharing plan would be limited to $1,500, and if I paid an additional amount of $500 into the pension fund, I take it that I would be taxed on the $500?


Donald Methuen Fleming: Mr. Chairman, I
must repeat that we are discussing two entirely different things.


Samuel Boulanger: I come back again to this matter.
I am sorry to inconvenience the hon. members.


Mr.   Marlel@: It is no trouble at all.


Samuel Boulanger: Excuse me, then.
Yet this recommendation is made by the council of profit sharing industries in its brief. Maybe I do not understand what is written therein, but it seems clear. We should like that the contribution made to a profit sharing plan be no more taxable than a contribution to a pension plan. That is simply what we want and what is requested by the council of profit sharing industries. We know that the two plans are different and involve two types of contributions, but we should like that neither of them be taxable.


John Whitney Pickersgill: It seems to me that since this is-


Robert Jardine McCleave: Order; the Chair recognized the hon. member for Welland.


John Whitney Pickersgill: I beg the hon. gentleman's pardon.


William Hector McMillan: I simply wish to ask the minister whether there are any regulations providing for the treasury to recapture some of the loss in income tax because of payments into some of these profit sharing plans and also deferred retirement plans. I have in mind the age of retirement and the speed with which money has to be returned. I just wondered whether there were regulations in respect of this matter.


Donald Methuen Fleming: I am trying to follow the hon. member. Is he asking about regulations under the deferred profit sharing plan?


William Hector McMillan: Yes, in this plan where a certain amount is paid in respect of the employer.


Donald Methuen Fleming: These provisions are not in effect yet. This is introducing a new idea into the Income Tax Act, so there are no regulations as yet to deal with it.


John Whitney Pickersgill: Mr. Chairman, I was going to observe that what we are doing here is setting out a very important new plan so far as taxation is concerned. We are making to these profit sharing plans the same kind of concessions as have been made for some years to pension plans, that is to say the contributions of employees shall not be taxable as income at the time they are made but shall be taxable at the time they are ultimately received. If I am not stating the matter correctly, I should like the minister to correct me because I am seeking to understand this provision. This is a new, complicated and rather lengthy section of the act. I do not believe we should just say "carried" without going over each subsection to see what it really means.
We do now that, with regard to some pension plans of late, some questions have been raised in very exalted quarters. It would be perhaps just as well before we deal with this matter to make sure that we are making a law that is workable and that is not going to be called into question and that the taxpayer's rights as well as his status are not going to be called into question at some future occasion. I suggest, therefore, sir, you call each of the subsections separately so that we can question the minister on the details and really understand what is meant by each part of this provision.
It seems to me I understand clearly what is meant by subsection 1. I think I know what
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the word "deferred" means. It means that the share of the profits coming to the employee is not going to be paid out in the year in which those profits are made but is instead going to be paid into a fund which shall have a trustee who will pay that out on some subsequent occasion. I assume also, and this is an assumption which I imagine is correct but the minister can put me right if I am not right, that any contributions made by employers to this profit sharing fund are of profits after tax, and that there is no way in which any of the profits before corporation income tax has been applied to them can be paid in; is that correct?


Donald Methuen Fleming: No, he can deduct up to the amount of the contribution for each individual employee not exceeding $1,500 in any one case.


John Whitney Pickersgill: In other words, this a device by which corporation income tax is also reduced as far as the treasury is concerned?


Donald Methuen Fleming: Just as in the case of a contribution to a registered pension plan. There is the same ceiling. This is an over-all ceiling. You cannot contribute $1,500 per employee under a registered pension plan and another $1,500 under a deferred profit sharing plan; $1,500 is the over-all limit of contributions per employee.


John Whitney Pickersgill: You can do one or the
other but not both?


Donald Methuen Fleming: You can do both but the employer cannot have an exemption for more than $1,500 aggregate of contributions per employee.


John Whitney Pickersgill: The minister will see that I have learned something already. I think my friend the hon. member for Drummond-Arthabaska has another question.
(Translation):


Samuel Boulanger: Section 79 of the present act prescribes that the employer's share is not taxable, which means that there is no limit to the amount he may subscribe. Is that right? I mean under the present act, not under the bill we are considering now.


Donald Methuen Fleming: That is quite correct, there is no limit now but the contribution is taxable each year.


Samuel Boulanger: Under the present act, the employee's share-


Donald Methuen Fleming: The tax is not
deferred.


William Moore Benidickson: That is the pension.


Samuel Boulanger: It seems as though a nondeferred profit sharing plan is taxable because it says here that:

Income Tax Act
An amount paid by an employer to a trustee under a profit sharing plan during a taxation year or within 120 days after the end of the year, can be deducted in the computing of the income of the employer for the taxation year, providing such amount was not deductible in computing the income of the employer for a previous taxation year.


Donald Methuen Fleming: In the present act, it is the same as in the case of wages; the employer's contribution is taxable in the hands of the employee, now.


Samuel Boulanger: Why then the amendments in Bill C-120? Why a limit of $1,500?


Donald Methuen Fleming: Because we are introducing a different plan from the one referred to by the hon. member. The difference is that the profits are deferred, the tax is deferred and the employer's contribution is not taxable under this deferred profit sharing plan. There lies the difference.


Samuel Boulanger: I realize of course that there is a difference between the two plans, but both have the same purpose. The purpose in either case is to establish a pension fund for the employee when he retires. I see therefore no reason why there is under the new act a limit of $1,500.
The recommendations of the council of profit sharing industries make reference to the employer's contribution. I have studied carefully these recommendations and it is requested, or rather I will read them to the minister. First-
(Text):
(a)	that restrictions on employer contributions to a deferred profit sharing plan be entirely divorced from any contributions which an employer may make to a registered pension plan;
(b)	that employer contributions to a deferred profit sharing plan should not be permitted to exceed in any year, 15 per cent of the total payroll of participating employees.
(Translation):
So the council of profit sharing industries asks that the limit be not $1,500 but 15 per cent of the total amount of the employer's contributions, which would be more logical. (Text):


Donald Methuen Fleming: I think I should point out to the hon. member that he is referring to representations made by this council previously, not the most recent ones.


