1971-11-16

PRIVILEGE


Mr. David Lewis (York South):: Mr. Speaker, I rise on a question of privilege of which I have given Your Honour notice. The question of privilege is directed to the Acting Prime Minister and the conflict between statements which he made to the House yesterday and revelations in a document purporting to be a cabinet memorandum published in today's Montreal Gazette.
The Acting Prime Minister was asked a number of questions yesterday relating not only to the report published in The Canadian Forum but also, in one question asked by the Leader of the Opposition, specifically to the question of whether or not there was a cabinet document stating that the main policy approach to the issue of foreign ownership should be the creation of a screening agency. In answering that specific question the Acting Prime Minister said that he was prevented by his oath of office from disclosing what had happened in cabinet. However, all through his answers to questions yesterday he created the impression, and obviously intended deliberately to create it, that no decision had been made by the government and that the government was still in the process of making decisions on the question of foreign ownership and the various aspects of policy that might deal with that subject. Indeed, according to the story in the Montreal Gazette he was asked about this matter when he left the House. The report in that newspaper says:
.. . Sharp was asked if he was denying that any part of the report in the Canadian Forum was in any way government policy.
He is reported as having answered, "Yes. We have taken no decisions yet."
Throughout the question period yesterday and in his comments outside the House the Acting Prime Minister sought to leave the impression that the government had made no decisions. If that is so, Mr. Speaker, then the article in the Montreal Gazette of this morning must be a forgery of some sort because the article in the Gazette claims to be an actual reproduction-it is all in quotes right through-of a cabinet document. At the end, D. J. Leach, superintendent of cabinet documents, is shown as the signatory of the document published in the Montreal Gazette. This is stated to be the actual document, the minute of cabinet. In paragraph (a) of the document the following statement appears:
The cabinet agreed in principle that the main policy approach to the issue of foreign ownership should be the creation of a screening mechanism that would cover foreign takeovers of Canadian firms doing business in Canada and that the further extent and
scope of the functions of a screening mechanism would be examined in full cabinet at an early September meeting.
I am not one who would suggest that every discussion in cabinet in the process of making decisions ought to be made public. I fully appreciate that under our system cabinet discussions, until a decision is reached, might well be kept to the cabinet for obvious reasons. However, that does not give a member of the cabinet, particularly when he is Acting Prime Minister, the right or discretion to make statements that mislead the House and the people of Canada.


Some hon. Members:: Hear, hear!


David Lewis: If the Acting Prime Minister had said "I will make no comment on this", "I will not deal with the matter because it is before cabinet" or had made any such statement of that sort, one could appreciate that. Indeed, his answer to the Leader of the Opposition was that he could not say what happened in cabinet because of his oath as a member of the cabinet. Whether one agrees or not with the attempt to keep it secret is a matter to which I will come in a moment. However, when the Acting Prime Minister goes out of his way to suggest to Parliament and the people of Canada that the cabinet has not reached a decision, he is misleading the House and the people of Canada and we, as Members of Parliament, have a legitimate point of privilege against that kind of answer.


Some hon. Members:: Hear, hear!


David Lewis: I want to emphasize for Your Honour the distinction I am trying to draw. I wish Your Honour could persuade some of the donkeys to stop braying. I want to emphasize the distinction I am trying to make. I do not say that the Acting Prime Minister, the Minister of National Revenue (Mr. Gray) or anyone else was under any obligation to tell Parliament or the people of Canada what decision has been made and what decision has not been made until such time as the government is ready to announce its decision or decisions. However, when the Acting Prime Minister knows, and he could not have helped but know, that as long ago as July 29 a decision was in fact made by cabinet, he has no right, without violating every sense of privilege of Parliament and, indeed, every sense of democracy-


Some hon. Members:: Order.


David Lewis: -to try to convey the impression that no decision has been made by cabinet, which is exactly what he did yesterday. I question the secrecy about some matters that the government refuses to disclose, and one may question what this government is about when, despite its numerous protestations of participation and so on, it refuses to give the Canadian people basic information
9594

November 16, 1971
Cabinet Security
that is essential to the discussion of a very important subject, but that we will deal with in another situation.
I say that the Acting Prime Minister misled this House and the people of Canada yesterday by statements in the House and by a statement he made outside the House. In my humble view, that is a clear point of privilege, a violation of the privileges of members of this House. If Your Honour recognizes that there is a prima facie case of privilege, I will be pleased to move the following motion:
That the discrepancies between the statements made to this House by the Acting Prime Minister in answer to questions addressed to him on Monday, November 15, and the contents of a Privy Council document published in The Gazette of Montreal on Tuesday, November 16, be referred to the Standing Committee on Privileges and Elections.


Some hon. Members:: Hear, hear!


Some hon. Members:: Resign.


Mr. Speaker:: Order. The hon. member for York South has given notice of his intention to raise this matter by way of a question of privilege. The matter is one of some importance and perhaps some complexity. Unfortunately, because of special circumstances, the Chair has not had an opportunity to look into the precedents to the extent to which I would have liked, and rather than reach a decision which would not be founded upon the proper authorities, I would ask the hon. member's co-operation in allowing the Chair to hold the matter in abeyance for a few hours so that I might have an opportunity, later in the afternoon, to consider all the facts, to consider the hon. member's statement, in particular, and give a ruling later in the afternoon.



ROUTINE PROCEEDINGS


Mr. G. W. Baldwin (Peace River):: Mr. Speaker, I am seeking the unanimous consent of the House to make a motion under Standing Order 43. The special and urgent circumstances involved would appear to be the complete breakdown of government cabinet security involving the publication in The Canadian Forum of the Gray Report, the publication in the Montreal Gazette today of what purports to be a cabinet document, and the publication in the Toronto Sun today of a story dealing with the refusal of the Prime Minister to allow the Minister of Manpower and Immigration to bring into the House of Commons the amendments to the Immigration Act which have been approved by the appropriate cabinet committee.
I would therefore move, if unanimous consent is given: That a special committee of this House consisting of six members who support the government and six members of opposition parties be established for the purpose of reviewing, considering and reporting on the chaotic situation which exists as a result of the publication of cabinet documents provided by unauthorized per-

sons and that such committee have the power to send for persons, papers and records and to consider and report on the right of the public to be informed and the extent to which the government may restrict that right.


Some hon. Members:: Hear, hear!


Mr. Speaker:: The hon. member's motion proposed under the terms of Standing Order 43, requires the unanimous consent of the House. Is there unanimous consent?


Some hon. Members:: Yes.


Some hon. Members:: No.


Mr. Speaker:: There is no unanimous consent.


Gerald William Baldwin: Shame.


Some hon. Members:: Oh, oh!



ORAL QUESTION PERIOD


Hon. Robert L. Stanfield (Leader oi the Opposition):: Mr. Speaker, I have a question for the Acting Prime Minister. Yesterday I asked the hon. gentleman whether a certain cabinet document existed. He told me then he was unable to give an answer relating to confidential cabinet information. In view of the publication in the Montreal Gazette today of what purports to be a cabinet document, a sentence from which I quoted yesterday, I should like to ask the hon. gentleman whether, in fact, the purported cabinet document published exists?


Hon. Mitchell Sharp (Acting Prime Minister):: Mr. Speaker, the government takes a very serious view-


Some hon. Members:: Oh, oh!


Mitchell William Sharp: -of this incident and it is clear that a member of the press, or members of the press, have gained access to a confidential cabinet document. I am glad to see, from the motion put forward by the hon. member for Peace River, that he also considers it to be a serious business. Perhaps hon. members behind him do not but he does and we do. This matter involves a serious breach of security. I should add that the report that appears in the Montreal Gazette is not completely accurate. It contains discrepancies. One to which I draw particular attention is the use of the phrase "the Gray report". This is not a quotation from the cabinet document.


Robert Lorne Stanfield: I have a supplementary question arising from the statement of the Acting Prime Minister that he views this as a very serious breach of cabinet security. I would ask the hon. gentleman whether an investigation has been launched, what is the method of investigation
November 16, 1971

that the government has chosen, and whether the hon. gentleman can report to the House today any results of that investigation?


Mitchell William Sharp: Mr. Speaker, because the government takes this matter seriously an investigation was launched immediately the report was heard on the radio this morning-


An hon. Member:: Which report?


Mitchell William Sharp: -and we read the report that appeared in the Gazette this morning. The procedure ordinarily followed is being followed here, namely, that of departmental and interdepartmental inquiries. If necessary, the matter will be put into the hands of the police.


Some hon. Members:: Oh, oh!


Mr. Speaker:: Order, please.


Robert Lorne Stanfield: The Acting Prime Minister has just stated that an investigation was launched this morning. If he takes this matter so seriously I should like to ask him why an investigation was not launched last Saturday when an excerpt from what purported to be a cabinet document, which was reported in the press of this country to be a confidential cabinet document, was published? If the hon. gentleman takes this matter seriously, has he any explanation why an investigation was not launched when it first became apparent that there was in fact a serious breach of cabinet security?


Mitchell William Sharp: Mr. Speaker, I gathered from the question that was put to me yesterday by the Leader of the Opposition that he had had access to some documents of which I was not aware at that time. I now find that there appeared in one newspaper on Saturday, one that I had not seen and that the Prime Minister had not seen, what purported to be an extract from a cabinet document. If at that time we had realized that the document had been revealed, then the inquiry would have been launched immediately. One was launched as soon as there was some evidence that there had been a breach of cabinet security.


Robert Lorne Stanfield: Mr. Speaker, is the hon. gentleman saying that no member of the cabinet or of the staff of the Prime Minister's office or any of the large number of officials retained to advise the Prime Minister were aware on Saturday that this quotation from what purported to be a confidential cabinet document had been published in the press? Will the hon. gentleman say to me, through you, sir, that neither he nor the Prime Minister of this country was advised that this publication did in fact take place on Saturday last?


Mitchell William Sharp: Mr. Speaker, the Leader of the Opposition seems to have been better informed about cabinet leaks than I was. The first news I had of this cabinet leak was this morning when I listened to the radio and then read that what purported to be a cabinet document, which, as I have said, has some discrepancies in it, had come into the hands of the press. Perhaps the hon. gentleman has better access to leaks from the cabinet than I have.


Mr. Speaker:: Order, please. The Chair will recognize the Leader of the Opposition for the purpose of asking a
Division
supplementary question and then the hon. member for Nanaimo-Cowichan-The Islands on a supplementary.


Robert Lorne Stanfield: Mr. Speaker, in view of the kind of answers we are getting this afternoon, pursuant to Standing Order 25 I move the adjournment of the House.


Some hon. Members:: Hear, hear!


Some hon. Members:: Oh, oh!


Mr. Speaker:: Order, please. May we have order, please. The Leader of the Opposition has not indicated whether he has a seconder for the motion.


Gerald William Baldwin: I second the motion.


Mr. Speaker:: Is it the pleasure of the House to adopt the said motion? All those in favour will please say yea.


Some hon. Members:: Yea.


Mr. Speaker:: All those opposed will please say nay.


Some hon. Members:: Nay.


Mr. Speaker:: In my opinion the nays have it.
And more than five members having risen:


Mr. Speaker:: Call in the members.


Mr. Maclnnis:: Mr. Speaker, I rise on a point of order. In order that we may better interpret the rules of the House, I would ask Your Honour to rule whether the vote of the hon. member for Sudbury (Mr. Jerome) ought to be considered.


Mr. Speaker:: I will consider the question. It is my impression that the hon. member is alluding to the fact that the hon. member referred to may have left his seat while the vote was being taken. Of course that does not disenfranchise the hon. member. However, I suggest to hon. members that the rule is clear. Hon. members should not leave their seats while a vote is being taken. This is a matter of order and the standing order is well known to all hon. members. Is the hon. member for Yukon rising on a point of order?


Mr. Nielsen:: Mr. Speaker, I rise on a point of order with respect to the rule of this House which requires the Crown to produce a document to which reference has been made in a proceeding of the House. It will be recalled that in answer to the first question of the Leader of the Opposition the Acting Prime Minister described the report in the Gazette as being inaccurate in at least one respect in that the words "the Gray report'' were used. The Acting Prime Minister asserted, inferentially, that in the cabinet document no such reference was present.
[DOT]	(3:10 p.m.)
In my submission it is a well known rule of the House that when a minister of the Crown refers to a document in a proceeding of the House the Crown is obliged to produce that document and to table it. The reasons for that rule are very apparent. I would like to cite for Your Honour's consideration the relevant paragraphs in Beau-chesne's Parliamentary Rules and Forms, Fourth Edition, 1958. At page 134 the following is set forth in paragraph 3 toward the bottom of the page:
It has been admitted that a document which has been cited ought to be laid upon the table of the House, if it can be done without injury to the public interest. The same rule, however, cannot be held to apply to private letters or memoranda.
The paragraph goes on-


An hon. Member:: Read it properly.


Erik Nielsen: If the hon. member would read the rules he might be able to follow the argument. I recommend that citation to Your Honour. I also refer Your Honour to Bourinot's Parliamentary Procedure where at page 337 the following is set forth:
It is a parliamentary rule that when a minister of the Crown quotes a public document in the House, and founds upon it an argument or assertion, that document, if called for, ought to be produced.
The paragraph goes on:
The rule respecting the production of public papers, quoted by a minister of the Crown, is necessary to give the House the same information he possesses, and enable it to come to a correct conclusion on a question.

November 16, 1971

The minister has unequivocally made reference to the document in question. In order for the House to come to its own assessment, that document should be produced. In Sir T. Erskine May's Parliamentary Practice, 13th edition, at page 328, the following is set forth toward the bottom of the page:
Another rule, or principle of debate, may be here added. A minister of the Crown is not at liberty to read or quote from a despatch or other state paper not before the house, unless he be prepared to lay it upon the table.
In my submission to Your Honour I will have a few words to say with regard to the words "read or quote". At the foot of the page it reads:
This restraint is similar to the rule of evidence in courts of law, which prevents counsel from citing documents which have not been produced in evidence. The principle is so reasonable that it has not been contested.
It might be advanced to Your Honour that before the Crown is required to produce such a document and lay it on the table it must be cited or quoted. I submit that the minister's reference to the document, in effect disclosing a part of its contents or purporting to disclose a part of its contents, is precisely the same as quoting from the document itself.
The only other argument that I can anticipate might be advanced to Your Honour is that the proceeding that is now before the House, namely the oral question period, is not a proceeding. With regard to that anticipated argument I refer Your Honour to Ontario Reports, 1971, volume two. I know it is not a binding precedent on the House. It involves the case of Roman Corporation Limited against Hudson Bay Oil and Gas Company Limited with regard to certain statements made by the Prime Minister and the Minister of Energy, Mines and Resources concerning privilege with respect to statements made by those two ministers of the Crown in the House. The Chief Justice of the High Court came to the conclusion, presumably after careful and considered research, that neither the House of Commons nor any court of law had ever determined exactly what was a proceeding of the House. The honourable justice did conclude that a proceeding did in fact include a question asked or even notice of a question asked in the House.
Anticipating those two arguments which may be advanced to Your Honour, I submit there is a clear obligation from a purely technical point of view on the Crown that it must produce this document now that the minister has referred to its content. Even if there were not that technical requirement, which I submit very strongly does exist, then there certainly exists a moral obligation on the part of the Crown to clear up the confusion in the minds of the public-


An hon. Member:: You are getting out of your field.


Erik Nielsen: -and certainly in the minds of the inane members opposite so that the House can judge for itself who is lying, the Montreal Gazette or the Acting Prime Minister.


Mr. MacEachen:: Mr. Speaker, if I may make a comment or two on the point of order raised by the hon. member with regard to an obligation on the part of the Acting
Inquiries of the Ministry
Prime Minister to table a particular document, I believe there is a justification for that particular obligation-


Some hon. Members:: Hear, hear!


Allan Joseph MacEachen: -if a minister of the Crown in the course of debate, as the citations indicate, is using a document, is quoting from it, is basing an argument upon it. In a circumstance of that kind it is unfair for a minister to have access to information or an analysis that is not available to other members of the House. It is unfair because other members are not in a position to assess for themselves the total context from which quotations may be taken.


Erik Nielsen: Precisely.


Allan Joseph MacEachen: Certainly that is related to a debate in which an argument is taking place and in which a minister has occasion to use a document and quote from it. With that situation there can be no dispute. Indeed, there is a rule of the House which requires a member, if he quotes from a letter from a constituent, to table that letter if asked to do so.


Gerald William Baldwin: No.


Allan Joseph MacEachen: That requirement has been followed in the past. In recent years it has fallen into disuse. It is not possible for any member to quote from a document unless he assimilates that document into his own speech.
The situation that has now occurred is not akin to any of those I have mentioned. The Acting Prime Minister has no document, has not quoted from any document and has not used any document in argument. All he has said in reply to a question by the Leader of the Opposition is that he takes a serious view of the security situation because a particular document has been improperly disclosed. He went on to say that the account in the Montreal Gazette contains discrepancies. It is true the Acting Prime Minister has referred to a document. It would be impossible for him to reply to the Leader of the Opposition without referring to the document. No one questions that, but it is rather silly to suggest that every document to which a person refers has to be tabled in the House. We refer to cabinet decisions that have been taken. We all know that cabinet decisions are written. Must we then table them in the House? Of course not.
In this case I would contend that because the minister has not quoted, has not used, any document in argumentation but has merely referred to the existence of a document as a result of a question asked, there is no obligation upon the government to table that document at all.


Gerald William Baldwin: Very briefly, Mr. Speaker, I think that in his defence of the Acting Prime Minister the President of the Privy Council has in fact condemned him and has indicated that the point made by my hon. friend from the Yukon is well-founded. There is no doubt that in the context of the answer the Acting Prime Minister gave to my leader he indicated he was aware of the document and of its contents as printed in the Gazette. He further said, by implication, that these documents were not quite the same because there had been one change. I submit these

November 16, 1971
Inquiries of the Ministry
observations with regard to the legal aspect of the matter. The point made by the hon. member for the Yukon is quite correct. So much for the law.
As to the question of equity-


An hon. Member:: Come on, now.


Gerald William Baldwin: I know the hon. member does not understand equity. It does not belong in the Liberal party. The fact remains that the Acting Prime Minister must be aware of this document because it is six weeks, I am told, since it was placed in the hands of the people who have used it. They knew where it was. In the circumstances, equity demands that the document be tabled in the House so that hon. members may know what it contains.


Some hon. Members:: Hear, hear!


Mr. Turner (Ottawa-Carleton):: Mr. Speaker, the authorities-


Some hon. Members:: Oh, oh!


Mr. Speaker:: Order, please. I should bring to the attention of hon. members the desirability of trying to resolve this point as quickly as we can. We have spent a good deal of time on it, and I think we should now try to resolve it as expeditiously as possible.


John Napier Turner: The citations referred to by the hon. member for Yukon are quite precise.


Some hon. Members:: Hear, hear!


John Napier Turner: They are citations 159, paragraphs 2 and 3. Citation 159(2) refers to the earlier citation in May to which the hon. member for the Yukon also alluded. The terms of these citations are very narrow in scope. They are equivalent to the rules of evidence applied by a court, to which the hon. member for the Yukon also referred.
A minister of the Crown is not at liberty to read or quote from a despatch or other state paper not before the House-
It has been admitted that a document which has been cited ought to be laid before the House-
As the government House leader has pointed out, the most the Acting Prime Minister did was to refer, indirectly or directly, to a document. There was no citation. There was no quotation. If the argument advanced by the hon. member for Yukon were to be accepted, the mere fact that a document was referred to would make it produce-able, and obviously that is well beyond anything May or Beauchesne had in mind when they placed these paragraphs in their books. I refer also to citation 159(3) which says:
It has been admitted that a document which has been cited ought to be laid upon the table of the House if it can be done without injury to the public interest.
That is another point I should like to bring to Your Honour's attention, that you should consider whether it is normally in the public interest to require the production of a cabinet document.


Gerald William Baldwin: Or the Liberal interest.


John Napier Turner: If Your Honour were to hold that despite the narrow construction placed upon

this rule by May and Beauchesne, who limit it to citation and quotation, not a reference, if you were to go beyond the protection given to the public interest and require the production of the document, then I submit that production should be limited to the article in the Montreal Gazette.


Mr. Speaker:: Order, please. I see the hon. member for Yukon seeking the floor. He knows he has already spoken to the question. It would be somewhat irregular to allow all four hon. members who have taken part in the debate to speak a second time. Perhaps the hon. member has an explanation to indicate why he should be allowed to speak a second time on the same point.


Erik Nielsen: Yes, Mr. Speaker. In all fairness, and having regard to parliamentary justice, there ought to be an opportunity for rebuttal of the new points which have been raised.


Mr. Speaker:: The hon. member might indicate the precedents. There may be such precedents of which I am not aware. I do not wish to be unfair to him. I appreciate the importance of the matter which has been raised, and there is no reason why we should not debate it. It is one of interest from a procedural standpoint. The Chair is always happy to hear arguments in relation to procedural points, so I certainly do not intend to limit the discussion in any way. The hon. member says he is entitled to make a rebuttal. Perhaps the argument will come from the government side that they are entitled to offer a rebuttal of the hon. member's rebuttal. The hon. member for Yukon is perhaps confusing court proceedings with proceedings of the House of Commons. It is certainly not the practice of the House to allow a member to speak a second time to the same question. I submit this view to the hon. member with all respect.


Erik Nielsen: In all modesty, I have been around here long enough not to confuse proceedings in this House with court proceedings, My Lord. But I think that in all fairness, in view of the importance of this question, a rebuttal should be made in response to what the Minister of Justice has stated.


Mr. Speaker:: Order, please. I have no objection to allowing the hon. member to state briefly what his point is. If he thinks he has a point of order he would be entitled to raise one in any event. We shall see where we go from there. We may be spending the whole day on rebuttals, and I am wondering whether this will lead to the orderly conduct of our business.


Erik Nielsen: My point will be very briefly made if the braying donkeys over there will be quiet. The point is that, contrary to what the Minister of Justice has urged you to accept, the Acting Prime Minister has used his knowledge of this document to argue his case in reply to a question by the Leader of the Opposition.


An hon. Member:: The same argument.


Erik Nielsen: It is not the same argument at all. The Acting Prime Minister said a decision on foreign ownership had not been made. He described the document as a study, a working paper. He asserted that the words "Gray
November 16, 1971

report" do not appear in it. All these assertions refer to the content of the document.
The rule is very clear. It is based upon the rule of evidence in a court of law which prevents people referring to documents unless they are prepared to produce them so that others who are interested can make their own observations. It is unfair to allow the minister to refer to the contents of the document without producing it so that we can make our own assessment. We must read it to know what the truth is.


