1964-04-28

PRIVILEGE


Mr. Stanley Knowles (Winnipeg North Centre):: Mr. Speaker, I rise on a question of privilege. My question of privilege relates to the fact that this house has been insulted in one way or another, if not in two ways. The basis for my statement is to be found in the remarks, under a question of privilege, that were made yesterday by the hon. member for Labelle. There are two aspects of that statement on which I found my question of privilege today. I shall come to each of them in a moment.
First of all, Mr. Speaker, may I draw your attention to standing order 79, which reads as follows:
The offer of any money or other advantage to any member of this house for the promoting of any matter whatsoever depending or to be transacted in parliament, is a high crime and misdemeanor, and tends to the subversion of the constitution.
I should like also to draw Your Honour's attention to citation 108, paragraph 5 of Beauchesne's fourth edition, which reads as follows:
The offer of a bribe in order to influence a member in any of the proceedings of the house, or of a committee, has been treated as a breach of privilege, being an insult not only to the member himself, but to the house.
It is the language of that citation that prompted me, in my opening words, to say it is the house that has been insulted. I should like also to draw your attention to section 100 of the Criminal Code of Canada. I shall not read all the section because all of it is not relevant, but I shall read the relevant portion:
Everyone who gives or offers corruptly to a person who holds a judicial office, or is a member of the parliament of Canada or of a legislature, any money, valuable consideration, office, place or employment in respect of anything done or omitted to be done or omitted by him in his official capacity for himself or another person, is guilty of an indictable offence and is liable to imprisonment for 14 years.
Yesterday, Mr. Speaker, the hon. member for Labelle, as reported at page 2583 of the English version of Hansard said this:
Mr. Davey was rather suggesting at that moment that I join the ranks of the Liberal party. He said he would take care of the defeated Liberal candidate and as for unsatisfied Liberal organizers, I only would have to change them.
The benefits: a party in power and a fat electoral fund for the next election.


Some hon. Members:: Shame.


Stanley Howard Knowles: The member continued:
Mr. Davey suggested that I ponder those proposals.
I submit, Mr. Speaker, that the member for Labelle has alleged in this house that he was offered a bribe, that he was offered certain advantages if he would take a certain position in this House of Commons. If that fact is true it is contrary to standing order 79 which I read, to citation 108, paragraph 5 and to section 100 of the Criminal Code.
If this has happened I say it is an insult not just to the hon. member for Labelle but it is an insult to this House of Commons. It is a breach of the privileges of this House of Commons, and the matter certainly ought to be investigated by this house through its committee on privileges and elections.
However, Mr. Speaker, if what the hon. member for Labelle said about things that happened outside this chamber is not true, or even if what he said is true, there is something else in what the hon. member said yesterday which gives offence to this house. It is an insult to one of the members of the house, and therefore is an insult to the house itself. I refer to the very next paragraph in the hon. member's statement, right after the ones I read a moment ago. That next paragraph reads as follows, on the same page 2583 of the English version of yesterday's Hansard:
A week later, a Liberal member of parliament belonging to that same group approached me to tell me that he was very sorry but the Prime Minister (Mr. Pearson) had asked his chief organizer to cease all pressure because he, the Prime Minister, was sure to lose the regular support of the Social Credit party if he ever stole members from that party.


Some hon. Members:: Oh, oh.


Mr. Pigeon:: The same old gang.


Stanley Howard Knowles: Mr. Speaker, I do not feel that the catcalls that are coming are necessarily any help, but I suggest that those remarks of the hon. member for Labelle, if there is no foundation for them, are an insult to and a calumny upon one of the members of the house, and that member happens to

Question of Privilege
be the Prime Minister. If the Prime Minister, as a member of the House of Commons, has been insulted, again the house itself has been insulted. This was my reason for saying at the outset that the events which have transpired within the last few days have provided one if not two insults to the House of Commons.
Now, Mr. Speaker, in support of my contention that the remarks of the hon. member for Labelle about the Prime Minister are as serious as his allegations with respect to someone outside the house, may I direct your attention to two or three more citations.
First of all, if Your Honour would please look at citation 112 (1) of Beauchesne's fourth edition, you will find it says:
Parliament is not concerned whether or not a libel uttered against it is liable to be tried by a court of law, either of civil or criminal jurisdiction May says: "Both houses will punish not only contempts arising out of facts which the ordinary courts will take cognizance, but those of which they cannot, such as contemptuous insults, gross calumny or foul epithets by word of mouth not within the category of actionable slander or threat of body injury."
I suggest, Mr. Speaker, that if the allegations that have been made are not true, the remarks made yesterday by the hon. member for Labelle about the Prime Minister come within the terms of that citation.
I also draw your attention to citation 113 in the same volume. This is the citation having to do with questions of privilege, which Your Honour has frequent occasion to read to the house. It is a bit of a text Your Honour uses, and I draw your attention to a sentence in about the middle:
Libels upon members and aspersions upon them in relation to parliament and interference of any kind with their official duties, are breaches of the privileges of the members.
I am relying in particular on the first part of that sentence, which says "Libels upon members and aspersions upon them in relation to parliament" are breaches of the privileges of members. If the statement made by the hon. member for Labelle about the Prime Minister is not true it is a libel upon him in connection with his relationship to parliament, and therefore is a breach of the privileges of parliament.
In the same vein I should like to direct Your Honour's attention to citation 104(5), and in particular to the last sentence in it, at the bottom of page 95 and the top of page 96:
The right of making complaint of a breach of privilege is open to any member of the house, and, even if an individual member alone is affected, is not confined to that member.
In other words, it seems to me that if we look at this as objectively as we can in the light of the concern there is about it, two

members of this house have been insulted. The hon. member for Labelle has been insulted by the alleged offer of a bribe. The Prime Minister has been insulted by what the hon. member for Labelle said about him yesterday.


Some hon. Members:: Oh, oh.


Stanley Howard Knowles: I am referring to the statement the hon. member for Labelle made to the effect that the Prime Minister stopped the activities of Mr. Keith Davey, not because those activities were wrong but because they interfered with his efforts to retain the support of the Social Credit party. Such a remark, unless it can be substantiated, is an insult and a calumny against the Prime Minister. But my concern is that an insult to any member of the House of Commons is an insult to the house as a whole. That is why I feel this whole matter should be referred to the committee on privileges and elections for a thorough investigation. Such a committee can call witnesses, call those concerned, examine people under oath and get to the bottom of this whole incident.
In a moment or two I will make the appropriate motion which I believe follows from this question of privilege. I have it typed and ready. I have my own name on it as the mover, and my hon. friend from Burnaby-Coquitlam is prepared to second it. However, if the Prime Minister himself recognizes the seriousness of this matter, as I am sure he does, and would like to second my motion, my leader would be glad to make way for him.
As regards the whole question of what the house ought to do about this matter, may I direct Your Honour's attention to citation 104(2), which is extremely relevant to the whole question of what is to happen in the next few minutes:
It has often been laid down that the Speaker's function in ruling on a claim of breach of privilege does not extend to deciding the question of substance whether a breach of privilege has in fact been committed-a question which can only be decided by the house itself.
I submit that it would not be using the time of the house properly if we were to debate this type of incident here in this chamber, but we have a committee of this house which could consider the matter and reach a decision. So I hope hon. members will be unanimous in their support of the contention that this matter is so serious that we should not let it drop but should refer it to the appropriate committee. When the dignity of the House of Commons is insulted, as it has been by these developments, we cannot take the matter lightly. Therefore I move:

That the matters raised by the hon. member for Labelle in his question of privilege as reported in Hansard for Monday, April 27, 1964, be referred to the committee on privileges and elections for consideration and report.


Mr. Girouard:: I should be delighted to second that motion, Mr. Speaker.


Some hon. Members:: Hear, hear.


Right Hon. L. B. Pearson (Prime Minister):: In relation to the motion which has just been moved, I have now had an opportunity to read the remarks of the hon. member for Labelle as reported in Hansard. In view of those remarks and the allegations made, and in view of the flat denial of those allegations -I repeat, the flat denial-


Some hon. Members:: By whom?


Lester Bowles Pearson: And in view of the reference to myself yesterday and the reference to myself in a morning paper to the effect that I had contact with the leader of the Social Credit party on this matter, which I also flatly deny-in view of all these things I think it is not only desirable but essential, now, that this question be sent to the committee-


Some hon. Members:: Hear, hear.


Lester Bowles Pearson: -so that the facts can be examined. As far as I am concerned I would be glad to move this motion, to second this motion or, certainly, to support it.


Mr. Speaker:: It has been moved by Mr. Knowles, seconded by the right hon. Prime Minister-


Some hon. Members:: No; by the hon. member for Labelle.


Mr. Speaker:: I would like to ask the hon. member who seconded this motion to stand up and tell me that he did second it, so there is no doubt about it.


Gérard Girouard: Yes, Mr. Speaker; I said I would be glad to second it.


Mr. Speaker:: Moved by Mr. Knowles, seconded by the hon. member for Labelle (Mr. Girouard):
That the matters raised by the hon. member for Labelle in his question of privilege as reported in Hansard for Monday, April 27, 1964, be referred to the committee on privileges and elections for consideration and report.


[Stage Direction]
Motion agreed to.


[Stage Direction]
Mr. L. T. Pennell (Branl-Haldimand) presented the first report of the standing commit-
Highways-Decision not to hold Conference tee on banking and commerce, and moved that the report be concurred in.
Motion agreed to.


[Stage Direction]
Mr. B. S. Maclcasey (Verdun) presented the first report of the standing committee on industrial relations, and moved that the report be concurred in.
Motion agreed to.

[Stage Direction]
Mr. Gerard Loiselle (Si. Ann) presented the first report of the standing committee on miscellaneous private bills, and moved that the report be concurred in.
Motion agreed to.


Hon. J. P. Deschaielels (Minister of Public Works):: Mr. Speaker, immediately preceding the federal-provincial conference recently held in Quebec, and subsequent to it, a number of hon. members, and particularly the hon. member for Skeena (Mr. Howard), requested information as to the possibility of a conference with the provincial highways ministers to formulate a national highways policy.
In this regard I would advise the house that the federal government has given consideration to holding a conference with the provincial highways ministers and, as I reported to the house on July 17, 1963, I had made arrangements for certain information to be collected from the provinces on possible programs and expenditures, and in particular to gain a picture of provincial thinking at that stage.
While the federal government has been willing to accept some responsibility in this field, our responsibility has to be examined in relation to the broader division of fiscal responsibility between the federal government and the provinces. The desirability of a federal-provincial conference on highways has therefore to be assessed in relation to the general conference between the federal and provincial governments of last November and the recent one in Quebec.
In the light of the substantial increases in tax transfers to the provincial governments which will result from these conferences, the federal government does not feel it should consider adding at the present time, on a nation-wide basis, to the already

Inquiries of the Ministry very substantial federal contribution to provincial highways. In the circumstances the holding of a federal-provincial conference in the near future would be likely to raise expectations that could not be realized.
The federal government is at present contributing to the cost of highway construction under the Trans-Canada Highway Act until December 31, 1967 and to the roads to resources program. In these programs there is still a substantial and expensive undertaking on the part of the federal government, estimated at this stage to be in the neighbourhood of $240 million.



ADMINISTRATION OF JUSTICE


[Stage Direction]
On the orders of the day:
Right Hon. J. G. Diefenbaker (Leader of the Opposition):: Mr. Speaker, I wish to direct a question to the Minister of Justice and ask him to give the house a report on certain rumoured espionage allegedly discovered recently in this country.


Lester Bowles Pearson: Mr. Speaker, the Secretary of State for External Affairs, anticipating a question on this matter, was prepared to answer it but has been called out of the chamber. Perhaps I could say in reply to the question of my right hon. friend that Mr. V. V. Tarasov, correspondent for Izvestia, was taken into custody by the Royal Canadian Mounted Police last night.


John George Diefenbaker: Within limitations of
security, of course, and I limit my question to that, is it anticipated that further arrests will be made?


Lester Bowles Pearson: Not to my knowledge, Mr. Speaker, but we will be anxious to make a statement on the whole matter at the earliest possible date.



INQUIRY AS TO ACTION FOLLOWING PERJURY TRIAL IN TORONTO

[Stage Direction]
On the orders of the day:
Mr. Erik Nielsen (Yukon):: Mr. Speaker, I have a question for the Minister of Justice. Has the minister read the evidence in the Farris trial as yet, and is he considering any action regarding Mr. Justice Landreville?


Mr. Speaker:: I suggest the order paper once more.


Erik Nielsen: I give notice now that I shall give written notice at five o'clock, for debate tonight.
	,



ARTS, LETTERS AND SCIENCES PROPOSED TRIP ABROAD BY ROYAL COMMISSION

[Stage Direction]
On the orders of the day:
['My hon. friend said the Congo, when I am sure he meant Cyprus. I ask my hon. friend to read the documentation that has already been tabled in the house dealing with the terms of reference, the aide memoire that was circulated by the secretary general, and the status of forces agreement.']
Hon. Michael Starr (Ontario):: I should like to address a question to the Prime Minister. Would he intervene in the proposed plan of the royal commission on bilingualism and bieulturalism to launch a world junket during the summer months and stop this wasteful use of the taxpayers' money?


Lester Bowles Pearson: No, Mr. Speaker.



[Stage Direction]
On the orders of the day:
Mr. T. C. Douglas (Burnaby-Coquitlam):: Mr. Speaker, may I direct a question to the Secretary of State for External Affairs. Has he any report to give the house with respect to operations in Cyprus? It would appear that a full scale Greek Cypriot offensive is now under way in the Kyrenia pass headed by the minister of the interior. It would also appear that this has taken place after the Canadian contingent of the United Nations force was unable to get the Turkish Cypriots to vacate their position. Does this mean that this offensive is being undertaken by the Greek Cypriots on behalf of the United Nations, or is the United Nations being ignored in this regard?


Hon. Paul  Marfin@Secreiary of Slate for External Affairs: Mr. Speaker, my hon. friend may be assured that no offensive is being taken by the United Nations. The United Nations force is not in Cyprus as an occupational force, nor is it there to further the political purposes or objectives of any one of the groups indigenous to the island.
The fighting to which my hon. friend directs our attention is a new outburst. Over the last week end, fighting was arrested partly as a result of the representations made by the commander of the force to the Cypriot authorities. With regard to the latest incident, I was in touch with the United Nations shortly before coming into the house but I have not got the final details. Until they are in my possession I prefer to make no comment.
In answer to the question my hon. friend asked yesterday, I might say that the Canadian armoured car which, according to reports, was fired upon last week end by Greek Cypriots, was clearly identified by United Nations insignia.


Thomas Clement (Tommy) Douglas: A supplementary question, Mr. Speaker. Were Canadian forces operating

under the United Nations in the area of the Kyrenia pass, and have the United Nations forces merely been ignored by the Greek Cypriot forces being led by a member of the Cypriot government?


Mr.   Marlin@Essex East: Mr. Speaker, as I said yesterday there was a United Nations air patrol by helicopters in which Canadians participated. That was the extent of Canadian participation. The Canadian forces are not being ignored. In the complicated and difficult situation that prevails, they are doing everything they can to comply with the provisions of the security council resolution of March 4.


Thomas Clement (Tommy) Douglas: A further supplementary question. Is the minister telling the house that the reports that the Canadian forces sought to persuade the Turkish Cypriots to withdraw from the Kyrenia pass are not correct and that they are actually not in the area as he suggested a few moments ago?


Mr.   Marlin@Essex East: The representations that were made were not made by the Canadians as such but by the force commander.


John George Diefenbaker: A further supplementary question, Mr. Speaker. Has authority been secured for the United Nations forces and in particular the Canadian contingent to disarm those who are engaged in internecine strife on that island, or is the position of the United Nations forces and particularly the Canadian contingent to be that of mere vulnerable spectators of strife within that island?


Mr.   Marlin@Essex East: Mr. Speaker, I regret the comment that has accompanied the interrogation of the right hon. gentleman. The situation in this regard is not dissimilar to the difficult circumstances that attended the Congo operation in which a Canadian contingent participated in the United Nations peace keeping force as the result of policies properly recommended to the house by the government of which my right hon. friend was the head. This is a situation of the greatest delicacy, and I suggest to my right hon. friend that he should appreciate the situation, as indeed he said he did and as indeed the hon. member for Burnaby-Coquitlam did, and quite properly, when this matter was discussed in this house on March 13. We knew when we went into this enterprise, in pursuance of our obligations under the United Nations charter, that we were undertaking a very difficult assignment. The incidents of the last few days have confirmed the difficulties of this assignment. But that is no reason for putting questions that add to the difficulties of the United Nations force.
Inquiries of the Ministry


John George Diefenbaker: Mr. Speaker, the latter part of the hon. gentleman's observations demands an observation on my part. I say to the minister that in the statement he made yesterday and on every other occasion he hides behind that smokescreen and fails to give parliament the facts. We want to know whether the statement he made yesterday that all is well over there, and similar statements during the last week or so, are in fact simply a series of statements which have no foundation, particularly in view of what happened yesterday.


Mr. Martin (Essex East):: Mr. Speaker, I do not propose to engage in a debate with the right hon. gentleman on a subject of this importance. I can only repeat that I am surprised that a man with his experience should indulge in this kind of crossfire.


Some hon. Members:: Oh, oh.


Some hon. Members:: Hear, hear.


Mr.   Marlin@Essex East: I did not say yesterday that all was well. What I did say yesterday was that the situation had subsided as a result in part of the representations of General Gyani. I did go on to say that as a result of the presence of the United Nations force, the situation in the island of Cyprus was much less serious than it would have been, as my hon. friend knows, but for the intervention of the United Nations peace keeping force.


John George Diefenbaker: Mr. Speaker, may I suggest to the minister, who does not usually lose his temper this way, that a little less boasting on his part and a little more action in this regard would be beneficial.


Paul Joseph James Martin: Mr. Speaker, so that my hon. friend and I can both be brought back to our normal impulses may I say to him that I was not speaking angrily or short-temperedly. I was just speaking with force about the right hon. gentleman's indiscretions yesterday and today.


Thomas Clement (Tommy) Douglas: On a point of order, Mr. Speaker, the Secretary of State for External Affairs has implied that questions are being raised simply to embarrass the government.


Paul Joseph James Martin: May I rise at once to say that I was not referring in any way to my hon. friend.


An hon. Member:: You did.


Thomas Clement (Tommy) Douglas: Mr. Speaker, the fact is that the statement, to whomever it refers, stands on Hansard. I want to make it perfectly clear that a recognition of the difficult situation which the government faces does not absolve members of the house from their responsibility, which is to ask the government why,

Inquiries of the Ministry with a United Nations force in Cyprus, a minister of the crown in Cyprus is leading an attack in complete violation of the peace keeping role the United Nations is seeking to carry out in Cyprus.


Paul Joseph James Martin: Mr. Speaker, I am glad the hon. gentleman has made this intervention. I have no official information at the moment that would warrant the statement that a Greek Cypriot minister is leading a group of guerrillas or other armed individuals in connection with the situation which my hon. friend has described. When I have that information I shall not hesitate to give it to the house. I am not quarrelling with the interrogations by hon. gentlemen; that is their right and indeed their duty. What I was quarrelling with were questions the answers to which could only be embarrassing and make difficult an operation which, in its very nature is certainly of the greatest delicacy. My remarks were not intended in any way to apply to the hon. gentleman. Thus far he has been the epitome of correctness in the questions he has put.


Thomas Clement (Tommy) Douglas: If the minister discovers that the press reports are accurate to the effect that a minister of the interior of the Cypriot government is leading forces in the Kyrenia pass, will representations be made to the Greek government to ask them to comply with the orders of the United Nations so as not to endanger the lives of Canadian members of the U.N. force?


Mr.   Marlin@Essex Easl: My hon. friend just referred to the Greek government but I believe he intended to refer to the Cypriot government. When the facts are known, and when they are clear, we will make representations through our representative in Cyprus. We will make our representations as we have been doing, to the United Nations secretary general and to his colleagues who in turn, I know, will make their representations. I might say that at this moment the secretary general and officials of the United Nations are engaged in very important acts in this very context.


John George Diefenbaker: May I ask a further supplementary question. Most of the information we are getting is through the press. Has there been a breakdown in liaison between the hon. gentleman and the officials?


Mr.   Marlin@Essex Easl: The only liaison that has broken down is between the right hon. gentleman and myself.


Mr. W. B. Nesbill (Oxford):: Mr. Speaker, may I ask a supplementary question. In view of the fact that the Secretary of State for External Affairs has told us this afternoon

that the Canadian troops in the United Nations unit are not there to take the offensive or to disarm people; they are not there to take sides politically, and in spite of what the minister said last week there is obvious anarchy-


Some hon. Members:: Question.


Wallace Bickford (Wally) Nesbitt: The question will be put just as soon as I have less interruption from the government benches. Can the minister give us some idea of what the purpose of the Canadian troops is? They are not there to do this or that, so would he give us some idea, without going into detail, of the purpose for which the Canadian troops are there?


Mr.   Marlin@Essex Easl: I am sure the house will sympathize with me since my hon. friend has asked me for details, and then in the next breath says he hopes I will not go into details.
The United Nations force in Cyprus is in that island for the same reason the United Nations peace keeping force was in the Congo. We will all recall the almost daily tragic events of the Congo. I would ask my hon. friend, who has had some experience in external affairs, to recall the way in which the opposition of that day dealt with the situation then and the way some hon. gentlemen in this house in seeking to embarrass the administration, might have the effect of making difficult the operations of the United Nations peace keeping force. This house felt the force should be established and that pursuant to the charter of the United Nations, that Canada, as a member of that body, should unhesitatingly join in the formation of that force which is doing a very important and vital job on the island of Cyprus right now.


Wallace Bickford (Wally) Nesbitt: Since the minister made some clearly personal allusions in his remarks I think I am entitled to make a reply. The Congo operation was totally different. We have 1,100 troops here. The only question I asked the minister was, since certain things are not to be done by the Canadian troops could he give us some idea, in general terms, what they are supposed to be doing? The minister then opened up again and made some offensive personal allusions-


Mr. Speaker:: Order. The hon. member for Calgary North on a supplementary.


Hon. D. S. Harkness (Calgary North):: should like to ask the minister if he is aware that in the Congo the United Nations troops took military action against many dissident elements, and actually fought them and disarmed them. You had a totally different situation than exists in Cyprus. I wonder

why the minister is trying to give the impression to the house that the United Nations troops in Cyprus are carrying on exactly as those in the Congo did, when there is no similarity whatever.


Mr.   Marlin@Essex East: This is a serious question by the former minister of national defence which deserves a serious answer and I will attempt to give one. He must know that the terms of reference under which the United Nations force in the Congo operated, are the same as the terms of reference under which the peace keeping force in Cyprus is now operating. My hon. friend will recall that for a number of months during the time the peace keeping was becoming operational in the Congo, there was no act of disarming the nationals of the Congo by the United Nations force. That eventuated long after the establishment of the force. What the future will be in Cyprus in this regard, will depend upon an assessment to be made by the force commander and those to whom he is responsible. Undoubtedly, the situation is difficult; but since the United Nations force was sent there to preserve peace and order, it should not prematurely take action that is calculated to add to the disorder that already exists on that island.


Douglas Scott Harkness: May I ask another supplementary question. May I ask the minister to read the history of the operation in the Congo. I think he will find the remark he has just made, that no action was taken to disarm the native troops in the Congo, will prove to be incorrect. I should like to ask him also, just by way of elaboration, what is being asked of the United Nations troops in the Congo in order to keep this conflict from spreading if they do not take action to disarm people?


Paul Joseph James Martin: My hon. friend said the Congo, when I am sure he meant Cyprus. I ask my hon. friend to read the documentation that has already been tabled in the house dealing with the terms of reference, the aide memoire that was circulated by the secretary general, and the status of forces agreement.



SOUTH AFRICA


[Stage Direction]
On the orders of the day:
Mr. H. W. Herridge (Kootenay West):: wish to address a question to the Secretary of State for External Affairs and to make a change in the locale of the operations. Has the minister received any protest from any African nations at the West German government's increasing share in rocket production
Inquiries of the Ministry in South Africa, and its rapidly increasing expenditures for military purposes in the South African nation?


Paul Joseph James Martin: I have not.


Mr. Speaker:: Order. It seems to me that this is the type of question that could very well be placed on the order paper.



DISTINGUISHED VISITOR IN GALLERY-CANADIAN MOTHER OF THE YEAR

[Stage Direction]
On the orders of the day:
Mr. Charles J. M. Willoughby (Kamloops):: I rise on a point of privilege, Mr. Speaker. I should like to draw your attention and the attention of all hon. members in the house to the fact that we are honoured today in having in the Speaker's gallery the Canadian mother of the year, Mrs. Gott-friedsen. She is a native of the Shuswap tribe, is the mother of 12 children and has adopted one. She is the foster mother of over 20 children as well. This is an accomplishment in itself, but she is equally well known for her great work among the Indian people, especially the young people, in connection with the development of their artistic and educational advancement.


Some hon. Members:: Hear, hear.



SHIPPING


[Stage Direction]
On the orders of the day:
Mr. Walter F. Foy (Lambton West):: Mr. Speaker, may I direct a question to the Minister of Transport. This question has great urgency. I would like to know if the minister can say whether an agreement has been made with the United States to build a weir or dam on the St. Clair river at Sarnia, to control the water levels in lake Huron.


Mr. Speaker:: Would the hon. member place this on the order paper? It is important, but I do not think it is that urgent.


Walter Frank Foy: This is indeed a question of great urgency-


Some hon. Members:: Order paper.


Mr. Speaker:: Order, please. I am sure the question is urgent and important and I know the minister would like to reply; nevertheless under the rules which the house has given me I think it should be placed on the order paper.

Inquiries of the Ministry


Mr. P. B. Rynard (Simcoe East):: Mr. Speaker, I would like to address a question to the Prime Minister which I know is of vital importance to him. Is the Canadian government going to participate in the study of the control of the water levels in lake Huron now being planned by the United States army engineering survey corps?


Lester Bowles Pearson: Mr. Speaker, a question was asked on this just a moment ago and you ruled that it should be put on the order paper. I presume you will do the same with this one.


