1971-11-08

PRIVILEGE


Mr. Donald Maclnnis (Cape Breton-East Richmond):: Mr. Speaker, I rise on a question of privilege of which I have given the proper notice. My question of privilege refers to a report in the Ottawa Citizen of Friday, November 5, when a paid official of this House took it upon himself to make an unauthorized and inaccurate statement with regard to the duties of the whips of the parties in the House. The statement, along with being unauthorized and inaccurate, is a reflection on the duties of every member of the House and the way in which members perform their duties. It makes it very awkward for hon. members to go back to their constituencies and take pride in the fact that they are representing those constituencies. I would say also it makes it impossible for members of the Liberal party to live with such a statement.
He has also criticized the method by which Parliament works and suggests that we should close Parliament and refer all our work to the committee system. He completely overlooks the fact having cirticized the length of time spent on the tax debate, that the House itself is following the dictates of the government in examining this legislation in committee of the whole.
Along with that this hon. member-and I use the word very liberally-is the author of this statement:
In this House one does not reflect upon the rulings of Mr. Speaker.
Having authored such a statement, the hon. member further reflects upon the conduct of this House when he goes to the press and makes a statement which not only casts a reflection but is very critical of the judgment used by Your Honour with regard to questions put before the House during the question period. On the basis of this unauthorized, inaccurate and critical statement of Your Honour's operation of this House I move, seconded by the hon. member for St. John's East (Mr. McGrath):
That the subject matter of the article which appeared in the Ottawa Citizen on Friday, November 5, reporting the views of the member for Vancouver Quadra, be referred to the Committee on Privileges and Elections.
Mr.Speaker: Order, please. The hon. member for Cape Breton-East Richmond has given notice of his intention to raise this matter by way of a question of privilege in relation to a statement which the hon. member says was published in an Ottawa newspaper. The hon. member had raised the matter originally in the House on Friday afternoon. I have had time to reflect on the situation and to give most serious consideration to the matter. My duty is
to determine whether there is prima facie case of privilege which ought to be debated by the House and, on the basis of the decision of the House, referred ultimatey to the Committee on Privileges and Elections.
I must tell the hon. member that in my view there is not a prima facie case of privilege. I have to refer the hon. member to a well known ruling which has been confirmed subsequently and which was based on previous rulings. This ruling was made by Mr. Speaker MacNaughton, as reported in Hansard for June 10, 1964 at page 4139, dealing with statements made outside the House of Commons. If the hon. member will read it, as I am sure he and all hon. members have because it has been quoted so often, the hon. member will agree that it would be extremely difficult for the Chair to agree that there is a prima facie case of privilege and that a statement which appeared in the press should be considered by a standing committee of the House.
Having given the matter every possible consideration and having looked at it as objectively and impartially as I could, in spite of the fact that, as the hon. member said, there is a suggestion that the statement might be a reflection on the Chair I would not think there is a prima facie case which should be considered by the Standing Committee on Privileges and Elections as suggested in the proposed motion of the hon. member.


Donald MacInnis: I rise on a point of order, Mr. Speaker. I should like to ask you, Sir, whether any precedents formerly established would cover the fact that this member is a paid official of the House of Commons.


Mr. Speaker:: Order, please. I would not think that would be a relevant factor.



ROUTINE PROCEEDINGS


Hon. Mitchell Sharp (Secretary of State for External Affairs):: Mr. Speaker, I should like to table copies of the communique issued at the conclusion of the visit to Canada of the President of Yugoslavia, together with copies of letters that I exchanged with the Foreign Minister of Yugoslavia.
9402

November 8, 1971
Questions



COMMUNICATIONS


Mr. Arnold Peters (Timiskaming):: Mr. Speaker, I wish to move a motion under Standing Order 43 concerning Bell Telephone's application to the Canadian Transport Commission for a 9.5 per cent rate increase. As this is a national public utility affecting all Canadians and a company with a profit of $38 million, I move:
That the matter of the most recent Bell Telephone rate increase application be referred to the Standing Committee on Transport and Communications with provision to examine the entire operations of Bell Canada in relation to the public interest.	[DOT]


Mr. Speaker:: The motion proposed by the hon. member for Timiskaming requires the unanimous consent of the House. Is there unanimous consent?


Some hon. Members:: Agreed.


Some hon. Members:: No.


Mr. Speaker:: Since there is not unanimity, the motion cannot be put.



QUESTIONS ON THE ORDER PAPER

[Stage Direction]
(Questions answered orally are indicated by an asterisk.)

Mr. Mather: What was the number and rate of crimes of violence in Canada in 1965 and in 1970?


Mr. Bruce Howard (Parliamentary Secretary to Minister of Industry, Trade and Commerce):: 
SPRINGHILL, N.S.-MINE DUMP FIRE
Mr. Coates: 1.	What action has been taken by the Department of the Environment to extinguish the mine dump fire at Springhill, Nova Scotia?
2.	Were these actions continuations of previous commitments by officials formerly associated with other departments or have there been new initiatives and, if so, when were they undertaken?
3.	Will the government share the cost of extinguishing this fire with the provincial government?


Mr. J. A. Jerome (Parliamentary Secretary to President of the Privy Council):: I am informed by the Department of Environment and the Department of Energy, Mines and Resources as follows:
1.	Responsibility for extinguishing the mine dump fire at Springhill, Nova Scotia, lies with the Nova Scotia government. The responsibility of the Department of the Environment is to ensure that there is no hazard to health from air pollution due to the fire. To this effect, a survey was conducted during the past summer and a report is being prepared at this time.
2.	See (1).
3.	This matter is under consideration but as yet no decision has been reached.


STATISTICS ON COST OF MODERN LIVING IN CANADA
Mr. Knowles (Winnipeg North Centre): Does the government, or any department thereof, maintain statistics on the cost of moderate living in Canada and, if so (a) on what basis are such statistics calculated (b) what is the cost of moderate living in 1971 for a family of four?


Bruce Andrew Thomas Howard: Statistics Canada reports that: no statistics on the cost of a defined "moderate living" in Canada are calculated by any government department. Statistics of family expenditure are compiled by Statistics Canada from information collected in household surveys. These are calculated in the form of average expenditures per family for a given year, classified according to family characteristics such as family income and family composition. Average expenditures for families of four are compiled for three distinct family types, namely, families with two adults and two children under sixteen, families consisting of four adults, or families consisting of three adults and one child. The resulting expenditure patterns reflect differences in consumption related to the different family types as well as differences in income levels. Results from a national expenditure survey conducted in 1970 are expected by the end of this year. Most recent published data are contained in Family
November 8, 1971

Food Expenditure in Canada 1969, Statistics Canada Catalogue No. 62-531 and Urban Family Expenditure 1967, Statistics Canada Catalogue No. 62-530.


ATLIN, B.G.-INVESTIGATIONS BY RCMP AND CUSTOMS OFFICERS
Mr. Howard (Skeena): 1.	Was RCMP Staff Sergeant R. L. Nesbitt stating government policy or RCMP policy when he said that the recent investigation by RCMP and a Customs Officer at Atlin, B.C. was as a result of Atlin Board of Trade's President Tom Kirkwood's complaints of "flagrant violations" of the Customs Act?
2.	Upon what occasion did the said Tom Kirkwood make such a statement?
3.	Is the government prepared to apologize to Mr. Kirkwood for any imputations contained in the statements attributed to Staff Sergeant Nesbitt as they appeared in the Vancouver Province of August 26,1971?


Hon. Jean-Pierre Goyer (Solicitor General):: The answer, in so far as it concerns the Department of the Solicitor General, is as follows: 1. Staff Sergeant R. L. Nesbitt, RCM, did not use the expression "flagrant violations" nor did he attribute such words to Mr. Tom Kirkwood when discussing the Atlin, B. C. matter with a Vancouver Province newspaper reporter. Staff Sergeant Nesbitt informed the reporter that enquiries such as carried out in the Atlin area were routine in nature but were generally conducted in the autumn because of the influx of American hunters in that particular region which is adjacent to the American Border and permits ready access to Canada without having to clear Customs. Enquiries were initiated earlier this year because of complaints concerning Customs enforcement having appeared in the press and which were attributed to Atlin Board of Trade President Tom Kirkwood. Staff Sergeant Nesbitt apprised the reporter of these articles, in particular an item which appeared in the Vancouver Sun on June 11, 1971. The article appearing in the Vancouver Province August 26, 1971, indicates that Mr. Kirkwood was contacted personally by the reporter which in all likelihood influenced the text used in the news story.
2.	The Royal Canadian Mounted Police do not know if in fact Mr. Tom Kirkwood made such a statement.
3.	No imputations were implied or intended in Staff Sergeant Nesbitt's statement to the press which appeared in the Vancouver Province of August 26, 1971 and, accordingly, no apology is called for.


ATLIN, B.C.-POSSESSION OF WRIT OF ASSISTANCE IN INVESTIGATION BY RCMP AND CUSTOMS OFFICERS
Mr. Howard (Skeena): When the RCMP and a Customs Officer conducted an investigation at Atlin, B.C. in July of this year, were any of the officers who visited Atlin and participated in the investigation in possession of a Writ of Assistance under the Customs Act and, if not, is the government prepared to correct RCMP Staff Sergeant Nesbitt's statement that appeared in the Vancouver Province of August 26, 1971 that "We had a Writ of Assistance under the Customs Act but didn't have to use it"?


Jean-Pierre Goyer: The answer, in so far as it concerns the Department of the Solicitor
Questions
General, is as follows: The Royal Canadian Mounted Police investigator was in possession of a Writ of Assistance under the Customs Act; however, on no occasion was he requested to produce it during the course of the investigations. Upon termination of the investigation at one of the premises the individual concerned requested, out of curiosity, to see a Writ of Assistance. The R.C.M. Police investigator obliged.


CANADIAN BIRTH RATE
Mr. Mather: What was the Canadian birth rate in 1950,1960 and 1970?


Bruce Andrew Thomas Howard: Statistics Canada reports that: The Canadians crude birth rate (per 1,000 population) were: 1950, 27.1; 1960, 26.8; 1970, 17.3.


NUMBER OF INDIAN STUDENTS ATTENDING UNIVERSITIES
Mr. Orlikow: 1.	How many Indian students attending university in 1970-71 completed the full course?
2.	How many Indian students attending university in 1970-71 withdrew before the end of the academic year?


Mr. Judd Buchanan (Parliamentary Secretary to Minister of Indian Affairs and Northern Development):: 1. Three hundred and eighty eight Indian students attending university in 1970-71 completed the full course. This figure includes those students who have completed summer courses at universities.
2.	Forty four Indian students attending university in 1970-71 withdrew before the end of the academic year.


COMPUTER INDUSTRY MARKET STATISTICS
Mr. Robinson: Will the government consider the advisability of providing computer industry market statistics?


Bruce Andrew Thomas Howard: Statistics Canada reports that: It plans to compile some general information on the computer services industry from the 1971 Census of Merchandising and Services which will be conducted in 1972 and plans to initiate a separate survey covering the year 1972 to obtain more detailed market statistics.


PAN AMERICAN HEALTH ORGANIZATION
Mr. Macquarrie: 1.	Did Canada become a member of the Pan American Health Organization and, if so (a) on what date (b) what is the Canadian contribution toward the budget of the Organization (c) did Canada request that a smaller figure be set as its portion and, if so, what was the proposed amount and for what reason was it not accepted by the PAHO?
2.	Of what other OAS agencies is Canada a member and in each case, what was our date of joining and what has been our annual contribution since joining?
3.	Is it intended that Canada will seek membership in other OAS organizations and, if so, which ones?
24372-36}

November 8, 1971
Questions
4.	Who comprised the Canadian delegation at the 20th annual PAHO meeting?


Mitchell William Sharp: 1. (a) Canada was admitted to membership in the Pan American Health Organization on September 27, 1971. (b) The Canadian contribution for 1971 will be U.S. $982,992. (c) Canada suggested to the Organization that the date of budgetary responsibility should correspond as closely as possible to the date of Canada's admission to full membership responsibility in the Organization. This principle, which Canada has advocated in other specialized agencies, would have involved payment of approximately 50 per cent of a full year's assessment. The Executive Committee of PAHO recommended Canadian membership on this basis but, at the same time, appealed to Canada to restudy the possibility of contributing a full quota for 1971 in view of the importance of the health programs for which it is intended. Responding to this appeal, Canada agreed, without prejudice to the principle of financial responsibility, to pay a full assessment for 1971 on the understanding that the additional funds thus made available in the present year would be used for health programs which the Directing Council of the Organization considered to be most urgent.
2.	Canada has been a member of the following OAS specialized agencies since the dates indicated: (a) The Pan American Institute of Geography and History (PAIGH), August 15, 1961. Canada's annual payments since joining have been (in U.S. dollars): 1960-61, $9,150; 1961-62, $9,150; 1962-63, $9,800; 1963-64, $10,300; 1964-65, $14,900; 1965-66, $15,150; 1966-67, $15,150; 1967-68, $15,150; 1968-69, $15,150; 1969-70, $15,250; 1970-71, $15,250. (b) Pan American Health Organization (PAHO), September 27, 1971: Contribution for 1971, U.S. $982,992.
3.	Canada has indicated its intention of seeking full membership in the Inter-American Institute of Agricultural Sciences and the Inter-American Indian Institute, both of which are OAS organizations. In addition Canada has indicated its interest in full membership in the InterAmerican Development Bank and in a number of other inter-American institutions that are considered to be part of the inter-American system but are not organizationally linked with the OAS. Canada is already a member of a number of these organizations: the Inter-American Statistical Institute; the Postal Union of the Americas and Spain; the Inter-American Centre for Tax Administrators; the Centre for Latin American Monetary Studies.
4.	The composition of the Canadian delegation at the 20th annual PAHO meeting was the following: the Hon. John Munro, Minister of National Health and Welfare, as Canadian Representative and head of the delegation; Alternate Representatives: Dr. Maurice Leclair, Deputy Minister (National Health), Mr. K. B. Williamson, Minister of the Canadian Embassy in Washington, and Dr. B. D. B. Layton, Principal Medical Officer, International Health, Department of National Health and Welfare; Advisers: Dr. Didier Dufour, Director, Institut National de la Recherche Scientifique-Sante, Centre de Bio-medecine, Laval University, Dr. Ernest Mastromatteo, Director, Environmental Health Services Branch, Ontario Department of Health, and Mr. L. Clark, First Secretary, Canadian Embassy in Washington.


DEFINITION OF A COMPUTER
Mr. Robinson: Has the government a satisfactory definition of a "Computer" and, if so, what is the definition and, if not, when will it have a definition?


Hon. C. M. Drury (President of the Treasury Board):: Government refers to the definition of a computer established by The International Organization for Standardization. "A data processor that can perform substantial computation, including numerous arithmetic or logic operations, without intervention by a human operator during the run."


PEI-ESTABLISHMENT OF SECOND NATIONAL PARK
Mr. McQuaid: Is the government considering the establishment of a second National Park in Prince Edward Island and, if so (a) where will the Park be established (b) how many acres will be included within the Park area?
Mr. ]udd Buchanan (Parliamentary Secretary to Minister of Indian Affairs and Northern Development): Yes. (a) In the vicinity of East Point, (b) The boundaries of the Park are still under negotiation but it is expected that the Park will cover an area of approximately 15 to 16 square miles.


DUTCH ELM DISEASE
Mr. Robinson: Will the government advise if the fungicide developed by the Forestry Service will be madde available to all Canadians to combat the Dutch Elm disease epidemic?


Mr. Eymard Corbin (Parliamentary Secretary to Minister of the Environment):: Scientists of the Canadian Forestry Service have formed a team of research people to test a number of chemicals which have shown promise against the Dutch Elm disease fungus. The program is still in the research stage and when and if acceptable results are forthcoming, the materials and method of use will be made available to the Canadian public.


NEW BRUNSWICK-NEW NATIONAL PARK
Mr. MacLean: 1.	Has land acquisition for a new national park, along the Northumberland Strait, in the Province of New Brunswick been completed?
2.	When is it planned to have the park in operation?
3.	What will be the area of this park?
4.	Has a name been selected for this park and, if so, what is it?
Mr. ]udd Buchanan (Parliamentary Secretary to Minister of Indian Affairs and Northern Development): 1. No.
2.	Operations will start in the Spring of 1972.
3.	Approximately 85.75 square miles.
4.	Yes. Kouchibouguac National Park.


FUNCTIONS OF THE MINISTRY OF STATE FOR SCIENCE AND TECHNOLOGY
Mr. Thomson: 1.	With reference to complaints that too many commercially feasible ideas have died in university or government labs, what
November 8, 1971

specific techniques is the Minister of State for Science and Technology considering for processing work done in such labs to test their commercial viability?
2.	Does the Minister intend to use financial incentives or penalties in universities to channel technological research in specific areas and does he intend to encourage NRC to do so?
3.	Does the Minister intend to contact provincial governments to avoid duplication of scientific research in Canada?
4.	What approach does the Minister intend to make to the scientific community as to selection of specific areas of scientific research?
5.	What financial or other incentives will be offered to skilled technical or scientific personnel in involving themselves in Canadian research, technical or business development?


Hon. Alistair Gillespie (Minister oi State for Science and Technology):: 1. None. The Ministry will not engage in any fundamental or applied research.
2.	The Ministry itself is not one of those federal agencies involved in grants to universities. The Ministry will however be interested in the policies to be formulated for such grants which are related to Scientific and Technological activities.
3.	The Ministry will establish liaison with provincial governments in areas of mutual interest relating to Science and Technology.
4.	The Ministry is charged with responsibility for advising the government and assisting other government agencies in the determination of policy for the support of scientific research. In the exercise of that function there will be continuing close liaison with the scientific community.
5.	The responsibility for offering financial and other incentives for the purposes mentioned rests with agencies of government other than the Ministry of State for Science and Technology.


FUNCTIONS OF THE MINISTRY OF STATE IN SCIENCE AND TECHNOLOGY
Mr. Thomson: 1.	What specific techniques does the Minister of State for Science and Technology intend to use to encourage technological innovation in industry (a) cash grants (b) loans (c) providing technical personnel (d) providing management personnel (e) providing sales personnel (f) other?
2.	In the promotion of such innovations, at what stage will the responsibility of the Minister end?
3.	How will the Minister involve other government departments in enabling infant industries to grow?
4.	Does the Minister intend using such commercial protective devices as tariffs or quotas in support of such infant industries?
Questions
3.	As indicated by the question other government departments are directly concerned with support for new industries. The Minister of State for Science and Technology will be concerned with reviewing and recommending policies where appropriate for stimulating R & D in Canadian industry.
4.	The Ministry will be interested in the government policy for tariffs and quotas relating to scientific and technological oriented new industries.


LOANS DISTRIBUTED IN ONTARIO 1970-71
Mr. Serre: How many (a) loans to small businesses (b) farm improvement loans (c) Industrial Development Bank loans were distributed in (i) Ontario (ii) the Sudbury district in 1970 and 1971?


Hon. E. J. Benson (Minister oi Finance):: (i) Ontario
1970	1971
(to 30 June)
No.	($000)	No.	($000)Small Business	
Loans Act	
317	3,121	201	2,213Farm Improvement Loans Act	
6,384	19,873	3,599	12,479Fiscal Year ended 30 Sept. 1970 No. ($000)	Fiscal Year ended 30 Sept. 1971 No. ($000)	Industrial Development Bank.	
978	46,490	1,216	49,723(ii) Information is	not available by	areas within	provinces.


SCIENCE AND TECHNOLOGY-CO-OPERATION OF VARIOUS DEPARTMENTS IN RESEARCH PROGRAMS
Mr. Thomson: 1.	By what specific method does the Minister of State for Science and Technology intend to obtain the cooperation of various departments in research programs such as (a) telecommunications by satellite (b) marine research (c) defence projects (d) pollution and environment control (e) medical research?
2.	Does the Minister intend to use the cost-benefit method in assessing scientific research programs undertaken by departments?


Alastair William Gillespie: 1. The Minister of State for Science and Technology will be concerned with advice to the government and assistance to other concerned federal agencies in the formulation of government policies with respect to the encouragement of technological innovation, specific techniques to be employed would be the responsibility of various federal agencies.
2. As noted in (1) the Minister is concerned primarily with advice to the government and assistance to other government agencies in the formulation of policy for the promotion of innovation.


Alastair William Gillespie: 1. Research programs in the areas mentioned are as the question indicates the responsibility of various departments other than the Ministry of State for Science and Technology. The latter Ministry will of course be assisting those departments and advising the government on such research programs.
2. Techniques including cost-benefit analysis will be used in studies undertaken by the Ministry for the purposes of assisting in the formulation of policies for scientific research.

November 8, 1971
Questions


CANADIAN INTERNATIONAL DEVELOPMENT AGENCY-SALARIES OF STAFF
Mr. Dionne: 1.	What is the salary of the Chairman and of each of the ViceChairmen of the Canadian International Development Agency?
2.	What is the salary of each person employed by this Agency?


Mitchell William Sharp: 
IDB INVOLVEMENT WITH CARTIER REFINERIES LTD.
Mr. MacDonald (Egmont): What is the involvement, if any, of the Industrial Development Bank in the financing of the purchase of shares of Cartier Refineries Limited of Quebec?


Edgar John Benson: It has not been the practice, nor is it appropriate for the Industrial Development Bank to make public information concerning individual accounts or applicants.


CANADIAN CASUALTIES IN WARS
Mr. Robinson: How many casualties did Canada have in each of (a) the Boer War (b) the First World War (c) the Second World War (d) the Korean War?


Hon. lean-Eudes Dube (Minister of Veterans Affairs):: (a)
South African War Deaths 170 Wounded Information not available (b) World War I Deaths 59,750 Wounded 138,166 (c) World War II Deaths 42,042 Wounded 54,414 (d) Korean Campaign Deaths 516 Wounded 1,211.


ORAL QUESTION PERIOD
Hon. Robert L. Stanfield (Leader of the Opposition):: Mr. Speaker, I should like to ask a question of the Acting Prime Minister. In view of statements over the weekend by the Premier of Alberta, has the government of Canada invited an official observer from Alberta or, indeed, any

November 8, 1971

other province, to sit in on the United States-Canada energy talks?


Mitchell William Sharp: Mr. Speaker, as the Leader of the Opposition may recall, the Prime Minister said some weeks ago that because of the pressure of other matters these conversations are not proceeding at the present time.


Robert Lorne Stanfield: Mr. Speaker, I would like to ask the Acting Prime Minister whether, at the time of that decision to which the hon. gentleman referred, the government of Canada consulted with any of the provinces, especially those provinces particularly interested in energy or the export of energy?


Mitchell William Sharp: Mr. Speaker, I am not quite sure what we would have consulted about. The talks are not going on at the present time. When they are resumed, of course we will be welcoming the views of any government or of any group in the country that may wish to give us its views on the question of energy.


Mr. Baldwin:: What about the views of the Official Opposition?


Mitchell William Sharp: We hear those freely. We do not have to ask for them.


Robert Lorne Stanfield: Mr. Speaker, I would hope the hon. gentleman understood that I was asking whether there had been consultation before the government of Canada took the decision to discontinue the talks. In view of the reason given for the discontinuance of the talks at that time, namely, that the government did not have the wherewithal, the personnel or the time to arrive at a decision, is the government considering seeking the assistance of some of the provinces in providing some of the personnel to help the overburdened members of the government?


Mitchell William Sharp: Mr. Speaker, I am sure the Leader of the Opposition would expect the government of Canada to take its responsibility for its decisions and would not want to pass these responsibilities on to any province. However, we would of course welcome the views of the province of Alberta, the provinces of Saskatchewan, British Columbia or any others that are vitally interested in this question.


SUGGESTED ESTABLISHMENT OF LIAISON GROUP OF FEDERAL AND PROVINCIAL OFFICIALS IN WASHINGTON-APPROVAL OF GAS EXPORT APPLICATION
Mr. Eldon M. Woolliams (Calgary North):: Mr. Speaker, in light of what the Acting Prime Minister has said and in light of the fact that exports of crude petroleum and natural gas are so important to our balance of trade with the United States, has any agreement been reached with the Premier of Alberta on the establishment of a permanent joint trade committee group in Washington, made up of federal and provincial advisers and liaison officers, to discuss the problem continuously and to assure and guarantee the continuation of the trade that now exists and the acceleration of trade which is needed by Canada?
Inquiries of the Ministry


Mitchell William Sharp: Mr. Speaker, I know the hon. gentleman is familiar with the fact that there has always been the closest consultation among the government of Canada, the government of Alberta and other provincial governments that are concerned with gas and oil before decisions are taken by the government of Canada. I do not think it would be proper for us to ask any province, whether Alberta or Quebec, to share in the responsibility for the foreign policy of Canada.


Eldon Mattison Woolliams: In light of the fact that the Minister of Energy, Mines and Resources is not here-I make nothing of that because he is ill-can the Acting Prime Minister tell us whether the National Energy Board has approved an application for the export of two trillion cubic feet of natural gas spread over a number of years, which export would be important to our trade? Has approval been given, and are discussions going on in Washington at the present time in reference to their energy needs?


Mitchell William Sharp: Mr. Speaker, the National Energy Board has been given the responsibility by an act of Parliament to make decisions on these matters. We have not yet been informed about the decision of the board in this case, and I am sure the hon. gentleman would not wish us to interfere with that process.


GOVERNMENT POSITION RESPECTING CONTINENTAL POLICY
Mr. Frank Howard (Skeena):: Mr. Speaker, I wish to direct a supplementary question to the Acting Prime Minister. Inasmuch as the Premier of Alberta has endorsed the concept of a continental energy policy, may I ask whether the federal government is going to endorse that concept and press that particular position in discussions with the United States?


Mitchell William Sharp: Mr. Speaker, I have not had an opportunity to speak with the government of Alberta to determine whether that is its view. The policy of the Canadian government is to get the maximum benefit out of the energy exchanges that take place between the United States and Canada, and that does not necessarily denote a continental energy policy.


Robert Lorne Stanfield: Mr. Speaker, arising out of the minister's suggestion that the government of Canada would exercise its own responsibilities in reply to the question whether there had been consultation with the provinces prior to discussions being broken off, is it the position of the Acting Prime Minister that it is inconsistent with the exercise and discharge of its responsibilities for the government to consult with the provinces?


Mitchell William Sharp: No, Mr. Speaker. We always consult with the provinces.


Mr. Speaker:: Order, please. I would not think that the question is in order. The hon. member for Timiskaming.

November 8, 1971
Inquiries of the Ministry COMMUNICATIONS


BELL CANADA RATE INCREASE APPLICATION-TRANSPORT COMMISSION STATUTE-SUGGESTED REFERENCE TO STANDING COMMITTEE
William Arnold Peters: I have a question for the Acting Prime Minister. In view of the latest application by Bell Canada for an increase in rates, will this whole subject matter be referred to the Standing Committee on Transport and Communications for investigation?


Mitchell William Sharp: Mr. Speaker, here again we have the Canadian Transport Commission which is responsible for dealing with these applications, and I would not want to prejudge its decision.


William Arnold Peters: In light of the fact that in the last five years Bell Canada has made three successful applications to the CTC, will the Acting Prime Minister agree to refer the subject matter of the CTC legislation to the Standing Committee on Transport and Communication as there is obviously some difficulty when the company has to make that many applications in a short period of time for such large increases?


Mitchell William Sharp: No, Mr. Speaker, we are not contemplating any action of that kind.


BELL CANADA RATE INCREASE APPLICATION-CONSIDERATION BY PRICES AND INCOMES COMMISSION
Mr. James A. McGrath (St. John's East):: I have a supplementary question for the Minister of Consumer and Corporate Affairs, Mr. Speaker. Has the application of Bell Canada to the Canadian Transport Commission been referred to the Prices and Incomes Commission for their consideration?


Hon. Ron Basford (Minister of Consumer and Corporate Affairs):: No, Mr. Speaker.


James Aloysius McGrath: In view of the inflationary aspect of the proposed increase, will the minister ask the Prices and Incomes Commission to look into it?


Stanley Ronald Basford: It seems to me that the appropriate body to look into it at the moment is the CTC.


James Aloysius McGrath: A further supplementary-


Mr. Speaker:: Order, please. The Chair will recognize the hon. member for St. John's East for a second supplementary and then recognize the hon. member for Temiscaminque.


James Aloysius McGrath: Will the Prices and Incomes Commission present a brief or appear before the CTC to argue that this proposed increase is inflationary?


Stanley Ronald Basford: Mr. Speaker, we would trust that the CTC is aware of economic conditions in the country.


Some hon. Members:: Oh, oh!


An hon. Member:: Who is not?


Eldon Mattison Woolliams: That is one time you do not stand alone, Ron.


EXTERNAL AFFAIRS
Mr. Real Caouette (Temiscamingue):: Mr. Speaker, I have a question for the hon. Secretary of State for External Affairs.
In view of his statement last night on some television stations to the effect that the government intended to deal normally with the United States, I should like to ask the minister whether the United States government has made its reactions known to Canada's expressed intention to gear its trade increasingly to the Russian-Chinese Communist bloc?


