1969-11-28

ROUTINE PROCEEDINGS


[Stage Direction]
Second report of Standing Committee on Miscellaneous Estimates in both official languages-Mr. Leblanc (Laurier).
Third report of Standing Committee on Finance, Trade and Economic Affairs in both official languages-Mr. Clermont.
[Editor's Note: Text of foregoing reports appears in today's Votes and Proceedings.]


Right Hon. P. E. Trudeau (Prime Minister):: Mr. Speaker, I should like to inform the House that general agreement has been reached with the provinces that the third session of the Constitutional Conference will be held in Ottawa on December 8, 9 and 10 in the new facilities being prepared in the Centennial Centre. With the agreement of the provincial premiers, I hope to be able to table the agenda early next week, Mr. Speaker.
I might add that the federal and provincial governments have agreed that documents which they will be preparing for the conference will be released in advance of the conference next Thursday at two o'clock in the afternoon, or as soon thereafter as the provinces wish to do so. The federal government will be publishing a paper entitled "Income Security and Social Services". The Federal and provincial governments have also agreed that the meetings will be public and televised.

A few seats will be reserved for observers accompanying the federal and provincial 21545-16
delegates. As for us, we want all parties in the House to be represented. Since only so many seats are available, I would suggest that one seat be reserved for each leader of the opposition parties, two for the Speakers of both houses, one for the Leader of the Opposition in the Senate, four for senators and 24 for members, the latter reserved on the basis of party representation in the House. Of course, it will be up to each party to select its own delegates.
[DOT] (11:10 a.m.)

Arrangements are also being made to associate with the federal delegation the Commissioner of the Northwest Territories, the Commissioner of the Yukon Territory and one Councillor from each of the Territorial Councils. This is the same arrangement which was made for the conference in February, 1969.



HEALTH AND WELFARE


Hon. C. M. Drury (President of the Treasury Board):: Mr. Speaker, the government has agreed that it will, as an employer, share in the cost of employees' medicare premiums, as recommended by the National Joint Council.
The policy provides that the employer will share in the direct premium charges levied upon employees by provincial governments with regard to medical care insurance. The share of the government will be the lesser of:
(a)	50 per cent of the direct premium, or
(b)	$1.34 for single persons, $3.38 for married employees and $4.87 for employees with families.
The specific amounts referred to represent the differences between the basic employer premiums under the Group Surgical-Medical Insurance Plan and the sum of the employer premiums for supplementary medical and hospital benefits available to employees under the Group Surgical-Medical Insurance Plan.
November 28, 1969
1360	COMMONS
Government Sharing Cost of Medicare
In order to cover to some degree the period during which this review has been carried out and consequently provide a measure of retroactivity, the employer's contribution for the four months commencing on January 1, 1970, will be at double the agreed rate.
The government has decided that, as employer, it should continue to contribute 50 per cent of the premium required for the basic Group Surgical-Medical Insurance Plan still operative in Quebec, Prince Edward Island and New Brunswick, in the Territories and outside of Canada. The government has also agreed it should continue to contribute 50 per cent of the premium of the supplementary medical insurance plan which is operative in medicare provinces.
The government has undertaken to continue its contribution of 50 per cent of the premium for optional hospital benefits.
Other participants in the Group Surgical-Medical Insurance Plan such as Members of Parliament, members of the Armed Forces, the RCMP and pensioners would also benefit by these decisions.
These decisions have been taken by the government following detailed consultation with employee organizations through the National Joint Council. The government wishes to express its thanks to the council, and particularly to its committee on health insurance plans, for its assistance.


Hon. Marcel Lambert (Edmonton West):: Mr. Speaker, I should like to thank the President of the Treasury Board for having sent us in good time a copy of the statement he has just made. This is a practice we can encourage. I am pleased to say that we welcome this statement.
I recall that in July last I raised this question in connection with public servants in the province of Alberta, members of the Armed Forces and members of the RCMP who at that time were under a considerable disadvantage with respect to the medicare plan in that province. Now we find that persons in these groups, along with participants in the Group Surgical-Medical Insurance Plan, will, in one form or another, benefit in the same way as citizens who are not in government employ. I think this decision will be welcomed and that it will become the pattern for good employers. I am glad to see that in this respect the government has attempted to rehabilitate itself.


Mr. Stanley Knowles (Winnipeg North Centre):: Mr. Speaker, I, too, would like to thank the President of the Treasury Board for sending us in advance a copy of the statement he has just made. I should also like to commend the government on the decision which has been announced. One could remark that it has taken a few months for the government to reach this decision, but it has corrected that by the proposal to pay double amounts for the first four months of 1970.
In effect, what the government has done has been to place its employees and the others who are covered by this announcement back in the position they occupied before they were shifted to provincial medicare schemes. It has put them back in the same position as far as paying their medicare premiums is concerned in that the federal government will pay 50 per cent of these premiums, or up to a certain level. I have studied the formula carefully and, despite my penchant for finding something wrong with what the government does, I must say the formula that has been agreed on is a good one and that we welcome this announcement.
I realize that the President of the Treasury Board could not have overlooked this, but nevertheless I am delighted that the arrangement does include all those pensioners who come under the various federal pension schemes, such as federal superannuates, retired RCMP personnel, retired members of the Armed Forces and others. I am glad that they too will benefit from this announcement.
Speaking of pensioners, it is good to have this problem solved. It is one of two problems about which I have been bugging this minister for a long time. I hope the minister will soon rise in his place and make a similarly favourable announcement concerning increases in the pensions of our federal superannuates.


Mr. Gerard Laprise (Abitibi):: Mr. Speaker, I should like, in my turn, to thank the President of the Treasury Board for sending us a copy of his statement in good French.
I should also like to thank the government for having accepted, for once, a National Joint Council's recommendation. We sometimes feel that the government pays little attention to its employees, but the decision it has just taken shows that it followed the recommendation resulting from previous
November 28, 1989	COMMONS DEBATES	1361
Inquiries of the Ministry
studies to the effect that it should protect its employees' health by paying 50 per cent of the direct premium for medicare.
I hope also that the government will pursue the same course and consider the problem of the retired employees, as suggested by my hon. colleague from Winnipeg North Centre (Mr. Knowles).



BUSINESS OF THE HOUSE

Hon. Donald S. Macdonald (President of the Privy Council):: Mr. Speaker, I should like to announce that there has been a discussion among the representatives of the parties with respect to the special order for the debate which we will have under way today and Monday. It is proposed that, for the purpose of debate on government order No. 32, Standing Order 31(1) shall be suspended and that the following time limits shall apply to debate on the item: no member shall speak for more than 20 minutes in the said debate, except that the first spokesman for each of the parties may speak for not more than 40 minutes.
This is not part of the order, but by way of exhortation I should also like to point out that I think it was agreed that nobody- and this means nobody-would seek an extension of those time limits. Perhaps the House would agree not to give any extension so that the maximum number of members might participate in this limited debate.
I have decided, even though the motion is in my name, to defer giving the House my views on the matter and I give way to the Minister of Finance to move the motion on my behalf.


Mr. Barnett:: Mr. Speaker, I rise for the purpose of asking for a correction in Hansard.


Mr. Speaker:: Order. I thought the hon. member was rising for the purpose of participating in discussion of the proposed motion of the President of the Privy Council. I should first ascertain whether the proposed order is agreed to by the House. Is it agreed?


Some hon. Members:: Agreed.
[DOT] (11:20 a.m.)



DOMINION COAL BOARD DISSOLUTION ACT


Hon. J. J. Greene (Minister of Energy, Mines and Resources) moved: for leave to
introduce Bill C-161, to provide for the dissolution of the Dominion Coal Board and for the repeal of the Canadian Coal Equality Act, the Coal Production Assistance Act and the Dominion Coal Board Act.


Mr. Speaker:: Is it the pleasure of the House that the minister shall have leave to introduce the said bill?


Some hon. Members:: Agreed.


[Stage Direction]
Motion agreed to, bill read the first time and ordered to be printed.


Hon. Robert L. Stanfield (Leader of the Opposition):: Mr. Speaker, I have a question for the Minister of Industry, Trade and Commerce. In light of the very real fears of the potash industry in Saskatchewan and the people of that province that the United States may impose a mandatory penalty against the import of Canadian potash which would cost the Canadian industry millions of dollars and, in effect, the province, can the minister tell us whether he has undertaken any talks with United States authorities in order to deal with this threat?


Hon. Jean-Luc Pepin (Minister of Industry, Trade and Commerce):: There have been talks before, Mr. Speaker. The regulations announced by the Premier of Saskatchewan last week are being studied now by different departments of the government, the Department of Justice, my department and others. They are being studied by the government and a commentary will be made when that study is completed.


Robert Lorne Stanfield: Mr. Speaker, in light of the recent announcement by Canadian National Railways of its plan to raise rates on the shipment of potash by 6 per cent, will the Prime Minister tell the House whether it is the intention of the government to indicate to this Crown corporation the government's desire that it exercise restraint in increasing its rates in view of the threat of inflation?


Pierre Elliott Trudeau: I will discuss that with the Minister of Transport, Mr. Speaker.
November 28, 1969

Inquiries of the Ministry


Robert Lorne Stanfield: Mr. Speaker, I should like to direct a supplementary question to the Minister of Transport. Does he propose to interest himself in this proposed increase in freight rates affecting potash industry? Has he received any representations and, if so, what action does he propose to take?


Hon. Donald C. Jamieson (Minister of Transport):: Mr. Speaker, I have received no direct representations. I do understand, however, that authorities in Saskatchewan have contacted the Canadian Transport Commission. I understand that subsequently a meeting has been arranged between representatives of Saskatchewan and officials of the railways and that it is to be held on Monday or Tuesday.


Mr. John Burton (Regina East):: Mr. Speaker, I should like to direct a supplementary question to the Minister of Industry, Trade and Commerce. Is it the intention of the government or is the government giving active consideration in co-operation with the government of Saskatchewan, if necessary, to establishing an export board to market potash and to develop new markets, for example, in eastern European nations?


Jean-Luc Pepin: That would be included in what I said would be the commentary of the government on that matter, Mr. Speaker.


John Stratford Burton: Mr. Speaker, has the government determined if the minimum price for potash of $18.75 per ton to be enforced by the province of Saskatchewan makes it more difficult to deal with the U.S. anti-dumping decision and is the government making any representations to the government of Saskatchewan on this matter?


Jean-Luc Pepin: The whole question is very difficult, Mr. Speaker.


Marcel Joseph Aimé Lambert: Is
the government of Canada now interesting itself, vis-a-vis the government of the United States, in protecting Canadian interests in this whole question inasmuch as it is a decision of the United States tariff board which will be applied against Canada? It is in respect of this particular point that I think the federal government should be having discussions with the United States government.


Jean-Luc Pepin: There was extensive discussion before the decision was made by the government of the United States. I personally telephoned the Secretary of the Treasury of the United States, so the decision was made by

the United States after the Canadian point of view had been put forward to them.


John Stratford Burton: Mr. Speaker, in view of the urgency and importance of this matter, would the Minister of Industry, Trade and Commerce consider making a statement on motions in the near future?


Jean-Luc Pepin: I will consider that, Mr. Speaker.



FINANCE


Mr. Max  Bailsman@Waterloo: Mr. Speaker, I have a question for the Minister of Finance arising from the announcement this morning that the profits of the Bank of Montreal have increased by almost 20 per cent. This is the third bank to make such an announcement. In view of the government's policy of restraint, has the minister raised any objection concerning banks' rates and these excessive increases? If so, can he indicate what the response has been?


Hon. E. J. Benson (Minister of Finance):: It
is very difficult to make objections to people because of increases in profits. I hope my hon. friend has noticed that the federal government's share of the profits of the Bank of Montreal through taxation went up to $37 million, more than half the profits. The shareholders will benefit, but the government of Canada and the people of Canada through the taxation levied will also benefit.


Mr. Max  Bailsman@Waterloo: Mr. Speaker, am I to understand from the minister's reply that it is the policy of the minister to encourage the profit margins of Canadian banks?


Mr. Speaker:: Order, please. The hon. member's supplementary clearly is argumentative.


Mr. Woolliams:: A supplementary-


Mr. Sallsman:: Mr. Speaker, a nonargumentative supplementary-


Mr. Speaker:: Order. The Chair has recognized the hon. member for Calgary North.


Eldon Mattison Woolliams: Mr. Speaker, is it then the policy of the government to encourage high rates of interest so that it will be able to collect more taxes from the banks?


Edgar John Benson: Mr. Speaker-
November 28, 1969	COMMONS


Mr. Speaker:: Order, please.


Eldon Mattison Woolliams: Ten o'clock, Mr. Speaker. I think it is the whole policy of the government's high interest rates that is responsible.
I can see that I am embarrassing the government.


Mr. Speaker:: Order, please. Clearly we are getting into the realm of argument. I do not think the matter should be pursued at this time. The hon. member has given notice of his intention to debate the matter at the time of adjournment.



COMPANY OF YOUNG CANADIANS


Right Hon. J. G. Diefenbaker (Prince Albert):: Mr. Speaker, my question is directed to the Solicitor General. My information is that Mr. Saulnier stated that he wrote a letter in April, May or June to the Prime Minister setting out the situation in connection with the Company of Young Canadians and the degree to which the group to which he referred was acting outside of the law. I ask the minister whether a copy of that letter was delivered to him as Solicitor General and was it placed in the hands of the Royal Canadian Mounted Police for their attention?


Hon. G. J. Mcllraiih (Solicitor General):: Did I understand the hon. member correctly to refer to a letter I am alleged to have written to the Prime Minister?


Some hon. Members:: No.


Mr. Bell:: Here we go again.


Eldon Mattison Woolliams: Put him in the Senate, Pierre; he needs it.


John George Diefenbaker: The minister needs another hearing aid. Was the letter which Mr. Saulnier says was sent to the Prime Minister in April, May or June, in connection with the extraordinary and seditious activities of certain members of the CYC, brought to his attention and did he in consequence instruct the RCMP to act thereon?


George James McIlraith: Mr. Speaker, the hon. gentleman has made certain assertions about a letter. I have no knowledge of such a letter, and I do not believe such a letter was written.


John George Diefenbaker: Mr. Speaker, I ask the Prime Minister: did he receive such a letter and will he table it in the House?
DEBATES	1363
Inquiries of the Ministry


Pierre Elliott Trudeau: I cannot remember ever having read such a letter.


Some hon. Members:: Oh, oh!


Pierre Elliott Trudeau: I may say, Mr. Speaker, that no such letter was ever sent or received.


John George Diefenbaker: Sometimes people forget, even in matters of great consequence. Would the Prime Minister have a search made to see whether such a letter was received and, if so, will he have it tabled in the House?


Pierre Elliott Trudeau: Mr. Speaker, surely the letter is hypothetical.


John George Diefenbaker: Not as far as Mr. Saulnier is concerned.


Pierre Elliott Trudeau: I have not heard that Mr. Saulnier ever said he wrote me a letter to that effect.


John George Diefenbaker: Would the Prime Minister answer this simple question: Will he have a search made-


Mr. Speaker:: Order, please.


John George Diefenbaker: -to see whether it is lost and, if not, will he table it?


Mr. Speaker:: Order, please.


John George Diefenbaker: I still want to ask a supplementary question, if I may. Refreshing his memory may help the Prime Minister. Are they hiding something?


Pierre Elliott Trudeau: I think the right hon. member may be alluding to the fact that yesterday I said that Mr. Saulnier had talked to me or had informed me about certain things, but this was not in writing; it was at the time I met him in Montreal. I know of no such letter, and if there were such a letter I would not hide it.


John George Diefenbaker: And would not find it.


Pierre Elliott Trudeau: I do not know if the right hon. member feels that somebody is trying to hide him.


Mr. Speaker:: Order, please. I believe other hon. members have supplementary questions.


Mr. J. E. Walker (Parliamentary Secretary to Prime Minister):: I have a supplementary question for the Prime Minister. I wonder if he would care to look under his bed to see whether the letter happens to be filed there?
November 28, 1969

Inquiries of the Ministry


An hon. Member:: That is what you are around for.


John George Diefenbaker: Apparently the government does not intend to look for the letter because it is embarrassing.


Mr. Steven E. Paproski (Edmonton Centre):: I have a further supplementary question for the Solicitor General. When did the minister receive the report of the Royal Canadian Mounted Police on the Montreal riots?


George James McIlraith: To which particular riots is the hon. member referring? I receive reports from the RCMP very frequently, several times a week.


Steve Eugene Paproski: I have a further supplementary question. On what day did the minister receive the report?


George James McIlraith: I do not understand the hon. gentleman's question. The subject is of such importance that I believe I should answer the question.


Mr. Speaker:: Order, please. We do not appear to be making much headway in this exchange of questions and answers. We will try the hon. member for York North.


Steve Eugene Paproski: Mr. Speaker, a point of order-


Mr. Speaker:: I have to ask for the co-operation of the hon. member for York North. The hon. member for Edmonton Centre is seeking the floor.


Steve Eugene Paproski: I should like to make a clarification and say that the riot about which I am concerned was on October 7, but since the minister has already said he has received reports I should like to ask him a further supplementary question, if I may. Would he give consideration to giving the reports to the committee investigating the Company of Young Canadians?


George James McIlraith: If the hon. gentleman, as he now indicates, is referring to the riots on October 7, I had reports of those during the time they were taking place and several times the next day and the following day. Those reports were verbal reports to me and were not in writing, but the matter was fully and carefully reported by the RCMP during the whole of the day on which it started, October 7, and on subsequent days.


Mr. Speaker:: Order, please. Now that we have disposed of the point of order, I recognize the hon. member for York North.


Mr. Barney Danson (York North):: I have a supplementary question for the Solicitor General. In view of the confusion, I wonder if the Solicitor General would consider planting the right hon. member for Prince Albert in the CYC as an undercover agent to supply us with all the facts?