Samuel Boulanger: Last year.


Donald Methuen Fleming: While there were representations designed to seek a raising of the limit beyond $1,500 which any employer may contribute to such an employee, we have not seen fit to give effect to those representations.
The hon. member has been discussing two different things. Where it is a matter today of an employer sharing profits with his employee without any tax deferment under a

plan, then obviously the distribution is assimilable to the payment of wages and the employer may deduct as an expense of doing business his contributions by way of profit sharing if there is to be an immediate distribution. It is just as though he were enlarging his wage bill. He can deduct without limit from his income tax the amount that he chooses to distribute by way of profits among his employees. But in that event the money is taxable in the hands of the employee.
We must put aside those ideas entirely when we come to the scheme of deferred profit sharing plans. Here, with a view to encouraging employers to share profits and also to set them aside in a plan that will provide benefits to the employee at the time of retirement, we do not propose to tax the employee in respect of those contributions made on his behalf by the employer into the fund and we propose to allow the employer to deduct up to $1,500 per employee the contribution that he makes into the fund on behalf of that employee. These are benefits that are extended to both employer and employee in order to encourage employers to make this kind of provision for employees under proper plans, with proper trust provisions, these plans to be registered according to rules with the Minister of National Revenue, in order that there may be something available to these employees at the time of retirement. These is therefore all the difference in the world between the conception of profit sharing in terms of immediate distribution and profit sharing under a deferred profit sharing plan.
(Translation):


Samuel Boulanger: Mr. Chairman, this brief I received from the council is of recent enough date since it was sent me on May 8, 1961, and I think the minister got it even before I did.
I should like to ask the minister what objection there would be to limiting the employer's contribution to 15 per cent of the total amount of wages paid instead of $1,500?


Donald Methuen Fleming: Mr. Chairman, I have already attempted to give that information to the hon. member. We consider the limitation which we are applying at present is fully justified.
(Text):


John Whitney Pickersgill: I must say that merely to say that it is justified is one thing but that to say why it is justified is quite smother thing. My hon. friend has sought several times, by putting his question, to find out what the basis or the foundation is for this $1,500 nontaxable limit in the case of each employee. Is it because the government feels that this

Income Tax Act
is all it can afford to lose out of its immediate revenue? I can see a point there. If profits are paid into a deferred fund of this kind and there is no limit upon it there is, conceivably going to be a greater loss to the revenue in the current year than the treasury would care to contemplate, though, after all, employers have to make profits for the shareholders, too, so perhaps it would not go to very great lengths. But is that the sole basis of the $1,500 a year or is there some other reason?


Donald Methuen Fleming: It is the same reason as prompted the former government to propose a limit of $1,500 in the case of a contribution to an employee's pension fund. There are two reasons. Obviously, one is so that there may not be substantial tax benefits going to persons with large incomes related to provisions of this kind, and the other is the extent to which it is fair to impose a burden on the treasury in aid of such a plan.


William Moore Benidickson: My curiosity is aroused because of other debates we have had about some senior officials whose pensions have come under discussion. Am I right in my assumption that in so far as individuals are concerned the highest amount that any individual may deduct from his gross salary in the course of a year for payment into a retirement pension plan is $1,500 a year? I believe crown corporations occasionally make profits. Some do not. The Canadian National Railways incurs substantial deficits. But should they make a profit they are obliged, I believe, to pay income tax. But they could not deduct in respect of any employee, including the president, on a tax deduction basis, more than $1,500 for any one of their employees. Is that the situation across the land?


Donald Methuen Fleming: Leaving out past service, the act at the present time allows a contribution of $1,500 by the employer to an employee pension plan and $1,500 by the employee. In the case of the registered retirement savings plan where you have one person contributing instead of the employer-employee combination the maximum contribution is $2,500 per anum.


William Moore Benidickson: Yes. We are thinking of the private enterprise annuity or whatever was made possible in 1957. But you cannot have both. When we provide, in our new law, section 79C and incorporate that into our income tax schedule, no taxpayer, and this includes the corporations, as an employer, and no individual as an employee will be able to take advantage of more than one of the sections. The $1,500 has to be taken up by the corporation in connection with the
pension scheme or a deferred profit sharing plan. In a similar way, an employee cannot deduct $1,500 as his contribution to a pension plan and an additional $1,500 with respect to deferred profit sharing plan. Am I right?


Donald Methuen Fleming: That is right. You cannot do it twice. Contributions can be made to the two plans but no more than $1,500 per annum per employee may be deducted for tax purposes.


John Whitney Pickersgill: The minister told my hon. friend from Drummond-Arthabaska that there was no limit to the amount of profit which an employer could put into one of these schemes for immediate distribution in the same tax year. I think the minister gave as his reason for that the explanation that this was assimilable to wages and therefore it was taxable as personal income. It is conceivable, of course, that the tax on personal income would be at a much lower rate than the tax would be in connection with corporation income tax. The government has decided to restrict contributions to $1,500, and I am not arguing about that, because the minister and his officials have got to judge what the needs of the treasury are. I am not criticizing that at all; I am just noting it. Is there any evidence that there is any serious loss to the treasury in revenue from these profit sharing plans where the profits are distributed immediately, a loss substantial enough to make the government feel there should be a limit there?


Donald Methuen Fleming: There are no statistics kept on this, but I have no doubt the answer would be in the negative.