Some hon. Members:: Hear, hear!


Mr. Speaker:: If there are no further arguments to be submitted, either in support of the hon. member's contention or in opposition thereto, I am quite prepared to make a ruling.
As hon. members know, this matter of the obligation on the part of either individual members or members of the cabinet to table or produce a document which has been quoted is a rule which is often disputed in the House. It is very seldom that a protracted debate on an important subject takes place in the House without a member rising on a point of order or a question of privilege to suggest that a document which has been referred to by another hon. member in debate ought to be tabled immediately, and the Chair is called upon to consider the precedents and citations and to make a ruling. The hon. member for Yukon will himself recognize that this is a matter of general interest that has been considered by the Chair on numerous occasions.
I suggest to hon. members that the citation to which the hon. members for Yukon and Peace River have alluded has to be interpreted rather strictly. I have to agree with the contention that if the reference made to a public document is not, as the citation says, a quotation from that document, it would be very difficult for the Chair to rule that the document ought to be tabled.
In fairness, looking at the matter as objectively as I can, I do not see how it is possible for the Chair to make a ruling at this point that a document that has simply been referred to but has not been directly quoted should be tabled in debate. I find it difficult to rule otherwise. Hon. members may look at the citations that have been quoted in a very interesting and forceful way by the hon. members for Yukon and Peace River. They are clear to me. If a document has been actually cited or quoted in debate by a minister of the Crown, it has to be tabled. If only reference is made to it, I do not see how there can be an obligation to table it.
I remember that when a similar matter was raised previously the suggestion was made that perhaps the remedy of members of the opposition is to move for the production of the document. I appreciate that this is not a very useful remedy in view of the rules. The way we have been operating is that a motion for the production of documents is sometimes debated, but it is difficult to bring it forward for debate and it very often falls to the bottom of the list and many months pass before the matter can be considered again. Therefore I cannot seriously suggest to hon. members that this is their remedy.
Inquiries of the Ministry
With respect, I have to make the ruling that the citation quoted does not apply in the present circumstances and therefore I cannot rule that the document in question should be tabled.



FOREIGN OWNERSHIP-POSSIBLE CREATION OF SCREENING MECHANISM TO REGULATE TAKEOVERS-ACCURACY OF MONTREAL &quot;GAZETTE&quot; VERSION OF CABINET DOCUMENT

Mr. T. C. Douglas (Nanaimo-Cowichan-The Islands):: Mr. Speaker, may I direct a question to the Acting Prime Minister which arises out of his statement that there are discrepancies between the document that appeared in the Montreal Gazette and the actual cabinet document to which it refers. May I first quote the paragraph in the alleged cabinet document headed "A":
The cabinet agreed in principle that the main policy approach to the issue of foreign ownership should be the creation of a screening mechanism that would cover foreign takeovers of Canadian firms doing business in Canada-
May I ask the Acting Prime Minister whether that paragraph is an accurate reproduction of the words contained in the original document to which it refers?


Mitchell William Sharp: Mr. Speaker, I was referring to discrepancies because I had discovered some. I cannot say for certain whether there are discrepancies in the first paragraph, but I certainly would not want to say that they were serious or that they are misleading.


Thomas Clement (Tommy) Douglas: In view of the fact the Acting Prime Minister has a very selective memory and remembers some discrepancies but not others, may I ask him whether he is now telling the House that the government did not decide last July to accept in principle the concept of setting up a screening mechanism to deal with foreign takeovers?


Mitchell William Sharp: Mr. Speaker, when this question was put to me by the Leader of the Opposition I made the statement that this was a matter of cabinet secrecy and I am bound by my oath not to disclose what goes on in cabinet. Therefore I am afraid I cannot answer that question directly without breaking my oath. What I do want to say to the hon. member and to the House is that no decisions have yet been made on the policy that this government intends to adopt toward foreign ownership, and that is the simple truth.


Thomas Clement (Tommy) Douglas: Mr. Speaker, may I ask a final supplementary question. Since the publication of now two cabinet documents indicates either that they were stolen or that they were deliberately leaked to the press, I should like to ask the Acting Prime Minister whether this is a manifestation either of the government's gross incompetence or wilful deception?


Mr. Speaker:: Order, please.



FOREIGN OWNERSHIP-SUGGESTED POSSESSION OF CABINET DOCUMENT BY OWNERS OF OTTAWA &quot;CITIZEN&quot;

Gerald William Baldwin: Mr. Speaker, may I ask the Acting Prime Minister whether the government or

November 16, 1971
Inquiries of the Ministry
the hon. gentleman can deny that the alleged cabinet memorandum reproduced in the Gazette has been in the hands of-


Mr. Speaker:: Order, please. The hon. member knows that he cannot ask a question in those terms. The hon. member for Calgary Centre.


Gerald William Baldwin: A point of order, Mr. Speaker-


Mr. Speaker:: Order, please. The hon. member for Peace River on a point of order.


Gerald William Baldwin: If Your Honour takes objection to my question I will rephrase it.


Mr. Speaker:: The hon. member for Peace River.


Gerald William Baldwin: Has this cabinet document been in the hands of the owners of the Citizen for six weeks?


Mitchell William Sharp: Since the hon. gentleman wishes to enlighten me, may I say that I did not know about this leak until this morning.


Mr. Speaker:: Order, please, the Chair recognized the hon. member for Calgary Centre a moment ago.



FOREIGN OWNERSHIP-CIRCULATION OF CABINET DOCUMENT TO MINISTERS

Hon. D. S. Harkness (Calgary Centre):: Mr. Speaker, I have a question for the Acting Prime Minister in connection with this document that he has now admitted exists. It does not involve any breaking of the oath of cabinet secrecy; it is really an administrative matter. Was this document circulated to all members of cabinet, or was it circulated only to a certain number and, if so, to whom? Or was it not circulated to members of the cabinet at all?


Mitchell William Sharp: Mr. Speaker, the hon. member has been a member of cabinets and he knows that records of cabinet proceedings are distributed to all ministers. There is nothing unusual about that.



FOREIGN OWNERSHIP-REQUEST THAT PRIVY COUNCILLORS BE PERMITTED TO SEE RECORD OF JULY 29 CABINET MEETING

Right Hon. J. G. Diefenbaker (Prince Albert):: Mr. Speaker, I have a very simple question for the minister since, whether he believes it or not his credibility is now in issue as a result of the statements he has made, which have been so-


Some hon. Members:: Order!


John George Diefenbaker: -that have clashed one with the other; I will put it that way. In order to clear up the matter, would the minister allow members of Her Majesty's Privy Council to see the record of the cabinet meeting on July 29? This would give the minister an opportunity to prove whether the disjointed stories he has been telling are well based.


Mr. Speaker:: Order, please.


John George Diefenbaker: Will the minister permit that?


Some hon. Members:: Answer!


Mitchell William Sharp: Mr. Speaker, in the answers I gave yesterday-and I have had an opportunity of reviewing the record very carefully-I did not in any way, I think, mislead the House. I said in answer to the specific question asked by the Leader of the Opposition that I could not discuss what was before cabinet. I said on a number of occasions, both within and without the House, that decisions regarding government policy on foreign ownership had not yet been reached. The matter is still before cabinet. We have not yet made our decisions. The document that has been released suggests there was some tentative decision in principle. This may or may not be true. I cannot either deny it or accept it, but the decisions of the government as to its policy on foreign ownership have still to be made.


John George Diefenbaker: Mr. Speaker, does the hon. gentleman not know that when there is a challenge in the mother of parliaments such as has taken place here the government invariably allows members of the Privy Council, bound by their oaths not to reveal what they find-


Some hon. Members:: Oh, oh!


Mr. Speaker:: Order, please. I am not sure whether that was a preamble or the question, but perhaps the right hon. gentleman might ask his supplementary question now.


John George Diefenbaker: I try so hard, Mr. Speaker, but those people across the way are a little frightened.


Some hon. Members:: Oh, oh!


John George Diefenbaker: The Parliamentary Secretary to the Prime Minister almost convinced me in the past that he is a wit, but I am beginning to think I was only half right.


An hon. Member:: That's twice in one week, Barnie.


Some hon. Members:: Oh, oh!



FOREIGN OWNERSHIP-REQUEST FOR TABLING OF CABINET DOCUMENT OF JULY 29

Mr. Stanley Knowles (Winnipeg North Centre):: Mr. Speaker, may I direct a supplementary question to the Acting Prime Minister? In order to clear up this matter, will he seek from his cabinet colleagues the authority to table the cabinet document of July 29 in the House tomorrow?


Mitchell William Sharp: As I said yesterday, Mr. Speaker, I think it is very desirable that the government should take a decision on this matter of foreign ownership. The matter is before cabinet at the present time and we are hopeful we can make a decision very shortly. I think this would be the best way of clearing up any confusion that may exist.


Stanley Howard Knowles: Mr. Speaker, pending the decision on the whole broad question, will the
November 16, 1971

Acting Prime Minister seek to clear up the present confusion by asking for authority to table the one document that was passed on July 29?


Mitchell William Sharp: Mr. Speaker, I will consider this suggestion. Certainly I would have thought there was an obligation upon those who have published or got access to it to reveal the whole of the document. As I said earlier, I have looked at the cabinet decisions and this document is not a word for word transcription of them. I think it is up to those who have revealed this document to give evidence that this is the document and not for the government to refute it.


An hon. Member:: Send it to a committee.


Erik Nielsen: Mr. Speaker, I rise on a question of privilege. The Acting Prime Minister asserted just a moment ago and earlier in his replies to questions from this side of the House that this document is now before the cabinet for consideration.


An hon. Member:: The subject.


Erik Nielsen: Mr. Speaker, the record will speak for itself, and when it is examined I am sure that my assertion to you, Your Honour, will be found to be accurate in that the Acting Prime Minister has said that this document is before the cabinet now for its consideration.
On November 15, at page 9555 of Hansard, in reply to a question by the right hon. member for Prince Albert which appears in the left-hand column the Minister of National Revenue said certain things. I will read the question first.
Mr. Speaker, I think we can clear up a great deal with the Minister of National Revenue here, because this looks like Gray's elegy and not Gray's eulogy. I should like to ask him simply whether these quotations which have appeared in The Canadian Forum came from any official document in the possession of the minister, and has he any idea how they were obtained?
The Minister of National Revenue then replied:
Mr. Speaker, I would draw the right hon. gentleman's attention to the statement issued by the Prime Minister's office on Friday which said that the article in The Canadian Forum is based on only one draft of a study prepared for official discussion at one stage in the preparation of documents to be submitted to cabinet. I have no knowledge at this time as to how any information may have reached The Canadian Forum in an unauthorized way.
My point of privilege is that the Minister of National Revenue led the House to believe on November 15 that this document had not yet been submitted to cabinet, and the Acting Prime Minister says today that it has.



GOVERNMENT ACTION TO ASSIST UNITED STATES TO OVERCOME BALANCE OF PAYMENTS PROBLEM-SUBJECTS DISCUSSED IN NEGOTIATIONS

David Lewis: Mr. Speaker, in view of the answers given by the Acting Prime Minister to the questions that have been asked, I want to turn to some other questions. Noting the Acting Prime Minister's distinction between a decision in principle and presumably an unprincipled decision, I must say that is something I
Inquiries of the Ministry
cannot quite follow. I should like to ask him a question that is related, but not quite along the same line, arising out of an answer he gave yesterday in which he informed the House that the government of Canada would like to help the United States overcome its balance of payments problems because this affects us. May I ask him whether the government has reached a decision in principle, or otherwise, as to what steps it would take to help the United States overcome its balance of payments problems?


Mitchell William Sharp: Mr. Speaker, this has been the subject of discussions going on for quite some time now, and, indeed, there was one yesterday with officials of the United States government who have brought forward a series of matters on which they would like our views and assistance.


David Lewis: Mr. Speaker, in view of the answer the obvious supplementary therefore is, would the Acting Prime Minister inform the House and the people of Canada what subjects the United States officials or representatives have brought before Canadian officials or representatives for discussion in the area of Canada's assistance to the United States to deal with its balance of payments problems? What are the subjects?


Mitchell William Sharp: Mr. Speaker, most of them have been in the public press from time to time. They want to talk about the automobile agreement; they want to talk about defence production sharing and they would like to talk about various parts of our program. We have raised with them a number of matters we would like to discuss with them at the same time. These are the sort of discussions that one would expect would take place under these circumstances.


David Lewis: I appreciate that, Mr. Speaker, but could we have a little enlightenment as to what subjects the Canadian representatives placed before the United States spokesmen as to the kind of grievances we have against the United States in the fields of trade, exchange or any others that are being discussed now at these meetings?


Mitchell William Sharp: Mr. Speaker, I mentioned some of them some weeks ago when a similar question was asked in the House and they remain on the list. We are very concerned about the fact that the Americans have banned the importation of uranium. We are very concerned about the effects of the manufacturing clause in their copyright act. Those are irritants or grievances of long standing. These are some we would like to proceed with at the present time.


Gerald William Baldwin: I have a question-


David Lewis: Mr. Speaker, I should like to ask-


Mr. Speaker:: Order, please. The Chair has recognized the hon. member for Peace River. If he is not asking a supplementary the Chair will recognize the hon. member for York South.


Gerald William Baldwin: My question is not supplementary, Mr. Speaker.

November 16, 1971
Inquiries of the Ministry


David Lewis: Mr. Speaker, I think my question is a relevant supplementary. I should like to ask the Acting Prime Minister whether the question of control of a large part of Canada's economy, particularly control of a large part of the manufacturing section of this country's economy, is a subject of discussion with the representatives from the United States and whether there has been any indication by the representatives of Canada that Canada intends to take some action with regard to the situation?


Mitchell William Sharp: Mr. Speaker, this does not seem to be very directly relevant to the balance of payments problem.


Mr. Speaker:: Order, please. The Chair will recognize the Leader of the Opposition on a supplementary.

I will then recognize the hon. member for Portneuf. [English]



DISCUSSION OF SUBJECT OF ENERGY WITH UNITED STATES

Robert Lorne Stanfield: Mr. Speaker, I should like to ask the Acting Prime Minister whether among the subjects the United States officials have indicated they want to discuss is included the subject of energy?


An hon. Member:: How about the heavy water leaks.


Some hon. Members:: Hear, hear!


Mitchell William Sharp: Mr. Speaker, the United States and Canada were discussing the subject of energy until the emergence of the emergency measures taken by the United States which gave some priority to other matters. I do understand that the United States would like to return to having some discussion, but I want to repeat what I said yesterday, that this has no relation whatever to the 10 per cent surcharge.


Robert Lorne Stanfield: Mr. Speaker, a supplementary-


Mr. Speaker:: Order, please. In fairness the Chair has to recognize the hon. member for Portneuf. We are still on the first round and I will return to the Leader of the Opposition in a moment.


Robert Lorne Stanfield: Mr. Speaker, my supplementary is for the Acting Prime Minister. The government of Canada having indicated that its officials were too preoccupied with other matters to resume discussions relating to energy matters, now that United States officials have asked that these discussions continue does the government of Canada propose to meet this request and resume these discussions?


Mitchell William Sharp: Yes, Mr. Speaker. The kind of discussions the United States is asking us to have we would be very happy to resume.



AGRICULTURE


Mr. Roland Godin (Portneuf):: Mr. Speaker, I wanted to put a question to the Minister of Agriculture but since he is away, I will put it to his Parliamentary Secretary.
Has the Department of Agriculture considered the telegram sent to it recently by the president general of the Catholic Farmers Union in which direct and immediate assistance was requested to prevent hog, egg and turkey producers from going bankrupt? In the affirmative, could the Parliamentary Secretary tell us what measures the government intends to take in this connection?


Mr. Marcel Lessard (Parliamentary Secretary to the Minister of Agriculture):: Mr. Speaker, the telegram referred to by the hon. member has indeed been received. In fact, I also received a copy of it.
I can assure the hon. member that the Department is considering this document. The Minister will be back tomorrow from a trip to Europe and will be in a position to inform the parties concerned about the position that the government intends to take on this subject.



REPRESENTATIONS OF QUEBEC MINISTER TO OBTAIN FINANCIAL ASSISTANCE FROM FEDERAL GOVERNMENT

Mr. Adrien Lambert (Bellechasse):: Mr. Speaker, I would like to ask a supplementary to the Parliamentary Secretary to the Minister of Agriculture.
Could he tell us if representations were made by the Quebec Minister of Agriculture on the same; matter in order to request the financial assistance of the federal government in respect of the provincial program?


Marcel Lessard: Mr. Chairman, as for the $16 millions contributed by organizations and the provincial government, I am not aware that the provincial government has asked for some assistance. It is possible that such a request was made these last few days but I am not aware of it. I will have to inquire and, if need be, I shall later provide the hon. member with an answer.



IMMIGRATION ACT


Gerald William Baldwin: Mr. Speaker, I should like to ask the Acting Prime Minister whether the government has decided to introduce into the House for first reading amendments to the Immigration Act which have been before cabinet so the House will be aware of what is contained in these proposals and, if so, when will this be done?


Allan Joseph MacEachen: Mr. Speaker, I am not sure I understand whether the hon. gentleman wants to know when we will bring for-
November 16, 1971

ward the bill. It certainly will not be brought forward for discussion this session but it may find its way on to the order paper.



TRANSPORT

[Stage Direction]
REMOVAL OF «EMPRESS OF CANADA. FROM SERVICE BY CPR-REQUEST FOR POSTPONEMENT FOR PURPOSE OF RECONSIDERATION
John George Diefenbaker: Mr. Speaker, I have a question with regard to which time is of the essence. It has to do with the Empress of Canada which will be sailing from Montreal tomorrow for the last time. The CPR has decided it is going to dismantle this ship and take her out of service. All across the country I think there is a general feeling that some action should be taken. I wonder whether the minister would get in touch with the officials of the CPR and ask them to postpone action for a reasonable period of time, so that some fitting solution might be arrived at whereby this connection between Canada and the United Kingdom might be preserved?


Hon. Donald C. Jamieson (Minister of Transport):: Mr. Speaker, as the hon. member knows, I can merely transmit this representation to the Canadian Pacific and I shall be glad to do that later this afternoon.



POST OFFICE


Hon. W. G. Dinsdale (Brandon-Souris):: Mr. Speaker, my question is for the Postmaster General. In view of the continuing deterioration in morale among the postal employees as indicated by the current wave of stikes, can the hon. gentleman indicate what steps he is taking to deal with this problem?


Hon. Jean-Pierre Cote (Postmaster General):: Once more, Mr. Speaker, I do not accept the premises of the hon. member's question. Like most hon. members, I deeply regret that some letter carriers should have decided to stage a series of illegal strikes now. I fully endorse the national executive of the Letter Carriers' Union in their efforts to have employees resume work, but a certain pattern seems to be taking shape whereby, as some letter carriers return to work in one locality, others stop work elsewhere.
The situation today is practically the same as yesterday, except for a shift in closing and re-opening of offices.
I might add, Mr. Speaker, that it has never been the department's intention not to comply with the arbitration award made following the investigation of the grievances submitted by three employees. We intend to offer them a sum of money.
With regard to the decision concerning part-time employees, there were so many applicants that, after coninquiries of the Ministry
suiting our legal advisers, we decided to ask the Treasury Board to appeal that decision.
So, we are asking the letter carriers-


Mr. Speaker:: Order.


Mr. Thomas M. Bell (Saint John-Lancaster):: Has the
government given consideration to not using non-union men in view of the controversy concerning the adjudication report which states that only union men should be used for overtime work?


Joseph Julien Jean-Pierre Côté: That, Mr. Speaker, is precisely the decision we intend to submit to the Public Service Staff Relations Board and, as soon as a decision is made, we shall be able to act accordingly.
At the present time, the department cannot operate without temporary or casual employees.


Mr. Les Benjamin (Regina-Lake Centre):: Mr. Speaker, may I ask the minister if he has received a request from the representatives of the postal workers to meet with them, and if he has received such a request will he be meeting with them?


Joseph Julien Jean-Pierre Côté: Mr. Speaker, I know that the national executive of the Letter Carriers' Union and the council of the Postal Unions met this morning with officials of my department. They asked that a meeting be held which they, my deputy minister and myself would attend. I am waiting to get back to my office to give an answer.


David Lewis: Mr. Speaker, the minister spoke about appealing the adjudicator's decision. Is the government contemplating going into court on some kind of certiorari motion or some other prerogative writ of that sort to challenge the adjudicator's decision? Is that what the minister is suggesting?


Joseph Julien Jean-Pierre Côté: I said we were going back to the PSSRB.


EXTERNAL AFFAIRS
Mr. Lloyd R. Crouse (South Shore):: Mr. Speaker, I wish to direct my question to the Acting Prime Minister. In view of the intention of the People's Republic of China, as indicated at the United Nations where they have stated that "China is determined to liberate Taiwan and no force on earth can stop us", what is the Canadian government's position on what is equivalent to a declaration of war by the Republic of China against the free nationalist Chinese?

November 16, 1971
Inquiries of the Ministry


Mitchell William Sharp: Mr. Speaker, when Canada agreed to exchange diplomats with the People's Republic of China it was clearly stated that the Canadian government neither accepted nor challenged the statement by the PRC about the position of Formosa. We have taken no position.


Lloyd Roseville Crouse: In the event of hostilities is it the government's intention to take a stand on this issue and, if so, which side will we be supporting?


Mitchell William Sharp: I can think of no more hypothetical question, Mr. Speaker.


Mr. Edward Broadbent (Oshawa-Whitby):: I have a question for the Minister of Industry, Trade and Commerce. As one means of aiding the Americans to overcome their balance of payments problem, could the minister inform the House whether officials of his department who were visiting Washington last week agreed or said on behalf of the government of this country that we would be willing to give up the existing safeguards in the automotive agreement?


Hon. Jean-Luc Pepin (Minister of Industry, Trade and Commerce):: The discussions on the subject of the auto pact at this time are exploratory. Any final Canadian decision would obviously have to be agreed to by the cabinet.


John Edward Broadbent: Could the minister indicate to the House whether, on the one hand, the government has a fixed position in terms of commitment to the existing safeguards or, on the other hand, whether it has proposed some alternative to the safeguards?


Jean-Luc Pepin: There is no commitment at this time. As I said a moment ago, the work being done now is exploratory.


Mr. G. H. Aiken (Parry Sound-Muskoka):: I have a question for the Acting Prime Minister in his capacity as Secretary of State for External Affairs. In view of the action taken by a member of this House in the United

States with regard to the trans-Alaska pipeline project, has the government in fact reached a dead end in its diplomatic efforts to prevent the tanker route from endangering our west coast?


