1962-11-16

Right Hon. J. G. Diefenbaker (Prime Minister):: Mr. Speaker, the various letters that passed between the provincial premiers and the government ol Canada up to February 3, 1962 regarding a proposed amendment to the British North America Act concerning contributory pensions have been filed. I now ask to file the subsequent letters. The hon. member for Winnipeg North Centre asked about this matter the other day. At the same time if it is agreeable to the house these letters, along with the earlier ones, might be appended to Hansard.


Mr. Speaker:: It is proposed by the Prime Minister that the correspondence be appended to the previous correspondence and that it be tabled, by leave. Is it agreed?


Some hon. Members:: Agreed.


Mr. Pickersgill:: Mr. Speaker, did the
Prime Minister not ask to have them made an appendix to Hansard?


John George Diefenbaker: Yes.


Mr. Speaker:: I am sorry if I misunderstood the request. The request is that they be made an appendix to Hansard. Is it agreed?


Some hon. Members:: Agreed.
[Editor's note: For correspondence above referred to see appendix]



IMMIGRATION


Hon. Richard A. Bell (Minister of Citizenship and Immigration):: Mr. Speaker, I wish to advise the house of certain far reaching modifications in procedures relating to the investigation into illegal Chinese immigration, which has been under way since early 1960.
First, as a result of the convictions registered against a score or more of illegal immigration agents and the confessions of several hundred Chinese immigrants that they entered Canada illegally, it is believed that substantial
success has been attained in exposing and breaking up the illegal Chinese immigration system and in drastically reducing the number of attempted fraudulent entries to Canada. Since the principal objectives of the investigation have now been largely achieved, the house will be pleased to learn that so far as the massive large scale investigation of thousands of Chinese already in Canada is concerned, we consider that we have reached the point where this can now be brought to a close. Prosecutions before the courts and those already recommended will naturally proceed to completion.
Hon. members know that Canadians of Chinese descent generally are amongst our most law abiding citizens and therefore will welcome the termination of this massive investigation.
Second, the Hong Kong policemen at present in Canada will be returned to Hong Kong in the very near future.
Third, new and greatly simplified procedures are being adopted for adjusting the status of those Chinese already in Canada who may still desire to come forward and make a voluntary statement as to their illegal status in this country. The essence of this new procedure will be the elimination generally of collateral interviews and the taking of a simple statement under oath after interview with the person principally concerned, correcting the false record previously given as to his true identity and family relationships. This interview will be carried out in the presence of the person's legal adviser, if requested, and the new and correct information about the individual's true identity will be embodied in a statutory declaration under the Canada Evidence Act.
I must emphasize that further false statements would be detrimental to the individual. Where it is established that in this interview and statement false information has once again been given, the individual will have perjured himself and will thereafter be debarred from sponsoring applications for relatives or other intending immigrants to Canada. My officials and I will deal sympathetically and honourably with all Chinese immigrants who will deal truthfully and honourably with us. We would like to have all those who entered Canada illegally prior to 1960 take advantage of this simple procedure to adjust their personal status, but no pressures will be brought to bear. It is a matter
16S4

Immigration Modifications of personal choice, but it must be evident that the course of wisdom for everyone would be to adjust his status on a truthful basis.
Fourth, a program to expedite greatly the processing of applications by Chinese immigrants for Canadian citizenship has been adopted.
With these new arrangements in effect, placing the emphasis on a simplified adjustment procedure, a sworn statement under oath and sanctions against those who attempt hereafter to falsify the evidence, I am confident that we will be able to maintain in the future the control which we have succeeded, as a result of the efforts of the past three years, in establishing over illegal and fraudulent applications. With the full co-operation of the members of the Chinese community across Canada, I am hopeful that we can turn the page to a new phase of the immigration story.


John Whitney Pickersgill: Mr. Speaker, without any qualification whatever I congratulate the new minister on accepting the advice that was tendered from this side of the house two years ago as to the proper method of dealing with this problem. I am very glad indeed that the minister is now removing the shadow that has hung for far too long over the whole Chinese community in Canada, and that he is acting in the spirit of the bill introduced into this house the other day by the hon. member for St. Paul's.


Mr. A. B. Patterson (Fraser Valley):: Mr. Speaker, we welcome the statement that has been made with relation to this matter. A very unpleasant situation has existed for some time. A great many of these people have been subjected to embarrassment and severe difficulty, and we are happy that arrangements are now being made to regularize their entry and accept them into the Canadian community. We realize that there are many ways in which our immigration policies need revision not only with regard to the particular group mentioned this morning but others as well, but we do appreciate the statement made by the minister.


Mr. H. W. Herridge (Kootenay West):: Mr. Speaker, the members of this group, like the hon. member for Bonavista-Twillingate, are very pleased that at last the minister has accepted the advice of the opposition parties. Not for some time have we heard in this house such unwarranted glorification of such a microscopic success. In the meantime quite unnecessary suffering has been caused to thousands of persons who had to undergo this inquisition. We are very pleased to see that

the policy is being changed, and we trust that from now on it will be a happier day for our citizens of Chinese origin.



WELDON CHAN


[Stage Direction]
On the orders of the day:
Mr. Hubert Badanai (Fort William):: I wish to direct a question to the Minister of Citizenship and Immigration. In view of the minister's statement earlier on the standing of Chinese who illegally entered Canada, can the minister indicate to the house whether the deportation order against Weldon Chan has been withdrawn, or is it under review and reconsideration?


Richard Albert Bell: Mr. Speaker, the other day I indicated to the hon. gentleman that there had been no change in the situation.



HONG KONG


[Stage Direction]
On the orders of the day:
Richard Albert Bell: Mr. Speaker, yesterday in my unavoidable absence the hon. member for Fort William inquired about the admission of additional refugees from Hong Kong. It is not expected that the existing number of family units will be filled for about another month. The matter of extending the number remains under consideration until it is then seen what additional demand, if any, there may be.


John Whitney Pickersgill: I wonder whether I could ask the minister a supplementary question on this subject. Could the minister say whether the persons from whom these refugees are selected are simply those recent refugees to Hong Kong, or whether they are selected from the whole body of refugees there?


Mr. Bell (Carleion):: From the recent refugees to Hong Kong. I do not have in mind the cut-off date, but it is within the last ten months.



STATEMENT BY MR. SPEAKER ON ANSWER TO ORDER FOR RETURN

['Why did they object?', 'Inquiries of the Ministry']
Mr. Speaker:: Before calling the orders of the day, I should like to mention a point raised by the hon. member for Bonavista-Twillingate on November 1 concerning the matter of replying to a question which had been made an order for return. At that time I indicated that I would take the matter under advisement, and I indicated also that if anyone, particularly the hon. member for

Winnipeg North Centre, wished to speak to this matter I would hear him. I am prepared to make my ruling but, as I indicated, if anyone wishes to speak to the point of order that was raised-as a matter of fact it was raised as a point of privilege-I am quite prepared to hear him.


Mr. Stanley Knowles (Winnipeg North Centre):: Since you have mentioned my name, Mr. Speaker, I should like to make a brief comment in the hope that even if your ruling is already prepared it will take into consideration the point I wish to make.
It seems to me that the main point of the complaint which was made on November 1 by the hon. member for Bonavista-Twillingate was perhaps missed, namely that there was one question in the set of questions passed as an order for return to which there was no answer at all.
I recognize that members have no right to require this or that kind of answer from a minister. I recognize that on orders of the day, when verbal questions are put such as are sometimes asked of ministers, the minister can sit still. However, when a question has been passed by the house as an order, it seems to me that the government is required to give some kind of answer. In this particular instance there was a question which read, "If not, why not?" To that question there was no answer at all. The government in giving an answer might say, "Not applicable" or "Not in the public interest" or it might give any one of a number of answers. However, to give no answer at all is, I submit, not complying with the order of the house.
I stress the point which was made by the hon. member for Bonavista-Twillingate, that before such a question is passed as an order for return the minister has an opportunity to scrutinize the question and make it an order for return, except for this part or that part. However, when that is not done; when the minister agrees that a question should be passed as an order for return, that becomes an order of the house, and I submit that an answer of some sort should be given to all parts of the question. As I say, in this particular question there was that part which read "If not, why not?", to which there was no answer at all. I think that is the point at issue.


John Whitney Pickersgill: I should like to say a few words about this matter in elaboration of the matter I raised as a point of privilege, as Your Honour pointed out. It is that the true essence of this matter has to be considered,
Statement by Mr. Speaker and when a minister says, "Order for return" in response to a question, what he is doing in shorthand form is making a motion. Otherwise, there could not be an order of the house, as Your Honour would recognize at once. There cannot be an order of the house unless the house has made a decision. The only way in which the house can make a decision is to have a proposition put before it. We have acquiesced in this brief way of doing this, and that is the essence of the matter.
At any time when a minister seeks to make a question an order for return it would, of course, be competent for a member to ask Your Honour to call the yeas and nays. This demonstrates quite clearly that what is being done at that time is to make an order of the house. I think Your Honour's predecessor made a decision on that point in the last parliament, that it is competent to ask for the yeas and nays when a minister proposes that a question be made an order for return. If that point has not been drawn to Your Honour's attention I will not give the reference now, because I know we do not want to have a lengthy discussion at this stage, but I suggest that aspect of the matter be further considered. But once the house has accepted the minister's suggestion, which is in fact a motion, that a question be made an order for return, then the house has ordered the ministry to comply with it in the precise language in which it is phrased, unless the minister in asking for it to be an order for return, as the hon. member for Winnipeg North Centre pointed out, makes some reservation and asks that it be changed in some fashion, which is quite often done, particularly with motions for papers.
My point is that while the ministers are perfectly free to give whatever kind of answers they choose to the questions of an individual hon. member, and as Your Honour has often pointed out quite correctly we have no recourse except to make it a grievance at some particular time, once an order of the house is made the government, being the servant of the house, is responsible for carrying out that order precisely in the terms in which it is made.
That is my whole point, and I speak with some assurance on this point because some years ago when I held the office now held by the hon. member for London (Mr. Hal-penny), I was told by the prime minister of that day that it was my duty to scrutinize all these questions and make sure no question was made an order for return which would ask for anything which the government would not wish to produce, and that proper

Statement by Mr. Speaker objection should be taken at the proper time before an order of the house was made. I submit that if the Minister of Veterans Affairs, in the particular matter that was before the house, felt that it was not a proper question to have been made an order of the house he should have taken exception to it, or he should have answered the question in the house itself and then the whole problem would not have arisen.
As Your Honour knows, a minister can be called to the bar of the house for his failure to comply with an order of the house, and it seems to me there is a fundamental question involved of the rights of parliament.


Hon. Gordon Churchill (Minister of Veterans Affairs):: Mr. Speaker, as I appear
to be the minister concerned I would like to record the fact that I am very happy that I did not answer the question that was asked on the order paper, because it has raised a very fundamental matter in connection with questions which I presume Your Honour will decide today.
I understand from your earlier remarks that you have examined the problem and will make some comment on it. Consequently I do not need to speak at any great length, but on November 1, when the hon. member for Bonavista-Twillingate raised this point he, with his usual extravagance of expression, claimed I was in contempt of the house for not complying with the order. However, he failed to point out that the question was contrary to the rules. Perhaps I might have given that as the answer and pointed out that despite all his experience he is yet unable to phrase a question properly in order to have it acceptable to the House of Commons.
He said in the course of his remarks, and he repeated it again today, that if the ministry think a question is improperly framed they should rewrite the question in order to suit hon. members opposite. I think they should be competent enough to do their own work, or else not ask questions at all. In this particular instance a very experienced member of the house put a question on the order paper that was very badly framed indeed, and it might have been rejected-


Mr. Speaker:: Order. I think the minister is really missing the point that is really at issue before the house. I will have something to say about the nature of the question and will indicate that in my view there are two points at issue at this time, and not only one. The remarks of the minister were more applicable to the second point I will advert to, that is, the nature of the question, and I would ask him to limit his remarks to


the narrow issue before the house, which is whether a question made an order for return must be complied with strictly. I think that was the burden of the hon. member's representations, and that is the point at issue before us.


Gordon Minto Churchill: I appreciate your remarks, Mr. Speaker. I was scoring a point, not evading one. I did not have the opportunity on November 1 to answer the hon. member for Bonavista-Twillingate because, as I was rising to speak, you indicated you were going to take it under advisement, and I conformed with your decision on that occasion. But I did wish to speak then, and I am only saying now what I had in mind to say on November 1.
However, on the narrow point may I direct your attention to page 358 in May's sixteenth edition, where it deals with examples of inadmissible questions. The paragraph says:
In the light of these general rules the following types of question have been ruled out of order:
(1) Questions seeking an expression of opinion-
A question which asks "If not, why not?" is asking for an expression of opinion.


Mr. Speaker:: Order. I appreciate what the hon. gentleman is doing, but I think we could reach that point when I am considering the nature of questions. Let us dispose of the first question first and then we can go to the next one. Then I will be prepared to hear other hon. members on the second point; that is, whether or not questions framed in a particular way are admissible. I do not think we should have that point confuse the issue. All I want to do is settle the nature of the return, and then we will deal with the other point.


John Whitney Pickersgill: I wonder if I might just say a word-


Mr. Speaker:: Only on the narrow point, because the hon. member will have an opportunity of speaking on the other matter.


John Whitney Pickersgill: Mr. Speaker, I merely wanted to make quite sure that I understood Your Honour was saying that you were going to give consideration subsequently to the question of the admissibility of certain types of questions. I have said all I wish to say on the first point, but I would not wish to be estopped by any decision from saying something on the second point in reply to the Minister of Veterans Affairs.


Mr. Speaker:: I think I have made myself quite clear on that point.


Gordon Minto Churchill: Mr. Speaker, I thought with two issues before us I was entitled to deal with both of them at the same time. However,

Statement by Mr. Speaker I presume that Your Honour will give a important than what is in Hansard, and what ruling on this question of an order of the we have in Votes and Proceedings for Monhouse for a return. I did not interpret the day, October 22, is a decision of the house. I order of the house as obliging a minister should like to read from page 129 of Votes who failed to satisfy a member of the op- and Proceedings for that day. position to appear at the bar for discipline.	The following questions were made orders for
__	returns under the provisions of standing order


Mr. Pearson:: Nonsense.	39(4).


Gordon Minto Churchill: The rule, which is 39 (4), reads as follows:
If a question is of such a nature that, in the opinion of the minister who is to furnish the reply, such reply should be in the form of a return, and the minister states that he has no objection to laying such return upon the table of the house, his statement shall, unless otherwise ordered by the house, be deemed an order of the house to that effect-
An order of the house was accordingly made that I should give a reply in the form of a return. In the form of a return simply means that it is not an oral answer but a typed or printed answer which is placed on the table and is then recorded in the records of the house. Giving it in the form of a return I assumed that I was operating under the same rules that apply when answers are required to oral questions, that if the question cannot be answered in the form in which it is written, then no answer is required from the minister.
In this particular instance I examined to see whether or not I could produce an answer to the "If not, why not?" question, at that time assuming that this was a proper question-I now know that it is not-and I was unable to find in the records any conclusion with regard to that particular part of the question. In any case the matter referred to, I discovered on investigation-I had to do the research, not the hon. member for Bona-vista-Twillingate, who should have done it- that this matter was raised at the time when my predecessor was in office, and the answer rests with him. I have no knowledge of what conclusion he reached or the reasons that he would adduce to answer an "If not, why not?" question. Consequently I did not provide an answer. I feel I am not obliged to answer such questions.


Stanley Howard Knowles: Mr. Speaker, may I add a further brief word on what you referred to as the narrow point, in other words the only point which is before us at this moment. I should like to start by asking that all of standing order 39(4) be put on the record. The Minister of Veterans Affairs neglected to read the last phrase, which is as follows:
-and the same shall be entered in the Votes and Proceedings as such.
I do not accuse the minister of anything in omitting that last phrase but it is pretty important. As Your Honour knows, what goes into Votes and Proceedings is legally more
Then on page 130 is question 273, the question in issue. In other words, Mr. Speaker, there is what is in effect a motion passed unanimously by the house ordering that this be done. I submit that the negligence on the minister's part has been compounded this morning by his statement to the effect that he was glad that he did not comply with an order of the house.


Mr. Fulton:: No, he did not say that. What he said was that he was glad he did not reply initially to an improper question.


Stanley Howard Knowles: Well, if the Minister of Public Works would like to speak, perhaps he would rise to his feet.


Gordon Minto Churchill: I will rise on a point of order and correct the hon. gentleman immediately. I did not say that I was glad that I had not complied with an order of the house. I said that I was glad I had not answered an inadmissible question.


Stanley Howard Knowles: I will accept that. We will see what the record says, but I accept the minister's statement that he was glad he did not answer what he calls an inadmissible question. My point is that the house made an order, and if there is the rule of law, if there is any sacredness about decisions taken, surely it should apply to ministers as well as to other people. The house ordered, as indicated in Votes and Proceedings, that this question be answered. That the minister advanced reasons for not answering to the effect that it had to do with the fact that the subject was his predecessor's responsibility I submit is not good enough. The minister had an opportunity, when the matter was before the house, to make some reservation; but if hon. members check Hansard for October 22, they will find that nothing was said at all. In other words the minister agreed that the question be made an order for return. Now he says that he was glad he did not answer this part of it. I submit that here we have an order of the house, and if one wanted to wax oratorical about it, it could be argued that the whole question of the rule of law is now before us.


Mr. Speaker:: I have listened to the observations of hon. gentlemen in this regard. First of all I would preface my remarks by indicating that standing order 39(4) does apply.

Statement by Mr. Speaker I would particularly underline a point which I think has been missed both by the hon. member for Bonavista-Twillingate and the hon. member for Winnipeg North Centre. Standing order 39(4) says:
If a question is of such a nature that, in the opinion of the minister who is to furnish the reply, such reply should be in the form of a return,-
This is the point which I think hon. members have missed, that it shall be "in the form of a return".
-and the minister states that he has no objection to laying such return upon the table of the house his statement shall, unless otherwise ordered by the house-
This refers to the point made by the hon. member for Bonavista-Twillingate.
-be deemed an order of the house to that effect-
The "effect" is that it shall be made in the form of a return.
-and the same shall be entered in the Votes and Proceedings as such
In other words, the order of the house is that the minister's answer shall be in the form of a return. It is not the order that the question shall be answered as it appears; it is merely to supply the information in the form of a return. We know that when a motion is before the house for the production of papers in the form of a return, there is nothing which indicates the precise nature of what shall be included. In the same way, when a minister, replying to a written or a starred question, says "Order for return tabled herewith", there is nothing there which says that every portion of that question has been answered.
I fully appreciate that the hon. member has said that this is a short method of putting a motion and dealing with it.
I would refer hon. members to Bourinot, page 244 of his fourth edition, under the title "Presentation of Papers", where he states:
Questions put by members are sometimes made equivalent to a motion for papers under rule 37.
That is now standing order 39. Now we get to the matter of whether an answer should be given to every portion of a question. I face immediately the problem of who is to judge the sufficiency of the answer. It is not open to hon. members to do so. It is not open to the Chair to determine whether such an answer is sufficient. And regardless of what might have been the particular parts of the question, the answer could be made the most capricious of answers one could imagine. To use the example of "If not, why not?", the minister could make the most capricious reply which I think could be devised and simply say "Because", and who would be able to judge the sufficiency of such reply?


Therefore I think we are belabouring the point here. I can see nothing further or different in this particular instance from an order for return tabled herewith, or than any other written question answered by a minister. As I indicated the other day, I felt there had been a suggestion of setting up a double standard in dealing with questions, and that I could not accept because to me there is no one who can judge the sufficiency of the answer.
In so far as whether there has been a defiance or an improper reply, I think the hon. member for Bonavista-Twillingate and others have indicated, as has been done by my predecessors, that a grossly or obviously improper answer might found a grievance. There are times when grievances can be aired, and I think that is when such a matter as has been under discussion could be raised. I do not think this is a matter of privilege; I think it is a matter of grievance. In my estimation there is no such thing as an order that the paragraph of a question shall be answered seriatim; the order is in the form of a return. That would be my ruling on that point.
In so far as the matter of "If not, why not?" and other such questions are concerned, I would suggest that we defer that to some day next week, because hon. members may wish to prepare for it. I am prepared to raise the matter and deal with it, because I have noticed that on the order paper there are presently two or three questions which I think, with all due respect, are not proper questions, as they raise certain points of order. Therefore I would prefer to have hon. members prepare themselves so that we can have a discussion.


John Whitney Pickersgill: Mr. Speaker, I have no objection at all to the suggestion Your Honour has made, but since the Minister of Veterans Affairs was allowed to make one or two personal insinuations about me-


Gordon Minto Churchill: It was you who made insinuations against me.


John Whitney Pickersgill: -I think Your Honour would recognize that I do have a question of privilege since my motives and my conduct have been questioned by the minister. I can assure you that my comments will be very brief and I hope quite non-contentious.
The minister said in the first place that I made reflections on him. If he will read carefully what I said he will find that I said that perhaps in principle, or words to that effect, perhaps technically it could be regarded as a contempt, but I was not suggesting that the minister had any such motive or any such thought. I thought I was being

as careful as possible to suggest that it was purely a technical point and not in any way a reflection on the minister. I suggest that any member reading Hansard will find that I was seeking to get the rule of law established, not to impute motives to anyone.
In the second place the minister suggested that as an old and experienced member of the house I had put an improper question on the order paper and that I should have known better. Of course I have not been in the house nearly as long as the minister, who confessed a little bit later that he himself did not know that it was an improper question until he began his research; but I suggest-


Mr. Speaker:: Order.


John Whitney Pickersgill: -and this is my real point-


Mr. Speaker:: Order. I think the hon. member has furnished satisfactory explanations, and we are not going to get into a debate here. I do not think anyone is very serious in this matter. In addition, I might also say that old dogs have been known to sin or to commit errors; therefore the score may be even. May we now pass to orders of the day.


John Whitney Pickersgill: Very well. I am quite happy.



[Stage Direction]
On the orders of the day:
Lester Bowles Pearson: Mr. Speaker, I should like to ask a question of the Prime Minister. Having regard to recent developments in the bay of Fundy, and having regard to the information we received yesterday that no progress has been made internationally in agreement on a wider zone of territorial and jurisdictional waters, is the government now prepared to establish immediately by national action a six mile territorial zone and a six mile jurisdictional and fisheries zone in addition, which it has been unable to secure by international action, reserving of course specific historic rights in the larger zone?


