1971-10-22

PRESENCE IN SPEAKER'S GALLERY OF PRIME MINISTER OF CEYLON, MADAME BANDARANAIKE

Mr. Speaker:: It gives me much pleasure to bring to the attention of hon. members the presence in the Speaker's gallery of a very distinguished visitor to our country, Madame Bandaranaike, Prime Minister of Ceylon.


Some hon. Members:: Hear, hear!


Mr. Speaker:: Mrs. Bandaranaike heads the government of a country with which, over a long period of years, we have had very close ties. We welcome you, Madame Prime Minister, as the enlightened leader of a country with which we are associated as partners in the Commonwealth of Nations and we welcome you as a friend of Canada.
On behalf of hon. members I thank you for the hospitality which your parliament, your government and you personally have extended to Canadian parliamentarians who have visited Ceylon through the Inter-Parliamentary Union and the Commonwealth Parliamentary Association.

We are therefore very happy to welcome you to Canada. On behalf of hon. members and all Canadians, I want to wish you and those who came with you a useful as well as a pleasant visit in Canada.


Some hon. Members:: Hear, hear!



ROUTINE PROCEEDINGS


Hon. Allan J. MacEachen (President of the Privy Council):: Mr. Speaker, I wish to make a brief statement to the House with respect to the method of dealing with Bill C-259 in committee of the whole. The House leaders met on this bill several times this week, and this morning we agreed that on Monday the committee of the whole should turn to the question of income exemption levels and certain deductions, as dealt with in the proposed new sections 109 and 110 found on pages 277 to 289 of the bill. Our understanding is that when these two proposed new sections are called on Monday discussion in committee of the
whole will be directed to the subject matter of those provisions.


Mr. G. W. Baldwin (Peace River):: Mr. Speaker, we agree that this method should be adopted. In light of the problems posed by this bill we think that the suggestion that has been outlined and discussed deserves the support of all members in an effort to have a relevant debate. The simple fact is that, having been confronted with this Frankenstein, we are now going to try to housebreak it.


Mr. Stanley Knowles (Winnipeg North Centre):: Mr. Speaker, we too are prepared to agree to this proposal for Monday, namely, that we focus our discussion on those aspects of the bill that are covered by the proposed new sections 109 and 110. It is also our hope that after this discussion has been concluded we may find other areas that we can similarly pinpoint and discuss under specific headings.



INDUSTRY


Hon. Iean-Luc Pepin (Minister of Industry, Trade and Commerce):: Mr. Speaker, under Standing Order 41(2), I would like to table, in both official languages, the Textile and Clothing Board report on men's and boys' shirts as well as a press release outlining the measures taken by the government in that matter.



MANPOWER


Mr. Frank Howard (Skeena):: Mr. Speaker, pursuant to Standing Order 43 I desire to seek the unanimous consent of the House to move a motion of urgent and pressing necessity occasioned by the admission of the ineffectiveness of the Canadian job vacancy survey program currently being conducted. If I get unanimous consent I will move, seconded by the hon. member for Winnipeg North Centre (Mr. Knowles):
The subject matter of the Canadian job vacancy survey be referred to the Standing Committee on Labour, Manpower and Immigration for an evaluation of the purposes and potential of the said survey.

October 22, 1971
Inquiries of the Ministry


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


Some hon. Members:: Agreed.


Some hon. Members:: No.


Mr. Speaker:: There is not unanimity. The motion cannot be put.



ORAL QUESTION PERIOD


Mr. Speaker:: The hon. Leader of the Opposition.


Some hon. Members:: Hear, hear!


Mr. Bell:: Newfoundland next.


Mr. Horner:: Then Assiniboia.


Mr. Ricard:: There is another one coming.


Hon. Robert L. Stanfield (Leader of the Opposition):: Mr. Speaker, I do not know what that is all about, but I am sure the Ontario Conservatives could never have done so well without the help of the federal Liberals.


Some hon. Members:: Hear, hear!


Some hon. Members:: Oh, oh!


Robert Lorne Stanfield: I wish to direct my question to the Prime Minister. Earlier in the week the Prime Minister told me he did not anticipate that the visit of Premier Kosygin and his party would result in the signing of any trade agreement between the two countries. I now wish to ask him whether as a result of this visit any additional sales of Canadian products to the U.S.S.R. have been arranged or consummated or whether he anticipates that any will be arranged and announced prior to the departure of Premier Kosygin from the country?


Right Hon. P. E. Trudeau (Prime Minister):: No, Mr. Speaker.


Robert Lorne Stanfield: Mr. Speaker-


Stanley Howard Knowles: Don't you sit down between questions?


Robert Lorne Stanfield: Only when the answers are long enough to give me a chance to sit down. I wish to ask the Prime Minister a question with regard to our relations with the U.S.S.R. on the subject of grains. Have we received any firm commitment that Canada will continue to be a preferred supplier of grain for the U.S.S.R. market and has there been some general understanding or agreement reached with regard to prices and terms of future sales?


Jean-Luc Pepin: I will try to answer this question, Mr. Speaker. The communique coming at the end of Mr. Kosygin's visit will be issued in due course. There will be something in it on trade. Yesterday I answered an hon. member's question by saying that the Russians have adopted the good habit of coming to Canada first when they are in need of wheat. This has taken place. I said also yesterday that the contacts between the Canadian Wheat Board and Exportkhleb were as intimate as could be, trade-wise, and that talks are taking place now on the possibility of adding further to the present contract under which deliveries are made to the Soviet Union, which anticipates export of 3.5 million tons of grains from Canada to the Soviet Union and comes to an end by April, 1972. On the general trade picture it was decided that the trade agreement between Canada and the U.S.S.R. which comes to an end next year will be renegotiated and discussions to that effect will begin early next year.


Robert Lorne Stanfield: Mr. Speaker, I hope the minister does not mind my asking this question so quickly after the one put yesterday, because we find that government policy changes from month to month and I thought it might change from day to day. I should like to ask the Prime Minister or the Minister of Industry, Trade and Commerce whether in the discussions with Premier Kosygin and his party any definite arrangements were made with regard to the consummation of any joint projects involving Canadian industry in association with the U.S.S.R. working in partnership in some areas where Canadian industry is regarded as having some special expertise?


Jean-Luc Pepin: Mr. Speaker, I will have to refrain on this subject. I think we should wait for the communique. I will expand on the communique if there is need to do so after it has been issued.



SENATE AND HOUSE OF COMMONS


Stanley Howard Knowles: Mr. Speaker, if the President of the Privy Council were still here I would put this question to him, but since he has departed perhaps I might put it to the Prime Minister. Some time ago, under the direction of the former President of the Privy Council, now the Minister of National Defence, the government had given some attention to the question of legislation respecting conflict of interest, having in mind particularly Senators, Members of Parliament and high-placed government officials. Can the Prime Minister say what has happened to that study and whether there is any present plan to bring in legislation in this area?


Pierre Elliott Trudeau: Mr. Speaker, the study was pursued so far as we could within government circles. We discussed it among ministers for our own guidance, but we see no possibility of bringing in legislation in the immediate future.
October 22, 1971



THE CANADIAN ECONOMY


Mr. Jack Murta (Lisgar):: Mr. Speaker, I should like to direct my question to the Minister of National Revenue. Since the Gray report recommended, as we have seen in some newspapers, that 50 per cent or 51 per cent Canadian ownership should be required in all major companies operating in Canada, is the government considering this recommendation at this time?


Hon. Herb Gray (Minister of National Revenue):: Mr. Speaker, as the House is aware, the cabinet is presently considering work I have been supervising in this area of policy. I cannot comment further on the hon. member's question because cabinet documents in their very nature are always confidential, but the Prime Minister has confirmed that when cabinet discussions are complete there will be a statement of policy.


Jack Burnett Murta: Mr. Speaker, I should like to direct a second question to the Minister of National Revenue. Is the government considering any such suggestion at this time, regardless of its origin, along the lines of my first question?


Herbert Eser (Herb) Gray: I regret there is nothing I can properly add to the answer I gave to the hon. member's first question.



FOREIGN OWNERSHIP-POSSIBLE EFFECT OF REPORT TO CABINET ON RELATIONS WITH UNITED STATES

Mr. Eldon M. Woolliams (Calgary North):: Mr. Speaker, I should like to ask the Minister of National Revenue whether the serious deterioration in relations between this government and the government of the United States is the reason for the delay in the Gray report or for the change in policy of this government?


Mr. Speaker:: Order, please. The hon. member will recognize that a question asked in those terms is not in order. It is obviously in the form of an argument. I suggest that the hon. member might wish to rephrase the question.


Eldon Mattison Woolliams: It was not my intention to start an argument.


Some hon. Members:: Oh, oh!


Eldon Mattison Woolliams: That is the last thing I would think of this morning. I will try to reword the question because I do not intend to start an argument. I think this is a question of fact. Is the apparent serious deterioration in the relations between this government and the government of the United States one of the reasons or the reason that the Gray report and its recommendations have not been brought forward?


Herbert Eser (Herb) Gray: I do not
agree with the hon. member's premise indicating that there has been any delay in this matter. It is a complicated and comprehensive matter and as soon as cabinet discusinquiries of the Ministry
sions are completed, as the Prime Minister has said, it is the government's intention to make an appropriate statement.


Eldon Mattison Woolliams: Can the Minister of National Revenue tell the House whether there has been any discussion with officials of the United States government regarding the contents of this report and what effect it might have on the relationships between this government and that of the United States?


Herbert Eser (Herb) Gray: No, Mr. Speaker.



COMPLAINT RESPECTING UNILINGUAL TELEPHONE SERVICE

Mr. Rene Matte (Champlain):: Mr. Speaker, my question is directed to the Prime Minister.
Could he tell the House the nature of and the reasons for the conflict which prevents French-speaking members of Parliament to have French telephone service today?


Pierre Elliott Trudeau: Mr. Speaker, I did not catch the last words but if the hon. member is referring to the conflict at Bell Canada, I understand that it involves all employees, whether their language or their extraction.


René Matte: May I put a supplementary question?
Has the Prime Minister, who seems never to place a call in French, not notice that we have no telephone operator on duty-


Mr. Speaker:: Order.


Pierre Elliott Trudeau: Mr. Speaker-


Mr. Speaker:: Order. Unless the Prime Minister rises on a question of privilege, I believe that the question, as asked, is not in order. The hon. member has not really asked a supplementary question.



CROWN CORPORATIONS


Mr. Charles H. Thomas (Moncton):: My question is for the Minister of Supply and Services. On Tuesday the minister stated that the Polymer lay-off was a management decision based on difficult markets. I note that last year Polymer made a $7 million profit. Has Polymer been making a profit this year?


Mr. Speaker:: Order, please. That question should normally be placed on the order paper. The hon. member asks whether a Crown corporation has made a profit. To my way of thinking, that question should be placed on the order paper .

October 22, 1971
Inquiries of the Ministry


Charles Humbert Thomas: May I rephrase the question, Mr. Speaker, and ask the minister whether, after Polymer announced the lay-off decision he checked the profit picture of the company with Polymer officials?


Hon. lames Richardson (Minister of Supply and Services):: Yes, Mr. Speaker. Polymer has shown some profit at this point but the final figures, of course, will not be known until the end of the year.



SUGGESTED USE BY CANADA OF UNITED KINGDOM AS SPRINGBOARD TO DIVERSIFY TRADE WITH EUROPEAN COMMON MARKET

Mr. Gordon Ritchie (Dauphin):: I have a question for the Minister of Industry, Trade and Commerce. Has the government any plans to respond to the invitation of the British High Commissioner speaking to the Canadian Export Association, that Canada use the United Kingdom as a springboard in order to diversify our trade with the European Common Market?


Jean-Luc Pepin: The idea is a familiar one to me. The High Commissioner is a very intelligent and sympathetic man. He has expressed these views before at the Canada-U.K. Meetings which took place a few weeks ago. We are aware of those ideas and hoping that Canadian businessmen will take advantage of the offer.

the whole Indian Act to the Supreme Court for analysis in terms of its offensiveness against the Bill of Rights?


Mr. Chretien:: Mr. Speaker, I do not know whether that procedure would be advisable, but I will consider it.



NEGOTIATIONS WITH UNITED KINGDOM TO OFFSET DIFFICULTIES FOR CANADIAN AGRICULTURAL EXPORTS IF BRITAIN ENTERS COMMON MARKET

Mr. A. P. Gleave (Saskatoon-Biggar):: Mr. Speaker, I want to ask the Minister of Industry, Trade and Commerce whether negotiations or consultations are still being carried on between officials of his department and their counterparts in the United Kingdom so that we can offset some of the difficulties that Canadian agricultural exports may encounter if and when the United Kingdom enters the Common Market?


Jean-Luc Pepin: Mr. Speaker, this was done a few months ago with some results which were reported to the House by the minister responsible for the Wheat Board at that time. The whole question of the position of Canadian exports of grains to the United Kingdom will be the subject of further discussion when an adjustment is made between Canada and the United Kingdom on all matters pertaining to entry. I am afraid the answer is not very clear, but I will meet the hon. gentleman later if he wants me to elaborate further.



INDIAN AFFAIRS


Frank Howard: May I direct my question to the Minister of Indian Affairs and Northern Development. Has a directive been issued from his department by Mr. Chapman, who I understand is the registrar, to the effect that Indian women who marry non-Indians no longer will be removed from the band register? If this is so, does it indicate the government has concluded that it will not appeal the decision of the Federal Court with respect to that matter?


Joseph Jacques Jean Chrétien: If I understand the situation correctly, Mr. Speaker, the registrar has decided to suspend proceedings until the matter is clarified.
The Minister of Justice and myself are presently considering the possibility of appealing this ruling of the Federal Court to the Supreme Court and as soon as a decision has been reached, I shall be pleased to inform the House.


Frank Howard: If the decision is made to proceed by way of appeal to the Supreme Court of Canada, would the government also take the occasion at that time to refer



TRANSPORT

[Stage Direction]
RETURN OF ..JOHN HAMILTON GRAY* TO BORDEN-TORMENTINE FERRY SERVICE
Mr. Heath Macquarrie (Hillsborough):: Mr. Speaker, I should like to direct a question to the Minister of Transport. Since October 21, an otherwise auspicous day too, was the day the John Hamilton Gray was to return to the Borden-Tormentine ferry service, can the minister now confirm that that ship is in fact on the strait service where it of course belongs?


Hon. Donald C. Jamieson (Minister of Transport):: Mr. Speaker, I am delighted to be able to say that I have met my commitment not only to the day but to the hour and that this fine ship is now plying the route as I said she would.



HARBOURS


Mr.   G.W. Baldwin@Peace River: Mr. Speaker, while the Minister of Transport is in such a good mood I would like
October 22, 1971

to ask him whether, in light of the very substantial increases in the production and export of coal from western Canada and the consequent need for additional ports, he is giving consideration to the development of one or two additional deep water ports in British Columbia?


Donald Campbell Jamieson: Yes, Mr. Speaker. In answer to questions from the hon. member for Skeena and also the hon. member for Peace River on previous occasions I have in fact indicated first of all in principle our willingness to establish a national harbour at Prince Rupert. What is being done now is that the confines that will come within that national harbour are being determined. As soon as that is done a formal declaration of its status will be made known. I hope that will be in a matter of a few weeks.



ACTION TO EXPAND EXPORT MARKETS FOR CANADIAN CATTLE

Mr. R. R. Southam (Qu'Appelle-Moose Mountain):: Mr. Speaker, I wish to direct a question to the Minister of Industry, Trade and Commerce. In light of the recent release by Statistics Canada indicating that the Canadian cattle population has reached an all-time high, what steps is the government taking to expand export markets for cattle and thus maintain the cattle population and assist in expanding it to a still higher level?


Mr. Speaker:: Order, please. This is a very general question. I suggest to the hon. member that this type of question ought to be replied to by way of a statement. If the minister can reply in three words, or perhaps four, he might be allowed to do so, but I suggest that the question is wide in scope and should be placed on the order paper or should invite a statement on motions.


Jean-Luc Pepin: Mr. Speaker, the export of cattle is one of the department's great preoccupations and also mine. If the hon. member wants to put down a written question I will give him the performance achieved in that field in the last two years.



NATIONAL PARKS


Mr. Real Caouette (Temiscamingue):: Mr. Speaker, I should like to put a question to the Minister of Indian Affairs and Northern Development who is responsible for national parks.
Is the minister in a position to tell us whether he has come to an agreement with the Quebec authorities concerning the development of a national park in the Temiscamingue area, a matter long under consideration?
Inquiries of the Ministry


Joseph Jacques Jean Chrétien: Mr. Speaker, I have nothing to report in this connection. I know that studies have been made at several locations in Quebec during the summer, but the provincial government has made no concrete proposal.


David Réal Caouette: Mr. Speaker, I should like to put a supplementary question.
Is the department making joint investigations with provincial authorities in Temiscamingue about the establishment of a national park in that area?


Joseph Jacques Jean Chrétien: Not only the department, Mr. Speaker, but the minister himself has been involved.


EXTERNAL AFFAIRS
Thomas Miller Bell: Mr. Speaker, I have a question for the Prime Minister. Is the Canadian government going to accord to President Tito the same level of honour and acclaim during his forthcoming visit as it did to Premier Kosygin, and does the government hope to sign cultural and trade agreements?


Pierre Elliott Trudeau: Mr. Speaker, on the matter of level of honour the hon. member should know that one is a head of state and the other is only the head of the government and therefore the treatment may vary in terms of protocol.I am not an expert on that, Mr. Speaker. As far as signatures are concerned, I am afraid we will have to wait until we sit down and discuss to ascertain whether any agreement is going to be signed.



NATIONAL REVENUE


Mr. J. P. Nowlan (Annapolis Valley):: I have a question for the Minister of National Revenue. Would the minister tell the House, if he can, whether the government intends to take any different action on the question of importation of apple concentrates from foreign countries prior to the meeting of the anti-dumping tribunal which I gather is scheduled for November 25?


Herbert Eser (Herb) Gray: Mr. Speaker, as the hon. member has confirmed, the Department of National Revenue has found dumping with respect to the importation of apple concentrates from certain countries. If I am not mistaken, this means that provisional duty is being applied subject to the final determination of injury by the injury tribunal. I am glad he has confirmed the greater degree of activity of the depart-

October 22, 1971
Inquiries of the Ministry
ment in the matter of anti-dumping investigations over the past year.


John Patrick (Pat) Nowlan: I have a supplementary question for the Prime Minister, Mr. Speaker. I appreciate that he may not be able to give an answer today but I hope he will take the matter up with the Minister of Agriculture. Since the question of importation of apple concentrates and apple products from offshore countries into Canada has been before the government in one form or another through briefs, in particular the brief from the national apple conference of January, 1971, and different types of action have been taken but no national apple policy has been enunciated, is the government prepared to implement the other recommendations from the first national apple conference of 1971 so the apple growers of the country will know just how to fit into the government's national plan?


Pierre Elliott Trudeau: I shall take notice of the question on behalf of the Minister of Agriculture, Mr. Speaker.



NATIONAL DEFENCE


Mr. Doug Rowland (Selkirk):: My question is addressed to the Minister of National Defence and relates to the purchase of aircraft for testing the flying potential of pilots, Mr. Speaker. Does the Musketeer aircraft which has been purchased have aerobatic capabilities and, if so, why? Do those capabilities result in an additional cost of $3,500 per unit over similar aircraft used for similar purposes by the United States Air Force?


Mr. Speaker:: Order, please. I would think a question such as this should be placed on the order paper. If there is some urgency which is not apparent, perhaps the minister might be allowed to reply briefly.


Hon. Donald S. Macdonald (Minister of National Defence):: Mr. Speaker, I should like to thank the hon. member for asking this question. The CBC report last night by Mr. Cleverley was erroneous in six major respects. The government acquired the aircraft in 1970 not for $1,500 above list price but for $1,500 below. The air force trainers have always been painted yellow, rather than only during World War II. The immediate predecessor of this aircraft, for example, was painted yellow. The aircraft, as used as part of the air force training, is used for aerobatic training in the sense of doing crisis control, stalls, spins and so on. It is for that reason that the aircraft whose manufacturer I take it was probably the source of the CBC reporter's information was not accepted and this aircraft was. The aerobatic procedures which are used are not the same as those in the United States air force. The Americans follow a different and more expensive system. We think ours is the better. The aircraft are not used for 12 hours flying as asserted but for 20 hours. As I have already indicated, we follow a different system in order to bring our pilots at an earlier point to a more advanced stage. I think it will be recognized that the CBC was again spreading false news.


Douglas Charles Rowland: A supplementary, Mr. Speaker. With regard to the urgency of the question, I thought the Liberals required some aid and comfort this morning!


Some hon. Members:: Oh, oh!



INCOME TAX


Mr. S. Perry Ryan (Spadina):: My question is directed to the right hon. Prime Minister. The president of Massey-Ferguson Limited has stated that certain tax proposals will make Massey-Ferguson less attractive to Canadian investors than Canadian corporations operating only in Canada and will result in Massey-Ferguson coming under the control of foreign investors-


Mr. Speaker:: Order, please. I would invite the hon. member to ask the question directly. I think it is not quite in order to quote in detail the statement on which the question is based.


Sylvester Perry Ryan: Thank you, Mr. Speaker. I was just coming to the question. Is the government going to make a statement about this matter which is of major concern to the thousands employed by Massey-Ferguson in metro Toronto?


Pierre Elliott Trudeau: I have not seen the remarks of the president of Massey-Ferguson, Mr. Speaker. Obviously the hon. member has and I would invite him to raise the matter with the Minister of Finance when the tax reform bill is discussed at that stage.


Sylvester Perry Ryan: As I consider it most urgent, would the Prime Minister ask the Department of Finance officials to review this serious matter immediately?


Mr. Speaker:: The hon. member for Yorkton-Melville.


An hon. Member:: Let him answer.


Pierre Elliott Trudeau: Mr. Speaker, we consider it most urgent too. That is why the bill is before the House now and that is why I invite the hon. member on an urgent basis to express his concern to the Minister of Finance.


Mr. Speaker:: The hon. member for Yorkton-Melville.



AGRICULTURE


Mr. Lome Nystrom (Yorkton-Melville):: In view of the supplementary to the previous question and in view of the very high cost of farm machinery as pointed out in the report of the Barber Commission, can the Prime Minister inform the House when we may expect action to implement the recommendations of that report?


Pierre Elliott Trudeau: Mr. Speaker, I shall take note of the question.
October 22, 1971



INDIAN AFFAIRS


Mr. Paul Yewchuk (Athabasca):: I have a question for the Minister of Indian Affairs and Northern Development. Is the minister in the process of negotiation or considering negotiation with the President of the Treasury Board for supplementary funds for the purpose of new school construction on Indian reservations?