Mitchell William Sharp: Mr. Speaker, the United States, like ourselves, is engaged in very actively promoting trade with both China and the Soviet Union.
[Translation)


David Réal Caouette: I should like to put a supplementary question, Mr. Speaker.
Does the minister mean that the United States approve the action of the Canadian government with regard to Communist China and the USSR? Is that what the minister means?


Mitchell William Sharp: Mr. Speaker, we do not require the approval of any other government for our actions. All I am saying is that the United States to some extent seems to be following our example.



HUMAN RIGHTS


Right Hon. J. G. Diefenbaker (Prince Albert):: Mr. Speaker, my question is directed to the Minister of Justice and concerns the former Toronto Telegram columnist, Ron Haggart, who wrote an article in support of a political party to which I do not belong, but that does not alter the question of principle. He was subsequently hired by the Toronto Star and when it was ascertained that he had written this article he was removed as a potential member of the staff. In view of the fact that freedom of the press generally speaking, though with limitations, and freedom of speech fall within the general ambit of parliamentary government and therefore under the authority of the Parliament of Canada, will the minister have the law officers of the Crown look into the action that was taken towards Mr. Haggart with a view to ascertaining whether what took place constituted a flagrant disregard of freedom within the meaning of the Bill of Rights?


An hon. Member:: You are out of court.

November 8, 1971


Hon. John N. Turner (Minister of Justice):: Mr. Speaker, it is open, of course, to Mr. Haggart to consider his own remedies before the courts. However, I will inquire into the matter to see whether there is anything that I might properly do.


John George Diefenbaker: Mr. Speaker, I am not sure that I accept the premise of that answer which was more in the form of a brush-off. Do I have the minister's assurance that he will secure the opinion of the law officers of the Crown? Am I right in that?


John Napier Turner: Mr. Speaker, the right hon. gentleman has that assurance.



UNEMPLOYMENT INSURANCE


Donald MacInnis: Mr. Speaker, my supplementary question arises out of the minister's answer with respect to the opportunity for an individual to go before the courts. May I ask the minister if he has reviewed the situation in which a Cape Breton miner has had to go to court to fight the government, despite the fact that the Crown corporation has admitted violating section 35 of the bill passed by this Parliament and section 58 of the Unemployment Insurance Act and despite the fact that in the Standing committee on Justice and Legal Affairs they admitted, as recorded in the committee evidence, that coercion was used with respect to unemployment insurance collections?


John Napier Turner: Mr. Speaker, I have asked the law officers to review the evidence before the Standing Committee on Justice and Legal Affairs so that I will be in a position to have a talk with the hon. member.



COMPETITION BILL


Gerald William Baldwin: Mr. Speaker, may I ask the Minister of Consumer and Corporate Affairs a question. Since the new competition act appears to intrude into several areas of provincial jurisdiction-


An hon. Member:: Order.


Gerald William Baldwin: -was this bill prepared in consultation with the provinces and is it the intention of the government to seek an amendment to the British North America Act on which to found jurisdiction?


Stanley Ronald Basford: Mr. Speaker, the provinces were asked to comment on the legislation some time ago.
Inquiries of the Ministry


Gerald William Baldwin: Will the government take the opportunity to submit this bill or parts of it to the Supreme Court of Canada on a reference as to its legality before the legislation is implemented?


Stanley Ronald Basford: Mr. Speaker, there is no question of its legality. Surely the court would be entitled to have Parliament decide the issue first.



ALLEGED CONFLICT BETWEEN PRINCIPLES OF BILL AND NATIONAL TRANSPORTATION ACT-CONSULTATION WITH TRANSPORT COMMISSION

Mr. J. P. Nowlan (Annapolis Valley):: Mr. Speaker, may I direct a supplementary question to the Minister of Consumer and Corporate Affairs. Has the minister or anyone in his department consulted with the chairman of the Canadian Transport Commission or with anyone else on that commission in order to resolve the apparent conflict between the principles underlying the competition bill and the National Transportation Act which was passed by this Parliament?


Stanley Ronald Basford: Mr. Speaker, I am not aware of the conflict to which the hon. member refers. Of course in drafting the competition bill cognizance was taken of existing acts that had been passed by parliament.


John Patrick (Pat) Nowlan: Am I to understand from the minister's answer that there has been no consultation whatsoever between his department and the chairman or officials of the Canadian Transport Commission with respect to the competition bill in order to resolve some of the apparent conflicts between the bill and the National Transportation Act?


Stanley Ronald Basford: Mr. Speaker, I would refer the hon. member to section 92 of the bill. The effects of other legislation are taken into account in section 92.



PENSIONS


Mr. Stanley Knowles (Winnipeg North Centre):: Mr. Speaker, may I direct a question to the Minister of National Health and Welfare. In view of the statement made several times by the minister during the debate last December on the Old Age Security Act to the effect that the basic amount of pension under that act was not necessarily frozen at $80 but could be increased by Parliament, is the minister, in view of the needs of our pensioners, now considering an increase in that basic amount?


Hon. John C. Munro (Minister of National Health and Welfare):: Not at this time, Mr. Speaker.


Robert Lorne Stanfield: This may be your last chance, John.


Stanley Howard Knowles: A supplementary question, Mr. Speaker. Then is the minister consider-

November 8, 1971
Inquiries of the Ministry
ing the lowering of the eligible age for those who are prepared to retire from the labour market?


John Carr Munro: Mr. Speaker, as we indicated, I believe in our white paper on income security, we see this as a future trend. In terms of immediate action the government does not have any plans at this time.


Stanley Howard Knowles: A further supplementary question, Mr. Speaker. Will the minister define "future"?


Mr. Speaker:: Order, please.


Gerald William Baldwin: It is something this government has not got.


Mr. Speaker:: Perhaps this matter might be considered at the time of adjournment.


Stanley Howard Knowles: Ten o'clock, Mr. Speaker.


Mr. Speaker:: Does the hon. member for Temiscamingue wish to put a supplementary question?


David Réal Caouette: Yes, Mr. Speaker. I should like to direct a question to the Minister of National Health and Welfare.
In view of the monthly increase of 42 cents granted to pensioners, does the minister not agree that another 42 cent increase should now be granted.


Mr. Speaker:: This is a suggestion rather than a question.



POSSIBLE UNITED STATES IMPORT SURTAX INCREASE AND EXCISE TAX ON CANADIAN AUTOMOBILES- CONTINGENCY PLAN

['Mr. Speaker, we have not definitely decided on the form of aid to give. In fact, I am awaiting the return of Mr. Gerin-Lajoie so we can talk about that question as well as the more general question of aid to the refugees.']
Mr. Gordon Ritchie (Dauphin):: Mr. Speaker, I have a question for the Minister of Finance. In view of the recommendation of the United States Senate committee on finance dealing with a possible increase in the United States surcharge and an excise tax on Canadian autos, has the government developed any contingency plan in the event that some or all of these proposals become law?


Edgar John Benson: As I have indicated, Mr. Speaker, it is very unlikely that they will become law, but we are considering the matter.



Mr. Heath Macquarrie (Hillsborough):: Mr. Speaker, I should like to ask the Secretary of State for External
IMr. Knowles (Winnipeg North Centre).]
Affairs if the government has yet made up its mind on what form of aid it will give to India in respect of the tragedy at Orissa and, further, if the president of CIDA has brought forth any recommendations on the broader question which the government will follow?


Mitchell William Sharp: Mr. Speaker, we have not definitely decided on the form of aid to give. In fact, I am awaiting the return of Mr. Gerin-Lajoie so we can talk about that question as well as the more general question of aid to the refugees.



AIR TRANSPORT


Mr. Cliff Downey (Battle River):: In the absence of the Minister of Transport I will direct my question to the Acting Prime Minister. It arises out of the concern expressed in Edmonton last week by Dick Campbell, president of the Air Traffic Controllers Association, over the use of the French language at three air control towers in the province of Quebec. Can the Acting Prime Minister assure the House that, in view of several near accidents because of language difficulties, the situation will be investigated and reported upon to the House?


Mitchell William Sharp: Mr. Speaker, I cannot vouch for the accuracy of these reports, but this is a very serious matter and I will draw it to the attention of the minister and ask him if he can report to the House.



NATIONAL DEFENCE


Mr. W. B. Nesbitt (Oxford):: My question is for the Minister of Supply and Services but in his absence I will direct it to the Acting Prime Minister. Is the government in a position to provide the House with information concerning the reported closing by the end of this year of a branch of Canadian Arsenals in the borough of Etobicoke, near Toronto, and the consequent laying-off of 150 skilled men and women and sending of the arms contract to the United States?


Mitchell William Sharp: I will take notice of this question, Mr. Speaker.


Mitchell William Sharp: Mr. Speaker, have I the permission of the House to answer a question asked previously? It is not an answer of substance, I can assure you, Mr. Speaker, but simply to say that the question of which I took notice was answered on Friday, as recorded at page 9370 of Hansard.
November 8, 1971



ALLEGED LOSS OF SALES BECAUSE OF LACK OF TRANSPORT FACILITIES

Mr. A. P. Gleave (Saskatoon-Biggar):: May I direct my question to the minister in charge of the Canadian Wheat Board. In view of a statement by Mr. Gibbings, one of the board's commissioners, to a meeting of the United Grain Growers that the Canadian Wheat Board has passed up sales of grain because of lack of transport, can the minister tell the House the extent of the lost sales and what steps are being taken to correct the situation?


Hon. Otto E. Lang (Minister of Manpower and Immigration):: Mr. Speaker, the statement, of course, refers to certain specific months as the wheat board is still selling grain. Certainly sales volumes for some months are so monumental that the capacity of our transportation facilities are strained to the maximum. We have been studying the transportation facilities for some time and are now in a position to begin to make some decision on those things necessary to have additional facilities as we are confident sales will go even higher in the near future.


Alfred Pullen Gleave: I am impressed by the generalities, Mr. Speaker, but may I ask a further question? In viejy of the statements by the Alberta Wheat Pool that No. 2 wheat is not in position for boats which will be arriving shortly for loading-indeed, they were referring to last week-can the minister give any assurance that this grain will be in position and available for loading?


Otto Emil Lang: Mr. Speaker, since something like 35 million bushels of grain went out of elevators toward Thunder Bay and Vancouver last week, I think the hon. member might get the impression that the block system is capable of bringing grain forward. Of course the whole point of the management of the block system is to attempt to bring grain requirements forward for the boats which are arriving. When we get to the very peak of our handling capacity there are times when there may be slight delays, but everything is being done to keep our terminal facilities running to the maximum.



SALE BY UNITED STATES TO RUSSIA-REASON FOR WHEAT BOARD NOT GETTING CONTRACT

John George Diefenbaker: My question to the minister is supplementary in a way to the answer he gave a moment ago regarding the difficulty in securing the necessary shipping space and the like which is interfering with the sale of grain abroad. Will the minister explain whether it was because of a shortage of such facilities as transportation that in the past few days the U.S.S.R. has made its first purchase of grain from the United States in seven years, 28 million bushels of barley and 21 million bushels of oats? Did the Wheat Board have an opportunity to make this sale or is this turn of events the result of Kosygin's visit to Canada?


Mr. Speaker:: Order, please.


Otto Emil Lang: Mr. Speaker, the Wheat Board, of course, had discussions with the Russians concerning this grain sale as in
Inquiries of the Ministry
regard to others. As far as this sale in concerned, it was associated with a very large movement of corn to the U.S.S.R. which we did not have available. As far as barley is concerned, I might say that the Wheat Board has reached the point where it is not sure that it can sell any more barley because most of the barley that has been grown has in fact been sold.


John George Diefenbaker: A supplementary question.


Mr. Speaker:: Order, please. The right hon. member will be recognized for a supplementary and then the hon. member for Skeena.


John George Diefenbaker: Will the minister give the figures for barley? He usually presents figures such as he has been using in the Assiniboia by-election but not the facts.


Mr. Speaker:: Order, please.


Frank Howard: Because of the great expectation of increased grain sales in the years ahead to which the minister just referred, would he mind putting his money where his mouth is and taking steps to increase the elevator capacity at Prince Rupert so that-


Mr. Speaker:: Order, please.



CANADIAN BROADCASTING CORPORATION


Mr. Jack Marshall (Humber-St. George's-St. Barbe):: My
question is for the Secretary of State. Will the minister investigate the reasons for continuous delays in extending CBC television coverage to parts of northern Newfoundland which have been denied this facility, and will he consider requesting the cabinet to include such a project for immediate action under the federal work-intensive projects?


Hon. Gerard Pelletier (Secretary of State):: Mr. Speaker, both questions are presently under study, a very close examination which will allow the Canadian Broadcasting Corporation to answer the hon. member's question and satisfy his curiosity. Far from being neglected, this question is under intensive study at the present time.



MANPOWER


Mr. G. H. Aiken (Parry Sound-Muskoka):: My question is for the Minister of Manpower and Immigration. Is the minister now able to give a specific projection of the number of man-months of employment that will be pro-

November 8, 1971
Inquiries of the Ministry
vided by the local initiatives plan this winter and, if so, will he be making a statement in the House?


Otto Emil Lang: As I indicated earlier, Mr. Speaker, we do not intend to make such a projection, although as projects are approved I may be in a position to report the number of jobs and man-months involved. We simply do not intend to make a projection because the quality of the projects will determine that. Of course, there will be some tremendous indirect jobs created as well as the jobs created directly.


Gordon Harvey Aiken: In view of a statement that was attributed to the minister in a speech in the Maritimes recently, will he be able to give a breakdown of the regional or provincial figures on the local initiatives plan?


Otto Emil Lang: Again, as was indicated in that same discussion with the press in the Maritimes, the intention is to use the allocations under the local initiatives plan to some extent to balance the allocations leading to employment under the various other parts of the special employment program rather than to make a final total initial allocation. I indicated that those areas which had the highest rates of unemployment should ordinarily expect the highest proportion of the amounts of money under the local initiatives program.


Gordon Harvey Aiken: One further supplementary-


Mr. Speaker:: Order, please. We are running short of time. There are a number of hon. members seeking an opportunity to ask questions. If we have too many supple-mentaries we will get into difficulty. The Chair will recognize the hon. member for Parry Sound-Muskoka and the the hon. member for Gander-Twillingate.


Gordon Harvey Aiken: In view of the minister's answer, will the acceptance of applications under the program in any way be related to regional allocation or will they be strictly according to the prerequisites set down in the application form?


Otto Emil Lang: They will all have to meet the criteria set down for applications. We anticipate more eligible applications than we can possibly approve, and in the approval of applications some attention will be paid to the distribution of unemployment, because we are attempting through this program to put to work as many as possible of those now unemployed.


Gerald William Baldwin: Where are you going to put Hooker?



LOCAL INITIATIVES PROGRAM-NUMBER OF PROJECTS APPROVED-NEWFOUNDLAND CO-ORDINATOR

Mr. John Lundrigan (Gander-Twillingate):: Having in mind the brevity of the program, can the minister tell the House how many projects have been approved to date and, second, who is the co-ordinating officer for the province of Newfoundland since the former co-ordinating officer, the executive assistant to the previous premier, obviously should have been replaced-


Mr. Speaker:: Order, please. Perhaps the hon. member will allow the Chair to comment on the question he has

asked. The hon. member asks who is the co-ordinator for one province. I would think a question of that kind should not be asked during the question period but should be asked in writing. If the hon. member thinks it is urgent that the information be provided, a reply could be secured by raising the matter at the time of adjournment.


John Howard Lundrigan: Mr. Speaker, the first part of my question related to the number of projects that have been approved. As to the second part, may I say that 230 municipalities are wondering to whom they should apply.


Mr. Speaker:: Order, please. There is no point in discussing the matter. The Chair has made a ruling. If there is urgency and the hon. member thinks he is right, as he possibly is, he knows he has recourse under the rules in that he may come back and discuss the matter at the time of the adjournment. However, I appreciate that the first part of the question might invite comment from the minister.


Otto Emil Lang: At this moment, as far as I know, no projects have been approved. We were hoping to assess a certain group of applications before approving the first one. But it should not be very long now before the first approvals are accorded.



ALLEGED LACK OF BOXCARS-POSSIBLE APPOINTMENT OF TRANSPORT CONTROLLER

Mr. John Burton (Regina East):: Mr. Speaker, my question is directed to the minister responsible for the Canadian Wheat Board. It relates to the question asked by my hon. friend from Saskatoon-Biggar and the response which was given by the minister. In view of reports that the response of the railways to the block system of shipping grain has been to withdraw boxcars from grain movement, is the government giving consideration to the appointment of a transport controller to deal with the problems which have arisen?


Otto Emil Lang: As far as the movement of grain is concerned the co-ordinator of the block system in Winnipeg plays an important role. We now have co-ordinators at both terminals. In fact, the levels of grain both at Thunder Bay and at Vancouver have been perfectly adequate to sustain the record movement of grain.


John Stratford Burton: Is the minister taking issue with the comments which were made by Mr. Gibbings?


Mr. Speaker:: Order, please. This is debate.



EFFECT OF SMALLER STOCKS OF FEED GRAINS IN SHIPPING POSITIONS ON SALES

Cliff Downey: My question is also directed to the minister responsible for the Wheat Board. It arises out of a Canadian Livestock Feed Board report, "Grain Facts", indicating that stocks of feed grain in
November 8, 1971

eastern terminal positions are down by 81 million bushels compared with a year ago. Can the minister assure us that this decline of stocks in shipping positions will not jeopardize our sales?


Otto Emil Lang: These stocks relate to an altogether different series of sales, but I can assure the hon. member that when the board indicated the other day a quota of between 20 and 25 bushels for barley this year they are bearing in mind the likely needs for feed grain in central and eastern Canada.



MANPOWER


David Réal Caouette: Mr. Speaker, I have a supplementary question for the hon. Minister of Manpower and Immigration.
In view of the statement made by Mayor Desrosiers, president of the Quebec Association of Mayors and Municipalities, to the effect that the winter works program is a little late and insufficient, is the minister in a position to tell us if decisions have been arrived at in co-operation with the Quebec authorities in order that these works be authorized as soon as possible, and when will that be?


Otto Emil Lang: Mr. Speaker, it has been our objective in the case of each of the provinces to secure the maximum co-operation with the provincial co-ordinator appointed so that applications received that seem to be desirable from their point of view can come forward to us for approval very promptly. I believe we have established this kind of cooperation with all the provinces, so I do not anticipate a great deal of delay in this area.



FEDERAL-PROVINCIAL CONFERENCE SUGGESTED OPEN SESSIONS AT FORTHCOMING MEETINGS

Robert Lorne Stanfield: Mr. Speaker, now that the Premier of Alberta has suggested he will be calling for part, at least, of the conference of first ministers to be open to the press and television, is it the intention of the government to support this suggestion?


Mitchell William Sharp: I would have thought this would depend upon the views of all the first ministers, including the premiers of all the provinces of Canada. We certainly would not wish the conference to be open if that were opposed by any of the first ministers.
Inquiries of the Ministry THE CANADIAN ECONOMY



POSSIBLE RESTRICTIONS ON FOREIGN-CONTROLLED INVESTMENT FIRMS

Mr. P. V. Noble (Grey-Simcoe):: Mr. Speaker, I wish to address a question to the Minister of Finance. Are restrictions of any kind to be imposed on foreign-controlled investment firms?


Mr. Speaker:: Order, please. I would think the question should be more specific. The hon. member is asking a question of such a general nature that I doubt whether it is in order at this time.



INDUSTRIAL DEVELOPMENT BANK


Mr. A. D. Hales (Wellington):: Mr. Speaker, I should like to direct a question to the Minister of Finance. Maybe this will be more specific. In view of the reduction in interest rates by the banks, trust companies and other lending institutions, can the minister tell us whether he has discussed with the governor of the Bank of Canada the failure of the Industrial Development Bank to reduce its lending rates?


Edgar John Benson: The I.D.B. rates come up for review periodically. I will discuss this matter with the governor of the bank; I have not done so up to this point. As hon. members know, bank rates have been decreasing in Canada over the past short period, encouraged by a reduction in the Bank of Canada rate. I will take this particular matter up with the I.D.B. I imagine there has been no consideration of the matter because the board has not met.



ALLEGED FAILURE TO FULFIL RESPONSIBILITIES- POSSIBILITY OF LEGISLATION

John Howard Lundrigan: In view of complaints that the Industrial Development Bank is not fulfilling its legislative responsibilities, can the Minister of Finance say whether any steps are being taken to ensure that the I.D.B. responds more fully to the needs of the economy and whether any legislative steps are contemplated shortly to make it more functional in present Canadian conditions?


Edgar John Benson: I completely deny the allegation. The Industrial Development Bank has hundreds of millions out on loan to people in Canada who could not obtain loans from other sources. The bank has also been increasing its loans proportionately more in the developing areas of Canada-


Mr. Speaker:: Order, please. I suggest to the minister and the hon. member that this is debate. We are running short of time.
Inquiries of the Ministry HEALTH

November 8, 1971



LIST OF DRUGS SENT TO FAMILY ALLOWANCE AND OLD AGE RECIPIENTS-ACCURACY OF INFORMATION

Mr. P. B. Rynard (Simcoe North):: Mr. Speaker, I should like to address a question to the Minister of National Health and Welfare. Will the hon. gentleman table the details of the survey which was recently conducted by his department, the results of which were sent to recipients of family allowance and old age supplement cheques in the form of a list of drugs which might have harmful side effects?


John Carr Munro: I believe the list to which the hon. member has referred was a list of comparative prices. It did not ask questions nor request replies.


Philip Bernard Rynard: Has the minister reviewed the accuracy of this information with the provinces and the medical profession?


John Carr Munro: We are certainly satisfied that the information we gave on the inserts is accurate.



RESEARCH ON EFFECTS OF POLYCHLORINATED BIPHENYLS ON HUMANS AND ENVIRONMENT

Mr. Randolph Harding (Kootenay West):: Mr. Speaker, I have a question for the Minister of National Health and Welfare. Is the department carrying on research into the polychlorinated biphenyls, or PCBs, to determine their effects both on human health and on the environment? If so, when will reports on this research be available?


Mr. Speaker:: It is difficult for the Chair to determine whether this is an urgent matter. It may very well be but it seems to me that perhaps it is not. The minister might be allowed to reply briefly, though I am inclined to think that normally that kind of question should be placed on the order paper,


John Carr Munro: I shall be pleased to look into the matter, Mr. Speaker.



WHEAT-CHANGES IN PRICING TO ENABLE WESTERN MILLERS TO COMPETE IN EXPORT MARKETS

Mr. Stan Schumacher (Palliser):: Mr. Speaker, my question is for the Minister of Manpower and Immigration in his capacity as minister responsible for the Wheat Board. Is the minister contemplating any changes in the pricing of wheat whereby millers in western Canada will be put in a position to compete in export markets in order to maintain and, if possible, increase Canada's share of the world's flour market?


Otto Emil Lang: Mr. Speaker, millers who export flour do, of course,
[Mr. Speaker.)
have consideration given to them and are not subject in relation to that portion of their purchases to the $1,951 higher price, that is put on wheat used for human consumption in Canada.



CANADA LABOUR CODE


Mr. Thomas S. Barnett (Comox-Alberni):: Mr. Speaker, in order that I may respond to people who have asked me the question, may I ask the Minister of Labour when he expects to bring forward for debate the bill to amend the Canada Labour Code?


Hon. Bryce Mackasey (Minister of Labour):: I hardly think at this session, Mr. Speaker. I gather from the House leader that by the time the tax reform bill has been completed and other items now at second reading or report stage, this bill will probably have to be carried over to the new session.



FINANCE


David Réal Caouette: Mr. Speaker, I should like to put a question to the Minister of Finance.
As the Bank of Canada recently lowered its interest rate to 4-3/4 per cent, can he tell us why provinces and municipalities still have to borrow at rates of 9, 91 or 10 per cent and whether they could avail themselves of the services of the Bank of Canada which grants loans at 4-3/4 per cent?


Mr. Speaker:: I have serious reservations about that question. In any event, the minister may perhaps answer it briefly.


Edgar John Benson: First of all, Mr. Speaker, I disagree with the rates quoted by my hon. friend. Second, the rates at which particular borrowers may borrow in the market for particular periods of time are determined by the market.



CANADIAN NATIONAL RAILWAYS


James Aloysius McGrath: Mr. Speaker, I should like to ask the Minister of Justice whether a decision has yet been taken with respect to the application of the minimum wage laws of this Parliament to Canadian National hotels. The minister will recall that prior to the summer recess this matter was placed before the courts by Canadian National hotels.
November 8, 1971


John Napier Turner: Mr. Speaker, through our counsel I have again asked the Alberta Supreme Court to give a preferential hearing to this matter in order to get a decision as early as possible.


EXTERNAL AFFAIRS
Frank Howard: Mr. Speaker, may I ask the Secretary of State for External Affairs whether it is the intention of the government, if it has not already done so, to lodge a protest with the government of France about the proposed nuclear atmospheric device that is scheduled to be exploded some time next summer on the atoll of Moorea in the Tahitian group?


Mitchell William Sharp: Mr. Speaker, it will be recalled that I answered a similar question last week in which I said it would be the intention of the Canadian government to register a protest with the French government as soon as we knew whether they were in fact going to proceed with this test.



GOVERNMENT ORDERS


[Stage Direction]
The House resumed, from Tuesday, November 2, consideration in committee of Bill C-259, to amend the Income Tax Act and to make certain provisions and alterations in the statute law related to or consequential upon the amendments to that act-Mr. Benson.-Mr. Honey in the chair.
The Chairman:: In accordance with the statement of the President of the Privy Council, as recorded at page 9251 of Hansard for Tuesday, November 2, 1971, the Committee will now proceed to the consideration of sections 28, 29, 30 and 31.
On clause 1-section 28: Farming business.


Cliff Downey: Mr. Chairman, I understand that the terms of reference for this afternoon's discussions are based on sections 28 to 32. I notice these provisions do not cover farm corporations, and I was wondering whether the terms of reference might be extended to include farm corporations within the ambit of the discussion of these sections.


Mr. Mahoney:: Mr. Chairman, there are not any sections in the bill that I am aware of dealing specifically with farm corporations. I understand that the House leaders or their representatives have decided on the blocks of sections that we will deal with as we go along. I suggested last week when the hon. member raised this particular question with me privately that he discuss it with the hon. member for Edmonton West, who is representing the Offi-
Income Tax Act
cial Opposition in these discussions. I said that if the House leaders agreed to a change in the allocation of blocks of sections, then we would deal with whatever had been agreed upon. However, I have not been advised that such agreement has been made.


Cliff Downey: Mr. Chairman, on looking over some of the figures released by Statistics Canada, as it has been newly named, I notice that something like 46 per cent of the gross national income in Canada is now taken by the government in the form of taxation. This seems to me rather odd. We have many programs that are distributing the wealth of the nation to the people in the form of welfare payments, unemployment insurance benefits and in many other ways. I suggest it might be well so to evolve our tax structure as to enable Canadians to retain more of their income instead of having to depend upon the largesse of the state, which takes it away from them and then hands it back again. Many countries of the world are doing just this, but I do not think it is acceptable to the majority of Canadians.
To deal more specifically with the sections under discussion, namely sections 28 to 32 of the tax bill, as far as the farming community is concerned I find very few advantages in any of these sections. To start with, we are getting away from the concept of the basic herd which has been enshrined within the tax act for many years. Under that provision a farmer or rancher can regard his cattle as a capital asset similar to a machine or some similar device. In reality, I think cattle should be a capital asset and be recognized as such. What rancher or farmer would stay in the business of producing beef if he did not have his "cow machine" to bring his product forward and to place it on the tables of consumers? I say to the parliamentary secretary that if we do away with the concept of recognizing the cattle herd as a capital asset of the farmer and the rancher, we do away with a very important concept in farming and jeopardize the already staggering plight of agriculture. We will only be hastening the demise of the basic herd, and cattle will no longer be considered a capital asset. This is a very important item which I believe we must consider. It is our intention at some later date to move amendments to this section. I hope the minister will seriously consider looking at this concept.
In going through the other sections, I noted an item which will further affect the income of producers. I refer to the averaging concept. Prior to this bill it was possible for farmers, in years of high income, to average the previous five-year period in order to have their tax reduced to a more realistic level because agriculture is a business which is subject to the vagaries of weather, and marketing. We know of many cases, in years when the farmer's income has been low perhaps because of rain or hail, where the averaging feature has been very important. If at the end of a five-year averaging period a farmer's income should be low, he can possibly get something back from the tax department. As I understand the provisions of this bill-and I would ask the parliamentary secretary to correct me if I am wrong-the averaging provision would be applicable only if one's income tended to rise. One can average it up but cannot average it down. I see the parliamenary secretary is not rising to say this is not

November 8, 1971
Income Tax Act
so and, therefore, I can only assume this indeed is the case.


Patrick Morgan Mahoney: On a point of order, Mr. Chairman, I assumed the hon. member would give some indication he is yielding the floor if and when he wants a question answered. On the specific point he has raised, the special averaging provisions which farmers and fishermen have hitherto enjoyed continue in effect and, in fact, were passed by this committee a few days ago.