John George Diefenbaker: Mr. Speaker, as the hon. gentleman knows, over a period of years when he held the position of secretary of state for external affairs this was a matter which received consideration, but at no time during the period in which he or his predecessor, Mr. St. Laurent, occupied the position was there ever any suggestion that by unilateral
Inquiries of the Ministry action the government of Canada could proceed in a manner that would not place Canadian fishermen in a very difficult position in relation to the United States in the markets that Canadian fishermen have in that country.
This question of the establishment of six and six or a twelve mile limit was before the conferences in Geneva. These conferences met in 1958 and 1960, and on the last occasion we came very close to bringing about the establishment by international agreement of a six and six mile area territorial sea. We lost out I think by only one vote. Since then no progress has been made in this regard. We have endeavoured to secure agreement among the nations which voted favourably with regard to the establishment of a universal agreement on a new territorial sea area. We have not achieved it. To act unilaterally, however, is one of those things that has dangerous implications, and I know the hon. gentleman and those associated with him while he was in office realized what they are.


Lester Bowles Pearson: I have a supplementary question. Admitting, of course, the desirability of doing these things by international action if possible, is the Prime Minister not aware of the fact that because of the failure of international action, other countries have taken national action in this regard?


John George Diefenbaker: Yes, Mr. Speaker, I am certainly aware of that fact. That happened during the period when the hon. gentleman was in office as well, that other countries took action. But we are in a position when we take this action, as the hon. gentleman knows, that our markets in the United States for fisheries may be in danger.


Mr. Speaker:: Order. I think we are getting into a little debate here.


Mr. A. J. MacEachen (Inverness-Richmond):: I wish to direct a question to the Secretary of State for External Affairs with reference to the international conference on the law of the sea. Will the Secretary of State for External Affairs tell the house whether the United States at that conference supported the Canadian proposal for a 12 mile limit which reserved the historic rights of the United States?


Hon. Howard C. Green (Secretary of Stale for External Affairs):: Mr. Speaker, as I remember it that was a joint Canada-United States initiative.


Allan Joseph MacEachen: Why did they object?

Inquiries of the Ministry



CONSULTATION RESPECTING POSSIBLE


[Stage Direction]
On the orders of the day:
Mr. T. R. Berger (Vancouver-Burrard):: I should like to direct a question to the Prime Minister. In view of the provisions of the North Atlantic treaty regarding consultation amongst the signatories, can the Prime Minister tell the house whether the government has been consulted about the plans formulated by the United States, the United Kingdom, France and West Germany to impose a naval blockade against the Soviet union and its eastern European satellites in the event of a new crisis in Berlin?


Howard Charles Green: Mr. Speaker, I presume that the hon. member has based his question on a report in the morning papers. These four powers are primarily interested in Berlin, and they have meetings about questions having to do with Berlin. In addition there are consultations continuously in the North Atlantic council which, of course, is made up of all the members of NATO.


Lester Bowles Pearson: May I ask a supplementary question-


Howard Charles Green: I think it would be very unwise for any attempt to be made in the house to go into the details of contingency plans which are being discussed in NATO.


Lester Bowles Pearson: May I ask the minister whether it is a fact that this four power committee reports regularly to the North Atlantic council?


Howard Charles Green: As the Leader of the Opposition knows, the council is meeting all the time and these four are members of NATO and there is no doubt that all members know exactly what is going on at all times.



REPORTED PRESENCE OF RUSSIAN FISHING FLEET IN BAY OF FUNDY

[Stage Direction]
On the orders of the day:
Mr. R. C. Coaies (Cumberland):: Mr. Speaker, I have a question for the Prime Minister. Can the Prime Minister inform the house whether there have been any further developments in the matter of Russian submarines in the bay of Fundy?


John George Diefenbaker: Mr. Speaker, at one time there were five Russian ships in that area. When I spoke in the house yesterday I mentioned that there were two. It is now known that four of the five have left for the high seas.

In so far as the other one is concerned, it has been impossible to find because of climatic conditions that have reduced visibility to some 200 feet. There is no question of it being a submarine. I was not dealing with submarines; I am dealing with the subject I dealt with yesterday, namely Russian trawlers and fishing boats.


Mr. L. R. Crouse (Queens-Lunenburg):: The
question of the Russian fishing trawlers in the bay of Fundy is one of importance to the entire maritime area. I should like to ask the Secretary of State for External Affairs if, when he prepares his report, he will advise the house whether or not the trawlers took refuge in the bay of Fundy from the severe storm which we had along the coast of Nova Scotia yesterday, or if they were actually carrying out fishing operations in that area.


Mr. Carter:: May I ask a supplementary question-


Hon. J. A. MacLean (Minister of Fisheries):: I can say in that regard that we have observed these vessels from time to time. The group consisted of an ocean going tug, a freighter, a mother ship and two trawlers. At no time were they seen carrying out fishing operations. On the last occasion on which they were observed before the weather closed down, three were heading for the open sea. Since that time one has been observed at sea off Lockeport, Nova Scotia.


Mr.  C. W. Carier@Burin-Burgeo: My question arises out of the reply given earlier by the Prime Minister, and I should like to address it to either the Minister of Fisheries or the Minister of National Defence. Since it has not been possible to carry out aerial reconnaissance of these ships, are surface units of the Royal Canadian Navy being employed in the patrol of these Russian ships?


Hon. D. S. Harkness (Minister of National Defence):: It is not impossible to carry out aerial search, and there is aerial search on the part of the R.C.A.F. taking place. The radar equipment and so forth possessed by some of these R.C.A.F. aircraft, would enable them to pick up ships even though the ceiling was low.



INDIA-POSSIBLE CANADIAN ASSISTANCE IN RECONCILIATION WITH CHINA

[Stage Direction]
On the orders of the day:
Mr. John R. Matheson (Leeds):: Mr. Speaker, I should like to address a question to the Secretary of State for External Affairs. Has the minister given consideration to Dr. Wilder G. Penfield's recommendation of yesterday

that Canada might be in a position to bring about a reconciliation between red China and India-


Mr. Speaker:: Order. I think the hon. member will recognize that his question asks the minister to comment on a speech made outside of this house, and that is quite contrary to the rules.



FINANCE


[Stage Direction]
On the orders of the day:
Mr. W. H. McMillan (Welland):: I should like to direct a question to the Minister of Finance. On October 22 he announced that the net cash requirements for the current fiscal year would be about $500 million. In the light of that announcement I wonder whether he is putting any limit on the sales of the current series of Canada savings bonds, and how much new money he is getting.


Hon. George C. Nowlan (Minister of Finance):: There is no limit on the quantum of the bonds that may be sold. In this case, as in all other cases in connection with Canada savings bonds, the Minister of Finance inserted in the advertisement a statement to the effect that he might withdraw the sale of the bonds at any time after November 15.



BROADCASTING


[Stage Direction]
On the orders of the day:
Hon. Lionel Chevrier (Laurier):: May I direct a question to the Secretary of State, and ask him whether the deputy attorney general gave an opinion to the C.B.C. that the ruling of the board of broadcast governors on the Grey cup game telecast was beyond its legal powers; and has that opinion been made public?


Hon. G. E. Halpenny (Secretary of Stale):: Mr. Speaker, I imagine the hon. member is asking for a legal opinion. I have not the slightest idea yet what opinions the C.B.C. have received. I have their press release, but I have not yet had a chance to read it.


Lionel Chevrier: Will the minister inquire as to whether a legal opinion was given, and whether it was made public?


George Ernest Halpenny: I should be glad to do that, Mr. Speaker.


John Whitney Pickersgill: I wonder if I might ask the Secretary of State a supplementary question. In view
Inquiries of the Ministry of the fact that the president of the C.B.C. has made a statement which appears to be in conflict with the statement made by the minister on November 12, as recorded at page 1508 of Hansard, would the minister consider taking steps to have the special committee on broadcasting set up to go into this whole matter, which is of such great interest to the Canadian people at this time.


George Ernest Halpenny: Mr. Speaker, I was going to suggest to the hon. member for Bona-vista-Twillingate that I feel we should wait until the Glassco report, or the section of it that has to do with the broadcasting interest in Canada, is with us. I understand that will not be too far in the future.


Lester Bowles Pearson: May I ask the minister whether that report is to be with us before the Grey cup game?


Stanley Howard Knowles: Mr. Speaker, it was my intention to ask a question on this matter of the Minister of Justice. In his absence perhaps I might address it to the Prime Minister. In view of the fact that the law officer of the crown has given an opinion on this matter which has been made public, may we assume that this was done with the concurrence of the government, and that the government shares the view that the C.B.C. cannot legally be required to carry advertisements in its telecast of the Grey cup game.


John George Diefenbaker: Mr. Speaker, I shall be obliged to have a look at that question before answering it.


John Whitney Pickersgill: Mr. Speaker, I wonder if I might put a question to the Prime Minister. Will the Prime Minister at the same time consider the propriety of the C.B.C. making public an opinion from the deputy minister of justice and the government's refusal to give the legal opinion to this house that it had the power to tax without parliamentary approval?


John George Diefenbaker: Mr. Speaker, the hon. gentleman is the last member in this house who can give the government any lectures on the basis of the experience we had when he was secretary of state.


Mr. Speaker:: Order.


John Whitney Pickersgill: The Prime Minister has lost his temper again.


Mr. Speaker:: I think this subject has been explored until we are rapidly getting into a debate. As a matter of fact I think we have been in one.

Inquiries of the Ministry TRANS-CANADA AIR LINES



WINNIPEG


[Stage Direction]
On the orders of the day:
M. R. J. Teillei (Si. Boniface):: Mr. Speaker, I have a question for the Minister of Transport and I apologize for giving him such short notice of the question. I had short notice myself. In view of the report that Trans-Canada Air Lines is moving its Viscount repairs to Montreal and the anxiety caused by the reported loss of 1,000 jobs in Manitoba, will the minister please inform the house just what the situation is in this regard?


Hon. Leon Balcer (Minister of Transport):: Mr. Speaker, this report is not accurate. There is no intention of moving the repair work on T.C.A. Viscounts to their base in Montreal. T.C.A. is going to carry on the overhauling and repair of Viscounts in Winnipeg as long as it has Viscounts in its fleet. There is no intention on the part of T.C.A. management to retire any Viscounts prior to 1966.



CANADIAN SUPPORT OF U.N. RESOLUTION FOR WORLD CONFERENCE

[Stage Direction]
On the orders of the day:
Lester Bowles Pearson: Mr. Speaker, may I ask the Secretary of State for External Affairs whether the Canadian delegation supported yesterday at the general assembly a United Nations resolution for a world trade conference to be held before September, 1963?


Howard Charles Green: Yes, Mr. Speaker.


Mr. W. M. Benidickson (Kenora-Rainy River):: May I direct a supplementary question to the Secretary of State for External Affairs. Is it a fact that the United States, the United Kingdom, Japan and some of Canada's important European trading customers voted against this resolution, and can the minister explain the important differences between Canada and these other countries?


Howard Charles Green: Mr. Speaker, I would have quite a job if I tried to explain why it is that countries take particular stands on different questions. I am only responsible for representing Canada. We supported this resolution. I have not seen detailed reports of the voting, and I am not sure whether the United States and the United Kingdom abstained or voted against it. I think they

are all in favour of having a conference, though there is some difference of opinion as to when it should be held. Canada is in favour of any conference which will promote the trade of this country.


Howard Charles Green: I should like to refer to a question asked, I think by the hon. member for Kenora-Rainy River, relating to the details of the vote yesterday in the United Nations. The United States and Great Britain preferred an open date for the conference, which they envisaged as taking place in 1964. Canada, while feeling that the date established of September, 1963, would be an inconveniently early date for the conference, voted for the resolution as a whole in company with Australia and New Zealand, on the grounds that our reservation about the date was not sufficiently strong to cause us to oppose a resolution for a conference. This resolution was not voted on a clause by clause basis. Had it been, of course, Canada would have voted against that particular clause.



BUSINESS OF THE HOUSE


[Stage Direction]
On the orders of the day:
Mr. Frank Howard (Skeena):: Mr. Speaker, yesterday I directed a question to the Minister of Citizenship and Immigration with respect to the possibility of an early introduction of the amendments to the Indian Act and proceeding at an early date with the resolution to establish an Indian claims commission, in order that these things may become public before the minister attends the native brotherhood convention in British Columbia. Is the minister able to reply to that question now?


Richard Albert Bell: Mr. Speaker, the question of when business shall be called is a matter for the house leader. There is on the order paper a resolution in respect of an Indian claims commission. As I indicated to the house earlier, drafting is proceeding with regard to the revision and consolidation of the Indian Act, but it is not likely that I will be able to introduce the resolution until some time in the new year. The hon. member has also placed me in the position of attending a particular convention in British Columbia. I regret very much that it will not be possible for me to attend.


Mr. T. S. Barneli (Comox-Alberni):: I should like to direct a question to the Minister of Citizenship and Immigration. In view of the

statement he has just made that he will be unable to attend the conference of the native brotherhood of British Columbia, would he consider sending the hon. member for Skeena as his representative, in view of the fact the conference will take place in the hon. member's constituency?



TRANSPORT


[Stage Direction]
On the orders of the day:
Mr. John R. Nicholson (Vancouver Centre):: Mr. Speaker, I wish to direct a question to the Minister of Transport. It is urgent, and I have given the minister notice. Has the minister received communications from the boat builders section of the Canadian Manufacturers' Association in Vancouver to the effect that small shipyards have had to cut production and lay off employees because of a lack of operating funds due to delay in the payment of construction subsidies?


Mr. Speaker:: Order.


John Robert (Jack) Nicholson: On a point of order, it is a matter of urgency. These yards are laying off employees.


Mr. Speaker:: I agree that it may be urgent, but I should point out to the hon. member that in the drafting of his question he has not been very careful. There are assertions of opinion and all sorts of deficiencies. However, if the minister has had notice and is prepared to answer, under the circumstances I will let the question go through, but I should like to make that point to the hon. member.


Léon Balcer: Mr. Speaker, I did receive representations, and these representations dealt largely with one yard in particular. I am pleased to tell the house that payments have been made to the yard in question. As far as other payments are concerned, we have to wait until the main and supplementary estimates are passed.



INQUIRY FOR RETURN


[Stage Direction]
On the orders of the day:
Frank Howard: Just before the orders of the day are called, may I say that tomorrow is the one month anniversary of the adoption of a notice of motion for the production of papers standing in my name relating to a report by Mr. Morris of the University of Manitoba regarding a survey of conditions on the Red Lake Indian reserve.
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Income Tax Act
I wonder if I could ask the Secretary of State if he could inquire what progress is being made in connection with this matter.


Richard Albert Bell: I think if the hon. gentleman will check Votes and Proceedings he will find it has been brought down for some time.


John Whitney Pickersgill: I should like to ask the Secretary of State if he is in a position to make a progress report on the arduous labour of his department in compiling a list of returns that have not been brought down.


George Ernest Halpenny: We are working hard at it.



INCOME TAX ACT

[Stage Direction]
The house resumed, from Thursday, November 15, consideration in committee of Bill No. C-78, to amend the Income Tax Act- Mr. Nowlan-Mr. Chown in the chair.
On clause 10-Production incentive deduction.
Mr. Benson:: Mr. Chairman, last evening when the committee adjourned I had mentioned that I, and most members of the house, were in favour of production incentives and basically in favour of anything which could be done by way of taxation to encourage manufacturers and other persons in our economy to increase productivity and create new jobs for Canadians.
However, I also pointed out that there are several difficulties involved in clause 10. One of the difficulties I mentioned was that it encourages firms to raise prices in order to get a tax advantage. I pointed out that by raising prices they could create additional income which would be taxable at a lower rate than that normally imposed on the profits of Canadian firms. I pointed out also that there was no incentive to efficiency contained in this clause, in that firms who maintained their selling price at the same level as last year, and who cut down on their production expenses, might have higher profits but would have to pay taxes on those profits at the ordinary rates of taxation rather than the incentive rate envisaged by this clause.
Furthermore, this clause does nothing for the manufacturer who operated at capacity in 1981, who is operating his business efficiently and selling as much as he can. There is no incentive included in this particular

Income Tax Act
clause for him. In addition, this clause encourages the transfer of sales from one company to another by devious means to take advantage of the rates of taxation allowed under this clause of the bill.
I maintained, Mr. Chairman, that this clause does not create incentives which are important enough to cause any real expansion in economic activity. The minister pointed out in his example that if a firm had a $100,000 increase in sales there would be a tax saving of only some $1,200. This, of course, might be more, depending on the increased profit which was generated through the additional $100,000 in sales.
One other important point with respect to this clause which I would like to draw to the attention of the committee is that it leaves out entirely unincorporated manufacturers, and when introducing the budget resolutions last spring the former minister of finance indicated to the house that unincorporated manufacturing concerns were not important. I maintain that many manufacturing concerns develop from rather small beginnings, and that every incentive which is given to the larger concerns should be given to the small men who want to get into manufacturing and who may not go into it through a corporation initially. These people, when they get into manufacturing in a small way, create jobs for Canadians and on occasion grow into important business enterprises. Many of our manufacturing concerns were originally small concerns which started out as an individual or group of individuals who were not incorporated as a limited liability company. Those of us on this side of the house say the small manufacturer is important, and I believe he should be given the same incentive as incorporated companies under this particular clause of the bill.
Aside from these general criticisms of this clause I would like to bring out a few points respecting its wording which I think will cause concern to the government and create litigation in the tax field, and all of us know there is enough litigation in this field now without putting a section into the act which will be very difficult to interpret and administer. Clause 1 of the proposed new section 40A says in part:
There may be deducted from the tax otherwise payable for a taxation year by a manufacturing and processing corporation...
It goes on to outline the amount which may be deducted, and subclauses 2 and 3 go on to say:
"manufacturing and processing corporation" means a corporation that had net sales...
-and so on, from the sale ofgoods processed or manufactured [DOT]..

So we have here a definition of manufacturing and processing, and I would think under the incentives which are given in this particular instance the effect will be that everyone is going to try to be classified as a manufacturing and processing concern, even those who are not ordinarily involved in this type of activity. For example, they will assemble products on their own rather than have them sent to them in completed form.
The minister, who was formerly minister of national revenue, should recall the difficulties he had in determining what were manufacturing and processing concerns under the Excise Tax Act. There were a great many difficulties involved. Under that particular act the minister had discretion to decide what was a manufacturing and processing concern, but under this clause in this bill he will not have that discretion. The Income Tax Act has very few instances of ministerial discretion in it. Perhaps under some provision the minister will be able to determine what is a manufacturing and processing corporation, but in my brief perusal of the bill I could not find such a provision. Subclause 3 of this clause brings into manufacturing many mining and refining companies, because it goes on to state:
The principle business of a corporation for a taxation year shall be deemed to be mining, operating an oil or gas well or a combination of both if
(i)	its profits . . . are at least 50 per cent of
(ii)	the amount that would be its income for the year if no amount were deductible, in computing its income for the year . . .
and so on. This means, I think, that some mining corporations will benefit from this clause. At the time the legislation was introduced in the former budget resolutions last spring we were not led to believe that mining corporations were to receive the benefits of this particular clause of the bill, and I believe that under the bill, as it is presently written, they will obtain advantages which were not foreseen when the budget resolutions were brought in last spring.
Subclause 4 of this clause says that:
"Subsection (1) -
That is the one that allows the tax deductions:
-does not apply in the case of a manufacturing and processing corporation that did not carry on business for at least 12 months immediately preceding the taxation year referred to in subsection (1) in respect of which the tax is otherwise payable.
This means that if some people are thinking of going into manufacturing they will not get the benefit of this particular clause in the first year of their operations. This may mean that they will choose to operate within the corporate organization in a small way in the first year, and then move sales from an

unincorporated body into it in the second year in order to get the full advantage of the tax reductions provided in this bill.
In subclause 7 of the proposed section 40A the term "connected corporation" is used. Basically a corporation is a body corporate created by a group of people getting together and forming a company in order to obtain the advantages of limited liability, and perhaps for other purposes; but under the Income Tax Act we find we have "personal corporations" "related corporations" "associated corporations" and now we are having "successor corporations". I am sure schemes will be devised to avoid being a connected corporation, just as they have been devised to avoid two corporations being associated or related, or a corporation being a personal corporation.
In effect I think this sort of legislation encourages people to try to find ways to get around it, because there is a specific tax advantage if you are not a successor corporation. If you are a manufacturing corporation, tax lawyers and other people engaged in taxation matters for corporations can find ways to get around sections of the act so they can fit people into its provisions in order to get tax advantages, and by so doing in some cases they can under this section manage to have taxation reduced by as much as 50 per cent. In all cases there will be a tax reduction of 25 per cent for new corporations which can be created within the meaning of the terms of this clause in the bill.
In the definition in subclause 8 it is stated:
...a manufacturing and processing corporation is connected in a taxation year with another corporation.. .if.. .the connected corporation purchased goods from the manufacturing and processing corporation in the year equal in amount to at least 50 per cent of the manufacturing and processing corporation's net sales...
I am sure there will be sales of 49 per cent of products to avoid this term being applied, and other ways will be found to fit corporations within the provisions of this particular clause.
Subclause 9 is the final subclause in this clause, and is intended to be the one which will prevent sales being transferred in order to take advantage of this clause in the bill. However, I believe it is ineffective, because it indicates that the primary purpose of the transfer of sales must be to take advantage of this clause. It is difficult enough to determine "purposes" without trying to determine "primary purposes" and I think there will be many legal arguments, where sales are transferred to a particular corporation, on the question of whether or not the primary purpose of the transfer of these sales is to take advantage of this clause in the bill.
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Income Tax Act
In summary I think this particular clause of the act, although the idea of incentives is good, does not go far enough. I think it is very poorly drawn. It is drawn in such a way that it is going to encourage additional tax litigation, and it is going to cause the government introducing it and the courts a great deal of worry in the future. It is, further, going to encourage people to devise means of getting around the Income Tax Act. I think that legislation which does this is poor legislation.


Mr. Turner:: Mr. Chairman, speaking in practical and non-technical terms, which the minister and I both understand, the incentive legislation which has been introduced under his auspices, but with the co-operation of the Minister of Trade and Commerce, to stimulate increased sales will, as I said last night, in my submission be ineffective in achieving what it is aimed at achieving, for two practical reasons. The first is that while resolution No. 2 was a very simple paragraph with very simple objects, the legislation as it is drafted, with over six pages here, is so complicated and the potential tax saving so minimal-and I refer again to the minister's own example in the income tax bill-that my fear is that the average manufacturing corporation will not undergo the risk and expense of retaining the necessary accounting and legal advice to come squarely under this section to achieve what after all is a very minimal, or proportionately very minimal, tax saving.
The second feature is that because of the moveable sales base that there is in this clause, the success of a manufacturing or processing operation in year one in increasing its sales will automatically increase the sales base and penalize that company in year two. In other words, after one good year the corporation is probably deprived of any benefit of the legislation in succeeding years. For those two practical reasons I suggest once again to the minister that the results which are honestly sought by this particular amendment will, in our opinion at least, not be achieved.