Mr. Speaker:: I doubt whether a question asked in those terms is in order. The hon. member might like to rephrase it so that it is acceptable procedurally.


Gordon Harvey Aiken: May I ask the minister, then, whether diplomatic efforts are still continuing in this matter?


Mitchell William Sharp: Yes, Mr. Speaker, and I am very happy to see the efforts that the Liberal Member of Parliament to whom the hon. member has made reference is making in support of the government's position.



RESEARCH


Hon. Marcel Lambert (Edmonton West):: I have a question for the Minister of Industry, Trade and Commerce which I put to him so that he will not feel neglected this afternoon. I wish to refer to the position of the chemical industry in Canada and particularly to their research facilities. In view of the vast reductions in research personnel and in the effectiveness of research in the Canadian chemical industry which have been drawn to the attention of the minister, what has been the response of the government in this regard, and especially in light of the recommendations of the committee on scientific research in Canada?


Jean-Luc Pepin: I am well aware of the difficulties of the chemical industry. A number of things have been done in the recent past, for example, the action taken in one of the recent budgets presented by the Minister of Finance to come to the support of that industry. I am quite aware that the industry is finding it difficult to keep some of their research men at this time, but I really do not know what the hon. member is searching for so far as a statement that I could make at this time is concerned.


Marcel Joseph Aimé Lambert: The minister has been, shall we say, solicitous in his attitude toward the chemical industry in response to questions from the opposition. I am wondering just what the government's response is to what is said to be the destruction of the research facilities of a Crown corporation of which the minister's own deputy minister is a director, in other words, Polymer?


Jean-Luc Pepin: The minister responsible for Polymer has said here a number of times that the company was doing its best to maintain its personnel at the highest possible level at this time. I fail to understand what my hon. friend would like to know-


Mr. Speaker:: Order, please. We are running short of time. Perhaps the question might be pursued further tomorrow.
November 16, 1971


Marcel Joseph Aimé Lambert: The minister will not be here tomorrow.



AIR TRANSPORT


Mr. Eldon M. Woolliams (Calgary North):: My question is for the Minister of Justice. In light of the fact that on December 15, 1970, Canada signed The Hague convention with reference to air piracy, and in view of the fact that there is a vacuum in the Criminal Code regarding the laying of proper charges in Canada in this respect and, furthermore, in view of the fact that the other western nations which signed The Hague convention have brought in legislation regarding air piracy, when will the minister be bringing forth a bill?


John Napier Turner: In speaking about the introduction of legislation I said yesterday "very soon", or words to that effect. I may say it is my understanding that charges will be laid against the man in Calgary. There are available charges for unlawful interference with an aircraft in flight as well as kidnapping and so on under the Criminal Code. We have not been standing still. We have signed The Hague convention. We have also signed an international treaty in Montreal involving other offences against aircraft, including sabotage. We have negotiated a treaty with Cuba, an extradition treaty involving hijacking, and we are prepared to sign a treaty with the United States involving hijacking.


Eldon Mattison Woolliams: May I say with the greatest respect to the minister that it has been a year since we signed The Hague convention. Would he now refer Bill C-231, which I presented almost a year ago, to the officers of the Crown and if they approve it-it is drawn up in line with The Hague convention-would he then bring it forth as a government measure so that we will have some law in this land regarding air piracy?


John Napier Turner: We will soon have some law. I want to draw to the attention of members of the House that when you deal with a matter such as hijacking, it is essential that both domestic and international law move forward together, and we have been moving them forward together.


Mr. Speaker:: We are running short of time and I ask for the co-operation of hon. members to limit supplementary questions. These important subjects might be revived tomorrow. For the moment, I will recognize the hon. member for Surrey-White Rock.



INQUIRY OF THE MINISTRY

Mr. Barry Mather (Surrey-White Rock):: I have a question for the Acting Prime Minister which arises from a statement he made earlier in the question period relating to the government's concern and its intention to stop leaks of cabinet information to the press. In doing that, I wonder whether the government would consider allowing more cabinet information to leak to the House?
Inquiries of the Ministry
W *	*



AGRICULTURE


Mr. Roch La Salle (loliette):: Mr. Speaker, in the absence of the Minister of Agriculture, I would like to direct my question to his Parliamentary Secretary.
Can he indicate whether the Department of Agriculture and the Canadian Dairy Commission have taken steps to import butter in order to alleviate the shortage anticipited for next spring?


Marcel Lessard: Mr. Speaker, according to the answer given by the Minister of Agriculture to the hon. member for Saskatoon-Biggar on November 4, it is anticipated that the stocks of butter might not be adequate this winter and that it might perhaps be necessary to import that commodity in order to meet the consumption for eight or ten days.
And to clarify the minister's answer, I want to add that he meant it would take several weeks before we need to import butter. However, there is presently a world shortage of butter and in order to supply the Canadian market, the Canadian Dairy Commission is taking measures to make some imports-


Mr. Speaker:: Order. I think such an answer aims at giving the House general information and I remind the parliamentary secretary that such a statement should normally be made on motions.


Joseph Adrien Henri Lambert: May I ask a supplementary, Mr. Speaker?



CANADIAN COASTGUARD


Mr. Robert Muir (Cape Breton-The Sydneys):: My question is for the Minister of Transport. Is the minister in a position today to announce that the Canadian Coastguard College will be retained in its present very suitable location and will also include expanded training facilities?


Donald Campbell Jamieson: I have great difficulty in giving such an assurance today to the hon. member for Cape Breton-The Sydneys, because I have not yet had an opportunity to give thorough study to the representations of his colleague, the hon. member for St. John's West, who wants me to move it to Argentia.


Some hon. Members:: Oh, oh!


Robert Muir: The fact that we have information the minister is considering removing the college from Sydney is probably the reason my colleague is interested, and I do not blame him. Now, may I pose a supplementary question? Could the minister advise the House whether he, himself, the government or anyone else in the Department of Transport has plans to remove, now or in the future,

November 16, 1971
Inquiries of the Ministry
the Canadian Coastguard College from its present location?


Donald Campbell Jamieson: Mr. Speaker, I have answered this question in a variety of ways before but, to reassure the hon. member, there are no immediate plans for the removal of the college. What is under way is a thorough re-examination of the role of the college, the kind of classes it will teach, and so on, with the hope that we can integrate this training into the college in view of the fact that at the present time it is costing something like $70,000 to graduate a cadet from the college.


Robert Muir: One further supplementary-


Mr. Speaker:: Order, please. We reached the end of the question period a few minutes ago, but perhaps the Chair might recognize the hon. member for a last supplementary and try to see one or two hon. members who have been gallantly trying to get the floor for the last 40 minutes.


Robert Muir: Through you, Mr. Speaker, may I ask the minister whether, in view of the fact that there is 25 per cent unemployment at the present time in the island of Cape Breton and we have the Minister of Regional Economic Expansion setting up Devco to try to create employment, the minister realizes-


Mr. Speaker:: Order, please. Would the hon. member ask the question?


Robert Muir: Does the minister realize that removing this college from Cape Breton Island will cause greater unemployment and create more economic difficulty-


Mr. Speaker:: Order, please. I think that is argument or a submission for the consideration of the minister. The hon. member for Broadview.



CANADIAN NATIONAL RAILWAYS


Mr. John Gilbert (Broadview):: My question is directed to the Minister of Transport. Has Canadian National Railways entered into an agreement with Metro Development Centre to sell Union Station in Toronto and, if so, does the federal government agree with the demolition of Union Station?


Mr. Speaker:: Order, please. I have some doubts whether this question is so urgent that it should not be placed on the order paper, but perhaps other questions of about the same degree of urgency have been asked, so the minister might be allowed to reply.


Donald Campbell Jamieson: Mr. Speaker, the hon. member I believe is aware that it is a consortium that is planning what is commonly referred to as Metro Centre. It has the full support of the government. We have given a good deal of assistance to the main parties concerned in order to get it going. One of the objectives is a new terminal, and I believe this involves the destruction of Union Station, but I would assume that the decision whether it is to be destroyed or not would be up to the municipal-


Mr. Speaker:: Order, please. Before we go on to orders of the day there might be time for a few quick supplementaries.

A while ago, the hon. member for Bellechasse wanted to ask a supplementary.



AGRICULTURE


Joseph Adrien Henri Lambert: Mr. Speaker, I should like to put a supplementary question to the Parliamentary Secretary to the Minister of Agriculture.
If Canada were to import butter in the coming months, would the Minister of Agriculture or the Canadian Dairy Commission be prepared to recommend changes in the manufacturing milk quotas in order to remove the penalty imposed on producers at this time?


Marcel Lessard: Mr. Speaker, this matter of the penalty with respect to quotas is under active consideration and if it becomes necessary to review it, it will be in due time and the minister will then be in a position to inform the House. But I must say to the hon. member that representatives of the agricultural industrial do not always necessarily agree on complete revisions-


Mr. Speaker:: Order, please. I suggest to hon. members that we have run out of time. Perhaps, as I said a moment ago, we might pursue these questions when we meet again tomorrow. Orders of the day.



GOVERNMENT ORDERS


[Stage Direction]
The House resumed, from Monday, November 15, consideration in committee of Bill C-259, to amend the Income Tax Act and to make certain provisions and alterations in the statute law related to or consequential upon the amendments to that act-Mr. Benson-Mr. Honey in the chair.
On Clause 1-Section 38: Meaning of Capital Gain and allowable capital Loss.
The Chairman:: When the committee rose last evening section 38 was under consideration and together with other sections in that grouping, according to the agreement reached by members of the committee. The hon. member for Edmonton West had the floor. The Chair had earlier taken under advisement the amendment moved by the hon. member for Edmonton West and the Chair is now prepared to make a ruling. I understand that the hon. member for Edmonton West would like to complete his remarks, so I recognize him now.


Marcel Joseph Aimé Lambert: Mr. Chairman, I think I have about four or five minutes available to me at this
November 16, 1971

Income Tax Act
time. I want to refer to one result of the introduction of the capital gains tax which is in line with the recommendation of the Standing Committee on Finance, Trade and Economic Affairs, as well as the strongest possible exhortations from this side of the House. I refer to the suggestion that either the estate tax be done away with or that it be modified to a very considerable extent. It has now been suggested that this tax should be eliminated.
I was rather amused to note that at the Canadian Tax Foundation meetings in Vancouver there seems to have been considerable academic discussion at a panel on this particular matter. I am afraid I have not seen the original papers that were prepared but having heard some of the hon. gentlemen who spoke when they appeared before the finance committee on the white paper, I must say, and I have to be frank, I think I am hearing a lot of academic nonsense-a sort of ideology that is completely divorced from reality.
Mr. Bird and others who want to insist upon this so-called equity as between taxpayers can do so in theory until they are blue in the face, but it is the Canadian people who are being taxed, not just university academicians. Not one of them can stand up to the view of the Canadian public which has been expressed not only in briefs to the committee but in thousands of letters which indicates the public insists it does not care one whit about equity as between taxpayers; it wants equity between itself and the government with regard to tax matters. That is the point to be considered, and that is the point upon which I wish to make the next few remarks.
It is all very well for the government to say it is doing something very grand by removing the Estate Tax Act because of the introduction of the capital gains tax. We know there is to be a deemed realization upon property that passes at death. This leaves the field wide open to the provinces, the majority of which have succession duty acts. Two of the provinces have not said as yet that they intend to move to establish a succession duty act or their version of an estate tax act. However, I do not think they can put in an estate tax because of constitutional barriers to that type of tax.
Where does this leave the taxpayer? It leaves him worse off than before, absolutely worse off than before. If there were a provincial succession duty and an estate tax with mutually interchangeable credits so that the taxpayer was not paying double duty on death, that would be fine. But now there is a possibility of a capital gains tax which is to be added to the income tax. There is a succession duty to be levied by a province. Yet the capital gains tax cannot be used as an offset against the succession duty, the net result being that the estates in question are in danger of being taxed twice. Our friends to the left will say that they support this until it affects, say, the union worker. I wonder how this aspect will be regarded by the aristocracy of union workers whose wages have now taken them up into the middle income bracket. They accumulate estates. They are not all spendthrifts. Some of them live very well and, when they die, they leave estates. They are men of ability. They are not all spendthrifts, as I said, and they will be subject to this provision. I wonder what they will say when they must face this prospect of double taxation.
I say this, Mr. Chairman. In making these changes, the federal government must arrange with the provinces for a satisfactory system of credits whereby any capital gains tax shall be credited towards any succession duty that may be levied on the decease of a taxpayer. That is the point I want to emphasize. I know that other colleagues of mine will deal with this. I say, that is the only just and equitable position to adopt.


Mr. Mahoney:: Mr. Chairman, I think perhaps this might be the appropriate time to suggest that certain amendments to the bill, which were discussed by the House leaders of the parties opposite this morning and by the government House leader, be formally moved and entered into the record. I understand that has been the practice in the past or, at least, in the debate on this particular bill. The practice has been, I think, that amendments be not read but be taken as read. May I ask if consent for that procedure is forthcoming.


Marcel Joseph Aimé Lambert: The parliamentary secretary asks for the amendments to be included in the record. The government House leader was not able to make reference to them and, therefore, they will be part of the record but arguments may be advanced to the Chair as to their admissibility.


Stanley Howard Knowles: That is true.


Marcel Joseph Aimé Lambert: I suggest, as I did suggest, that some of the arguments that applied to amendments presented before the committee may apply, certainly, to one of the amendments that is contained in the list that it is proposed to include in the record. They are not being opposed. It would profit us little to read them into the record and, perhaps a week hence, find that they may be out of order. The government then would have to start all over again.


Patrick Morgan Mahoney: I wonder then, to satisfy the situation, if they might be moved now without being read but printed as if they were read; and they might not be accepted by the Chair until tomorrow. That would give hon. members an opportunity to look at them and to raise any procedural objections they might have tomorrow. Some of the amendments are quite lengthy, as the hon. member is well aware.


Marcel Joseph Aimé Lambert: Perhaps they could be entered into the record at present merely for purposes of record, so that everyone concerned would have notice of them. They might be moved tomorrow afternoon, and tomorrow a sundry collection of clauses is to be considered. In other words, the amendments could be moved and then we could argue their admissibility or otherwise.


Stanley Howard Knowles: Mr. Chairman, I wonder if the amendments could not just be handled in the same way as previous amendments were handled. I suggest that they be moved now, for the purpose of getting them on the record, but that it be understood by the Chair that their admissibility can still be challenged at the point when any of these amendments is actually called.


Thomas Miller Bell: What? More amendments?

November 16, 1971
Income Tax Act


Patrick Morgan Mahoney: They come from a very flexible and accommodating government.


Russell Clayton Honey: Is it agreed that the amendments which have been referred to by the parliamentary secretary be moved and become part of the Hansard record, it being understood by the Chair, of course,-and there is no question about this-that any question of their acceptability from the procedural standpoint is always open for hon. members.


Some hon. Members:: Agreed.


Mr.   Chairman@: Moved by Mr. O'Connell that the amendments which have been referred to by hon. members in this discussion, subject always to the reservations I have mentioned be received and printed in Hansard.


Mr. O'Connell:: (d)	by striking out lines 31 to 37 on page 471 and substituting the following:
'(i) the lesser of
(A) the amount in respect of the corporation that would be determined at the end of 1971 under subparagraph 28(6)(b)(ii) of this Act as it read in its application to the 1971 taxation year if the provisions of this Act as it so read were applicable to the corporation's 1972 taxation year, and
(B) the amount, if any, by which
1.	the amount that the corporation's 1971 undistributed income on hand would be at the commencement of 1972 if subsection 196(4) were read without reference to paragraphs (c) and (f) thereof,
exceeds
2.	the amount of the corporation's earnings for the control period that was available for the payment of dividends (within the meaning assigned by subsection 28(5) of this Act as it read in its application to the 1971 taxation year) at the end of 1971, and'
(e)	by striking out lines 8 to 21 on page 472 and substituting the following:
'(iii) the amount, if any, by which
(A)	the aggregate of all amounts each of which is an amount on which the corporation has, before the particular time, elected to pay tax under Part IX,
exceeds
(B)	the amount in respect of the corporation determined under subclause (i)(B)2., and'
To be added to amendment moved on October 22, 1971 Page 476
That section 194 as set forth in clause 1 of the said Bill be further amended by striking out line 26 on page 476 and substituting the following:
'1971 paid a taxable dividend to a shareholder that'
To be substituted for amendment moved on October 29, 1971 Clause 65 (Pages 698 and 699)
That clause 65 of the said Bill be amended
(a)	by adding, immediately after subclause (1) on page 698, the following subclause:
'Idem
(1.1) Where, at any particular time after October 13, 1971 and before 1972, a taxpayer to whom Part XI of the amended Act applies has acquired a foreign property that was a share of the capital stock of a corporation that would be an investment corporation if subparagraph 130(3) (a) (i) of the amended Aot were read without reference to the words ''that was a public corporation", for the purposes of subsection (1) the share so acquired shall be deemed to be a share described in paragraph (1) (a)
(b)	by striking out line 1 on page 699 and substituting the following:
'person to or under the plan as was'
(c)	by striking out line 15 on page 699 and substituting the following:
'any premium paid by the annuitant'
Income Tax Act
(d)	by striking out line 24 on page 699 and substituting the following:
'paid by an employer to a trustee'
(e)	by adding, immediately after subclause (2) on page 699, the following subclauses:
'Foreign
property
acquired by
registered
retirement
savings
plan
(3) Where, at any particular time after 1971 and before 1974, a trust governed by a registered retirement savings plan has acquired a foreign property described in paragraph (1) (a) or (b) or a foreign property that would be described in paragraph (1) (c) if the references therein to the ''1971 taxation year" of the trust were read as references to the "1972 and 1973 taxation years" of the trust, the property shall, to the extent that the cost to the trust thereof does not exceed the amount, if any, by which the trust's foreign reinvestment limit exceeds the aggregate of the cost to it of all such foreign properties so acquired by it after 1971 and before the particular time, be deemed
(a)	for the purposes of Part XI of the amended Act, to have been acquired before June 19, 1971 and not to have been acquired after June 18, 1971, and
(b)	notwithstanding paragraph 146(1) (g) of the amended Act, to have been a qualified investment for the purposes of section 146 of that Act.
"Foreign
reinvestment
limit"
defined
(4) In subsection (3), "foreign reinvestment limit" of a trust governed by a registered retirement savings plan means such portion of the aggregate of
(a)	the trust's income from property for its 1972 and 1973 taxation years, and
(b)	all amounts each of which is such portion of any premium paid by the annuitant under the plan as was deductible under subsection 146(5) of the amended Act in computing the annuitant's income for the 1972 or 1973 taxation years,
as was, under the terms and conditions of the plan as fixed on or before June 18, 1971, required to be invested by the trust in foreign property described in paragraph (1) (a) or (b) or foreign property that would be described in paragraph (1) (c) if the references therein to the "1971 taxation year" of the trust were read as references to the "1971 and 1972 taxation years" of the trust.'
New clause 64.2 (Page 697)
That the said Bill be amended by adding, immediately after clause 64.1, the following clause:
'Parts VII and VIII of amended Act
64.2 For the purposes of Parts VII' and VIII of the amended Act,
(a)	control of a corporation shall be deemed not to have been acquired by another person at any particular time before 1972 unless at that time that other person had acquired control, within the meaning assigned by subsection 28(3) of the former Act, of the corporation; and
(b)	where, at the commencement of 1972, one corporation was
(i)	controlled, within the meaning assigned by subsection 192(4) of the amended Act, by another corporation, and
(ii)	not controlled, within the meaning assigned by subsection 28(3) of the former Act, by that other corporation,
control of the corporation shall be deemed to have been acquired by that other corporation at that time.'