SOURCE OF REPORTS RECEIVED BY RCMP

Mr. Roch La Salle (Jolietie):: Mr. Speaker, I wish to put a question to the Solicitor General.
In view of the statement made yesterday by the Minister of Justice to the effect that the Royal Canadian Mounted Police had received reports about the activities of the Company of Young Canadians in the province of Quebec, could he tell the House whether the RCMP sent him any reports from provinces other than Quebec?


George James McIlraith: I think the hon. member is under a misapprehension. As I read Hansard, the reports to which he is referring were discussed in the House yesterday during the question period. These reports arise out of material seized immediately after the October 7 disturbance in Montreal, and that information has been coming forward from time to time since October 29 from the Montreal police to the RCMP. The major part has come after November 20. That information is passed on immediately, after the RCMP have looked at it, to the law officers of the Crown for an analysis and their opinion on it. I might add that this material is still coming and more of it is anticipated-


Eldon Mattison Woolliams: It will keep coming.


George James McIlraith: The hon. member for Calgary North seems to know a great deal about it.


Eldon Mattison Woolliams: The minister should know a lot more.


George James McIlraith: There is more of it to come, and until its examination is completed and the evidence is completed I do not think I will have much more to say to the House.
As to the question whether other documents came from other provinces, I do not see how documents of that nature could come, and the answer would have to be a simple no.
November 28, 1S69


Some hon. Members:: Oh, oh!


Mr. Speaker:: Order, please. The Chair will allow one further and last supplementary question because we do have to go on to other subjects.


Steve Eugene Paproski: I wonder if the Solicitor General can say whether he is aware that the riots and all the other problems that have arisen in Montreal are part of a well organized plan by the international communist movement?


George James McIlraith: No, Mr. Speaker. The Solicitor General would not be so irresponsible as to say that all other problems in Montreal are due to this factor. He would not give any such opinion.



ADMINISTRATION OF JUSTICE


Mr. Frank Howard (Skeena):: Mr. Speaker, I would like to direct a question to the Solicitor General. Has he received any report of a statement made within the last day or two by a high officer of the John Howard Society in Vancouver that the Mafia have invaded the business field, particularly the small loans sector and, if so, what is being done about it?


George James McIlraith: have noted the statement, Mr. Speaker. It has been drawn to my attention but I am not in a position to make any report on the assertion, and indeed I think the hon. member will realize it would be inappropriate for me to say what has been done about the statement. The subject matter has been drawn to my attention, and the subject matter is of concern and is receiving attention.


Frank Howard: Am I to assume that somehow it is being investigated by our police force?


George James McIlraith: Mr. Speaker, it has never been the practice here for ministers to say what suspicions of offences are being investigated. There is a very good reason for that, and that is why I tried to avoid answering that question.



POLLUTION


Thomas Speakman Barnett: Mr. Speaker, I would like to give the Solicitor General a rest by addressing this question to
13S5
Inquiries of the Ministry his seatmate, the President of the Treasury Board. Would he be prepared to direct the National Research Council to undertake a crash program of research into finding a nonphosphate detergent in view of the widely expressed concern that detergents containing phosphate should be banned from use and in view of the fact that statements by the industry indicate that no substitute is on the immediate horizon?


Charles Mills (Bud) Drury: Mr. Speaker, a very considerable amount of work is being put into discovering or trying to find detergents which do not have the undesirable effects of the current phosphate ones. I do not know all the work that is being done, but I would be glad to find out and inform the hon. member.



SHIPBUILDING


Hon. Theogene Ricard (Saini-Hyacinihe):: Mr. Speaker, I have a question for the Minister of Transport.
Has the federal government approved a $50 million contract awarded to Davie Shipbuilding for the construction of 24 freighters?


Donald Campbell Jamieson: Not to my knowledge, Mr. Speaker.


J.-H.-Théogène Ricard: Mr. Speaker, I should like to ask the President of the Treasury Board why the federal government has deferred its approval of the $50 million contract awarded to Davie Shipbuilding?


Mr. Speaker:: Order! I think that the information requested by the hon. member for Saint-Hyacinthe should normally be given in a statement on motions.
If the minister wishes to answer the hon. member's question, he might do so immediately.


Charles Mills (Bud) Drury: Mr. Speaker, I regret to say I have no knowledge of such contract.

November 28, 1969

Inquiries of the Ministry UNITED NATIONS



RE-ELECTION OF CANADA TO CERTAIN BODIES

Mr.  R. Gordon L. Fairwealher@Fundy-Roy-al: Mr. Speaker, I have a question for the Acting Secretary of State for External Affairs. Perhaps the minister would like to take it as notice. Is it the policy of the government not to seek re-election to the Industrial Development Board of the United Nations and the Committee on Program Co-ordination for Economic and Social Development because of a reassessment of priorities due to the staff freeze resulting from the current austerity program? Further, if the minister is to take this question as notice, I have a supplementary-


Mr. Speaker:: Order, please.


Mr. Fairwealher:: What is the rationalization-


Mr. Speaker:: Order, please. Before the hon. member proceeds with the supplementary, perhaps I might be of assistance to him by suggesting to him that both the question and the supplementary be put on the Order Paper.



THE MINISTRY


Thomas Miller Bell: Mr. Speaker, I wish to direct a question to the Prime Minister. In view of the recently disclosed information that the principal secretary to the Prime Minister is acting as secretary of an organization of 50,000 Liberals, a new and potent political arm, is the Prime Minister satisfied that this secretary, as capable as he may be, is able to carry on his public service duties which are about the most highly priced in Canada?


Mr. Speaker:: The hon. member for
Waterloo.


Thomas Miller Bell: No, Mr. Speaker-


Mr. Speaker:: The hon. member will have to assume that I do not accept the question as being one that can be asked at this time. If the hon. member thinks there is urgency to the question it could be debated at the time of adjournment.


Thomas Miller Bell: May I rephrase my question, Sir, if it is not in order. With your indulgence, sir,


may I ask the Prime Minister if this principal secretary is engaging in these political duties and, if so, is he still carrying on his duties as one of the highest priced public servants in Canada?


Mr. Speaker:: The question should be placed on the Order Paper.



STUDENT LOANS


Max Saltsman: Mr. Speaker, I wish to direct a question to the Minister of Finance. Has his attention been drawn to a statement by a Liberal member of the Quebec National Assembly who charged that banks are refusing student loans to children of welfare families and, if so, does he intend to make representations to the banks?


Edgar John Benson: Mr. Speaker, I will certainly look into the matter. It had not been drawn to my attention. I would hope such is not the case. I think the student loans program instituted by this government has worked very well, even though it is administered by the provinces-


Some hon. Members:: Oh, oh!


Edgar John Benson: -and we would hope it would continue to work that way.



FINANCE


Mr. John Lundrigan (Gander-Twillingale):: Mr. Speaker, I wish to direct a supplementary but perhaps broader question to the Minister of Finance. Is he holding discussions with his friend, the Governor of the Bank of Canada, in order to have the banks institute selective lending policies so as to ease the effects of monetary stringencies in slow growth areas?


Mr. Speaker:: Order. That is not a supplementary question, but as the question has been asked perhaps the minister might be allowed to answer it.


Edgar John Benson: Mr. Speaker, the banks have been urged to do this both by the Governor of the Bank of Canada and by myself publicly. May I say that I would like to get away from the idea that the Minister of Finance runs the banks in Canada. The banks are run by their share-
November 28, 1969	COMMONS
holders and officers, and my dealings with them are through the Governor of the Bank of Canada who is responsible for banking generally in this country.


John Howard Lundrigan: A supplementary question, Mr. Speaker. In view of the fact that the Governor of the Bank of Canada claims not to be in agreement with selective lending policies in regional areas, could the minister indicate what plans he has to resolve this conflict between himself and the Governor of the Bank of Canada?


Edgar John Benson: Mr. Speaker, I think what my hon. friend has said is exactly contrary to conversations I have had with the Governor of the Bank of Canada. I would be pleased to look into the matter but I know that the Governor of the Bank of Canada has urged the banks not to impose as severe restrictions in areas of development in this country. I know that to be the case because it has been done in my presence.



HOUSING


Mr. John Gilbert (Broadview):: Mr. Speaker,
I wish to direct a question to the minister in charge of housing. Can we expect his long awaited statement on guidelines for public housing and urban renewal before the Christmas recess? If not, would he state the reason why not?


Hon. Robert K. Andras (Minister without Portfolio):: Mr. Speaker, I think I will be able to make some statement on both matters before the Christmas recess. The delay has been caused by long consultations with my counterparts in the provincial governments. We are receiving their recommendations now, and they will be carefully considered. We have not yet received them all. I think there will be further consultations with them before we make any definitive statement but I would hope, if it is at all possible, to make such a statement before the Christmas recess.



ECONOMIC COUNCIL


Mr. Heath Macquarrie (Hillsborough):: Mr. Speaker, I wish to direct a question to the bearer of good news, the President of the
DEBATES	1367
Inquiries of the Ministry Treasury Board. It concerns the representations which the minister said he was receiving from the Economic Council of Canada concerning proposed reduction of its staff and the curtailment of its contracts with outside consultants. Can the minister advise if the representations of this important and valuable body have received favourable consideration.


Charles Mills (Bud) Drury: Mr. Speaker, representations
were received some time ago and an answer was made to the Economic Council of Canada, the nature of which I outlined some few days ago in the House.


Heath Nelson Macquarrie: May I ask very simply if the answer was favourable, such as that given to the Auditor General, particularly considering how much the government needs economic advice?


Charles Mills (Bud) Drury: Mr. Speaker, I think the definition of "favourable" is a very subjective one and perhaps depends a bit on where you sit.



FINANCE


Mr. R. R. Southam (Qu'Appelle-Moose Mountain):: Mr. Speaker, may I direct a question to the Minister of Finance. In light of the serious economic plight of the Canadian agricultural industry at the present time, would the minister give serious considering to declaring a one-year moratorium on interest and principal payments on farm improvement loans, Farm Credit Corporation loans and farm machinery syndicate loans?


Edgar John Benson: Mr. Speaker, this has not been considered at the present time, but I would be glad to look into the suggestion made by the hon. member.


Max Saltsman: A supplementary question, Mr. Speaker. While the minister is looking into that, would he give some consideration to the establishment of regulations governing the spread between what banks pay for money and what they charge for money?


Edgar John Benson: Mr. Speaker, I would be glad to look into any suggestion made by the hon. member.
1368	COMMONS
Inquiries of the Ministry COST OF BORROWING IN CANADIAN MONEY MARKET


Marcel Joseph Aimé Lambert: Mr. Speaker, may I direct a question to the Minister of Finance. Can he explain to the House how it is that in the face of the government's monetary and fiscal restraint policies the cost of borrowing in the Canadian money market hit an all-time high last week all across the board?


Edgar John Benson: Mr. Speaker, that situation is not confined to the Canadian money market but obtains throughout the world.


EXTERNAL AFFAIRS
Mr. J. Edward Broadbent (Oshawa-Whii-by):: Mr. Speaker, may I direct a question to the Prime Minister. Following the conversations he had last evening with the heads of Canairelief, can the Prime Minister indicate whether the government is seriously considering participating directly in the flying in of food to Biafra during the night hours?


Pierre Elliott Trudeau: Mr. Speaker, I have nothing to add beyond what I said in my speech, that we are looking at alternative methods of ensuring the relief of starving people.


John Stratford Burton: Mr. Speaker, I wish to direct a question to the President of the Treasury Board in his capacity as Acting Minister of National Defence. Have any preparations been made for the invasion of Montreal this weekend by the Saskatchewan Roughriders?


Charles Mills (Bud) Drury: Mr. Speaker, as a Montrealer I can say that adequate preparations have been made for their repulse.


John Stratford Burton: A supplementary question, Mr. Speaker, In the likely event that the defenders of Montreal are routed, have preparations been made to establish evacuation centres in the Ungava region?


Some hon. Members:: Oh, oh!



TRANSPORT


John George Diefenbaker: Mr. Speaker, my question is of great

DEBATES	November 28. 1969
and immediate urgency to the florist industry of western Canada and arises from an order which has been made by the CPR, which I understand is also to be adopted by the CNR, whereby consignees of flowers henceforth will be required to take the risk of frost damage. This practically strikes a death blow at the florist industry. Have representations been made to the minister and will he bring those representations to the attention of the railways?


Donald Campbell Jamieson: Mr. Speaker, in this particular case I saw a most awesome demonstration of flower power. A protest was received yesterday along with a very nice bunch of roses. As a result, since this was done in such an amiable fashion, I have arranged for a meeting between the parties concerned and the railways. I believe that will be taking place on Monday. I have also indicated my sympathy for the florists in this matter.



COMPANY OF YOUNG CANADIANS


Robert Lorne Stanfield: Mr. Speaker, may I ask the Solicitor General whether, following the statements made by Mr. Saulnier to the Prime Minister last spring, the Solicitor General at any time gave instructions or launched any sort of investigation with respect to any of these charges or matters arising out of any of these charges?


George James McIlraith: Mr. Speaker, the information, as I understand it, was not in the nature of a charge or anything like that. There has been full information communicated to the Solicitor General and appropriate action taken throughout.


Robert Lorne Stanfield: A supplementary question, Mr. Speaker. I want to make sure the Solicitor General understands me. What I asked was whether, following the receipt of this information or these charges from Mr. Saulnier-perhaps the Prime Minister may prefer to answer this question-the Solicitor General launched an investigation or gave instructions with regard to any such investigation?


George James McIlraith: Mr. Speaker, I should, I think, deal with the matter this way. The hon. member is asking whether we launched an investigation. The work of the police authorities in this kind of activity relates to persons. The information was passed on to
November 28, 19G9	COMMONS
me; therefore discussion of the action being taken by the police in connection with the whole matter, intensified examination of any information they had and steps they should take to perfect what information they had, relates to persons. There is great confusion, I notice, in the question between persons and certain companies or organizations.


Some hon. Members:: Oh, oh!


Robert Lorne Stanfield: A supplementary question, Mr. Speaker. I ask it so as not to be unfair to the Solicitor General or misinterpret him. As I understand it, he has not given any instructions leading to an investigation into those charges but has simply examined information or documents that may have been sent to him?


George James McIlraith: No, Mr. Speaker, that is not a correct summary of the situation at all.



POSSIBILITY OF LIMITING CERTAIN ACTIVITIES

Mr. Gerald Laniel (Beauharnois):: Mr. Speaker, I have a supplementary question for the Prime Minister. It has to do more with the present than with the past, in connection with the activities of the Company of Young Canadians.
Considering the serious nature of some of the charges or allegations made with regard to the activities of the CYC, would the Prime Minister inform the House whether the government has already considered the means at its disposal to curtail or limit some of the activities of the CYC until such time as the act may be amended?
Mr. Speaker, I would like to know whether it is at present in the government's power to freeze certain funds placed at the disposal of the Company should it deem it advisable.


Pierre Elliott Trudeau: Mr. Speaker, we have studied that question. As the measures we could take under the act did not seem sufficient to us, we decided to refer to the committee of the House all questions related to the organization and to the structure of the Company of Young Canadians.



REQUEST FOR STATEMENT BY SOLICITOR GENERAL

Mr. G. W. Baldwin (Peace River):: A supplementary question, Mr. Speaker. Since the Prime Minister and the Solicitor General
DEBATES	1369
Inquiries of the Ministry seem to have successfully thrown out a fog-screen, will the Solicitor General make a statement, consistent with his responsibilities, carefully outlining what did happen and what action was taken?


Pierre Elliott Trudeau: The fog is over there, with the opposition.


George James McIlraith: Mr. Speaker, there has been no fogscreen thrown out. The situation is that certain evidence is being given now before a committee of this House. It has also been stated that certain evidence has come from one police force to the federal police authority and that it is being examined by the law officers of the Crown. Until the examination of that information is complete and the work of the committee of this House is complete, I do not think any useful purpose would be served by the Solicitor General making such statement at this time.


Mr. J. P. Nowlan (Annapolis Valley):: Mr. Speaker, may I direct a supplementary to the Solicitor General. It is not about information that may be coming to the responsible minister. Is it not a fact that the anti-subversive squad in Montreal is a three-party group made up of provincial, city and federal police authorities, the latter being the RCMP, and that they have been in on all these anti-subversive seizures and searches?


George James McIlraith: Yes, Mr. Speaker.


Mr. Speaker:: Order, please. I was going to say that the question was asked in an argumentative way, but it has been replied to. We have just three minutes left before the end of the question period.



HOUSING


Mrs. Grace Maclnnis (Vancouver-Kings-way):: Mr. Speaker, may I address a question to the minister in charge of housing. In line with the proposal of the United Church of Canada, will the minister try to get a cabinet decision to permit him to use the $28 million now earmarked for a Canadian Pentagon to provide, instead, rent subsidies of $1,000 each to 28,000 Canadian low income families?


Mr. Speaker:: Order, please. The hon. member's question is rather in the form of a representation and to that extent I suggest it is not in order.
1370	COMMONS DEBATES	November 28. 1989
Inquiries of the Ministry AIR TRANSPORT



WABUSH-REQUEST FOR STATEMENT ON FACILITIES FOR LANDING

Mr. James A. McGralh (SI. John's East):: Mr. Speaker, I wish to direct a question to the Minister of Transport. Is the minister now in a position to answer a question directed to him by the hon. member for Grand Falls-White Bay-Labrador a few days ago regarding statements made by officials of Quebecair raising serious doubts about the safety of the airport at Wabush, Labrador?


Donald Campbell Jamieson: Yes, Mr. Speaker. I wish to assure the hon. member and the House that, as I explained to the Standing Committee on Transport and Communications yesterday, with the navigational aids that are provided at Wabush and with operation in accordance with operating procedures established by the Department of Transport, flight operations at Wabush can be conducted safely at the same high standards as those in effect at other commercial airports across Canada.



