1971-11-29

OFFICIAL REPORT

[Stage Direction]
THIRD SESSION-TWENTY-EIGHTH PARLIAMENT 20-21 Elizabeth II

[Stage Direction]
Published under the authority of the Speaker of the House of Commons by the Queen's Printer for Canada
Available from Information Canada, Ottawa, Canada
[Stage Direction]
Monday. November 29, 1971


[Stage Direction]
Ninth report of Standing Committee on Procedure and Organization-Mr. Blair.
[Editor's Note: For text of above report, see today's Votes and Proceedings.]


Right Hon. P. E. Trudeau (Prime Minister):: Mr. Speaker, I wish to announce that following proclamation of the Canada Development Corporation Act, the first meeting of directors of the corporation was held today in Ottawa. Under the legislation the government must designate the initial head office. This is to be at Ottawa, but the government has made known to the board of directors its wish to see the location of the head office moved to Vancouver, British Columbia, within two years.


Some hon. Members:: Hear, hear!


Pierre Elliott Trudeau: At this morning's meeting, the directors elected Mr. H. Anthony Hampson as chairman of the board, and Mr. M. A. Crowe as president.
Mr. Speaker, under Standing Order 41(2), I should like to table the list of directors, together with biographical notes.



AGRICULTURE


Mr. Adrien Lambert (Bellechasse):: Mr. Speaker, under the provisions of Standing Order 43, I would like to move a motion on an important and urgent matter.
A study and measures are urgently needed in order to help hog, egg or turkey producers whose returns for their production were not high enough during the past year, and who were forced to pay for the feed they used prices out of proportion with the selling price of their production, because of an inadequate cereal policy in Quebec
and the Atlantic provinces, producers in Quebec alone having incurred a $16 million deficit in 1971.
Therefore, I move, seconded by the hon. member for Portneuf (Mr. Godin):
That the House immediately undertakes a study on the whole matter of the deficit incurred in the last twelve months by hog, egg or turkey producers in Quebec, and on the government cereal policy in order to invite the Department of Agriculture of Canada to co-operate financially with the government of Quebec in giving producers compensation for losses incurred and avoiding numerous bankruptcies in that area.


Mr. Speaker:: The House has heard the motion moved by the Hon. member. There must be unanimous consent of the House under the provisions of Standing Order 43. Is there unanimous consent?


Some hon. Members:: Agreed.


Some hon. Members:: No.


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



PROPOSED STANDING COMMITTEE-REQUEST FOR UNANIMOUS CONSENT TO MOVE MOTION UNDER S.O. 43

Mr. Lome Nystrom (Yorkton-Melville):: Mr. Speaker, I rise under the provisions of Standing Order 43 to ask the unanimous consent of the House to move a motion of urgent and pressing necessity. I do so, Mr. Speaker, in light of a proposal over the weekend by the Secretary of State (Mr. Pelletier) regarding what is called a domestic peace corps style program as well as the necessity to study the report of the task force on youth. In light of this, I move, seconded by the hon. member for Assiniboia (Mr. Knight):
That this House establish a Standing Committee on Youth in order that there be a continuous study of steps and proposals that might be undertaken for the development and participation of young people in our society.


Mr. Speaker:: This motion is also proposed under the terms of Standing Order 43. Is there unanimous consent?


Some hon. Members:: Agreed.


Some hon. Members:: No.


Mr. Speaker:: The motion will not be put at this time.

November 29, 1971
Questions



FINANCE


Hon. Mitchell Sharp (Secretary of State for External Affairs):: Mr. Speaker, on October 28 the hon. member for York South (Mr. Lewis) asked a question of the Minister of Finance (Mr. Benson) regarding the method of calculating provincial allocation of the $160 million employment loan fund. I would like to table copies of statements in English and French setting forth the basis.



QUESTIONS ON THE ORDER PAPER

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(Questions answered orally are indicated by an asterisk.)

Mr. Coates: 1.	Have any meetings been held since July 1, 1971, between the Minister of Energy, Mines and Resources, or any of his officials, and the Premiers of Nova Scotia and New Brunswick, or their representatives, with regard to the terms of reference covering the re-examination of the 1969 Fundy Tidal Programming Board Report and, if so (a) on what dates were such meetings held (b) who attended the meetings?
2.	Have satisfactory terms of reference been agreed to by the three governments involved and, if so (a) on what date were they finalized (b) what are the terms of reference?
3.	(a) What are the names of the individuals who will carry out the re-examination (b) what are their respective positions (c) were they involved in the original examination?
4.	If satisfactory terms of reference have been agreed to, has work started on the re-examination and if no agreement has been reached, will a meeting be held by the parties involved to discuss the matter and, if so, on what date?


