1963-07-23

[Stage Direction]
Sixth report of standing committee on miscellaneous private bills-Mr. Wahn.

Hon. Paul Martin (Secretary of State for External Affairs):: One year ago today, on July 23, 1962, an international agreement on the Laotian question was signed at Geneva. The 13 governments whose representatives signed that agreement solemnly declared that they would "respect and observe in every way the sovereignty, independence, neutrality, unity and territorial integrity" of the kingdom of Laos.
Unfortunately during the past year there has not been much progress in that direction. The administration and armed forces of Laos have not been integrated. The country remains divided and there has been a renewal, on a limited scale, of fighting. The international commission of which Canada, India and Poland are members, has not been allowed to circulate freely through the country in order to supervise the implementation of the agreement.
However, the international commission has made a number of limited investigations and on May 17, 1963, three majority reports were submitted by the Canadian and Indian commissioners, the Polish commissioner having declined to associate himself with them. In accordance with the Geneva protocol these reports are strictly factual, but from a reading of them it is quite clear that the Pathet Lao and their dissident neutralist allies are responsible for the recent deterioration of the situation in Laos.
I wish to table copies of these three reports numbered 22, 23 and 24. Canada will of course continue, as a member of the commission, to strive for Laotian unity and neutrality, the objectives of the Geneva agreement of 1962.


Mr. Speaker:: Does the house consent to the tabling of these reports?


Some hon. Members:: Agreed.
28902-5-1591



FINANCE


[Stage Direction]
On the orders of the day:
Righi Hon. J. G. Diefenbaker (Leader of fhe Opposition):: I would like to direct a
question to the Prime Minister in connection with the discussions which took place in Washington either on Friday or on Saturday between the representatives of Canada and the United States regarding the financial payments question of the United States and the action being taken thereon.
While the communique makes no reference to this, is it a fact that the Canadian representatives agreed to strive for a modest decline in the Canadian interest rate as one of the conditions basic and precedent to the arrangements which were entered upon?


Right Hon. L. B. Pearson (Prime Minister):: Mr. Speaker, I think I will ask the Minister of Finance to answer that question. He is more familiar with the details of the discussions than I am.
Hon. Walter L. Gordon (Minister of
Finance): Mr. Speaker, I think the right hon.
gentleman may have had reference to a press report during the morning respecting a statement that Secretary of the Treasury Dillon is reputed to have made before a congressional committee today. I do not think it was clear from the reports that came over the wires just what Secretary Dillon actually did say or in what context, but I can assure the right hon. gentleman that there was no undertaking by the Canadian representatives in the connection about which he has inquired.
In the course of the discussions in Washington, the Canadian representatives explained that Canadian monetary policy had been directed to encouraging credit conditions which would favour domestic economic expansion and employment while maintaining the international balance and stability of the Canadian dollar. What they did say and emphasize was that the imposition of the proposed tax on Canada would have resulted in a substantially higher level of interest rates in Canada, which it was obviously desired to avoid in present economic circumstances. But they did not make any

Inquiries of the Ministry definite statements, as suggested in these press reports, that Canada would be looking toward a lower rate of interest.


John George Diefenbaker: Mr. Speaker, may I also ask the Minister of Finance whether the report in the New York Times is correct to the effect that on Friday the Bank of Canada was forced to purchase $250 million in Canadian dollars to stabilize our dollar at the rate of 92.5 cents in relation to United States currency?


Mr. Gordon:: Mr. Speaker, it is not customary and I am not even sure if it is proper to announce the particular transactions on any particular day that have taken place in the exchange fund, but I can assure the right hon. gentleman that the report is highly exaggerated.


Mr. H. A. Olson (Medicine Hat):: I have a supplementary question, Mr. Speaker, with respect to the negotiations held over the week end between Canadian and United States officials. Did these negotiations reveal whether the United States has a plan of administration to overcome the administrative difficulties that caused the withdrawal of the stock sales or transaction tax here?


Walter Lockhart Gordon: I do not think this particular question was discussed over the week end, certainly not in any serious way, although I think it is fair to comment that at least some of the difficulties that were encountered in connection with the proposed take-over tax in Canada will probably be encountered in connection with the United States tax. I do not think it would be appropriate for me to say any more than that, but there certainly will be difficulties.


Mr. T. C. Douglas (Burnaby-Coquitlam):: Was there any quid pro quo concession made to the United States government in return for giving Canada a certain exemption under their foreign security tax?


Walter Lockhart Gordon: No, Mr. Speaker. There were no arrangements or agreements or conditions or undertakings that were not set out in the joint communique.


Mr. G. H. Aiken (Parry Sound-Muskoka):: I have a supplementary question for the Minister of Finance in connection with the exemption. Was the President's power of exemption of general application to all 22 countries, or was it applicable to Canada only?


Walter Lockhart Gordon: Well, Mr. Speaker, the reference to this in the communique was that the United States officials agreed that draft legislation to be submitted would include this provision. There was a reference later


to the hope and expectation of both governments that by the maintenance of close consultation it will prove possible in practice to have an unlimited exemption for Canada without adverse effect on the United States.
I do not think there is any question of this being done for Canada, but just what form the legislation will take I am not sure, because I have not seen it.



SPECIAL ASSISTANTS


[Stage Direction]
On the orders of the day:
Mr. Stanley Knowles (Winnipeg North Centre):: Mr. Speaker, may I ask the Minister of Finance if he is yet in a position to answer my question of yesterday regarding the certificates required under section 32 of the Financial Administration Act before payment is made for work done under a service contract?


Walter Lockhart Gordon: I am not yet in a position to answer that question. It referred among other things to certain actions by the deputy minister, and I would wish to consult him before giving an answer.



EXTERNAL AFFAIRS


[Stage Direction]
On the orders of the day:
Thomas Clement (Tommy) Douglas: May I direct a question to the Secretary of State for External AfEairs. Will he give the house a progress report on the test ban negotiations that are now proceeding in Moscow?


Paul Joseph James Martin: The house will recall that the hon. member for Medicine Hat asked a somewhat similar question yesterday. I said I hoped, perhaps today or later this week, to make a statement. I do not believe I can add anything to what I said last week in a tentative way with regard to the discussions that were then taking place, and which, as of this date, continue.
I can say now, however, that there is every reason to believe that great progress has been made with regard to a test ban in the three environments. I hope before the end of the week to be able to say something more concrete arising out of what I hope will be a satisfactory conclusion reached in Moscow.


STATEMENT RESPECTING FISHING WITHIN 12 MILE ZONE
[Stage Direction]
On the orders of the day:
Paul Joseph James Martin: On Friday the hon. member for Okanagan Boundary asked me if nationals from other countries are still fishing within the 12 mile limit off Canada's coasts, according to historic rights. I now wish to make a reply as I promised.
Nationals from other countries are still fishing within the 12 mile limit off Canada's coasts. It will be recalled that the Prime Minister announced in this house on June 4 that the proposed 12 mile exclusive fisheries zone would be established as of mid May 1964. It is possible that some nationals from other countries contend that they are fishing within 12 miles of Canada's coasts in accordance with historic rights. It will be recalled that in the Prime Minister's statement he said that the government recognizes that the establishment of a 12 mile exclusive fisheries zone and the implementation of the straight base line system may necessarily have implications for other countries which have treaty fishing rights or claims to historic fishing rights off Canada's shores. Any action taken by Canada on these matters will take into consideration the interests of the countries thus affected.


ARTS, LETTERS AND SCIENCES PERSONNEL OF ROYAL COMMISSION ON BICULTURALISM
[Stage Direction]
On the orders of the day:
Mr. Barry Malher (New Westminster):: have a question I should like to direct to the Prime Minister. Having in mind that yesterday the Prime Minister announced the appointment of an excellent commission on the subject of biculturalism whose members come from the maritimes, the two central provinces and the prairies, will the government not consider taking a second look at completing the regional representation on this commission by appointing a member from British Columbia?


Lester Bowles Pearson: It would, of course, be impossible to have every province represented on the commission as well as all ethnic-


Some hon. Members:: Why?


Lester Bowles Pearson: - as well as all ethnic and racial groups, without the commission acquiring a size which would make its operation unwieldy. In so far as a particular representative from British Columbia is concerned, I shall be glad to consider the matter in the light of the hon. gentleman's question.
Inquiries of the Ministry (Translation):
On the orders of the day:


Mr. L. J. Pigeon (Jolieiie-l'Assomplion-Monlcalm):: Mr. Speaker, I should like to put a question to the Prime Minister. With regard to the announcement concerning the inquiry on biculturalism, can the Prime Minister tell the house whether the members of the commission will work on a full time basis, and what will the remuneration of the members and co-chairmen be?
(Text):


Lester Bowles Pearson: Mr. Speaker, I cannot say whether all the commissioners will be occupied full time with the commission, but they will give all the time necessary, I am sure, for the discharge of this important duty.
(Translation) :


INFORMATION REPORTEDLY GIVEN TO &quot;TIME&quot; MAGAZINE
[Stage Direction]
On the orders of the day:
Mr. Heward Graffiey (Brome-Missisquoi):: Mr. Speaker, I wish to direct a question to the President of the Privy Council.
With respect to the publication in Time magazine of details concerning the royal commission on biculturalism, can the President of the Privy Council explain why such information was given to Time magazine before being given to House of Commons or to Canadian journalists?


Hon. Maurice Lamonlagne (President of the Privy Council):: Mr. Speaker, I have not read the report published in Time magazine.
(Text):


Mr. Reynold Rapp (Humboldi-Melfori-Tisdale):: Mr. Speaker, I should like to direct a question to the Prime Minister. When the Prime Minister announced yesterday the names of the members of the commission on biculturalism and bilingualism it was noticeable that there were only two members of European ethnic origin included-


Some hon. Members:: Oh, oh.


Mr. Speaker:: Order, please. Would the hon. member please state his question.


Reynold Rapp: Would the Prime Minister not give consideration to increasing the membership of the commission so as to have representatives from some of the larger ethnic groups in Canada? This would not only make the commission-


Some hon. Members:: Order.


Reynold Rapp: Mr. Speaker, on a point of order, I have never shouted down anyone in this house as long as I have been here. Every time I ask a question, a proper question, I hear shouts and I am not in a position
2504	HOUSE OF
Inquiries of the Ministry to bring my question to the attention of the minister. Would you please give me an opportunity, Mr. Speaker, to finish my question?
I continue. This would not only make the commission a truly Canadian one but it would also have more appropriate representation.


Lester Bowles Pearson: Mr. Speaker, if all the larger ethnic groups were represented I am afraid the commission might be unwieldy in size to do the job efficiently that it is meant to do for all Canadians.


Mr. H. N. Thompson (Red Deer):: Mr. Speaker, may I direct a question to the Prime Minister. I notice from order in council No. 1106 dated July 19, 1963 that provision is made for the position of chief executive officer to the royal commission on bilingualism and biculturalism, and the co-chairman, Andre Laurendeau, has been appointed to this post. I would ask what are the duties of a chief executive officer on such a royal commission?


Lester Bowles Pearson: Mr. Speaker, it has been felt that in a commission of this kind, of this importance and size, one of the members should have the administrative responsibility for the commission as one of the co-chairmen. That will be the main duty of the chief executive officer, to be in charge of the administrative activities of the commission.
(Translation) :


DOMINION-PROVINCIAL CONFERENCE INQUIRY AS TO MEETING WITH PREMIER LESAGE
[Stage Direction]
On the orders of the day:
Hon. Paul Martineau (Poniiac-Temisca-mingue):: Mr. Speaker, I wish to direct a question to the Minister of Justice. Can the minister tell whether during the conference he and some of his colleagues had over the week end with Mr. Lesage in Quebec city, the setting up of a permanent organization for federal-provincial co-operation was mentioned, for instance a secretariat?


Hon. Lionel Chevrier (Minister of Justice):: Mr. Speaker, the answer is no, because the discussions were of a private character.
(Text):



LABOUR CONDITIONS


[Stage Direction]
On the orders of the day:
Robert Norman Thompson: Mr. Speaker, may I direct a question to the Secretary of State for External Affairs. Is the government planning further action to free


the Canadian ship which continues to be boycotted in the port of Chicago, where she has been stranded for more than 80 days?


Paul Joseph James Martin: Mr. Speaker, I shall turn that question over to the Minister of Labour.


Hon. A. J. MacEachen (Minister of Labour):: Mr. Speaker, in reply to the question of the hon. gentleman I think it is inaccurate to use the words "to free the ship", because this ship is not imprisoned in the port of Chicago. It is true that the ship has gone there to be loaded and that the union has refused to load it.
As the hon. gentleman may know, as a result of what I consider to be extraordinary assistance from the justice department and the labour department of the United States, the Chicago court did issue an injunction which would have had the effect of ordering the affected union members to load the ship. However, the fact is that the union members refused to obey the injunction, and about three weeks ago, as a further legal step, the national labour relations board attempted to lay the foundation for contempt proceedings against the union members. As a result of legal difficulties that action was quashed, however, and no further legal action was taken on this particular legal injunction until today.
The Canadian government has made quite frequent representations to the United States authorities and has sought the co-operation of these authorities, particularly with respect to the port situation in Chicago, which is very difficult. I might add that this particular problem of the Howard L. Shaw appears to be a symbol of the general problem now engaging the attention of the government as a result of the Norris report.


Robert Norman Thompson: As a supplementary question, does the minister not regard this as a matter of extreme importance, in view of the fact that the ship is running out of coal and the members of the crew cannot even get water or food delivered on the ship?


Allan Joseph MacEachen: It is serious, Mr. Speaker, because I understand that the owners of the ship must make a decision within the next day or so as to whether they ought to take the ship out of that port because of a shortage of coal. My information is that the ship cannot take on coal because of the refusal on the part of the people who load the ship. However, I have not been told anything about lack of food or water for the crew members.


Robert Norman Thompson: As a further supplementary question, Mr. Speaker-I had intended to ask this as a separate question but it relates

directly to this problem. In its review of the Norris report recommendations and the continuing urgent situation regarding great lakes shipping, is the government considering legislation which would require trade unions operating in Canada to have their head offices in Canada, that their elected officers be Canadians, and that their assets be retained in this country?


Allan Joseph MacEachen: The Canadian government has not undertaken any examination of this larger problem of controlling Canadian unions beyond consideration of what action might be taken to deal with the rather extraordinary situation that now prevails in great lakes shipping.


Hon. Michael Siarr (Ontario):: Mr. Speaker, I would like to ask the Minister of Labour a supplementary question with respect to this very important matter. Would the minister ask the secretary of labour of the United States to hold a joint meeting with him as quickly as possible, and when that joint meeting is held would he impress upon the United States government the necessity of taking more positive action than has been taken up until now to end the harassment of Canadian ships in United States ports?


Some hon. Members:: Hear, hear.


Allan Joseph MacEachen: Mr. Speaker, at present arrangements are being made to convene a meeting with the secretary of labour of the United States as quickly as possible and as the opportune time arises. The Canadian government has attempted to secure, and I think successfully, the co-operation of the United States authorities. But as the United States authorities state, they must operate within their own law as it applies to this particular situation in Chicago.


Thomas Clement (Tommy) Douglas: Mr. Speaker, I have a supplementary question. May I ask the Minister of Labour how soon he expects to be able to bring down measures designed to implement the recommendations of the Norris commission.


Allan Joseph MacEachen: Mr. Speaker, I should like to tell my hon. friend that at present the interdepartmental committee is meeting regularly to consider the report. I expect that very soon a preliminary report will be made to me, which I will bring to the government for consideration as quickly as possible.
(Translation):



THREATENED STRIKE ON U.S. RAILROADS

[Stage Direction]
On the orders of the day:
Mr. Raymond Langlois (Meganfic):: Mr. Speaker, my question is directed to the Minister of Transport. It deals with an article
Inquiries of the Ministry published in La Presse on Monday, July 22, 1963, about the possibility of a railroad strike in the United States.
Has the government taken any measure with regard to this possible strike that would affect Canadian railway lines running through the United States?
(Text):


Hon. G. J. Mcllrailh (Minister of Transport):: Mr. Speaker, I would prefer to take that question as notice.
(Translation):



UNEMPLOYMENT


[Stage Direction]
On the orders of the day:
Hon. Theogene Ricard (St. Hyacinlhe-Bagot):: Mr. Speaker, I should like to direct a question to the Minister of Labour.
In view of the increasing number of unemployed in Canada, and especially in the province of Quebec, can the minister tell the house whether the government intends to take definite actions to correct this alarming situation?
(Text):


Allan Joseph MacEachen: Mr. Speaker, on June 10 I made a statement to the house with respect to special employment and manpower development programs. These programs will be prosecuted vigorously by the government. At present a number of those programs are under examination, which will allow us to announce, I hope at an earlj date, regulations applying to them.


J.-H.-Théogène Ricard: A supplementary question. Can the minister assure the house that these programs will be ready for next winter?


Allan Joseph MacEachen: Mr. Speaker, the purpose in making the announcement at such an early date, earlier than ever before, was to make it possible to have these programs available and ready for implementation long before the onset of seasonally high winter unemployment.


Michael Starr: Mr. Speaker, a supplementary question. Is it not a fact that seven of the nine programs announced were put into effect by the former government and are still in existence now?


Allan Joseph MacEachen: Mr. Speaker, that Is what
one would call a provocative question.


Raymond Langlois: Mr. Speaker, I have a question for the Minister of Labour concerning the answer which he gave a while ago. Is the government intending to apply as quickly as possible some of the recommendations made in the Gill report on unemployment across Canada at the moment?

Inquiries of the Ministry


Allan Joseph MacEachen: The principal recommendations of the Gill committee report have to do with far reaching changes in the method of applying unemployment insurance. These recommendations are presently under consideration. They are not intended, in themselves, to deal with the problems referred to in the previous questions. I might add, however, that one or two recommendations of the Gill committee are under immediate consideration and it may be possible to make an announcement at an early date with respect to those.
(Translation):



PUBLIC SERVICE


[Stage Direction]
On the orders of the day:
Mr. Gilles Gregoire (Lapointe):: Mr. Speaker, I should like to direct a question to the President of the Privy Council. Can he tell us if the special committee set up within the cabinet to apply the recommendations of the Therrien report will continue its work? Can he tell us also whether steps have actually been taken concerning the implementation of the Therrien report?


Maurice Lamontagne: Mr. Speaker, twice already I have informed the house that a special committee of the cabinet had been set up for that purpose, that it was pursuing its work, that it intended to go far beyond the recommendations of the Therrien report and that, by September, we hope to have a general plan which could be applied by stages in our country.
(Text):



WORLD FAIR


[Stage Direction]
On the orders of the day:
Mr. D. G. Hahn (Broadview):: Mr. Speaker, I have a question for the right hon. Prime Minister. I would like to ask him when the vacancy on the board of directors of the Montreal world fair is going to be filled.


Lester Bowles Pearson: Mr. Speaker, it will be filled very shortly, within a day or two, by the appointment of Hon. George Hees.
(Translation):


Louis-Joseph Pigeon: Mr. Speaker, I should like to direct a question to the Minister of Public Works. Can he inform us whether it is true
[Mr. Langlois.l
that Mayor Jean Drapeau, of Montreal, intends to inaugurate by an official ceremony the start of work on the Montreal world fair?


Hon. J. P. Deschatelets (Minisier of Public Works):: Mr. Speaker, I think I can answer this question in the affirmative. The ceremony will take place on a date that remains to be decided upon.
(Text):



PENSIONS


[Stage Direction]
On the orders of the day:
Mr. Stanley Knowles (Winnipeg Norih
Centre): Mr. Speaker, may I direct a question to the Secretary of State. Has the Secretary of State yet had an opportunity to consult his colleagues as he promised he would, about the possibility of again bringing before the house before the summer recess the resolution regarding the Canada pension plan? If so, can he say whether this resolution will again be before us shortly?
Hon. J. W. Pickersgill (Secretary of State):: Mr. Speaker, it is quite correct that I gave such an undertaking to the house, but the hon. gentleman will remember that I gave it in a certain context. It did not seem to me that until the meeting with the premiers had taken place I could have very useful consultation with my colleagues. As soon as that meeting has been concluded I will have the consultation I promised.


Stanley Howard Knowles: A supplementary question, Mr. Speaker. Can the Secretary of State as house leader tell us where we can get extra stenographic help to answer all the letters we are getting from disappointed old age pensioners?


John Whitney Pickersgill: If the hon. gentleman is getting the same number of letters as I am, he will find the existing staff can deal with them. I believe the public generally are quite convinced of the sincerity of the government and need no further reassurance.



COLUMBIA RIVER


[Stage Direction]
On the orders of the day:
Mr. H. W. Herridge (Kootenay West):: Mr. Speaker, I wish to address to the Minister of Northern Affairs and National Resources a question of national significance based on local incidents. In view of the fact that Dr.

Krutilla, a well known United States hydro engineer, and a representative of the B.C. hydro authority under the sponsorship of Dr. Keenleyside have been visiting Arrow lakes points trying to persuade local residents that the proposed draft Columbia river treaty will be of great advantage to Canada and to them, would the minister inform the house whether Dr. Krutilla's intervention in Canadian affairs has the blessing and approval of the government of Canada?


Hon. Arthur Laing (Minister of Northern Affairs and National Resources):: Mr. Speaker, I think this question involves the conveyance to the house by the hon. member of further information concerning the Columbia river treaty. I must admit that much of the information the hon. member has brought to us so far has been authentic. As of this moment I have no knowledge whether Dr. Krutilla is in Canada; therefore I do not know what he is saying or whether he is saying anything. Further than that, I might remind the hon. member, that if that gentleman should be in the employ of the province of British Columbia I would not be disposed to agree that he is intervening in Canadian affairs, because that government and other governments and individuals have brought in authorities from outside. However, I will endeavour to obtain some information for the hon. member and try to let him know tomorrow.



INQUIRY AS TO NEGOTIATIONS WITH RED CHINA

[Stage Direction]
On the orders of the day:
Mr. J. H. Horner (Acadia):: Mr. Speaker, I should like to direct a question to the Minister of Trade and Commerce. Can the minister bring the house up to date on the proposed wheat sale to China, which some time ago was being finalized and which means so much to western Canada? Can he assure the house that the wheat board is being given all necessary credit in order to finalize this deal, because of its very necessity in view of the large crop in western Canada?


Hon. Miichell Sharp (Minister of Trade and Commerce):: I am not sure now what the question was, Mr. Speaker, but I can assure the hon. member that negotiations are proceeding in what I consider the normal way and I am getting regular reports. I have never at any time suggested that these negotiations were not going to be very difficult, because they are; but I am hoping that shortly-I do not know when it will be because it depends on when the Chinese and the wheat
28902-5-160
Inquiries of the Ministry board conclude their negotiations-I will be able to make an announcement in this house.



INCOME TAX


[Stage Direction]
On the orders of the day:
Gilles Grégoire: I wish to address a question to the Minister of National Revenue. Can the minister take steps to correct the situation existing, especially in the districts of Saguenay and lake St. John, concerning delays in making refunds of income tax in those areas?
Hon. J. R. Garland (Minister of National
Revenue): All the action which can be taken has been taken, but I should be glad to bring the hon. member's question to the attention of our officials. If the hon. member has any specific case in mind I would be glad to deal with it.



TRANSPORT


[Stage Direction]
On the orders of the day:
Gordon Harvey Aiken: May I ask the Minister of Transport whether he authorized the use of a Department of Transport aircraft last week end by some of his colleagues to make a trip of a private nature to Quebec?


George James McIlraith: It was not of a private nature.


Gordon Harvey Aiken: I did not hear the reply the minister made.


George James McIlraith: It will be printed in Hansard.


Paul Raymond Martineau: On a point of order, Mr. Speaker, a few minutes ago, in answer to a question by my hon. friend from Parry Sound-Muskoka, I distinctly heard the Minister of Transport say something, but his reply was not loud enough to be heard by most hon. members. He was asked by the hon. member for Parry Sound-Muskoka if he would repeat his answer, but again there was no audible reply. So I suggest with all deference to the minister that he be courteous enough to repeat his original answer.


George James McIlraith: On the point of order, we have a situation here where the hon. member put a question without notice, but to which nevertheless I gave a clear and definite answer.


Some hon. Members:: No.


George James McIlraith: I regret very much if the hon. member did not hear it. It must have

Inquiries of the Ministry been due to noise beyond my control, because I certainly gave an answer in a sufficiently loud and clear way.


Some hon. Members:: Answer.