THE CANADIAN ECONOMY


Mr. Randolph Harding (Kootenay West):: have a question for the Minister of Finance. Is the minister ready to answer the question I addressed to him on October 31 as to how and why group life insurance for the Canadian Armed Forces, worth between $1 billion and $2 billion, has been given to a foreign controlled insurance firm?


Edgar John Benson: Not only did I answer that question, Mr. Speaker, but I also indicated at the time that I believed a similar question was on the Order Paper and was going to be answered by the Minister of National Defence.



PENITENTIARIES


Mr. Mark Rose (Fraser Valley West):: My
question is directed to the President of the Treasury Board. In view of the discontent of the penitentiary correctional staff over the proposed salary increase of 2 per cent, will the minister have this matter reviewed in the hope that these important public servants may be awarded a living wage?


Charles Mills (Bud) Drury: Mr. Speaker, the course of collective bargaining, like that of true love, is not always smooth. We are in the midst of collective bargaining negotiations.



GOVERNMENT ORDERS


Edgar John Benson: That the whitepaper entitled Proposals for Tax Reform, tabled in the House on November 7, 1969, be referred to the Standing Committee on Finance, Trade and Economic Affairs.
He said: Mr. Speaker, the motion before the House is, I believe, very important in two respects. First, in referring proposals for changes in the tax system to a committee of the House for detailed discussion and for hearings before a bill is drafted, we are breaking new ground in Canada. The importance of this motion also stems from the fact that the white paper contains proposals for the most substantial reform of the Canadian income tax system since the Income War Tax Act was first introduced 52 years ago.
I will not catalogue all the proposals today because the white paper has been in member's hands for three weeks. Also, members were able to obtain some clarification of the proposals in a question and answer period immediately before the paper was made public. However, I do want to review the objectives which the government had in mind in framing these proposals. I will mention a few of the more important proposals by which we hope to attain those objectives.
First, we believe that there must be a fair distribution of the tax burden based on ability to pay. In keeping with this objective we have recommended that basic exemptions be increased to $1,400 from $1,000 for single taxpayers and to $2,800 from $2,000 for married taxpayers. We have also recommended that mothers with jobs be permitted to deduct child care expenses and secondly, that a general deduction be granted for employment expenses up to a maximum of $150. Further, our most fundamental proposal is that capital gains be brought to tax and that capital losses be deductible. Taken together the tax propos-
November 28, 1969

als would eliminate taxes for 750,000 Canadians. They would reduce taxes for another 3,000,000. About 800,000 would pay virtually the same tax, and to finance the relief to the lower income groups about 3,000,000 would pay more.
Our second objective was to see that the tax system interfered as little as possible with economic growth and productivity. Expenditure programs which tax finance foster economic and intellectual growth and the security of Canadians. But taxes taken by themselves interfere with economic growth and productivity. It has been one of our goals to try to design an income tax system which would interfere as little as possible with incentives to work and invest and with the direction our economy follows in meeting demands of consumers and other markets. In this connection we propose to give Canadian shareholders credit for half or all of the Canadian income taxes paid by their corporations, depending on whether they are widely held or closely held corporations.


Mr. Lewis:: May I rise on a point of order? I hope this will not sound offensive to the minister because I do not intend it to be. I wish he would deliver his speech a little more slowly, perhaps by paying a little less attention to the extensive notes that he is looking at, in order that we may follow him.


Edgar John Benson: Mr. Speaker, I will be very pleased to speak more slowly.


David Lewis: I just want him to-


Edgar John Benson: I hope hon. members will sympathize with me because I have a cold today and it is rather difficult to speak as loudly as I otherwise would.
We also propose to extend tax incentives to the mining and oil industries, although in a more direct and less costly way.
Keeping the tax system simple is an uphill battle, but we have tried. The growing complexity of our society and our economy requires a lot of rules if the tax system is to be fair. Nevertheless, we have tried to remove as many complexities as possible. For example, we propose to replace the surtaxes, the abatements and special taxes which have grown up over the past 15 to 20 years with a single, simple rate schedule. This would simplify tax calculations for all Canadians. Our proposals to bring capital gains into income include rules to reduce the difficulty of complying with the law. They would remove
Taxation Reform
many of the uncertainties of the present system. Now, a taxpayer is often unsure of the tax results of a particular transaction. He fears that unless he hires sophisticated advisers who can twist the transaction, he will pay substantially more tax than others with advisers.
This ties in with another very important fact concerning our tax system. Ours is basically a self-assessment system in which the vast majority of our taxpayers comply in all respects with the tax laws. Our system must encourage them to continue to do so. The best encouragement is to demonstrate clearly that others in similar or better economic circumstances will bear their fair share of the tax. This can only be accomplished by closing loopholes in the law, and by treating capital gains as income.
A final important goal is to design a tax system that the provincial governments will adopt for their income taxes. For the past 30 years the tax systems of the federal and provincial governments have developed in fairly good harmony. Should some provincial governments step out in another direction, Canadians would find it more difficult to comply. The time spent on their annual task of preparing returns might be doubled. And for those taxpayers who have interests in more than one province, there might be overlapping and double taxation. Since the publication of the royal commission report, we have met often with provincial ministers and officials to discuss the commission's proposals, and the provinces have made their views known to us. We have had those views in mind in the preparation of these proposals. Now, the government plans to continue this process by consulting the provinces about the white paper. The first meeting of ministers will take place about two weeks from now.
I should also like to mention at this point that in bringing forth the proposals for tax reforms, it was not intended to solve the problems of distribution of tax revenues between the provinces and the federal government. All the proposals are intended to do is build a fair system of taxation as a basis for taxing income in Canada. The distribution of tax revenue between the provinces and the federal government is another matter, and one which will undoubtedly be under continuing discussion, but it is not basic to these proposals.
Taxation Reform

November 28, 1969
[DOT] (12:10 p.m.)
I mentioned earlier that we are following a new procedure in referring the reform proposals to a committee of the House. This procedure will permit interested Canadians to put forward their views concerning the proposed Canadian tax system and to bring to the attention of Parliament and the government particular situations in which for some reason the proposals might have anomalous results.
The white paper has also been referred to a committee of the other place. I hope that the two committees will co-ordinate their activities so that their programs for hearing witnesses do not conflict. I propose at some appropriate stage to bring in an amendment which, if accepted, would enable the committee to obtain staff as necessary to assist them in carrying out their examination of these tax proposals and also to study the numerous briefs which, no doubt, will be submitted.
We believe that the proposals outlined in the white paper would produce a good tax system, a system substantially better than the one we now have. Indeed, we believe that it would be a system better suited to the Canadian situation than any of the systems in other countries. But we do not suggest it is a perfect system. If Canadians, including members of the opposition, can put forward ways in which these proposals could be improved, the government will be quick to adopt them. What we are bringing forward, and I have said this before, are proposals for tax reform. We are in no way bound by these proposals; indeed, I have made it clear from the day they were brought forward that we want hon. members of this House and all other Canadians with suggestions to offer, to make them known for consideration.
I now wish to bring to the attention of hon. members two of the modifications which we are prepared to make. I think it is important to clear up a couple of the situations dealt with in the white paper. The first concerns a modification of details in the proposals concerning the application of capital gains tax to bonds and mortgages. In the white paper, it was recommended that if the value of a bond or mortgage held by a taxpayer was less on valuation day than the cost to him of that investment-or his amortized cost, if he bought at a discount-the recovery cost or amortized cost would not be taxed. As originally phrased, this rule would only have applied to bonds held on white paper day. It is now proposed that the same treatment be

accorded to bonds and mortgages purchased between November 7 and valuation day. This would ensure that a market dip extending through valuation day would not cause taxpayers who buy bonds and mortgages now to pay tax on more than the yield they had expected at the time of their purchase.


Some hon. Members:: Hear, hear.


Edgar John Benson: This should remove an uncertainty which might otherwise have complicated the marketing of new bond issues and bond trading between now and valuation day.


Robert Lorne Stanfield: Better market those bonds.


Edgar John Benson: Would you like to hear about the success of the new Canada Savings Bonds-the largest amount ever raised in an issue?


Some hon. Members:: Hear, hear.


An hon. Member:: And the highest interest rate.


Edgar John Benson: The second example concerns dividends passing from a gas, steam or electric utility company to its parent company. At present, 95 per cent of the tax paid by these companies on their utility profits is turned over to the provinces, and the white paper proposes that it all be turned over in the future, that is, 100 per cent. Consequently, there would not be any net federal tax for which shareholders could be given credit. If the proposals were applied literally, there would be a federal tax on a dividend from a utility company to its parent, even though the provinces had received a tax of 48 per cent on the utility profits. This would be adjusted to 50 per cent when the 100 per cent of the tax is paid over. Individual Canadian shareholders of the parent company would receive credit for their share of this tax. However, the cash flow of the company would be reduced and shareholders who were either under a pension plan or not resident in Canada would not receive credit for their share of the tax. The government is prepared to remedy this situation. We would provide that a parent company can receive tax-free a dividend from a subsidiary that is a gas, steam or electric utility provided the dividend is paid out of profits which have borne the tax we are turning over to the province.
Naturally, these are not the only questions which have been raised with me in the past three weeks. Indeed, they are not the ques-
November 28. 1969

tions which have been raised most often. I should like to comment now on two or three of the most popular questions.
In my discussions with Canadians across the country I have been told the same story over and over again by taxpayers in the middle income group. They do not mind paying a little more in taxes if in doing so they will lighten the load for those with low incomes. But they want to be sure that those who are better off than they are will be pulling their weight.
Naturally, they are concerned when suggestions are made that taxes will go up more for those with middle incomes than for those in the upper income group. Comments like these are misleading. They ignore completely the effect on the upper income group of bringing capital gains into income.
When estimating the effects of the white paper proposals, we used a carefully constructed sample of 100,000 personal income tax returns from 1967, with adjustments to reflect the number of 1969 taxpayers, their incomes and tax rates. This sample is representative of the whole tax-paying population. By calculating the tax for each of those returns under the white paper proposals, we were able to derive the over-all revenue and incidence effects. With capital gains, we relied on the relationship between dividends received and capital gains, and to some extent on United States experience. But we believe the results are as good an estimate as can be derived.
The computer runs show the average increase or decrease in tax for taxpayers in various income brackets when all of the changes, including capital gains, are taken into account. They show that taxpayers now in the $10,000 to $15,000 income group would pay average increases in income taxes of $210. This includes both single and married taxpayers

all taxpayers. In the $15,000 to $20,000 group the average increase is $420; between $20,000 and $25,000, it is $445; between $25,000 and $50,000, it is $870, and for those with incomes over $50,000, the average increase would be $1,820. So, when we include the provisions concerning capital gains, we find it is a progressive tax up the scale; there is no upward movement affecting the middle income group particularly. There may be individual taxpayers, not realizing capital gains, who would not face as large an increase, but the upper income group as a
Taxation Reform
whole would pay their share of the cost of the tax relief proposed for the low income groups. Let me say that the wealthy understand this. They have told me so-in Calgary and elsewhere.


Eldon Mattison Woolliams: They told you in Calgary, all right.


Edgar John Benson: I would also point out that the reduction in the top rate from 80 per cent to 50 per cent would cost some $40 million while the revenue from capi'al gains, which will be derived largely from the same group of people, would amount to some $340 million. This confirms the data produced by the computer runs which I have just mentioned.
[DOT] (12:20 p.m.)
Taxpayers have also asked about the proposal that certain assets be revalued every five years. In view of some comments which seem to assume that all assets would be taxed every five years, it should be made crystal clear that this proposal applies only to the shares of widely-held Canadian corporations-the shares which give rise to half-rate gains. The proposal does not apply to any other class of asset. In particular, it would not apply to the shares of closely-held private corporations. The shares of public companies are readily marketable. Therefore, taxpayers can realize their gain or loss fairly readily at the time of their own choosing. In a manner of speaking, they would be on a voluntary tax system. The government feels that some limit to this type of postponement is desirable in order to distribute the tax burden fairly between those who own such shares and those who do not.
A revaluation every five years would reduce the lock-in effect. By "lock-in", I means the pressure on taxpayers to hold on to assets all their lives to avoid tax at the time of sale. This might interfere with the free working of the capital market. Periodic revaluation also has some technical advantages that are detailed in the white paper, and I refer hon. members to them.
We recognize that is is a new idea to Canadians, and that those who own shares in widely-held corporations may need some time to grow accustomed to it. Here again this is a matter that I think will receive a great deal of discussion, and rightly so, before the committee of the House.
I might also say that one of the difficulties that arises when one moves into the taxation

November 28, 1969
Taxation Reform
of capital gains is that governments want at some time to realize the tax on the gain. If one is allowing a roll-over of the property- this applies to all property mentioned in the proposals-at death, it would be possible for someone to hold shares in widely-held public corporations, hold on to them through several generations with a consequent great increase in value, and the tax would never be collected. I believe that in the case of trusts in Britain there is now a periodic revaluation. In the United States, partially because of this sort of problem, I understand they are now proposing to put a limit on the life of a trust.
It is a difficult problem to deal with. One might say that one should only collect the tax when the securities are sold. If one did that and allowed a roll-over at death, which would not force people to pay the gains tax and the estate tax at death, the shares in question might pass through the hands of several generations without tax being collected on the increment in value, whereas other Canadians would be paying tax on the increment in value of other assets of which they had disposed.


David Lewis: Mr. Speaker, at this point may I ask the minister a question. He dealt only with shares in widely-held corporations and closely-held corporations. Would this five year revaluation also apply to land, and other assets of that sort?


Edgar John Benson: 
Mr. Wahn:: Would the minister permit a question, please?


Edgar John Benson: I am just about finished.
The last item I should like to discuss is the increase in personal exemptions. The Leader of the Opposition (Mr. Stanfield) said in Edmonton last week that the really poor in this country do not pay income tax anyway. The proposed exemptions would mean that a single man with an income of $1,500 would be exempt. It would also mean that a married man with two children would be exempt on $3,500. In my opinion, people in these circumstances are relatively poor in Canada. I think it is a step in the right direction to be able to take the 750,000 people in these categories off the tax rolls of our country.
I am not claiming that tax reform is going to solve all of the social problems of our country, the problems of people on low income. Through tax reform the only people you can help are people who pay taxes. The other side of the coin has to be looked at in a review of social welfare schemes and systems in existence within the country. Indeed there is a committee of the cabinet, as you know, considering the Willard Report. They have been looking into this matter and ultimately will produce ideas on this side.
All I have been trying to do here is provide a fair and equitable tax system. We in Government believe that the system proposed is a good one. As I said, it is being put forward as a proposal for discussion, to be brought into study whereby it will be accepted by Canadians as being a good tax system.
Certainly, I can indicate to the committee that my department officials will be pleased to give all the assistance we can in order that the committee of the House of Commons may have hearings which are informed and have

November 28, 1969
Taxation Reform
full explanations regarding any problems that may arise from the white paper. I think if all of us work in conjunction with the committee, then we will have acceptable legislation. We can use the proposal as a basis to be adjusted and end up with a tax system in Canada which Canadians will say is more fair and equitable than the present tax system and yet will not stifle the economic growth of our country. Thank you, Mr. Speaker.


James Aloysius McGrath: Mr. Speaker, would the minister permit a question which is prompted by the presence in the gallery of the distinguished Premier of Newfoundland?


Some hon. Members:: Hear, hear.


James Aloysius McGrath: Mr. Speaker, is the minister aware of the objections and reservations the Premier of Newfoundland has about this white paper? Perhaps while the minister is on his feet he might avail himself of this opportunity to tell the House whether other premiers have expressed similar objections.


Edgar John Benson: Mr. Speaker, the only objections that I have had or have seen from government officials are the ones that have been briefly stated in the paper. I do not think we will ever develop a taxation system that will make everybody in Canada happy. I do think by moving through proposals such as we have, with everything to be discussed at public hearings before the committee of this House and the committee of the other place, we can at least receive the opinions of all sorts of people before we finally decide on a new tax system for Canada.


Ian Grant Wahn: Mr. Speaker, I, too, should like to ask a question arising out of this statement. Is it the intention that Section 105 would continue to be available in respect of surplus amounts accumulated before the effective date of the new legislation? May I ask the minister whether the five year reevaluation of marketable securities would apply only to individuals who hold marketable securities or also to corporations which hold marketable securities?


Edgar John Benson: Mr. Speaker, the hon. member is getting into details with regard to the proposals. I would be pleased to answer the first question dealing with Section 105. It is proposed in the white paper quite clearly that existing surpluses can be cleared by the payment of a flat 15 per cent at times to be

chosen by the shareholders and the corporation. So, this would involve Section 105 as modified. This would be easier than Section 105. Under Section 105 as it presently is, you have to pay out half in dividends and 15 per cent on the balance. With the new proposal, one could clear sin-pluses by the payment of a flat tax of 15 per cent.
In response to the second question, periodic revaluation would apply to corporations as well, but I should like to look into the detail of the particular situation my hon. friend may be thinking of because this is a rather complicated question.


John Gilbert: Mr. Speaker, in view of the minister's concern about the low income groups in the country, and his statement that it is a step in the right direction to increase exemptions to $1,500 for a single man and $3,500 for a married man, I wonder whether he has received any criticism about this increase in the exemptions? If not, will he implement or recommend the implementation of them as of January 1, 1970 to give relief to these low income groups?