November 16, 1971
Income Tax Act


Russell Clayton Honey: Before I recognize any hon. members, I wish to say something. I indicated earlier that it would facilitate debate if I were to make a ruling on the amendment moved by the hon. member for Edmonton West which I took under advisement yesterday afternoon. After the ruling is made, debate can proceed.
Yesterday the hon. member for Edmonton West proposed an amendment in the following terms:
That paragraph (b) of section 3 as set forth in clause 1 of the said Bill be amended by inserting in lines 15 and 21 on page 2, immediately after the word "property" in each said line, the following:
"other than land used in farming as defined in this Act and"
At that time the Chair suggested that the proposed amendment might have the effect of shifting the incidence of taxation. The hon. member for Edmonton West dealt with this aspect when assisting on the procedural problem. I have had the opportunity to read his remarks in Hansard, to consider them in the context of authorities and I am persuaded on this point. It no longer gives me concern.
It might be appropriate at this time to suggest to the Committee that some difficulty arises for the Chair in determining the procedural acceptability of some amendments. As the Committee is aware, the House adopted an order to the effect that the ways and means motion which preceded this bill would be set aside. In effect, therefore, the basic ground rules have been altered and it follows that there is some difficulty in applying accepted practices in every case.
As the hon. member for Edmonton West suggested in his argument yesterday, a peculiar difficulty arises because of the arrangement of the bill. There is but one clause in the bill covering a great number of substantive proposals. In other circumstances it might be possible to isolate a major proposal and bring it to a vote. The Chair is of the opinion that the construction of the bill in many cases closes that avenue.
There is, of course, authority for the statement that, in certain circumstances, a provision which has the effect of alleviating taxation is open to amendment in the Committee to further alleviate the taxation. While I have some doubts as to whether or not I should put the proposed amendment, nevertheless, for the reasons mentioned and because, in such circumstances, I feel the Committee should be given the opportunity to decide the question, I am prepared to put the amendment.
The hon. member for Edmonton West moves:
That paragraph (b) of section 3 as set forth in clause 1 of the said Bill be amended by inserting in lines 15 and 21 on page 2, immediately after the word "property" in each said line, the following:
"other than land used in farming as defined in this Act and"


Douglas Scott Harkness: Mr. Chairman, I do not propose to debate the desirability or otherwise of imposing a capital gains tax in Canada at the present stage of its development, because I am enough of a realist to perceive that the government is determined to impose such a tax and it has a big enough majority to force that decision through in the course of time. Instead, I want to address my remarks to ways in which the present legislation could be improved considerably to make it, in my opinion, much more equitable than it now is.
The chief argument advanced for the imposition of a capital gains tax is the argument of equity: that the tax will produce a greater degree of justice, fairness and equity in taxation than is evident in our present taxation system under which capital gains are not taxed'. The example most frequently quoted to try and justify this position is that of the lucky speculator in the stock market who has made $5,000, $10,000, $20,000 or perhaps more. This is not subject to taxation. Compared with the wage earner who is making $5,000 to $10,000 a year and has to pay taxes, this is an inequitable situation.
The other chief example quoted is that of the person who owns land on the outskirts of a city. As the city grows, this land is converted from farmland to city building lots. There is a very large increase in the value and the price he receives for it. There are a certain number of people who are lucky speculators. There are more who are unlucky and lose money on the stock market over the course of the years. There are a limited number of people who have made considerable amounts of money because the farmland they owned happened to be on the edge of a developing city. The numbers of people in both these classes are very small indeed.
As far as this bill is concerned, it is designed to catch those people. It will catch these people all right and make them subject to tax on their gains. However, at the same time it will catch and bear heavily on a very large proportion of Canadians and, in many cases, in a very inequitable manner. In my opinion, this legislation will produce more inequity than equity in taxation. I do not think anyone will argue against the cases I have mentioned. However, on the basis of equity, certainly as far as this bill is concerned, the basic argument of producing greater equity falls to the ground. I think it can be demonstrated that carrying into effect the provisions of this bill will produce far more inequity as far as the majority of the people of Canada are concerned than the situation that exists at the present time.
The amendment moved by the hon. member for Edmonton West, which I am very glad has been allowed, is a case in point. I support that amendment strongly. The average farmer bought his land on a time payment plan. The average farmer in the future will have to buy his land on a time payment plan, perhaps more often than has been the case in the past. After having mortgaged his land, he spends the greater part of his life making mortgage pay-
November 16, 1971

ments and buying the necessary machinery to keep his farm in operation. During that period, he receives a much lower income than the average salary or wage earner. At the end of his working career or when he dies, the returns from a lifetime of labour are available, namely, whatever increase has taken place in the value of his land. This is what his wages really are for a lifetime of work. In the meantime, he and his family have enjoyed a far poorer standard of living then the average wage or salary earner. Under this legislation, practically all farmers will have to pay 23 per cent or more of what they have accumulated in a different way from other people after a lifetime of labour.
To see that this is the situation, one need only look at the statistics since the inception of the income tax during the first great war. These statistics show that the great majority of farmers have never had enough income to pay income tax. Their wages, and thus their standard of living, were sufficiently low that they did not get into the income tax paying bracket. The number of them who have been income tax payers, and I have forgotten the figure at the present time, is remarkably small. This alone is sufficient to demonstrate that the income secured by these farmers was very much less than that secured by their fellow Canadians from governments, corporations and the like. It is inequitable that farmers, more so than any other group of people in this country, should now be subjected to a capital gains levy on what, to a large extent, is the result of a lifetime of hardship.
Another point of view, and I wish to place particular emphasis on this, is that to a large extent the increased value of land in this country is the result of inflation. Except in exceptional cases where the land is close to a city or something along that line, it is chiefly due to inflation. Therefore the apparent gain which farmers secure is not a real gain at all. The same situation applies to most other Canadians who will be taxed on their capital gains under this legislation. To a very large extent, their gain is not a real gain because of the effects of inflation; it is just an apparent gain.
I suggest that for a capital gains tax to be equitable, allowance must be made for inflation; that has not been done in this legislation. That alone is sufficient to condemn this system of calculating capital gains as an unfair system. I strongly suggest that the government should again take this matter under advisement and include an inflationary factor which would result in the tax being calculated on the real value of the capital asset, not its apparent value because of inflation. The tax should be applied only on the increase in value in terms of real buying power, rather than the inflated value which results from the loss of buying power of our Canadian dollar.


An hon. Member:: That is not a just society.


Douglas Scott Harkness: As the hon. member said, that is not a just society. This should be one of the main considerations. The type of taxation proposed in this bill is anything but just. As I said at the beginning, it will undoubtedly produce far more inequities for many more people than the inequities which it will cure.
This leads me to the consideration of the application of this tax to personal possessions such as pictures, jewellery, stamp and coin collections and anything else along
Income Tax Act
that line. Their increase in value has been largely due to inflation; it is not a real increase in value at all. The purchasing power realized when people sell these possessions would, in many instances, be no greater than it was before they bought them. To the extent that increases in value have not been due to inflation, I suggest that such increases were less than the return would have been had the money used 'to purchase them been invested in stocks, bonds or other investments of that kind. Once again an extremely unjust situation arises if we tax as a capital gain any increase in the value of articles of this sort. It is true there is an exemption of $1,000 with respect to any single article in this category of personal possession and this does provide a good deal of relief. However, it does not by any means cover the situation as a whole. Once more, I have a suggestion to make in this regard.
I suggest there should be a lump sum exemption for all such articles taken as a group as of valuation day, and this exemption should be at least $50,000. Thus, a person with a picture worth $1,000 which may realize $2,000 when he sells it 10 years later on the break-up of a family home, or something along that line, will not be penalized by the capital gains tax. A provision of this sort would remove a great deal of the resentment and antagonism felt toward this legislation by a great many people in Canada who have a basic objection to these personal possessions, pictures, manuscripts and so on suddenly becoming subject to tax. Actually, I know a few people of quite modest means whose entire savings are invested in pictures and things of that sort. People in this position would be harshly penalized by the provisions of this bill as they exist at the present time.
I should like, now, to consider ways in which a better form of capital gains tax could be devised which would keep capable Canadians working in this country, retain highly trained business and professional men and encourage the establishment of new enterprises. One of the more important arguments against the imposition of any capital gains tax is that such a tax would discourage development in Canada. I think there is considerable validity in this argument. However, it is possible to devise a form of capital gains tax which would not have this effect. It would run roughly along these lines.
The type of capital gains tax I prefer would be designed to tax the traders but not the legitimate investors who make risk-taking possible. If we accept that a capital gain on an investment in a Canadian corporation acquired and sold within one year would be taxable at 25 per cent, I would suggest that the capital gains tax on investments held beyond one year should slide off progressively at the rate of 2 j per cent per year to zero in 10 years. If greater investment incentive is required, the tax could slide off to zero over a five-year period.
This arrangement would apply to all capital gains on shares of all Canadian corporations, on family corporations and even on real estate. This proposal should deter short-term speculation-which does very little for the economy-and would encourage longer term investment by Canadians in their own future. Losses on investment should be deductible only from capital gains with the same percentages applied in respect to length of owner-

November 16, 1971
Income Tax Act
ship. Furthermore, in order to discourage Canadians from investing in foreign corporations and to channel their investment funds instead into Canadian enterprises, I would suggest that investments by Canadians in nonCanadian corporations should be subject to the full capital gains tax without any sliding scale reduction.
Great concern has been expressed in recent years over the extent to which the Canadian economy has been dominated by foreign companies. All the questions and to-do we have heard in the last two days over the so-called Gray Report release and so on have been related to this subject. It is one which very much affects Canadians as a whole. But the application of a capital gains tax of the kind I have suggested would go a long way to correcting this situation in the future. I am surprised that this opportunity has been neglected by the government in its tax proposals now before us. They set up a task force to look into ways of keeping Canadian investment inside Canada to a great extent, and to consider means of preventing a further take-over of our natural and manufacturing resources by foreigners, then they completely neglect the possible opportunity to achieve those very ends through the careful application of a capital gains tax.
I might add that this idea as to the form of a capital gains tax is not original with me. Others have put it forward. I happen to know it was put directly to the Minister of Finance, and I am surprised he has not taken action to introduce provisions along these lines in the legislation. It is still not too late for him to do so, and I still hope the government will bring in amendments giving effect to the suggestions I have made so that capital gains tax legislation in this country will be more equitable than it would be as presently proposed and so that it might also serve the purpose of channelling Canadian enterprise and money into new Canadian businesses and thus stimulate an increase in the growth of the economy generally.


Mr. Ritchie:: Mr. Chairman, it seems to me that the introduction of a capital gains tax is probably the most significant part of the tax bill before us. I think it can still be said that the economic and investment consequences of adopting a capital gains tax are still debatable. Economists differ in their opinions, and the discussions which took place in committee when considering the white paper were most interesting in this regard. There is no doubt that any tax which reduces returns to investors after taxation must result in a lessening of incentive. It is generally conceded that the burden of the capital gains tax will fall on savings to some extent. On the other hand, there are those who point to the fact that in the United States, where a capital gains tax has been in existence for a long time, investment has not been adversely affected.
But in applying such a tax in Canada, if we hope to avoid unfortunate consequences, two assumptions must be made. The first is that despite higher taxation the economy will remain as buoyant as it was before, and, second, that the Canadian proposals will result in a system comparable to that in operation in the United States. We have to accept that probably the first assumption is highly dubious, particularly at a time when everyone tells us about the enormous number of jobs that need to be created. Speaking of the United States, for nearly 30 years U.S. taxpayers in the higher income brackets have

enjoyed a very significant differential as between short and long-term rates. The 25 per cent long-term rate is highly preferential and of considerable benefit to those in the higher income brackets in the United States.
The adverse effect of the tax in the United States has been the exemption from capital gains tax of assets held until death, when revaluation to the benefit of the legatee takes place. This has been called a major loophole and has been used highly successfully. Since wealth and age tend to go together, families have been able to pass on closely held corporations at death without liability for tax. There has been some argument whether this has a locked-in effect, and it is not clear whether it has or not. According to the legislation before us, presumably this loophole would be blocked. In the United Kingdom, after five years or so of a capital gains tax, some psychological effect of being locked in is still evident.
When speaking of capital gains tax, we have to remember that this is the linchpin of our new income tax base. It constitutes a fundamental redefinition of our personal and corporate tax base, and also compromises a significant element in the estimated revenue resulting from the proposed changes. Third, these proposals, in effect, will change the ownership of wealth and, in the long run, will have significant redistributive effects so far as income is concerned.
During the white paper hearings, the government relied heavily on the United States estimate of the amount of taxation brought in by a capital gains tax. It is likely that there will be a considerable difference between what the United States derives from a capital gains tax and what will be derived from the proposed tax in Canada. There is implicit in many people's minds the belief that the implementation of a capital gains tax will have no great effect on taxpayers generally in view of their manner of working and their investment behaviour. Such a belief depends heavily upon economic theorizing and has really been misplaced in the real world. As the hon. member for Edmonton West has said, people do not necessarily react the way they are expected to react.
One of the great problems with a capital gains tax is its impact on inflation. While the term "equity" means one thing to the academic, it may mean something else to the taxpayer who will be highly conscious of any impact the tax has on inflation and on his own affairs. It is for this reason that most governments which tax capital gains adopt either a low preferential rate or they ignore gains realized after a given holding period; for example, in Germany it is after two years, in Italy after six years and in Sweden after ten years. Other countries use the inflation index to adjust capital gains, as in Belgium, France and Brazil. So, it is most important that these matters be looked at.
Ignoring for the moment these economic weaknesses, it might be argued that the inclusion of the capital gains tax would increase equity. In the long run, a capital gains tax is often the reverse of equity and may be impracticable. In consequence, therefore, changes in the treatment of capital gains will inevitably be introduced on an ad hoc basis and will no longer be designed to fit the integrated package contained in the tax bill.
November 16, 1971

Another aspect of a capital gains tax relates to capital losses, which under the proposed legislation will be deducted from the capital gain. In the case of losses that are greater than the original capital investment, the maximum deduction will be $1,000 a year. This means that the federal government would not be able to afford losing revenue if a large capital loss was sustained, or if the stock market depreciated.
While on the subject of implementing a capital gains tax, may I quote from the United States Congressional study of federal income tax treatment of capital gains and losses of June 1951:
Congress has tried time and time again to find a method both practicable and equitable of taxing capital gains. Such a method has been conceived to be one which would interfere as little as possible with the realization of gains and at the same time would not stimulate loss realization too much. But finding satisfactory formulae for achieving the divergent equity and incentive objectives that are entwined in the philosophy of capital gains taxation and at the same time protecting the revenue has been a difficult problem. Consequently the history of the legal provisions has been a record of compromise and change without satisfactory solutions.
Even so, the present complications of the U.S. treatment of capital gains stem less from the actual design of the tax than from the attitudes of Congress toward taxation. During the past quarter of a century the United States has sought to moderate the excessive top rates of income tax by providing, in effect, a whole series of loopholes whereby ordinary income could be converted into capital gains. Once this practice had started, initially perhaps with some justification, it became virtually impossible not to extend the range of such preferences and, at the same time, to open up new loopholes for tax avoidance.
In the meetings currently being held in Vancouver by the Canadian Tax Foundation, the question of a capital gains tax has been raised. According to a report in this morning's Globe and Mail, it was pointed out that it is very difficult to define what is capital and what is income. Up until now capital gains have been tax free, though there has been a tendency for revenue officials and for judges who hear tax cases steadily to encroach upon this freedom and to include capital gains within income. If the government introduces a capital gains tax I think we can expect a reversion back to the original attitude. In other words, where the line is shadowy there could be a movement away from regarding it as income. On the other hand, what is now considered to be income might well come to be regarded as a capital gain, so the taxpayer would have to pay some tax to the federal treasury and this would be regarded as a satisfactory solution. In this sense, it may well be that the capital gains tax is not going to bring in as much money as we have been led to believe, because what is now considered to be income will in many cases be considered a capital gain.
Problems connected with a capital gains tax are largely considered in three ways. First, how do we attain equity of administration? In many cases there must be arbitrary administration in respect of capital gain. In fact, the tax should be on accrued gains, but the practice is it can only be on realized gains. We also have the problem of so-called bunched gains. In some cases capital gains may be realized in one year, while in other cases the capital gain
Income Tax Act
may have accrued over a period of 20 years, but the individual has to pay the tax as though it was gained in the one year. This individual should receive some recognition of the fact that his assets took 20 years to be obtained. Finally, there is the problem of capital gains in relation to losses, which I mentioned before.
During the hearings on the white paper on taxation Professor Ilersic of Vancouver, who has a great deal of experience in respect of these matters in the United Kingdom, had this to say:
It is in respect of land, in respect of real property, real estate, and also other assets which are not normally regularly valued, where difficulties arise. And most important of all, it is particularly difficult to value shareholdings in private companies, or closely held corporations. This is the biggest problem, and what has happened is that as far as the estate duty office is concerned now, the volume of work involved has substantially increased.
He was speaking of the United Kingdom and the problems there. The problems in respect of capital gains seem to be far-reaching and will be much more basic to our economy and tax structure than we think, because presently this brings in little actual revenue. The one great mistake the government is making in this bill is its failure to differentiate between long and short-term gains. For those who are willing to invest in long-term ventures and hold their investments for five or more years there may well be no capital gain. Those who invest for a short-term, for a year, perhaps should pay full tax, and so on, using the sliding scale suggested by the hon. member for Calgary Centre. Because there is no differentiation between long and short-term gains, this bill is deficient. The implications are quite clear. The effect of this will be, to some extent, a deterrent to investment.
Another thing that has been overlooked is the effect of the federal government moving out of the estate tax field. I think it must do so in order to bring in a capital gains tax and deemed realization on death. There has been no provision made for the provinces to work out some arrangement. It is almost certain that if the provinces are to get money from estate taxes, including my own province of Manitoba, they will have to levy heavy estate taxes which, combined with deemed realization on death, will mean that most estates will carry a heavy taxation load. It seems the government has been deficient in not clarifying what might happen when it vacates the estates tax field and brings in deemed realization on death by way of a capital gains tax.
One of the effects likely to flow from the combined impact of a capital gains tax and succession duties, if instituted in some provinces, is an incentive to foreign ownership of Canadian ranches and farms. Up to the present time, foreign ownership of Canadian land, as far as ranches and farms are concerned, has been minimal. Foreign ownership has been involved in our natural resources, and so on, but if the deemed realization on death, and estate taxes, continue to be levied by the provinces this will certainly mean that foreign owners will be in a position to avoid capital gains and succession duties within the framework of the law. To this extent Canadian farmers will be in an extremely disadvantaged position in competing with foreigners for Canadian farms. I think the federal government should, before it institutes a capital gains tax, work out some formula with the provinces in order that the two taxes will not cause a loss of revenue to

November 16, 1971
Income Tax Act
the provinces, and so there will not be a vast jungle created with the institution of a capital gains tax and the institution of estate tax, especially in respect of farms and investment.
These problems in respect of capital gains tax are important. The government has not differentiated between long and short-term capital gain; it has not worked out with the provinces this problem of dual taxation on estates at death either by capital gains deemed realization or estate tax, and this will create a tax jungle. Furthermore, in respect of farm land, and I now speak to the amendment by the hon. member for Edmonton West, I hope the government will consider this seriously and accept it. With the deemed realization at death and estate taxes in many provinces, farm estates will face an almost impossible situation. In many cases individuals concerned will not be able to carry on. The estates will not be able to turn the property over from one member of the family to the next. I seriously commend to the government this amendment for consideration and I hope some action can be taken.


The Assistant Deputy Chairman:: Order. It is my duty, pursuant to Standing Order 40, to inform the House that the questions to be raised tonight at the time of adjournment are as follows: the hon. member for Fraser Valley West (Mr. Rose)-Public Service-Request for publication of report of Staff Relations Committee-implementation of recommendations; the hon. member for Sainte-Marie (Mr. Valade)-Labour conditions-Quebec-unemployment forecasts; the hon. member for Selkirk (Mr. Rowland)-Fisheries-Federal government participation with Manitoba in income support and retraining plan for Lake Winnipeg fishermen.


Mr. Beaudoin:: Mr. Chairman, I have a few remarks to make about the section under study, the purpose of which is to make part of a taxpayer's capital gains taxable.
In this respect, the bill, if it were to go through as it is written at present, would certainly be unfair to small property owners-those who have had to take a 9 3/4, 10, 10J, or even 10 3/4 per cent mortgage in order to buy, or have built, a multiple-unit house.
The question is: what is a capital gain? Is it the difference between the price paid for the house and the current sale price? If somebody bought a multiple-unit house 10 years ago, and now sells it for 25 per cent more than what he paid for it then, he is not making a profit: it is a capital loss rather than a capital gain. With the progress of inflation these last few years, I think it will be very difficult for the taxpayer to determine what a capital gain really is. Perhaps I would agree with the principle of the bill, that is to tax part of the capital gain, if the rate of inflation and the time the owner has owned the house were taken into consideration in the bill.
I would not want individuals to be considered on the same footing as real estate agents, for example, who make a living out of accumulated profits, one transaction after another, who can make 50 transactions a year. An individual who would realize a capital gain on the first or

second transaction, during one year, should not pay income tax.
I would like to see some protection for the small owner with a bit of cash who borrowed money to buy a small apartment house and who, at the time of the transaction has already made a profit because in order that a house be worth buying or building, a reasonable profit margin must be expected, granted the fact that before this tax reform, capital gains were not taxable, the effect of which was to maintain rents at a reasonable level.
Taxing part of capital gains will contribute to increase the cost of lodgings. Low income people will still be footing the bill because owners will obviously have to make profits, otherwise they will not invest. If they fail to invest there will be fewer housing starts, more unemployment and the whole economy will suffer.
As for a capital gains tax on a family farm, I completely agree with the hon. member for Edmonton-West (Mr. Lambert). In fact, if a man who has owned a house or a farm for 10, 12, 15 or 25 years puts it up for sale and if the capital gain is taxable, this will not encourage those who intend to buy that family farm.
It is imperative that this bill make a difference between capital gains on long and short term investments. Furthermore, we should devise a method for figuring out the real profit in terms of capital gains.


Mr. Flemming:: Mr. Chairman, my first thought in rising is to refer to the speech delivered by my hon. friend, my seatmate, a few minutes ago. My general hope is that the parliamentary secretary will carry the message to the government that was conveyed so ably to the House by my seatmate. I believe many valuable suggestions were made by him. I almost had the idea of getting up and saying "amen" two or three times to the speech of my hon. friend from Calgary Centre. However, since I am on my feet, perhaps I should make a few observations.
First of all, I wish to speak on the general idea of taxation. I believe taxation, and the means of imposing it, are very dangerous weapons. In general terms, I do not believe it should be considered desirable to impose taxes. Taxes are dressed up and called revenue, but really this amounts to taxation because something is being taken from people. So, while in the course of these remarks I do not intend to indicate any tremendous proposition in respect of capital gains compared to other taxes, I do propose to attempt to convince the House, and especially my hon. friend from Calgary South, the parliamentary secretary on one or two points.
I must say at this point that the parliamentary secretary has been most faithful in his attendance here during this debate. He has indicated a great knowledge of the subject, and I should like to pay him that tribute here and now. It would seem to me that a capital gains tax must discourage people. These remarks are directed especially to younger people. I believe it is a good thing to encourage people to invest their money. It is good to encourage them to save a few dollars when they have a pay cheque and can afford to do so. However, I think it is also good to encourage them to buy something which they consider to be good value from someone who has it to sell, especially when they think that sooner or later the value will increase.
November 16, 1971

Speculators have been spoken of here as though they were public enemies. I do not subscribe to such a philosophy.
About a month ago the government announced its intention to reduce taxation. It was said that this would stimulate employment. Well, if a stimulation of employment comes about through a reduction in taxation, as was stated in this House by the Minister of Finance, then surely it is consistent for us to point out the weaknesses in the proposal to now impose a new tax, because this is a new tax. It is something which we have never had before in this country. I refer to a tax on capital gains.
In a previous speech I referred to the fact that I believed the existing statute under which we impose income tax might very well have been retained, if not in its entirety at least to an extent, by this government for whom I have only a minimum respect. The present income tax statute has some good, fundamental points. So, it would seem to me to be a good idea to retain the good points. Instead of this, however, the government gives us this three-inch document of 700 or 800 pages which no one understands very well and which I submit will cause a great deal of confusion in the minds of even the chartered accountants who will be involved with it.
I made those few remarks a month or so ago in connection with that point, and I repeat them now because nothing has happened since that time to make me change my mind. In fact, I believe that an examination of the present economic situation in this country leads me to be more convinced than ever that it would have been beneficial to retain the existing income tax statute as a base, adding to it or taking away from it whenever it is considered to be in the general public interest.
In considering the basis for taxing capital gain, surely we might properly go back over a 100 year period to see what the situation has been in that time. Under the existing statutes we have become an industrial nation, we have become an exporting nation and we have become a competitive nation. Living as we do alongside a great nation and a great people we should, and we have, at least until the coming into office of the Trudeau government, found ourselves facing tough competition from those same friends to the south who have the benefit of mass production, and a home market of immense proportions where they can dispose of a large percentage of their total production. In case of need, they can dispose of their surplus in our limited market. I do not favour tariff laws which make it possible for them to do this. So let us examine the record and see what has taken place in the last 100 years under the existing tax laws.
Let us consider in particular the last 25 years so that we may have the benefit of our experience in determining our course for the future. That seems to me to be very sensible. We should use the experience of the past in determining our course for the future. I am sure that no one within sound of my voice will argue that that is not a very desirable position to take. When I mention 25 years in general terms, I go back to the Second World War. In that war Canadians played an important and impressive part, and our fighting men and women came out of it with their heads held high. The honour and the sacrifice of those
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brave men and women who made up the personnel of those armed forces had not then and has never been excelled. Last week we observed Remembrance Day. All over the land we united, something which we seldom do. What united us? We united in remembrance, recognition and appreciation of what had been done in the past. We appreciated the sacrifice which they had made, those who did not return, and we expressed thankfulness to those who marched that day, for their bravery and devotion to duty in placing their services at the disposal of their country. We came out of the conflict with our reputation established, and we set to work to utilize the skills of our people in transforming and making peacetime operations out of wartime machinery. That is what we did after the Second World War.
The government of that day was very conscious of the need to utilize the skills of those who had produced the goods required for war purposes and to utilize the services of the men and women as they returned from the various theatres of war. The need for productive employment became evident. The key figure who had been in charge of war production was Mr. C. D. Howe, a man of tremendous ability and drive. I do not think that enough attention is paid to the drive and determination of an individual to do something. To me this is more important than ability and more important than education. Mr. Howe carried on under Prime Minister King and he was a key figure in the government of Mr. St. Laurent. I had the honour of knowing him personally, since he spent a portion of his free time in St. Andrew's, New Brunswick. No one could be exposed to his personality without developing an admiration for him.
The reason I mention all these things is that they were accomplished during the last 25 years under the present Income Tax Act, and yet this government suggests that they must destroy it and replace it with this three inch thick document which no one understands. That is what they propose to do. I am very much against the destruction of the statute under which we have operated during a period in which this country made great headway. That is what I object to here and now.
The capital gains tax would discourage the young man who wants to improve his financial position. He is ambi-tous for himself, for his wife and for his family. He is willing to work long hours beyond the call of duty when his competitors have gone home. He applies good management principles to his operation. He buys a piece of property which he feels is good value and which will enhance his capital position. The government wants to tax him because he was wise enough and thrifty enough to purchase a piece of property when it was offered to him. The government, by taking a large chunk of whatever he happens to make by way of profit, will discourage him from buying property.
I know that if the parliamentary secretary were to offer an excuse, he would say that the government must impose taxes because they need the revenue. I know that I am putting words in the parliamentary secretary's mouth, but I imagine that this is what he would say because he is quite a good debater. I want to call the attention of the committee to the Auditor General's report for the year ending 1970. On page 17 of that report, hon. members will find a review of the revenue of the last three years, all

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properly comparable so far as I know. The first item is the amount received from personal income taxes in the years 1967-68, 1968-69, and 1969-70. I want to put on the record the differences in the amounts of revenue derived in these years, because I wish to establish in the mind of the parliamentary secretary and in the minds of government members, the idea that had they managed the affairs of the people of this country as they should have managed them there would be no need for a capital gains tax. That is my point.