George James McIlraith: I have not the question which was asked. If the hon. member would care to pose his question again-I would ask him to put it in the identical language which he used before-I will give him the answer again.


Gordon Harvey Aiken: My question was, did the Minister of Transport authorize the use of a Department of Transport aircraft last week end for some of his colleagues to make a trip of a private nature?


George James McIlraith: My answer was, the trip was not of a private nature.


Paul Raymond Martineau: On a question of privilege, a few minutes ago I asked the Minister of Justice for some information with regard to that trip. I asked him if the question of setting up a permanent organization for consultation with the province of Quebec was discussed with Mr. Lesage in the course of the meeting, and the Minister of Justice definitely answered "No, because the trip was of a private nature".


Some hon. Members:: No.


Lionel Chevrier: Apparently the hon. member did not listen to the answer I gave, otherwise he would not have prefaced his question of privilege in the manner he did. My first answer to the question was no, but I said the discussions were of a private nature.


An hon. Member:: Entirely different.


John George Diefenbaker: May I ask the Minister of Justice this. If he and the other ministers discussed with the premier of the province of Quebec matters connected with public business, what was the purpose of this discussion? It was not a private meeting. Therefore the question put by my hon. friend was perfectly proper.


Lionel Chevrier: Is the Leader of the Opposition making a point of order?


John George Diefenbaker: I am asking a question.


Lionel Chevrier: If he is, he is clearly out of order, as was the hon. member for Pontiac-Temiscamingue.


Some hon. Members:: Oh, oh.


An hon. Member:: No lesson.


Lionel Chevrier: The hon. gentleman says "no lesson". Certainly there is no lesson to be taught by the other side of the house, particularly so far as the use of planes is concerned;


and I have been reminded that the Leader of the Opposition should be the last one to refer to trips to the city of Quebec.


Mr. Speaker:: Order. It seems to me we are embarking on a fishing trip. Has the Leader of the Opposition anything to add?


John George Diefenbaker: I rise on a question of privilege and say to the hon. gentleman that this kind of smokescreen does not meet the situation. As far as the use of aircraft is concerned, I am willing to have that looked into at any time, and to deal with the trips of members of the former government, the St. Laurent government, to Florida and elsewhere.
(Translation):


Gilles Grégoire: Mr. Speaker, I should like to direct a question to the Minister of Justice. In connection with the authorization given by the Department of Transport to enable the present government to use its aircraft, I should like to ask the Minister of Justice how he could obtain an authorization of the Minister of Transport who at that time was flying in another jet in western Canada?


Lionel Chevrier: Mr. Speaker, with respect to the second part of the question, the hon. member should put it to the responsible minister. As for the first part, there is no doubt that, along with the other ministers, I was fully authorized to fly in an airplane of the Department of Transport to go to Quebec city last Sunday.


Paul Raymond Martineau: Mr. Speaker, may I put a
supplementary question? Since the Minister of Justice said that his meeting was of a public character, could he tell the house what was the purpose of that meeting?


Lionel Chevrier: Mr. Speaker, I never said what the hon. member has just mentioned in the preamble of his question. Apparently, the hon. member did not understand my first and second answers. Nevertheless, as I said a moment ago-


William Heward Grafftey: Then, give the answer.


Lionel Chevrier: If you would kindly wait, I shall give the answer to you who are jumping like a-


Some hon. Members:: Hear, hear.


Lionel Chevrier: I wish to remind you that the questions-
(Text):


Mr. Speaker:: Order. I had hoped at five minuter ->fter three that we were reaching

Inquiries of the Ministry
the end of the question period, and I was about to congratulate hon. members.


Louis-Joseph Pigeon: On a point of order, Mr. Speaker-


Mr. Speaker:: I think we have gone far enough into this matter. Two ministers have attempted to reply, and surely hon. members must be satisfied. The hon. member for Port Arthur.


Paul Raymond Martineau: On a point of order, Mr. Speaker, the minister started to give an answer to my question, and I hope he will at least be permitted to terminate his answer.


Lionel Chevrier: If the hon. member would put his question clearly so the house could understand it perhaps I could then deal with it.


Paul Raymond Martineau: I would be very glad to do that.


An hon. Member:: No preamble.


Paul Raymond Martineau: What was the purpose of the minister's week-end meeting with Premier Lesage?


Lionel Chevrier: I have replied to that question on three occasions both today and yesterday. The meetings were of a private nature and dealt with federal and provincial matters.


John George Diefenbaker: A private meeting at public expense.


Mr. Speaker:: The hon. member for Port Arthur.


Louis-Joseph Pigeon: On a point or order, Mr. Speaker-


Some hon. Members:: Oh, oh.


Louis-Joseph Pigeon: It is my right to raise a point of order, Mr. Speaker, and you will then decide.


Some hon. Members:: Oh, oh.


Louis-Joseph Pigeon: It is my right to submit a point of order. The Speaker will decide.


Mr. Speaker:: Order. I will listen to the point of order.
(Translation):


Louis-Joseph Pigeon: Mr. Speaker, I raise a point of order. The Minister of Justice mentioned that he travelled with his colleagues in a Canadian government aircraft paid for by the Canadian taxpayers. If they did so on the occasion of an official visit, I feel it is in the interests of the Canadian people to know the reason why the minister went to Quebec. I maintain that we are entitled to know.
28902-5-1601
(Text) :


Mr. Speaker:: Order. There is no point of order there.



COMMUNICATIONS


[Stage Direction]
On the orders of the day:
Thomas Clement (Tommy) Douglas: Some time ago, when the Prime Minister was in hospital, I directed a question to the Minister of Justice asking whether the government would consider the establishment of a royal commission to determine whether the concentration of control of news gathering and disseminating media had reached a point at which it was a menace to the public interest. At that time the Minister of Justice said he would refer the matter to the Prime Minister on his return. I wonder whether the right hon. gentleman has had time to take it under consideration.


Lester Bowles Pearson: No, I am afraid I have not had time to give consideration to that very important matter.


Mr. D. M. Fisher (Port Arthur):: Mr. Speaker, I want to ask the Minister of Justice a question following on the one relating to a commission to examine the trend of the press toward consolidation. I should like to ask the minister whether the restraining order of the restrictive trade practices commission with regard to Pacific Press has been outmoded or is no longer in effect as a result of the purchase of the Vancouver Sun by F. P. Publications?


Lionel Chevrier: Mr. Speaker, I am afraid I shall have to take that question as notice and give my hon. friend a reply later.



WHEAT-REQUEST FOR FORECAST OF EXPORT VOLUME

[Stage Direction]
On the orders of the day:
Mr. George Muir (Lisgar):: Mr. Speaker, I should like to address a question to the Minister of Trade and Commerce. In view of the large wheat crop expected in the prairie region this fall, would the minister care to forecast the expected volume of wheat to be exported in the crop year 1963-64 beginning August 1?


Mr. Speaker:: Order. That is a question for the order paper.


George Robson Muir: On a point of order, Mr. Speaker, I do not think it should take a question on the order paper to ask the minister to forecast what he thinks will be the volume of wheat exported.

Income Tax Act


Mitchell William Sharp: Mr. Speaker, this is obviously not a question of urgency since the new crop year has not yet begun. The question the hon. member asked me was, would I care to make a forecast, and the answer is no.
(Translation):



NATIONAL DEFENCE


[Stage Direction]
On the orders of the day:
Mr. Maurice  Cole@Chicoutimi: Mr. Speaker, may I put a question to the Minister of National Defence? Will the minister take into consideration the strong representations submitted by individuals and public organizations of the Saguenay area concerning the storage of nuclear warheads at the Bagot-ville military airport?
(Text):


Hon. Paul Hellyer (Minister of National Defence):: Yes, Mr. Speaker, we listen to all representations from all parts of the country.


Louis-Joseph Pigeon: The Voice of Women, too?



WAYS AND MEANS

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

[Stage Direction]
Resolved,-That it is expedient to introduce a measure to amend the Income Tax Act and to provide among other things:
1.	That with respect to new depreciable property of a prescribed class acquired in the period of 24 months commencing June 14, 1963 capital cost allowances be computed on a straight line basis at a prescribed rate not exceeding 50 per cent per annum if the property has been acquired by a taxpayer in a taxation year for a manufacturing or processing business in Canada and the taxpayer is
(a)	an individual who was resident in Canada for a period of not less than 183 days in the year, or
(b)	a corporation that in the year had a degree of Canadian ownership and control;
and for the purposes of this paragraph,
(c)	a corporation has a degree of Canadian ownership and control in a year if the corporation throughout the 60 day period immediately preceding the year (or if the corporation did not have a preceding year, throughout the 60 day period commencing on the first day of the year) complied with the following conditions:
(i)	the corporation was resident in Canada,
(ii)	either
(A)	not less than 25 per cent of its voting shares were beneficially owned by one or more individuals resident in Canada, one or more corporations controlled in Canada or a combination thereof,
or
(B)	the voting shares of the corporation were listed on a recognized stock exchange in Canada and it is established, in prescribed manner, that no one non-resident shareholder owned beneficially, together with any other person associated with

him at any time in the period, more than 75 per cent of the voting shares of the corporation, and
(iii)	where the year commences after December 31, 1964, the number of directors of the corporation who were resident in Canada was not less than 25 per cent of the total number of directors of the corporation;
or complied with the conditions specified in clauses (i) and (iii) and was a wholly-owned subsidiary of a corporation that throughout the 60 day period complied with the conditions specified in clauses (i), (ii) and (iii); and
(d)	a corporation is controlled in Canada at a particular time if at that time it complies with the following conditions:
(i)	the corporation is resident in Canada, and
(ii)	not less than 51 per cent of its voting shares are beneficially owned by one or more individuals resident in Canada, one or more corporations controlled in Canada or a combination thereof.
2.	That a taxpayer whose business in a prescribed area of Canada has been certified to be a new manufacturing or processing business that commenced commercial operations in the period of 24 months commencing with the date on which any enactment based on this paragraph is assented to be exempt from tax on the income from that business for a period of 36 months from the date certified to be the date of commencement of operations, and that the rate of capital cost allowances for new depreciable property of a prescribed class acquired by the said taxpayer in the said 24 months period for such business be computed on a straight line basis at a prescribed rate not exceeding 50 per cent per annum.
3.	That with effect for 1964 and subsequent taxation years section 40A of the act, which provides for a deduction from the tax otherwise payable by a manufacturing and processing corporation, be repealed.
4.	That with respect to expenses incurred after June 13, 1963 a corporation whose principal business is operating a pipe line for the transmission of oil or natural gas be allowed to deduct in computing income the drilling and exploration expenses, including all general geological and geophysical expenses, incurred by it on or in respect of exploring for petroleum or natural gas in Canada and the prospecting, exploration and development expenses incurred by it in searching for minerals in Canada.
5.	That for the 1963 and subsequent taxation years a dividend received by a person resident in Canada from a corporation that throughout its taxation year in which the dividend is paid or credited
(a)	is taxable as a non-resident corporation carrying on business in Canada,
(b)	derives substantially all of its income from sources in Canada, and
(c)	has its shares listed on a recognized stock exchange in Canada be deemed to be a dividend from sources in Canada paid or credited by a taxable corporation within the meaning of section 38 of the act.
6.	That the 15 per cent rate of tax payable by a non-resident person on dividends paid or credited to him by a person resident in Canada be reduced to 10 per cent with respect to dividends paid or credited after June 13, 1963 by a corporation that in its taxation year in which the dividend is paid or credited has a degree of Canadian ownership or control within the meaning or paragraph 1.
7.	That the 15 per cent rate of tax payable by a non-resident person on dividends paid or credited to him by a person resident in Canada be increased

to 20 per cent with respect to dividends paid or credited after December 31, 1964 by a corporation that in its taxation year in which the dividend is paid or credited does not have a degree of Canadian ownership or control within the meaning of paragraph 1.
8.	That where a corporation resident in Canada that in any year before 1967 was not a corporation that had a degree of Canadian ownership and control, within the meaning of paragraph 1, becomes a corporation that in 1967 has such a degree of Canadian ownership and control, a non-resident person shall be entitled to a refund equal to
(a)	5 per cent of any dividends paid or credited by the corporation to him after June 13, 1963 and before January 1, 1965, in respect of which he has paid a tax of 15 per cent to Canada, and
(b) 10 per cent of any dividends paid or credited by the corporation to him after December 31, 1964 and before January 1, 1967, in respect of which he has paid a tax of 20 per cent to Canada.
9.	That where a corporation (other than a nonresident-owned investment corporation) paid or credited dividends during the period commencing on June 14, 1963 and ending on December 31, 1964 in taxation years in which it did not have a degree of Canadian ownership and control within the meaning of paragraph 1, the amount of which dividends exceeds five fourths of the amount of dividends paid or credited by the corporation during that number of days immediately preceding June 14, 1963 that is equal to the number of days in the period commencing on June 14, 1963 and ending on December 31, 1964 that were included in taxation years in which the corporation did not have such a degree of Canadian ownership and control, the corporation shall, on or before January 31, 1965, pay a special tax equal to 5 per cent of the amount of the excess.
10. That with respect to income earned after December 31, 1964 the 15 per cent tax imposed by part IIIA of the act on a non-resident corporation carrying on business in Canada be 20 per cent.
11.	That with respect to income of a non-resident-owned investment corporation earned after December 31, 1964 the present 15 per cent rate of tax be 20 per cent.
12. That any amount paid or credited after June 13, 1963, by a person resident in Canada to a non-resident person, as or on account of a management or administration fee or charge, be subject to the 15 per cent tax on income from Canada of non-resident persons.
13.	That with respect to interest paid by a person resident in Canada to a non-resident person on any obligation issued after June 13, 1963, if the nonresident person
(a)	is exempt from income tax in the country in which that person is resident; and
(b)	has obtained a certificate of exemption from the minister,
the non-resident person be exempt from the 15 per cent rate of tax imposed in respect of such payment.
14.	That for the taxation years ending after November, 1965 a corporation shall during the 12 months period ending 4 months after the close of each taxation year, pay to the Receiver General of Canada
(a)	on or before the last day of each of the first 10 months in that period, an amount equal to one twelfth of the tax as estimated by it at the rate for the taxation year
(i)	on its estimated taxable income for the year, or
(ii)	on its taxable income for the immediately preceding year,
Income Tax Act
(b)	on or before the last day of the eleventh month in the period, an amount equal to one half of the remainder of the tax payable as estimated by it on its taxable income for the year at the rate for the year, and
(c)	on or before the last day of the period, the remainder of the tax
and that for the taxation years ending after November, 1963 and before December, 1964 a corporation shall, during the 11 month period ending 5 months after the close of its taxation year, pay to the Receiver General of Canada
(d)	on or before the last day of each of the first 9 months in that period, an amount equal to one twelfth of the tax as estimated by it at the rate for the taxation year
(i)	on its estimated taxable income for the year,
or
(ii)	on its taxable income for the immediately preceding year,
(e)	on or before the last day of the tenth month in the period an amount equal to one half of the remainder of the tax payable as estimated by it on its taxable income for the year at the rate for the year, and
(f)	on or before the last day of the period, the remainder of the tax, and that for taxation years ending after November, 1964 and before December, 1965 a corporation shall, during the 11 months period ending 4 months after the close of its taxation year, pay to the Receiver General of Canada
(g)	on or before the last day of each of the first 9 months in that period an amount equal to one eleventh of the tax as estimated by it as the rate for the taxation year
(i)	on its estimated taxable income for the year or
(ii)	on its taxable income for the immediately preceding year,
(h)	on or before the last day of the tenth month in the period, an amount equal to one half of the remainder of the tax payable as estimated by it on its taxable income for the year at the rate for the year, and
(i)	on or before the last day of the period, the remainder of the tax.
15.	That the return of income for a taxation year that is to be filed with the minister in prescribed form and containing prescribed information by or on behalf of a corporation be filed
(a)	for taxation years ending after November
1963	and before December, 1964 within 5 months from the end of the year, and
(b)	for taxation years ending after November
1964	within 4 months from the end of the year.
16.	That with respect to amounts received after June 13, 1963, where a taxpayer has received an amount in a taxation year,
(a)	as consideration for the sale or other disposition of any shares of a corporation or of any interest in such shares,
(b)	in consequence of a corporation having
(i)	redeemed or acquired any of its shares or reduced its capital stock or
(ii)	converted any of its shares into shares of another class or into an obligation of the corporation, or
(c)	otherwise, as a payment that would, but for this provision, be exempt income,
which amount, in the opinion of the minister, was received by the taxpayer as part of a transaction or series of transactions whenever effected or to be effected, one of the purposes of which was or is to effect a substantial reduction of, or disappearance of, the assets of a corporation in such a manner that the whole or any part of any tax that might otherwise have been or become payable
[Stage Direction]
Income Tax Act
under the act in consequence of any distribution of income of a corporation has been or will be avoided, the amount so received by the taxpayer or such part thereof as may be specified by the minister shall, if the minister so directs,
(d)	be included in computing the income of the taxpayer for that taxation year, and
(e)	in the case of a taxpayer who is an individual, be deemed to have been received by him as a dividend from a taxable corporation within the meaning of section 38 of the act.
17.	That for the 1964 and subsequent taxation years where, in the case of two or more corporations, the minister is satisfied
(a)	that the separate existence of those corporations is not solely for the purpose of carrying out the business of those corporations in the most effective manner, and
(b)	that one of the main reasons for such separate existence is to reduce the amount of taxes that would otherwise be payable under the act the two or more corporations shall, if the minister so directs, be deemed to be associated with each other.
18.	That upon any appeal to the Exchequer Court of Canada from an assessment in such case the court may confirm or vary any direction given by the minister as provided in paragraph 16 or 17, or may vacate any such direction where it determines that
(a)	none of the purposes of the transaction or series of transactions referred to in paragraph 16 was or is that specified in that paragraph, or
(b)	none of the main reasons for the separate existence of the corporations referred to in paragraph 17 is that specified in subparagraph (b) of that paragraph.
19.	That for the 1963 and subsequent taxation years
(a)	a business loss incurred in a previous year by a corporation may not be deducted in a taxation year if
(i)	the business in which the loss was sustained by the corporation was not carried on by it in the taxation year, and
(ii)	in the period between the end of the year in which the loss was sustained and the end of the taxation year control of the corporation has changed hands, and
(b)	a business loss incurred by a corporation in a taxation year may not be deducted in computing the income of the corporation for that taxation year if the business in which the loss was sustained by the corporation was wound up or discontinued, and after such winding up or discontinuance control of the corporation passed to a person or persons who did not control the corporation in the year at any time when the business in which the loss was sustained was carried on; but this paragraph is not applicable where the change of the control of the corporation occurred prior to June 14, 1963.
20.	That for the 1963 and subsequent taxation years section 18 of the act, which provides rules in the case of any lease option agreement, hire purchase agreement or other contract or arrangement for the leasing or hiring of property, be repealed, and appropriate transitional provisions be enacted in respect of any such contract or arrangement.
21.	That for the 1963 and subsequent taxation years the benefits received by an employee from his employer's contribution to a group life insurance plan that are at present excluded from income be excluded only if such contribution is in respect of group term life insurance.
22.	That, with respect to any annuity contract entered into after June 13, 1963, that part of the

proceeds of the contract that consists of interest accumulated prior to the date on which the annuity commences be included in computing income of the recipient unless such proceeds are received as a life annuity or as a refund of premiums upon the death of the holder of the annuity contract.
23.	That for the 1962 and subsequent taxation years the manner of taxing a bankrupt corporation, a bankrupt individual and a trustee in bankruptcy be revised and in particular
(a)	that the trustee be deemed to be the agent of the bankrupt person for all purposes of the act;
(b)	that section 63 of the act not apply in the case of any income of the trustee from dealing in the property of the bankrupt person or from carrying on the business of the bankrupt person
(c)	that the income of the bankrupt person be computed as if upon the occurrence of the bankruptcy the property of the bankrupt person did not pass to and vest in the trustee; and
(d)	that the trustee be liable for payment of any tax payable by the bankrupt person to the extent of the property of the bankrupt person in the possession of the trustee.
The Chairman:: Order. When the committee rose last evening we were discussing paragraph 17. Shall we now proceed to paragraph 18?


Some hon. Members:: Agreed.


Walter Lockhart Gordon: Mr. Chairman, this paragraph of the resolution proposes that a taxpayer who is dissatisfied with the direction of the minister in connection with dividend stripping or associated companies may appeal to the Exchequer Court of Canada.


Mr. Nowlan:: Mr. Chairman, I spoke at some length on this matter when we were dealing with the budget speech per se, and I do not intend to repeat now what I said on that occasion.


Some hon. Members:: Hear, hear.


George Clyde Nowlan: Well, if there is to be noise over there I will. I think the minister has attempted to improve the situation by the insertion of this appeal section, but I doubt very much that it achieves the purpose. As was pointed out by other members in the discussion last night, I do not think any appeal provision will meet the situation. However, I think the proper thing to do is to wait until the bill is before us, when we will have the various sections of the bill rather than spending considerable time in dealing with resolutions which, although important, are not effective in the same way that clauses of a bill are. So as far as we are concerned I think we are prepared to let the matter stand until we see the bill.


Mr. Lambert:: In preparing the bill I wonder whether the minister would be willing to consider that the appeal should start at the tax appeal board level rather than in the exchequer court. The provision here is a specific one for an appeal to the exchequer

court rather than to the tax appeal board and so far as many smaller taxpayers are concerned I think there might be a good deal of merit in allowing them at least to start with an appeal to the tax appeal board.


Walter Lockhart Gordon: Mr. Chairman, there would be no objection to that, except that in the discussions it was felt that the tax appeal board was probably not in a position to deal with these matters as expeditiously or perhaps as fully as the exchequer court. However, I would be glad to consider the matter and look into it more carefully between now and the introduction of the bill.


Lucien Lamoureux: Shall we proceed to the consideration of paragraph 19?


Some hon. Members:: Agreed.


Walter Lockhart Gordon: Mr. Chairman, this is another section that is designed to plug a loophole. It is an amendment to stop a device whereby a company that has experienced a loss is purchased by somebody else for the purpose of applying the loss against income from another business.


Mr. Monieith:: Mr. Chairman, I fully understand the minister's thinking concerning the plugging of loopholes, but might not this first business be sold to another business for a quite legitimate reason? Is there any protection under those circumstances?


Walter Lockhart Gordon: There might be occasions where this could happen. I think the hon. member will agree with me, though, that in the vast majority of cases, particularly in recent years, this practice, which has been an ever-increasing one, has been for the simple purpose of avoiding taxes in future for profitable concerns.


Jay Waldo Monteith: I do not agree entirely. I feel that because of succession duties and all sorts of things there have been many cases in the past where a corporation, even though it has suffered losses in the previous year, may be sold to some other concern which has every right to take the losses in the previous year of the first company into consideration. I just do not like to see us put in the position where this may be forbidden.


Walter Lockhart Gordon: Perhaps I should have explained that this only applies in a case where the first business has been discontinued. It does not apply if the business is a continuing one with some losses that can be applied in the future. It is restricted to a case where the corporation has gone out of business with heavy losses. There used to be a regular market for such corporations.
Income Tax Act


Norman Platt Lambert: It should be clearly understood that when the legislation comes before the house the provision will be clearly identified. One can readily envisage the condition referred to by the hon. member for Perth, where you might have two related businesses.


Walter Lockhart Gordon: It is not intended to cover those at all.


Norman Platt Lambert: Of course we are fully aware that there was some, shall we say, plucking of ripe plums from certain trees by people who were rather astute at picking up tax losses of one company to the benefit of another. On the other hand, this legislation might become far too wide. A successful merger might be made of one or two unsuccessful businesses with one that is quite successful, or there might be the gathering together of two or three rather rundown businesses with a view to putting them on their feet, as long as there was a certain amount of working capital that might be introduced by the fourth corporation.


Walter Lockhart Gordon: I think it is fair to say that this would stop the most blatant cases, but there might be a more sophisticated situation of the kind the hon. member has just described that would probably get through the net.


Lucien Lamoureux: Shall we go to paragraph 20?


Walter Lockhart Gordon: This paragraph of the resolution proposes that section 18 of the act which deals with lease operations be repealed. This is another major plugging of a loophole and one that has been taken advantage of to an increasing extent in recent years.
Briefly, section 18 provides that lease options or similar agreements under which the lessee has the right to purchase shall be deemed to be agreements for the sale of the property. The lessee is not permitted to deduct the rent he pays for the use of the property, but he may deduct the cost of capital allowance. The original purpose of this section was to block arrangements under which contractors were leasing equipment and paying a rental which was sufficient to pay for the equipment in two or three years, after which the contractor had the right to buy the equipment for a nominal sum. This had the effect of allowing the contractor to deduct the cost of the equipment under the guise of rent over a very short period, and then write off the cost for tax purposes at a faster rate than would be allowed.