Edgar John Benson: Mr. Speaker, as soon as the proposals move through the committee we would prepare legislation and go ahead with it. You must remember that these proposals are in a sense designed to raise a similar amount of revenue. If one were to move ahead by simply increasing exemptions, without considering the other proposals with regard to personal income tax, bringing in capital gains and so on, this would mean a cost of a billion dollars. We would have to make more than one change at a time.
I do not think I have received criticism in respect of the exemption, but I have had the question raised in some letters to me as to why we do not go further. The answer is simply that to move up $400 for single people and $800 for married couples costs $1,000 million which has to be raised from other taxpayers through redistribution within the system. It is a matter of opinion as to how far you can go in shifting the burden at a particular time. I think we have made a substantial step.


David Lewis: Is that $1,000 million a year?


Robert Lorne Stanfield: Mr. Speaker, since I am limited to 40 minutes in speaking to the motion to refer this white paper to the committee, there is time to do no more than touch upon some of the main considerations involved as I see
November 28, 1969

them. My colleagues will deal with particular aspects in detail and, of course, the committee will have an opportunity to examine the Government proposals point by point together with the alternatives that will be suggested by us and by others. Today I simply want to call the attention of the House to certain matters I consider to be of particular importance.
It should be emphasized at the beginning that the white paper deals with only part of the taxation field. That shortcoming is fundamental. Last winter we protested that the changes then made by the Government in the estate tax field could only be judged in the context of other tax measures, especially income and capital gains tax, and suggested changes which we had not then seen. Likewise today it is not really very sensible and not just to ask Canadians to accept these changes in tax laws that are proposed without knowing what the policy of the Government is with regard to the rest of the taxation field, especially the so-called consumption or sales taxes.
To read the white paper, one would almost think that the provinces and the municipalities did not exist. It is ridiculous to be trying to devise a more equitable taxation system while ignoring for all practical purposes that the provinces and municipalities are also imposing taxes on the same Canadian citizens. The federal government has turned a deaf ear to the demands for consultation on a comprehensive federal-provincial tax system. The minister shakes his head. He is prepared to listen but that is about it.


Edgar John Benson: I spent two hours with the minister for Ontario yesterday.
[DOT] (12:40 p.m.)


Robert Lorne Stanfield: Until this is achieved,
Canada will be a long way from sanity, much less justice, in its tax system. The Canadian citizen will continue to pay a high price for this disorganization and rivalry among the three levels of government. The proposal in this white paper to subject bursaries and scholarships to income taxation will have an obvious effect upon the provinces. It is well known that the federal government is not in the bursary field, despite certain commitments made in the past. The burden for this will fall in large part upon the provincial treasurer who will have to supplement the bursaries accordingly to enable young Canadians to attend school. This will mean, in effect, a transfer of the burden from the federal government to the provincial treasurer.
Taxation Reform
There are very serious objections to some of the proposals and some of the methods proposed in the white paper. I think some of the defects can easily be corrected, and I hope the government will move to amend its proposals or that the committee will move to amend them right away. For example, I think all Canadians will approve of the intention to bring tax relief to the lower income levels, although the minister's expectation that it will benefit 700,000 or 750,000 Canadians is on the basis of this year's incomes. The minister cannot say how many will be exempt when these laws become effective, say, in 1972 because with the rate of inflation we have the exemption may apply to several hundred thousand fewer Canadians. I suggest that the minister's statement is almost misleading because it is made on the basis of 1969 incomes and is not made on the basis of what incomes might be in 1972.


An hon. Member:: 1968.


Robert Lorne Stanfield: 1968 or 1969; it is certainly not on the basis of what might be anticipated in the future.
As an anti-poverty measure, of course, the exemptions are of very limited value. By the time the legislation comes into operation they will be considerably less. Many thousands of Canadians who, on the basis of incomes this year, would be exempt will not be exempt in 1972 as a result of the inflation which is going on today and which by all signs will continue at some rate at least.
The proposal to grant some relief to working parents who must pay for child care is very welcome. Again this does not help the working parents who most need it. I am sure the minister will agree with this. I have in mind those parents who do not pay any income tax at all. I suggest it would be far more equitable for the government to provide what relief it does not in the form of an exemption to the parent, which is the method mentioned. I believe it should be provided entirely in the form of a tax credit which would be of as much value to the relatively low income parents as to the high income parent. This is something to which the committee should give its attention.
What I call attention to is the fact that the proposals in the white paper do not provide sufficiently for parents with dependant children. The answer of the government to this criticism has been that the forthcoming white paper on social welfare will cover this
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Taxation Reform
omission. We will see, and I hope we will have an opportunity to examine these proposals and the new proposals together.
There are many highly technical questions which arise. For example, there is the matter of trusts. I suspect and believe that the authors of the white paper are strikingly oblivious to many of the implications of the proposed taxation changes upon trusts and the receivers of income from trusts. This is something which I am sure the committee will have to examine very carefully. There is every indication that many questions have not even occurred to the authors of this white paper.
I should like to deal now with the extra burden the minister intends to impose on Canadians in the middle income groups. It is on this aspect of the white paper that the minister in the past few weeks has been attempting to pull off what I believe to be one of the greatest "snow jobs" of this or any other century. I think it is obvious that the minister's public relations advisers planned a campaign that is literally incredible and literally unbelievable. Worse still, they have taken the Minister of Finance (Mr. Benson) and made sort of a huckster out of him.
I think the minister would like to think of himself as sort of a Robin Hood. I do not know about that, but many Canadians are beginning to think the minister is some kind of a hood. He is trying to convey the impression that the wealthy will be taxed more heavily than the less wealthy and that the less wealthy will be better off. That is not true. The minister appears on television and talks about the powerful interests which will protest. Who are these powerful interests? The taxpayer who is single and earns more than $4,000 a year will pay more under these proposals. The taxpayer who is married and earns about $9,000 per year and up will pay more. These people will be surprised to find themselves classed by the minister with the powerful interests. They will be quite astonished to hear that the minister thinks they are wealthy if they earn more than $4,000 single or $9,000 married.
Of course any person who thinks, as the minister does, that one can live on $30 a week-


Edgar John Benson: I never said that.


Robert Lorne Stanfield: -is bound to think that anybody with $9,000 is rich beyond the dreams of avarice. The minister has since clarified this

DEBATES	November 28, 1969
statement. He really meant that $30 a week could be lived on in certain parts of the country. So much for the government's regional disparity policy.
I believe it is inequitable that those in the general area of $10,000 to $15,000 will, in most cases, be faced with a larger increase in respect of their income tax payments than those in the $25,000, $30,000 or $35,000 a year bracket. At this point I wish to say I do not have one of those evil minds that would dwell for long on the fact that the minister and some of his senior advisers are in that $25,000, $30,000 or $35,000 area-*


Edgar John Benson: What is your bracket?


Robert Lorne Stanfield: -but I think I should tell the minister confidentially that there are a lot of suspicious people in this country. They think they hear the sound of grinding axes coming from the minister's office. I assure the minister I shall do my utmost to persuade people that this remarkable coincidence is purely accidental. What cannot be accidental, of course, is the attempt by the minister to distort the meaning of the increases because the comparison the minister attempted to draw between his proposals in the white paper and the situation of a taxpayer in the state of New York is, as the minister ought to know by this time, blatantly misleading. New York state has about the highest income tax of any major state. This was mentioned as long ago as the Carter report.
Furthermore, the minister's table took no account of the fact that a substantial tax reduction has been announced in the United States. Apparently the surtax is to be taken off and there is talk at least of further reductions. Finally, the minister's calculations simply omitted to allow for the fact that a number of Canadian provinces have their own income taxes in addition to those proposed here. In other words, he attempted to compare the lowest federal and provincial income tax in Canada with the highest federal and state income tax in the United States, that of the state of New York. I suggest the minister or whoever prepared the white paper-and	the minister must accept
responsibility for it-is guilty of a cheap manipulation of figures in this regard. This kind of political statistic is useless, and the use of misleading comparisons is offensive to Canadians who try to make a serious analysis of the government's proposals in this white paper.
November 28, 1969
[DOT] 12:50 p.m.
It is my view that the rate of progression is too steep on the personal income tax, and that it is indefensible in the context of the present and proposed tax system to impose a heavier increase on the incomes of the $10,000 to $15,000 a year group than on the higher groups. Furthermore, let me say just for the record that I do not see anything sacred- again, certainly not in the context of the tax system proposed by the minister-about a 50 per cent maximum on the extremely wealthy. The 80 per cent limit would be absurd, particularly in the light of the capital gains tax, but, as I said, I do not see any justification for the rate of progression on the lower and the middle income tax as proposed.
The minister will no doubt talk about the billion dollars in revenue that is being dropped as a result of the increase in the exemptions. Let me point out three ways this loss could be overcome, other than by tax increases. First of all, the loss about which the minister speaks is computed on the basis of 1969 incomes, not 1972 incomes, and when allowance is made for inflation far fewer people will get the benefit of these exemptions or will be totally exempt in 1972. There will be still fewer of them in 1973 and still fewer in 1974. Therefore, the cost of the proposed exemptions will be far less than was suggested, and the minister is using an inflated figure because he is using the 1969 figures.


Edgar John Benson: Take a look at the table at page 95.


Robert Lorne Stanfield: I am taking a look at it and those figures are proposed on the basis of 1969 incomes.
Also, when you consider what a given tax structure will produce, and when you consider it in an inflationary context, you have to bear in mind that revenues from federal taxes, particularly income taxes, increase more substantially than the gross national product. In other words, government revenues rise even more than the rate of inflation. If, for example, there is an increase in the year of 5 per cent in the gross national product, the take of this government from the safe level of income taxes is substantially more than 5 per cent. This must be taken into account when one tries to compute what a particular tax structure will in fact produce. The minister has not made any attempt to tell us what that would be, and of course he cannot. But the committee must bear in mind that inflation is here, that it may very well
Taxation Reform continue, and the committee should by no means agree to the rates that are proposed for the lower and middle income groups on the basis of any information that they have yet received from the minister.


Some hon. Members:: Hear, hear.


Robert Lorne Stanfield: Furthermore, the package that he has proposed provides just under $200 million in additional revenue immediately, and some $630 million after it has been in operation for five years, that is a 5.7 per cent increase in rates. In other words, the minister is using this device not only to bring about some reform but also to slip in a little tax increase at the same time, to the extent of $630 million.


Steve Eugene Paproski: Shame.


Robert Lorne Stanfield: So, when the minister speaks about losing a billion dollars, one must put this in the context of inflation and what the incomes are likely to be in 1972. One must put it in the context of the additional revenue that the minister means to collect in any event, some $630 million. It will then become apparent that there is no need to take this crack at Canadians in the lower and middle income brackets.
The minister has not made any case at all, particularly when one considers that these people are now paying substantially higher taxes than are paid in most states. In many cases these middle groups are composed of professional people and middle management groups who will be the leaders in the professions and management in Canada tomorrow, unless they are encouraged to depart to the United States.
As to smaller businesses, it must have been in the start of the life of the just society that somebody decided that smaller businesses do not really count very much. Certainly, there has been an open season on smaller business for the past year or two. The Postmaster General (Mr. Kierans) has added substantially to the cost of doing business. The so-called two level system of corporate taxation has been applied equally to small and large corporations, which is quite unnecessary I agree. Furthermore, I realize it has been subject to some abuses. But to abolish the lower rate in order to prevent abuse, and to end up by crippling many small businesses which in many cases will become the medium business of the future unless they are crippled, displays



November 28, 1969
Taxation Reform
a certain intellectual bankruptcy unusual even for this government. This proposal will be very serious for many small corporations.
The minister spoke about the number of unincorporated companies. I agree there are many of them, but on the other hand anyone engaging in small manufacturing or in any company which, like any organization, is likely to develop, is pretty well certain to become incorporated for reasons of limitation of liability, quite apart from any question of taxation.
The government should give an undertaking right away that it will not abolish the two level system until some appropriate alternative is found to help small businesses get under way and to help them compete as well as raise the money they need for expansion. This will also apply, of course, to farmers who are incorporated. It is quite certain that the minister is proposing to seriously reduce the cash flow of small corporations. The two level system must not be abolished until some offsetting provision is devised to try to overcome the bias of the capital market against the small corporation because the small businessman trying to expand cannot go to Wall Street or Bay Street to raise money. I suggest that the government proposal is stupid and we will oppose it as hard as we can until some way is devised to overcome it.


Mr. Deputy Speaker:: Order, please. I see it is one o'clock and I do now leave the Chair until 2 p.m.
At one o'clock the house took recess.


[Stage Direction]
AFTER RECESS

The House resumed at 2 p.m.
Robert Lorne Stanfield: Mr. Speaker, when I broke off this morning I was discussing the effect of the white paper proposals on the small corporation. As the minister himself stated, it is not so much a question of a tax differential in the long run. The shareholders of a small corporation that pays a 21 per cent rate are paying a substantially higher tax in the end, and the question really is whether it is sensible to impair the ability of a small corporation to compete, to remain modern and to expand in view of the difficulty that this kind of corporation encounters, generally speaking, in raising money. It does not seem to me to be sensible, Mr. Speaker. It is a definite discouragement and in my opinion will definitely

make available a larger percentage of the Canadian market to the large corporation, and make it difficult for the small corporation to compete and develop.
I do not propose to say very much about the proposals regarding natural resource industries. No doubt others will discuss at some length the effect of the white paper proposals on these industries. I believe it is essential that our tax policies encourage the exploration for and development of our natural resources, and that we should be generally competitive with other countries whose natural resources are comparable with ours.
I would just like to say that with regard to the new incentives that are being substituted for the old, I believe that under the new ones there will be less encouragement for the development of resources, of mines, and of oil explorations in the more remote areas. I believe that this change may make it somewhat more difficult for the Minister of Regional Economic Development (Mr. Mar-chand) to achieve his purpose of reducing economic disparities.
I wish to spend some time this afternoon on the proposed changes relating to capital gains. I want to make it very clear at the outset that I do not oppose a capital gains tax in principle, but I serve notice now, Sir, that unless some important changes are made we will have to fight this proposal in its present form just as vigorously as we know how.
1 would like to make four points in connection with the capital gains aspect of the proposals. First, in the present Canadian economic context it is absurd for any government in Canada to contemplate a capital gains tax at the rates proposed, or anything like them, that does not take account of inflation. Indeed I think the committee should consider very carefully the effect upon Canada of having a capital gains tax at rates substantially above those prevailing in the United States.
o (2:10 p.m.)
In recent years we have had an inflationary factor in our economy of some 4 per cent or 5 per cent. There seems to be very little likelihood of any easing in that trend, given the inability of the government to decide on an anti-inflationary policy and to stick with it, and the hapless and rather pathetic gestures of the Minister of Consumer Affairs and Higher Prices. Given the present situation, the government proposal to tax what is simply an inflationary gain, not a gain in real
November 28, 1369

value but an illusory inflationary gain, surely cannot be defended. I know it is suggested there is no logical distinction between taxing inflated incomes with an income tax rate and a capital gains rate, but I think there is a great difference, Sir. The income tax rate is the rate applied by Parliament each year affecting the income of any given year, whereas the capital gains tax is the tax applied to a change in value which may have accrued over many years. Serious as it may be, inflation automatically involves a reduction in the value of exemptions for income purposes and automatically involves an increase in tax rates. This is something Parliament can deal with each year, whereas a tax on a capital gain that has accrued over the years is in a very different category. So, sir, this is an aspect of the proposals that must be given very serious consideration.
Secondly, the capital gains tax to be imposed should be related to the rest of the tax system from the point of view both of incentives and equity and, especially, it should be related to the estate tax. In other words, the introduction of the capital gains tax should be accompanied by a review of the estate tax structure which was adopted during the last session, and especially the way that structure affects smaller and medium sized estates. May I remind the House that under the new proposals, and even after they were modified they were opposed by every opposition party in the House, the estate tax reaches a level of 50 per cent at the $300,000 estate level, whereas formerly that rate applied to estates of $1,800,000. Furthermore, the $300,000 estates are worth that much less in depreciated currency. This is something that must be investigated. Introduction of a capital gains tax ought to involve a re-examination of our entire estate tax legislation.
Thirdly, the averaging period proposed in the white paper must be examined. It should be extended over a longer period, and the averaging should be a real averaging without the so-called threshold amount-it might be called a strangle hold amount-proposed in the white paper. Unless there is a longer averaging period, farmers and others, for example, who hold assets after a lifetime's work are going to suffer very severe hardships. I would hope that at least the government might consider something in the nature of a moving ten-year average so that a person-say, a farmer in the future, who sells his farm at the age of 65 in order to retire- would not suffer from having kept his farm,
Taxation Reform
thereby possibly deriving a low return on his investment and a small income, over 20 or 30 years. That is practically a lifetime. This will turn out to be a confiscatory rate of tax if the inadequate averaging provisions suggested by the minister are adopted. Indeed, the present proposal of the government may be confiscatory. It may be said that difficulties would be created in lengthening the period; but the government so much as admitted in its white paper that even with the five-year averaging proposal, it will no longer be possible for the ordinary citizen to compute his taxes. They will have to be computed by the tax gatherer. If that is the case-


Edgar John Benson: It is not.


Robert Lorne Stanfield: Is the minister shaking his head?


Edgar John Benson: It does not have to be so computed. The hon. member could compute his own.


Robert Lorne Stanfield: One could compute one's own tax, but the government recognizes in the white paper that it will no longer be feasible for some taxpayers to do so, Mr. Speaker, because the taxpayer in many cases will have to rely on the tax gatherer in computing taxes. If that is so, then why not make the averaging period as equitable as possible? Why not make it longer, so that the fellow who works an asset like a farm all his life will not get kicked in the teeth at the end of his working life.


Some hon. Members:: Hear, hear.