John Whitney Pickersgill: I trust that my suggestion regarding procedure will be adopted. I think my hon. friends on this side all concur in it. At least, I hope they do. My suggestion is that we should take the subclauses one by one. It would be understood that we would not go back to them. This is a long, complicated and involved clause. I think that if we are going to do our duty as the representatives of the taxpayers we ought to scrutinize the clause carefully. I have only one more question to ask on subclause 1. It is an important question. The minister may say it is referred to in a subsequent clause. If he does, that ends it as far as I am concerned.
The minister has to approve these plans. There is a trustee. Does this mean that some kind of supervision of these plans is envisaged by the federal government to make as sure as they can be that they are run in a competent manner and that the trustees behave as trustees should, or do the federal government consider this to be beyond their jurisdiction?

Income Tax Act


Donald Methuen Fleming: Obviously, the Minister of National Revenue is mainly responsible for reviewing the plan submitted in order to determine whether under subsection 2 he should accept it for registration. Then, if we were to read further on in this bill we would see the conditions under which the minister may revoke the plan. This is to be found in subsection 13. Obviously this arrangement assumes a measure of supervision. I am not going to say it can amount to a detailed measure of supervision from year to year but obviously in order to discharge the burdens put upon him by this clause the Minister of National Revenue will have to undertake supervision in the manner indicated.


John Whitney Pickersgill: Is this supervision to be exercised merely by the tax collector or is there to be some measure of supervision by, say, the superintendent of insurance? What does the government envisage in this regard?


Donald Methuen Fleming: It would be the Minister of National Revenue.


John Whitney Pickersgill: What kind of staff would be envisaged for the purpose of doing this work? This is really important. It does seem to me that if we are going to allow these deferred trusts, these deferred profit sharing plans to be set up, there might be serious eventual losses to the treasury, in addition to the deferment of immediate revenue if the funds were to be dissipated.


Donald Methuen Fleming: I cannot say in detail what kind of section will be set up within the department or how it will be staffed to deal with this. There are provisions here, Mr. Chairman, that obviously lay certain duties upon the minister and when the bill comes into effect the minister will have to be responsible with the assistance of the civil service commission to make the staff provisions required to discharge the duties imposed upon him by the legislation.


John Whitney Pickersgill: Mr. Chairman, I should imagine that the same kind of persons and staff that the minister now uses for whatever supervision he may give to pension plans would be the obvious kind of persons to be engaged in this kind of activity. Does the minister consider that to be correct? I cannot imagine that the government is asking us to set up a plan of this kind without having thought out the administrative scheme carefully before doing so. Unfortunately, as we all regret, the Minister of National Revenue is not here to give us any guidance in the matter. It might be that his parliamentary secretary could throw a flood of light on this question. He is here and we all know how

eager he is, and I am sure we would be delighted if he could give us a little help in this matter.


Donald Methuen Fleming: There is nothing I can add to what I have said. This matter has to be worked out when the legislation is passed. It is partly a departmental responsibility and partly the responsibility of the civil service commission.


William Moore Benidickson: Mr. Chairman, I think the hon. member for Bonavista-Twillingate has a good point. We are enlarging the field under which some form of old age security may be worked out. We are referring now to a matter of deferred profit sharing which will be used, for the most part, by individuals for purposes of old age retirement. The minister came before parliament on budget night and talked about the portability of pensions as reported at page 6660 of Hansard of June 20, 1961. He also indicated his willingness to confer with the different provinces in regard to these matters. I was surprised that he indicated some insecurity in regard to pension schemes which already exist for old age retirement plans; yet at the same time he introduced, through tax laws, an element of encouragement in profit sharing which will take place under this proposed amending bill. He suggested there was some form of registration in existence now carried out by the Department of National Revenue.
I suggest we forget about the uncertainties that have existed in the past in regard to portability of pensions, because we are starting afresh this year with something which I assume the minister wants to launch on a sound basis. How does he intend to ensure that these new schemes will be registered and tied up with the Department of National Revenue? How does he intend to ensure that this program will be commenced on a clear and sound basis so that in future years we will not find it necessary to come back and discuss this scheme and its security with the provinces and companies involved? I suggest that is what the hon. member for Bonavista-Twillingate was dealing with.
We have exempted in a similar way contributions made by employers and employees to pension schemes. For a long time we have had very loosely defined registration of such schemes with the Department of National Revenue. However, in regard to this new type of tax exemption encouragement to individuals to provide security in old age by way of profit sharing plans, we are commencing under the aegis of the federal government something new which we hope will do the complete job. The minister has cast doubts upon a great number of old age security

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schemes, payments to which are now exempted taxation and took a whole page of Hansard on June 20, 1961, to do so. Is he sure that this scheme is to be launched on a sound basis so that within three, five or 10 years it will not be necessary to come back to the companies, provinces and others to renegotiate it again? I think this type of assurance should be given by the minister because he said in his budget speech he intended to review the whole situation in regard to pensions, portable and otherwise.
I should also like the minister to deal with the portability of pensions provided by profit sharing programs. Is there any clause to be included in such schemes which would not allow an employee to benefit from years of employment until he had remained a certain period of time with a specific employer? Has that situation been taken into consideration in the drafting of the provisions now before us about which the minister boasts? Before he retracts some of the old plans which he has criticized I should like him to give some assurance that this new profit sharing arrangement provided for under this new measure-of which I approve and think very desirable-is being commenced on a proper and worth-while basis following complete and thorough consultation with the provinces, companies and others. I suggest in this regard the minister should give us an indication that he is going to be as paternal as he proposed he was in respect to the original plan for old age security to which he referred as reported at page 6660 of Hansard for June 20, 1961.
(Translation):


Samuel Boulanger: I would have another question to direct to the minister. Are the profits of a trust company, administering a pension fund for a group of workers, taxable?


Donald Methuen Fleming: Mr. Chairman, I did not understand the question.


Samuel Boulanger: I am asking the minister whether the profits of a trust company, administering a pension fund, are taxable?