Mr. G. H. Aiken (Parry Sound-Muskoka):: Mr. Speaker, I want to ask a question. I feel it will be out of order, but I must ask it in order to be given the opportunity to debate it. It is a question for the Minister of Transport. Is the government aware of experiments being conducted by the United States corps of engineers directed toward cutting down the outflow of water from lake Huron at Sarnia.


Mr. Speaker:: I am glad to inform the hon. member that his opportunity is at hand.


Hon. J. W. Pickersgill (Minister of Transport):: Mr. Speaker, I rise on a point of order. I suggest to Your Honour that if the hon. member for Lambton West (Mr. Foy), who first raised this question, should wish to debate it this evening he should have a prior claim over another hon. member who asked the question, which he said he knew was out of order, in order to take advantage of the rules.


Mr. Speaker:: I do not think we need waste any time of the house in deciding this matter. If the house cares to leave it in my hands I will do the best I can.


Gordon Harvey Aiken: Nevertheless I wish to give notice, in order that I will be the first hon. member who has given notice.


Walter Frank Foy: I have already said I am giving notice.


Mr. Speaker:: In order to settle the matter I shall check the blues.



HEALTH AND WELFARE


[Stage Direction]
On the orders of the day:
Hon. Leon Balcer (Three Rivers):: Mr. Speaker, may I put a question to the Minister of National Health and Welfare?
Is the minister aware of the fact that Mr. Naessens, a French biochemist whose serum 
against leukemia has been rejected by the French medical bureau, has announced his intention of building a laboratory in the Montreal area for the production and distribution of his serum?
In the interest of public health in Canada, will the hon. lady order an investigation concerning the intentions and activities of that person?


Hon. Judy V. LaMarsh (Minister of National Health and Welfare):: Mr. Speaker, I thank the hon. member for giving me notice of his question.
I checked that situation this morning. If a person comes to Canada with a drug or a particular serum and uses it to treat the sick, that person is practising medicine. The case would then come under the jurisdiction of the Quebec college of practicians and surgeons, which is responsible for the issuing of licences to practise medicine in that province.
On the other hand, anyone who undertakes to manufacture or offer for sale a drug or medicine automatically comes under the Food and Drugs Act, which, naturally, is my department's responsibility. My department is keeping an eye on those developments.



NATIONAL DEFENCE


[Stage Direction]
On the orders of the day:
Mr. Real Caouelle (Villeneuve):: Mr. Speaker, may I direct a question to the Minister of National Defence?
In view of the numerous complaints originating from his department, particularly from the building on Elgin street in Ottawa, is the minister aware that only English is used there, that even French Canadian employees must hold a card made out in English only, and that this situation has been going on as long as one can remember?
Could the minister inquire from his officials if that is the case and can he assure us that the situation will change?


Mr. Speaker:: This is a question for the order paper.



THE CANADIAN ECONOMY


[Stage Direction]
On the orders of the day:
Mr. Marcel Lessard (Lake Si. John):: Mr. Speaker, may I put a question to the Secretary of State?

In a talk delivered recently, the Secretary of State announced that the Economic Council of Canada would investigate, at a cost of $800,000, the economic possibilities of the Gaspe peninsula and lower St. Lawrence regions. Could the minister inform the house whether similar investigations are planned for other regions of Canada, for example the Lake St. John and Saguenay regions?


Hon. Maurice Lamonlagne (Secretary of State):: Mr. Speaker, I think the hon. member has misinterpreted what I have said, i.e. that the federal government decided to participate, under ARDA, in such an investigation for the lower St. Lawrence region.


Mr. L. P. Antoine Belanger (Charlevoix):: Mr. Speaker, may I ask a supplementary question?
When the minister speaks about the lower St. Lawrence valley does he include the area of Charlevoix?


Maurice Lamontagne: The investigation now being carried out does not include that area of the province of Quebec.



POST OFFICE DEPARTMENT


[Stage Direction]
On the orders of the day:
Mr. Gerard Laprise (Chapleau):: Mr. Speaker, may I direct a question to the Postmaster General?
Since 1964 will be the fiftieth anniversary of Abitibi, which will be commemorated by important celebrations, does the Postmaster General intend to issue a commemorative stamp to emphasize this jubilee more particularly?


Mr. Speaker:: This is a question for the order paper.



COST OF SENDING NEWSPAPERS TO TROOPS OVERSEAS

[Stage Direction]
On the orders of the day:
Hon. J. R. Nicholson (Postmaster General):: Mr. Speaker, some two weeks ago the hon. member for Hastings-Frontenac asked if I would look into the matter of mailing charges for newspapers being sent to troops serving overseas, and I assured him I would look into the matter. I have done so, and the Post Office Department will be issuing a press release within the next day or two so that people in all parts of Canada who have newspapers and periodicals which they would like to send to the troops will know the regulations and the ground rules. As a matter of courtesy to the hon. member I am mentioning it now.
Inquiries oj the Ministry NATIONAL MUSEUM



INQUIRY AS TO INTRODUCTION OF LEGISLATION

[Stage Direction]
On the orders of the day:
Hon. W. G. Dinsdale (Brandon-Souris):: Mr. Speaker, I have a question for the Secretary of State. Could he inform the house when legislation will be introduced to implement the plans for Canada's national museum, referred to in Charlottetown over the week end?


Mr. Speaker:: Is there any special urgency in that? I know the question is important, but if it is not really pressing I think it should be on the order paper.


Walter Gilbert Dinsdale: Mr. Speaker, the urgency arises from the fact that a resolution to this effect was on the order paper in January 1963, and the delay indicates the matter has now become urgent.


Mr. Speaker:: Would the hon. member put it on the order paper?



BROADCASTING


[Stage Direction]
On the orders of the day:
Mr. A. D. Hales (Wellington South):: Mr. Speaker, my question is directed to the Minister of Transport. Would the minister advise the house does he intend to refer cable television and the legislation proposed therefor to the special committee of the house on broadcasting?


John Whitney Pickersgill: Well, Mr. Speaker, the government has not decided yet whether there will be any legislation.


Mr. Jack A. Irvine (London):: I would like to direct a supplementary question to the Secretary of State. When will the minister be prepared to inform the house as to the composition and personnel of the special committee on broadcasting?


Maurice Lamontagne: Mr. Speaker, I hope to be able to make a statement at the beginning of May.



BUSINESS OF THE HOUSE


[Stage Direction]
On the orders of the day:
Mr. David Orlikow (Winnipeg North):: should like to direct a question to the chief government whip and ask him if he is in a position to make any announcement about meetings of committees which have not yet

Inquiries of the Ministry been set up, particularly the joint House of Commons-Senate committee on consumer credit.


Mr. J. E. Walker (York Centre):: The consumer credit committee is being organized tomorrow afternoon at two o'clock. There are five other standing committees being organized on Thursday starting at 9.30 in the morning. That makes 14 or 15 in all.



PENSIONS


[Stage Direction]
On the orders of the day:
John Alfred Irvine: I have a question for the Prime Minister. Is the Canada pension plan to be revised once again in view of the criticism contained in the report of the royal commission on banking and finance?


Mr. Speaker:: Would the hon. member put this on the order paper.


Léon Balcer: Mr. Speaker, I should like to direct a question to the Prime Minister. Could he tell the house whether the forthcoming pension plan will be the only one throughout Canada, or whether some provinces will have distinct and entirely independent plans?


Mr. Speaker:: It seems that this question is very wide and would demand a very careful answer. I do not think it should be asked at this time.



NORTHERN AFFAIRS


[Stage Direction]
On the orders of the day:
Erik Nielsen: Last week I asked a question of the Prime Minister with respect to a request from the Alberta legislature concerning legislation unanimously passed by that legislature. The Prime Minister indicated he would look into the matter and reply later. I wonder if he is now in a position to do so.


Lester Bowles Pearson: I do not have that answer with me; I hope I will have it tomorrow.



REQUEST FOR STATEMENT ON GENEVA CONFERENCE

[Stage Direction]
On the orders of the day:
Mr. Henri Lalulippe (Compion-Frontenac):: Mr. Speaker, I wish to direct to the Minister of Trade and Commerce a question of which I gave him notice.
Can the minister give the house a progress report on the international trade conference at Geneva and tell us where Canada stands.


Mr. Speaker:: I hope the minister will not make it just at the moment. May I suggest that the hon. member put this question on the order paper.



FINANCE


[Stage Direction]
On the orders of the day:
Mr. Maurice Cole (Chicoutimi):: Mr. Speaker, I should like to direct a question to the Minister of Finance.
Following the statement made by President Johnson, who intends to combat extreme poverty in his country, may we hope that a financial reform policy will be introduced in this house in order to do away with poverty and to fight enemies of economic stability in this country?


Mr. Speaker:: May I suggest that this question is far too wide, and that it should be placed on the order paper.



REFERENCE TO COMMITTEE OF REPORT OF ROYAL COMMISSION

[Stage Direction]
On the orders of the day:
David Réal Caouette: Mr. Speaker, I wish to direct a question to the Prime Minister. Can he tell us whether the government intends to refer to a special committee or to the committee on banking and commerce the report on banking and finance which was tabled last Friday?


Hon. Walter L. Gordon (Minister of Finance):: I should like to take this question as notice, Mr. Speaker, and consider it.



WATER RESOURCES


[Stage Direction]
On the orders of the day:
Thomas Clement (Tommy) Douglas: want to have some information from the minister of northern affairs. Do I understand that yesterday he tabled appendices to the

report of the Fraser river development board; and will copies of that report and the appendices be available to members of this house?


Hon. Arthur Laing (Minister of Northern Affairs and National Resources):: We are obtaining copies of the original report and of the appendix volume as well for all those members of parliament-I think probably from the province of British Columbia in the first place-who are interested in the project.


Thomas Clement (Tommy) Douglas: May I ask the minister, in view of the fact that the information given to us by the sessional papers office is that members have to write to British Columbia for this report or appendix volume, whether he would make the appropriate correction so that this matter can be taken care of?


Arthur Laing: It has been so made. The volumes are here.



HARBOURS


[Stage Direction]
On the orders of the day:
Louis-Philippe-Antoine Bélanger: Mr. Speaker, I should like to address a question to the Minister of Public Works. Is it true, as reported in a statement made by the Minister without Portfolio, that he intends to carry out the project of building an ocean port at Riviere du Loup, at a cost of $7 million. If so, is the minister aware that this port could hardly be used in winter, according to experienced sailors, on account of ice which accumulates almost invariably on the south side?
Could the minister consider at the same time Baie St. Paul or Pointe au Pic as more suitable sites for the establishment of such a port?


Mr. Speaker:: This is a question for the order paper.


Louis-Philippe-Antoine Bélanger: Mr. Speaker, I wish to give notice that I shall raise this matter this evening, under the adjournment motion. [Text]



INQUIRY OF THE MINISTRY

[Stage Direction]
On the orders of the day:
Louis-Joseph Pigeon: Mr. Speaker, I should like to direct a question to the Prime Minister in order to clear up a point.
As the Minister of Justice was chosen by the Prime Minister as lieutenant of the Quebec's Liberals, could the Prime Minister tell
Income Tax Act
the house what will from now on be the exact duties of the hon. member for Outre-mont-St. Jean (Mr. Lamontagne) in that field?


Mr. Speaker:: I have grave doubts whether the question is in order, but, giving the hon. member the benefit of the doubt, may I suggest the order paper.


Louis-Joseph Pigeon: After ten o'clock.



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 for the 1964 and subsequent taxation years the deduction from income granted in respect of certain tuition fees be extended to include tuition fees paid by a taxpayer who is a student, whether or not he is a full time student, to an educational institution in Canada
(a)	that is a university, college or other educational institution providing courses at a postsecondary school level,
(b)	that is a school operated by or on behalf of Her Majesty in right of Canada or a province, a municipality in Canada, or a municipal or public body performing a function of government in Canada,
(c)	that is a high school or secondary school providing courses leading to a secondary school certificate or diploma that is a requirement for entrance to a college or university, or
(d)	that is certified by the Minister of Labour to be an educational institution by which courses are conducted that provide or improve the qualifications of a person for employment or for the carrying on of a business or profession,
if the tuition fees paid by the taxpayer for the year exceed $25.
2.	That for the 1964 and subsequent taxation years a dependant in respect of whom a taxpayer may deduct an amount not exceeding $550 in computing his taxable income shall include a taxpayer's brother or sister who was 21 years of age or over and in full time attendance at a school or university.
3.	That the period commencing on December 5, 1963 within which a new manufacturing or processing business must have commenced manufacturing or processing in reasonable commercial quantities in a designated area in order to obtain a certificate for the purposes of section 71A of the act be extended to March 31, 1967.
4.	That for the 1964 and subsequent taxation years in determining whether 95 per cent of the assets used in a business were new and situated in a designated area, for purposes of establishing under section 71A of the act that a person was carrying on the business in a designated area, the value of the assets shall be their fair market value notwithstanding that such value may be different from their capital cost.
5.	That where at a time when an area was a designated area a business has been certified to be a new manufacturing or processing business, or an application has been made in writing to the Minister of Industry by a taxpayer in respect of a business that upon the fulfilment of specified conditions would be certified to be a new manufacturing or
[Stage Direction]
Income Tax Act
processing business in the designated area, that area, notwithstanding that it may no longer be a designated area, shall for the purpose of the application of section 71A of the act to that particular business continue to be a designated area.
6.	That for the 1962 and subsequent taxation years a taxpayer may deduct in computing income all expenditures of a current nature for scientific research carried on outside Canada that are expenditures made in the year
(a)	for scientific research related to the taxpayer's business directly undertaken by or on behalf of the taxpayer, or
(b)	to an approved association, university, college, research institute or other similar institution to be used for scientific research related to the taxpayer's business.
7.	That for the 1964 and subsequent taxation years a taxpayer may deduct in computing income amounts expended by him in relation to an objection to an assessment or an appeal from an assessment and shall include in computing income any costs recovered in respect thereof.
8.	That for the 1964 and subsequent taxation years a taxpayer may deduct in computing income an amount paid in the year or in a previous year since 1962 as a contribution to or under a registered pension fund or plan in respect of services rendered by him in past years while he was a contributor even if he also deducts an amount as a contribution in respect of services rendered by him in past years while he was not a contributor, but the maximum amount deductible in a year in respect of past services while he was a contributor shall not exceed $1,500 minus the aggregate of the amounts deducted in the year in respect of services rendered by him in the year and in respect of services rendered by him previous to the year while he was not a contributor.
9.	That for the 1964 and subsequent taxation years the period of 60 days from the end of a year within which an employer may pay an amount to or under a registered pension fund or plan in respect of services rendered by his employees be increased to 120 days.
10.	That for the 1964 and subsequent taxation years it be made clear that any amount received by an employer upon the winding up or reorganization of a pension fund or plan shall be included in his income.
11.	That for the 1964 and subsequent taxation years subsection (3) of section 12 of the act, which provides rules concerning an outlay or expense payable by a taxpayer to a person with whom he was not dealing at arm's length, be amended so that a taxpayer who at the end of his taxation year has a liability that
(a)	arose in respect of a non-arm's length transaction,
(b)	was deductible in computing his income, and
(c)	has been outstanding for two years following the end of the taxation year in which it accrued must include in income for the third year after it accrued an amount equal to the liability, unless the debtor and creditor sign and file an agreement in which they elect to have their taxes computed as though the debt had been paid and replaced by a loan on the first day of that third year.
12.	That the 20 per cent rate of tax payable by a non-resident person on dividends paid or credited to him after 1964 by a corporation resident in Canada that does not have a degree of Canadian ownership be reduced to 15 per cent, and that in consequence thereof:
(a)	Part IID of the act imposing a tax equal to 5 per cent of certain dividends paid by a corporation that does not have a degree of Canadian ownership be repealed;
(b)	the 20 per cent rate of tax imposed by Part IIIA of the act on income earned after 1964 by

a non-resident corporation carrying on business in Canada be reduced to 15 per cent; and
(c)	the 20 per cent rate of tax imposed on the taxable income earned after 1964 by a non-resident-owned investment corporation be reduced to 15 per cent.
13.	That for the 1964 and subsequent taxation years, where a taxpayer has disposed of his interest in a partnership, such part of the consideration as is reasonable in the circumstances shall be deemed to be proceeds of disposition of depreciable property of the taxpayer used in the partnership business.
14.	That for the 1964 taxation year the amount deductible in computing taxable income in respect of a dependant child who was over 15 and under 18 years of age at the end of the year shall not exceed $470 if an allowance was paid under the Family Allowances Act in respect of the child for any month after the month in which he attained the age of 16 years.
15.	That for the 1965 and subsequent taxation years, a child shall be regarded as a child qualified for family allowance for any year at the end of which he was over 15 and under 18 years of age, if an allowance under the Family Allowances Act was paid in the year in respect of that child after the month in which he attained the age of 16 years.
16.	That with regard to the definition of degree of Canadian ownership in section 139A of the said Act, the said measure provide as follows:
"(1) Subparagraph (ii) of paragraph (a) of subsection (1) of section 139A of the said Act is repealed and the following substituted therefor:
"(ii) either
(A)	not less than 25 per cent of the issued and oustanding shares of the corporation having full voting rights under all circumstances were owned by one or more individuals resident in Canada, one or more corporations controlled in Canada or a combination thereof, and equity shares representing in the aggregate not less than 25 per cent of that part of the paid up capital of the corporation that was represented by all the issued and oustanding equity shares of the corporation were owned by one or more individuals resident in Canada, one or more corporations controlled in Canada, or a combination thereof, or
(B)	a class or classes of shares of the corporation having full voting rights under all circumstances were listed on a prescribed stock exchange in Canada, and it is established in prescribed manner that no one non-resident person and no one corporation that did not comply with clause (A) of this subparagraph owned more than 75 per cent of the issued and outstanding shares of the corporation having full voting rights under all circumstances, alone or in combination with any other person related to such non-resident person or such corporation at any time within the period within the meaning of subsection (5a) or (5b) of section 139, and a class or classes of equity shares of the corporation representing in the aggregate not less than 50 per cent of that part of the paid up capital of the corporation that was represented by all the issued and outstanding equity shares of the corporation were listed on a prescribed stock exchange in Canada, and it is established in prescribed manner that no one non-resident person and no one corporation that did not comply with clause (A) of this subparagraph owned equity shares representing in the aggregate more than 75 per cent of that part of the paid up capital of the corporation that was represented by all the issued and outstanding equity shares of the corporation, alone or in combination with any other person related to such nonresident person or such corporation at any time

within the period within the meaning of subsection (5a) or (5b) of section 139, and"
(2)	Subsection (1) of section 139A of the said act is further amended by striking out the word "or" at the end of paragraph (a) thereof, by repealing paragraph (b) thereof and by substituting therefor the following paragraphs:
"(b) the corporation complied with the conditions specified in subparagraphs (i) and (iii) of paragraph (a) and was a subsidiary wholly-owned corporation subsidiary to a corporation that throughout the sixty-day period complied with the conditions specified in paragraph (a) or (c); or
(c)	the corporation complied with the conditions specified in subparagraphs (i) and (iii) of paragraph (a) and was a subsidiary controlled corporation
(i)	having issued and outstanding equity shares none of which were owned by a person other than
(A)	the corporation to which it was subsidiary,
(B)	a non-resident person not related to the corporation to which it was subsidiary,
(C)	an individual resident in Canada, or
(D)	a corporation controlled in Canada, and
(ii)	subsidiary to a corporation that throughout the sixty-day period complied with the conditions specified in paragraph (a) or (b)."
(3)	Paragraphs (a) and (b) of subsection (2) of section 139A of the said act are repealed and the following substituted therefor:
''(a) a corporation that has share capital is not controlled in Canada at a particular time unless at that time the corporation is resident in Canada, and more than 50 per cent of its issued and outstanding shares having full voting rights under all circumstances, and shares representing in the aggregate more than 50 per cent of its paid up capital are owned by
(i)	individuals resident in Canada,
(ii)	corporations resident in Canada with respect to each of which
(A)	more than 50 per cent of the issued shares having full voting rights under all circumstances, and
(B)	shares representing in the aggregate more than 50 per cent of the paid up capital
are owned by individuals resident in Canada, or
(iii)	any combination of individuals or corporations described in subparagraph (i) or (ii);
(b) where
(i)	a non-resident person,
(ii)	a corporation that does not have a degree of Canadian ownership, or
(iii)	a corporation that is related to a nonresident person within the meaning of subsection (5a) or (5b) of section 139
has a right under a contract in equity or otherwise either immediately or in the future and either absolutely or contingently, to, or to acquire, equity shares in a corporation, those shares shall
(iv)	unless the right is contingent upon an event that it is not reasonable to expect to occur within a reasonable time, or
(v)	unless the right is such that a reasonable man concerned only with the value of the shares would not exercise it,
be deemed
(vi)	to be owned by the person who has the right,
(vii)	to be owned by a non-resident person, where the person who has the right is a corporation described in subparagraph (ii) or (iii) and
(viii)	where the shares are unissued,
(A)	to be issued and outstanding, and
(B)	to have a paid up capital value, with respect to each share, equal to
1.	the par value, where the shares have a par value,
Income Tax Act
2.	the amount that would be paid with respect to each share to exercise the right under the terms of the contract, where the shares have no par value and amount is specified in the contract, or
3.	the market value at the end of the relevant sixty day period of a share of the class of shares of that corporation that is most closely similar to that share, where the shares have no par value and no amount is specified in the contract,
and any other person who actually owns the shares in respect of which that right exists shall be deemed not to own those shares."
(4)	Subsection (2) of section 139A of the said act is further amended by striking out the word "and" at the end of paragraph (c) thereof and by adding thereto the following paragraphs:
"(e) "equity share" means
(i)	a share, the owner of which has, as owner thereof, a right
(A)	to a dividend, and
(B)	to a part of the surplus of the corporation after repayment of capital, upon the redemption of the share, a reduction of the capital of the corporation or the winding up of the corporation, as great as the right of the owner of any other share of the corporation, when the magnitude of the right in each case is expressed as a rate based on the paid up capital value of the share to which the right relates, and
(ii)	a share, the owner of which has, as owner thereof, a right
(A)	to a dividend, after a dividend at a rate not in excess of 8 per cent per annum has been paid to the owners of shares of a class other than the class to which that share belongs, and
(B)	to a part of the surplus of the corporation after repayment of capital, upon the redemption of the share, a reduction of the capital of the corporation or the winding up of the corporation, after a payment of a part of the surplus at a rate not in excess of 10 per cent has been made to the owners of shares of a class other than the class to which that share belongs, as great as the right of the owner of any other share of the corporation, when the magnitude of the right in each case is expressed as a rate based, on the paid up capital value of the share to which the right relates; and
(f) "paid up capital value" with reference to a share, means
(i)	in the case of an unissued share that is deemed by paragraph (b) to be issued and outstanding, the amount determined under clause (B) of subparagraph (viii) of that paragraph, and
(ii) in any other case, an amount equal to the paid up capital of the corporation that is represented by the shares of the class to which that share belongs divided by the number of shares of that class that are in fact issued and outstanding."
(5)	In the case of a taxation year commencing before January 1, 1965, of a corporation that would have had a degree of Canadian ownership in the 1964 taxation year if section 139A of the said act had not been amended by this act, that portion of subsection (1) of section 139A of the said act, as amended by this act, that precedes paragraph (a) thereof shall, if the corporation elects in prescribed manner before January 1, 1965, be read as follows:
"139A. (1) For the purposes of this act, a corporation has a degree of Canadian ownership in a taxation year if throughout any sixty day period commencing after March 16, 1964 and ending before January 1, 1965"
(6)	This section is applicable to the 1964 and subsequent taxation years."
[Stage Direction]
Income Tax Act
and for the purpose of determining whether a corporation had a degree of Canadian ownership for the purposes of paragraph (b) of subsection (la) of section 106 the said act, section 139A of the said act shall
(a)	in relation to any dividend declared on or before March 16, 1964 be read as if it had not been amended by the said measure, and
(b)	in relation to any dividend declared after March 16, 1964 be read as amended by the said measure.
The Chairman:: When the committee rose last night we were considering paragraph 7 of the resolution.


Mr. Mariineau:: Before we go on, I wonder whether the minister has any answers to some of the questions which were put to him on this paragraph last night.


Walter Lockhart Gordon: I think what I have said on this paragraph is reasonably clear. At the moment certain fees charged by lawyers, accountants and others in connection with appeals are not allowed as a deductible expense for tax purposes. This provision proposes that they should be allowed as deductible expenses in the same way that similar expenditures by corporations and others are allowed.
The amounts paid will, of course, be included in the income of recipients and tax will be collected on that, so that except in the very few unusual cases, perhaps, where a taxpayer's income is less than the top rates of income of the practitioner, the tax which will .be collected from the practitioner will be higher than the amount of the allowance.
I think last night I answered most of the questions raised by the hon. member. I will be glad to go into this matter again, if he thinks that is necessary.


Mr. Nowlan:: As far as I am concerned, Mr. Chairman, having raised this objection I would be perfectly prepared to now wait and see the wording of the section in the act; then we could deal with it more fully. We do not know at the moment how the section itself is worded. If it is agreeable to the other members of the committee, I would be perfectly agreeable to moving on. Last night we held paragraphs 3, 4 and 5 in order to obtain further information. Perhaps it would be more orderly if we returned to paragraphs 3, 4 and 5 and proceeded from there.


Lucien Lamoureux: Is it the wish of the committee that we return to paragraphs 3, 4 and 5 to obtain more information from the minister, and return to paragraph 7 later?


Alfred Dryden Hales: Before we leave paragraph 7, Mr. Chairman, could I ask the minister a question in order to save time when this legislation is drafted. Paragraph 7 refers to

"any costs". This is not spelled out. Does this refer to lawyers' costs, travelling expenses, and so on; or what does "any costs" mean? Perhaps this will be cleared up in the legislation. There is also nothing in this paragraph which lays down a ceiling; the costs can be as high as they like and there is no ceiling on them. I hope these things will be taken care of in the legislation that is coming forth.


Walter Lockhart Gordon: Mr. Chairman, the costs
referred to here are the legal costs that might be awarded by the court to the taxpayer, and in that event he would have to include those reimbursements as part of his income.


Lucien Lamoureux: Does this conclude the discussion on paragraph 7?


Mr. Olson:: Before we pass from paragraph 7, Mr. Chairman, I should like to raise this matter. The minister has just raised a very interesting point. Is he now suggesting that the only way a taxpayer will be able to recover any of these costs is if they are awarded by a court?