Cliff Downey: I thank the parliamentary secretary. I did not realize it was necessary to make him aware of the fact that an answer was desired. Knowing his great interest in agricultural problems, I assumed he would be sitting on the edge of his seat ready to answer at any time. I understand that the averaging provision will continue to be applicable in these circumstances, and that it is only in respect of other taxpayers that this will not apply.
Another item which I believe would jeopardize the situation of farmers is the roll-over, and the fact that we know we will have transfers of farms from generation to generation. It is true that in this tax bill the federal government is removing the estate tax, but a capital gains tax is being introduced. I believe it would be very beneficial to agriculture if transfers between bona fide farmers could be permitted without being subject to a capital gains tax. If agriculture is to continue, I suggest it is very vital that inter-generation transfers and family transfers be permitted. Very few young farmers are able to start farming today if there is not a farm already in the family. Capital is hard to acquire and the farming situation is very tight because, although the products are not selling at a higher price than they sold at 10, 20 or 25 years ago, costs are much higher. I suggest the only way in which we can ensure that farms will continue in operation is to allow these inter-generation and inter-family transfers without attracting a great deal of tax, capital gains, estate tax or what have you.
I do not believe there has been enough consultation between the provinces on the matter of estate tax and capital gains tax. The federal government says it intends to take off the estate tax, but we read in the papers that two more provinces are required to make up the necessary four before the federal government will collect estate taxes on their behalf. So, really there will be no respite for many people in this country in respect of estate taxes, simply because there has not been sufficient consultation with the provinces. Now, a great many of these people will be forced into a position where they will be subject to a capital gains tax and an estate tax as well. In the province of Alberta we are very fortunate in having a government which has no intention of bringing in an estate tax. However, provinces such as Manitoba and Saskatchewan are considering this, and therefore I feel very sorry for the farmers in those provinces.
Now, I should like to refer to section 31 which reads in part:
Where a taxpayer's chief source of income for a taxation year is neither farming nor a combination of farming and some other source of income-
I suppose one could call this the hobby farmer section. In reality, we must remember that it means a young fellow who starts a farm and, during a period when he has

no real income from that farm goes out and works for an oil company, for instance, cannot deduct the expenses of his farm from his income because his main source of income was not from farming. I realize the intention behind this section, but it is one of these examples of going after a sparrow with a shotgun. Probably we are hurting a great many people while enabling the government to receive only a small amount of revenue from people who would capitalize on this section while not being bona fide farmers. I suggest we should have an amended formula, which I hope the minister would consider, under which an individual who is trying to maintain the farming operation and is supplementing his income with other employment, may be able to deduct his expenses as a bona fide farmer, which indeed in this case he would be. I hope the department will consider this suggestion because this is a very important matter.
Another point is that in the past few years the Minister of Agriculture has made a sincere effort to try to make farms into economic units. As a result of the process of making economic units out of farms and the desire of farmers to pass on the farm to future generations, some farm operations have been incorporated. We have many farm partnerships. Often brothers start off farming together. But in this situation they will not be treated quite the same as will other individuals. I suggest that the $1,000 residence exemption as well as other provisions that are applicable to farmers as individuals, should be applicable to partnerships and to bona fide family farming operations. Some formula could be devised here, and I would adopt the suggestion the Federation of Agriculture made in its brief that so long as 80 per cent of the income of the family came from the farm held by the family, this should be handled in the same manner as the income of an individual. It is difficult to imagine why a family corporation, a partnership or something of this nature, would not qualify for the $1,000 a year exemption granted to an individual when the only reason a farm is incorporated is to sustain it as an economic unit. I think it is very important that this matter be considered.
In the matter of recaptured depreciation, we have had a method which has worked quite satisfactorily, which has encouraged farmers to upgrade their equipment and to keep up with technological advances. There is no way in which they could produce food for the same price they were getting for it 20 years ago if they had not kept pace with the times and kept abreast of the technological advances. I think that bringing any recaptured depreciation into income by way of capital gains, as is done under this bill is a retrograde step. It will not encourage farmers to maintain their equipment or to upgrade it, and this can only be to the detriment of agriculture. Many forms of encouragement are given to industry to ensure that they are able to upgrade their equipment and keep pace with the times. I suggest that under this legislation we are doing exactly the opposite when we bring recaptured depreciation into income. I might give notice that we will be moving an amendment in this regard at a later date, but I would ask the minister to give consideration to this problem.
November 8, 1971

Another situation which we should consider is that of a farmer who attempts to reorganize his business and possibly wants to intensify his operation. If he is a grain farmer he might want to sell part of his farmland and put the capital back into equipment, buildings, plant, or something to expand the livestock enterprise. I suggest that when there is a partial sale of farmland and a reinvestment of the proceeds in the farm business, that money should not be subjected to capital gains taxation. As I understand the tax act-and the parliamentary secretary might correct me if I am wrong, as he does so ably-if one were to sell a proportion of one's land, the proceeds would be taxed at capital gains rates. I suggest there should be a provision in the legislation enabling the reinvestment of the capital in the farm business.
While it is true that farmers may compute their taxes on a cash or an accrual basis, whichever they select, I imagine most of them prefer the cash basis because it is by far the more realistic method for them to use in computing their tax. If an occasion arises when, for some unknown reason, a farmer must switch from the cash to the accrual basis, there should be a gradual phasing of this process in much the same manner as is offered to the professions, because if vast amounts of grain are held in storage an immediate switch from the cash to the accrual basis of computing income tax might very well spell disaster and the bankruptcy of the individual concerned. Since we extend this privilege to professionals, I suggest that it should also be granted to the farmers.
I see that my time is nearly up and I know that many other hon. members here will have other points to bring out, some of which I may not have touched upon because this is certainly a very complicated bill. When you have a document which is as thick as four or five Eaton's catalogues, it goes without saying that the farmers of this nation will never know on what basis they are taxed.


William Arnold Peters: There are no pictures in this bill, either.


Cliff Downey: There are no pictures, and 99 per cent of the farmers in this country will never know on what basis they are taxed. They will have to rely on the honesty of the bureaucracy and on honourable servants, such as the parliamentary secretary sitting over there, to interpret it for them. This is going to be the basis on which farmers will be taxed from here on in, should this document be translated into law.
.20 p.m.)


Alfred Pullen Gleave: Mr. Chairman, on October 25, the Canadian Federation of Agriculture mailed a letter to the Minister of Finance, with copies to all members of Parliament. In part it read:
This is a letter regarding your amendments to Bill C-259-or more accurately to what we regard as unfortunate omissions in those amendments.
We have received no reply from you responsive to our brief of August 30 suggesting certain modest amendments to the bill to better serve farmers' legitimate interests.
Unless we have missed the point in the complexities of the amendments introduced we cannot see where any of our proposals have been taken into account. We hope, however, that it has been the pressure of time which has prevented you from giving adequate attention to our requests, and that the necessary amendments will be forthcoming.
Income Tax Act
The essential proposals we made are:
For transfer of farms within the family by sale, gift or inheritance without realization of capital gains.
Retention of a basic herd system whereby basic livestock herds can be treated as capital, which they in fact truly are.
This is one of the sections we have before us now.
More fair and liberal appreciation of the $1,000 per year farm capital gains exemption (as an option to the principal residence exemption) including its extension for family farm corporations.
Retention of present straight line depreciation practices as a farmer's option.
This again has reference to one of the sections with which we are dealing today.
Re-investment of capital gains on sale of farm property in the continuing farm operation (either land, or buildings and equipment) without immediate realization.
Adding of losses on farming operations not capable of being set off against taxable income, to capital value for capital gains purposes, up to the amount of taxes and interest on borrowing, as is being provided, for hobby farmers only, under the new law.
The letter went on to say that there were other submissions in the Federation's brief, but those listed were the most significant "and are those on which we look for your appropriate amendments to the bill now before Parliament." I was a little surprised to receive such a letter so roundly condemning the proposed changes in taxation for farmers. This bill was touted as tax reform legislation. If it is intended as reform it should make the process easier and more simple for the taxpayer.
Tax reform legislation should make it possible for the taxpayer to stay in business, to conduct his business in an efficient and workable manner, and to pay his taxes to the government of Canada. In the type of society in which we live, as individuals, we realize that if we make a taxable income we will have to pay taxes. Even those who do not have a taxable income, in terms of income tax, pay taxes in other ways. They pay sales tax and other indirect taxes. In the federal field, income tax is the most important tax and most people expect to pay it.
The important feature of any tax should be that it does not interfere with the carrying on of a business by an individual, or with the work of a wage earner or salaried professional person. It should make things easier and more simple for the farmer rather than more difficult.
My criticism of the proposals in the bill is that they will make things more difficult for the farmer-rancher, and here I speak particularly of the situation in western Canada. They will make it more difficult for him in the ordinary conduct of his business, and in his attempts to comply with the tax laws of the country. These proposals will place an extra burden on the smaller operator. At times he will probably pay more tax than he should because he will not be able to hire highly skilled professional accountants to tell him how to comply with the tax provisions to his own best advantage.
Section 28 clearly says:
For the purpose of computing the income of a taxpayer for a taxation year from a farming business, the income from the business for that year may, if the taxpayer so elects, be computed in accordance with a method (hereinafter in this section referred to as the "cash" method) whereby the income therefrom for that year shall be deemed to be an amount equal to-

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It goes on to set out the method which most farmers now use, which is to set out the cash income they have taken in during a year, set off against it the cash expenses they have paid out, calculate the depreciation and other things which they are allowed, and file that as a return. At first glance a person would say, "That is very nice; there is not much change there." But, Mr. Chairman, we must look further at what the legislation proposes to do to the basic herd concept. Again at first glance the proposal is that the provisions for a basic herd, which have been optional to the farmer-rancher up until now, will be gradually phased out. But so far as I can determine, no farmer will be able to establish a new basic herd after this legislation comes into effect. Inherent in it is a proposal to phase out the total basic herd concept. The present proposal is nothing more than a transitional operation while the idea of the basic herd concept is being phased out.
It would seem to me, Mr. Chairman, that this means that if the farmer-rancher wants to build any protection into his operation he will have to go on the accrual basis for his basic herd or for his cattle operation. But there is a neat trick in this. It says the proposal is that he must conduct his total operation on the same basis, so that in declaring his income he has to follow through. In a typical operation in which there is a herd of cattle as well as cash crops involved, this means that in order to effectively operate the herd and acquire capital the farmer has to put his grain operation on an accrual basis for purposes of taxation. As soon as he tries that he will be in financial trouble because he will have to take into inventory grain which he cannot sell in the current year and declare it as income. If he has to declare several thousand dollars worth of grain an which he has not actually received any income in that taxation year, then he will have to borrow to pay tax on money which he has not received. He will have to put a value on grain when he does not know what that value will be 12 months hence. We have the situation now where the minister in charge of the Wheat Board says we are going to get this, that or the other; I can tell him how much confidence the people of western Canada and Saskatchewan have in this, that or the other. However, I hope he is right.
I am trying, Mr. Chairman, to describe the situation in which the farmer will find himself as a result of these tax laws and the sad part is that these laws are not necessary. A simple and workable alternative has been offered by the Canadian Federation of Agriculture and the Canadian Cattlemen's Association. Both organizations have asked for a method by which the breeding herd could be considered a capital asset, as is machinery or buildings. Then, the ordinary application of depreciation could apply and the farmer would have the option of the cash or the accrual basis. I seriously suggest to the minister that the proposals now before the House be withdrawn and that people who know something about farming and farm accounting be consulted in order to come up with something that will work. Accountants in Saskatoon who year after year work out the tax payable by individual farmers and farm corporations in the province tell me that the proposed method will be extremely difficult. They feel
[Mr. Gleave.J
that this bill should be withdrawn and a more workable one substituted.
The previous speaker pointed out some of the difficulties in the approach to hobby farming, but that is another matter. What I am concerned about, though, is that we develop a system which is simple and which allows farmers all across western Canada with a gross income ranging from $10,000 to $30,000 to easily establish their taxable income, pay their taxes and be done with it with a minimum of expense. This is not being accomplished by this so-called tax reform and the task of completing income tax returns will fall on those least able to cope with it. In some of its aspects this tax measure comes close to being unworkable if, indeed, the objective is to use the taxing authority in such a manner that the individual can continue in operation.
The straight-line basis of depreciation for farm machinery which has been in use is the simplest. In a brief presented to this government on August 30, 1971, the Canadian Federation of Agriculture said:
Our proposal is that a simple single rate of allowable depreciation be applied to all depreciable farm assets-namely, 40 per cent on a diminishing balance basis, and 20 per cent on a straight-line basis, which latter, as noted, we hope you will retain as an option to farmers.
Perhaps some changes are forthcoming. In the case of cattle, hogs and sheep, our objective should be a straightline depreciation system for the breeding herd because this is simply a capital investment. It takes a lot of time and effort to build the herd and when it is disposed of this is really a disposition of capital, not a disposition of inventory. The difference should be obvious to those responsible for this legislation. In a straight cattle feeder operation, the farmer is dealing with inventory which he holds for a period of time and then sells. A breeding herd of dairy or beef cattle or of hogs is a long-term capital investment through which the farmer hopes to increase his market cattle which will later be sold. I think it is simply a lack of understanding of the kind of business they are dealing with that has led to the creation of the difficulties inherent in the proposals in this reform bill.


Bruce Andrew Thomas Howard: Mr. Chairman, I want to say a few words on the subject of farm problems in connection with the bill before us. I listened to a number of arguments on the matters of straight-line depreciation, cash versus accrual, and so on. I think it is worth while discussing some of the points raised by hon. members on the other side of the House, arguments implying that farm groups are unanimous in their opinions on this subject and that all the points which have been made by some farm groups on these subjects are perfectly valid and unchallengeable. I suggest some of them are challengeable. Some of these points are not as strong as some previous speakers have suggested.
For example, the question of straight-line depreciation has been raised. I really cannot see the value of this in a farming situation. If we talk about the depreciation of a piece of farm machinery, that machinery will depreciate a great deal more in the first year than in the tenth year. The farmer should be able to use that extra depreciation which arises in the first few years, and I really think that
November 8, 1971

members of the opposition are quibbling in this area, since their arguments, if successful, would introduce an unnecessary complication in this field. That is why I cannot support their arguments and I think the bill is correct as set out.
The question of cash versus accrual accounting has been raised. Farmers have always had the right to make a choice in this area. They are in the same position as professional people, who are now required to switch over, except that farmers are not required to switch over. They are retaining the right to use either system so long as they do not switch back and forth. Having made their decision, they must stick with it. A farm group in a presentation argued that farmers should be given the opportunity of entering into some kind of time payment arrangement if they are to switch. That is a reasonable argument, and I think the parliamentary secretary ought to take cognizance of it. Perhaps it is a valid argument to say that if special arrangements are to be made for professional people to switch to an accrual system, the same kind of provision could justifiably be made for farm groups.
An argument was advanced relating to the transfer of assets within the family, that is, the transfer of assets at the time of or prior to death. I think that farmers have a valid argument here, and we ought to pay attention to it. They say that the turnover of the family farm from father to son under the new provisions will result in a deemed capital gain, and that the tax on this gain will have to be paid at once. The argument has been advanced that where a son purchases a farm from the father who takes back and holds the mortgage, the father should be permitted to pay the gains tax as the mortgage payments are received from the son. The further point has been made that incorporation should not be necessary to avoid this heavy taxation.
The concept of the transfer of the farm by way of mortgage arose during the era of the gift tax. Of course, this era is now behind us. The father sold to the son the farm and took back a mortgage which was payable in instalments of the amount of the allowable free limit on gifts each year. He did that in order to avoid the payment of taxes on the transfer. The whole mortgage could be paid off on that basis, if the father lived long enough. However, the gift tax era has gone. That area has been vacated and there is plenty of leeway now for transferring the farm assets from father to son. It could be done, for example, on the basis of transferring one-tenth of the value of the farm each year and paying the gains tax on that proportion on an agreed date. The tax will be paid in small amounts and, if the farmer transferred at the rate of one-tenth of its value each year, the whole property could be transferred to the son without incurring the burden of a massive payment of tax. Of course, an additional factor under the new provisions is this: If the father should die before he has completed the transfer, the remainder would automatically pass to his wife free of tax and the wife could continue the transfer to the son in an orderly way.
The objection might be raised that this method will result in recurring property appraisals. It does not seem to me that an appraisal after the original V-day appraisal would be a difficult or necessarily expensive matter, since over-all increases or decreases in specific items are usualincome Tax Act
ly easily determined in the shortrun. By this use of the new rules or lack of rules regarding gifting, estate planning would be considerably easier to achieve than under the old, complicated system of annual gifting. If the son is in a position to pay his father for the farm in occasional cash payments, the transfer of the farm does not have to be done at once. It could be done in portions, just as in the gifting process. The farmer could invest such money received in some kind of annuity program. He could invest it in a registered retirement savings plan and benefit from the consequent saving on taxes that that system allows. So, I do not think the situation we face here is nearly as onerous as members of the opposition or farm groups have feared. There are opportunities for the alleviation of the tax burden here and many farm groups have not looked at those opportunities. If they examine them they will see, I submit, that the bill is not unjust to farmers and is supportable as a reasonable piece of legislation.
There is an interesting loophole in the legislation that farm groups ought to look at. It may well arise in the first year following valuation day. If the farmer should decide to give his son the entire farm after the new legislation abolishing gift taxes has come into effect and before much time has elapsed since V-day, the gift should attract little or no tax of any sort under the V-day valuation option for capital gains. In other words, if V-day were to be some day this fall and if the farm were to pass to the son in January of the coming year, the loophole would come into play. The son would pay tax only on the difference between the value on valuation day and the value in January. That amount would be negligible. Farmers ought to look at this interesting loophole. I hope the Minister of Finance does not look at it with a view to plugging it, because there might be an opportunity here for farmers facing certain problems to solve those problems right away. I am trying to say that farm groups and members of the opposition should look at this bill very closely, because it is not nearly as onerous with respect to farmers as has been suggested. A number of areas need correcting and I believe the Minister of Finance is prepared to study them.
I mentioned the matter of cash versus accrual and that farmers should be given the same opportunity as professional people to spread out the cost of switching in this area.
A group appearing here today raised the question of deferred payments with respect to the capital gains tax and the fact that the cutoff proposed would force the breakup of the family holding. May I remind hon. members that this provision, this option for deferring payments, was present in the old gift tax legislation and, in cases of hardship, the minister had the right to allow the deferred payment of taxes of this kind. I suppose that the Minister of Finance will be prepared to make the same kind of concession in the new tax bill. I think that is a reasonable consideration and something that the minister ought to look at thoroughly. I recognize that farmers are in a position different from that of factory earners, the owners of blocks of stock and so on. Farmers own a block of land and, if that were to be broken up at time of death in order that taxes might be paid, the family would suffer real hardship. I think we should make special considera-

November 8, 1971
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tions there. I am pleased that that provision has been made in the past. I look forward to seeing the minister confirm that provision will be made in the future to give farmers the right to defer payments when passing property from father to son at the time of death.


Mr. Danforth:: Mr. Chairman, I rise to support the contentions made by my colleague, the hon. member for Battle River, on this proposition of the reform of the tax structure, especially as it pertains to the farming industry and is dealt with in the sections we are now considering.
One only has to read the sections to immediately realize that those who are responsible for the drafting never had to deal very closely with farming as a business. I do not say this unkindly or in a critical or a derogatory manner, but basically to point out that in my view the provisions as set out in the bill before us deal in the main with companies and corporations. I should like to prove that, as a business, farming cannot be just coldly classified in the same categories as other corporate structures.
When it was intimated to the farming community that there would be a reform of the tax laws, I believe it was the concept among all farmers that if indeed there was a true reform of the tax structure to which Canadians are submitted, perhaps the various governments would be able to derive sufficient funds for the operation of their various enterprises so that, as a result, there would be a more equitable distribution of the tax load throughout the Canadian community. They thought that for the individual, whether he be a farmer, day labourer, businessman or professional, his tax load as a consequence would be either lighter or would not be progressively increased, as has been the case over the past few years. I think this was the basic belief of most Canadians when they were made aware of the fact that a very serious study had been undertaken by the professions under the instigation of this department to see whether there could be a revision of the tax act.
With the advent of the white paper, most of those engaged in the farming industry changed their views drastically. It then appeared to them that what the government meant by a revision was not based on the principle in which they believed, but rather a new formula designed to increase wherever possible the tax load carried by individuals and more specifically by corporations, businesses and the farming community as a whole. As we read through the provisions of this bill, there seems to be very little to abate this fear. The fear has grown to such proportions that many farm operators now feel that if the tax rates and tax formula are as prescribed, then under the economic climate they are faced with today it will be almost impossible for them to continue farming as a viable economic enterprise. They are so convinced that, unfortunately, many of the present day farmers are deliberately advising their heirs to seek other means of making a living rather than stay in the farming business. This is indeed unfortunate.
Those responsible for drafting the tax structure which we in Canada must use to finance our government undertakings should bear in mind that we are not trying to raise every available dollar that the community can possibly part with, sometimes at the expense of the very livelihood

of those who are being taxed. This should not be the concept. I am not convinced this was the intent of the bill before us. However, as a result of the method used in drafting it and some of the regulations that will follow, I am very fearful that the end result will be exactly what we seek to avoid. Because of the tax burden, many businesses will have to be phased out. In the process, we will lose many of our large and up until now successful farm enterprises in Canada. In order to be competitive in today's very competitive world, these farming enterprises must have two things. They must have an incentive to compete internationally and a profit margin. Lacking either or both of those, farming in Canada will progressively degenerate. I am convinced there is no other way to go.
I think this thought was back of the briefs submitted by the Federation of Agriculture, the Canadian Cattlemen's Association and various other groups responsible to and having concern for the farmers of Canada. They did not attempt to present to the government a way to avoid income tax, but methods by which they would be assessed what they considered to be their fair tax load. They presented for government consideration ways and means which they felt would make it possible to contribute their fair share, but not at the expense of their livelihood or at the expense of the degeneration of their various businesses.
I am not sure that the government fully realizes that the present day tax load is almost all that the agricultural industry can bear. Sometimes farmers find they cannot bear it. There are too many "for sale" signs on farms today. Too many farmers are delinquent in their present day taxes, perhaps one, two or even three years. Too many farmers are facing foreclosure and bankruptcy under the present situation. Yet in the bill before us, the government proposes to change the method of taxation under the guise of a revision of the tax law. It is going to change the method of taxation in a deliberate manner so as to broaden the actual tax base faced by farmers.
There is no doubt in anyone's mind that once these regulations and the changes to the tax act come into force, farmers are going to have to pay more taxes. It is all very well for us as legislators to say that all are going to have to pay more taxes under this revised act, but it is serious when you consider that many who are going to be taxable have a way of passing on the increased taxes by adding them to the cost of the goods and services that they provide. A labourer can demand higher wages. A businessman can place a higher price on the goods and services he is selling. But a farmer is not in a position to do this, and with profit margins shrinking, the added cost which is proposed could make all the difference between a profit and a loss for many of our successful farms. I do not believe we can classify farming operations in the same category as corporations and businesses.
When we speak as farmers against the disappearance of the concept of a basic herd as a capital asset, we bear in mind other actions taken by the government. The government is willing to offer high rates of depreciation with respect to such assets as machinery. It is perfectly prepared to offer grandiose tax concessions to industries
November 8, 1971

which consent to locate in particular regions of Canada to take advantage of surplus labour. I have no quarrel with this. I am not opposed to the government's actions in this regard. Over the years, for no reason other than political expediency, tremendous tax benefits have been granted to companies and corporations through tax forgiveness, tax benefits and so on. We see no evidence of such an attitude where agriculture is concerned. No doubt the government will argue that other measures have been taken to assist agriculture. The fact remains that we must deal with these tax provisions as they are set before us, on their merits. From my study of the bill they will be disastrous for many farmers.
We are concerned over the fact that it will be almost impossible in many cases for a farm to be passed on to blood relatives. The hon. member for Okanagan-Boundary has told us that even though the gift tax will be a thing of the past a tax would still have to be paid on capital gains related to the property itself. He explained that the tax might not have to be paid all at once-payment could be spread out over ten years, for example. The point he made was a valid one and perhaps it is a fair one. The fact remains that tax would still have to be paid. We are saying that because of the very nature of the farming industry, and of the units we are considering, it will be impossible to make these payments in many cases. There is not enough money there. In many instances it will be necessary to dispose of capital assets in order to comply with the regulation. As a result, the economy of the unit will be weakened and it will be almost impossible for the farm to carry on successfully. Thus, in effect, we are destroying the unit. Mr. Chairman, we cannot destroy these units. They are the very basis of agriculture.
Perhaps it will be necessary for us to elicit from the government during this very debate a statement reflecting the position taken on this issue by those who sit on the treasury benches. Are they really concerned about maintaining an agriculture industry in Canada? This is what we are talking about, in effect. The returns to agriculture are so marginal that even as things stand we are losing many of our farms. The bill before us proposes a further financial handicap as a result of which farmers will be placed in an even less competitive position in terms of international trade. It will be interesting to learn in the course of this debate why the government should feel it necessary to change the basic concept of the taxation of farmers and farm businesses. It will be interesting to learn whether the government is at all interested in maintaining any segment of a viable agriculture industry.
I am looking forward to hearing answers to these questions, because these are the questions about which farmers are most concerned. They are asking themselves: Have I any hope of making a living for myself and my family in the years ahead? Is there any use trying to build up a strong and successful farm enterprise in order that my children and grandchildren may have an independent business and source of income, or am I simply making it possible for the government, through its tax laws, to take an ever-increasing share of my returns to the extent that I shall eventually lose my business, lose my security? Ought I to advise my heirs to go out and make a living in some other fashion? I am not overstating the position, Mr. Chairman. I am seeking in a calm and factual way to
Income Tax Act
indicate to those on the government benches what the repercussions of some of the provisions in this tax measure before us are likely to be.


Mr. Horner:: Mr. Chairman, on rising to take part in this debate, I find myself wondering what is in the mind and heart of the government. We are dealing today with four sections which pertain to the agriculture industry.
To be kind, the government has tried to exercise some control, some sense of direction, to give some guidance to the agriculture industry. Then, the treasury seeks to slap on a set of taxes which suggests that hon. members over there on the front benches really have no heart. One is prompted to examine the intent of other legislation which the government has introduced affecting the farm industry. A number of such measures have been brought down since 1968, and I shall list them briefly. There was the National Marketing Act, commonly known as Bill C-176. In western Canada, at least, it has been determined that this is unsatisfactory. At about the same time the government introduced a bill known as Bill C-175 dealing to a large extent with the rationalization of the grain handling system, and protein grading. It was overhauled and modified a good deal in the agriculture committee; the government did not get its way altogether.
Then the minister brought in Operation Lift, which was implemented not by legislation but through regulation. While the minister in charge of the Wheat Board may boast that the operation accomplished what the government sought to achieve, the farmers of western Canada regarded it as being most objectionable. Next, we were invited to approve a new quota system, a proposal which is still being analyzed by farm opinion. Maybe it has some merits. The stabilization plan is the subject of heated debate in Assiniboia. We shall know the answer tonight. I am confident of what that answer will be. It will be a complete rejection.


Mr. McBride:: Of whom?


John (Jack) Henry Horner: Of the stabilization bill and of the present government. Then, we also had on March 13 a program devised by the government and called the farm adjustment program. The federal government was seeking the co-operation of the prairie agricultural ministers in this program. When you roll all this into one package, you can well ask just where government agricultural policies are leading, and how this proposed tax legislation we are now debating fits into the picture.
Is this bill compatible with the government's agricultural legislation? What has that legislation attempted to do? It has attempted to regulate, to control and to simplify the agricultural industry. Even the spokesmen for the national marketing board would agree with that simple definition of the intent of the legislation: it is to control, to simplify and to regulate the agricultural industry. That has been the theme of the government's agricultural legislation. Has this legislation been accepted by the agricultural community? Have they received it warmly or rejected it? I think nearly to a man the agricultural community has rejected this kind of thrust, this regulation, simplica-tion and control by the government.

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In considering clauses 28 and 32 it becomes apparent that these provisions are a device to remove any special privileges that the farmers may have enjoyed to date. The previous speaker dealt with this point at length. He made a very good point when he said that the agricultural industry has been unable to pass on in the price of its products to the consumer-whoever he may be-any taxes that might from part of his increased cost of production. The industry has also been unable to meet the increase in inflation in this country.
I say this, Mr. Chairman, to emphasize the point that it is still my belief that the agricultural industry needs special consideration in the field of taxation. One has to go back to the Carter philosophy and ask whether Carter was right in his theory that a buck is a buck; that if a farmer makes a buck that buck should be taxed equally with anybody else's buck. The Minister of Finance, to be kind to him, does not fully accept in Bill C-259 the theory that a buck is a buck, and I am heartened by his generous attitude. But although he does not go quite as far as Carter and say that a buck is a buck, when it comes to agriculture he goes nearly all the way. Four or five basic rights that farmers have previously enjoyed are now being eliminated by this bill.
What does the removal of these concessions mean to the farmers? First of all, these provisions will blend in well with the farm adjustment program because they will tend to eliminate small farming operations. They will also blend in well with the marketing act which tends to introduce rigid control. The government will be able to control the advancement of the very few farmers who will still be left in business. I suppose there is an overriding feeling in the academic world, particularly around Ottawa, that if we can just get rid of two thirds of oub farmers by 1980, as the task force report on agriculture suggests, the remaining one third will be so much better off financially they will not have to be subsidized in any way, shape or form, by the federal government. Certainly, this is an attitude that is reflected in federal tax measures. It is the old attitude that was expressed by the Prime Minister in Winnipeg, when he said: "Why should I sell your wheat?", giving a characteristic shrug of his shoulders. That is the attitude that is going to be rejected today in Assiniboia.