Donald Methuen Fleming: Yes, Mr. Chairman, it is a taxable profit.


Samuel Boulanger: I believe there is a section in the present act which says that the profits of a trust company are not taxable.
(Text):


Donald Methuen Fleming: I think the hon. member is misleading himself in talking all the time about a trust company. What he means is a trust fund. I am trying to read
some sense into his question. I think he means a trust fund or what is earned by a trust fund.


John Whitney Pickersgill: By the trustee.


Donald Methuen Fleming: No, by the fund. It is in the hands of a trustee. It is dealt with here. We will come to that.


John Whitney Pickersgill: It is not in this clause.


Donald Methuen Fleming: No.


John Whitney Pickersgill: I still have a question about the first subclause, or perhaps I should say an observation which follows the observation made so eloquently by my hon. friend from Kenora-Rainy River. It does seem to me, sir, that we have had about enough in this present year of those broad general principles enunciated by this government which at some time in the remote future are going to provide the administrative or regulatory framework for carrying them out. I will illustrate what I mean. This is just by way of analogy, sir; I am not seeking to debate this matter. Last November we were told we were going to have financial assistance for shipbuilding. We were told about it again in May, and a strategic moment in May, and we have been trying ever since to find out what the scheme is.


Donald Methuen Fleming: Order.


John Whitney Pickersgill: This is just by way of analogy to show that we are being given the same old treatment here in this bill.
I said to the minister these deferred profit sharing plans have to be registered and there has to be a trustee prescribed who must make application in a prescribed manner. I asked him something about the degree of supervision and what facilities the department had for doing this. I asked him whether the same people would do it, or people similar to those who were now supervising pension plans with which, as my hon. friend from Kenora-Rainy River rightly reminded us, the government was not very well satisfied because the minister raised a good deal of questioning about the trustees of many of those pension plans. I believe that my hon. friend from Kenora-Rainy River was quite right in saying, if those pension plans have not been well supervised, if we are now going to start this new deferred profit sharing business, let us start it right, let us not have to come back, three, four or five years hence and say many of those trustees under this plan are not very satisfactory and we ought to be doing something about it.
This government seems to have vague, general ideas which it brings in in the form of legislation, with all kinds of regulatory power left to the governor in council to be

Income Tax Act
carried out some time after and it is usually some time after; but, sir, surely if this is going to amount to anything, if it is going to have any importance, the government ought to know now, and ought to have ready now, the regulations which are going to govern. I do not say that they can lay them on the table now; I am not asking that at all. But I am saying that in my experience when I was in the government-and I was in the government at one time and I had quite a lot to do with it for quite a long time-my right hon. friend, Mr. St. Laurent^ did not bring vague, nebulous schemes into this house. He knew where he was going and what he was doing and so did his ministers, and this is why in those days we had an administration in this country instead of a lot of nebulous ideas that never seem to come to any kind of fruition, or if they do they are shockingly badly administered.
From what the minister himself has confessed about pension funds it looks as though we are starting on the same road here with these things without any clear knowledge of how it is going to be done, without any knowledge whether the officials are there to do it.
I gave the hon. member for Edmonton West, the parliamentary secretary to the Minister of National Revenue, the opportunity to tell us how this was going to be done. I am sure the hon. member is a very zealous parliamentary secretary. I am sure he knows. I am sure he has gone into this whole matter in the department and can tell us. I wish he would. I wish he would give us some reassurance as to how this job is going to be done and how efficiently it is going to be done. That is all I am asking. I do hope the parliamentary secretary will give us the benefit of the knowledge he undoubtedly has.


Donald Methuen Fleming: The question was answered some time ago. We are just getting a repetition of the question. The question has been answered. Would we not look bright, Mr. Chairman, coming here and saying we would set up a whole new section before the legislation was ever passed? We prefer to follow the constitutional manner, ask parliament to pass the legislation and then deal with the question of machinery and staff in a prescribed manner that will mean responsibility on the part of the department in association with the civil service commission.


William Moore Benidickson: I think I can answer that immediately by quoting the minister's words in his budget speech as reported at page 6660 of Hansard. He referred to what has been on the statute books for a long time and he took a good deal of our time on budget night

to say that in connection with pension plans he felt there was much that should be attended to. Now he is introducing something very controversial. I wish to refer him to his words. He said:
These pension plans are accorded valuable income tax concessions provided they are registered for this purpose with the Department of National Revenue. In general, tax deferral is granted during the period of accumulation and the pension benefits are taxed as personal income as and when they are received.
I doubt very much whether it is as well known as it should be that the federal government does not supervise or control the solvency of private pension funds; neither do the provinces.
The minister is introducing another form of tax exemption on exactly the same line after taking 20 minutes on June 20 to tell us, patting himself on the back, that he felt he was going to tidy up some of these matters for the benefit of those who might reach retirement age and expect to get financial benefits when they arrive at that age. But, as the hon. member for Bonavista-Twillingate has said, he is introducing something new without in any way assuring us that he has provided for those concerned the kind of protection which he said on June 20 was desirable and which had been ignored in the past and which, in consultation with the provinces, he proposes to rectify. That is the position we are in.
What is the project? Is the degree of supervision of trustee plans in the public interest comparable in some respects with the supervision traditionally exercised over insurance companies? Many people may be surprised to learn that no such supervision has existed with respect to pension plans in the past. These are the words of the Minister of Finance when he is appealing to the public in his budget speech with respect to old fashioned ideas of savings provided not only by employers but matched by employees. Now with respect to this plan, when we are introducing new legislation, when the minister has all these things in his mind with respect to the past, why can he not tell us of the supervision which he points out was absent in so far as the federal government is concerned? What supervision does he expect to provide with respect to those deferred profit sharing plans? What reason is there for not telling us about the federal supervision at the time that this kind of legislation is being introduced? Inferentially at least the minister criticized in the past the fact that pension plans had some elements of danger connected with them and should be reviewed, and if he is introducing something new that involves tax exemption on both sides, employer and employee, why can he not say at the same time what he is going to do to make sure

that there is what he referred to as the supervision traditionally exercised over insurance companies?