Joseph Jacques Jean Chrétien: Mr. Speaker, if the hon. member refers to the situation prevailing in northern Alberta, we have already taken steps in order to make three mobile schools available to Indian communities, and urgently needed repairs to the water system have been made. We are still prepared to have talks with the Indian chiefs, if they are willing to meet with us here, but it is most urgent that the children go back to school immediately.


Paul Yewchuk: Can the minister indicate whether he intends to implement any of the recommendations contained in the fifth report of the Standing Committee on Indian Affairs and Northern Development which deals with Indian education?


Joseph Jacques Jean Chrétien: Mr. Speaker, we are now in the progress of studying the recommendations of the committee. I am making a review of the federal government policy on the education of the Indians. The problem is extremely important and complex. As soon as we have come to some conclusions, I shall be pleased to advise the House.


Paul Yewchuk: Can the minister tell the House when he intends to go to northeastern Alberta to meet with the chiefs?


Joseph Jacques Jean Chrétien: Mr. Speaker, I told the chiefs concerned that I should be pleased to go to Alberta in the weeks following the children's return to school.



INDUSTRY


Robert Lorne Stanfield: Mr. Speaker, I wish to ask the Minister of Industry, Trade and Commerce a question. A speech made recently by the Minister of National Revenue suggested that discussions on the auto pact between Canada and the United States are in abeyance. Are these discussions in fact in abeyance at present?
Inquiries of the Ministry


Jean-Luc Pepin: Mr. Speaker, these discussions have been in first, second or third gear at different times in the last 18 months, although I must say that at present they are in abeyance if one means by that that no active discussion is taking place. That is so today. I want to remind the hon. member that quite a number of meetings were held in the past at which Canadian negotiators tried to demonstrate to their United States counterparts that some of the suggestions they were making were in effect that the elimination of the safeguards might lead to greater difficulties than they had suspected and would result in freer entry into Canada for overseas produced cars.


Robert Lorne Stanfield: Can the minister indicate briefly why these talks are in abeyance, particularly in view of the importance we have been led to believe the United States authorities attach to these talks? Are they deadlocked or is there some other explanation.


Jean-Luc Pepin: Mr. Speaker, the only explanation is the one that the Prime Minister and I have offered on a number of occasions. When we met with the Americans after the August 15 announcement they informed us that they had a number of irritants they would like-


Eldon Mattison Woolliams: One of which is the Prime Minister.


Jean-Luc Pepin: -to discuss with us. We said at the time that we would gladly do so and that we too had a number of irritants to discuss. The only interpretation I can make, as to why the discussions have not yet begun, is that the U.S. authorities had other things to do which were more important in their minds, for example, international conferences, IMF talks, discussions with the Japanese on textiles, and so on. In due course, when they have done their homework, I am sure they will be in touch with us, and as we have done our homework we will be ready to start discussions.



INQUIRY OF THE MINISTRY

Mr. Gilbert Rondeau (Shefford):: Mr. Speaker, I should like to put a question to the right hon. Prime Minister.
Has he ordered the Quebec premier, Mr. Bourassa, to meet Mr. Kosygin?



FISHERIES


Mr. Lloyd R. Crouse (South Shore):: Mr. Speaker, I wish to direct a question to the Prime Minister. As the Prime Minister is aware, there is grave concern in Atlantic Canada about the decline in our fishing resources on our offshore banks as the result of overfishing by the Russians. I understand this matter was discussed with Premier Kosygin when he was in Ottawa. What response did the

October 22, 1971
Inquiries of the Ministry
Prime Minister receive from Premier Kosygin to his representations? Was any agreement reached that would be helpful, and when may we expect an announcement concerning any arrangements or agreements that were reached between our two countries?


Pierre Elliott Trudeau: Mr. Speaker, the matter was discussed mainly between the Minister of Fisheries or Minister of the Environment and Mr. Kosygin, and the hon. member may wish to direct his question to that minister.


An hon. Member:: That's a red herring.



EXTERNAL AFFAIRS


Mr. Barry Mather (Surrey-White Rock):: Mr. Speaker, I have a question for the Prime Minister. It has to do with the resolution passed by the House and endorsed by all parties last Friday urging President Nixon that the United States cancel the underground nuclear blast at Amchitka. Has Canada received an acknowledgement of this request and, if so, can the Prime Minister indicate what the form of the acknowledgement was?


Pierre Elliott Trudeau: Mr. Speaker, I do not know that we have received any substantive response to our representations. It is possible that there has been an acknowledgement but certainly there has been no substantive response.


NATIONAL SECURITY
Hon. Jean-Pierre Goyer (Solicitor General):: Mr. Speaker, I would like to answer a question that was put to me yesterday by the hon. member for Calgary North (Mr. Woolliams).
The Public Service Commission has announced a competition for the hiring by my department of three regional analysts who will be assigned to the Security Planning and Research Group. The salaries range between $13,400 and $15,200 and the applicants are subject to the normal security clearance process.
However, the journalist mentioned in his article that he had obtained this false information from an informer. This newspaperman should revise his knowledge about hiring methods.


Eldon Mattison Woolliams: Mr. Speaker, may I direct a question to the Solicitor General. Since we at last have this admission, am I to take it that investigation in reference to security is being taken out of the hands of the RCMP and the provincial police of Quebec

and is being handed over to these new recruits who will investigate and infiltrate the various strata of society in that province?


Jean-Pierre Goyer: Mr. Speaker, I think that I have been very clear in my reply. They are not investigators but analysts.


Mr. Fairweather:: A supplementary question, Mr. Speaker.


Eldon Mattison Woolliams: Mr. Speaker, may I ask a
supplementary.


Mr. Speaker:: The hon. member for Calgary North may ask one last supplementary. The hon. member for Fundy-Royal has a supplementary to the previous question. He will be recognized immediately after the hon. member.


Eldon Mattison Woolliams: Mr. Speaker, the Solicitor General used an unusual word. Can he tell us what the duties are of these analysts? What will they do?


Jean-Pierre Goyer: Mr. Speaker, I explained the matter at length in a statement to the House. Those persons will simply analyze the conclusions of investigations undertaken by the Royal Canadian Mounted Police and by various other groups, departments or governments.




Mr.  R. Gordon L. Fairweather@Fundy-Royal: Mr. Speaker, I was interested in my colleague's question about the Amchitka blast and the resolution of this House. May I ask the Prime Minister this question. Exactly what form did the government use to transmit the resolution of this Parliament to the President of the United States? Did we mail a copy of Hansard to him or what did we do?


Pierre Elliott Trudeau: Mr. Speaker, I cannot say exactly what form was followed or what steps were taken; certainly the Secretary of State for External Affairs could. I know that the opinion of the House was transmitted not only to the United States government but also to the governments of the other three countries mentioned and discussed at that time. Certainly, if the hon. member asks the minister, he will be able to say what form the representations took.


AIRPORTS
Mr. Oza Tetrault (Villeneuve):: Mr. Speaker, I address my question to the Minister of Transport. Can the minis-
October 22, 1971

ter say whether his department is studying the possibility of enlarging the size of Val d'Or airport?


Donald Campbell Jamieson: Mr. Speaker, I am-


Mr. Speaker:: Order, please. I doubt whether this type of question ought to be asked. Normally it should be placed on the order paper. If there is urgency which is not obvious or even apparent to the Chair the minister might answer, but I would invite the hon. member to place the question on the order paper.



AIR CANADA


Mr. Steven E. Paproski (Edmonton Centre):: Mr. Speaker, my question is directed to the Minister of Transport. In light of reports that since Air Canada reservation operations have been centralized in Montreal arrangements for Ottawa passengers have seriously deteriorated, is the government reviewing its decision to remove reservation services out of Ottawa. If so, when will a statement be made?


Donald Campbell Jamieson: Mr. Speaker, I am not capable of assessing the correctness of the first part of the statement. As for the decision it was not, of course, a government decision; it was one taken by Air Canada independently. I have made representation to them on behalf of those who do not like the idea, but they are entirely free to make that decision if they wish.


Steve Eugene Paproski: Would the minister check into the next Air Canada flight schedule for flights to and from Edmonton and see that Edmonton receives a few extra flights, or at least as many as go to and from the city of Calgary?


Mr. Speaker:: Order, please. Of course that can be considered to be a representation rather than as a question.



SUGGESTED ESTABLISHMENT OF TOLL-FREE TELEPHONE SERVICE FOR PERSONS OUTSIDE HALIFAX WISHING TO MAKE RESERVATIONS

John Patrick (Pat) Nowlan: Mr. Speaker, my supplementary is related more to the first question asked by my hon. friend than to the second. When the Minister of Transport is checking with whoever he checks with at Air Canada from time to time, would he also check on service in the Atlantic area, particularly in Nova Scotia, and find out if it is possible to establish Zenith toll-free numbers for those Canadian citizens living outside Metropolitan Halifax who, through their taxes, help to support Air Canada so they can phone directly for reservations inasmuch as aircraft, because of fog and other reasons, sometimes do not fly?


Hon. Donald C. lamieson (Minister of Transport):: Mr. Speaker, I will be glad to do that.
Inquiries of the Ministry NATIONAL REVENUE



ATLANTIC SUGAR REFINERIES PROPOSAL TO SELL ASSETS TO ACADIA PULP AND PAPER-PREVENTION OF LOSS OF TAXES

Frank Howard: Mr. Speaker, I had a question for the Minister of National Revenue but I see he is not in his seat at the moment. Perhaps I might pose it and he could reply later.


An hon. Member:: Here he is.


Frank Howard: I wish to ask the minister about the proposal of Atlantic Sugar Refineries Company Limited to sell its business and assets to Acadia Pulp and Paper, a wholly owned subsidiary of Atlantic Sugar, and thereby cheat the federal government of $2,300,000 in otherwise legitimate taxes over the next two years. Would the minister cause an inquiry to be made and see that this tax revenue is not lost?


Mr. Speaker:: Order, please. The hon. member's question contains a number of allegations and to that extent it is not in order. Perhaps the minister will overlook the allegations and answer that part of the question which is in order.


Herbert Eser (Herb) Gray: I shall simply say I will have the matter thoroughly looked into.


Thomas Miller Bell: Would the minister be prepared to state that Atlantic Sugar Refineries, an important employer in New Brunswick, is only carrying out a normal corporate action such as companies all over Canada have been doing for years?


Mr. Speaker:: Order, please. I suggest to the hon. member that his question amounts to debate or a representation. Orders of the day.



GOVERNMENT ORDERS


[Stage Direction]
The House resumed, from Wednesday, October 20, consideration in committee of Bill C-259, to amend the Income Tax Act and to make cert ain provisions and alterations in the statute law related to or consequential upon the amendments to that act-Mr. Benson-Mr. Boulanger in the chair.
On Clause 1:-
Mr. Benson:: Mr. Chairman, there seems to be agreement among the parties opposite and ourselves that in order to deal with the amendments to clause one, which I have tabled in the House, we might ask my colleague, the Minister of National Revenue, to move them all at one time so that they might be considered as the various aspects of the matter are dealt with. This would in no way preclude the moving of further amendments, either by the opposition or by ourselves. It is simply a method of get-

October 22, 1971
Income Tax Act
ting the amendments before the committee in proper form.


The Assistant Deputy Chairman:: Is there unanimous consent to that proposal?


Some hon. Members:: Agreed.


Mr. Lambert (Edmonton West):: May I inquire as to the nature of the amendments to be moved? Will the minister be moving the amendments which appeared as an appendix to Votes and Proceedings on October 13?


Edgar John Benson: He would be moving the amendments as tabled on that day. There is a slight difference between the two. There was one section as printed in Votes and Proceedings which got into the wrong place, and the underlining was omitted.


Some hon. Members:: Resign.


Edgar John Benson: It had nothing to do with the government. It was simply a printing error. Therefore, my colleague will move the amendments as tabled on October 13.


Stanley Howard Knowles: Yes, Mr. Chairman, this was understood. I might make the point that the batch of amendments to clause one now being presented will, of course, appear in Hansard at this point, so any confusion between what has been tabled and what has been printed will be cleared up, if the minister does it correctly.


Edgar John Benson: Yes, Mr. Chairman, that is understood. They will appear in Hansard properly with the underlining included.


Stanley Howard Knowles: Do some of the amendments tabled on October 13 refer to clauses other than clause 1?


Edgar John Benson: No, they were all amendments to clause 1.


Gérald Laniel: The hon. member for Lotbiniere rises on a point of order.


Mr. Fortin:: Mr. Chairman, in the House there is a party that is apparently not taken into account. We would also like to give our agreement subject however to a consensus of the House leaders of all parties about a formula for the discussion.


Herbert Eser (Herb) Gray: I hereby move:
Pages 17 and 20
That section 8 as set forth in clause 1 of Bill C-259 be amended
(a)	by striking out lines 28 to 32 on page 17 and
substituting the following:
'amounts expended by him in the year for the purpose of earning the income from the employment (not exceeding the commissions or other similar amounts fixed as aforesaid received by him in the year) to the extent that such amounts were not
(v)	outlays, losses or replacements of capital or payments on account of capital, except as described in paragraph (j), or
(vi)	outlays or expenses that would, by virtue of paragraph 18(1) (l), not be deductible in computing the taxpayer's income for the year if the employment were a business carried on by him;'
(b)	by striking out line 12 on page 20 of the French version and substituting the following:
'(ii) sans depasser, au total, le moins eleve des montants suivants:
(A)	le plafond de la cotisation aff6-'
Page 26
That the French version of section 12 as set forth in clause 1 of the said Bill be amended by striking out line 7 on page 26 and substituting the following:
'(ii) deduite, en vertu de l'alinea 20(l)n) ou du paragraphe 20(7),'
Page 35
That section 13 as set forth in clause 1 of the said Bill be amended by striking out lines 1 and 2 on page 35 and substituting the following:
'Deduction (11) Any deduction made under subpara-autoSf graph 8(1) (j) (ii) of this Act or subsection used In per- 11(11) of The' formanoe of duties
Pages 47 and 48
That section 15 as set forth in clause 1 of the said Bill be amended
(a)	by striking out lines 11 and. 12 on page 47 and substituting the following:
'(d) on the reduction of capital, the redemption of shares or the winding-up. discontinuance or reorganization of its business, or otherwise by way of a transaction to which section 84, 88 or Part II applies,'
(b)	by striking out lines 11 to 17 on page 48 and substituting the following:
'Intereston '(3) An annual or other periodic amount bonds6 Paid by a corporation resident in Canada to a taxpayer in respect of an income bond or income debenture shall be deemed to have been paid by the corporation and received by the taxpayer as a dividend on a share of the capital stock of the corporation, unless the corporation is entitled to deduct the amount so paid in computing its income.'
Pages 55 to 58
That section 18 as set forth in clause 1 of the said Bill be amended
(a)	by striking out lines 13 to 18 on page 55 and substituting the following:
'(a) interest on borrowed money used to acquire land, or on an amount payable by him for land, or
October 22, 1971

October 22, 1971
Income Tax Act
(a)	the amount, if any, by which the amount for which the obligation was issued by the taxpayer exceeds the purchase price paid or agreed to be paid by the taxpayer for the obligation shall be deemed to be a capital gain of the taxpayer for the taxation year from the disposition of a capital property; and
(b)	the amount, if any, by which the purchase price paid or agreed to be paid by the taxpayer for the obligation exceeds the greater of the principal amount thereof and the amount for which it was issued by the taxpayer shall be deemed to be a capital loss of the taxpayer for the taxation year from the disposition of a capital property,
to the extent of the amount of the capital gain or capital loss, as the case may be, that would not, if section 3 were read in the manner described in paragraph (l)(a) of this section, be included or be deductible, as the case may be, in computing the taxpayer's income for the year or any other taxation year.'
Pages 100, 101 and 102
That section 40 as set forth in clause 1 of the said Bill be amended
(a)	by striking out lines 27 to 33 on page 100 and substituting the following:
'(i) one plus the number of taxation years ending after 1971 for which the property was his principal residence and during which he was resident in Canada,
is of
(ii)	the number of taxation years ending after 1971 during which he owned the property, whether jointly with another person or otherwise;'
(b)	by striking out lines 7 to 10 on page 101 and substituting the following:
'of this paragraph, less the aggregate of
(A)	$1,000, and
(B)	$1,000 for each taxation year ending after 1971 for which the property was his principal residence and during which he was resident in Canada;'
(c)	by striking out lines 20 to 30 on page 101 and substituting the following:
'(e) where the taxpayer is a corporation, its loss otherwise determined from the disposition of any property disposed of by it to
(i)	a person by whom it was controlled, or
(ii)	a corporation that was controlled by a person described in subparagraph (i),
is nil;'
(d)	by striking out lines 42 to 46 on page 101 and lines 1 to 11 on page 102 and substituting the following:
'(ii) a loss from the disposition of a debt or other right to receive an amount, unless the debt or right, as the case may be, was acquired by the taxpayer for the purpose of gaining or producing income from a business or property (other than exempt income) or as consideration for the disposition of capital property to a person with whom the taxpayer was dealing at arm's length, or
(iii)	a loss from the disposition of any personal-use property of the taxpayer other than listed personal property,
is nil.'
(e)	by striking out lines 12 to 14 on page 102 and substituting the following:
'Deemed gain where amounts to be deducted from adjusted cost base exceed cost plus amounts to be added to adjusted cost base
(3) Where
(a)	the aggregate of all amounts required by subsection 53(2) (except paragraph (c))'
(f)	by adding, immediately after subsection (3) on page 102, the following subsections:
'Where principal residence disposed of to spouse or trust in favour of spouse
(4)	Where a taxpayer has, after 1971, disposed of property to an individual who is deemed by subsection 70(6) or 73(1) to have acquired it for an amount equal to its adjusted cost base to the taxpayer immediately before the disposition, for the purposes of computing the individual's gain from the disposition of the property under paragraph
(2)	(b) or (c), as the case may be,
(a)	the individual shall be deemed to have owned the property throughout the period during which the taxpayer owned it;
(b)	the property shall be deemed to have been the individual's principal residence
(i)	in any case where subsection 70(6) is applicable, for any taxation year for which it would, if the taxpayer had designated it in prescribed manner to have been his principal residence for that year,
October 22, 1971

have been the taxpayer's principal residence, and
(ii)	in any case where subsection 73(1) is applicable for any taxation year for which it was the taxpayer's principal residence; and
(c)	where the individual is a trust, the trust shall be deemed to have been resident in Canada during each taxation year during which the taxpayer was resident in Canada.
Principal residence where property of trust In favour of spouse
(5)	For the purposes of determining whether any property of a trust described in subsection 70(6) or 73(1) was its principal residence for any taxation year, paragraph 54(a) shall be read as if
(a)	the reference in subparagraph (i) of that paragraph to "the taxpayer" were read as a reference to the spouse referred to in subparagraph 70(6) (b) (i) or paragraph 73(1) (a), as the case may be, and
(b)	the references in subparagraph (iii) of that paragraph to "him" were read as references to the trust and the spouse mentioned in paragraph (a).'
Page 108
That section 46 as set forth in clause 1 of the said Bill be amended by striking out line 27 on page 108 and substituting the following:
'value of any personal-use property of a'
Page 109
That section 47 as set forth in clause 1 of the said Bill be amended by striking out lines 1 to 31 on page 109 and substituting the following:
'identical 47. (1) Where at any particular time after properties 1971 a taxpayer who owns one property or two or more identical properties that was or each of which was, as the case may be, acquired by him after 1971, acquires one or more other properties (in this subsection referred to as "newly-acquired properties") each of which is identical to each such previously-acquired property, for the purposes of computing, at any subsequent time, the adjusted cost base to the taxpayer of each such identical property,
(a)	the taxpayer shall be deemed to have disposed of each such previously-acquired property immediately before the particular time for proceeds equal to its adjusted cost base to him immediately before the particular time, and
(b)	the taxpayer shall be deemed to have acquired each such identical property at the particular time at a cost equal to the quotient obtained when
Income Tax Act
(i)	the aggregate of the adjusted cost bases to the taxpayer immediately before the particular time of the previously-acquired properties, and the cost to him (determined without reference to this section) of the newly-acquired properties
is divided by
(ii)	the number of such identical properties owned by the taxpayer immediately after the particular time.
Where	(2) For the purposes of subsection (1),
identical where a group of identical properties referred arebonds! to in that subsection is a group of identical etc.	obligations within the meaning of subsection
(3), subparagraph (1) (b) (ii) shall be read as follows:
"(ii) the quotient obtained when the aggregate of the principal amounts of all such identical properties owned by the taxpayer immediately after the particular time is divided by the principal amount of the identical property." '
Pages 110 and 111
That section 48 as set forth in clause 1 of the said Bill be amended
(a)	by striking out lines 22 to 25 on page 110 and substituting the following:
'Election by (2) Where subsection (1) would otherwise taxpayer apply for the purpose of computing the in-teresident come for a taxation year of a taxpayer who in Canada is an individual other than a trust or that was, immediately before it ceased to be resident in Canada, a Canadian corporation, if the taxpayer'
(b)	by striking out lines 1 to 8 on page 111 and substituting the following:
'(d) the taxpayer shall, except for the purposes of subsections 70(6), 72(2) and 73(1), be deemed to have been resident in Canada throughout any taxation year for which he had a capital gain from the disposition of any property (other than property described in paragraph (1) (a) or (b)) owned by him at the time he ceased to be resident in Canada.'
(c)	by striking out lines 9 to 16 on page 111 and substituting the following:
'Deemed	(3) For the purposes of this subdivision,
onbecomCi w^ere at any time after 1971 a taxpayer a resident 8 becomes a resident of Canada, he shall be of Canada deemed to have acquired at that time each property owned by him at that time, other than
(a)	property that would be property described in paragraph (1) (a) if he had disposed of it immediately before that time, and
(b)	where the taxpayer has previously made an election under subsection (2) in