Robert Lorne Stanfield: Fourthly, I wish to state my opposition to what I call the revaluation tax in its present form. I am speaking of the appreciation tax which is to be imposed every five years. If a person owns a piece of real estate or a work of art or some shares in a closely held company, he will pay a capital gains tax if and when he sells those assets and realizes a profit. But if a person has some shares in what is called a widely held corporation, which might be described as the sort of company that is listed on a stock exchange, he not only pays a capital gains tax if and when he sells those shares at a profit but, in addition, every five years he has to pay a tax on one half of the assessed increase in value of those shares he has held and not sold; losses, of course, being deducted. This is actually a value appreciation tax, a tax on capital, a tax on the growth that Canada needs. I say in all sincerity, sir, that no Minister of

November 28, 1989
Taxation Reform
Finance has ever made a proposal that would leave future successful Canadian enterprises more vulnerable to United States take-overs.


Some hon. Members:: Hear, hear.


Robert Lorne Stanfield: I hope the Minister of
Finance does not run into Walter Gordon in a dark alley, because he might not come out. The white paper makes a distinction between shareholders of so-called closely held corporations who are usually closely linked with management of the company, and the general run of shareholders who hold shares in the larger, more widely held corporations and may have no connection at all with management. I understand that distinction; we all do. The difficulty is that the minister has applied the same distinction with respect to those shareholders who, in the larger, more widely held corporations, are connected with management-in order words, the controlling shareholders. The minister has applied standards that may be valid for the general run of shareholders to individuals or groups which control a Canadian corporation, and that is likely to have disastrous effects for this country.
I want to see someone on the government side of the House get up and defend in detail the implications of the confused thinking behind this proposal. If a Canadian, or a group of Canadians, begins a company-a new mine, let us say-and, in order to raise capital and develop the mine he sells shares which are listed on a stock exchange; and if the mine is one of the relatively few successful mines which in the past have strengthened the economy of the country and as a result its shares rise substantially in value over a five-year period, I ask, how is the controlling shareholder, or shareholders, to pay the heavy appreciation tax? Generally, that shareholder will have to sell shares in the company in order to pay the tax, and will thereby risk losing control of the company. If he does not lose control after the first five years when the appreciation tax is imposed, he will very likely lose it after the second five years.


Eldon Mattison Woolliams: That is what the minister wants.


Robert Lorne Stanfield: 
Some hon. Members:: Hear, hear.


Robert Lorne Stanfield: I think the committee should take a good look at that. The minister will forgive me, and the House will understand, that I am not dwelling on those aspects of the white paper that I approve of, although I did mention some. I think we can take it for granted that the members of the government will overcome their natural modesty long enough to draw attention to the good points, perchance even to exaggerate them slightly.
November 28, 1S69

Taken as a whole, the white paper moves in the direction of "disincentives" rather than incentives to Canadians. What comes through loud and clear is that the government is complacent, almost foolishly complacent, in its belief that nothing can stop Canada from achieving its potential economic growth.
Small businesses that are incorporated will be hard hit. People in the low and medium income bracket, who are already at a substantial disadvantage compared to their United States counterparts, are to be put at a greater disadvantage. The more successful a future Canadian enterprise is, the more likely it is that the control will be taken over by some outside corporation because Canadians will have to sell their shares in order to pay the tax the minister proposes to impose, thereby losing control.
A capital gains tax is to be imposed that is considerably more than that of the United States. There is in the white paper a strong "disincentive" to capital formation and reinvestment. There are some "disincentives" that will clearly affect certain regions. If Canada is to grow economically, the main impetus in the context of these proposals in the white paper will not come from Canadians, but from foreign countries. I suppose some people will say "So what else is new?", but I think most Canadians will regret it. They will regret that the government, given an opportunity to develop a tax system that would not only be more equitable, but would help provide a greater opportunity for Canadians to control our own economic growth, failed to do so.
The government can set up the Canada Development Corporation, but I say in all sincerity that 50 Canada Development Corporations would not undo some of the damage and some of the "disincentives" that are contained in this white paper.


Some hon. Members:: Hear, hear!


Robert Lorne Stanfield: I have made some suggestions. We will be making other alternative proposals in committee. Our aim will be to relieve some of the inequities that are perpetuated or worsened by this white paper, to eliminate some of the glaring "disincentives" and try to build a tax system that will maximize opportunity for individual Canadians.
I move an amendment, seconded by the hon. member for Peace River (Mr. Baldwin), that the motion be amended by adding the following to it:
Taxation Reform
-with instructions to develop alternatives to the proposed "disincentives" affecting middle income groups and small businesses in particular, and which increase the vulnerability of Canadian enterprise to foreign take-overs.


Mr. Deputy Speaker:: I prefer to take the amendment under advisement in terms of putting it to the House until I have had an opportunity to consult with Mr. Speaker.


David Lewis: Mr. Speaker, some of the criticisms which the hon. Leader of the Opposition (Mr. Stanfield) has made of the white paper we agree with, but many of the statements he made we do not agree with because of the basic difference of approach to what we are trying to do in and for our country.
The minister emphasized during his speech that this was the most thorough tax revision since the Income War Tax Act was introduced many years ago. I say to the minister that all the greater is the pity that instead of building a genuinely equitable and desirable tax system, he has in major part only tinkered with it and produced something that does not meet the needs of the 1970's and the ideas of equality which the Canadian people now accept.
The minister boasts about the fact that 750,000 people are off the tax rolls. He speaks of it in such a way as to suggest that all of us, particularly the 750,000 who are no longer to pay tax, are to genuflect before him for his immense generosity. I refuse to do that, Mr. Speaker. I think the 750,000 people should have stopped paying taxes years ago and the fact that, belatedly the minister finally made some adjustment that clears them off the tax rolls will not win him a seat in heaven. It may win him a slightly less uncomfortable seat in the other place, but it is nothing to cause us to genuflect before him.


Edgar John Benson: You and the Leader of the Opposition will be there with me.


David Lewis: The minister talks about losing $1 billion in the same sentence that he talks about 750,000 people being taken off the tax roll. They were off the payroll before, Mr. Speaker. I do not suggest that he is implying by that that he is losing a billion dollars from these people, but it is important to note, Mr. Speaker, that these 750,000 people who unfairly and unjustly were forced to pay taxes before will account for approximately $30 million of his thousand million dollar loss. This is what the situation is.

November 28, 1969
Taxation Reform
[DOT] (2:30 p.m.)
I want to say on behalf of the New Democratic party that we look on the tax system of Canada as an expression of the social goals which a society seeks at any given time and of the social philosophy and social ethics of that society. We want the tax system to be an example, a reflection, of what we agree to be the proper relationship between the state and its citizens. Who is encouraged by the tax system? Who is rewarded by it? Who retains the power to control the economy; how is the economic power distributed? What are the values which underlie our tax system? These are the criteria by which we think the white paper before us should be measured.
A tax system, it is agreed, should be equitable. This white paper does not propose an equitable income tax structure. A tax system, it is agreed, should be comprehensive so that all the income of a taxpayer is included. This white paper does not provide a comprehensive tax base from that viewpoint. When considering a tax system, all people pay some kind of homage to the proposition that it should redistribute income. This proposed tax structure does not redistribute income; it leaves the lower and lower middle class income groups in a devil of a spot. A tax system in our opinion ought to deal with the income and wealth of a country in such a way as to reduce the power of the large private corporations and redistribute power in such a way as to give the ordinary people a greater say in decisions reached on their behalf and for their future. This white paper does not do this. A tax system, in our view, should be so constructed as to enable the central authorities, both federal and provincial, to do some meaningful spending within the economy and bring about some meaningful planning of the economy to serve socially desirable purposes and to serve the ends of the common people. The paper before us does not do this.
Above all, in our view a tax system ought to be so designed as to encourage provision of funds, where necessary, to provide the public goods and services without which life in modern society is simply not liveable. The white paper does not do this. Indeed, it does the contrary; it encourages the dividend holders and discourages lending to public authorities, federal, provincial and municipal, to enable them to carry on the basic work of the country and to make life liveable for larger numbers of our people.

We have said many times that in a modern society government activities are expanding and will continue to expand. I have said this myself both inside and outside the House, and it is here that I cannot agree with what was said by the Leader of the Opposition (Mr. Stanfield). Whether some hon. members like it or not, I say emphatically that government activities will continue to expand in the future. None of the difficulties facing Canada today-none of them-can be resolved at all if they are left to the private corporate powers in this country. The Minister of Consumer and Corporate Affairs (Mr. Basford) has been flailing around in the polluted atmosphere of price increases-and the Prime Minister (Mr. Trudeau) supported by the Minister of Finance (Mr. Benson) has joined him in this pointless little dance-saying to the corporations: Please be good. The corporations listened-and hiked their prices. The hon. gentleman makes statements here about the need for restraint, to which no one pays any attention. The fact is, these continual increases in price, the pressures of inflation on those with low and fixed incomes, are becoming intolerable and they will not be stopped until federal and provincial governments have the imagination and the courage to take the necessary legislative steps to prevent the gouging corporations from increasing prices. The efforts of hon. gentlemen opposite will continue to fail. All the homilies, all the pleas, will fall on deaf ears in a system in which the maximization of profit is the major consideration. No success will be achieved until government has the courage to step in and control prices directly.
We talk a great deal in this parliament about the need to end regional disparities in Canada. Every one of us says "Amen" when such hopes are mentioned. It is not only unjust and unfair that people in the Atlantic provinces should receive a per capita income so much lower than the national average, but this situation is also one of the major agencies in the promotion of national disunity. It is one of the major causes of disenchantment with the federal government and with Canada as a whole. When this resentment is related, as it is in the Province of Quebec, to issues of language and culture, to legitimate requests and aspirations of the people, the fact that per capita income in the province is so much lower than it is in Ontario, that the rate of growth is so much lower than it is in Ontario, that the general situation is so much worse than it is in a neighbouring province, is
November 28, 1969

one of the factors which has promoted and is promoting a disenchantment with federalism and has resulted in a real threat to the future unity of our country.
I submit to you, Mr. Speaker, not in any dogmatic way but in a realistic way, that none of these disparities will disappear on a permanent basis if it is left to private corporate enterprise to do the necessary investment and build the necessary industry. Private enterprise has not done anything for the last hundred years because it was not profitable to establish industry in those areas, and it will not do anything for the next hundred years because it will still not be profitable to do so. The only way in which to meet the challenge of the 'seventies, the 'eighties and the years to come is by making a much larger, indeed, a massive infusion of public investment and public ownership in the disadvantaged areas of this country. This might often be done in partnership with private investment and private ownership, but the direction would have to come from public agencies and, primarily, from the federal government. This is the only way to deal with regional inequalities, increasing prices, pollution, urban renewal and all the other issues which face this country.
[DOT] (2:40 p.m.)
The need is for more funds, not less, in the hands of the federal government, and more funds in the hands of the provincial governments. A tax system which puts a premium on private ownership as against the development of public goods and services in this country is a reactionary and retrograde tax system. Yet this is exactly what the white paper proposes. This white paper falls short of such criteria which to me seem essential to any decent tax system.
Improvements have been made; no one denies that. Even the Minister of Finance, when setting out to change the present inequitable and deplorable tax system, could not avoid improving it. He started at the very bottom and had nowhere to go but up, so even he could not make it worse. I do not propose to praise him or to thank him for that. He has set out to make the system a better one, but I suggest there are many more things he could have done to make our tax system a really equitable one.
Let me deal with some specifics of the white paper. Everybody agrees that a taxation system should be equitable, and let us look at the equity of the proposed system. Despite the fact that the exemptions have
21545-lTi
Taxation Reform
been raised, during the last 20 years, since 1949, the cost of living index has increased by 64 per cent. Yet the increase in exemption is only 40 per cent. This means that the taxpayers are not even in the position they were 20 years ago, let alone having their position improved.
On the whole, exemptions favour those in the upper income brackets. No one has stated this more eloquently than the Minister of Finance did in 1962, when the minister was sitting in opposition. He said, as reported I think at page 1696 of Hansard, that an increase in exemptions merely favours those in the higher income brackets and does not benefit those in the lower income brackets. This is always the pattern when you lower or increase the exemptions.
When you increase a single man's exemptions from $1,000 to $1,400, those in the lower income brackets may save $20 or $30, whereas those in the higher income brackets will save $200 or $300.


Edgar John Benson: Would the hon. member
permit a question? Does he realize that through the adjustment in the rates the people who are going to benefit are those who are single, up to an income of $3,400, and married people up to an income of $9,100. Those earning more will pay more tax. There has been a change in both exemptions and the rate of tax.


David Lewis: I assure the minister that I am aware of what he says, but I contend it is not very helpful to his case. He would have to show me that the entire $200 or $300 saving from the exemption accruing to those in the upper income brackets has been offset by the increase in the tax rates, and it has not, as I will point out in a moment.
I suggest that we do not need exemptions any more. Anyone who has studied modern tax systems realizes that merely increasing exemptions favours those of upper income, not those in the lower income brackets. The Leader of the Opposition will correct me if I am wrong, since I did not make a note of what he said, but he pointed out that working mothers' allowances would favour the wife of an upper or middle income husband who wanted a career for herself, to which of course she is entitled. She would be in a much better position than the wife of a working man who makes $5,000 and pays a much lower rate of income tax. The same is true not only of working mothers' allowances but also of personal exemptions.

November 28, 1969
Taxation Reform.
I contend that you cannot build an equitable tax system by retaining the traditional, old-fashioned, conservative exemptions, lacking the courage and vision to replace them with a modern system of tax credits which will return money to those people against whom tax should not have been levied.
Losses can also be immensely reduced by a system of tax credits. The minister stated that the government lost $1 billion by raising tax exemptions. According to a calculation we made, though I do not vouch for its validity, if a tax credit system had been applied to every taxpayer of Canada, one third of this $1 billion would have been saved. If tax credits had been applied only against the lower income group, you would probably have saved about two thirds of the loss. I suggest this also stamps the white paper proposals as inequitable.
The most striking inequity in the white paper is the continuation of the double standard of taxation. The white paper proposes to allow a self-employed person to deduct from his taxable income all of his reasonable and legitimate expenses. Although there are many more wage earners and salary earners in this country than persons who are self-employed, they are allowed only a 3 per cent deduction, up to a maximum of $150.
I go further and say that this proposal is a snare and a delusion. I suggest everybody could take advantage of it. It could be used- I do not know whether it will or not-by members of Parliament, who already have a pretty hefty tax free allowance. The maximum of $150 could also be used by every wage and salary earner as a straight addition to the exemption. Where is the sense in this?
Some people incur no expenses with regard to the earning of their income. So why should they be given a further $150 exemption? There are many wage and salary earners, on the other hand, who for years have incurred expenditures much higher than $150 and who will not receive any relief except up to the $150. In all earnestness, I suggest this proposal is not only unfair but to my mind totally immoral. It is setting one standard for the majority of Canadians whose livelihood brings them a salary or wages, and a second standard for the minority of French Canadians who are self-employed or earn their income in some other way.


James Aloysius McGrath: French Canadians?


David Lewis: Why the different standard?


Robert Lorne Stanfield: It will affect English Canadians too. My hon. friend said French Canadians.


David Lewis: to make the changes in the spring of next year, during his budget, applicable to the taxation year January 1, 1970 so that the taxpayers who are going to be helped by some little improvements could have benefited in the year 1970. Even if the minister needed some months for study and discussion, he would still have some five or six months between now and the spring of next year. He could have introduced his budget and made these amendments in that budget applicable to the taxation year 1970. Why did he postpone them until 1971?
The hon. Leader of the Opposition said he is not a suspicious person. I must admit that in this case I am suspicious. I had a look at the calendar and I found this result. You produce a white paper in the fall of 1969 and you boast about it until 1971. You introduce these proposals in the budget of 1971, applicable to the tax year 1971. The returns for the tax year 1971 will not be made out until April, 1972, and two months later you have an election.


Some hon. Members:: Oh, oh.


David Lewis: That is the timetable of this white paper.


Edgar John Benson: Mr. Speaker, on a point of
order.


Some hon. Members:: Oh, oh.


The Acting Speaker (Mr. Bechard):: Order, please. The hon. minister is rising on a point of order.


Edgar John Benson: On the point of order, I should like to ask a question. If the hon. member and the hon. Leader of the Opposition think the white paper is so damn awful, why do they turn around and say it might be an election document?