Donald Methuen Fleming: It is a most unprofitable way to spend the time of this committee to engage in repetition of the kind we have been having. I have already dealt with this question.


William Moore Benidickson: I was giving you your own words. I thought you would like to hear them.


Donald Methuen Fleming: The hon. member has given me my words about something entirely different and I wish he could get these two things clearly separated in his mind. In the one case we are dealing with deferred profit sharing plans and in the other we were dealing with pension plans. There are actuarial considerations applicable to pension plans that do not apply to deferred profit sharing plans because in the case of pension plans you have contributions by employers and employees. In the case of deferred profit sharing plans you have contributions made by employers. So you have a different situation altogether, Mr. Chairman. The hon. member can read the language of this clause quite clearly, I am sure, and see what is required in the way of decision, in the way of supervision on the part of the minister. The language of the clause is quite clear in the duties it lays upon the minister and you may be sure those duties will be discharged.


John Whitney Pickersgill: Mr. Chairman, after this lecture to the opposition-and we have had a good many from the minister about how wrong it is for us to repeat things that it seems to be very difficult for the minister to understand-may I say that the minister's idea of an answer in this house, which is all right under the rules on the orders of the day, of course, but is a very different thing when we are in committee, is to say "I answered that", and his original answer is usually to read the explanatory note or perhaps half of it.
I did not rise to comment on what the minister said this time so much as on what he said last time. His expression was, "Wouldn't we look bright?" Well, it would be pretty hard for them to look bright at any time in this year, I am telling you, and that is what the public is coming to see. He said, "Wouldn't we look bright if we had our plans ready to carry out this law when it is passed?"


Donald Methuen Fleming: That is not what I said.


John Whitney Pickersgill: I suggest that the trouble with this government, as I have said before,
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is that when they pass a law they have no idea how to administer it. The thing lies around for months and even years without anything being done about it because they do not think these things out in detail in advance. I can tell the minister that I was around here in the days at the end of the war-


Marcel Joseph Aimé Lambert: The great I am.


John Whitney Pickersgill: -when the economy of this country was being transferred from a wartime to a peacetime economy and when Mr. Ilsley, Mr. Howe, Mr. Claxton, the hon. member for Essex East and the hon. member for Laurier were piloting legislation through this house that gave the country the years of full employment we had up to 1957. When those things were happening we knew what we were going to do about the laws after they were passed. We did not start erecting an administration after the law had been passed.
I say that for the minister to say that he does not even know who is going to administer this, that he supposes they will get some civil servants and he supposes these civil servants will conduct some kind of supervision, and he does not know how extensive it will be, is to say that they would look bright if they knew. I think they would look bright if they knew and, to put it the way my children sometimes put it to me, I suggest it is about time they "smartened up".


Donald Methuen Fleming: Aren't you the bright fellow?


Richard Albert Bell: Your family must say that to you about three times a day.


Robert Jardine McCleave: Shall clause 26 carry?


John Whitney Pickersgill: No, we are still on subclause 1. For my part I would be quite prepared to have subclause 1 carried and we could go on now to subclause 2.


Robert Jardine McCleave: Is it
agreeable to the committee that we proceed through clause 26 subclause by subclause?


Some hon. Members:: No.


William Moore Benidickson: Mr. Chairman, I would suggest-


Donald Methuen Fleming: Surely we can make some progress. Can it not be called a page at a time?


William Moore Benidickson: I think even the minister will agree with this suggestion. We are on subclause 2 of the clause 27, I take it.


John Whitney Pickersgill: They have now changed it to 26.

Income Tax Act


William Moore Benidickson: I know, but I cannot keep up with the amendments.


Robert Jardine McCleave: Order. I take it that it is agreeable that the committee proceed through this clause page by page. It will perhaps make it easier for the committee's deliberations. Shall the section of the clause on page 21 carry?


John Whitney Pickersgill: First of all, sir, in paragraph (a) of subclause 2 the plan provides that each payment made by an employer to a trustee in trust for the benefit of employees of that employer or employees of any other employer who are beneficiaries thereunder, is an amount that is the aggregate of amounts each of which is identifiable as a specified amount in respect of an individual employee. That is going to be prescribed as a condition of the plan but is there going to be some kind of continuous audit to see that in fact that provision is carried out? I would think it is very essential to the success of this plan that there should be some kind of audit in some kind of fashion to see that that does happen.


Donald Methuen Fleming: Mr. Chairman, the hon. member has, I think, not grasped the effect of this subsection. This is a term or condition of registration of the plan. The plan must make provision in the terms appearing in subsection (2) before the minister can accept the plan for registration.


John Whitney Pickersgill: But having accepted it for registration, is he not going to take any further interest? You can accept a plan for registration and then they can do something else entirely unless there is some kind of supervision from some quarter. What I am asking is, what kind of policing, what kind of auditing is going to be done to see that in fact the plan is carried out, or is none to be done?


Donald Methuen Fleming: If the hon. member will look at page 26, subsection (13)(b) he will see that if any provision of the plan has not been complied with the minister may revoke the registration of the plan as of any date following the date that the plan ceased so to comply or that any provision of the plan was not so complied with, and he shall thereupon give notification of his action by registered mail to a trustee under the plan and to an employer of employees who are beneficiaries under the plan.