Walter Lockhart Gordon: If a taxpayer launches an appeal and loses the appeal, it is pretty difficult to think of any other way in which he can recover his costs. By that I mean the amounts he pays out by way of fees. He cannot get them back if he has paid them out and lost his case. If the court finds in his favour and awards him costs at the expense of the crown, then to that extent he gets part of them back.


George Clyde Nowlan: I said I was satisfied, Mr. Chairman, but I should just like to clarify that one point. I have no particular quarrel with the part of the paragraph dealing with appeals. When we get the section in front of us we can perhaps deal with this matter with greater understanding. I have some real doubts as to the filing of an objection, because this is not an appeal before the court; it is something that is perhaps dealt with in the minister's office, the deputy minister's office, or in the office of the director in Halifax or Vancouver. It is to that point I think the minister should direct his attention very carefully when he sees the section brought in in the bill.


Horace Andrew (Bud) Olson: Mr. Chairman, the last two or three remarks of the minister have thrown an altogether different light on the interpretation of what is in paragraph 7. As a matter of fact I think his latest interpretation of how this paragraph will be applied is far superior to the wide range or scope of the interpretation that may have been put on it in the case, for example, of a taxpayer making an appeal against an assessment. I believe that is included in this paragraph, as well as an objection to an assessment. If the minister is now

saying that the application of this paragraph will be confined to costs that are awarded by the court in a case where an appeal is granted, that is considerably different than the interpretation we took from his remarks yesterday.


Mr. Thomas:: Mr. Chairman, can the minister assure us that these costs will only be costs that might be awarded by a court?


Walter Lockhart Gordon: No, Mr. Chairman; the proposal is that the amount of the fees paid, which may be in excess of the amount of costs settled by the court, should be allowed as a deductible expense. But I think last night I referred to the particular section of the act, section 12 (2), which permits the department to disallow anything that might be unreasonable.


Horace Andrew (Bud) Olson: I have one other point. Will the income tax appeal board be granted the authority to assess costs in cases of this nature?


Walter Lockhart Gordon: No, Mr. Chairman. [Translation]


David Réal Caouette: Mr. Chairman, according to clause 7, I appreciate that the taxpayer can deduct from his income the amounts he had to pay in order to appeal against a judgment or a decision by an income tax assessor.
Now, when a taxpayer is faced with court action by officials of the Department of Finance or the Department of National Revenue, sometimes it costs him a lot of money to pay his lawyers. Does the government intend to assume such expenses when the taxpayer wins his case, which would prove that the government employees were completely wrong?


Walter Lockhart Gordon: They have not thought of anything that goes that far, although if it went so far as to get before the exchequer court or the supreme court and that court saw fit to award costs to the taxpayer, then he would recoup them to that extent; but not in an appeal to an official of the department or to the tax appeal board.


Horace Andrew (Bud) Olson: I do not want to belabour this matter, Mr. Chairman, but I just want to clarify one point. Then there is no possibility of a taxpayer being able to claim any part of the costs involved in objecting to an appeal-that is, for accountants' or lawyers' fees, or anything of that nature-in a case that went only as far as one of the officials of the department or even the tax appeal board? It would have to go beyond that, to the exchequer court or the Supreme Court of Canada, before he would be able to make any claim from his taxable income with respect to the costs of so doing?
Income Tax Act


Walter Lockhart Gordon: I am afraid, Mr. Chairman, that we have become a little mixed up with this word "costs". The kind of costs that my hon. friend referred to I would like to call expenses. Those legal expenses or other expenses, under this section, will be allowed as deductions from the taxpayer's income whether or not he wins the case. If, however, he goes further, to the exchequer court or the supreme court, wins his case and the judgment includes what are known as costs, this paragraph means he is reimbursed for his legal fees. Then, if having been allowed to deduct the legal fees in the first place, he gets them paid back to him by the crown, he has to include what he receives as income. In other words he cannot have it both ways.


William Howell Arthur Thomas: Mr. Chairman, there still seems to be some confusion about this. Let us take the case of a constituent of mine who objects to his assessment. He goes as far as he can with the local officials; then he comes to Ottawa and spends a week here, possibly with counsel, and debates the matter with the officials of the Department of National Revenue. Can he deduct the cost to which he has been put? Is it a deductible item in the preparation of his income tax?


Walter Lockhart Gordon: Yes, Mr. Chairman, absolutely. The last phrase refers to something else altogether. But in the example given by the hon. member he would be entitled to deduct from his taxable income his total expenses in connection with his representations to the department. That is the point about which my hon. friend from Digby-Annapolis-Kings has some doubt, I think, but according to the resolution all the expenses incurred by a constituent from London going to Ottawa, with counsel or anybody else he might like to take with him, will be allowed as a deduction from his taxable income.


William Howell Arthur Thomas: Does that apply whether or not he wins his point?


Walter Lockhart Gordon: Yes, whether or not he wins. [Translation]


David Réal Caouette: Mr. Chairman, as an example, a taxpayer files his income tax return in which he claims, let us say, a sum of $700 as charitable donations. The department decides to cut down this sum and reduce it to $200, and does so arbitrarily as usual. The taxpayer then asks the services of a lawyer to plead his case and substantiate the amount claimed as charitable donations. Will all the expenses thus incurred by the taxpayer be deductible for income tax purposes, whether he wins or loses his case?
2660	HOUSE OF
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Walter Lockhart Gordon: Mr. Chairman, all these expenses are deductible from his income; not from his tax but from his income. If he is arguing about an amount of $300 and his lawyer charges him $500, he can deduct the $500 from his income but he still has to pay the lawyer $500. So there is a pretty good check on this.


David Réal Caouette: Does the minister not think that the crown should pay him back if he wins his case?


Walter Lockhart Gordon: That is an entirely different subject, Mr. Chairman, and is one which has come up. Various people have suggested this. It has been considered by the department and I am sure it is being considered by the royal commission on taxation; but in this particular resolution this is not proposed.


[Stage Direction]
Paragraph agreed to.
Lucien Lamoureux: We will return to paragraphs 3, 4 and 5, which were stood aside last night.
On paragraphs 3, 4 and 5.


Michael Starr: Mr. Chairman, for a number of weeks now we have been endeavouring to get some correct information from the ministry with respect to industries which have established themselves in designated areas for the purpose of availing themselves of the incentives proposed by the government. In all these efforts we have not as yet been able to get anything definite either from the Minister of Industry or from the Minister of Finance; all we get is a conglomeration of words and answers which are not directly related to the questions asked.
As an example of this, Mr. Chairman, a written question put by the hon. member for Peterborough was replied to on April 13. The hon. member asked five questions and I will refer only to the first, which is reported at page 2078 of Hansard. It is as follows:
1. How many industries have settled in the designated areas since these areas were set up?
This is a question which is quite simple and understandable. It is asking how many industries have settled. Let us take a look at the reply which the hon. member received from the Minister of Industry:
1. Thirty four new businesses are being established in Canada-
The question asked how many have settled, and the answer is that 34 are being established in Canada. The answer is not in conformity with the question put. Then yesterday the Minister of Finance, as reported at page 2632 of Hansard, made this statement:
[Mr. Caouette.l

I am informed that 150 proposals for new businesses have been discussed with the area development agency. Of these over 40 companies have formally indicated they are going ahead with projects to be located in 14 of the 35 designated areas.
Then at the conclusion of his remarks the hon. member for Digby-Annapolis-Kings asked the minister:
Could the minister give us the geographical areas involved in these applications? I do not want them by counties but how many are there, for instance, in the Atlantic provinces and how many in Ontario, Quebec and the west?
There is nothing difficult to answer there. The minister replied as follows:
The Minister of Industry informs me that an answer was given today and will appear in Hansard tor today. I do not have the answer before me.
Now, Mr. Chairman, we have searched vainly in Hansard of yesterday's date to which the minister referred, but no answer appears to have been given. This is just an indication either of evasiveness on the part of ministers or a lack of knowledge as to what is happening. As I say, we have searched Hansard without success, failing to find the answer which according to the minister was given.
Then the Minister of Industry got into the act a little later on, and amongst other things he said, as reported at page 2633 of Hansard:
These 40 industries in 14 of the 35 designated areas are planning capital investments-
Then he went on to give the amounts. Surely the government, through the Minister of Finance or the Minister of Industry, can tell us in fairly wide terms where these 40 industries are establishing, or have established, themselves. I do not think any industries have established themselves in Canada yet in any of these designated areas, because I followed this matter up and asked this question of the Minister of Industry yesterday, as reported at the same page of Hansard:
Will the minister tell us now how many have been actually established? Has there been one, have there been four or has there been none?
I am sure that yesterday the Minister of Industry said there were none, yet in Hansard this answer appears:


Mr. Drury:: I do not think that there is one that has come into commercial operations yet.
That is the sort of answer, Mr. Chairman, which we get to a specific question. I asked the minister whether he would tell us how many industries have been actually established. Again I got an evasive answer, although I do not think the minister uttered the words which appear in Hansard because I am fairly certain he said none. But according to Hansard he said:

I do not think that there is one that has come into commercial operations yet.
In view of all this confusion and evasiveness-and all we in this committee are trying to do is find out the facts-surely if none has been established yet the government ought to be honest and aboveboard and say so. Several industries have made inquiries, and I understand that naturally they would, but in fact no industries have been established as yet. That is my understanding. I suggest that we stop all this beating about the bush with words, because I think we would get on much more quickly if the answers were direct and to the point.


Walter Lockhart Gordon: Mr. Chairman, I have no intention of beating about the bush with words, the legislation became effective, I think, on December 5 of last year. It provides that if a new manufacturing or processing business- I forget whether the word is "establishes" but I will use that word-establishes itself in a designated area and gets into production on a commercial scale within a certain period it then qualifies for these tax concessions. Most of these businesses are large ones.


Michael Starr: Would the minister put on record the period in which they must qualify?


Walter Lockhart Gordon: The period was 24 months from December 5, 1963. It is now proposed that it be extended to March 31, 1967. This is an example of what happens. In the first place, the businesses concerned will decide that this is a good thing for them to do and they may or may not come and discuss the matter with the department. There is no need for them to do so. Therefore the department is only aware of the ones that actually come to it. There is no obligation to come and they do not lose anything if they do not come. These businesses then have to build a plant or-


Michael Starr: Or rent one.


Walter Lockhart Gordon: -rent one or buy equipment and get into commercial production. So far none have done that to my knowledge. The Minister of Industry said that a certain question had been answered yesterday and he did so because he had sent the answer to the office of the Secretary of State. However, it did not reach that office in time to be included in the answers that were tabled yesterday and appear in yesterday's Hansard. But the question is as follows:
Of the 34 manufacturing businesses that have been established in Canada in designated areas, how many have established in (a) each province, (b) Windsor, Ontario, (c) Brantford, Ontario?
The answer, which will presumably appear in tomorrow's Hansard, is as follows:
"Of the 34 new businesses which are being established"-
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As I said a moment ago, none are actually in commercial production yet.
-"in Canada with the declared intention of benefiting from the designated area tax incentive program the breakdown is as follows: Alberta and British Columbia. 1"-
I do not know which province it is in.
-"New Brunswick, 2; Nova Scotia, 3; Ontario, 17; Quebec, 11, a total of 34".
The answer to the (b) part of the question is "Windsor, 2" and to the (c) part, "Brantford, 10".
Another question which I was asked yesterday had to do with the location-


Michael Starr: May I interrupt at this point? Is there any definite commitment of any kind, any definite declared intention on the part of any industry to carry through such a project, or is it possible that some of them may change their minds and not establish?


Walter Lockhart Gordon: There is no reason at all why they cannot change their minds, run out of money, go bankrupt. Any of these things may happen.


Michael Starr: In other words, there is nothing definite.


Walter Lockhart Gordon: I feel that the hon. member for Ontario really should be a lawyer.


Michael Starr: I just want to get at the truth.


Walter Lockhart Gordon: The fact is, as I have said before, that none of these businesses has yet got into full production. To that extent I suppose you might say there is nothing definite, but the indications are pretty attractive.


Michael Starr: May I interrupt again? How many have started construction?


Walter Lockhart Gordon: I have not got that answer, but at the time this question was asked there were 34 and now there are 40 that have stated to the department that they are going ahead. There are also a number of others that certainly are going ahead but have not put it in categorical terms. If I may answer the question of my hon. friend about the breakdown in Nova Scotia and New Brunswick, one of these businesses is in the process of establishing in Amherst, two in New Glasgow, one in Campbellton and one in Sussex.


Mr. MacEwan:: Would the minister have the names of the businesses to be established in New Glasgow?


Walter Lockhart Gordon: I have not got the names with me but I will be glad to ask the Minister of Industry to send them to my hon. friend, if that will be satisfactory.

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Mr. Slenson:: Could I ask the minister for the names of the ones establishing in Brantford?


Walter Lockhart Gordon: I have just been cautioned by my advisers that I had better be careful about the promises I make and I may have to retract the one I have just made. Some of these businesses may not wish it to be known ahead of time that they plan to locate in these areas, but if they have no objection I will be glad to supply the information.


Mr. Howe (Wellingion-Huron):: Could the minister advise us what information these firms have to give to the government before being issued a permit to go ahead?


Walter Lockhart Gordon: They do not have to give any information and they do not have to receive any permit. They have to establish the fact that between these various dates they went into business in one of these areas. They have to receive a certificate from the Department of Industry that within the specified time they commenced the business of manufacturing or processing in reasonable commercial quantities. Those are the phrases that were used last year and that are in the act now.


Fred Frise Stenson: Will the names of all industries that receive income tax deductions be available?


Walter Lockhart Gordon: I see no reason why that information should not be supplied, and I think it should be. So that we can button this up, inasmuch as I do not have the information myself I wonder whether the hon. member would be kind enough to drop a line to the Minister of Industry asking for the names of the businesses in the areas in which he is interested, and I will twist his arm and see if I can get as much of the information as possible for the hon. member.


Lucien Lamoureux: Does this conclude discussion of paragraphs 3, 4 and 5?


Michael Starr: I just want to make one observation with reference to a question I asked the Minister of Industry yesterday. I am sorry he is not in the house but I would make the same observation if he were. I asked him this specific question, as found on page 2633 of Hansard.
Will the minister tell us now how many have been actually established? Has there been one, have there been four or has there been none?
According to my recollection the minister said "none" and sat down. Yet in today's Hansard the following answer appears:


Charles Mills (Bud) Drury: I do not think that there is one that has come into commercial operations yet.

I am certain the Minister of Industry did not say that at all. All he said was "none" and sat down. That indicates that even when a direct answer is given it is eliminated and an evasive one is put in its place.


Lucien Lamoureux: Does this conclude the discussion of paragraphs 3, 4 and 5?


Mr. Muir (Cape Breton North and Victoria):: Mr. Chairman, may I ask the minister if he has now departed from his previously stated views in the Gordon report that the Atlantic provinces are a land in which there is a lack of potential, etc., and would he use his good offices in conjunction with the Minister of Industry to coax, coerce, encourage, beg, if you wish, some of these industries that are interested in locating in such areas to look at Cape Breton Island and see if they may be able to assist that area, because we are facing a lot of unemployment?


Lucien Lamoureux: Order. I am sure the hon. member realizes that when he asks the Minister of Finance to do something which should be done by the Minister of Industry he is getting away from the item now before the committee.


Robert Muir: I, of course, bow to your ruling, Mr. Chairman. I would think that possibly the Minister of Finance is on good terms with the Minister of Industry.


Mr. Horner (Acadia):: Before we proceed to the next item, may I ask if I correctly understood the minister's answer that there were no designated depressed areas in western Canada at all?


Walter Lockhart Gordon: No, you were not correct, Mr. Chairman.


John (Jack) Henry Horner: I might say that the west has long been seeking industry because the farmers in the west have felt that they have danced to the tune of the eastern manufacturers long enough. I should like this government, as I know the previous government did, to pay particular attention to the development of the west by trying to get new industries in that part of Canada. I should like to see the Minister of Finance and the Minister of Industry take a greater interest in that part of Canada in relation to this section of the Income Tax Act.


Lucien Lamoureux: Does this conclude the discussion on paragraphs 3, 4 and 5?


Alfred Dryden Hales: No, I should like to speak on
paragraph 4. Will the minister explain to the committee this reference to the fair market value? Does this mean that a manufacturer can use second hand machinery now, whereas before he had to use new machinery?


Walter Lockhart Gordon: The purpose of the proposal in the resolution is precisely the opposite. As the law now stands the use of capital goods for used machinery can be manipulated and a large quantity of second hand equipment could be bought from a parent company at a very slight capital cost, and a business may qualify by equipping with very little new machinery. There would be no advantage to this. In order to prevent this manipulation, the resolution proposes to substitute fair market value of assets in place of the written down value of capital cost in the application which is now found under section 71A(3). In this test it is provided that a company does not qualify unless 95 per cent of the machinery, equipment and buildings owned or leased and used in the business are situated in the designated area. It can be got around by a little ingenuity, and I think that is the kindest word I could use at the moment. This section is designed to prevent that.
Paragraphs 3, 4 and 5 agreed to.


Lucien Lamoureux: Shall we go to paragraph 8?
On paragraph 8.


George Clyde Nowlan: I should like to ask the minister to give us an explanation of paragraph 8, which is a very technical one. It is one, I am sure, for which he can give us an adequate explanation so that we can understand the technical language.


Walter Lockhart Gordon: Mr. Chairman, this proposes a broadening of the rules concerning the deduction of amounts contributed by employees into a registered pension plan. It proposes an amendment to allow an employee to deduct an amount contributed in respect of services in past years while he was a contributor to a plan, even though he may also claim a deduction for the same years in respect of services in past years while he was not a contributor. The purpose of the proposed amendment is to cover a situation where a member of a pension plan wants to make a lump sum or annual contribution in respect of services for previous years, during some of which he was a contributor and during some of which he was not a contributor. The intention is to smooth out or to clarify the situation where some individuals are being discriminated against.


Mr. Monteiih:: I did not understand what the minister meant when he referred to past years. Before I come to that, I gather that the reference to any previous year since 1962 means that in computing his income an amount may be deducted in 1963 or subsequent years; am I right in that? If a taxpayer were to file a claim against 1963, which presumably has been filed, this would
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be taken into consideration. The minister said, "During past years while he was a contributor and while he was not a contributor." I presume he is going to make a lump sum payment to cover the period while he was not a contributor, or distributed over a period of time, related to that period when he was not a contributor. Is he presumed to be making that payment on that period now, or increasing the payments for that period?


Walter Lockhart Gordon: It has been suggested to me that instead of trying to give a short and snappy answer to that question I should explain what the present law is. The law at present permits an employee to claim a deduction for a contribution into a registered pension plan under three principal subparagraphs. The first deals with current services, not exceeding $1,500 a year in respect of such current services; the second is for past services, not exceeding $1,500 a year in respect of services in past years while he was not a contributor. If an amount in excess of $1,500 is contributed under this subparagraph in a year, the excess may be carried forward and deducted in subsequent years.
Now, the third provision also has to do with past services. It applies if an employee has not made a deduction under the second provision. He may deduct an amount in respect of services in past years while he was a contributor; and the amount deducted in a year under this subparagraph, plus the amount deducted under the first subparagraph for current services may not exceed $1,500. This means an employee may deduct a maximum of $3,000 under these various provisions. The deduction under the second one is intended to cover the employee who did not join a pension plan of his employer at the commencement of his employment, but in later years wants to make a contribution for those years of employment while he was not a contributor. The deduction under subparagraph (3) is intended to cover an employee who wishes to increase the contributions he made in previous years. The proposed change would permit an employee to make a deduction in respect of services in past years while he was not a contributor, even though he also deducts an amount in the year in respect of services in past years while he was not a contributor. The maximum amount deductible in respect of past years while he was a contributor shall not exceed $1,500, minus the amount deductible in a year, (a) on account of current services and (b) on account of services in past years while he was not a contributor-


Jay Waldo Monteith: Would the minister repeat that last line, minus the amount-

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Walter Lockhart Gordon: Minus the amount deducted in a year (a) on account of current services in past years while he was not a contributor.
Now, I thoroughly agree with other members of the committee that this is a rather complicated subject. The purpose is to allow people to pay up their past contributions if they so wish, and not to hinder them in the process.


Jay Waldo Monteith: Is the total amount that he may deduct in any one year still $3,000?


Walter Lockhart Gordon: Yes, that is correct. It can never be more than $3,000.


Jay Waldo Monteith: But he may distribute it in different categories?


Walter Lockhart Gordon: That is right.


George Clyde Nowlan: This was intended to be a relieving section?


Walter Lockhart Gordon: That is correct.


George Clyde Nowlan: I might say, if it has any bearing on the situation, that there is a member of the committee who is not here today who comes into a category described by the minister, being in the employment of one of the very large corporations of this country, and he was told by his personnel officer that he would be penalized by the passing of this paragraph. The hon. member is not here today, but presumably he will be present when the bill comes before the house. At that stage he may have some questions concerning his own personal status, but the minister says this is a relieving section and in no way penalizes those within any of these categories.


Walter Lockhart Gordon: Perhaps the hon. member for Digby-Annapolis-Kings would be kind enough to speak to his friend so that I might have an opportunity of having a word with him before the bill comes forward.


George Clyde Nowlan: I will do that.


[Stage Direction]
Paragraph agreed to.
On paragraph 9.
Mr. Crouse:: This is an interesting paragraph, especially in view of the fact that the Department of National Revenue has been endeavouring to encourage Canadians to pay their taxes as early as possible following the end of the calendar year. If further payments are to be made into a registered pension plan over a period of 120 days from the end of the year, it is only natural that taxpayers will wait for receipts from a pension fund, and this will further crowd the filing of returns into the last 30 days before returns are generally due. Will an individual, who may be paying
[Mr. Monteith.I
into a pension plan, be allowed 120 days along with employers, or will he just be cut off at the end of the 60 day period? At present this paragraph states specifically that the extension to 120 days applies only to employers.


Walter Lockhart Gordon: The intention is that this would only be extended to employers because the individual has a fixed amount he has to pay, and he knows what it is. In some of the corporation pension plans the amount a corporation pays in is dependant to some extent on its profits for the year. It may pay a certain amount plus a percentage of its profits, and in some cases it has been said that corporations do not know what their profits are 60 days after the end of the year.
There are some companies which take a little longer than others in closing their books, and it has proven to be impossible for them to determine what they owe to a pension plan within a period of two months. So they need longer in order to ascertain the exact amount.


Lloyd Roseville Crouse: I thank the minister for that explanation, but it is equally true that some commercial salesmen for insurance companies, and other individuals working for large corporations, are not aware of the amount of commission or bonus that may be forwarded to them. If their bonus is late in arriving they may wish to lower their own income tax by making a heavier contribution to a pension plan, and it would be only fair that this provision, if it is extended to large corporations, should also be extended to all Canadians so that there would be no discrimination.


Walter Lockhart Gordon: There may be something in what the hon. gentleman says, although I am informed that there have been no representations and no complaints on this point. I would prefer to inquire into it to see if there is a real difficulty before taking it into account. I must say I am sympathetic with the point that has been made, and it is the sort of thing we might look into next year. However, I would like to be sure that there is some substance to it.


[Stage Direction]
Paragraph agreed to.
On paragraph 10.
Jay Waldo Monteith: I am assuming that actually the intent now is that any amount received by an employer upon the winding up or reorganization of a pension fund or plan shall be included in his income in the year it is received. I understand there has apparently been some weakness discovered in the present bill, and that this amendment is purely to make sure that this is so.


Walter Lockhart Gordon: That is correct, Mr. Chairman. In one court case, which I think brought hope

to the hearts of others, it was ruled that when a pension plan was wound up and there was a surplus in it which came back to the corporation, the corporation did not have to pay tax on the amount it received in this fashion. This was a windfall and the corporation got off scot free. It was brought to the attention of the government and it was decided that this was something that should not be allowed to continue.


George Clyde Nowlan: I am wondering about the wording of the paragraph. I can understand that on the winding up of any pension plan the amount left should be taken into income, but I can conceive where in the reorganization of a pension fund this would not be fair or advisable. I was wondering whether it should not be worded to read "shall be" on the winding up and "may be" on the reorganization of a pension plan, in order to permit some discrimination to the officials administering the act, rather than to make it mandatory.


Walter Lockhart Gordon: It would only be taxable if the corporation received the money. After all, the corporation would have been allowed this as a deduction in earlier years when the amounts were paid into the pension fund. If, at any time, it gets that money back it should pay tax on it, and I think it would apply to reorganization as well as winding up.


George Clyde Nowlan: I could imagine a reorganization where it would be just a transfer, where it really does not become vested in the corporation.


Walter Lockhart Gordon: This would only apply if it became vested in the corporation.


[Stage Direction]
Paragraph agreed to.
On paragraph 11.
George Clyde Nowlan: Would the minister give us an explanation of this paragraph? I think he said yesterday that it is a technical one to clarify the act. I would like to have the explanation again.


Walter Lockhart Gordon: Under the proposed change an expense that becomes owing in a year will be deductible in that year, but if the amount is not actually paid within two years from the end of the year in question-the end of the year in which it becomes owing -the taxpayer who has taken the deduction must add the amount back into his income in the third year unless he, and the person to whom the amount is owing, file a certain election.
In this election the debtor and creditor must agree that the taxes should be computed as though the debt had been repaid and replaced by a loan. If such an election is filed,
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the amount owing shall be deemed to be paid in the third year and returned to the debtor as a loan.
I would like to give an illustration of this. If the taxpayer claims a deduction for interest which is payable to somebody else, the "somebody else" does not pay any tax on the interest until he receives it. The first taxpayer can claim a deduction at present even though he does not pay it.
It is suggested there are cases where the crown is short-changed, if I may use that expression, in this way, and if that particular interest charge is not actually paid within three years it has to be brought back into the income of the original taxpayer who obtained a deduction in the first year. I do not suggest this is a major loophole, but it is certainly a mousehole.


Jay Waldo Monteith: What if the taxpayer pays it in a subsequent year?


Walter Lockhart Gordon: Then he gets the credit for it. He gets the reduction once, not twice.


Jay Waldo Monteith: Yes, but if he takes it back into income he is paying tax on it.