Mr. Allen B. Sulatycky (Parliamentary Secretary to Minister of Energy. Mines and Resources):: 1. There have been no meetings between the Minister of Energy, Mines and Resources or any federal officials and Premiers or officials of New Brunswick and Nova Scotia to discuss terms of reference pertaining to a proposed review of the 1969 Atlantic Tidal Power Programming Board Report.
2 and 3. No agreement has yet been reached on the terms of reference for a Review Board. Draft terms of reference were proposed by the federal government on April 7, 1971. The Premiers of New Brunswick and Nova Scotia have recently written to the Minister of Energy, Mines and Resources outlining specific proposals for setting up of a tidal power Board of Review including suggestions relating to membership; the full membership has however not as yet been selected.
4.	It is anticipated that the proposed Board of Review will meet at an early date following naming of its membership.


DEPARTMENT OF FINANCE-ECONOMIC FORECASTING
Mr. Saltsman: 1.	How many professional economists, who are public servants, are currently engaged in economic forecasting in the Department of Finance?
(Mr. Speaker.]
2.	What are their classification levels and salary ranges?
3.	How many consultants and others engaged under contract were retained by the Department of Finance for economic forecasting in the fiscal year 1970-71?
4.	What were the names of such consultants and how much were they paid in the fiscal year 1970-71?


Hon. E. J. Benson (Minister of Finance):: 1, 2, 3 and 4. For
the purposes of this question economic forecasting may be defined as the projection of the aggregate condition of the economy. In the Department of Finance the Economic Analysis Division has prime responsibility for this function and 16 officers devote at least some portion of their time to this activity. Of this group, six public servants are currently engaged full-time in the activity at the following levels and salary ranges, and no consultants or contract personnel were retained for this purpose in the fiscal year 1970-71.
Classification Economist-Statistician 1 Economist-Statistician 2 Economist-Statistician 4
Number	Salary Range
4	$ 6,960-$14,192
1	15,236- 20,557
1	23,220- 25,785


TASK FORCE REPORT ON AGRICULTURE
Mr. Yewchuk: 1.	For each year, 1968 to 1970 inclusive, how many farmers have migrated from the farm?
2.	How many of these farmers are presently receiving (a) unemployment insurance (b) social welfare?
3.	Did farmers assist in the compilation of the Task Force Report on Agriculture and, if not, for what reason?


Mr. J. A. Jerome (Parliamentary Secretary to President of the Privy Council):: I am informed by several departments as follows: 1. Information not available.
2.	(a) and (b) Information not available.
3.	Farmers and farmers' organizations were consulted on a regular basis by the Task Force members and participated in large numbers (over 50 per cent of delegates) in a Canadian Congress on Agriculture which was convened by the Task Force just before their final report was drafted.


PRIVY COUNCIL OFFICE PERSONNEL
Mr. MacDonald (Egmont): How many people are presently employed in the Privy Council Office and how many obtained their positions following a normal public service competition for the openings available?
Mr. Barnett ]. Danson (Parliamentary Secretary to the Prime Minister): A total of 238 personnel are employed in the Privy Council Office. Appointments were made in accordance with the provisions of the Public Service Employment Act. Officer appointments are made, according to merit, by the Public Service Commission through competition or other processes of selection from within the Public Service or from outside. Support staff positions are filled by the Privy Council Office under delegated staffing authority from the Public Service Commission and are subject to audit. New support staff members are recruited from outside the Public Service, on merit, through referrals by the local Canada Manpower Centres unless the Regional Office of the Public Service Commis-
November 29, 1971

sion advises that there are qualified candidates available from lay-off lists, lateral transfer lists or interdepartmental competitions.


CANADOME PROGRAM
Mr. MacDonald (Egmont): What is being done with the Canadome program during the winter, and are there any plans to make these facilities available for primary and secondary schools during the school year?


Hon. Martin P. O'Connell (Minister of State):: The three Canadome displays will be held in storage during the winter months, but material printed for distribution in the Canadomes will continue to be distributed. Plans for the utilization of the Canadomes next year have not yet been finalized.


BANKRUPTCIES
Mr. Latulippe: 1.	Since January 1, 1969, how many (a) limited (b) incorporated companies declared bankruptcy?
2.	What amount did the government lose in taxes from these bankruptcies?