Mr. Gordon:: Mr. Chairman, I think the minister made it reasonably clear last evening that this legislation was introduced before he became Minister of Finance. I thought it might be helpful to look up some of the explanations given by his predecessor when he introduced these resolutions. I would like to read a few words from pages 2703 and 2704 of Hansard for April 10 in which the

Income Tax Act
previous minister oi finance described the reasons and purposes of this and the other resolutions:
One of the new measures is expressly designed as an incentive for further industrial expansion and increased employment.
Then he goes on to say, on this and the resolution on research:
They will constitute an important addition to the structure of tax changes which I have brought to this house in recent years. Encouragement and incentive are thus being given to private industry under several related headings, to increase its efficiency, to expand employment, to improve Canada's competitive position and to keep current with the most advanced technical and scientific methods.
In the next paragraph he goes on to say that a number of these resolutions or changes "result from probing into the deficiencies of the tax system in a continuing effort to overcome obstacles to progress and to achieve greater equity among taxpayers".
If that is the purpose, Mr. Chairman, I suggest that this particular proposal fails dismally to meet that objective, because in the first place the incentives are very meagre; in the second place, as was pointed out before, they will result in certain windfall profits resulting to companies because of the devaluation of the dollar which, as the minister said yesterday, was not contemplated at the time these proposals were made. Taxpayers will receive a benefit, a bonus or an incentive for increasing prices. This, surely, is the very opposite of what this legislation should be trying to achieve. If, for instance, perhaps because of the tariff surcharges, companies are in a position to increase prices, instead of being condemned for doing that and taking advantage of these increased surcharges, they are going to be bonused for it.
It seems to me those are reasons which make this particular incentive bonus a very questionable piece of legislation. I would like to ask the minister whether there is any way in which taxpayers who do increase prices for some of the reasons that have been mentioned in the house will be prevented from taking advantage of the tax incentives that are offered in this clause.


Mr. Mather:: Mr. Chairman, I think this is another of those clauses which give incentives to producers and corporations to encourage them to produce, whereas what is needed, in our opinion, is more incentive to the consumer to enable him to be in a position to consume. In line with that, I think if we look to the south we will find that the United States provides very much more generous incentives to the taxpayers of that country than we do here, on a consumer

basis. I have read that there are now more persons of Canadian descent living in the United States than there are Canadians living in Canada. If this is true, I think we must look to the difference between our tax system and that in the United States which makes it so attractive for so many of our Canadian people to go there rather than live here.
It might be useful, Mr. Chairman, to consider one or two of the distinctions which are apparent in the United States income tax exemptions as they affect the consuming public, as compared to those we have in Canada. There is, for example, instalment buying. When you purchase property of any kind on the instalment plan in the United States you may deduct the interest payments from your income tax. Such property includes automobiles, television sets, radios and home furnishings of all types. Also deductible are the interest portions of home mortgage payments. This represents a very substantial saving to the taxpaying consumer in the United States, and encourages many people to build or buy their own homes. I think the same could be said for those clauses which exempt interest payments on home furnishings such as those I have mentioned. In addition, in the United States taxpayers are exempt from paying income taxes on real estate and personal property. State income taxes are all-


William Moore Benidickson: Mr. Chairman, on a point of order, has this reference to clause 10, which I think deals with incentives to business on the basis of increased sales?


Barry Mather: Mr. Chairman, I know the clause intends to do that, but my argument is that I do not think we are doing it in this measure.


William Moore Benidickson: In fairness to the hon.
member, Mr. Chairman, I might say that we are having difficulty hearing him. If he would speak directly into the microphone perhaps we would hear him better.


The Chairman:: Order. I think there is some conversation going on behind the curtains which is being picked up by the hon. member's microphone, and it is disturbing to those of us endeavouring to listen to the hon. member, who is some distance away from the chair. I find that the interference makes it very difficult for me to hear what he is saying, and I can only assume that is where the interference is coming from.


Barry Mather: May I move nearer, Mr. Chairman?


Gordon Campbell Chown: The hon. member may move to any other convenient place in the committee, and that will be very helpful.


Barry Mather: The point raised by the hon. member was whether what I was saying had reference to clause 10. My contention is that it has, because I oppose the ideas expressed in clause 10. I contend that they would give incentive to the producers, the corporations, to urge them to produce, whereas what is needed in Canada, in my opinion, is more incentive to be given to the consumer in order to help him consume.
In line with that, I said that in the United States many more generous concessions or inducements to the consumer are given under their tax structure. I think this has been a great inducement to many Canadians to leave our country and go to the United States. It may be unfortunate, but I believe this is one of the facts of life which has attracted people there. In this connection I have read, and I think it is pretty close to the truth, that there are now more persons of Canadian descent living in the United States than there are in Canada. I believe that if our tax system was more realistic and gave better recognition to the needs of the common people of Canada, this situation would not exist. I cited a few instances of the more generous terms given under the United States tax structure to their consumers, and among them were these. There is one which exempts-


Gordon Campbell Chown: I am sorry to interrupt the hon. member. I am hearing him well now, and I find it very difficult to see, although I am prepared to hear argument on it, how he can bring this within the strict rule of relevancy which is applied in committee. I would hate to see a privilege of this nature allowed him and then not allowed to another speaker who may follow him. This clause, in my view, has to do strictly with production incentives. There may be another clause in the bill where his words would be more applicable, at which time I am sure the committee would be very glad to hear him.


Mr. Douglas:: Surely, Mr. Chairman, if it is proper to discuss incentives to stimulate production the hon. member is quite within his rights in suggesting other incentives which might, in his opinion, be more effective. He is hardly out of order in discussing that aspect of the problem. He is dealing with incentives which he thinks should be placed in this clause, rather than the incentives that are there now.


Gordon Campbell Chown: I do not want to be unduly restrictive as far as the remarks of the hon. member are concerned. I know one can do this sort of thing by way of analogy and
Income Tax Act
therefore still tightrope-walk the rule of relevancy. But I just want to caution him, and we will continue to hear what he has to say. I hope his remarks will come within the strict rule, and it is a strict rule in committee.


Barry Mather: Mr. Chairman, I think it is hard on me. When you could not hear what I was saying, you did not like it; now you do hear what I say, and you still do not like it. In view of your ruling, sir, which certainly I abide by though I think it is a little harsh, may I say that I have about another two minutes to outline my ideas and then I will conclude. Those ideas are, in the main, that the incentives should be given to the consumers, not to the producers.
In conclusion, in regard to the examples I quoted from the United States of how they give incentives to consumers, may I say that in that country the following taxes and charges are exempt from federal income tax. They exempt real estate, personal property and state income taxes. Poll taxes are deductible. Auto licenses and registration fees, casualty and theft losses are deductible. Work clothes in cases of employment demanding special apparel are deductible. Certain types of personal transportation expenses are deductible. Educational expenses are also deductible when incurred primarily for maintaining or improving skills involved in a person's employment.
Mr. Chairman, that is all I have to say in brief. I reiterate the idea, which our party has long put forward, that what we need in Canada are more incentives to the consumer to help him consume and less to the corporations to help them, possibly, to produce but more likely to make additional profits.


William Hector McMillan: In connection with clause 10 I just want to make some reference to exporters. Under this clause exporters can benefit even though they do not increase their volume of sales. In fact they can benefit even though their volume of sales is down by 3 per cent or 4 per cent. But if our dollar should stay depressed at, say, 92J cents for a year or so, their sales base would be high, and our exporters would not benefit until they had an increase in export sales of about or close to 10 per cent.
The whole purpose of this clause is to increase the volume of business. I should think it would be within the ingenuity of the minister's department to include a clause to eliminate the effect of the variation in the value of the Canadian dollar as far as computing income tax of corporations is concerned. There is nothing in the clause now to allow that. As an example, if the Canadian dollar was down by an average of 5 per cent in the year

Income Tax Act
as compared to the previous year, then 5 per cent of the export sales abroad would not or should not count as an increase in business for income tax purposes. I think we could also make provision in the Income Tax Act for an increase in sales when our dollar was going up in value.
The whole purpose of this clause is to increase volume of sales, to increase production in our country; and it seems to me that we are extending the benefits at a time when our dollar is depressed and it is easier to sell our products, and we are making it harder to sell our products when our dollar goes up in value.


Mr. Addison:: Mr. Chairman, nothing is sure but death and taxes, they say, but I am delighted to see a reduction in taxes coming up. I was wondering whether the Minister of Finance has taken into account the operation of a new industry starting up initially in this coming year. Normally a new industry needs a respectable cash flow, but these incentive agreements in this clause mean that the owner of such an industry will be paying the full rate on any profit in the first year of business. Normally the growth rate of a business does not go up in a straight line, and particularly in the export field there are a great number of firms entering it for the first time who are operating on a loss position until they initiate a marketing capability in a foreign area.
I suggest to the Minister of Finance, Mr. Chairman, that some consideration should be given to a firm starting up in business and an accelerated depreciation allowed to that firm in the first year of business in lieu of a tax credit which is available in the succeeding year after the initial operation, so that the money can be retained in the business and not go out of the business in tax dollars. As I have suggested, in the formative years of a business the first year in a lot of cases is very critical in regard to cash flow.


Mr. Maiheson:: Mr. Chairman, I wonder whether I could say to the Minister of Finance, in regard to this clause dealing with production incentives, that we have had pointed out that all this purports to do is to make a slight variation in the cost curve. If we are thinking of incentives, then probably the real consideration should be demand curves, although the two must obviously be considered together. But when we think of the timing of this legislation, I note that the budget, of which this is a part, was brought down on April 10 last, and at that time I submit that the government had no real knowledge that there would be a dollar devaluation. I say that with some confidence because on March 21, 1962, I asked the then

minister of finance if he had given consideration to establishing a pegged rate, and the minister's reply was:
The house has been kept well informed on the very striking success of the government's policy in relation to the external value of the Canadian dollar.
From that answer which was given on March 21, 1962, I take it that the government, when they brought in their budget on April 10, were thinking in terms of a dollar of approximately 95 cents. Then on April 10 we have the production incentives proposal, which is obviously going to give very considerable benefit to anybody who can establish higher cost sales or higher sales on a cost basis. Let me give this illustration, and it is hypothetical, of course; a newsprint company that has perhaps contracted for the sale of $1 million tons of newsprint, let us say to the Wall Street Journal.


George Clyde Nowlan: I wish they would do so.


Neil Alexander Matheson: I do not know the facts. I am sure the minister would know who are benefiting. I am sure he knows who is benefiting by this extraordinary legislation.


George Clyde Nowlan: Our balance of payments.


Neil Alexander Matheson: Yes. In any event I ask the minister to hear me with patience. I am suggesting that a good many people who have benefited from the devaluation forced on this government on May 3, 1962, in extremis, are really people who are satisfying an inelastic demand curve. In other words, the fact that there is a price change is not going to alter the content of volume shipped, for instance, of newsprint. Therefore we have this newsprint company which is going to ship exactly the same requirements now that they shipped previously but they get the additional advantage of the devaluation on May 3, 1962, and on top of that they get this additional gift of a bonus with respect to a substantial tax cutback, not because they ship one more ton of paper but merely because this government has given them the bonus on the bonus.
We have in mind the fact that since this government has been in power the national debt per employed person has increased by $321. I may say I am going by these figures. In 1957 the national debt per employed person was $1,923. In 1962 it is up to $2,244. In this respect I think we have a good deal of sympathy with some of our friends on the left who talk in terms of consumption, because these additional debt charges are purely moneys that are going to be paid by Canadians and ultimately by Canadian consumers. This is what they mean. Hence actually what is

happening suddenly, by even this clause here, is a shift from, I would say, progressive taxation in effect to regressive taxation.
I do not think there is any possibility that this can provide a solution. Those parts of the community that have been most benefited by devaluation-and many people will have been benefited by this action-in many instances are going to get the extra bonus. Those people who have been benefited by the devaluation of May 3, 1962 are going to get this bonus out of the pockets of other Canadian people. The objections that have been presented by some of the members of the New Democratic party in this house have pointed out quite accurately and truthfully that actually the benefits to one must be paid for by the loss to the other.
I think it is only fair that the minister answer fairly and accurately who is going to benefit, in his view, from these production incentives already involved. I think he should answer this question. If the government had known that devaluation would be forced on it on May 3, 1962, would it have ever countenanced section 10 with its production incentive in this particular form? For example, when studying the tax structures of western Europe at the present time, we know perfectly well that many things have been done by Germany, Belgium, France, Italy and other countries which have produced all kinds of production incentives. However, I submit that what we have here in clause 10 has failed, is already out of date and obsolete. Even to permit it to pass in this form is adding an injustice to something that has already taken place as a result of the collapse of our dollar.


Thomas Speakman Barnett: I have been seeking to catch your eye, Mr. Chairman, in order to raise two matters, one of which is in the general area which was under discussion by the preceding speaker and which in my opinion was pinpointed by the hon. member for Welland in particular. It relates to this matter of the devaluation of the dollar. If our dollars were fluctuating freely the minister might argue that this was an irrelevant discussion. However, it seems to me that when the Canadian dollar is pegged as a matter of government policy, this question is then very relevant to the clause under discussion.
The minister has already suggested that these proposals were contained in the budget of last April and that he is bringing them forward, as I understood it, virtually intact. However, in the light of all that has transpired since that time, and particularly in relation to the government action in pegging the dollar, I suggest that there would have
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been plenty of opportunity for the government to have another look at this question. If we are going to proceed with this sort of plan I believe that the distinction which is drawn by the hon. member for Welland, between manufacturers who are producing for the domestic market and corporations which are primarily engaged in the export market is valid.
I certainly know this. From all recent reports that have come from the large manufacturing and processing corporations in British Columbia which are engaged in the export trade, their financial returns as a result of the devaluation of the dollar have been quite substantial, to say the least. I think the illustration with respect to newsprint exports was a good one, and that with this proposal they are going to get another kick at the cat and in a way which is not, as far as I can see, going to provide another job in, for example, the forest products industry of British Columbia. I think this is a matter to which the minister should give some reply.
There is another part of this clause in respect of which I should like to have a reply from him. I refer to subclause 2 in particular, in line 32, where it goes into the matter of defining what is meant by "manufacturing and processing corporation" for the purposes of this clause. It uses the words
-but does not include a corporation whose principal business for the year was-
And then it enumerates a number of categories. First of all I should like to inquire on what basis the determination is going to be made with respect to what is the principal business of a corporation. I raise this point with particular reference to the fact that one of the excluded processes is logging, and having in mind that in a later clause of the bill there is a special provision with reference to logging and the taxation of profits on logging.
The forest products industry of British Columbia, which happened to be the type of manufacturing and processing corporation with which I am most familiar, includes logging as well as the production of manufactured products. When the minister replies I should like him to use that industry as an example of how it is going to be determined whether the principal business of corporations like B.C. Forest Products, Crown Zeller -bach or MacMillan, Bloedel, Powell River is logging or whether it is not for purposes of this clause. If we are going to proceed with this clause in this form I am wondering whether, in view of the other clause in the bill, we will not have amended the act in a way which will in effect segregate the profits of a corporation from logging from those derived from manufacturing and processing. As

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I understand this clause and the one which we will be considering later, I can see a real possibility that some of these large export corporations are not only going to have two kicks at the cat but a third kick at the cat under the provisions of the later clause.
I certainly would appreciate some explanation from the minister of just what is involved in the determination of what is the principal business, and I should also like to hear him comment on the discussion in which we have been engaged with regard to the relationship of this proposal to the devaluation of the dollar.


William Moore Benidickson: Mr. Chairman, if I thought the minister could use the next five minutes before lunch to deal in full with the criticisms that have been advanced with respect to this clause I would not speak now, but we are dealing with a very serious matter, in that it was indicated by the former minister of finance when he advanced this proposal that it involved the major part of the tax concessions in the budget and, indeed, involved a tax abatement or a tax value estimated at $88 million, I believe.
I would be interested in knowing whether the new minister and his officials would now suggest to the committee that that figure is just as valid now as it was in April, inasmuch as they have had so many months between then and now to consult with those in industry and manufacturing who may benefit. I would imagine that the figure was more or less of a guess in April, but I would think that as a result of their negotiations with the taxpayers affected they might now want to come up with some revision.
As I indicated last night, I have never claimed to be an expert with regard to this complicated act. However, we now have in the house several chartered accountants from whom we have heard, and last night and today we also heard from members who to my personal knowledge devote a good deal of their legal practice to tax work. I am sure the minister has been impressed with the suggestions that as drafted this particular proposal, good as I know it was intended to be, offers unusual loopholes, windfalls and opportunities for tax avoidance that I know it is never the intention of the department to permit. On Wednesday last I read, as no doubt many other members did, the very interesting daily financial column of John Meyer in the Montreal Gazette, and I was struck by these words:
The biggest poker game in Canada today is tax avoidance.
It would appear that in an unusual way this particular clause is providing a wider opportunity for tax avoidance which, as has

been pointed out, is a legitimate exercise. When the crown presents legislation it is up to it to make sure that it is not in the nature of a sieve for tax avoidance, and in these difficult days of high taxation a taypayer has every right to employ experts in a legitimate way to find loopholes if they exist in the legislation.
Therefore our concern is to get an answer from the minister with respect to the criticism of this clause. We have always suggested that to stimulate business in these difficult times, with the unemployment we have had in the last four or five years, we certainly need all the incentives for increased production and employment that ingenuity can present to us, but this clause does not seem to be it. While this clause was perhaps rather hurriedly devised in the election atmosphere of last April, a number of months have since gone by, and it would seem to me that there is some lack of ingenuity on the part of the administration inasmuch as they learned at the polls that their proposals were not very popular, as indicated by the return of a much smaller number of members of their party to this house. Having that in mind, I should have thought they would have presented a new budget, not something, as I said last night, simply representing a warming up of what even last April was only a halfbaked proposal not properly thought through.
As the minister has had since last night to do some homework and prepare himself to explain how these loopholes are taken care of, and as I have made it possible for him to have another hour and a half to consider the very important criticisms that have been advanced this morning, I hope the minister will be full of information as to what is contained in the bill that will prevent the happening of the things that have been predicted by so many members this morning.


Gordon Campbell Chown: Before calling it one o'clock I should like to remind hon. members, without specific reference to any member, of standing order 12 (3) which reads as follows:
When a member is speaking, no member shall pass between him and the chair, nor interrupt him, except to raise a point of order.
Section 4 provides as follows:
No member may pass between the chair and the table, nor between the chair and the mace when the mace has been taken off the table by the Sergeant-at-Arms.
Section 5 reads as follows:
When the house adjourns the members shall keep their seats until Mr. Speaker has left the chair.
I was inadvertently guilty myself yesterday, but as these things have been happening

with greater frequency I thought I would bring the standing order to the attention of members of the committee.


Walter Lockhart Gordon: My apologies, Mr. Chairman. At one o'clock the committee took recess.


[Stage Direction]
AFTER RECESS

The committee resumed at 2.30 p.m.
The Deputy Chairman:: When the committee rose at one o'clock we were dealing with clause 10. Shall clause 10 carry?


Edgar John Benson: I wonder if the Minister of Finance might answer some of the questions that have been raised in respect of this clause before we move on to the other clauses in the bill.


George Clyde Nowlan: Mr. Chairman, I expected to try to answer some of the questions which have been raised, but I thought it would facilitate matters if we had most of them before us at the time rather than answer them individually. It was for this reason I was waiting until all the questions were before the committee. I suppose the committee would like to have some of the matters discussed which have been raised by hon. gentlemen opposite. I must say that I feel this has been an interesting, and I think an informative, debate. With all due respect to hon. gentlemen who participated in it, I must say frankly that I have not heard any questions raised during last evening and this morning that I have not heard raised during the consultations in respect of this bill.
I realize there are difficulties in connection with it. I realize there are difficulties in connection with administration. I realize some of the problems which are raised by this measure. I would suggest this situation could arise in connection with any amendment or any change in a taxation statute. This is perhaps a new approach, in one sense of the word, and therefore there may be fields opened up which were not opened up in other taxation statutes. The government had given very careful consideration to most of these criticisms, at any rate, but not the details of them. We realized that these problems existed, but we felt it advisable to go ahead with this measure because, as my colleague the Minister of Trade and Commerce said yesterday afternoon, there has been a substantial demand from manufacturers and producers in Canada for this measure. Despite some of the criticisms which I think are justified, and notwithstanding some of the difficulties which are fairly 27507-3-109
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obvious in connection with this measure, I believe it will do a substantial amount of good for the manufacturing industry of this country. We are, therefore, proceeding on that basis.
This morning I was asked who were going to benefit from this legislation. Well, of course, all exporters who increase their exports are going to benefit from this legislation. Manufacturers who increase their production over the base year are going to benefit from it. There should be, and it is anticipated there will be, a substantial increase in employment in this country. This is the basic design of this legislation.
Now, it has been said that there are windfalls connected with this legislation which my friends suggest result from the devaluation of the dollar. The fact that this was an unexpected windfall, it was suggested, should add substantially to the profits of certain phases of industry. In the first place, Mr. Chairman, it must be emphasized that if there is a windfall it only accrues to the export trade because the exporters are the ones who will get the advantage of the devaluation of the dollar. So far as I am concerned, quite frankly, if I can help increase the exports of this country and thereby help to offset the balance of payments problem, which is one of the fundamental problems facing this nation, then I am not going to worry unduly at the inception of legislation about possible accruals of benefit to exporters.
This is a matter which will always, of course, be under review. This statute is not one which runs in perpetuity and is unchangeable like the laws of the Medes and the Persians. This act is before parliament every year and is open to review and amendment. I do suggest this matter of windfall benefit is one which, if there is a windfall, accrues only to the exporter. While there has been a substantial increase in our exports, we certainly need to assist that aspect of our trade in every way possible.
As the hon. member for Leeds, I think, pointed out this morning, when this budget was introduced by my predecessor in April, the dollar was then at 95. The fiscal years of corporations have been closing at various times since then, so the result is not necessarily a windfall of 7.5 cents on the dollar. It may be, at the most, 2.5 cents on the dollar. In any event, as I have said, so far as the government is concerned, we are prepared to stand on this basis if this is of assistance to exporters. If there is a windfall there, the advantage which may accrue to them is not such as would deter the government from proceeding with the legislation; in fact, it is something which would encourage it.