Walter Lockhart Gordon: Then when he gets around to paying it he is allowed to deduct it.


Jay Waldo Monteith: He gets it back at that time.


[Stage Direction]
Paragraph agreed to.
On paragraph 12.
John George Diefenbaker: There are a few references I intend to make regarding this matter and, of course, I intend to seek information from the minister respecting some observations made very recently by United States under secretary George Ball who spoke on United States-Canada economic relations last Saturday night.
I should like to find out from the minister what his views are on the speech which was delivered-a speech which he tabled following a request on my part that he do so yesterday.
I begin by referring to the transcript of the program "Conversation with the Prime Minister" on Sunday, April 19, wherein the Prime Minister, speaking with political modesty, referred to a clipping from a newspaper correspondent in Washington which said that Canadian-United States relations are better today than they have been in years-


Walter Lockhart Gordon: Good.


John George Diefenbaker: The finance minister applauds. I merely direct attention to that. I take it that, in keeping with the attitude adopted by all ministers of this government, any statement made by the Prime Minister,

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regardless of whether they agree with it or not, is the object of approbation and loud applause.
Now I intend to refer, first, to the Canadian Press dispatch in which Mr. Ball is reported as referring to key economic policies of the Canadian government-I refer to the dispatch in the narrative form.
He said that in a situation such as that of Canada and the U.S., with closely intertwined economic affairs and large trade, "any change in the existing ground rules can have immediate and substantial repercussions".
Then he went on to list the various things which could cause what he called repercussions:
Measures designed to induce a change in the character of foreign investment from equity to debt.
Measures designed to "refuse national treatment to capital that had earlier been welcomed."
There is no indirectness about those two criticisms or statements. They have to do with action taken by the present government. The third is:
Measures to bring about the transfer of production from one country to another.
That criticism, too, is levelled directly against the present government which, when in opposition paraded itself as the friend of good relations with the United States and criticized us for what we had done in order to maintain Canada's individuality. At that time hon. gentlemen now sitting opposite condemned us for endeavouring to assure that our resources in the north, controlled by the Canadian government, should as far as possible be available for investment by Canadians. Having made those criticisms, the very first action taken by the present government was the threat of the 30 per cent tax-about which I do not intend to say more-and the subsequent retreat, and then the further action which Mr. Ball criticizes in his remarks. Then the article goes on to say:
Canadian finance minister Walter Gordon, in a speech before the New York Economic Club last Monday, said Canada would like to see an increasing proportion of foreign investment in Canada "in the form of loans which can be paid off."
And it continues:
Ball's second point, about refusal of national treatment to capital that had earlier been welcomed, appeared to refer to Canadian action to increase Canadian financial participation in U.S.-owned subsidiaries.
The third point on transfer of production ran counter to statements by Gordon in New York that Canada would have to increase its exports of manufactured goods to the U.S. to cope with its current account deficit.
Then the report describes this speech as having a "rough and tough quality"-


Walter Lockhart Gordon: That was not my speech.


John George Diefenbaker: No, not the speech of the hon. gentleman, whose suavity can never be described in those terms. He believes in saccharine words, and then he withdraws. Not so, Mr. Ball. Mr. Ball's speech had a rough and ready quality-in the words of the article, it was "a reminder of what America could or could not do to help Canada". Then he went on to deal with Canada's general attitude, and he dealt, also, with some bitterness-never does the Minister of Finance, and I pause to say this, allow any of his words to be saturated with bitterness; I am speaking of the Canadian Press description of Mr. Ball's berating of the government of Canada-he spoke with bitterness of "Ottawa proposals to discourage Canadian companies from advertising in American magazines which circulate in Canada, as a form of protection". Then he added:
I would hope that however the Canadian government may ultimately resolve this question it will not act in such a manner as to inhibit the free flow of thought across our borders.
His observations in this direction were, of course, entirely motivated by a commendable desire to ensure that Canadians should not deny themselves the opportunity of a full and complete education in world matters. Then the report says:
Mr. Ball's speech reflected a Washington apprehension that in its century-old desire to maintain a Canadian identity and amidst a growing tension among French Canadians in Quebec seeking greater autonomy or even separatism, Ottawa may adopt policies to counter what the state department regards as the inevitable spread of "economic interdependence" between the two countries.
There is something here with which we are all of us in agreement. In a concluding report, the American assembly, to which this speech was delivered "decided the United States should not try to bind Canadian foreign policies into a pattern of conformity with United States policies". That was tried in connection with the trade and commerce of this country in non-strategic materials during the days when we were in office-and tried unsuccessfully.
What I wish to find out from the minister is this: Has he made any representations as yet, to Mr. Ball? It is going to be difficult for him to do so, because when there was that great interference by the state department with political issues in Canada in January of 1963 it was those hon. members who sit opposite, now on the treasury benches, who approved of gross interference in matters of Canadian domestic concern. I am interested to know whether there has been any change in the viewpoint of the government in this connection. Does the minister accept this stark,

harsh criticism even described by the Canadian Press as rough and tough? Does he accept this? We would like to be let in on some of the representations the Canadian government is making in this regard. It is said, "Sharp issue has been taken with this government's fiscal and economic policies". The opposition has taken sharp issue with some of these policies which were entirely ill-digested, ill-conceived and had to be withdrawn by the Minister of Finance and those associated with him.
We ask, what is the approach, because it was quite a remarkable speech that was delivered. It dealt with cultural infiltration. He holds out some hope for Canada in this regard, because he says:
I am aware of the apprehensions in some circles that Canada risks being culturally overwhelmed by the United States. We Americans are a vocal, sometimes a rather noisy, people, and the development of radio and television has extended exposure to American cultural influence beyond the written to the spoken word.
Then he is disturbed about the press-I have referred to that already-being interfered with in any way, as he said. Then he referred to the areas of complexity and said:
The areas of greatest complexity and difficulty between our two nations lie in the range of our commercial and economic policies.
He pointed out that there is really no criticism that the United States has tariffs high enough to keep our products out of the United States, while our tariffs practically render available competition from any part of the world. He says this:
But what is often forgotten is that on a per capita basis Canadians have invested almost twice as much in the United States as Americans have in Canada.
That is just one of the old dodges regarding the use of statistics, which is not applicable in any way to the situation that prevails. He said:
From the point of view of economic principles, there is no doubt that Canada and the United States could employ the resources of North America most efficiently by developing the continent as a single great market.
Indeed, he goes so far as to suggest that we should get together. He would not be much concerned with divisions between our countries. We have resources that they need, and therefore everything should be done, as he said, to move toward commercial liberalization. He said it is hopeful that we will move even farther in that direction, although some of us have drawn back, for political reasons, from the ultimate logic of the single market. Then he deals with the minister and he really gives him the works. It was obvious yesterday that the minister realized he had got the full treatment. The minister does not 20220-170
Income Tax Act
always smile when he gets the full treatment, but he is smiling on this occasion because he cannot do otherwise; he is going to meet Mr. Ball tomorrow. Mr. Ball said:
But difficulties necessarily arise when the anxiety to avoid economic interdependence leads to policies that are discriminatory and inequitable.
That is his description of the economic policies of this government:
This is particularly the case with close neighbours such as the United States and Canada-
Then he goes on to say this:
-any change in existing ground rules can have immediate and substantial repercussions. Measures by governments designed to induce a change in the character of investment from equity to debV-
That was the minister's own suggestion only a day or so before:
-for example, or to refuse national treatment to capital that had earlier been welcomed, or to bring about the transfer of production from one country to another can be seriously disruptive.
The minister cannot accept that, if he remains true to the ever nescient policies that he enunciated in June and July last, and since. I want to hear what his reaction is to this. I know that someone said some of his policies were pre-Keynesian. Some of them are pre-Cambrian. Mr. Ball takes it upon himself to teach the Canadian government a lesson. He said:
The desire of our Canadian friends to safeguard the identity of their national market apparently stems from the belief that the nation and people may lose something of their national political independence if their economy is too closely meshed with that of other nations and particularly the United States.
I do not think we have ever got a more complete lesson from the administration of the United States on what Canada should do than Mr. Ball gave vent to the other day. Then he said:
Certainly, neither Canada nor the United States is interested in yielding or compromising its own freedom of political decision... I do not believe, therefore, that as between Canada and the United States there is any basis for assuming an automatic and parallel relation between increased economic interdependence and a loss of independence in political life.
Now, sir, I want to hear from the minister what is his reaction to this. Does he share the fulsome terms that were used in criticism by him and his associates, when in January and February, 1963 the state department of the United States chose to issue a document giving information such as the one in question here issued by the United States information service? Will the minister tell the committee what is the attitude of the government in this connection? When we were in office we were criticized regarding our attitude toward preserving Canada's right to declare her policies within Canada, while

Income Tax Act
maintaining the fullest co-operation with the other legions of freedom and the other nations of freedom. We were criticized by the Liberal party and they said we were antiAmerican. I want to know from the minister now, has he in the course of one year turned a somersault, too, in the views regarding the matters that he expressed a year ago-because it will not be unusual. He will not be alone if he admits he has turned a somersault; he will have company all down the front bench. I want to know, has he changed his views in this regard?
Do you remember, Mr. Chairman, how they criticized us with regard to American investment. Will the minister tell us what American investment came into Canada between last October and December, those three months, and during January, February and March of this year. We would like to get the figures; we have never had the official figures for the last three months of 1963. We know that when we were in office American investment in Canada, in the last two three-month periods, amounted to $400 million. We know that in that third quarter of 1963 that amount had fallen, under this government, with its tinkering, its economic nonsense in the manner in which it brought these policies into effect. We wanted to bring about Canadian strength, not through the club but through incentives, and that is what we did. That is the reason we were able to assure a continuance of investment.
Four hundred million dollars was the average for the last two three-month periods of our tenure of office. In the third quarter of 1963 it was down to $98 million. That is my understanding, on the basis of the figures that I have, although I do not say they are correct. It is a matter of computation that we have not been able to get. The amount is down to something like $60 million, I understand. I ask the minister before this item is passed to give us the figures of American investment in Canada in the last three months of 1963 and the first three months of 1964. If he cannot give us the first three months, he can give us the first two months, which will show that as a result of the economic fallacy that was his and those associated with him they have destroyed or reduced almost to a trickle the investment in our country.
Why? Simply because of the uncertainty of investors in Canada. They do not know what will be the next tinkering in which the Minister of Finance will indulge himself. Nobody knows. The minister started by chopping away, decided that he would discontinue his chopping and changed to a smaller axe. But the effect is just the same. We want to know what is his attitude in this regard. Why is it 
that there has not been on his part greater emphasis on incentives, rather than on pressure and the infliction of what we described as discriminatory reactions on the part of this government? We want to know whether, if paragraph 12 is passed, this will be the last tinkering which will be done. Countries everywhere want to invest in Canada.
When the Conservative government was in office the Liberal party of that day said that we had discouraged investment. However, since they have been in power investment has gone down and down, and more than one minister has gone on bended knee to Washington in order to engage in dialogue with Washington to implore, as it were, an increase in the amount of investment. The minister even admitted the other day that foreign investment must continue. If we require foreign investment, then what is going to be done to encourage it? We believe in foreign investment. We never altered our view in that regard. But we stated that while investment was welcomed, investment in Canada should be used by the corporations for the benefit of Canada generally rather than be put at the direction of a country elsewhere, however friendly. That was our view and our stand, and we maintained that United States investment in Canada should become Canadianized.
What has happened today? First, the government brought in a series of experiments. Bold and imaginative, was the expression of the Prime Minister. They were bold, but they were so unimaginative that the government had to withdraw them one by one. Now the latest retreat is in this particular piece of legislation. How the government rushed to increase the percentage from 15 to 20. This was the salvation, said the Minister of Finance and the Prime Minister. Now after a few months they come back to parliament and say: "It is just another mistake which we made". No; they do not admit that: It is the result of dialogue. That is the expression today.
We want to hear something of this dialogue between the Minister of Finance and other ministers with United States cabinet secretaries. What has happened? What representation has been made? What is the general attitude of the government? Is it a protectionist attitude? How the Liberal party used to condemn us for a protectionist attitude. I would point out that no longer are we condemned for that. Instead the present government's own press gives it almost universal condemnation for its uncertain, irregular, ill-conceived policies which have been effective in one respect only, and that is in having

parliament pass these measures, only to be asked a few months later to reverse their decision.
We want to know, why this reversal. Why are they swallowing themselves on that side of the house? The "medicine" which was prescribed eight, nine or ten months ago was not mixed hurriedly. It was all set out in the pharmacopoeia of "Troubled Canada". When was it discovered that the beneficial medicine which was so effective when it was first prescribed in that masterful work has turned out to be poison? These are matters about which we should like to know. I realize the minister is just waiting for the opportunity to furnish this information, and I want to give him a full opportunity.
I mentioned a moment ago that even the minister's best friends are criticizing him. You would not think, Mr. Chairman, that even they would tell him. "Even your best friends won't tell you", is how one ad reads. But the minister's best friends are telling him today. This is what the Winnipeg Free Press said on March 28:
Canada's attitude toward trading relationships between the industrialized and the underdeveloped countries of the world was outlined to the United Nations world trade and development conference in Geneva this week by the Secretary of State for External Affairs, Mr. Paul Martin.
Then the Secretary of State for External Affairs is given praise, although we are told that he may indeed be considering leaving us shortly to assume a very high position; at least that is the rumour which is going around in the international field. The article continues:
Mr. Martin was moderate and cautious in tone-
He does not always show it in the house, but apparently he was on this occasion.
-but his remarks were sufficiently liberal to take some of the curse off the restrictionist, defensive approach implicit in Mr. Gordon's 1964 budget speech.
The Free Press have always worshipped at the throne of Liberalism and been intense admirers of both the Minister of Finance and the Prime Minister. Yet the policies of this government were described as restrictionist and defensive approaches. Then the article continues in these words:
Canadians who believe that their prosperity depends on greatly expanded international trade have been disturbed at the lukewarm approach to trade shown by the Minister of Finance in his budget speech. Mr. Martin's contribution to the U.N. conference must give rise to hopes that Mr. Gordon is not the voice of the government at Ottawa, but only of a small minority. Whether these hopes are justified will be answered-
__and so on. The general conclusion is
that this government, pretending that it is following one policy, has become a restrictive, and I would add discriminatory, gov-20220- 1704
Sweepstakes
ernment. We want to know why the change. What has happened? Is it actually redemption that has been bought by this government? Last year they said that these things had to be done. They told us that this section raising the percentage from 15 to 20 represented a tremendous step forward. Now the government say: "We are going to depart from it". Mr. Chairman, my time is up.


The Deputy Chairman:: Order. It being five o'clock, so that the house may proceed to the consideration of private members' business it is my duty to leave the chair.


Mr. Deputy Speaker:: Order. It being five o'clock the house will now proceed to the consideration of private members' business as listed on today's order paper, namely private bills, public bills.


SWEEPSTAKES
Louis-Joseph Pigeon: the second reading of Bill No. C-19, with respect to hospital and university sweepstakes.
He said: I have only a few remarks, Mr. Speaker.

Mr. Speaker, I have been introducing this bill in the house for the past few years in order to amend the Criminal Code so that the provinces that wish to do so may hold lotteries to subsidize hospitals and universities.
I am asking for the government's co-operation during this hour to have the bill accepted, since, throughout the last election campaign, according to La Presse of March 4, 1963, they were saying for all to hear:
A Liberal government would authorize provincial lotteries (Mr. Rouleau).
Malartic: The Liberals are quite decided to let the provinces act as they see fit in a field of endeavour which could certainly be important to several of them: that of provincial lotteries.
Now is the time to put to the test the influence of the Minister of Justice, the Quebec Liberals' new lieutenant. We shall see whether he had enough influence to convince the cabinet in such a way that the bill can be passed before six o'clock, because if the Minister of Justice is himself convinced that this measure should be passed, he has advised the government accordingly, and this bill which would enable any provincial government to establish lotteries will be passed.
Besides, the Quebec government has taken a strong stand on the matter, not only

Sweepstakes
through the former Duplessis administration but also through that of Mr. Lesage. Indeed, in he Devoir of May 6, 1963, here is what I find:
One always thought that, to establish a lottery to Quebec, the Criminal Code had first to be amended.
In his recent budget speech, on April 5, Mr. Lesage advocated the establishment of a provincial lottery.
Mr. Speaker, as there is a complete agreement between the Quebec government and this federal government, I would be very surprised if the government did not adopt the bill this very day, in order especially to enable the provinces to set up their own lotteries.
I am asking Mr. Lesage-


An hon. Member:: He is not here.


Louis-Joseph Pigeon: -if the bill is rejected because the government refuses to fulfil its promises, its formal promises made during the last election campaign, and if Mr. Lesage is really a man of action, he will prove it to the province of Quebec-


An hon. Member:: He has proved it.


Louis-Joseph Pigeon: -by compelling the federal government by means of another ultimatum to amend the Criminal Code to authorize provincial lotteries.
Moreover, the newspaper La Presse, two years ago, I believe, conducted a survey in the province of Quebec where 98 per cent of those people interviewed professed to be in favour.


Mr. Gregoire:: Name them.


Louis-Joseph Pigeon: -And this not only in the province of Quebec, but also throughout Canada, as reported in the press.
For example, if I refer to the newspaper Le Droit of August 24, 1962, I read the following:
Winnipeg

In favour of a national sweepstake- The oldest veterans' organization of Canada asked the federal government to establish a national sweepstake in compliance with the people's wishes.
Many organizations throughout Canada are making the same request. For instance, in its brief to the Parent commission, the seminary of Chicoutimi recommended the establishment of a provincial lottery, the receipts of which would be used to subsidize education.
It is common knowledge that New Hampshire recently passed an act to allow the establishment of a state lottery. Listen to this:
Governor John W. King announced in the New Hampshire legislature yesterday that he had approved a bill for the establishment of a state lottery, which had been a controversial issue for many months.
Mr. King asked the legislators to help him to establish "the first lottery to be operated by an 
American state, a lottery which will be administered honestly, efficiently and in compliance with the laws of the U.S. government."
Mr. King, a Democrat Governor in a state controlled by the Republicans, said that Mr. Joseph Millinet, a legal adviser, after discussing the lottery with lawyers of the U.S. Department of Justice, was satisfied that New Hampshire was not violating any federal law.
He said that tickets of that lottery, the first to be legalized in the United States in 70 years, would be sold to any person, whether a resident of New Hampshire or not.
"Our neighbours have certainly the right to spend their holidays here, to buy lottery tickets and to collect their prize if they win," said the Governor.
He added that the federal legislation only applies in the case of traffic between states and not to lotteries operated within a state.
The Governor was speaking before members of the Congress and the Senate at a joint conference.
I have here a copy of La Presse newspaper, dated Friday March 13, 1964; there is a picture under which is written:
The crowd gathers at counters where vending machines distribute lottery tickets for $3 each, at Rockingham Park. That first American lottery has been in operation since yesterday, once the New Hampshire electorate voted for it by a strong majority. The first draw will take place on September 12 next.
The legalization of lotteries by an American state adjoining Canada should encourage the Canadian people to buy lottery tickets from that American state, just as they buy them from foreign countries.
It is time for the government to be consistent with itself and fulfil its promise in order to stop that loss of millions of dollars that benefit foreigners.
In New Zealand, where each year $4.5 million was spent on foreign lottery tickets, they set up a national lottery which brings in so much money that the government is wondering how to spend it all.
I am convinced that if the provinces, including Quebec, had the right to set up a lottery, Mr. Lesage would know right away how to spend the money accruing from it since he is piling up deficit upon deficit, whereas taxes are increasing at a fantastic rate, so that the citizens, in Quebec, are now more heavily taxed than those in all the other provinces of confederation.
And that, Mr. Speaker, in addition to taxes imposed by the federal government, such as the 11 per cent tax which discriminates against the municipalities, school boards, crown corporations and provinces-


Mr. Deputy Speaker:: Order. May I invite the hon. member to limit his remarks to the bill now under consideration?


Louis-Joseph Pigeon: With pleasure, Mr. Speaker, but I wanted to point out the importance of having a provincial lottery in Quebec, in

view of the appalling deficit and heavy taxes that the people have to bear now. No one knows where Quebec is going.
Mr. Speaker, I beg you to convince the house to agree to amend the Criminal Code so that lotteries may be set up to help not only the people of Quebec but also the other provinces which could use such additional revenue.
If this took place in Canada, and in the province of Quebec in particular, it would be possible to reduce taxes, improve certain social services, in brief, improve the conditions of life of the people. And for that there is only too much to choose from.
According to Israel's Information dated March 6, 1962, consideration is given to the possibility of setting up in Israel a lottery to finance the building of new schools. Most countries in the world have a lottery. This is the reason why-


An hon. Member:: Which ones?


Louis-Joseph Pigeon: -we wonder why the government procrastinates and does not carry out the promise it made to amend the Criminal Code of Canada accordingly.
Mr. Speaker, Canada is on the road to ruin. We have an inefficient government which accumulates astronomical deficits; taxes are increasing at an alarming rate and, as I said, the people in some provinces, including the province of Quebec, are downhearted. Industries are considering leaving the province of Quebec because its government is short of sources of income. The provinces need their sources of income. If the federal government were willing to amend the Criminal Code, so as to enable the provinces, including Quebec, to hold lotteries, it would help the provinces to recover these sources of revenue.
I repeat what I said: If Mr. Lesage is really honest with himself, he will not be afraid to give an ultimatum and compel his friends to keep the promises they made during the last election campaign.


Mr. Auguste Choqueite (Lolbiniere):: Mr. Speaker, I have listened very closely to the remarks of my hon. friend opposite. It is unfortunate indeed that he should have introduced a note of partisanship in his explanation of such an important principle, which we endorse.


Gilles Grégoire: If you are in favour of the principle, sit down.


Auguste Choquette: Mr. Speaker, I feel that the remarks of my hon. friend from Villeneuve are rather incongruous and vulgar.
I could not help being surprised when the hon. member for Joliette-L'Assomption-Mont-
Sweepstakes
calm so strongly urged the house to pass this bill without delay, because his party did nothing about that during the five years it was in power and also because the hon. member himself never could convince the leader to amend the Criminal Code.
It is most remarkable that the opposition should be so anxious now to have this house recognize a principle to which I personally adhere. Indeed, I am in favour of provincial lotteries but as far as the procedure to be followed-


Gilles Grégoire: Would the hon. member allow me a question?


Auguste Choquette: Certainly.


Gilles Grégoire: Does he approve of the principle of a lottery or the income deriving from such lotteries?


Auguste Choquette: In my opinion, the two are indivisible.
The problem is to find additional revenue. Remember the appalling deficits piled up by the Conservative government? Because of them, Canada needs additional revenue, as well as the provinces, in short, all governments. But that does not mean at all that the Social Credit philosophy is a cure-all.
However, if it is possible to find additional revenue that way, that is by setting up a lottery-


An hon. Member:: What logic.


Auguste Choquette: -as requested by the hon. member for Joliette-L'Assomption-Montcalm, whereas his colleague, the hon. member for St. Mary (Mr. Valade) is requesting that the Criminal Code be amended, why not do it?
To hear the hon. member for St. Mary call for the amendment of the Criminal Code seemed logical. But I think it rather inconsistent and strange for the hon. member for Joliette-L'Assomption-Montcalm to ask for an amendment to the Criminal Code, as he did a while ago, when the purpose of the bill he is moving is precisely to recognize the principle of the setting up of a provincial sweepstake without having to amend the Criminal Code.
The hon. member said so a while ago. The Criminal Code must be amended. I should like the hon. member to be a little more logical. Does he wish his bill to be passed or would he rather that we put it aside in favour of the bill moved by his colleague from St. Mary and that we call for an amendment to the Criminal Code?
I find his attitude contradictory and I feel he has not given this problem the mature consideration it received from the attorneys general of the provinces and from the federal Minister of Justice. In fact, the latter

Sweepstakes
has fully examined the effects of recognizing such a principle and, following the federal-provincial conference of last November, a press release was issued. In order that the friends of the hon. member for Joliette-L'Assomption-Montcalm be able to better understand it, I will read it in English:

Some provincial governments explained the difficulties they have in enforcing the provisions of the Criminal Code in respect of lotteries and gambling.

Quebec may be in favour but since the Criminal Code applies to the whole of Canada, we must find out whether the other provinces would agree to recognize that principle.
The press release continues as follows: [Text]
Suggestions were made that the institution of provincial lotteries would alleviate the situation. Other provinces, however, opposed this suggestion. The federal government indicated that it had no interest in instituting a federal lottery but undertook to consider the amendment of the Criminal Code in the light of the views put forward.

Mr. Speaker, what the federal government wants to do is to seek an agreement with the various provincial governments to find out in what way the Criminal Code may be amended.
Quebec might agree to it, but if, however, other provinces were opposed to the sale of Quebec lottery tickets in Ontario; if the western provinces were forbidding their citizens to purchase lottery tickets issued in another province, a jurisdictional problem would arise then. Would provincial authorities have the right to forbid the sale, within their province, of lottery tickets issued in another prov-vince, namely in Quebec? A conflict, an imbroglio might arise out of this matter.
Mr. Speaker, there is a jurisdictional point involved as well as a problem of law enforcement on the national scale. I agree with the principle of instituting a lottery, but that legislation would nevertheless require an amendment to the federal legislation called the Criminal Code. The Criminal Code needs to be amended in such a way that the legislation will be enforced all over Canada, because it is federal legislation. This is what the hon. member for Joliette-L'Assomption-Montcalm is unable to understand.


Louis-Joseph Pigeon: Mr. Speaker, may I put a question to the hon. member?


Auguste Choquette: With pleasure, Mr. Speaker.


Louis-Joseph Pigeon: Mr. Speaker, could the hon. member tell the house why, during the last
[Mr. Choquette.l
election campaign, the hon. member for Dollard promised in Malartic, on behalf of his party-


Auguste Choquette: On what date?


Louis-Joseph Pigeon: On April 5. At that time, the hon. member promised that if his party were elected, it would amend the Criminal Code to authorize the provinces to set up lotteries if they wanted to.