John Patrick (Pat) Nowlan: The Minister of Justice has been out there.


John (Jack) Henry Horner: The Minister of Justice went to Assiniboia earlier in the campaign and called the issues. I hope he accepts the result, having called those issues, when it is announced later today.


John Napier Turner: You can have half of Woolliams' benefit.


John (Jack) Henry Horner: I did not hear that remark!


John Stratford Burton: Tell us about the meeting you had in Winnipeg, John.


The Deputy Chairman:: Order, please. I invite the hon. member to address his remarks to the Chair as much as possible.


John (Jack) Henry Horner: Mr. Chairman, I was interrupted and it brought me back to that great meeting the Minister of
Justice had. The hon. member who is piloting through this legislation was also out in Weyburn.


Some hon. Members:: Hear, hear!


John (Jack) Henry Horner: I think some of his Liberal colleagues should slap him on the back and thump their desks, because from what I hear only about 16 came out to hear him.


John Napier Turner: I hear you spent two days looking for a crowd, Jack.


John (Jack) Henry Horner: I did not have that privilege, no. I was saying, Mr. Chairman, that one has to assess just where this particular thrust in our agricultural legislation came from. Having done that, let us couple it with the proposals of the Carter Commission in regard to the agricultural industry which the Minister of Finance has pretty well accepted intact, though there are certain differences between the minister and Carter over the capital gains tax and so on.
We have also had a number of studies conducted of the agricultural industry. Besides the Carter report on taxation we had the task force report on agriculture which was conducted by academics and one person from western Canada who perhaps knew something about agriculture-the dean of agricultural economics, I believe it was, at Winnipeg University. Then we had a study of the grain marketing situation. Then we had a study of grain handling and then one of the rapeseed industry. That was followed by the issuance of the farm adjustment program paper. All of these studies were devised by academics and directed toward control and simplication of the agricultural industry. The theory is that if the government is going to put money into agriculture, then it should control agriculture.
As I say, the tax bill that we are discussing takes away certain advantages farmers have previously enjoyed. It tends to take away, and I think eventually will take away, a farmer's right to compute his income tax on a cash basis. I see the parliamentary secretary shaking his head in dissent. I did not say that it would take it away; I said it was moving in that direction. He is now nodding his head affirmatively. This would seem to be the direction in which the Department of National Revenue intends to move. It will strive to place the farmer on an accrual income tax basis rather than on a cash basis. This will mean a great deal to the practical farmer.
These changes in income tax Act will tend to force the farmer into incorporation. A farmer with a large operation is better off with incorporation. Many farmers, however, derive their livelihood from owning a small farm and take a sense of pride in it. They do not want to become incorporated. They do not want to issue annual statements to a provincial government in which they outline their income and expenses for a given year. This legislation will tend to force farmers into incorporating. This will be acceptable to the large well-financed farmers. The farmers with small farms will not bother to take advantage of incorporation. This will hasten their demise.

November 8, 1971

The government also intends to take away the advantage of the basic herd principle which was established a good number of years ago, in the late 40's. The farmer will be able to enlarge his basic herd until December 31, 1971 and if it is enlarged after that he will have to pay a capital gains tax on the increased value of the basic herd. We would seem to be destroying one of the privileges livestock men have acquired over the years. This will tend to simplify the method of taxing the livestock man and bring about greater control over his income.
One might ask what the purpose was of the basic herd. I believe one purpose of the basic herd concept was that a person would pay income tax on money he set aside to enlarge his capital investment at the time he was earning it and then when he retired or withdrew from the livestock industry he would not have to pay income tax on this money which he had invested in increasing this herd during his working period. We must ask ourselves whether this is important to the agriculture industry. What is the average age of participants in this industry? A recent study carried on by the Alberta Wheat Pool in respect of the province of Alberta showed that the average farmer in that province is well over 45 years of age and is crowding 50. I believe a similar study has been carried on in Ontario. Without any boasting I believe Alberta ranks low in respect of the average age of farmers. I think there are more young farmers in Alberta than there are in any other province.
In any event, it is common knowledge that many people involved in the agriculture industry will be retiring within the next 10 years. There will be a tremendous changeover in the personnel involved in the agriculture industry. I believe there are 480,000 farmers today, and I should like to see the same number in the next 10 years comprised of new young men in the industry. Here we are doing away with a basic concept which encourages young men to set aside money in their working years which will not be taxable when they retire. What will happen to the people who have been involved in the basic herd during the last 20 years? They will retire perhaps in 10 years from now. I realize the price of meat to the consumer is high enough, but I have no real assurance that inflation will be curtailed or that the livestock man will not suffer from ad hoc financial policies of one government or another. Therefore, it is quite conceivable in my mind that livestock will increase in value in the years ahead. It has happened in the past, and I believe it will happen in the future.
The result of the change in the basic herd concept is that those who retire will be subject to a capital gains tax on the money they have set aside. This is not fair because, in essence, it is a change in the rules in mid-stream in respect of those who have retired and who have made use of the basic herd concept. For this reason, I can only come to the conclusion that the government is heartless with regard to the agricultural industry. The government would like to get rid of a third of the farms. Then, according to some kind of odd logic, they think all will be well.
We must deal with the effect of the capital gains tax on property which a farmer purchases from time to time. We are told the capital gains tax will affect anything of a capital value over $1,000. We all know a farmer is a large purchaser of machinery. From time to time the Minister
Income Tax Act
of Agriculture and the minister in charge of the Wheat Board, in statements and propaganda in the Assiniboia riding, have suggested that farmers have a tendency to over-capitalize in respect of farm machinery. I shall not go into that now, although I believe it should be pointed out that we have just had an exhaustive study of farm machinery prices. I refer to the Barber commission. I do not know what this commission has cost. It has published 12 volumes and I believe is still publishing additional volumes. As yet the Barber commission has had no effect in lowering the prices of farm machinery. The commission did not recommend any changes in the taxation structure. These changes in the capitalization apply-


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


John (Jack) Henry Horner: May I just finish the sentence.


An hon. Member:: One sentence.


John (Jack) Henry Horner: I would like to conclude this sentence because I was entering a vein of thought that would make no sense otherwise.


An hon. Member:: Nothing else does.


John (Jack) Henry Horner: The portion of machinery cost that is fully depreciated, and which is allowed on a trade-in, will now become subject to tax. This will do more to increase the cost of farm machinery than the Barber Commission has done to decrease it, by tenfold or by one hundredfold, because the Barber commission recommended nothing that this government has nerve enough to act upon. But this tax legislation will cause an increase in the cost of farm machinery. When I speak of farm machinery, I should point out that this will cause great havoc to the farm machinery dealers, many of whom will become bankrupt.
I have more to add on this subject but I do not wish to abuse the patience of the House right now, so I will give the time to someone else who might wish to speak. I thank the House for giving me the extra minute or two.


John Stratford Burton: I feel that this portion of Bill C-259 is a very important part, and one which deserves serious and close consideration. As will be acknowledged by all members in the House, the agricultural industry of Canada is a very important sector of the Canadian economy. It has been experiencing economic difficulties in recent years which I think surpass any other example that might be cited of economic difficulties faced within the past few years. In my province of Saskatchewan there has been a sharp and serious decline in farm income. It has dropped from $480 million some three or four years ago to $188 million in 1970. This is a serious situation.
Leaving aside some of the issues involved with respect to that drop in income, I suggest that there is a point to be made within the scope of our consideration in dealing with this bill, namely that this drop in income imposes a special obligation on the committee to ensure that we have done everything possible to avoid further unnecessary difficulties for farmers in Canada in trying to cope

November 8, 1971
Income Tax Act
with the difficult set of problems which they are now facing. I think it will be acknowledged that special problems face farmers in the agricultural industry by the very nature of the industry and by its unique characteristics. I am referring to factors such as the high level of investment which is required in the industry in order to carry on production, taking account of today's technology and economic conditions. This is a factor which must be kept in mind. At the same time, this is coupled with a pattern of low rates of interest on capital investment and in fact low rates of labour return to farmers as a result of their efforts oh their farms. This is a serious problem which must be of concern to all Canadians.
I think we also have to take note of the fact that the farmer makes a contribution to the build-up in the capital value of his farm in terms of the unpaid value of his labour contribution to the development of the capital assets on that farm. The farmer never sees any return for his unpaid labour except in the low rate of return he might receive on his investment. He really does not receive the real return to which he is entitled for the labour he contributes towards the development of the capital value of the farm until he disposes of that farm. That is one of the basic problems that faces the farming industry in this country which I think must be taken into account in developing tax law.
Of course, there are other problems that face agriculture, such as the very serious and wide fluctuations in land values with which farmers are faced, particularly the prairie farmers in recent years. These must be taken into account by the tax department. It must also be noted- and I am glad that this has been recognized in some respects in the bill now before us-that much of the farmer's assets also constitute his retirement fund, and as such deserve special consideration. I am glad that some consideration has been given in the bill to this matter.
There may be other matters which also deserve consideration. One of the problems that has been noted with respect to the application of the bill as it now stands involves a new institution, a new development in the farming industry, that is the development of family held corporations which do not involve any basic change in the pattern of the particular farming operation involved. Many families, for a variety of reasons, have decided to incorporate their operation. This has to be done, of course, by simply incorporating as a joint stock company. However, this institution is of a somewhat different nature from an ordinary shareholding corporation, so I think some problems do arise.
It has been noted in some of the representations made to the government that there are problems with respect to such things as the principal residences of the farmers or the farm families, as the case may be. This deserves special consideration as well.
I think it should also be acknowledged that some further development in provincial law is required. It would be very useful and worthwhile if the provinces gave consideration to developing a special piece of legislation which would provide for the incorporation of the family farm. These companies would operate somewhat differently from ordinary joint stock companies in that the law would take account of some of the unique characteristics of the family farm and the unique circumstances that
[Mr. Burton.J
exist with respect to some of the incorporations which have been made in recent years. We have to take note of the fact that incorporations by family held groups operate in the same way in terms of company law as the large shareholding corporations which are engaged in a variety of farming business today but where the shareholders are, for the most part, completely removed from the actual operations that are being carried on by the corporation.
Another matter of concern has to do with the capital gains tax and the way it will operate for farmers across Canada. The Canadian Federation of Agriculture, as the government is aware, has made representations on this matter. They are concerned about the question of transfers of farms within a family, whether this occurs by sale or by inheritance. They have expressed the hope that some provision might be made whereby this could be done without affecting a realization of capital gains. I note, as well, that the Canadian Cattlemen's Association has made a very reasonable proposal, which I think the government should be prepared to consider as a minimum step. Their proposal is that there would be provision, not for any waiving of tax or waiving of realization of capital gains when there is such a transfer of a farm within a family, but simply a provision whereby the payment of any tax that is incurred at the time of the realization of capital gains could be spread over an adequate period of time. This could be done in a variety of ways. One way could be to provide for a fixed time period for paying the amount due as a result of the realization of the capital gain. There is a provision in the tax law for time payments in some cases, but in the case of many farms with a low rate of return on capital investment there is good cause for the extension of the time period involved. This could be done without in any way changing any of the principles that may be desirable in developing our tax law.
One other mechanism that could be considered is the provision of some form of open-ended mortgage or lien on the property, which would involve the annual payment of interest by the farmer to the tax department, he having the option of closing out the amount due at any time. Of course, I agree that the interest rate payable in such a case would have to be high enough that there would be no inducement for the farmer simply to leave the amount outstanding to the tax department over a long-term basis, without it ever being liquidated. There may be other possibilities, making provision for annuity plans that could be dovetailed into this type of situation, such as has been done in other provisions of the bill dealing with other matters.
The Canadian Cattlemen's Association made this recommendation:
While taxes are payable on the deemed realization on the intergeneration transfer, provision be provided that the tax may be payable over a period of time sufficient to not reduce the income generating capacity of the farm.
That is the principal concern that has been expressed with respect to this matter. I am sure the government is aware of cases where, as the result of valuation of property in dealing with estates, it has been necessary to liquidate farm units which were sound economic units. I hope
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Income Tax Act
the government will give some consideration to this matter, and consider some further amendments to the bill.
There is another item I would like to deal with which comes within the scope of sections 28 to 31. It has to do with the government's proposal to phase out the basic herd provisions in the Income Tax Act. It would appear that this is an attempt to encourage farmers to move to an accrual system of accounting for tax purposes. The government's present proposal with respect to the basic herd amounts to no more than a transitional provision before phasing out the operation altogether.
The Canadian Federation of Agriculture has proposed that a breeding herd be treated as a capital asset, and that the taxable income from the sale of an animal from the herd would be the difference between the selling price and some other definition of price that might be determined. It seems to me there are a number of serious problems we have to consider in this regard.
In discussing this problem, the Canadian Federation of Agriculture stated as follows, in a submission to the government at the end of August:
The basic issue is this: there is a real, valid need to have some system by which the farmer can treat his capital investment in livestock as a capital investment. Consider for example the problem of the farmer who wishes to take money out of capital to acquire a herd or a major addition to an existing herd. From his standpoint he now has a capital asset which cannot be depreciated. His cost of acquisition of the cattle is an expense to him if he is on a cash basis of accounting, giving him a number of years of severe losses that will not be corrected by the five-year averaging provision. To go on an accrual basis with annual valuation of the herd is often impractical and undesirable. A much better answer is to establish a basic herd.
The same consideration in a less extreme way applies to farmers who wish to build up their herd year by year, reporting the cost of acquisition as income and enlarging their capital base of animals.
If this is not provided for, the farmer builds up a large sum which will be realized as income immediately on dispersal of the herd.
The Canadian Federation of Agriculture also pointed out:
To phase out the basic herd will have the mischievous side effect of weakening the capital structures of thousands of farming operations without producing a significant gain in tax revenues.
That is a point that might be considered by the government when it is taking a look at this matter. The Federation also stated:
-the recognition of the basic herd as capital has validity, and there is no reason why proceeds of dispersal should not be assessed by treating the gain on disposal over initial cost on valuation day value as a capital gain rather than as ordinary income, and tax levied accordingly on only half of such gain.
There are three basic points that might be made when we are examining this. First of all, I point out that the government has stated publicly on a number of occasions that it is taking a look at the whole area of capital cost allowances, the whole manner in which depreciation is to be treated in tax law. In fact, we may expect to have some further word from the government on this in due course. Why could not this provision with respect to the basic herd be deferred until the government is conducting its examination of the whole area of capital cost allowances and depreciation?
The second point that needs to be considered when looking at the basic herd proposition is that it would seem
the government is phasing out the basic herd concept partly as the result of its introducing a capital gains provision into the income tax law, with one half of the rate of tax to come into effect. This presents a real problem. If you are going to treat the basic herd as a capital asset, on which capital loss or gain may apply, then it seems to me you are treating that asset differently from the capital assets of other businesses.
Make no mistake about it, Mr. Chairman. To the farmer his basic herd, his breeding herd, is a capital asset. It is part of his capital equipment. Certainly, some of the mechanisms of the situation are somewhat different from those which apply in other areas of business. In the case of a particular type of large machine, let us say a printing press or large lathe, to which capital gains or losses apply, the tax will be applied at half rate. But in the case of a farmer's breeding herd it will be treated differently, as a matter of income and expenses. I submit that the government cannot allow this type of discrimination to exist in tax law.
There is another point that must be considered. It has been made clear by many people, and indeed I believe the government has asserted this on a number of occasions, that one of the shifts that must take place in the Canadian agricultural industry is an increase in livestock production. This is necessary if we are to make adjustments and changes in the Canadian farming industry. The manner in which we treat this matter will have an important influence on other government programs designed to encourage livestock production. If this provision is allowed to pass into law as it now stands, it will discourage farmers from going into livestock production when in fact the government should be encouraging them to enter this field. Thus, if the government fails to make any changes they will be in conflict with other government programs.
Before I sit down, Mr. Chairman, there is one further point which needs to be emphasized.


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


Some hon. Members:: Carry on.


Gérald Laniel: The hon. parliamentary secretary knows that this can only be done by unanimous consent. Is there unanimous consent for the hon. member for Regina East to complete his remarks?


Some hon. Members:: Yes.


Some hon. Members:: No.


An hon. Member:: Might as well.


Gérald Laniel: The Chair has heard some negatives, so it will not be possible to permit the hon. member to continue.


John Stratford Burton: I take note of the place from which the "no" came.


Gérald Laniel: It is my duty, pursuant to Standing Order 40, to inform the House that the questions to be
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raised tonight at the time of adjournment are as follows: the hon. member for Winnipeg North Centre (Mr. Knowles)-Senate and House of Commons-Position of study of conflict of interest and possible legislation; the hon. member for Dartmouth-Halifax East (Mr. Forre-stall)-External Affairs-Canadian Soviet Communique- Effect of exchange of scientific and technological information on defence-sharing arrangements with United States; the hon. member for St. John's West (Mr. Carter)- Canadian National Railways-Lay-off of dockyard employees, St. John's, Newfoundland-government action.


Mr. Pringle:: Mr. Chairman, I think we can agree on one thing in this House, that taxes of any kind are not too popular and whenever we are confronted with changes we are apprehensive about what they might do to our own position. I have heard members on both sides of the House state the plight of the agricultural industry with regard to the high investment required and the low return. Over a period of time, a farm requires a very considerable capital investment and over the same period, income should increase.
Today, members of the opposition have said that agriculture must be considered as a special status industry and I believe this suggestion has some validity. But in the next breath almost, the same members have said that if farm equipment is to be considered as capital then the basic herd must also be considered as such; in other words, agriculture must be considered in the same light as all other industries. There is variation of opinion here and we should all give very serious thought to this subject. Since the time the original income tax law was proposed and passed in the House of Commons, changes have taken place almost annually. However, it is a fact that regulations brought down by the Minister of Finance in the various budgets can very quickly rectify some differences which appear.
I have a couple of statements to make on the subject of farm land. It is my understanding that a farmer has two alternatives. He may claim a complete exemption from capital gains tax for his farm home and an acre of surrounding land. Alternatively, if it is more beneficial to do so, a farmer may elect to deduct $1,000 from his taxable capital gain for his entire farm operation for each year during which the farm home was his principal residence. Appraisal of the land constitutes a problem. Is farm land being valued taking into consideration the purpose for which it is being used or is it being valued with regard to the market price of surrounding land, such as housing developments or industrial developments? A farmer who is maintaining a dairy herd or who is growing cash crops for the good of the people living in urban centres should not be confronted with the problem of appraising his land at a price much higher than similar land in other areas being used strictly for farming. This whole question should be given full consideration.
As far as farm equipment is concerned-


Eldon Mattison Woolliams: I wonder if the hon. member would permit a question.


M. Ervin Pringle: Oh, no, I am not going-oh pardon me, I thought it was the hon. member for Crowfoot.
[The Deputy Chairman.]


Murray Arndell McBride: Things are getting pretty bad when you are mistaken for him.


Eldon Mattison Woolliams: I appreciate the compliment. I would ask the hon. member to think about this question: Where you have a ranching, grain or dairy operation-basically I am getting into a field apart from what we are debating now but it is important because you cannot separate capital gains from a farmer's other income for tax purposes- you are going to have capital gains based on the value of the land whenever it is sold. How would the formula apply if the ranch or farm were incorporated?


M. Ervin Pringle: I do not differentiate, and for this reason. If a farmer is using his land for a farming operation and he suddenly dies and his family is confronted with a capital gains tax, the land must then be valued. It is my opinion that the land should be valued on the basis of the purpose for which the farm was being used when he died. In his lifetime he could have disposed of the land for industrial or housing development, so the family is confronted with a very difficult situation. In British Columbia we have examples which prove this point. I do not suggest that this situation does not arise in connection with other industries. We do not have death duties now but formerly when a man died and his property was disposed of his family was confronted with the estates tax. I think we should consider these problems connected with the valuation of farm land.
There is little likelihood that any capital gain will be paid with respect to farm equipment, since farm equipment rarely increases in value, notwithstanding our inflationary spiral. Often farm equipment must be used in rugged areas and the depreciation, in my opinion, is even higher than the allowable amount. I doubt very much that there will be any problem in this area. Of course, so far as principal residence is concerned, it must be conceded that the increase in value must be over $1,000 a year before it can be subject to the capital gains tax.
If I may speak about the basic herd, I think the Parliamentary Secretary to Minister of Finance is giving consideration to something that has been suggested in a number of representations, namely, that the basic herd is really a capital asset and, as such, that it should be depreciated as a capital asset. The system of taxation applying to an animal that is used for reproduction should be the same as that applying to a machine used to produce products. I hope this question will be given some consideration. I support the principle of time payments with respect to taxes of the kind I have mentioned. I firmly believe that they will be allowed and I will be very surprised if that is not the case.
May I talk about depreciable assets, Mr. Chairman? The system of depreciating assets has been compared with the system involving diminishing balances. I am having a great deal of difficulty- in reassuring those who say that the matter of depreciation should be continued on a straight-line basis. It seems to me that, in the long run, the system involving diminishing balances is really not that much different, although I concede that there are many arguments in this area that we must consider. Farmers now will be permitted to continue to compute their
November 8, 1971

income on a cash basis rather than on an accrual basis, the method that is required for most other taxpayers. This method will not affect the amount of income tax farmers will have to pay, and I do not think there is any suggestion that the Department of National Revenue wants to to do anything differently in this area. Farmers will be allowed to continue averaging their income over five years. This provision is generally more beneficial than the general averaging provisions applicable to all other taxpayers.
Next I come to the question of farm corporations. Unfortunately, many of our farmers think of corporations as large companies. Nevertheless, many farm corporations throughout the country are, effectively, family incorporated farms. It is not only farmers with large operations who should consider incorporating. Those with medium sized and, in some instances, small farms, whose families wish to remain on the farm, should consider incorporating their farms. I believe that, the young folk who are coming along in this field should also be considered. Their income often is inadequate. Often a young boy helps his father to work a farm. Often, because there is more inventory on the farm than can be used, cash is not readily available. Consequently, I feel that this type of farm help is often somewhat underpaid. Of course, there is a strong understanding in most cases that some day the young fellow will take over the farm from his father. If the farm is set up as a corporate structure, and there need not be more than two or three shareholders, it is possible through accounting procedures to eliminate a great many problems which might otherwise arise with respect to the transfer of farmland from the farmer to the younger people of the family.
Next, I come to succession duties. There is a difficulty in this area, since we, in the federal field, have given them up and we know that the provinces may introduce different types of succession duty. Such being the case, we are under a handicap. I do not think it is proper for us to advise the provinces as to what they must do, and I can see great difficulties arising if we become involved in any type of plan connected with succession duties. It is interesting to note, if one looks at this sheet entitled, "Comparison of Effect of Present Death Duties and Proposed Capital Gains Tax on a Farm Estate," that where the rate of capital appreciation on farmland is 20 per cent in ten years, a great deal of saving is brought about under the new system. As a matter of fact, the saving on an estate of $200,000 would be nearly $12,000 over ten years. The document in my hand shows the amounts various provinces would levy with regard to such an estate. The amounts vary because the provinces impose different levels of succession duty. I notice, however, that in every province of Canada there is to be a considerable saving and, if the new plan is compared with the old plan, it will be readily seen that there is to be a great deal of saving in this area.
I wish to reply to a few remarks that were made by the hon. member for Crowfoot. He talked about Operation Lift. The inference I drew from his remarks, and I do not know whether he intentionally wanted me to draw that inference, was that Operation Lift was foisted on the farmers of Canada.


John (Jack) Henry Horner: Exactly.


M. Ervin Pringle: Operation Lift was an optional program.
Income Tax Act


John (Jack) Henry Horner: Optional be damned.


M. Ervin Pringle: It was designed to place grain inventories in western Canada in a proper perspective.


William Arnold Peters: So that grain could remain on the farm instead of in the elevator.


M. Ervin Pringle: It was brought in because there was a likelihood of more inventory than it was possible to move.
I suggest that, in the years ahead, when we look back we will see that the program was of considerable help to the western grain business.
So far as the new quota system is concerned, may I say that when I was out west a week or so ago in my attempt to turn the tide, so to speak, I found that the quota system is generally well accepted by western farmers. The farm adjustment program, Mr. Chairman, must be mentioned. Although that program has not yet been proposed in this House, it would come into effect at the farmer's option and give farmers a method of determining their own future. The program would give them access to a realistic pension. The whole thing, so far as I can see at the moment, is to be financed by this government which is trying to give these farmers an opportunity to stay on their property and retire on it. They can participate in this pension plan right where they are and do not have to move. I wish the full story could be told.
You know, when I was in the riding of Assiniboia I was most amazed to see the way in which opposition members daily completely sabotaged and misrepresented information that was readily available to them. Of course, I am talking about the stabilization plan. Farmers thought that it was based on production, whereas they ought to have known that it was supposed to be based on farm income and that it was farm income that was to be stabilized. When people elect members to Parliament, they expect them to give the true facts. I am sorry to say, Mr. Chairman, that I found very little evidence that this axiom was being heeded. I found only confusion resulting from misleading statements by members of the opposition who had gone back to the Assiniboia area.


Some hon. Members:: Shame.


John (Jack) Henry Horner: That's a weak story, boys, a weak story.