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It has been suggested by someone, I think the hon. member for St. Lawrence-St. George, that the advantages which were going to accrue were infinitesimal, negligible and of very little benefit to most exporters or manufacturers. This was one phase of the argument. Then, the hon. member for Davenport and other gentlemen who have taken part in this debate have suggested that there might be substantial profits accruing as a result of this measure. Well, you cannot have it both ways, Mr. Chairman, that the results will be negligible and there will be no substantial profits, and that there is going to be a bonus, as some of my hon. friends have stressed. In order to achieve this tax avoidance, as pointed out by the hon. member for St. Lawrence-St. George, it would be necessary to have corporate re-organization. There would be substantial legal costs involved, and at least his argument was an answer to that.
I point out too that, if as has been suggested, it is possible to raise prices in one year and thereby attract a profit which would result in this tax benefit. This is a moving feature. It moves on from one year to another and if something of that nature should be done in one year it means that the next year the taxpayer would be in a very difficult situation indeed and would not derive the benefit from the so-called increase, artificial or otherwise, created the year before.
I do not necessarily accept the fact that this would be done because, as my colleague pointed out yesterday afternoon, although somebody has said this is an entirely free competitive economy, we all must admit that there are various features about it which do not quite meet the picture Adam Smith had of the economy a century ago. Competition still plays a very substantial part in our economy, particularly in our mercantile world, and I am not too concerned with that when one considers the statutory provisions which are in here now, and also the law of competition.
I am not going to worry the committee by recounting all the amendments and provisions in the bill, but there are substantial ones which will effectively prevent any taxpayer escaping or using this legislation in an attempt to defraud the revenue.
I was also asked by an hon. member this morning who would decide whether it was processing and manufacturing, and he pointed out that the Minister of National Revenue does not now have any great discretion in these matters. That is perfectly true although there was a time when he did have very substantial discretion. However, a prudent government in its wisdom saw fit to decide that
[Mr. Nowlan.)
most of those discretionary powers should be removed and that matters be left to the courts to decide.
Although the Minister of National Revenue may not have great discretionary power I am sure hon. gentlemen opposite who discussed the bill today will agree, from experience, that we have a very able group of expert officials in the Department of National Revenue, and if a taxpayer submits a return and is claiming something under this bill, or pursuant to this legislation, although the minister may not have a great lot of discretionary power certainly he and his department have the discretion of saying no and disallowing items which the taxpayer claims. The taxpayer can then either accept the revision or reassessment of the department or go to the income tax appeal board or the exchequer court, or indeed both as he sees fit.
That is one of the effective mechanisms which is always there and which will guard against the anticipated abuses which may arise out of this legislation. I would remind hon. members that abuses have arisen out of other sections. These abuses are known to departmental officials, as my hon. friends opposite are well aware, and I believe the department can decide fairly effectively what steps should be taken to prevent those abuses arising.
The hon. member for Comox-Alberni raised a technical point this morning with respect to one definition in the bill. However, provision has been in the Income Tax Act for many years-I think it is section 83A-covering that point, and I do not anticipate there will be any great difficulty whatsoever with respect to it.
It has also been pointed out that small corporations may not benefit too much by the provisions of this bill. However I think small corporations will benefit to a substantial degree, and I need not point out to the committee that the tax benefits accruing to small corporations have been increased on two occasions since this government came into power in 1957, during which time the income bracket subject to the lower rate went from $20,000 to $35,000. That in itself provided fairly substantial assistance to the small corporations.
The question was also asked why individuals, who were unincorporated, were not included in this provision. The reason must be obvious to any hon. gentleman conversant with the tax law because taxation on an individual is, of course, on a graduated scale while taxation on a corporation is on a flat basis, and it is easier to give 50 per cent or 25 per cent deductions in the case of corporations than it is in the case of individuals.

One individual may have a tax rate of 80 per cent and a border line individual may have a tax rate of 30 so hon. members can readily see the inequalities that would arise. This phase of the matter was given very careful consideration at a time when I was minister of national revenue and we decided it would be absolutely impractical to make a provision such as that because it would be impossible to administer. That is why the deduction is left on the corporate basis.
The hon. member for St. Lawrence-St. George, or some other hon. member opposite, pointed out that there was no benefit to a company starting in its first year. It was said that many companies had difficulties in getting under way and that therefore it was perhaps unfair not to allow a benefit to such companies. That is doubtlessly true; but on the other hand if there is going to be tax avoidance, if there is going to be this splitting up, or these semi-illegal arrangements which have been suggested by the hon. member for Davenport and others, then it is advisable to take that into consideration. The bill does this by providing that these tax benefits shall not accrue to a company in its first year.
I think this answers most of the criticisms made of the legislation. As I say, Mr. Chairman, I appreciate the manner in which the debate has been conducted. I know full well that there are difficulties in connection with this legislation but I also believe there are some substantial benefits connected with the enactment of it. I would hope the committee would see fit to pass this now so that we could go on with the other clauses. I am quite sure if that is done, then beneficial results will accrue to the economy of the country.


Walter Lockhart Gordon: I do not want to review and rehash all the things already said about this legislation, but I would like to record that the minister's explanations and answers to our questions have been anything but clear and precise. They covered certain ground that we did not cover, ground of a more political nature, but there is one thing in particular which he said and on which I wish to comment. He suggested that if there was anything wrong with this legislation then in some mysterious way the very efficient officials of the Department of National Revenue could do something about it. The trouble with bad law is that officials cannot do anything about it. This is bad law and in my humble opinion it will not do the things that have been represented on its behalf.


Rémi Paul: Shall clause 10 carry?


William Moore Benidickson: Mr. Chairman, I simply want to say a word on the other side of the coin. Up to now we have been discussing 27507-3-109J
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the question of whether or not this statute is properly and tightly drawn to prevent the maximum of tax avoidance. Also, the question has been before us as to whether this is the best way to provide business incentives, assuming that we have $88 million of tax abatement as a means of doing it. The minister says critics of his formulas cannot have it both ways. We pointed out that this may not be the best way of providing these incentives. It has been suggested that price increases would provide various windfalls and there would be other means by which benefits would accrue without perhaps being earned in the way of incentive, which this clause was designed to provide.
There is another side to the coin. It is that this particular remedy as compared with, say, depreciation allowances or some other form of incentive to industry, would be ineffective if prices go down, and go down to the extent that no matter how hard the producer works, no matter how hard he tries to and perhaps does increase his production, he may not increase his production in dollars under this formula in a manner that would entitle him to get tax benefit.
This is not something that is hypothetical. I am sure the minister read, as I read last week, in the Financial Post the lead headline to their editorial, which is "The big threat in price trends". They quote perhaps the greatest authority in the world today, Per Jacobsson, the managing director of the international monetary fund. He was right a few months ago when people were worried about inflation when he said that was not our concern. But now he gives us rather ominous warnings and, to quote the Financial Post, the prophecy means that "there is unpleasant evidence that the Canadian stage is set for deflation". The Financial Post says:
Substantial as this year's economic growth may be, it is indeed far from making up for five previous years of stagnation and steadily rising unemployment.
I am not going to take personal responsibility for receiving from the minister, as we in the opposition usually do in debates of this kind, the immediate charge of simply, "You are a prophet of gloom and doom". I am simply going to point out to the minister that concern is being expressed today by reputable independent financial observers, particularly those who speak to us from the financial journals of this country. Just yesterday those of us who subscribe received this week's issue of the Financial Post. The lead headline on the front page is "1963 Prospects Slow Down Sure". I am just pointing out to the minister that this formula is not one that will help business if we are in for deflation.

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No matter how hard the businessman tries, under this formula in price deflation, though his volume may increase he will not win because his sales have not gone up in gross dollar value.


[Stage Direction]
Clause agreed to.
On clause 11-"Tax for the year otherwise payable under this part" defined.
George Clyde Nowlan: Mr. Chairman, I might just say that clause 11 is one of those not referred to in the resolution, but it is purely a procedural one to deal with this question.


[Stage Direction]
Clause agreed to.
On clause 12-Logging tax deduction.
John Robert (Jack) Nicholson: Mr. Chairman, as was brought out, of course, in the debate on the resolution, this section is intended to remedy the injustice that exists under the present legislation that is in force in two provinces in Canada, namely British Columbia and Ontario. When the logging tax was first introduced in 1949 in the province of Ontario there was not a great deal of objection taken because it was a resource tax and it was more or less an operating expense. Some four years later similar legislation was passed in British Columbia, and while a protest was raised that it was in effect an increase in income tax, there was no strenuous objection until the year 1957 when both provinces, Ontario and British Columbia, went beyond the stage of taxing the logging operations and began to tax the profits on the operations of the plywood factory, the shingle mill, the saw mill or the other processing units involved. It then became an income tax. But because the dominion-provincial fiscal agreements had been entered into in that year there was not very much that could be done about it until the expiration of the agreements.
I know that since the expiration of the agreements, approximately 18 months ago, continuous representations have been made by operators in all parts of British Columbia and Ontario to the three governments concerned to correct this discrimination, this tax, which results in the forest industries of the two provinces paying a higher income tax than any other units in the forest industry in other parts of Canada. I feel that the government is to be commended for having taken the step to correct this injustice. I might say that when I first saw section 41(A) I was a bit concerned about the wording of subsection 2(a), where it says that the " 'income for the year from logging operations in the province' has the meaning given to that expression by regulation." I was inclined to

fear that possibly the effect of this legislation might be weakened by that. But after discussing it with other colleagues in the house and considering the matter further I must say that, having in mind the action taken by the government of British Columbia earlier this year, probably the government could not have done otherwise than introduce this subsection. Therefore we on this side of the house feel this is remedial legislation correcting an injustice, and we support it.


Mr. Cameron (Nanaimo-Cowichan-The Islands):: Mr. Chairman, I have one or two questions I should like to ask the minister on this clause. The argument was advanced, although it was not advanced specifically just now, by the hon. member for Vancouver Centre that this tax has constituted a double taxation on the same income. But when one reads the bill he realizes that perhaps that is not an argument the minister can advance because this bill does not propose to remove it entirely. However, when we examine another document from another place, the report by the government of British Columbia entitled "An economic review of resources, production and government finances" issued in July of 1962 we see this section. This is the part about which I would like to have some information from the minister:
Logging Tax Act (Revised Statutes of British Columbia, 1960, chapter 225, and amendments) - levies a tax of 10 per cent on income derived from logging operations in excess of $25,000. Under the Logging Tax Act Offset Act (B.C.S. 1962, chapter 35) the lieutenant governor in council is authorized by regulation to offset the logging tax against tax payable under the Income Tax Act, 1962-in lieu of the deduction of the logging tax from income under that act-in the ratio of the general provincial corporation to the federal corporation tax. Provincial action on the full offset of the logging tax is conditional on the federal government providing an offset of the logging tax to its general corporation tax in the ratio of the federal corporation tax to the provincial corporation tax (i.e., the province bear nine forty sevenths of the full offset and Canada thirty eight forty sevenths). This proposal would fully remove the burden of the logging tax.
What I should like the minister to tell us is this. Does this mean that the government of Canada has arranged with the government of British Columbia-although the proportions do not seem quite to jibe, because two thirds, if my arithmetic is right, is not quite the same as thirty eight forty sevenths-to agree to remove completely any tax from logging operations as such? Because I think the committee ought to know that. I think there is a certain plausibility, at least, to the argument that there should not be double taxation of the same income; but if it is advanced as a measure of relief for a number of struggling lumber companies, then I am obliged to view

it with a certain amount of misgiving and reserve. It may be that the logging corporations of British Columbia, who are by far the major economic section of the province of British Columbia, are suffering from the dreadful burden of paying $3 million to the provincial treasury in addition to what they pay to the federal treasury. But I would suggest, Mr. Chairman, that before we begin to shed too many tears over them, we should examine their balance sheets.
I have before me the figures of an operation which takes place in my own constituency. I am sure it is of great interest to this government too, because the leading figure one hears of in connection with this is that of the new deus ex machina of the Conservative party, who sometimes looms over us from the gallery. This is the British Columbia Forest Products Company. They became well known in British Columbia a few years ago on account of a rather distressing circumstance which resulted in a cabinet minister being sent to the penitentiary for bribery, or rather for being bribed. According to the court action, he was bribed to provide extra forest management rights to this company. In 1958 this was a very struggling little company and made a profit of only $718,943. But in 1959 they were really beginning-as we say in British Columbia-to log, both metaphorically and actually, and there was a profit of $3,224,503. In 1960-and I am sorry this is the last figure I have-the profit had increased to $3,535,044. Of course, there were also other considerations, and they were able to put aside in 1960 some $4 million in depreciation and depletion. This, incidentally, is the company which not long ago was announcing with understandable elation that in the first six months of 1962 their profits had increased by 50 per cent over their profits for the comparable period of 1961. It is generally considered that a large part at least of this increase in profits was due to the action of the government in devaluing the dollar.
Now let us come to another one, and this one I might call the daddy of the lot. It is very dear to the hearts of British Columbians because we have seen it grow like the mighty oak from the small acorn. Some of us in British Columbia are old enough to remember when an extremely eminent public servant in British Columbia, the chief forester of the province, took a trip to Europe at public expense in order to sound out market conditions in Europe. He came back and established an export company which since that time has grown, as I say, like the mighty oak from the small acorn. Now the MacMillan, Bloedel, Powell River Company Limited is
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able to make quite satisfactory earnings. In 1959 they made a net profit after all costs and all taxes of $23J million. In addition to that, of course, they also tucked away $150,783,000 in depreciation.
Mr. Chairman, I would suggest that if we are going to accede to the principle, which has I admit a certain validity, that there should not be double taxation of the same income, we should at least make sure that the income is being adequately taxed, and I suggest to you that it is far from adequate at the present time when these sorts of profits are being made. As I say, I am not sure what arrangement has been come to between the two governments; whether it means that on the passage of this bill the provincial government has agreed that it will offset all of the rest of the logging tax and they will not be paying any tax, or whether they are still going to pay some tax to the province. Perhaps these companies prefer to deal with the provinces, having had more satisfactory results in dealing with provincial authorities than they would have with the internal revenue department of the federal government. As my colleague from Comox-Alberni remarked a little while ago, this appears to be giving these companies a second or third kick at the cat, as he called it. I assume that the taxpayer of Canada is the cat which he has in mind. It is at least the taxpayer of Canada who is getting kicked for this.
I am surprised at the intense feeling which has apparently been generated in the logging industry over this tax, which in the light of the figures I have put on the record is almost insignificant. I can only presume that they operate on the age-old precept of looking after the nickels and the dollars will look after themselves, and they do not overlook any bets, however small they may be. But I would suggest this, that if we are going to pass this bill then we must look very closely at the corporation tax structure of this country. I suggest that this government would be well advised to consider revising it in the light of having a much more frequent graduation of corporation tax, somewhat on the lines of graduated personal income tax. Because profits like these, in times like these, plus the enormous allowances which this government and the previous administration have been allowing for depreciation and depletion, to my mind constitute an adequate handout to these struggling little companies.
(Translation):


Mr. Gregoire:: Mr. Chairman, I suggest that the section under study is a typical example of what we mentioned yesterday to the effect that these tax exemptions aimed at

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encouraging an increase in production, especially in the field which is now being considered, would have no effect at all. Let us look at the facts, particularly in the case of corporations engaged in logging operations, and we shall see that what prevents an increase in lumber production is certainly not the burden of taxes, but rather a lack of demand from consumers in this field. For some time now it has been mentioned that there is a decrease in some fields such as in the building industry. Well, it is certainly not because of taxes but rather because consumers lack the purchasing power.
So, Mr. Chairman, I ask the Minister of Finance (Mr. Nowlan) if in the case of the logging industry it is not rather the lumberman whose needs would be the greatest and whom we should pity instead of thinking of the logging companies. Indeed, we see that in every place where there is a logging industry, the working class which gets the least from the economic system is still the class of lumbermen.
We cannot be against a tax exemption, but we ask the Minister of Finance to think of lumbermen who, here at least, should be helped by his department so that they can enjoy a more pleasant life.


Mr. Caouetie:: Mr. Chairman, I completely agree with the statements just made by the hon. member for Lapointe (Mr. Gregoire), but here is what I find in paragraph (a) of section 12:
There may be deducted from the tax otherwise payable by a taxpayer under this part for a taxation year an amount equal to the lesser of
(a) two thirds of any logging tax paid by the taxpayer to the government of a province in respect of income for the year from logging operations in the province;
Whether it is in the province of Quebec, in British Columbia or any other province, the main point is not merely to allow our logging companies to deduct one third or two thirds from their income tax, as set out in paragraph (a), but rather to provide an outlet for their production. What this country needs today is an expansion of trade. All our logging companies are faced with the problem of surplus production. In British Columbia, everything is being done to find new markets, both domestic and foreign, for those products.
The situation is the same in Quebec. The Canadian International Paper, for example, does not know what to do with its wood.
Is it logical to help the CIP increase its production in Quebec when it cannot even

find markets for the products it has in stock? That is no solution or rather it is putting the cart before the horse.
Like the hon. member for Lapointe, I feel that what we need is to find new markets for our products. Yet we have a ready market for them. Giving advantages to the production industry will in no way increase the purchasing power of those who need that wood.
So, instead of reducing the producers' taxes, let us reduce those of our Canadian consumers. In doing so, we will increase their purchasing power and, by the same token, we will enable the logging companies to meet their obligations, even in the taxation field, since companies like Canadian International Paper can pay taxes more easily than city workers. In fact, because of the taxes he has to pay, the small man cannot afford to build himself a house, the construction of which would take care of our wood surplus.
Mr. Chairman, section 12 of the bill should, in my opinion, look after the consumer rather than the producer, because as I said, what we need in Canada is not production but the power to purchase our production.
(Text):


Mr. Fisher:: I am intrigued by the suggestion, if I understood it correctly, just put forward by the previous speaker. We have a great deal of production of pulp and paper in our part of the country, including Kleenex, kraft paper and newsprint. All I can say to the hon. member is that we would really have to pump prime the Canadian consumer if we were ever going to take care of all that production of Kleenex, kraft paper and newsprint. I can see the Toronto Star coming out with editions of 1,000 pages a day, maybe. Perhaps the hon. member would get his ordinary share of that too.
In connection with the logging tax change I should like to make some remarks somewhat in line with those of my colleague from Nanaimo-Cowichan-The Islands. I have been interested for some years in seeing this tax removed. In terms of the total budget it really does not amount to very much. I think it was $3 million last year in British Columbia and about $2 million in Ontario. However, it has been used a great deal by these poor abused corporation presidents always under pressure from a spendthrift government and over-eager and over-zealous trade unions to grab more than their share of the cake. It has always been used by them

as an example of the iniquities and the inequities against which they are obliged to fight. I can remember reading some remarks by another colleague of the colleague who is now advising the Minister of Finance. Not only does this adviser who sometimes sits in our presence, but unrecognized, have an influence out in British Columbia; he has influence I suppose throughout the rest of Canada. But even up in northern Ontario two extremely large pulp and paper complexes seem to have come somewhat under his control.
One of these gentlemen, namely Mr. Warwick Fox of the St. Lawrence Paper Corporation, every year when he brings out the annual report, usually takes the opportunity to talk about the iniquity of the welfare state and how false the politicians are in going after more and more money from these corporations which create jobs and which in essence are really rather benevolent institutions.
This logging tax is used by people like Mr. Fox and Mr. Ambridge of Abitibi, and by other companies, as a terrible example. I can remember reading not too long ago where Mr. Ambridge was speaking. Every year he calls in his employees or representatives from unions, at least, and has a bit of a management-labour conference with them. It is a good idea and it goes very well; but almost invariably at these conferences Mr. Ambridge, who is a very canny man, gets rolling, and this logging tax is one of the things he likes to bring forward as the vicious kind of thing that politicians come up with in order to make life miserable and terrible for those great contributors to our economy, the pulp and paper companies.
Therefore, Mr. Chairman, I say it is wonderful that we are finally going to get rid of this iniquitous logging tax, even though it does not represent that much money, as it is going to take something away from the social scene in which the presidents of large wood corporations operate. It is going to take away from them one of their best bleats, and I think that is a very good thing.
Further than that, as long as this tax remains in existence, or the duplication of the tax, we have a confusion within the provincial scene of just what revenue is available and is coming to the provinces from the crown lands which they hold in trust for the people of the province. At least this applies in Ontario and I assume it applies in British Columbia. We have had a tremendous amount of arguing on the provincial scene in Ontario as to just how much revenue we should expect or how much we should take from our natural resource industries.
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One of the confusions is that so often the person who logs the wood is a great distance away from where the finished product is and where the finished product is sold. We have had the creation of these tremendously large organizations which reach all the way from advertising agencies in the major cities of the world right back to the man cutting the log from the stump. This kind of situation is most confusing where you have in a sense an integrated operation, a very large holding company that may embrace as many as four or five pulp and paper mills and all kinds of side and complementary companies. In this kind of situation it is very difficult to figure out just where the tax money should be taken for both provincial and federal purposes, particularly in relation to the crown lands and the forests which grow on the crown lands. It seems to me that by this move we may be able to have a clearer picture with a little bit less propaganda emanating from the forest industries than we have had in the last few years in Ontario. For that reason, Mr. Chairman, I welcome the move that has been made here.
I was interested in the Ontario legislature's Hansard for April 17, 1962. The hon. James Allan, provincial treasurer, was queried about the resolution that the previous minister of finance had just brought in and he made this reply to the questioner:
It is true that logging companies in Ontario have slightly larger taxes to pay, based on income, than an ordinary manufacturing company but it was only on April 10, 1962, that any indication of an adjustment being made by the federal government was introduced when the minister of finance placed on the order paper the following resolution-
Then the resolution is given. Mr. Allan went on to say:
It has been the view of the Ontario government
for years that any duplication of tax that might be deemed to exist should be shared between the federal government and the Ontario government. No evidence that the federal government would share in such a reduction in taxation was indicated until the resolution referred to was introduced in the House of Commons.
If and when this resolution is enacted into law by an amendment to the Income Tax Act of Canada, it is the intention of this government-
The Ontario government.
-to introduce similar legislation to allow a tax credit of one third of the tax on the taxpayer's income from logging operations under the corporations tax act.
That is a verbal assurance by the provincial treasurer in the Ontario house. I wanted to ask the minister if he can give us any indication as to the timing of the probable provincial action or whether he has heard anything to indicate that the province may have changed its mind in relation to this

Income Tax Act
particular promise with regard to taxation revealed by the provincial minister in that speech.
One of the final points I want to touch on in relation to the logging tax has to do with something that the former minister said in his budget speech last spring when he was speaking on this matter. At that time he said that this proposal constitutes a unique concession inasmuch as no other provincial tax is allowed as a deduction under the Income Tax Act. If this is a unique concession, could the minister indicate the reasons why the concession was given? I am not trying to argue against my approval of the move. I should like to know why in this case the federal government is prepared to take a unique step.
I have always understood that the primary rule in setting out a tax policy is never to make an exception if you can possibly help it, and here we have, according to the former minister, a unique concession. I should like to hear from the minister why this is a unique concession and what possible consequences may flow from it. It almost seemed to me as though the former minister was expressing fear that it might open up some other avenues for concession that would be unique. I should like an explanation from the minister not for controversial purposes but just for information.