William Moore Benidickson: That is perfectly true but we have had long experience with what we call the blue book of registration of pension plans in the Department of National Revenue. I did not read this before; but I come back

to the minister's comments in the budget where he was very exuberant. He said:
There is, however, no governmental supervision to ensure that the assets of other plans are being accumulated at an appropriate rate to meet the future liabilities of those plans.
I know that the minister has said that the same liability does not exist with respect to profit sharing plans unless there is an appropriate deduction in compensation by the employee. I agree. However, I see nothing here to say that perhaps under some of these plans the employee is not going to be obliged to make a contribution and perhaps to buy stock in the corporation with which he is employed or in some of its other enterprises. The minister has complained of laxness over the years and he has introduced a new feature. I approve the new feature but I say that at the time of introduction surely the minister should present us with evidence that he is starting out to guard against the kind of thing that he complained about in connection with the availability of opportunities for old age security for employees. The minister said that there is no individual provision to assure that assets are being accumulated at an appropriate rate to meet future liabilities of these plans.


Donald Methuen Fleming: I repeat what I said earlier, Mr. Chairman, about the difference between deferred profit sharing plans and pension plans. The pension plan involves contributions by employers and employees under a contractual arrangement under which there is an undertaking to pay stipulated amounts on a periodical basis to the employee or pensioner at a particular time. Now that, of course, involves a question of the actuarial soundness of the plan. But in the case of deferred profit sharing plans, there is no contribution by the employee. There is no stipulation as to periodical payments. In this case it is simply a matter of carrying along and making available at the time of retirement the benefit of whatever amounts were paid in and credited to a particular employee. The particular employee will be taking some responsibility in relation to such plans himself. There is no contractual feature there in the sense that there is in a pension plan to give rise to the question of actuarial sufficiency.


William Moore Benidickson: Is the minister suggesting that under no circumstances will there be a profit sharing plan under which the employee makes contributions out of earnings that he could have taken as salary or compensation and that as an alternative he contributed to a profit sharing plan? In other words, is the minister suggesting that these amendments do not contemplate any scheme under which there would be a co-operative contribution,

perhaps on the part of the employer and employee, which would build up the employee's share in the deferred profit sharing plan?


Mr, Fleming (Eglinton):: It does not prohibit the employee from contributing but it offers no tax concession in such a case.
(Translation):


Samuel Boulanger: Under the present legislation, the beneficiary of a profit sharing plan is not required to pay income tax on the amounts he receives from the trust company, up to the amount of his own contributions. Nor is he required to pay tax on the capital gains of the trust. Under the amendment to the present act, I understand that these capital gains and contributions will be taxable. I should like to know why, under the amendment, capital gains and employee contributions will be taxable, whereas they were not under the present legislation?
(Text):


Donald Methuen Fleming: I think the hon. member, Mr. Chairman, is on page 27 or a later page, and not page 22.


John Whitney Pickersgill: I have one or two more questions concerning page 22. I was troubled by one observation made by the minister who went on to page 26 and said that if this condition that we set out for registration was not fulfilled, the minister could revoke the plan. Well, of course, I had read through the bill and I rwas aware of that. This was precisely what prompted me to ask the question that the minister seems to find so unintelligent when I ask it. My question was how the minister was going to find out if these conditions were being fulfilled. Does someone have to complain to him or will there, in fact, be some kind of continuous supervision?
There are a lot of detailed stipulations about these plans. I am sure the government is not putting them in there just for fun or in order to fill up the pages of the bill. I am sure the government must think there is some public interest to be served by putting them in here. If there is a public interest to be served by putting them in here, then there is a public interest to be served by seeing that they are fulfilled. I come back again to my question; what means is the government going to take to see that these conditions are fulfilled and are not merely part of a paper plan?


Donald Methuen Fleming: The hon. member is evidently speaking about the conditions on page 22. Those are conditions on which the minister must satisfy himself before he registers the plan. Obviously, he must examine the plan with sufficient care to be able
Income Tax Act
to make the determination that is called for by each of the conditions prescribed in subsection (2).


John Whitney Pickersgill: Would the minister tell me why the second condition, (b), is a neces-ary one? It is not readily apparent.


Donald Methuen Fleming: It would not be a deferred plan if it were possible to borrow benefits out of it by way of a loan. If you allow loans to be made that is the very same thing as a distribution of the profits. The loans could be to the full amount of the employee's share of the profits. There has to be a deferment of the enjoyment of the benefit, Mr. Chairman, if there is a deferment of the tax.


John Whitney Pickersgill: The minister seems to have a rather different conception of a loan from the puritanical conception that I was brought up to have. My conception of a loan is something you pay back. It would appear to me that there would be no particular benefit if these employees used the deferred profits that were in this fund. Suppose an employee went to Household Finance and borrowed some money; that would not be regarded as a benefit that ought to be taxable. I should like to know what the reason is. After all, presumably any of these loans would be paid back. There probably is some good reason but the reason the minister gave is certainly not a good reason, unless the loans were not loans but were, in fact, just an indirect way of distributing profits immediately without any intention of recovering them and recovering them with interest.
It does not seem to me on the face of it that there is any more reason for a trustee not to invest this money in loans to employees, if they are good risks and if he can get a good rate of interest, than to invest in the minister's bonds or something else. As I say, there must be a good reason, but certainly it is not the reason given by the minister. I should like to know what it is.


Donald Methuen Fleming: I have given the reason, Mr. Chairman. If the hon. member would read the provisions of the Income Tax Act he would see a good many other cases in this act in which provision is made to the effect that loans are to be treated as though they were a distribution and taxed as though they were payments out, to guard against cases where the provisions of the act would be avoided by people who take money out and call it a loan in the hope of evading tax on payments which, if they were called anything else but a loan, would become taxable as income. There are various provisions to that effect in the act.