Lloyd Roseville Crouse: Hear, hear!


Hugh John Flemming: I will give round figures. The revenue from the personal income tax in the year 1967-68 produced $2,800,000,000. The next year, it was $3,300,000,000, and the next year, in 1970, it was four billion and nearly one hundred million dollars. The point I am making is that there has been a tremendous increase of roughly 20 per cent in both these years. In other words, between the first and the last years for which I quoted figures there has been an increase of 40 per cent. Yet, the government says they must have more money.
Let us consider the corporation income tax. My remarks are in rebuttal of the so-called need for more tax revenue. Corporation tax in the year ending March 31, 1968, was $1,600 million, in the year ending March 31, 1969, in round figures it was $2 billion, and the next year ending March 31, 1970, it was $2,611 million. This is almost the same percentage of increase. All through the figures that I am referring to there is roughly the same percentage increase. That is why I say there is no need for a capital gains tax.
Income tax on dividends, interest, etc. going abroad in the first year that I mentioned was $220 million, the next year it was down to $205 million and in the year ending March 31, 1970, it was $248 million. Social development tax, whatever that is, for the year ending March 31, 1969, was $63 million, but for the year ending March 31, 1970, it went up to $476 million. From $63 million to $476 million. I do not know the explanation for that, but I do know that $476 million is much more than $63 million.
Then we come to sales tax and there is not very much difference there. It seems as though personal income tax and corporate taxes show the largest percentage increase and the largest amounts. We have never had any explanation from the government for these increased revenues. Revenue, as I said at the outset, is really a matter of taxation. The government can dress it up and call it revenue, but it is really taxation. On the same page of the Auditor General's report we find that the total revenue for the year ending March 31, 1968, was $9,001,716,000, and for the year ending March 31, 1969, it was $10,162,843,000, in round figures. That is an increase of 9 per cent to 10 per cent. For the year ending March 31, 1970, the total was $12,323,845,000. We might be very impressed with these figures, Mr. Chairman, were it not for the fact that the government is asking for authority to impose more taxation because they say they need it and must have it. I say we need an explanation from this government and I am sure everyone will agree with that statement.

It is often emphasized that there is a capital gains tax in the United States, but I say that is not any reason why there should be one in Canada. I say that because Canada is largely an undeveloped nation. We need to encourage people to invest money here, so-called risk capital. That is what it is. If I had the time and the House was willing to listen, I could name businesses that have been carried on with foreign capital simply because they could not get a bank loan in Canada. But it is said that because the United States has a capital gains tax, Canada should have one. But the United States is a developed country and we are not, so the same principle does not apply. It is an entirely different situation in Canada and it is no argument that we should have this tax because they have it. We need risk capital and we should not discourage it.


Gérald Laniel: Order, please. I regret having to interrupt the hon. member, but I must advise him that his time has expired and unless he receives permission of the committee he will be unable to continue his remarks. Does the committee give the hon. member permission to continue?


Some hon. Members:: Agreed.


Hugh John Flemming: Thank you, Mr. Chairman, and members for this consideration. I shall try not to be too long. I want to say a word or two about small businesses. To my certain knowledge many people, sometimes just a man and wife, carry on a small business. They work long hours and take very little out of the business except their bare expenses. They try to improve their property chiefly from money which under ordinary circumstances would give them an increase in salary. At the end of 25, 30 or sometimes even 40 years they decide to take it a little easier. The only way they can realize funds is by selling the property. Now this government suggests that if these people sell the property for $100,000 they will take 30 per cent or 40 per cent of it. I submit that this does not make for good citizenship and it does not encourage people who are the salt of the earth and who built the country.
As my hon. friend from Dauphin and my hon. friend from Calgary Centre have said-I hope the parliamentary secretary will take this into consideration-I, too, think that the government should recognize the difference between short-term speculators and long-term investors so far as capital gains are concerned. There is a great difference. I do not know that I have any great criticism of a capital gains tax on speculation. If a person is lucky, I think that is all right. But the person who puts money into a valuable property, improves it and maybe 15 or 30 years hence sells it, should not be penalized. That is my feeling on this subject.
I should like to make a few remarks on the whole question of foreign ownership. It seems to me that the ownership of business is really not very important as long as the owners abide by the laws of the country. I fail to see a great deal of difference between foreign ownership and ownership by our own people. I will say, and I know whereof I speak, that if we in the Maritimes did not have the market to the south of us, we would find it very difficult to get along; there is no question about that.
November 16, 1971

The government's action in discouraging foreign capital can be interpreted as suggesting that people coming to invest in Canada have the smallpox and should be avoided as we would avoid the plague or, alternatively, that we have more capital than we need and we must keep them out. That is the idea that comes to one from some of the things for which this government seems to stand.
I was speaking about short-term versus long-term considerations. In my opinion we need to harness our resources. We will never solve the unemployment problem of this country through government action alone. We must harness the private enterpriser so that he may employ people. We must encourage him to do that. We must harness all the resources we have, including human resources, and stimulate productivity. Incentives should be provided. We must fully utilize all our resources and encourage, not discourage, such utilization.
I do not say how I will vote. I will probably vote for what the government thinks is best. After all, we must carry on; we must keep going. I merely wanted to point out these things. I appreciate the extra time and consideration that has been extended to me and I thank members of the committee.


Patrick Morgan Mahoney: Mr. Chairman, I listened with a great deal of interest to the speech of the hon. member for Carleton-Charlotte. We were treated to the courtly, courteous and classic brand of Conservatism that we expect from him. There was, however, one area where I felt that perhaps he may have assumed something that was not entirely justified. He assumed, it seems to me, that somehow or other the capital gains tax would be piled on top of other taxes, that this was to be a source of revenue that would be an increased tax burden for Canadians on an over-all basis and that it would be an added burden to the corporation and income taxes that they have been paying in the past.
I would respectfully direct his attention to chapter 8 of the summary of the tax reform legislation which deals with the revenue consequences of the whole tax reform package. I would most particularly point out that this does not take into account subsequent tax reductions which have been announced by the Minister of Finance. It merely deals with the revenue changes flowing from the tax reform package announced in the June 18 budget and now reflected in the bill before the committee.
I note that although these changes will amount to a net increase in revenue from corporation taxes of $30 million, and that changes with respect to withholding taxes will increase revenues by $5 million, the various changes relating to individuals-that is, the increase in exemptions, the employment expenses allowances and the babysitting deduction, if I can use that expression-will result in a reduction, under this package, in personal income taxes of $290 million. Of course, the elimination of estate and gift taxes will reduce federal revenues by $65 million. In total, the package means a revenue reduction of $320 million in the income, estate and gift tax areas. The capital gains tax, it is estimated, will result in increased revenue of $50 million from corporations and $80 million from individuals. But this was all taken into account in this whole package and the net reduction in revenues is indeed significant.
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I should also point out that the progressive reductions in marginal rates of tax from 17 per cent to 6 per cent for individuals and from 50 per cent to 46 per cent for corporations over the period to 1976 are designed to hold the government's revenues at the current year's level as the capital gains system matures. I am sure the hon. member would not want to leave the impression that the capital gains tax is simply being piled on top of other tax sources, that these other taxes have not been modified in order to take into account the government's real revenue position and that the capital gains tax is simply a device to bring increased revenues to the government.


Hugh John Flemming: Mr. Chairman, may I ask the parliamentary secretary a question? Has the government any assurance that when it vacates the succession duties and the estate tax field, the provinces will not move in, so that the net result will be the imposition of additional taxes on some taxpayers?


Patrick Morgan Mahoney: Mr. Chairman, on the contrary. We have indications that a number of provinces intend to replace the revenues they will be deprived of as a result of our discontinuing estate and gift taxes. It has been indicated to us that the three provinces that presently levy succession duties, Quebec, Ontario and British Columbia, will continue to do so. However, the whole package, federally and provincially, still involves as far as we are aware a very significant reduction in revenues. It is in the order of $320 million.
I suggest that it is inconceivable that the provinces, including those which do not at present levy succession duties but are considering entering the succession duty field, would in their levies come anywhere near this revenue figure. One of the conditions that the federal government has suggested to them as a criterion for its agreeing to collect these provincial taxes, if the provinces should indicate a desire for this to be done, is that the succession duty levies adopted by them ought to be, generally, at the level of succession duties imposed in the three provinces of Ontario, Quebec and British Columbia which presently impose these taxes. There is no way in which the succession duties being contemplated by provinces newly entering the field would come anywhere near making up the difference that I indicated earlier.


Lloyd Roseville Crouse: Mr. Chairman, could I ask a question? Was there not an understanding among the federal government and the provinces that as a result of withdrawing from the estate tax field the provinces would not lose any revenue? I understand that the provinces are very concerned about the loss of revenue which they will suffer. They, in turn, must take action to enter the estate tax field in order to recoup revenues lost through federal government action. Could the parliamentary secretary explain that situation a little better?
This seems to be one of the matters that is deeply troubling provincial ministers of finance. It has been debated, I understand, at the conference held in Ottawa and attended by the finance ministers, the Prime Minister and members of the cabinet. This matter is of crucial importance to my province. It has been indicated that the provincial government will enter the estate tax field in order to recoup some of the revenue lost through federal
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action. The taxes that they must impose will in the end place an even greater burden on the taxpayers of Nova Scotia since, as the hon. member just said, the same people, in the final analysis, pay taxes to both the federal and the provincial government.


Patrick Morgan Mahoney: Mr. Chairman, there was no undertaking to the provinces with respect to the revenues that they might lose as a result of the federal government's discontinuing the collection of estate taxes and paying 75 per cent of those to the provinces. There was a revenue guarantee-I think the hon. member will appreciate that the federal government retained all the gift taxes and that these were not shared with the provinces-with respect to the income tax the provincial governments might lose as a result of the very substantial reduction in income tax that is involved in the tax reform package.
The revenue guarantee was initially offered for three years, which was subsequently extended to five years, and provided that no province which chose to conform its system to the system we are proposing and have the federal government continue to collect income tax as we do under the present system, would lose any income tax revenue as a result, provided that the rates of income tax they impose do not exceed a formula based on their existing rates of taxation. Subject to modifications, that formula is a factor of 30.5 as the numerator and 28 as the denominator applied to the existing provincial tax rates.
In the case of a province such as Ontario which levies a tax of 28 per cent of the federal tax, that figure would now become 30.5 per cent. In the case of a province such as Manitoba which has a current income tax rate of 39 per cent, the figure would be higher; I believe it would be 42.5 or 43 per cent. It is an arithmetical calculation which the hon. member can make. I reiterate, there was no undertaking with regard to lost revenues in so far as estate tax is concerned.


Hugh John Flemming: Mr. Chairman, I wish to direct one more question to the parliamentary secretary. If, for example, the province of New Brunswick goes into the succession duty or gift tax fields vacated by the federal government, would it not be proper to say that the taxation in that province will be increased by the amount of the capital gains tax?


Patrick Morgan Mahoney: Not necessarily. Indeed, it probably would not because the federal taxation in that province would be significantly reduced because of the reduction in personal income tax that would also be involved in the province.


Mr. Stewart (Marquette):: Mr. Chairman, I believe that all aspects of capital gains tax as it applies to agriculture should be withdrawn from this legislation. When the Minister of Finance originally introduced the white paper there were many protests with regard to the proposed increases in estate taxes. I was pleased when the minister withdrew these proposals and announced that the federal government was withdrawing from the estate tax field. However, with these proposals on capital gains, plus the fact that in Manitoba the NDP government wants to introduce a provincial estate tax, the farmer will definite-

ly face double taxation. It could well mean the end of the family farm.


An hon. Member:: This would only affect the people of south Winnipeg.


Donald Craig Stewart: An hon. member to my left said it will only affect the people in south Winnipeg. However, judging by the statements that have been made by the Manitoba government I am sure it will get to the family farm as we know it. The Premier of Manitoba announced that the provincial government's loss will be $5 million which will have to be recovered by their share of estate taxes. Last year the Department of National Revenue in Manitoba collected $2,900,000 in estate taxes. Manitoba received three quarters of this, in the neighbourhood of $2 million. The government of Manitoba will need a very healthy estate tax plan if they intend to collect this $5 million.
At this time the family farm needs every possible encouragement if it is to survive. It is vital to our rural areas. It balances the whole economy, particularly in western Canada. In my view the biggest blow to the farmer will be capital gains on recaptured depreciation. I was in the farm implement business for 15 years and I have some very strong opinions on this subject. I wish to give some examples of how recaptured depreciation will affect our farmers in respect of all types of equipment. For example, I will use a popular make of tractor such as the model 4020 John Deere. This tractor has been on the market for seven years. As a rule a farmer will have it fully depreciated. However, because of the high price of new farm machinery, when he decides to sell this tractor it will still sell for between $6,000 and $7,000. The farmer must show this amount as recaptured depreciation. Under the present proposals, 50 per cent of this amount must be shown as taxable income on his next year's tax return. This is really just a book figure. We all know of the shortage of cash at this time in most rural areas of Canada. Members can check the value of all makes of tractors. I have used the John Deere 4020 as an example.
Another example is the Super 92 Massey-Ferguson combine. These machines have been out of production for ten years. Because of the high price of new farm machinery this combine will still bring $6,000 to a farmer as a trade-in allowance. Here again, he must declare $3,000 of this as taxable income.
May I call it six o'clock, Mr. Chairman?


Gérald Laniel: Order, please. It being six o'clock, I do now leave the chair. The committee will meet again at eight o'clock.
At six o'clock the committee took recess.


[Stage Direction]
AFTER RECESS

The committee resumed at 8 p.m.
Russell Clayton Honey: Order. May I suggest that the committee rise, report progress and request leave to sit again later this day? It is the understanding of the Chair that Mr. Speaker wishes to rule on a question of privilege raised
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earlier this day by the hon. member for York South. Is this agreed?


Some hon. Members:: Agreed.
Progress reported.



PRIVILEGE


Mr. Speaker:: As hon. members know, a question of privilege was raised earlier today. The Chair undertook at that time to look into the matter and make a ruling later.
The hon. member for York South (Mr. Lewis) raised a question of privilege and proposed for the consideration of a Standing Committee of the House what he termed the discrepancies between statements made to the House by the Acting Prime Minister and the contents of a document published in a newspaper. The hon. member referred to answers made in the House yesterday by the Acting Prime Minister to the effect that no decision had been reached by cabinet in reference to certain matters. He then argued that the existence of the document published by the newspaper conflicts with the Acting Prime Minister's statements.
Does this constitute a question of privilege? I said earlier today that there had been no opportunity to review the precedents. This has been done in the intervening hours. A close review of the records of the House has been carried out in an attempt to find a precedent or precedents which might support the hon. member's contention that in the stated circumstances there might be a prima facie question of privilege.
On the contrary, the pertinent precedents tend to establish in the main that statements made outside the House, or documents published elsewhere, ought not to be used for the purpose of questioning statements made in this chamber by hon. members from either side of the House. I refer, for example, to certain decisions of the Chair which may be found recorded in Hansard of February 14, 1938, at page 382; in Hansard of July 3, 1952, at page 4162 and in Hansard of December 21, 1951, at page 2346. There are many other precedents more or less on the point, which might be quoted by the Chair.
Hon. members will allow the Chair once again to refer to citation 113 of Beauchesne's Fourth Edition as follows:
A dispute arising between two members as to allegations of facts does not fulfil the condition of parliamentary privilege.
With respect, I suggest to the hon. member for York South that the point he has raised is much more a matter of debate than it is one of privilege. I must therefore rule that there is no prima facie question of privilege which would enable the Chair to put the motion proposed by the hon. member for York South.
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GOVERNMENT ORDERS


[Stage Direction]
The House resumed consideration in committee of Bill C-259, to amend the Income Tax Act and to make certain provisions and alterations in the statute law related to or consequent upon the amendments to that act-Mr. Benson-Mr. Honey in the chair.
Russell Clayton Honey: When the committee rose, section 3 was under consideration, with an amendment to paragraph (b) proposed by the hon. member for Edmonton West. Shall the amendment carry?
On clause 1-section 38: Meaning of taxable capital gain and allowable capital loss.


Donald Craig Stewart: Mr. Chairman, before six o'clock I was drawing attention to the detrimental effect which the proposals before us dealing with the application of capital gains tax to farm machinery would necessarily have on the whole farm economy. I was showing just how hard this would hit the farmer, using different lines of machinery by way of illustration. I used as an example the 4020 John Deere tractor, a popular model used by many farmers across Canada.
Since most farmers need combines, I used as a further example the Massey-Ferguson Super 92 combine. This combine has not been produced for the last nine years. If a farmer trades in a machine of this type today it will be fully depreciated. Yet because of the high cost of new farm machinery the trade-in value would still be around $6,000. This means the farmer would have to show the $6,000 as a capital gain or as recaptured depreciation, and 50 per cent of it, or $3,000, has to be declared as taxable income. These are book figures.
Another example I should like to point out as an indication of how hard a capital gains tax on farm machinery will hit the farmers is that only two years ago a Farmall M tractor, which has not been built for 20 years and which sold new for $1,600, was resold for $1,800. In these days of inflation the same tractor would sell for $7,000, but here again this shows up as recapture depreciation and is strictly a book figure.
I am surprised that the government has not brought in the Barber report on farm machinery for discussion by the Standing Committee on Agriculture. There have been complaints by all segments of the agricultural industry about the high cost of farm machinery. All farm organizations maintain that these inflationary trends will put farmers out of business. The price of farm machinery has tripled during the last 20 years. We are told by the implement companies that the reason for this increase is that improvements have been made, though I do not agree with that claim. As an example, a wide level discer has not changed materially during the last 20 years with the exception of hydraulic operation, though it has changed considerably in price. This is why the government should not delay putting the Barber report on farm machinery prices before the Standing Committee on Agriculture.
I have maintained all along that many of the government's proposed tax changes are unnecessary. Earlier this

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year I pointed out that the sixth annual report of the Economic Council of Canada had stated that even if there were no change in taxation during the seven-year period between 1968 and 1975, the government's revenue would still double during that period. The government seems to spend its time finding ways to spend tax dollars rather than ways to cut back and be more efficient.
The main point I want to make this evening is that the load of the farmer is already heavy enough today, particularly in view of the government's agricultural policies. I ask the government to leave the farmer alone and to withdraw its proposals regarding a capital gains tax and recapture depreciation. Actually, this form of capital gains tax is simply a tax on inflation.


Mr. Otto:: Mr. Chairman, I have been listening to the discussion on capital gains and I am inclined to agree with a good number of the statements that have been made. Before I talk about section 38 and capital gains, may I remind the parliamentary secretary that the whole concept of capital gains has been derived from the Carter proposals made ten years ago when a buck was a buck. In those days it did not matter much whether a buck was made by way of salary or by way of a windfall. Capital gains were not taxed on the basis that it was either a windfall or something that was not earned and was not income, but Mr. Carter's idea was that a buck was a buck, a dollar was a dollar and should be taxed. This was before the "Nixonomics", and at that time this proposal seemed logical enough. Since a capital gain was to be regarded as an earning, it seemed very logical to all of us that it should be taxed, although some concession was made. However, this was all before August 15 of this year.
I suggest to the parliamentary secretary and to the minister that to go on debating this bill and each section of it as if nothing had happened does not make sense. It does not make sense to say that we are not going to distinguish capital gains because nothing has happened. I have put it to the minister and his parliamentary secretary that when we speak of capital gains and how they should be defined, we should consider that there are at least two different kinds of capital gain, the passive gain and the active gain.
If I am a land speculator and buy land that I know is going to rise in price because of the pressures of the community around me, and I contribute absolutely nothing to that land, and having bought it at $5,000 an acre I sell it at $10,000 an acre, this is a passive gain. It is a gain which no one contributed to making; no risk at all was taken. In such a case I think the capital gains tax should apply very strictly. In cases like this there should be no allowance made for capital loss since it would be very difficult to argue that this type of endeavour is in any way beneficial to the nation or to the nation's economy.
The same situation prevails when an insider in a corporation knows there is going to be a demand for shares and buys shares merely to turn them over again in two days, a week or a month at a profit. This also is a passive gain. It has added nothing to the economy, is speculative in nature and has to be treated very differently from a capital gain that comes to a taxpayer from investment in an active enterprise.