James Alexander Jerome: I am informed by the Departments of Consumer and Corporate Affairs and National Revenue, Customs and Excise as follows: 1. From January 1, 1969 to September 30, 1971, 2287 corporate bankruptcies were declared. No distinction is made between limited and incorporated companies in the records of the Bankruptcy Branch. Details of the above are as follows:
Number of Corporate
Year	Bankruptcies Filed
1969	741
1970	946
1971	to date	600
Total	2287
2.	The Government lost $190,173.01 in taxes from bankruptcies, broken down as follows: Limited companies, $116,862.57; incorporated companies, $73,310.44.


EMPLOYMENT STATISTICS
Mr. Latulippe: 1.	To date, in 1971, how many people did not find jobs after they finished school?
2.	How many women work while their husband is (a) unemployed (b) employed?
3.	How many people are working after the normal retirement age?


James Alexander Jerome: I am informed by Statistics Canada and the Department of Manpower and Immigration as follows: 1. A special survey of the labour force has indicated that among persons aged 14 to 24, full-time students in March 1971 who did not plan to return to school, 67,000 were unemployed in the reference week ended September 18, 1971.
Questions
2.	In September 1971 the number of married women who were employed was 1,591,000. There is no information on the employment status of their husbands.
3.	In the reference week ended September 18, the number of persons who were over 65 years of age and were employed totalled 187,000.


OFFSHORE OIL EXPLORATION PERMITS
Mr. Forrestall: 1.	In each of the past five years, how many exploration permits have been issued by the federal authority for oil off Canada's East Coast?
2.	What revenues have been collected from such permits for each year?
3.	Was this revenue shared with the Atlantic Provinces and (a) if so, under what formula (b) if not, for what reason?
4.	What arrangements exist between the federal and provincial authorities for the granting of parallel exploration permits?


Allen B. Sulatycky: 1.	Year
1968
1970
1971	to date
2.	Year
1968
1970
1971	to date Total
Number Permits Issued 361 748 949 396 399
2,853
Total

3.	(a) No. (b) No revenue sharing arrangement has been reached with the provinces as yet.
4.	None.


AGRICULTURE-FINANCIAL ASSISTANCE UNDER GRASSLAND INCENTIVE PROGRAM
Mr. Horner: Has the Minister responsible for the Wheat Board received any applications for financial assistance under the re-grassing program announced earlier this year and, if so (a) how many (b) what amount has been paid to date?


Hon. H. A. Olson (Minister of Agriculture):: The Grassland Incentive Program is financed and operated in the Department of Agriculture, (a) 18,600 claims have been received, (b) $8,343,099 has been paid to November 5, 1971.

November 29, 1971
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Questions


AMCHITKA NUCLEAR BLAST
Mr. Yewchuk: 1.	What action is being taken by the government to protect the Canadian people and wildlife against possible damage resulting from the Amchitka nuclear blast?
2.	Has any information been exchanged and have any discussions been held between Defence Research Board and the United States Atomic Energy Commission concerning the Amchitka nuclear test and, if so, on what date?
3.	What role was played by the Canadian members of the Arctic Institute of North America regarding the test?
4.	Does the AINA report regularly to the government and, if so, what was the stand taken by the AINA concerning the nuclear test at Amchitka?


James Alexander Jerome: I am informed by the Department of the Environment and the Department of National Defence as follows: 1. Several monitoring devices were used to ensure the early detection of any threats to the Environment.
2.	No.
3.	None. A number of Defence Research Board employees are members of the Arctic Institute of North America but such memberships are held on a purely personal basis.
4.	AINA does not report to the Government regularly and has taken no stand on the Cannikin Test.
AINA reports to the Defence Research Board only on the results of specific research contracts which may from time to time be awarded to it.


CRIMINAL CODE-AMENDMENT TO SECTIONS CONCERNING DRINKING
Mr. Robinson: Will the government consider an amendment to the sections of the Criminal Code concerning drinking to allow convicted drivers who earn their living by driving, to drive during their business hours on business only during the period that their licence has been suspended?


Hon. John N. Turner (Minister of Justice):: Yes.


ESKIMO POPULATION
Mr. Robinson: How many Eskimos are there in each province?