George Clyde Nowlan: Oh, oh.

Income Tax Act


Walter Lockhart Gordon: I see the hon. member who for some years administered this act recognizes some of the cases to which I am referring. The contractor would then write off the cost at a faster rate than would be allowed under normal depreciation allowance for whatever equipment had been purchased.
In 1948 the section was rewritten and an attempt was made to prevent the purchase price of land being deducted under the heading of rental payments. It has been found that the section has a number of serious deficiencies, and it interferes with legitimate business transactions. On the other hand it provides a way for substantial tax avoidance. It is believed it would be extremely difficult to devise an amendment to correct the deficiencies of the section without interfering further with legitimate business arrangements and making an already difficult section incomprehensible. I do not think that is an exaggeration.
A brief submitted by a joint committee representing the Canadian Bar Association and the Canadian Institute of Chartered Accountants for the last two years has urged repeal of the section.


George Clyde Nowlan: I quite agree that there have been occasions when it might have been abused. The practice to which the minister has referred was a fairly ancient and shall I say honourable tradition. At any rate, it is one which has been in effect for a long while. I am particularly intrigued by the wording in one part. What does the minister mean by "appropriate transitional provision"? This is something I have not seen in resolutions heretofore, and I would hope that the section, when incorporated in the act, would translate "appropriate transitional provision" into a regulation which would enable us to know specifically with what we are dealing.


Walter Lockhart Gordon: I think the point that has been raised is a very good one. I will indicate, with the approval of the committee, three of the types of measures that are proposed. First of all, in those cases where rents already paid in previous years exceed capital cost allowances that have been deducted in those years, the excess of rents shall be deductible in the year first affected by the repeal of the section. Second, in those cases where the capital cost allowances deducted have exceeded the amount paid in rents, the excess shall be recovered by adding it to income. The taxpayer should be given the right to elect to spread this additional income over the previous five years in accordance with section 43.
Third, where the financing of ships built in Canada has been facilitated by an agreement under section 18, no recapture along

the lines indicated is required, and instead, any subsequent payment of rent, charter party fees, shall not be deducted until the total of such rentals exceeds the capital cost allowance. The final adjustment shall be made at the termination of the agreement.


Norman Platt Lambert: This may be a rather technical point. I take it that the provision for spreading the recapture over the previous five years does not in fact open up the assessment in the fifth year so there can be a full reassessment which goes beyond the four year statutory limitation.


Walter Lockhart Gordon: I am afraid that the significance of that question has escaped my officials. Perhaps the hon. member would be kind enough to repeat it?


Norman Platt Lambert: I am just worried that by spreading this recapture over five years, by going into the last year, the furthest year, you are in effect having a reassessment, and by so doing even at the option of the taxpayer you may be reopening an assessment that had been closed beyond the statutory period.


Walter Lockhart Gordon: This would only be done at the option of the taxpayer. It is proposed that he have this option so that if he is stuck he can spread the additional cost over a reasonable period of years. Perhaps the hon. member would prefer to limit it to four years, but the intention is just to produce an average rate.


Lucien Lamoureux: We shall now proceed to paragraph 21.


Walter Lockhart Gordon: This paragraph of the resolution provides that the present concession to exclude from the income tax of an employee certain benefits he receives from an employer through contributions to a group life insurance plan will be allowed only if the contributions are for term life insurance. That is to say that they would not be for permanent life insurance, because this may mean unduly large benefits for selected employees. This is just another loophole.


Lucien Lamoureux: Paragraph 22.


Walter Lockhart Gordon: This paragraph of the resolution proposes an amendment to ensure that interest earned on amounts paid to purchase an annuity contract will be taxed where proceeds of the contract are taken in a lump sum rather than in a life annuity. It is the same principle. This is another measure to close a loophole.


Norman Platt Lambert: I take it that the time at which the income is computed by the recipient is when he receives the lump sum, and it will be deemed to be income within that taxation year.


Walter Lockhart Gordon: That is correct, Mr. Chairman.


Lucien Lamoureux: Paragraph 23.


Walter Lockhart Gordon: This paragraph of the resolution proposes that a set of rules be added to the Income Tax Act to deal with certain taxation problems which arise when a person becomes bankrupt. At present it does not include special provisions governing a trustee of a bankrupt corporation or an individual, and as a result the trustee in bankruptcy must be taxed under the provisions of the law applicable to an estate or trust. This leaves uncovered a wide range of situations.
Moreover, if a trustee earns any income, and they often do, he would be taxed at the individual rates without exemptions, even when the bankrupt person is a corporation and frequently the trustee continues the operation. In the past, returns have been made and filed on assessment of what seems to be the most reasonable basis for handling the situation. However, the basis used has been questioned and there is need for more detailed law.


Lucien Lamoureux: Have we completed discussion of paragraph 23?


Some hon. Members:: Yes.


Lucien Lamoureux: Then I should inform the committee that in the course of the discussion paragraphs 1, 6, 7, 8 and 9 were allowed to stand.


Mr. Barnett:: Mr. Chairman, this might be an appropriate moment to call to the attention of the committee what I consider to be some of the omissions in the resolution. We have been dealing at some length with provisions which affect corporate taxpayers, and according to the minister we have been attempting to plug some loopholes. Under other provisions we have been concerning ourselves with the granting of certain taxation concessions to corporate taxpayers, and it might be appropriate if we were to spend a little time concerning ourselves with matters relating to the far larger number of individual taxpayers. To my mind the resolution has some serious omissions in this connection.
In my experience during the time I have been in this house, this seems to have been an all too prevalent condition pertaining to the income tax resolutions and bills introduced by various ministers of finance, and the particular matter to which I make reference is certainly not new so far as I am concerned. I am sure the former minister of finance will
Income Tax Act
recall that during a somewhat similar discussion last year I raised a question in regard to limitations on exemptions of expenses incurred by individual taxpayers in the course of earning a living, because of the restrictions in section 5(2) of the Income Tax Act.
Perhaps the present minister may recall that last year I introduced an amendment in the committee stage of the bill which the chairman ruled out of order; and in spite of my plea to the then minister of finance that he accept my motion, and thereby put it in order, he indicated in a genial way that he did not see fit to adopt that suggestion. In passing I may say I have had a rather similar experience with quite a number of ministers of finance. I recall that when the first Conservative minister of finance of the current era in Canadian politics assumed office we had a similar discussion, and I remember saying at that time that apparently I was going to have to start all over again on a new minister of finance. I only hope that my starting on the present minister will be more effective than my previous experiences.
In this connection I would like to draw to the attention of the minister a statement which was made in this chamber by Mr. Harris, the then minister of finance, as recorded at page 3034 of Hansard, 1957, volume III. He was the last previous spokesman on behalf of a Liberal government in that portfolio, and on that occasion he had this to say:
The hon. member argues, in any event, that on social grounds it is desirable that full income tax should not be charged to men who are away from home because they ought to have a home life and be able to return and have some money with which to do it. I recognize both these arguments and I can assure hon. members that the subject is not closed.
It appears to have been closed during the period since 1957.
It is one of the problems to which we have to find a proper answer, but I am not prepared to make any recommendation to the committee at the present time.
In reply to that statement I had this to say, as recorded at page 3036 of Hansard:
I welcome the statement which the minister has made in part, because up until this year the only thing I have been able to get in the way of an answer from the opposite side of the house has been a few inconclusive words from the minister's parliamentary assistant on the subject. The one point to which I want to make reference, seeing that the discussion has gone this far, is this.
I agree in part with what the minister has been saying, namely that this problem is not something which is unique to the construction industry.
The present minister may recall that there was a great deal of discussion in respect to this sort of exemption being applicable to the construction industry. Following the taking of office by the Conservative administration, subsection 2 of section 5 of the act was

Income Tax Act
introduced, and it does provide some consideration for construction workers in respect to the deduction of expenses. In fact, as I recall the debate which occurred during that particular session, and from the records which I have been quoting, some of the then front bench members of the Conservative opposition dealt with the subject at considerable length, and I have always surmised that when shortly afterward they found themselves sitting on the treasury benches they could not do any more than show good faith in the course of action which they had been advocating so vigorously a short time previously.
The then minister of finance was trying to point out that this was not a problem confined only to the construction industry. As I was saying, in speaking at that time I said this:
I agree in part with what the minister has been saying, namely that this problem is not something which is unique to the construction industry. As far as I am concerned, it applies equally, and as seriously, for example to the logging industry. In my opinion from the study I have made of the matter over the past several sessions, this whole question can be resolved only by a suitable amendment to the Income Tax Act, one that will remove what to me is a discrimination that now exists against the expenses that are incurred by those on wages and salaries in the course of earning a living.
While no action has been taken by parliament in regard to legislation since the amendment covering construction workers was introduced by the Conservatives, this matter has not been allowed to lie dormant. I am not sure whether in the voluminous correspondence the Minister of Finance has been receiving in connection with budget matters he has had an opportunity of personally examining a brief which was submitted to him very recently, dated July 8 of this year, from what is referred to in British Columbia as the loggers' local of the international woodworkers of America. This particular brief merely reiterates the case that this local union, on behalf of its membership, has been placing before the minister of finance in Ottawa for quite a number of years.
While it is concerned primarily with the situation of the loggers on the Pacific coast, large numbers of whom have to spend most of their working life away from their homes and families and have to undertake expensive air travel as well as having to incur expenses for the special tools of their trade, nevertheless it is in line with the argument I have been attempting to present in the house and which was concurred in, in part at least, by the former minister of finance, Hon. Walter Harris, when I suggested that the only proper way to deal with this matter

was to provide the same rights of deduction for all people in the same or equivalent situations.
I am sure that people on wages and salaries in this country will have noted with interest the brave efforts of the present minister to curb what he termed expense account living; the suggestion that no one should be able to have a car valued at over $5,000, as I recall his figure, and write it off to expense. But I would urge that the minister consider that as long as any form of expense account living is allowed in this country, then under the same terms and conditions expenses incurred in the course of earning a living should be allowed to more Canadians no matter what the source of their income may happen to be.
It is for that reason, and in the hope that the present Minister of Finance will give a really sympathetic hearing to this argument that I have been presenting and perhaps agree that this should be incorporated in his proposed amendment to the Income Tax Act, that I would like to move:
That the resolution be amended by adding thereto after item 23 the following:
24.	That for the 1962 and subsequent taxation years, the existing limitations in section 5 of the act with respect to allowable deductions from taxable income of those whose income is derived from salary or wages be changed to provide for the deduction by each such taxpayer of the following:
(a)	Expenses necessarily incurred by him for board and lodging by reason of his employment at i distance from the place where he maintains a self contained domestic establishment.
(b)	Expenses incurred by him for transportation between his ordinary place of residence and his place of employment where, by reason of distance, he is required to live away from home to perform the duties of his employment.
(c)	Expenses incurred by him for depreciation and replacement of tools and special equipment or clothing which are necessarily required by him in the performance of the duties of his employment.


Walter Lockhart Gordon: Mr. Chairman, before putting the motion I hope Your Honour will consider whether or not it is in order.


Lucien Lamoureux: Order. Perhaps I should read the proposed amendment to the committee. Mr. Barnett moves:
That the resolution be amended by adding thereto after item 23 the following:
24. That for the 1962 and subsequent taxation years, the existing limitations in section 5 of the act with respect to allowable deductions from taxable income of those whose income is derived from salary or wages be changed to provide for the deduction by each such taxpayer of the following :
(a)	Expenses necessarily incurred by him for board and lodging by reason of his employment at a distance from the place where he maintains a self-contained domestic establishment.
(b)	Expenses incurred by him for transportation between his ordinary place of residence and his place of employment where, by reason of distance, he is required to live away from home to perform the duties of his employment.

<c) Expenses incurred by him for depreciation and replacement of tools and special equipment or clothing which are necessarily required by him in the performance of the duties of his employment.


Walter Lockhart Gordon: Mr. Chairman, as I think the hon. member pointed out, the brief submitted to me on this subject was dated July 8.
I have not had a chance to study it. It came in after the budget was presented. I would be only too pleased to consider it carefully before the next budget, but I would respectfully suggest that this particular motion is out of order at this stage because it would upset the balance of ways and means.


Lucien Lamoureux: After considering this motion it seems to me it should not be too difficult for the Chair to render a decision in connection with the proposed amendment. It is quite obvious that it is imposing a charge on the treasury, and it is a well known principle that only the crown can initiate a financial proposal such as this. I think, therefore, that the amendment cannot be proposed to the committee. Moreover, it is introducing an entirely new proposition; therefore it is irrelevant.


Thomas Speakman Barnett: Mr. Chairman, I cannot say that your ruling has taken me altogether by surprise in view of the experience I have had. However I would suggest, as I did last year to the then minister of finance, that the minister on his own initiative should do something about this matter. I would be pleased to assist him by providing him with a copy of the draft amendment to the clause of the bill. I think this might cut down the amount of time necessary for his consideration. I have here-and I would be glad to send it across to him-a suggested draft amendment to clause 5 (2) of the bill for his consideration, in the hope that before we get to the committee stage he will have had an opportunity to take a good look at it and perhaps agree that it would be appropriate that it should be brought in with his consent. I will be quite happy to give the present Minister of Finance full credit if he will be the minister who finally completes the consideration begun by his predecessor, Hon. Walter Harris.


Walter Lockhart Gordon: Would the hon. member allow me to ask him a question. In connection with this information which he has been kind enough to send me, I wonder whether he could give me some estimate of the cost in terms of government revenue which an amendment of this kind would represent. As he may remember, I am little concerned about a number of things in the economy, but one which has some bearing on this situation is the extent of government revenue and ex-
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penditure. I should like to know whether he has any estimate of the effect of this on government revenue.


Thomas Speakman Barnett: I cannot say that I have any estimate I would consider accurate enough to suggest to the committee. I am sure the minister has much better facilities than I to arrive at such a figure; but I am convinced, particularly if one gets down to considering the kind of detail which would be included in the actual text of a clause-and my draft is based closely on existing subsection 2-that with the restrictions and safeguards in such wording the effect would be quite insignificant in comparison with some of the other things which the minister has been prepared to undertake.


Douglas Mason Fisher: Mr. Chairman, I am disappointed with the response which the minister has made to this point. Not that I expected him to take it up, but it does get a little tiresome for representatives of the people, as we all are here, to keep taking this particular issue to ministers of finance and officials of the Department of Finance. On one occasion a few years ago representatives from the logging industry of Ontario and Quebec sat for more than an hour in the office of the minister of finance, and we were told- I do not think this is confidential any more- by a senior official of the department that the present situation was not fair in equity. The reason it is not fair is that construction workers have the privilege of charging expenses incurred by living away from home as a deductible item, yet people doing exactly the same kind of work in the logging and the bush industry cannot take advantage of this privilege.
The reason the logging industry missed out when the Canadian Construction Association and the Canadian Labour Congress managed to convinced Mr. Fleming a few years ago that they deserved this particular advantage is something that I have never been able to get clearly in my head. But I know from conversations we have had with department officials and with Mr. Fleming that the Department of Finance was perfectly aware that inequity exists in this matter. Therefore for the minister to say to the hon. member, who has brought this question up several times, as have I and other hon. members, "How much is it likely to cost?", is surely not good enough.
Last year I understand the Canadian Medical Association sponsored a seminar which took place on board a boat on a trip to Hawaii. Wives were allowed to go along and everybody had a good time. The seminar, of course, enabled the worthy doctors to charge

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the trip as an expense. I know we smile at these things, but they come up all the time. We have had some vitriolics from the minister already with regard to expense accounts, but what we have in Canada today is a situation where people in professional occupations band together in organizations and hold conventions, and you have the old expense account business. They are able to take advantage of the act in a way that the ordinary guy-the little fellow, in the Prime Minister's words-has no opportunity to do at all.
I should like to point out that if the minister accepts the sort of amendment offered by the hon. member for Comox-Alberni he will be doing something for the genuine little guy in this country. By no stretch of the imagination are people like the loggers on the west coast and the bush workers of Ontario, Quebec and the maritimes the kind of people who, for example, are going to be able to have seminars on their way home from Hawaii.
I suggest to the minister that if he checks with his officials he will find that they were disturbed when this exemption was extended to the construction workers. This is my opinion and I may be wrong, but I think the minister will discover that to be the fact. I will not say that the minister masquerades about this; I think he genuinely feels that as minister he has to be fair to all the people in this country. But as long as the logging workers and the bush workers cannot take advantage of this exemption, although their situation is in every way on all fours with that of most construction workers, then we have a real injustice embedded in the Income Tax Act.
The workers in my part of northern Ontario bring cases to me every year which I usually take up with the Department of National Revenue, and these workers cannot see why, if they have to go 300 miles from the city of Port Arthur to work as bush workers at a site which is right next door to a hydro construction project which is being carried on for a considerable length of time, they cannot deduct the cost of their board and room when they are also keeping a home in Port Arthur.
Yet the construction workers across the road from them are entitled to this benefit under the act. I hope the minister will get around to examining this, not from the point of view of removing from construction workers the entitlement they now have but from the point of view of extending it to other workingmen. Because this is the kind of group which needs assistance.
There is another group of workers in Canada with whose position I am quite familiar; that is the railway workers. In the main they are taken care of under the act when

they find themselves on the go most of the time. So far as the woods industry is concerned, that is the basic industry in our country. All other arguments about farming or anything else to the contrary, that is the basic industry. The men who prime the whole thing are the guys who go into the woods, get the trees, load them and get them out to the landings. They are the people who in so many cases do not have the opportunity to live at home; they have to go away to some kind of temporary camp in some other part of the country. Although there may be a trend this way, it is not yet the case in Canada that loggers live at the place they work. I think it is about time these people received some justice under the Income Tax Act, as the hon. member for Comox-Alberni has said.


Mr. Leboe:: Mr. Chairman, I rise at this time to support the argument which has been put forward, coming from a part of the country which produces a great deal of lumber. I do not know whether the minister is aware of it, but the city of Prince George is the western white spruce capital of the world as far as we are concerned. The situation which has been disclosed certainly merits the attention of the minister, and again I am pleased to see the Minister of Forestry is with us. I do hope he will whisper in the ear of the Minister of Finance and give a little support to this case. I know the minister is well aware of the situation. So I rise to support the contention which has been made. I think the arguments have been well put, and I hope the hon. gentleman will give serious consideration to providing some measure of relief for these people.
(Translation):


Mr. Marcoux:: Mr. Chairman, after listening to what the hon. member for Port Arthur (Mr. Fisher) had to say about a trip made by some physicians on a ship bound for Hawaii, I would like to point out that, as far as I know, expenses incurred through the presence of ladies on board cannot be deducted for income tax purposes.
Besides, many workers can take such trips if they are members of a labour union or a group which enable them to hold seminars. And if they want to choose Hawaii as their destination, I do not think that the Department of National Revenue sees any objection to it.
In addition, I must say that Social Credit, in its election platform, had a plank advocating an income tax exemption for equipment that workers must own. I fail to see also why the minister should not grant an income tax exemption with regard to trans-

portation costs incurred by workers when they have to earn their living away from their own home. Contrary to what was suggested to me by an hon. member a moment ago, it is not a matter of taking an exemption away from those who enjoy it at the present time, but rather to extend it to workers who are entitled to it also as Canadian citizens and human beings.
(Text):


Mr. Moreau:: Previous speakers have been championing the cause of the lumber workers. I would ask the Minister of Finance to consider the position of the people working in the field of exploration. Their case is even more deserving than some of those which have been mentioned many times today. As a rule they live in much more difficult circumstances. The camps in which they stay are almost invariably slight and temporary in nature by comparison with logging camps. Their expenses are considerable and they often work under conditions of great hardship, molested by flies and subject to all the inconveniences of life far from the comforts of civilization. These people, too, usually have to retain a permanent establishment in some place or other, and I trust the minister will consider their case when he is giving attention to other workers who come within this general category.


Herbert Wilfred Herridge: I just want to add my voice to those of other hon. members who have spoken on this subject. I support the remarks which were made in connection with the situation in the forest industry. I can speak with some knowledge of the forest industry, because I cut my first log in 1907. I have talked a lot about logs and I have written a lot about logs. I am not an academic logger.
I also wish to support the remarks made with respect to the mining industry. There are many employees in this industry who should receive special consideration because of the extra expenses they must incur by reason of their occupation.
I also wish to make a plea on behalf of the smelter workers. I am glad to see the minister look in my direction as I mention the smelter workers. I never rise to speak in this chamber on a question such as this without having in mind the industry at Trail, and I think of those men tramping up the hill to the smelter each day. Many of them, owing to changing circumstances of life and the difficulty of securing a place to live, have to stay in some cases 30 miles from their place of employment, and I suggest that consideration be given to the recognition of these unusual travelling expenses occasioned by the circumstances in which many of these men live.
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When one considers that a commercial traveller, travelling long distances to sell, on occasion, quite unnecessary commodities, or insurance agents travelling all over the country, are allowed to deduct the cost of travelling from their income as a legitimate expense, I think the minister might well be asked to give consideration to the situation of those groups of employees which have been mentioned by previous speakers, and more recently by the hon. member for Kootenay West.
(Translation):


Mr. Lessard (Lake St. John):: Mr. Chairman, I would not like to see this debate come to an end before having had an opportunity to say a few words, since the Saguenay area of which I represent a county has lots of pulp-wood. There are in fact several lumber companies operating mills and therefore a great number of cords of wood are cut there each year.
The lumber companies, for some time now, have changed their way of doing. The method of cutting wood has changed and the workers now must get rather expensive power saws which do not last very long. I feel that the amendment moved by the hon. member for Comox-Alberni (Mr. Barnett) makes a very important point since the lumber companies are in fact the only ones to benefit from mechanization.
Workers probably work less hard physically but, on the other hand, the work periods in the bush are shorter and expenses higher. The lumber companies no longer build camps where they have their logging operations; the workers must therefore get there by truck and give the contractor what it costs to take them from the camp to the work site. In my opinion, the situation having changed, the Minister of Finance should really consider the advisability of extending those exemptions to the bush workers who are quite often far from home for rather long periods and who are unable, because of that recent change, to bring home as much money as they used to.
I understand that this would entail a loss of revenue for the department but I feel that the act works against the small wage earners while sources of revenue that could greatly help the Minister of Finance to balance his budget are disregarded.
I find it strange that, during this debate, there was hardly any talk about how it would have been advantageous for Canada if the Minister of Finance had imposed a tax on capital gains. I am aware that Canada is one of the few countries where capital gains are not taxed. Such a tax is levied in Europe and

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in the United States but not here in Canada. It is claimed that to impose a tax on capital gains would drive American investments away from Canada.
Well, if the minister felt it was appropriate, in the earlier introduction of his budget, to levy a 30 per cent tax on the sale of Canadian securities to Americans, if the United States government is now levying a tax on American investments in Canada, I feel that it would be wise for Canada to consider levying a tax on capital gains. I realize that it would be difficult to apply and that it would cover an extensive field because capital gains can include gains on the sale of capital investments, of buildings of any kind.
In my opinion, this tax could be levied against gains which accrue from stock market transactions. That sector remains untouched at present. Yet, it is a domain where huge benefits are made at the expense of the small man. As things stand at present, in Canada, when we have to find new revenue sources for the government, I feel that the minister would have been much wiser if he had levied a tax on the benefits made on stock market transactions instead of establishing an 11 per cent tax on building materials.
Mr. Chairman, it is my opinion that this matter should be looked into.
I realize that this matter was discussed neither by representatives of the Conservative party nor by those of the Liberal party, because they seem committed to the protection of the interest of large investors, more particularly the funds handlers.
I think that our party is in a good position, as I am myself, to suggest to the government to consider the opportunity to impose a tax on profits arising from the sale of corporation bonds and shares on the stock exchange. Those sales constitute a source of revenues which seems important, and the imposition of a tax would probably prevent many transactions which, at the present time, are certainly not made with a view to contributing to the welfare of industry or of the Canadian people.
(Text):


Mr. Howe (Wellington-Huron):: Mr. Chairman, representations have been made with regard to those workers who have to leave their homes to carry on their way of life. I should like to say something on behalf of the railway workers. In this day and age when so many changes and abandonment of

railway lines are taking place, many elderly railway workers have found themselves faced with the necessity of moving to another place of residence. To them this is not economically sound. They feel they would like to retain their homes where they have lived for so many years, but they have to move to some other area to carry on their work. Many of them have complained to me about the fact that, like members of parliament, they have to maintain two places of residence.
In my view some consideration should be given to workers of this type who not only have to maintain the residence they have had for so many years, but have to move from there because of the fact that their employment has disappeared in the place where they have lived so long. I would ask the minister to give consideration to workers of this type.