Mr. Howe:: Mr. Chairman, I am very happy to participate in this particular debate today because it has to do with changes in the Income Tax Act as contained in Bill C-259, as they relate to the agricultural industry. Like a lot of other people who come from areas in which there is a large agricultural population, I have been disturbed over the years by the fact that so many people are getting out of agriculture. If we look at the statistics, we find today that only 7.7 per cent of the working population are involved in producing food for the people of Canada as well as the food which we export from this great land of ours. More emphasis should be placed on incentive programs that will encourage people to stay on the land.
We talk about the family farm. I am happy to say that in my area there are many successful family farms, and this is one of the reasons I was so emphatic the other day that the wages of the wives of businessmen and of farmers
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should be allowable as income tax deductions. Anyone who has lived in these areas realizes that the family farm is just that. A great many of them are successful because the farmer's wife works alongside her husband for a great part of the day and for a large part of the year. The parliamentary secretary said that such a provision would cause a great deal of division of income. I do not think the income of those who carry on this type of operation would be enough to make a great deal of difference to the coffers of the Minister of Finance when it came to collecting income tax. If the earnings of the wife were allowable as a deduction, the farmer would be placed in another bracket.
I would like to say a few words about this industry and the impact it has on our economy today. I am disturbed, day by day and week by week, when I hear the consumers of Canada talking about the high cost of living. They like to complain that food costs are out of range. That is not true. I have an article that appeared in Weekend Magazine. It is entitled "The High Cost of Food is Low". It is a very interesting article and points out that a lot of the remarks made by the consumers are not true. I quote from the article:
Food prices increased only slightly more than half between 1949 and 1969. (For a family of four the average weekly food bill was about $20 in 1949; about $31 in 1969.)-
The proportion of average disposable income spent on food today is smaller than ever-about 15 per cent in 1969 compared to at least 22 per cent in 1949.
Canadians are eating better. This differentiation is an indication that the farming industry is efficient. However, it is not that attractive. There are many people who are disturbed about this bill and other things that have happened, such as the cost squeeze in agriculture. They have decided to leave the industry, and that is the reason farmland is not selling now nearly as well as a year ago. Another reason for this situation is this bill, the white paper and the implications that farmers were going to be faced with more bookkeeping problems. Other matters farmers have to take into consideration are the alteration in the basic herd concept and other programs they followed for many years because of the capital gains tax.
All through the piece there has been a feeling of uncertainty in the farm community. One of my neighbours is a real estate salesman. When I am home, I periodically ask how things are going. He tells me that farms are not selling these days as they were one or two years ago. This did not happen by reason of mother nature or anything like that. It happened because of the economic policies of this government and the fears and frustrations people have when they look at this monstrous bill, then wonder what will happen to them. The government has indicated that there will be changes. This is one reason people are disturbed.
It is interesting to note that, according to this same article, irrespective of the fact that only 7.7 per cent of the population is on farms today, this is not the whole picture. It is estimated that in the farming communities three out of every 10 Canadian jobs relate to agriculture. Many more than the 7.7 per cent are directly involved. They are involved in agricultural legislation and things that affect the agricultural community. With regard to the costs of farming, the article reads:

Farmers' costs have more than doubled since 1949, so it is clear farmers gain very little from increased prices since their portion of the consumer's food dollar continues to diminish.
Does the parliamentary secretary feel that in this particular program there is any sort of incentive for people to go back to the farming area? What incentive is there for all those junior farmers who have been working so hard learning how to run a farm and the 4H club members being taught by agricultural representatives how to operate a farm? If they work on their father's farm, they feel that by the time they receive it, pay for it and the government gets through with them there will not be much left.
I wish to cite a recent case concerning a farmer in my area. He had 500 acres of very good land and a beautiful dairy herd. He had three children, two boys and one girl. They were all smart, intelligent children. They have worked on that farm all their lives, but will they continue to work on the farm? A few weeks ago that beautiful herd of 125 holstein cows was sold. They were put on the market because the farmer felt there was not any future in this type of operation. Although his family had been raised on that farm, enjoyed farming, belonged to the junior farmers' organization, were bright, intelligent young people, there was not any incentive for them to continue. They decided to leave the farm and go into some other occupation. This is a loss to the agriculture community.
The government and organizations should do everything possible to stop these bright, young people from leaving the farms. They should be encouraged to continue farming. There is going to come a day, and I would not like to predict how far away it is, when we may have to import a lot more agricultural products into this country. That will be a disgrace and a crime. It will be an indication that governments in the past did not do enough to encourage young people to remain on the farms which their fathers started many years ago, and of which they were so proud. I cannot see anything in this particular bill that will give encouragement to those people.
There were one or two questions which the hon. member for Fraser Valley West introduced into the discussion. He referred to the capital gains tax. In my area there are developments taking place around the big cities. The farmers who live adjacent to these large cities are fortunate because they receive a high price for their land. However, it does not stop there. I am referring to farmers who live around Toronto, Brampton, Guelph, Woodstock and Kitchener. They are receiving large prices for their farms, but many of them want to continue farming. What do they do? They sell the farm for a high price and move back into the country. They are driving along a road and they see a beautiful farm in a good location. They drive in. The farmer has no idea of selling his farm. But the prospective buyer looks at the farm and the house. They are attractive and well-kept. He asks the farmer to name a price. The farmer mentions a figure that he does not believe any buyer would look at, maybe $85,000 or $100,000. To his surprise, the offer is accepted. What is the result? Not only that farm but all the farms in the area are brought within an entirely artificial taxation bracket, and the consequences of the proposed insidious capital gains tax will be frightening to those who have to face them.
November 8, 1971

I might say the same about farm residences. There has been a marked trend in my part of the country for people to come from the city to seek an old stone house in which to live. There are a lot of these houses in my area. For example, two ladies driving along a road saw a beautiful stone house for which they were willing to pay $35,000. This was for the house alone; they did not want the farm. Where does it leave the fair operation of the act when cases of this kind occur, as they do with increasing frequency, unless a means is found of differentiating between the value of the farmhouse and the value of the farm itself? How will capital gains be assessed when the tax inspector comes round if the farmhouse has been sold for more than the whole farm is worth? It will create entirely false values, the consequence of which farmers who are continuing to operate their business will have to face. I can see this proposal creating many serious problems without thought of their solution. Farm values will tend to go way out of line and I am afraid the piece of legislation before us is far from helpful.
It is interesting to note that the Banking, Trade and Commerce Committee of the other place was not too happy about the effect of these sections upon farmers. We have been talking about the proposal to end the basic herd concept, something our farmers have got used to and been able to live with for many years. Here is what the Senate committee had to say about that proposition:
Under the proposed legislation, it is intended to abolish the concept of the basic herd and to treat such herds as inventory or stock-in-trade. Under the transitional rules, basic herds which have already been established will continue to be treated as capital assets to the extent that gains accrued at the commencement of the new system will not be subject to tax. However, gains accruing thereafter will be treated in the same manner as profits on the sale of inventory.
Your Committee is not aware of any reason for not continuing to recognize a permanent herd for what it is, namely, a capital asset.
And here is the recommendation made by the committee in the other place:
Your Committee recommends that provision be made in the proposed legislation for the continued recognition of a farmer's permanent herd as a "basic herd" and, therefore, as a capital asset.
In other words, the committee does not agree with the legislation we have before us. They advise that the existing act should not be changed in this respect.
A few moments ago I was talking about the sale of farm homes and farm land. Here is what the committee of the other place had to say about that particular aspect:
Your Committee is of the view that farmers occupy a special position in the economic structure of this country. Over the years, this sector of the economy has become increasingly subjected to pressures which have led to a profound change in the nature and use of farm lands.
Your Committee is concerned by this trend and believes that measures should be taken to reverse it.
And here is the recommendation which is made in this connection:
Your Committee recommends that consideration be given to extending the rollover provisions to permit land together with any other capital property which is used by an individual in a farming activity to be transferred, either during lifetime or on death, to lineal ascendants or descendants without being subject to capital
Income Tax Act
gains treatment under the deemed realization provisions. This exemption should only be available in those circumstances where the transferee or transferees continue to carry on the farming activities.
I feel that agriculture is of special importance to Canada and that we should do everything we can to encourage farmers to stay on the land. We should encourage their children, who have been trained as junior farmers and 4H club members, to follow in their father's footsteps. I do not feel the legislation before us offers any incentive or assistance to the farmers of Canada, so I would suggest these sections be amended along the lines proposed by the committee of the other place in order that the farm industry might be brought out of the uncertain period through which it is presently living, and farmers be able to go forward with hope, knowing that their future is in good hands.


Eldon Mattison Woolliams: Mr. Chairman, before I say a few words on this section I should like to put two or three questions to the parliamentary secretary and his experts. May I premise these questions by saying that a number of farmers in Alberta are incorporated as small businesses. My first question in this regard is as follows: Suppose the new act is passed. If a farmer incorporates, will he be taxed in accordance with the rates and allowances which govern small corporations or will the rates and allowances which apply particularly to farmers apply to him?


Patrick Morgan Mahoney: The corporation would be treated as a small business in the same way as any small corporation carrying on another business.


Eldon Mattison Woolliams: As the parliamentary secretary knows, there are a lot of big ranchers in Alberta who are incorporated, because they can run a better business operation and come up with a better tax picture. Would they be entitled to a basic herd? As I understand it, the basic herd rules and regulations apply only to a taxpayer who is unincorporated.


Patrick Morgan Mahoney: It is the intent of the bill before us to phase out the basic herd commencing the first of next year. I should like to add to my previous answer regarding the incorporated farm that a corporate farmer is entitled to calculate his income on a cash basis rather than on an accrual basis if he chooses to do so.


Eldon Mattison Woolliams: I appreciate that, and I understand the small business provisions, but what we are really saying is this: As I understand the small business deduction provision, subject to rigidly prescribed conditions, private corporations are entitled to a reduction on the rate of tax on the first $50,000. This is phased out if that particular corporation has produced a taxable income of $400,000. In eight years, that is eight times $50,000, is $400,000. This corporation then moves to a rate of 50 per cent of its net income, just as a big corporation like Imperial Oil and other corporations like that.


Patrick Morgan Mahoney: Provided that they did not reduce that accumulation of earnings by payment of dividends. If such a corporation chooses to pay out dividends, as the years go by that money comes off the amount which goes to make up the $400,000. So, a corporation of the nature of

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which my hon. friend refers could perpetuate its eligibility for the low rate of tax simply by paying dividends.


Eldon Mattison Woolliams: That clears up something at least. One of the answers given by the parliamentary secretary was that he thought that was the intention of the act. I hope it is the intention also of Parliament; we cannot control the interpretations of the courts. There are many interested people in Alberta where large sections of farms and ranches are incorporated at the present time, as there are in Saskatchewan. Farming and ranching is a big operation, a "big small business", as it were. It has been natural for these corporations, not only from the point of view of protection in business but from the taxation point of view, to leave their capital in and to expand operations.
Am I to take it that the rules and regulations set out in sections 28, 29, 30, and so on, which apply to farmers, only apply to farmers and ranchers who are not incorporated? I believe that is correct. Second, do I take it that the tax structure relating to incorporated small businesses applies to ranchers also? My third question is, could they, then, go on, providing they are paying the shareholders dividends, for we might say forever without ever reaching the $400,000 provision, or is there a time limit on it?


Patrick Morgan Mahoney: There is not time limit on this. To be absolutely clear on the basic herd point, if a farmer or rancher, incorporated or otherwise, wishes to establish a basic herd between now and the end of the calendar year, under the legislation he can do so.


Eldon Mattison Woolliams: That is the question I put and he has his experts there. Would the parliamentary secretary point out to me in this big volume the section which says that the basic herd provision applies? That is why I asked that question to start with. I appreciate it is a very difficult piece of legislation and I sympathize with him, but I want to put this to him. I should like to find out where it says in clear, unequivocal English that a small business corporation-which of course is what a ranch or farm would be- comes within the basic herd provision if they are incorporated. I should like him to read that part.


Patrick Morgan Mahoney: The first few words of section 29 reads as follows:
(1) Where a taxpayer has a basic herd of a class of animals-
The taxpayer can either be a corporation or an individual. The term under the Income Tax Act extends both to an individual and to a corporate entity.


Eldon Mattison Woolliams: We have that cleared up then. I hope those answers will not be the kind of answers we got from a former minister of health when we asked her on an afternoon similar to this whether Members of Parliament and others came within the Canada Pension Plan, and she said they did not. Then, we woke up the morning after the act was proclaimed and the regulations passed by cabinet to find an entirely different situation had developed. That is the trouble with this kind of tax law. As my good friend knows, legislation is always subject to the court's interpretation. A taxpayer may be a corporation under the act, but I should like to see it spelled out without any question that this law applies to the operations of a ranch or a farm that is incorporated. Then, we would know where we stood in that regard.
(Mr. Mahoney.]
This type of legislation is difficult for those engaged in agriculture. I think I know something about that having been raised in the prairie provinces and spent some time connected with farming operations, both as a farmer and as a lawyer practising in the city of Calgary. Prior to that time I was in Saskatchewan dealing with farmers and ranchers. As a result of my experience I got to know pretty well some of their problems, particularly from the income tax point of view. My concern with the method of debate this afternoon is that we are swatting mosquitoes when we should be belting horseflies. One of the things we are talking about is the basic herd. Under the old act this was treated as a capital asset. Under the new act, while it is true farmers can get on a cash basis, as the parliamentary secretary says, the real intention is to phase out the basic herds. He can shake his head but that is what he said, and finally it will work out that way. The basic herd provision will not apply to new farmers and ranchers. I do not think he can deny that.
I suggest that when we are talking about farming and ranching we should discuss all those things that apply to farming and ranching. One of the things that this act will do is this. There were members of the committee who said the white paper did not go far enough. These people really never explained to the farmers and ranchers that if it went further there would not be a farmer or rancher left. The fact is it went too far. We should be debating not only how farmers should pay their personal taxes when they are unincorporated or their corporate tax when they are incorporated, but we should integrate with this the debate on capital gains.
A member this afternoon talked about equating the value of land with the purpose for which it is used. Let us not fool around: when valuation day comes I think the valuation should be set on that day, applying the rules and regulations. There are various systems for arriving at the value, but whatever value is agreed upon between the department and the taxpayer as at valuation day, any capital gain made on the farm or on the ranch will be added to the personal income tax of the owners according to the formula, which is 50 per cent of the value. Then, you have the 25 per cent rule.
I ask these questions because of what I have heard said this afternoon in reference to the basic herd and the changes in the bill with reference to capital cost allowances and to trading in machinery.
These changes will make it more difficult for a farmer to remain on his ranch or farm and carry on the operation. I am very concerned about the situation in western Canada at this time because there is a large group of people who have operated farms and are reaching an age where they wish to either sell or turn over the farm to their children. In many cases this has been a husband and wife operation because it is difficult to obtain labourers in the fall of the year. What happens? They have built up this farming operation and then are subject to a capital gains tax. The formula is not the same as it is in the United States or in Great Britain. After the formula is applied to the top valuation, it is added to the income. I say the result will be that the family farm will be quickly turned over to the government or will be mortgaged to the government to
November 8, 1971

the extent that the next generation will have to continue to work in order to meet the mortgage payments to the government. Some people to my left have said that this legislation does not go far enough. It goes so far that when the farmers wake up in a few years they will find that they cannot continue to own the farm.
If a farm is passed on to a son or is sold, the capital gains tax will mean either that the farm will be turned over to the government or will be mortgaged to the state. I believe when speaking in the southern part of Saskatchewan or Alberta during the last election the Prime Minister said that the objective of the government was to have the farms owned by the government. This is what the bill will do if the capital gains tax is implemented.


Patrick Morgan Mahoney: Let us have the report of what the Prime Minister said on the record.


Eldon Mattison Woolliams: I can easily read it into the record tomorrow because I have his statement as it appeared in the Calgary Herald.


Patrick Morgan Mahoney: It is gospel!


Eldon Mattison Woolliams: It is up to you to argue with the Calgary Herald.


Mr. Osier:: Give us the reference.


Eldon Mattison Woolliams: My friend from Winnipeg is a peculiar man. He never believes anything. I just want to make my point. The hon. member should go down Main Street in Winnipeg and stand on the corner on a cold day. What would happen there on the corner I think would apply to him, and he knows what it might be. When the capital gains tax is applied against the farmer I believe he will pass on the farm or it will be mortgaged so that he will, in effect, be giving a mortgage to the government in lieu of taxes. If anyone denies that would be the result of the capital gains tax when the farm is sold, then I would ask him to stand in his place and say so.
I was interested in what one hon. member said this afternoon. I refer to the hon. member who has supported the government up until now. He spoke of equating the value of the land with its purpose. For example, if it were a dairy farm it would be valued for the purpose of dairy production. In an area between Calgary and Red Deer, in that area around Regina, Saskatoon or Moose Jaw or Edmonton, you will find that the farm is valued because of its proximity to an urban centre. I believe this would be true around Brandon and Winnipeg. The result is that the demand for the land determines its price. The amount of capital gains tax a farmer or rancher will pay when he has reached the period in which he wants to retire will be so great that he will not possibly be able to retain the title to his farm. This situation is particularly true under present marketing conditions. Let me deal with this for a few moments.
Under the capital gains tax structure and under the quota system which limits the cash flow to the farmer's pocket, the farmer would never be able to meet his obligations under this capital gains tax provision. I say this is proof that the capital gains tax will mean that the farmer or rancher will either keep the land or eventually it will become a state farm or be mortgaged so that the second
Income Tax Act
generation farmer will have to work all his life in order to be able to pay off the mortgage. The farm economy is such that he would never be able to produce enough dollars in extra cash to meet the capital gains tax even if it were spread over a period of years. A tax is, in effect being added to the tax on the land on which they are producing in order to pay the capital gains tax. I believe this is a severe discrimination against a particular class of people. It discriminates against the farmer because, even though we are becoming urbanized, there are more farming operations in western Canada, in the farm belt of Ontario, the farm belt of Quebec and even in the farm belt of the Maritimes, than there are small businesses in the cities.
So this legislation really discriminates against an industry which until now has been the real backbone of our country. This is why when talking of the rate of tax, and the changes in tax structure, the real problem about which the farmers should be concerned is the capital gains tax because one cannot be separated from the other. This is why I submit that eventually those farms will go to the state, particularly under the kind of marketing arrangement we have which determines the amount of cash a farmer receives with which to pay his taxes. The minister in charge of the Wheat Board tells us that sales are good. Well, during the past five years, in respect of wheat sales, Canada has dropped from first to sixth position. The minister says we have wheat sales, but the truth is that this government and the previous government have never realized that the real problem in western Canada has not been a surplus of grain but rather the tie-up in getting the product from the farms to the country elevators, to the ports and then to the countries which buy it.
We have had management and labour disputes and so on. In these circumstances, how can a farmer pay the increased taxes which will result from the capital gains tax being added to his personal income tax or corporate tax indirectly. He will have to borrow in order to do this and he will have to pay interest on the money he borrows which will increase his cost of production. Because of this legislation and high taxes, the ownership of the farm will be turned over to the state or to other people and, as a result, the farmer who has worked all his life must pay a capital gains tax added to the tax on whatever other income or investments he may have. This is why the whole tax structure should be discussed in one package when we deal with agriculture.


Gérald Laniel: The time of the hon. member has expired. Is there unanimous consent to allow the hon. member to continue?


Some hon. Members:: Agreed.


Eldon Mattison Woolliams: Thank you, Mr. Chairman, I appreciate that very much.
Under section 28, farmers may continue to compute income on a cash basis and the existing provisions requiring inventory and or accounts receivable to be brought to account on disposal of the business or on leaving the country are also continued. It is true that the farmer will be subject to automatic general averaging rules. He may elect to use the existing five year block averaging provi-

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sions if he so wishes. The problem here is the high capital gains tax. In the United States and in Great Britain you know the costs which you have to meet. Because of inflated land prices, capital gains will be so high that no farmer will be able to stay in business. The government leaves the impression that the estate tax has been abolished, but all they have done has been to create a vacuum for the year. The capital gains formula as applied, against these farms, will be far greater than the estate tax.
With regard to the basic herd, we have heard complaints this afternoon. I would like to quote the view of a group of researchers on Canadian tax reform. I will read what a group of accountants wrote about the subject. They wrote:
No additions may be made to a basic herd after December 31, 1971.
That is certainly of no advantage to farmers because their basic herds do not increase. The researchers go on to say:
-if subsequent to that date, the total number of animals of the appropriate class falls below the number in the basic herd, a sale is deemed to be made from the basic herd to the extent of the excess.
Is that of advantage to farmers? Of course, it is not. I continue the quotation:
The basic herd cannot then be increased. In computing income of a year in which a part of the basic herd is realized, there may be deducted the December 31, 1971 fair market value of the animals so disposed of. Where a farmer has a basic herd plus other animals of the same class, he cannot, in a year of sale, reduce his basic herd by more than 10 per cent of the number of his December 31, 1971 basic herd provided he still owns sufficient animals of the class equal to the reduced basic herd.
If a farmer reached a position in which he could not keep his basic herd because of marketing or economic conditions and he wanted to dispose of that capital asset, he would lose the benefit of the basic herd formula. In other words, it is a straight bookkeeping entry. The government is in fact saying to a farmer "we will control how you market the stock, and if you market it in this fashion you will pay more taxes because we are the ones who determine the formula for the basic herd." According to the old idea, the basic herd was a capital asset, rather than part of income, until it was sold.
This is what the researchers had to say with regard to a farmer's residence:
Where a farmer disposes of his farm and part of it was his principal residence, rather than having the farmland and principal residence treated separately, he can elect to treat the entire farm as one asset, and deduct from his capital gain otherwise determined $1,000 a year for each year the farm was his principal residence.
This means that if he is farming for ten years he can elect to take ten times $1,000 off his total capital gains. Let us consider the point I raise. If the value of the farm is inflated because of its proximity to an urban centre, when he sells it he may double his money. If that is the case he will have a capital gain of 50 per cent, that is the difference between the value on valuation day and the price at which he sold it. The 50 per cent is added to his income, with some averaging. That is the situation which is affecting farmers and which will put these people off the farms and out of business.
If the state runs farms as they run other corporations, we know what will happen to production. Farmers will not have much trouble with marketing when the state takes over. The researchers, comment as follows:
On the face of it, this provision should avoid the need for separate valuations on Valuation Day and the segregation of the sale price, but without the valuation and segregation, on what basis can a determination be made that the election is beneficial?
It is certainly not beneficial to the farmer, and that is my point. We must realize when we are debating these tax provisions as they relate to farmers and ranchers, that they are in a unique position because farming requires large amounts of capital. If a farmer wished to take his investment out of machinery and land and invest it in trust companies, even at today's rates of interest, he would find that he would be far better off. But farming is a way of life, and we should have the kind of taxation which would encourage those people who are serving the nation by producing food as well as by bringing back to Canada large numbers of dollars from the export of grain and cattle.
May I call it six o'clock, Mr. Chairman.


Gérald Laniel: Order, please. It being six o'clock, I leave the chair until eight o'clock.
At 6 p.m. the committee took recess.


[Stage Direction]
AFTER RECESS

The committee resumed at 8 p.m.
Russell Clayton Honey: Shall section 28 carry?


Mr. Fortin:: Mr. Chairman, I feel it is my duty to speak on this section of Bill C-259 concerning taxation of producers and farmers.
I object to the spirit of this legislation, especially because of the sections now under consideration. Departments adopt a policy unaliterally without taking into account measures adopted by other departments and, consequently, those programs are eventually disastrous for the very people that they intended to help.
The case under consideration tonight is one of those. In fact, it shows how the government lacks logic sometimes when adopting legislation or regulations for the purpose of helping the farmer. Action is taken to help him borrow, but, on the other hand, measures are adopted to ruin him. Finally, neither policies have been effective, because they are contradictory.
In my opinion, any tax reform must take into account the objectives determined by other departments so as to avoid conflicts. To make this point clearer and make my colleagues understand that the provisions before us can in no way satisfy either western or eastern producers, I shall make a brief historical review.
There was a time when, in Canada, all producers were free to run their farms as they liked. It was what was then called the family farm on which parents and children worked and which was transmitted from generation to generation. The young took charge and so on. In eastern

November 8, 1971

Canada, and particularly in the riding of Lotbiniere where there is a strong rural population, two, three or sometimes four generations have lived from the income of the same farm. The farmer ran his farm as he pleased independently of agricultural policies. In any event, policies then did not particularly concern farmers.
And one day governments through their more and more complex political objectives adopted measures tending to industrialize and organize the farms and make them more efficient. People said then that it was the "efficiency folly" or "the great period of agricultural revolution from the point of view of profit", and I am one of those who said so. The Federal and Provincial governments therefore said to the Eastern and Western farmers: "What you were doing yesterday is no longer any good; today, you must improve your land, your herd, your farm machinery, otherwise you will starve.
Farmers who have never hindered progress, fell into step, although they could not afford it. It is then that the government decided to grant loans to agriculture, in order to help farmers to modernize their farms, to get into debt, which they did. They ran into debt, and the government then started to take over the farms, because immediately after having told the farmer: Modernize your operation, improve your methods, we will give you financial means to do that through farm loans, it also said: Now, we shall control the production; the days when anybody could produce anything are over. Thus, the policy of wheat, milk and egg quotas was born. Then the farmers found that their income was systematically controlled by the state. The latter started with financial control of the individual, control of the land through mortgages, and now, control of the farmer's income which the state freezes at will.
If a producer produces more than the permissible quota, not only will he not receive a salary, but he will be taxed. Such is the present policy. The government, after having taken over the farms and control of the farmer's income, taxes their meagre profits. And this, not equitably, for if it were done equitably we could not but congratulate the government.
On reading section 28, for instance, one realizes to what lengths the government intends to go to control the farmers, to own them, to socialize them. That is why I said at the onset that I did not share the spirit and the aims of the tax reform because of its aims.
Let me quote you only one example of the administrative follies we are witnessing. On page 85, clause 29 reads as follows:
Disposition of animal of basic herd class
29. (1) Where a taxpayer has a basic herd of a class of animals and disposes of an animal of that class in the course of carrying on a farming business in a taxation year, if the taxpayer so elects in his return of income under this Part for the year the following rules apply:
Thus the bill says that in order to comply with the will of the government, and I quote:
(a) there shall be deducted in computing-
-if somebody understands that, I would like him to let me know, because I have been studying that text for at least
Income Tax Act
three days. I talked to some people and I have been told that no farmer will be able to make it. I feel sure of that because no one where this is taking us.
I quote again:
(a)	there shall be deducted in computing his basic herd of that class at the end of the year such number as is designated by him in his election, not exceeding the least of-
And that to find out the tax which the individual will pay on his capital gains, on what he will sell. That is interesting. The quotation goes on:
(i)	the number of animals of that class so disposed of by him in the year,
(ii)	1/10 of his basic herd of that class on December 31, 1971, and
(iii)	his basic herd of that class of animal at the end of the immediately preceding taxation year; and
(b)	there shall be deducted in computing his income from the farming business for the taxation year the product obtained when
That is fantastic. I quote further:
(i)	the number determined under paragraph (a) in respect of his basic herd of that class for the year
is multiplied by
(ii)	the quotient obtained when the fair market value on December 31, 1971 of his animals of that class on that day is divided by the number of his animals of that class on that day.
Once this bill is adopted-if that is the intention of the government wishes so-I wonder in what kind of mess the farmers will have to manage their business since their farm is now considered as a business.
Everything has a limit. Farmers have gradually lost ownership of their farm owing to government socialization programs. The farmers' revenue is controlled by the government which wishes to make the management of a farm so complicated that farmers will have no choice but to give up business and get into a simpler field.
Several of my colleagues may not believe it, but I heard the previous speaker this afternoon mention that only 7.7 per cent of Canadian workers were farmers and that only 4 per cent among them enjoyed a minimum level of subsistence.
It is tragic. It so happens that a strict minimum of farmers feed 22 million Canadians and that instead of taking steps to help them, they are discouraged.
This means that a farmer with 30 heads of cattle, for example, is compelled to keep complex accounts for each head. I refer my colleagues to section 28 and the following to show how ridiculous and complicated it is, yet for the sole purpose of collecting a little more taxes from those who are penniless.
The Minister of Finance (Mr. Benson) was boasting recently that 750,000 Canadians will be removed from the taxation rolls under the tax reform. In all honesty, Mr. Chairman, this is not something that we can brag about, because 750,000 Canadians are no longer paying taxes it is due to the fact that they are in need of money. If their income is inadequate, it is because they are below the poverty line.
If we are aware that the basic exemptions suggested are $1,500 for single people and $2,850 for married ones, and that 750,000 Canadians will not pay taxes, this means that many married or single people are living in extreme poverty.
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What will happen to farmers within that context? They have usually succeeded their father and have not had the same opportunity as other citizens to get a better education. Those people always managed somehow. They were in the fields before sunrise and came home after sunset, and they worked hard.
As a result of government schemes, those farms were taken over. Farmers are even being told today to have collective farms, to group themselves. In socialist or communist countries they have reached that point; first the farms were taken over now they are gradually reverting to private enterprise.
At the beginning of my remarks, I said that when passing a bill here it should be re-situated in the context of general policy objectives, after which it could be determined whether it does not defeat the purpose of other legislation. If it does, it is not a step forward but a step backward and I feel that enough harm has already been done to farmers as it is.
Instead of passing legislation, granting tax credits for any farmer's children willing to carry on the family business so they may continue to modernize and improve it, we do absolutely nothing.
The government talks of capital gains. This means the farmer will be taxed just like big businesses. They can afford to pay but not the small ones. The government treats on an equal basis the small business, the family farm and the big businesses. It treats them according to the same criteria. So, the small businesses, whether they like it or not, are going to be wiped out by this bill.
I rose recently in the House to acquaint the minister with the views of co-operatives, credit unions and caisses populaires. I said then that these measures would sooner or later bring about the disappearance of these co-operatives. The minister has realized his mistake and tabled some amendments. We were happy about it, but when we read them we noticed that once again people were being made fools of and that nothing had been done. Representations are therefore continuing.
The spokesmen for co-operatives and ourselves use the same language which is that the tax reform before us will entail the gradual phasing out of those institutions and of at least 50, if not 60 per cent of family farms still being operated in Canada.
Mr. Chairman, the farmers are moving into cities and becoming unemployed. We then ask them to undergo retraining courses to momentarily get rid of them, and once these courses end, they find themselves stuffed full with useless diplomas.
Instead of helping the farmer when he operated his farm, when he was independent of government, in order to preserve his independence, to increase his productivity so that he would not depend on social welfare, the government's policies have reduced him to an underprivileged status and he is totally dependent on the state.
I suggest that the rural exodus is the result of the policy of the federal government aiming particularly at ousting the greatest number of farmers with a view to laying hands on their farms, allegedly to promote collective farming which is a socialist inspired principle. We are socializing production; we have socialized lands and we are getting rid of people.
(Mr. Fortin.]
And yet when the farmers were requested to feed the Canadian Armed Forces during the war, they did not boggle and abode by the government's directions and worked.
It is not by discouraging private enterprise and personal initiative that we will make free Canadians independent from public administration.
For instance, we might just wonder, in connection with the distribution of the tax burden, what will be done with all the taxes collected under this voluminous bill. If you try to know where our tax money goes by leafing through the publication issued by the President of the Treasury Board (Mr. Drury) you find that 25 per cent of this money goes to social projects.
In other words, this money is not used to increase productivity or the purchasing power but simply to keep them in poverty. At the same time, 14 per cent is earmarked for economic expansion and 14 per cent for servicing the public debt.
Mr. Chairman, the government's basic concepts are wrong. Under these concepts, the government is increasingly downgrading the farmers as masters of their free enterprise by stiffling them under taxes so as to turn them into unemployed or into poor city dwellers. Thus, unemployment and poverty continue to increase in a country bursting with wealth.
If the government is aware of the problem, let it choose the solution aimed at encouraging young people to maintain the family farm, to improve, modernize and restore it if necessary. Let it provide them with incentives, not of mere enrolment in all kinds of social measures, but of assistance through measures such as tax credits for a number of years, as it does for private enterprise.
When with great fanfare an industry establishes in a given area and creates jobs there, the government says; For a number of years, you will be exempt from taxation, or your tax burden will be eased to some extent or else, you will be given this or that land. But in the case of farmers, the government does things in a completely different way. Since it is dealing with little people, it must crush them; it is easier and it does not show much.
However, people are becoming aware of things much more than we think. The time has come to take our responsibilities in this respect. Why not help small businesses? Why not help the individual who tries to get by, to own his land, to grow, to be himself, instead of only a number in the Unemployment Insurance Administration? Why not adopt concrete measures such as tax cuts for the young man who wants to continue to operate the family farm, or else, help him reimburse a farm loan that makes it impossible for him to make ends meet, because the government has adopted an income control policy? If on the one hand the government has taken steps to control income through its quota policies, and on the other hand it controls capital gains by subjecting them to a 50 per cent tax, whether in the case of a small business or a large corporation, it is clear in my mind, as it is in those of most of my constituents in Lotbiniere, that this will soon result in the disappearance of most small businesses.
As the Parliamentary Secretary to the Minister of Finance (Mr. Mahoney) is here tonight, I take this opportunity to ask him to explain the thought behind this legis-
November 8, 1971

Income Tax Act
lation and show us that it will promote farm development and encourage, rather than discourage, farmers. Let him prove that this will help farm development and make farmers more and more independent, less and less under the government's thumb, and then we will be willing to discuss and even to change our position. But in the light of the information at our disposal and of the results of the programs put into effect in the last 15 years in this field, we have no doubt that this piece of legislation will continue to systematically undermine private enterprise and discourage the owners.
When it is stated, for example, that upon selling any part of his herd the farmer will have to pay a tax based on the age of the cattle, I feel that is going too far; the farmers' production is being controlled far too much; this can only discourage them. In bringing my remarks to a close-


Russell Clayton Honey: Order, please. I regret to interrupt the hon. member. I do so to advise him and the committee that his time has expired.