October 22, 1971
Income Tax Act
respect of the last time he ceased to be resident in Canada, any property owned by him immediately before that last such time,
at a cost equal to its fair market value at the time he becomes a resident of Canada.'
Page 111
That section 49 as set forth in clause 1 of the said Bill be amended by striking out lines 28 to 30 on page 111 and substituting the following:
'Where	(2) Where at any time an option described
expires in paragraph (1) (b) (other than an option the consideration for the granting of which is an amount described in subparagraph 66(15)(b) (v) paid pursuant to an agreement described in that subparagraph) that has been granted by a corporation after 1971 expires,'
Page 113
That section 51 as set forth in clause 1 of the said Bill be amended by striking out lines 28 to 40 on page 113 and substituting the following:
'Convertible 51, Where shares of the capital stock of a properties corporation have, after 1971, been acquired by a taxpayer in exchange for a preferred share, bond, debenture or note of the corporation (in this section referred to as a "convertible property") the terms of which conferred upon the holder the right to make the exchange,
(a)	the exchange shall be deemed not to have been a disposition of property, and
(b)	the cost to the taxpayer of the shares shall be deemed to be the adjusted cost base to him of the convertible property immediately before the exchange.'
Pages 115, 116, 119 and 120
That section 53 as set forth in clause 1 of the said Bill be amended
(a)	by striking out lines 43 to 48 on page 115 and
substituting the following:
'(B) paragraph (i) of this subsection, section 55, paragraph 82(1) (b) and the provisions of the Income Tax Application Rules, 1971 relating to income from the operation of new mines,'
(b)	by striking out lines 5 and 6 on page 116 and
substituting the following:
'ship property,
(iii)	the taxpayer's share of the amount, if any, by which
(A)	any proceeds of a life insurance policy received by the partnership after 1971 and before that time in consequence of the death of any person whose life was insured under the policy, exceeds
(B)	all amounts paid as or on account of premiums I under the policy, and
(iv)	where the taxpayer has, after 1971,'
(c)	by striking out lines 25 and 26 on page 119 and substituting the following:
'Canada, any amount required by section 99. r>r subsection 93(1) to be'
(d)	by striking out lines 41 to 44 on page 119 and substituting the following:
'(B) section 31, subsection 40(2) and section 55,'
(e)	by striking out lines 43 to 47 on page 120 and substituting the following:
'capital stock of a corporation, the amount paid by the taxpayer therefor, to the extent that the amount was paid pursuant to an agreement described in subparagraph 66(15)(b)(v);'
Pages 123 and 125
That section 54 as set forth in clause 1 of the said Bill be amended
(a)	by striking out lines 18 to 20 on page 123 and substituting the following:
'except that
(iii)	for greater certainty, where any property of the taxpayer is property that was reacquired by him after having been previously disposed of by him, no adjustment to the cost to him of the property that was required to be made under section 53 before its reacquisition by him shall be made under that section to the cost to him of the property as reacquired property of the taxpayer, and
(iv)	in no case shall the adjusted cost base of any property at the time of its disposition by the taxpayer be less than nil;'
use
property"
(b)	by striking out lines 8 to 22 on page 125 and substituting the following:
' "Personal- (f) "personal-use property" of a taxpayer includes
(i)	property owned by him that is used primarily for the personal use or enjoyment of the taxpayer or for the personal use or enjoyment of one or more individuals each of whom is
(A)	the taxpayer,
(B)	a person related to the taxpayer, or
(C)	where the taxpayer is a trust, a beneficiary under the trust or any person related to the beneficiary,
(ii)	any debt owing to him in respect of the disposition of property that was his personal-use property, and
(iii)	any property of the taxpayer that is an option to acquire property that would, if he acquired it, be personal-use property of the taxpayer,
October 22, 1971

and "personal-use property" of a partnership includes any partnership property that is used primarily for the personal use or enjoyment of any member of the partnership or for the personal use or enjoyment of one or more individuals each of whom is a member of the partnership or a person related to such a member;'
Pages 133 and 134
That the French version of section 57 as set forth in clause 1 of the said Bill be amended as follows:
(a)	by striking out lines 5 and 6 on page 133 and substituting the following:
'caisse de retraite ou de pensions ou en vertu d'une caisse ou d'un regime de retraite ou de pensions dont'
(b)	by striking out line 17 on page 133 and substituting the following:
'tribuable a la caisse ou au regime ou en vertu de la caisse ou du'
(c)	by striking out line 25 on page 133 and substituting the following:
'tribuable a la caisse ou au regime ou en vertu de la caisse ou du'
(d)	by striking out line 35 on page 133 and substituting the following:
'caisse ou au regime ou en vertu de la caisse ou du regime ainsi que*
(e)	by striking out lines 41 to 45 on page 133 and substituting the following:
'paiement regu par un contribuable d'une caisse ou d'un regime de retraite ou de pensions ou en vertu d'une caisse ou d'un regime de retraite ou de pensions si le contribuable n'a effectue aucun paiement a la caisse ou au regime ou en vertu de la caisse ou du regime.'
(f)	by striking out lines 3 to 17 on page 134 and substituting the following:
'regu par un contribuable d'une caisse ou d'un regime de retraite ou de pensions ou en vertu d'une caisse ou d'un regime de retraite ou de pensions au titre d'une periode de service pour une partie seulement de laquelle il a effectue des paiements a la caisse ou au regime ou en vertu de la caisse ou du regime, le paragraphe (1) ne s'applique qu'a la partie du paie-ment qui peut raisonnablement etre consideree comme ayant ete regue au titre de la periode pour laquelle il a effectue des paiements a la caisse ou au regime ou en vertu de la caisse ou du regime et toute partie du paiement qui peut raisonnablement etre consideree comme ayant ete regue au titre d'une periode pour laquelle il n'a pas fait de paiements a la caisse ou au regime ou en vertu de la caisse ou du regime est incluse'
(g)	by striking out lines 23 to 34 on page 134 and substituting the following:
Income Tax Act
'une caisse ou un regime enregistrb de pensions ou en vertu d'une caisse ou d'un regime enregistrb de pensions, au titre de services qu'il a fournis avant de commencer a effectuer des paiements, seule est incluse dans le calcul de son revenu, en ce qui con-cerne tout paiement qu'il a regu de la caisse ou du regime ou en vertu de la caisse ou du regime, la partie du paiement restant apres deduction de la fraction de ce paiement representee par le rapport existant entre la cotisation ainsi versee moins $300 et le total des sommes qu'il a payees a la caisse ou au regime ou en vertu de la caisse ou du regime.'
(h)	by striking out lines 36 lb 45 on page 134 and substituting the following:
'tribuable affllie a une caisse ou a un regime de retraite ou de pensions vise au paragraphe (1) ou (4), une personne regoit, dans une annee d'impogition, un paiement d'une caisse ou d'un regime ou en vertu d'une caisse ou d'un regime, seule est incluse dans le calcul du revenu regu b ce titre dans l'annee par cette personne, la partie du paiement qui, si le paiement avait ete regu dans l'annee, d'une caisse ou d'un regime ou en vertu d'une caisse ou d'un regime par le contribuable, aurait ete incluse,'
Page 136
That the French version of section 58 as set forth in clause 1 of the said Bill be amended by striking out lines 46 and 47 on page 136, and substituting the following: 'd'une caisse ou d'un regime enregistre de pensions ou en vertu d'une caisse ou d'un regime enregistrb de pensions.'
Pages 142 and 145
That section 60 as set forth in clause 1 of the said Bill be amended
(a)	by striking out lines 27 and 28 on page 142 of the French version, and substituting the following:
'(A) a titre de cotisation b une caisse ou b un regime enregistre de pensions ou en vertu d'une caisse ou d'un regime enregistre de'
(b)	by striking out lines 30 to 32 on page 142 and substituting the following:
'deductible under paragraph (I), paragraph 8(1) (m) or subsection 146(5) in computing his income for the year;'
(c)	by striking out lines 2 and 3 on page 145 find substituting the following:
'(i) any pension described in clause 56(1) (a) (i) (A),' Pages 146 and 147
That section 61 as set forth in clause 1 of the said Bill be amended
(a)	by striking out lines 29 and 30 on page 146 of the French version, and substituting the following: '(i) d'une caisse ou d'un regime de pensions de retraite ou autres pensions ou en vertu d'une caisse ou d'un'

October 22, 1971
Income Tax Act
(b)	by striking out the word "and" at the end of line 37 on page 147.
(c)	by striking out line 40 on page 147 and substituting the following:
'by virtue of his employment; and (9) the amount, if any, by which any amount received by the individual in the year as or on account of a prize for achievement in a field of endeavour ordinarily carried on by him exceeds $500.
Page 152
That section 63 as set forth in clause 1 of the said Bill be amended by striking out lines 32 to 34 on page 152 and substituting the following:
'(C) his wife was confined as described in clause (b)
(iii)	(A) or subparagraph (b) (iv) or was incapable as described in clause (b) (iii) (B),'
Pages 154 and 155
That section 64 as set forth in clause 1 of the said Bill be amended by striking out lines 40 and 41 on page 154 and lines 1 to 11 on page 155 and substituting the following:
'the current year, there may be deducted as a reserve in respect of that amount the part thereof that is not receivable until a day that is after the end of the current year (not exceeding, where the property was disposed of in a taxation year preceding the current year, any amount deducted under this subsection in respect of the disposition of the property in computing the taxpayer's income for the taxation year immediately preceding the current year), and for greater certainty, no deduction may be made in respect of that amount by virtue of paragraph 20(l)(n).'
Pages 157, 158, 163 and 165
That section 66 as set forth in clause 1 of the said Bill be amended
(a)	by striking out line 30 on page 157 and substituting the following:
'2. the amount deducted under'
(b)	by striking out line 31 on page 158 and substituting the following:
'2. the amount deducted under sec-'
(c)	by striking out line 23 on page 163 and substituting the following:
'after 1971 and between a time when the corporation ceased to'
(d)	by striking out line 1 on page 165 and substituting the following:
'ration corporation under subsection (10)'
(e)	by striking out lines 23 to 40 on page 165 and substituting the following:
'(v) where the taxpayer is a principal-business corporation, the amount paid by it for any share or any
interest therein or right thereto, to the extent that the amount was paid pursuant to an agreement under which it undertook to incur, after 1971 the cost of
(A)	drilling or exploration activities, including any general geological or geophysical activities, in or in respect of exploring or drilling for petroleum or natural gas in Canada,
(B)	prospecting, exploration or development activities in searching for minerals in Canada, or
(C)	acquiring a Canadian resource property,' Pages 173 and 174
That section 70 as set forth in clause 1 of the said Bill be amended
(a)	by striking out lines 33 to 42 on page 173 and lines 1 to 3 on page 174 and substituting the following:
'(b) a trust created by the taxpayer's will under which
(i)	his spouse is entitled to receive all of the income of the trust that arises before the spouse's death, and
(ii)	no person except the spouse may, before the spouse's death, receive or otherwise obtain the use of any of the income or capital of the trust,
and both the taxpayer and the spouse or trust, as the case may be, were resident in Canada immediately before the death of the taxpayer, the following rules apply
(c)	paragraphs (5) (a) to (d) are not applicable to the property;'
(b)	by striking out line 22 on page 174 and substituting the following:
'ty at the same amount; and
(e)	where the property was depreciable property of the taxpayer of a prescribed class, paragraph (5) (e) is applicable as if the reference therein to "paragraph (b) " and to "paragraph (d)" were read as references to "paragraph (6) (d)
Page 175
That section 72 as set forth in clause 1 of the said Bill be amended
(a)	by striking out line 12 on page 175 and substituting the following:
' "transferee"), if both the taxpayer and the transferee were resident in Canada immediately before the death of the taxpayer and the taxpayer's legal repre-'
(b)	by striking out lines 41 to 44 on page 175 and substituting the following:
'(C) an amount that, by virtue of subsection 59(1) or (3), has been included in computing the transferee's income for a previous year,'
October 22, 1971

Pages 176 and 177
That section 73 as set forth in clause 1 of the said Bill be amended
(a)	by striking out lines 26 to 28 on page 176 and substituting the following:
'income of the trust that arises before the spouse's death, and'
(b)	by striking out line 33 on page 176 and substituting the following:
'and both the taxpayer and the spouse or trust, as the case may be, were'
(c)	by striking out lines 9 to 25 on page 177 and substituting the following:
'Capital cost and amount deemed allowed to spouse or trust
(2)	Where a spouse or trust, as the case may be, is deemed by subsection (1) to have acquired any particular depreciable property of a prescribed class of a taxpayer for an amount determined under paragraph (1) (c) and the capital cost to the taxpayer of the particular property exceeds the amount determined under that paragraph, for the purposes of sections 13 and 20 and any regulations made under paragraph 20(1) (a)
(a)	the capital cost to the spouse or trust, as the case may be, of the particular property shall be deemed to be the amount that was the capital cost to the taxpayer thereof, and
(b)	the excess shall be deemed to have been allowed to the spouse or trust, as the case may be, in respect of the particular property under regulations made under paragraph 20(1) (a) in computing income for taxation years before the acquisition thereof.'
Page 178
That section 74 as set forth in clause 1 of the said Bill be amended by striking out lines 1 to 7 on page 178 and substituting the following:
'since become his spouse (which property is referred to in this subsection as "transferred property"), in computing the transferor's income for any taxation year the amount, if any, by which
(a)	the aggregate of
(i)	the transferee's taxable capital gains for the year from dispositions of transferred property other than listed personal property and from dispositions of property (other than listed personal property) substituted for transferred property, and
(ii)	the amount that the transferee's taxable net gain for the year from dispositions of listed personal property would be if the transferee had at no time owned listed personal property other than listed personal property that was transferred property or property substituted therefor,
Income Tax Act
exceeds
(b)	the aggregate of the transferee's allowable capital losses for the year from dispositions of transferred property other than listed personal property and from dispositions of property (other than listed personal property) substituted for transferred property,
shall, during the lifetime of the transferor while the transferor is resident in Canada and the transferee is his spouse, be deemed to be a taxable capital gain of the transferor for the year from the disposition of property other than listed personal property, and any gain or loss taken into account in computing the aggregate described in paragraph (a) or the aggregate described in paragraph (b) shall, for the purposes of computing the income of the transferee for a taxation year, be deemed not to have been a gain or loss of the transferee.'
Page 178
That section 75 as set forth in clause 1 of the said Bill be amended
(a)	by striking out line 30 on page 178 and substituting the following:
'18 years of age, either directly or indirectly, by'
(b)	by striking out line 39 on page 178 and substituting the following:
'JUS years.'
Page 184
That section 80 as set forth in clause 1 of the said Bill be amended by striking out lines 43 and 44 on page 184 and substituting the following:
'may be, the amount by which the lesser of the principal amount thereof and the amount for which the obligation was issued by the taxpayer exceeds the amount so paid, if'
Page 187
That section 81 as set forth in clause 1 of the said Bill be amended by striking out lines 15 to 32 on page 187 and substituting the following:
'Interest on certain obligations
(m) interest received by a corporation resident in Canada (in this paragraph referred to as the "parent corporation") on a bond, debenture, bill, note, mortgage, hypothec or similar obligation received by it as consideration for the disposition by it, before June 18, 1971, of
(i)	a business carried on by it in a country other than Canada, or
(ii)	all of the shares of a corporation that carried on a business in a country other than Canada, and such of the debts and other obligations of that corporation as were, immediately before the disposition, owing to the parent corporation,
if

October 22, 1971
Income Tax Act
(iii)	the business was of a public utility or public service nature,
(iv)	the business or the property described in subparagraph (ii), as the case may be, was disposed of to a person or persons resident in that country, and
(v)	the obligation received by the parent corporation was issued by or guaranteed by the government of that country or any agent thereof; or'
Page 189
That section 82 as set forth in clause 1 of the said Bill be amended
(a)	by striking out line 5 on page 189 and substituting the following:
'purposes of this section and sections 112 and 121, the'
(b)	by adding, immediately after subsection (2) on page 189, the following subsection:
(3)	Where the amount that would, but for this subsection, be deductible under paragraph 109(l)(a) from a taxpayer's income for a taxation year is less than the amount that would be deductible under that paragraph from his income for the year if no amount were required by subsection (1) to be included in computing his spouse's income for the year and the taxpayer so elects in his return of income for the year under this Part, all amounts described in paragraph (1) (a) received in the year from taxable Canadian corporations by the taxpayer's spouse shall be deemed to have been so received by the taxpayer and not by his spouse.'
Pages 189 and 190
That section 83 as set forth in clause 1 of the said Bill be amended
(a)	by striking out lines 9 and 10 on page 189 and substituting the following:
'1971 a dividend becomes payable by a Canadian corporation to shareholders of'
(b)	by striking out lines 27 to 36 on page 189 and substituting the following:
'(b) the dividend shall be deemed to be payable out of the corporation's 1971 capital surplus on hand to the extent that
(i)	the amount, if any, by which the portion of the dividend designated in the election to be payable out of such surplus exceeds the corporation's 1971 undistributed income on hand immediately before the particular time,
does not exceed
(ii)	the corporation's 1971 capital surplus on hand immediately before the particular time;'
(c)	by striking out lines 7 to 31 on page 190 and substituting the following:
'Dividends received by spouse
Capital	(2) Where at any particular time after 1971
dividend a dividend becomes payable by a private corporation to shareholders of any class of shares of its capital stock and the corporation so elects in respect of the full amount of the dividend, in prescribed manner and prescribed form and at or before the particular time or the first day on which any part of the dividend was paid if that day is earlier than the particular time, the following rules apply:
(a)	the dividend shall be deemed to be a capital dividend to the extent that the portion thereof in excess of the aggregate of
(i)	the corporation's 1971 undistributed income on hand immediately before the particular time, and
(ii)	the corporation's tax-paid undistributed surplus on hand immediately before the particular time
does not exceed the corporation's capital dividend account immediately before the particular time; and
(b)	no part of the dividend shall be included in computing the income of any shareholder of the corporation.'
Pages 190 and 191
That section 84 as set forth in clause 1 of the said Bill be amended
(a)	by striking out line 33 on page 190 of the French version, and substituting the following:
'Canada a, a une date quelconque apres 1971, aug-mente'
(b)	by striking out lines 21 to 26 on page 191 and substituting the following:
'immediately after that time equal to that proportion of the dividend so deemed to have been paid by the corporation that the number of the shares of the particular class held by him immediately after that time is of the number of the issued shares of that class outstanding immediately after that time.'
Pages 195, 196 and 197
That section 85 as set forth in clause 1 of the said Bill be amended
(a)	by striking out line 1 on page 195 and substituting the following:
'(b) subject to paragraph (c), where the amount that the taxpayer and'
(b)	by striking out lines 16 to 22 on page 196 and substituting the following:
' (f) the cost to the taxpayer of any particular property (other than shares of the capital stock of the corporation or a right to receive any such shares) received by him as consideration for the disposition shall be deemed to be an amount equal to the lesser of
October 22, 1971

(i)	the fair market value of the particular property at the time of the disposition, and
(ii)	that proportion of the fair market value, at the time of the disposition, of the property disposed of by the taxpayer to the corporation that
(A)	the amount determined under subparagraph (i)
is of
(B)	the fair market value, at the time of the disposition, of all properties (other than shares of the capital stock of the corporation or a right to receive any such shares) received by the taxpayer as consideration for the disposition;'
(c)	by striking out line 34 on page 197 and substituting the following:
'less than 80% of the issued shares of each class of'
Pages 214, 215, 218 and 219
That section 87 as set forth in clause 1 of the said Bill be amended
(a)	by adding, immediately after paragraph 87(2) (2) on page 214, the following paragraph:
'(2.1) in the case of a new corporation that is a private corporation, for the purposes of computing the capital dividend account of the new corporation at any particular time,
(i)	i of the amount of any capital gain and i of the amount of any capital loss of any predecessor private corporation for any taxation year commencing after it last became a private corporation and ending after 1971 and either before or at the time of the amalgamation shall, in the case of a capital gain, be included, and in the case of a capital loss, be deducted,
(ii)	any amount that would, if the amalgamation had not occurred but if any taxation year of a predecessor corporation that would otherwise have ended next after the amalgamation had ended immediately before the amalgamation, have been required by any of subparagraphs 89(1) (b) (ii) to
(iv)	to be included in computing the predecessor corporation's capital dividend account immediately after the amalgamation shall be included, and
(iii)	any capital dividend that became payable by any predecessor corporation after it last became a private corporation and before the amalgamation shall be deducted.'
(b)	by striking out line 25 on page 215 of the French version and substituting the following:
'cette Partie, payable par la nouvelle cor-'
(c)	by striking out line 33 on page 215 of the French version and substituting the following:
'prevu par cette Partie, remboursable a la'
(d)	by striking out lines 24 to 34 on page 218 and substituting the following:
Income Tax Act
'(iii) either
(A)	the persons (except any predecessor corporation) who together owned all of the common shares of the capital stock of the predecessor corporation immediately before the amalgamation together received as consideration for the disposition of those shares on the amalgamation not less than 25% of the shares of each particular class of the issued common shares of the capital stock of the new corporation immediately after the amalgamation,
or
(B)	in any case where
1.	the shareholder owned one or more of the common shares of the capital stock of one or more other predecessor corporations immediately before the amalgamation, and
2.	none of the persons (except any predecessor corporation) who owned one or more of the common shares of the capital stock of such one or more other predecessor corporations immediately before the amalgamation received any consideration for the disposition of those shares on the amalgamation other than one or more shares of the capital stock of the new corporation,
the shareholder received on the amalgamation, as consideration for the disposition of the common shares of the capital stock of the predecessor corporation and of such one or more other predecessor corporations owned by him immediately before the amalgamation, not less than 80% of the shares of each particular class of the issued common shares of the capital stock of the new corporation immediately after the amalgamation,'
(e)	by striking out lines 13 to 39 on page 219 and substituting the following:
'Percentage (5) For the purposes of clause (4) (b) received (iii) (A), the percentage of the shares of any by share- particular class of the issued common shares holders of of the capital stock of the new corporation predecessor immediately after the amalgamation received corporation as described in that clause by the persons (except any predecessor corporation) who together owned all of the common shares of the capital stock of a particular predecessor corporation shall be deemed to be
(a)	the percentage thereof otherwise determined,
plus
(b)	that proportion of the percentage described in paragraph (a) that
(i)	the fair market value of the issued common shares of the capital stock of the particular predecessor corporation owned by all other predecessor corporations immediately before the amalgamation
is of
(ii)	the fair market value of the issued common shares of the capital stock of the