On the other hand, if an investor buys shares in a corporation or in an up-and-coming enterprise, holds on to the shares and risks his money, or if the entrepreneur himself takes a gamble at great sacrifice to himself and then they make a dollar on the sale of shares or on the sale of an enterprise, money that they will probably immediately reinvest, then no one can tell me that this situation is the same as that of the land speculator. I think such investors should be treated differently from speculators.
The merging of capital gains into one grouping regardless of their effect on the economy or how desirable or undesirable they are is one of the mistakes the government has made. Whether it be agricultural policy or redevelopment policy, the government tends to make one clean sweep and merge them all. The fact is that there is a great difference between the two types of enterprise I have described and gains received from long-term investments.
In the United States, which has a record of capital gains, a distinction has been made between capital gains that are short-term and those that are long-term. A heavier tax is imposed on short-term capital gains than on long-term capital gains since these stimulate long-standing investment in companies, the growth of industry, and so on. But apparently we have not seen fit to make this distinction.
Having read the unacknowledged Gray report-I say "report" although it would not be acknowledged as a report-we find it deals with foreign investment and contains a plain recommendation that incentives will have to be given to Canadian enterprises and investors. We are now faced with the United States isolationist economic program. We may not have to worry about this foreign investment problem because I think all the foreign investors will probably go away anyway, back to the United States or elsewhere. We will still have to worry about how we will get Canadians to undertake new enterprise and invest.
This report and other acknowledged reports indicate we must give incentives. I wonder what kind of incentives the minister intends to give. Does he intend to give the Canada Medal? What are we going to give our entrepreneurs? Are we going to say to Canadians that they should leave their safe jobs as engineers, accountants or lawyers, take a risk and put their savings into enterprise? If we do, they will ask why they should. The logical answer is that they must take this kind of risk in order to make a gain.


Mr. Gleave:: Mr. Chairman, I rise on a point of order. Would the hon. member permit a question?


Russell Clayton Honey: If the hon. member wishes to rise to ask the speaker whether he will permit a question, that is not a point of order, as hon. members know. If the hon. member who has the floor will entertain a question, the hon. member may ask it.


Steven Otto: Yes, Mr. Chairman.
November 16, 1971


Alfred Pullen Gleave: Mr. Chairman, in view of the fact that the hon. member is Parliamentary Secretary to the Minister of Supply and Services I should like to ask whether he is stating government policy.


An hon. Member:: Oh, grow up.


Steven Otto: Mr. Chairman, the hon. gentleman has a very far reaching idea of what is the responsibility of a parliamentary secretary, especially this one.


An hon. Member:: Tell him what it is.


Some hon. Members:: Explain.


Steven Otto: If I could tell you, Mr. Chairman, I would. It seems that there is a graduated scale of power, at the top of which I suspect is the deputy minister and at the bottom the parliamentary secretary. Below that, or possibly above that, is probably his secretary.
To get back to the subject, if I may, without expounding government policy, let me relate to the committee some of the concepts I have had over a period of years. I might say to the Parliamentary Secretary to the Minister of Finance that I have been a great champion of this reform measure. I still am. I sat on the committee when the present Minister of Finance was Minister of National Revenue. That was years ago. We went through all these things and at that time a capital gains tax in its true form seemed like a good idea. That was before the Nixon economics-and there is a difference.
We must have some sort of incentive. The one that is most acknowledged is an incentive for active participation in enterprise. That must be in the form of a return for risk. But that is not equity, and we know we must be very equitable and fair. In fact, the Carter report was based more on equity than on growth. We cannot afford this type of equity at the present time. The fact is that we have nothing to share except future poverty.
I wonder whether the minister and his parliamentary secretary would consider redefining "capital gain" so that we have a very accurate understanding of that phrase. In this concept there are two different things and we would not be doing a service to the country or to our economic position if we married them. If we give the same benefit to one who speculates and makes money in the form of capital gain, without putting in any effort whatsoever and without adding anything to the economy, as we give to the entrepreneur who has risked capital and has been active in an enterprise, producing and selling goods as well as employing men and women, then we are being equitable.
I suggest we do not have to be equitable in this sense, but that we should make a distinction between the two. We should make a distinction between passive and active capital gain. We should make a distinction between the people who invest in Canadian corporations that produce goods and employ men, thereby helping this nation, and those who invest in speculative corporations which do nothing except jack up the cost of goods and play havoc with the nation's economy. It is about time the government came to the conclusion that not everything should be treated in exactly the same way. There is a vast difference between various types of capital gains and they should be taxed at different levels.
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Mr. Burton:: Mr. Chairman, it is significant that a great deal of discussion on the capital gain portion of this bill has centred on farmlands and the manner in which capital gains will affect them. We have an amendment before us dealing with the taxation of capital gains on farmlands. This is significant because it reflects what is happening in our society and in governments.
Bill C-259 represents an effort by the government to put into law provisions concerning taxation on income. They are very elaborate and very thoroughly thought out. Provisions concerning corporations and corporate activity are thoroughly considered, but that is not the case when it comes to problems involving individuals and small businessmen. I think this is indicated by the capital gains tax. There has been too little understanding of the effect this will have on the individual and the small businessman in this country. These ordinary people are trying to carry on as best they can in the livelihood or occupation in which they are engaged, but they are finding it increasingly difficult because of lack of understanding and response by governments to their situation.
It must be recognized that special problems face farmers and the agricultural industry of Canada. Many farmers are in a very precarious economic situation. A number of factors have an adverse effect on the agricultural economy and the well-being of persons engaged in farming. One of the factors is the high level of investment required in carrying on a farming operation, not the least of which is the increasing cost of land. Farmers also must contend with low rates of return on investment and labour input. This is an acknowledged fact in the agricultural industry.
We must also consider the peculiar characteristics of the agricultural industry. This must be taken into account when we are considering proposals for a capital gains tax. The farmer makes a contribution to the capital growth of his farm through the unpaid labour he contributes to capital improvements on the farm. The farmer does not receive any return for that unpaid labour until he sells his farm. At that time he receives the hoped for return for the labour he contributed in terms of capital improvement.
We also must take into account the fact that land values are a very volatile component of the over-all picture of the farm capital structure, and that land values fluctuate upward and downward in respect of changing economic conditions. This also produces problems. In addition, we must take into account the fact that many of a farmer's assets also constitute a retirement fund. I think this factor also deserves consideration. The fact is that a farmer contributes his unpaid labour in the form of capital improvements on his farm. In many instances he also plows back much of the income he receives from farming into capital improvement and capital development.
Many representations were made when this matter was before the committee on Finance, Trade and Economic Affairs. The New Democratic Party members on that committee, the hon. member for Waterloo and myself, made public a minority report concerning the white paper proposals on taxation. We presented a number of proposals with regard to capital gains of farmers. Our report read as follows:

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In addition, we also propose that the following provisions be made for the situation of farmers;
-That there be special rules governing the realization of capital gains on family farms when ownership is transferred in the family succession to ensure that the future viability of the farm unit and the welfare of the farm family is not jeopardized by the imposition of taxes.
-That farmers be enabled on realization of capital gains to invest such funds in a retirement savings plan to be taxed as received in income.
-That there be 'roll-over' provisions to enable a farmer to invest the proceeds of a farm sale in another farm as long as he is an active operator and it is his principal source of income.
We feel these proposals would deal with the great bulk of the problems which may arise from the imposition of a tax on capital gains so far as it would affect Canadian farmers and the farming industry. Last evening an amendment was moved by the hon. member for Edmonton West on behalf of the Progressive Conservative party. It proposed that in calculating capital gains there be the following exclusion:
other than land used in farming as defined in this act-
The amendment provides that any land used in farming, so long as it meets the criteria defined in this act, would be exempt from capital gains tax. When I spoke on this matter previously I made clear that I did not question the motives of those who moved this amendment. I felt they were trying to meet any problem that exists. I hope hon. members to my right in the Conservative party will forgive me if I note that there seemed to be indecent haste when they jumped to their feet to suggest that members of the New Democratic Party were not showing concern for the question of capital gains as it would affect farming.
As a matter of fact, the hon. member for Mackenzie said that if we do not like the amendment they have moved, why do we not move an amendment of our own. This, again, demonstrates the haste shown by some members of that party. At that point the hon. member for Edmonton West had moved his amendment but Your Honour had not ruled on it. I do not think it was possible at that stage for members of this party to move an amendment to the amendment which had not been ruled upon by Your Honour. I can understand why some members such as the hon. member for Mackenzie are experiencing problems and why they are facing difficulty.
With regard to the hon. member for Mackenzie, I suppose it might be said there is a Bracken breathing down his neck, because the NDP candidate for Mackenzie in the next federal election is to be a gentleman named Lars Bracken. This should interest some members of the Progressive Conservative party since this young man is a grandson of the brother of the late John Bracken, a former leader of the Conservative party. So I can understand why they are quite concerned about what is happening to them, after the by-election in Assiniboia.
Let us look at the amendment moved by the Progressive Conservative Party. What effect would it have? I suggest that it would have two important implications which have been completely ignored, and that it would nullify the benefits they hope to gain through the amendment. The first point is that an amendment to exclude all land used in farming from any form of capital gains tax would subject all farmlands to a degree of speculation and activity by speculators such as we have never known. I 
suggest that would be the effect, because we are to have a capital gains tax introduced in this country through this bill and we would have this area of productive economic activity excluded. I believe this would result in a rush of speculation in this area.
The second objection which I believe can be raised to the amendment proposed by the Progressive Conservative party is that it applies to all land used in farming regardless of circumstances and who is involved. I suggest this would be an open door invitation to every large corporation to become involved in the land and farming business.


Russell Clayton Honey: Order, please. The hon. member for Athabasca is rising on a point of order.


Mr. Yewchuk:: Mr. Chairman, would the hon. member permit a question?


John Stratford Burton: Mr. Chairman, I would be glad to entertain questions at the conclusion of my remarks. I believe the amendment proposed by the Progressive Conservative party would result in a rash of activity by corporations which could not be defined as farmers in any way, shape or form. We have the National Grain Company and other corporations moving into farming enterprises simply as another branch of their industrial empires. They are not interested in the welfare of the farmer or of agriculture but, rather, in the future welfare of their corporations. I suggest this amendment would have the effect of encouraging and abetting corporations which may be interested in getting into some form of agricultural activity. Thus, I feel the amendment as it is before us is very unsatisfactory.
However, there is a very real problem that must be dealt with and I feel it can be dealt with within the framework which has been proposed. Thus, I propose to move an amendment to the amendment as follows:
That the amendment be amended by adding the following after the word "act":
"under the following circumstances:
1.	when farm property is transferred by sale, gift or legacy to a spouse or a son or daughter or a spouse thereof when the minister is of the opinion that it is the intention of the recipient of the property to continue farming.
2.	when a farmer sells farm land and uses the proceeds to purchase other farm land provided that the said farmer satisfies the minister that he intends to continue farming and that his usual principal source of income is from farming.
3.	any instance when a bona fide farmer on the sale of farm land is not allowed to invest the capital gain therefrom in a registered retirement savings plan which will result in the farmer concerned being taxed only on benefits received from the said plan as they are received;
and"


Gerald William Baldwin: Explain.


John Stratford Burton: The effect of this amendment would be to make the amended section read as follows: other than land used in farming as defined in this act and under the following circumstances:
Following which we would have paragraphs 1, 2 and 3 as proposed in my amendment. The first point which I
November 16, 1971

have made in the subamendment deals with the question of transfers of land within the family where in fact the legislation deals with sales, gifts or legacies to a spouse or to a son, a daughter or a spouse thereof-that is, transfers within the family unit.
The second point that I make deals with the proposal that there be a roll-over provision whereby a farmer could sell one farm or a piece of land and invest the proceeds in another piece of land without incurring a tax on the capital gain involved. The third point is to enable farmers to invest any proceeds which they do receive from a capital gain. There can be circumstances where they can invest those proceeds in a registered retirement savings plan, draw from that savings plan and be taxed only on the benefits as they are received. If they are not allowed to put their money into registered retirement savings plans, there would be no capital gains tax, in accordance with the wording of the third paragraph.
We feel that these three points deal with the fundamental concerns of the farming community in so far as taxation of capital gains is concerned. We feel that this would deal with the real concerns, some of which were raised last night in support of the amendment moved by the hon. member for Edmonton West. However, this subamendment also has the merit that it avoids some of the problems that would be raised by allowing the amendment to pass as it is because, as I pointed out, it would simply encourage speculation and corporation farming. We do not want that and I am sure the Conservative party do not want it either. It is for that reason that we move this subamendment and commend it to the committee.


Paul Yewchuk: I am curious to know whether the hon. member is serious about the suggestion that not putting the capital gains tax on the sale of farmland would cause a rush of speculation. Since at present there is no capital gains tax on land, why is there no rash of speculation right now?


John Stratford Burton: We already have some problems on the outskirts and the peripheries of many of our larger urban centres and this would be intensified if we allowed the proposals to stand as they are.


Mr. Nowlan:: We are referring to farms, not to urban centres.


Russell Clayton Honey: The committee has before it the subamendment of the hon. member for Regina East. The Chair's initial thought is that it would be in order in that it defines more precisely certain circumstances under which the capital gains tax would not apply. However, the Chair would ask the hon. member who moved the subamendment whether he in fact intended to leave in the word "and", because if that is so he would be expanding on the amendment moved by the hon. member for Edmonton West and the Chair would have some doubt about the subamendment.
It seems to the Chair that the subamendment would be in order if it were to read "other than land used in farming as defined in this act under the following circumstances".


John Stratford Burton: I am quite prepared to accept the suggestion made by Your Honour. It was certainly not my intention
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to expand in any way on the amendment moved by the hon. member for Edmonton West. It was my intention to qualify the amendment.


Russell Clayton Honey: I think the Chair and the hon. member for Regina East are in agreement, because it did seem to me that the hon. member did not intend to expand on the amendment now before the committee.


Mr. Noble:: Mr. Chairman, I rise to speak in support of the amendment proposed by my colleague, the hon. member for Edmonton West. At the outset I will make some observations with respect to the bill. It seems to me that one of the problems in attempting to assess the significance of the changes proposed in Bill C-259 is that amendments continue to follow amendments and a definitive analysis can hardly be made until the regulations come down. They will not be available until some time after the draft proposals become law, and the draft proposals will not become law until the amendments stop flowing and the last one has been debated. It is a vicious circle-almost a case of the snake or the red tape-worm swallowing its own tail.
Mr. Chairman, as the draft bill now stands, my first and dominant impression is that it does not represent true tax reform but, rather, several hundred pages of additions and amendments to the Income Tax Act and related acts. Informed businessmen and their advisers seem to agree that the present Income Tax Act is badly written, difficult to interpret and full of problems. The hundreds of pages of additions and amendments incorporated in the draft bill, when added to the present Income Tax Act will still leave us with many of our old problems and a great many new ones.
The repeated introduction of amendments since June 18, and the further changes arising from the finance minister's about-face on policy because of the country's unhappily deteriorating financial and employment situation leads to one inescapable conclusion, that if the bill was not ill-conceived it was at the very least so poorly designed as to lack the resilience and elasticity needed to absorb the internal and external pressures so recently, and still, plaguing us-rising costs of raw materials and labour, rising living costs, increasing unemployment and the Nixon surcharge, to name but a few.
In view of these circumstances the bill should be scrapped. Any and all amendments leading to tax reduction, increased purchasing power and stabilization of our economic and employment situation should be processed at the earliest possible moment and, finally, another attempt at tax reform in its truest sense should be made at a time when the blood, bone and spirit of our country are somewhat healthier than they are now.
The issues raised by the government's decision to tax capital gains, since the presentation of the white paper on taxation, have been clouded by complications and the government's own uncertainty about what it really wants to accomplish. Taking the Carter commission's premise that a buck is a buck, the government decided back in 1969 that it must pursue equity at any cost. That was the year the government was frozen into a trade-off mentality. It will be recalled that in 1969 the government decided

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to trade off unemployment in order to control inflation. It was in the same vein that they suggested it was appropriate to trade off economic growth in favour of equity.
So stern were they in pursuit of that elusive principle that they ignored the whole spectrum of social and economic realities involved until they were confronted with a major political protest. Even then the Minister of Finance was willing to dismiss that protest as the outpouring of special interest groups who were unrelated to the average taxpayer.
The opposition is pleased that the Gallup poll assisted the minister with his arithmetic to the extent of pointing out that the total of the special interest groups was the majority of the population, and that the government has now backed off from some of its proposals. The decision not to apply a capital gains tax to a homeowner's principal residence acknowledges at last that the homeowner is not a real estate speculator and should be treated differently. We are pleased the government has abandoned its intention to tax unrealized gains, a proposal that would have been seriously harmful to investment in this country.
The argument previously used in favour of the capital gains tax was that of equity. Yet the government has ignored the requests of the opposition to utilize the more equitable system of tax credits instead of increasing exemptions. We have pointed out on many occasions that increased exemptions only update the existing tax system rather than reform it. Similarly, the government has not made any attempt to integrate federal taxes with seriously regressive provincial and municipal taxes. Obviously, the question of equity is not uppermost in this government's mind. One can only conclude that their major preoccupation in instituting a capital gains tax under these circumstances is for the purpose of raising revenue. In this objective they have shown themselves to be far more single-minded than when they were pursuing equity.
Genuine tax reform must take into account more than the single consideration of government revenue. It must be sensitive to social considerations and what consequences a reformed tax structure is likely to bring about, and it must have goals that are compatible with these considerations. The unwillingness of this government to exempt the family farm from the capital gains tax demonstrates a complete insensitivity to all these requirements.
In addition to being an economic unit, the family farm is a traditional way of life for thousands of Canadians, and in both respects the capital gains tax will be disruptive of its very existence. Yet the government has offered no evidence that it understands the problem or that it is even aware of it. Under the proposed legislation, the family farm is not looked upon as an on-going business undertaken by a whole family but as the personal property of the head of the household. When he dies, his property will be deemed realized and his heirs will have to pay a capital gains tax on an inheritance.
This attitude does not take into account the possibility that the farm may not be disposable at any given time. The fact that it may have a book value of $100,000 does not mean the heir could sell it at that time for $100,000. More likely, the heir will not wish to sell the farm because he has devoted much of his labour to it, but since the farm has now been deemed realized he will have to pay a tax on

its appreciation in value and will either be forced to sell some of the farm assets or go into debt. Since farming requires continually increasing capital investment which will have to be foregone in order to pay the tax, the economic functioning of the farm will be seriously undermined.
It hardly needs to be pointed out that agriculture is having serious trouble as it is. For the government to add to that trouble by undermining the stability of the family farm is inexplicable by any standard of good government. But it is not inexplicable when examined in the context of the goals of this government.
Mr. Chairman, it is not a secret that the bureaucrats in Ottawa have blamed the family farm for the problems in agriculture today. They would like to encourage the development of huge corporate farms, and perhaps the capital gains tax is the right tool to accomplish that end. But it cannot be proven that the corporate farm would be any more economical than the family farm except in one respect-it would employ fewer people. That is hardly a desirable goal at this time. In bringing this about the government should pause to calculate the social costs involved.
The costs of dislocation and adjustment that will follow the breaking up of the family farm, a process encouraged by the capital gains tax, may far outweigh any hypothetical advantages. A way of life that has enriched this country socially and economically will be seriously strained by this tax reform legislation. Is that worth the so-called economy of the corporate farm? Is it worth the additional revenue that will be brought to the government?
As long as a farm remains in a family it should be exempt from the capital gains tax. As an on-going business that requires heavy capital investment it is foolish and unjust to disrupt its existence by removing a significant proportion of its capital because the head of the household has died. The opposition does not believe the government has made an effective case for refusing to exempt the family farm, and if it has private reasons for its refusal it should bring them out into the open where they can be debated. Mr. Chairman, it may be the case that the government is worried that the tax could be deferred indefinitely under these circumstances. If that is so, then its obsession with revenue has led it into mindless disregard for the higher priority of quality of life.
The proposal to tax capital gains from investment reflects a similar obsession with revenue without regard for consequences. In presenting his white paper on tax reform, the Minister of Finance acknowledged the possibility that investors might be unwilling to realize their capital gains if they are subject to taxation. This locking-in effect would seriously interfere with the mobility of capital in the Canadian market. The Toronto Stock Exchange raised the example of an investor who sells for $100 a share which was acquired at $50. At a personal income tax rate of 50 per cent, the capital gains tax would be $12.50, leaving $87.50 for reinvestment in a new asset. It would be necessary for this new asset to appreciate by 14.3 per cent to restore capital to the $100 value which prevailed before realization. Unless the investor is fairly certain of this appreciation he would not likely make the adjustment.
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The Minister of Finance recognized two years ago that a capital gains tax would introduce an artificial element into the market. It was to prevent the locking-in effect that he proposed in his white paper to have a five-year deemed realization when everybody would pay capital gains tax whether their gains were realized or not. The ill-considered proposal was cast into such disrepute that the minister abandoned it in his proposed legislation. He is to be congratulated for doing so. However, he has not suggested any alternative means for dealing with the problem of locked-in investment, the consequences of which might be seriously detrimental to the Canadian capital market.
The opposition has long ceased to expect wisdom from the Minister of Finance but we occasionally hope for some humility. Two years ago the minister was so concerned about locked-in investment that he elaborated a scheme to counteract it that ultimately brought him some embarrassment. Is he now trying to save face by not admitting that it is a problem? Or if he admits it is a problem, is he more concerned with collecting revenue at the expense of any solution? There is a solution, one suggested by the Toronto Stock Exchange in its response to the white paper. In its brief of May, 1970, the Toronto Stock Exchange argued that a distinction should be made between capital realized for the purpose of reinvestment and capital realized for personal consumption. The mechanism proposed was a roll-over exemption to allow capital transfers within a defined period of time. Reinvested gains would be deferred as long as they remained in the capital market.
The government will probably dismiss this suggestion with the response that it would mean an investor could defer taxation of his gains forever. I will anticipate such an argument by pointing out, first, that there would be deemed realization at death and, second, that the money is doing just as much good in the capital market as it would be doing in government revenues. Furthermore, I submit that under a Liberal government the money is doing more good in the capital market. There is a consistency in the present government's approach to the federal role which is reflected in aggrandizing revenues on the one hand, and ill-considered expenditure on the other. The taxation of capital gains as it is proposed in this bill is simply one thread in that consistency.
The opposition accepts the fact that there are competing public and private claims on capital. It is obvious that private investment will go where it can obtain its best return and there is a necessary and positive role for public capital in many areas. In a mixed economy we must determine our priorities in this context. The real question facing us at this moment is whether we believe our capital market is so mature that we can take money out of it for purposes of government expenditure. And what kind of government expenditure justifies the depletion of the capital market?
Obviously, an investor is not going to put his money into an Opportunities for Youth program. But does that program have a priority over economic investment that may provide genuine jobs? Some day, when we have a very mature canital market, it may indeed have a higher prioriincome Tax Act
ty. But surely not today. And where there is an acute need for public capital at the provincial and municipal levels, the federal government has been stingy and unco-operative. We have no assurance that it will, and much evidence that it will not, allocate this increased revenue wisely.
The opposition deplores the inability of the government to face up to the fact all our institutions are involved in these questions. A capital gains tax is not simply a matter of equity. If investment capital is performing a public role by stimulating the economy and creating jobs, then it should be analysed in that role. The question of equity only arises when capital gains are used as personal income. Nor should the government isolate the capital gains tax as purely a matter of revenue. The conversion of private capital into public capital should take place when there is a clear and defined necessity for that conversion. Nowhere, either by its legislative program, its financial relationship with other governments or by its arguments, has the government defined that necessity.
When the Minister of Finance refused Quebec's request for a one-year delay in the implementation of the tax reform legislation, he justified his refusal by pointing out that the process of tax reform has been before us for eight years. One may only wonder, in this length of time, Why the fundamental problems have not been addressed. The government has obviously not concerned itself very much with the consequences of its tax reform legislation, nor has it analysed the relationship of taxes to the health of other institutions.
It has been easy, Mr. Chairman, for the government to sink into a posture of self-righteousness on the issue of taxing capital gains. Equity is a principle to which everyone subscribes and to oppose the taxation of capital gains is to run the risk of appearing to defend special interests and unfair advantages. Yet to ignore the consequences or a capital gains tax is to ignore the economic health of our agricultural community and the direction of the potential growth of our country and, by implication, the well-being of our society.
That is why I feel it is imperative that the government re-examine the context of the capital gains tax. When capital gains are used as income it is obviously only fair that they be taxed. But when, as in the case of the family farm, they are required to sustain the activity of the farm they should be exempt. Similarly, in the case of private investment, when capital gains are reinvested and are performing a needed social function they should be rechannelled into public capital in the form of a capital gains tax.