Stanley Howard Knowles: Mr. Chairman, I too should like to support the representations made by the hon. member for Comox-Alberni and others who have spoken more recently, but I rise at this moment to ask the Minister of Finance to take a look at still another subject when he reviews the whole matter of the Income Tax Act. I refer to the right that is accorded to trade unionists and others to deduct their dues for income tax purposes. As the minister knows, that right is spelled out in subsection 10 of section 11 of the Income Tax Act. It is accorded not only to members of trade unions as defined in the act, but also to members of various other kinds of associations to which people belong for the purpose of improving their conditions of employment.
However, subsection 12 of the same section limits to a certain extent the amount of the dues that can be deducted. There are three limitations set out in subsection 12. The first two have to do with superannuation funds, pension funds, annuities and so on, and one can readily understand those limitations. As a matter of fact, unions that have pension plan payments included in their dues usually get deductibility for the payments into those pension plans under legislation with regard to pension plans as such. But the third limitation reads as follows:
(c)	for any other purpose not directly related to the ordinary operating expenses of the association or trade union to which they were paid.
Under this limitation it has been provided somewhere, by regulation or administrative decision, that trade unionists are not permitted in most cases to deduct the full amount of the dues they pay to their unions. I should like the minister to take a serious look at that situation. I do not expect him

to have the answer at this moment, but perhaps this can be notice to him that when we get to his estimates I should like to have a discussion of this matter.
For example, there are unions that go in for the construction of buildings which are necessary as part of the work of the union, and the members are required to pay a portion of their dues for these building funds. There are also other purposes that arise. Strike benefits sometimes impose an extra charge on members of unions. It seems to me that in all cases these payments come under the definition of money that members are required to pay to promote the improvement of members' conditions of employment and of work, and I regret that it has been found appropriate to make the kind of deductions that are made under the provisions of subsection 12, paragraph (c).
The result is that among trade unionists the percentage of their dues that they are allowed to deduct varies. Some are permitted to deduct quite a large percentage of their dues and some a much smaller percentage. As I say, this is a situation that has existed for quite some time. As far as I can ascertain, there has been no change in the practice since this provision was first brought in by Mr. Abbott when he was minister of finance I think the present Minister of Finance is undoubtedly looking for places to improve this kind of legislation. I hope he will take a good look at this point, and that if he cannot do something about it in the bill to be brought in momentarily he will be prepared to discuss the matter when we reach his departmental estimates.


Walter Lockhart Gordon: Mr. Chairman, I am grateful to all hon. members of the committee for their contributions, and I can assure them I will take their views into very serious consideration; not, I am afraid, before the bill is introduced, which I hope will be momentarily, but certainly before the next budget. I hope that very early in the fall any hon. members who have any suggestions to make respecting changes in the existing tax legislation will give me the benefit of their views well before the budget is put together.
(Translation) :


Mr. Perron:: Mr. Chairman, since we are now discussing section 11, paragraph 10, of the resolution concerning the Income Tax Act and because my riding, instead of enjoying the benefit of having vast industrial empires, has for the most part low income workers, especially bush workers who, most of the time, have to leave for the United States
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where they barely manage to earn a living and suffer from the devaluation of our Canadian dollar compared to the U.S. dollar, I have a few comments to make.
Those people who, like many others, wish to come back home for the week end to discharge some of their duties as fathers, must pay for their transportation. It was pointed out a while ago that travelling salesmen, insurance agents and persons employed in several other fields, such as salaried workers and employees paid on commission, benefit from income tax deductions.
On behalf of the bush workers in my riding and the surrounding area-those people who, for over 20 years, have been given to understand that means are being sought to have them benefit from unemployment insurance when they come back for six months in their country-I cannot let this opportunity go by without asking for the revision of the income tax form for the low salaried workers and particularly the lumberjacks. In the Social Credit program there is an article which provides for the deduction from gross income of the cost of machinery and equipment that lumberjacks must get to work in the woods.
We also feel it would be advisable to revise the Income Tax Act as regards the salary of garage employees. Most of those employees are required today to have $300, $400 or $500 worth of tools, which they often break while doing their work. So if, in the case of certain jobs, the cost of equipment can be deducted from gross income, I think the time has come to consider giving bush workers and garage employees the right to deduct from their gross income the cost of the machines or tools they use in their work. Moreover, the 11 per cent tax, called the sales tax on building materials, also affects the bush workers of my constituency.
Most of the time the small wage earners- who are already sadly tried as they hardly work more than six or seven months a year, after which unemployment insurance is their only income-are unfortunately those affected by that tax.
I wonder if we should not take this fact into consideration and allow these workers, when in April they file their income tax return, to deduct the cost of the equipment they use to earn their living since the government must refund the entire amount collected during their period of employment.

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In my opinion, the Income Tax Act should be completely revised as far as low income groups are concerned, those who earn only $2,000, $3,000 or $4,000 a year.
I am not going to suggest that taxes should be imposed in other fields, since I support in this house the Social Credit doctrine, because we have advocated some other formulas likely to balance government budgets without resorting to taxation, which has become a heavy burden for all classes of society, but mainly for the little people, the lower income groups who bear most of it through direct or indirect taxes included in the cost of goods and services.
It is easy to pretend that taxes will be paid by large companies, but through the process of accounting-


Lucien Lamoureux: Order. May I point out to the hon. member that his comments should deal more specifically with the resolution before the committee. It seems to me that the remarks he has just made refer to the imposition of taxes in general, but he should restrict himself to the resolution now under consideration by the committee.


Gérard Perron: Thank you, Mr. Chairman. I was just coming back to it, and I was giving as an example the cost of tools, machines and equipment of the loggers. In the last five years the price of the chainsaws used by the bushworkers has nearly increased by 25 per cent, not on account of direct taxation, but probably because of indirect taxes. Bush-workers, small wage earners, all those who suffer most from the high cost of living, because they do not have the necessary income to meet it, should at least benefit from the amendments to the Income Tax Act.
I feel that the suggestions we heard this afternoon should be seriously considered, and I hope that in the not too distant future the necessary adjustments will be made on the income tax form.


J.-H.-Théogène Ricard: Mr. Chairman, I do not want to delay the study of this resolution but I cannot miss this opportunity of passing on to the Minister of Finance the request from the low income citizens of my constituency.
As the minister knows, people with a small income find it very difficult to make both ends meet at the end of the year. Therefore I would ask the minister, on their behalf, to consider raising personal exemptions to $3,000 for married people and to $2,000 for unmarried people for, as the cost of living

goes on increasing, people in the lower income brackets have a hard time making both ends meet.
That is why, without making a long speech, I would ask the minister to consider immediately such a possibility.
(Text):


Thomas Speakman Barnett: Mr. Chairman, I should like to raise one other matter for the attention of the committee, in case it might have been lost in the shuffle of the political events that have occurred in the not too distant past. On February 4 of this year I received a joint communication from four volunteer fire brigades in my district. I had to reply on February 6 that, because of circumstances beyond my control, I could not do anything for the time being about the suggestion they brought to my attention. I do not know whether the present Minister of Finance has had any representations along these lines, but I have had a communication on the same subject from the same source since he took office.
I think perhaps I can briefly set out the point best by putting on the record a resolution which was passed by the British Columbia fire chiefs association in respect of volunteer firemen. It reads as follows:
Whereas the Department of National Revenue has recognized that all volunteer firemen have expenses in connection with their services, and
Whereas many volunteer firemen are not reimbursed for such expenses while others are, and
Whereas only volunteer firemen receiving remuneration up to a maximum of $300 per annum are eligible to claim tax exemptions, and
Whereas this discriminatory section of the Income Tax Act is not in the best interests of the Canadian fire service,
Therefore be it resolved that the B.C. fire chiefs association request the Minister of Finance to take whatever steps are necessary to have the Income Tax Act amended to allow a basic tax exemption of $300 per annum for all volunteer firemen.
I think it is obvious from the text of this resolution, and from the source from which I received it, that this is a matter which is of concern principally to the smaller brigades across the country who feel that they have been left out of the expense allowance which, in fact, is given to the members of the larger forces. I hope that this is a matter to which the minister will give his attention, as he suggested, prior to the introduction of the next budget.


Lucien Lamoureux: Have we completed the discussion on paragraph 1?


George Clyde Nowlan: No, Mr. Chairman. We had a long discussion on this item on Friday and I do not propose to take much of the time of the committee in going over the ground which we covered on that day. This section, as we pointed out on that occasion, deals

with the principle of incentives under certain circumstances and to businesses of certain classes. It also has combined with it the definition of a corporation which has a certain degree of Canadian ownership.
The minister, in the course of a long discussion and questioning which we had on Friday, stated that one of the principal purposes of the provision was the modernization of Canadian plants and Canadian equipment. He pointed out that with a highly competitive economy it was very necessary to have the most modern, efficient plants and equipment. I think that is something with which every member of the committee would be in full agreement. He stated also that the other aim of the resolution was to create employment and stressed again, as he did in his budget speech, the fact that unemployment was one of the main problems of the nation. He suggested to the committee that when this resolution was enacted it would go some considerable degree towards the relief of unemployment, or in other words that it would contribute to a greater degree of employment.
At this time I am not discussing the principle of incentives. There are differences of opinion as to how much incentives may accomplish, but I am taking the minister's statements on these two points, (a) the modernization of equipment and (b) employment, and I say to the minister that if we accept that, as I am sure we all do, then it certainly is not necessary to have coupled with this paragraph the definition of a degree of Canadian ownership. The reason is that every plant in the country engaged in production, whether it be owned by a Canadian or somebody else, should have the most efficient machinery and plant possible. In other words everybody who can be employed should be employed.
To use the illustration I gave the other day, the mere fact that one person is working for General Motors and another person is working for Ford, and one company has a degree of Canadian ownership and the other does not, is a factor which has no relation to either of the persons who have jobs.
If this resolution is going to accomplish what the minister said it would, then I would suggest it should be given the widest possible scope and should apply to all plants regardless of ownership, provided they are operating in a legitimate manner in Canada. That can be done very easily when it comes to the bill, by the minister simply amending the resolution before us by deleting the definition in this paragraph. We all know the minister has strong opinions in this field, but if he is determined to go ahead with the propagation of his belief at this time, I would suggest that he simply drop the rest of the
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paragraph and carry it over to the one dealing with the withholding tax, where it properly belongs. I suggest it has no place whatever in this paragraph, in view of what the minister himself said was the purpose of this part of the resolution.
He could accomplish the same purpose if the paragraph stopped after the words-
-if the property has been acquired by a taxpayer in a taxation year for a manufacturing or processing business in Canada.
If this were done it would cover all Canadians and would be of great assistance to both efficiency of plant and employment. I hope that when the minister brings in the bill he will consider this; but I repeat that if he feels strongly about this matter, as I know he does, then this definition properly belongs with the withholding tax and not here. I cannot help feeling that some draftsman in a hurry stuck it on the wrong paragraph, and that is all I have to say.


Jay Waldo Monteith: The hon. member for Digby-Annapolis-Kings mentioned the possibility that the minister might consider segregating these two parts of paragraph 1. I would be heartily in accord with that suggestion, in that I think that if more employment is to be arrived at there must not be any differentiation between two companies of a comparable basis, as for example General Motors and Ford.
With regard to the suggestion that the definition clause apply to paragraphs 6, 7, 8 and 9, I agree that the minister should give further consideration to this so that when he brings in the bill there will not be this discrimination and penalty against those now owning United States subsidiaries in Canada.
Let us consider for a moment what might happen if a company, in order to meet the requirements of this provision, were to dispose of some of its Canadian holdings. What would happen to the funds? They would go to the United States if it were an American concern. They would automatically go out of the country, and this would create a further strain on our foreign exchange. Also, if a company were to dispose of part of its Canadian shares I think it would undoubtedly take whatever surpluses there were in the company to the United States before disposing of Canadian shares, and this again would be a drain upon our foreign exchange.
I suggest that the minister give further consideration to this suggestion so that he might amend this paragraph to a degree that it would not be a penalty against foreign controlled companies. The incentive should be to Canadian investors to invest in equities in Canada.

Income Tax Act
I shall not say any more. I agree entirely with what the hon. member for Digby-Annapolis-Kings said earlier about segregating the two parts of the paragraph, but I also feel that if the minister is going to go ahead with this, then at least he should give some further consideration towards amelioration of the severity of paragraphs 6, 7, 8, 9 and 10 as they now stand.


Lucien Lamoureux: Is consideration of the paragraph completed?


Some hon. Members:: Carried.


Lucien Lamoureux: Paragraph 6?


Some hon. Members:: Carried.


Lucien Lamoureux: Paragraph 7?


Some hon. Members:: Carried.


Lucien Lamoureux: Paragraph 8?


Some hon. Members:: Carried.


Lucien Lamoureux: Paragraph 9?


George Clyde Nowlan: I have just one word to say in connection with all these paragraphs which deal with the withholding tax and the change in the rate, in some cases dropping down to 10 per cent, or alternatively going up to 20 per cent under certain circumstances. I spoke about them at some length previously and I do not propose to repeat my arguments.
This is a bad principle. The minister is committed to it, but in view of the developments of the last few days in the situation vis-a-vis the United States, and having to deal with that country in many involved financial matters, it may be recalled that something was said about the Secretary of State for External Affairs having a discussion with the ambassador. We know that later on there were discussions with Dillon, George Ball and others in Washington.
I can quite believe the retort which one might get in such a discussion, "Very well, Mr. Canada, but you have yourself imposed certain forms of taxation and have taken certain action-"


Walter Lockhart Gordon: Would the hon. member permit me to ask him a question?


George Clyde Nowlan: Right.


Walter Lockhart Gordon: There have been very important discussions with the American authorities over the last week. They were very cordial discussions and, as I said before, the American officials have been more than cooperative. Is he suggesting that this subject was raised?


George Clyde Nowlan: I am not suggesting it was raised at that time, but I would be very much surprised if it were not. I cannot imagine your sitting down with the financial officials of

the United States and talking about financial problems without talking about this phase of them.
But I am saying that when we do raise these problems we might very easily be faced with the fact that because of our action in incorporating this principle it is very difficult for us to object if a similar form of action should be taken by the United States or any other country. We have the problem of renegotiating treaties. I am not going into the details here, Mr. Chairman. In his answer the other day the minister said no action had been taken with respect to renegotiation of the treaty or abrogation of its sections. I think it would be easy enough for us to renegotiate the treaty between today and the date the penal effect would become effective. I wonder whether any consideration has been given to that matter.
I remember a time not too long ago when we in this country had a succession duty treaty with the United States. As hon. members know, parliament in its wisdom decided to change from the principle of succession duty to that of estate tax. It was a different form of taxation but the principle was exactly the same. But what happened? We had a treaty, as I said, in which the words "succession duty" were used. We had to renegotiate another treaty with the United States incorporating estate tax. There was no objection to it in the United States; it was a relatively simple amendment to make; but I happen to know that the life of the minister of national revenue of that time was made miserable for two or three months by people who had been having taxes imposed without the benefit of a treaty, because they just could not find time, despite their willingness to co-operate, to get it through on the floor of the United States senate. This is not easy to do, despite the level of friendly relations that may exist between our two countries, and despite whatever promises may have been given by the executive. I presume promises have been given to deal with this matter rapidly. However, Mr. Chairman, I am suggesting that there will be difficulty in getting the treaty through on the floor of the senate, no matter how co-operative they want to be. We know how long it takes sometimes to get legislation through this house.
I think it would have been much better to have had the renegotiation take place before the cut off date, if any, is reached. We have given notice of it anyway. I think this would be better, rather than putting the cart before the horse and committing ourselves to doing certain things by a certain date, and wondering afterwards whether we are going to be able to renegotiate the treaties in order to do them.

I will not spend any more time on this question now, Mr. Chairman; I think we have already spent sufficient time on it. We will see the legislation when it comes before us. I simply want to say that we on this side of the chamber do not approve of this principle; we think it is bad. I suggest that this matter should be given further consideration. I read a newspaper article the other day which said the minister has had this principle in mind for ten years. I refer to the principle of greater Canadianism, which is a good principle. But if he has had it in mind for ten years, a few more months will not be much of a delay and it might be better to wait, say six months, to savour the atmosphere, find out what the developments are going to be and arrange for renegotiation of the treaties. Then things will move much more smoothly and quickly for the improvement of the economy of our two countries than I fear will be the case if we go ahead on this basis.


Lucien Lamoureux: Shall the resolution carry?


[Stage Direction]
Resolution agreed to.
Resolution reported and concurred in.

Lucien Lamoureux: Order. House in committee of ways and means to amend the Excise Tax Act. Shall the resolution carry?


John Whitney Pickersgill: Mr. Chairman, I think there is some question about which resolution is before the committee and I wonder whether there could be the same agreement that there was before, that without any additional formalities we would consider the resolution of which my hon. friend gave notice on July 8.


George Clyde Nowlan: That is agreeable to us, Mr. Chairman.


Lucien Lamoureux: Is it agreed that the committee shall consider the resolution as submitted on July 8?


Stanley Howard Knowles: Mr. Chairman, if in effect the government is asking unanimous consent so to do, we are prepared to give that consent.


George Clyde Nowlan: Without restricting the debate in any way.


John Whitney Pickersgill: I think it is understood, Mr. Chairman, as my hon. friend from Digby-Annapolis-Kings has said, that there shall be no restriction of such debate as anyone would have wished on the earlier motion.


Norman Platt Lambert: On the Excise Tax Act
resolution.


John Whitney Pickersgill: Yes, Mr. Chairman; as the hon. member for Edmonton West has said, on
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the Excise Tax Act resolution. We do not want to open up the income tax and customs tariff resolutions again.



[Stage Direction]
Resolved,-That It is expedient to introduce a measure to amend the Excise Tax Act and to provide among other things:
1.	That the present exemption from sales tax for certain building materials be withdrawn by repealing the exemption for all goods mentioned under the heading "Building Materials" in Schedule III of the said Act and by repealing the exemptions for
(a)	"Creosote oil and other wood preservatives when for use exclusively in the treatment of timber, poles or lumber;"
(b)	"Railway ties;''
(c)	"Goods for use as part of sewerage and drainage systems, and articles and materials to be used exclusively in the manufacture thereof;"
2.	That any enactment based on paragraph 1 of this resolution provide that
(a)	goods for use as part of sewerage and drainage systems be exempt from sales tax when sold to or imported by a municipality for its own use and not for resale;
(b)	any transfer of a sewerage or drainage system to a municipality by any person within two years after the completion thereof, pursuant to a bylaw of or agreement with that municipality under which that person is required to instal such system and transfer it without charge to that municipality after the completion thereof be deemed, for the purpose of section 46 of the said act, to be a sale to the municipality for its own use and not for resale of goods for use as part of a sewerage or drainage system,
and that any agency operating a sewerage or drainage system for or on behalf of a municipality may be declared by the minister to be a municipality for the purpose of this paragraph.
3.	That any enactment based on paragraph 1 of this resolution provide that drain tile for agricultural purposes and materials to be used exclusively in the manufacture thereof be exempt from sales tax.
4.	That any enactment founded on paragraph 1 of this resolution provide that where materials have been purchased by or on behalf of a school, university or other similar educational institution for use exclusively in the construction of a building for that institution and the tax imposed by Part VI of the said act has been paid In respect of those materials, the Minister of National Revenue may upon application by the institution in such form as the minister prescribes made to the minister within two years from the time the materials were purchased, pay to the institution an amount equal to that tax.
5.	That any enactment founded on paragraph 1 of this resolution provide that a person who
(a)	manufactures or produces a building or other structure, in competition with persons who Conor erection thereof, in competition with persons who construct or erect similar buildings or structures not so manufactured or produced,
(b)	manufactures or produces otherwise than at the site of construction or erection of a building or other structure, structural building sections for incorporation into such building or structure, in comptetition with persons who construct or erect buildings or other structures that incorporate similar sections not so manufactured or produced, or
(c)	manufactures or produces concrete or cinder building blocks, be deemed for the purposes of the said act not to be, in relation to any such building.
[Stage Direction]
Excise Tax Act
structure, building sections or building blocks so manufactured or produced by him the manufacturer or producer thereof.
6.	That the present exemption from sales tax for "Seventy five per cent of the sale price if manufactured in Canada, or seventy five per cent of the duty paid value if imported, of trailers for use as homes'' be changed to read "Twenty five per cent of the sale price if manufactured in Canada, or twenty five per cent of the duty-paid value if imported, of trailers for use as homes''.
7.	That the present exemption for certain machinery and apparatus to be used in manufacture or production be withdrawn by repealing the exemption for all goods mentioned under the headings "Machinery and Apparatus to be used in Manufacture or Production" and "Engines" in Schedule III of the said Act and by repealing the exemptions for
(a)	"Seismic shot-hole casing and materials used in the manufacture thereof;"
(b)	"Tires and tubes for use exclusively on the machinery enumerated in Customs Tariff Item 411a."
(c)	Goods enumerated in customs tariff items 399a, 399b, 399c, 411a, 417, 431h, 439c, 848, 848a and 848b.
8.	That any enactment founded on paragraph 7 of this resolution provide that traction engines for farm purposes and accessories therefor (not including machines and tools for operation by such engines) and complete parts of all the foregoing, and materials to be used exclusively in the manufacture of the said engines, accessories or parts be exempt from sales tax.
9.	That any enactment founded on paragraph 7 of this resolution provide that farm wagons, including four-wheeled farm wagons equipped to be tractor drawn and farm sleds, and materials to be used exclusively in the manufacture thereof be exempt from sales tax.
10.	That the present exemption from sales tax for "Photographs, paintings, pastels, drawing and other art work and illustrations of all kinds, whether originals, copies or proofs, and printing plates made to reproduce the same, for use exclusively as non-advertising news pictures or for illustrating non-advertising articles or stories in periodical publications enjoying second-class mailing privileges, the pages of which are regularly bound, wired, stitched or otherwise fastened together;" be changed to read "Typesetting and composition, metal plates, cylinders, matrices, film, art work, designs, photographs, rubber material, plastic material and paper material, when impressed with or displaying or carrying an image for reproduction by printing, made or imported by or sold to a manufacturer or producer for use exclusively in the manufacture or production of printed matter."
11.	That feeds for fish, supplements for addition to such feeds, and materials to be used exclusively in the manufacture of such feeds or supplements be exempt from sales tax.
12.	That the exemption from sales tax for materials for use in the equipment and repair of ships over ten tons net register tonnage be restricted to materials for use in the equipment and repair of ships to be used exclusively for commercial purposes.
13.	That the present exemption from sales tax for "Bakers' cakes and pies including biscuits, cookies or other similar articles;" be changed to read "Bakers' cakes and pies including biscuits, cookies and similar articles but not including simulated chocolate bars or candy bars;".
14.	That the export duty of three one hundredths of one cent per kilowatt hour on electrical power exported from Canada be repealed.