Some hon. Members:: Continue.


Russell Clayton Honey: The hon. member may continue only if there is unanimous consent. Is there such consent?


Some hon. Members:: Agreed.


André-Gilles Fortin: Mr. Chairman, I thank my colleagues for their consideration, but I shall not take undue advantage of it. In any event, I was about to bring my remarks to a close.
I should therefore like to ask the minister to explain this section to us. I would also ask him not to interpret my remarks as political opposition, but to realize that it is in our interest that we understand this bill thoroughly and make sure that it does not go against the farmers' interests; that we truly mean to help them and to ensure that the proposed measure will not conflict with the policies of other departments.
If the minister is right, he should prove it. I suggest that he study the point I have made, namely that the farm policy has brought about the elimination of a great many producers who have simply become unemployed because we do not know what to do with them, our system being such that our main Canadian industry is now unemployment.
In the light of the experiences already attempted, I feel that it is now time for the government to study once and for all the need for adopting positive measures, instead of proposing a tax reform designed to control farm property, production and the individual, and even to tax capital gains and the proceeds from the sale of cattle, time to study at last the advisability of introducing concrete measures. Instead of discouraging individuals, it would encourage them to work. Consequently, these people would be less and less dependent on the government for a living.


Russell Clayton Honey: The hon. member for Annapolis Valley.


Cliff Downey: Mr. Chairman, I rise on a question of privilege. This afternoon when I began my remarks in this debate I asked the parliamentary secretary a question with regard to the averaging of farm income and he indicated that these provisions are exactly the same as they were before.


Russell Clayton Honey: Order, please.


Cliff Downey: I am just coming to my question of privilege, Mr. Chairman.


Russell Clayton Honey: I have some doubt about the point of privilege. It may be a point of argument. The hon. member knows that he may gain the floor when the Chair recognizes him. I do not think he should have the floor to raise this point.


Cliff Downey: Mr. Chairman, I was just introducing a preamble. My question is: Will there be the same averaging provisions as now exist with regard to incorporated-


Russell Clayton Honey: Order, please. I want to be as kind as possible but I say, with respect, to the hon. member for Battle River that he has not raised a question of privilege. He may have an argument with the parliamentary secretary and his point may be a point of debate. In the fullness of time I will recognize the hon. member.


Cliff Downey: Mr. Chairman, could I, then, ask a question which is not raised by way of privilege?


Russell Clayton Honey: Order, please. The hon. member for Battle River will remember that the Chair had recognized the hon. member for Annapolis Valley.


Eldon Mattison Woolliams: But he is prepared to yield the floor.


Some hon. Members:: Oh, oh!


Russell Clayton Honey: Order, please. The hon. member for Annapolis Valley.


John Patrick (Pat) Nowlan: Mr. Chairman, I rise to participate in this debate on Bill C-259 with some hesitation. Even though I have been exposed to not only the farm community but also taxation in a professional way, I have found that the more one digs into the 707 pages, with amendments and amendments to amendments, the bill becomes not only confusing but somewhat incomprehensible to a member of this institution. It is certainly confusing and incomprehensible to the average Canadian who will be exposed to these new proposals.
In committee of the whole we are now dealing specifically with sections 28 to 31 which I will touch on lightly. In any discussion on agriculture at this time, as a member from the east I would be remiss if I did not quote part of a press release on the state of agriculture in Atlantic Canada, particularly the maritime provinces. This document was written by one of the leaders of the agricultural industry in the maritime provinces, a former deputy minister of agriculture in the Nova Scotia government. He is now president of the Maritime Co-operatives Society, Dr.
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J. E. Walsh, who has been recognized in the Atlantic area and all across Canada as one of the leading voices in this country. On October 29 he said, among other things:
Agriculture in the maritime provinces is facing its most desperate crisis in 40 years. Our hog industry is being forced to close down, our egg industry is seriously threatened, our potato and apple industries are severely depressed, our dairy industry is dwindling, and our beef industry is faced with rapidly increasing production costs.
I could go on ad infinitum.


An hon. Member:: You can do that.


John Patrick (Pat) Nowlan: I could go on ad nauseam-


An hon. Member:: You can do that too.


John Patrick (Pat) Nowlan: -and not just restrict my comments to one region of Canada. I could cover Canada from coast to coast. The same general critique and the same condemnation could be levelled at the leaders of government who are not providing leadership to the agricultural community in this land. If any member in this House thinks that this 5 pound 14-ounce monstrosity is going to provide leadership to the agricultural community, he is living in the land of Rip Van Winkle.


Some hon. Members:: Hear, hear!


Some hon. Members:: Oh, oh!


John Patrick (Pat) Nowlan: Perhaps later tonight when the returns are in from Assiniboia members opposite will wish they were in the land of Rip Van Winkle. If the present government does not start to listen to the pulse of the farmer, the businessman, the little man, the union man, the average Canadian, let alone the lonely housewives in Canada, it will be sent to the land of Rip Van Winkle pretty soon. As I try to understand the incomprehensible, as I try to unwind-


An hon. Member:: "Unravel."


John Patrick (Pat) Nowlan: -and unravel the twisted strain coming from the minister before I come to the specific sections under discussion, this bill will go down in the annals of parliamentary history as the arteriosclerosis of our society. Mark my words, because they will come back and haunt members opposite, especially the Minister of Finance. I say that without any hesitation. If the hon. member for Lanark, who sometimes with divine guidance and a very articulate tongue-


An hon. Member:: What do you think about heavy water?


John Patrick (Pat) Nowlan: -and other members opposite consider the amount of time, effort and energy that has already been expended, beginning with the many studies supposedly from the Carter commission, Benson's white paper, the debate, proposals, counterproposals, briefs, counterbriefs, delegations coming to Ottawa, getting a hurried hamburger in some cafeteria so they can see the minister-


Russell Clayton Honey: Order, please. When the hon. member for Annapolis Valley commenced his remarks he told the Chair he would touch lightly on sections 28, 29, 30 and 31.

The Chair now invites him to touch lightly on these sections.


John Patrick (Pat) Nowlan: I appreciate the good grace, discretion and direction that comes from the Chair. However, the first section is 28. It says in the marginal note, "Farming business." If I cannot talk in a general way about the farming business and the plight that affects the farmer and thereby the consumer, I wonder what has happened to the rules of parliamentary debate-with no reflection on the Chair. This is not reform legislation; it is a deformity. How can anyone in his right mind say that this 707-page monstrosity is reform when the first tax bill in 1917 had 10 pages and 20 sections? This has 707 pages not including the amendments. This is supposed to be the age of education, communication, technology, streamlined government, the whiz kids, the super-gang in the Prime Minister's office and the Privy Council office. They are supposed to have all the answers.
This bill is confused deformity. Anyone who thinks otherwise does not have the sanity that I think members had at one time in order to get this far in the House. This legislation is the arteriosclerosis, because farmers, farm delegations and other important Canadians are taking so much time, effort and energy trying to understand it. They try to interpret and react to the bill in their own way. The productive forces in this country are not being directed toward producing a bigger and better Canada but are being used in a negative way to figure out and work around the provisions of this bill. That is why I say it is arteriosclerosis. Instead of growing, expanding and producing a vibrant economy, this bill is clogging the pores of this country, the political stream and the pores and arteries of agriculture, business, labour unions, housewives and other segments of society.
I say in a general way that this Benson's bill, or Benson's bumble will become known as the arteriosclerosis. We are going to reach a high-water mark. When the government process starts, Canadians will grumble; they will not be able to redirect their lives in order to conform to this bill.


Edgar John Benson: Will the hon. member permit a question? He has been talking about arteriosclerosis all evening. Is this another name for Bob Stanfield?


Robert Lorne Stanfield: You have to do better than that, Ben.


John Patrick (Pat) Nowlan: If my leader had anything to do with organization and implementation of legislation we would never be faced with this deformity on the floor of the House. This bill perpetuates a ridiculous situation because Canadians are suppose to understand it. I shall come back to the minister in the way I could. While he has many faults, one of them is not lack of geniality. He certainly has geniality. I only wish his mental competence matched his geniality. If it did, he would never have tried to impose this deformity upon the House and upon yourself, Mr. Chairman.


Russell Clayton Honey: I would remind hon. members that we are in committee of the whole and that in these proceedings we should make a particular effort to be relevant. It seems to the Chair that we are not advancing the work of
November 8, 1971

the committee. There have been interjections from either side, and possibly the remarks of the hon. member prompted the intervention by the Minister of Finance. Neither side is helping the Chair.
May I remind hon. members that we are now engaged in considering section 28 which deals with the computing of farm business income, with section 29 which has to do with the basic herd, with section 30 which provides for deductions in assessing taxable income for land clearance, levelling and drainage, and section 31 which is concerned with losses which may be deducted when computing the income of a farmer. I have been very lenient with the hon. member who has the floor but I would now ask him to be relevant to the subjects we are discussing.


John Patrick (Pat) Nowlan: I shall return more particularly to the four sections now under discussion, Mr. Chairman. As Your Honour has pointed out, the first has to do with the general subject of computing farm income, the transition from cash system of accounting to an accrual system. There will certainly be pressure upon the farmer to move from one system to the other. Section 30 deals with levelling land, and tile drainage. The Minister of Finance should be careful when dealing with this section. I would suggest he clear the land, level the land and put in some tile drainage so that he can take his remarks, bury them and drain them into a cesspool. I am sure we could put the Minister of Finance on a hobby farm so that he could obtain some income from it and, as a result, take a personal interest in this legislation.
With those frivolities disposed of, I should like to discuss the proposed changes very briefly. It is quite apparent that we are being asked to abandon the basic herd concept for no understandable reason. The Senate committee, in a unique document which it issued on November 4 in anticipation of the bill passing this House, stated it was aware of no reason for not continuing to recognize the basic herd for what it is, namely, a capital asset.
The Cattlemen's Association also questions, in its brief, the decision to phase-out the breeding herd concept despite the difficulties it might have involved with provincial administration. They maintain the principle that the herd is a capital asset to be preserved. Whether we call it a basic herd or a capital asset, there should be some recognition that these animals are a capital asset on a farm in the same way as a piece of machinery and that the same rights and rules ought to apply to it. There seems to be no justifiable explanation of the government's position, and I hope the minister or the parliamentary secretary will be able to fill in the gaps in this respect.
Under the transition rules, basic herds which have already been established will continue to be treated as capital assets to the extent that gains accrued at the commencement of the new system will not be subject to tax. There can therefore be little point in treating gains accruing thereafter in the same manner as the profits on the sale of inventory or stock-in-trade. The facts require the basic herd to be regarded as analogous to other capital assets of a farmer such as land and orchards and the fixed capital assets of any other business.
A farmer wishing to acquire a herd or a major addition to an existing herd takes money out of his capital. To proceed on an accrual basis with an annual valuation of
Income Tax Act
the herd is often impractical. If a farmer is on a cash basis of accounting he will experience losses in a number of years for which the averaging provision will not fully compensate.


An hon. Member:: You are reading.


John Patrick (Pat) Nowlan: Yes, I am reading. These are very explicit notes. I suggest that all hon. members when they speak on this bill on something called a capital herd, straight-line depreciation and all these other complex forms of legislative poetry, should stick to clear notes, otherwise they will wallow around in a swampland just as these 700 pages wallow around in a swampland. I return to my basic notes. The failure of the government to treat a unique capital asset of a farmer, that is to say, his animals, as a form of capital subject to the usual rules respecting the taxation of capital gains, must therefore be regarded as discriminatory. The young farmer, especially, should be permitted to establish a basic herd and his expenses in this direction should be regarded as a capital investment.
I hope the Minister of Finance will contribute in a constructive way to this debate and explain how a young farmer, not necessarily one young in years but a farmer who wants to become established and acquire a basic herd, will be able to do so when the herd is no longer considered as a capital asset. I suggest that under the conditions now proposed he will not be able to do so. If the basic herd concept is abandoned he will be locked out and those farmers who have already built up basic herds will be locked in. There will be no way in which a new farmer, be he young or old, can move into this very necessary area.
I repeat that the expense incurred by a young farmer in establishing a basic herd should be regarded as a capital investment. The proceeds of sale from that basic herd cannot equitably be regarded as income for the year in which he sells. If the present tax proposal is not modified, the farmer will realize the proceeds of sale as income immediately on disposal of the herd. Farmers who wish to build up their herd year by year, reporting the cost of acquisition as income as they do now, will not under the proposed changes be able to enlarge their capital base in animals.
I suggest this will have a restrictive and negative impact on the agricultural community rather than a positive, constructive impact that the minister and some of his spokesmen have maintained it embodies, and that this provision in particular will have a depressing effect on agriculture. I would appreciate the minister or the parliamentary secretary explaining how a young man will be able to establish a new herd under the provisions proposed. That, Mr. Chairman, is all I have to say about the basic herd concept contained in section 29.
Coming to the next section under discussion, section 31 dealing with so-called hobby farms, even though the definition is rather loose-


Russell Clayton Honey: Order. I regret to interrupt the hon. member but I do so to advise him and the committee that his time has expired.

November 8, 1971
Income Tax Act


William Arnold Peters: Mr. Chairman, we are interested in these provisions dealing with agriculture primarily from a mundane point of view. For many years the Liberal party, through its legislation, has been saying that like everything else agriculture must become industrialized, that there is only room in this country for large, integrated farming operations. Most of the legislation brought in by the Liberal party during the past 20 years has been directed to that end. As a result, certain difficulties have been created.
If we are to treat agriculture in the same way as every other segment of the economy, then the Liberal party is right and it should be incorporated. Agriculture should consist of large farming operations. The sale of agricultural products should be sufficient to produce enough income to maintain this industrialized segment of the economy. The old concept that it was nice to produce cheap food and to make it available to all individuals in Canada regardless of income is now being thrown out.
The fact is that no other industry except the fisheries has the same low individual return as agriculture. Bell Canada comes before one of our commissions to ask for an increase in rates in order to meet capital expenditures or to pay dividends to its shareholders. Last year Bell paid something like 91 cents on the first quarter, 93 cents on the second quarter and 95 cents on the third quarter. I may be wrong because I am quoting those figures from memory.


Mr. Francis:: Would the hon. member permit a question? Is he quoting earnings or dividend rates?


William Arnold Peters: These are dividends paid on the shares.


Cyril Lloyd Francis: By Bell Canada?


William Arnold Peters: Yes.


Cyril Lloyd Francis: Then the hon. member is mistaken.


Russell Clayton Honey: The hon. member for Ottawa West rose to ask a question because the hon. member for Timiskam-ing was making certain comparisons. As I explained earlier, hon. members should as much as possible try to speak relevant to the sections before the committee.


William Arnold Peters: Mr. Chairman, just because the hon. member for Ottawa West asked me a question does not mean I was out of order. The point I was making was that here we have a company incorporated under Canadian legislation which we allow to make a 9.2 per cent profit each year on its operations. I suppose there are very few industrialized operations in Canada operating on less than a 10 per cent profit margin per year on capital investment. I think it is safe to say that the average farmer has a declared taxable income at the end of the year of about 1 per cent of his capital investment, and this is why I think he should be placed in a special category.
If we were to reorganize agriculture in this country and give farmers a return of 10 per cent on their capital investment, I do not think there would be any problem at all for family farms to save enough money to pay valuation tax, estate tax and any other kind of tax we might try to collect when farms are transferred from one generation to another, from one farmer to another or when the prop-
[The Chairman.]
erty is disposed of in some way. However, we do not do this. We established a long time ago that in order for agriculture to develop it was necessary for a farmer, his wife and children to work on the farm. As a result of their labour the enterprise increased in value, size and efficiency because everything that the farmer, his wife and children earned was plowed back into the business as a capital investment.
We are now discussing the problem of a breeding herd. I am not sure how a breeding herd was established in the first place but it is one of the capital assets of a farmer. Over the years it is true that if a family worked hard and the farming operation was successful, the basic herd would be upgraded. However, the income tax authorities can be very tough if they discover just one extra cow in the basic herd. They would object if a farmer kept an extra two or three heifers to see whether or not one of them would be fit to join the basic herd. For example, on a number of occasions they objected to the number of calves my father kept as possible additions to his basic herd.
This type of cattle is easily identifiable. Most cows in a basic herd are registered and have a better pedigree than most of us adults. They have a social security number traceable further back than the social security numbers we have. So a basic herd is an easily identifiable asset as far as a farmer is concerned. This is why I am worried about what is going to happen to the small farm, the establishment of a basic herd, the improvement of the herd and, as a result, the farming operation itself.
It has been said, and I think everyone will agree, that quite often a farmer is poor all his life but he dies rich. This is partly true. I know of no other endeavour where practically the total wages earned in a lifetime are plowed back. Perhaps when Carter said that a buck was a buck he was right, and I am not sure that our tax structure will not eventually be based on that precept. But the fact is that if we adopt this change in the Income Tax Act we will see the end of the family farm at least by the end of the next generation. This will mean the end of a whole way of life in our rural economy-the small grocery store, drug store and all the small businesses associated with a farming enterprise.
The industrial farm of the future, the industrial farm of the Liberal party, will be the type of farm that will buy wholesale in very large quantities and will make a profit on its production. The integration will be complete in respect of purchases as well as the utilization and sale of its products. That may be the Liberal way. It may be the way of the future. However, I believe we will lose something in the process. We must make an exception if we are to maintain the family farm unit. This is not a unit which has been a great problem in Canada.
We have the lowest food costs of any country which has a standard of living equal to Canada's. We do not subsidize the production of agricultural commodities. They are subsidized by the farmer, by his children and by his wife. They subsidize the very food that is consumed by the people of our nation. This has not been a very expensive process. It is true many farmers have not paid income tax, but if you travel around in this country, Mr. Chairman, I
November 8, 1971

am sure you must be aware that farms have modernized, that farmers have been willing to make the expenditures necessary to provide a highly mechanized farm unit and that they have been willing to increase their basic herd content and thus have been able to upgrade their stock.
Farmers have been able to conserve their land. They have put fertilizer on it. They have done all these things mainly at the expense of receiving an income from the farm which should be in keeping with the investment they have made over the years. In many cases while changing our tax laws we have made it not only possible but mandatory that we lose some of our best agricultural land. We have done this through our tax structure, by allowing high taxes in respect of agricultural land and by claiming in many cases that land adjacent to a city should be used for subdivision purposes. We have allowed and made necessary the selling of such land to municipalities for subdivision at the expense of the Canadian public.
We might consider the Niagara escarpment, located in an area which could produce fresh fruit. However, if one went to a market this summer or into a local groceteria to buy fruit from the Niagara peninsula I doubt very much that this would be possible in many cases. Most of the fruit would have been from the United States because we have disposed of almost all the agricultural land that has produced for Canadians a very reasonably priced product by allowing taxes on such land to increase to the extent that it was no longer possible for farmers to retain it as a family farm unit.
A great controversy is raging between economists in the taxation branch. This was evident in the presentation of the white paper and other documents which have been presented by all kinds of interested parties. This controversy has involved the exceptions that could be made in the agricultural field without destroying the basic concept of tax reform. There are 264 members of this House who should be interested, in agricultural production. This question affects every Canadian. If we are to impose taxes as if this were an industry, then we will produce an industrial agricultural segment in our economy which obviously should have the same kind of profit motive as other segments of the economy.
Many small farms today in the province of Ontario- this is also true of the province of Quebec-have a resale value as a viable agricultural unit of probably $250,000. That is a good deal of money. It is also very interesting to consider the number of occasions in the past year when farms in many areas of Ontario and Quebec were foreclosed by the Canadian Farm Credit Corporation. These foreclosures were necessary because there was not a sufficient margin of profit. If the income tax department expects every year to take its share of the capitalization of the family farm unit, it will find that all it will be doing is killing the goose that lays the golden egg and the general public will have to compensate for that through increased costs. If Loblaws or any other major integrator is to own the family farm and produce a major portion of the agricultural production for consumption in Canada, it will operate in a way that will make the income tax department very satisfied.
As I indicated in respect of Bell Telephone Company- and this is the case with most industrial corporations-it will operate with a 10 per cent mark-up. They have the
Income Tax Act
money. They prepare for the tax they will have to pay. They will not have to take a large slice out of the farm income. I do not know how the big farmer or even the integrator will relate the price of his commodity to the market so that he can earn the kind of income that will give him enough to pay his taxes and the other things he has to provide.
It would be interesting if the parliamentary secretary would give us an indication, with regard to the few years in which the Canada Pension Plan has been in operation, how many farmers have earned sufficient income to make payments under that plan. These payments are geared to income. I think a large number of farmers would not have earned that kind of income and therefore have not been contributing under the Canada Pension Plan.
This is all part of the parcel of the family farm. The government may consider it is something else and that they are not abusing the farmer. The establishment of a basic herd really is equivalent to establishing factory machinery. I agree that it is not depreciated. You cannot have it both ways. Hopefully, the basic herd would appreciate. It would be a very poor farmer who would have 40 milk cows and did not find at the end of 20 years that he had 40 much better cows in his basic herd. Something would be wrong if he did not. So there is an appreciation. There is appreciation in everything else. The cost of living goes up, the price of land and everything else goes up, and it would be very surprising if the price of his basic herd did not appreciate due to his entrepreneurial skill and the up-breeding of his cattle.
I am not suggesting that we depreciate cattle every year as you do factory machinery. The basic herd concept is such that when you establish such a herd you maintain it and it does not depreciate. You are not asking for depreciation, but also you are not asking to evaluate periodically and to pay a capital gains tax on it because you have stood still in a changing world in terms of the industry.
It may also surprise the committee to know that this happens in other fields. My brother bought a tractor 25 years ago and on several occasions the implement dealer offered him more for it as a trade-in than he initially paid for it. After 25 years it is worth more as a second-hand tractor than it was when it was new. But he depreciated it over the years until there was no value left in it. He could have benefited from another tax system when he traded-in that tractor, because obviously he had a greater asset than when he bought it.
If the government are not interested in establishing in Canada industrial agriculture, with all the problems that will flow from it in the changing environment of rural Canada, if they are not interested in providing food to consumers who carry all the costs necessary to run a viable industrial development in any other segment of the economy, if they are not interested in increasing the price of our commodities by five or ten times, I strongly urge the parliamentary secretary, in discussion with his officials, with the Cattlemen's Association, with the Federation of Agriculture and all the other agencies representing farmers to consider making exceptions for agriculture so as to maintain the family farm.

November 8, 1971
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Mr. Bigg:: Mr. Chairman, Canada is facing a crisis in agriculture. At a time when we would expect sense from some of our best agricultural brains-I understand we have no less than 40 PhD's in Ottawa working on the problem of agriculture-and to be led out of the morass of bureaucracy and into some common sense, we are being led into a whole mess of socialistic nonsense. I do not blame the Minister of Finance.


Eldon Mattison Woolliams: I do.


Frederick Johnstone (Jack) Bigg: The Minister of Finance is nothing but a Little Sir Echo of his leader. The Minister of Finance is a genial gentleman but I find nothing genial in the words of his master. I hold in my hand the new gospel of the Liberal party according to Pierre Elliott Trudeau. The book is entitled "Federalism and the French Canadians". It is not written about French Canadians; it is written about the complete take-over of Canada by a carefully thought out strategy and carefully worked out tactics. I will not spend all my time referring to this book. I just want to introduce it to you, Mr. Chairman, and through you to the committee.
On page 124 we find a chapter on the practice and theory of federalism. Our minister's leader sets out in minute detail how to destroy not only agriculture but most of our democratic institutions by masterful use of socialistic strategy. He himself does not pretend to have invented this method. On page 125 he quotes no less an authority on the subject than one Mao Tse-tung. We read the following statement at the bottom of the page with regard to strategy and tactics:
The revolutionary bases, in spite of their insignificant size, are a great political force and strongly oppose the power of Kuomin-tang-
Take out "Kuomintang" and put in "the power of the federal government." Of course, when this was written he was not the federal government; now he is. It continues:
-which spreads over vast regions-
Instead, put "from ocean to ocean, our great and beloved Dominion".
Revolution and revolutionary wars proceed from birth to development, from small to large, from lack of power to seizure of power-
This is not an old book; it was reprinted in 1968 on the eve of the taking over of the leadership of the Liberal party by our Prime Minister-the leader of the Liberal party not the socialist party. I do not think the Liberals themselves have read the book and they do not know in what camp they are. But I beg you, Mr. Chairman, and every member of the House, to get a copy of this book. It costs only $2.50. It is a good investment. If you read it you will probably find what one or two members of your party have done since they read it. They had to decide whether they belonged to the right or to the left.
What has this to do with Bill C-259? I will tell you what it has to do with it. Bill C-259 is a small step toward tax reform but it is a tremendous leap forward toward complete and utter socialism in Canada. The confusion is rampant and it is not accidental, it is planned confusion. We are told on the one hand to make agriculture viable, to enlarge farms and to incorporate. What happens then?

According to this bill, if you incorporate you will lose the power to average your income.
At a time when agriculture is sagging, when world markets are down and when world prices are down, what do we find? We find the 40 experts on agriculture slavishly writing nonsense at the behest of the socialist Prime Minister, nonsense which is slavishly put in by the Minister of Finance who himself does not know the purport of his own bill. To prove it I may point out that we have more than 100 amendments to the bill. The bill, the child, was dead before it was born. I say it is a good thing. Should it be revived? No, it should never be smacked on the bottom. The people who wrote the bill should be smacked on the bottom and it is our constant desire to smack that bottom until it is beautifully red, as red as that which lay behind the idea that agriculture should be taken out of the hands of individuals and free entrepreneurs in Canada and, instead, run by bureaucracy.
There might be an argument in favour of this bureaucratic running of Canadian agriculture if it in fact meant cheaper food for the Canadian people. But what has happened since the government took over the running of agriculture? We find prices going higher and higher. Butter has gone up four or five cents a pound. It is so high that the working people of Canada from whom we hear constant complaints can no longer afford one of the basic products of this country and we have to import butter.
In this process, what have we done to the small farmer, to the little housewife on the farm who used to have a broken cream jug on the mantlepiece in which she put her Christmas money and from which she took money to help her husband buy twine at threshing time? She can no longer go to the cream jug because apparently we have agreed that we want largeness and efficiency; we want the corporate farm. Yet in this bill, even though the government wants larger farms its avowed policy is to make sure that even if farms become larger they cannot make a great corporate profit.


Mr. Danson:: Everybody can have a bigger jug.