Hon. Jean Chretien (Minister of Indian Affairs and Northern Development):: The Eskimo population by Province is as follows:
Newfoundland (Labrador)	1,250**
P.E.I.	-
Nova Scotia	4*
New Brunswick	-
Quebec (Arctic Quebec)	3,200**
Ontario	212*
Manitoba	365**
Saskatchewan	2*
Alberta	85*
British Columbia	25*
Yukon Territory	40*
Northwest Territories	11,050***
* Information obtained from D.B.S. 1961 Census ** Information obtained in Canada Year Book 1970-71 *** Information obtained from Government of Northwest Territories December 1970.


PORNOGRAPHIC LITERATURE
Mr. Robinson: Will the government take steps to prevent pornographic literature from coming into Canada from Denmark?


Hon. Herb Gray (Minister of National Revenue):: In so
far as the Department of National Revenue, Customs and Excise is concerned: The importation of literature of this nature, as described in Item 99201-1 of Schedule "C" of the Customs Tariff, is prohibited under Section 14 of this Tariff. (RSC 1970)


ESTIMATED TOTAL INCOME OF CANADIANS FOR YEAR 1971
Mr. Mather: 1.	What is the estimated total income of all Canadians for this year?
2.	What is the estimated total amount in dollars to be paid by Canadians in interest payments of all kinds this year?


James Alexander Jerome: 1. National Accounts income estimates are available only for the first half of 1971. According to the second quarter National Accounts, total personal income in Canada in the first half of 1971, not adjusted for seasonality, amounted to $34,326 million.
2. Estimates of interest payments made by Canadians are not made. The total of interest, dividends and miscellaneous investment income received by Canadians in the first half of 1971 was $2,848 million.


LOSS OF FISHING RIGHTS DUE TO ESTABLISHMENT OF NATIONAL PARK, KENT COUNTY, N.B.
Mr. Smith (Northumberland-Mirami-chi): 1.	How many fishermen lost fishing rights due to the establishment of a National Park in Kent County, N.B.?
2.	Of these, how many have received payment from the Government of Canada to compensate for such loss?
3.	What was (a) the highest payment made to a fisherman (b) the lowest (c) the average?
4.	What criterion was used to determine the amount of compensation to be paid?
5.	Did departmental agents, in interviewing the fishermen relative to this matter, advise such fishermen in all cases of the purpose of such interview?


Joseph Jacques Jean Chrétien: 1. One hundred and seventy eight.
2.	One hundred and sixty.
3.	(a) $10,676.60; (b) $21.00; (c) $1,576.57.
4.	Loss of annual income derived from the catch and reduced value of individual investment in commercial fishing equipment and oyster lease improvements.
[Mr. Olson.J
November 29, 1971

5.	The fishermen when interviewed were being advised that the information requested was in connection with the establishment of a National Park.


BEEF EXPORT MARKET
Mr. Southam: In view of the recent report of Statistics Canada that the Canadian beef cattle population is at an all-time high, what initiatives is the government taking to expand still further our export markets for beef and beef products with a view to keeping this industry in a healthy state economically?


Mr. Bruce Howard (Parliamentary Secretary to Minister of Industry, Trade and Commerce):: The Department of Industry, Trade and Commerce is actively promoting beef products in export markets through various means such as: (a) Incoming and outgoing missions program; (b) exhibits at international shows and exhibitions; (c) export oriented training program; (d) incoming businessmen's program; (e) special promotional functions initiated by individual Trade Commissioners; (f) identification of potential export markets through market surveys.


FEDERAL ASSISTANCE TO CONSTRUCTION OF GLACE BAY HEAVY WATER PLANT
Mr. Lambert (Bellechasse): Did the government contribute financially to the construction of the heavy water plant in Glace Bay, Nova Scotia and, if so, what amount was involved?


Allen B. Sulatycky: Atomic Energy of Canada Limited advises as follows: No.


HIGHWAY SAFETY-MOTOR VEHICLE REAR VISION
Mr. Ryan: Is the Department of Transport going to instal rear vision scopes on its cars in different locations in Canada to test their feasibility under our differing weather and driving conditions with a view to requiring their installation in all motor vehicles?


Mr. Gerard Duquet (Parliamentary Secretary to Minister of Transport):: The Department of Transport has purchased vehicles for experimental purposes and various rear vision aids will be installed for evaluation. Upon completion of this study, the Department may propose improved performance standards for rear vision.


CANADA COUNCIL-GRANT FOR THE &quot;WHOLE EARTH PROJECT&quot;
Mr. Penner: 1.	Has the Canada Council made a grant of $10,000 to Mr. Patrick Watson for the "Whole Earth Project" and, if so, for what reason?
2.	How many people are to be employed on this project?
3.	How is the money to be used?