15.	That any enactment founded on paragraphs 1 to 13 of this resolution be deemed to have come into force on June 14, 1963, and any enactment founded on paragraph 14 of this resolution be applicable in respect of electrical power exported after June, 1963.
16.	That with respect to the period commencing June 14, 1963 and ending March 31, 1964, the rate of tax payable under Part VI of the said act in respect of any goods for which exemption from tax was withdrawn by any enactment founded on paragraphs 1 and 7 of this resolution be four per cent instead of eight per cent, and that with respect to the period commencing June 14, 1963 and ending December 31, 1964 the rate of tax payable under subsection (1) of section 10 of the Old Age Security Act in respect of any such goods be nil.
17.	That the said measure further provide that
(a)	where any tax under Part VI of the said act
has become payable by any person in respect of any goods for which exemption for tax under that part was withdrawn by any enactment founded on paragraphs 1 and 7 of this resolution, which goods were, not later than December 31,	1964,
sold and delivered by that person, or applied by that person to a use resulting in the property in the goods passing from that person, pursuant to a bona fide contract in writing
(i)	that provided for the sale of those goods or their application to that use for a fixed amount stated in the contract and that did not permit the adding of the tax to the amount payable to that person under the contract, and
(ii)	that was signed by the parties thereto
(A)	on or before June 13, 1963, or
(B)	after June 13,	1963, if the contract was
entered into in accordance with the terms of a tender in writing submitted by that person on or before that day whereby that person undertook to enter into such a contract and in default of so doing to incur or cause to be incurred a pecuniary penalty whether by forfeiture of a security deposit or otherwise,
a refund, or deduction from any of the taxes imposed by the said act, of the tax or such part thereof as could not under the contract be added to the amount payable to that person thereunder may be granted to that person; and
(b)	where any goods for which exemption from tax under Part VI of the said act was withdrawn by any enactment founded on paragraphs 1 and 7 of this resolution were, after June 13, 1963 and not later than December 31, 1964, sold and delivered by any person, or applied by any person to a use resulting in the property in the goods passing from that person, pursuant to a bona fide contract in writing
(i)	that provided for the sale of those goods or their application to that use for a fixed amount stated in the contract and that did not permit the adding of any tax under that part that became payable after June 13, 1963 in respect of those goods to the amount payable to that person under the contract, and
(ii)	that was signed by the parties thereto
(A)	on or before June 13, 1963, or
(B)	after June 13, 1963, if the contract was entered into in accordance with the terms of a tender in writing submitted by that person on or before that day whereby that person undertook to enter into such a contract and in default of so doing to incur or cause to be incurred a pecuniary penalty whether by forfeiture of a security deposit or otherwise,
an amount equal to the tax or such part thereof as could not under the contract be added to the amount payable to that person thereunder may, where application therefor is made to the Minister of National Revenue by that person in such form

as the minister prescribes within two years from the time the goods were delivered by that person or applied by him to that use, and the minister is satisfied that the tax has been paid, be paid by the minister to that person.
Walter Lockhart Gordon: Mr. Chairman, the Excise Tax Act resolution which is now before the committee sets forth a variety of proposals in 17 numbered paragraphs. Before considering these individually it might be helpful for me to make some comments on the resolution as a whole. The most important provisions are in paragraphs 1 and 7, which provide for the withdrawal of the present exemptions for certain building materials and construction machinery with the effect of imposing a manufacturers sales tax on these commodities. Provision is made for new exemptions and for the continuation of existing exemptions as follows:
In paragraph 2, for municipal sewerage and drainage systems; in paragraphs 3, 8 and 9, for certain materials and machinery for agricultural purposes; in paragraph 4, for schools, universities and similar educational institutions; in paragraph 5, for certain components of buildings manufactured off site in competition with components manufactured on the construction site and exempt from tax; in paragraph 10, for materials used in newspapers and periodicals; in paragraph 11, for feeds for fish. Paragraph 12 proposes the withdrawal of exemption from sales tax for materials entering into the equipment and repair of private yachts and other non-commercial ships. Paragraph 13 is introduced to provide a greater measure of equity for the manufacturers of candy bars by withdrawing exemptions for certain confectionery products which resemble candy bars. Paragraph 14 repeals the existing export duty on electricity. Paragraph 16 provides for the application of the sales tax to previously exempt commodities in three stages, 4 per cent until March 31, 1964; 8 per cent thereafter until December 31, 1964; and 11 per cent from the beginning of 1965. Paragraph 17 provides relief in respect of goods sold and delivered prior to December 31, 1964 under certain fixed price contracts or tenders involving pecuniary penalties which were in effect prior to the budget.
It was indicated in the budget speech that the withdrawal of exemptions from building materials and production machinery could not be expected to be a popular move. I do not think that was an exaggerated statement. Tax increases are never accepted easily, particularly by those directly affected, and this is understandable. Nevertheless it was and still is my considered judgment that these amendments will be less harmful to the economy than the alternatives of obtaining
Excise Tax Act
similar amounts of revenue from any other tax sources. In order to obtain the additional revenues expected from withdrawing the exemptions for building materials and production machinery it would have been necessary to increase other taxes by very substantial amounts. For example, the government might instead have recommended a 33J per cent increase in the rate of sales tax; that is, from the present 11 per cent to 14J per cent. But to do this would have enhanced the marginal inequities which now exist between commodities subject to the sales tax and those which are exempt; and of course any move of that kind would have borne particularly heavily on people in the lower income groups. The government could have recommended the addition of a 20 per cent surtax on personal income taxes. This substantial increase would have had to be applied even at the lowest levels of income and this would have undoubtedly involved very severe hardship. In the present circumstances the government would not be prepared to recommend a measure of that kind. The government could have proposed the addition of 9J points to the rate of corporation income tax, which would have had the effect of increasing the top rate-that is, the 50 per cent rate-by 23 per cent. The economic effect on corporate industry of a measure of this kind would have been very damaging and the effect on employment would have been worse. Criticisms have been made of the measures we have put forward, and I dare say there will be more of them during the course of the discussion in committee. I suggest that anyone who wishes to criticize responsibly should try to indicate as clearly as possible-and I must say this was done by the hon. member for Nanaimo-Cowichan-The Islands-the alternative course which he believes should have been adopted.
In addition to the measures and reliefs set forth in the resolution, hon. members may find it useful to be reminded of others. Special measures were announced in the budget in connection with interest rates and other terms of lending applicable to N.H.A. mortgages. These are designed to relieve the purchasers of new houses financed in this way from most of the burden of the increased sales tax on construction materials, and certainly all of the burden at the 4 per cent or even the 8 per cent rate. Important continuing exemptions from sales tax have been left untouched, including those for hospitals and those for homes for the aged. In addition I should refer to the exemptions in respect of farm machinery, crushed stone, sand and gravel and a list of goods purchased by municipalities.


Michael Starr: We have listened while the minister has told us why he is imposing this tax on building products and industrial machinery used by two of our largest employers in this country-the construction industry and the manufacturing industry. This is the type of argument the minister has been putting up ever since he presented his budget. He has been explaining to us which is the less harmful tax and which is the more harmful, and why one should be applied rather than the other. In other words, he seems to have the impression that no one understands what he is doing and that he is the only one who is right, that everyone else must be wrong in the attitude they take with respect to this tax.
I saw a cartoon in the Globe and Mail the other day which, I think, reflected the hon. gentleman's attitude very well. It shows the minister driving up the wrong way on a one way street. The car he is driving is all battered; his glasses are shattered. A police officer, evidently, is nearby and the minister is saying to him: "But officer, you just don't understand". This is the situation which has been created in Canada by the application of the sales tax, whether it is levied in one lump sum of 11 per cent as originally intended or whether it is applied in stages. However it is put into effect it is bound to have a most harmful result in these two areas which employ so many Canadians. Instead of those industries moving ahead they will be restricted in their forward movement, and in the employment they are capable of offering, as a consequence of the application of this tax.
But the government has placed this parliament in a most peculiar position, because we have before us a set of budget resolutions which has replaced the original set. We agreed to this being done. It was done on the basis of unanimous consent. But this has given rise to a very strange procedure, particularly in view of the fact that the resolutions which were first presented formed the very basis of a budget. With these resolutions which we now have before us, we virtually have a new budget. This situation was pointed out in the Globe and Mail of July 10. The phrase was used-and I quote-"The second budget of Finance Minister Walter Gordon". If that is so, one is tempted to

Excise Tax Act
ask: what happened to the first budget? Well, it has been removed by a process which is strongly reminiscent of sleight of hand. There are those who have been telling us that the Minister of Finance is a financial wizard. Well, when it comes to making budgets disappear with nothing up his sleeve, the phrase certainly applies. I might say he is more than a wizard-he is a magician.
What is the position now with regard to the budget? After all, it must not be forgotten that the budget presented on June 13 received a vote of confidence. I might add that the party I represent did not participate in according this vote of confidence. But following that vote, the government expressed lack of confidence in its own budget by withdrawing the budget as it had been presented. Never, I submit, has there been such a situation of confusion compounded. The government has shown a complete lack of confidence in its own budget. It has swept it under the rug, I submit. The natural consequence should have been the removal of the minister responsible for the production of the budget or the resignation of the government. But neither of these courses has been followed. I want to emphasize that the responsibility does not rest entirely upon the Minister of Finance. Full responsibility rests upon the Prime Minister and his cabinet colleagues. It is a fact that the budget was not presented to the House of Commons without the Prime Minister's consent, and his approval of what it contained.
But neither of the courses I have mentioned has been followed. The government is going on as though nothing had happened. What it is saying in effect is: Let us forget about budget No. 1 and let us deal with budget No. 2. So this is the situation, the incredible position in which the parliament of this country finds itself owing to the ineptitude and confusion displayed by the government, an ineptitude and confusion unprecedented in parliamentary history. This confusion and ineptitude has been shown in the short space of time of two months since parliament convened.
These are the same people who accused the former government of creating confusion and indecision. All one has to do is to sit in the house and ask questions of importance to the nation. What do you get in reply from a government that was elected as a government of decision? We are told that a decision has not yet been made, that the matter is still under consideration.
The budget presented to parliament on June 13 last aroused a storm of protest such as has never been experienced before in the country. It was more than protest: it was

revulsion. It swept across all party lines. It came from business groups and organized labour. It came from provincial governments, and that is still going on, I might say. It came from municipalities and the stock exchanges. It came from all those who believed that what was needed was a fiscal and monetary program which would contribute to the expansion of the economy and provide employment.


Mr. Pugh:: It came from a lot of Liberals too.


Michael Starr: Responsible individuals, responsible and representative groups of people with no partisan axe to grind, all knew when the budget was presented that it would not accomplish the objective of providing employment. They all knew that the budget as presented was going to bring about the opposite effect. They all knew that it was a bad budget.
This agitation by all these people throughout the country, which was stirred up regardless of their political affiliation, penetrated finally to the inner councils of the government. When I say "inner councils of the government" I mean that rarefied stratum where only the planners and the economic manipulators are persona grata, that haven of the theorists and the collectivists.


Mr. Byrne:: Whom are you reading from?


David Vaughan Pugh: Not your book, anyway.


Michael Starr: After the budget was presented the Prime Minister stated-


James Allen (Jim) Byrne: It sounds like Shakespeare.


Michael Starr: -that before another budget was presented in the future he was going to seek advice from the business community and industrialists in the country as to what type of budget should be presented. Upon questioning in the house he agreed that probably other groups also such as the agricultural sector-


James Allen (Jim) Byrne: Mr. Chairman-


An hon. Member:: Sit down.


James Allen (Jim) Byrne: On a point of order, I suggest that the hon. member for Ontario, who was at one time a minister, should know the rules of the house and that he should refer to a minister as the honourable minister and not as he or she or it.


Some hon. Members:: Oh, oh.


Michael Starr: Mr. Chairman, after that nonsensical intervention I think I may carry on. Upon being questioned in the House of Commons the Prime Minister agreed that he would also seek the advice of organized labour and the farmers. And why not? When

the Prime Minister and the Minister of Finance present another budget why should they not ask the advice of these people? It has been proven they were not able to do it on their own, even though they had the advice of whiz kids and students from universities.
We have been told that this budget is directed toward creating employment and cutting down on unemployment. This is the government that prior to and during the election campaign promised the people of the country that they would create full employment. All they wanted was a chance, 60 days of decision, and they would bring about full employment in the country.


Maurice Lamontagne: "No one will suffer".


Michael Starr: I must say that this budget has been created to create unemployment instead of employment. Regardless of how the 11 per cent sales tax is applied, whether it is applied in three stages or one as was originally intended, the budget still is not one designed to create employment but rather to create unemployment. The 11 per cent tax applies to the construction industry, one of the biggest employers in the country in that it provides work for some 600,000 Canadians. One would have thought that a government that had in mind the creation of employment would have given an incentive, a boost, to that industry so that it would have been able to employ more people. But they have not done so. They have laid a tax upon this industry in order to keep it from expanding.
The government talks about giving an incentive to secondary manufacturing industry in Canada, an industry that employs Canadians on a year-round basis, an industry that was given incentives by the former government to the extent that they were able to increase employment by at least 2 to 2J per cent each and every year. That industry is now taxed so that it cannot expand, so it cannot maintain the percentage of increase that the former government was able to provide. Here are the two largest employers in Canada taxed by this government in such a way that they will not be able to expand.
The Minister of Finance has made some retreats in one or two areas from his original budget but he has not retreated from the imposition of the sales tax. All he has done is to modify it. He is going to apply it in three stages. This sales tax affects the workingmen of the country, but there is no retreat by the minister. He and the government are determined to tax the working people of this country and not give them any relief.
This was supposed to be a 60 days of decision government. Ninety days have now gone by and all one has to do is to look at the 28902-5-161
Excise Tax Act
record and he will find that it is a government of 90 days of indecision and confusion, of one fiasco after another. They do not need any help to create these fiascos. I submit that because of their actions and because of their failure to introduce proper legislation to help the unemployment situation they will go down in history as the government of unemployment. This government is now engaged in the business of crippling the economy of the country. All I have to do is read to hon. members some of the things that have been said in respect of the imposition of the sales tax. In the Ottawa Journal of July 11 the following appeared:
L. G. McKimmie, president of the Canadian Lumbermen's Association, said Wednesday the government's revised application of the sales tax on building materials and production machinery will continue to work hardships on the lumber and allied industries. He added that many small operators would be forced out of business.
That means lay-offs of men who are now employed.
The remarks were included in a letter sent by Mr. McKimmie to finance minister Gordon.
Did he pay any attention to them? He did not. Somebody gave him the idea that if he would modify this proposal and put it into effect in three stages, then the heat would be off and representations would stop.
According to the Toronto Telegram of July 10, the Toronto metropolitan homebuilders association intend to keep after finance minister Walter Gordon until it gets the budget sales tax on building materials wiped out altogether. I submit to the minister that this is good advice and he should take this advice if he is interested in promoting employment in this country and not promoting unemployment.
I should like to quote from an editorial in the Winnipeg Tribune of July 9:
_Mr. Gordon has in effect brought in four budgets. The first he brought down on June 13. The second came in on June 19 when he rescinded the proposed 30 per cent takeover tax. The third was read for him on June 24 by revenue minister Garland. The fourth came on Monday evening.
It must be admitted that Mr. Gordon improves as he goes along.
I submit, Mr. Chairman, that is good advice to the Minister of Finance and if he wants to improve further along this line he should retract this tax which is going to be such an imposition on the economy of this country. I should like to list some of the protests from some of the industries in this country. I want to read extracts from a publication entitled "Industry", which is published by the Canadian Manufacturers' Association. I read this from the issue of July, 1963:

Excise Tax Act
The measure of manufacturing industry's disappointment with the new federal government's first budget is the measure of the high hopes with which it was awaited-
Alas for great expectations. The dynamic incentives which industry, rightly or wrongly believed it had good reason to anticipate are not so dynamic after all. True, there are a number of corporate inducements of one kind or another in the budget but, for the most part, they prove upon examination to be restrictive and narrow in their application and consequently of limited value.
They say, in effect, they will be paying the tax twice over. This is not just, it is not wise and it is certainly not expansionist. If the Minister of Finance does not want to take advice from others, he should listen to us because we are in direct communication with the people in our ridings and the industries in our ridings. We know what they think about it. Certainly, at least, the minister should take the advice of the Canadian Manufacturers' Association, because they are most reasonable in their representations, as history has proven.
In so far as my own riding is concerned, for instance, Ajax Magnethermic Canada Limited, an industry which has located in Ajax, Ontario, sent a letter to the Minister of Finance protesting this tax. They have pointed out that this is a tax which will lose employment for Canadians, and it is a tax on their income. It is a tax that has permanently lessened the prospects of employment in the purchaser's plant. They followed this up with a telegram which I received the other day. It reads in part as follows:
Further to our recent discussions budget apparently requires payment of sales tax on engineering drawings purchased from our U.S. associates so that we can build equipment in Canada. This increases our cost unfairly in competition with foreign competitors selling into Canada and furthermore constitutes double taxation since the added cost is reflected in our price on which we must collect sales tax from the purchaser.
Then, the automotive parts manufacturers association of Canada is protesting this tax. They have made representations to the Minister of Finance. A. C. Coulter, of Coulter Manufacturing Company, Oshawa, sent the following telegram:
Effect of sales tax provision on production machinery and tools is to worsen competitive position vis-a-vis imports of auto parts.
Then, we see more protests coming as listed in the Globe and Mail of June 18, 1963. In that issue of the newspaper we find Mr. McConnell of Edmonton, president of the national house builders association, protesting the imposition of this tax.


Walter Lockhart Gordon: I wonder if the hon. member for Ontario, since he has referred to Mr. McConnell, would like to put the whole story

on the record from Mr. McConnell or if he would prefer that I do this at the end of his remarks?


Michael Starr: This is an extract from Mr. McConnell's statement published in the Globe and Mail by the writer, Mr. Kenneth Smith. I see the date of this article is June 18, and no doubt Mr. McConnell is one of the persons who, in discussing these protests with the Minister of Finance, suggested the tax might be applied in three stages.


Walter Lockhart Gordon: I will be glad to say more about Mr. McConnell and the national house builders association when the hon. member has concluded.


Michael Starr: Then, we have the Canadian Federation of Mayors and Municipalities protesting against the imposition of this tax on building materials purchased by municipalities. The very capable mayor and capable members of the Oshawa city council have endorsed a resolution, a copy of which has been passed on to me to bring to the attention of the government. They feel that the imposition of the 11 per cent sales tax will be a great detriment to that municipality as well as other municipalities across the land.
However, the government has adopted a new attitude, a new technique. They say to the people of this country, we will give you this with one hand and take away even more with the other hand. We have the example of the municipal loan fund which is now being held in abeyance. The government promised that they would lend money to the municipalities at a low rate of interest and, as a result, there may be a saving of 1 per cent. There is also a forgiveness clause in this measure, the details of which we are unaware at the moment. They give this to the municipality, and then they turn around and tax the municipalities on the materials the municipalities are going to use as a result of the granting of these loans. Will there be a saving? This is something into which the municipalities will have to look very closely because you have the government giving them something with one hand and taking it away with the other.
All of these measures in the budget, naturally, have an effect on the employment situation, which is the prime concern of all Canadians and should be the prime concern of this government as it was of the former government. As a result of the actions we took we were able, for almost 24 months to decrease unemployment in this country month by month as compared with each month of the previous year. We find that since this government has taken office we have had an increase in unemployment for two months

in succession now, as compared with the same months last year. We are hoping that this trend does not continue, that this government will come out of its lethargy and introduce legislation containing incentives to the economy of this country that will overcome the situation I have described.
As an example of the very definite action we took while we were in office, directed at alleviating the situation of our economy, I would cite housing. House construction was undertaken on a scale on which it had never been undertaken in the history of this country. There was the drive for exports and the increase in labour-management co-operation which we brought about in this country through the productivity council. This council, which has done so much in this field, has now been discarded by this government. Our incentives to industry resulted in an increase in employment of 2\ per cent every year. Then, there was the winter works program which provided jobs for 100,000 every winter. This government has adopted this program, but has curtailed its effectiveness by shortening the applicable period by six weeks. These six weeks are the most productive of this program, and yet the government has shortened it by six weeks. What will the result be? Will 130,000 Canadians be able to get jobs under the program this winter? I doubt it very much. They have curtailed this program, not to help unemployment but rather to worsen it.
With regard to technical schools we provided space for 138,000 Canadians to learn new trades and skills, and the present government has adopted this program and added nothing new. Some 4,000 unemployed were trained in Canada in 1957; but last year, because of our incentives to the provinces, 38,000 Canadians were trained.
The government has also taken over our sewage disposal program. Our subsidies to the shipbuilding industry helped create employment in it, and we gave aid to the provinces and helped tremendously in the social justice field. Then there were our wheat sales; but now the Minister of Trade and Commerce says he is not responsible in this area.
What has the government done since it came into office? The most outstanding things have been the appointment of the cabinet and the two trips made by the Prime Minister. The Minister of Labour brought in nine points, but seven dealt with existing programs inaugurated by the former government, and two were gimmicks, one being the $500 for houses built within certain winter months.
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What will this mean? There will be a tremendous bureaucracy of inspectors going around checking each and every home, when it was started and completed, to see whether it was built under N.H.A. standards and to find a reason not to give the builder the $500. It is nothing but a gimmick. Here is a case where the government offers something with one hand and takes it away with the other. It offers $500, and takes it away in the sales tax on building materials. A sales tax of 4 per cent can add $2,000 to the cost of a home. On a $40,000 house it will mean an extra $1,600, and it must be remembered that construction costs in the winter months are higher than during the summer. Will people build in the wintertime to get this $500, in view of the extra cost and the imposition of the sales tax?
There is another gimmick in the nine points announced by the Minister of Labour, the $75 bonus to an employer who employs workers over 45 years of age during a certain period. Where are the new programs the government was going to bring into effect?


Walter Lockhart Gordon: Would the hon. member be willing to answer a question? Do I gather from his remarks that he is opposed to the suggestion that this measure should be introduced, which would give employment to people over 45 years of age?


Michael Starr: I did not say that. I said that this was one of the two new points-


Walter Lockhart Gordon: You called it a gimmick.


Michael Starr: Both of them are gimmicks. It is just a gimmick because it would take a great army of inspectors to go around to every establishment in the country that employs people to find out if they have lived up to the regulations, which have yet to be drawn, in order to qualify for this $75.
What has the government done? It has amended the Atlantic Development Board Act to give six new Grits a position on it. It has given that board $100 million for a period of six years, and restricted expansion in the Atlantic provinces. The department of industry has been established, but even the Liberal senators in the other house were against it.


James Allen (Jim) Byrne: On a point of order, Mr. Chairman; I am sure if the hon. member were kept in order he would be making very little of his speech this afternoon. There is a well known rule-


David Vaughan Pugh: What is your point of order?


James Allen (Jim) Byrne: -that no hon. member should reflect on any act of parliament that has been passed in the current session of the

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house. That is one of the points on which the hon. member is out of order, and I would like to bring it to the attention of the committee at this time.


An hon. Member:: Which measure?


James Allen (Jim) Byrne: The Atlantic Development
Board Act and the department of industry and commerce.


Michael Starr: I want to thank the hon. member, and I will keep that in mind.


James Allen (Jim) Byrne: I ask that the hon. member obey the rules, and then I am sure his speech will be short.


Michael Starr: I thank the hon. member and I will try to keep the rules of the house. I am sure, Mr. Chairman, if I digress too far from them you will bring them to my attention. The government has introduced nothing new to deal with the economic situation of the country. As I have said, the municipal winter works program has been cut by six weeks and-


John Whitney Pickersgill: On a point of order-


The Deputy Chairman:: Order.


John Whitney Pickersgill: Oh, Your Honour is rising on a point of order?


Herman Maxwell Batten: No, I am not rising on a point of order. I rise to inform the hon. member that the time allotted to him has expired.


Walter Lockhart Gordon: Mr. Chairman, I do not want to reply to the hon. member but he did mention the name of Mr. C. J. McConnell, president of the national house builders association, and I would just like to point out that the national house builders association presented a brief, in which they said that if the proposed tax could not be withdrawn altogether they would be grateful if it could be introduced in stages, and they thought it would be much easier for the industry to absorb it in that way. I notice that the hon. member read from and referred to a-


James Allen (Jim) Byrne: That was out of order also.


Walter Lockhart Gordon: Don't say it was out of order before I read mine.


David Vaughan Pugh: On a point of order, Mr. Chairman, may the minister refer to something which was out of order, as admitted by the parliamentary secretary on the other side? May he refer to it at this time as being out of order?


James Allen (Jim) Byrne: I suggest that the previous speaker's speech would be stricken from the record if he were to be held out of order at every point on which he contravened the rules.


Walter Lockhart Gordon: I do not propose to get into a wrangle over these points, but I would like to draw the hon. member's attention to a statement made by Mr. McConnell, as reported in the Edmonton Journal of July 9, in which he said:
We are gratified that Mr. Gordon has seen fit to comply with this request so the industry can become acclimatized to the higher costs.
While I am talking about Mr. McConnell I wonder if I might be permitted, with the consent of the house, to read a telegram which he sent me today. It reads as follows, and in its ending has a very direct bearing on the subject under discussion:
Congratulations on success of negotiations in Washington over week end. National house builders association commends your prompt and effective action on proposed American security tax. Your achievement already reversing approved lenders' decision to divert available funds from N.H.A. mortgages to bonds to take advantage of more attractive investment.
C. J. McConnell, P. Eng., President, National House Builders Association.


Michael Starr: I would just like to ask the Minister of Finance whether he was in Washington or not?
Now, Mr. Chairman, this was supposed to be a government of boldness and imagination.