Frederick Johnstone (Jack) Bigg: I know what I am talking about. There are several thousand small farmers in my constituency whose wives have a little, broken cream jug somewhere. But now there is nothing in the jug and they are worried. The answer is not for them to move to Edmonton, Calgary or any other city and try to make a living there.
One of my dreams from childhood has been that when I finished being a policeman, a soldier and a Member of Parliament I could get a piece of land and help the little woman fill that little cream jug until it was time to buy Christmas presents for the children or grandchildren. But I have not seen in this bill, nor in any bill that has come before this House in the last seven years, anything that provides the small farmer with the kind of security he once had. There is nothing in this bill that offers the small farmer one bit of relief.
On Friday I begged, on behalf of the small businessman, for a chance for the woman who helps him behind the counter. I begged that he be given a little tax relief. I would like to see in this bill some small step forward in
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tax relief but all I can see amounts to little more than one inch forward. Being charitable to the minister and his minions, I say that if there is a small step forward in this bill I would like to have them explain it to me and then I would apologize. But I see nothing in it except that each year several thousand poor farmers will have to go to the wall, sell out to corporate farms, and those corporate farms in turn will find themselves in a bind, owing money to the farm machine companies and to the government itself, with $75,000 loans being given out here, there and all over the place, with no guarantee of prices, no guarantee of markets and no relief from overtaxation.
One of my colleagues gave figures the other day, which I have no reason to disbelieve, showing that the three levels of government through their departments are taking 46 cents out of every Canadian dollar. The people who are doing this think they have some God-given right to spend the money we have earned. No such right exists anywhere, under natural law or any other law.
I ask hon. members opposite to read further into this book. They would do better to read it instead of heckling me. I ask them to read these 26 pages, and then I ask any one of them to get to his feet and say that this is not a complete blueprint for the socialization of agriculture and every other industry in Canada. It is there for them to read. I would like to know how many of them have read this book written by their own chief. If they have not the courage to read it, then at least let them have the courage to listen and I will read it to them.
I now wish to deal with the proposals concerning the basic herd. There is a pretence made under section 28 and other sections to retain the basic herd. But after you have read the bill thoroughly you know that the basic herd is doomed. The government says, "Oh, don't take away the basic herd right away. Leave the pretence there. Don't do things any faster than the people will stand." That is in the book. That is the strategy. Do it slowly, inch by inch. Cut off one toe at a time. Don't take away the basic herd at one go. Just stop the young farmer coming up. Stop the son or grandson from acquiring a basic herd. Let it be spelled out in the statute books that nobody will be allowed to start a homestead in Canada in the future and raise his herd from 10 to 20, then to 30 and get it up to the level demanded in other parts of this bill. The government demands large herds but it will not allow new herds to be built up.


An hon. Member:: Using the old buggy-whip.


Frederick Johnstone (Jack) Bigg: If I had an old buggy-whip I would know where to use it to good advantage. My mother once had a buggy-whip which she kept in the kitchen for those who did not pull their weight. I suggest that hon. members opposite should do their homework. They should fill their own woodbox, and they can start by reading this book. If they want copies, I will buy them.
This is supposed to be the age when we all come together. This is the age when the government consults the farmers. What do the farm unions say about the basic herd? The Canadian Federation of Agriculture, the Saskatchewan Farmers' Union, the Alberta Farmers' Union, the National Farmers' Union, the cattlebreeders associations of Alberta and of Saskatchewan are unanimous in saying the basic herd is essential to a viable farm.
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Where is the consultation? Who will be consulted by the government? To whom will the government listen? Whenever there is an opportunity to consult and listen, what kind of action do we get? We get the same kind of action as we had with regard to the grain stabilization act, when the ministers of agriculture from the prairie provinces came down here to discuss Bill C-244. What happened? The government immediately panicked into emergency measures. There was a threat of blackmail-$100 million or nothing. But the government was scared off that by the action of four small farmers who decided to test in the courts of Canada whether an arrogant minister of the Crown had the right to break the law. And thank goodness, at half past 11-or was it a quarter to 12 on the political time clock-the government decided it was just as well to back down. It knew the people of Canada were not yet ready to be bullied into the corner.


Patrick Morgan Mahoney: Is this under section 28?


Frederick Johnstone (Jack) Bigg: Yes, under section 28, section 29 and the rest of this preposterous document. It is all socialism in disguise, and very poor disguise. Mr. Chairman, hon. members to my left in the NDP are at least honest about their position. They say openly, "We are socialists. We believe in taking over all means of production. We had our Regina manifesto. We nailed our colours to the mast and we said, "This is where we stand."
The government does not always tell us where it stands. It prentends to be in favour of tax reform but all it is trying to do is take over the agricultural industry. That is what this bill and the amendments are all about. How are you going to do it? When are you going to do it? In what miserable, creeping ways are you going to do it? I do not like any part of it. The basic herd proposal is only one part of it, Mr. Chairman. It is not tax reform at all; it is confiscation by statute.
We have just under six pounds of amendments, and still the bill is unclear. We are taking a great leap which means that it will no longer be possible for any free enterpriser in Canada to own a piece of land and make a living. With inflation and rocketing costs, the small entrepreneur farmer will not be allowed to remain in business-and all in the name of efficiency! Where in this bill is the incentive to enlarge, to produce more and cheaper food, if the farmer is not allowed to retain a modest income?
.30 p.m.)
It is well known that the small family farm cannot afford to incorporate. Most family farmers are so deeply in debt already as a result of rising costs of machinery and the drop in prices of products that the only alternatives are to sell out or move onto a larger farm. Farm unions are discouraged. The government prefers things this way, with the propaganda from the eggheads-


Mr. Broadbent:: What? A question of privilege.


Frederick Johnstone (Jack) Bigg: My friend, you must have a head before you can call it an egg. This worship of bigness will not pay; it is not succeeding. It is true that people are leaving the farm, but food is not cheaper nor is farming more efficient. The farmer is not getting out of debt; indeed, his debts are larger and his problems greater. If the farm

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unions agreed with the government I would say they had been brainwashed. The trend should be the other way-


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


Some hon. Members:: Carry on.


Gérald Laniel: Does the committee agree to allow the hon. member to continue?


Some hon. Members:: Agreed.


Some hon. Members:: No.


Gérald Laniel: I hear some negatives; there is not unanimous consent.


John (Jack) Henry Horner: Mr. Chairman, in rising to speak-


An hon. Member:: Who is winning in Assiniboia, Jack?


An hon. Member:: Not the Grits.


John (Jack) Henry Horner: I am winning. My wagers have all been well placed. Mr. Chairman, rather than make a speech I should like to ask a question or two to clarify some questions in my mind. Regarding the change in the basic herd concept, could the parliamentary secretary indicate whether I am correct in assuming that this provision was brought about because of the introduction of the capital gains tax? I am referring to section 29 (2).


Patrick Morgan Mahoney: Yes, Mr. Chairman. It is the view of the government that with the introduction of a capital gains tax the need for the basic herd is greatly reduced or eliminated.


John (Jack) Henry Horner: That is what I thought, and I note that from the point of view of the government the need is eliminated. I have another question with regard to this concept of a basic herd and the capital gains tax. Am I correct in the assumption that the family unit will be encouraged to incorporate in order to assist in the transfer from one generation to another?


Patrick Morgan Mahoney: That does not necessarily follow. There are some advantages to incorporation now with the estate tax that permits intergenerational transfers perhaps in a smoother way. It may be that this will continue to be desirable, but basically I think the bill is neutral in that respect. I do not think the introduction of capital gains into the tax base can be divorced from the elimination of estate and gift taxes at the federal level.
The net cash result of projections that I have seen would indicate that less tax will be payable in respect of capital gains than in respect of estate taxes unless the farm unit or ranch appreciates in the order of something like 10 per cent a year. At that point you cross over the line to the point where the capital gains inclusion in the tax base may result in more tax than under the present estate tax. On the projections I have seen, this applies to all situations including those in Ontario, Quebec and British Columbia where the current succession duties are presumed to be continuing, to the situation in Alberta where it is assumed that the province will not pick up the federal estate tax that has been relinquished and will not

institute its own, to the situation in Manitoba where we understand the provincial government intends to take up the tax room that the federal government has vacated.


John (Jack) Henry Horner: I have another one or two short questions, Mr. Chairman. The parliamentary secretary has said that the introduction of capital gains should not be divorced from the concept of estate taxes and their removal. Would it be fair to assume that the capital gains tax would not be income declared operative until there had been negotiations with the provinces? This is a very important point because of the vacuum in some of the provinces now-in Ontario, for instance, and Saskatchewan where there has been a change of government and it is my impression that they will introduce an estate tax. Alberta has no estate tax, or in effect is refunding 75 per cent of the present estate taxes.
Would it be fair to suggest that this section not be proceeded with? Can the agricultural industry expect that it will not be proceeded with until there is a general announcement or clarification by the provinces?


Patrick Morgan Mahoney: The federal government has indicated to those provinces that do not have machinery for the collection of death duties-that is all of the provinces except British Columbia, Quebec and Ontario-that the federal government would be willing to continue to act as collecting agent under certain terms and conditions. However, the federal government has very emphatically and explicitly rejected representations that the tax reform package be deferred until such time as the provincial governments have an opportunity to establish the machinery to enable them to move into this field when they choose.


John (Jack) Henry Horner: Then several months ago, when the minister in his opening remarks suggested that in fact it was the government's intention to do away with the Estate Tax Act and to bring in capital gains and that the one would offset the other, really he was saying that the amount the government would receive from the capital gains tax is only equal to that portion which the federal government received under the Estate Tax Act; in other words, 25 per cent of the Estate Tax Act? Would that be a correct assumption?


Patrick Morgan Mahoney: Mr. Chairman, the introduction of capital gains into the income tax base is part of income tax reform. The decision to discontinue collection of estate and gift taxes is an independent decision. I joined these subjects together. Certainly they must be taken together when one considers the impact or influence of taxation on intergeneration transfers. Basically, however, the two decisions are independent. I do not think the Minister of Finance ever connected the two in any statement he made, although I have seen them connected in public utterances and press statements.


John (Jack) Henry Horner: Mr. Chairman, I do not want to prolong this discussion but the hon. member a few minutes ago connected the two together and said they could not be divorced. The Minister of Finance said in his budget speech of June 18, I think-I am not certain when he said it but it was in a budget speech-that we are getting out of
November 8, 1971

the estate tax field and in its place we are bringing in the capital gains tax.


An hon. Member:: Hear, hear!


John (Jack) Henry Horner: Can the parliamentary secretary give the committee an estimate of how much money the government hopes to net from the capital gains tax, if revenue from that tax is not to equal approximately 25 per cent of revenue from estate taxes? How much will the capital gains tax bring in? We want to know because here we are bringing in mass changes that will affect the whole industry. Could the parliamentary secretary give us some idea in that regard?


Patrick Morgan Mahoney: Mr. Chairman, if I may use a semiagricultural term, I think the hon. member is putting the cart before the horse in terms of the relationship between the withdrawal from estate and gift taxes on the one hand and the introduction of capital gains tax on the other. It was thought that since the government had made the policy decision to introduce capital gains to the income tax base some relief with regard to estate taxes obviously had to be given. The decision was made, of course, ultimately to discontinue collection of estate and gift taxes, the double-whammy of the white paper debate, if I may use a popular expression. That taxation would have impact at the time of the death of a taxpayer.
As to the specific question regarding the expected revenue from the collection of capital gains taxes, on the basis of 1972 incomes it is anticipated that in the first year of the system $50 million will be collected from corporations and $80 million from individuals.


John (Jack) Henry Horner: Mr. Chairman, I do not want to prolong this discussion. I am wondering if we could agree on another concept since we seem to be getting along very well. Is it logical to assume that the capital gains tax which is to apply to the basic herd and to other items will bring in increasing revenues as the years go along? The parliamentary secretary mentioned that $50 million would be collected in the first year from corporations and $80 million from individuals.
I do not want to be out of the ball park completely. Is it logical to assume that the revenue the federal government expects from the capital gains tax will increase as the years go on? Judging from the past performance of our economy, is it fair to assume that revenues from the capital gains tax will increase?


Patrick Morgan Mahoney: Mr. Chairman, since the provisions of the bill do not permit the capital gains tax to be applied retroactively to gains accrued or realized before valuation day, the tax in the first year would apply only to gains from valuation day to the date of realization. So it will probably take five years for the system to mature and for the ordinary number of transactions involving capital assets and capital gains revenues to level out. These revenues should increase for the first five years and then reach some sort of norm.


John (Jack) Henry Horner: Mr. Chairman, I appreciate the frankness with which the parliamentary secretary is helping the committee to understand this legislation. May I ask another question? Why should these revenues level off after five
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years, since the capital gains provisions in effect after valuation day would apply to land, cattle, various assets and residences which increase by more than $1,000 per year? They will apply to all increases in capital values. Surely these values will tend to increase by so much every year after valuation day. I do not understand why we should reach the norm in five years. Why would such revenues not continue to grow? You might reach a plateau in terms of the number of transactions or turnovers; however, in essence, would not revenues continue to grow every year?


Patrick Morgan Mahoney: Mr. Chairman, the five-year period is based on the experience in the United States, which we may relate to these provisions. That period is a guesstimate, if I may say so. We expect, from their experience and from studies that the Department of National Revenue has carried out here, that by the end of five years the ordinary number of capital transactions will probably level out and that we shall obtain some sort of normal level of revenue from that source.


Alfred Pullen Gleave: I rise on a point of order, Mr. Chairman. I do not wish to curtail this discussion, but I recall that when we started discussion of this section today the hon. member for Battle River, I believe, requested that the sections dealing with capital gains and inheritance be brought before the committee at the same time as the sections we are discussing, because all these sections are very closely associated and deal with the question of herds and procedures of taxation that will be followed with respect to farms. If I remember correctly, the parliamentary secretary pointed out that the leaders of the parties had not agreed to this and therefore he was not prepared to enter into a discussion on the matter.
As I say, I do not want to curtail the discussion we are embarked upon because I think it is most relevant. However, the parliamentary secretary must adopt one course or the other. I only bring this to your attention, Mr. Chairman, since you might bring it to the attention of the House leaders who could determine how this matter could be handled.


John (Jack) Henry Horner: Mr. Chairman, I knew that I might be treading on dangerous ground when I opened this discussion. Since I am one who likes to stick to House rules, I led nervously and gently to the question of how this tax would apply to the basic herd. I wanted to know whether the question I had raised was or was not related to the concept of capital gains. The parliamentary secretary said yes, it was related. Now I want to proceed one step further. I think the parliamentary secretary was comparing the capital gains tax provisions tax in Canada with those of the United States.
You have to lead into these things before you can get to where you want to go. I will now get to my next question. Does the parliamentary secretary agree to our imposing a capital gains tax on cattle similar to that in the United States?


Gérald Laniel: Order.


John (Jack) Henry Horner: I am just asking for the reasoning and logic.

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Gérald Laniel: Order. The hon. member is taking advantage of a point of order to ask this question. The parliamentary secretary also wants to say a few words on the point of order.


Patrick Morgan Mahoney: On the point of order, Mr. Chairman. If the hon. member checks Hansard he will see that the point which the hon. member for Battle River wished to include was the question of corporate farms. The indication at that point was that it was up to the House leaders as to what block they might consider. I was certainly not aware of any particular sections of the bill that deal with corporate farms as opposed to corporate anything else.
In the spirit of the debate we are entering into I am quite prepared to try to range over the field of taxation of agricultural enterprises. I do not think there has been very much in the speeches we have heard until now to indicate that we are dealing strictly within the terms of the four sections before us. I suggest, on the basis that the points are important, that they must be dealt with at some point during consideration in committee of the whole. Perhaps if we deal with them in the context of these four sections being our opportunity to deal with agricultural matters specifically, we will not have to re-cover the same ground when the particular sections involved come up for discussion.
I say this on the basis that the special averaging provisions applicable to farmers and fishermen have already passed the House. How you can talk about taxation of farmers without bringing section 119 back into the debate, I do not know. This is provided Your Honour does not feel we are straying too far afield. Certainly we on this side are quite prepared to talk about taxation of agricultural enterprises generally.


Alfred Pullen Gleave: On the point of order, Mr. Chairman, it was not my purpose to prevent discussion ranging into this area. My purpose was to point out that if we were to range into this area, those responsible for planning the business of this House and which sections of this bill shall be before us at a given time should have included the sections dealing with capital gains and estate taxes at this time. That is my point, Mr. Chairman.


Gérald Laniel: Order, please. The Chair feels that the point of order might be useful to the committee although it does not have to rule on it. It is my feeling that the questions put were useful to members on all sides of the House. This will permit a better discussion on a very complicated subject, although the Chair can only be guided by agreement among House leaders or those working out the schedule of work of the committee and trying to be as fair as possible. One of the questions I must ask myself, in fairness, is how many questions I should allow the hon. member for Crowfoot to ask without depriving the hon. member for Saskatoon-Biggar of an opportunity to intervene.


John (Jack) Henry Horner: I appreciate your concern, Mr. Chairman. I assure Your Honour that if anyone wants the floor to discuss these sections I will gladly contain my curiosity.
I wish to ask the question I was slowly approaching when the untimely interjection broke my train of reasoning. I will try and give a quick synopsis of the point I had

reached. We were dealing with the application of the capital gains tax on the livestock industry, the purpose hnd reasoning behind the application of the capital gains tax and the possibility that there may be a growth factor in the application of that tax. The parliamentary secretary suggested that the best guesstimate he could give the House is that it would tend to reach a norm in five years. I believe he is being slightly optimistic in that figure. I think it will probably level out closer to ten years, and I would settle on nine.
Your Honour might ask what the capital gains tax has to do with the livestock industry. This was the question of the hon. member for Saskatoon-Biggar. I had just brought the parliamentary secretary to the point where he said he was basing his calculations on the American capital gains tax and the returns derived from it. My next question is whether the government is prepared to entertain and possibly accept an application of the capital gains tax on the livestock industry similar to the capital gains tax imposed in the United States. Basically, they have a situation where you can opt for either a short gain or a long period. There is written in a kind of roll-in provision with regard to capital gains in the livestock industry. I now pose that question.
I apologize for being a little lengthy. The parliamentary secretary may not be in a position to answer yes or no. If so, I ask him to please not answer no. Can the parliamentary secretary give the committee some idea on this? Has he studied it? Has the government looked at the application of the basic herd concept rather than bring in its dissolution? Has he looked at the capital gains tax as it applies to American cattlemen, and can he give us an opinion on that question? Perhaps then we will better understand why the government did not accept it. In light of the guesstimate being based on the United States system, maybe we would be better off with their system. I wonder if the parliamentary secretary will give us his views in that regard.


Patrick Morgan Mahoney: First, Mr. Chairman, the hon. member is perhaps giving undue significance to my reference to the United States. With regard to the United States system I was referring to the length of time it would probably take our capital gains system to mature. That was strictly a timing matter. It is not basically related to the system itself but, rather, to the fact that you have a capital gains tax and how long it will take to reach what might be regarded as a normal plateau in terms of revenue and transactions.
I must confess that I am not sufficiently familiar with the United States system of capital gains tax on this particular type of asset to discuss it with the hon. member. Therefore I can neither say yes or not. I suspect that the debate on this section may be continuing tomorrow. Perhaps by eleven o'clock tomorrow I will have had an opportunity for some self-education.


John (Jack) Henry Horner: That is why I cautioned the parliamentary secretary. I am very reluctant to accept the answer "No" when a person does not have knowledge of the situation. I thank the parliamentary secretary for assuring me that he will look into the matter. I then ask him this question: what good is his guesstimate if he stands up within the next minute or so and says that our capital gains tax is not
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related to the United States capital gains tax? It seems to me it would be of little value.
I know the parliamentary secretary does not have to be well versed in the livestock industry, but this bill has been before us a long time. Section 29 deals with the basic herd concept and he and his officials know that this was a tax concession fought for by the livestock men, for value received and amply used, particularly by men who are reaching retirement age. The bill has been under study for a long while and surely the officials at least have considered the system of capital gains taxation employed in the United States as it affects the livestock industry.
The bill before us did not appear from nowhere. Surely we have the right to inspect an outline of the situation before we are asked to pass this section. Subject to correction, as a man engaged in the livestock industry I would much prefer the United States capital gains tax system to the system which is proposed here. I have other questions I should like to ask, but if the hon. member for Saskatoon-Biggar is anxious to take the floor I shall say no more at this time.


Patrick Morgan Mahoney: Perhaps I might say a word in clarification of this point before we move on to another plateau. The United States experience is one which basically involves timing. When we talk about a capital gains tax system and speculate about when it will reach what might be regarded as a norm of transactions and, hence, of revenue, it is really a question of acquisition of holdings, the length of time in which property of one sort or another is held and the disposition of the same, at which point the tax becomes applicable. We believe that the United States society is comparable to our own in this area and that their experience is valid for this purpose, which is not, of course, to indicate that the system we present is by any means identical with theirs.


John (Jack) Henry Horner: The point the parliamentary secretary has not noticed is that the United States system involves a time factor which is built in with application to the livestock industry. A taxpayer can opt for a short-term or a long-term application of the tax. This is where the number of years in the guesstimate is involved. Would the parliamentary secretary have one of his officials do a little study on this point overnight?


Patrick Morgan Mahoney: That is what I have undertaken to do.


John (Jack) Henry Horner: I appreciate that.


Alfred Pullen Gleave: Would the parliamentary secretary comment on a situation which as I see it may place the individual farmer in a difficult position? If we approve a capital gains tax as proposed, and if at the same time certain provinces decide to impose an estate tax, would the hon. gentleman agree to consider the position of the individual entrepreneur farmer as against that of the corporations? Would he care to consider the possibility of the survival of each of those two structures, bearing in mind that the individual is subject to capital gains tax and at the same time to estate taxation, while the corporations are subject only to the capital gains tax and then, possibly, at a lower rate?
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Patrick Morgan Mahoney: I am a little mystified as to the significance of the difference which the hon. member sees as between corporations and individuals at this level. It is true, of course, that corporations do not die, and hence there is no estate tax. But shareholders of corporations, who are the real farmers, do die and in a jurisdiction where death duties are applicable those duties will apply on the value of the interest they might have in a corporation. So I am not conceding that the owner of shares in a corporate farm is necessarily in a better position from this point of view than an individual farmer.
Of course, the decision of some provincial governments-coincidentally, those of the hon. member's political persuasion-to move in and occupy the field which the federal government intends to vacate is one which I rather regret. I think these provinces have perhaps ignored that they will be sharing in whatever increased revenues are collected as a result of the inclusion of capital gains in the tax legislation.


Alfred Pullen Gleave: It really would not matter whether the provincial governmen which proposes to levy on estate tax is of my political persuasion, or Social Credit or Conservative or Liberal because the net result would be the same. My understanding is that there is provision within the government's policy for the levying of an estate tax if four provinces agree on this procedure. I see the parliamentary secretary indicate that this is not the case. In any case, it is quite possible for this to be done.
My question is: Is the government prepared to look with equanimity on the imposition of both a capital gains tax and an estate tax on these individuals at the same time? Is it considered they will be able to hold enough capital to enable them to remain in business? I doubt that they will be able to do so.


Patrick Morgan Mahoney: It was clear in the budget announcement that it was the intention of the federal government to withdraw from the collection of estate and gift taxes. This indicated the government's view. At the same time, the imposition of an estate tax is a matter entirely within the competence of provincial legislatures. The federal government has not said it would continue levying estate taxes provided four provinces agree this should be done. What we have said is that we will collect it for them. The Department of National Revenue will collect provincial estate taxes if four provinces who do not already have collection machinery decide to enter this particular tax field. We would act purely as a collecting agent and would expect to be paid a fee. We would also expect the enabling statutes to be pretty well uniform, to be fair and reasonable, and so on.
But it would be purely a matter of making available to the provinces the tax collecting facilities of the Department of National Revenue, which we assume would be a more economical means of collecting this revenue than if the provinces were to set up their own collection divisions in the provincial public service.


William Gordon Ritchie: Mr. Chairman, before discussing capital gains in a general way I ask the parliamentary secretary whether he could clarify a matter for me. Section 31 is

November 8, 1971
Income Tax Act
known as the hobby farmer section and deals with a loss from farming where the chief source of income is not from farming. My question is: Does the department rule on whether a person is a farmer or a hobby farmer? If a person's income from a source other than farming exceeds his income from farming in any given year, is that person, for the purposes of this section, classified as a hobby farmer?


Patrick Morgan Mahoney: Mr. Chairman, it is not really a question of classification, it is a question of a person being able to offset losses from farming operations against his income from another source. The question of what is the chief source of income of a given taxpayer in a given year is a simple matter of calculation. If his chief source of income is from farming, then it may be he will sustain a loss for the entire year. But if some other source of income, say from professional investment or some other business, is the chief source of income, then he can only offset a limited part of his farming loss against such income.


William Gordon Ritchie: Take the case of a farmer who has a crop disaster and takes, say, a job building roads or something like that. For that year that is his main source of income. Are the losses he sustains in that year and which he may deduct restricted by section 31?


Patrick Morgan Mahoney: If whatever income he has from his farming operations is entirely offset by the cost he incurs in conducting those farming operations, then he is limited to the $2,500 as provided for in that section. Then above that $2,500 he may deduct half of the balance of his loss up to a total of $5,000 from his income as a construction worker on a road gang.


William Gordon Ritchie: Suppose a taxpayer sustains a $2,500 loss during his taxation year; can he include in that loss his property taxes on the land, the interest he pays on any mortgage on the land, and so on?


Patrick Morgan Mahoney: As far as his farming operations are concerned, they are factors that go to determine his cost. If they bring his net to a loss position rather than to a profit position, then yes they are part of the loss.


William Gordon Ritchie: If his loss is greater than $2,500 and his property taxes and interest on his mortgage have to be paid, I understand he would use what is called an accumulated cost basis in assessing his tax; is this correct?


Patrick Morgan Mahoney: This is for a hobby farmer who may have an opportunity to write off that loss later against income other than farming income. But this is not a section that would apply to a bona fide farmer. We are talking about people who run a farm as a sideline. I think the hon. member could conceive of a situation where a farmer might find himself in this position in a given year, but I do not think it happens in practice. A hobby farmer is a hobby farmer; a bona fide farmer is not.


William Gordon Ritchie: I find this section a little confusing. Today you can easily lose $2,500 on a very modest farming operation if you have a bad year. To get back to the construction worker, his principal income would be that derived from road building in the year that he had a crop failure.