October 22, 1971
Income Tax Act
particular predecessor corporation owned by all persons (except any predecessor corporation) immediately before the amalgamation.'
Pages 221 and 222
That section 88 as set forth in clause 1 of the said Bill be amended
(a)	by striking out lines 18 to 23 on page 221 and substituting the following:
'(a) each property of the subsidiary that was distributed to the parent on the winding-up shall be deemed to have been disposed of by the subsidiary for proceeds equal to,
(i)	in the case of any property described in subsection 59(2), nil, and
(ii)	in the case of any other property, the cost amount to the subsidiary of the property immediately before the winding-up;'
(b)	by striking out lines 39 to 46 on page 221 and lines 1 and 2 on page 222 and substituting the following:
'(c) the cost to the parent of each property of the subsidiary distributed to the parent on the winding-up shall be deemed to be the amount deemed by paragraph (a) to be the proceeds of disposition of the property, plus, where the property was a capital property (other than depreciable property) of the subsidiary, the amount determined under paragraph
(d)	in respect thereof;'
Pages 223, 224, 225, 226, 228, 229, 230, 232 and 233
That section 89 as set forth in clause 1 of the said Bill be amended
(a)	by striking out lines 35 to 37 on page 223 and substituting the following:
'(ii) resident in Canada throughout the period commencing June 18, 1971 and ending at that time, except that for the purposes of subsection 83(1) a corporation that was incorporated in Canada before April 27, 1965 and that was not resident in Canada at the end of 1971 shall be deemed not to be a Canadian corporation;'
(b)	by striking out lines 43 to 45 on page 223 and lines 1 to 13 on page 224 and substituting the following:
'corporation, for taxation years in the period commencing with the first taxation year commencing after the time the corporation last became a private corporation and ending after 1971, and ending with the last taxation year ending before the particular time, exceeds the aggregate of its capital losses for those years,
(ii) all amounts each of which is an amount in respect of a dividend received by the corporation on a share of the capital stock of another corporation in the period, which amount was, by virtue of
subsection 83(2), not included in computing the income of the corporation,
(iii)	all amounts each of which is an amount in respect of a business carried on by the corporation at any time in the period, equal to the amount, if any, by which
(A)	the aggregate of the eligible capital amounts (within the meaning assigned by subsection 14(1)) in respect of the business that became payable to the corporation in the period
exceeds the aggregate of
(B)	the cumulative eligible capital of the corporation in respect of the business at the commencement of the period, and
(C)	i of the aggregate of the eligible capital expenditures in respect of the business that were made or incurred by the corporation in the period, and
(iv)	the amount, if any, by which
(A)	the proceeds of any life insurance policy received by the corporation in the period and after 1971 in consequence of the death of any person whose life was insured under the policy,
exceeds
(B)	all amounts paid as or on account of premiums paid under the policy,
exceeds the aggregate of all capital dividends that became payable by the corporation after the commencement of the period and before the particular time;' * [DOT]
(c)	by striking out line 16 on page 225 and substituting the following:
'paragraphs (l)(ii), (iii), (iv) and (iv.l) in res-'
(d)	by striking out line 2 on page 226 and substituting the following:
'graph 111(1) (a2 from the corporation's'
(e)	by striking out lines 22 to 28 on page 226 and substituting the following:
[DOT] "Private (f) "private corporation" at any particular corporation time means a corporation that, at the particular time, was resident in Canada, was not a public corporation, and was not controlled, directly or indirectly in any manner whatever, by one or more public corporations; and for greater certainty for the purposes of determining, at any particular time, when a corporation last became a private corporation,
(i) a corporation that was a private corporation at the commencement of its 1972 taxation year and thereafter without interruption until the particular time shall be deemed to have last become a private corporation at the end of its 1971 taxation year, and
October 22, 1971

(ii) a corporation incorporated after 1971 that was a private corporation at the time of its incorporation and thereafter without interruption until the particular time shall be deemed to have last become a private corporation immediately before the time of its incorporation;'
U) by striking out line 25 on page 228 and substituting the following:
'were allowed under paragraph'
(g)	by striking out lines 8 and 9 on page 229 and substituting the following:
'(v) the amount of any debt owing to the corporation (other than any debt the amount of which was included in computing the corporation's income for its 1971 taxation year and deducted in computing that income under paragraph ll(l)(f) of this Act as it read in its application to the 1971 taxation year) or of any other right of the' -
(h)	by striking out lines 35 to 39 on page 230 and substituting the following:
'(i) the lesser of
(A)	the amount that the corporation's tax-paid undistributed income (within the meaning of this Act as it read in its application to the 1971 taxation year) would be (if this Act as it so read were applicable to the period consisting of that part of the corporation's 1972 taxation year that is before 1972) as of the end of 1971, and
(B)	the amount that the corporation's 1971 undistributed income on hand would be on January 1, 1972 if subsection 196(4) were read without reference to paragraph (d) thereof,'
(i)	by striking out line 7 on page 232 and substituting the following:
'taxation year or acquired by it thereafter and disposed of by the'
(j)	by striking out the word "and" at the end of line 13 on page 232, and by striking out line 25 on page 232 and substituting the following:
'distributed surplus on hand, and
(iv.l) all amounts each of which is an amount in respect of an eligible capital amount (within the meaning assigned by subsection 14(1)) in respect of a business carried on by the corporation that became payable to the corporation in a taxation year commencing after the time the corporation last became a private corporation and ending before the particular time, equal to the amount, if any, by which
(A)	the amount that the eligible capital amount would be but for the provisions of the Income Tax Application Rules relating to section 14
exceeds
(B)	the eligible capital amount.'
Income Tax Act
(k)	by striking out line 26 on page 233 and substituting the following:
'year or acquired by it thereafter and disposed of by it before 1972,'
Page 238
That section 92 as set forth in clause 1 of the said Bill be amended by striking out line 21 on page 238 and substituting the following:
'amount deducted under subsection 113(2)'
Pages 250, 251, 253, 255 and 256
That section 98 as set forth in clause 1 of the said Bill be amended
(a) by striking out line 36 on page 250 and substituting the following:
'Deemed
proceeds
(2)	Subject to subsection 85(3) and subsections (3) and (5) of this section, where at any time after 1971 a partner-'
(b) by striking out lines 1 and 2 on page substituting the following:
"Rules
applicable
where
partnership
ceases to
exist
(3)	Where at any particular time
251 and
after'
(c)	by striking out line 10 on page 253 and by striking out line 32 on page 253 and substituting the following:
'by him of the undivided interest; and (/) the partnership shall be deemed to have disposed of each such property for proceeds equal to the cost amount to the partnership of the property immediately before its distribution.'
(d)	by striking out the word "and" at the end of line 39 on page 255 and by striking out line 10 on page 256 and substituting the following:
'acquisition by him of the property; and (/) the partnership shall be deemed to have disposed of each such property for proceeds equal to the cost amount to the partnership of the property immediately before the particular time.'
(e)	by striking out lines 13 and 14 on page 256 and substituting the following:
'partnership") has ceased to exist at any particular time after 1971 and, at or before that time, all of'
Pages 261, 262, 263, 267, 268 and 270
That section 104 as set forth in clause 1 of the said Bill be amended
(a)	by striking out lines 5 and 6 on page 261 and substituting the following:
'the income of the trust that arises before'
(b)	by striking out line 38 on page 261 and substituting the following:
'exceeds that fair market value, and to have reacquired each such depreciable property of that class immediately thereafter at a capital cost
8946

October 22, 1971
Income Tax Act
(in this subsection referred to as the "deemed capital cost") equal to that proportion of the proceeds determined under paragraph (a) or (b), as the case may be, that the amount that was the fair market value of that property on that day is of the aggregate of the amounts that were the fair market values of all properties of that class on that day, except that
(c)	where the amount that was the capital cost to the trust of any particular property of that class exceeds the deemed capital cost to the trust of the property, for the purposes of sections 13 and 20 and any regulations made under paragraph 20(1) (a) as they apply in respect of the property at any subsequent time,
(i)	the capital cost to the trust of the property shall be deemed to be the amount that was the capital cost to the trust of the property, and
(ii)	the excess shall be deemed to have been allowed to the trust in respect of the property under paragraph 20(1) (a) in computing income for taxation years before the reacquisition by the trust of the property, and any other amount allowed to the trust in respect of the property under that paragraph in computing income for those years shall be deemed to be nil, and
(d)	subsection 13(2) is not applicable in respect of any such reacquisition.'
(c)	by striking out lines 42 and 43 on page 261 and substituting the following:
'that would, but for this subsection, subsection (12) and subsection 105(2), be its income for the year as was'
(d)	by striking out lines 28 to 32 on page 262 and substituting the following:
'taxation year of a trust other than a mutual fund trust, in respect of any amount that is deemed by subsection (21) to be a taxable capital gain for the year of a non-resident person or of a non-resident-owned investment corporation from the disposition of capital property.'
(e)	by striking out line 43 on page 263 and substituting the following:
'paragraph (4) (a) and the taxpayer's spouse referred to therein is alive at the end of the year, an amount equal to,'	'
(f)	by striking out lines 23 to 47 on page 267 and lines 1 to 47 on page 268 and substituting the following:
'Deduction (22) For the purpose of section 126, the taxes0 Allowing rules apply:
(a) such portion of the income of a trust for a taxation year (before making any deduction under subsection (6) or (12)) from sources in a foreign country as (i) may reasonably be considered (having regard to all the circumstances including the terms and conditions of the
trust arrangement) to be part of the income that, by virtue of subsection (13) or (14), as the case may be, was included in computing the income for a taxation year of a particular beneficiary under the trust, and (ii) was not designated by the trust in respect of any other beneficiary thereunder,
shall, if so designated by the trust in respect of the particular beneficiary in its return of income for the year under this Part, be deemed to be income of the particular beneficiary for the taxation year from sources in that country;
(b)	a beneficiary under a trust shall be deemed to have paid as income tax for a taxation year, on the income that he is deemed by paragraph (a) to have for the year from sources in a foreign country, to the government of that country an amount equal to that proportion of the income or profits tax paid by the trust for the year to the government of that country or to the government of a state, province or other political subdivision of that country (except such portion of that tax as was deductible under subsection 20(11) or (12) in computing its income for the year) that
(i) such portion of the amount included in computing his income for the year by virtue of subsection (13) or (14), as the case may be, as is deemed by paragraph (a) to be income for the year from sources in that country,
is of
(ii)	the income of the trust for the year from sources in that country (before making any deduction under subsection
(6)	or (12));
(c)	the income of a trust from sources in a foreign country for a taxation year shall be deemed to be its actual income therefrom for the year minus the aggregate of the amounts deemed by paragraph (a) to be the income therefrom for the year of all beneficiaries under the trust; and
(d)	a trust shall be deemed to have paid as income tax to the government of a foreign country for a taxation year an amount equal to the income or profits tax actually paid by it for the year to the government of that country, or to the government of a state, province or other political subdivision of that country (except such portion of that tax as was deductible under subsection 20(11) or (12) in computing its income for the year), minus the aggregate of
October 22, 1971

the amounts deemed by paragraph (b) to have been paid to the government of that country for the year by all beneficiaries under the trust.'
(fif) by striking out line 2 on page 270 of the French version and substituting the following:
'(13) et (20), une somme ne doit pas etre con-sideree'
Page 270
That section 106 as set forth in clause 1 of the said Bill be amended by striking out lines 41 to 43 on page 270 and substituting the following:
'(o) except where subsection (3) is applicable, there shall be included in computing his income for the year the proceeds of the disposition;'
Page 273
That section 107 as set forth in clause 1 of the said Bill be amended by striking out lines 45 to 49 on page 273 and substituting the following:
'who was a beneficiary under the trust and the property was not taxable Canadian property or property that would be taxable Canadian property if at no time in the taxation year of the trust in which it was so distributed the trust had been resident in Canada, notwithstanding paragraphs (2)(a) to (c) the provisions of paragraphs (4) (d) to (f) are applicable in respect of the property as if the reference in paragraph
(4)	(f) to "that fair market value" were read as a reference to "the adjusted cost base to him of the interest or part thereof, as the case may be, immediately before the property was so distributed".'
Pages 275, 276 and 277
That section 108 as set forth in clause 1 of the said Bill be amended
(a)	by striking out line 20 on page 275 and substituting the following:
'means the individual referred to in paragraph'
(b)	by striking out lines 3 to 12 on page 276 and substituting the following:
'"Testamen- (i) "testamentary trust" means a trust or tary trust" estate that arose upon the death of an individual and in consequence of his death, but for greater certainty does not include any such trust that was created by any person other than that individual; and'
(c)	by striking out line 15 on page 276 and substituting the following:
T04(4), (5), (12), (14) and (15) and sections'
(d)	by striking out lines 24 to 47 on page 276 and lines 1 to 3 on page 277 and substituting the following:
24372-7i
Income Tax Act
*Meaning Of (2) For the purposes of this Act, a trust is a unit tr.ust at any particular time if, at that time, it was an inter vivos trust the interest of each beneficiary under which was described by reference to units of the trust, and
(a)	the issued units of the trust included
(i)	units having conditions attached thereto that included conditions requiring the trust to accept, at the demand of the holder thereof and at prices determined and payable in accordance with the conditions, the surrender of the units, or fractions or parts thereof, that are fully paid, or
(ii)	units qualified in accordance with prescribed conditions relating to the redemption of the units by the trust,
and the fair market value of such of the units as had conditions attached thereto that included such conditions or as were so qualified, as the case may be, was not less than 95% of the fair market value of all the issued units of the trust (such fair market values being determined without regard to any voting rights attaching to units of the trust), or
(b)	throughout the taxation year in which the particular time occurred it complied with the following conditions:
(i)	it was resident in Canada,
(ii)	its only undertaking was the investing of funds of the trust,
(iii)	at least 80% of its property throughout the year consisted of shares, bonds, mortgages, marketable securities, or cash, or of rights to or interests in any rental or royalty computed by reference to the amount or value of production from an oil or gas well, or from a mineral resource, situated in Canada,
(iv)	not less than 95% of its income for the year was derived from, or from dispositions of, investments described in subparagraph (iii),
(v)	at no time in the year did more than 10% of its property consist of shares, bonds or securities of any one corporation or debtor other than Her Majesty in right of Canada or a province or a Canadian municipality, and
(vi)	all holdings of and transactions, if any, in its units accorded with prescribed conditions relating to the number of its

October 22, 1971
Income Tax Act
unit holders, dispersal of ownership of its units and public trading of its units.
(3) For the purposes of subparagraph 70(6) (b)(i), paragraph 73(1) (a), subparagraph 104(4) (a) (i) and paragraph 108(1) (e), the income of a trust is its income computed without reference to the provisions of this Act.'
Page 279
That section 109 as set forth in clause 1 of the said Bill be amended by striking out line 37 on page 279 and substituting the following:
'(ii) dependent upon the individual for'
Pages 283, 286 and 287
That section 110 as set forth in clause 1 of the said Bill be amended
(o) by striking out lines 3 to 9 on page 283 and substituting the following:
'(vi) for the care, or the care and training of the taxpayer, his spouse or any such dependant in a school, institution or other place that is specially equipped to provide care and training to persons who are physically or mentally handicapped and that admits for care, or for care and training, only persons who are so handicapped,
(b) by striking out lines 43 to 47 on page 286 and lines 1 to 17 on page 287 and substituting the following:
'Gifts	(5) Where a taxpayer was, at the end of a
. taxation year of a partnership, a member of the partnership, his share of any amount that would, if the partnership were a person, be a gift made by the partnership to any donee, shall, for the purposes of this section, be deemed to be a gift made by the taxpayer, in his taxation year in which the taxation year of the partnership ended, to that donee.'
Meaning of "income" of trust
Page 292
That section 111 as set forth in clause 1 of the said Bill be amended by striking out lines 31 to 38 on page 292 and substituting the following:
'from an office, employment, business or property and all amounts deductible under section 112 or subsection 113(1) from the taxpayer's income for the year exceeds
(ii) the amount determined under paragraph 3(c); and'
Pages 293 and 295
That section 112 as set forth in clause 1 of the said Bill be amended
(a) by striking out lines 14 and 15 on page 293 and substituting the following:
'(b) a corporation resident in Canada (other than a non-resident-owned investment corporation) and controlled by it,'
(b) by striking out lines 1 to 9 on page 295 and substituting the following:
'Meaning of certain expressions
(6) For the purposes of this section,
(a)	"taxable dividend" does not include a capital gains dividend within the meaning assigned by subsection 131(1); and
(b)	one corporation is controlled by another corporation if more than 50% of its issued share capital (having full voting rights under all circumstances) belongs to the other corporation, to persons with whom the other corporation does not deal at arm's length, or to the other corporation and persons with whom the other corporation does not deal at arm's length.'
Page 296
That section 113 as set forth in clause 1 of the said Bill be amended
(a)	by striking out line 24 on page 296 and substituting the following:
'to in clause (A) exceeds the'
(b)	by striking out lines 37 and 38 on page 296 and substituting the following:
'(ii) the aggregate of amounts deducted under this subsection in respect of'
Pages 299, 300, 301 and 302
That section 115 as set forth in clause 1 of the said Bill be amended
(a) by adding, immediately after subparagraph 115(1)
(a)	(iii) on page 299, the following subparagraph:
'(iii.l) proceeds of the disposition by him in the year of a property that is a Canadian resource property (within the meaning assigned by subsection 66(15)) or that would have been such a property if it had been acquired by him after 1971, to the extent not included in computing his income from a business carried on by him in Canada,'
(b)	by striking out lines 36 to 42 on page 299 and lines 1 to 6 on page 300 and substituting the following:
'(i) real property situated in Canada, or an interest therein,
(ii)	any other capital property used by him in carrying on a business in Canada,
(iii)	a share of the capital stock of a corporation resident in Canada (other than a public corporation), or an interest therein,
(iv)	a share of the capital stock of a public corporation, or an interest therein, if at any time during such of the period of. 5 years immediately preceding
October 22, 1971

the disposition thereof as is after 1971, not less than 25% of the issued'
(c)	by striking out lines 15 and 16 on page 300 and substituting the following:
'time during such of the period of 12 months immediately preceding the disposition thereof as is after 1971, the fair'
(d)	by striking out line 19 on page 300 of the French version and substituting the following:
'societe qui dtaient des biens visds dans le'
(e)	by striking out lines 30 and 31 on page 300 and substituting the following:
'any time during such of the period of 5 years immediately preceding the disposition thereof as______is
after 1971, not less'
(/) by striking out the word "or" at the end of line 25 on page 301
(g)	by adding, immediately after paragraph 115(2) (b) on page 301, the following paragraph:
' (b.l) an individual who had, in any previous year, ceased to be resident in Canada in the course of or subsequent to moving to carry on research or any similar work under a grant received by him to enable him to carry on that research or work, or'
(h)	by striking out line 2 on page 302 of the French version and substituting the following:
'determine en vertu du present alinda, au sujet de la personne non rdsidante, est'
Page 305
That section 116 as set forth in clause 1 of the said Bill be amended by striking out line 1 on page 305 and substituting the following:
'(a) the purchaser, unless after reasonable inquiry he had no reason to believe that the non-resident person was not resident in Canada, is liable to pay, as tax'
Page 312
That section 117 as set forth in clause 1 of the said Bill be amended by striking out subsection (8) thereof on page 312.
Pages 325, 326 and 327
That section 125 as set forth in clause 1 of the said Bill be amended
(a)	by striking out lines 17 to 21 on page 325 and substituting the following:
'the business limit for the year of each of the corporations is the amount so allocated to it under subparagraph (a) (i) and the total business limit for the year of each of the corporations is the amount so allocated to it under subparagraph (a)(ii).'
(b)	by striking out lines 26 to 42 on page 326 and lines 1 to 7 on page 327, and substituting the following:
Income Tax Act
'(i) the corporation's taxable incomes for taxation years commencing after 1971 and ending not later than the end of the particular year, and
(ii)	4/3 of the amounts deductible under section 112 or subsection 113(1) from the corporation's incomes for those years
exceeds the aggregate of
(iii)	4/3 of the taxable dividends paid by the corporation in those years, and
(iv)	4 times the amount, if any, by which the corporation's refundable dividend tax on hand (within the meaning assigned by subsection 129 (3)) at the end of the particular year exceeds its dividend refund (within the meaning assigned by subsection 129(1)) for the particular year.'
Page 332
That section 127 as set forth in clause 1 of the said Bill be amended by striking out lines 19 to 27 on page 332 and substituting the following:
'except that in no case shall the aggregate of amounts in respect of all provinces that would otherwise be deductible under this section from the tax otherwise payable by the taxpayer under this Part for the year exceed 6js% of the amount, if any, by which the taxpayer's taxable income for the year or taxable income earned in Canada for the year, as the case may be, exceeds, where the taxation year ends after 1976, the lesser of'
Pages 337 and 338
That section 129 as set forth in clause 1 of the said Bill be amended
(a) by striking out lines 1 and 2 on page 337 and substituting the following:
'Dividend refund to private corporation
129. (1) Where a corporation was, at the end of any taxation year, a private corporation,'
(b) by striking out lines 28 to 35 on page 337 and substituting the following:
"'Refundable (3) in this section, "refundable dividend onhand"433*tax on hand" of a private corporation at the end of any particular taxation year means the aggregate of amounts each of which is an amount in respect of any taxation year commencing after it last became a private corporation and ending not later than the end of the particular taxation year, equal to the least of'
(c)	by striking out lines 40 and 41 on page 338 and substituting the following:
'plus the aggregate of the taxes under Part IV payable by the corporation for the particular taxation year and any previous taxation years during or after which it last became a

October 22, 1971
"Taxable
dividend"
Definitions
"Allowable refundable tax on hand"
Income Tax Act
(ii)	its income for each taxation year ending in the period was derived from
(A)	ownership of or trading or dealing in bonds, shares, debentures, mortgages, hypothecs, bills, notes, or other similar property or any interest therein,
(B)	lending money with or without security,
(C)	rents, hire of chattels, charterparty fees or remunerations, annuities, royalties, interest or dividends,
(D)	estates or trusts, or
(E)	disposition of capital property;
(iii)	not more than 10% of its gross revenue for each taxation year ending in the period was derived from rents, hire of chattels, charterparty fees or charter-party remunerations;
(iv)	its principal business in each taxation year ending in the period was not
(A)	the making of loans, or
(B)	trading or dealing in bonds, shares, debentures, mortgages, hypothecs, bills, notes or other similar property or any interest therein;
(v)	it has, not later than 90 days after the commencement of its first taxation year commencing after 1971 elected in prescribed manner to be taxed under this section; and
(vi)	it has not, before the end of the last taxation year in the period, revoked in prescribed manner the election so made by it;
except that in no case shall a new corporation (within the meaning assigned by section 87) formed as a result of an amalgamation after June 18, 1971 of two or more predecessor corporations be regarded as a non-resident-owned investment corporation unless each of the predecessor corporations was, immediately before the amalgamation, a non-resident-owned investment corporation; and
(e) "taxable dividend" does not include a capital gains dividend.
(9) In paragraph (8)(a),
(a) "allowable refundable tax on hand" of a corporation at any particular time means the amount, if any, by which the aggregate of
(i) ah amounts each of which is an amount in respect of any taxation year commencing after 1971 and ending before
the particular time, equal to the tax under this Part payable by the corporation for the year, and
(ii)	15% of the amount determined under subparagraph (b) (ii) in respect of the corporation
exceeds the aggregate of amounts each of which is
(iii)	an amount in respect of the 1972 taxation year or any taxation year referred to in subparagraph (i), equal to 25% of the amount, if any, by which the aggregate of the corporation's taxable capital gains for the year from dispositions after 1971 of property described in paragraph (l)(c) exceeds the aggregate of
(A)	its allowable capital losses for the year from dispositions after 1971 of property described in that paragraph, and
(B)	the amount deductible from its income for the year by virtue of paragraph (2) (c)
(such gains and losses being computed in accordance with the assumption set forth in paragraph (l)(d)),
(iv)	1/3 of any amount paid or credited by the corporation after the commencement of its 1972 taxation year and before the particular time, as, on account or in lieu of payment of, or in satisfaction of interest, or
(v)	an amount in respect of any taxable dividend paid by the corporation on a share of its capital stock before the particular time and after the commencement of its first taxation year commencing after 1971, equal to the amount in respect of the dividend determined under paragraph (8)(a); and
"Cumulative (b) "cumulative taxable income" of a cor-income"	poration at any particular time means the
amount, if any, by which the aggregate of
(i)	its taxable incomes for taxation years commencing after 1971 and ending before the particular time, and
(ii)	where the corporation's 1972 taxation year commenced before 1972, the amount, if any, by which its taxable income for that year exceeds the aggregate of
(A) all amounts received by the corporation as described in paragraph 196(4) (b), and
October 22, 1971