Income Tax Act


John Whitney Pickersgill: The minister accuses me of not understanding the Income Tax Act, and in doing so he is quite right. I am not a careful student of the Income Tax Act. I thought I should like to take a sort of elementary course this evening. I think the minister cannot complain that my questions are not to the point. I never heard before about such provisions in connection with loans. I have once or twice had an overdraft at the bank, but I have never had to pay income tax on it. It is just possible that I might, at some time or other, have borrowed money from an employer, though mostly my employer has been the government of Canada or an impecunious university and they were not in a position to lend. This information that the Income Tax Act is studded with cases where loans are treated as income on which you have to pay a tax is news to me. I should like the minister to show me several examples because they may throw light on this situation.


Donald Methuen Fleming: I do not think there is time in which to give the hon. member all the education he needs on this subject tonight. However, I ask that we stick to the clause under consideration. Perhaps then we could make a little progress. We have not passed anything now for about two hours.


John Whitney Pickersgill: We have not passed anything for the very good reason that this is an entirely new proposition-


William Moore Benidickson: The minister does not understand it.


John Whitney Pickersgill: -with which the minister is apparently so little familiar that he does not know how to explain it. I do not think that anybody anywhere, including the minister, believes the ridiculous explanation he gave for this provision, namely that if one of these funds lent money to the employee, that would be an indirect way of giving him an income. It is absurd; it is ridiculous. It may be that it is thought that they would not be careful enough. I can think of reasons myself, but I am not sponsoring this legislation. It is not my duty to explain it to the minister. I am a member of the opposition. As an opposition we have a duty to see to it that, as far as we can do so, silly, unnecessary or ill-conceived legislation or legislation that is not understood by the sponsor is not passed by this House of Commons. It seems to me that a plan of this sort is a good way in which to invest. After all, we think of credit unions which are not perhaps in many ways so very different from this. They exist for the very purpose of lending money to their members. Most of them have a very good

record of collections. I would think that the other persons participating in one of these deferred profit sharing plans would make it fairly unpleasant for any one employee who took money out on a loan and did not pay back the loan. I would have thought that on balance that this would be a fairly good way to invest the money, namely in loans to members. However, as I say, there must be some good reason for this provision but it is certainly not the one given by the minister. If the minister just does not know what it is, perhaps I have laboured this point enough and I might go on and ask him about the next one.
Section 79C, subsection 2(c) reads as follows:
(c) the plan provides that no part of the funds of the trust governed by the plan may be invested in notes, bonds, debentures or similar obligations of
(i)	an employer by whom payments are made in trust to a trustee under the plan for the benefit of beneficiaries thereunder, or
(ii)	a corporation with whom that employee does not deal at arm's length;
Will the minister explain what public or other interest is served by this particular stipulation?


Donald Methuen Fleming: I think the purpose of this provision is quite obvious to all concerned. It is a question of solvency. It is a question of the direction of these moneys to the proper purpose. This plan is largely created by the employer through his contributions on behalf of the employee. That is the reason why this step is taken to prevent the funds of the plan from being used by the employer in his own business or in a business that is associated with his business.


William Moore Benidickson: I am speaking on subsection 2, and there are a number of subsections here. I felt the minister had not properly answered my colleague the hon. member for Bonavista-Twillingate on an earlier question which related to loans. To bring something down to simple terms, if I were reading paragraph (e) of subsection 2 I would think it relates to loans. I would think it perhaps relates to a requirement by a person who may have all his assets in one of these deferred profit sharing plan schemes. He may have been so keen on participating that he does not even own his own home. He may have been a renter all his life. Everything may have gone into it. I have heard about one or two such people who have participated very successfully in the deferred profit sharing plan of their employer but to the extent that they have no current assets; they own practically nothing except perhaps a bit of furniture in their houses. Eventually they hope to share in the progress of the business in which they have been

employed. Under paragraph, (e) it is stated that this sole savings plan of the individual would not be available to him in the case of an emergency when he wanted to borrow some money and when he was in dire straits.
1 cannot think of anyone who was more eloquent in describing straits of this kind than was the Minister of Finance when again, on budget night, he referred to the extraordinary medical expenses which some of our people unfortunately are obliged to meet. He referred to a single motor accident. I quote from page 6661 of Hansard. As found there he stated as follows:
A single motor accident, for example, may cause a taxpayer more extraordinary medical expense in one year-


Robert Jardine McCleave: Order. I shall have to ask the hon. member for Kenora-Rainy River how he relates this quotation to the material set forth on page 22 of this bill.


William Moore Benidickson: Mr. Chairman, I thought the minister had been so eloquent that I would use his words in order to indicate that a person having devoted all his resources and savings to one form of security at the time of retirement, namely that under a deferred profit sharing plan, might have no assets except his assets in the profit sharing plan. I am referring to paragraph (e) where it states that the minister would not accept for registration such plan if an individual in those dire straits felt obliged in any way to assign or surrender in whole or in part his assets and interest in this lifelong plan of savings through the profit sharing plan. That is why I referred to the catastrophe that could occur. I thought the minister on budget night had dealt with the matter very well when he said that today even one automobile accident might put a person who had not made other savings provisions into a position where he was in very dire straits.
Before we pass it, I ask what is the necessity for paragraph (e). In other words, this is a form of individual asset that has been accumulated over the years. In my illustration I take it that the man, if he went to his banker, could not point to anything except the fact that, all through his life, he had been a devoted servant to his company and that in consequence, in accordance with a plan they had with their employees, this company had provided for him a deferred profit sharing scheme. He needed money desperately. He had nothing. As a matter of fact, he may have been injured and in consequence may have had to terminate his employment. The question I ask is this. Why would he not be able to take recourse to the only asset he has, and perhaps a very consequential one, which had been accumulated
Income Tax Act
for him, and by his own design, in co-operation with his employer over the years? But it says here he could not suggest anybody who would lend him capital funds in this emergency-the kind of money he would need, say, for a temporary emergency.


Donald Methuen Fleming: Deferment of tax is a valuable benefit and it is associated with the deferment of payment. If you are going to allow benefits to be enjoyed during the period you are going to defeat the whole purpose of the relationship between deferment of benefit and deferment of tax.