Let us say he sustains a loss of $3,500, $1,000 more than for which relief is allowed. Five hundred dollars is deductible under the one-half provision. The interest on his mortgage would no doubt be quite heavy if he were just starting his operation, and so would his property tax. These items would not be carried back to the farming income that he may well expect to earn in the years ahead. Therefore, as far as I can see he will never be able to deduct his losses until he sells his farm; and if he realizes a capital gain he may get some recompense for that loss.
I think this is one area which should be looked at. I think the problem is one of definition. What is a so-called hobby farmer? Some people are hobby farmers, but according to surveys I have conducted I have found that over 50 per cent of our farmers have some income other than from farming. Very often this income is earned by the wife. But as far as our tax laws are concerned I think we are moving toward some sort of income splitting and some recognition will have to be given to family farming units if this is the case.
A good many farmers have income derived from sources other than the actual farming operation. Very often this source of income represents in cash the chief source of income. As a matter of fact, many farmers in western Canada and in my area admit that if it were not for their jobs outside the farming industry they would not be able to remain on the farm.
I should like to speak for a few minutes on the problem of capital gains as applied to farming. As a broad, general philosophy I believe a capital gains tax is really more important to the farming industry and will have greater impact there than oh any other segment of our economy. I believe it is important to recognize that, because of the peculiarities of the agricultural industry. It has been said that over the years everything in the capital gains field had been narrowed down to include all groups except the stock market and the farms which had been virtually cut out. I think this is probably reasonably accurate in a general way. A person might sell a house once, but if he sold it a second time the revenue people would be around and would say he was in the business of buying and selling. Only in the stock market would the capital gains not apply, and also to a large extent in farming.
I think people who have stocks may well be able to cope with the capital gains within reason, but I suggest a farmer would not be so successful in coping with the situation. I believe this is a very serious problem and one we should take a good look at. As the hon. member for Crowfoot said, I do not think we should look at capital gains in respect of farming without comparing the situation in the United States. In Mr. Nixon's surcharge episode we have an example of how important it is to have our tax structure competitive with the tax structure in the United States.
Mr. Nixon said he intends to turn the balance of payments around in favour of the United States by reversing the trend in respect of the $13 billion. He expects the farmers in the United States to be one group of people who would reverse this trend. I believe with that in mind we must look very closely at our policy to make sure our
November 8, 1971

farming position will be good enough to compete with the United States in the coming competitiveness which is ahead of us.
We talk about the $80 million involved in the process of helping manufacturers hurt by the United States surcharge, but no group will probably feel it more than the farmers. For a year or two Mr. Nixon has been telling us he intends to have United States agricultural products on the markets of the world. He has said he is not forgetting that the United States has become alarmed about the trend in world agricultural trade.
The Americans have been explaining that their farmers are highly efficient and that the United States government wants them to share in the nation's growth and in world markets. They, in effect, are calling on Japan and the European Common Market countries to develop policies which would allow for a comparative advantage in world agriculture and an increase in agricultural trade. In this way farmers of the world would be able to seek wider markets and consumers could look forward to rapid improvements.
I believe this is important, because when you consider that all Canadian farmers have to sell abroad it is obvious that we must compete with the United States and must have a capital gains structure in line with that in the United States. For instance, the United States does not produce rapeseed, but the soybean market is very competitive with rapeseed. The United States also grows flax in large quantities. They also grow barley in large quantities and, in addition, have corn which is very competitive. So we must look very carefully at the capital gains structure under which Canada will operate.
The United States has designed its farm policy to support an orderly expansion of world trade and has in general avoided rigid commodity by commodity planting restrictions. It also avoids price support loans which serve only as an umbrella for uneconomic production. It provides levels of price support to farmers which permit free movement of commodities into world markets. It includes direct payments to bring returns of farmers up to a specified goal without stimulating unneeded production. In other words, it is designed so that agricultural trade can be carried on in a reasonably unsubsidized and unfettered way.
The United States has given a great deal of thought to its agricultural program and has moved away from many programs in which they have been involved. I believe this is brought into sharp focus when we attempt to bring in a capital gains tax. We certainly are increasing the taxes which the farmers must pay to the government. The farmer either must obtain more for his product, or the money must come out of his savings or out of the capital of the farming operation. This is the reason I believe it is most important that we look at what the United States is doing and relate it to our own trade. In a general way, Ottawa's policy in respect of agriculture shows a tendency to restrict our produce, with a few exceptions into the domestic market. I do not think this is a good thing.
Turning to the matter of the basic herd, I believe we must look at this question because, after all, North America virtually is one meat market involving cattle, pigs, and so on. The price structure remains the same; as it goes up
Income Tax Act
in the United States the flow is south, and as it goes up here the flow of produce is north. This means that if our farmers are to survive they must compete on an equal basis so far as possible with United States producers. If we consider all the capital gains provisions involved in Bill C-259 I do not believe it requires any great seer to realize that compared with the Americans our producers will be at a basic disadvantage in the long term.
Everyone seemed to be happy that the estate tax was phased out and replaced by a capital gains tax. This was the proposal of the Minister of Finance, but really it did not mean much because only 25 per cent of the estate tax went to the federal government in any event. Now we are faced with the possibility of an estate tax being levied by the provinces. Many provinces feel they must levy an estate tax. They feel it would be sacrilegious not to levy it because the wealth must be divided.
I suggest that the capital gains tax as envisaged in Bill C-259, as well as the estate tax-and I am sure both of them will be enforced in nearly all the provinces of Canada-will create extreme hardship in agriculture and in the farm units as we know them today. I believe that in the matter of stocks more flexibility is available to people than in farming where an extremely rigid capital structure exists. I believe it is a good capital structure which has provided a high level of efficiency.
The western grain industry, with practically no subsidy, has been doing quite well, and our exports have provided around 10 per cent of our total exports in western grains, not to the United States where we cannot diversify our trading arrangements but to countries where we can diversify our trade. I think the farming industry has been most useful in this respect. As a matter of fact, Canada's growth would have been greatly impeded had large amounts of grain not been exported over the years.
I should now like to turn to the proposal to wipe out the breeding herd as a capital asset. By doing so the government will obviously increase taxes and take people out of the cattle breeding business. The basic herd provisions have not heretofore been codified in the statutes and there are variations from province to province, but until now it has been recognized that a breeding herd is a capital asset. This is a most serious omission in the legislation.
It may be that the tax authorities, not being familiar with the cattle industry, have assumed that the basic herd provision has been nothing more than an arbitrary concession to farmers, a concession which they firmly believe would now be discontinued. We most emphatically disagree. The problem with capital gains in farming is that, as I have said, our tax structure is on a yearly basis- whatever your cash income for that year may be, you have to pay tax on it no matter whether it is a risk dollar, a non-risk dollar or a salary dollar, and the farmer has the problem of saving money in the yearly stages of his farming life to pay for the basic capital needs of the farm.
It is obvious that the purpose of the basic herd concept has not been understood by the tax authorites, for the stated justification for phasing out the provision on the basis that the introduction of a capital gains tax reduces the need for the basic herd provision is invalid and misses the main purpose for which the basic herd provision was

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Income Tax Act
established. It is the argument of beef producers, and I agree with it, that enlightened tax legislation should provide for the definition of a breeding herd as a capital asset. I think we first have to decide whether or not it is right to define a breeding herd as a capital asset. It takes many years to amass a breeding herd. A breeding herd of livestock is analogous to machines in a factory. In the case of the beef breeding herd, the product is calves which are either fed for slaughter or returned to a breeding herd for the production of more cattle. So cows wear out as do machines in the factory.
Let us consider why the loss of the basic herd provision would be such a disaster and would cause considerable difficulties to livestock farmers in increasing their herds as rapidly as they can, more so than at present. I think the old adage is well established, that farmers live poor and die rich. This will be made worse by the loss of the basic herd provision. Let us consider the reasons for this. Obviously, during the early years of establishment of a breeding herd the farmer will have many expenses and little or no income. He will have the cost of buying his cattle, he will have to retain as many as he can and he will have very little income.
He can have a five-year averaging provision, but at the end of the five years he will not be much further ahead than when he started. In the second five years, again he will not be further ahead. During these years, in many cases the farmer may not even be able to fully utilize his personal exemption. Apart from that, he may not have been able to pay into the Canada Pension Plan. Although we hear of citizens who are working very hard and who are useful contributors, they are classified as being poverty stricken because they will not be able to contribute to the Canada Pension Plan.
Thus it can be seen that this tax legislation would mitigate against the satisfactory growth of newly-established breeding herds. This means that the farmer will have to build up his herd over a longer period of time. He will be obliged to sell his heifers in order to generate sufficient income to partially offset his legitimate expenses. During the years of large sales of cattle from the breeding herd, or in fact at dissolution, a high rate of taxation would apply. Also, it would be quite normal for large sales or dissolution to occur in years of lower than normal expense. In other words, almost certainly at some time in his life he will be faced with abnormally heavy taxes.


Gérald Laniel: Order, please. The time allotted to the hon. member has expired.


Mr. Blair:: Mr. Chairman, one of the sections of the income tax legislation which causes an undue amount of alarm and concern in my constituency is section 31. This deals with the disposition of a taxpayer's income where the chief source of income is not from a farm and where he may in various years have farming losses to charge off against his income. The rulings that have been made with regard to a number of people in this position in my constituency have caused me great distress. In my opinion, the Department of National Revenue has chosen to apply a narrow and restrictive definition to what is the business of farming-


Alfred Pullen Gleave: I am glad to have your support.


Duncan Gordon Blair: -with the result that unless a person is a farmer in a large way, or unless he is a farmer who has actually earned a profit in a given year, there seems to be a disposition in the Department of National Revenue to disregard him entirely as a person who is engaged in the business of farming.
I have several examples, unhappily, that come to mind. I know of a man who is a retired serviceman, who has a relatively small pension and who is trying to establish himself as a farmer. He has no great capital resources and as a consequence has had to build up his operation slowly over the years. He has experienced losses, but there is no question that he devotes himself almost entirely to the conduct of his farming operation. Yet because he has not prospered at it immediately, he has been told that he is not sufficiently in the business of farming to qualify for the privilege of deducting the losses from his farming operation from his other income.
I know of another case where a young couple would like nothing better in this world than to establish themselves as large farmers on a prosperous farm, but they have not the capital resources which would entitle them to do that, with the result that the husband has another job and practically every dollar the family earns is devoted to building up the family farm. The financial results of their farming enterprise have not been spectacular to date, but from what they have accomplished I would judge that over a period of time they are likely to accomplish their purpose. In circumstances like these I would suggest it is greatly in the national interest that they should be encouraged. But, again, because they have not prospered, because they have not a great herd of cattle, because they have not a huge collection of farming machinery, the revenue department has determined that they are not engaged in the business of farming and therefore has ruled against the deductibility of the losses of their farming operation from their other income.
I have made many submissions in the course of the last few years against these rulings. This has always resulted in the repetition to me of the various definition sections of the Income Tax Act-the definitions of what is a business and what is farming. If these were wealthy people I am quite sure they would have the opportunity to exercise their right to challenge these rulings in the courts. But it is very difficult to advise people in marginal positions like this to embark on costly litigation and, as it were, to make themselves legal guinea pigs in order to determine whether or not a precise and correct definition is being applied to the words of the statute.
So far as I can see there is no great change in the pattern of these statutory provisions in the new bill, but I hopefully ask the parliamentary secretary whether there are any changes and whether it is intended that the same course of interpretation and administration will apply under the new act. I express the hope that it will not and that the administration of this statute from now on will make a division between that fortunate group in the community whom we have traditionally called hobby farmers, and on account of whom these restrictive provisions were initially put in, and the other group, the bona fide, small,
November 8, 1971

struggling persons who want to become full-time farmers, so that some balance can be struck in their favour.


Mr. Southam:: Mr. Chairman, I took part in the general debate on clause 1 of the government's tax reform bill, C-259, back on September 29. This evening we are now in committee of the whole studying sections 28 to 31 inclusive or, more particularly, those sections of the bill dealing with several aspects related to farming.
Like many other pieces of government legislation, this bill, as time goes by, is coming in for more and more criticism. As the hon. member for Annapolis Valley said earlier in the debate, it is confusion compounded. This confusion is not only related to the sections dealing with agriculture but it seems to be the problem in every area of the 41-pound, 710-page document that we are examining. I say this because as time goes by members' desks are being piled high with briefs from every sector of our society, pointing out serious defects in the bill affecting their respective areas of concern.
These defects have been amplified and emphasized by the fact that the Minister of Finance has been forced to table over 125 amendments or subamendments to the bill since it was introduced. What he should be doing is taking the recent advice of several provincial premiers. He should shelve the bill and rewrite a proper tax reform bill in the future. In the meantime, the only practical reform clause in this bill, that increasing the income tax exemptions for low-income earners, could be implemented at once by a simple tax amendment that I am sure would be supported by all members of the House.
As several members of the official opposition have already pointed out in this debate, various farm organizations including the Canadian Federation of Agriculture, the National Farmers' Union, the prairie pools, farm cooperatives and various livestock associations, including the widely supported Canadian Cattlemen's Association, have all taken strong exception to many provisions in the bill.
It seems to me that many of the principles of the bill as related to agriculture were adopted from the agricultural task force report. In the view of many farmers and farm spokesmen it appears that many of the suggestions that were put forth in that report, if implemented, would hasten the day of the agricultural industry's demise. The experience we have had with the Lift program and with the proposals set out in Bill C-176, which is now resting quietly on the bottom of the government's agenda, and latterly with the furore created over Bill C-244, the grain stabilization act, along with the clauses in this bill would all indicate that this total load of unacceptable legislation could be the final straw to break the camel's back in so far as the agricultural industry is concerned.
Let us look at a few of the comments submitted by the Canadian Federation of Agriculture. Its members have had access to some good research and have taken the time to make a close study of those provisions of the bill relating to agriculture. Even at the risk of trespassing on the time of the House, and although there may be some repetition here simply because I have not been able to listen to all the contributions made thus far, I wish to put on record some of the submissions made by the Canadian
Income Tax Act
Federation of Agriculture. Under the heading "The family farm corporation," the federation says:
One general point we would like to make is that all provisions applicable to farmers as individuals should in principle be applicable to family-held farming corporations. We suggest there be some general provision in the law providing for this. This requires definition of what a family farm corporation is. We would suggest perhaps that 80 per cent of all shares require to be held by members of the family, and 80 per cent of the income to the corporation be from the farming operation. This can be important in many connections.
Under the heading "Transfer of a farm within a family, whether by sale or inheritance, without realization of capital gains," it says:
There is, as we understand it, absolutely no provision for farms to be transferred within a family (except to a spouse), whether by sale or inheritance, without immediate realization of capital gains This would be true of the sale or transfer of a farm to a son, or inheritance by the son of the farmer. We have been informed that this problem can be avoided in many cases by good estate planning through incorporation of the farm, and this may well be so.
I point out to the parliamentary secretary that every farmer, particularly every small farmer, has not the financial wherewithal to go to tax experts and lawyers for the advice suggested here, but nevertheless it would sometimes result in the wrong decision being made relative to this bill. The brief continues:
Even in such a case the death of the son, holder of common shares in an incorporation, prior to that of the father, could result in realization of taxable capital gains while the father was still in active charge of the running of the farm, creating severe financial problems.
Beyond this, however, we do not believe that it should in all cases be necessary for the farmer to incorporate in order to achieve stability and continuity of the farm business within the family.
Payment of tax on capital gains out of the tied-up assets of an ongoing family farming operation could and probably would be disruptive, and place the continuation of the enterprise in jeopardy.
We would again very strongly urge that transfer of a farm to the son or daughter of a farmer, whether by sale, gift or inheritance, carry with it no realization of capital gains at that time, but that in later disposition the capital gains be calculated as of from the valuation initially established for capital gains purposes. The $1,000 per annum exemption provision should apply for the whole of this period of course.
Finally, while the federal government has, as far as its own funding is concerned, given up use of estate and gift taxes, this does not settle the question of what may be done by the provinces in this area. Farmers, under your proposals, are still potentially faced with double taxation of the farm on inheritance-something which should at all costs be avoided.
Mr. Chairman, this point was belaboured and discussed at length earlier this evening by interested members. However, I think I should refer to a brief presented by the Canadian Cattlemen's Association on November 1, 1971, which also emphasizes the importance of this legislation. The brief reads as follows on page 6:
Moreover, it is not inconceivable that various provincial governments might enter the areas about to be vacated.
We believe it is incumbent upon the several provincial governments to clarify their intentions in this area and equally incumbent upon federal government to seek such clarification.
It is unfair that Canadian citizens be asked to contemplate capital gains taxes without being fully informed of the status of succession duties and gift taxes as contemplated by the various

November 8, 1971
Proceedings on Adjournment Motion
provincial governments. It had been the public's understanding that the proposed legislation would result in a rationalization, co-ordination and simplification of the tax laws rather than a fragmentation and duplication.
It is not difficult to imagine the devastating effects that might ensue should provincial succession duties and/or gift taxes be added to capital gains taxes.
One of the most disastrous effects that is likely to flow from the combined impact of capital gains taxes and succession duties, if instituted in some provinces, will be the incentive thus created for foreign ownership of Canadian farms and ranches. This will happen, we are advised, because foreign owners will be in a position to avoid taxes on both capital gains and succession duties. To the extent that this is true Canadian farmers will be at an extreme disadvantage in competing with foreign investors for ownership of Canadian soil.
We are certain that this disadvantage was not contemplated in the draft legislation.
Mr. Chairman, here again this has been an important issue in western Canada, as I know from the mail I receive and from questions put to me in the boundary areas of Saskatchewan. Farmers there have been facing this problem for some time and are quite concerned about the tax advantages that American farmers would have by coming up here and availing themselves of our natural resources in the form of farmland. I should like the minister or his parliamentary secretary to clarify this point, "We are certain that this disadvantage was not contemplated in the draft legislation." The Cattlemen's Association brief goes on to make the following recommendation on page 7:
We therefore urge the federal government to establish an undertaking with provincial jurisdictions to the effect that, revenue lost to provinces through the discontinuation of federal estate taxes and provincial succession duties be reimbursed from funds made available by the federal government.
To expedite this principle we would recommend further that, should any province impose estate taxes or succession duties;
A tax abatement system be introduced in the federal legislation such that the amount of capital gains tax payable may be abated by the amount of succession duties payable to the province.
As we in the farming industry know, particularly in western Canada, this concern of double-taxation is a very basic problem. Incomes are low as a result of decreasing prices for farm produce, input costs have been accelerating, machinery, repairs, taxes, fuel and high interest rates have all added to the load and any further tax placed on the farmer's back at the present time will be the straw to break it.
May I call it eleven o'clock, Mr. Chairman?
Progress reported.



PROCEEDINGS ON ADJOURNMENT MOTION

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

Stanley Howard Knowles: Mr. Speaker, on Friday, October 22, as recorded in Hansard at

page 8926, I put this question to the Prime Minister (Mr. Trudeau):
Mr. Speaker, if the President of the Privy Council were still here I would put this question to him but since he has departed-
That simply meant departed to Nova Scotia.
-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?
The Prime Minister replied to my question as follows:
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.
I have to say, Mr. Speaker, that I was somewhat disappointed in the answer which the Prime Minister gave me on that occasion. This subject of the conflict of interest so far as elected representatives and highly-placed government officials are concerned is a very important one and it has received a good deal of study in the United Kingdom, the United States and in other jurisdictions. Actually, in some of these jurisdictions legislation has been adopted or rules have been laid down to prevent as far as possible a conflict of interest or, at least, to make sure that the interests of certain persons are declared.
As a matter of fact, when the present Minister of National Defence (Mr. Macdonald) was President of the Privy Council certain studies were conducted under his guidance. I have in my hand copies of two sessional papers that were tabled by the former President of the Privy Council. One was tabled on Wednesday, July 16, 1969; this is a document of 49 pages. Another was tabled on Wednesday, January 28, 1970; this is a document of nine pages. These, of course, can be found in the sessional papers' office. The point of referring to them is to indicate that the matter is a serious one to which study and attention have been given.
I do not want to be disrespectful about the Prime Minister's answer. However, it seems to me that on Friday, October 22, he was simply saying to me, "We are all right; we have looked into the matter and find we are quite pure, so nothing more need be done about it." I did not think much of that answer and I was glad to learn that the Parliamentary Secretary to President of the Privy Council (Mr. Jerome) was to give me an answer tonight. Here is his chance. I hope he has a better answer to give.


James Alexander Jerome: The words, "the study was pursued as far as we could within government circles" could mean, on the one extreme, that which the hon. member has taken from them; on the other extreme they could mean that we are doing everything possible to deal with this important subject. Undoubtedly, since the Prime Minister, according to everybody's understanding, was answering a question which should have been directed to the President of the Privy Council (Mr. MacEachen), since it was that office that had been responsible for the study, the Prime Minister's answer was brief. I think we must look at it in that light.
I think we must put this construction on the answer: The Prime Minister was trying to convey the meaning that everything had been done that could be done and that everything was being done that could be done in continuing the study of this important question and that, indeed, the conflict of interest with respect to all elected representatives is an important subject, it has been treated in that way and we will continue treating it in that way.
There are immense difficulties, of course, in reducing to comprehensive legislation the rules that can eliminate all the fields of conflict of interest that can be contemplated without at the same time restricting too greatly the opportunity for all people to enter fairly into the legislative field as elected representatives. However, as difficult as that may be, I assure the hon. member that it is the desire of this government to do everything possible in that way.
In case the hon. member took from the Prime Minister's answer the impression that the work had stopped, or that the government was satisfied with the study up to that point and was not going to do anything more, I specifically want to assure him that is not the case and not the meaning the Prime Minister intended to convey. In fact, the work is continuing in a very serious vein and at a very serious level at the present time. We hope the study, research and reporting aspect will be completed fairly soon. Of course, depending on the nature of the report the government will carry on to recommend and draft legislation in line with the recommendations that will come forward. It is too early to say at this stage because the study has not yet been completed.
I again wish to assure the hon. member that the study is continuing and that the government is very much concerned about the results of the study. It has gone on at a very high level of government and on the political side as well. In conclusion, we hope the study will soon be completed and if possible, if the study so indicates, legislation will be drafted in due course.


Stanley Howard Knowles: That is a great deal better.
EXTERNAL	AFFAIRS-CANADIAN-SOVIET	COM-



MUNIQUE-EFFECT OF EXCHANGE OF SCIENTIFIC AND TECHNOLOGICAL INFORMATION ON DEFENCE-SHARING ARRANGEMENTS WITH UNITED STATES

Mr. J. M. Forrestall (Dartmouth-Halifax East):: Mr. Speaker, I am a little curious about who is to respond. I had hoped for the minister's presence or at least the presence of his parliamentary secretary. My question arises out of the most recent agreements of exchange with
Proceedings on Adjournment Motion
the U.S.S.R. If I can set the premise which brings me here this evening, I can do this best by repeating the question that I asked in the House the other day. In the absence of the Prime Minister (Mr. Trudeau) I directed the question to the Minister of National Defence (Mr. Macdonald). It related to the Canadian-Soviet communique released the other day in which there were at least six, and possibly seven different references to an increase in the level of exchange of scientific and technological information with our allies. The specific question was as follows:
Is the minister satisfied that such an extended level of exchange of this type of information will not impair our capacity to remain within the defence-sharing arrangement with the United States?
The minister replied:
Yes, Mr. Speaker, I am satisfied that it has not been impaired in any way.
I asked a supplementary based on the same levels of exchange of information as outlined in the protocol with the Soviets. I asked whether this would hold true with respect to the level at which we exchange particular scientific and military information with our allies in the United States. The minister replied:
Mr. Speaker, it is a little difficult to measure that exactly, although the level of exchange at the moment is very high.
My concern is with the defence production arrangement with the United States which now provides Canadians with in excess of 110,000 jobs. This is meaningful. There is a very apparent sentiment in Canada today which leads many Canadians to believe that this government has deliberately extended, lengthened or plotted the pipelines of exchange of information with the United States to the point where these two points are in jeopardy: first, the willingness of the United States to remain in the defence production-sharing arrangement with the people of Canada; second, and even put hypothetically, their preparedness to remain in this program with us that will result in a downgrading of the level at which they permit an exchange of scientific and technological information with us.
To illustrate the seriousness of this question I cite one or two other points. First, it is interesting to note that Canadian military and scientific people have received no direct output from such scientific sectors or "think tanks" as the Rand Corporation, for example. I mention this because it is startling and specific and because it highlights the degree to which those involved in science and technology of defence production and defence planning feel that relations between Canada and the United States have'deteriorated in recent years.
The question must be faced by the government in light of related economic difficulties. I would welcome from the parliamentary secretary an answer which is a little more frank and forthright than the response given by the minister which indicated that the level at which we exchange technical and scientific information remains very high. I think this is nonsense. The minister was probably carried away by the events of that week, having just returned to the House after seeing Mr. Kosygin off to Cuba. Possibly he was not fully cognizant of the response he gave to the question. To back up this assertion, and in

November 8, 1971
Proceedings on Adjournment Motion
conclusion, I might say that article II of that protocol, the Canada-U.S.S.R. General Exchanges Agreement, states: Both governments will encourage and facilitate the exchange of visits by scientists and scientific research workers and the exchange of scientific information.
The whole basis of our defence research production program and sharing program rests entirely on the willingness of the United States to exchange details of highly classified strategic military information with respect to weapons systems, and so on. I suggest that this confidence has been impaired and that the people of Canada deserve a better answer than the one the minister gave the other evening.


Bruce Andrew Thomas Howard: Mr. Speaker, I am happy to reply to the hon. member and to reassure him in his concern about this matter. Canada has entered into a new agreement with the Soviet Union to exchange information on technology for the purpose of promoting mutually beneficial business arrangements between the two countries as part of our program to diversify our trade relationships throughout the world. But I hasten to assure the hon. member that any such arrangements have not and will not infringe in any way upon Canada's long standing arrangements for the sharing of military information with the United States.


J. Michael Forrestall: They already have.


Bruce Andrew Thomas Howard: I assure the hon. member that any exchanges of information or any sales of material to the Soviet Union have to be agreed to by the Department of National Defence and that no sensitive materials may be exchanged. We have a list of specific materials and items which cannot be exchanged with the Soviet Union. We are obligated in our agreements with the United States to refrain from exporting U.S. technology to the Soviet Union. We honour those agreements and we will continue to honour them.
Furthermore, we have commitments to NATO that we will consult with them on the exchange of materials with any country other than NATO countries, and we honour those commitments and will continue to do so. I can assure the hon. member that his concern is unfounded and that we will continue the course of action we have followed in the past.



CANADIAN NATIONAL RAILWAYS-LAY-OFF OF DOCKYARD EMPLOYEES, ST. JOHN'S NFLD.- GOVERNMENT ACTION

Mr. Walter C. Carter (St. John's West):: Mr. Speaker, my question to the Minister of Transport (Mr. Jamieson), as reported in Hansard for November 5 at page 9367, was prompted by the recent action on the part of Canadian National in St. John's, Newfoundland, and what I consider to be grossly unfair treatment accorded 28 of their employees. In this particular instance I am compelled to raise two objections. First, I consider that with proper planning and consideration on the part of Canadian National the lay-offs in question were not necessary. Secondly, I take the strongest possible objection to the callous and almost inhuman treatment given their

employees by Canadian National officials in Newfoundland, as evidenced by the way the lay-off notices were issued.
Union officials have informed me that on October 25, 22 members of the boilermakers' union and six shipwrights first received word of their impending lay-off. On October 27 the lay-off notices were rescinded. On October 29 layoff notices were again issued, only to be rescinded again on November 1. On November 2 the men were finally told that on Monday, November 8, their services would no longer be required. What kind of treatment is that to give men who in many cases have large families and have given the best part of their adult lives to service in their trade for Canadian National?
Is it any wonder that these men, as well as their fellow employees have lost confidence in Canadian National management in Newfoundland? How dare they toy with the jobs and livelihood of a large number of people in such a heartless, cold-blooded way! One would not expect that kind of treatment from any employer, least of all from one of the largest corporations in this country. This is just one of many indignities imposed on Canadian National workers in St. John's by management in recent years.
Canadian National's St. John's operation can rightfully boast of having on its payroll a group of dedicated, competent and highly skilled workers. It is unfortunate that the fine attributes of the workers have not been matched by high calibre management as well as the facilities provided to enable them to be in a position to compete with their mainland counterparts and to realize the operation's true potential.
St. John's has been referred to as the service station of the Atlantic. Our geographic position lends itself to a truly exciting prospect in so far as ship repairs and related work are concerned. I am of the opinion that we are not taking full advantage of our potential in that respect and the workers themselves are being denied opportunity for full and lucrative employment. Too often must they contend with lay-offs which have been brought about mainly by inefficiency on the part of management. Today, with the high cost of living and with the normal financial commitments that are expected of family men, C.N. dock-workers in St. John's can ill-afford the luxury of a ten-month work year.
What is needed, Mr. Speaker, is a thorough investigation into all aspects of Canadian National's drydock operation to determine, first of all, the potential of the port as well as an inventory of existing facilities, their capability of being able to cater to our potential under existing conditions and the feasibility of upgrading facilities at the dock which could, in my opinion, result in continuous employment for the existing staff as well as a large number of others who could be employed there.
In Newfoundland there is a widespread feeling that Canadian National has embarked upon a phase-out program. We all know the story of the abandonment of our rail passenger service, a plan that was well calculated and well executed by Canadian National. In recent months we have seen evidence of a repeat performance with regard to our rail freight service. I understand that the coastal
November 8, 1971

boat service is in danger of being abandoned and I suspect that next on the list will be our drydock operations.
The other day we received an interim report from the railway transport committee concerning the study of a rationalization program for the Montreal-Toronto-Van-couver passenger train services operated by CN and CP. It is regrettable that the second study commissioned by the railway transport committee of a similar nature, wherein they plan to undertake an investigation of other principal passenger services in the Atlantic region by CN and CP rail, will terminate in Nova Scotia.
It is about time Canadian National and the Canadian Transport Commission recognized that a transcontinental railway should not terminate in Nova Scotia but in St. John's, Newfoundland. It is a little ironic that while the railway transport committee appears to be so concerned with respect to finding ways of upgrading a transcontinental railway service in Newfoundland they have adopted an opposite course, because in our province they have apparently adopted different criteria and instead of upgrading that which we had, they have imposed upon us a passenger service that would not be acceptable in any other part of Canada.
I should like also to call upon the powers that be, the Minister of Transport and the Canadian National officials, to show a deeper concern for the plight of our Canadian National dockyard workers, especially the victims of the most recent lay-off. I would also urge them to develop a closer liaison with Canadian National workers in St. John's. I suggest that if and when they undertake a study and investigation of the docking potential of our dock, as well as the capabilities of existing facilities, they involve the heads of the unions at the CN dock at St. John's as well as some of the senior employees who, having spent years working there, have accumulated a wealth of information which I am sure could be of tre-
Proceedings on Adjournment Motion
mendous help to Canadian National in assessing the potential of the dock.


Bruce Andrew Thomas Howard: Mr. Speaker, I am pleased to respond this evening for the Minister of Transport (Mr. Jamieson). He is presently on his way back to Ottawa from Newfoundland.
As explained in the House last Friday by the minister's parliamentary secretary, the situation at the CN dockyard is dependent to a very large extent on the number of projects which CN are able to attract to the yard. As the hon. member knows, there normally is a drop in the workload at this time of year. This necessitates a reduction in the number of employees. Canadian National have advised the minister they are searching actively for more work which could be done in the dockyard and that every effort will be made to keep as many men as possible employed until the time when the coastal boats start coming in for annual maintenance, usually in January.
It is because of the company's attempts to obtain extra work that this confusion arose. The company was under the impression that additional work was coming in and it would be possible for them to maintain employment in the dockyard. But this proved to be false. They were unable to obtain the orders and for that reason confusion arose and the men were laid off again. The minister has had direct communications with the machinist union. They are aware of the efforts that the CNR has made in order to bring additional work to the dockyard.
The hon. member has made a number of valuable points this evening. I will be happy to bring them to the attention of the minister. However, I assure the hon. member that the minister has been in close contact with the CNR and with the union on this matter and he is confident that the CNR is making every possible effort to obtain whatever work is possible in that area to maintain employment in the dockyard at St. John's.
Motion agreed to and the House adjourned at 11.30 p.m.

Tuesday, November 9, 1971