(B) the lesser of the amount determined under paragraph 196(4) (e) in respect of the corporation and the amount, if any, by which the aggregate of amounts determined under paragraphs 196(4) (d) to (f) in respect of the corporation exceeds the aggregate of amounts determined under paragraphs 196(4) (a) to (c) in respect of the corporation,
exceeds the aggregate of amounts each of which is
(iii)	an amount in respect of the 1972 taxation year or any taxation year referred to in subparagraph (i), equal to the amount, if any, by which the aggregate of the corporation's taxable capital gains for the year from dispositions after 1971 of property described in paragraph
(1)	(c) exceeds the aggregate of
(A)	its allowable capital losses for the year from dispositions after 1971 of property described in that paragraph, and
(B)	the amount deductible from its income for the year by virtue of paragraph (2) (c)
(such gains and losses being computed in accordance with the assumption set forth in paragraph (l)(d)),
(iv)	4/3 of any amount paid or credited by the corporation, after the commencement of its 1972 taxation year and before the particular time, as, on account or in lieu of payment of, or in satisfaction of interest, or
(v)	the amount of any taxable dividend paid by the corporation on a share of its capital stock before the particular time and after the commencement of its first taxation year commencing after 1971.'
Page 354
That section 134 as set forth in clause 1 of the said Bill be amended by striking out lines 44 and 45 on page 354 and substituting the following:
'be, except for the purposes of subsection 83(1) and sections 87 and 219.'
Pages 355 and 356
That section 135 as set forth in clause 1 of the said Bill be amended by striking out lines 32 to 44 on page 355 and lines 1 to 4 on page 356 and substituting the following:
*Limitation (3) Where the deduction of an amount by reference uncjer subsection (1) or (2) would result in employed the taxpayer's taxable income for the taxation year (before making any deduction
Income Tax Act
under section 111) being less than the lesser of
(a)	the amount, if any, by which
(1) 5% of the members' capital employed by the taxpayer at the commencement of the year, exceeds
<ii) the interest, if any, paid on money borrowed from members and deductible in computing the taxpayer's income for the year, and
(b)	i of the amount that would be the taxpayer's taxable income (before making any deduction under section 111) for the year if the taxpayer were not entitled to any deduction under this section in computing his income for the year,
the amount that may be deducted under this section is such as will leave the taxpayer with a taxable income (before making any deduction under section 111) equal to the lesser of the amount determined under paragraph (a) and the amount determined under paragraph (b).'
Page 360
That section 136 as set forth in clause 1 of the said Bill be amended by striking out lines 16 to 27 on page 360 and substituting the following:
'Meaning of (2) In this section, "cooperative corpora-"cooperaUvetion" means a corporation that was incor-corporation" porated by or under a law of Canada or a province providing for the establishment of the corporation or respecting the establishment of cooperative corporations for the purpose of marketing (including processing incident to or connected therewith) natural products belonging to or acquired from its members or customers, of purchasing supplies, equipment or household necessaries for or to be sold to its members or customers or of performing services for its members or customers, if
(a) the statute by or under which it was incorpo-'
Pages 361, 362 and 363
That section 137 as set forth in clause 1 of the said Bill be amended
(a) by striking out lines 35 to 42 on page 361 and lines 1 to 10 on page 362 and substituting the following:
'Limitation (3) Where the deduction of an amount t<feaefftainCe un^er subsection (2) would result in a employed credit union's taxable income for the year (before making any deduction under section 111) being less than the lesser of
8954

October 22, 1971
Income Tax Act
(a)	the amount, if any, by which
(i)	5% of the members' capital employed by the credit union at the commencement of the year,
exceeds
(ii)	the aggregate of annual or other periodic amounts paid by the credit union in the year to its members in respect of the members' shares in the credit union, and
(b)	l of the amount that would be the credit union's taxable income (before making any deduction under section 111) for the year if the credit union were not entitled to any deduction under this section in computing its income for the year,
the amount that may be deducted under subsection (2) is such as will leave the credit union with a taxable income (before making any deduction under section 111) equal to the lesser of the amount determined under
(b) by page 365 'Amount paid in respect of members' share
deemed paid as interest
(c)	by striking out lines 19 to 29 on page 362 and substituting the following:
Member's (5) Where a payment has been received by income a taxpayer from a credit union in a taxation year in respect of an allocation in proportion to borrowing, the amount thereof shall, if the money so borrowed was used by the taxpayer for the purpose of earning income from a business or property (otherwise than to acquire property the income from which would be exempt or to acquire a life insurance policy), be included in computing the taxpayer's income for the year.'
(d)	by striking out lines 32 to 34 on page 362 and substituting the following:
'for a taxation year means an amount credited by a credit union to a person who was a member of the credit union in the year on terms that the'
(e)	by striking out lines 11 to 21 on page 363 and substituting the following:
(i) it derived its revenues primarily from
(A) loans made to, or cashing cheques for, members,
paragraph (a) and the amount determined under paragraph (b).'
adding, immediately after subsection (4) on !, the following subsection:
(4.1)	For the purposes of this Act, any annual or other periodic amount paid or payable by a credit union to a member thereof in respect of his share in the credit union, other than any such amount paid or payable as or on account of capital, shall be deemed to have been paid or payable, as the case may be, by the credit union as interest and, when received by the member, to have been received by him as interest.'
(B)	bonds of, or guaranteed by, the Government of Canada or a province, or a Canadian municipality, or bonds of a municipal or public body performing a function of government in Canada,
(C)	bonds of a corporation, commission or association not less than 90% of the shares or capital of which was owned by the Government of Canada or a province or by a municipality in Canada, or
(D)	loans made to a cooperative credit society of which it is member, or'
(f)	by striking out lines 30 to 33 on page 363 and substituting the following:
(B) incorporated, organized or registered under, or governed by a law of Canada or a province with respect to cooperatives, or'
Page 369
That section 138 as set forth in clause 1 of the said Bill be amended by striking out line 44 on page 369 and substituting the following:
'of the aggregate of taxable dividends received by' Page 379
That section 142 as set forth in clause 1 of the said Bill be amended by striking out lines 33 and 34 on page 379 and substituting the following:
'under a policy described in paragraph 148(1) (b) or under a policy that is a registered retirement savings plan or that is or is issued pursuant to a registered pension fund or plan,'
Page 384
That section 144 as set forth in clause 1 of the said Bill be amended by adding, immediately after subsection (8), the following subsection:
Foreign tax (8.1) For the purpose of subsection 126(1), deduction the following rules apply:
(a)	that proportion of the income for a taxation year of a trust governed by an employees profit sharing plan from sources (other than businesses, carried on by it) in a foreign country that
(i)	the aggregate of amounts allocated in the year by the trustee under the plan to a particular beneficiary under the plan
is of
(ii)	the aggregate of amounts allocated in the year by the trustee under the plan to all beneficiaries under the plan
shall be deemed to be income of the particular beneficiary for the year from sources in that foreign country; and
(b)	a particular beneficiary under the plan shall be deemed to have paid as non-business-income tax for a taxation year, on the income that he is deemed by paragraph (a) to have for the year from sources in
October 22, 1971

Pages 468, 470, 471 and 472
That section 192 as set forth in clause 1 of the said Bill be amended
(a)	by striking out lines 6 to 11 on page 468 and substituting the following:
'(a) the amount, if any, by which
(i)	the amount of its earnings for the control period that was available for payment of dividends at the end of its 1971 taxation year (within the meaning assigned by subsection 28(5) of this Act as it read in its application to the 1971 taxation year),
exceeds
(ii)	all amounts on which the corporation has, before the particular time, elected to pay tax under Part IX,'
(b)	by striking out line 15 on page 468 and substituting the following:
'corporation's refundable dividend tax on hand (with-'
(c)	by adding, immediately after subsection (10) on page 470, the following subsection:
'Life	(10.1) Notwithstanding anything contained
insurance jn subsection (9), the amount of a life control insurance corporation s earnings for a control period period that was available for payment of earnings dividends at a particular time is the aggregate of the amount thereof determined under subsection (9) and 2 times the aggregate of all income or profits taxes paid or payable by the corporation, for taxation years ending after 1971 that are in the control period, to a government of a country other than Canada or to a state, province or other political subdivision of a country other than Canada.'
(d) by striking out lines 24 to 44 on page 471 and lines 1 to 25 on page 472 and substituting the following:
' "Designated (13) in this section, "designated surplus" at defined any particular time after 1971 of a corporation resident in Canada means,
(a) where control of the corporation was acquired before the end of the corporation's 1972 taxation year, the amount, if any, by which the aggregate of
(i)	the amount determined under paragraph 196(4)(a) in respect of the corporation, and
(ii)	where control of the corporation was acquired after 1971, all taxable dividends received by the corporation in the control period after 1971 and before the particular time from corporations resident in Canada and controlled by it, to the extent that the dividends
Income Tax Act
(A)	were not paid out of designated surplus, and
(B)	would have been paid out of designated surplus on the assumption made by subsection (10) with respect to the corporation,
exceeds the aggregate of
(iii)	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 the corporation's 1971 taxation year,
(iv)	the corporation's tax-paid undistributed income as of the end of its 1971 taxation year, computed in accordance with the provisions of this Act as it read in its application to the 1971 taxation year,
(v)	any amount on which tax has been paid by the corporation, after the end of its 1971 taxation year and before 1972, under Part II of this Act as it read in its application to the 1971 taxation year,
(vi)	the amount, if any, by which
(A)	the aggregate of all amounts on which the corporation has, before the particular time, elected to pay tax under Part IX
exceeds
(B)	the amount determined under subparagraph (iii) in respect of the corporation,
(vii)	all dividends paid by the corporation after the end of its 1971 taxation year and before 1972, to the extent that they were, under the provisions of this Act as it read in its application to the 1971 taxation year, paid out of designated surplus, and
(viii)	all taxable dividends paid by the corporation after 1971 to the extent that they were paid out of designated surplus; and'
Page 476
That section 194 as set forth in clause 1 of the said Bill be amended by Striking out line 28 on page 476 and substituting the following:
'(a) a non-resident corporation or a non-resident-owned investment corporation, or'
Pages 479 and 480
That section 196 as set forth in clause 1 of the said Bill be amended by striking out lines 9 to 43 on page

October 22, 1971
Income Tax Act
Page 559
That the French version of section 244 as set forth in clause 1 of the said Bill be amended by striking out lines 28 to 39 on page 559 and substituting the following:
Idem	(18) Dans toutes procedures en vertu de la
section J de la Partie I, la production d'une declaration, d'un certificat, d'un etat ou d'une reponse prescrite par la presente loi ou par un reglement, ou en vertu de la presente loi ou d'un reglement, donnee comme ayant ete produce ou fournie par le contribuable ou en son nom ou ayant 6te faite ou signee par lui ou en son nom, doit etre acceptee comme preuve prima facie que telle declaration, certificat, etat ou reponse a ete produite ou fournie par cette personne ou pour son compte ou a ete faite ou signee par cette personne ou pour son compte.'
Page 560
That section 245 as set forth in clause 1 of the said Bill be amended by striking out lines 23 to 26 on page 560 and substituting the following:
'(a) included in computing the taxpayer's income for the purpose of Part I,
(b) deemed to be a payment to a non-resident person to which Part XIII applies, or
| (c) deemed to be a disposition by way of gift.'
Pages 566, 575 and 578
That section 248 as set forth in clause 1 of the said Bill be amended
(a)	by striking out lines 25 to 27 on page 566 and substituting the following:
'(f) in any other case, the cost to the taxpayer of the property as determined for the purpose of computing his income, except to the extent that such cost has I been deducted in computing his income for any taxa-1 tion year ending before that time;'
(b)	by striking out lines 5 to 8 on page 575 and substituting the following:
'incorporeal and, without restricting the generality of the foregoing, includes
(a) a right of any kind whatever, a share or a chose in action, and
| (b) unless a contrary intention is evident, money;'
(c)	by striking out lines 3 and 4 on page 578 and substituting the following:
Can^dUin	"taxable Canadian property" has the meanproperty" inS assigned by subsection 115(1) except [DOT]bien	that, for the purposes only of section 2, the
canadien...* expression "taxable Canadian property" includes a Canadian resource property (within the meaning assigned by subsection 66 (15) ), any property that would have been a Canadian resource property (within the
meaning assigned by subsection 66(15)) if it had been acquired after 1971, and an income interest in a trust resident in Canada;'
Page 582
That section 250 as set forth in clause 1 of the said Bill be amended by striking out lines 24 to 27 on page 582 and substituting the following:
'(c) in the case of a corporation incorporated before April 27, 1965 (other than a corporation to which subparagraphs (b) (i) to (iv) apply), it was incorporated in Canada and, at'
Page 584
That section 251 as set forth in clause 1 of the said Bill be amended by striking out line 1 on page 584 and substituting the following:
'Control by related groups, options, etc.
(5)	For the purpose^ of subsection (2) and section 256,'
Page 589
That section 256 as set forth in clause. 1 of the said Bill be amended by adding, immediately after subsection
(5)	on page 589, the following subsection:
*Controlled (6) Where, for the purposes of any pro-fensT^saving Y,ision of this Act, one corporation resident in provision Canada (in this subsection referred to as the "controlled corporation") would, but for this subsection, be regarded as having been controlled by another corporation resident in Canada (in this subsection referred to as the "controller") at a particular time and it is established to the satisfaction of the Minister that
(a)	there was in effect at the particular time an agreement or arrangement enforceable according to the terms thereof, under which, upon the satisfaction of a condition or the happening of an event that it is reasonable to expect will be satisfied or happen, the controlled corporation will
(i)	cease to be controlled by the controller, and
(ii)	become controlled by a person or group of persons, with whom or with each of the members of which, as the case may be, the controller was at the particular time dealing at arm's length, and
(b)	the chief purpose for which the controlled corporation was at the particular time so controlled was the safeguarding of rights or interests of the controller in respect of
October 22, 1971

(i)	any loan made by the controller the whole or any part of the principal amount of which was outstanding at the particular time, or
(ii)	any shares of the capital stock of the controlled corporation that were owned by the controller at the particular time and that were, under the agreement or arrangement, to be redeemed by the controlled corporation or purchased by the person or group of persons referred to in subparagraph (a) (ii),


William Gordon Ritchie: October 22, 1971
Income Tax Act
embraces those that will qualify. Finally, the exclusion of infrastructure expenditures from any major expansion does not seem entirely logical. Apparently, it is considered that this expenditure does not carry the same risk as an expenditure on mining assets. However, all these expenditures bear the same degree of risk, which is contingent upon whether the mine has the ability to produce profitably. In my opinion, these points should be taken into consideration when amending the bill. In dropping the three-year exemption in favour of an accelerated depreciation, the government has definitely reduced the incentive to risk money in mining and presumably feels that risk capital, as in the past, has been getting off too lightly in the tax structure.
Turning now to the wiping out of depreciation allowances of 33-1/3 per cent by substituting $1 credit for every $3 worth of exploration, the government has again departed from the standard type of tax incentives that are offered around the world. The United States has continued to offer percentage depletion at varying rates based on the gross revenue from mining, with a maximum deduction of 50 per cent of the net income before depletion. In the United States, for example, after exhaustive hearings on the subject, Congress substantially maintained the existing levels for hard minerals.
Around the world, most countries are not reducing tax incentives to promote mining exploration and development. The depletion allowance of 33-1/3 per cent was allowed on the presumption that mining was a wasting resource and that allowance should be made for this in order to encourage new discoveries and development. While there may be considerable argument over the best way to give incentive to the mining industry, depletion allowances of fixed percentages seem to have worked well in Canada.
Under Bill C-259, companies not engaged on off-property mineral rights exploration will receive no depletion allowance at all. While superficially this may seem to encourage mineral exploration, on closer analysis it is highly discriminatory and fails to meet the condition for which the depletion allowance was instituted. Some mining companies are by nature better organized and committed to broad and continuing mineral exploration. Others are concerned only with metals, such as gold, asbestos, potash and iron ore, of which abundant supplies and reserves are known to exist.
For some minerals there may be no point in continuing exploration programs. It seems a fundamental error and wholly unwarranted to make the depletion allowance completely dependent on future exploration expenditures. The justification for depletion allowance is the wasting asset nature of mining and ore bodies. There is no doubt that at the present time the depletion allowance has been an important factor in enabling Canadian companies to sell their products on the world market.
In the matter of earned depletion, the bill seems to need broadening so as to include the cost of any exploration and development in the vicinity of an existing mine, the development of permanent underground fixtures and development costs related to a major expansion of an open pit mine.

In the area of new processing facilities that have to do with the processing of Canadian ores beyond the stage to which they were previously processed in Canada, it would seem logical that all new facilities should qualify if it is our intention to increase the processing of ores in Canada. This would seem to be a desirable role for Canada, one that would meet with wide approval.
The announcement by the Minister of Finance that there would be an abatement of 15 per cent for the provinces has clarified the situation to some extent. However, the provinces will not necessarily pass on these abatements and are under no obligation to do so. Until a more definite position on the part of the provinces is known, the mining companies will be in some confusion. The proposals in Bill C-259 definitely reduce the incentive to invest money in mining and will relatively reduce the amount of risk capital that will go to the mining industry.
In a recent speech Mr. A. G. Goodeve, president of McIntyre, Porcupine Mines, said:
The most basic uncertainty regarding new provisions relates to exploration, because the investment decisions that must be made now are concerned not with short term but with the eventual rates of return from discoveries not yet made, which must compare favourably with investment opportunities elsewhere.
In revising the tax on the mining industry the government has made the decision that more capital should be directed away from the mining industry and-hopefully- channelled into the manufacturing sector of the economy.
Because of the mining industry's wide dispersion across the country, and its value as often the only industry in large areas of Canada, I think we must look at this tax very closely. Mining is carried on in many of the regions that have been designated under the regional economic expansion program. Under the proposed program, the government is making massive grants to the so-called underdeveloped areas of Canada and grants are being given to many firms that have little hope of becoming viable entities once these grants are discontinued. I think that the restrictions proposed by the federal government just do not make sense. Indeed, the government seems to be reversing its policy in its attempt to rehabilitate these regions by means of grants under the regional economic expansion program. Particularly is this true in western Canada, where mining, oil and gas industries are of extreme value to the economy of the four western provinces. Indeed, in the Yukon these industries are virtually the mainstay of the economy. In Manitoba towns like Thompson, Flin Flon and Lynn Lake are almost wholly dependent in economic terms upon the mining industry. The government has made a calculated effort to discriminate against communities on the periphery of the country in order to build up a central manufacturing industry.
It is generally accepted that there is adequate replacement of minerals from sources in the world other than Canada and at prices that are quite competitive. Cutbacks in the mining industry will only compound the problem of job creation and favourable trade balances that are so necessary for the 1970's. The unsettled international economic and monetary situation holds such serious potential consequences for Canada that we must view this aspect of the bill which relates to mining with some grave misgivings.

October 22, 1971
A recent report by the Science Council of Canada entitled "Innovation in a Cold Climate" illustrates why it is so dangerous to tamper with the taxation structure for Canadian mining at this time. The mining and petroleum industries are two outstanding Canadian sectors which have shown the capacity over the years to successfully compete in world markets. With regard to manufacturing, pages 20 and 21 of the Council's report read:
Growth, competitive ability, and profits go hand in hand. All three appear to be lacking in the Canadian Manufacturing Industry at the moment.-
Together, however, these trends represent a threat of unusual severity and duration. Additional complications have also begun to appear: the United States import surcharge, the rising exchange rate, and the possible recurrence of inflation, for example.-
__if these trends continue and there are no signs in the last four
years of their improvement or even of their arrest -Canada's economy in this decade will increasingly become dependent on the resource and service industries.
If the council's views are correct, they surely add further support to the contention which the mining industry has repeatedly made; namely that with so many other industries in Canada in difficulty, it makes no sense, especially in these anxious times, to tamper with the taxation structure which has enabled the mining industry to develop successfully and thereby contribute so importantly to the over-all economic growth of this country.
I feel that the government has made major changes in the taxation structure of the mining industry. We do not know where this will lead. All indications are that there will be a dampening of mining activity in view of the heavy increase in the work force that is necessary in Canada and will occur in the 1970's. This indicates that the government has not acted wisely in its handling of the mining industry in Bill C-259.