John Whitney Pickersgill: Mr. Chairman, I understood the hon. gentleman's time had expired.


Michael Starr: That is fine. I am starting again.


John Whitney Pickersgill: Really, Mr. Chairman; I hope that if the hon. gentleman is going to go on speaking he will be asked to speak, like other members of the committee, to the resolution before us and not make a speech on the address which was passed some month and a half ago.


Michael Starr: The resolution before us has a direct effect upon the employment and unemployment situation in this country. This was stated very dramatically by the Minister of Finance when he introduced his budget and said that these measures were to deal with these very important aspects of our economy. In order to deal with that situation thoroughly and completely it is necessary to review what the government has done in its bold and imaginative approach to economic problems.


John Whitney Pickersgill: Mr. Chairman, I rise again on a point of order. The hon. gentleman was allowed to proceed without interruption for about half an hour making a speech which was almost totally irrelevant to the business before the committee. The budget has been adopted-


Some hon. Members:: Oh, oh.


John Whitney Pickersgill: -and we are in committee of ways and means on the resolutions. The government indicated clearly, with the unanimous approval of the committee, that there would not be any technical restriction on the debate-


David Vaughan Pugh: Closure.


John Whitney Pickersgill: -so far as the earlier resolution was concerned; that any reference to that resolution as compared with this one would be considered in order. But the hon. member for Edmonton West drew my attention, and I underlined it, to the fact that we were not opening up the resolutions that had already been dealt with, nor other fields beyond the Excise Tax Act resolution.
If we are ever to make any progress, Mr. Chairman, surely the rules must be abided by in a reasonable manner. The effect of these proposed taxes upon the economy could be discussed. I would not object in the least to the hon. gentleman doing that, but when he starts talking about the department of industry and things of that sort, which have no relation whatever to this matter and about which the house-indeed, both houses-made a decision and respecting which there has been royal assent, those matters are totally irrelevant. It seems to me that if we are to have any order in parliament at all, some attention must be paid to the rules, especially by those senior members and privy councillors with great experience, who almost invariably invoked the rules in the narrowest possible spirit when they sat over here.


Michael Starr: Speaking on the point of order, Mr. Chairman, the Secretary of State mentioned that these resolutions are as a result of the budget that was presented. I submit that this is not so; these are not the resolutions which represent the budget. The budget, in other words, has been withdrawn by the presentation of these resolutions. These are modified resolutions which have been presented and they will have an effect upon our economic situation, and employment and unemployment in this country.
The Secretary of State says we are experienced privy councillors. I would like to refer him to the fact that he and his colleagues have been referred to as old pros. Well, we know where old pros end up-in the bush league. As a matter of fact I can go even further than that and call them the three G's, the Grit-gimmick-government.


Horace Andrew (Bud) Olson: Mr Chairman, on the point of order raised by the Secretary of State, I think most of us would agree that the hon. member for Ontario has been ranging far and wide in some of the arguments put forward on this matter. However, when the
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Secretary of State says the budget has been adopted, I must disagree with him. I think the only thing that has been adopted is that the house agreed it should go into committee to consider the budget resolutions. Certainly the budget itself has not been adopted. Also, of course, we have to take into consideration the fact that since that vote new and different resolutions have been introduced. Therefore, while I have some sympathy with him because of the wide latitude given to the hon. member for Ontario, I cannot accept his statement that the budget has been adopted.


David Vaughan Pugh: Mr. Chairman, just before Your Honour makes a decision could I say a word on the point of order raised by the Secretary of State. I am a rather new member here, but I listened for five years to the hon. gentleman in opposition. If my memory serves me correctly, on more than one occasion, in fact probably on hundreds of occasions, there was no restriction whatever on debate. Debate on a subject can come in one way or another. I suggest to the hon. gentleman that whenever he wanted to discuss a problem, he was able to bring it in. But to come right down to the point of this strip-tease budget that we have had right down the line, we still do not know where it is going to end.


John Whitney Pickersgill: Just like strip-tease.


David Vaughan Pugh: We are on the budget resolutions at the present time, and they refer back to the budget. It is true that we voted on the budget in this house. But if this is so, how can the government change the budget without further debate? It has been said that the hon. member for Ontario has been engaging in a far ranging debate, but there was to be no restriction on this debate and the hon. member has touched upon nothing outside the budget or outside those things which pertain to the budget, because the budget goes to the financial arrangements that this government proposes for Canada. On that assumption I say that from now for the period of the next four or five days we will probably have a very wide ranging debate, and I think it is proper to discuss these things at this time.


Herman Maxwell Batten: Order. The Chair can understand how easily one can, when speaking on these resolutions, stray away and perhaps not adhere as closely as he should to the question in hand. I would suggest that in the interests of economy of time we adhere as closely as possible to the

Excise Tax Act
topic under discussion. We are now discussing paragraph 1 of the Excise Tax Act resolution. The hon. member for Medicine Hat.


Horace Andrew (Bud) Olson: Mr. Chairman, I think I can agree with the hon. member for Ontario when he suggests that no proposals have created so much public protest as the ones introduced under the Excise Tax Act resolution back on June 13. I believe, too, there has been a definite withdrawal of some plans that had been made for construction within Canada as a result of the budget resolutions introduced at that time.
However, if we are to accept the premise that something needed to be done by the government to bring the budget more in balance, I suppose we must also accept the argument put forward by the Minister of Finance that some measures had to be taken which would broaden the base for revenue and taxation. I think we have to consider both these things in balance. One is sometimes led to believe that the imposition of new taxes, certainly if they have been suddenly imposed at a rate of 11 per cent, might have the effect of being a tax of diminishing returns, to the extent that additional government expenditure would be required to take care of unemployment resulting from imposing these taxes.
Mr. Chairman, I wonder if I might call it six o'clock.
At six o'clock the committee took recess.


[Stage Direction]
AFTER RECESS

The committee resumed at 7 p.m.
Horace Andrew (Bud) Olson: Mr. Chairman, I had just begun my remarks respecting the excise tax resolutions when the committee rose at six o'clock. At that time I was discussing the point of diminishing returns with respect to the government's stated intention of attempting to balance the budget, or of bringing the budget closer into balance. I believe it is fair to say that the government in its dealings with Canadian citizens cannot approach these matters in exactly the same manner as a corporation. In other words, one cannot look at the books and say that there are millions of dollars worth of sales, and that if a tax of 11 per cent, or any other percentage, is applied one can then multiply the tax by the previous year's sales and expect a revenue on that basis. We also have to realize that in the public affairs of this country sometimes a situation could develop whereby government
[The Deputy Chairman.]
expenditure would be greater than the anticipated revenue because of some disruptions in the economy affecting employment, and so on.
In addition to that, Mr. Chairman, I think we should accept the argument that the Minister of Finance has made that we need to do something to lower the deficits which Canada has experienced in its national affairs over the last few years. I believe that if we look at the increase in the national debt, the debt service charges which have been building up so rapidly, we cannot help becoming alarmed at the situation, and certainly any move to balance the budget or to try to balance the budget is a step in the right direction in slowing down this acceleration. However, I should like to suggest to the minister that increasing taxes-in other words, trying to increase revenue-is only one way of attempting to bring the budget into balance. We should also be looking at ways of eliminating expenditure which is equally as important as the other side of the ledger.
Looking back over the last few years, Mr. Chairman, we have seen enormous increases in the contribution paid by the Canadian people to the national debt. We have seen this in absolute terms of dollars and cents, and we have also seen the percentage of the interest charge on the national debt increased. I think the now famous conversion loan of 1958 added more to the expenditure side of the national account than any other single action of any government in Canadian history outside of wartime. I believe it is fair to say that this particular action of the government not only added a great deal to the debt service charges of that year, but that its effects will be with us in some cases for 25 years to come. While Conservative members are trying to make a lot out of the public protests which arose because of some of these additional taxes which were proposed by the minister of finance, they should remember that they did in fact create a situation in Canada during the last five or six years where it was necessary for a minister of finance, no matter to which party he belonged, to increase the revenue to take care of this additional expenditure. We in this party do not believe that that action was necessary. We do not believe it achieved any beneficial purpose for the Canadian people, and if it did it has not been thoroughly and adequately explained to this date. Perhaps here was another case of the government taking what was called bold, imaginative action and having it backfire on them, and consequently on the taxpayers of the country.
We in this party have over the years advocated that there should be some other

source of funds available to the government so that this tremendous increase in the debt service charges of the national treasury will at least be slowed down a little. We have said time and again that the Bank of Canada could be used to provide some of this capital which the government requires to expand the social services of this country. There are hon. members of this house and Canadian citizens outside this house who I believe do not quite understand just what it is the Social Credit party have been proposing with regard to having this capital supplied to the government. On occasions, some people just ridiculed the proposals we made. On others, people honestly and sincerely recognized the problem but did not understand the suggestions we were making as to ways of meeting it.
I have before me a series of articles written for the Winnipeg Free Press. They were carried on the pages of that paper in October and November, 1961. I am sure the minister would agree that the editorial writers and other writers on the staff of the Winnipeg Free Press are certainly not pro-Social Credit in their views. In fact, if anything can be said about them it is, I think, that they have unfalteringly supported the Liberal party over the years, whether right or wrong. So if I read certain excerpts from these articles I do not think the minister will brand them as additional Social Credit propaganda which can be dismissed as ridiculous or without foundation in fact. I want to read some of these passages so that we may lay a foundation for the proposals we are trying to make -a foundation which will gain some credence among people outside the Social Credit party.
Experts who are skilled in such matters will find that the relationship between currency, monetary inflation and sales of government bonds is direct and easily established. All that is necessary is to compare the amounts of the inflation with the government's offering of bonds and a little later, with increases in the assets of the chartered banks.
First comes the inflation-baiting the hook, so to speak. Then comes the bond issue. The public buys little. But the next time the assets of the banks are reported they show a corresponding gain in the holding of government bonds.
Here is another excerpt:
There is a wealth of statistics on money supply going back to early days. The pitfall for the unwary is that the only set of statistics which is based on a comparable dollar is the work of the research experts of the Bank of Canada, and have never been published. This set is available at the Bank of Canada at Ottawa but cannot be referred to usefully in this article because readers cannot easily verify the figures.
Accurate statistics for the years prior to the creation of the Bank of Canada are conveniently available in Professor Knox's study published by the Rowell-Sirois royal commission in 1940. Later figures are available in the statistics of the Bank of Canada.
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The present figures appearing in the Bank of Canada weekly, monthly and annual reports go back only to 1947. These are readily available at any good library. For present purposes the record can start in 1950. Generally speaking, the years 1950 to 1957 when the government changed were -except for 1950-good years. The growth in the money supply was the normal growth required by a growing population and a growing national output.
Then follows a list of the total money-supply for each year from 1950 to 1960. I do not intend to read this list now, because there is a summary at the end which I shall
quote.
It will be seen that the increase under the Liberal government, after 1950, was about $500 millions per year, except for 1955 which brought an upward spurt of $1 billion. This is a period of just over six years. Except for one year-1959-the increase in money supply under the Diefenbaker government has been very great. Indeed, there have been two great inflationary splurges. In 1958, the increase was $1,324 millions.
I just put this on record so that the public of Canada may know that there is an increase in the money supply every year in a normal, growing economy and that there are years in which such an increase is substantially above the $500 million which is the average rate of increase during that period of time.
In this series of articles, the writer sets out to explain the technique used by the Bank of Canada to expand the money supply. He says:
The best way to explain ... is to give an example. The bank is the agent of the government. The government in the present year-
The year referred to is 1961.
-is spending $980 millions more than it receives in revenue from taxation. The government must, therefore, raise money by selling bonds and thus be able to pay its bills.
The article goes on:
In the illustration given, the government needs $250 millions. It is afraid to take a chance on the open market and so increases the money supply.
The Bank of Canada puts in an order with financial houses to buy any given amount of government bonds-say $20 million worth. The bond houses go on the open market and buy these bonds. They present themselves to the Bank of Canada the next morning and say "Here are the bonds you ordered. You owe us $20 million".
The Bank of Canada accepts the bonds and pays for them with a cheque-a small piece of paper worth, perhaps, 2 cents. The investment houses can do only one thing with that cheque-deposit it in a chartered bank. And the chartered banks can do but one thing with the Bank of Canada cheque. They present themselves before the teller's wicket in the Bank of Canada and deposit it in their account. The chartered banks are to the Bank of Canada what the mass of the people are to the chartered banks-customers.
I continue to quote.
Under the Bank Act. the chartered banks are required to hold cash or Bank of Canada deposits

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equal to 8 per cent of their own deposits from the public. This means that once the $20 million is deposited with the Bank of Canada the chartered banks can expand their own deposits by 12J times this amount-or by $250 millions.
The money supply is thus expanded by $250 millions by the stroke of a pen.
The chartered banks suddenly find themselves in possession of $250 millions of money or credit which they can lend. But they already had met all the credit-worthy demands. They had not been short of money.
So it follows, the banks use the $250 millions of new money to buy the $250 million bond issue which the government promptly issues. The government's accounts with the banks go up by this amount.
What has happened is that the chartered banks have increased their deposits by $250 millions and the money is thus dispersed all over the country-to contractors, manufacturers, civil servants, old age pensioners, and so on.
That is the end of the article. The point I wish to make is this: If this is correct-and we believe this is the way in which the increase in the money supply takes place- then why in the name of common sense cannot the Minister of Finance and the federal treasury go directly to the Bank of Canada, which is a publicly owned institution, and get the money there in the first place? If this were done, then the interest paid on this increase in the money supply would accrue to the Bank of Canada, which must turn its profits over to the treasury annually. I do not understand why we cannot use this means of increasing the money supply rather than having the chartered banks create an increase and then obliging the government of Canada to pay interest to them on something they did not have before this transaction took place.
Possibly there is a good, solid reason why this cannot be done, in which case I should like the Minister of Finance to explain to us. I bring this matter up at this time because we are interested in the minister's argument that something ought to be done to balance the budget-that something ought to be done to halt, to roll back, this tremendous increase in the debt service charge which is piling up year after year.
I think it is interesting to point out at this time that the increase in debt service charges for all of the years since 1958 is nearly equal to the deficits that have been incurred for those years. Even if this is so, if we had done something basic along the lines of what I am suggesting now so that the increase in the money supply would be made available to the government rather than coming to them as a debt, we would not be faced with nearly $900 million in interest charges this year and the deficit that the minister is forecasting simply would not have been necessary.

I wanted to bring this out, Mr. Chairman. It is not Social Credit propaganda. It was written by a man who has supported the Liberal party all through the years. We cannot undo or change something that took place years ago but we think that this can be done now. We are faced with this problem. We have got to meet the commitments that previous governments have made to the bondholders, but even a trip of a thousand miles begins with the first step and we can start now to do the financing of the federal government through this kind of action.


An hon. Member:: Just like Aberhart.


Horace Andrew (Bud) Olson: There are some gentlemen to my right who are using the same old kind of ridicule that we have been experiencing for the last 28 years. If it is ridiculous, I wish they would come forward with some kind of solution for the tremendous increase in the debt that has been accumulating, and the interest charges on it.


Mr. Woolliams:: Mr. Chairman, I should like to ask the member for Medicine Hat a question. Is he against increasing old age pensions or baby bonuses? You cannot have your cake and eat it. If you are going to have these social services you have got to pay for them. If you are against any increase in social services, let us hear it tonight.


Lucien Lamoureux: Order. I suggest to the hon. member that perhaps he should address the Chair.


Eldon Mattison Woolliams: I am sorry, sir; I should have done that. That is right. I agree with you and I am sorry.


Horace Andrew (Bud) Olson: Mr. Chairman-


Eldon Mattison Woolliams: Let us have an answer.


Horace Andrew (Bud) Olson: Again, of course, the hon. member is trying to throw up a smokescreen. I have not said anything about increasing social services. I have been dealing with the problem that has been building up with regard to the tremendous increase in debt service charges. I think all members of the house are concerned about it, even though they try to blow it away by suggesting that we are not in favour of social services. I see no relation between the two points. I might say to the hon. member that if we did not have to pay $890 million odd in interest charges this year we would have a whole lot more money to do many things that are necessary.


John (Jack) Henry Horner: I wonder whether the hon. member would permit another question.


Horace Andrew (Bud) Olson: One more, but I should like to continue my speech.


Lucien Lamoureux: Order. The hon. member has the floor, but he may yield, of course.


Eldon Mattison Woolliams: He has yielded.


John (Jack) Henry Horner: I wish to thank the hon. member for Medicine Hat for yielding the floor. I realize that all Canadians are concerned about the debt. I also realize that in the budget a deficit of approximately $650 million was forecast, and yet he voted for it. How can he explain voting for a deficit of that amount and at the same time speaking against debt and deficits generally?


Horace Andrew (Bud) Olson: Mr. Chairman, the answer to that is very simple. We could have done the irresponsible thing his party did last winter-


Eldon Mattison Woolliams: You voted for it then.


John (Jack) Henry Horner: You were responsible.


Horace Andrew (Bud) Olson: Certain items in the whole government policy were picked out on which the government was brought down; but now we have come back here and are picking up where we left off. We did not solve anything. As a matter of fact, the former government managed to play around with the public business of Canada to the extent that we never even had an opportunity to look at the estimates for the whole fiscal year 1962-63.


John (Jack) Henry Horner: I wonder whether the hon. member will permit another question.


Lucien Lamoureux: Order. As the hon. member for Acadia knows, he can ask the hon. member who has the floor whether a question may be asked, but if the member who has the floor does not yield he should be allowed to continue his speech.


Horace Andrew (Bud) Olson: Thank you very much, Mr. Chairman.


John (Jack) Henry Horner: I have asked and I hoped he would yield, Mr. Chairman.


Horace Andrew (Bud) Olson: I want to deal with some of these matters. As a matter of fact, in my view the previous government had a responsibility to deal with the estimates, the budget and all of the other matters of public business before they saw an international exchange crisis coming and quickly closed up shop and ran to the people.


John (Jack) Henry Horner: You are wrong.


Horace Andrew (Bud) Olson: No.


John (Jack) Henry Horner: Permit me to ask one question.


Lucien Lamoureux: Order.


John (Jack) Henry Horner: If I am wrong, permit me to ask one more question.
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Horace Andrew (Bud) Olson: The hon. member will have full opportunity to make a speech.


John (Jack) Henry Horner: I acknowledge your fear.


Lucien Lamoureux: Order. May I bring to the attention of some hon. members who are interrupting unduly and perhaps unfairly, that the member who has the floor should be allowed to continue with his remarks freely and uninterrupted.


Horace Andrew (Bud) Olson: Thank you, Mr. Chairman. I hope you will take into consideration the loss of time they have caused me. The point I was about to make was that if the government would adopt some of the proposals we have suggested with respect to finding social capital or social credit

call it whatever you like-for the municipal development fund, that proposal would be one of the most far reaching and beneficial introduction by any government in a long time. I am not going to get into a discussion of that matter, because it will be coming up later; but the fact is that when the money supply is increased we believe it could be done directly by the Bank of Canada, and thus we would not have to sink deeper into the mire of debt where we are committed to pay increasingly large debt service charges.
In his opening remarks the minister asked for some alternatives and I suggest that he consider this proposal very seriously as an alternative, as a means of bringing the budget closer into balance. That is why I respectfully submit this to him.
There are one or two other matters I want to discuss with respect to the excise tax resolutions. One of them has to do with the administrative problems that the minister encountered respecting what is now referred to as the 30 per cent takeover tax. I realize it was withdrawn, but I bring it up now because the President of the United States has apparently proposed to congress a tax that is going to involve almost the same kind of administrative problems. As I see it, the major difference is that the tax will be 15 per cent rather than 30 per cent on sales of stock that would in effect transfer ownership of Canadian companies to Americans.
The other major difference is that the United States government and the United States treasury will be collecting the revenue, rather than the Canadian government under a proposal which, if enacted, will encounter the same kind of problem. If the President of the United States and his advisers have worked out some method of execution, if one may call it that, to overcome these administrative problems, I think it would be

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well for the Minister of Finance to find out what it is, because if the Canadian economy is going to have to deal with measures to restrict foreign ownership and foreign investment it seems to me it would be beneficial to the Canadian government and treasury if they could collect the revenue, rather than the United States government, because the effect is going to be the same. They are measures designed to inhibit the flow of capital from the United States and expand the ownership of Canadian industrial establishments in Canada. I realize, of course, that President Kennedy's proposals are much expanded over what the Minister of Finance brought in because they include bonds and securities as well as equity issues. In so far as this new plan will apply to equity stock, I think we should have some explanation of how the United States government plans to administer the collection of this tax and still avoid the administrative difficulties that caused the minister to withdraw his proposal. It would be interesting to know how this is done.
In closing, Mr. Chairman, may I say that I think we have to realize that there is no balance between the $500 bonus that the department intends to extend to new homebuilders and the imposition of the excise tax on the building material that will be going into these homes. As the hon. member for Ontario pointed out, there will likely be at least $500 additional cost of construction simply because construction will take place during the winter as opposed to being undertaken during the summer. If one accepts that, and I think it is a reasonable deduction, then you are right back where you started. However, the addition of the 4 per cent tax on the cost of the material going into that home is going to be hung on to the mortgage, so the home owner will eventually have to pay, that is by the time the mortgage is paid off, at least $500, $1,000 or several times that amount.
In closing, may I say that I think we have to accept the argument that something ought to be done about this tremendous increase in the debt, and debt service charges. I urge the minister to give some attention to the administrative problem that will be encountered in connection with any particular measure before he introduces this in the house, because once a measure of this nature is introduced there are repercussions in the economy and in the stock market that are not easy to overcome. The other thing I should mention is that there have been some windfalls to wholesalers, and in some cases I do not believe the tax will be refunded to the customer.
This is not quite fair. I think the problem of imposing this 30 per cent takeover tax should certainly have been given far more consideration before it was introduced, in spite of the "60 days of decision". There were some rather heavy losses and some substantial gains as a result of the few days it was talked about in the house. The government did not increase its revenues as a result, but there were some people hurt while other people made fortunes to which they were not really entitled.