Herbert Wilfred Herridge: Mr. Chairman, I rise briefly to express my support of the argument put forward on this clause by the hon. member for Nanaimo-Cowichan-The Islands. As a matter of fact, he almost brought tears to my eyes when he was discussing the destitute condition of some of these corporations, which he knows quite well. I am of the personal opinion that there is validity in removing what might be termed a form of double taxation because I think it is an unsound procedure both from the point of view of principle and the point of view of administration.
However, I think it is a wrong approach to suggest that by doing so we are going to relieve a further unnecessary burden upon these large corporations. Under present circumstances, while the profits of these corporations have continued to increase generally speaking over the last three or four years we have had increases in government deficits, increases in difficulties on the part of small businesses and small industry generally throughout Canada, and we have also had an unemployment problem with us continuously. With the hon. member for Nanaimo-Cowichan-The Islands I believe that we are failing to face up to the opportunities for further revenue when we deal with the problem in

this way. When it comes to the question of this logging tax or other taxes of that type, I have always been of the opinion that the provinces should have resource taxes. They should get their taxes from the value of the timber cut, either stumpage or royalty, from the tons of ore mined and from any other resource used.


John Robert (Jack) Nicholson: Hear, hear.


Herbert Wilfred Herridge: I am delighted that I am being applauded by the member for Vancouver Centre. I know he has long experience in the forest industry of British Columbia. I have always maintained that as far as revenue is concerned from the operations of those companies that are processing natural resources the provinces should depend upon such a tax.
The hon. member for Nanaimo-Cowichan-The Islands gave one or two illustrations of the net profits of certain corporations. He dealt with British Columbia corporations. I have some notes here based on the last information I could obtain. The net profits of the Abitibi Power and Paper Company were $9,657,382 in 1958, nearly $12 million in 1959 and over $12 million in 1960. When we discuss these questions it is not a matter of being personal. I have been informed on good authority that Mr. Ambridge is a very humane, Christian gentleman who has helped many young Canadians over difficult economic stiles. We are dealing with a principle of taxation and the possibilities of further revenue under the circumstances that exist in this country at this time.
Then I come to the Bowater Paper Corporation. Its net profits increased from over $14 million in 1958 to nearly $16 million in 1960 while the net profits of its wholly owned subsidiary, Bowater Corporation of North America Limited, increased from under $9 million in 1958 to over $10 million in 1960. While we support this amendment as tidying up, shall I say, the methods of collecting taxes and removing this degree of double taxation, which is unsound in principle and from the point of view of administration, we believe that under present circumstances we should be giving consideration to securing increasing revenue from these large corporations. It is obvious from their balance sheets that they can well afford to make a greater contribution to the exchequer of this country. We are eliminating this double taxation but at the same time we should do more to compensate small industries and small businesses for the difficulties they are experiencing at the present time. When the minister replies I should like him to give his opinion of the

suggestion we have put forward with relation to increasing the corporation taxes of those corporations that can well afford to pay, and also his opinion with respect to the taxation of resources within the jurisdiction of the provinces.


John Robert (Jack) Nicholson: Before the minister speaks, may I say I would not want hon. members or others who might read our proceedings to gather that the members on this side of the house are speaking on behalf of some 10 or 12 large pulp and paper companies. What the last four speakers all seem to have overlooked is that there are several hundred manufacturers of forest products throughout the provinces of Ontario and British Columbia who are seriously affected by this tax. It is the principle that is involved, more than anything else.


Thomas Speakman Barnett: If I may just say a word in connection with the last remark by the hon. member for Vancouver Centre, I would say there is no argument but what there are smaller operators in this field than those mentioned earlier by some of my colleagues. However, I think if he had followed those remarks carefully, particularly the last remarks of the hon. member for Kootenay West, he would have realized that what was being suggested to the minister was that consideration should be given to a revision of the taxation structure in a manner that would cause taxes to come from the sources from which they should come.
The only thing I should like to say in expressing my agreement with the approach taken by the hon. member for Kootenay West in respect of the resources tax is that I feel, in looking at this proposal, that this parliament is being placed in a horrible position as a result of the stupid action taken by the provincial governments of two of the provinces. It seems to me there can be little argument that this is poor legislation; that it is a bad principle that this parliament should, in effect, be asked to bail out any taxpayers of Canada because certain provincial governments may have introduced certain stupid and illogical methods of collecting taxes in their own fields. While there may be some point in straightening up these anomalies, nevertheless I hope this will be the only precedent for legislation of this kind. We could open the way for other provincial governments to introduce equally ridiculous tax proposals, and then have them come to this parliament to have the taxpayers in those provinces bailed out as well. I hope the minister will make it clear, if approval is given to this proposal, that this parliament is
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not extending an open invitation to other provincial governments to act in an equally irresponsible manner.


George Clyde Nowlan: I have very few comments to make on this clause. I appreciate what hon, gentlemen opposite say, on the one hand, that they are in favour of this legislation-with the exception of hon. gentlemen in the corner -and on the other hand, suggest there is something iniquitous about it. I happen to have had the privilege of sitting in on all dominion-provincial conferences since I have been on this side of the house, and in 1957 or 1958, whenever the first one was held. I can tell hon. gentlemen opposite, and hon. gentlemen in the far corner, that this action was not prompted by the tycoons from British Columbia or from Ontario. This action was prompted by requests of the provincial treasurers of those two provinces. These requests were made time and time again, and for that reason we have taken this action.
Personally, I welcome those expanding profit figures which my hon. friend read to me a few minutes ago. They simply bear out what we have always said, that under this government the economy of Canada is expanding and prosperity is greater. I appreciate very much this tribute to our efficient housekeeping indicated by the figures which the hon. member has put before us today. I also remind hon. gentlemen that the larger those figures are the larger the intake of my colleague the Minister of National Revenue which, afterwards, is paid over to me as Minister of Finance. I welcome, therefore, these expanding figures and I hope they grow larger as time goes by.
My hon. friend from Kootenay West said he was talking about a tax philosophy. The reason this action is being taken, Mr. Chairman is, as I said, at the request of the provincial governments and because, as a matter of tax philosophy, we thought it was unfair to this primary industry which was subject to two systems of tax, this income tax, a 41 per cent corporate tax, and then these logging taxes in addition. It is not a matter of double taxation per se, it is the matter of the imposition of this tax upon an industry which provides a great deal of employment. Although there are some large operators, we know there are also some smaller ones, and it is for that reason and on that basis we are amending the act to remit to the taxpayer two thirds of this logging tax, rather than having it deducted from income as heretofore.


[Stage Direction]
Clause agreed to.
Clause 13 agreed to.
[Stage Direction]
Income Tax Act
On clause 14-Demands for returns.
Edgar John Benson: I should like to ask the Minister of Finance why it has become necessary to give the right to the Minister of National Revenue to personally serve the request for a tax return rather than trusting to the mails. Is it because the minister can no longer trust the post office to deliver this sort of thing?


[Stage Direction]
Clause agreed to.
On clause 15-Minister may obtain advice.
Edgar John Benson: I should like to say a word about clause 15, Mr. Chairman.


George Clyde Nowlan: This is one which was not referred to in the resolution, I should have said.


Edgar John Benson: Yes. Subsection 5 Cb) of this
clause I find very interesting in that just a little while ago when we were talking about clause 10 the minister and I discussed the question as to the definition of manufacturing or processing. The minister seemed quite happy to have this decided by the courts. Now, we refer to scientific expenditures and this word is defined in the bill. Scientific expenditure is defined as meaning any activity in the field of natural or applied science for the extension of knowledge. In this clause the minister asks to have scientific research given the meaning that is expressed by the regulations and here he is asking for discretion in determining what a scientific expenditure is; but he said this was not necessary in connection with clause 10.


George Clyde Nowlan: Of course, this is a specialized field, Mr. Chairman, in which a great many questions could arise as to what is and what is not research. Frankly, I do not know why this clause is in here because I know that the Department of National Revenue obtains the assistance of other departments in advising on these matters. When I was minister, I know a question arose as to whether or not a mine that had been operating for three years was entitled to a tax recess. We obtained the advice of the mines branch in respect of that question. Here, in connection with the matter of what is or what is not research, I think it proper we should be authorized to go to the national research council to get assistance and advice when it is required.
I believe that this clause will have a beneficial result upon research. We hope it will greatly expand the research work being done in Canada and also bring in research work from outside to be done here by companies associated with companies outside of Canada.


Edgar John Benson: I had no objection to the clause as such or the extension of scientific

research in Canada. The one thing I feel may be subject to objection is the fact that ministerial discretion is being put back into the act by this particular clause which gives the minister the right to determine whether or not something is an allowable expense.


George Clyde Nowlan: There was a discretion, if you call it that, in the act before this because, in order to take 100 per cent, I think it was, of the expenditure, the consent of the minister had to be obtained.


[Stage Direction]
Clause agreed to.
On clause 16-Additional deduction for scientific research.
Gordon Campbell Chown: Shall clause 16 carry?


John Napier Turner: Mr. Chairman, this clause deals with the additional 50 per cent as an extra incentive to companies to encourage them to conduct scientific research in Canada. My only comment is that while this particular clause, in terms of its incentive towards scientific research, is perhaps more beneficial than the incentive legislation under the proposed section 40A, its long term effect is somewhat limited by the fact that under clause 2 of the bill the extra 50 per cent which is granted to a corporation for scientific research in Canada is brought back into income on disposal of those assets. In other words, it is not like the deduction in clause 15, which is considered to be an expense, but in effect is a type of accelerated depreciation, which is brought back into income on the disposal of the assets.
For that reason I would suggest to the minister that the term "deduction" is a misnomer, and what we really have is a disguised type of acceleration depreciation, and one which somewhat diminishes the long term effects of the incentive he is trying to achieve.


George Clyde Nowlan: I think there is an element of fact in the approach of my hon. friend. That is true to some extent. On the other hand, if we did not have this provision in here it was felt it would be very easy for a firm to acquire machinery and equipment and then divert it for other purposes. Suspicions have been advanced before this today that some taxpayers would seek opportunities to avoid the incidence of taxation if possible, and it was felt that with a provision such as this it would make it difficult for them to do so.


Douglas Mason Fisher: Opposite page 14 of the bill there is an explanation which says:
The new subsection permits the minister to obtain advice from other agencies of the government in determining what constitutes scientific research.

Is it merely that advice that is going to be obtained, or would officials of these departments be used somewhat in the way of assisting in the kind of check made by an assessor going in to examine the books and operations of a company?


George Clyde Nowlan: It is simply, as the clause says, to get advice as to what constitutes scientific research. There could be a claim made that certain production steps made by a company were really scientific research and it would be hard for one who did not have scientific training to deal with the claim or disprove it. It is simply an advisory device, to advise the department, if required, as to what in the opinion of the council does or does not constitute scientific research.


Douglas Mason Fisher: Would it not be fairer to let the matter go to an appeal where the disallowance of a company's proposal is made? It seems to me this amendment might be getting the scientific agencies of the government somewhat close to the tax collection basis, and I think there is a great difference between research work and tax assessment.


George Clyde Nowlan: This does not involve the scientific council directly in any procedure such as that. It simply enables the minister, for the time being, to take advice, if he wants it. It is the minister who takes the responsibility, not the national research council, and the national research council would probably never appear in the matter. Officially the minister would give his decision and he gives his decision on such information as is available to him. This will not preclude a taxpayer going to the courts if he is dissatisfied.


Douglas Mason Fisher: But then he would know he would have to challenge the scientific advice of the minister with scientific advice of his own.
I have a general question with regard to clause 16 and what might be a counter relationship. As the minister knows there are provisions within the act, not covered by these particular changes, that encourage corporations to give money to universities, colleges and technical institutions. Those kinds of allowances which were introduced a few years ago were welcomed by everybody who realizes the burdens on universities, and I understand there has been a growing tendency that industries making such gifts to universities do so on condition that they be used for scientific or research purposes.
Have the minister's officials considered that this particular change which is being introduced may have some bad effects on the amount of money which corporations are giving at the present time to universities where research is being conducted? Could
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there be an effect caused by this particular legislation that might lead to the reduction of the amount of money granted to universities by corporations?
I mention this because usually any corporation which is able to get into scientific research is a rather large scale organization and, because of its size, it is probably the type which has begun to build up some kind of tradition of making gifts to universities. It would seem to me that this kind of incentive here might lead some of them to wonder whether it would not be wise to take advantage of this in the research field, rather than continue with gifts and donations that they may have been making for a special purpose to some science faculty of a university.


George Clyde Nowlan: Well, Mr. Chairman, this is a rather theoretical matter. Certainly I am most interested, as is my hon. friend, in assistance to universities, but I would think that if a corporation got a tax credit for 150 per cent for certain expenditures that were made, then that corporation would be in a more generous position vis-a-vis its balance sheet, and would give more if it so desired.
I would also point out to my hon. friend that these provisions regarding research permit the taxpayer to farm out research, and a great deal of money paid out today by corporations and, in fact, the national research council is going to universities carrying out specific programs. It would be possible for a taxpayer to retain the facilities of X university, pay that university for the research and get 150 per cent tax credit on it. Therefore I would think there would be substantial inducement for commercial undertakings to be of greater assistance to universities in future than they were in the past.


[Stage Direction]
Clause agreed to.
On clause 17-Transfer of funds.
Mr. Nesbili:: In view of the remarks made by my colleague, the hon. member for Hamilton South, last evening, I think this clause is of very great importance to hundreds of thousands of persons employed in industry as it is a start in dealing with the very complex and vexing problem of portable pensions. This is of interest to so many people that I would ask the minister to give us a rather expanded explanation of the effect this clause might have.


Edgar John Benson: I would like the minister, when dealing with this clause, to answer the question I asked him back on clause 2, whether or not this helps the widows to receive lump sum payments out of pensions.

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George Clyde Nowlan: Mr. Chairman, as my hon. friend from Hamilton pointed out last evening, heretofore this permitted the payment from one pension fund to another without attracting tax. Clause 17 permits the payment without attracting tax, from one savings plan to another, or from a savings plan to a pension plan. In other words, it is a step along the road anyway, shall we say, to portability of pensions. There is portability in respect of these two phases, the one last year of pension plans and this year of savings plans.


William Hector McMillan: Mr. Chairman, I would like to ask the minister one question. In clause 17 (12) (a) what does it mean when it says "to another such person under a registered retirement savings plan"?


George Clyde Nowlan: Mr. Chairman, I am afraid the explanation is too technical for me to even follow, although it was explained to me. But it is possible for one issuer to transfer, under certain circumstances, to another issuer. That is why this term "another such person" is used in this clause throughout. Further than that the witness would not care to go.


Edgar John Benson: Mr. Chairman, does the minister mean transfer to another trustee? Is that what I am to gather from what he said, a transfer from one trustee to another trustee?


George Clyde Nowlan: That is right.


[Stage Direction]
Clause agreed to.
Clause 18 agreed to.
On clause 19-
John Napier Turner: Mr. Chairman, I do not want to forestall the hon. member for Calgary South, who has a legitimate interest in rising on this particular question affecting the oil industry, but perhaps I may for a moment just comment on section 83A to which has been added another 15 pages of legislation which I must confess I find rough, going into a rough, rough act. It is virtually impossible to decipher and virtually impossible to understand. I am reminded of the words of a learned judge of the exchequer court when speaking about this particular section earlier this year in the Hargal Oils Limited case. I am speaking of Mr. Justice Dumoulin, who had this to say about section 83A, to which we are now proposing to add another 15 pages of legislation:
This encompassing enactment despite, or perhaps on account of, its pretensions at exhaustiveness, revolves itself into another statutory Noah's ark, corralling together a menagerie of conjectures, deductions hinted at or refused and criss-cross 
references to other sections, inevitably jeopardizing the task of making "heads or tails" of such a jumble.
If that was the situation before the suggestion of this amendment, my only comment is that, instead of its being a Noah's ark most of the taxpayers will be sunk before they get halfway through it. In any event I might draw to the attention of the committee that it is certain, especially because of clauses 5(b) and 5(c), which are found on page 26 of the text of the bill, that any corporation which was entitled to drilling or exploration expenses on April 10, 1962 must, except for the special cases cited in here, include in income the proceeds of disposition after that date.
In other words, under this legislation it will be virtually impossible for an oil company henceforth on the sale of its assets to make a capital gain in respect of those capital profits. Since most of the assets now acquired are acquired by United States petroleum companies, what it means is that any new operators getting into the oilfields will under this legislation find it virtually impossible to achieve a tax gain or a tax free increment on the disposal of those assets.


Mr. Smith (Calgary South):: Mr. Chairman, I indicated to the minister when we were discussing these provisions in resolution form that I would appreciate it if he would give us his interpretation of certain words which appeared not only in the resolution but of course also in the bill. The purpose of drawing it to his attention is to ask whether or not his officials, the law officers in particular who drafted this bill, intend to include farm-outs under the heading of "consideration". This, of course, appears in subclauses 5(b) and 5(e). I think I might wait until the minister has an opportunity of indicating whether he is prepared to make a statement before I argue the importance of these particular subclauses.


Mr. Grafftey:: Mr. Chairman, I would like to indicate to the hon. member that we are prepared to make a brief statement on the proposition of farm-outs. A common form of farm-out agreement is an agreement under which the holder of gas and oil rights agrees to assign a part of his interest in the production from wells on the property to another person if the other person drills a well or wells to a specified depth, at his own expense, and the drilling is successful. In these circumstances, even though the original holder's rights are made more valuable by reason of the successful drilling, he does not actually receive any payment for the part interest

that he must give up, so there is no amount to be brought into income. Of course, if he later sells the part of the interest which he has retained or any portion of it, the amounts received from the sale must be brought into income.


Arthur Smith: Mr. Chairman,
I think that basically satisfies the concern which was not only in my mind, but I am sure in the minds of a good many other hon. members. We were particularly anxious to have it established that a farm-out arrangement should not be interfered with in its normal interpretation and that it should not be treated as a sale of oil lands, because it is appreciated, of course, that the farm-out provision in exploratory work is very often the key to the discovery of oil reserves. In fact the history has been that in a great many instances an independent Canadian company has only been able to obtain its entry into the industry via the farm-out route.
On the other hand we see other examples in which some independent companies have taken under lease large areas of land and have farmed out large parts of those leases to other companies who have greater resources to develop them. If this provision had not been clarified it might have been equally harmful to those individual Canadian companies. Therefore I think this definition or clarification of the word satisfies the point that I raised earlier.
(Translation):


Mr. Chapdelaine:: Mr. Chairman, subsection 3(c), paragraph 5, section 19 of the bill now under discussion reads as follows:
A joint exploration corporation may in a taxation year elect in prescribed form to renounce in favour of another corporation described in subsection (3b) ...
That is, an exploration corporation or concern connected with the main corporation.
... an agreed portion of the aggregate of such of the . .. expenses.
Who will agree on that portion, and who will decide of the percentage to be agreed on? Is it the government which will decide if that portion is appropriate or not, or is it the corporation itself which will determine the portion of expenses to be transferred to another corporation with which it is connected? As a matter of fact, is it that company which will decide whether that portion is appropriate or not?


William Heward Grafftey: Mr. Chairman, it is the corporation itself which makes the decision. (Text):


John Napier Turner: In the absence of the minister might I pose a question to the parliamentary
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secretary, the hon. member for Brome-Missis-quoi. It is with reference to his interpretation of subsection 5(b) and 5(c), which say that there is a penalty against anyone who enters oilfields and acquires rights to drill or to explore properties after April 10, 1962. In view of the fact that about 85 per cent of those properties are currently held by Americans, what it really means is that in future Canadian participation in oil rights will be taxed as a revenue transaction; whereas under the present law any rights acquired before April 10, 1962 can in the appropriate circumstances be disposed of as a capital gain free from tax. Would that in effect not constitute a discrimination against new developments, especially new Canadian developments?


William Heward Grafftey: The answer offhand is no. People entering the oil industry will be taxed, but people buying rights will be able to expense the cost of the rights.
(Translation):


Mr. Cook:: Mr. Chairman, referring to paragraph (3)(c) from which the hon. member for Sherbrooke (Mr. Chapdelaine) has read out an extract, I notice that subparagraph (b) reads
as follows:
the prospecting, exploration and development expenses incurred by the joint exploration corporation in searching for minerals in Canada.
Are there any exceptions or are all minerals included? If so, I believe that the word "any" should be inserted.
(Text):


William Heward Grafftey: Mr. Chairman, again in
answer to the hon. member for St. Lawrence-St. George, another answer to part of his question is that oil companies selling rights will have to take the proceeds into income.


John Napier Turner: That is, those properties acquired after April 10, 1962?


William Heward Grafftey: No, all properties.


Gordon Campbell Chown: The hon. member for Mont-magny-L'Islet asked the parliamentary secretary a question and I do not know whether he heard it.
(Translation):


Jean-Paul Cook: Mr. Chairman, I inquired, in connection with subparagraph (b) of paragraph
(3)(c) which reads as follows:
the prospecting, exploration and development expenses incurred by the joint exploration corporation in searching for minerals in Canada.
Are all minerals included or are there any exceptions? If all minerals are included should not the word "any" have been inserted before the word "minerals" in the bill?

Income Tax Act


William Heward Grafftey: There is no exception whatsoever.
(Text):


Gordon Campbell Chown: Shall clause 19 carry?