David Lewis: Don't let the minister be so obvious and so disingenuous. He has been given a great deal of time on radio and television, and no doubt will be given a great deal more. I am not saying that enviously because the more often he appears the better it is for those who oppose him. He will have a great deal of time to boast about these 750,000 who will no longer be on the tax roll and a great deal of time to boast about the $150 and the allowances for working mothers, but he is leaving it until the election year before making them effective. I think this is pretty shoddy politics, Mr. Speaker. I think to deal with a question such as the reform of the tax
Taxation Reform
system on that kind of carefully calculated timetable is to do an injustice to the people of Canada and to the country.
Even if the minister could not bring his proposals into being earlier, certainly the relief to the poorest in this country, the 750,000 people who have been unfairly and unjustly on the tax roll for years, should come next year and not the year after. That relief should come now.
On November 8, 1962, when the Minister of Finance (Mr. Benson) was in opposition, he made quite a speech about taxation in this country. This was not my leader speaking or the hon. member for Waterloo (Mr. Saltsman), who has often spoken on this matter, or myself, and I have sometimes spoken, but this was Mr. Benson, the same man only now a little corrupted by the power he holds. This is the same man and this is what he said, as recorded at page 1464 of Hansard for that year:
The oil and gas industry as such will contribute very little to the income tax revenue of the federal government even though its gross revenue exceeds $500 million.
Today, that gross revenue is probably much more than that. He went on to say:
I can think of no other industry in Canada in this favourable position.
Then, he went on to say that what we need for this industry are other things rather than tax concessions. He said, as recorded at page 1464 of Hansard:
It has been claimed that this industry needs further encouragement to find reserves.
This was in 1962 when reserves in Canada were much smaller than they are now. He continued:
According to figures produced by the Canadian petroleum association at the end of 1961 reserves on hand in Canada amounted to 18.9 year's supply.
Today, these reserves are much higher than that. Later on, he went on to say:
What we need is more and faster growing markets for petroleum products.
The Minister of Industry, Trade and Commerce (Mr. Pepin) should listen to his colleague in pre-incarnation. He said:
If we had these we would not need tax concessions to stimulate the search for oil.
All I say is, amen. What was true in 1962 is doubly true in 1969. The minister is merely showing disregard for fairness and equity in this way by continuing the present gas and oil concessions until 1974 and then making

November 28, 1989
Taxation Reform
some changes but continuing the privilege none the less.
We think this also makes the white paper inequitable and unjust. In judgment of these concessions to the mining, gas and oil companies he had not only to say what I have read, he also said this:
I would think the next thing to consider is, who is going to benefit from these tax concessions contained in resolutions 6 to 10? Foreign control and ownership of this industry has been increasing and this legislation, I submit, will do nothing to discourage foreign ownership and encourage Canadian ownership. In this particular type of industry you have to go into the business wholeheartedly and operate in a big way to make a success of oil and gas exploration and development. Permitting other Canadian interests and industries to dabble in this type of activity is no way to ensure the expansion of Canadian investment in this field.
This was the Minister of Finance talking seven years ago. The same thing is true today. The same widespread foreign ownership and control exists today as existed in 1962, and the same foreign multi-national corporations will benefit from the tax concessions which he continues in his white paper. He condemned them then. He has either changed his social outlook for the worse, which I imagine is what has happened, or he has forgotten what he said in 1962, because there is nothing to justify a continuation of these tax concessions amounting to hundreds of millions of dollars a year to foreign owned and foreign controlled corporations at a time when the reserves of oil and gas are already far higher than needed, and when the industry is over-capitalized on almost every basis of calculation or consideration. So, we say that the white paper falls down on the basis of equity on this point as well.
We are very concerned about the fact that there is no limit suggested in the white paper in so far as the deduction of advertising expenses for tax purposes is concerned. We are concerned about that because we are concerned about the total effect of modern advertising in the North American world in particular, and perhaps throughout the world.
[DOT] (3:00 p.m.)
We are concerned about the immense power which the corporations now have, not to respond to the market but to control it, not to meet the needs of the people but to create unnecessary wants, not to respond to what the people of this country really need and desire but to distort and pervert the social objectives of society. That is what modern advertising in the large means and does. Yet

the corporations will be able to continue spending as much in this field as they like and will have 50 per cent of it paid by the federal treasury. That is what it amounts to, if they deduct it from their income for tax purposes. Then, of course, we the taxpayers take a 50 per cent loss in the federal treasury in respect of the amount the corporations have deducted. I submit that this, too, is an indication of the kind of social philosophy, the sort of social objective which has motivated this government and the Minister of Finance.
If people have heretofore been misled by talk about this government being progressive and small "1" liberal, I hope from now on that because of this white paper, the failure of the government to deal with price increases and the inequitable measures in our tax system, no one will have any illusions about progress-ivism, small "1" liberalism or anything else worth while in the 1970s in this country. I hope no one in Canada will be fooled by the tendency of the Prime Minister (Mr. Trudeau), repeated again and again by other spokesmen, to talk in generalizations about the need to adapt to change, merely talk instead of action. I hope these things will become clear to the people of this country.
Other members of this party will deal with the capital gains tax and other points on which the white paper displeases us. I do not have sufficient time to do so, except to say we are dissatisfied with the capital gains tax; we think it is inadequate in the circumstances. I will leave this subject to my colleagues, particularly the hon. member for Waterloo (Mr. Saltsman), to deal with in greater detail.
In the time remaining to me I wish to turn to the subject of public versus private goods. I would point out that the white paper continues the practice of promoting and encouraging the creation in this country of private goods and services, of promoting and encouraging the kind of economic development which creates a plethora of unnecessary private goods competing with each other for no other purpose than to make the corporations producing them richer and more powerful. This produces a disincentive in raising the funds that are necessary to provide the public goods and services of this country. A good many people believe in the present order of society because of the talk about the benefit of private enterprise-if it exists-and of free enterprise, which I know does not exist in the modem economy.
November 28, 1369

Let me say to these people in all seriousness that in our modern system, life would not be livable were it not for the public goods and services created, the public housing and urban renewal, the planned cities which make life liveable in the megalopolies that we now have and the opportunity of young people to find a useful, meaningful and creative life which depends on education at all levels. All these things, and many more, will not be created by private corporations and will not be created by private goods. They can be created only if the federal government, provincial governments and municipal governments can find the funds to promote, initiate and develop plans in all those fields. That to me seems to be elementary in our present society. One does not have to be a dogmatic socialist or anything else to recognize this fact. One does not have to rely on lengthy doctrines in order to recognize that in our modern society the money, goods and services that people require in order to live a life that has any quality at all, depend on public investment, public initiative and public ownership.
Yet what does this white paper do for us? The white paper and the Minister of Finance who produced it make sure that those who hold shares and clip dividend coupons will have concessions but those who may be encouraged to invest in bonds or securities of federal, provincial or municipal governments will have no concessions at all. The entire white paper is pointed in the direction of equity share capital to make the bond market much more difficult in the future, and in the direction of increasing interest rates. This makes it more and more difficult for the government of this country to carry out its duties without mortgaging future generations for years and years at ever higher rates of interest.
This is a perversion of the social needs of a modern society; this is a betrayal of the social needs of a modern society. A tax system ought to make it as easy as possible for governments to raise their funds at the lowest possible interest rates, instead of placing roadblocks in the way of federal, provincial and municipal governments obtaining the funds for these essential services and goods for which they are responsible in our society.
Mr. Speaker, as I have only another minute I shall conclude by saying briefly, if I can put it adequately, that to me this White Paper merely reflects the determination of this government to encourage foreign ownership and
Taxation Reform
control of the economy in the same way the government has encouraged it until now. The continentalists are all on the treasury benches. This White Paper reflects a determination by the government to do nothing to reduce either the competition or the power of the rich and the powerful. It reflect a reactionary attitude toward modern society in the government is not concerned at all with equality in the condition of life of the Canadian people. The government would seem to be concerned only with making sure that their friends, if they are a little angry, are not angry enough to stop giving the support which they require in order to continue in power.


Mr. Henry Latulippe (Compton):: Mr. Speaker, I am pleased to have the opportunity to say what 1 have in mind about the White Paper.
Mr. Speaker, the so-called White Paper has turned red. I do not know why, but I think it is from shame due to the tax increase, particularly on capital gains.
We have a lot of things to say about the White Paper which will put our economy further off balance as a result of tax increases and higher interest rates, and as a result of the exaggerated profits that some financial institutions realize, which while degrading the population brings unparalleled prosperity to these institutions.
[DOT] (3:10 p.m.)
We have no time to suggest alternative solutions to replace the findings of the report. However, we realize that there is a need for constant fiscal study and reform of our present system, to alloy its injustices.
The Carter Commission rendered a great service by accomplishing its task. We consider that a fiscal reform should immediately challenge abuses and eliminate the injustices which result therefrom.
That is what the White Paper should have done. But taxes are levied on a sector of the population that does not have enough money to cope with its needs and to balance family, city, school and provincial budgets.
The report does not speak well of the authorities insofar as the tax reforms of the last few years are concerned. The persistency of that outlook requires from the government unceasing concern and effort. It must see to it that the public has confidence in the tax

November 28, 19S9
Taxation Reform
system and that all taxpayers are treated fairly.
I would like to express the grievances of the Ralliement creditiste against the present system. We talk about reform, but what the White Paper proposes is not reform, it is a distortion of our economy, a distortion which will make it increasingly difficult for our Canadian citizens to reach their goal in life and to secure a decent well-being in an immeasurably rich country.
I would like to find the root of the evil, to determine the main causes of the economic crisis that has arisen, because tax increases undermine the morale of the people and unfortunately lead them to dishonesty.
Several citizens, business men and professional people betray their conscience to keep their standing, because they are too heavily taxed.
Why criticize and denounce the present financial system? Simply because it does not play its role which is to finance the production of goods and services, as well as their fair distribution to all the people and not only to a small number of them who make money through taxes and higher interest rates. It is in this way that big institutions get richer in Canada and the measures we take contribute only to increase substantially their assets.
Why does not the present financial system play its part? Because public and private assets are perfectly realizable but certainly not under the present financial system. Many physical assets are realizable now but we cannot develop them due to credit restrictions and to excessive rates of interest. Such a situation delays progress and paralyzes even more the economy, while unbalancing it further.
Production is impossible in many cases because it is not financed. However, the necessary goods and services are offered to the people who cannot get them because the financial system does not subsidize consumption. This is undeniable.
In fact, how is production or consumption financed? Through various means. It may be metal or paper money, legalized money or cheques drawn on bank accounts. From where do such means get their value? From where does financial credit get its value?
It is worth its true credit value, that is the productivity of a country. Money, whatever the type of currency, has some value only because countries can produce goods and services to meet the demand of the population. A

country's productivity is the real credit through which it is hoped to obtain the goods and services necessary to the well-being of the population.
However, that is not the case in this country. We have everything we need. Available to us are all the proper techniques to further our development and the prosperity of individuals in Canada, nevertheless, we follow another course because we flatly refuse to apply the main regulators that could balance our economy on a continual and permanent basis, so as to satisfy our people who ask nothing but to work.
Our present financial system precludes any progress. It annihilates all these advantages and puts an end to the building industry. Whole families, large families sometimes, live in two or three room dwellings. This is illogical in a country like Canada which has everything to build and to enlarge houses so that these families can be properly accommodated. The restriction of credit, which was made necessary by inflation, and the increase in interest rate, which is said to be satisfactory and able to regulate our economy, are injustifiable measure because it is the exact opposite which is necessary. And if we have now an increase in the cost of living while faced with inflation, it is precisely because of an increase in the interest rate which has no precedent.
[DOT] (3:20 p.m.)
So, we speak of national production which does not mean nationalized production. It is the general productivity that must ensure every citizen the means to satisfy all his essential needs.
Who owns the financial credit? Nowadays, it is those who take advantage of the raise in interest rates to increase their fortune. Originally, the financial credit belongs to the community in the same capacity as the real credit from which its value is derived. It is a collective asset which must profit to each and everyone in one way or another, without restriction. Like the real credit, the financial credit is, by its very nature, a social credit, that is a credit based on life and society.
Is it possible to get from the general economy of a country all the financial credit so that each individual may be able to control himself the production of goods and services he must have to meet his essential needs? My answer, without any hesitation is yes. But under our economic system, this is impossible
November 28, 1969

because it is contrary to common sense and social thinking.
It would be possible provided that the actual credit could be adapted without violence to the actual situation. Our financial system should reflect the capacity to produce instead of opposing it, should speed up distribution instead of containing it, should serve man for pin-poses of fulfillment and not of frustration.
At the present time, we know only of frustrations. Economically speaking, we have never known a balanced system and we have always experienced recessions and wars. We have never recognized the individual as a component of any society or economy. Any economy should be based upon the family and the human being, and unless we follow this principle, our efforts will not be successful. This is one of the reasons why we experience disasters, revolutions, strikes and discontent in every field to such a degree that any progress has become impossible. In fact, interest rates are so high that they have turned out to be an odious exploitation of the people.
Credit costs but a few drops of sweat and ink to those who create it and exploit people by charging excessive rates of interest on credit created out of nothing and which is based on nothing. There is no consideration for the needs of the people but only for the confidence financial institutions may have in someone. No consideration is given either to the economic factors that Canada can offer to sell to Canadians the services they need.
All democratic parties recognize man's political rights but ignore his economic ones. That is just what we are doing now. Every individual's economic rights are totally disregarded. The economic rights of a few individuals only are recognized and in a few minutes I shall quote statistics in this regard.
Let us not be too surprised at the fact that experts on the current economic situation are different from us. Their views are "superterrestrial". They sail on lunar orbits, from where they criticize everything on this poor planet, except our splendid financial system, which is the quintessence of a deranged civilization. They find it very difficult to distinguish between the capacity to produce, sell, eat and pay, just like those who can barely see the difference between the ability to think and to flatter.
I submit my proposals should be accepted by at least a great number of the people or by many hon. members who are elected, in 21545-18
Taxation Reform
my view, to serve the people and not merely to exploit them. As a matter of fact, everyone will agree that the financial system should be made to serve the people and not merely a few individuals who exploit the rest of the people. I would like to describe the chronic disease of the financial system: the madness of indebtedness, prices and full employment, and of accepted inflation. We are all involved in this madness and some of us are aware of it. We can hardly realize that we are involved in one of the greatest economic aberrations in the course of history.
The financial system is out of gear. It is obvious to everybody except, apparently, to those who keep it going and thereby enjoy a number of privileges. Maybe they realize the system is all topsy-turvy and cannot be corrected; and that is why they are proud to rule the world.
The people of the top I have just described know that the system did not create itself and that it is not just anybody who can manage it.
When you talk about taxes, you talk about finance. And when you talk about money or financial credit you talk, roughly speaking, of about 90 per cent of today's money, money that the banks have created out of nothing.
[DOT] (3:30 p.m.)
You cannot create money out of nothing, it does not grow on trees, as stated more than once by the various Ministers of Finance, even though they do not seem to know where it comes from. But they know that financial credit does not come and go all by itself. So if it leaves debts behind, it is not just by accident; it is because it can only be in circulation by means of a debt machinery invented and conditioned by men. Not by hon. members, nor by me, nor even by the Minister of Finance, but by citizens much above him, by citizens who have the power to tell the Minister of Finance what they want and what they want him to do, that is, those who control credit. That is the reason for the wild increase in taxes.
Developments are the admirable work of brains, and brawn and courageous hearts; but as that wealth is created, those who control money and credit, high-class parasites, sink the producers of wealth into debt, which means that the wealthier the country becomes, the more indebted it is. Does that not indicate insanity beyond words, due to the inefficiency of the system and the astuteness of those who control it? Even though

November 28, 1969
Taxation Reform
they may not want, deliberately, some of the results of the system, they derive enough power from it to persist in maintaining it, and enough profits to be able to corrupt those in influential places.
I have spoken about the insanity in prices due to the increase in the rates of interest. When we speak of prices, we do not speak of goods or services, for they constitute real wealth, the fruit of the economic activity.
Indeed, prices are only one of the financial aspects of the economic system; they are no more than an assessment, expressed in figures.
There are citizens who benefit from the labour of the pioneers. To give you proof of this, I shall demonstrate that here in Canada, although there is unemployment, we contribute, through technology, to increase our production to a marked extent.
Thanks to technology, and in spite of the reduction in the labour force, we increase our production which amounted to $72 billion in 1969, while consumption amounted to $44 billion, and capital investments to $28 billion.
Since consumption equals the production, if consumption in Canada amounted to $44 billion and production to $72 billion, the total price consumers should pay for that production should be $44 billion. The balance represents a surplus.
If we have surpluses in Canada, they should be distributed to the people. So, we should not create inflation by increasing the interest rate and the salaries of professional people, as this gives rise to an increase in the cost of living.
To solve this problem, consumption should reach $72 billion instead of $40 billion, even if we have $28 billion difference which had to be distributed as a compensatory discount on prices, instead of creating new taxes or increasing the old ones, as the minister is now suggesting.
In so doing we would act as competent economists anxious to help the people, to meet the needs of all Canadians rather than to exploit them shamelessly as it is the case at present.
The White Paper recommends to tax capital gains because it is impossible to tax more heavily the small wage earners who already have reached the point when they have to borrow money to live.
Taxing the low or middle income taxpayer is no longer possible because both are facing bankruptcy. But steps are contemplated to

tax the small business which survived painfully with loans, to tax debts on debts, and taxes on taxes, because we are unable to find other solutions.
What should be taxed is capital gains and hidden profits. At the present time, preparations are made to tax even more the middle income group, but those who go too far, who pile up reserves of all kinds, will not be further affected.
To support my claims, I would like to give you statistics covering a number of years, namely from 1957 to 1966. In my opinion, it is appropriate to say that the big businesses make profits thanks to our present financial system. Those who, directly or indirectly, capitalize make a great deal of money that is never taxed. To me, the White Paper does not provide for the adoption of harsh enough measures against those who make considerable profits.
For instance, in 1957, the profits claimed by the major financial institutions totalled $3,056 million, while the hidden profits amounted to $7,335 million. In 1958, the profits claimed amounted to $3,075 million and the hidden profits to $6,975 million.
[DOT] (3:40 p.m.)
In those ten years large corporations and financial institutions have declared total profits of $45,112 million for tax purposes and failed to declare profits of $96,050 million.
If these corporations and institutions are so wealthy, it is because governments accumulate debts and deficits and because the people who work for such companies live from day to day and lack bare essentials.
However, these businesses are only tools of production or administration of goods and services, material intellectual or spiritual, to meet the needs of the human beings who make up our nation.
In order to show clearly and throw the light again on what has been done by our financial institutions in the past 12 months, I shall give some statistics. There are many institutions, but I shall- speak mostly about financial institutions because they are the most important.
The assets of Canada's nine chartered banks went up from $33,677,990,000 on July 31, 1968 to $40,325,792,000 on July 31, 1969- an increase of $6,647,802,000.
This increase in assets represents double the total number of notes issued by the Bank of Canada in the last 35 years, or $3,287,000,000.
November 28, 1969