Hon. Gerard Pelletier (Secretary of State):: I am
informed by the Canada Council as follows: 1. Yes. A special grant was made in November, 1970, to assist the research stages of an innovative programming concept
Questions
for television, being developed by Mr. Watson and his associates.
2.	Four people received support from the grant.
3.	The grant was used for the remuneration of persons involved in the development of the project, and to defray certain costs associated with efforts to interest other organizations in the financing of a pilot program and in eventual full-scale production.


FLOUR MILLING INDUSTRY
Mr. Southam: Has the statement of Mr. Ken Sarsons, Director of Saskatchewan Wheat Pool's Industrial Division that "the Canadian flour milling industry is facing a serious economic situation due to rising freight costs, inflation and stronger competition in other countries" been brought to the attention of the government and, if so, what steps is the government taking to save this industry?


Bruce Andrew Thomas Howard: The statement of Mr. Sarsons has been brought to the Government's attention. The Government has assisted this industry as follows: (a) increased the quantity of flour in the foreign aid program; (b) encouraged Canadian flour milling companies to establish mills in foreign countries in order to preserve their markets overseas; (c) encouraged companies to diversify; (d) offered to assist in the rationalization of the industry; (e) conducted a seminar to explain the full range of government services available to assist the industry in adjusting to changing environment; (f) conducted a study of the entire grain distribution system and is now holding discussions with grain handlers and railways on ways to attain greater efficiency in this area.


CRIMINAL CODE-AMENDMENT TO SECTION 237
Mr. Robinson: Is the government considering an amendment to section 237 of the Criminal Code so that all references to therapeutic abortion committees will be omitted?


John Napier Turner: Consideration of proposals of this nature is being left in abeyance until after the special debate on abortion is held.


POST OFFICE-OVERTIME WORK HOURS
Mr. Mather: 1.	To date what has been the number of overtime work hours of employees of the Post Offices of Canada in 1971?
2.	What was the number of overtime work hours in 1968 for the same service?


Hon. Jean-Pierre Cote (Postmaster General):: Overtime records are maintained on a fiscal year basis and answers are therefore prepared on the same basis. 1. 867,518 overtime hours for first six months of current fiscal year.
2. 1,793,002 overtime hours for fiscal year 1967-68.


CANADIAN TRADE WITH FRANCE
Mr. Robinson: What was the total of Canadian exports to France in 1970 and 1971 and what was the total of imports form France in each of the same years?
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November 29, 1971
Questions


Bruce Andrew Thomas Howard: Statistics Canada reports that: Canadian trade with France for the years 1970 and 1971:
Exports to France	Imports from France
Year	$'000	Year	$'0001970	157,198	1970	158,3581971	(8 months) 103,214	1971	(8 months)	133,448


CANADA'S CONTRIBUTION TO THE INTER-AMERICAN DEVELOPMENT BANK
Mr. Robinson: What has been Canada's contribution to the Inter-American Development Bank and what are the interest and repayment arrangements?


Mitchell William Sharp: Canada has not made any contributions to the Bank, as such. However, as of September of this year, Canada has made available to the Inter-American Development Bank a total of Cdn. $60 million for projects to be administered by the Bank upon approval by Canada. This amount has now been fully committed. Canada has recently agreed to make available an additional Cdn. $14 million for projects suitable for Canadian financing which brings the total allocation to Cdn. $74 million. Normally loans are for 50 years including a 10-year grace period at zero per cent interest. The Bank charges a 0.5 per cent commission charge on the loans.


PRIME MINISTER'S OFFICE-OPERATION OF REGIONAL DESKS
Mr. Orlikow: 1.	Have regional desks been established for the Prime Minister's Office?
2.	How many such offices have been established, or are planned?
3.	Who are the persons in charge of each regional desk and what additional staff has been assigned to the regional desks?
4.	What are the qualifications of the persons in charge of each regional desk?
5.	What is the annual estimated cost of operating the regional desks?
6.	What are the functions of the regional desks?