William Moore Benidickson: Mr. Chairman, this is one of the situations which I intimated yesterday we might get into when a very short study interval or practically no interval is provided to the industries affected by the legislation before us. This bill was presented Wednesday afternoon and we were asked to proceed with it on Thursday. If the tax advantages that so often relate to something regarded as a gain capitalwise, are to be lost here, I am wondering to what extent the industry itself is aware of what the government is proposing in this legislation. I doubt very much if we are likely to complete the bill by five o'clock. I believe there are a number of others who want to speak on this bill. They may not be in this section of the committee, but I understand there are others elsewhere who wish to speak. I wonder whether this clause could be stood, not to hold up the passage of the bill if there is a prospect of getting through this afternoon, but on the assumption that it will not, perhaps it could just be stood till we get an even more expansive statement as to the change that results in the category in which profits of this kind will be taxed. Are they to be regarded as taxable income or as a capital gain after April 10, 1962?
(Translation):


Gérard Chapdelaine: Mr. Chairman, coming back to my previous question, I believe that the final wording of section 11 of the resolution reads as follows:
That a joint exploration corporation may renounce an appropriate portion ol the drilling expenses ...
The parliamentary secretary to the Minister of Finance answered a moment ago that it was the corporation itself that decided on that appropriate portion.
Then, why is it said that the corporation would be able to deduct only an appropriate portion? If it is the corporation itself that decides, it will be able to deduct all its expenses. The situation should be clarified and it should be established whether or not the corporation could deduct all its expenses or only an appropriate portion of its expenses.
(Text):


George Clyde Nowlan: In reply to the reference which the hon. member for Kenora-Rainy River made to the advisability of holding this section until such time as the industry has a chance to review it, may I say that knowledge of this section has been before the industry for a long period of time. As far as I know there has been no dissent from the

industry whatsoever in connection with it. There have been all sorts of expressions of approval from the companies affected by it. It is in the interests of the industry to have this legislation implemented at the earliest possible moment. It is to their advantage. I therefore would not wish to see this section held. I do not think it should be held.
The hon. gentleman is perfectly right in what he says in the ordinary circumstance where resolutions are brought in and carried forward immediately. However, these matters have been before the industry for a long while and therefore there is not the necessity for the time element that there would be if these were being brought in or initiated in a new budget and being dealt with a few days thereafter. In reply to my hon. friend with respect to expenditures, I am told that it would be possible for them to charge up as expenditures the total amount paid out for the rights.


Gordon Campbell Chown: Shall clause 19 carry?


John Napier Turner: Just in order to clarify the matter, if I may, without labouring it, the point that I was attempting to make, may I say this. On page 26 of the text of the bill, subparagraph 5(b) I think it is stated very clearly that any right, licence or privilege on its disposition is brought into income unless the corporation or association or partnership or syndicate acquired such right, licence or privilege before April 11, 1962, and disposed of it before November 9, 1962. In other words any new participation in the industry by way of rights to explore or rights to drill will be deprived henceforth, as we understand it on this side, of a capital gain on the disposition of those assets.


George Clyde Nowlan: That is my understanding of the situation.


William Moore Benidickson: And the minister says the industry is well aware of the results.


George Clyde Nowlan: Yes.


Colin Cameron: There are one or two questions I would like to ask on this particular clause of the bill. I have been wondering just what is included in the term "exploration expenses including all general geological and geophysical expenses." How do you determine what is a new exploration? I presume that is what this bill is intended to cover, and not the mere expansion of present operations. There must be some dividing line, I presume. For instance are they to be permitted this tax concession in respect of all the wells they may drill regardless of the experience in surrounding areas? If that were the case, it would seem to me that there is considerable discrimination. It may very well be that a

company in sinking its well has been able to acquire so much geological knowledge of what has been the experience close around that it may be virtually sure of what it is going to get.
However, in addition to that, I should also like to ask the minister just why it has been considered necessary to make another provision in order presumably to encourage exploration for oil and for minerals, in the light of the present concessions that are granted to this type of operation in the country. I must confess I do not know much about the Canadian oil companies. I am obliged to take what I get out of the official documents. However, there is one called the Canadian Petrofina with a quite modest net profit of just over $1 million in 1960. However-and this is the important thing-$36 million were put aside for depreciation and depletion. This would seem to me to be adequate provision for future operations. Then we can go to another one and I notice that these figures vary quite sharply from company to company. They must have different policies. I am now referring to Texaco Canada Limited which has more substantial profits than had the previous company I quoted, namely about $11 million in 1960. They put aside only $8,100,000 for depletion and depreciation reserves.
It would seem to me that apparently these oil companies are permitted already to put aside a nest egg for future operations that would cover any prospective losses, without these special provisions that you are proposing to grant them now. The case is even more pronounced with regard to mining. I have here some figures for a mining company that has not brought too much credit to Canada in recent days since it has been the subject of investigation in the United States. I refer to the International Nickel Company, with $80 million in net profits and $304 million for depreciation and depletion. When a company is able to set aside over $300 million for depreciation and depletion, it would seem to me that it has ample funds for any exploration with regard to future ore bodies at its disposal without asking the taxpayer of Canada to subsidize it further, particularly when we find that in 1961 the net profit in the first three months was $18,600,000 compared with $11,900,000 in the same period in the year previous.
Then let us turn to the Algoma Steel Corporation. We may feel perhaps that the International Nickel Company has been rather blown upon during the last few days in Washington. I believe Algoma Steel is full of virtue and it also has an interesting history. It had profits of over $11 million in
Income Tax Act
1958	and it set aside for depletion and depreciation allowances $95 million. The following year it had profits of $17 million and it set aside $104 million in depletion and depreciation allowances. In 1960 it had net profits of $13 million and it set aside over $111 million.
If this government is feeling generous, Mr. Chairman, I feel that there are more suitable directions in which this generosity could be exercised. I cannot conceive of Algoma Steel Corporation or International Nickel Company being pinched in any way for funds for exploration and geological research. It may be said, of course, that this is not meant to apply to these big monsters, that the government is not interested in them at all, but that it is interested in the little people who are going out with a pick and shovel to try and establish a new mine or who are going out with a small drilling rig in order to establish a new well. If that is the case, I would suggest that the government had better draft this bill in rather different form.
What is quite obvious is that the bulk of any returns that come from these concessions will and must inevitably go to these large figures in the two industries concerned. It would appear to me, when we have a government urging the Canadian people to tighten their belts, a government that has reduced its expenditures to a disastrous extent and has treated its own employees in an extremely casual niggardly manner, that such a government should not be considering reducing its income in order to give handouts to people who do not require them.


Gordon Campbell Chown: Shall clause 19 carry?


George Clyde Nowlan: In reply to the hon. gentleman I just wish to say that I think he was a little bit out in left field in dealing with the section. In fact, he was out of the ball park entirely. This clause does not deal with exploration expenses; it does not deal with any matter such as that. It deals with the acquisition of rights, the sale of rights and the possibility of taking them into income.
Mr.	Cameron	(Nanaimo-Cowichan-The
Islands): Are we on section 19?


George Clyde Nowlan: It deals with the sale and the acquisition of rights and nothing else. It puts people who may want to acquire rights roughly into the same position as those in the United States where individuals and firms engaged in other businesses other than oil can enter into such undertakings. This is all that the section deals with.
Mr.	Cameron	(Nanaimo-Cowichan-The-
Islands): May I ask if I may be provided with a copy of the bill, such as that which

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the minister has, as the copy of the bill which I have reads in this way in section 19, which I believe is the section we are dealing with. I would call this to the minister's attention:
A corporation whose principal business is
(a) production, refining or marketing of petroleum, petroleum products or natural gas, or exploring or drilling for petroleum or natural gas,. .. may deduct, in computing its income under this part for a taxation year, the lesser of
(f) the aggregate of such of
(i)	the drilling and exploration expenses, including all general geological and geophysical expenses, incurred by it on or in respect of exploring or drilling for petroleum or natural gas in Canada, and
(ii)	the prospecting, exploration and development expenses incurred by it in searching for minerals in Canada,-
I would respectfully ask you, Mr. Chairman, to send me a copy of whatever bill the minister has before him as he obviously has not this one.


Gordon Campbell Chown: Shall clause 19 carry?


Thomas Clement (Tommy) Douglas: Let us find out who is in the ball park.


George Clyde Nowlan: My hon. friend should know that what he has read is in the present act and there is no change there whatsoever. It is true that we are dealing with the amendments which are included in this bill, and this is part of the original act to which my hon. friend refers.


Colin Cameron: Again, Mr. Chairman, the minister must have another copy. My copy reads this way:
Section 83A of the said act is further amended by adding thereto, immediately after subsection (3a) thereof, the following subsections-
What I read just now.


Gordon Campbell Chown: Shall clause 19 carry?


Some hon. Members:: Carried.


[Stage Direction]
Clause agreed to.
Colin Cameron: Then we cannot find out what it is.
Clauses 20 to 22 inclusive agreed to.
On clause 23-
(Translation):


Gilles Grégoire: Mr. Chairman, yesterday, on second reading of Bill C-78 to amend the Income Tax Act, I mentioned some of the reasons for which we are opposed to section 23, providing tax deductions for foreign corporations working mines in Canada.
[Mr. Cameron (Nanaimo-Cowichan-The Islands) .1
Mr. Chairman, the Minister of Finance (Mr. Nowlan) would like to see a great many industries settle in Canada, which would create jobs and by this very fact decrease unemployment in this country. I agree. Yet, we believe that it should not be done at any price. When we are asked-as is the case under section 23-to grant special tax exemptions to foreign corporations who would come to our country to develop our mines, those are obviously companies who have the required financial resources. This means that we recognize by this very fact that Canadian companies do not have those resources or are not able to find capital in this country.
If, at this time, our Canadian companies do not have the necessary capital to develop our own mines or are unable to find it, there must be something wrong in our system. There is certainly something lacking, if we have to approach foreign companies and even give them some privileges in order to attract them to this country.
Mr. Chairman, I think that we do not look at the development of our natural wealth from the right angle.
Rather, we should ask ourselves: Have we, in this country, the required engineers, miners and machinery for the development of our natural resources? If we do have them, why then go and beg capital in New York, Chicago, Switzerland, Italy, France, Belgium or elsewhere?
We have a wealth of natural resources, we have labour, we have the engineers and we can obtain machinery. Therefore, there is only one thing we do not have: capital.
Clause 23 of the bill bears out my assertion, since its intent is to get foreign corporations to come to this country by granting them tax exemptions. The purpose of clause 23 is not to get engineers, because we have them; it is not to bring in more miners, for we know that we have unemployed miners here in Canada and it is exactly to put them back to work that the government wants to lure foreign corporations to come to this country. Everybody, of course, knows that we have the necessary natural resources. Our problem is that they must be developed with foreign capital.
Mr. Chairman, it seems to me that the Minister of Finance should realize that we have here the essential elements and I mean, mines, natural resources and labour for the operation of our mines. We also have engineers and machinery; therefore, the only thing we

need on top of that is capital. This is a problem he should try to solve and if no solution appears feasible to him I really wonder what problem he could solve?
We do not ask him for miracles. This is not a matter of "growing" mines in the province of Quebec or elsewhere in Canada. The mines are already there. It is not either a question of looking for engineers, we have them. The only thing we ask him is to find means to put capital available for our Canadian companies. The only thing we need is the ticket to develop our natural resources. With reference to this section, Mr. Chairman, the Minister of Finance reminds me of a station master-anywhere in Canada, in Ottawa or Montreal-who would refuse to let people get on the train simply because he forgot to have tickets printed and who would tell the Canadian people: "I cannot sell tickets for I forgot to have them printed, so you cannot get on the train".
What would you think of such a station master? You would say of course that he was remiss in his duty in neglecting to have tickets printed to let those people travel. What would you think of the station master who would let the train pull out without any passenger?
With this section, it is exactly the same situation. The real resources, mines, ores, engineers and machinery are there. The only thing missing is the "ticket" to permit the development of our resources.
Mr. Chairman, one question we might ask the Minister of Finance is this: Which is the most important? The mine itself, the ore it contains, or the capital required to develop the mine? Of course, it is the ore. The mine, the ore, the potential is there. Even with the best intentions in the world, the Minister of Finance absolutely could not create the mine and the ore, but it is his duty to deliver the "ticket" to develop that mine. That, the Minister of Finance must do.
It seems to me that on this discussion of section 23 of Bill No. C-78, it is relatively easy, after the remarks I just made, to understand the Social Credit supporters when they say that what is physically possible should be made financially possible. It is physically possible to develop our mines because we have everything we need. But it is not financially possible, and that is evidenced by the fact that the Minister of Finance will have to get capital from outside the country.
Income Tax Act
But is he not the minister responsible for the Bank of Canada? That being the case, he can use the Bank of Canada to create the money required for the development of our mines and the extraction of the ore that lies there waiting.
People will say that Social Crediters want to manufacture money. No, Mr. Chairman, that is not so. All we want is simply to make financially possible, what according to that section 23, is recognized as being physically possible. We want the Minister of Finance to use that instrument he has, that is, the Bank of Canada, to ensure that the mines of our country will be developed.
Some will raise the cry of inflation. Is capital from Ottawa going to create more inflation than capital from New York? The same amount of money will contribute to the development of our mining industry. What would be the result if the Minister of Finance were to use Canadian instead of foreign capital?
The problem is always the same. By constantly calling upon foreign capital to develop our natural resources, we have reached the point where 70 per cent, or even more, of our industries, our natural resources, our manufactures are developed with foreign capital. All those foreign investments in Canada were made with profit in mind, and each investor gets a profit or an interest from the shares he holds in our country.
That money, I said it yesterday and I am saying it again this afternoon, leaves Canada each year for foreign countries. That is the main reason for the imbalance in our foreign exchange. It is also the reason for the austerity program that has been with us since two or three days after the election of last June 18.
We do not necessarily lay the blame for Canada's present situation on the present Minister of Finance. The finance department was not in his hands when Canada started encouraging foreign investments some 15 or 20 years ago. There have been other ministers of finance and they are the ones who are responsible for the situation in which we find ourselves nowadays because that was the time to prevent foreign investment in our country and they failed to do so. They did exactly the contrary; they encouraged foreign investors to place their capital in Canada. They are the ones who are to blame for Canada's present economic difficulties. The

Income Tax Act
present Minister of Finance cannot therefore be held responsible for the enormous quantity of foreign investments in our country nor for the yearly outflow of Canadian capital under the form of profits and interest.
On the other hand, if the present Minister of Finance continues the ruinous policy of the previous government, if he does not give up that policy which Canada has been following for the past five, ten or 15 years, he will be the one who deserves our criticism. For the time being, however, we blame only the federal ministers of finance of the past 10, 12, 15 or 20 years, whose attitude caused the present situation.
Mr. Chairman, I notice that some of the Liberal members who sit on this side of the house seem to find my remarks funny. It still remains that an economic crisis like the one we are going through right now does not occur overnight.
Mr. Chairman, the present crisis is not, in fact, a true economic crisis, it is just a monetary crisis created by investments of foreign capital in our country. That economic situation was brought about by the Liberal administrations that came before the present government.
Mr. Chairman, I wish to say to the Minister of Finance that if he continues to apply the disastrous policy adopted by his predecessors 15 to 20 years ago, he will be held responsible in his turn, 15 years from now, because then the situation will have become worse.
In fact, if you look at the capital leaving the country at the present time-


Rémi Paul: Order. I have listened carefully to the remarks made by the hon. member for Lapointe (Mr. Gregoire), but under the provisions of standing order 59 (2), I must remind him that he must limit his remarks, as much as possible, to the clause under study which, in this case, deals with the mining of iron ore in Canada.
Consequently, I have no doubt that the hon. member will come back to the clause under study.


Gilles Grégoire: You are right, Mr. Chairman, clause 23 deals with the mining of iron ore. I am talking about the mining of iron ore when I say that it proposes to grant an income tax reduction of 15 per cent to nonresident companies that will come and mine iron ore in Canada. That is what I am talking about.

I have no intention of talking in this house about the mining of iron ore because I am not familiar with that matter. However, I know very well that if non-resident corporations, or foreign capitalists, are allowed to develop our Canadian iron ore, then we are certainly creating an economic crisis for the years to come.
Mr. Chairman, if we are dealing with this principle it is because we want to urge the Minister of Finance to cancel section 23 of Bill C-78 now under consideration.
Temporarily, he might perhaps gain an immediate advantage, but such an advantage will always be only immediate.
That provision of the bill will perhaps encourage companies to set up here in this country, since they would benefit from a 15 per cent tax reduction on mining operations. But, Mr. Chairman, if our mines are developed by foreign companies, what will be the result in a few years?
First of all, there will happen what has always happened, that is, that foreign companies will get hold of our ore and will transport it in their countries under that form. And afterwards, it is in those foreign countries that secondary industry will prosper and will transform that ore into secondary or finished products. And what will we have here in Canada? We will simply have given away our natural resources to foreigners; foreign industrialists will have taken over our raw materials to send them to other countries.
Mr. Chairman, the first disadvantage of such a policy is the fact that when foreign companies come here to develop our natural resources, they hasten to transport our raw materials into their own countries, thus promoting there the expansion of secondary industries. It is the progress of secondary industries which brings about increased employment.
The implementation of this section may result in increasing labour demand in other countries, but not in Canada.
The second disadvantage which might result from the implementation of this section is the one to which I referred a moment ago, that is to say, that in eight or ten years from now, when the development of those mines will have begun to progress, the profits made will get out of this country, and it is our monetary system which will still continue to suffer the consequences.
Mr. Chairman, I would ask the Minister of Finance to cancel section 23, not in cancelling income tax for those who develop our ore,

but rather in easing the tax burden for Canadian companies only, and not for foreign companies.
That is why I should like to suggest an amendment to section 23, that is to strike out the words "non-resident corporations", to leave only the words "Canadian corporations only".
Mr. Chairman, if you will kindly give me the time to draw up this amendment, I shall send you a copy of it.


Gérard Chapdelaine: Mr. Chairman, I fully agree with the remarks of the hon. member for Lapointe, and I should like to point out a further aspect of the problem raised by section 23.
In my opinion, this constitutes an economic nonsense and a disturbing inconsistency.
Mention was made yesterday of an additional exemption of $50 for every dependant child, which represents only a crumb for the small wage earners, whereas today it is the intention to exempt foreign companies of 15 per cent of the taxes they had to pay up to now.
That amounts more or less to rejecting the fatted calf, while our Canadian people are not even enjoying a vital minimum.
When will the government realize its sustained inconsistency? Are the heads of foreign corporations in need of an additional purchasing power in order to consume our production? Indeed not, because they will spend that money elsewhere.
Those who are really in need of an increased purchasing power are our people, the low income groups of Canada.
The maintenance of taxes at their present level ensures moreover an ever increasing inflow of foreign capital in our country, which controls over 75 per cent of our economy.
Does the government want at all costs to hand over the control of our economy, and especially of our natural resources, to foreign companies? The government has nothing to gain in reducing the taxes of those companies which, even if they have to pay 15 per cent more to come here and develop our resources, will not hesitate to do so in order to enjoy the enormous advantages they are now getting and which they will never give up, even at the cost of a 15 per cent increase in taxes.
Instead of doing that the government should endeavour to eliminate the causes of the present economic disorder, that is the lack in purchasing power among people who live in such a rich country as ours and do not even have a vital minimum.
Instead of working to reduce foreign corporation taxes, the government should rather
Income Tax Act
work to increase the tax exemption for dependant children of small wage earners.
(Text):


George Clyde Nowlan: I would like to say one or two words with respect to this clause, but first I should mention that a few moments ago I was really optimistic with the progress we were making and hoped we would finish the remaining clauses by five o'clock. I would like to speak in an as accomplished a manner and as forcefully as the hon. member for Lapointe has spoken about respect for Canadian industries. I do not think anybody in the house would disagree with the desirability of Canadians owning more and more of Canadian industry. To that policy and to that principle this government subscribes entirely.
It is desirable to increase in every way possible Canadian ownership and Canadian control, but when the 15 per cent tax was imposed in 1960 the principle was recognized at that time that, in some cases due to factors over which we have no control whatsoever, it was necessary to allow certain exemptions from the imposition of that tax, for instance, in the case of banks, insurance companies, corporations whose principal business is transportation or communication, and corporations incorporated before 1867. I think the only one in that last class was the Hudson's Bay Company, and there were also the corporations exempted from tax under section 62.
I am not sure whether the hon. member for Lapointe recognizes that this clause does not prevent the full imposition of income tax on these branches operating in Canada, but that due to certain devices of the tax laws in other countries there are companies which find it inadvisable to incorporate subsidiaries in Canada and therefore they operate through branches. Such branches are taxed completely and entirely on their income to the same extent as any Canadian company and any foreign company incorporated within the country.
What we are doing here is suggesting to the committee that the special 15 per cent tax imposed in 1960 should be lifted from companies engaged, as the clause says, in mining iron ore in Canada because, as I am quite sure the hon. member for Lapointe and other Quebec members know, there are great deposits of iron ore in that province and in other parts of Canada.
It was intended, five or six years ago, when it was thought Canada had a great monopoly of iron ore, that we would go ahead and develop, exploit, manufacture and control the mining of it in this country; but if I may use a rather slang expression, today iron ore

Income Tax Act
is running out of the ears of countries in many parts of the world, such as Venezuela, and certain other countries in Africa and South America. In fact they have richer iron ore and more of it than we have, and were it not for the fact that steel companies had spent millions and millions of dollars developing iron ore companies in Canada I doubt if we would be able to get them to do that at the present time.
It is only very rarely that an individual company can go ahead and meet the great expense of developing a huge iron ore company. To do this you need a consortium of steel companies because you need more than one customer for the iron ore. Without this provision in the bill there is a very great danger some of these investments would not be made and it is for that reason, and that reason alone, that this amendment is being brought forward. It is not anything new or novel. It is an extension of a principle recognized before and made applicable to the mining of iron ore, and these companies are subject to the full taxation laws except for this 15 per cent.


Gilles Grégoire: I understand perfectly well what the Minister of Finance has just told us, especially regarding the iron ore in the province of Quebec. It is true that we have lots of minerals in Quebec on the north shore of the St. Lawrence seaway, but when we see the way they are being developed, then that is exactly what we are opposed to. We see our minerals, our raw materials, going out of the province of Quebec at a couple of cents per ton and they come back into the province of Quebec, or Canada, after passing through the United States where they are processed in secondary industries.
We are witnesses to that every day. We see it in Ungava and everywhere else in the province of Quebec. Foreign companies are extracting our minerals at a fast rate, but what do we profit by it? We just have a couple of men working while our minerals are transported to other countries to be processed. It is secondary industry which brings real employment and real wealth to a country, and if Canadian companies were developing our mines and minerals in the province of Quebec, as well as in Canada, we would see secondary industries grow up everywhere.
I recognize that some foreign companies have preferred to invest in Canada, and especially in the province of Quebec; but maybe this is because they have found such conditions here that they can take everything away and bring all the profits to their own countries. That is what we are opposed to in this group. We do not care to see full taxation

imposed on non-resident companies, but we would like to see Canadian companies given much better conditions under which to develop our mines. If a 15 per cent tax is imposed on non-resident companies over what resident companies pay, then surely our resident companies will see they have the benefit of better conditions to develop our mines and natural resources. That is exactly what we are for. The non-resident corporations should have more taxation than the resident corporations. In other words, the resident corporations, the Canadian companies should have better conditions than non-resident corporations to develop our natural resources. Therefore I think my amendment should stand.