John Patrick (Pat) Nowlan: Mr. Chairman, speaking as one who has sat in this chamber during Committee of the Whole proceedings on clause 1 of the tax reform bill now before the committee, it is clear that many parts of the income tax bill will create confusion and justifiable consternation. No part of the debate on this bill has involved more hypocrisy and mythology than the part dealing with capital gains.


Eldon Mattison Woolliams: That applies particularly to the NDP.


John Patrick (Pat) Nowlan: If the sections we are presently discussing go through unamended, the confusion as to how capital gains will hit not only special interest groups but all Canadians at almost all levels of life will be surpassed
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only by the confusion of the administrators of the act and bureaucrats in Ottawa. They will be confused about how to administer this part of the act, and thereby other Canadians will suffer. For, Mr. Chairman, I think we are looking at this question from the reverse side. We talk about equity and say that equity means fair treatment. As one of my friends to my left said, a buck is a buck; how do you distinguish between a dollar made through a capital gain and a dollar made from an income-producing job?
We can philosophize at length about concepts of equity, yet I suggest, Mr. Chairman, that in talking about the capital gains tax we are really talking about a social tax. Although I do not have the figures in front of me, I understand that the capital gains tax will produce in the first year $50 million from individuals and approximately $80 million from the corporate area.


Patrick Morgan Mahoney: It is just the reverse.


John Patrick (Pat) Nowlan: My hon. friend says it is the reverse. I accept his correction: he has listened to more of this debate than I have. Regardless of the figures, if you talk to people on the streets about capital gains, the impression you get is that they think the coffers of the nation will be opened up, that King Midas will walk up and down the street and that we will have money for doing all sorts of things, including money for assistance plans that are designed to help those who cannot help themselves. Actually, we are talking about a social tax. We talk about a capital gains tax when we should be talking about a social tax. The philosophy behind it is that of a social tax, the result being that in the minds of Canadians this tax is cumbersome, vague and completely confusing.
This new tax has been introduced because it will produce revenue which governments obviously need. I am informed that in the United States, a country which has long imposed such a tax and which is beginning to wonder about it, capital gains taxes produce in the neighbourhood of 3 per cent of tax derived from income. While you can argue about the percentage, there is no doubt that as far as the internal revenue service code and the regulations are concerned, the regulations and the code which have implemented capital gains in the United States have, I am informed, trebled. I refer to the code and the regulations necessary to implement the law. There is a blanket of bureaucracy-to produce what? It will produce relatively few dollars as far as the over-all picture is concerned.
I do not think any speaker will disagree that as far as social justice is concerned-the reason we are talking about capital gains-this is where the hypocrisy comes into it. We talk about land and stock speculators and the way to make a million overnight. All hon. members know that in a great number of cases those transactions are not covered by our tax law because they are deemed to be income if you set up the return pattern. There is more hypocrisy and smokescreen about where the capital gains tax is going to hit than I have heard in a long time. That is one of the reasons I am prodded to contribute a few remarks to this portion of the debate.
I am in agreement with anyone who wishes to talk about the social injustice of the land speculator. The Parliamen-

tary Secretary to the Minister of Supply and Services mentioned the difference between a passive gain and an active gain. That might open up a whole new chapter of tax law. There is a difference in a land speculator sitting, licking his chops, letting the land value go up and up, hoping to cash in, using some land for farming, some for orchards and part of it for a subdivision. He makes a large capital appreciation. I suggest in large measure those situations are now covered. The Parliamentary Secretary knows that. Notwithstanding that, the number of taxpayers involved in this type of speculation are miniscule.
I listened with great interest to my friend from Grey-Simcoe. He talked about the necessity, from a political point of view of being reasonable to all points of view and how it may be politically incorrect to say "No capital gains whatsoever." You are then accused of favouring special groups. I want to turn the thing around. Instead of talking about social justice necessitating capital gains, against the small number of speculators who are now covered by the income tax law-and the national revenue boys know that-I want to know where the social justice and capital gain is for the widow, retired school teacher, labourer, small businessman and farmer. I will illustrate how it hits them. What about the young couple trying to save a little nest-egg so that they can move out of the syndrome of high interest and/or rent payments in an apartment complex and build a home of their home? They will not be able to do it.
I practised law in Vancouver for seven years. I met with couples, both of whom worked. They paid high rent for their apartment. They were caught in a syndrome whereby under the ordinary tax law it was difficult when they had children to break away from this vicious circle and move to the country. Somehow, some of them were able to save and invest a little, not like the great speculator playing the market day in and day out as a principal source of income but in the small hope that by investing in a little of this country they could get a small return and get out of the apartment and build a small home.
In this chamber we hear speaker after speaker and minister after minister say that we have a new housing program and a new plan for youth. Reversing the procedure of capital gains is not social injustice for the speculator in the stock or land market; it is social injustice perpetrated in respect of capital gains for the widow. How does this affect the widow? Most widows have a principal residence. If a poll were conducted I am sure that most widows would say their principal residence is protected. They think that when they die, the gain that has accrued in their lifetime will not be subject to capital gains and, therefore, the situation is not too bad. However, in reality there are two things that bother people about a principal residence. I have already referred to the situation of a widow. One is that you get one acre of land, and the other is that you must use your residence as a principal residence.
I suggest that for many widows in this country the only real asset after a constructive life of raising a family, having the children grow up and move away and the husband die, is a pension of some sort and a home. What does the widow want to do? She has four or five children scattered around the countryside whom she wants to visit.
November 16, 1971

She wants to visit two months with John, one month with Sam and, if one is in the south, she may want to go there for the winter and enjoy some of the sunlight she reads about in Air Canada ads. She is told to fly south and enjoy the birds now, because she will not enjoy them later; she will be plucked. What happens when she returns to her home? The income tax assessor tells her, "Madam, you were away for two months, five months or a year and you rented your home. You did not want to sell the family home." She wanted to keep the home because she knew one of the boys would come back or one of the families was getting too big for an apartment and wanted to use her home. For this reason she kept the home. She thought she could at least give them the home. What happens? The income tax assessor says that is not her principal residence.
Look how complicated it becomes when a gain has accrued. There is a market valuation day on the home. Because this woman has been away for a certain period she has to pay the gain on that. She may have rented the home. She may have lived away. That is how the widow gets hit. In my area the widow gets hit much more viciously. I come from a part of Canada where we do not have all the basic natural resources and the fundamental riches that the Canadian shield has produced for people living in other parts of this country. We do not have the oil and gas fields of the west, or the Rocky Mountains near where my friend from Vancouver South comes and yearns to return.


Mr. Laing:: What about all the oil?


John Patrick (Pat) Nowlan: We do not have many homes on the water. We have floating derricks, but you will not even let us have the oil. The minister knows they do many things in British Columbia tremendously well. I was there for a while. In Nova Scotia we also do many things, but we do not yet have houses on the water. When you talk about oil, that is not only a red herring but it is pollution of the water which the Minister of the Environment would not care to handle.
Separate and apart from the principal residence owner who still has to pay taxes, is the lady left only with the home. In my area there are countless situations where there is only a little home and two or three acres of land. Do you know what "big brother" is going to do? He is going to say that under the tax act you are allowed this home and one acre surrounding it. She will ask the tax collector, "What am I going to do? I have my cow on the second acre. I have a little woodlot for firewood on the third acre. It is all scrubland. I like to walk out there and pick blueberries or enjoy the spring." The tax collector says, "I shall be reasonable. You are allowed one acre and a house, but you have to go down to the county assessment office and decide on the value of those two acres because at some time you will have to pay a little tax on them". This principal residence provision is a snare and a delusion.


An hon. Member:: Is the cow a basic herd or not?


John Patrick (Pat) Nowlan: I was coming to the basic herd. I was trying to lay the groundwork for the acres on which the old lady
Income Tax Act
might be able to develop the herd. But on this little piece of ground she could not develop a basic herd.


Some hon. Members:: Hear, hear!


John Patrick (Pat) Nowlan: There are many other reasons she could not develop a basic herd. Let us talk about the labourer.


An hon. Member:: Let us talk about the bill.


John Patrick (Pat) Nowlan: I am talking about capital gains. I am talking about labourers, friends of my friends to the left. We always have to look there. It is a little slant vision but it is completely appropriate because they talk with forked tongues and you have to look a little slantwise. We are all familiar with the term "mobility of labour". An employee is called upon to move when his company transfers him to a job at another plant or when his old job comes to an end and he has to move in order to find a new one. He gets a job and he has to move from A to B. It is a brand new job. He goes away 40, 50, 100 or 200 miles away and rents a home. Perhaps a year or two later he comes back.
The same thing happens to him as happens in the case of the widow. He finds he will be stuck for a capital gain during the period of his absence. He does not appreciate this today, and if he listens only to the preachings from my friends to the left he will not understand it now; but he will understand it when he gets to his bank. Here are two situations, the widow and the labourer. I can think, too, of the retired schoolteacher with a little nest-egg, or of a young couple trying to buy a home. It is hard enough to save money today under the burden of taxation. I think of young persons living in apartments in cities, working to get money to move out and buy a home.
As I said earlier, all sorts of governments, regardless of political affiliation, keep talking about housing plans, a cherished dream for all and so on. A man's home is his castle. Under this capital gains tax proposal that man's castle will be as far away as most of the castles in England are removed from Canadians of ordinary means. I think of the small businessman. I believe this message is sinking in. It is the average Canadian, the small Canadian running a corner grocery store or a barbershop in a little town who is going to be socked over the head with the problem of capital gains.
Then, of course, there is the question of the family farm. The family farm, or the farm which is the subject of this amendment, has two basic characteristics which do not apply to any other vocation or endeavour. Basically, there is a very high family farm component to the bona fide farms of Canada today even though this is changing under present pressures. The other component is a very high ration of investment as compared with returns, and the fact that it takes many years to develop a farm into a viable proposition.
I suggest there is something wrong with the priorities of a government which in this tax bill will let you buy a lottery ticket and get the full benefit of that, as I understand to be the case, and yet is so preoccupied with getting every penny. You can gamble with a piece of paper and win and keep it all, yet people are penalized when they try to build up a home, a little farm, a little business, move from one town to another to keep a job or move out of an apartment to build a home. I say it is not social justice to
24372-50 J

November 16, 1971
Income Tax Act
institute a capital gains tax in this form. It is a social injustice in its impact upon the average Canadian and we should look at this proposal much closer than we have.
There are several things we could do to lessen the impact of this heavy, cumbersome and complicated new system whose effects none of us can fully appreciate. Some people have mentioned them. I shall only touch lightly on them because my time is just about up.


Some hon. Members:: No, no.


John Patrick (Pat) Nowlan: I could go on. I am very concerned about this, Mr. Chairman, because the average Canadian does not appreciate what is happening. But here is one example. As I understand it, the federal government will vacate the estate tax field because there is to be a capital gains tax. Yet we know that the provinces have already moved into the estate tax field. How, in all conscience, can we think of imposing a capital gains tax on top of estate tax in the absence of any abatement procedures for avoiding double taxation? If the parliamentary secretary and his minister think this is the type of just society Canadians want, I believe they will get a sad awakening at the right time and I hope it is not too far off.


Mr. Peters:: Mr. Chairman, I have been very interested in the comments which have been made in the last two days. They mostly reflect on the fact that the government does not appear to be cognizant that one very large segment of the economy does not fit into the thinking of most of the rest of the economy. I was interested in listening to the last speaker who raised a very interesting point. It is one I do not understand and I should like to understand it in its relationship to the workers and those in the organized labour force in this country, particularly those who are no longer at the end of the economic scale but have reached a fairly high level of income.
Despite taxation and despite the fact that they have enjoyed no exemptions of any description, no deductions with respect to the cars they must use in order to go to work, nothing written off for the lunch-pail or the tools of their trade, they have been able, as a result of their own efforts, to buy a house. And because of inflation, the house for which they paid $15,000 or $20,000 turns out to be priced on valuation day at $35,000 or $45,000. They have done nothing except live in the house and pay the mortgage, which is not unrealistic in relation to the total price at which the property is valued. But they will find themselves in some difficulty as a result of the capital gains proposals in this bill, just the same as other segments of our economy.
A long time ago I was in favour of a capital gains tax. I came from a mining area and could see no legitimate reason why a person who played the stock market should not pay tax on his winnings of $10,000 while I worked in the mine and earned $5,000, of which a considerable portion was taxed. I have always been in favour of the speculator, the man who manipulates money, paying tax on the return he receives since as far as he is concerned it is income, the same as my $5,000. Yet he did not pay tax and I paid a considerable amount. He could afford to pay a considerable amount of tax but did not pay any, whereas I was in the position where I could not afford to pay tax and was paying a sizeable portion of my income in tax.

The workers of this country over the years have put their savings away. We are known as a nation of savers. One of the United States president's advisers has said that Canada influences 25 per cent of the control over the United States money supply, and he is really talking about one trait Canadians have developed which we thought was admirable, namely, that of saving money. We invest only in blue chip stock, mainly in insurance companies and other forms of retirement investment. We have paid very dearly for this because of the manipulations of government over a period of time. I think it is safe to say that an insurance policy bought in 1939 or 1940 with a value on maturity of $1,000 would only have the purchasing power today equal to a few months' old age pension. The purchasing power of our money today is very limited, yet no recognition of this is given to those who have saved. People who spend everything they earn are in a much better position since the state will provide for them in terms of today's dollars, not in terms of dollars saved.
I do not think it has ever been suggested to me by those who are familiar with the purposes of a capital gains tax that such tax is similar to succession duties or estate tax levied on every Canadian who dies. It was to be a substitute for income tax or was a tax on income which previously had been tax free. The previous speaker talked about buying a lottery ticket for $2.75 and winning $100,000 on the Irish sweepstake, which amount is tax free.


Eldon Mattison Woolliams: There are only about four a year, though.


William Arnold Peters: I grant that this does not apply to many people, and since it is such a limited activity perhaps we should include it in the allowances as a sop to the poor people of the nation. Then we have the poor cleaning woman in England who buys a football pool ticket for two pennies, hoping to win sufficient money to retire from her job that does not pay sufficient to enable her to buy clothes and keep warm in her apartment. In my opinion this is the type of situation where we should apply a capital gains tax.


Eldon Mattison Woolliams: How sick can you be!


William Arnold Peters: I am always surprised when I find people from a certain area putting more faith in the buying of a lottery ticket than in anything else. These play people play it big. They are rich today, broke tomorrow, but smile just the same because that is their way of life. It takes all kinds to make a world. A transformation in the thinking of this government has taken place within a very short time. The government introduced an estate tax with a great deal of fanfare and announced that when a man died his widow would inherit his estate free of tax, at least up to a certain level. That money would be hers for the rest of her life, and it was not until the estate was passed on to other members of the family that tax would be paid, though a certain amount was tax free.
Then within a period of two years, before the Department of National Revenue had had time to assess the effect of that tax, whether it had been abused or lent itself to abuse, the government brought in a half-baked proposition that removed the very protection it had made so
November 16, 1971

much fuss about two years previously. A great deal of objection was raised by some hon. members to the estate tax proposal, but now we see that although there was objection at the time to any estate tax at all, the government is accepting this kind of proposition and in many cases any transfers of this sort made to widows or to others will be taxed.
This is a great change to make and I am wondering whether the government can justify it. I realize the government needs large amounts of revenue. Nevertheless, the government has indicated that the revenue it will get from this tax will only be about $130 million. That is the estimated revenue from this capital gains tax in the red book. We are eliminating a tax that the government thought was so wonderful when it introduced it, and imposing a capital gains tax in its place. Such a tax will apply to farmers. The Conservative party has moved an amendment that would eliminate such a tax on land used for agricultural purposes. It would be very nice if we could abolish all taxes. We would have a Utopia. As far as I am concerned, however, if a person saves money from the operation of a farm, by running a family business or in some other way, he should at least be allowed some amount for the maintenance of the business as well as for the maintenance of his spouse and family.
The amendment that has been moved relates directly to farmers. I think it has a weakness and it is a weakness which I am not smart enough in economics to correct. It obviously is a weakness in so far as it affects other segments of our economy, particularly the labour force. As the previous speaker said, members of the labour force have developed a number of traits in the last few years which put them in a totally different position. They no longer live in tenement homes, they own their own homes. They have purchased cars and through their own endeavours have provided for retirement so the nation will not have to look after them. This bill does not give any consideration to that category of people. I am sure the urban-oriented Liberal government members should be able to come up with some solution to this situation.
There may be a limit in this regard and perhaps we should modify this tax in some areas because of hardships suffered by certain people. We could eliminate the tax in that sector of our economy. We should not allow what most Canadians do not want, that is, a hierarchy in which money generates more money generation by generation. I know that government members are not too damned interested in this phase because there are more millionaires on the government side than ever before. Most of them have inherited their money. I am sure some of them are not even competent to hang on to what they have inherited. As long as they leave it in safe securities, perhaps they will be able to keep it. But they are not interested in eliminating inherited wealth.
I am sure most Canadians would agree that tax should apply in respect of large inherited sums of money. It is not to our advantage as Canadians to provide a landed gentry class. It is not to our advantage to provide a continuation of the inherited wealthy in this country. Obviously, if a father worked hard enough some benefit should flow to his wife and to his family. This is easily understood in
Income Tax Act
respect of the agricultural industry where a wife and husband have made an effort to build up an estate which in some cases is considerable.
We will probably choose December 1 or the week of December 6, or a neutral date in the future, as valuation day-but I suggest it will be relatively close to December 6, depending on the progress made with this bill. People will then have to value their properties without taking into consideration all those things which have been considered by organized business over a period of time.
I know of no farmer who charges wages on his own behalf. Whether a farmer operates a partnership with his son or farms on his own, very seldom does he charge a salary for himself or his son. Obviously, farming is not that good, otherwise speculators would get into this field and buy land. They are buying land around cities, but that land is no longer agricultural land; it is subdivided and falls within a different category. The point is that the things written off in normal business are not written off in agriculture and we arrive at a fairly high value for farm property.
It seems to me that calculating the best day for valuation should be a very simple proposition, but the basis for calculating the value of agricultural land will not be simple. Over a period of many years farmers have paid interest on mortgages. This has been paid out of family income, probably because wages were not charged and the farmers lived at a substandard level. Similar to what was suggested by the parliamentary secretary, we in Ontario put a value on land on the basis of a voluntary sale to a voluntary buyer.


Mr. Alexander:: Fair market value.


William Arnold Peters: It is not necessarily the market value.


Eldon Mattison Woolliams: It is the fair market value.


William Arnold Peters: It is not necessarily the fair market value. In northern Ontario we find that the Liberal government which believes in socializing the land is deeply involved in this field and has provided an unfair value for land. Normally, two factors enter into valuation of land in northern Ontario. The first is the transfer of land from father to son. The father usually tries to sell the farm for only enough to provide for his wife and himself. Farmers are intelligent and they know they cannot take their money with them, and they sell to the son on that basis.


Eldon Mattison Woolliams: What utter nonsense.


William Arnold Peters: The hon. member for Calgary North may have, like one of his colleagues in British Columbia, a pipeline to the Lord and can take his money with him. Perhaps he can transfer it there by bank draft; I don't know. But most people can't take theirs with them. A farmer will say to his son that he can only afford to pay so much for the farm, and that is all he needs for his retirement. So that is the price to be paid. This places an improper value on the farm which cannot be taken into account so far as the provisions of this bill are concerned. We have the same situation in respect of the Liberal government's land socializing program. An unfair value is arrived at, based on different considerations.

November 16, 1971
Income Tax Act
Under the ARDA program an old man and an old woman who have no children are approached and offered a price for land which is often based on fair value. I am not opposed to the price that is paid under this plan but in some areas it is based on social considerations. If these people are not paid a fair price they will not be able to meet their costs of living and will go on welfare. One of the largest land owners in my area is the federal government. It owns much of the land in the area as a result of this kind of deal.