Auguste Choquette: Mr. Speaker, I think that the hon. member for Dollard spoke with much objectivity.
The federal government is not opposed to amending the Criminal Code. The hon. member is trying to make us believe the opposite, and by doing so, he is distorting this whole discussion.
The federal government would like to know how the provinces will react to such an amendment and how it will be possible to apply the Criminal Code, as amended. That raises a problem.
If the problem were such an easy one, or if it could be solved that quickly, why then, when the Conservatives were in power at Ottawa and the Union Nationale at Quebec, did the hon. member not succeed in having the Criminal Code amended? Those two governments were on friendly terms. Everybody knew that the Duplessis and Diefenbaker governments constituted a firm axis and that they were working hand in hand. Everybody knew they co-operated with one another. How is it then that when those two governments were in power, they did not succeed in amending the Criminal Code? It is because there were difficulties. And it is those difficulties which the Minister of Justice wants to remove with the consent of the provinces, so that as smooth an agreement as possible may be reached and so that the principle may be recognized, provided it is applicable under law and order.


Horace Andrew (Bud) Olson: May I ask the hon. member one question. Is it not a fact that members of the Liberal government went about the country promising there would be more decisions in 60 days, that they had the answers to some of the problems which the Conservatives found very difficult, and were prepared to implement these solutions at once?


Auguste Choquette: Mr. Speaker, I think the question might be put to my hon. friend. Does he consider the matter of provincial lotteries as a problem of the utmost urgency, or rather as a very important one which might, however, be solved in time, so as not to create any unnecessary conflict?


An hon. Member:: In 60 days.


Auguste Choquette: Mr. Speaker, the achievement promised in 60 days was to settle the most pressing matters which our friends opposite had been unable to solve, as their policy was leading Canada straight to bankruptcy. We stated that, in 60 days, we would avoid the failure-the bankruptcy-they were bringing about.


Mr. Barry Mather (New Westminster):: Mr. Speaker, in rising to say a few words in favour of the proposal before us, I must make it clear at the outset that I speak for myself and not for my party. I personally regret this. In the New Democratic party we have a lot of very high principles and admirable moral and ethical ideals which I certainly share, but sometimes I feel members of the New Democratic party, like the members of labour movements, and perhaps socialist movements in other countries, are at times apt to be in the order of the old Roundheads of Puritan days, and are apt to take a rather Puritan point of view as to some of the facts of life.
This is in contrast to some of those around about us, those who belong to the older parties, and who are much more like the Cavalier types than the Puritan Roundheads. Having this in mind I think it is possible for me, on my own behalf, to say a word or two in favour of the principle of legalizing sweepstakes, in the same way as it was possible for some of the sober Roundheads to cast an admiring glance at Nell Gwyn, and who were none the worse for it. Speaking as one who favours public control and public operation of sweepstakes provincially as in the public interest, I want to put forward five facts which underline what seems to me the need for this legislation.
First, the question today is actually not whether we want sweepstakes. We have sweepstakes. It is estimated that no less than 28 sweepstake operations of a major nature are functioning in Canada at this time. Gambling and drinking are two of the oldest human frailties of which we have record. Drawing by lot, which is a form of gambling, is favourably recorded in the Old Testament, in Joshua chapter 18 verse 10. In the case of drinking, the public long ago gave up the idea that it could, through prohibition, be legislated out of existence.
We have public control of drinking, with the public contributing to the government, through taxation, a considerable amount of the public drinking money. My contention is that the time has come, indeed it is long overdue, to apply the same general principle
Sweepstakes
to the control of sweepstakes in Canada, just as we have done earlier with gambling at the race tracks.
My second point is that at present, as previous speakers have mentioned, millions of dollars leave this country every year to subsidize the private or public sweepstake promoters in other countries. Legislation permitting a provincial or national sweepstake would reduce this toll, and keep a good deal of this money in Canada.
My third fact is that the most modest estimate of sweepstake revenue on a provincial basis indicates that a province, say the size of British Columbia with the population of British Columbia, would net over $1 million a year. This in effect would be a do-it-yourself tax paid by the sweepstake participants. In time to come, United States tourists would add their money to a British Columbia sweepstake, at no cost to our taxpayers. The proceeds would be sufficient, I estimate, to build at least one chronic hospital every 12 months in British Columbia, something which hon. members will agree is very badly needed there.
My fourth point is that Canada is one of the dwindling number of countries which do not already have some form of national, provincial, or government lottery. Countries with as divergent policies as Great Britain and the Soviet union have, if not a sweepstake in the terms of the Irish sweepstake, at least a government bond lottery through which- and I may say I have one here-a person may buy a non-interest bearing bond and thereby be a participant in a draw which distributes a number of prizes to lucky ticket holders. The public is thereby, as it is also in the U.S.S.R., encouraged to invest in state enterprises and the state saves the interest it would otherwise have to pay. A side beneficial effect of this policy is a reduction in inflationary tendencies by the siphoning off of this amount of money into government enterprises.
There are now 30 countries which have sweepstakes or lotteries of one type or another, including New Zealand which has already been mentioned, where the popularity of these enterprises is now so great that they have several every year.
Fifth, I would urge action to regularize sweeps on a basis of respect for the law. Our present anti-sweepstake law is flouted daily by thousands of Canadians, and has been for many years. It is time to make a law that conforms to public usage in this matter rather than to strive vainly to make the public conform to this outdated and unworkable law.
2674	HOUSE OF
Sweepstakes


Mr. Jean-Louis Frenefte (Portneuf):: Mr. Speaker, I do not have a lawyer's qualifications to determine the most efficient way to operate lotteries in the various Canadian provinces. Neither do I intend to discuss the legal aspects thereof, nor suggest the legal procedure best suited for amending the Criminal Code to authorize the operation of provincial lotteries. But I want to express my humble opinion on the subject matter of Bill No. C-19.
Like the hon. member who preceded me, I want to say that I am only expressing my personal opinion and do not want to commit anybody in my group. Though we are but few, it might happen that one or the other would disagree with me.
I therefore want to say that I am in favour of the principle that the Criminal Code be amended so as to enable the provinces which want to do so, to operate the lotteries as considered necessary within their respective territories.
I would even go further than the hon. member for Joliette-L'Assomption-Montcalm (Mr. Pigeon), the mover of Bill No. C-19, by not limiting provincial governments as to quantity or method of disposing of the funds thus collected.
When the matter of lotteries is considered, a moral problem is encountered and many people cut short any discussion of the subject by putting up a screen of ethics. But, meanwhile, lottery tickets of all kinds are sold and bought at an ever-increasing rate.
Besides, those lotteries, unfortunately, are organized most of the time by people whose honesty and integrity are more than questionable. No control is possible on the way prizes are drawn, and most of the sums of money collected in this way go into the already full pockets of certain professional parasites.
In my opinion, the question has already been sufficiently considered, at least enough to enlighten us, the legislators, on the urgency of revising our stand on that matter and protecting, as far as possible, the interests of those who elected us.
The newspapers, throughout the country, conducted thorough investigations on lotteries, obtaining in the process opinions from hundreds of thousands of readers who, in over 90 per cent of the cases, said they were in favour of the organization of such lotteries and of amending the Criminal Code, in order to allow provincial governments to establish their own lotteries.
I am sure a great proportion of the people would be glad to take part in lotteries, which they would know in advance to be organized 

by responsible people, with everything aboveboard and with the proceeds payable to charitable organizations.
In certain quarters, they state it is bad, and even immoral to participate in lotteries, but they do nothing to put an end to it. I believe that with provincial lotteries an end would be put to lots of small organizations, unfortunately controlled by people whose only aim is to exploit a simple-minded public. I do not say that all present organizations are actually in the hands of dishonest people, for there are sweepstakes the philanthropic aim of which is well recognized and the administration of which is perfectly honest.
If we allowed the establishment of such provincial lotteries, we could make use at home, for purposes equally noble, of large amounts of dollars we are presently exporting.
For those reasons, I say it is urgent to legislate in order to stop this hemorrhage of funds which go to help foreign organizations and which could serve right purposes.
In my opinion, it is time the government took its own responsibilities to meet the situation and legislated accordingly. There exists also an evil which should be recognized, I admit. It is perhaps not an argument to put forward, but I know many people have not got the means to buy these lottery tickets but, in view of the existing evil, of two evils should we not choose the lesser.
That is why I believe it is urgent for our legislation to be directed in such a way as to serve the well-being of the population.
Is it not our duty as representatives of the people to pass the pieces of legislation that they want? Is it not our responsibility to reflect here the opinion of our constituents? I believe that is our most definite mandate. That is why, even if I do not completely agree with the provisions of Bill No. C-19, I must nevertheless support it, considering that it is a first step in the right direction.
If I wanted to take this opportunity to play politics, like the hon. members for Joliette-L'Assomption-Montcalm (Mr. Pigeon), and Lotbiniere (Mr. Choquette), I would say that if the government is now trying by every possible means to get the necessary revenues in order to meet all its objectives, if governments at all levels are faced with many financial problems they cannot solve, they should apply the monetary policies that we advocate. In brief, they would find them a much more effective remedy than the setting up of lotteries.


Gilles Grégoire: Mr. Speaker, only a few words to express an opinion on the matter.

A while ago, I asked the hon. member for Lotbiniere whether he supported the principle of lotteries or the principle of finding sources of income.


Auguste Choquette: On a point of order, Mr. Speaker. The hon. member told me: If you are in favour of the principle, sit down. Now, you can realize the inconsistency in his stand.


Gilles Grégoire: Mr. Speaker, I have much admiration for the hon. member for Lotbiniere, but I shall not attempt to act like him. Rather, I shall simply try to express some opinions during the few minutes at my disposal.


Auguste Choquette: That will be something new.


Gilles Grégoire: It would be something new for the hon. member for Lotbiniere and I suggest he should give it a try.
Mr. Speaker, we are therefore called upon to discuss the principle of finding sources of income. Of course, it is more pleasant to buy a sweepstake ticket than to see the income tax inspector take our shirts off our backs. At least, lotteries are voluntary and you buy tickets only if you wish to.
But the principle is always the same, that is to find sources of income for the benefit of hospitals and universities. At this stage, we could ask ourselves how far it could go. Will we have raffles, bingos, all kinds of games to find revenues to support hospitals and universities?
I think it would be better to amend our monetary system in order to find, within the framework of logical and sensible systems, sources of revenue to meet government expenditures instead of doing it on the basis of lotteries such as what we are discussing today. As long as the Minister of Finance will not agree to amend the monetary system, lotteries are a last resource and since there are already some operating illegally in the province, why not organize lotteries and put them in the hands of qualified people who would see to it that the profits serve useful purposes?
That is a middle term on which we could agree if we are in favour of the development of hospitals and universities today.


Auguste Choquette: Would the hon. member allow me to ask him a question?


Gilles Grégoire: Certainly.


Auguste Choquette: What would be the nature of the monetary reforms he is suggesting to take the place of revenue that would be derived from lotteries?


Gilles Grégoire: Mr. Speaker, that is quite easy; make financially possible what is
Sweepstakes
physically possible. If it is physically possible to build universities and hospitals with the proceeds from lotteries, I say that it is always financially possible to make financially possible what is physically possible.
If it is possible to build a hospital because we have the bricks, plaster, nails, workmen, technicians, engineers and architects an<}, if the one thing still to be done, Mr. Speaker, is to bring back to their senses economists like some Laval University professors sitting in this house-indeed, we have two of them -well, then, it is easier to establish lotteries.
If it is physically possible to develop hospitals and universities, let it be made financially possible through legislation put forward by the Minister of Finance. It is as simple as that.
I realize that one has to be able to grasp those things in order to accept them. Indeed, for some people who are too blinded by political partisanship or by the various studies of the present system they may have undertaken, new ideas are difficult to conceive.
In closing my remarks, I would like to say this: if there is no lottery yet in the province of Quebec, I think the leaders of the province are responsible. They argue that they have the right to organize lotteries in that province. Therefore let them exercise their rights, stop their kneeling and bootlicking with regard to the federal government and exert their right.
On television and over the radio, we hear competitions being announced where prizes in money are given out when a purchase is proved, and where the law is bypassed through asking and answering a question. Let the provincial government do likewise.
Let the C.B.C., which is a crown corporation, organize its own lotteries: let them select the winner, and when he presents himself, ask him who is the premier of Quebec, or the Prime Minister of Canada, or some such question, as simple to answer as those we hear on the radio. When such a question is asked, the whole thing becomes legal.
So why should the government of the province of Quebec not organize its own lottery? Let it take its responsibilities and stop crawling on all fours before the federal government. If you win and answer correctly when asked a very simple question, you are handed out $10, $20, $30 or $50,000.
Why does the government of the province of Quebec not do so? Because it has neither the energy nor the courage to act at the proper time, and prefers handing over its responsibilities to others.
Mr. Speaker, it is all very well to talk out legislation here because I am sure that if I

Sweepstakes
do not have the floor, someone else, on the Liberal side, will rise to discuss the matter now before us. I am convinced of that and besides, that is the way it always works out.
But will the government of Quebec always be the victim of such speeches going on until six o'clock? Will the government always wait for the good will of certain backbenchers who had instructions to rise and talk until six o'clock so that the question will not be put? The hon. member for Lotbiniere is one of them. Some others will rise. I can assure you that if, on the Liberal side, there is no one prepared to discuss the matter, someone will nevertheless rise to carry on the debate until six o'clock and talk out the bill now before the house.
Let the government of the province of Quebec take its responsibilities in that matter, let it decide to organize its own lottery and to ask that question to evade the law as C.B.C. has been doing for years. You will see that the lottery will work out very well.
If that is the only way, under our present system, to finance hospitals and universities-


Auguste Choquette: That is sedition.


Gilles Grégoire: Mr. Speaker, the hon. member for Lotbiniere says it is sedition. If that is so, the example comes from higher up, since it comes from a crown corporation, from the C.B.C.
Then, let the Quebec government take its responsibilities, organize a lottery and take the same means as the C.B.C. On a proof of purchase, you will be asked a minor question and should you give the proper answer, you will be given a prize which may amount up to $5,000, as can be seen on T.Y. program "La poule aux oeufs d'or".
This is the advice I am giving. I am sure that should the Quebec government apply it, the federal government would not react, simply because the C.B.C., a crown corporation, is doing that.
The hon. member for Lotbiniere and other hon. members have been told for a long time that the present system is a crazy system administered by the craziest people. Well, they do not want to alter the system. They would rather vegetate. Well, if we have to live under such a system, at least let Quebec take its responsibilities in that field and establish its own lottery.
I see another member rising. Let him rise and speak until six o'clock, for if it is not he, it will be another one.


Mr. Marcel Prud'homme (Si. Denis):: Mr. Speaker, notwithstanding the low demagogy of the hon. members for Lapointe (Mr. Gregoire) and Joliette-L'Assomption-Mont-calm (Mr. Pigeon)-and those who might be

in doubt about it have only to read tomorrow's Hansard to realize how far the hon. member for Lapointe can go in contradicting himself in less than half an hour-I shall make a few remarks-


Gilles Grégoire: Quote one inconsistency.


Marcel Prud'homme: -and I shall remain-


Gilles Grégoire: Go ahead.


Marcel Prud'homme: -within the subject of the debate, in following the general outlines and without lingering needlessly as I said before, on the vulgar demagogy of some members.
There is no doubt that the federal government would be prepared to accept lotteries, I mean to accept the amendment to the Criminal Code.
But the hon. member for Joliette-L'As-somption-Montcalm has not yet understood, just as the hon. member for Lapointe, that this is a matter which would come under an interprovincial agreement.
In reply to the hon. member for Joliette-L'Assomption-Montcalm I would tell him that I have great confidence, for my part, in the tact and diplomacy of the Quebec premier. I am sure that during a federal-provincial conference, he would use the right arguments to convince-


Gilles Grégoire: Would the hon. member allow me a question?


Marcel Prud'homme: Mr. Speaker, I would rather complete my remarks, since the hon. member for Lapointe has suggested that we wished to kill the bill, I do not want to-


Gilles Grégoire: I should just like to direct a question to the hon. member so as to know whether he is reading the speech of the member for Lotbiniere (Mr. Choquette) ?


Marcel Prud'homme: 
Louis-Joseph Pigeon: May I ask the hon. member a question?


Marcel Prud'homme: Mr. Speaker, I have already told another hon. member that I would not answer any question of his before I am through with my remarks.


Louis-Joseph Pigeon: In the United States, New Hampshire is the only state which has established a lottery, and there has been no opposition from the other states.


Marcel Prud'homme: Mr. Speaker, as pointed out by my good friend the hon. member for Portneuf (Mr. Frenette), some people are opposed to such a bill on moral grounds, others on religious grounds. I suggest that before amending the Criminal Code-which the government is prepared to do-there should first be agreement among the provinces. That is what we understand by respecting the rights of the provinces.
The hon. member for Joliette-L'Assomp-tion-Montcalm can be the earnest upholder of a negative autonomy, such as he has experienced during the years prior to 1960, but I say that this central government would rather consult the provinces in order to obtain their approval.
I conclude by pointing out that the present government is certainly in favour of such a project. If the provinces, at their interprovincial meeting, express that wish, you will see how promptly it will be carried out by the federal government.


Louis-Joseph Pigeon: Mr. Speaker, now that the hon. member has concluded his remarks, would he allow me a question?
Sweepstakes


Marcel Prud'homme: Certainly.


Louis-Joseph Pigeon: The hon. member for St. Denis said earlier that if the Criminal Code were amended so that one province might set up lotteries, it would be discriminatory toward the other provinces.
How is it that New Hampshire, the only American state to have a lottery, did not receive any complaints from other American states?


Marcel Prud'homme: If the hon. member for Joliette-L'Assomption-Montcalm will take the trouble to read the question he just asked, not only will he find the answer, but he will note the contradiction in it.


Mr. J. E. Lloyd (Halifax):: Mr. Speaker, I trust that before I finish my remarks on this bill the hon. member for Lapointe (Mr. Gr6-goire) will recognize that, while I agree in principle that something should be done about this problem of lotteries in Canada, I have the common sense to oppose with every justification the passage of this particular bill on the subject. During the debate the hon. and distinguished gentleman from Joliette-L'Assomption-Montcalm (Mr. Pigeon) included some gratuitous observations about the state of this government. He referred in rather extravagant terms, without any foundation whatsoever, to the fact that we in this country were heading for bankruptcy. He very smoothly passed over the deficit spending of prior years, and as is sometimes the case with narrow-minded people he was looking through a keyhole with both of his eyes. I am sure that he was not serious when he made these gratuitous additions to what was otherwise a reasoned debate in favour of an amendment to the Criminal Code to permit lottery operations.
During the course of the debate another hon. member referred to the extensive volume of dollars which are exported from Canada to other countries to purchase sweepstakes tickets. Indeed, apart from the moral question the export of Canadian dollars to other countries by this means is certainly a matter which should occupy the attention of the finance department of any government; there is no doubt about that whatsoever.
On the other side of the coin, if we permitted one province or two provinces to engage in this type of operation without general agreement that all are going to compete with each other in the field, we would be exporting dollars into those provinces from the nonparticipating provinces in Canada, which again would lead to difficulties.
It seems to me that the principle of this bill, which is to examine the whole question
2678	HOUSE OF
Administration of Justice of sweepstakes and lotteries and to find ways and means of obtaining from the Canadian people investment in such undertakings, with the reward of a higher return than might otherwise be obtained, is perfectly all right. On the other hand, before we begin to pass a bill of this kind I think we must examine the experience of other countries.
It is true that in the United States recently the state of New Hampshire passed this very controversial measure and set up a state lottery. It came into being amid a very stormy debate over the moral issue, with anxiety being expressed about possible reaction from neighbouring states and from the federal government-in some respects similar to the situation I attempted to describe a minute ago. The proceeds of this undertaking were to be used for school needs.
I think that one scheme which exploits, and for good, the desire of people to have a chance to make some extra money is that represented by the British system of lottery bonds. I think this scheme should certainly be examined by the Canadian government most carefully because it seems to me to have a great deal of merit. For example, in Great Britain bonds can be purchased, up to maximum blocks, of course. The investors do not receive any interest; instead, drawings are made and something equivalent to 4 per cent interest on the total amount of bonds sold over a specified period is distributed in the way of prizes.



ADMINISTRATION OF JUSTICE


Paul Joseph James Martin: Would the hon. gentleman permit me to interrupt for a moment. I wonder if I could have the unanimous consent of the house to make a statement, which I would otherwise have to make outside the house. I believe the house would want me to make it here at this time.


Louis-Joseph Pigeon: We on this side agree, Mr. Speaker, if the government accepts my sweepstakes bill.


Mr. Deputy Speaker:: Order. Does the house give unanimous consent?


Some hon. Members:: Agreed.


Paul Joseph James Martin: Mr. Speaker, I wish to announce that Mr. Vasily Vasilievich Tarasov, Izvestia correspondent in Canada, had been engaged in activities which were wholly incompatible with his status in Canada as a newspaper reporter. Mr. Tarasov's visa has been cancelled and he has been told to leave the country at once.


Mr. Tarasov attempted to obtain classified information relating to industrial processes of importance to Canada from a Canadian government employee after carefully cultivating his friendship for nearly a year. The government employee concerned reported this matter to the Royal Canadian Mounted Police as soon as it was clear that he had been asked to engage in a highly improper enterprise in return for payment. This led to Mr. Tarasov's confrontation by the Royal Canadian Mounted Police immediately after he had accepted a number of documents.
Today the Soviet ambassador was informed of the government's action, since a correspondent of Izvestia was admitted to Canada as a result of pressing requests of the government of the Soviet union. Fortunately Canadian interests were not harmed because the Canadian civil servant at once reported to the Royal Canadian Mounted Police the approaches made to him by the Soviet correspondent.


Mr. Deputy Speaker:: Order. The hour appointed for the consideration of private members' business has now expired.



BUSINESS OF THE HOUSE

Mr. Deputy Speaker:: It is my duty, pursuant to provisional standing order 39A, to inform the house that the following questions to be raised at ten o'clock this day are as follows: the hon. member for Lambton West (Mr. Foy), whether agreement has been made with the United States to build a weir or dam on the St. Clair river at Sarnia to control the level of the waters in lake Huron; the hon. member for Parry Sound-Muskoka (Mr. Aiken), experiments being conducted by the United States corps of engineers directed toward cutting down the outflow of water from lake Huron at Sarnia;

Mr. Belanger (Charlevoix), the construction of harbour facilities at Riviere du Loup.

The house will now resume the business interrupted at five o'clock.



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 for the 1964 and subsequent taxation years the deduction from income granted in respect of certain tuition fees be extended to include tuition fees paid by a taxpayer who is a student