John Whitney Pickersgill: Mr. Chairman, the hon. member for Grand Falls-White Bay-Labrador is unavoidably absent today. I feel, therefore, that I should like to say just one word in very warm support of the Minister of Finance. I will tell the committee why very briefly. This summer I was in Labrador City, which happens to be in Newfoundland, and when I commend the minister I would also recommend that he get an atlas, because there is at least as much of this iron ore in Newfoundland as there is in Quebec. I was in Labrador City this summer at a time when one of these iron ore companies was establishing a processing plant for the further processing of the ore here in Canada. We all know that we are on the edge, in this country, of the generation of power from the Hamilton river which is going to make it possible to make steel-certainly it is going to go a long way toward making steel right up in that area of new Quebec and in Labrador-if we have an economic climate that makes it possible to attract the necessary capital to that area.
If we were seeking to give United States companies any advantage over Canadian companies I would just be as much opposed to this as any other hon. member in this house. All we are saying is that the companies that are already there, the companies that were established before 1960 when this tax was put on, should be treated in the same way as companies that have their head offices in Canada. It just happens that the iron companies-the two that are in Newfoundland: one of them is in Quebec as well- though they are in part United States companies have very large Canadian shareholdings of completely Canadian shareholders. Their direction and management to a very great extent, is in the city of Montreal, and to a marked extent in Seven Islands, Labrador City and Wabush City. I do not know of any United States companies that are more conscious of the importance of Canadianizing their operations to the maximum extent possible

than are these companies. I think it is only fair, when they are doing the kind of thing we have all said we wanted them to do, to recognize that fact.
I do know that at the time of confederation 13 years ago there were about 5,000 people in Labrador; and look at the population today. There are going to be 25,000 people at Labrador City and Wabush in the next two or three years. Those people are there with their families, earning a very good living. It is one of the few areas where there has been a real expansion of employment in these last five years, and the expansion of employment has been because there was capital there to provide that employment for Canadians in Canada. I say we should not discriminate and that there is no more reason for not including these companies mining iron ore than there is for not including the other companies.
I think perhaps it would enable us to understand this whole question better if the minister would read the schedule to which "mining iron ore in Canada" is being added, so we would see what companies in 1960 were not subject to this 15 per cent tax, because the 15 per cent tax did not apply to all United States companies. Whether or not the 15 per cent tax was wise is not proper to debate now, but whether or not it was wise, I think it was designed to prevent United States capital coming in and gobbling up Canadian companies that had already developed, rather than to prevent new developments. Perhaps if the minister could tell us what the other categories of companies are that are exempted from that tax, that were exempted in 1960, it would bring the whole matter into rather better perspective.


Herbert Wilfred Herridge: Mr. Chairman, I followed the interesting speech of the hon. member, to a point, with considerable attention and I agree with the spirit of his speech. But I am somewhat confused as the result of the taxation philosophy which he was espousing. Will he inform the committee, before the amendment is voted on, whether the Social Credit government of Alberta has the same philosophy with respect to taxation of foreign *corporations as the Social Credit movement in Quebec?


Gilles Grégoire: Mr. Chairman, it is a pleasure for me to inform the committee, and I think if the Minister of Finance would agree to adopting the same principles as they have in Alberta it would be far better for the government of Canada. The hon. member for Kootenay West should know that in Alberta, when a company comes into that province to develop an oilfield, for example, the government of Alberta keeps one out of every ten barrels of oil they are extracting from
Income Tax Act
the soil. These are royalties which have brought prosperity and wealth to that province.


Mr. Woolliams:: Mr. Chairman, would the hon. member permit a question? I would like to ask the hon. member, is it not a fact that the premier of the province of Alberta and many of his cabinet ministers were slightly critical about this 15 per cent tax on industries that were affected? I am sure he would go along with the present Minister of Finance in agreeing with the amendment that is now before parliament.


Gilles Grégoire: Mr. Chairman, according to the actual system, the 15 per cent deduction would help provide more investment and development in our country. We arrive with a proposition. We do not want to stop any development in our country; we would just like to have this development under another set of principles. Instead of having foreign capital coming into Canada with which to extract our minerals, we would like to ask the Minister of Finance to use the Bank of Canada to create new capital to invest in our country, so that we will not any longer be responsible to foreign capital but to Canadian capital and we will have our own Canadian investment in the development of our country. That is different from the principle we now have in clause 23, developing our country with foreign capital, and we suggest we could achieve much more development with Canadian capital through the Bank of Canada.


Rémi Paul: Order. So that the house may proceed to the consideration of private members' business pursuant to section 3 of standing order 15, it is my duty to rise, report progress and request leave to sit again later this day or at the next sitting of the house, as the case may be.


Gordon Minto Churchill: Mr. Chairman, could I interrupt for one minute. I wonder how close we are to finishing this particular bill and whether the committee would carry on for a few minutes more.


Rémi Paul: Is that agreed?


Some hon. Members:: Agreed.


Gordon Minto Churchill: May I ask, Mr. Chairman, how many more hon. members wish to speak on this particular bill?


Rémi Paul: Shall clause 23 carry?


John Whitney Pickersgill: There is an amendment, is there not?


Rémi Paul: I have no amendment on the table.

Income Tax Act


Gilles Grégoire: I have sent you the amendment, Mr. Chairman.


Rémi Paul: Will you read it, please.


Gilles Grégoire: It is to add, after the words -well, I have it in French; my copy is in French.
(Translation):
Add after the words-
"mining iron ore in Canada", the following words:
"by Canadian corporations only".
(Text):


Rémi Paul: Mr. Gregoire moves an amendment to clause 23 by adding the words "by Canadian companies only" after the word "Canada" in line 6. I had to study the amendment moved by the hon. member for Lapointe and I am obliged to say that his amendment is not acceptable. If we refer to page 225 of Beauchesne's fourth edition, we read this:
The motion by which a tax is proposed in committee of ways and means is now treated as an effective expression of the financial initiative of the crown, and therefore as the standard in relation to which the admissibility of amendments is determined. Accordingly an amendment is debarred, not only from increasing the rate of a tax, but also from extending its incidence to new classes, even while proposing to relieve other classes of payers.
In the circumstances, I am obliged to say that this amendment is not acceptable.


Gilles Grégoire: May I call it five o'clock, because some other hon. members would like to speak on the amendment too? May we continue on Monday?


Rémi Paul: I have declared the amendment not acceptable. The hon. member cannot speak on this amendment.
(Translation):


Gilles Grégoire: I appeal your ruling.
(Text):


John Whitney Pickersgill: Mr. Chairman, on the point raised by the hon. gentleman, I think there was unanimous consent when the Speaker was in the chair to go on and finish this bill. That consent having been given and that order having been made, it seems to me that the house has committed this committee to do that, and we for our part are exceedingly anxious to go on and get this business through. I suggest that we go right ahead and get it through. Perhaps I might add that the hon. member for Red Deer has been complaining ever since this parliament met that we were not getting on with the business of the country, so I hope that he and his friends will now join with us in getting on with the business of the country.
[The Deputy Chairman.]


David Réal Caouette: Mr. Chairman, we wish to get on with the business, but with sound business, not the business expressed by the hon. member for Bonavista-Twillingate.


Rémi Paul: Shall clause 23
carry?


Some hon. Members:: Carried.


Gilles Grégoire: No.


Rémi Paul: In the circumstances, I must call it five o'clock.


John Whitney Pickersgill: No. An hon. member wants to speak.


Gilles Grégoire: On a point of order; you asked for unanimous consent to continue with Bill No. C-78, and we do not give unanimous consent. We should like to have it continue on Monday.


Mr. McCleave:: Consent has already been given.


Gilles Grégoire: No, sir, we did not give it.


Robert Jardine McCleave: Mr. Chairman, on a point of order which has been raised, I submit that by staying here and moving the amendment the hon. member agreed that we should continue with the study of this bill.


Some hon. Members:: Hear, hear.


Mr. Horner (Acadia):: The amendment was declared out of order.


Rémi Paul: Shall clause 23
carry?
(Translation):


Mr. Belanger:: Mr. Chairman, I rise in support of the hon. member's amendment.
I wish to speak to clause 23 of the bill. As the hon. member for Lapointe (Mr. Gregoire) said, the Minister of Finance (Mr. Nowlan) complained that we were trying to prevent foreign corporations, particularly American corporations, from coming into the province of Quebec or elsewhere in Canada by our insistence that the present tax on foreign corporation income be retained.
I am asking the Minister of Finance and the member for Bonavista-Twillingate (Mr. Pickersgill) what would have happened to our wealth if, through some misfortune, the United States had never been developed. Would we not have by ourselves succeeded in developing our natural resources even if the United States had never existed?


Rémi Paul: I regret to remind the hon. member that we are not on Canadian natural resources but on the opportunity of exempting from a 15 per cent tax foreign corporations developing iron ore deposits. I wish to remind the hon. member that his remarks must remain relevant to this debate.


Louis-Philippe-Antoine Bélanger: Mr. Chairman, I feel I have not strayed from the matter before us as I am actually trying to explain that we do not want that exemption to apply to American corporations. Therefore, my remarks were relevant to the debate.
The main purpose of this bill, in my opinion, is to promote employment, and reduce unemployment; as a matter of fact, it tends to reduce unemployment by giving incentives to production through a tax reduction.
Now, since the beginning of this session, we Social Crediters very often stated that the best way to promote production was not to create employment through mere incentives to production. We have always held and still hold the view that the best way would rather be to develop and give incentive to consumption.
The bill before us calls for tax exemption for foreign corporations and we are absolutely sure that somebody will have to make up for the loss of revenue it will entail. I believe it would be preferable to reduce consumers' and workers' taxes.
If, for instance, 500,000 workers in Canada obtain a tax reduction equal to the amount of money they have to spend to purchase the tools they need in their work, suppose they had at their disposal an additional $25 each, this amount by the number of workers, 500,000, would come to $12 million put back into circulation.


Rémi Paul: I am sure the hon. member must realize that he is now suggesting a better distribution of taxes, or of the tax structure, whereas we are actually on a rather precise article of the bill. Once again I wish to ask the hon. member to limit his remarks to the purpose of clause 23.


Louis-Philippe-Antoine Bélanger: I believe I did comply, if I understood the rules, and that my remarks were relevant to the purpose of clause 23.


Rémi Paul: When the hon. member mentions the tax reduction through enactment of the bill before us and says that it will entail enactment of some other legislation to replace tax revenues which otherwise would have been forthcoming to the treasury, I feel he is roaming far afield.


David Réal Caouette: Mr. Chairman, while we do not want to delay the business of the house, I should like to draw the attention of hon. members to the explanatory note to section 23, which reads as follows:
Income Tax Act
This new subparagraph makes an addition to the list of classes of corporations which are exempt from the additional 15 per cent tax imposed on nonresident corporations carrying on business in Canada. This implements paragraph 13 of the Income Tax Act resolution which reads as follows:
We are asked to grant an additional tax exemption of 15 per cent to foreign companies who establish themselves in Canada. Now, we want Canadian companies to be the first to benefit from that exemption.
We hear that our Canadian companies do not have the necessary funds to improve or direct their production towards other fields of economic activity. We want first of all, that Canadian companies be treated in the same way. After that, we would not be opposed to our natural wealth being developed by foreign companies as long as we preserve our rights with regard to this development.
In short we want our resources to be developed first of all for the benefit of the Canadian people and not serve to supply other nations in the world before our own people here in Canada.
We are not opposed to this section being passed, but let the Minister of Finance tell us whether or not he accepts the principle we advocate, that is, that our Canadian companies should benefit from that same exemption.
(Text):


Rémi Paul: Shall clause 23 carry?


Some hon. Members:: Carried.
Clause 23 agreed to.
On clause 24-


Mr. Prittie:: Mr. Chairman, I should like to move an amendment at this time which in effect would amount to a new clause being inserted in the bill after clause 23 and before clause 24.
I move:
That Bill C-78 be amended by adding thereto, immediately after clause 23 thereof, the following
new clause:
"23A. The said act is further amended by adding thereto, immediately after section 118 thereof, the following:
"118A. The governor in council shall remit, before liability for payment of income tax arises, an amount equal to the amount paid by the taxpayer for tuition fees, outlay for textbooks and related aids, and such other expenses as the governor in council may deem proper, incurred for education to better fit himself for the occupation by which he earns his income.
This provision is applicable to the 1962 and subsequent taxation years.


George Clyde Nowlan: Mr. Chairman, I know that you should read the motion before making a

Income Tax Act
ruling but since we are trying to save some time, perhaps you will permit me to say that this motion is out of order. I suggest that you read it and rule it out of order and that we shall have no further discussion.


Gordon Campbell Chown: I think I can dispose immediately of this amendment moved by the hon. member. I refer to May's sixteenth edition, page 421, and I read as follows:
Stated generally, no matter ought to be raised in debate on a question which would be irrelevant, if moved as an amendment, and an amendment cannot be used for importing arguments which would be irrelevant to the main question.
I therefore declare this amendment not to be acceptable.


Robert William Prittie: I rise on a point of order.


Mr. Ricard:: There is no point of order on an amendment.
Clause 24 agreed to.
Clauses 25 to 28 inclusive agreed to.


Thomas Speakman Barnett: Mr. Chairman, I move:
That the bill be amended by adding thereto after clause 28 the following:
29. Section 5 of the said act is amended by deleting the present subsection (2) and substituting therefor the following:
(2) Notwithstanding subsection (1), in computing the income of a taxpayer for a taxation year from an office or employment there shall not be included
(a)	the value of, or an allowance (not in excess of a reasonable amount) in respect of expenses incurred by him for board and lodging received by him
(i)	in respect of, in the course of or by virtue of his employment at a site from which, by reason of distance from the place where he maintained a self-contained domestic establishment (hereinafter in this subsection referred to as his "ordinary place of residence") in which he resided and actually supported a spouse or a person dependant upon him for support and connected with him by blood relationship, marriage or adoption, he could not reasonably be expected to return daily to his ordinary place of residence, and
(ii)	in respect of a period while he was required by his duties to be away, for a period of not less than 36 hours, from his ordinary place of residence; or
(b)	the value of, or an allowance (not in excess of a reasonable amount) in respect of expenses incurred by him for transportation between his ordinary place of residence and the site referred to in subparagraph (i) of paragraph (a), or
(c)	the value of, or an allowance (not in excess of a reasonable amount) in respect of expenses incurred by him for depreciation and replacement of tools and special equipment or clothing which are necessarily provided by him and normally required in the course of carrying out the duties of his employment.


Rémi Paul: I think this amendment cannot be accepted because the amendment moved by the hon. member has the effect of changing the main legislation with regard to income tax revenue. In these circumstances, I must make to the hon. member
[Mr. Nowlan.l
the same comments I made a few moments ago when I read from May's sixteenth edition, page 421. His amendment is not acceptable because it would change all the law of income tax. We have before us Bill No. C-78. It is in order to move an amendment in relation to this bill, but not to move one in relation to the main act on income tax revenue. In these circumstances I declare this amendment to be out of order.


Thomas Speakman Barnett: Mr. Chairman, I wonder if
you would just permit me to say this. I realize what great pain it has given you to suggest that my amendment is out of order. I have not such great pride of authorship that I would mind at all if the minister would accept my amendment and move it in my place. If he would do that, I am sure the difficulties you are having could very speedily be eliminated and a very great improvement could be made in the act.


[Stage Direction]
Title agreed to.
Bill reported and read the third time and passed.
John Whitney Pickersgill: Five o'clock.


Mr. Speaker:: The agreement in committee of the whole having been that the five o'clock rule be suspended in regard to the particular bill which has just been read the third time and passed, the house will now proceed to the consideration of private members' business as listed on today's order paper, namely public bills.



INDIAN AFFAIRS


Frank Howard: the second reading of Bill No. C-19, respecting the Canada court of Indian claims.


Mr. McGee:: Mr. Speaker, I rise on a point of order concerning the propriety of the introduction of this particular bill by a private member, and I propose to offer for your consideration reasons why this is not a proper bill to be introduced by a private member. Before stating those reasons I should like to congratulate the hon. member on the obvious thoroughness with which he has pursued his objective and the many interesting and, I am sure, useful ideas suggested by him in his bill.
In Beauchesne, fourth edition, page 214, citation 249, it is stated:
No principle is better understood than the constitutional obligation that rests upon the executive government, of alone initiating measures imposing charges upon the public exchequer.

There are many other citations in Beau-chesne to which I could refer and which have been mentioned by other hon. members when similar occasions have arisen, but I will not refer to them at this moment. In support of this general thesis I should like to quote a few sentences from a recently published book by Professor Dawson entitled "Procedure in the Canadian House of Commons". It is one of the Canadian government series published by the University of Toronto Press. On page 231 there is a section dealing with money bills where Professor Dawson has this to say:
A bill which affects the rights, property or prerogatives of the crown must also be accompanied at some stage in its progress by the consent of the crown. This may be announced at any stage of a bill's passage through the house, although normally before second reading. The minister in charge merely states in the house that the Governor General has been made acquainted with the purpose of the bill and has given his consent for the house to do with it as the house sees fit. A public bill introduced by a private member which affects the prerogatives of the crown must be withdrawn if the crown withholds consent.
I do not think there is any suggestion of consent involved here. The expression of the government's views with respect to this particular matter is clear indeed. During the recent election campaign the Prime Minister announced the intention of the government to introduce such an Indian claims commission. This was followed by a reference to the same matter in the speech from the throne and, as found on page 8 of Votes and Proceedings, a resolution appeared in the name of the Minister of Citizenship and Immigration reading as follows:
That it is expedient to introduce a measure to provide for the establishment of an Indian claims commission and the appointment of its members and staff; to provide for their salaries and expenses; to define the duties of the commission, to authorize it to exercise certain powers and to provide for other related and incidental matters.
Clearly the presence of this resolution preceding the introduction of a bill defines the objective as being one which will make the bill in essence a money bill, and in such cases where there is a resolution the purpose is to determine essentially whether money should be provided for this purpose. I suggest to you, Mr. Speaker, that the presence of the resolution in the name of the minister indicates that Bill No. C-19 clearly is a money bill and as such beyond the capacity of a private member to introduce or present to the House of Commons.


Frank Howard: If I may comment, I gather that the sole objection raised by the parliamentary secretary is that the bill is in fact a money bill and therefore beyond the competence of a private member to introduce. He referred to the fact that the Prime 27507-3-110
Indian Affairs
Minister had made an announcement during the election campaign that such an Indian claims commission would be established at this session. I recall also the Prime Minister promising that a second trans-Canada highway would be built, starting during this session, but we have not seen anything of that yet either.
The hon. member also referred to the fact that because there is a resolution on the order paper in the name of the minister- I will not bother to recite the details at the moment-my bill is therefore out of order. Presumably the only reason that the resolution is there is that the minister knows what the bill will contain, namely, that there will be a newly established commission with members and involving expenditure because it is a newly established commission. That is within the knowledge of the minister but it is certainly not within the knowledge of the house or you either, Mr. Speaker. It is purely a notice of a certain action to be taken.


Frank Charles McGee: May I offer the hon. member some assistance on this particular point? My point was that the fact that this bill is preceded by a resolution is in fact evidence that it is a money bill.


Frank Howard: It is in fact evidence that the minister thinks his bill will be a money bill. It is no evidence at all that my bill has anything to do with the resolution or with the expenditure of money.


Thomas Clement (Tommy) Douglas: Unless he copied your bill.


Frank Howard: He may well have. I introduced it last year as a guide to the government in taking action on this particular matter and for that specific purpose. I would point out that I have specifically tried to word my bill so that use will be made of the exchequer court as a court of Indian claims. Under the Exchequer Court Act there is already statutory authority for the salaries of the judges, the expenses of the operation of the court and the salaries of the staff. Statutory authority is given for the appointment of deputy judges and for covering all possible expenses that could arise by reason of a court of Indian claims as envisaged in Bill No. C-19. Therefore this bill is not a money bill at all.
I believe the principal point of the parliamentary secretary, because he emphasized it so much and interrupted my comments a while ago to re-emphasize it, obviously is that because the minister has a resolution on the order paper my bill is out of order, and I submit the two are disconnected entirely.


John Whitney Pickersgill: I wonder if I could say a word on the point of order, sir. I agree with

Indian Affairs
everything that has been said by the hon. member for Skeena, but I thought it might help Your Honour if I recalled the fact that many times in previous parliaments the hon. member for Winnipeg North Centre has introduced legislation to vest certain functions in the exchequer court and never before have I heard it suggested, because we suggested that the exchequer court, which is fully paid for, should do new things, that this would constitute a charge. It is only if the bill would provide specifically for expenditures that it would be a money bill.
I have looked hastily through the hon. member's bill and confess I have not read it carefully, but there does not appear to me to be anything in the bill imposing any new charge whatsoever. It does impose a new obligation. It might be that the exchequer court judges might have to work a little harder and perhaps not have quite so much leisure as they would like to have, but the bill does not create any new officials or create a new court. It simply gives certain duties to a body already existing, and there have been many bills of that character introduced in parliament.