John Whitney Pickersgill: With regard to paragraph (f) I have no particular query. It seems to me to be a sensible provision. As to paragraph (g) it is, of course, just the usual provision by the government to make as many regulations as possible which it had not thought of when the legislation was before the house. As far as subsection 2 is concerned, I should like to be able to say I am satisfied with the minister's explanation, but I think after the minister's total failure to give any explanation it is perhaps not much use for us to proceed further with it.


Robert Jardine McCleave: Shall
page 22 carry?


Some hon. Members:: Carried.


Robert Jardine McCleave: Shall page 23 carry?


John Whitney Pickersgill: We are going a little fast.


Donald Methuen Fleming: Too fast for the obstructionists.


John Whitney Pickersgill: Subsection 3 contains one of the points about which my hon. friend from Drummond-Arthabaska wished to ask.


Robert Jardine McCleave: This is on page 23. I suggest the hon. member should address his questions to the Chair. (Translation):


Samuel Boulanger: Mr. Chairman, a moment ago I asked a question of the minister. I do not know whether he is ready to answer it now, or whether he wants me to put it to him again. In any case, here is my question: Under the present act, the beneficiary under a profit sharing plan is exempted from taxation tax-


Mr. Martineau:: Taxation tax?


Samuel Boulanger: Income tax, if you prefer.


Paul Raymond Martineau: His income tax.


Mr. Denis:: You should read your speeches on aid to universities instead of laughing at others.

Income Tax Act


Samuel Boulanger: Mr. Chairman, I was saying that the beneficiary under a profit sharing plan did not have to pay tax on the amounts received from the trustee or the trust company up to the total of his contributions, on the capital gains of the trust.
Under the new act, those contributions and the capital gains of the trust will be taxable. So, I ask the minister why he has amended the act in this way.
(Text):


Donald Methuen Fleming: I think the clause the hon. member is looking for is subsection (6). No tax is payable under this part by a trust on the taxable income of the trust for the period during which the trust was governed by a deferred profit sharing plan.


William Moore Benidickson: I confess I did not completely follow the question which my hon. friend asked in French, but long before this debate I had noted a question I wished to ask the minister with respect to subclause 3. In what circumstances would there be capital gains prior to registration of a plan of this kind? Would the plan not be set up, and does not this amending bill contemplate that a corporation, say, would immediately indicate its intention to register in this way? Would there be much capital gain or loss in a matter of days involved prior to this decision or within a few days after this decision before the letter actually reached the department? What is the important date -the date of signifying intention? Is that information by the Department of National Revenue? Is it from that date that capital gains and losses become effective in so far as this clause is concerned?


Donald Methuen Fleming: The hon. member
began with subsection 3 and has moved to subsection 4. Subsection 4 defines the registration date. On looking at subsection 3 it must be obvious to all hon. members that there are employees profit sharing plans in existence. These are not going to be accepted for registration under subsection 3 unless all the capital gains which have been made by the trust governed by the plan before the date of application for registration have been allocated by the trustee under the plan to the employees or other beneficiaries.


William Moore Benidickson: I thank the minister for that answer which was a helpful one.
There are some important companies, not many, which already have profit sharing plans, which have not had the advantage of the employer being able to deduct from corporation tax a maximum of $1,500 in respect to each employee. The minister is simply requiring that any plan which has gone on up to now without the benefit of this
tax concession must bring its capital gains into the fund up to date. Is that the point?


Donald Methuen Fleming: I can repeat what I said. It is all set out in subsection 3. The minister will not accept for registration any plan unless all the capital gains made prior to the date of application have been allocated by the trustees to the employees and other beneficiaries under the plan.


William Moore Benidickson: There have not been many of these, but some are of some consequence. Perhaps the Simpsons-Sears plan is important in the light of this legislation. Does the minister agree?


Donald Methuen Fleming: Any plan of the kind is important to those concerned.


Mr. Malheson:: This amendment represents the hope of the government that there will be a lot of new people going into this type of program. Is that correct?


Donald Methuen Fleming: The plan offers considerable benefits and is obviously based on the view that this is good social legislation and should be encouraged.


Neil Alexander Matheson: Is it the hope of the department that there will be literature available to the public with respect to the administration of this plan? It appears to me, as an average small town lawyer, that this is extremely complex for people to understand unless there is some accompanying literature to guide them. Is there any literature at the moment with respect to this?


Donald Methuen Fleming: There is no literature drawn up yet. We are simply dealing with the bill.
The Acling Chairman (Mr. McCleave): Shall
page 23 carry?


John Whitney Pickersgill: It is 10.30.


An hon. Member:: Pure obstruction. Another filibuster.
Progress reported.



BUSINESS OF THE HOUSE

John Whitney Pickersgill: May I ask the leader of the house what the business will be tomorrow?


Gordon Minto Churchill: It appears that we shall carry on with the business on which we were engaged today, and the other items of legislation which I announced on Saturday. If there should be any change in that program I shall let the opposition parties know in good time before the house opens.
It being two minutes after 10.30 o'clock, the house adjourned, without question put, pursuant to special order.



ANSWER TO QUESTION

[Stage Direction]
The following answer, deposited with the Clerk of the house, is printed in the official report of debates pursuant to standing order 39:

Mr. McLennan: 1. What Is the total cost of operating the customs and immigration offices at Point Roberts and
Question
Boundary Bay including salaries and upkeep during a fiscal year?
2. What is the total revenue collected for the same period?
Answer by: Hon. J. W. Monleilh (Minister of National Health and Welfare):
1.	Total expenditure for 1960-61: Boundary Bay, $36,123.03.
No information is available regarding Point Roberts since it is the United States office opposite Boundary Bay.
2.	Total revenue collected for 1960-61: Boundary Bay, $36,425.03.

Tuesday, July 11, 1961