Charles Humbert Thomas: Mr. Chairman, the most remarkable characteristic of this government, apart from its incompetence of course, is its amazing faith in its own infallibility. The members of this government believe they are right and the world is wrong. One would think that their dismal record to date, the funny forecasts of the Minister of Finance, the withdrawal of the grain stabilization bill, the about-face of the October 14 mini-budget, would cause some misgivings of their infallibility, but evidently not. Apparently the Minister of Finance is determined to bull these amendments through the House, despite the growing criticism the amendments belong in the minister's own Alice in Wonderland world and not in the cold reality of today's trading world. These criticisms are becoming so prevalent and diverse that surely the minister must be having some doubts.
I wish to refer to a few of the criticisms that have been made. Mr. Gerard Filion, the president of the Canadian Manufacturers Association, pointed out in a letter to the Prime Minister that the imposition of additional costs on industry in today's trading world is making it extremely difficult for Canadian industry to compete with foreign manufacturers in the export markets. These extra government costs, according to public opinion, cannot always be passed on to the consumer. In many cases they have to be added directly to the cost of the product. This makes it very difficult to compete in the trading world. He also
Income Tax Act
preferred to the fact that while many of the government's social programs are nice to have, in many cases they are beyond the ability of Canadians to pay. Here again, additional charges are placed on industry. Mr. Filion went on to say, as reported in the Globe and Mail:
The letter says rules for the treatment of international income in the proposed changes to Income Tax Act would discriminate against the development of Canadian-based multi-national companies.
He called upon the government to withdraw from the order paper the Competition Act, the technological change provisions of the proposed amendments to the Canada Labour Code and other proposed changes which will cripple industry more than it is crippled at present.
Dr. Friedland, director of the Capital Markets Research program at York University, commented on the tax changes in the mini-budget. While he admitted they could have some effect as a crash program, they certainly would have little or no long-term effect. He suggested that the government should have made some concessions in excise taxes and in other types of sales taxes. I quote from the October 16 issue of the Globe and Mail:
As for tax reform measures, Dr. Friedland feels Ottawa would now like to delay their enactment until it sees more clearly what is going to happen in the economy, but that political pressures to enact the legislation on schedule may be unavoidable.
The president of the Canadian Real Estate Association recently commented on the effects on real estate business of the tax proposals. He stated that the tax reforms pose a serious threat to real estate companies and that possibly many of them may well be forced out of existence.
I quote from a newspaper article published yesterday:
A spokesman for Massey-Ferguson Limited says the government should postpone action on new tax laws for a year because of the damage they might do to Canadian business-
Peter N. Breyfogle, Massey-Ferguson comptroller, said that because of the current economic climate there is a greater need than normal for more jobs, more company profits, and-resulting from them-more government revenue.
This is what the government does not seem to be able to grasp.
But the tax revision introduced last June by Finance Minister Benson will increase the tax burden on multinational operations based in Canada and other companies depending on income from abroad, he added.
This is the disturbing feature of this whole exercise. Every day in this House questions are asked about layoffs by various national firms. More of them will occur in the days to come, yet the government insists on going ahead with measures to place more restrictions on these firms. These will inevitably lead to further lay-offs.
I wish to refer to an editorial in the October 21 edition of the Toronto Telegram by Mr. Fraser Robertson. He commented on the Science Council report which has been referred to more than once in this debate. Mr. Robertson points out that the whole thrust of the report is that the government has not yet developed any long range policy. For three and a half years the government has gone along with stop-and-go programs. The private sector of the economy is completely confused about the intentions of the government. Each week we see further about-faces and further changes in the thrust of the economy. Mr. Robertson also referred to several pieces of legislation

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which this goverment has proposed and which are apparently on the order paper. It is apparently the deliberate intention, through this legislation, to cripple the private sector of the economy and give more and more control to the public sector. He mentions a few of these pieces of legislation. He starts off with the tax reform proposals, the Competition Act and unfair labour laws. Mr. Robertson says:
Each casts a chill across the business community. Each was conceived with the belief that business activity is, somehow, detrimental to Canada's interests. Each is designed to substitute bureaucratic control for business enterprise. If these measures are indicative of government policy, and not merely examples of mistaken expediency, then it may be said that government policy is to suppress business innovation of every sort, to persuade alike those who now have jobs and those who do not have jobs that business is their enemy.
I know I will probably be accused of being a spokesman for business and the CMA. I would be quite happy to be accused of taking such a position because I believe it is high time someone in this House spoke out on behalf of the whipping boys of the government, the business community of this country. On Friday, October 15 I was interested in reading the leading editorial in the Globe and Mail. It reads:
As a general rule, a carpenter does not continue to remodel a house while the roof burns.
Yet this is approximately what the federal government is about, as it continues to process its gigantic tax bill while the world into which the legislation will eventually emerge changes drastically.
This illustrates what I mentioned earlier. We are living in a new world, in a new economic climate. Yet, this government is living in the 19th century. It is time it came out of the Alice in Wonderland dreamworld it is in and took some measures to cope with the changing economic conditions of the day. The editorial goes on to point out: The opposition leaders have been complaining that the tax bill is irrelevant-
It just does not apply in today's industrial world. It is not productive. There is nothing in the tax measure which would increase the gross national product or the number of jobs for Canadians. The article states that there is also quite a bit of evidence that in the post-August 15 world, since the announcement of the Nixon economic measures, some of the proposed tax measures could be absolutely the wrong type.
What is there in this tax bill to cope with DISC? The tax bill will do nothing to strengthen the Canadian economy and meet the pressures created by Mr. Nixon. The editorial continues:
Mr. Benson should withdraw that tax bill and concentrate all his energies on our real problems.
I have just one further quotation. There are dozens of them and I have picked out a few at random. Mr. John Meyer, writing in the Montreal Gazette of October 14, referred to the fact that the tax bill is now undergoing clause by clause study in committee and points out that many of the provisions in the tax bill are not relevant to today's changing conditions. He concludes by saying:
Mr. Benson should make clear now that he'll settle for passage of the generally non-controversial sections of the bill while holding over, for continuing discussion and amendment, the controversial

sections. That would be the first step. The second step would be to withdraw those portions of the bill which drag on business activity.
As I say, those are a few criticisms I have selected at random. There are many others. I could go on for hours citing criticisms of this tax bill. Even though all these criticisms are mounting, they impress everyone except this government and the Minister of Finance. I have little hope now that we can make any impression on the government or on the minister, because after all how many mistakes can the minister admit without losing all credibility. So, I accept the fact that the tax bill will not be withdrawn. We in the opposition can only concentrate on the most repugnant clauses of the bill and hope, through our pleas and interventions, the minister may be persuaded to make some necessary amendments.
One proposal which will have the most serious effect on the greatest number of Canadians is that dealing with the change in the method of taxation of co-operatives and credit unions. I know this subject has been brought up many times in this debate. Many speakers on both sides of the House have stood in their place and have affirmed their strong support for the co-operative. Many government members have made these statements. However, I have yet to see any concrete evidence that this government intends to accept any of the suggestions or proposals put forward either from the government side of the House or from our side. I know there is an amendment which I shall not discuss now other than to say it does not satisfy the criticism that these tax changes will be very damaging to the co-operatives. After all, co-operatives are a special type of business. Certainly, they have been treated differently.
The criticism has been made often that co-operatives have received tax advantages at the expense of other businesses. I cannot agree with that statement because the co-operatives are subject to a type of taxation that is unique in this country to co-operatives and is unique in the world. I refer of course to the arbitrary method of taxing on the capital employed concept. This is a discriminatory method of collecting taxes and to the best of my knowledge it is not found in any other tax system in the world. Why should there be a difference? What is the logic of taxing on the capital employed in a business. I have been in business all my life and have never seen such a concept in private business. The amount of capital employed in a business has nothing to do with its income and should not be the basis for levying income tax.
Co-operatives are different from other enterprises primarily because of their objectives. They are self-help organizations. Incidentally, with all the criticism in respect of United States ownership I would point out that co-operatives are always Canadian and locally owned. These self-help organizations are generally found in primary production areas, namely, grain, dairying, farm products and fishing. The merchandising they carry on actually is a service to the people in the small centres which in many cases is not supplied by private enterprise because it is not profitable. The question I should like to ask is, should city people be denied the right to self-help organization recognition because their attempts to cut living costs cause some profit oriented corporations to lose some business? Co-operatives usually serve members
October 22, 1971

whose income level is below average. This should be sufficient reason to encourage their self-help efforts.
Despite the efforts to tax co-operatives as a business, they have grown, and largely in the poorer areas of the country where their services are so much in demand. All co-operatives are willing to accept taxation practices that are in every day use for thousands of Canadian taxpayers. Thousands of Canadian entrepreneurs, be they shopkeepers, farmers, fishermen, doctors, some lawyers, some accountants, are in business. They prepare income statements and are taxed at the graduated individual rates. There is no special business tax. There is no tax on capital employed. Thousands of these Canadian businessmen are in business in the areas which I have outlined, but they operate partnerships. Partners in accountancy enterprises sometimes number in the hundreds. Partnerships in law forms are very common and numbers of partners can be quite substantial. I suggest that these are not underprivileged citizens, yet partnerships may apportion their total income as they see fit and are taxed at the individual level. There is no special business tax, I repeat. Trusts are sometimes created and in addition, in cases of estates, income allocated is taxed at individual rates. There is no special business tax.
I also submit that co-operatives are partnerships in selfhelp efforts and the members are bound together by a common cause that is comparable to that of any of the partnerships I have named. Cannot farmers combine to form a partnership to sell their grain? Does it matter if there are 10 farmers or 10,000? Is not the principle the same? I submit that co-operatives compete with individual entrepreneurs, partnerships as well as corporations. Their objectives in forming a co-operative are practically the same as the partnership which I described, that is self-help. The patronage returns method of disposing of earnings, if unrestricted by capital employed capital tax, results in taxation at individual level of owners of partnership co-operatives. This was the method of taxation recommended in the Carter report. Therefore, I submit that it is equitable and reasonable that the income of co-operatives allocated to members be taxed at individual levels and reserves retained be taxed at appropriate corporate rates.
I admit that there is nothing new in these proposals, but I am trying to throw a little new light on the matter and to point out to the officials as well as to the minister that co-operatives are basically partnerships. Many types of partnerships exist in business. Why are the co-operatives singled out for special discriminatory tax on the capital employed basis? If the minister or his officials can satisfy me or can point out to me any similar cases of partnerships being taxed in this way, then possibly I would be able to accept their arguments. However, until such time as they can give us on this side of the House a satisfactory explanation why co-operatives are being singled out for discriminatory treatment, we will continue to fight these clauses when they come before the committee. We will continue to hope that somehow or other we can persuade this government that co-operatives in this country render too vital a service to be taxed out of existence.
Income Tax Act


Steve Eugene Paproski: I rise to take part in this debate on Bill C-259, an act 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 the act. If this bill does nothing else, it will provide an opportunity to debate the government's economic failures, and for that we must be grateful. However, the country is not grateful for the mess in which the government has left the nation's finances. On all sides we see the total failure of anti-poverty programs which never got off the paper on which they were written, the increasing menace of unemployment, the fear and uncertainty of industry and the worsening climate of confidence. That is the government's record, a record of failure and fear.


Some hon. Members:: Hear, hear!


Steve Eugene Paproski: The bill before the House represents the obituary of the hopes with which this government came to power less than four years ago. The amendments which our party put forward, and which were defeated, highlighted the government's failure in the economic field, the unacceptable level of unemployment, inflation, the crisis condition of industry, the lack of confidence in the government, and the fact that the proposed bill does nothing to remedy these serious conditions. The bill is a shadow and a fraud. It contains 700 pages of imcomprehensible amendments to an act that has already been subjected to repeated amendments over the years. You call that reform, but it is only piling confusion on top of confusion and confounding even the lawyers of this country who frankly confess that the entire tax law, with the addition of the present bill, is not only meaningless but impossible to understand.
I refer in passing to the arrival in this country of a young Russian seaman who jumped from a ship, swam for two hours through the icy coastal waters of British Columbia, and climbed a high cliff just to be in Canada. If he had seen this legislation, he would have turned around and swum back. I hope that the government will allow this young man to stay in Canada. Anything else would be unthinkable. This is the kind of immigrant we need in this country.


Mr. Whelan:: One that can swim.


Steve Eugene Paproski: A week or two ago, the income figures were released and they showed which cities in Canada had the highest income level. It will be interesting for my Waffle friends in the NDP to note that Oakville, where there is a Ford automobile plant led all the rest, including Toronto and Edmonton. I wonder what the NDP solution would be once they got rid of all the U.S. industry? Would they put everyone on the federal government payroll? There would be total regimentation.
The present legislation is a fraud because in reality it does not represent tax reform. What it represents is an attempt by the government to carry out the principle of taxing Canadians to the fullest extent that the traffic will bear. The government has been spending money like a drunken sailor. They are running huge deficits and are now at the point, as we have seen recently, where they no longer pay the Wheat Board what belongs to the Wheat Board by statute. Maybe they cannot afford to keep up the payments to the Wheat Board. But apparently they are

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able to find $15 million for an experiment to see whether people will lose the incentive to work if they are placed on welfare. Do we need any further experiments in that direction? I can assure the government that if they want to supply me with the necessary income to maintain a standard of living to which I would like to become accustomed, something on a par with the Prime Minister, for example, then I will guarantee to lose the incentive to work. There was $15 million for experiments in sociology, but nothing for the western farmer. There was $40 million for the Opportunities for Youth program, but nothing for the poor and aged.
The government can always find unlimited funds for the kookie ideas but no money to take care of the essential business. This is a government which goes out and buys a new hat when there is no food on the table. I hope the Prime Minister does better on his housekeeping accounts than he has been doing at balancing the nation's business. We have asked for tax cuts, industry has asked for tax cuts, the poor bloody taxpayers always ask for tax cuts. The only thing the government is cutting is the taxpayer's windpipe. Tax cuts would increase consumer demand, stimulate industry, increase employment and put Canada back in competition. The government will not listen because they are obsessed with the old Liberal philosophy of tax and tax, spend and spend, and waste and waste. They call that redistribution. The Minister of Finance regards himself as a kind of pipe-smoking Robin Hood, taking from the poor to give to the rich. The only problem is that he does not have Friar Tuck and Little John to guide him.


Thomas Miller Bell: How about the man from Georgia?


Steve Eugene Paproski: The present bill is a gigantic monument to the government's inability to come to terms with reality. It represents the final stage of a long process which began under the Diefenbaker government with the setting up of the Carter Royal Commission on taxation. That commission brought forward a number of new principles, most of which have been thrown by the wayside in this legislation. The Carter Commission inaugurated the policy of taxation based on equity. There is no shadow of equity anywhere in these amendments.
Then, we had the white paper on taxation. Perhaps the present bill could be called the black paper. The white paper made the House and the country aware of the theorizing and speculative conjectures of the minister and his officials. It was a kind of almanac of taxation possibilities, none of which were ever realized. Then came the present legislation, if I can use that term in relation to the hodge-podge before us, which betrayed and discarded both the white paper and the Carter Commission. In the bill before the House there is no trace of Carter and very little of the white paper. What we have here is a vise to squeeze the taxpayer, the farmer, the householder, business and industry.
This legislation will have an inflationary impact such as we have not yet seen in this country. It will push up prices, stifle industry, and reduce the standard of living of 30 per cent of the people of this country. The reason it is needed is that the government has wasted so much that it must

now extract every last cent from the taxpayer. The bill is the government's attempt to prove that you can squeeze blood from a stone if you squeeze hard enough.
This bill should not be allowed to pass because it is a bad bill. It introduces a new principle in Canadian politics, the principle of legal confiscation. Everyone can understand taxing a dollar. But when the same dollar is taxed over and over, that is no longer taxation, that is confiscation. A dollar is taxed when an individual receives it as income. It is further taxed as a return on investment. It is taxed once again as profit. It is taxed when he dies, and passes it on to his heirs. We used to complain about double taxation. This bill brings in triple and quadruple taxation, and gives the government the right to go as far as it likes.
This legislation carries on a process which has been growing more and more destructive, taking capital out of productive purposes and diverting it to non-productive experimentation. When money is spent on social theorizing there is no return on the investment. It is removed from the economy. That means that people who are interested in producing and contributing have to work harder to find more money elsewhere in order to produce, to build, to create, to explore and develop. The government is not concerned about these things, but non-productive distribution has resulted in slowing down the wheels of industry, putting a stop to development, and giving us the highest unemployment in history.
So far, we have been able to get by on our resources. As the hon. member for Duvernay pointed out the other day-and he is one of the greatest philosophers in the Liberal hierarchy-living on our resources is like living on capital. We all know how far that goes. I want to commend his speech on the economic situation, and his grasp of the essentials of Canada's position when we are being asked by the government to surrender our heritage for a mess of American pottage.
The hon. member for Duvernay, who should have been the Minister of Finance, gave a realistic appraisal of the present situation, one the government could study with profit. The present illogical and theoretical approach cannot go on without destroying the economy entirely. What level of unemployment, what level of inflation is the government prepared to tolerate before it will act? How long is it going to try to deal with problems through seminars, task forces and position papers? Canadians are suffering all across this land, and the government is playing tiddleywinks with taxation reform that is not reform but simply a tightening of the screw on the taxpayer.
The hon. member for Duvernay said, "Cut taxes on lower income and middle income groups." Instead of that the government is raising them. Is it not curious indeed that some of the brighter minds in the Liberal hierarchy have had enough of this shilly-shallying and tinkering? The hon. member for Duvernay is one. The former minister of defence, the hon. member for Trinity, is one. The former member for York West has parted company with the little group at the top, presumably because there was no room at the top. They are all honourable and honest men who decided that the fate of Canada concerned them more than the fate of the government. That is what we are asking the government to do. Think about Canada, about the unemployed, about inflation, about the western
October 22, 1971

farmer, about the housewife who, as a result of this legislation if it passes, will have to pay even more than she now does to put food on the table and educate her children.
The government is taking more and more from the private sector and frittering it away in a series of socialist experiments. Money frittered away by the government does not produce economic activity, does not produce jobs, does not help production and development. It keeps a lot of people working in the high echelons of government think-tanks, but that does not help unemployment. This legislation should not be allowed to pass this House for the simple reason that it does not approach the problem of tax reform on a basis of equity or economic development. It is just another move in imposing on the Canadian people a new set of theories emanating from the government.
When you consistently avoid the problems and deal with those things which exist only in your own mind, then you are creating serious and long-lasting trouble in the economy. That is what the government is doing. It is simply tilting at strawmen while Canadians are suffering. The economy is running downhill because of indifference and neglect. There is no reason for this policy except ineptness and stupidity on the part of the government. A little incentive, and a little leadership in the form of widespread tax cuts might mean cutting back on some of the programs which the government's advisers love to dream up. At the same time, it would mean that many more Canadians would be working, many more Canadians would be eating better, dressing better, and paying less, and we would be in a position to take up the slack in the economy caused by the Nixon measures.
I just want to make one point on the Nixon measures. Personally, I have respect for President Nixon's integrity and his qualities as a human being. There is no doubt he is growing into his job. But I cannot accept the fact that Canada should be penalized for the Americans' failure to stay competitive. Nor can I, along with many other Canadians, accept the sheep-like attitude of the present government. The Minister of Finance went to Washington and, while he was blowing smoke in their eyes, they pulled the wool over his. Is it not time the government stood up and told Washington that we are their best customer? I am not advocating a trade war with the United States. That would be suicide. I am advocating that the government take a firm position for once-


Eugene Whelan: Would the hon. member permit a question?


Steve Eugene Paproski: There are only a few minutes to go. If I have time at the end, I would be glad to allow the hon. senator to ask a question.


Thomas Miller Bell: Explain!


Steve Eugene Paproski: I am advocating that the government take a firm position for once, instead of the traditional posture of the Liberal party which has always been to roll over and play dead whenever Uncle Sam snapped his fingers. They did it when they brought nuclear weapons into this country. They did it when they let the Americans stake a claim to Canada's Arctic waters. They are doing it now on
Income Tax Act
the Nixon measures which are a clear breach of the GATT agreement.
If it will not stand up to Washington, let the government at least ease the burden on producers in this country by a sizeable tax cut right along the line, so that Canada can once more get back into production with more jobs and lower prices. I suggest to the government that it scrap this pile of garbage and bring in some realistic tax policies for the benefit of Canadians. Now, Mr. Chairman, if the hon. gentleman would like to ask a question and it has anything to do with the bill I will accept it, but if it has anything to do with the Amchitka bomb blast I will not.


Eugene Whelan: It has a lot to do with what the hon. member said in his speech. I should like to ask if he is aware of a certain gentleman in Ontario who said that the federal government took the right position regarding the surcharge and the income tax cuts? Is the hon. member aware that the people of Ontario yesterday gave this gentleman the biggest majority any Conservative government has had in Ontario?


An hon. Member:: That is because he supported the federal Liberals.


An hon. Member:: Would you repeat that last part?


Steve Eugene Paproski: I am sorry, Mr. Chairman, but I didn't get that. Would the hon. member repeat it please?


Eugene Whelan: I said that the Ontario Conservatives won by following federal policy.


Steve Eugene Paproski: They did everything that the federal Conservatives asked them to do. You can see that we were very conservative yesterday. The next time there is a federal election you people will be on this side of the House.


Some hon. Members:: Oh, oh!


Some hon. Members:: Hear, hear!


Gérald Laniel: Order, order. The hon. member for Lethbridge.


Mr. Gundlock:: Mr. Chairman, I welcome the remarks of the hon. member over there who called our attention to a new mandate in the province of Ontario, the greatest ever in that province. This resulted from the fact that they went along with this government in one aspect, they did not appear unfriendly to the United States. This is why we are in so much trouble at the moment. We blame everything on our association with the United States. I should like to repeat, Mr. Chairman, that the mandate the government of Ontario now has is an entirely different sort of mandate from that which the party opposite will have when they face up to what they have been doing in this House in the last few years.


Steve Eugene Paproski: That's right. It is shameful, intolerable and shameful.


Some hon. Members:: Oh, oh!

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Gérald Laniel: Order. Order. I cannot hear the hon. member, please.


Deane Roscoe Gundlock: I was not saying anything. I liked the by-play.


Gérald Laniel: Order. If the hon. member was not saying anything, perhaps he should not have the floor.


Deane Roscoe Gundlock: Well, Mr. Chairman, I like to listen to what is said in this House and I will have more to say about that.


Thomas Miller Bell: Call it one o'clock.


Deane Roscoe Gundlock: I hardly know where to begin when speaking on Bill C-259. Admittedly, I do not understand it and as you remarked just a moment ago, maybe I am speechless. However, I have learned to carry a scale along with me and I can weigh the damn thing. It weighs over four pounds!


Steve Eugene Paproski: That is a lot of paper.


Thomas Miller Bell: May I call it one o'clock, Mr. Chairman.


Gérald Laniel: Is it the pleasure of the committee to call it one o'clock?


Some hon. Members:: Agreed.


An hon. Member:: No.


Gérald Laniel: It is not agreed.


Deane Roscoe Gundlock: It was reported in the press the other day, Mr. Chairman, that the chartered banks have reduced their interest rates. About a week ago in this House the Minister of Finance, in a sense, reduced the interest rates to the Canadian public. But I think the banks were a little bit late. The government thought it was doing something when it turned the interest rates loose, just as it thought it was doing something in bringing forth the white paper and the present bill. People are not going to forget, however, what the banks did before they reduced the interest rate and they are not going to forget what the Liberal government did before and after producing this white paper.
This bill is just too much for the Canadian people to absorb. I would point out to the Minister of Finance and the Prime Minister that the Canadian people are not going to take it. When the government brings in a tax bill that no one can understand-I doubt if the minister himself understands it-the people are not going to accept it. We receive letters from all over the country, personal letters, letters from associations such as co-operatives, credit unions and others, rejecting this measure.


Thomas Miller Bell: One o'clock.


Deane Roscoe Gundlock: Credit unions, co-operatives, senior citizen groups, even the young people, are disappointed in this bill because they cannot understand it. Mr. Chairman, I have much more respect for hon. members opposite than this bill would demonstrate. I wonder where it emanated? From a practical viewpoint, I cannot imagine the Minister of Finance, personally, or even the Prime Minis-

ter, allowing such a bill to reach this House. Eventually, it will have to make its way through the other place and I simply cannot imagine that.
I should like to ask the question of anyone who can give the answer, where did such a bill emanate?


Stanley Howard Knowles: One o'clock.


Gérald Laniel: It being one o'clock, I do now leave the chair.
At one o'clock the committee took recess.


[Stage Direction]
AFTER RECESS

The Committee resumed at 2 p.m.
Deane Roscoe Gundlock: Mr. Chairman, before I resume the debate, I should like to call your attention to something. I do not want, Mr. Chairman, to bring this point up as a question of privilege. However, before lunch, during the course of my remarks, the Chair had called, "Order, order." The occupant of the chair then went on to say, "I cannot hear the speaker, please." I rose after that and said, "I was not saying anything. I like the by-play." The occupant of the chair called order again and said, "If the hon. member was not saying anything perhaps he should not have the floor."
I feel strongly about this, Mr. Chairman. The Chairman of the Committee could not hear what was being said and an hon. member had to resume his seat for that purpose. The occupant of the chair called order, and the person who had the floor had to remind the Chair that he was not saying anything. Then, the hon. member was called to order a second time. I take exception to that. I have looked through some of the rules pertaining to procedures of committees of this House, and I find no rule saying that any member of the committee who has the floor has to continue speaking when not even the Chair can hear him. Certainly, when the person occupying the chair cannot hear what is being said the matter is very serious, because there may be difficulty in recording the hon. member's remarks. There are many things in the proceedings of the committee which I think should be heard as well as recorded. I hope, Mr. Chairman, I have put this in a proper form.