whether or not he is a full time student, to an educational institution in Canada
(a)	that is a university, college or other educational institution providing courses at a postsecondary school level,
(b)	that is a school operated by or on behalf of Her Majesty in right of Canada or a province, a municipality in Canada, or a municipal or public body performing a function of government in Canada,
(c)	that is a high school or secondary school providing courses leading to a secondary school certificate or diploma that is a requirement for entrance to a college or university, or
(d)	that is certified by the Minister of Labour to be an educational institution by which courses are conducted that provide or improve the qualifications of a person for employment or for the carrying on of a business or profession,
if the tuition fees paid by the taxpayer for the year exceed $25.
2.	That for the 1964 and subsequent taxation years a dependant in respect of whom a taxpayer may deduct an amount not exceeding $550 in computing his taxable income shall include a taxpayer's brother or sister who was 21 years of age or over and in full time attendance at a school or university.
3.	That the period commencing on December 5, 1963 within which a new manufacturing or processing business must have commenced manufacturing or processing in reasonable commercial quantities in a designated area in order to obtain a certificate for the purposes of section 71A of the act be extended to March 31. 1967.
4.	That for the 1964 and subsequent taxation years in determining whether 95 per cent of the assets used in a business were new and situated in a designated area, for purposes of establishing under section 71A of the act that a person was carrying on the business in a designated area, the value of the assets shall be their fair market value notwithstanding that such value may be different from their capital cost.
5.	That where at a time when an area was a designated area a business has been certified to be a new manufacturing or processing business, or an application has been made in writing to the Minister of Industry by a taxpayer in respect of a business that upon the fulfilment of specified conditions would be certified to be a new manufacturing or processing business in the designated area, that area, notwithstanding that it may no longer be a designated area, shall for the purpose of the application of section 71A of the act to that particular business continue to be a designated area.
6.	That for the 1962 and subsequent taxation years a taxpayer may deduct in computing income all expenditures of a current nature for scientific research carried on outside Canada that are expenditures made in the year
(a)	for scientific research related to the taxpayer's business directly undertaken by or on behalf of the taxpayer, or
(b)	to an approved association, university, college, research institute or other similar institution to be used for scientific research related to the taxpayer's business.
7.	That for the 1964 and subsequent taxation years a taxpayer may deduct in computing income amounts expended by him in relation to an objection to an assessment or an appeal from an assessment and shall include in computing income any costs recovered in respect thereof.
8.	That for the 1964 and subsequent taxation years a taxpayer may deduct in computing income an amount paid in the year or in a previous year since 1962 as a contribution to or under a registered
Income Tax Act
pension fund or plan in respect of services rendered by him in past years while he was a contributor even if he also deducts an amount as a contribution in respect of services rendered by him in past years while he was not a contributor, but the maximum amount deductible in a year in respect of past services while he was a contributor shall not exceed $1,500 minus the aggregate of the amounts deducted in the year in respect of services rendered by him in the year and in respect of services rendered by him previous to the year while he was not a contributor.
9.	That for the 1964 and subsequent taxation years the period of 60 days from the end of a year within which an employer may pay an amount to or under a registered pension fund or plan in respect of services rendered by his employees be increased to 120 days.
10.	That for the 1964 and subsequent taxation years it be made clear that any amount received by an employer upon the winding up or reorganization of a pension fund or plan shall be included in his income.
11.	That for the 1964 and subsequent taxation years subsection (3) of section 12 of the act, which provides rules concerning an outlay or expense payable by a taxpayer to a person with whom he was not dealing at arm's length, be amended so that a taxpayer who at the end of his taxation year has a liability that
(a)	arose in respect of a non-arm's length transaction,
(b)	was deductible in computing his income, and
(c)	has been outstanding for two years following the end of the taxation year in which it accrued must include in income for the third year after it accrued an amount equal to the liability, unless the debtor and creditor sign and file an agreement in which they elect to have their taxes computed as though the debt had been paid and replaced by a loan on the first day of that third year.
12.	That the 20 per cent rate of tax payable by a non-resident person on dividends paid or credited to him after 1964 by a corporation resident in Canada that does not have a degree of Canadian ownership be reduced to 15 per cent, and that in consequence thereof:
(a)	Part IID of the act imposing a tax equal to 5 per cent of certain dividends paid by a corporation that does not have a degree of Canadian ownership be repealed;
(b)	the 20 per cent rate of tax imposed by Part IIIA of the act on income earned after 1964 by a non-resident corporation carrying on business in Canada be reduced to 15 per cent; and
(c)	the 20 per cent rate of tax imposed on the taxable income earned after 1964 by a non-resident-owned investment corporation be reduced to 15 per cent.
13.	That for the 1964 and subsequent taxation years, where a taxpayer has disposed of his interest in a partnership, such part of the consideration as is reasonable in the circumstances shall be deemed to be proceeds of disposition of depreciable property of the taxpayer used in the partnership business.
14.	That for the 1964 taxation year the amount deductible in computing taxable income in respect of a dependant child who was over 15 and under 18 years of age at the end of the year shall not exceed $470 if an allowance was paid under the Family Allowances Act in respect of the child for any month after the month in which he attained the age of 16 years.
15.	That for the 1965 and subsequent taxation years, a child shall be regarded as a child qualified for family allowance for any year at the end of which he was over 15 and under 18 years of age,
[Stage Direction]
Income Tax Act
if an allowance under the Family Allowances Act was paid in the year in respect of that child after the month in which he attained the age of 16 years.
16.	That with regard to the definition of degree of Canadian ownership in section 139A of the said Act, the said measure provide as follows:
"(1) Subparagraph (ii) of paragraph (a) of subsection (1) of section 139A of the said Act is repealed and the following substituted therefor:
"(ii) either
(A)	not less than 25 per cent of the issued and outstanding shares of the corporation having full voting rights under all circumstances were owned by one or more individuals resident in Canada, one or more corporation controlled in Canada or a combination thereof, and equity shares representing in the aggregate not less than 25 per cent of that part of the paid up capital of the corporation that was represented by all the issued and outstanding equity shares of the corporation were owned by one or more individuals resident in Canada, one or more corporations controlled in Canada, or a combination thereof, or
(B)	a class or classes of shares of the corporation having full voting rights under all circumstances were listed on a prescribed stock exchange in Canada, and it is established in prescribed manner that no one non-resident person and no one corporation that did not comply with clause (A) of this subparagraph owned more than 75 per cent of the issued and outstanding shares of the corporation having full voting rights under all circumstances, alone or in combination with any other person related to such non-resident person or such corporation at any time within the period within the meaning of subsection (5a) or (5b) of section 139, and a class or classes of equity shares of the corporation representing in the aggregate not less than 50 per cent of that part of the paid up capital of the corporation that was represented by all the issued and outstanding equity shares of the corporation were listed on a prescribed stock exchange in Canada, and it is established in prescribed manner that no one non-resident person and no one corporation that did not comply with clause (A) of this subparagraph owned equity shares representing in the aggregate more than 75 per cent of that part of the paid up capital of the corporation that was represented by all the issued and outstanding equity shares of the corporation, alone or in combination with any other person related to such nonresident person or such corporation at any time within the period within the meaning of subsection (5a) or (5b) of section 139, and"
(2)	Subsection (1) of section 139A of the said act is further amended by striking out the word "or" at the end of paragraph (a) thereof, by repealing paragraph (b) thereof and by substituting therefor the following paragraphs:
"(b) the corporation complied with the conditions specified in subparagraphs (i) and (iii) of paragraph (a) and was a subsidiary wholly-owned corporation subsidiary to a corporation that throughout the sixty-day period complied with the conditions specified in paragraph (a) or (c); or
(c)	the corporation complied with the conditions specified in subparagraphs (i) and (iii) of paragraph (a) and was a subsidiary controlled corporation
(i)	having issued and outstanding equity shares none of which were owned by a person other than
(A)	the corporation to which it was subsidiary,
(B)	a non-resident person not related to the corporation to which it was subsidiary,
(C)	an individual resident in Canada, or
(D)	a corporation controlled in Canada, and 
(ii)	subsidiary to a corporation that throughout the sixty-day period complied with the conditions specified in paragraph (a) or (b)."
(3)	Paragraphs (a) and (b) of subsection (2) of section 139A of the said act are repealed and the following substituted therefor:
"(a) a corporation that has share capital is not controlled in Canada at a particular time unless at that time the corporation is resident in Canada, and more than 50 per cent of its issued and outstanding shares having full voting rights under all circumstances, and shares representing in the aggregate more than 50 per cent of its paid up capital are owned by
(i)	individuals resident in Canada,
(ii)	corporations resident in Canada with respect to each of which
(A)	more than 50 per cent of the issued shares having full voting rights under all circumstances, and
(B)	shares representing in the aggregate more than 50 per cent of the paid up capital
are owned by individuals resident in Canada, or
(iii)	any combination of individuals or corporations described in subparagraph (i) or (ii);
(b) where
(i)	a non-resident person,
(ii)	a corporation that does not have a degree of Canadian ownership, or
(iii)	a corporation that is related to a nonresident person within the meaning of subsection (5a) or (5b) of section 139
has a right under a contract in equity or otherwise either immediately or in the future and either absolutely or contingently, to, or to acquire, equity shares in a corporation, those shares shall
(iv)	unless the right is contingent upon an event that it is not reasonable to expect to occur within a reasonable time, or
(v)	unless the right is such that a reasonable man concerned only with the value of the shares would not exercise it.
be deemed
(vi)	to be owned by the person who has the right.
(vii)	to be owned by a non-resident person, where the person who has the right is a corporation described in subparagraph (ii) or (iii), and
(viii)	where the shares are unissued,
(A)	to be issued and outstanding, and
(B)	to have a paid-up capital value, with respect to each share, equal to
1.	the par value, where the shares have a par value,
2.	the amount that would be paid with respect to each share to exercise the right under the terms of the contract, where the shares have no par value and an amount is specified in the contract, or
3.	the market value at the end of the relevant sixty-day period of a share of the class of shares of that corporation that is most closely similar to that share, where the shares have no par value and no amount is specified in the contract,
and any other person who actually owns the shares in respect of which that right exists shall be deemed not to own those shares."
(4)	Subsection (2) of section 139A of the said act is further amended by striking out the word "and" at the end of paragraph (c) thereof and by adding thereto the following paragraphs:
"(e) "equity share" means
(i) a share, the owner of which has, as owner thereof, a right
(A)	to a dividend, and
(B)	to a part of the surplus of the corporation after repayment of capital, upon the redemption of the share, a reduction of the capital of the corporation or the winding-up of the corporation.

as great as the right of the owner of any other share of the corporation, when the magnitude of the right in each case is expressed as a rate based on the paid-up capital value of the share to which the right relates, and
(ii) a share, the owner of which has, as owner thereof, a right
(A)	to a dividend, after a dividend at a rate not in excess of 8 per cent per annum has been paid to the owners of shares of a class other than the class to which that share belongs, and
(B)	to a part of the surplus of the corporation after repayment of capital, upon the redemption of the share, a reduction of the capital of the corporation or the winding-up of the corporation, after a payment of a part of the surplus at a rate not in excess of 10 per cent has been made to the owners of shares of a class other than the class to which that share belongs,
as great as the right of the owner of any other share of the corporation, when the magnitude of the right in each case is expressed as a rate based on the paid-up capital value of the share to which the right relates; and
(f) "paid-up capital value" with reference to a share, means
(i)	in the case of an unissued share that is deemed by paragraph (b) to be issued and outstanding, the amount determined under clause (B) of subparagraph (viii) of that paragraph, and
(ii)	in any other case, an amount equal to the paid-up capital of the corporation that is represented by the shares of the class to which that share belongs divided by the number of shares of that class that are in fact issued and oustanding."
(5)	In the case of a taxation year commencing before January 1, 1965, of a corporation that would have had a degree of Canadian ownership in the 1964 taxation year if section 139A of the said act had not been amended by this act, that portion of subsection (1) of section 139A of the said act, as amended by this act, that precedes paragraph (a) thereof shall, if the corporation elects in prescribed manner before January 1, 1965, be read as follows:
"139A. (1) For the purposes of this act, a corporation has a degree of Canadian ownership in a taxation year if throughout any sixty day period commencing after March 16,	1964 and ending
before January 1, 1965"
(6)	This section is applicable to the 1964 and subsequent taxation years."
and for the purpose of determining whether a corporation had a degree of Canadian ownership for the purposes of paragraph (b) of subsection (la) of section 106 of the said act, section 139A of the said act shall
(a)	in relation to any dividend declared on or before March 16, 1964 be read as if it had not been amended by the said measure, and
(b)	in relation to any dividend declared after March 16, 1964 be read as amended by the said measure.
At six o'clock the committee took recess.

AFTER RECESS

The committee resumed at 8 p.m.
Lucien Lamoureux: Has the committee completed consideration of paragraph 12?


Mr. Graffiey:: Mr. Chairman, I should like to speak to paragraph 12 very briefly. I think
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many of the initial remarks made by the Minister of Finance during his budget address in relation to the changes he proposes to bring about in the withholding tax were most plausible but, without adopting any holier than thou attitude, I think most of us recognize that if the minister had consulted his departmental officials over a year ago with regard to the proposals he introduced in his first budget he would not have found it necessary to propose the amendment in paragraph 12 that confronts hon. members at the present time. In fact, I feel that the approach of the minister and the government to the problem of the withholding tax has initially been a negative one.
While hon. members of all parties in the house recognize that the Canadian people and the Canadian economy are faced with a real problem, in that many of our secondary and primary industries are controlled by forces outside of the country, and are familiar with the problem in its basic form, I think we in Canada also recognize that at this time we need outside capital to develop our country. If we were able to go back to 1867 and live our economic lives over again I am not so sure we would not profit from some of the experiences we have had, but the objective economic facts are that at this time in 1964 we need capital from outside to develop our resources.
I am not one of those who want to hang the blame on the minister all the time, but certainly the fact is that the approach of the minister and the government to the problem of the withholding tax has been a negative one which has been damaging to Canada from the point of view of dealing with the problem of outside control of our resources. Indeed, it has been most damaging for Canada when we consider that we must have foreign capital to develop our resources.
I should like to state most emphatically that I hope the minister and the government will take a positive attitude from now on in relation to the problem of investment in and control of the economic resources of Canada. I hope that as soon as possible the government will implement those recommendations in the report of the royal commission on banking and finance which will encourage more Canadians and Canadian institutions to invest in both primary and secondary industries within Canada's economy.
I am not going to take the time of the committee by putting forward too much data, but I have always been one of those who have felt that far too many Canadians are keeping their money in a sock. This being so, rather than penalizing investors from outside of Canada who want to invest in our future because they really believe that Canada has

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a bright economic future, I believe it is the responsibility of the minister in particular and the government in general not to engage in tinkering and wasting the time of the house and the country by experimenting-I am sure the minister would be the first to admit that the experiment has been an unhappy one-but rather to devote their thinking to implementing those measures which will encourage Canadians and Canadian institutions to invest in Canadian enterprises.
I should simply like to say that I do not believe the government alone can do this, but rather the government in co-operation with our stock exchanges and stock commissions will have to devise ways and means of encouraging not only those people in the high income brackets to invest in the Canadian economy but also those Canadians in the population generally who I believe have savings that can be devoted to this end. Again I repeat the proposition that I think far too many of our people, because of hidebound tradition, are keeping their money in a great big sock, and I think it is time that the minister and the government took positive measures to do something about this situation. These positive measures should be measures of the government's choice, and the positive measures that are to be found in the report of the royal commission on banking and finance, such as permitting broader scope for the investment of moneys to be found in pension funds and the like.
I do not know how much time it is going to take for the government to do these things but I think there is an immediate need for the government to do some serious thinking about policing stock transactions and the introduction of rules and regulations such as the rules and regulations of the securities and exchange commission in the United States. In sum and substance I am simply attempting to urge the minister to get away from the negative attitude which seems to have characterized the government in relation to its tinkering with the withholding tax and to adopt a positive attitude. I am sure that the opposition, realizing that this problem is much more important than party considerations, will support any government that forgets past activities and lets foreign investors know that their capital is welcome in Canada. I know we are living in difficult times and both the government of the day and the former government may have made particular and general mistakes which unfortunately may have had the result of discouraging foreign investors from coming into Canada.
Let us all regard this as a bipartisan proposition. Let the people outside of Canada
[Mr. Grafftey.f
know that their capital is welcome in Canada and that we need it. Let the minister and the government-I repeat this because it is something that needs repeating time and time again-try to encourage Canadians to take this money out of the sock and invest it in good Canadian securities.


Mr. Otto:: If we may continue in that very reasonable vein the hon. member just started in this discussion, I wonder if we can get down to some very basic facts? The first one is that we have been in the habit of legislating for angels only to find that mortals inhabit this earth. We seem to be greatly shocked and surprised when we find that people behave like human beings. We have known for some time that more and more Canadian industry, Canadian mining and power are held by foreign investors. This is a situation which we realize now and for which we want an instant solution. Of course, there is no instant solution.
We talk about investment, but just what is the purpose of paragraph 12? I believe we are trying to repatriate the investment in Canadian companies. What we are really talking about is an element of risk. What we are saying is, if you put a little money into a new venture, 20 per cent of the people will lose and 80 per cent will make a fantastic amount. We know that in years gone by billions of dollars in profit have gone to people in the United States or Europe. We do not have this money. We must recognize that this is a gamble and that we are asking Canadians to invest.
If we may generalize for a moment we may say that the Canadian is very kind, considerate, and brave. He is a person who will never hurt your feelings. As hon. gentlemen here know, it is very difficult to find anyone who will admit a political affiliation because he may hurt your feelings. We are considerate and kind people, but we are also very apprehensive. We do not gamble. We are, therefore, going to require some incentive if we are going to gamble.
The second point I wish to mention is that the hon. member who has resumed his seat said Canadians have a lot of money. We do have a lot of money. I believe the minister will acknowledge that there is somewhere in the vicinity of $14 billion in savings in this country. We do not know how much money is hidden away in the socks of the Canadian people. If we can judge from the reports of the Brockville robbery, the safety deposit boxes of this country probably contain another $10 billion which is not being used. Possibly we have more in savings in this country for every man, woman and child than anywhere else. However, this is not the kind of money you gamble. This is money which

you scrimped to save and which was difficult to acquire. You do not play the market or gamble with this money. Most businessmen will acknowledge that the money with which people gamble or invest is the easy money, that is the money returned in the form of dividends or profits which people did not expect or which amounted to more than they expected. This is the kind of money that has not remained in this country.
I believe the minister has acknowledged the problem and tried to approach it in a reasonable way. We will have to provide an incentive if we are to find a solution to this problem. We have to consider that the Canadian is apprehensive. We will find it will be a great help in this problem when the Canadian is satisfied he will not starve in his old age. It will be a help when he realizes he has a good pension plan, good medical care and a good unemployment insurance scheme. This will remove that fear of what is going to happen in his old age. Even then, we are not going to get a bunch of Canadian investors.
I dare say you could have the stock market floor covered with shares and even then Canadians are not going to pick them up. We are not shares buyers. A program of education will have to be introduced, therefore, to let Canadians know what we are talking about when we urge them to invest in equity shares. We have to clean up the stock market. I think the minister will acknowledge, as will most members who have had any business dealings, that about 40 per cent of the equity money collected by a company is used in promotional sales. In so far as mining companies are concerned, this may amount to 80 per cent or 90 per cent. We cannot afford these promotional costs. There should be legislation governing this, perhaps by having all companies public companies, or some other method of controlling promotional sales.
I doubt if even this will induce Canadians to invest in shares because Canadians like the kind of risk that is 100 per cent sure. It is a curious thing that when we want Canadians to invest in equity shares we pass legislation which helps the Canadians put all their money in bricks and mortar. I am referring to Central Mortgage and Housing Corporation. We do have legislation which invites Canadians to put money in mortgages. Surely, if our problem is connected with the share structure of companies, our real problem is specifically who is entitled to the dividends? We want the dividend money to stay here so it will be reinvested. So far as control of the company is concerned, that makes very little difference. Business is in business to make money, and will invest money in the manner that is most profitable to business.
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It is true that in some instances United States companies do control Canadian subsidiaries in a way that interferes with these companies doing business in Canada. However, our main problem is to get the money from dividends to stay in Canada. Surely, there should be some thought given to legislation similar to the National Housing Act by which approved stock-


Lucien Lamoureux: Order; I am sorry I have to interrupt the hon. member, but I am wondering if at this time he is not getting away from paragraph 12 to a very substantial degree.


Louis-Joseph Pigeon: Mr. Chairman, we do not think so.


Lucien Lamoureux: Well, the Chair is expressing an opinion. At this point may I say that I have tried to be as lenient as possible in the course of this discussion. Perhaps the hon. member would resume his seat for a moment. We must recognize the rules of the committee which require that discussion in committee should be strictly relevant to the item under study. We have been considering paragraph 12 of this resolution, and it has nothing to do, so far as I can see, with the National Housing Act or several other things which have just been mentioned by the hon. member for York East.


Louis-Joseph Pigeon: We are ready to give unanimous consent to allow the hon. member to continue.


Steven Otto: With all due respect, Mr. Chairman, I was commenting on how legislation had been passed in other fields and yet we did not legislate in the same way in connection with the ownership of shares. Now, just to carry on, surely we could find a method of insuring shares, losses of shares, which would help and which would have some effect on Canadian investors. In another way possibly tax incentives, losses sustained in share purchase or sale, could be applied against profits and earnings; but an individual purchaser cannot do these things.
I have a great admiration for the minister. If you will recall, some time ago I said he was one of the reform ministers, and I believe he is. His ideas are very good, but I would like to think that certain thoughts are good in other fields other than the penalty section. I do not think penalties are going to do very much at all. We need someone to buy the shares if we expect the people who own them outside this country to sell them to us.


Walter Lockhart Gordon: Mr. Chairman, if I might say a word or two about paragraph 12, this paragraph proposes that the 20 per cent rate of withholding tax on dividends paid after December 31, 1964, by a company that does

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not have a degree of Canadian ownership, be reduced to 15 per cent. This will leave a rate of 15 per cent on dividends paid by companies that do not have a degree of Canadian ownership, and a rate of 10 per cent on Canadian companies that have a degree of Canadian ownership.
The purpose of subclause (a) is that the special tax of 5 per cent on increased dividends paid in the period between June 13, 1963 and January 1, 1965, by a company that does not have a degree of Canadian ownership, be repealed. This special tax was necessary to cover increased dividends paid before 1965 in anticipation of the 20 per cent rate scheduled to become payable on dividends after 1964. If there is not to be a rate of 20 per cent of dividends, this special tax is not necessary. We propose to repeal this tax with effect from the date of its enactment in 1963.
Consequential amendment (b) proposes that the increase from 15 per cent to 20 per cent in the tax on branch profits in Canada of non-resident companies shall not come into effect. The 1963 legislation provided for such an increase in tax after 1964, so that the tax on branches in Canada of non-resident companies would conform with the rate on dividends paid by companies that have not a degree of Canadian ownership.
Consequential amendment (c) proposes that the increase from 15 per cent to 20 per cent in the rate of tax on non-resident owned investment corporations, scheduled for 1964, shall not come into effect. If the rate of tax paid by companies without a degree of Canadian ownership had been increased to 20 per cent, it would have been necessary to impose the same rate of tax on the special kind of companies known as non-resident owned investment companies.
I presume from the tenor of the remarks so far that these changes will command the respect and the acceptance of all hon. members of the committee.


George Clyde Nowlan: I can assure the Minister of Finance that these amendments will command the respect, attention and approbation of the official opposition because we have been urging them for the last year and we are very glad to see the minister is bringing them in now. I must say that I agree very much with what the hon. member for York East had to say in his comments about penalties themselves not being sufficient to accomplish the ends the minister has in mind.
Whatever we may think of the desirability, from the philosophical point, of the idea he has, as the hon. member for Brome-Missis-quoi said a few moments ago if we were starting out to negotiate confederation all over again, and if the minister happened to be 
minister of finance, we could have accomplished something that we may have missed in the intervening years.


Walter Lockhart Gordon: I wasn't there then.


George Clyde Nowlan: If the minister were there then we would not have the pleasure of having him here in front of us now. We are very glad he was not there because- and of course I would not say this myself- if he did not do better then than he did in his first budget, we would not have a Canadian parliament here at this time.
I am not going to repeat what has been said before. I think the best object lesson we have had was the speech given the other day by Mr. Ball, the United States under secretary of state. I suggested to the minister a year ago that in my opinion it was obviously necessary-and this the minister admitted-to get a treaty through the United States senate, to renegotiate a treaty if we were going to accomplish what he had in mind; and with the pressure on the United States senate, an election year being in the offing, and with the important legislation it had in front of it, it would be impossible for that body to renegotiate a treaty this year.
When you get the state under secretary in the United States making a speech such as he did on Saturday, attacking this policy hip and thigh, in shall we say polite but stern terms-I have forgotten how the minister described it-you can imagine what hope there would be of the United States senate passing such legislation this year.
The minister has said that the tax reductions in the United States have enabled him to retreat from the position he took when he brought this measure in a year ago. He is fortunate to have some justification for his retreat, but I do not think that is at all the material one. The material one is that he could not have got the legislation through and, if there had not been a tax treaty renegotiated, we would have been faced with a 30 per cent withholding tax on Canadian corporations in the United States, and this would be an absolutely impossible situation.
It is a very good thing that the minister has withdrawn from that position and that we are going back to the 15 per cent. The club has been withdrawn and there is now this small carrot held out. There should be more carrots. There should be a more positive approach. Obviously the banking commission, which reported the other day, felt that way, and there have been various briefs presented to it by the bankers' associations, making recommendations to deal with estate tax and other matters by which this end could be accomplished. We are well away from this legislation on which we embarked,

and from the clubs inherent in it in dealing with investment from outside.
There has been a great deal of controversy as to how much the investment of funds has dried up in this country. I know there are various aspects to that. I know the equalization tax in the United States played an important part, as well as the minister's first budget. I am not sure how far he can go in trying to delimit which had the greater effect, but I hope when the bill is before the house that he will be able to give us more information on that score. As it is, I am simply saying that we of the opposition appreciate the fact that this legislation is being amended, and this move certainly has our full hearted support.


Mr, Douglas:: The minister has said that apparently the provisions of paragraph 12 commend themselves to the committee. Lest silence appear to give consent, I want to express very briefly my point of view on this paragraph. Last year when the minister presented his budget he very properly expressed great concern about the growing control of the Canadian economy by foreign investors and he proposed some measures to rectify this situation. I do not think the measures he proposed at that time were very far reaching or likely to be effective, but at least they were a timid move in the right direction. I wish to express my regret that the minister has now completely retreated from the position he took last year and that he has not so far suggested any positive means of coping with the serious problem of the extensive control of the Canadian economy by foreign investors, particularly by the tremendous United States corporations.
I think it goes much further than this question of the withholding tax. When one finds under secretary George W. Ball, in the speech he made at Harrington, New York, warning the Canadian government that a very dim view will be taken of measures designed to make a change in the character of investment from equity to debt, it seems to me a serious point has been reached. If we are to get out of the dilemma in which we find ourselves there must, in my view, be a gradual change from equity control to loan capital and if Mr. Ball's words imply a warning to the Canadian government that any attempt to transfer indebtedness from an equity position to a loan capital position means there will be restrictions or retaliations, then, indeed, we have become an economic satellite and not a nation at all. While I do not intend to fight for the retention of these trifling provisions which are designed to move some of the indebtedness from an equity position to a debt position, I think this is symptomatic of the fact that the Canadian government is now in
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retreat as far as any serious attempt to grapple with the problem of foreign control is concerned.
If the minister were simply removing these minor provisions in order to introduce some constructive and dynamic program, I would agree these would be no loss. But I see no signs of any such proposal. We in this party have a number of proposals which we have put forward from time to time and which I should like to make again. However, I am sure Your Honour would not permit me to discuss them under this paragraph and I therefore do not intend to seek to do so. But I think I should say to the minister that we are disappointed the government has apparently completely capitulated on this question of attempting to deal with foreign control of our economy; and in the absence of any proposals in the minister's budget speech and in the absence of any announced legislation, we can only assume that the government is giving up the battle after a very small and feeble effort.


John Edward Lloyd: Some brief references have been made to the royal commission on banking, and the previous speaker for the opposition observed that perhaps now was not the time to look back; that we should look ahead and recognize mistakes. The royal commission report made it clear that in its judgment there may have been mistakes on the part of the present administration as well as past administrations, and I think it might help us if we were to remember that the royal commission declared that it rejected the use of direct controls on international capital flows as disrupting to the efficient working of economic incentives and as having harmful long term effects. Then the report went on:
The country will no doubt continue to draw in resources from abroad at some times but on balance the economy need not be a large net user of foreign funds if soundly managed at home.
In this connection, the report points out that much of the capital inflow from 1958 to 1961 stemmed from inappropriate domestic credit policies.
Perhaps I might turn now to the observations made by the previous speaker. The leader of the New Democratic party spoke of the need for a challenging and positive program. Anybody who has been associated with the advanced training of young Canadians in commerce and law over the last two decades will readily recognize that there has been a tremendous improvement in management skills among Canadians during that period. Any legislation which draws attention to the fact that foreign investors may obtain important advantages by making use of these skills will prove worth while both to ourselves and to the companies concerned. If

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those companies, in addition to taking advantage of Canadian skills, adjust their policies so as to be more in line with Canadian objectives, not only would their capital yield more, but the legislation under debate, instead of constituting a deterrent will constitute in my judgment both an incentive and an advantage.