Mr.   Scoll@: Mr. Chairman, the particular section of the Excise Tax Act now before us, of course, deals with the removal of the exemption of building materials, and it is to this I should like to address myself. This matter has been so widely discussed in the house and in the press that it is difficult to say very much about it now without endlessly repeating the arguments that have been made before. I, therefore, do not intend to take very much time of the committee. I will merely summarize our unalterable opposition to this tax and state that we will not vote for it when the resolution is called. Indeed, I hope to move an amendment at the conclusion of my remarks to emphasize our opposition to this tax.
We do not want to repeat arguments that were used in the budget speech, although since that time there have been certain changes in the budget resolutions. Some people have referred to this as almost a baby budget. Presumably, the baby is needed to take care of the miscarriage that happened to its predecessor. I listened to the remarks of the minister this afternoon with a great deal of attention, hoping that we would hear from him some clear, precise, intelligent and cogent arguments that would convince us to support this particular measure. As I understand the minister's position, his argument in favour of the tax is twofold.
First, there was his basic argument that we must somehow begin to move towards a balanced budget and cut down the national deficit and, second, that in order to do this we must find new sources of revenue. The tax that is being imposed in this resolution is the least unpleasant one that the minister could think of under the circumstances. Mr. Chairman, with both of those propositions we are in complete disagreement. We do not accept the premise that what is needed at the moment is a balanced budget. When you have a condition of chronic unemployment and regional underdevelopment such as we have discussed in this house, this myth of a balanced budget is a form of economic lunacy. What is really

needed at the present time or in the near future in Canada is a large, healthy deficit. We feel that a great infusion of capital should be made available; social capital is what we have called it. We have been asking for this since the commencement of the session, for large doses of social capital to be injected into the Canadian economy.
The member for Medicine Hat, who spoke before me devoted a great deal of his speech to outlining his party's fears of large national deficits. Other hon. members have done the same. I would only point out to the hon. member that this fear is not shared by many of the progressive governments of Europe. They have consistently run deficits for 10 or 12 years and, at the same time, have managed practically to wipe out unemployment and to have these social security benefits. The only thing about a deficit is that the percentage of your gross national product required to service it should remain practically constant. So long as this is done, large deficits present no problem, either in their financing or in their strain upon the economy of the country.
We do not accept the proposition of the minister, that what is required today is a balanced budget. We think this is a myth, economically unwise and unjustifiable. We also disagree with the particular form of taxation imposed here. This is a sales tax. As we said during the budget discussion, the sales tax is the most regressive form of taxation possible because it affects everybody in the community in a similar way regardless of the size of his income. We feel it is an unfair form of taxation. It is particularly unjustifiable in the case of a national government. Our provincial governments have to impose sales taxes, and have been forced into doing so because of their restricted revenue raising base. However, in so far as a national government is concerned, with all of the tax raising methods at its disposal, it is completely unjustifiable for that government to introduce a sales tax at this time.
For some strange reason the government has seen fit to single out for this new regressive tax one of the most sensitive sectors of the Canadian economy, and by that I mean the building and construction industry, and the manufacture of machinery for industry. It seems to us that by singling out this very sensitive section of the economy the government is setting in process of movement changes that will increase unemployment, decrease employment and cut the over-all revenue. We feel that to have singled out this particular industry is extremely unwise.
This action is 100 per cent incompatible with the government's expressed goal of full employment, because it holds out to us the hope of increased revenues while at the same 28902-5-1625
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time it is setting in force movements and trends in the economy which will result in less employment and eventually less income to the government. It is a self-defeating piece of economic lunacy, shortsighted, incredible, discriminatory and just plain illogical.
Since it has been proposed there has been a wave of protests from coast to coast. I am not going to place them on the record because I am sure the minister himself has received far more than other hon. members, but all of us have been deluged with opposition to this particular measure, urging us to oppose it as strongly as we can. For example there was an editorial in the Globe and Mail on June 26, and I may mention in passing that this was a newspaper which performed the interesting feat in the last election of changing its party without changing its principles. In this particular editorial it dealt with the sales tax and said:
The sales tax can only be interpreted as an expedient to raise revenue, in the area of the economy where expansion would be most likely to create jobs. Yet the finance minister has admitted that taxes are already too high, and that unemployment is Canada's major problem. The best that can be said of the budget in this respect is that there will certainly be no unemployment among chartered accountants and lawyers, as they sort out the confusions and plead the contradictions.
As I find myself in the latter category I might almost welcome that particular suggestion but, Mr. Chairman, in the Gazette of Wednesday June 26, its financial editor, Mr. John Meyer, attacks this proposal, registers his objections and concludes by saying:
The point here is that the opposition, in forcing the withdrawal of these measures, can accomplish a valuable service-
We would very much like to accomplish that valuable service, tonight if possible.
This afternoon the minister outlined what he felt was the compensating factors for this new tax, namely the changes in the income tax regulations, the reduction of one quarter of 1 per cent in the interest rate and the enlargement of the amount of mortgage with a consequent reduction in down payments. I hope that before this debate concludes the minister will give us some facts and figures to substantiate this bland assumption, because all of our calculations indicate that by the time you are through with this arrangement your down payments will be higher, your monthly carrying costs will be higher, and the number of people qualifying for loans will be lower because the income requirements will be higher.
I hope the minister will give us some evidence to indicate that this is truly a compensating factor; but previous speakers

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have pointed out that this one quarter of 1 per cent reduction is more than offset by the increase in the cost of a home caused by this sales tax, and the increase in construction costs during wintertime.
We are not prepared to accept the bland assurance of the government that this is a wise tax. We intend to oppose it for the reasons I have stated: 1, it is based on the wrong philosophy; 2, it will curtail expansion and increase unemployment; 3, it will reduce government income; 4, by its nature it is a regressive, discriminatory and unfair tax, and 5, it will have a drastic effect on one of the most sensitive sectors in our economy, the building and manufacturing industry. For those reasons I move, seconded by the hon. member for Nanaimo-Cowichan-The Islands:
That the Excise Tax Act resolution be amended by the deletion of paragraph 1.


Walter Lockhart Gordon: Mr. Chairman, I would certainly think this amendment is out of order because it most assuredly would have a major effect on the balance of ways and means. I would like to say a word or two about the hon. member's remarks. He is a man with whom I quite often agree and sometimes disagree, but I was surprised that he quoted the Globe and Mail editorial with such enthusiasm. I am sure this will be looked upon with considerable satisfaction by the editors of the Globe and Mail, who perhaps until tonight might not have thought that the hon. member for Danforth and his party always agreed with their economic points of view.
By the same token it surprises me to think that the editors of the Globe and Mail and the progressive and very sincere members of the New Democratic party might now be described as being, if not in bed together, at least contemplating an accouchement of that type. This is a development of the debate that I had not foreseen and I am sure it will be looked upon with interest, and in some quarters perhaps with some slight raising of the eyebrows, if not amusement. When I think of the editor of the Globe and Mail, whom I have known for some time and who I sometimes think-


Gordon Harvey Aiken: Mr. Chairman, I wonder is the minister speaking on a point of order or on the amendment. I gathered the impression that he was going to speak on a point of order.


Eldon Mattison Woolliams: I take it he likes the Globe and Mail.


Walter Lockhart Gordon: It all depends on the day of the week; but I think the hon. member for Parry Sound-Muskoka made a good point and perhaps at the moment I should only speak on the point of order. I shall restrain

myself until Your Honour has ruled on it, and after that I may have a little more leeway to discuss the amendment, if Your Honour has not ruled it out of order. If Your Honour does rule it out of order, then I shall not have the opportunity of saying any more about the Globe and Mail.


Gordon Harvey Aiken: I wonder if I might assist the minister.


Herman Maxwell Batten: Is the hon. member addressing the Chair on a point of order?


Gordon Harvey Aiken: Yes, Mr. Chairman. I would particularly like to point out the provision in Beauchesne, fourth edition, page 221, citation 265 which reads:
No member other than a minister of the crown may introduce a bill for the reduction of duties. The government must take full responsibility for the taxation levied to provide the revenue. But the house enjoys complete freedom to make every representation possible to the government with regard to the manner in which the ministers discharge this responsibility. This duty the members may perform by moving amendments to reduce the taxes proposed by the administration.
I would say, Mr. Chairman, that since the amendment has the effect of deleting a tax, therefore it is in effect a motion to reduce taxation and would be in order.


Mr. Scott:: Mr. Chairman, I merely wish to observe that a somewhat analogous motion was made yesterday by my desk-mate when we were dealing with these budget resolutions. It is reported in Hansard at page 2479. A motion was made to delete one of the paragraphs of the income tax resolution, and it came to a vote in the committee. It is not completely on all fours with the amendment we are now discussing, but it seems to me that, taken in conjunction with the representations of the last speaker, this amendment should be ruled in order so that we might hear the interesting comments of the Minister of Finance.


James Allen (Jim) Byrne: Mr. Chairman, I submit that it would be interesting, as it has been up to now, to hear the observations of the Minister of Finance. However, I submit also that this is not a good reason for abrogating the rules and practices that have been established in the house over many years. I am sure that most hon. members who were in the house during the session of the last parliament will recall a similar discussion on a similar point of order. But if I may go back to 1948, a similar point of order was then raised and determined by a vote of the house; that a resolution presented-


John (Jack) Henry Horner: What page of Hansard?


James Allen (Jim) Byrne: -by the Minister of Finance by way of a resolution that was segregated into paragraphs by numbers was in effect the same as any other resolution presented by a minister and no portion of that resolution could be dealt with paragraph by paragraph in committee of the whole.
In the 1951 Debates of the House of Commons, volume III, it will be seen that the then minister of finance protested a ruling of the Chair. A vote was taken in committee of the whole and the minister appealed the ruling of the Chair that a vote may be taken paragraph by paragraph. At page 2662 of Hansard of that session hon. members will see that a vote was taken and the decision of the Chair was reversed. There are a number of such rulings which have substantiated this premise, and as recently as the last session of parliament a matter of a similar nature was discussed. The hon. member for Winnipeg South, speaking to the question that was before the committee-that is, on the point of order that was before the committee as to whether the resolution should be dealt with paragraph by paragraph-had this to say. It will be recalled, of course, that the hon. member for Winnipeg South was on the opposite side of the house at that time. He sought to prevent a vote being taken on the resolution paragraph by paragraph, and pointed out substantially what I said earlier, that the excise tax and income tax resolutions are segregated for clarification and for no other purpose. I will read from Hansard of November 9, 1962, page 1477:


Mr. Churchill:: Mr. Chairman, I would just like to add one point to the very learned discussion we have had, contributed to by the hon. member for Winnipeg North Centre. I wonder whether he has considered this fact. Although he was quoting from Bourinot with regard to a motion which might be divided into two or more distinct propositions. we are here dealing with a resolution, and a resolution is brought into the house and is followed by a bill. If the hon. member will look at the order paper he will find several resolutions there which contain several propositions; but the resolutions are written as a paragraph, divided by semicolons. It appears to me from a consideration of this matter that the budget resolutions are, for the convenience of the house, divided and numbered, rather than written all in one distinct paragraph with just the separation of a semicolon. Rather than being a whole series of distinct propositions, it is a resolution, just as other resolutions are, on which subsequently a bill will be founded and in which distinct measures are brought forward. That is perhaps a portion of the argument that was overlooked by the hon. member for Winnipeg North Centre when he was speaking on this matter.
I submit, Mr. Chairman, that this argument applies equally to this proposition, and that this amendment is strictly and completely out of order having regard to the rules of the house.
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Horace Andrew (Bud) Olson: Mr. Chairman, I do not claim to be an expert on all the citations that could be referred to with respect to the point of order that has been raised. When we look at citation 263 of Beauchesne's fourth edition, in paragraph 2 we find these words:
The principle that the sanction of the crown must be given to every grant of money drawn from the public revenue, applies equally to the taxation levied to provide that revenue.
Citation 265 quoted by the hon. member for Parry Sound-Muskoka seems to not altogether contradict that, except as regards the status of paragraph 1 of the excise tax proposals that are before us. It says, of course, that no member other than a minister of the crown may introduce a bill for the reduction of duties. However, further down it says:
This duty the members may perform by moving amendments to reduce the taxes proposed-
I do not believe that in so far as the committee is concerned the provisions contained in paragraph 1 have actually come into law, according to the stage we are at in this committee. In other words, the Minister of Finance is asking for the repeal of certain exemptions that were previously in effect; therefore they must be classified as "proposed" taxes, and if we are to accept the last sentence of citation 265 it would appear to me that the amendment moved is in order.


John (Jack) Henry Horner: Hear, hear for the Social Credit.


Mr. Brewin:: Mr. Chairman, I, too, would like to speak on the point of order. May I first point out the very great importance of this point of order as indicated by the citation in Beauchesne already referred to by the hon. member for Parry Sound-Muskoka. The point he makes in this regard is supported in the following phraseology, which indicates the importance of the matter before Your Honour.


Eldon Mattison Woolliams: What page is that?


Francis Andrew Brewin: It is page 221 of Beauchesne, citation 265, which reads as follows:
But the house enjoys complete freedom to make every representation possible to the government with regard to the manner in which the ministers discharge this responsibility.
Upon this ruling depends the exercise of what is described as the complete freedom of the house, which surely should be interfered with only in the clearest of instances. The citation then goes on with a surprising and delightful clarity which, Mr. Chairman, must make your task an easy one. It says:
This duty the members may perform by moving amendments to reduce the taxes proposed by the administration.

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That, Mr. Chairman, is precisely what the motion of the hon. member for Danforth does. The resolution proposes what is in effect a new tax. It is perfectly true that it takes the form of calling for the removal of a previous exemption from taxation, but the excise tax which is proposed is clearly an imposition of tax. Ask the building industry and the construction industry of Canada if this is not the imposition of a new tax. It being thus, the freedom of this house to perform its duty by proposing amendments to reduce the taxes proposed by the administration is clearly indicated by this passage in citation 265. The prohibition referred to by the hon. member for Kootenay East- for a moment I almost mixed him up with the hon. member for Kootenay West, which would have been a horrible mistake-related, as I see it, to the sole responsibility of the government in levying taxes. We could move no amendment as private members which would levy a new tax, but in my submission it is perfectly clear from this citation that this historic freedom of the house is involved in this ruling which you are now called upon to make, but in which you are, as I said, relieved from anxiety in the matter by the clearcut terms of this citation.


Mr. Lloyd:: Mr. Chairman, perhaps my perplexities as a new member may only add to the confusion but I would refer to Beauchesne's fourth edition, page 222, citation 268(1), which reads:
Though it is the function of the committee of ways and means to impose rather than to repeal taxes, example of the repeal of taxation effected in this committee are to be found upon the journals. Proposals for the variation or modification of taxation can therefore be made in the committee, but these proposals must be grafted upon the financial scheme submitted by the government, and must not affect the balance of ways and means voted for the service of the year. Amendments, therefore, can be proposed to substitute another tax, of equivalent amount, for that proposed by the government, as an alternative duty, the necessity of new taxation, to that extent, being already declared on behalf of the crown.
If this were not so it would destroy the means of recognizing the responsibility of the government in financial matters.


Mr. Basford:: Mr. Chairman, I should like to add my remarks to those made by my hon. friend the parliamentary secretary to the Minister of Labour. Hon. members opposite have referred to citation 265 of Beauchesne's fourth edition. It is quite apparent from reading citation 265 that that is making reference only to bills and not to resolutions in committee of ways and means. Throughout it is clear that it refers to the power of the house in dealing with a bill, and we are
[Mr. Brewin.l
a committee of ways and means, a committee of the whole house dealing with a resolution. Beauchesne is quite clear on this point, where in paragraph (4) of citation 266 he says:
It is not in order to move the deletion of a particular clause in an excise tax resolution because it alters the balance of ways and means.
That is a very clear statement of what this committee can do and clearly shows that the amendment before us is obviously out of order.


James Allen (Jim) Byrne: Mr. Chairman, the hon. member for Greenwood said that it would be a very grave error to get me mixed up with the hon. member for Kootenay West. I can assure him that I would feel very badly about that, but the mistake would be in his favour. I want to point out, in support of the argument of my hon. friend from Vancouver-Burrard, that the point of order is not that we will be so much impeding the balance of ways and means, but rather that this is a resolution not a bill and cannot be voted upon clause by clause. It can be agreed that discussion cease on various clauses, but there can be no determination by a division of the house on the resolution stage. I submit, Mr. Chairman, that you have no alternative but to rule this amendment out of order.


Stanley Howard Knowles: Mr. Chairman, I marvel at the number of members on the government side who think this matter is clear and straightforward. I suggest that the hon. member for Kootenay East has come close to the heart of the point, but he has come at it from the wrong side.


James Allen (Jim) Byrne: I am not a left winger; I am a right winger.


Stanley Howard Knowles: I hope that remark is on the record. To get back to the point of order, hon. members realize that if the objection to this amendment is sustained we are put in the position which the hon. member for Kootenay East said we should be put in, namely that we have no right to express ourselves as a house on paragraph 1 of the Excise Tax Act resolution. In my view we are still suffering from the mistake which was made in 1948 when the house, by a vote, reversed a ruling which had been made by the chairman of the committee of ways and means at that time. Up to that time we had followed the simple, logical, understandable course of voting on the separate paragraphs of a budget resolution as they came along.
What is before us now is paragraph 1 of the Excise Tax Act resolution. It is a proposition complete in itself. Yet the hon. member for Kootenay East says that somehow the rules must be interpreted in such a way as to prohibit us from having the chance to

vote on this section of the resolution. Because we are caught with that ruling of 1948-actually it was not a ruling, but a vote by the majority of the house against the ruling of the Liberal member who was in the chair at that time-because we are stuck with that, we have no other way to get a decision on individual paragraphs than by moving, as the hon. member for Danforth has done, that a particular paragraph be deleted.
I submit that after all the citations have been read on both sides the simple, common sense, logical position is that the House of Commons of Canada ought to have the right to vote on this proposition by itself. I submit that the most recent precedent occurred in this very committee only yesterday. Yesterday, my hon. friend from Winnipeg North moved by way of an amendment that paragraph 4 be deleted from the income tax resolution. The hon. member for Kootenay East was not on his feet then telling us we could not do it, and all these other people were not raising points of order. Of course, there were only a dozen or so of us who were prepared to vote for that amendment; but I submit that since the Chair yesterday allowed the hon. member for Winnipeg North to move the deletion of a paragraph from the income tax resolution a similar view should be taken today with respect to the excise tax resolution.
In both cases an attempt is being made to do a simple, common sense thing, namely to vote on the proposition which is before us. The minister has placed his thoughts before us on paragraph 1, and if we are no longer permitted to vote on these resolutions paragraph by paragraph, then I submit we should follow the precedent set yesterday when an hon. member moved to delete the paragraph.


Lucien Lamoureux: I wonder if we have not heard sufficient argument on this point. As to the proposed amendment, I must say the Chair is ready to make a ruling and that additional argument would not be helpful in any way.
I should like to refer first of all to the point just made by the hon. member for Winnipeg North Centre, who referred to the fact that yesterday the committee was allowed to vote on a similar amendment. The Chair was well aware of the difficulties which might arise from the standpoint of correct procedure in connection with that particular amendment; but as everyone knows, who was in the chamber at the time, no point of order was raised in connection with it and I felt I should not intervene by bringing up the question. That is why I allowed the committee to divide on the substance of the amendment. However, I do not think a precedent was set. As I say, I was fully aware
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of the implications of what was done yesterday. I had before me then the decision reported in Hansard, of November 9, 1962, and I felt then, as I feel now, that no precedent was set.
To come to the particular point involved: paragraph 1 of the resolution before us proposes a tax. The amendment, to my mind, has an exactly opposite effect. Indeed, it destroys the proposal we have before us. It is not properly speaking, an amendment. It is a negative. In other words, it is an entirely new question which is now proposed and it would appear to me, if only for this reason, that this is sufficient ground for reaching a decision that this is not a proper amendment.
A moment ago the hon. member for Kootenay East brought up the point to which I referred, with regard to the decision of the house made last year. This decision can be found in Hansard of November 9, 1962 and I should like to read in part the ruling which was then made by Mr. Chairman Chown who said at page 1477:
While I rose, perhaps instinctively, on the suggestion there should be a division on the section. I realize that I moved in haste and overlooked the authorities in support of the point of view I am now making, namely, that there should not be paragraph by paragraph division.
My authority for that, briefly, is May's sixteenth edition, pages 411 and 412. Perhaps 1 might read a very brief portion of this passage on page 412 which is helpful to us.
"The house does not recognize the right of individual members to insist on the division of motions moved in committee of the whole house or of motions giving special facilities for the transaction of public business-"
Of course, I am quoting only in part. I should like to refer directly to page 411 of May's sixteenth edition where we read:
In 1770 a motion "That it is the rule of this House, that a complicated question which prevents any member from giving his free assent or dissent to any part thereof ought, if required, to be divided," was negatived on a division. As late as 1883 it was generally held that an individual member had no right to insist upon the division of a complicated question.
For these reasons, the Chair cannot put this amendment before the committee.


Reid Scott: With great respect, Mr. Chairman, I appeal your ruling to the house.
Mr. Deputy Speaker resumed the chair and made the following report:
The question is an appeal to the house as follows:
When a resolution to amend the Excise Tax Act was being considered in committee of ways and means, the hon. member for Danforth moved the following amendment:
"I move that the Excise Tax Act resolution be amended by the deletion of paragraph 1."
The Chair decided that the amendment was in effect a negative and was out of order as in accordance with recent practices and decisions of

Division
the house a vote could not be called on a particular section of a budget resolution. Whereupon the hon. member for Danforth appealed to the house from the decision of the Chair.
Mr. Speaker put the question as follows:
When the resolution to amend the Excise Tax Act was being considered in committee of ways and means, the hon. member for Danforth moved the following amendment:
"That the Excise Tax Act resolution be amended by the deletion of paragraph 1."
The Chair decided that the amendment was, in effect, a negative and was out of order as in accordance with recent practices and decisions of the house a vote could not be called upon a particular section of a budget resolution. Whereupon, the hon. member for Danforth appealed to the house from the decision of the Chair.


Lionel Chevrier: Mr. Speaker, I was paired. Had I voted, I would have voted to uphold the ruling of the Chair.


Walter Lockhart Gordon: I was paired. If I had voted, I would have voted to uphold the ruling of the Chair.
And the house having resumed in committee:


Lucien Lamoureux: Does the resolution carry?


Douglas Mason Fisher: Mr. Chairman-


Some hon. Members:: Oh, oh.


Douglas Mason Fisher: It is nice to know, Mr. Chairman, that the boys are in here earning their $10,000 tonight. I wish to bring up a particular matter relating to paragraph 1, although it specifically deals with paragraph 4 of the resolution. It is the question of what classification the institutions known as public libraries will receive under the general purposes of the first part of the resolution.
I suppose the minister is aware that the way the provision reads at present, any kind of university construction would be entitled to the exemption. Therefore a university library would be entitled to it. Libraries within colleges and universities will have the

exemption, but the public institutions supported by communities or municipalities, or even endowed, will not be able to take advantage of it.
The minister must be aware that a public library to all intents and purposes is accepted as an educational institution. It is certainly accepted as such by the teaching profession. I took the trouble to call the Department of National Revenue, but the official who is supposedly responsible for interpreting this part of the resolution gave me to understand that public libraries would not be exempt.
I also think the minister is familiar enough with the penury of public libraries. He has an example in his own city where Toronto public library recently had difficulties in getting funds, and he must know that this imposition will hurt the construction of public libraries much more than it will secondary and primary schools in some parts of the country. Indeed, in Toronto itself the board of education has more facilities in terms of finance and the capacity to raise capital than the public library board.
For that reason the minister should give us some kind of declaration, right at the very beginning, as to what consideration he is going to give to classifying public libraries as educational institutions.
I know that if someone speaks about public libraries someone else is likely to bring up the question of art galleries and museums, but in effect throughout most of the country public libraries serve as museums and art galleries, and I think in general that part of the community which reads, studies and is interested in adult education would approve very heartily of public libraries being exempted.
I understand the minister has received representations on this point from the Canadian library association, and I can tell him that in my own constituency two communities intend to extend their library facilities within the very near future. From experience I know that the library boards in these communities have much more difficulty than boards of education in raising money. They will be especially hurt if public libraries are not included under the exemption set out in paragraph 4 of the resolution.


Walter Lockhart Gordon: I wonder if I might reply to this question now?


Gordon Harvey Aiken: I just have a few remarks to make on the same point. I was going to leave them until we had reached paragraph 4 where universities and educational institutions are defined, but I want to support the plea made by the hon. member for Port Arthur. Generally speaking libraries are in
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the same classification as educational institutions. They do have unusual difficulties because in many cases they are not part of municipal councils or municipal set-ups, and in some cases they form a more or less volunteer organization. They perform a very good public service at a very low cost, and I would certainly support the proposal of the hon. member that libraries should be specifically included in the definition contained in paragraph 4.


Horace Andrew (Bud) Olson: Mr. Chairman, before the minister replies I wonder whether I may have about 45 seconds to ask him-


An hon. Member:: To clear yourself.


Horace Andrew (Bud) Olson: -this question. I was going to wait until clause 4 was under discussion to raise this question with respect to public libraries; however, there is one specific question I wanted to ask the minister. Is the government taking into consideration the limit on financing imposed by reason of a bylaw in a municipality which has been passed to provide the authority to borrow funds to build a library? I ask this question because the municipality and the local library board are confined to the limits imposed by the bylaw. Of course, if they classify them as educational institutions, that automatically takes care of the matter. On the other hand, if the minister does not intend to designate libraries as educational institutions, I wonder whether he would care to comment on what consideration the government will give to these bylaws which impose limits.


Walter Lockhart Gordon: Mr. Chairman, I think all hon. members will appreciate the fact that there is no complete equity in taxation, and as soon as you start to grant exceptions it is a question of where you draw the line. This particular problem of the libraries has been raised with me over the last several days by the hon. member for York-Humber, who is particularly concerned about a public library that is contemplated in the town of Mimico.


An hon. Member:: Oh, oh.


Walter Lockhart Gordon: The hon. gentleman laughs, but I am being quite serious. This is a point, and I have been giving it consideration. My difficulty is that if the line of exemption is moved, the question is where do you draw that line? Unfortunately, or fortunately, all public libraries are not operated in the same fashion. In some cases everything is free; in other cases only certain things are free. Then, of course, you get to the stage where it is operated on a semi-commercial basis. I can assure my hon. friend that the members on this side of the house are very

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interested in libraries and in books. I believe it has been mentioned that some of us have even had the temerity to write books. We do not think that is anything to be ashamed of. I think it is fair to say that quite a lot of us read books, as do many hon. members across the way. But this is a difficult point upon which to draw the line, and we have decided that the line cannot be extended.


Mr. Weichel:: 
James Allen (Jim) Byrne: Mr. Chairman, on a point of order.