Mr. Baldwin:: Mr. Speaker, I feel that a careful examination of the bill offered by the hon. member for Skeena will definitely disclose that in effect, in pith and substance, it is a money bill. What the hon. member is attempting to do very adroitly is to achieve indirectly something which he is prohibited from doing directly. This is the issue to which he has directed his mind and my submission is that he has failed to achieve this result. I would ask Your Honour to refer to some of the sections of the proposed bill. Section 3 of the bill reads as follows:
The court shall consist of the president, puisne judges and deputy judges of the Exchequer Court of Canada as that court from time to time is constituted;
Then I underline these next words:
2. A deputy judge who is specially appointed for the purposes of this act shall be, notwithstanding anything as to qualifications for appointment in section 8 of the Exchequer Court Act-
Then, the next subsection sets out what the qualifications shall be. I pointed out to Your Honour that under the Exchequer Court Act there are a number of sections which lay down the jurisdiction of the exchequer court. During 1960-61, the then minister of justice introduced a bill amending the Judges Act by which one additional judge was appointed to the exchequer court. At that time it was made plain that the amount of work which was being done by the exchequer court required the appointment of this additional judge. It is quite true that under the

provisions of section 8 of the Exchequer Court Act there is the power to appoint a deputy, but not deputies.
I point out to the hon. member that a careful reading of section 8 of the Exchequer Court Act suggests that there is a limitation to the appointment of a deputy, and that is when one of the judges may be prohibited from carrying on his work. Quite obviously, sir, the hon. member has certain objectives in mind. As the parliamentary secretary has pointed out these laudable objectives deal with a considerable number of cases which will probably arise if legislation such as this is passed. Obviously, if this measure is passed some method of implementing the hon. member's intention will be required; a tribunal of some kind will be required.
My submission is, and I think the hon. member realizes this, that the exchequer court as presently constituted would be totally incapable of devoting the amount of time required to do the work. For this reason, the hon. member has suggested that deputies shall be appointed. This can only presuppose that there will be a charge imposed upon the crown because deputy judges, presently not in existence, will have to be engaged and paid a salary. Of course, the salary of these judges will be a burden upon the crown. This, by itself, is a certain indication that this bill will result in payment being made by the crown.
Then, I refer Your Honour to clause 5 which mentions the fact that the registrar of the Exchequer Court of Canada and the other officers such as clerks, stenographers and so on, shall be the registrar, clerks and stenographers in respect of this proposed court. There is a reference also to travelling expenses. The court proposed by the hon. member is authorized to travel throughout Canada. Quite obviously in doing so the travelling would be on business entirely distinct from the normal jurisdiction of the judges of the exchequer court. The expenses and costs which would be imposed by these services, these travellings, would be additional burdens upon the crown.
I point out to Your Honour that at the moment the exchequer court consists of the president and five puisne judges. According to clause 7, this court of Indian claims which the hon. member proposes to set up will consist of five judges. This would not leave any great number of judges for the ordinary functions of the exchequer court.
Finally, clause 19 makes provision for this court which the hon. member proposes to set up to have the power to request counsel to argue any claim as to any interest that is affected and as to which counsel or an agent does not appear. Then, subclause 4 of clause

19 provides that the court may order the reasonable costs or expenses of preparing a claim to be administrative expenses of the court. Quite obviously, this will result in additional burdens being placed upon the crown. Then, Your Honour, I point out there is a provision that the crown shall be bound by this act. I point out that from time to time, during the course of its deliberations, this court may make decisions which may impose upon the crown the necessity of making certain payments in respect of claims. This, quite obviously, could mean nothing else but a burden on the crown.
In my submission, therefore, I would take it from the mere fact that the hon. member is attempting to engage the services of the exchequer court, and from what he seeks to do, one can come to no other rational conclusion but that there will be additional costs levied upon the crown.


Frank Howard: I wonder if I could be allowed similar latitude, Mr. Speaker, to that which has been allowed the hon. member who has just taken his seat? He did deal with a number of points in connection with the bill which I should like to refute and which are not valid points at all.
He made a reference to clause 3 of the bill which says that the court of Indian claims shall consist, in fact, of the exchequer court. He made a specific reference to part II concerning the appointment of a deputy judge. He set out the qualifications for a deputy judge which differ from those qualifications which are now established for a judge of the exchequer court or a deputy judge of the exchequer court. These qualifications must necessarily be different because the problem with which this court would deal is distinctly different from the problem with which the exchequer court has had to deal. The problem involves long standing grievances of a group within this country who were a nation before coming under European influence and before their rights and freedoms were taken away from them. These qualifications necessarily must be there in order to permit people who are qualified to sit in the international courts of justice, or highly reputed jurists in other countries, to be members of the court. This has nothing to do with the cost involved in the appointment of these deputy judges.
This is covered, and the hon. member for Peace River referred to it, by section 8 of the Exchequer Court Act which says that the governor in council may, for a variety of reasons, appoint a deputy judge to do things for a temporary purpose. This is all this bill seeks to do. Although there is a reference in part I to deputy judges, you will see it means 27507-3-110J
Indian Affairs
the exchequer court including those deputy judges who from time to time constitute it. Whether or not the governor in council wants to set it out in different ways is his business, but the statutory authority is there already. All the bill seeks to do is to take what presently exists as a court in this land, and a court incidentally which will have experience in such matters as land valuation and taxation, and give it specific authority; that is all it does. The measure would give to that court specific authority to deal with the particular claims of the Indian people on the basis of that Latin phrase ex aequo et bono, which you will understand more readily than I.
This court would deal with the long standing complaints of these native people in the most equitable manner possible. I do not believe that is possible under the rules of court procedure and evidence as they stand at the present time. This is the design, purely and simply behind this bill, and it is not to do indirectly what I cannot do directly nor is it to spend money of the crown. The design is to use this court which already exists within the structure of the law of this country, to give it special authority and to give to the native Indian people of these provinces a square deal in respect of the complaints which have been built up for over many, many years.
I submit that all of these other references to expenses, to judges' salaries, even to the question of authorizing expenses in clause 19(4), to which the hon. member for Peace River made reference, even to the extent of paying the charges, the court costs and legal fees incurred by natives in processing their claims, do not constitute a new charge on the crown but are already covered by virtue of the statutory authority now existing in the Exchequer Court itself.
On the question of whether or not there is a prohibition against the introduction or the moving of second reading, I submit to Your Honour that I myself, on two or three occasions in other parliaments, introduced a bill to bind the crown to the Industrial Relations and Disputes Investigation Act so that civil servants in this country would have the same rights as other people. No objection was taken to that bill; in fact, cabinet ministers and parliamentary secretaries engaged in the debates upon it. The principle involved in that bill was to bring equality to a group of people employed in the public service of Canada by binding those people to the act, which is precisely similar to what I seek to do here.
In essence, Mr. Speaker, I submit that all of the arguments that have been presented so far by those objecting to this bill, all of

Indian Affairs
the arguments revolving around the expenditure of money, are not valid arguments. I could go further in dealing with the various clauses referred to by the hon. member for Peace River but I shall content myself by submitting that all authority for expenses and payments of money is covered in statutory form by the Exchequer Court Act.


Frank Charles McGee: I am rather interested to find the hon. member for Bonavista-Twillingate and the hon. member for Skeena subscribing to the philosophy that if a sin is repeated it somehow acquires virtue. I recall one bill I introduced, the validity of which was questionable. It was one of those cases similar to the one referred to by the hon. member for Bonavista-Twillingate, where an increased charge might evolve; but it is also a well known rule of the house that if a point of order is to be raised it must be taken at the point in the proceedings at which we are at the present time.
The circumstance that there may have been some doubts cast on the matter by the hon. member for Bonavista-Twillingate does not destroy the validity of the facts which must govern a money bill, and it does violence to common sense to suggest that a group of judges can instal themselves in chambers, acquire a secretary, spend money travelling across the land and pay witness fees without adding an additional charge on the crown. If that is not the case, then there is no point in having any restrictions in this way whatsoever.


Mr. Speaker:: The Chair has heard the arguments raised on the point of order. I would hope to study more carefully some of the implications that have been raised and I would propose to reserve judgment on the matter of the power or right of an hon. member to introduce a bill of this nature. In so doing I would permit the debate to continue on the principle of the bill, subject to the reservations expressed by the Chair. On the next occasion we come to debate it the Chair would be prepared to rule on the matter.


Frank Charles McGee: Would Your Honour hear me?


Mr. Speaker:: If you are continuing the point of order. The Chair has decided it will reserve its opinion and we can carry on subject to that reservation.


Frank Charles McGee: I have a point of order which arises out of my acceptance of that ruling. Would it not be far better from every point of view that, in view of the reservations you have expressed, and properly so, the bill should stand until it can be determined whether in fact it is in order or not in order? Otherwise we fall into a position-and I am

confident you will reach a decision that it is not in order-that the house has sanctioned something in the proceedings about which, in my view, there is considerable doubt.


Mr. Speaker:: I regret I cannot accept the hon. member's point of order. The question is before the house and we will proceed with it, subject to the reservations expressed by the Chair.


Frank Howard: In moving second reading of the bill, Mr. Speaker, perhaps I can preface my additional remarks by saying we have already had a bit of discussion about the principle and perhaps some of my remarks would be repetitive in that sense. It will be six o'clock shortly, and because some time has been taken up on the question of order and by the unanimous agreement of the house to proceed with the Income Tax Act, I would ask that the bill maintain its precedence on the order paper instead of dropping to the bottom of the list because, if it drops to the bottom of the list, Your Honour might not have the opportunity to rule on it.


Mr. Speaker:: The Chair would be materially assisted if it were possible to hear the remarks that are being made. They may have some pertinence to the debate. The hon. member for Skeena has the floor and if he would address his remarks to the Chair that would be helpful.


Frank Howard: Mr. Speaker, I thought I was addressing my remarks to the Chair. At least I was looking in your direction. I shall try to be as brief as possible because I am sure other hon. members will wish to speak. Native Indians are in a very peculiar situation in this country. They are involved in the understanding that we have about relationships between nations as distinct from a group of citizens within a country, because when the so-called white man-and I use the expression "so-called" because I do not like the term "white man"-came to this country, and in the years following the discovery of the American continent, this nation was populated by Indian people and the resources of the nation were exploited by them. They had jurisdiction and authority and control and were, in fact, a group of nations to themselves with some of them not having knowledge of others in other parts of the country.
The fact that they came to be called Indians was the result of a mistake made by Christopher Columbus, and this is why our British Columbia natives on the Pacific coast today prefer to be called Haidas because they do not see why they should perpetuate the

mistake Columbus made. Recent anthropological studies in the area near Vancouver and in other parts of the B.C. mainland have shown they had settlements dating back
4,000	or 5,000 years.
Their whole concept of ownership of land, their social structure and their economic life were entirely different from that understood by people of European extraction such as the English, French, Spanish and the like. When these two concepts came into conflict with each other a great deal of confusion and misunderstanding developed, especially among the native Indian people. As a result of that, over the years there have developed grievances over, primarily, the land question, grievances over the wording of the treaties, treaties which were written, designed and worded by people who spoke English and explained them to the native Indian people, who did not speak English and could not write. Any examination of those treaties will show, I am sure, that the Indian people were misled and in fact cheated by the treaties that were signed many years ago.
In British Columbia we have a situation in which there are no treaties except one which was signed with the Hudson's Bay Company in 1850, I think it was, involving some 350 square miles of land, and an area of 134,000 acres in the Peace river country covered by treaty No. 8, which primarily covers the northern part of Alberta. We in British Columbia have a problem different from that which concerns natives in other parts of Canada, in that there is the claim in British Columbia that the native Indian population still has the aboriginal title to that province, that it was never extinguished, that it was never purchased from them, there was no treaty signed, no agreement, no war or wars in which they were a defeated nation or group of people. All that happened was that the crown moved in and took over the area without any compensation or any extinguishment of that aboriginal title. I would ask the house to remember that when the native Indian people think of title to land, they do not think of it as we do, in terms of deeds, pieces of paper and measured lots; they think of it in terms of their hereditary concept of title and communal ownership of the land and its resources.
This bill is designed to establish a court in which these claims, disputes and long standing grievances can be dealt with. The joint Senate and House of Commons committee which reported to this parliament last year recommended the establishment of an Indian claims commission to deal with a number of things. It specifically mentioned the British Columbia land question and the
Indian Affairs
Oka land dispute. The principle, as I mentioned earlier, is that the court should look at these claims on the basic principle of fairness and equitability and that the provisions of the Canada Evidence Act, with all its strictures and rules, should not apply. I say that because it is impossible, with many of these claims, to use rules of evidence to prove a particular case of ownership. The ownership, for the sake of argument, over a trap line is one of inheritance from fathers and mothers from time immemorial. It is impossible, in many cases, to actually prove that such ownership rests in the hands of one individual. The principle is that the court would look at these things and consider evidence which they think fair, reasonable and decent, and then act upon those particular grounds.
We also want to make sure that, because these native people have been so unfairly and unjustly treated over the years, the burden of expense does not fall upon them to process their cases before this particular court. This, again, was a unanimous recommendation of the joint Senate and House of Commons committee, that there is a responsibility for legal costs, and fees for processing and arguing their claims should be borne out of the cost structure of the exchequer court or the court itself. The purpose, I suppose, would be primarily to keep this matter before the government and before the public, to help bring public pressure to bear upon the government to take the initiative in presenting legislation of its own.
There is a notice on the order paper, to which reference has already been made. I hope that notice is proceeded with at the earliest possible moment and the commission as envisaged by the government is established. I do not have any great doubts about what will happen to this particular bill, regardless of your ruling, Mr. Speaker. If you get around to ruling in its favour, I am quite sure that in the one hour at one's disposal every few days it will never come to a vote.
I know there are legal minds in this parliament-we listened to one of them earlier today -who will try to dissect this bill in all possible ways to show why it is inoperative, and so on. To me that is a minor concern. The main principle is to deal with the long standing grievances that have rancoured the native Indian people in this country for many, many years and finally bring to them the solutions which we promised hundreds of years ago.


Frank Charles McGee: Mr. Speaker, I am glad the hon. gentleman resumed his seat, otherwise he might have become the second private member to

Indian Affairs
talk out his own private bill. I was interested to hear the references to the situation as alleged by the hon. member to exist in British Columbia, in which he seemed to imply that the natives in that province still in fact own the province. Some of us had an idea that perhaps there was something to be said in support of this proposition. I seem to recall not too many years ago a certain gentleman who claimed to be a chief, armed with a bow and arrow, shooting at somebody else out on a raft with, presumably, some of the same kind of debt free money for which the hon. member for Bonavista-Twillingate and his party expressed such zeal and interest quite recently.


John Whitney Pickersgill: I am rather surprised at the hon. gentleman talking about arrows.


Frank Charles McGee: This is the answer, perhaps, to how the hon. member for Skeena is going to accomplish the establishment of this court, with regard to the paying of expenses, and so on. Obviously he is not going to be using conventional money or it would involve a considerable expenditure on the part of the crown. Perhaps he is going to be using some of that debt free currency.


Mr. Habel:: That your leader voted for in 1953.


Frank Charles McGee: Very briefly, Mr. Speaker, I would like to conclude this debate, as I obviously will before I reach the end of my remarks, by saying that it is the clear and expressed intention of this government to deal with this problem, having confronted this issue and having examined it through its initiative in establishing the joint Senate and House of Commons committee to study the matter in far greater detail and with far greater care than at any time in the past. The government's concern and interest in the problems of the Indian is very evident. One has only to consider the expenditures since 1957 to realize the concern of the government for this problem. Time and time
again the government has expressed its interest, and constructive interest, in the problems of the Indian.


Frank Howard: Would the hon. member permit a question?


Frank Charles McGee: This is one more example of the government's attitude and I am sure this session will see the establishment of a commission to right these ancient wrongs.


Mr. Speaker:: Order. The hour for consideration of private members' business having expired, we will now revert to the business interrupted at five o'clock.



BUSINESS OF THE HOUSE

John Whitney Pickersgill: Mr. Speaker, I recognize that last night, the house leader gave a pretty full menu for next week, but it is convenient to have the order of things on Hansard for the first day or two, and it would suit his convenience, I am sure, and help other hon. members if that were done.


Gordon Minto Churchill: What is proposed is that on Monday we continue with the three tax bills in the order in which they have been called.


George Clyde Nowlan: Unless they want to change it.


John Whitney Pickersgill: Perhaps the minister would list the order of them so that we can read Hansard without having to go back.


Gordon Minto Churchill: You do not like to go back and read some of the bad things you said the other day. The first one would be Bill No. C-79, the Estate Tax Act; the second Bill No. C-80, the Excise Tax Act; and the third, Bill No. C-81, the Customs Tariff. Then the fourth item would be Bill No. C-4, to amend the Department of National Health and Welfare Act, and the fifth would be Bill No. C-71, to amend the Farm Credit Act. Having completed those, Mr. Speaker, if there is still time left on Monday I will call some other item from the 17 items I put on Hansard yesterday.


[Stage Direction]
At six o'clock the house adjourned, without question put, pursuant to standing order.


[Stage Direction]
(Translation):

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OFFICE OF THE PRIME MINISTER Province of Quebec
September 19, 1962.
The Right Hon. John Diefenbaker, P.C., Q.C., Prime Minister of Canada Ottawa, Canada
My dear Prime Minister,
In reply to your letter of August 27 with regard to the proposed amendment of section 94A of the British North America Act, I must inform you that the provincial legislature has just been dissolved.
My government feels that only the legislature is empowered to deal with such a matter.
In the circumstances, it seems proper that I should wait until the new legislature is convened before pursuing this matter any further.
I wish to make it clear that this does not imply in the least that I am thinking of revising the position set forth in my previous letters.
Yours very truly,
Jean Lesage.
Ottawa, August 27, 1962
Honourable Jean Lesage, P.C., LL.D. Premier of the province of Quebec Parliament Buildings Quebec, P.Q.
My dear Premier:
I refer to the correspondence we exchanged last January and February concerning a proposed amendment to section 94A of the British North America Act, which would authorize parliament to legislate not only in relation to old age pensions, as is the case now, but also in relation to pensions and other benefits incidental to, or conducive to the better operation and administration of, a scheme of old age pensions.
More specifically, the proposed amendment would authorize parliament not only to pass a law creating a contributory and progressive
old age pension plan but would also make it possible to include provisions regarding the payment of benefits, in some cases, to widows and children, as well as to contributors who become disabled before reaching the pensionable age. You replied to my letter on January 24; I wrote to you again on February 3 and you replied again on February 8.
Similar letters were addressed to the premiers of all the other nine provinces on January 17. Eight of them replied without delay, saying that they agreed to the proposed amendment. I hope to hear shortly from the only premier (Newfoundland) who has not replied yet. The explanation of the scope of the amendment we contemplate, as it was given in my letter of January 17, was found sufficient by the eight premiers who have expressed their agreement.
I hope that I have sufficiently indicated the objectives of the proposed amendment so that you and your colleagues will find it possible to advise us of your agreement.
According to the information I have, it was not customary in the past, when the provinces were invited to agree to amendments to the British North America Act, to supply them with the details of the provisions that the government and parliament hoped to adopt under their legislative powers. In 1941 and in 1951 in particular, when the federal government proposed some constitutional amendments, I am told that the consultations between the federal and provincial governments did not result in any effort on the part of any party either to furnish or request detailed information on the legislative measures that were to follow the adoption of the constitutional amendments.
In any case, I am convinced that you are not without realizing that, even if we were to furnish details of the legislation we contemplate, it would not prevent subsequent amendments to the law in the light of policy changes.
I am confident that you will agree with me that it is in the public interest, at the federal as well as the provincial levels, that parliament be invested with specific jurisdiction
[Stage Direction]
to legislate in the way proposed in the amendment submitted to your consideration.
I earnestly hope that you are now prepared to agree to the proposal I have already submitted to you.
Your sincerely,
John G. Diefenbaker
(Text):
Ottawa,
August 25th, 1962
My dear Premier,
I wrote you on January 17th, 1962, setting forth the terms of a proposed amendment of section 94A of the British North America Act to authorize parliament to make laws not only in relation to old age pensions, as it is now authorized to do, but also pensions and other benefits incidental and conducive to better operation and administration of a scheme of old age pensions. I requested the concurrence of Newfoundland in the proposed amendment of the British North America Act.
I wrote to the premiers of all the provinces at the same time. I have received responses from all of them with the exception of yourself. Eight of nine immediately concurred in the proposal.
A decision on this subject is now urgently required. I should be obliged, therefore, for an expression of your government's views. May I express the hope that Newfoundland will concur in the proposed amendment?
Yours sincerely,
John G. Diefenbaker. The Honourable J. R. Smallwood, M.H.A., Premier of Newfoundland,
St. John's, Newfoundland.
OFFICE OF THE PREMIER Province of British Columbia
February 12th, 1962
Right Honourable John G. Diefenbaker, Q.C., Prime Minister of Canada,
Ottawa, Canada.
My dear Prime Minister:
I acknowledge and thank you for your letter of January 17th, describing your plans for improving the Canadian social security system by authorizing contributory old age pensions for those not presently covered, but who can reasonably afford additional provision for their old age and certain ancillary benefits.
In view of the fact that present pension and annuity issuing authority is so broadly based, it is not clear to my advisors why a constitutional change should be necessary to implement the measures you describe.
However, there is no objection to the proposed amendment to section 94A of the British North America Act in the form proposed.
Yours truly,
W. A. C. Bennett, Premier.
(Translation):
OFFICE OF THE PREMIER Province of Quebec
February 8, 1962
The Right Honourable John G. Diefenbaker,

[Stage Direction]
Prime Minister of Canada,
Parliament Buildings,
Ottawa, Ontario.
My dear Prime Minister,
In compliance with the request you made in your letter of February 3, I re-examined the text of the amendment you propose to bring to section 94A of the British North America Act.
Having done so, I am even more convinced that it would have been impossible for me to bring such a proposition before the legislative assembly without being able to explain its scope adequately by means of a detailed description of the legislation to be put forward through that amendment.
I should point out that the proposed text is extremely vague and indefinite. It seems to me that the phrase "benefits incidental and conducive to a better operation and administration of a scheme of old age pensions" could be made to cover a great number of things which, at the present time, all come under provincial jurisdiction.
Obviously, the question does not involve the subordinate provisions to which any jurisdiction usually extends according to well-established principles of interpretation. Surely, what is sought is an extension beyond that limit, and nowhere do I see the dividing line which would be chosen.
I find it impossible to concede that the provincial jurisdiction is adequately safeguarded by the reservation concerning laws passed by a provincial legislative assembly. When the federal parliament becomes entitled to legislate in matters under provincial legislative authority, the jurisdiction of the provinces is necessarily reduced even if they are left with some legislative power. Indeed, from then on, such power can only be exercised subordinately.

For those reasons, once again, I must say I find it impossible to bring before the legislative assembly a proposed constitutional amendment without having on hand a detailed description of your proposal.
I intend to table a copy of this letter in the legislative assembly next Tuesday.
Yours sincerely, (signed) Jean Lesage
(Text):

[Stage Direction]
Toronto, Ontario.
February 6, 1962. Dear Mr. Prime Minister:
I learn with much pleasure of your proposals to develop a contributory social security scheme for the aged which will also include and extend to the disabled and survivors (including children) of contributors who have died.
It is our considered opinion that the only proper way to add strength to our social security planning for the future lies in the establishment of a contributory scheme enabling contributors to establish their right to receive benefits on a prescribed basis in keeping with their previous contributions.
May I say, therefore, that the government of Ontario would concur in and facilitate proper and reasonable plans by your government resulting in a contributory social insurance program becoming a reality.
Yours very truly, John P. Robarts.
The Right Honourable John G. Diefenbaker,

[Stage Direction]
Prime Minister of Canada,
Ottawa, Ontario.
THE PREMIER Fredericton
February 5th, 1962 Dear Mr. Prime Minister:
I regret the delay in replying to your letter of January 17th which was received during my absence.
The improvement of the Canadian social security system through the inclusion of a plan for graduated old age pensions on a contributory basis in addition to the basic old age security pension will be well received in all quarters.
The government of New Brunswick is pleased to concur in the amendment of section 94A of the British North America Act in the form proposed in your letter and will support the submission of such an amendment to the parliament at Westminster.
Yours sincerely,
Louis J. Robichaud. The Right Honourable John Diefenbaker, Prime Minister of Canada Ottawa, Ontario.
27507-3-111
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Monday, November 19, 1962