David Réal Caouette: Mr. Chairman, I am of the
opinion that this paragraph 12 will change the present situation very little and will not contribute anything towards creating a single new industry in Canada.
In this regard, I completely support the remarks made by the hon. member for Bur-naby-Coquitlam (Mr. Douglas) to the effect that it is urgent for the government to take positive action and to make a forceful gesture in order to favour an economy controlled by Canadians.
In paragraph 12, we read the following:
That the 20 per cent rate of tax payable by a non-resident person... be reduced to 15 per cent, and that in consequence thereof:
(a) Part IID of the act imposing a tax equal to 5 per cent of certain dividends paid by a corporation that does not have a degree of Canadian ownership be repealed;
On the one hand, the 5 per cent exemption is reduced and, on the other, the 5 per cent tax now payable is removed. This means that we are running around in a circle with this paragraph 12, or this amendment to the Income Tax Act.
It was suggested a while ago that Canadians who have money or securities hidden away in wool stockings, etc., should be encouraged to take a gamble in order to help our secondary industries. We agree. However, it is not with the money hidden away nowadays in wool stockings that new secondary industries will be set up in Canada. Government action is absolutely necessary. The government must take its responsibilities. To suggest such solutions will not prevent Americans from continuing their control of the whole economy of the country. The government must assume its responsibilities, not in the face of the American people or the other peoples of the world, but in the face of Canadians themselves who are ready to work for the development of the natural resources of their country.
To that end, the government's co-operation is imperative. We have the necessary physical means in Canada, we have the talents, we have the brains, we have everything that is necessary to develop our natural resources and to turn them to the advantage of the whole population. The only element we do not have is credit, to finance the launching of an economic development program. The

Minister of Finance does not make such a suggestion. He forgets his responsibilities in that respect. He tries to make the Canadian people believe that a 5 per cent tax increase, levied on American companies will prevent Americans from continuing to exercise their control in Canada; but this will not allow Canadians to control their own economy.
Mr. Chairman, that clause was discussed earlier this afternoon and we have not made much progress. We are at a standstill. The Minister of Finance will not change his opinion or his attitude. Nevertheless, he should know that only concrete action will enable us to establish in our country an economic balance, the majority of which would be controlled by our fellow citizens. Then, secondary industries will pop up all over the country.
Some of our citizens have inventions to offer, things to present to the country which could be useful to the general welfare of our people.
The government listens but with half an ear.
It seems to me that we must regain our sense of responsibility; we must get back within the bounds of logic and common sense; we must stop erecting or spreading smoke screens before the public eye on the pretence that the government is helping greatly the Canadian people by imposing a 5 per cent tax on American companies operating businesses in Canada. In my opinion, it is to laugh in our people's face, to consider them as ignorant people who know nothing of what is happening in their country and who believe that the Minister of Finance actually is assisting them in gratifying a little less the American people, while still leaving to them the control of our Canadian economy, as they have it at the present time.
If we want to keep and help our Canadian industries, the Minister of Finance only has to ask the industrial expansion bank to provide an amount of credit proportionate to our physical capability of setting up secondary industries which, in turn, will create jobs and increase our national production. Then, it would no longer be necessary to deal with odd questions like the one covered by paragraph 12 of this amendment to the Income Tax Act.


[Stage Direction]
Paragraph agreed to.
On paragraph 13.
George Clyde Nowlan: Mr. Chairman, I think the minister spoke about this matter the other day. This is a question concerning the sale of a partnership, to provide a basis for capital

cost allowance. Would the minister like to say something on this paragraph?


Walter Lockhart Gordon: Mr. Chairman, this paragraph proposes that where a partner sells his interest, the appropriate part of the amount he receives as the selling price shall be deemed to be received on account of the disposition of depreciable property. This will make it possible to recapture depreciation which the partners claimed in recent years, or to allow a terminal loss in respect of the depreciable property, depending upon the circumstances.
It is just as if a corporation sells some depreciable assets at a profit. The amount of capital cost allowance that it has claimed in earlier years is recouped by the crown as a charge against the corporation's profits, and this provision is intended to apply the same principle when a partner retires.


[Stage Direction]
Paragraph agreed to.
On paragraph 14.
George Clyde Nowlan: On paragraph 14, Mr. Chairman, I think there is raised a question which the minister should explain carefully to the committee at this time. This is the paragraph which provides that family allowances will be paid in respect of children who otherwise would not be qualified; that is, children over the age of 16. The parents of such children will receive for this year a deduction of $470. Ordinarily, if they were dependants and not in receipt of family allowance, they would receive a deduction from income of $550. If they were in receipt of family allowance for the year, they would only receive a deduction of $300, I think.
In this case I think the minister is splitting the difference, shall we say, and assuming that the legislation will not come into effect until some time this year, possibly not until next fall; therefore they will receive $470 and then, presumably, the family allowance for the balance of the year. That raises the question of the payment of family allowances under this paragraph and the deductibility therefrom. The whole field has yet to be dealt with, I quite appreciate that; but this is a situation which should be clarified now as far as the minister is concerned.
As I understand it from newspaper reports and, I think, from the statement of the Prime Minister as well, and possibly from the statement of the Minister of Finance-I am not sure about that-the situation is as follows. The Prime Minister spoke on this when dealing with the arrangements that were made between the province of Quebec and the government of Canada and said that the province of Quebec had, of course, been paying for some years an educational grant to children over the family allowance age. I think the province certainly deserves a great deal
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of commendation for so doing. It has been an educational grant for those who stayed in school and has been paid out of provincial revenues. Now we are going to pay family allowance in respect of all children who remain in school over the ages of 16 and 17. But in the province of Quebec, this being an educational grant, as I gather from what the Prime Minister said the other day, the province will continue to make that payment in respect of the children and there will be an abatement from the federal treasury to the province of the amount, roughly, that has been paid to the parents of the children in Quebec. In Ontario and the rest of Canada the family allowance will be paid.
It may be-and this is a situation which I think the minister should clarify now- that a parent living on the other side of the river here with one dependant 16 years of age will be receiving $10 a month from the province of Quebec in respect of this educational grant and at the same time will be receiving the deduction in so far as the dependant is concerned, because he will not be receiving family allowance. On the other hand, with regard to the parent living on this side of the river and receiving a family allowance, the dependancy will only result in a deduction of $300 a year instead of $550. That is an anomalous situation which has caused some discussion in the press and elsewhere in Canada. Therefore I think that with regard to this paragraph the minister should clarify the situation as it will be when the legislation is completed.


Walter Lockhart Gordon: Mr. Chairman, this particular paragraph of the resolution, as the hon. member for Digby-Annapolis-Kings pointed out, deals only with the difference between the $550 that is normally allowed for a dependant and the $300 that is allowed for a dependant in respect of whom family allowance is being paid to the parents for a period. The difference between those two amounts is $250. It is expected that these payments will apply for the months of September to December, inclusive, this year-that is to say, four months-and a third of $250 is roughly $80. This explains why the figure is $470.
In the application of this new proposal to the province of Quebec certain difficulties arose. As the hon. member pointed out, the province of Quebec has been paying an educational grant for some years. This went back either to 1960, or it began in 1961. In the case of the province of Quebec the amounts are paid to the children, or in the right of the children, rather than to the parents. Because of this, and because I suppose it was a payment by a provincial government, there has been no change in the

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income tax deductions allowable to the parents. They are not reduced because the payments are made, as I say, to the children.
I would remind the members of this committee that under the Quebec plan this educational grant applies for ten months only, not for 12, so the payment in respect of a 16 or 17 year old child to continue at school amounts to $100 a year. Under the proposed federal plan which will be presented to the house as soon as the legislation has been drafted the amount will be $10 a month and will apply for 12 months, and it will be paid, as are the family allowances, to the parents. I suppose that theoretically the federal plan could apply to everyone in Canada, but in that case the additional $10 per month per child in the case of Quebec would be superimposed upon an existing plan under which the province is already paying $10 per month by way of educational grants. I think most people would agree that although it would be nice for the people of Quebec to get it twice, it would not be a reasonable thing to do.
The government of the province of Quebec has pointed out that they have a plan which has been in existence for three or four years. It has been well accepted. It meets their requirements and understandably they do not wish to change it. On the other hand, in extending the principle of family allowances the federal government certainly would not wish to pay something which could be interpreted as an educational grant. After all, there are certain sensitivities in these matters as well as certain constitutional rights and responsibilities, and I not think that the members of this committee would agree that this would be a wise course for the federal government to embark upon. And, of course, the federal government has no intention of doing so.
Therefore, the problem has been to find a workable and reasonable compromise. It is proposed-and I am now answering my hon. friend's question, although this will doubtless be discussed again when the legislation is before the house-that an amount be paid to the province of Quebec which will be calculated at the net amount which would have been paid in respect of children remaining at school in the province of Quebec, less the reduction in the allowances in the rest of the country in the case of parents in the higher income brackets. This deduction is quite substantial and this is the proposal which will be presented to the house when this legislation is ready for consideration.


Mr. Ricard:: Mr. Chairman, I would not want to let this occasion go by without [Mr. Nowlan.J	,
rectifying one statement made by the minister. In his remarks he said that allowances were paid to the children, which is not the case. In fact, they are paid directly to the mother of the child.


Walter Lockhart Gordon: May I just correct that. They are paid in the right of the children; but the children are a little young so probably the money goes to the mother.


Louis-Joseph Pigeon: Only a few short remarks, Mr. Chairman.
When Mr. Lesage was a federal minister, he never considered as an interference by the federal government in the field of education the fact that this government paid family allowances to children of a certain age and to those who are still studying. That is why I am surprised that Mr. Lesage objects to the decision of the federal government to grant a further amount and extend the period during which family allowances are paid.
I understand that the Quebec government pays family allowances to children at a more advanced age than the federal government but, in my opinion, the basic reason why Mr. Lesage objects to an extension of those family allowances by the federal government, is not so much because provincial autonomy is jeopardized, but because the provincial government is already paying a school allowance, and Mr. Lesage prefers to get those sums of money back and use them for other purposes.
Consequently, I believe that it would be more normal for Mr. Lesage to receive those sums of money and to give them to children who continue their studies.
That is my personal opinion.


Walter Lockhart Gordon: Perhaps I might just clear up any misunderstanding on this last point. As I said earlier, there was some discussion as to whether the very fortunate children-or perhaps the very fortunate mothers-of the province of Quebec should get two $10 per month payments, one from the province and one from the federal government.


Mr. Rondeau:: What is wrong with that?


Walter Lockhart Gordon: Well, that is a very natural comment and I can quite understand it. I dare say that that is a comment which would be made by many of the mothers in the province of Quebec. However, I would remind my hon. friend that payments are made to the mothers and not to the fathers. The fact is that there are those who feel there are a lot of demands which are made upon the relatively meagre resources of governments, both federal and provincial, and that this problem having been looked after in the

province of Quebec in 1960 or 1961 it would not make sense to duplicate it. It was for that reason and because their plan has been in existence for some time and is working well-and no one wants to abandon a plan which has been successful-that it is proposed to handle the matter in the way I have described.


Louis-Joseph Pigeon: Mr. Chairman, what I meant is that Mr. Lesage reminds me of a magician.
The federal government wants to pass that legislation, vote those sums of money which in the other provinces, will normally be going to the children attending school, whereas Mr. Lesage will get that money and will be able to do what he pleases with it. In other words, the money he will receive from the federal government will not go to the children of Quebec still attending school. He will be able to do what he pleases with it.
Everyone knows that Mr. Lesage once was a cabinet minister in Ottawa and that he is now premier of Quebec. I feel that his attitude has changed completely; he is not the same man, in short, he does not have the same political conscience. That is what I wanted to draw to the attention of the house.
I understand why Mr. Lesage so rightly objects to the federal government's intrusion in the field of education, but whatever means the latter might have taken to satisfy the Quebec premier, I would have wished that, upon receipt of that money, Mr. Lesage would have been compelled to distribute it to children who still attend school, even if the provincial government already provides a certain amount in that connection. In fact, I feel such a course of action would have been more normal.


Alfred Dryden Hales: Mr. Chairman, I must admit that I did not follow the minister's explanation too clearly and I would ask him to explain the matter in a little more detail. Will the exemption that parents of children 16 and 17 in the nine provinces can claim be reduced to $300 and will the parents of children of the same age in Quebec continue to get an exemption of $550? Would the minister take a family just across the river, let us say, with one child going to school and a similar family in Ontario, compare the two and explain the matter so that we may follow it?


Walter Lockhart Gordon: Mr. Chairman, there is a difference now between a family in Quebec and a family in Ontario which I will explain in a moment. That difference will be narrowed. At the moment a family in Quebec receives $550 in respect of or on behalf of-I forget the
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legal phrase-a child who continues in school up to the age of 18. I am informed that the age is higher than that. This is something that the people of the province of Quebec get from their provincial government, and that the people of no other province receive. Therefore parents in the province of Quebec now have a decided advantage in this respect over people in the other nine provinces. That is the way it is now.
Under the proposed plan the present arrangement in the province of Quebec will, as far as I know, continue without change. That is the intention of the government of Quebec. In all the other provinces, however, the federal government will extend the present family allowances at the rate of $10 per month for 12 months, whereas in Quebec it is only 10 months, and apply exactly the same formula that now applies up to the age of 15 in so far as allowances are concerned.
Therefore if you take somebody on one side of the river and compare her with somebody on the other side of the river I think you will be able to show that there is a difference in the net amount they will receive and that difference will be reduced in the future. Because the Quebec plan was introduced some time ago, because it is an established plan and because, understandably, I think, the government there feels it would be unacceptable to change it, the net amount after the deduction of the statutory allowances for children that would have been payable in the province of Quebec to mothers in the province of Quebec under the federal scheme will be paid to the government of that province. I do not know whether I should comment on the remarks of the hon. member for Assomption-Montcalm.


An hon. Member:: Joliette.


Walter Lockhart Gordon: Joliette-L'Assomption-Mont-calm. These triple constituencies bother me sometimes. At the beginning of his remarks he said that Premier Lesage had worked a miracle or was something of a miracle man or something like that. There are times when I am inclined to agree with my hon. friend opposite, but in this case I think this is not the logical conclusion.


Thomas Clement (Tommy) Douglas: Mr. Chairman, I want to get some further clarification from the minister. I tried to follow him very closely. Briefly, do I understand the situation to be this? First of all, may I say that I agree with the minister, of course, that as Quebec already has its plan there is no reason why the federal government should ask them to discard it, and there ought to be some accommodation. All I am trying to find out is whether this is an equitable arrangement.

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Do I understand what the minister is now telling us is something like this? In the province of Quebec the provincial government will continue to pay $100 a year per child. I am putting it on an annual basis. In other parts of Canada the federal government will pay to each family $120 per year for 16 and 17 year-olds. Will the financial equivalent which is to be paid to the province of Quebec be on the basis of $100 per child or on the basis of $120 per child. My second question is: Do I understand that the exemption for parents in Quebec will continue to be $550 whereas in the rest of Canada it will be reduced to $300? Will the minister answer those questions?


Walter Lockhart Gordon: Yes, but in calculating the financial equivalent to be paid to the province of Quebec it will be worked out at $120 less the difference between the allowances of $550 and $300, which makes quite a difference in the total tax paid by any individual. Therefore it will not be the gross amount of $120. Let me take my hon. friend as an example, although as he is roughly my age perhaps I had better pick somebody younger. I do not know whether the hon. member has teenage children. If a member of this house has two teenage children his wife will receive-


Thomas Clement (Tommy) Douglas: In Quebec?


Walter Lockhart Gordon: In the rest of Canada-$240, but the amount of the deduction that the member can claim for those two children will only be $600 because his wife gets this extra amount instead of being $550 times two or a total of $1,100. So his tax will go up and the amount that the tax goes up is obviously an offset to the total that is paid. Exactly the same calculation will be made in arriving at the fiscal equivalent that is due to the province of Quebec. Therefore the province of Quebec, taking the province as representing all the people of Quebec, will be in exactly the same position as any other province.


Thomas Clement (Tommy) Douglas: May I clarify one point? I think I understand the minister now, but am I correct that parents in the province of Quebec will get $100 instead of $120, but they will save almost the equivalent amount on income tax, so it works out reasonably fairly? The province of Quebec will collect on the basis of $120 even though it is only paying $100, but there will be deducted from the fiscal equivalent paid to them the amount of income tax which the federal government would have collected if the exemption had been only $300 in Quebec instead of $550. Is that correct?


Walter Lockhart Gordon: That is correct.


Mr. Fairweaiher:: May I ask the minister
at this stage, for the sake of consistency-* and that is apparently the approach-why did the government not adopt the Quebec formula or the Quebec plan? Then we would not be spending all evening on this thing?


Walter Lockhart Gordon: I can assure my hon. friend that the members of the government spent many evenings in trying to arrive at the best solution of this very complicated problem.


Robert Gordon Lee Fairweather: Is this the best solution? I doubt it.


Walter Lockhart Gordon: The government thinks it is. Perhaps the hon. member may think so too when I have finished my explanation.
If the government had proposed to this house or, when the time comes if it did propose to this house, that we just adopt the Quebec plan holus-bolus we would not be extending the family allowance procedure at all. We would be doing something different. The family allowance procedure has been in force, I think, for 20 years. There has been no question about it. No one, to my knowledge, has ever challenged its constitutionality. If we were to adopt an entirely new approach for people in the 16 and 17 year old brackets, then I would have to go to the Minister of Justice and ask him if he was quite sure this would be acceptable.
The intention has always been in connection with this legislation that it should represent an extension of the family allowance scheme to apply to people at 16 and 17 years, because times have changed in 20 years and people no longer leave school, or we hope they no longer leave school at 15. This was the purpose and the intention. Apart from that, the problem has been to find a fair, reasonable and equitable basis for compensating the government of Quebec who, understandably, do not want to withdraw or change their system which has been in effect for three or four years.


Mr. Paul:: Mr. Chairman, I listened with interest to the remarks made by the Minister of Finance, but I feel he was ill informed by his adviser when he told the hon. member for Wellington South (Mr. Hales) that school allowances were paid even after the age of 18 in the province of Quebec.
The granting of those school allowances ends at 18. But what I feel is unfair is that the Minister of Finance seems to consider as a dependant child one who attends an institution or a school, and that is the basis of his argument. Consequently, a 16 or 17 year old youth who does not attend school in Quebec would be deprived of the family allowance

from 16 to 18 years of age, while in the other provinces, such a child would get it.
Therefore, the word "dependant" should not be limited to those who go to school, because it may happen that a sick or crippled child remains dependant on his parents without going to school.


Walter Lockhart Gordon: May I interrupt the hon. member? I am afraid that when I attempted to explain this I simplified it too greatly. I can assure my hon. friend this allowance will apply to children who are sick or invalids.


Rémi Paul: I thank the minister for clearing up that point, but here again it seems to me that the basic exemption will vary in the province of Quebec as compared to the other provinces. The minister stated that in Quebec the deductibility will reach a maximum of $470. But what about poor or large families? The individual who does not pay income tax for lack of sufficient income will not be able to benefit by this basic exemption of $470 and he will lose his monthly allowance of $20 compared to children of other provinces.
I believe the minister should, in the bill which he will submit to the house later, provide a special allowance based on 12 rather than ten months per year.


Walter Lockhart Gordon: Mr. Chairman, all I can say in reply to that is the people in Quebec will be treated in exactly the same way as they always have been. So far as the compensation that will be paid to Quebec is concerned, I can say with some assurance that I have every confidence in the government of Quebec being able to check the arithmetic very carefully.


Mr. Rheaume:: I am wondering too, Mr. Chairman, about the grants that are going to be made to Quebec in lieu of this program. These family allowances are rigidly controlled by the Department of National Health and Welfare and in certain cases children would not be eligible under the program. For instance, a person over 16 not attending school would not qualify for the additional allowance. It seems to me the allowance regulations are going to differ between the federal family allowance scheme operative in all other provinces except Quebec, and the Quebec scheme. We are going to get serious discrepancies.
I can conceive of a situation whereby a mother in Quebec would receive the $100 a year allowance from the provincial authorities for income tax purposes and would be able to deduct the full $550 exemption for youngsters between 16 and 17, whereas a 20220-171
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family in a province other than Quebec in the identical situation would not receive the extra family allowance and would still be allowed only the same deduction for income tax purposes. The question I have for the minister is, at the time these negotiations were being conducted did the federal government examine the kind of controls that were going to be imposed on this program to ensure there would not be a discrepancy here?


Walter Lockhart Gordon: Perhaps questions of this kind could be dealt with better when the legislation is before the house. I can assure my hon. friend that this problem has been gone into very thoroughly. I think it might perhaps becloud a very interesting and a very good discussion on this resolution if we get into a discussion of another piece of legislation that will be presented very shortly.


Alfred Dryden Hales: I understood the minister to say the exemption for parents in the nine provinces will be $300 and in Quebec it will be $550 for children aged 16 or 17 years going to school. Now, how do we know whether or not a child is at school? How is this arrived at? I think I understand the Ontario situation; is Quebec operated the same way?


Walter Lockhart Gordon: The same tests will apply in the future as apply now, and family allowances are not paid now unless children go to school.


Alfred Dryden Hales: The question is, how do we know the child is at school? What controls have we?


Walter Lockhart Gordon: This is something I would prefer to discuss when the legislation is before the house. I do not know whether that will be next week or next month, but it will certainly have to be soon. I will be properly briefed then and I hope I will be in a position to answer my hon. friend's question. My understanding is that the officials of the Department of National Health and Welfare have an inspection service, and they check up with the schools.


Alfred Dryden Hales: Maybe we can hold over paragraph 14 until we have this information that the minister speaks of.


William Heward Grafftey: On this clause

and at first glance one might think I was getting off the subject-I would like to point out that often, both in this chamber and outside it, I have proposed closer liaison between the federal government and the provincial governments. I proposed the establishment of a secretariat or other body for federal-provincial affairs,

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and if any example demonstrates the necessity for such a body it is the debate in this committee tonight.
I am not blaming the minister for this. I know we are still a young country and are still evolving our procedures, but my proposal to this effect was talked out the other day during private members' hour. What is going on here tonight indicates the immediate need for the government to sit down with the provinces, not tomorrow but almost tonight. I have spoken about this to my colleagues, to my friends in the press gallery and to my friends on both sides of the chamber. There has been far too much postponement about it.
There is an immediate need for the establishment of more sophisticated bodies, call them secretariats or what you will. Tonight's debate indicates the type of misunderstandings and disagreements that can take place when we lack this liaison or these sophisticated bodies for federal-provincial affairs. I should think the minister would be getting pretty tired of having ultimatums issued to him by the premier of Quebec, but I congratulate the minister.
Every sincere Canadian, no matter what party he belongs to, is happy about the type of arrangement the minister and the government have been able to make with Quebec in the last few days. I congratulate the minister and the government upon it, and we are putting party after country when we say that.
However, I remember just before that the federal government was threatened by the premier of Quebec that this whole question was going to be brought immediately before the supreme court. Within the short space of one year we have had a Liberal premier telling a Liberal government at Ottawa that he is going to have his way, or else.


Lucien Lamoureux: Order. The standing order is well known to the hon. member, which requires that discussion in committee be strictly relevant to the resolution before us, and I would ask him to keep that in mind.


William Heward Grafftey: I bow to that ruling, but I
would point out that before the arrangement was made with the province of Quebec, the premier of Quebec stated that this whole matter was going to be brought by his government before the supreme court, and I think that is relevant. That being the case I would like to ask the minister, before this arrangement was made with the province of Quebec, did any of the government's advisers advise it that this whole proposal was unconstitutional?
Before taking my seat I offer this idea in all sincerity to the committee, because I think 
it is a very appropriate time to do it. The debate taking place tonight, and what has happened outside the committee in relation to this whole problem, indicates that there is a pressing need for more sophisticated bodies to deal with liaison between the federal government and the provinces.


David Réal Caouette: I have only a few words to say about paragraph 14.
I feel that the reference to exemptions which must not exceed $470 if an allowance is paid under the Family Allowances Act causes confusion more than anything else.
Many people think that the province of Quebec will benefit more than the other provinces and will get a preferential treatment under this paragraph 14.
I wonder whether the minister intends to introduce legislation in this field in the near future? The minister and the government should have granted a general increase in family allowances for children 17 and 18 years old, under the same conditions now applying to children getting allowances since 1945-if a child stops going to school, as the minister knows, the payment of those family allowances is stopped. It has always been so. Now, to avoid this confusion which exists at the present time between Quebec legislation and federal legislation which is interpreted in Quebec as a federal intrusion in a provincial field, why not increase family allowances now granted to other children?
If Quebec decides to pay school allowance in addition to family allowances, that would be its own business. If Ontario wants to do likewise that is also Ontario's own business and if that province does not want to do so, it does not have to. I think that it would justify the federal point of view, if we had standard legislation throughout Canada. It is useless to divide. There has not been any division in the case of family allowances since 1945.
All the provinces and all the mothers have accepted it, like the minister said a moment ago. But since the minister does not see any objection to the mothers of our children receiving an allowance $10 larger, why does he not introduce general legislation to continue family allowances up to 18 years of age. Then, let the province of Quebec administer its own educational system, and let Mr. Jean Lesage continue, I hope, to pay $10 a month to the children of the province of Quebec. And that will free the federal government.


Mr. Baldwin:: I realize the minister is in a difficult position. He is trying to explain what,

prima facie, is a very simple question. Unfortunately for him it is complicated by the fact that the Prime Minister, in making his statement, indicated that instead of this family allowance being extended into the province of Quebec there would be an equivalent provided. Consequently, when we look at paragraph 14 we must look at it in the light of what the Prime Minister said in his announcement.
What the minister has been attempting to do is to indicate what type of regulations there will be in the future, so that in the view of the government there will be equity done between the parents of 16 and 17 year old children in Quebec and the parents of 16 and 17 year old children outside Quebec. This is how I understand his proposition. We must take these two statements together, and the fact that the government of Quebec has stated it wants this allowance in another form.
What puzzles me is how we can reconcile that with the fact that for 20 years family allowances have been paid into every province with a stipulation that if a child ceases to attend school the allowance ceases to be paid. I realize in making this comment the minister may be driven to consider what may be the type of legislation to be introduced in the future, but for the last 20 years family allowances have been paid under the provisions of the legislation which provides, under section 4, that the allowance ceases to be payable if the child does not regularly attend school as required by the laws of the province where he resides. I realize this is not the time when the minister can give a complete answer, but nevertheless we are being asked to approve paragraph 14, and we must keep this in mind. How do we reconcile this provision which has been in the Family Allowances Act for 20 years with the distinction which we are now asked to make with respect to the province of Quebec?