Some hon. Members:: Oh, oh.


Lucien Lamoureux: Order. The hon. member is rising on a point of order.


James Allen (Jim) Byrne: I hesitate to raise this point of order against the hon. member for Waterloo North, but I think it should be drawn to the attention of the committee that it is against the rules of the house to quote from a document which reflects upon proceedings which are taking place at the time. If I may quote citation 149 of the rules of the house, there are a number of rules or prohibitions, and (1) says that a member must not:
-read from a printed document or book commenting on any speech made in parliament during the session;-
I might also refer to Beauchesne's third edition, page 802. According to that page Mr. A. E. Ross, the acting deputy speaker, ruled that it was out of order to quote in committee articles from newspapers commenting on the proceedings then under consideration. Objection was taken and a division followed, and of course the ruling was sustained. I suggest that if the hon. member were going to limit his quotations to one or two documents, that would be all right; but to make up almost his entire speech from quotations from people not participating in the debate is completely contrary to the rules.


Lucien Lamoureux: The point taken by the hon. member is a good one, to a degree, and I am sure that the hon. member will want to keep that in mind in the course of his remarks.

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Oscar William Weichel: Thank you, Mr. Chairman; and I hope the hon. member who was speaking will do the same when his turn comes.
In writing to the Minister of Finance on June 29, 1963, Hogg Fuel and Supply Limited of Waterloo voiced its objections in this way:
I would like to voice our opinion in as strong words as possible, our objections to this sales tax on building supplies and machinery. Not only ourselves but the whole industry is in a state of confusion. We can get no answers from anyone. Our serious belief is that you will kill industry and business. The cost and uncertainty of this tax is terrible. Our belief is that our business is going to suffer extremely through this tax, and therefore profits will drop and defeat the purpose of this tax.
Mr. Kay Bauer of Bauer's Limited, Waterloo, manufacturers of cotton felts, automobile pads, and so on, sent me a copy of a letter which was sent to the Canadian Manufacturers' Association at Toronto, in which he asked for clarification of the 1963 federal budget and the proposed amendment to the Income Tax Act. He also stated that his firm considered the repeal of the sales tax exemption on building materials, and especially on production machinery and processing materials, to be a very retrogressive step, to say the least. He said it would add considerably to the manufacturer's cost of production and be yet another handicap in his fight against imported goods. He also added that the government not only proposes to increase his costs drastically, but is also proposing to reduce our tariff protection under tariff item 559g from 20 per cent to 17 per cent, most favoured nation. Mr. Chairman, there is not much consideration for Canadian industry in this budget.
Mr. Vincent McHale of the Siegner Lumber Company of Kitchener, in a letter to the Minister of Finance, had this to say:
It is my contention that by placing this sales tax on building materials you are penalizing the person who wishes to buy a home, who under most circumstances is the most productive and the type of citizen Canada needs and wants.
Mr. Chairman, the lumber industry is one of the few, outside of mining, which contributes considerably more to the provincial and federal governments than it gets in return.
The automotive parts manufacturers association (Canada), of Toronto, of which many firms in Kitchener and Waterloo are a part, have written to me concerning this sales tax. They expressed their views in these words:
It is the belief of the automotive parts manufacturing industry that the present increase in taxes from zero to 11 per cent can only lead to increased prices which cannot be tolerated in this industry. The automotive parts manufacturers association of Canada has requested the hon. Minister of Finance to repeal the withdrawals of the exemptions.
[The Chairman.}
Another copy of a letter of interest sent to me, addressed to the Minister of Finance by Mr. Jean-Guy Maheu, executive vice president of the shoe manufacturers' association of Canada, which has a large number of firms located in my area, gave his impressions concerning this tax in these remarks:
Faced with intense competition and rising imports of foreign made footwear, our Canadian manufacturers have successfully held the price line for footwear in the past as industry profit margins have dwindled. The new sales tax, however, contributes substantially to our factory costs of operations, and footwear prices will soon reflect this new federal tax burden.
In addition, several companies report that they will defer or cancel orders for new machinery as a result of the new tax and this action will, in time, leave them with less than the best of equipment to compete with foreign footwear at this critical time.
Another important association which has protested this cost increase and which is well represented in Waterloo North is the Canadian Construction Association. They have urged that the proposed application of the federal sales tax to all construction materials be deleted from the budget resolution. These people play a big part in the economy of our country, and I hope the minister will give serious consideration to their request. Objections I have received from my riding include those from such well known firms as Canada Barrels and Kegs, Waterloo, the Sign Association of Canada, represented by A-K and Lippert Plastics in Kitchener, Sehl Engineering Limited, Kitchener, under the management of Mr. John Vingoe, and Campbell Machinery Limited, Kitchener. These firms have lost a number of orders already, and feel that the new sales tax will affect them considerably, both in buying and selling. Some even find they will come to a standstill.
I am sure the minister will realize that with such criticisms and objections coming from the many firms I have mentioned, and others too numerous to mention, it could well be that our unemployment situation will rise. We will be paying out huge sums of money through our unemployment insurance fund to these many unfortunate people without work, people who could, with the cancellation of this tax, be making a real contribution to the growth of our country and a happier life for themselves and their families.
An editorial in the Kitchener-Waterloo Record of July 11, said the measures introduced in this lamentable budget were obviously ill suited to the task of raising money. Their long range effects may even be highly detrimental to the general economy. Another paragraph with which I heartily agree said:
It has been remarked by more than one Canadian that an increase in the income levy would

be fairer and surer. There would have been protests hut it is almost certain they would have died away after a relatively brief time.
When the budget came out and, again, when changes in it were made there was criticism that fortunes had been won and lost in the fluctuations of the stock market.
There is a parallel situation here in respect of this 11 per cent sales tax, even when applied in stages. A lot of money is being made by building supply dealers with big inventories, just because the budget provisions concerning this tax were not clear when they were imposed. While some dealers have not raised their prices, others have, and the tax now applies to building supplies which might have been in their inventory for months. It is just like found money, Mr. Chairman. These dealers are lining their pockets with money which should be going to the government.
While the government has made these moves, which will definitely hinder building activity, it has done nothing in the way of allowing the refinancing of older homes-a move which would do more to help the housebuilding industry than any $500 bonus the government could devise.
Government spokesmen promised during the election campaign that the refinancing of older homes under the National Housing Act would be made possible. Why is not such a system in operation here? It has worked well for years in the United States. I suggest to the government that some consideration be given to a plan whereby older homes could be refinanced under National Housing Act regulations, though it might be wise to look into it more thoroughly than were some of the budget regulations before the legislation is enacted.
The Minister of Finance mentioned in his address of July 8, 1963, that the government proposes two changes of substance in the excise tax resolutions. The first of these concerns schools and universities and similar educational institutions. This is a step in the right direction and should assist my two universities in my riding of Waterloo North, the University of Waterloo and the Waterloo Lutheran University along with collegiates and other schools. The previous government did much to help universities, and I hope the present government will continue to make such assistance available.
My remarks have been of a constructive nature, Mr. Chairman, and have, I hope, brought to the attention of the government the sound thinking of thousands of Canadians concerning this unfair tax. I sincerely hope the government will reject this tax so that
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the people of our country may know, finally, where they stand economically in the coming year.


Mr. Noble:: In speaking to this resolution, Mr. Chairman, I shall express my views on the matter and make some reference as to how my own area will be affected. Many observations have been made on the budget and on its preparation. One which was of particular interest was made by the Prime Minister recently when he said that the traditional methods of producing a Canadian budget were no longer adequate to the country's needs. The right hon. gentleman suggested that changes would be made in procedures so as to enable the government to consult with business before another budget is prepared. That is nothing more or less than a smokescreen.
This government did not make use of the information and knowledge which are readily available to them. The personnel of the finance department are in possession of a wealth of experience accumulated over a long period of years. Without a doubt, they are keen students of our economy and its requirements. Given the opportunity, they could have charted a safe course for the Minister of Finance and thereby averted the severe set-back in our economy, as well as the many unnecessary inconveniences caused by the current budget. The minister preferred to make a bold new approach by consulting amateurs who led him down the garden path to budget chaos.
On launching his budget, the Minister of Finance told us that someone had given him his horoscope for that day, which read, "Don't worry over money matters". The measures proposed in the budget would indicate that the minister had, indeed, been heeding such advice during the period of its preparation. He made many decisions on money matters which at the time did not worry him, but which have since given the Canadian people much worry, and himself a severe headache.
The three ghost writers must have absorbed a good part of the worry in connection with the budget during the course of its preparation. However, Mr. Speaker, it appears that they shared the mental lapses of the minister and between them they came up with a document that, had it not been for last minute adjustments, would have made a complete shambles of the economy which a Conservative government had well on the way to boom proportions.
Perhaps the most flagrant disregard for what the repercussions might be was the introduction of the 30 per cent takeover tax. This measure immediately created confusion and frustration on our stock markets and


Mr. Patterson:: Mr. Chairman, I thought for a little while this evening that the debate had proceeded to the point of a detailed consideration of some of the issues in the resolution, but I find that it has now turned back to a more or less general discussion of the principles involved. I am glad, because this gives me an opportunity to take part in the debate and outline in a general way our position relative to some of these matters.
I think it is doubtful that any proposal in the field of taxation has ever met with such a storm of protest as the one before us tonight, the withdrawal of the sales tax exemption on building materials and production machinery.
I agree with the Minister of Finance, of course, when he says that no tax is popular, but it seems to me this one is especially obnoxious in that it not only reduces still further the purchasing power in the hands of the people but also threatens the very objectives it proposes to realize. If I understood the statement made by the Minister of Finance correctly, he pointed out that one of the objectives was the balancing of the budget or at least bringing our financial affairs into closer proximity to a balanced budget. The second was the creation of employment opportunities. Another one was the expansion of the economy. I am sure that these various matters to which the minister has called attention are of vital importance and they have been dealt with by various speakers throughout the day.
I should like to refer, first of all, to the announced intention of endeavouring to balance the budget. I know that the hon. member for Danforth ridiculed this idea. He said it was not desirable, and it was something that should not be sought after. But I believe that the present picture as it relates to our national debt, and to the cost of servicing the national debt, would point up very definitely the importance of doing something in this field of endeavouring to balance our budget. I should like to refer to the statement made by the hon. member for Medicine Hat. The hon. member made some suggestions and asked the minister if he would reply to those suggestions. Unfortunately, the Minister of Finance has not done that as yet. This reminds me of the fact that a number of years ago Social Credit members in the house made some suggestions relative to monetary and financial reform. A great deal of criticism was levelled against us, not only by members of the house but by some of the newspapers.

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A newspaper in eastern Canada, the Fundy Fisherman-I am sure many of us know who is the publisher of that paper-in an editorial said that it would take more than ridicule to get rid of Social Credit proposals in the field of monetary and financial reform. I recall another occasion when I was speaking in the house and I asked the then minister of finance if he would outline his views relative to the proposals we were advancing. We received the same silent treatment as my colleague from Medicine Hat has received today in relation to his request. I would suggest that before this debate is brought to a conclusion, the Minister of Finance should reply to my colleague and give some reason for his inability to accept these suggestions. He should outline the weaknesses in these proposals so that, at least, if they are not satisfactory we will know there is no use proposing them again. So long as we are met with silence in connection with our proposals, we are likely to keep pounding along making them time and time again until perhaps we do get some response from the Minister of Finance.
I suggest, Mr. Chairman, that since this measure has been outlined as one of the measures that is aimed at the objective of balancing our budget, then these things should be taken into consideration. I believe that the steps that have been taken will lead us to the point of diminishing returns. The minister pointed out a number of rises in the cost of material and indicated they had not caused any disruption so far as construction is concerned. In other words, he seemed to imply he was going to work on the principle of putting on as many taxes as the traffic will bear. I suggest if we take that attitude, if we continue with that principle, then we are going to reach the point where we stifle production, where we stifle construction and instead of increasing our revenues we will find our revenues decreasing.
In so far as employment opportunities are concerned, it would seem to me that the implementation of the proposals now before us would just work in reverse. I, as well as many other members in the house, have received many communications. I am not going to read them, I am not going to give them by name. I just refer to this matter and say we have received these communications indicating that project after project has been shelved or delayed and, in some cases, businesses have been closed up, productive enterprises have ceased to exist, men have been thrown out of employment.
Of course, when men are thrown out of employment they go on the unemployment insurance list and receive payments, thus putting a further strain on a fund that has been in serious difficulty in the past. It

would appear to me, Mr. Chairman, that the objections that have been raised, so far as this particular aspect of the resolution is concerned, are very sound, and instead of promoting employment opportunities they are going to throw men out of employment, cause further unemployment.
The third point was a reference to the expansion of the economy. I believe the periodical "Industry" published by the Canadian Manufacturers' Association was referred to today. I should like to quote this very short paragraph from the periodical:
In short, the effect of this extension of the sales tax can only be to slow down economic activity, hold down employment, inhibit competitiveness, retard productivity improvement and generally act as a depressant rather than a stimulant.
Now, that seems to sum it up. The minister may take objection to some of those suggestions, but nevertheless I think they should be given consideration. I had a communication from Mr. Pybus of the industrial development commission of greater Vancouver with reference to this whole matter of expansion of the economy. Perhaps I should just make a brief reference or two to this particular letter. He says:
We in British Columbia, as across the prairies and in the maritimes, are fighting to expand and develop new secondary industries in order to create job opportunities for our young people and our growing work force and a better balanced economy. We cannot reconcile this setback for growth in job-creating industries with the Liberal party's espoused sympathy for and policies to expedite economic growth which gave much hope to the great numbers in need of work.
Now then, what are some of the categories that are affected by the removal of the sales tax exemption from this particular item? First of all, we think of the potential home owner. I recall many members in the house in other days speaking of the importance of our people owning their own homes, emphasizing the fact that every encouragement should be given to our people to own their own homes, because it gave them a sense of security and well being that nothing else could give. I am sure that today we all agree with the desirability of home ownership. We think of Central Mortgage and Housing Corporation, an institution which I believe is designed to make home ownership possible. On the other hand, when we look at the other side of the picture we find that the imposition of this tax is going to work in the opposite direction. It has been pointed out that a $500 bonus has been offered to people who build in the wintertime. Well, of course, that is used up by the extra cost of building in the wintertime.

One hon. member referred to the fact the government had made certain amendments to the National Housing Act in order to lower interest rates and extend the period of amortization. I would suggest that this is not going to solve the problem or meet the need. It may be a matter of putting a little money into one pocket and taking it out of the other, but it will not accomplish anything so far as the potential home owner is concerned.
Even those who are remodelling or repairing their present homes will be affected. I had a letter from one of them who said he could not proceed to do necessary renovations to his home because of the imposition of this tax.
Mr. Chairman, there is an industry to which not too much reference has been made in this debate, and which is subject to this tax. I have here a telegram from Mr. L. P. Starck, of the Giant Mascot Mines Ltd. at Hope, British Columbia, and I want to read part of it as it points out something that has not been referred to in the course of this debate. It reads:
As western Canada's only nickel mine we wish to protest the imposition of 11 per cent tax on equipment and supplies used in manufacturing. Pyramiding effect of tax through all levels of manufacturing will ultimately increase material cost by some 15 to 18 per cent. This conservatively means cost increase to our company of $9,000 per month. Due to low prices and lack of markets in Canada we must sell our production to Japan on a long term fixed price contract without escalator clauses for increased cost. As we cannot pass increased cost on to consumer we must effect them by reducing crews and curtailing development and exploration projects. This means reduced employment. Ultimately this could result in closure of operation which would mean the loss of 150 jobs and a payroll of $80,000 per month in Hope.
As I say, that is just part of the telegram, and it asks for the repeal of this resolution.
Reference has been made to its effect on the entire construction industry, but I believe it will have a very detrimental effect right through our whole economy. We appreciate some of the changes that have been made since the introduction of the original resolution, and we appreciate the exemptions that are being continued. They will be of real importance in British Columbia. There has been some discussion tonight about universities and colleges, and in British Columbia plans are already under way for the erection of additional universities. This exemption will be of real benefit to such projects.
We also appreciate the exemptions now being provided to various municipalities, and are appreciative of the fact that the minister has indicated the imposition of the tax will be phased, with 4 per cent this year, another 4 per cent next spring and the remainder at the end of December 1964. However, even though this is appreciated, I do not think it is
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going to meet or answer the need of industry across the country. It is rather like the fellow who is going to cut his dog's tail off and he decides he will cut it off in little pieces because it would not hurt so much. That is the same principle which the minister is applying, to accomplish the same objectives in the final analysis.
Once again I would urge the minister to look at this situation and see if he could not discover some other more satisfactory way of obtaining the necessary revenue than by the imposition of a tax of this nature. I would remind him of the suggestions made by my colleague, the hon. member for Medicine Hat, and I ask him to give these careful consideration because they would be an effective alternative to the proposal now before us.


Mr. Irvine:: Mr. Chairman, would I be out of order if I suggested that we call it ten o'clock?


Herman Maxwell Batten: I think you had better go ahead.


John Alfred Irvine: Under ordinary circumstances, even an opposition member might be expected to congratulate a minister of finance upon the presentation of one of his first submissions to the house. As the member for London, and anticipating an opportunity to participate in this discussion of the II per cent tax, I considered this an ordinary and a proper courtesy; but after due consideration I have come to the conclusion that neither proprieties of the house nor the dictates of common courtesy impose any such obligation.
Mr. Chairman, speaking on this resolution, let us not delude ourselves. This is still an 11 per cent tax, an escalator tax and, as the hon. member for Digby-Annapolis-Kings suggested some time ago, it is a tax that is a part of a budget of deceit and deception, of fiction and of fraud.
The Prime Minister once had an enviable reputation as minister of external affairs, as a diplomat, and as a Canadian. I was prepared to accord him every respect in his office of Prime Minister. This is only as it should be, regardless of what I might consider the inaccuracies and fallacies of the right hon. gentleman before and during the recent election campaign; but the Prime Minister must share with his Minister of Finance responsibility for the budget in all its details, including this 11 per cent escalator tax. The office of Prime Minister is now to be equated with the ineptness of the Minister of Finance.
For the average Canadian this tax is one part of a budget of disreputable gimmicks, even as the Liberal campaign in the last election was a campaign of phoney truth squads

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and colouring books. The committee is being asked to vote confidence in the government by giving its approval to this resolution. But, sir, it is a tax in which the government itself is already beginning to show signs of no confidence.
From individual builders, construction groups and manufacturing concerns all across the country, there has come a tide of protest against the imposition of this tax on building materials and production machinery. If one were to take the file of letters, telegrams and submissions that I have in my office, and multiply them by the 265 members in the Commons, it would represent an amazing array of protest and indignation.
This is the strangest of all the manoeuvres of the minister and his three budgeteers. The government wants to get the economy rolling; it wants to stimulate construction and increase employment. Yet it imposes an 11 per cent penalty upon business expansion in the form of new plant facilities. To help still further to increase employment and stimulate production, it slaps a similar tax on the very tools of industry, new production machinery and equipment.
I recently had a delegation from London, from an automobile firm which was contemplating a $21 million expansion program. They had already drawn plans for the building, but since then have cancelled the whole plan and are going to make automobile parts in an American plant and bring them in duty free-which they are able to do, and of course at a lower price than they can make them in Canada. All this is as a result of this prohibitive tax. That is only one item. Multiply it again by 265 ridings across the Dominion of Canada and immediately we have a loss of well over half a billion dollars, to say nothing of the loss of potential work for many thousands of people for years to come. I submit that this is a gigantic retrograde step.
A few moments ago the hon. member for Port Arthur mentioned public libraries. I raised this matter in the house at one time. I learned something on that occasion. All hon. members learn as they go along, or hope they will. I have received representations from the Canadian library association and from the London library, the main library in my constituency. May I refer to paragraph 4 of the resolution which refers to "a school, university or other similar educational institution". I am wondering just how similar it has to be, and just how more similar an institution that supplies learning for people from the time they go to kindergarten until they go to the grave could be to a school,

university or other similar educational institution. I have no doubt that the minister thinks he knows all the answers, but there is an old saying that goes something like this: "When you review the things you think you know, you get to know the things you thought you knew".
Across the country business and industry contemplating new plant and equipment will start to prune and trim capital outlays. The deeper and more drastic the pruning, the less will be the minister's estimated revenue flow from that source. More important, millions of dollars in orders for materials, machinery and equipment will be cut back. With these cut-backs will be applied the brake to supplying industries and providing employment. Just as in the case I have cited with regard to the automobile supply firm, Eaton Automotive Company of London, I can only regard this as one of the most disastrous decisions taken by this government within its vaunted 60 days of decision. I submit, Mr. Chairman, that this is a vicious and unwarranted tax brought to bear upon one of the most sensitive sectors of our economy. It is a reprehensible tax imposed by a discredited minister and a discredited government. In the best interests-


Mr. Matheson:: Mr. Chairman, may I ask the hon. member what is discreditable about placing equipment supplies and construction material industries in precisely the same position as other industries?


An hon. Member:: Put it on the order paper.


John Alfred Irvine: Mr. Chairman, there are people who have sat in this house for so long they have become benevolent in their thinking. I do not exactly know what the hon. member said because he was not very clear. But I will talk to him again some other time. I was just saying that in the best interests of the country and the government itself, the Minister of Finance should withdraw this tax or resign forthwith.


Some hon. Members:: Hear, hear.


John Alfred Irvine: Nothing he can now say or do will ever restore confidence in him as a finance minister in the tradition of Canada and the Canadian parliament. Mr. Chairman, when this tax was introduced the minister, with that brand of narrow partisanship with which he has so characterized himself, trumpeted that the brain truster would seek out any and all skeletons from the Conservative fiscal closet. It seems to me that the minister himself is the one that is haunted; he is haunted now by the spectres of the three

hired budgeteers, the clatter of the ticker-tape machines making fortunes for the big speculators as a consequence of his ignorance and thoughtlessness. It is the minister who is harried by thoughts of what may next plop out of the Liberal closet of ineptitude and gimmickry. Mr. Chairman, Britain has its Profumo case. Canada has its "perfumo" case, in this whole tragic and demoralizing episode of an excuse for a budget. In short, sir, this is part of a tainted budget contrived by a discredited minister and a government in bad odour.


J.-H.-Théogène Ricard: Mr. Chairman, may I call it ten o'clock?


Some hon. Members:: No.


Mr. McIntosh:: Argue the point now. Keep it going until ten o'clock.
(Translation):


J.-H.-Théogène Ricard: Mr. Chairman, upon rising to make a few remarks on the resolution now before us, I cannot help taking this opportunity to recall the election campaigns of 1962 and 1963 and to compare them with what happened on the eve of June 13, 1963.
If you remember, Mr. Chairman, during both last election campaigns, the team now sitting on the treasury benches had led the population of Canada to believe that a Liberal administration would cure all ills and that its coming into office would change Canada in such a way that it would become a new Eden.
However, the people were bitterly disappointed when they learned, since June 13 last, what the Liberal team was up to.
Budget night was remarkable in its own way for the people of Canada, because it gave birth to dissatisfaction and doubt about the economic future of Canada.
Mr. Speaker, may I point out that it is now ten o'clock?
Business of the House
(Text):
Progress reported.



BUSINESS OF THE HOUSE

Stanley Howard Knowles: Mr. Speaker, would the house leader-


Gordon Minto Churchill: Do you want to ask it? I will
give you the opportunity.


Stanley Howard Knowles: Mr. Speaker, this is the hon. member for Winnipeg North Centre speaking for the hon. member for Winnipeg South Centre and asking what the business is for tomorrow and the next day.


John Whitney Pickersgill: Mr. Speaker, I would hope that tomorrow we would complete the resolution, so we could then proceed. If we do complete it before the end of the day tomorrow, we would ask to have first reading of the bill based upon it. Then if the committee felt so inclined, we would hope they would do what they did with the Customs Tariff, give second reading and go right ahead with it. But if there were any inclination on the part of the house not to do that, we would go back to the economic council. The same situation would apply if as I hope will not happen, we go over to Thursday with the excise tax resolution. As soon as it is completed we would seek leave to proceed with the bill. If leave is not given we would go on with the economic council. If a great deal of progress is made I am sure the government can scrape up some other business to keep the house occupied.


Gordon Minto Churchill: The hon. member for Winnipeg North Centre got as long and as involved an answer as I get, normally.


[Stage Direction]
It being two minutes after ten o'clock the house adjourned, without question put, pursuant to standing order.
[Stage Direction]
Wednesday, July 24, 19G3