Gérald Laniel: Order, please. I regret to interrupt the hon. member, but I must advise him that his time has expired.


Stanley Howard Knowles: Carry on.


Gérald Laniel: Does the hon. member have the unanimous consent of the committee to continue his remarks?


Some hon. Members:: Agreed.


Some hon. Members:: No.


Gérald Laniel: I am afraid the hon. member does not have unanimous consent; therefore, he may not continue.


Mr. Downey:: Mr. Chairman, I am rather disappointed that members on the government side would not allow the hon. member for Timiskaming to conclude his remarks.


An hon. Member:: We're not.


William Arnold Peters: That's all right; I'll make the speech again tomorrow.


Cliff Downey: In respect of the amendment before us, when one looks at the special nature of the farming community it would seem essential that something be done for these people to ensure continuance of the farm unit. I do not know whether it should be exactly in the form of this amendment or through some other concepts. When one takes into consideration the importance of the agricultural industry to civilization through the centuries, I believe it is important that it be given special consideration.
This amendment, and I suggest some of the wording in the subamendment, would certainly assist in recognizing agriculture and placing it in a special position. Admittedly, there are some difficulties in making all farms completely free of capital gains tax. It is possible that some locked-in effect might accrue over the years in the accumulation of capital gains, but I would urge the minister to consider these amendments and the special nature of agriculture so that the people engaged in this field might be able to carry on in the same manner even though they are in difficult circumstances.
Certainly, if no recognition is given to the manner in which intergeneration transfers are made, farmers will be in difficult circumstances because there will never be funds available to even look after a deemed realization. I do not think the actual realization is a difficult situation when a farmer sells out, because he has the benefit of the income averaging concept. He can average his income

over 15 years and I believe this will be very valuable to the farmer who sells a farm.
However, I would ask the parliamentary secretary, if the government is to go along with a suggestion in the brief presented by the stock breeders, to see if there is some way to bring in the income averaging concept on the deemed realization of intergeneration transfers. Perhaps a concept could be introduced to take the load of the deemed realization off the family farm and make it possible for these people to carry on without having their income adversely affected over a very short span of one or two years.
I believe it is unfortunate the minister has not seen fit to extend to the incorporated family farm the provisions granted individual farmers. These have become very important in the last few years. The fact that there is nothing to indicate that the provision in respect of the $1,000 annual capital gains exemption is available to the incorporated family farm is, I believe, an oversight. When 80 per cent or 90 per cent of the income of a family farm incorporation comes from the sale of agricultural products, and when 80 per cent of the shares are held by the family, I believe the family farm corporation should be treated in the same manner as the individual farmer. I hope the minister will consider an amendment to rectify the situation in the days ahead.
If we are to have capital gains, it is vital that an inflation factor be built into this concept. Inflation will hit no one harder than those in the farming community. In many cases land values today are artificial. Certainly they are not realistic when one takes into consideration the productivity of the land. The prices of agricultural products are much the same today as they were 20 or 30 years ago. While production methods have increased, productivity costs have spiralled. I suggest that a great deal of the capital gain which would seem to be evident on farmland over the past 20 years has been largely due to an inflation factor and a lessening of the value of money. I believe it is disastrous to consider a capital gains tax without taking into consideration the factor of inflation.
May I call it ten o'clock?


Patrick Morgan Mahoney: Mr. Chairman, perhaps I might be permitted, on a point of order, to suggest what the menu might be for the next few days. Tomorrow we will resume the debate we were involved in last Wednesday on division I of part I. That is, returns, assessments, payment and appeals. Then we would proceed with division J, appeals to the Tax Review Board and the Federal Court. Following that we would deal with part XV, administration and enforcement, and part XVI, tax evasion. When we finish those tomorrow afternoon it would be the intention to return to this block of sections dealing with capital gains, and on Thursday and Friday we would proceed to sections 135, 136 and 137 dealing with co-operatives and credit unions. Without indicating the section numbers, it would then be the intention to proceed with international income next Monday and with the resource industries on Tuesday.
Progress reported.
November 16, 1971



PROCEEDINGS ON ADJOURNMENT MOTION

[Stage Direction]
A motion to adjourn the House under Standing Order 40 deemed to have been moved.

Mr. Mark Rose (Fraser Valley West):: Mr. Speaker, since the question I raised about a month ago regarding the-


The Acting Speaker (Mr. Boulanger):: Order. The hon. member for Chambly (Mr. L'Heureux).



THE LATE BERNARD PILON

Mr.   Yvon@: Mr. Speaker, I rise on a question of privilege.
I should like for a moment to recall the memory of my predecessor, the friend of all hon. members, the late Bernard Pilon.
Bernard Pilon left us prematurely a year ago, following upon a heart attack which felled him as he was on his way back to Ottawa one Sunday evening.
The heart-wrenching news saddened all his friends, all his fellow citizens. All certainly wondered why that happened to one who was kindness and devotion itself, irradiating human warmth.
One day, while I was in Mr. Pilon's home, I noticed a plaque bearing a maxim expressing the philosophy of those who live according to their heart, and I quote:
When the One Great Scorer comes to write against your name, he writes: not that you won or lost but how you played the game.

Without knowing it, Bernard Pilon had posted on the wall the summary of his own life, he to whom had been given a thankless task he assumed with the sense of dedication and courtesy which was a characteristic of his life.


The Acting Speaker (Mr. Boulanger):: Order, please. This is not a question of privilege but I think the House would agree that we could forget the rules for a minute. The House will now continue with the adjournment debate.



PROCEEDINGS ON ADJOURNMENT MOTION

[Stage Direction]
Resuming consideration of a motion to adjourn the House under Standing Order 40 which was deemed to have been moved.
Proceedings on Adjournment Motion

Mark Willson Rose: Mr. Speaker, I am certain that all members of the House were pleased to extend the necessary time in the adjournment debate in order that the hon. member for Chambly (Mr. L'Heureux) could pay his respects to the late hon. member.
To return to the point that I was attempting to raise a little earlier, about a month ago I raised some questions regarding the report on the Public Service Staff Relations Act. It might be helpful to hon. members who are unfamiliar with this matter and who are attending tonight if I quoted the exchange which took place on October 25 between the Minister of Manpower and Immigration (Mr. Lang) and myself. I quote from page 8993 of Hansard as follows:


Mark Willson Rose: Mr. Speaker, I should like to address a question to the Minister of Manpower and Immigration. Since problems of morale in the public service are of long standing, many of them associated with the Public Service Staff Relations Act, and since the minister had had on his desk the report of the public service staff relations committee of three since June 15, when does the minister intend to make this report public?


Hon. Otto E. Lang (Minister of Manpower and Immigration):: Mr. Speaker, the report referred to by the hon. member is part of work done in connection with cabinet planning of possible proposals in regard to this whole area. Any decisions about the changes that will follow in consequence thereof will be announced when the decisions are known.


Mark Willson Rose: Since the report is reported to contain recommendations that include the extension of the bargaining process along lines somewhat equivalent to that in the private sector, and also the right to strike under certain circumstances, when does the minister feel that these recommendations, if accepted by the government, are going to be translated into legislation?


Otto Emil Lang: Mr. Speaker, I do not intend to comment on what may or may not be in recommendations, nor try to predict the date upon which a decision will be made.
This is why I raise the question in the adjournment debate. My first comment this evening is concerned with the observation over the past three years that when this government wants to score political Brownie points it makes every effort to publicize them through white papers, press releases, various forms of flattery and draft legislation in a naked attempt to draw the people of Canada into a dialogue regarding the new policy proposal. This is not necessarily always bad. We had the white paper on taxation, the social welfare white paper and even the musings of the Minister of the Environment (Mr. Davis) on ecological matters that are not necessarily backed up by legislation. This creates a dialogue.
On the other hand, when the issue is touchy, sensitive, liable to cost money, cause the government to give up some of its power or provide some source of embarrassment, the Liberals seek to keep all their deliberations beneath the glare of publicity and subsequent studies, paid for by the people of Canada and of vital interest to many Canadians, become internal documents meant only for the uncorruptable eyes of cabinet ministers.
This is the case with the Bryden committee study of the Public Service Staff Relations Act and related matters. Incidentally, the undercover charge made just now also applies to the Gray report of foreign ownership , the proclamation leading up to the War Measures Act and

November 16, 1971
Proceedings on Adjournment Motion
literally hundreds of other studies and reports that have been refused Members of Parliament who have requested certain public documents through the order paper procedures.
This is a very secretive government, Mr. Speaker. No wonder people are becoming increasingly disenchanted with the institution of Parliament when the government on one hand professes participation and shared decisionmaking, and on the other refuses to be open and frank with people and their elected representatives in developing certain intimate government plans and proposals.
It has been said frequently that this government is contemptuous of Parliament, Mr. Speaker. I for one do not believe that this government holds Parliament in contempt. Quite the opposite. I think frequently the government is terrorized by Parliament and that is precisely why in reaction to the searching initiated by the opposition the government has sought refuge in secrecy.
The plain fact of the matter is that various groups in the public service do not have even the primitive bargaining rights enjoyed in the private sector. Another fact is that there is a tremendous morale erosion in the public service because of the lethargy with which improvements have come about and the one-year stalling which the Bryden committee occupied in its deliberations. A third one is that civil servants have been jockeyed around long enough in classifications, salaries and lack of adequate appeal procedures in the current act. I am glad the President of the Treasury Board (Mr. Drury) is here. Particularly offensive is clause 7 in the act.
Finally, I believe public servants are going to demand action on the Bryden report, and they want it quickly. For not much longer will they behave as responsible supporters of the system that exploits them. Sooner or later I think they will abandon the responsible stance which they take in many of the groups of threadbare professionalism and will begin to act like a militant union, and then maybe they will get some action. In conclusion, Mr. Speaker, the Bryden report has been on the minister's desk since June 15. I think it contains many progressive recommendations, and it is time it was released for all of us to see.


Mr. Marcel Prud'homme (Parliamentary Secretary to Minister of Manpower and Immigration):: I am sure my hon. friend will be very satisfied with my answer. His question did not terrorize us at all and we are very happy to give the following answer.
Mr. Speaker, I can appreciate the hon. member's keen interest in staff relations in the public service. The government, too, is keenly aware that this is a most important matter and this is why the Minister of Manpower and Immigration (Mr. Lang), who reports to Parliament for the Public Service Staff Relations Board, undertook a review of the Public Service Staff Relations Act. The minister, as the hon. member will recall, established a three-member working group to assist him in the review. The intention was to provide a vehicle whereby the views of interested parties could be co-ordinated and assessed in order that problem areas could be identified and it could be determined if revision of the act was in fact required. Submissions from all the interested parties in this area were invited and many were received and referred to the working group.

As the minister indicated in the House, the report mentioned by the hon. member is a major aspect of the overall examination of staff relations in the public service. It is an integral part of the process which will enable the government to have the opportunity to give close consideration to this very important matter. It is not possible at the present time to indicate the nature or scope of proposals or to determine possible changes that will follow as a result of this review; and, Mr. Speaker, at this time I am not in a position to predict the date upon which decisions will be made or announced.
I am sure the president of the President of the Treasury Board (Mr. Drury) is a good indication of our interest and the fact that we are not at all terrorized by the question of our hon. friend.


Stanley Howard Knowles: How long, o Lord, how long?



LABOUR CONDITIONS-QUEBEC-GOVERNMENT FORECAST AS TO UNEMPLOYMENT

Mr. Georges Valade (Sainte-Marie):: Mr. Speaker, I do not pretend that my intervention tonight will change even an iota of the procedure and practice the government has adopted for a few years of systematically refusing to answer the members of this House who are elected to try to inform the population through newspapers and their interventions during the debates.
I have tried for a few days now to obtain information from the government, particularly from the minister responsible for manpower, but unfortunately it has been impossible for me to obtain an answer likely to eliminate the uncertainty which prevails in that respect.
I have here a summary of the recommendations made recently by the Economic Council of Canada. May I quote a remark dealing with the very point I am trying to raise. I would like to quote a newspaper article in that connection. Here it is:
In its annual review on the design for decision-making and their application to human resources policies, the Economic Council of Canada states that people have the right to know what is going on and what is in the making and that governments must free information from bureaucratic and political restraints which are too often imposed on it.
Mr. Speaker, a few days after this statement by the Economic Council, a press release dated November 9, 1971 and issued by the office of the Minister of Justice (Mr. Turner) bore the title "Statutory Instruments Act" and the sub-title "Government regulations become more accessible to the public".
What amazes me is that a few days before this wellmeaning statement, I was trying to obtain from the Minister of Manpower and Immigration (Mr. Lang) economic data likely to indicate to the House what the rate of unemployment would be this coming winter, as recorded at page 9034 of Hansard for October 26, 1971. But, since the minister was not in the House at that time, I put the question to the Prime Minister (Mr. Trudeau), who bluntly refused to reply. I renewed my attempt the next day, October 27, as recorded at page 9089 of Hansard, and
November 16, 1971

asked the Minister of Manpower and Immigration if he could give the House some indication of the extent of unemployment this winter.
My question was related to a statement made a few days before by the Minister of Regional Economic Expansion (Mr. Marchand) during a speech in Montreal in which he had said that the government expected unemployment to reach 10 or 12 per cent during that season, especially in the province of Quebec.
I was trying to get from the minister responsible for manpower or from the Prime Minister scientific data which could enlighten the House on the present situation, or else suggestions to alleviate the disaster which threatens us.
I was surprised to realize that every time I was asked that question, I was flatly refused an answer. I would like to quote the answer of the Minister of Manpower and Immigration:


Otto Emil Lang: Mr. Speaker, I am not sure, because I was not in the House yesterday, to what figures the hon. member is referring.
We all know that there are in the House a number of parliamentary secretaries whose function is precisely to inform the minister of the proceedings of the House, particularly those concerning his own department.
I cannot accept, Mr. Speaker, that under the rules of this House the ministers or parliamentary secretaries should not be allowed to answer questions of hon. members the next day.
Recently I was listening to a radio broadcast on which the right hon. Prime Minister met students near Quebec City. He did not hesitate to answer all questions, both serious and bold, which the students put to him on government policy; yet the same privilege is denied members elected for the very purpose of getting information on current problems.
The Minister of Finance (Mr. Benson) recently made a statement the text of which appeared in the Ottawa Journal on November 16. The minister predicted a growing economy, an increase in the gross national product and the creation of 234,000 new jobs. But he never said what he used as a basis for these predictions, and he refuses to give us the criteria which could help us assess the extent of unemployment we will have to face this winter. So, Mr. Speaker-


The Acting Speaker (Mr. Boulanger):: Order. I regret to interrupt the hon. member but his time has expired. I now recognize the Parliamentary Secretary to the Minister of Manpower and Immigration (Mr. Prud'homme).


Marcel Prud'homme: Mr. Speaker, the Department of Manpower and Immigration, jointly with Statistics Canada, conducts a monthly statistical survey on the distribution of the labour force. This survey enables us to express in percentage the employment and unemployment rates in every part of the country, not only in terms of persons who have a job or are unemployed, but including also the normal seasonal variations.
Although the department makes a continual assessment of the labour force, this monthly statistical survey is not
Proceedings on Adjournment Motion
make in order to extrapolate future employment or unemployment rates in the country.
The hon. member for Sainte-Marie knows very well that some things are unforeseeable. He also referred to a report from the Economic Council of Canada: he might also quote this part of the Council's report that suggests that we should find new manpower training formulas.
My hon. colleague might also acknowledge that, in accordance with the new policy announced for this winter, a new $20 million on-the-job manpower training program is going to be established, following the well advised recommendations of the Economic Council of Canada.
I know that the hon. member does not like us to attempt to predict things which only the Riders of the Apocalypse could predict, as he and his party could have come up with wise proposals had the rate of unemployment been high.
My hon. colleague knows very well that the government is doing its best to lower the rate of unemployment by bringing in all sorts of new programs like the one announced by the Minister of Finance and the Minister of Manpower and Immigration. I am referring to the $498 million works program which is going to benefit a number of organizations. I am thinking of the local initiative program, either for municipalities or for organizations to carry out public works for which $80 million will be granted for the immediate creation of jobs-as the hon. member for Sainte-Marie should know-in order to meet a difficulty which would arise for any government in the present economic situation in view of the world situation and especially in the United States.
I am convinced that the government does its utmost to cope with that situation and, if my hon. friend has better suggestions, the government will hear him very carefully in order to reduce the unemployment rate to a minimum.


Mr. Deputy Speaker (Mr. Boulanger):: Order. I regret to have to interrupt the hon. Parliamentary Secretary, but his time has expired.


Georges-J. Valade: Mr. Speaker, I rise on a point of order.


Mr. Deputy Speaker (Mr. Boulanger):: Order. The hon. member knows the rules of the House. At this point of the proceedings he cannot rise on a point of order.



FISHERIES-FEDERAL GOVERNMENT PARTICIPATION WITH MANITOBA IN INCOME SUPPORT AND RETRAINING PLAN FOR LAKE WINNIPEG FISHERMEN

Mr. Doug Rowland (Selkirk):: Mr. Speaker, in 1970 Lake Winnipeg was closed for fishing because certain species of fish had been found to contain levels of mercury in their flesh which made them unacceptable for human consumption. One might argue about what level of contamination is acceptable and, indeed, many people are doing so. But the fact remains that Lake Winnipeg fish were declared by the federal government to fall within the unacceptable category.
Fishermen were forced out of work. Legal proceedings were initiated by the government of Manitoba to seek damages from the companies which were believed to have

November 16, 1971
Proceedings on Adjournment Motion
contributed to the pollution of the lake, thereby bringing about its closure. A little earlier the federal government had been buying fish from the fishermen and burning them in order to prevent the possibility of contaminated fish reaching the market. Once the lake had been closed, a crash program of compensation for the fishermen affected was instituted by the federal Department of Fisheries and the government of Manitoba, the federal department supplying $1 million of the total bill of $2 million. Later, when it became obvious that the problem would not be solved immediately and that something would have to be done before the winter, the government of Manitoba established a further program costing $490,000, approached the federal Minister of Fisheries (Mr. Davis) for half the cost of this program and received the money.
Throughout this period the province had been working toward the establishment of income maintenance and job retraining programs which would provide a long-range solution to the problems of the fishermen affected. It was determined that this program-incidentally, it was described by federal spokesmen as imaginative-would cost somewhat in excess of $2 million for the first year. Again, the government of Manitoba went to the Minister of Fisheries with the suggestion that the federal government should pay half. But on this occasion, for some reason, the minister was unable to make such a commitment on behalf of his department. He spoke of the need to consult the departments of Manpower, Indian Affairs and Northern Development, and so forth. As a result, the implementation of the plan was delayed and became snarled in red tape.
It is even now uncertain whether contributions from the various federal departments have amounted to half the costs incurred. To this day the government of Manitoba has not received a commitment from the federal government to be responsible for half the costs incurred in attempting to help these unfortunate fishermen adjust to circumstances which were not of their making. Surely, asking the federal government to bear half the cost of this program is an extremely modest request to make, given the fact that fisheries fall under federal jurisdiction. Yet no formal recognition of its responsibility has yet been forthcoming from the federal government.
What is to happen this winter, or next year? Are the problems of the fishermen to be dealt with again on an ad hoc basis? To which federal minister must the government of Manitoba go in order to obtain a decision in principle? Logic would suggest that the appropriate person would be the Minister of Fisheries since it is he who has been involved from the beginning. Even if the money does not ultimately come from the budget of his department, surely it is he who is best equipped to go to bat for the fishermen of Manitoba before his cabinet colleagues. Surely it is he who is best able to co-ordinate federal efforts. Surely the government of Manitoba should not be expected to go from door to door. But in his answer to my question of October 19, the minister said not so. This was his reply:
The short answer is my department is concerned with the development of an economic fishery and is not engaged in constructing an income support program for this segment of the Canadian population.
Who, then, is able to state definitely whether the federal government will accept some of the on-going financial responsibility for the problems encountered by the fishermen? The Prime Minister (Mr. Trudeau)? Last June I asked him that question directly in the House and he intimated he would have to consult the Minister of Fisheries who, as it happened, was not in the chamber at that time.
This evening I am asking for answers to three questions. First, is the federal government prepared to accept in principle and in fact responsibility for a share of the cost incurred in meeting the problems of the fishermen involved in this special case of pollution dislocation? Second, which department and which minister are responsible for co-ordinating federal efforts in this regard? Third, when will the federal government's decision with respect to assistance be made, when will it be conveyed to the province of Manitoba, and by whom?


Hon. Jack Davis (Minister of Fisheries):: Mr. Speaker, we have a very difficult problem in Manitoba in respect of the fishery on Lake Winnipeg. Fishery matters, particularly conservation, and management of the fishery in that province have long been delegated to the province and are the direct responsibility of the provincial government.
Difficulties have been encountered recently in respect of income maintenance. The provincial government has developed several plans. It announces them and then asks the federal government to put up half the cost. The federal government, through its Department of the Environment, has been engaged in formulating development plans for the re-establishment of the fishery there. The fish resource was badly depleted in the 1950s and 1960s. It fell from a high of some seven million pounds, an all-time record, to half a million pounds in 1969-obviously a very poorly managed fishery.
Then the mercury problem came along. Winnipeg gol-deye were fished out. Whitefish were in difficulty from a supply point of view before mercury struck. The federal Department of Fisheries, together with other provincial governments on the Prairies, had established a selling agency and was marketing all the fish from the Prairies. For a period while we were exploring the extent of the mercury problem, fish were bought and a percentage of the catch was destroyed.
Once the mercury problem indicated a closure, the federal Department of Fisheries endeavoured to develop new sources of livelihood for the fishermen. It has had a very active campaign, costing a total of $450,000 during the last 12 months as a result of which 150 fishermen have been employed. Coarse fish, fish formerly rejected and not thought to be economic, now show considerable promise.
The provincial government continues to put forward programs for income maintenance for fishermen, many of whom have had their livelihoods seriously undermined by bad management in previous years. We are hopeful that most of Lake Winnipeg can be reopened for whitefish next year. However, it will be a very low level because of the very serious depletion of the lake. Also, we are hopeful that the coarse fish operation will develop to the point where it becomes commercial and provides considerable income for a number of fishermen. Other departments have been involved in the over-all program of rehabilitation, such as the Department of Indian Affairs and Northern Development, and Manpower and Immigration. They have also assisted the provincial government.


The Acting Speaker (Mr. Boulanger):: Order. I regret that the time allotted to the minister has expired.
Motion agreed to and the House adjourned at 10.31 p.m.

Wednesday, November 17, 1971