The seven English chartered banks alone have total assets 3.3 times greater than those of the two French-Canadian banks, the Banque Canadienne Nationale and the Banque Provinciale, whose total assets of $2,350 million are only approximately 6 per cent of total assets of $40,325 million and this, for 28 per cent of the population of Canada. We are certainly far from making any headway.
According to me, the chief trouble lies in the fact that our French-Canadian banks have not yet caught on to the game of issuing currency through loans on notes or bonds to individuals or to institutions, or have not started playing it in time.
These statistics clearly show that chartered banks are empowered to issue credit 'money to the extent of twelve times the amount of notes issued by the Bank of Canada. This of course has an impact on the development of industrial, agricultural and financial activities in Canada.
It is not that the banking system is despicable in general, but it must be appreciated and better known in order to get the best out of it for ourselves and for Canada.
When one looks at the part played by the presidents and directors of the seven English banks in the large Canadian institutions, such as companies, trusts, universities and hospitals, it is a pity to see the part played by the directors of our two French-Canadian banks.
If through finance and mass production English-speaking people have dominated the Canadian scene since the turn of the century, we still have to balance our national economy by demanding that the right to live of every citizen whether he be without work, without a capital, without a personal income, be recognized.
Then, in a democratic system, capitalizing is desirable, and various' institutions should be allowed to make huge profits, but it is also essential that Canadian citizens be able to live a decent life.
I read the following in yesterday's La Presse:
The White Paper Drives a Company Out of Quebec
Some provisions contained in the White Paper on Taxation have prompted a mining company, the Asbestos Corporation Ltd., to review its plans in connection with the operation of an asbestos deposit of the Ungava peninsula, in New Quebec.
And it is in Belgium that the company expects from now on to invest $13 to $14 million with a view to setting up a plant to process asbestos extracted in New Quebec.
21545-18*
Taxation Reform
Mr. I. C. Campbell, vice-president and secretary-treasurer of the company, who confirmed that the original plans for the development of New Quebec included the construction on the spot of a processing plant, specified that two of the measures recently proposed by Mr. Benson concerning the mining industry made the carrying out of the whole project prohibitive.
Asbestos Corporation of Thetford Mines had already announced that following its exploration work in New Quebec, it intended to develop an interesting asbestos deposit in the area of Deception Bay.
According to the original plans, that development was to be done in conjunction with the setting up of a plant for the processing of the product and would entail the creation of a quite costly urban complex, due to the climatic conditions and the distance factor which must be taken into account for the implementation of such a project.
However, the company had deferred making a decision until the White Paper was published. The proposal to abolish the tax exemption granted to new mines in the first three years of operation and the proposal to apply new conditions to depletion premiums would, according to the vice-president of Asbestos Corporation, make the proposed undertaking unprofitable.
One of the main faults of the White Paper is to impose a capital gains tax.
I would have much more to say but before concluding, I would like to deal briefly with a brief submitted by the Canadian Association of Insurance Companies to the Minister of Finance. It is an economic and financial evaluation. On page 12, one can read the following:
It does not seem fair that the most important chance gains resulting from the reform would favour the status quo-except in the fields of mining, oil and life insurance. The corporations that would benefit most from the implementation of the proposed system would be the medium-sized and smaller ones, engaged mainly in operations in Canada and having at their disposal a sound capital stock quoted on the Stock Exchange. Big resident and non-resident investors would make a substantial windfall on the stocks and shares market.
This means that only companies with a large capital stock will be able to survive, while small privately owned companies or companies with indirect capital or borrowing money will not be able to hold out. This is what this report says.
The repercussions would seem unfair to two groups in the low income bracket: young couples who are just settling down and the older citizens who are retired or dependent on someone. Due to the increase in the interest rate on loans, the increase in rents will seriously affect the young couples-


The Acting Speaker (Mr. Bechard):: Order, please. I am sorry to interrupt the hon.

November 28, 1969
Taxation Reform
member but his time has expired unless he has the unanimous consent of the House to continue.


Henry P. Latulippe: Mr. Speaker, I would not want to take too much time. But I would have several more things to say.


The Acting Speaker (Mr. Bechard):: Is there unanimous consent to allow the hon. member to continue?


Some hon. Members:: No.


The Acting Speaker (Mr. Bechard):: I am
sorry but there is not unanimous consent.


Some hon. Members:: No.


Gerald William Baldwin: Maybe at another time.


Mr. Robert P. Kaplan (Don Valley):: In the
few weeks since the white paper on tax reform was published, Mr. Speaker, it has received very wide attention. It is significant, and perhaps it is a good sign, that no class of taxpayer is jumping for joy about it. Taxation is not a popular government activity, and tax reform is perhaps only a little less unpopular than taxation itself.
[DOT] (3:50 p.m.)
One of the most disappointed groups is the one which had hoped that the highest priority would be given by the government to the promotion of economic growth, the encouragement of saving, investment and reinvestment, the development of the Canadian economy and increased reward for success in business. This is the group whose complaints, after some initial expressions of satisfaction or at least of relief, are beginning to dominate the nation's financial pages. I would like to direct myself to the issues being raised by this group.
What I have to say at this time, Mr. Speaker, should be taken as preliminary, because as a member of the special committee which will be receiving the white paper for review I shall be looking forward to the widest possible public reaction and comment before coming to final conclusions. By this statement I hope to indicate the frame of reference in which at least one committee member will be expecting public discussion by business interests to fall.
Much could be said for a white paper which puts economic stimulus first. Something could be said for imposing an increased
[The Acting Speaker (Mr. Bechard).]
burden on the mass of taxpayers to help remove some of the purchasing power which may be accelerating inflation. Such a priority would be related to the promotion of economic well-being. But while the first of these objectiveness has clearly received considerable attention in a way which I would like to review, neither of these goals has been the main one. The main goal has obviously been the instant relief afforded 750,000 Canadians who have been taxed in the past and who are living in poverty. This group has not only been paying income tax and more than its fair share of sales tax but it has been paying, more than any other segment of society, the cruel tax which is represented by inflation. Our poorest citizens are those who are most exposed to inflation because they cannot easily bargain for increases in the way that unionized workers and primary industries like the nickel industry can do as their own costs rise.
The highest priority has been given to the poor people's needs for some justice out of the tax system. Some have complained about the white paper on the ground that it would reduce savings by half a billion dollars a year and would stimulate an inflationary pressure for consumer goods. I cannot be too sympathetic toward this complaint, because these critics are simply recognizing the fact that when poor people obtain tax relief they use their tax savings to buy better food, clothing and shelter. They do not use their tax savings to buy Canada Savings Bonds or stocks, or to open small businesses.
If their obvious economic choice tends to work against the goal of encouraging saving and of economic growth, and is inflationary, I think we just have to live with that, because we should not tolerate a tax system which adds another burden on those who live in poverty. Having said this, I would like to add that some critics on the other side have missed the point that a taxing statute can go only so far in the relief of poverty. Poverty cannot be eliminated by mere tax reform; other social measures are required to finish the job. To criticize this proposal for failing to do more is like criticizing it for failing to lower the voting age. It just is not the right tool to do the job most efficiently. In this connection, we have to wait for the white paper on social assistance which is promised by the Minister of National Health and Welfare (Mr. Munro).
While the bringing of tax relief to people living in poverty was of the highest priority,
November 28, 1969

it has obviously also been kept in mind that income tax is imposed in order to raise revenue, and revenue that is lost must be replaced. This fact was lost sight of by the hon. member for York South (Mr. Lewis) and by his hon. friend for Broadview (Mr. Gilbert) when they suggested that provisions to relieve poverty ought to be introduced right away. Similar problems are now being encountered in the United States. Some very interesting tax relief measures have been introduced in the United States lately, but the over-all tax base has been reduced without thought to the importance of maintaining government revenues. This irresponsible attitude on the part of legislators was criticized in yesterday's New York Times. While American problems are different from ours, I think it would be useful if I read a few sentences from this very relevant editorial. It reads in part.
What Congress never likes to think about in such bursts of generosity is the expensive and lengthy agenda of unmet national needs clamouring for governmental attention and action. Hundreds of billions of dollars are required in the next decade or so to do what is even minimally essential in rebuilding the nation's cities, cleaning up the polluted air and slowing down, if not actually reversing, the forces that are converting the nation's rivers and lakes into open sewers.
On every side the American people are surrounded by dismaying evidence of urgent and unsatisfied priority requirements which can be met only by large-scale government expenditure dwarfing any in the nation's history. These needs are so great that even an end to the Viet Nam war, if it comes soon, will not free nearly enough money for the tasks ahead.
I think therefore, that the question which businessmen should be asking themselves is not simply what the government can do in the way of tax reform to encourage the development of a bigger gross national product so there will be more for all of us, but how can we do that while meeting the tax bill for an extra half billion dollars a year, which will result from the sweeping proposal for tax relief at the bottom of the income scale.
One way of filling the gap is by eliminating the unequal tax treatment of individuals who are basically in the same economic circumstances. The man whose economic well-being is derived from capital appreciation is put in the same boat as the man whose income comes from his employment. The man who has been able to shield his income in a corporation is put in the same position as one who could not or did not do so. The man and woman, particularly the working woman-
Taxation Reform


Mr. Speaker:: Order, please. I regret I have to interrupt the hon. member, but we are approaching four o'clock and before proceeding further with this measure I thought I should bring to the notice of hon. members that I have had an opportunity to study the amendment proposed to the House by the Leader of the Opposition (Mr. Stanfield) and seconded by the hon. member for Peace River (Mr. Baldwin).
The hon. member for Peace River has been informed through the usual channels that the Chair has serious reservations about the admissibility of this motion, on procedural grounds. It should not be debated for some time and then ruled out of order, so I think a decision should be made one way or another at this time and the hon. member for Peace River should have an opportunity to make a case before any ruling is made. In fairness to all concerned, I invite the hon. member for Peace River to indicate his views on the question. I am sure he is aware of the difficulties in connection with the amendment.


Gerald William Baldwin: In addition to the fact that I seconded the amendment, Mr. Speaker, there are other reasons for its validity. I call to Your Honour's attention, first, the provisions of Standing Order 68 which are to be found at page 71. That Standing Order provides that standing committees shall be empowered to examine and inquire into all matters referred to it by the House, and to report from time to time. Your Honour is well aware of that rule, and we start on this basis. While the motion standing in the name of the Minister of Finance (Mr. Benson) does not mention anything about a report, the right to report is inherent; it is possessed by all committees by virtue of this standing order.
[DOT] (4:00 p.m.)
The report that the committee is being directed to examine is that referred to by the terms of the motion of the Minister of Finance, which reads:
That the white paper entitled Proposals for Tax Reform, tabled in the House on November 7, 1969, be referred to the Standing Committee on Finance, Trade and Economic Affairs.
Therefore, Mr. Speaker, I suggest you must read into that the words "and that the committee do report to the House in respect of this particular term of reference." What is the committee going to report? Is it going to report that we have examined this 91 page document; that the committee has looked into

November 28, 1969
Taxation Reform
the whole lousy can of worms, if I may use that expression; that the members of the committee like what they see and that they have certain recommendations to make? I think Your Honour can take some parliamentary notice of what the Minister of Finance has been saying in various parts of the country, which is something to this effect, "We are going to have everybody look at this white paper. We will send it to a parliamentary committee. We will be to some extent guided by what the committee may say about it. We will also refer it to other people in the country".
In other words, the Minister of Finance is saying, "Here is a paper. Take it, look at it, chew on it, and come back with some recommendations." I have given the Minister of Finance more credit than he is entitled to; I note the motion is in the name of the President of the Privy Council (Mr. Macdonald), not the Minister of Finance.
Consequently, when considering the white paper we, Her Majesty's Loyal Opposition, say there are some things in it which we like. Perhaps it is medicine which the country must take to pay for some of the stupid, past actions of the government. We may say that certain tax changes should be made. But with respect to certain parts of the white paper, we say that there are not the incentives which should be the founding and basic motive of any tax proposal, but there are disincentives.
As an aside, let me say I think we have had enough of this government instructing committees to do things. We think it is about time the House of Commons instructed some committees, and we say we should instruct this committee to develop alternatives to those proposals which are disincentives. We are not contending that the committee should be instructed to develop alternatives to the white paper-God forbid! We are saying the committee should be given instructions to develop, and I presume to report to the House, alternatives to some of the proposals which, in our opinion, constitute disincentives.
I am not allowed to enlarge on this argument. In any event, the Leader of the Opposition (Mr. Stanfield) made a tremendous case and established beyond any measure of doubt, except for those who are partisan, that there are disincentives in the white paper. Under these circumstances, I submit that what we are doing falls within the provisions of citation 201 of Beauchesne, which reads:
The object of an amendment may be to effect such an alteration in a question as will obtain the

supnort of those who, without such alteration, must either vote against it or abstain from voting thereon.-
Speaking for myself, I would have the greatest difficulty voting for the motion, because in the absence of some instructions to the committee I fear the reference of the white paper may well be a waste of time. I would be far more inclined to vote for the motion than I am at the present time if there were added to it an instruction to the committee to develop some alternatives. I suggest we must read into the amendment an instruction to the committee to put forward in its report to the House some alternatives to the proposals contained in the white paper.
If a simple, ordinary, harmless amendment of this nature falls beyond the scope permitted hon. members of this House in dealing with a proposal by the government to send a document to a committee for consideration and report, then there is really very little we can do at all. There are a number of citations dealing with this point, but I am sure Your Honour has looked at them. I suggest to Your Honour that we are brought squarely within the ambit of citation 201. We are offering an amendment which will make this proposition far more palatable to the members of our party.


Marcel Joseph Aimé Lambert: Mr. Speaker, I find myself at a disadvantage. Although Your Honour did indicate you had some reservations, you did not say in which area you might find the amendment repugnant to the rules. I am sure Your Honour would not expect hon. members to argue in a vacuum, or to try to cover the whole spectrum in the hope that some of the objections they raise might anticipate some of Your Honour's reasoning. I have some difficulty understanding what the objection is here. Is Your Honour bothered about whether it is a substantive motion requiring notice? I am not, of course, questioning Your Honour-


Mr. Speaker:: Order. I might intervene to tell the hon. member that there are a number of things that I thought might be doubtful in connection with the amendment. However, the hon. member for Peace River, who is an expert on the procedures of the House of Commons, put his finger on the difficulty and without question went straight to the point and put forward an argument in support of the acceptability of the amendment. In doing so he argued exactly the point about which I do have some reservations. If the hon.
November 28, 1969

member would pursue the type of argument that was made by the hon. member for Peace River, it would be helpful to the Chair.


Marcel Joseph Aimé Lambert: I thought we had zeroed in on the right point, Mr. Speaker. I submit that the amendment is correct in form, in that it is reasoned and does modify the original proposal. It is not negative in the sense of being a double negative. Therefore, I think in form the amendment is in order. As to whether it is a substantive matter, something that is new, again I strongly support the argument of my colleague from Peace River. The rule imposes an obligation upon the committee. I think we must interpret rules as having some purpose behind them. The rule in question here says that the committee shall be empowered to consider and to report. The purpose of the committee is to report on the white paper. If I may follow some of the suggestions made by my colleague, if that were not the purpose one could say the committee could take the report and flush it down the drain.


Some hon. Members:: Hear, hear.


Marcel Joseph Aimé Lambert: But that is going from the sublime to the ridiculous and is well beyond a reasonable approach. I put it to Your Honour that the purpose of this rule must be effected.
[DOT] (4:10 p.m.)
If anything else was meant by rule 65(8) and the motion of the President of the Privy Council (Mr. Macdonald) that the committee should consider the white paper and then report its recommendations to the House, some other direction would have to be given. If the government had included the direction that the committee should hear witnesses, that part of the motion would be redundant because the committee is already empowered by the rule-in fact, directed by the rule-to do these things, and how to conduct itself. That has been our practice, and this is our understanding of the rule. This is the only effective way the rule can function.
The white paper shall be referred to the committee, which shall consider and report. It may call witnesses and it may make recommendations. It could merely report, but in so doing I would say it would be putting the House in the almost ridiculous position of directing a committee to consider certain aspects and then report and, if it sees fit, to make recommendations.
Taxation Reform
If it is open to this House to give these directions, I say to Your Honour that it is open to any member of the House to bring forward an amendment within reasonable terms, that is, it must be relevant to the motion, and so forth. Therefore, this motion is quite in order; otherwise, I put it to Your Honour that there is no sensible way in which a motion referring any matter to a committee could be amended. We would then come to the ultimate position that such motions are unamendable by this House. I do not think that is the proper interpretation of the rule or its intent. Not must we give effect to the letter of the rule, but we must give effect to its intention. I submit that on these grounds the amendment is completely in order.


Mr. Grant Deachman (Vancouver Quadra):: Mr. Speaker, I should like to make a few comments in respect of the motion. I hope to be as helpful to the Chair as others who have commented on it. Order No. 32 listed under Government Orders on today's Order Paper reads as follows:
That the white paper entitled Proposals for Tax Reform, tabled in the House on November 7, 1969, be referred to the Standing Committee on Finance, Trade and Economic Affairs.
That is the broadest kind of resolution, designed to place a government proposal in the hands of a committee with the broadest possible opportunity to examine every aspect of it, to call witnesses and to report upon the proposal in any way it sees fit. As I understand the amendment of the Leader of the Opposition (Mr. Stanfield), if it were to pass the motion would read: "That the white paper be referred to the Standing Committee on Finance, Trade and Economic Affairs with instructions to develop alternatives t o the proposed disincentives affecting middle income groups and small businesses in particular, and which increase the vulnerability of Canadian enterprise to foreign take-overs.
This is a restrictive amendment which reduces the function of the original motion to an examination of the white paper for a certain specific purpose. The amendment does not carry out the intention of the original motion and, in fact, changes it to something quite different, that is, a restricted examination of some aspects of the white paper.
If I understand the purpose of today's debate following the very general motion of the minister, it is to give all members of this House an opportunity to advise the House of Commons, and specifically the members of

November 28, 1969
Taxation Reform
the committee, what they think of the proposals in the white paper, and to advise as to the areas that should be looked at when the committee is in session. This was done by the Leader of the Opposition today when he made his speech. He spoke of some aspects of the white paper of which he disapproved. Presumably, the members of his party who will sit on the committee were listening to him and taking notice of the points he was making.
It is my submission that when we refer a white paper of this kind to a committee for examination, it is never our intention as members of the House of Commons to place restrictions on the way in which that white paper should be examined, or to narrow the examination of the policies set forth in the white paper. The intention is that each member of the House, no matter whether he sits on that side or on this side, should be free and unfettered to attend the committee, investigate every aspect of the white paper and report upon it in the best way possible.
If hon. members opposite had faith in then-own members of the committee, having told them in this House what their views are they would find an excellent report coming back from the committee. I do not suppose it was really the intention of the Leader of the Opposition to restrict his members in the work they do on the committee. I suggest that for these reasons the amendment does not add to what we are doing here, but rather detracts from it.