Walter Lockhart Gordon: I think that is a perfectly clear question and I will try to answer it. In the normal course I would have expected that if it were decided that family allowances should be continued in respect of children in school after the age of 15, that is while they are 16 and 17, there would just be an extension and we would go along in exactly the same way as before. That is what will happen, except in the province of Quebec. Why should there be a different formula for Quebec? The answer is that Quebec is already in this field. The province is already paying an educational grant to children who are 16 and 17 years of age.
Theoretically, I suppose, if the federal government wanted to extend the present family allowance arrangements up to the age of 18 they could do so and this would apply 20220-1714
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everywhere in Canada, including Quebec; and the government of Quebec could in that event do one of two things: It could either continue to pay its present education grants, which would mean there would be roughly twice as much paid in the province of Quebec in respect to children aged 16 and 17 as would be paid elsewhere in Canada, or, alternatively, it could say: The federal government is now paying these sums; we shall stop our payments. Either of these decisions would be perfectly logical, I suggest. However, the government of the province of Quebec says: We have been in this field for three or four years; we are doing it in a way which seems to us reasonable; a way which seems acceptable to our people, one which is well established; and we want to go on doing it that way; we would prefer it if you would pay to us the equivalent of what would have been paid by the federal government net, after income tax and so on, and if it were paid directly in respect of the children.
Anyone could argue whether or not this was a good way of doing it. As I say, the federal government could charge right ahead, ignore the fact that this is an established program in Quebec and insist on paying the amounts directly to the mothers despite the fact that the government of the province does not want this done. Or the government of Canada could say: We recognize the fact that you have been in this field for three or four years. We are not going to pay any more than the citizens of Quebec would have got under our new scheme, but instead of paying them double and embarrassing everybody we shall pay the net equivalent to the government of Quebec. And this is what will be proposed when the legislation is presented in this house.


Mr. Enns:: I believe this extended discussion would not have taken place if the minister had been able to say right at the outset that there would be no difference in the income tax deductions applicable to the mothers in the province of Quebec and those in the rest of Canada. He said there would be a financial equivalent but it would not be the same.
Is it fair to assume that the education grant being paid to the people in Quebec is possible because of the tax-sharing arrangement by the federal government-in other words, because there is an element of federal assistance in those payments? If so, it seems unfair that there should be this difference.


Walter Lockhart Gordon: I cannot say the situation would be exactly the same, because it has not been exactly the same for the last three or four years. It has been very different.

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Amounts paid by the province of Quebec in respect of children in that province have not had any effect on deductions. They have been treated as though they were made to the child, not to the mother.


Siegfried John Enns: My point is that if there is an element of federal assistance in the provincial scheme for paying education grants there must be some way of working this out so that for income tax purposes there would be no difference as between parents in Quebec and parents in other parts of the country.


Walter Lockhart Gordon: I appreciate the hon. member's suggestion and his feelings in the matter but I do not know of any way in which this could be done.


Eugène (Gene) Rhéaume: When I addressed a question to the minister earlier on the subject-admittedly it was not in such clear terms as were used by my hon. friend from Portage-Neepawa-the hon. gentleman suggested we should wait until the legislation was before the house, at which time, he said, it would be possible to go into the details of this program. I do not quarrel with that position, but I do not necessarily want details of this program. I want an assurance that the controls which have been placed on this program, be it administered in Quebec or in any other part of the country under the authority of the federal government, are going to be equally effective. Arrangements for deductions should be the same for all Canadians, especially if the programs are to be similar. Surely if we enter into this bargain with the people of Quebec-and it is a bargain for those who live in Quebec-Canadians who live in other provinces should not be subjected to rules and regulations, under the family allowances program, which people in Quebec will not be obliged to keep. If the minister can give me this assurance I shall be prepared to wait for the details on a later occasion.


Walter Lockhart Gordon: I am perfectly prepared to give that assurance to the best of my knowledge and belief. If anything, I think the checking up process will be more complete in the province of Quebec than elsewhere in Canada. I do not wish to go into details but I think I am safe in assuring the hon. member that there is nothing to worry about on that score.


William Howell Arthur Thomas: There seems to be a fundamental matter here which should be taken into consideration. As I understand the minister's explanation, the people of Quebec are to be treated differently from people in other parts of Canada. I think that is unfortunate. I know there is to be a compensatory payment made to the province of Quebec, but

I understand that the mothers in Quebec are to receive $10 for ten months of the year whereas parents in other parts of Canada are to receive $10 per month for 12 months of the year. I would have to put myself on record as favouring a program whereby all mothers across Canada would be treated alike-


Some hon. Members:: Hear, hear.


William Howell Arthur Thomas: *-and the children paid $10 for 12 months of the year. I think it is up to any provincial government to accommodate its arrangements in such a field as this to an over-all scheme, and in this I agree with the hon. member for Peace River. In effect we are simply extending family allowance at the rate of $10 per month from the age of 16 to the age of 18. That is what we are doing. Why not come right out and do it openly without any of these confusing arrangements which seem to enter into this question? Why not simply extend family allowances from age 16 to age 18 and have done with it? The present act takes care of school attendants and children who are dependant. The children who are ill or cannot attend school are taken care of. The children who are healthy and do not attend school come under the same regulations and the same conditions as do other children at the present time.
I feel we are on the wrong track. There is a fundamental point which this committee should take into consideration and I do not think we can pass it over as lightly as has been suggested. I think we should increase family allowances to the age of 18, leave it at that and let the different provinces deal with it as they will.


J.-H.-Théogène Ricard: Mr. Chairman, I want to thank the hon. member who said a few words a while ago. I felt like him, but coming from the province of Quebec I thought I would give the opportunity to somebody else to speak for me, and I want to thank the member very warmly.
It seems to me, after taking into consideration everything we have heard tonight, that there is only one aim in the mind of the minister, and it is to save the face of his friend the premier of the province of Quebec. I think the mothers of the province of Quebec owe a debt of gratitude to the hon. member for Middlesex West, and I would like the minister to take into consideration the recommendation he has just made, and forget the petty politics that seem to be underneath this matter and governing all the acts and movements of the minister. Please put us on the same level as everybody, and try to forget your friend the premier of the province of Quebec.


Some hon. Members:: Hear, hear.


Louis-Joseph Pigeon: Mr. Chairman, at the present time the government of the province of Quebec pays the children attending school $10 a month during a period of ten months, that is during the school year, whereas the federal government pays $10 a month during 12 months.
Under the circumstances, I am of the opinion that this situation discriminates against the mothers and children of Quebec.
I feel that if the federal government reached an agreement with the province of Quebec about that sum of $10, it would have been very important to make Mr. Lesage and his government pay that $10 during 12 months instead of ten, as they do in the other provinces where mothers will receive $10 during 12 months. That is discrimination against mothers and, consequently, I should like to know whether the minister intends to intervene with the Quebec premier to remedy the situation.


Gilbert F. Rondeau: Mr. Chairman, I rise on a point of order. Is the hon. member for Joliette-L'Assomption-Montcalm aware of the fact that the Quebec premier has announced that his province will pay $10 a month over a 12 month period just the same as the federal government?
I will have a few words to say on that point later on.
[TextJ


Walter Lockhart Gordon: Mr. Chairman, I wish to thank my hon. friend. I was just about to say that I am quite certain the premier of the province of Quebec will do right by the mothers of that province.


George Clyde Nowlan: Mr. Chairman, I am not intervening in this debate, which is very interesting and, I hope, helpful, but I would just like to say a few words. This is a very involved and complicated matter that we have been discussing tonight. Therefore I think it is desirable that we should read the record and the explanations the minister has given so we may obtain a proper understanding of exactly what has been done. It is rather difficult during the course of debate to follow this matter in the detail that I think is required.
We are now told that the payments are exactly the same in all provinces, and that at least is one step on the road to uniformity. There is still the problem of the income tax deductions under the Income Tax Act, and I think this is perhaps more serious than the minister was inclined to recognize or admit when he referred to it a short while ago. Previously there was a lesser payment made to
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the province of Quebec; now it is a larger one. With regard to the deduction which the minister mentioned, if you get a deduction of $300 a year for a dependancy in one case, and $550 in another case, it depends entirely on the taxable income as to how much deduction that may be worth. There is no point at all in saying it is equalized because of this, that and the other. We can all imagine a good many cases where a deduction of $550 would be infinitely more valuable than the compensating factors which the minister mentioned. I think we have to study this question. As I said, we will have the bill before us, I presume, in the reasonably near future and we will be able to discuss it then in all its details.
I want to impress upon the minister that we want-this has been said on this side of the chamber

absolute equality, and no one wants there to be any interference whatsoever with the Quebec scheme. As the minister said, they started their scheme some time ago, no one wants to interfere with it and no one wants to impose a tax on it, because we realize the constitutional complications that would arise immediately if you had an educational grant there and it was treated in a different way than we would have to treat it in regard to the other provinces. But I think we have to go some way yet in order to achieve uniformity among provinces in this matter. That is highly desirable, of course. We cannot have a family on one side of the river here treated in one way, and a family on the other side of the river treated in a different way.


Some hon. Members:: Hear, hear.


George Clyde Nowlan: That certainly would not be co-operative federalism; it would be the disruption of federalism, the disruption of federation, and we do not want to see that happen. As far as I am concerned-and I think most of us are concerned about this-there has been a fairly long discussion on this matter and I believe the minister appreciates the viewpoint that has been put forward. I can imagine that he has discussed this matter at length on various occasions and in a far different place from this, and has heard every argument which has been advanced tonight- and possibly he has raised some of them himself.


[Stage Direction]
Paragraph agreed to.
On paragraph 15.
Philip Bernard Rynard: Mr. Chairman, I would like to ask the minister whether under this paragraph students who go to trade school, business college, or even take an apprenticeship in a factory where they are learning a trade or receiving technical training, qualify for this allowance.

Income Tax Act


Walter Lockhart Gordon: Mr. Chairman, this is now being worked out and will be incorporated in the legislation that deals with this subject. I am afraid I am just not able to give a direct answer to my hon. friend at this moment. It does not have any bearing on this particular section of the resolution, but it will be explained fully when the next piece of legislation is presented.


Mr. Clancy:: Mr. Chairman, I would like to ask the Minister of Finance whether you can opt out on this 16, 17 and 18 year old deal.


Walter Lockhart Gordon: No, Mr. Chairman.


[Stage Direction]
Paragraph agreed to.
On paragraph 16.
George Clyde Nowlan: I have only one comment with respect to paragraph 16. If I were to make a comment which is as long as the paragraph itself we would have to ask leave to sit much later than ten o'clock tonight, but the best comment I think I could make on this legislation which the minister has fought so hard to achieve with regard to the control of Canadian corporations is to be found by anybody who wants to look at the regulations which are in front of us. If they do so they will find the definition of Canadian ownership, which should be a fairly simple term to define. For the sake of those who may read Hansard, may I say that I am looking at a text in form roughly the size of Hansard, and this simple little definition of Canadian ownership starts half way down page 6, runs all the way down page 7, runs all the way down page 8, and runs almost to the end of page 9. Never were so many words used to express so little, as has been the case here. I think this is the only comment which needs to be made at this time.
The minister spoke the day before yesterday about loopholes and the plugging of loopholes. I am sure that the minister's former associates would look forward to an interpretation of this section with the highest possible degree of anticipation, because if there is anything that a chartered accountant or lawyer likes to do it is to try and interpret a section, to find holes in it, and to drive horses and wagons and even automobiles and railway cars through it. The longer the section the larger the openings and the more difficult is its interpretation. If this section ever becomes law every lawyer and chartered accountant of any repute will be fully employed for the next two or three years in handling cases arising from it, quite apart from the section we passed this afternoon concerning their being able to charge it up to their client.
IMr. Rynard.]
This is a commentary on legislation which I think is most unfortunate and is unen-forcible; but in view of the hour and the comments which have been made earlier on the accompanying section I do not propose to say anything more about it now.


[Stage Direction]
Paragraph agreed to.
Lucien Lamoureux: Shall we now consider the amendment.


Maurice Lamontagne: I move:
That the Income Tax Act resolution be amended by adding thereto the following paragraph:
17. That the income tax otherwise payable by an individual in respect of income earned in a province of Canada be reduced by
(A)	21 per cent for the 1965 taxation year, rather than 19 per cent, and
(B)	24 per cent for the 1966 taxation year, rather than 20 per cent."


George Clyde Nowlan: This is an increase of 2 per cent in the coming year and 3 per cent in the succeeding year?


Walter Lockhart Gordon: It is 3 per cent each year.


George Clyde Nowlan: It is 19 per cent to 21 per cent and 21 per cent to 24 per cent. Is there an error there?


Walter Lockhart Gordon: It is going up to 21 per cent instead of 19 per cent, and to 24 per cent instead of to 20 per cent. Normally it would go up to 19 per cent next year and 20 per cent the year after. It is now proposed that it go up to 21 per cent next year and 24 per cent the year after.


[Stage Direction]
Amendment agreed to.
Lucien Lamoureux: The committee will now proceed to the consideration of the Customs Tariff resolution.


George Clyde Nowlan: Mr. Chairman, shall we call it ten o'clock? There will be some little discussion on the Customs Tariff resolution. If the minister wishes we could start now but I can assure him that this matter will take more than three or four minutes. Might I suggest to the minister that we proceed with the Income Tax Act bill?


Walter Lockhart Gordon: I should like, if the chairman will allow me, to proceed until the bill receives first reading so that hon. members will have a chance of studying it. Then if it is ten o'clock, we could start the customs resolution tomorrow.


George Clyde Nowlan: As far as we in this part of the house are concerned we would be agreeable to have the committee rise and introduce the bill and have first reading of the bill.


Lucien Lamoureux: Shall I rise, report a certain resolution and ask leave to sit again at the next sitting of the house?


Some hon. Members:: Agreed.
Resolution reported and concurred in.



Walter Lockhart Gordon: for leave to introduce Bill No. C-91, to amend the Income Tax Act.
Motion agreed to and bill read the first time.


Mr. Deputy Speaker:: When shall the bill be read a second time? Next sitting of the house?


Some hon. Members:: Agreed.



BUSINESS OF THE HOUSE

Mr. Churchill:: Mr. Speaker, if we are calling it ten o'clock I might ask for the business of the house for the balance of the week.


Mr. Favreau:: Mr. Speaker, we will proceed tomorrow with the debate on the Customs Tariff and if time is available the Estate Tax Act resolution. On Thursday we will be taking the Blue Water bridge bill; then the Post Office Act amendment resolution; and also if we have time on Thursday my little resolution concerning the amendment to the Exchequer Court Act. On Friday the estimates we will be dealing with will be those of public works. The reason I am not calling agriculture is because the Minister of Agriculture will not be available, as he will be attending a conference in Ottawa. That is the business of the house for the next few days.



PROCEEDINGS ON ADJOURNMENT MOTION

[Stage Direction]
(Subject matter of questions debated under adjournment motion)
A motion to adjourn the house under provisional standing order 39A deemed to have been moved:
Mr. Deputy Speaker:: In accordance with provisional standing order 39A, a motion to adjourn the house is deemed to have been made and seconded at this time. Therefore the question is that this house do now adjourn.



SHIPPING-REPORTED U.S. ACTION TO CONTROL LAKE HURON WATER LEVELS

Mr. Deputy Speaker:: The first question is from the hon. member for Lambton West.


Walter Frank Foy: Mr. Speaker, the reason I asked the Minister of Transport a question this afternoon was because the harbours along the shores of lake Huron are becoming useless. This year I
Proceedings on Adjournment Motion understand the drop in the level of water has reached the point where the water level is approximately three feet below average. My riding, like others in the lake Huron area, is suffering a great deal because of this. For example, Grand Bend has a number of fishing companies which produced about $750,000 five years ago, quite a large amount for a small area. This is now reduced to about $500,000 per year. The harbour has been dredged each year, but if the harbour has no water all the dredging that can be done is not going to help the fishing boats in and out of the harbour. What they need is water.
Following along the lake Huron shore of my riding I come to Port Franks, Perch creek and Point Edward where there is a great deal of commercial fishing which is very important to these areas. Business that requires river dockage suffers at the port of Sarnia. I believe the port of Sarnia is classified as part of the seaway and if the water levels of the lake continue to go down that very busy port of Sarnia will be in real trouble unless something is done. This is the reason I asked the Minister of Transport this question this afternoon.


John Whitney Pickersgill: Mr. Speaker, the question raised by the hon. member for Lambton West has to do with a matter that was decided in principle some years ago. According to the information available to me, at the time the dredging was started in the St. Clair river-I recall the very beginnings of that because I was minister of citizenship and immigration at the time and it affected the Indian reserve on Walpole island-the United States government also proposed that they should make a study of the possibility of putting some kind of barrier in the river just below the Blue Water bridge in order to maintain the levels as much as could be done in that way without interference with navigation, and to offset any possible effect that dredging might have.
However, this was not the kind of thing that could be done very effectively without a good deal of model testing and experimentation. The government of Canada agreed in principle to having this matter considered. The information I have is that agreement was given in 1962 by the previous administration, and I think very wisely, and that this experimentation is now going on. I sincerely hope, as I am sure all hon. members do, that it may be successful and that some definitive action may be taken as the result of it.
I am afraid, however, that however valuable this may be as a long term measure it is not going to have very much effect, and in fact cannot possibly have any effect at all, in the present season. We are faced with a very grave problem indeed not only in lake
2698	HOUSE OF
Proceedings on Adjournment Motion Huron and Georgian bay, and a great deal of concern has been expressed to me in this regard by many hon. members and by many outside the house through considerable correspondence. I think the hon. member for Lambton West is quite right in saying that the problem cannot really be cured by dredging.
The Minister of Public Works (Mr. Descha-telets) and I and our officials have been considering this matter and we are going to do anything we can to alleviate the situation by dredging. But the water just is not there. This is something that I am afraid can only be cured by more water.


Mr. Deputy Speaker:: Order. I am sorry to interrupt the minister but his time has expired. The hon. member for Parry Sound-Muskoka.



SHIPPING


Gordon Harvey Aiken: Mr. Speaker, my question is along similar lines and perhaps the minister will have an opportunity to complete the second instalment of his reply.


John Whitney Pickersgill: Part two.


Gordon Harvey Aiken: I have a somewhat similar question to that of the hon. member who just spoke. The low water levels on the great lakes and the Georgian bay have been causing concern for about a year now. In 1963 it was generally felt that the problem was one of a natural cycle. It was so explained to those of us who made inquiries and it was said that it would soon right itself.
However, when the ice went out in 1964 it became obvious that this was not just a low cycle. There was no restoration of the water level and, at the moment, it is not just a problem for many places along the lakes: It is a disaster. I saw pictures published in the Parry Sound North Star and in the Globe and Mail this morning which indicate how disastrous this situation is.
As the minister has just stated, members representing constituencies, particularly along Georgian bay and lake Huron, have been very concerned. The government, if I may be fair,
I believe has accepted the advice it received that this was a cycle and there was not much that could be done about it. While this is undoubtedly a factor, and while undoubtedly there is low precipitation, many of us fear that underlying this may be something more fundamental, that there may be not just a short term problem but a major one such as the drainage away of water.
In asking the numerous questions that have been asked, we are not trying to attach 

blame. We are merely attempting to get the government to undertake some active measures to have the situation rectified. Several indicators show that the lack of precipitation is not the whole answer. Over the week end, I verified this. For example, the Muskoka lakes and most of the smaller inland lakes have normal water levels now. Lake Nipis-sing, according to an answer I received yesterday, has water one foot higher than it was last year or the year before. We are not suggesting that any of these lakes should be lowered because that would merely be extending the problem into other lakes.
We do feel that the studies that are being undertaken by the United States corps of engineers now indicate there is a problem to be met. We are hoping that some long term measures will be seriously considered so that we will not find the situation is a permanent one. My question is really to determine whether the government has now been persuaded that some action is necessary and that some research will have to be done. If the Minister of Transport would make a statement along those lines, then I am sure we would all like to hear that statement.


John Whitney Pickersgill: I could not agree more with what the hon. gentleman has just said. I do not pose as an expert, myself, but I do not believe, although there has been a serious lack of precipitation in the last two or three years, that is the whole answer to the problem. I did not bring the figures with me, but I have been looking at them. It is quite apparent that there has been, over two or three years, a lack of precipitation. There may be something cyclical about these things. However, it is a little questionable whether our records extend back in a really accurate way long enough to be sure about that. There is not any doubt that the rate at which water is being used at the present time, particularly in highly settled areas like the old part of Ontario, and the gradual denuding of forest cover, have contributed to what may be a long term situation. Since this situation has been partly created by man, perhaps it will need man to do something to offset it.
I would be hopeful that the ARDA program would have some effect in helping in the conservation of water. We are going to have to look quite seriously at this. With respect to some of the streams that were diverted into lake Superior, the diversions were started about a generation ago, and perhaps steps no one would have once contemplated even a very few years ago will have to be studied.
I do not think there is any possibility of doing too much research into this problem.

More and more we come to realize, not only all over this continent but throughout the world that water, which seems in many respects to be the cheapest commodity of all, is the most precious resource we have.
Speaking for myself, and I think for those of my colleagues who have a special responsibility in this matter, I will endeavour to see that everything is done that can be done to study the long term problem. Certainly we intend to do everything possible to alleviate

and I am afraid it can only be to alleviate

the immediate situation which is a cause of very great concern-perhaps of greater concern in Georgian bay than anywhere else- but of great concern to the whole of the lakes region.



HARBOURS


[Stage Direction]
TION or DEEP WATER PORT
Louis-Philippe-Antoine Bélanger: Mr. Speaker, if I insisted on raising the question of the construction of a sea harbour at Riviere du Loup, it is because representations were made to me by people of great experience in matters of navigation on the St. Lawrence river. They are shipmasters who spend all their lives on the river and know it practically through and through.
Their experience acquired over many years of navigation on these waters gives them a knowledge that we do not have and could hardly acquire even with the most competent government engineers. Do you know, Mr. Speaker, what those people say? Well, they maintain that to build a sea harbour at Riviere du Loup at the cost of $7 million would be a mere waste of money, and that they cannot understand how qualified engineers could recommend such an expenditure, which will be a true waste of public funds. It is so evident that one already wonders whether that undue expenditure of public funds, if it is made will not be a typical example of plain patronage such as practised by the Union Nationale, but this time at the federal government level.
To support these statements, let me tell you that to build a sea harbour in Riviere du Loup, it would be necessary in the first place to dig deeply into the bottom of the river and to maintain it at a reasonable depth it would have to be dredged throughout the year. Then in the winter, on account of the general direction of winds, that sea harbour would be so heavily ice-bound that it would be necessary to have at least two or three icebreakers to clear it.
I would be glad for Riviere du Loup if an ocean port were established there, but it is not my fault if common sense and economic 20220-172
28. 1964
Proceedings on Adjournment Motion considerations indicate it would be absurd, in view of its location.
On the other hand, in the county of Charlevoix, two places are wonderfully suited to serve as ocean ports: Baie St. Paul and Pointe au Pic.
In addition, mineral resources are far greater on the north shore. At the present time, the economic slump is more severe in Charlevoix. Finally, the places mentioned have the natural qualities and meet the standards required for ocean ports. That is why it would be a tragic mistake for the Minister of Transport to go and spend $7 million where such an expenditure would be practically useless.
I suggest, therefore, that the minister be very cautious with this bill and give it full consideration before going ahead with it; incidentally, I would ask him to consider all the possibilities which Baie St. Paul or Pointe au Pic offer for a bill of this scope.
Furthermore, the establishment of a sea port at Riviere du Loup would not bring any great changes in the economy of that place, for Riviere du Loup does not suffer from lack of means of transportation; it already has the trans-Canada highway, and the C.N.R. as well as enough wharves for current business, and its economy at the present time is far more developed than that of Charlevoix county. In any case, such a harbour could not stay open all winter long, even if a lot of money were spent to keep it clear of ice.
Furthermore, it is precisely because the south shore was always favoured that part of the traffic going to the north shore passes on the other side of the river for quite a distance.
Besides, and nobody can deny this, since facts are there to prove it-it is on the north shore that one finds mining and other resources. In the long run, good sense will have to prevail; it is on the north shore that seaports and wharves should be built.
That is why I feel that the government would do well to start reversing that trend right now and stop favouring the south shore at the expense of the north shore.
Mr. Speaker, if I have chosen to speak of the riding of Charlevoix and of the harbour of Riviere du Loup, it is not so much to try to get a little more work for my riding-even though that would be commendable-but rather because I feel it is wasteful to make an expenditure of $7 million at a place where it would be useless, especially considering the deficits accumulated by the present government.


Jean-Paul Deschatelets: Mr. Speaker, we have given close, if reluctant attention to the remarks made by the hon. member for Charlevoix.

Proceedings on Adjournment Motion
I want the hon. member to be sure of one thing. If we proceed with the case of Gros Cacouna-which is not Riviere du Loup, located at least ten miles away-let me assure him that we do not lose-


Louis-Philippe-Antoine Bélanger: Mr. Speaker, would the minister allow me a question? I should like to ask him-


Mr. Deputy Speaker:: Order. Questions are not permitted at this stage, according to the rules under which we are now proceeding.


Jean-Paul Deschatelets: I should tell the hon. member that we are discussing the whole problem of the north shore, of the lower St. Lawrence and of the Gaspe peninsula.
The major project at Gros Cacouna is only the first step of a very important scheme we want to put forward for the three areas just mentioned.
We must start with one area. We are starting with that of Gros Cacouna and we shall build a deep water port which will be open 12 months a year.
If my hon. friend from Charlevoix will take the trouble to think a little about this problem, he will find that his area, that of the
north shore, will directly benefit from this thoroughfare which will be open 12 months a year.
There is no doubt that the north shore coast contains extraordinary natural resources, but all the experts who have studied the communication problem in that area have agreed that the unemployment in the lower St. Lawrence and in the Gaspe peninsula is related to the fact that no concern or secondary industry will want to settle in an area where the thoroughfares are so poor.
I should like to review briefly the arguments put forward by the hon. member for Charlevoix, to the effect that the implementation of such a plan would be a waste of public funds, as we would venture to spend $7 million on a project without due consideration, due study-


The Deputy Speaker:: Order. I regret to interrupt the minister, but his time is up.

Under the provisions of provisional standing order 39A this house stands adjourned until tomorrow at 2.30 in the afternoon.
Motion agreed to and the house adjourned at 10.21 p.m.

Wednesday, April 29, 1964