Gérald Laniel: The Chair finds it difficult to understand exactly the point raised by the hon. member, and is wondering whether he is talking about a technical difficulty which occurred in translation or whether, the intolerance of other members prevented the Chair from hearing. I was not the occupant of the chair at that time. The hon. member should be advised, though, that he cannot, at any time, quote from the blues in the House. He can refer to Hansard once it is printed. Perhaps the best way to examine the situation to which he has referred would be to look at Hansard on Monday. This would, perhaps, give us a better idea of exactly what happened. If there is anything to be corrected, I am sure this can be done. In addition to looking after the application of the
October 22, 1971

rules, the Chair does its best to ensure the good operation of the House.


Deane Roscoe Gundlock: 
Mr. Gillespie:: A point of order, Mr. Chairman.


Gérald Laniel: Order, please. The minister is rising on a point of order.


Alastair William Gillespie: I would challenge the hon. member to give evidence for his statement. If he will look at the record he will find that short-term interest rates in Canada are in fact lower than interest rates in a number of important industrialized countries.


Gérald Laniel: Order. I would remind the minister that that is not a point of order. The hon. member of Lethbridge.


Deane Roscoe Gundlock: If I may talk across the floor, through you, Mr. Chairman, some of the figures that I have are the most reliable we have in this country and come from the bureau of Martin statistics.


Alastair William Gillespie: Page?


Deane Roscoe Gundlock: I have mentioned co-ops, credit unions and our senior citizens and, in the few moments left to me, I want to emphasize what this tax bill has not done for Canadian taxpayers. As a result of the provisions in its 750 pages, the government has gathered in a few more taxes, or will do so if and when the bill ever becomes law. I cannot see why this measure should take all the time of this House. If you follow its lineage, even just back to the white paper, you will find that this new tax bill has not done anything for us.
There has been some attempt lately to lower the corporate tax by 7 per cent and personal income tax by 3 per cent, but what is the minister trying to do? As I said earlier, our unemployment figures are the highest in the world. This has forced, and I emphasize that word, the Minister of Finance to revise his policies and bring in yet a third budget this session. I do not know Canadian history all that well, but I think that three budgets in one

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session is a precedent. However, I commend the minister for trying to do his best.
I observe you are getting restless, Mr. Chairman, so I will finish on this note. I find it very hard to equate this 7 per cent and 3 per cent tax reduction with jobs, especially in view of the way the minister seeks to implement those cuts. How many jobs is a 7 per cent cut in corporate tax going to provide and how long will it take to provide them? Similarly, how many jobs is a 3 per cent cut in personal tax going to provide, and how long will it take to provide them?


William Gordon Ritchie: Mr. Chairman, I should like to say a few words on the oil and gas industry as it relates to Bill C-259. The most important feature of oil and gas exploration is the cash flow of money in order to control land for exploration and development. After 25 years of extremely active exploration and development in western Canada, the hunt for oil is spreading to the far north, offshore areas and Hudson Bay. What concerns the oil and gas industry most is the attitude of governments to the extractive industries, particularly as exemplified in Bill C-259.
Mr. W. O. Twaits of Imperial Oil forecast a sum of $25 billion will be required for the Canadian petroleum industry over the next ten years. Others have suggested that this may be too high by $10 billion, but in any case the figure is enormous. What is the basic source of funds for this industry? In the statistics comparing the operations of a group of companies in the years 1960 to 1969 that control just under 50 per cent of all oil and gas production and 90 per cent of all refining and sales capacity, it was revealed that in 1960 usage of funds for capital stock was
31.5	per cent of the total; retained earnings amounted to
30.5	per cent for a total equity base of 62 per cent; short term debt was 22.1 per cent; and long term debt was 15.9 per cent. In 1969 capital stock had gone down to 22 per cent, retained earnings had risen to 36 per cent. In other words, capital stock declined by 25 per cent while retained earnings went up by 20 per cent.
This really means a greatly reduced injection of private capital into the equity base of the Canadian petroleum industry during the past ten years. Long term debt increased by one-third, which means that the large companies were able to procure more capital than smaller companies.
There are three basic sources of capital for this industry. First of all, there is the self-generated cash flow. Second, there is public participation, which can be had on an equity base for common or preferred shares and sold to the public, to pension funds, mutual funds, life insurance and trust funds within the limitation of govenment statutes. All the funds I have mentioned so far must come from the private investor, either from his savings or from his earnings on his savings. In recent years, the issuing of debentures has generally involved a substantially increased return to the lender. The third source of funds is money provided through government sources, such as by the Canada Development Corporation, though it seems doubtful that this source would be very profitable.
All of this adds up to a tremendous demand for capital in Canada by this industry over the next decade. However, all levels of government as well as industry are being asked to look for their investment money to the domestic

market. In 1969 the oil industry generated 36 per cent of its needs internally, the other 63 per cent having to come from sources outside the industry. The Canadian public contributed less than 5 per cent of this capital need on an equity basis. The oil and gas industry in the eight years between 1962 and 1969 earned 8 per cent on invested capital, compared with other industries such as mining which earned 10 per cent. Not many industries were this low. Where is the oil and gas industry getting its funds today? More and more it is going to United States sources, tapping individuals and offering participatory units or drilling units for as little as $5,000. These investments can enter this country on a preferential after-tax basis in competition with Canadian money.
What does Bill C-259 provide to remedy this situation? A United States taxpayer can reduce his income by the amount of the loss if his oil well drilling turned out to be a "bust". As far as the Canadian taxpayer is concerned, for a long time no such relief was offered him. In this bill the government is providing for only a 20 per cent write-off per year. I am not sure whether this write-off is on a diminishing basis or on a straight-line basis, as suggested in the white paper, and I hope the Minister of Finance will enlighten me in this regard. If it is on a diminishing basis, it will take about 26 years before it is completely written off, and I therefore suggest this is no way to offer incentives to Canadians to buy into their own oil and gas industry. If we want our Canadian citizens to be involved in the oil and gas industry, we will have to do something with this. It will be much better to have Canadians buy into their own oil and gas industry rather than to have the government attempt to use vast sums of the taxpayers' money through the Canada Development Corporation to give Canadians control of this industry.
I now turn to the depletion allowance. The Independent Petroleum Association appeared before the other place yesterday. It feels that the abatement of the depletion concept, as it is generally understood in the world-wide oil industry, and its replacement with the concept of earned depletion will not generate the necessary capital for the Canadian petroleum industry. We believe that taxpayers with oil and gas income should be entitled to gross depletion. If the government does not accept our recommendation of the gross depletion concept, then we consider that the earned depletion as proposed in the legislation would be more meaningful.
Failing an acceptance of the gross depreciation concept, the Independent Petroleum Association suggests that all Canadian exploration and development expenses, as defined in clause 66 (15) (b), should be included in determining the earned depletion base, but to avoid any abuse in the sale of properties between companies, it is suggested that income from such sales should be credited to Canadian companies' development and exploration expenses and thus the total earned depletion base does not change. The new changes have caused considerable unease and lack of direction about how they will be effective. It is hoped they will not be as bad as some feel. Apparently the government is departing from the present concept of depletion into an unknown field, a field in which other countries have very little experience.
October 22, 1971

I now turn to the Canadian pulp and paper industry. I wish to say a few words about this industry because it is one of our large employers, but it seems to have deteriorated in the last decade. At this time there are numerous announcements of lay-offs which indicate that the pulp and paper industry is in some difficulty. A brief was prepared by the Canadian pulp and paper industry and submitted to the Minister of Finance in October, 1970. It contained a general set of proposals. The pulp and paper industry seems to have made a case for a study of a new basis of taxation for that industry. Since the pulp and paper industry is dealing with a renewable resource, it cannot advance the same argument as the mining, oil and gas industries which deal with a nonrenewable resource. Therefore, we have to make a decision as to whether or not we can accept their argument.
If the Canadian pulp and paper industry can maintain a growth rate of 6 per cent a year, which is approximately the world growth rate, it will mean about one million tons of pulp. This would provide an estimated 5,000 jobs in the mills and woodlands with considerable multiplier effects. Although Canadian production of pulp and paper has increased in recent years, the industry has lost its position in a number of its markets. Canada's share of the United States newsprint market dropped from 77 per cent in 1955 to 64 per cent in 1970. In 1955, Canada produced 54 per cent of the free world supply of newsprint. In 1970, the share was down to 41 per cent. There has been a corresponding decline in all the statistics relevant to world trade in pulp and paper. The main competitors of the Canadian pulp and paper industry are located in the United States and Scandinavia. Canada has vast forest resources with a skilled labour force, but this is offset by higher transportation costs, machinery costs, corporation taxes and other factors.
In a brief presented to the federal government in 1971, the pulp and paper industry stated that corporation taxes in Canada are considerably higher than those applying to their counterparts in the United States and Sweden. In the United States, the value of timber may be classed as a capital gain and taxed at a lower rate. A compilation of the corporate tax rate in Canada and the United States shows rates in the United States to be from 43 to 49 per cent of income while in Canada rates vary from 51 to 54 per cent. More important, the weighted average of taxes paid as a percentage of income, comparing United States companies with Canadian companies, shows the average rate of the United States company to be 34 per cent while that of the Canadian company is 49 per cent.
Corporations in Sweden have tax advantages resulting from liberal depreciation allowances, a lower over-all rate of taxation, the use of value-added taxes in place of sales taxes and the provision of tax-free investment reserves. It is estimated that the corporation tax rate in Sweden is 40 per cent as compared to 51 to 54 per cent in Canada. I wish to quote from The Tax System in Sweden published by Stockholm's Enskilda Bank, November, 1969:
Swedish tax rules "have contributed to the efficiency 6f Swedish industry as a competitor in world markets ... These Swedish tax devices constitute an arsenal of tax weapons, probably unmatched elsewhere in the world, which may serve as a fertile source of ideas for the business man, government official, tax practioneer, or economist seeking ways to use taxation to strengthen corporate liquidity and offset business cycle fluctuations."
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In Finland, the 31 per cent devaluation of the Finmark in 1967, and the related fiscal policies, placed the industry in that country in a particularly advantageous position to improve its place as a world supplier of forest products. The sharp increase in capacity in the period 1970-71 has resulted from government policies fostering the export industries. The Canadian pulp and paper industry has made its case that it needs incentives and a revamping of the tax structure. It is well known that the pulp and paper industry is not as profitable as it has been in the past. An account in a Montreal newspaper approximately one month ago indicated that many plants in Quebec were approaching obsolescence and that very few new ones had been built.
Bill C-259 does not seem to provide any improvements in the tax structure, although dropping the corporation tax by 7 per cent as announced last Thursday will be helpful, but this provision will expire at the end of 1972. It seems unlikely that the industry will respond without future encouragement. The pulp and paper industry is dealing with a renewable resource. It provides jobs in many so-called underdeveloped areas that are receiving grants under the regional economic expansion program. In many cases the government would be well advised to consider the tax structure of industries indigent to the area rather than the elaborate subventions granted by members of the civil service. I feel that Bill C-259 has created uncertainty in the mining, oil and gas industry. It does not seem to have much to offer for the pulp and paper industry in the future, either.


John (Jack) Henry Horner: Mr. Chairman, in rising to speak again on Bill C-259,1 want to continue with the general theme that I find the government in error. I refer to the failure of the government to reinstate confidence^ in the business community. It will be very difficult for the 7 per cent reduction in corporates taxes announced by the minister in his budgetary statement of a week ago to really have the beneficial effect the government expected it to have and which I believe all Canadians wish it would have in creating more employment. Bill C-259 brings about changes in the corporate tax structure and many significant changes in what one might call foreign investment within Canada. I think now it has become pretty clear that a great deal of our economic policy will hinge upon our foreign policy. It once was said by a number of people that a country's defence policy should be in tune with its foreign policy. I think it is now true that the government is attempting to tie its corporate policy to its foreign policy. In order to instil confidence within the nation and within the business community we must take a look at our foreign policy. I do not intend to do that at this time, but I think one really has to draw that parallel. Surely, we are divorcing ourselves from the economic atmosphere and environment of the United States through a number of measures.
Bill C-259 deals with foreign investment in two or three subtle ways and perhaps, as the editorial in the Toronto Star of October 20 suggests, Canada should emphasize that 50 per cent or 51 per cent of a corporation should be owned by Canadians and, second, that all new foreign investment that is proposed should be screened by a government board or body. Actually, this will happen under

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Bill C-256 when it passes, at least the competitive aspect. Then again, the question of foreign investment and the size of corporations that will be allowed to sell out to United States or foreign concerns is dealt with very fully in this particular piece of legislation. They will have to pay the difference between the 50 per cent rate of taxation and the 25 per cent rate of taxation.
This lack of confidence in the business community, of course, is compounded by the difficulty arising out of the United States surtax and the attitude of that country. It is now commonly believed by many Canadians that the United States government is not going to be overly anxious to please Canada by removing the surtax or to give Canada the special status we have enjoyed in the past because of our continental position with the United States. The United States is not prepared to do this now, at least partly because of our foreign policy, our policy of supporting the Albanian resolution at the United Nations. Let us accept the situation as it is. Perhaps we are now shifting toward the Russian economic sphere. One might wonder where that will lead us and whether or not we are encouraging Russian investment within our corporate structure and whether this will bring about renewed confidence within the Canadian economy. I might refer to Time magazine of March 29 which deals at length with the Russian economy and states:
For the first time in history, the new Soviet five-year plan, which will be approved at the present Congress, assigns a fractionally higher growth rate to the consumer-oriented industries .. .
I think this is very important because it has been said often we do not want to appear to be solely drawers of water and hewers of wood in respect of the United States but want to become an industrial economy. In some parts of Canada we are well on the way to becoming an industrial country and want to continue this. If we are to shift our trade to Russia, then we want to become an industrial country and not merely be hewers of wood and carriers of water for Russia.
It is helpful to note that Russia is shifting its position to a higher growth rate in consumer oriented industries than in respect of the "metal eaters" of heavy industry. Even so, the metal eaters will continue to receive the great bulk of Soviet industrial investment, the article states. Then further the article suggests that under the present leadership the Russian economy has done fairly well but not well enough. In fact Soviet agriculture, which employs about 26 per cent of the work force versus less than 2 per cent in the United States, has picked up considerably and the Soviets have not had to buy wheat abroad for two years. However, there are still shortages of meat, fruit and fresh vegetables. Industry is lagging badly. Technological advance is falling even farther behind that of the west. The consumer remains ill cared for. So perhaps we have a role as an industrial country in trading with the U.S.S.R. if we would be permitted through some system to supply our industrial goods to that country. Perhaps this would bring about some renewed confidence in Canada.
But what would all this do in respect to our trading partner to the south, the United States. It is interesting to note that even if they should remove the surcharge and other retaliatory acts, we are to some extent quite vulnerable. I should like to quote from the Toronto Telegram of September 7,1971:

Total Canadian investment in the U.S.-direct and portfolio-is $11,773 million while American investment in Canada totals $34,323 million.
Perhaps equally significant from the Canadian viewpoint is the fact that a much greater proportion of U.S. investment is direct-in 'productive facilities' including plants and factories and such fields as petroleum and natural gas and others . . .
As the hon. member for Dauphin pointed out in his speech a few minutes ago more of that investment is entering what is commonly referred to as the extractive industry, resources. The article continues:
Many Canadian ventures are formidable. Carling Brewing Co., a subsidiary of Canadian Breweries, the world's largest beer producer, has seven plants in the U.S. with sales of more than $200 million, greater than those of the Canadian parent.
Massey-Ferguson Ltd., world's largest producer of farm machinery, has eight plants employing 10,000 Americans. The American subsidiary of Distillers Corp.-Seagrams Ltd. controls more than one-fifth of the U.S. liquor market. Hiram Walker and Sons Inc., another Canadian-owned subsidiary, has vast plant and bottling facilities scattered throughout the U.S.
It goes on to suggest that Garfield Weston, the food, bakery and groceteria tycoon, has major outlets in the United States as has the Thomson chain of newspapers which owns 44 dailies and 12 weekly newspapers in the United States. It suggests that much of the present Canadian corporate structure of which Canadians hold majority Canadian ownership also has a dual role in the United States economy so we must be very careful that we do not bring about retaliatory action after the surtax is lifted in order to restore the confidence in the business community within Canada. The attitude that Canada is taking toward the United States at present, which is one of preference for a closer trade and economic alignment with the United States, may well turn out to be very costly to the industrial growth of Canada because much of the industrial investment in Canada is also invested in the U.S.
One interesting point which I think has not been made in this debate, and perhaps should be made, is that much of this loss of confidence stems from the feeling that the United States believed they were getting the short end of the stick in the auto pact and that some changes should be made in order to bring about a greater degree of fairness between the two countries.


Jean-Luc Pepin: Explain.


John (Jack) Henry Horner: Yes, I will explain. Canada said that the auto pact is not negotiable, that we are going to carry on and that we will pay no attention to the wishes of the United States in that regard. This did not bring about any degree of confidence in the business community in Canada. Does the minister wish to ask me a question?


Jean-Luc Pepin: I was wondering who said that because I certainly did not.


John (Jack) Henry Horner: I did not hear the minister's remark, Mr. Chairman.


The Acting Chairman (Mr. Boulanger):: Does the minister wish to ask a question?
October 22, 1971


Jean-Luc Pepin: This is a point of order, Mr. Chairman. I asked who had said that because it certainly cannot be attributed to me. As a matter of fact, our negotiations with the United States on the automobile agreement had been going on for quite a while before we suffered the interruption of the U.S. surcharge.


John (Jack) Henry Horner: I appreciate the minister's interruption because I do not want to misinterpret his remarks. If the auto pact is negotiable, that is a very good thing for Canadian industry because it may instil confidence in the industry and it may prevent any retaliatory action by the U.S. Let us assume, however, that we have to adjust our automobile production. I think the auto pact has built up in Canada a tremendous capacity to produce trucks and automobiles. Let us take a look at the Toronto Telegram issue of April 25, 1967, which says the following about the automobile industry:
The capacity of the auto industry has been substantially expanded in order to meet the growing demands of the Canadian market plus the new requirements for the U.S. market. At Ford of Canada, for example, we added a new $25 million truck plant which now operates on a two shift basis- We carried out a $14 million expansion of our Oakville passenger plant- A new passenger plant has been constructed at St. Thomas at a cost of $65 million.
The article goes on to speak about the number of people employed. The point I want to make here is that now that we have built up this capacity it would be shameful if, through some negotiations with the U.S., we failed to employ the capitalization that has been poured into that industrial complex.
I notice in today's Gazette an article which says that after Mr. Kosygin's visit to Canada the Soviets will want a super deal for wheat and prefabs. The Prime Minister said today during the question period that no new wheat sales would be forthcoming and the communique did not deal with wheat. The Soviets-are going to take the three and a half million tons under the present contract, which would take up until April of next year, but they are interested in prefabs. If we are attempting to divorce ourselves from the U.S. economic sphere, perhaps we should look for some way in which to use the capitalization in the auto industry.
I have here a book called "Soviet Transport Experience" which describes the recent troubles in the U.S.S.R. in transportation. The book was published as late as 1969 and it suggests that the production of trucks in the U.S.S.R. is not keeping up with the demand in that country. At page 177 of the book we find the following statement:
Recent scrappage rates in Soviet agriculture imply that a truck would be on hand for 30 years, not necessarily always in operable condition.
The book gives statistics regarding the number of trucks produced and it suggests that, with the growth in transportation and the increased number of roads built, hard surfaced and unsurfaced, what might be called a switch from railways to truck transportation is taking place in that country. The book goes on to suggest that the production of trucks in the U.S.S.R. is not keeping up with the demand. After studying that book, perhaps we should consider whether we in Canada, with our expanded truck industry, could make a major breakthrough in the sale of
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trucks to Russia. This is no particular secret. I remember some time ago when Ford went over to study a truck production plant in the U.S.S.R. but because of U.S. regulations he was prohibited from building a truck plant in that country. Perhaps negotiations could be carried out with the U.S., which wants us to bring about greater fairness toward their country with regard to automotive production, to find out whether they would permit part of Canada's production to be directed to the U.S.S.R.
The book which I mentioned which deals with the Russian transportation experience deals also with the growth and the potential growth in passenger cars. It seems to me that it is difficult to compare roads for passenger travel in Russia with those on the North American continent because, even taking into account their increased road construction, they are far behind this continent. There is a section in the book dealing with growth in passenger travel in the U.S.S.R. Here also agreements could be worked out between our two countries which would allow Canada to sell a limited number of cars which would be produced in our expanded auto production complex.
I throw out these thoughts in the hope that the minister will consider them and see what could be done because my aim is to restore confidence in the business community in Canada so that Canadians will no longer remain on the unemployment list in such large numbers and so that the business community will readily re-invest the 7 per cent which the Minister of Finance suggests in his budgetary statement he is giving back to them. Thus, confidence will be renewed within our industrial complex and Canadians can once again be gainfully employed.
All economic indicators point toward a very dismal winter, but if we are going to switch our production and our economy from the U.S. to Russia, I think we should perhaps explore this automotive concept very closely because automobiles is one of the commodities, in addition to wheat, which perhaps could be sold to the U.S.S.R. I do not want us ending up as hewers of wood and drawers of water for Russia, any more than I want us being that for the United States.


Mr. Downey:: Mr. Chairman, in taking a general, over-all view of the tax bill we have to assess what it will do in terms of improving the position of Canadians. When we look at those portions of the bill dealing with personal taxation I think we must all agree that there are some good points. We can disagree on whether the government has gone far enough or has gone too far in increasing exemptions, but nevertheless the exemptions are welcome. Expenses for child care will now be taken into consideration, and there will be an exemption of up to $150 to workers, mechanics and the like who have to purchase their own tools. All this is a step in the right direction and we are happy that the government finally has acted upon the suggestions made by the Leader of the Opposition. Certainly his constructive suggestions have been most helpful to the Minister of Finance when deciding these matters.
The main problems in Canada today are unemployment, an uncertain business climate and lack of the faith in the economy by the manufacturing, agricultural and resource industries. The increased exemptions in the per-

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sonal tax area may mean an extra $50 or $60 a year for a family, but in terms of creating real employment what will the tax bill do? Will it help the resource industries? Will it help the mining and petroleum industries? Will they be able to expand?


Steve Eugene Paproski: The waste paper industry; that is all it helps.