Gerald William Baldwin: Mr. Speaker, could I ask the hon. member a question? Would the hon. member agree that it would be the right of any member of the committee to move a motion along the lines contained within the four corners of the amendment moved by the Leader of the Opposition?


Grant Deachman: I certainly think it would he a right. Having listened to the views of hon. members opposite, I am sure those members of the hon. gentleman's party who are interested in moving such a motion will do so in the committee. Why should hon. members opposite who will attend the committee meetings be given this kind of restrictive instruction to-


Mr. Speaker:: Order, please. That aspect of the debate might be pursued in the committee. I think at the moment we should limit our discussion specifically to the procedural aspects of the motion.


Eldon Mattison Woolliams: Mr. Speaker, I am not going to repeat the arguments that have been put forward, but I should like to read part of Standing Order 5(8) as follows:
Standing committees shall be severally empowered to examine and enquire into all such matters as may he referred to them by the House, and, to report from time to time-
It then goes on to list the duties. If the amendment instructed the committee to obtain counsel or do certain things in order to examine this red manifesto-it is not a White paper-I do not think Your Honour would have any difficulty with it. We have to get around, and I think this is what is bothering Your Honour, any instructions in the amendment that in fact change those matters which the committee is to examine. That might be a matter of argument or inference, and it is probably a matter for the committee to decide. Surely, specific and proper instructions can be given to a committee.
I think now is the time to point out this important fact. We were told, when committees were changed and took over the right of the House of Commons to sit as a committee of the whole to examine bills and estimates, that they would be non-partisan and would function as such, along the lines of Congressional committees. We have found that this is not the case.
[DOT] (4:20 p.m.)
Mr. Speaker, with the greatest respect, I think it is putting too much onus on you to ask Your Honour to make a decision in this regard. I think this is a matter on which Parliament should vote in order to decide whether this amendment should be allowed in respect of the red manifesto. It is a red manifesto, because it is red and it is a manifesto. We are saying that when the committee takes a look at the white paper, whether or not it has counsel, expert or other witnesses before it, it should have certain instructions, and those instructions should be to develop alternatives to the proposed disincentives affecting middle-income groups and small businesses in particular. We should zero in on these things.
Surely the instructions do not say that we cannot examine those parts which take away all incentives. The committee must look at this aspect of the matter because this red manifesto is very hard on Canadians in the middle-income group. I can understand Your Honour's problem. If it were a matter of saying that the committee was to have before
November 28, 1969

it counsel and certain witnesses, that would perhaps be adding to the instructions of the committee. All you are properly concerned with, Mr. Speaker, is whether this amendment altogether changes another document.
I am like Browning; I believe that only God and the people who drew the document really know what is in it. The government really thinks the committees are creatures of its creation. Parliament controls the committees, and surely we can say what we should do when studying this difficult and comprehensive document. I think this is the problem. Surely my good friends are not frightened of this amendment coming to a vote.


Gerald William Baldwin: They almost were the other day.


Mr. Speaker:: Order, please. The hon.
member for Gander-Twillingate (Mr. Lundri-gan) seems to want to add to the argument. I doubt that anything new can be said at this point. I have heard learned argument from experts in procedure. Having said that, however, I would be pleased to hear also from the hon. member for Gander-Twillingate.


John Howard Lundrigan: Mr. Speaker, I do not wish to steal the show from the hon. member for Peace River (Mr. Baldwin) and the hon. member for Winnipeg North Centre (Mr. Knowles), the experts on rules and procedure, but I do wish to raise one point.


Stanley Howard Knowles: How did I get into this?


John Howard Lundrigan: I gather that Your Honour is concerned that perhaps the amendment tends to eliminate the original motion. I certainly would not support any amendment that was so restrictive that it directed the committee to take specific action such as was the situation, for example, a few days ago when a committee was directed to reduce the voting age to 18. I should like to draw attention to something that was touched on by the hon. member for Peace River. I believe that on two grounds the amendment ought to be ruled in order. First of all, it does not give specific direction to the committee. The amendment is very broad. It refers to developing alternatives, and in that regard it is in very broad terms.
Having spent the last two weeks studying in detail the white paper on taxation, I suggest to Your Honour that the amendment gets at the very guts, if I may use that term, of the white paper. The very broad areas in the
Taxation Reform
white paper to which we feel Parliament should take exception are covered in this amendment. On the ground that we are giving the committee very little direction, and on the ground that the amendment we propose gets to the essence of the objections of the House to the white paper, I support the amendment of the Leader of the Opposition (Mr. Stanfield). On the basis of Standing Order 65(8) I feel we have no alternative but to let the House rule on the amendment.


Mr. Speaker:: I thank hon. members for their counsel. I thank each one in turn for the assistance he has extended to the Chair. Hon. members must realize that the Chair has to rule strictly on procedural grounds. A number of the arguments presented were in some way substantive. The hon. member for Calgary North (Mr. Woolliams) referred to the substance of what he called the red manifesto. I think he indicated that perhaps the Chair should study this document and decide whether the amendment would or would not affect the substance of it. The hon. member for Gander-Twillingate (Mr. Lundrigan) presented an argument along much the same lines. Fortunately, the Chair does not have to go into that aspect of things before rendering the type of judgment it must render at the present time. The situation is more simple than that.
The hon. member for Peace River and the hon. member for Edmonton West (Mr. Lambert) in the course of their arguments have shown that they understand exactly what the difficulty is. It is not necessary to indicate to them what are the worries of the Chair. What we must determine now is whether it is possible to amend this type of very simple and basic motion to the effect that a certain document be referred to a committee. In my view, it is very difficult to amend this kind of motion. I find it difficult to imagine any amendment that would be in order. Hon. members might even wonder whether it is necessary, in the first instance, to have this type of motion at all. That might be a very good point to consider. But that is not the kind of argument in which the Chair should become involved.
The effect of the motion is that this document be referred to a committee. That is the only proposition with which I must deal. The hon. member for Peace River said that in his view there are many arguments to support the proposition that the amendment is acceptable, the best one of course being that he seconded it. I might say that perhaps that is

November 28, 1989
Taxation Reform
the only good argument for accepting it. I wonder whether it is necessary to do this, but for the record I shall read the motion again.
That the White Paper entitled Proposals for Tax Reform, Tabled in the House on November 7, 1969, be referred to the Standing Committee on Finance, Trade and Economic Affairs.
As I have indicated, it may well be that the committee could have easily, on its own initiative, studied this document without the initiative of the government in referring the document to the committee. However, this is the motion which has been proposed and which is being considered by hon. members. That is the motion which is before the House for debate today and on Monday. The amendment reads as follows:
That the motion be amended by adding the following to it:
with instructions to develop alternatives to the proposed disincentives affecting middle income groups and small businesses in particular, and which increase the vulnerability of Canadian enterprise to foreign take-overs.
As I said, the motion is a simple one. It proposes the reference to a standing committee of a document which deals with tax reform. The motion before the House can, I suppose, in some way be amended. But certainly the amendment proposed would have to be relevant to and have the effect of amending the main motion. It must not seek to amend the question which the motion would refer to the committee for consideration. That is the whole point of argument. What we are trying to do through this amendment is go behind the motion and alter or affect in some way the substance of the question which will be considered by the committee if the motion were adopted by the House.
[DOT] (4:30 p.m.)
In my view, the amendment endeavours to reach behind the motion and attempts to direct the committee to consider certain propositions which would appear to be outside the scope or the content of the motion which is before the House. In effect, the proposed amendment is not only irrelevant in the procedural sense to the motion it purports to amend, but it also seems to raise a new and substantive question which under our standing orders can only be moved after the appropriate notice. In other words, there is the additional difficulty that it not only goes beyond the terms of the simple motion before us at the present time, but it is also in the

form of a substantive motion which can be moved only after appropriate notice.
I should say that Standing Order 47 has the effect of precluding an amendment of this kind. For the benefit of the record I will read the standing order. It reads:
47. A motion to refer a bill, resolution or any question to a Committee of the Whole, or any Standing or Special Committee, shall preclude all amendment of the main question.
I think that hon. members who sought to enlighten the Chair on the question were silent on the effect of Standing Order 47.


Gerald William Baldwin: We realized Your Honour would find it!


Mr. Speaker:: In the circumstances it is very difficult for the Chair to overlook the provisions of Standing Order 47 and to rule in any other way except that the amendment should not be put to the House.


Marcel Joseph Aimé Lambert: May I ask
Your Honour a question? On the basis of your ruling, under Standing Order 47 it would be impossible for any member of the opposition or of the government to advance an amendment stating that the committee shall report by date "X", if that were the sense of the House as a result of discussion. I find that rather difficult to accept.


Mr. Speaker:: The hon. member who just asked the question, having illustriously occupied the chair before the present holder of this office, knows that the Chair does not reply to theoretical questions.


Robert Phillip Kaplan: Mr. Speaker, I wonder if I might seek the permission of the House to conclude my remarks. I would require an additional seven minutes.


Mr. Speaker:: This would, of course, require the unanimous consent of the House. There is a difficulty in that the hon. member whose motion was to be considered by the House during private members' business may feel that he is being deprived of an opportunity to present his case. I assume that hon. members would want to ensure that the hon. member who would be affected adversely this way would be given an opportunity and priority to present his motion on another occasion. This matter might be considered at this time.


Gerald William Baldwin: We are quite impartial as to whether we hear the hon. member for Don Valley (Mr. Kaplan) or the hon. member for
November 28, 1969

Waterloo (Mr. Saltsman). We have no feelings about it one way or the other.


Stanley Howard Knowles: Mr. Speaker, I believe the hon. member for Waterloo (Mr. Saltsman) is a very generous and co-operative person and is willing to agree. I think, also, that if we adjourned seven minutes from now there might be some disappointment among all these friends of ours in the press gallery who anticipate something happening at five o'clock. So we have to stay here anyway.


Max Saltsman: I am willing to allow the hon. member for Don Valley to proceed. There will be enough time left for me to present my motion.


Robert Phillip Kaplan: Mr. Speaker, I should like to thank the House, and in particular the hon. member for Waterloo (Mr. Saltsman) for affording me this opportunity. In my consideration of the white paper I was speaking of its effect on small business. Many critics regret that more attention has not been paid to the importance of small and independent business. I regret this as well, and I want to make a few comments about it. But before doing so I would like to contradict those hon. members who suggest that small business has now been put on the same basis as big business. This is just not true. Although initial rates are the same, the closely-held business tax can be fully integrated with the personal tax of the owner, while the tax on the big, widely-held corporation can only be half-integrated. By my reckoning, this still gives the successful small businessman more than $10,000 a year less tax than the man who shares the profits of big corporations. Moreover, as a further preference over big business, he is not subject to the peculiar and difficult obligation to pay a tax every five years on the increased growth and value of his business.
But the white paper as it stands has met some criticism from small business in spite of its continued favoured treatment vis-a-vis big business, and I would like to deal with these complaints. The complaints are partly legitimate, partly not. It does not seem fair to me that the small businessman should be able to continue to pay less tax on his disposable income than the fellow who may be an independent professional, a salaried worker or an incorporated businessman. That is the effect of the combination of a low rate on corporate accumulation and the variety of techniques available for extracting retained
Taxation Reform
earnings at lower rates of tax. On the other hand, unlike the professional or salaried employee, the small businessman has a special need for capital to grow, which the low rate in the past provided.
This low rate encouraged him to leave profits in the business and to use them constructively. Much has been said about the value and importance of small business in our economy. It is not necessary to repeat it, but to highlight the special problem of the businessman who wants to expand, I need only observe that the cost of increasing inventories of goods and the expenses of plant expansion are not deductible and never have been. The least that can be said for the low rate is that it gave some relief to the businessman who wanted to apply his capital to either of these socially worth-while objectives.
So that while I am against the preservation of the low rate, I would like to propose a measure which is not inconsistent with the white paper in its present form. It will also assist small business in its need to have the use of capital to expand which, so far as I can see, is the only legitimate claim the small businessman can make for special treatment. In this respect, the small businessman's problem is heightened by the reduced availability of capital from conventional sources. At the same time, while providing capital to growing businesses, the proposal will not narrow the tax base or reduce the ultimate tax payable to the government.
What I would like to suggest might be called an expansion allowance. Like a capital cost allowance, it would permit the acceleration of deductibility of certain costs of inventory and plant expansion, and I hope that it would apply to 100 per cent of the costs concerned up to a reasonable maximum of, say, $15,000 per year. To achieve its purpose of encouraging businesses to grow, it would be applicable only to increases in inventory over the prior year and to increases in classes of capital expenditure. Eventually, when the concern's growth slowed down and the special claim for capital was no longer present, the expansion allowance would no longer be available. The deferred taxes would then become payable through liability to tax at the normal rate but still, of course, subject to the tax advantages over the widely-held corporations which I described.
[DOT] (4:40 p.m.)
The proposal for an expansion allowance will remind some hon. members of the proposals of the Carter report for special
November 28, 1969

Company of Young Canadians capital cost allowances for new businesses to the extent of $250,000. The expansion allowance has the advantage that it is available for small but growing businesses and not just for new business, that it applies to inventory as well as capital assets, and that it is not subject to the abuse of encouraging new incorporations and re-incorporations, as the Carter proposal does.
The white paper promises a new look at the question of capital cost allowance. I urge the government to consider adapting the capital cost allowance system to the expansion allowance which I have proposed. There are a number of other aspects of the white paper about which I would like to have spoken- entertainment expenses, for example, where serious abuses have occurred under the present system but where there is a legitimate interest in the continued deductibility of genuine business expenses for entertainment. I would also like to have had time to deal with the effect of the capital gains tax on five-year accruals not applying to foreign investments. But as a member of the tax committee, no doubt I will have the opportunity to do so later. I thank the hon. member for Waterloo for his indulgence, Mr. Speaker.



ROUTINE PROCEEDINGS


Pierre Elliott Trudeau: Mr. Speaker, may I rise on a question of privilege. In reply to questions asked of me this morning by the right hon. member for Prince Albert (Mr. Diefenbaker), asking if I had received a letter from Mr. Saulnier with respect to the activities of the Company of Young Canadians, I replied in the negative. Notwithstanding the admonition of the right hon. gentleman that memories can be faulty, I nevertheless insisted that I knew of no such letter. I added, however, that "if there were such a letter, I would not hide it."
Mr. Speaker, I should have heeded the wise counsel of the right hon. gentleman. On examination of my files I find that Mr. Saulnier did indeed write to me on March 17 of this year on this subject. I wish to apologize through you, Mr. Speaker, to the House and to the right hon. member for my erroneous reply. I have taken this earliest opportunity of correcting the record.

I hasten to add, Mr. Speaker, that I have no objection whatever to tabling Mr. Saulnier's letter and my reply thereto. Because Mr. Saulnier had written to me on a personal and confidential basis, however, I must seek his consent to such tabling. I shall try to reach him this week end and see if it is possible. In conclusion, Mr. Speaker, may I say that this correspondence followed shortly upon my conversation of last spring with Mr. Saulnier, about which I talked to the House yesterday, and perhaps for that reason the two events became confused in my mind.


Some hon. Members:: Hear, hear.


Mr. Speaker:: It being after four o'clock the House will now proceed to the consideration of private members' business. Is the hon. member for Winnipeg North Centre (Mr. Knowles) rising on a point of order?


John Patrick (Pat) Nowlan: I am rising on a point of
order.


Stanley Howard Knowles: So am I, Mr. Speaker.


Mr. Speaker:: The hon. member for Winnipeg North Centre.


Stanley Howard Knowles: Mr. Speaker, I said a few minutes ago that the hon. member for Waterloo (Mr. Saltsman) was willing to take a truncated period for his public bill, but now that the time has been shortened to only 15 minutes, and in view of the fact that we have had the statement from the Prime Minister (Mr. Trudeau) that we were anticipating at five o'clock, my hon. friend would prefer if we cancelled the private members' hour today, so that there would be the full period for the discussion of his bill on another occasion.


Mr. Speaker:: Is this agreed?


Some hon. Members:: Agreed.


John Patrick (Pat) Nowlan: Mr. Speaker, I am rising on a point of order as a result of the Prime Minister's point of privilege. Mr. Saulnier in his evidence last night and today before the parliamentary committee said that he would table the letter that he wrote to the Prime Minister, but since he did not have it in his files he would return to Montreal and send it. While the Prime Minister may very well be able to contact him this week end, before or during the Grey Cup, in view of Mr. Saulnier's evidence before the parliamentary committee I do not see what
November 28, 1969	COMMONS
harm there would be in having the letter published in today's Hansard.


Mr. Speaker:: That is an argument
advanced by the hon. member in favour of the suggestion that the letter be tabled now. The Prime Minister (Mr. Trudeau) has indicated the reason why he should delay
DEBATES	1403
Company of Young Canadians tabling it until the start of next week. I believe that the matter could easily rest until Monday.


Stanley Howard Knowles: Mr. Speaker, I move that we now adjourn.
Motion agreed to and the House adjourned at 4.47 p.m.

Monday, December 1, 1969