Cliff Downey: It doesn't do much for the paper industry. Let us see what the Canadian Manufacturers Association has to say with regard to improving the tax bill as it applies to resource industries. Speaking about depreciation, the association says:
The tax reform bill permits resource industries to deduct $1 of depletion for every $3 of defined expenditures up to a maximum of 33 1/3 per cent of production profits. The association is concerned that, apart from the possibility that the new incentive system may prove seriously ineffective, the definition of eligible expenditures is too narrow.
Then they cite a few items which in their opinion have been unreasonably excluded from the eligible expenditure base. The following is one:
Cost of acquiring Crown mineral rights.
Both parliamentary committees thought that this should be included but the minister chose not to heed them.
All capital costs directly associated with the development of oil or gas for market, including field equipment and gas plants.
Exploration and development costs incurred in the "vicinity" of an existing mine.
These are not included and their exclusion will discourage expansion of our major industries.
What will the bill do for the agricultural industry? It certainly will not do much for farmers. If they have a small personal income it will provide them with an extra $50, $60, or $70 a year. On the other hand, it will bring their recaptured depreciation into income, which will mean that they will be taxed on an extra $3,000 or $4,000. We will give them a little on the one hand, and on the other take away three or four times as much.
The proposed capital gains tax will be difficult to live with, and certainly many people in agriculture will not be able to do much to protect themselves from extra tax in this area. This tax will be mainly applied against the small and middle-income earners, those who cannot protect themselves against it because of the great expense involved in hiring experts to advise them.
The United States has had a capital gains tax in effect for some time. It does not affect the most wealthy people. They have title-holding companies which theoretically, so far as the tax department is concerned, provide them with exemptions. There is nothing in this tax bill that will take care of such a situation. People who are wealthy enough will be able to discover the loopholes and escape the provisions of the legislation. Regarding the provisions with respect to international competitiveness, the Canadian Manufactures Association has this to say:
The proposals with respect to international income are more onerous than those applied elsewhere and would inhibit Canadian companies' efforts to sell and expand abroad. In addition, we think the over-all impact of the bill would add somewhat to a corporation's costs. Recent developments in the United States increase our concern on these two points.

This is a reference to the U.S. surcharge and DISC proposal. In light of new developments with the United States we need to reassess the tax bill and the tax structure as it applies to the international situation.
Every few days in this House the Prime Minister tries to reassure us that business is picking up and that there will be a renewal of confidence. But what are the manufacturers doing, Mr. Chairman? We have one example of our only domestic manufacturer of tractors-the remainder being imported from the United States, Sweden, Russia and Roumania-who is now residing in Mexico and is reported to be contemplating taking out citizenship in that country. We can assume that he is also contemplating moving his headquarters to that country, so his confidence in what the future holds for Canada cannot be very great. If this happens, then of course we will have another foreign-owned company. This indicates what business thinks of the economic climate in Canada.
I suggest that these reassurances given in the House by the Prime Minister are futile and a waste of time, considering the reaction of business leaders and manufacturers. Of late the Prime Minister has been assuming the role of the great internationalist developing relations around the globe. In some ways this is commendable, but I do not think Canadians want to jeopardize their standard of living for the sake of the Prime Minister presenting himself as a great internationalist or mediator.
It must be remembered that about 80 per cent of our manufactured production goes to the United States, especially that of U.S.-controlled firms. We cannot overlook the realities of life. Even those who talk about economic nationalism in this House want a nice comfortable house to go home to; they want to know that the pay cheque is coming at the end of the month and that their standard of living at least remains stable or possibly improves a little. If our relationships with the United States are destroyed, we will suffer.
The hon. member for Crowfoot referred to the role of this country as hewers of wood and drawers of water. What are our chief exports to China and Russia at the present time? Do we export to them the same type of goods that we send to the United States in large quantities? Is it likely, considering their supply of cheap labour, that the Chinese will accept the same quantity of manufactured goods as the United States will? It would be unrealistic to expect this. The imposition of the 10 per cent surcharge on manufactured goods by the United States may give us an opportunity to develop our own manufacturing industry.


An hon. Member:: I hear a child crying in our public gallery.


Cliff Downey: He is listening to what I am saying; he is responding.


Thomas Miller Bell: It is quiet despair.


Cliff Downey: Even before he can read this 707-page document, he is crying.


Mr. Osier:: That child will tell his grandchildren not to vote for you.
October 22, 1971


Deane Roscoe Gundlock: He will tell them he heard.


Cliff Downey: The majority of Canadians will understand the tax bill just about as well as the child that is crying in the gallery right now. This 707-page is as thick as four Eaton's catalogues. The child's understanding of that document is about as great as that of hon. members on the other side of the House.


Deane Roscoe Gundlock: And he is crying about it!


Cliff Downey: Mr. Chairman, we may very well be worse off being regarded as hewers of wood and drawers of water if we do not heed the cries of necessity from below the border and continue to imperil our relations with the United States. The Prime Minister is often asked what he is doing to improve this relationship, but he does not have very much to say about it. During the past six months he should have visited Washington in an effort to reach greater understanding. Instead, he goes skiing or takes trips to countries that are interested only in our great natural resources. It is this indifference to the realities of international diplomacy and the real needs of the Canadian people that has put us in the catastrophic position in which we find ourselves today.


Mr. Schumacher:: Mr. Chairman, Bill C-259 which was introduced last June under very different circumstances from those we face today, has taken up some time of the House. I have not participated in the debate so far and I hope I will not intrude too long on the committee's time this afternoon.
I suggest, for the sake of argument, that even if this bill was a masterpiece at the time it was introduced-and I doubt that; I do not believe it a-it is not what we require for our country at this stage of its progress, particularly in view of the United States policy introduced on August 15. I would like to use the analogy of a wartime aircraft. We might develop an aircraft which would have been suitable for the last war but which will not be good enough for any war of the future. This bill is like that: the whole picture has changed.
I think the government's policy in preparing Bill C-259 was designed to some extent to discourage the flow of foreign capital to Canada and to increase the investment in Canadian industries by Canadians. Although that aim is laudable, I do not believe the legislation goes far enough in that regard. I do not believe that this income tax revision will in the end result in Canadians being on an even footing with foreigners so far as investing in the resources of this country is concerned. However, at least a small, faltering step has been taken. Under the present situation our capital requirements are substantially different. Actually, I suggest that we depend more than ever on foreign capital and that there is a greater need for it now than there was prior to August 15.
The new economic policies adopted by the United States have resulted in encouraging a retrenchment of their foreign operations. Whereas the United States might have encouraged its corporations and other enterprises to invest in businesses or other undertakings in Canada, West Germany and elsewhere, before the new policies were announced, the interest of the United States is now
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focused in centres such as Pittsburgh and Cleveland. There will be an increase in the rate of the withdrawal of capital from Canada, or at least there will be a marked slowdown at the rate in which capital comes into this country. Although it may not be so apparent to the people of Ontario, people living in the part of the country I have the honour to represent, or in the province of Quebec across the river, realize that capital is required to create opportunities for Canadians so that they may make the best of their lives as well as strengthen the country in the long run.
I believe it is a matter of record, Mr. Chairman, that Canadians make substantial capital investment. I believe the figures indicate that on a per capita basis Canadians invest more in the United States than the people of the United States invest in Canada. On a per capita basis we invest three times as much. In my view, proper tax legislation at this time ought to be aimed at encouraging the return of that Canadian capital for use in this country. Yet we find that the tax systems of other countries are such that Canadians prefer to invest in those countries rather than in the enterprises in this country.
I suggest that the new economic policies of the United States have been caused by the current economic crisis, the greatest since the depression of the 1930s. Here, again, I should like to use an analogy to illustrate my meaning. During the late 1930s the government of Canada established a royal commission to study dominion-provincial relations. It was known as the Rowell-Sirois commission. That commission did its work late in the 1930s and issued its report, I believe, in 1940. Of course, since the commission had done most of its work during peacetime, when its report came out did not reflect the situation then existing. It was realized, therefore, when the commission reported that the government could not adopt its recommendations because circumstances had changed so greatly. The country was then involved in the war effort, and common sense prevailed.
I do not know what name one could give to our present situation. I think we are witnessing a love affair with systems analyses, or something of that kind. This government seems to feel that everything must happen by a certain time, and that if something does not happen by a certain time it should not happen at all. There seems to be undue concern about January 1, 1972. The government's attitude leads me to conclude that by January 1, 1972, we shall be pretty close to "1984".
The government wanted to produce a grain stabilization program for this country. Because the bill did not proceed in the manner the government thought it ought to proceed, the bill was withdrawn. That is to say, because the government could not get it through in the time allotted, it decided not to go ahead with it at all. The same suggestions are being made with regard to this legislation. We are told that consideration must be finished before January 1, 1972. On the other hand, this tax legislation, in my view, is obsolete and should not be proceeded with.
Our taxation system is not that bad. I think if we look at it on an international basis we will find that Canada is considered as having a relatively good tax system. Yet we are not satisfied with it. We are to do away with the system we have and replace it with a system nobody understands. I suppose it is too much to hope that the

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government will postpone the operation of this law for one year. If that cannot be done, there should be an undertaking by the government that it will not proclaim the great bulk of the bill until the taxpayers and provinces who will be greatly affected by it understand the legislation. We must understand it before it is fully implemented.


Jean-Luc Pepin: If our taxation system is so good, why did the right hon. member for Prince Albert ask Carter to look into it?


Stanley Stanford Schumacher: That is something I have wondered about. I do not think he asked Mr. Carter to produce a brand new system. I think he asked Carter to simplify the existing system. Surely the name of Carter must conjure up nightmares for the right hon. member for Prince Albert, because Carter did not follow the instructions that were given to him. I do not think this country owes a debt of any nature to the late Kenneth Carter, because he did not do what he was supposed to do.


Mr. Reid:: Is the hon. member talking about instructions Carter was given in private or in writing?


Stanley Stanford Schumacher: Who said anything about private instructions?


An hon. Member:: Who is speaking from behind the curtains?


Stanley Stanford Schumacher: Mr. Chairman, if the hon. member for Kenora-Rainy River wishes to say something, perhaps he would say it from his seat.


John Mercer Reid: Mr. Chairman, may I ask the hon. member a question?


The Chairman:: Order, please. The hon. member for Kenora-Rainy River may ask the question only if the hon. member for Palliser agrees.


Stanley Stanford Schumacher: Agreed, Mr. Chairman.


John Mercer Reid: Mr. Chairman, I should like to ask the hon. member if it is not true that the terms of reference relating to the Carter report asked Mr. Carter and his colleagues to look into all aspects of our tax system and did not preclude the possibility of bringing in a new system.


Eldon Mattison Woolliams: He was not asked to write a socialist bible.


Stanley Stanford Schumacher: As my hon. friend from Calgary North suggests, he was not asked to write a socialist bible. He was asked to look into all aspects of the existing tax system with a view to simplyfing it, not to making it more complicated.


John Mercer Reid: Why bother, if it was such a perfect tax law?


Stanley Stanford Schumacher: I did not say it was a perfect tax law. I said it was generally recognized in the international community as being a good tax law. The effects of these proposals are unknown to the ordinary taxpayer. Moreover, they are unknown to the provinces. The Minister of Finance tells us there is to be a guarantee that provincial income will be maintained, but no one can understand the

formula which he has proposed to make good this assurance. Gift tax and estate tax are to be dropped and replaced by a capital gains tax, but the federal government has given no undertaking to share the proceeds of that tax with the provinces in the way in which the gift tax and estate tax were formerly shared.


Mr. Clermont:: We give them all.


Stanley Stanford Schumacher: I beg you pardon.


Eldon Mattison Woolliams: He does not know.


Gaston Clermont: It is not hard to know as much as the hon. member for Calgary North.


Stanley Stanford Schumacher: The government's attitude is that once it has received a mandate from the people it can do anything it pleases until the next election. If the people do not like it, then in the phrase of the Prime Minister they can lump it. In my view that is not a proper way in which to manage this country. The government is forcing the taxpayers to acquiesce in its aims and this places a very high responsibility upon the government for the damage which is likely to result from the legislation before us.
The government is forcing most provinces-all of them, I suppose, with the exception of Quebec which has its own tax machinery-to accept this system. The provinces have no choice, because they lack the facilities to collect taxes on their own behalf. The Minister of Finance says to the provinces, "If you do not like the deal we are offering, then raise your own taxes." But the facilities do not exist. The government is making use of this situation in order to coerce the provinces into agreeing to its proposals. I do not think it can be denied that this measure will have the effect of raising more money for the treasury. The tax base is substantially broadened. It is just a question of making collection by the federal government easier.
I should like to say a word about the mines and minerals provision in the bill. My hon. friend from Battle River has already referred to it and I believe my hon. friend from Dauphin has also done so. I should like to lend my support to their pleas for amendments to the legislation with respect to depletion allowances. I feel the provisions in the bill as it stands are not adequate. Reference has been made to the cost of acquiring land, to the restriction on depletion allowances in that connection. There is also the question of the further facilities which are required in order to carry on an efficient operation once the company has been established.
These mines are often situated in remote areas and developers are required to build houses, construct streets, put in power lines and all the other utilities which go to making up a viable community. I know that at the present time in Alberta the MacIntyre Porcupine Company is finding difficulty in meeting its commitment in connection with the export of coal to Japan under contracts already signed, because the circumstances in which its miners are required to live are not satisfactory to those miners.
Situations of this kind will certainly not be corrected by the prospect offered in Bill C-259. In addition, there are exploration and development expenses which are normally incurred in the vicinity of a mine after it comes into operation-expenses which are required in order to keep
October 22, 1971

a company operating efficiently. Items of this kind should be classified as qualifying for earned depletion allowance. I have been advised that land costs can sometimes amount to 40 per cent of the cost of an oil well. If such costs do not qualify for depletion it can easily be seen that the net tax which is to be paid by these companies will be substantially increased. Indeed, it may no longer be possible for companies to locate and develop these resources.
People in Ontario, particularly in southern Ontario, as well as in other metropolitan areas have a peculiar view about the development of this country. They seem to think we can build up a great number of labour-intensive undertakings overnight. They do not realize that many parts of this country possess only raw materials and that you cannot make labour-intensive employment out of resources of that kind. We must develop these resources because in many areas there is nothing else to develop. It will bear repetition to point out that over the next short period there will be a requirement of $25 billion for the development of the petroleum and natural gas industries to meet the demands presently foreseen, of which only $17 billion will be available from internal sources.


Russell Clayton Honey: Order. I regret to interrupt the hon. member but I must remind him that his time has expired.


Some hon. Members:: Continue.


Russell Clayton Honey: The hon. member may continue if he has the unanimous consent of the committee. Is there such consent?


Some hon. Members:: Agreed.


Stanley Stanford Schumacher: I thank the committee for its indulgence in allowing me to conclude my remarks.
In summary, may I say this legislation is not applicable to the problem we are facing today. It appears to me to be part of a grand design to narrow our association with the United States, which will only be to the detriment of both countries. This measure at this particular time will cause untold hardships to the people of Canada, and I urge the government to change its view. Instead of taking the time of the House with this legislation, I urge the government to deal with something that will give new confidence to the people of Canada and put them back to work. That is what is required today.


Stanley Howard Knowles: Mr. Chairman, my intervention at this point will be very brief.


Some hon. Members:: Hear, hear!


Stanley Howard Knowles: Mr. Chairman, I learned the very first year I was here that that is the only way to get applause.


An hon. Member:: It still works.


Stanley Howard Knowles: Yes, it still works. There has been no change in that respect in the last 100 years.


Mr. Cafik:: The trouble is that you always go on to make a long speech, just to mislead us.
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Stanley Howard Knowles: The hon.
member is tempting me to do what is often done, namely, to say that one will be brief and then to go on for the full time allowed by the rules, but I refuse to be tempted. The reason we of this party have not been in this debate today is the fact that an agreement has been made under which, starting Monday, we shall deal with specific areas and subject matters of the bill. My understanding is that at four o'clock today it is to be agreed that the general discussion is over and that from here on we shall deal with specific matters.
Therefore, since the Minister of Finance gave notice today of the omnibus amendment that he is moving to clause 1, and since on Monday we shall be dealing with the proposed section 109 I should like to give notice that during the course of that discussion we should like to see a change made respecting the main phase of this new, proposed section.
What this section does in the main is to set the new exemption levels of $1,500 for a single taxpayer and $2,850 for a married taxpayer. We have pointed out time and time again that 22 years have elapsed since the present levels of $1,000 and $2,000 were set. We do not thing that the change that has been proposed is at all sufficient.
We also think that consideration should be given to a system of tax credits as perhaps an even better way to provide exemptions for those in the lower income brackets, and we shall be making proposals along this line on Monday. We hope that the government will give consideration to this matter over the weekend. The government knows the arguments that can be'made in favour of this proposal and it knows how weak is the case for this $1,500 and $2,850 set-up. On Monday we hope we can make a real improvement to this section of the bill.
If we also get to the proposed new section 110, when we have finished our discussion on section 109, this section will deal with a number of matters that are allowed as deductions and we think amendments should be made to it too, particularly to the benefit of those in the lower tax brackets.
I hope those hon. members across the way will agree with me that my remarks have been brief. In fact, I have not made a speech; I have simply given notice that on Monday we want some real action by way of changing the proposed exemption levels in this bill.


Deane Roscoe Gundlock: Mr. Chairman, I enjoyed the remarks of the previous speaker. I took him literally and did not think he meant exactly what he said. For my part, I do not look forward to Monday because when we come to deal with this bill clause by clause, in view of the number of clauses I see no end to it. Quite frankly, I do not think there will be an end to this bill even if the government makes substantial amendments.
Having listened to the discussion so far on clause 1, it seems to me that as Canadians, not only as Members of Parliament, we are being confronted with something that we have not encountered at least within the memories of those of us who are debating this bill. Quite frankly, we are confronted with a new relationship between Canada and the United States and I do not think the Canadian people recognize this. We are hearing more about it every day in the papers of the nation, on radio and television,
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Income Tax Act
and we are even hearing about it from the people we represent.
I hope hon. members opposite will take this question seriously. As Canadians we have been proud, as have the citizens of the United States, to have the longest undefended border in the world. Suddenly we are made aware of the fact that the United States is now defending that border, at least in economic terms. I am very glad to see that finally some of the minister's advisers are listening to what is said.
What has brought about this sudden confrontation between Canada and the United States? Are we to blame the Minister of Finance? I do not think so. Perhaps the blame lies with the minister's advisers who are advising him to bring forward this bill. In the first place, its provisions are now out of date and, secondly, it does not meet present-day needs. I could detail other deficiencies but time is short. It may be these deficiencies stem from the fact the leader of the government is confronting the United States, first in our relationship with NATO and second in our relationship with NORAD. I see that the Minister of National Defence is paying no attention. The United States has suddenly begun to defend its economic border. I urge the advisers of the Prime Minister and the Minister of Finance to realize that something is wrong.
If you look at the record of the past few weeks, and indeed of the past few years, you will see that there is every evidence that something has gone wrong with regard to Bill C-259. There is a great deal of evidence to show that the bill should be withdrawn. It is not only doing wrong to Canadian taxpayers and the country as a whole; it is creating a wrong impression for the best friend that Canada ever had. It takes two to have that sort of friendship. I am very disturbed at what is apparent today in Canada-U.S. relations and about the effects of Bill C-259. The cause of this trouble may lie with government advisers, the Prime Minister or the leadership of this country. I am not too sure.
When we attempt to deal with this bill clause by clause we will be lost in a real fog; therefore, I urge the leader of this country and his advisers to withdraw the bill and bring forward a new one without delay.


Thomas Miller Bell: Mr. Chairman, I understand there is agreement to finish in an orderly way within a few minutes and demonstrate a slight degree of progress. I want to deal with a matter that was raised in this debate the other night by the hon. member for Skeena. As reported at page 8865 of Hansard, he referred to the Atlantic Sugar Refineries Company, Limited. I will paraphrase his words. He said they were bilking, or cheating the Canadian taxpayers out of $2,300,000 because of certain action that would be taken in a few days at a shareholders' meeting. I am not taking up the hon. member in too serious a way. I just want to take this opportunity to put forward the other side of the story.
I thought the hon. member was just using a newspaper clipping to make a point in the debate. In the question period today he pressed the matter further; therefore, I feel I have to go further. Today he asked if one of the ministers of the Crown was investigating this bilking, or

cheating of Canadian taxpayers out of the sum of money I have stated. In a supplementary question I asked if the minister would report and give assurance that this action was nothing more than an ordinary corporate arrangement that would go forward with the full approval of the shareholders.


Stanley Howard Knowles: You mean they all do it?


Thomas Miller Bell: The hon. member for Winnipeg North Centre, of course, is of the same socialist ilk. I do not mind standing here and defending a company that employs thousands of people in a very honourable and legitimate way.


Some hon. Members:: Hear, hear!


Thomas Miller Bell: I say to the hon. member and those in his party that if this company is not allowed to go forward in the proper way and amalgamate its losses, thousands of jobs will be lost. The members of that party will be the first to irresponsibly get up and holler and yell because something was not done about it. This company has been a very good citizen of New Brunswick, through its president, W. J. R. Paton. It has always taken part in community activities in Saint John and, in a larger sphere, in the province of New Brunswick. As everyone knows, it is in difficulty with Acadia Pulp and Paper Limited because of international actions and actions of this government with regard to the dollar. I will not even get into an argument about confidence in the pulp and paper industry. This company also had bad luck with its tuna company which it established anew. It did a very honourable job in this industry in New Brunswick until the difficulties with mercury.
I merely wish to state, on this Friday afternoon, that as far as I am concerned this company is going ahead in the proper way, a way in which it is entitled to go under the law. It has called shareholders' meetings. I suppose they will amalgamate the various companies and in this way consolidate their losses. I hope they will be able to continue their business in New Brunswick. It means thousands of jobs in that province.


An hon. Member:: Four o'clock.


Russell Clayton Honey: Before I call it four o'clock, having in mind the remarks of the hon. member for Winnipeg North Centre is it the understanding of the Chair that the general discussion is now concluded and that on Monday the committee will move to discussion of the details of clauses 109 and 110?


Some hon. Members:: Agreed.


Russell Clayton Honey: Does the committee so order?


Some hon. Members:: Agreed.


Russell Clayton Honey: It is so ordered.
Progress reported.


Mr. Deputy Speaker:: It being 4 o'clock p.m., the House will now proceed to the consideration of private members' business.
October 22, 1971


Mr. Deachman:: Mr. Speaker, I understand there is disposition among hon. members to forgo the private members' hour today.


Thomas Miller Bell: We are agreeable, Mr. Speaker. I trust these bills will hold their normal place on the order paper.


Stanley Howard Knowles: Agreed.
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Mr. Deputy Speaker:: Is it agreed that private members' hour shall be dispensed with and the bills shall retain their normal place on the order paper?


Some hon. Members:: Agreed.
At four o'clock the House adjourned, without question put, pursuant to Standing Order.
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Monday, October 25, 1971