Mr. Barnett J. Danson (Parliamentary Secretary to the Prime Minister):: 1. Yes.
2.	Four desks have been established and no others are planned
3.	Atlantic, Jean Hache; Quebec, Gilles Dufault; Ontario, Colin Kenny; Western Canada, David Thomson. In addition, two stenographers are assigned to the regional desks.
4.	Selection is made on the basis of the overall suitability of the individuals experience and personal qualifications in relation to the requirements of the position.
5.	$94,500.
6.	The functions of the regional desks are to improve the liaison between the Prime Minister and those voluntary organizations which concern themselves with issues and problems common to many Canadians; to act as an additional source of information and advice to the Prime

Minister on matters upon which he has requested such information and advice; to be of assistance to members of Parliament in their dealings with the Prime Minister and his office.


CANADIAN CONTRIBUTIONS TO INTERNATIONAL ORGANIZATIONS
Mr. Robinson: What was Canada's contribution this year to the following international organizations (a) IBRD (b) IMF (c) IDA (d) IFC (e) FAO (f) UNCTAD (g) UNIDO (h) UNDP (i) UNESCO (j) ECA (k) ECLA (1) ECAFE (m) WHO (n) ILO (o) GATT (p) OECD?


Mitchell William Sharp: Canada's contributions for fiscal year 1970/1971 were (a) IBRD, 0; (b) IMF, 0; (c) IDA, $27,027,000 being the last installment of the Second Replenishment; (d) IFC, 0; (e) FAO, $1,226,000; (f) UNCTAD, The secretariat costs of these organizations are paid from the U.N. regular budget; (g) UNIDO, The secretariat costs of these organizations are paid from the U.N. regular budget; (h) UNDP, $15,267,000; (i) UNESCO, $1,174,411; (j) ECA, Canada is not a member; (k) ECLA, the Commission receives its funds through the regular budget of the U.N.; (1) ECAFE, Canada is not a member; (m) WHO, $2,813,262; (n) ILO, $1,071,855; (o) GATT, $231,724; (p) OECD,


AGRICULTURE-AVERAGE PRICE FOR CLASS A PORK
Mr. Lambert (Bellechasse): 1.	What was the average price paid to Canadian producers for Class A pork during the first ten months of 1971?
2.	What will be the average support price to be established by the Stabilization Board for such meat for the past twelve months?


Horace Andrew (Bud) Olson: 1. The
cumulative weighted national average price to hog producers to October 30, 1971 was $23.21 per hundredweight.
2. The mandatory support level for the 1971 hog (calendar) year under the Agriculture Stabilization Act is $24.14 per hundred-weight, basis index 100 hogs.


INTRODUCTION OF LEGISLATION RESPECTING ROYAL AND NATIONAL ANTHEMS
Mr. Forrestall: Does the government intend, during this or the next Session of Parliament, to introduce legislation with respect to either, or both, of our Royal and National Anthems?


Gérard Pelletier: Yes.


NATIONAL DEFENCE-WELFARE AND PAY ALLOWANCES
Mr. Forrestall: Will there be any increase in costs to CAF personnel before the end of 1972 with respect to meals, SDB insurance rates, mess dues, clothing allowances or costs and, if so, by what amounts?


Mr. Jack Cullen (Parliamentary Secretary to Minister of National Defence):: Meals-The charges for prepared rations in the Canadian Forces are adjusted periodically
November 29, 1971

contingent on current food costs. The next adjustment will be effective December 1971.
SDB Insurance Rates-There will be no increase before the end of 1972 with respect to SDB insurance rates which have been in effect since the plan was restructured in 1966.
Mess Dues-The amount paid by each member for mess dues is set by a vote of the members of each mess at a general mess meeting, subject to the approval of the commanding officers. It will differ between messes according to their particular needs.
Clothing Allowances or Costs-Clothing prices are normally reviewed annually and adjustments are made as required to reflect the latest procurement costs. A study is presently under way to determine whether there should be any adjustments to the prices charged for clothing and to determine whether the rate of Clothing Upkeep Allowance should be changed. As the results of this study will not be available until the spring of 1972, it is not possible to forecast what the net result of any changes in clothing prices or allowances will be.
sport office


Mr. McCleave: Was the Passport Office moved from 85 Sparks Street to 48 Besserer Street and, if so, for what reason?


Mr. Gaston Isabelle (Parliamentary Secretary to Secretary of State for External Affairs):: Yes. The Passport Office recently moved to 48 Besserer Street to provide it with more useable floor space better suited to carry out its passport production activities and to release space in the Blackburn Building requested by the Department of Public Works.


DEPARTMENT OF JUSTICE-NUMBER OF JUDGES
Mr. Lambert (Bellechasse): How many judges hold office (a) in Canada (b) in each province, by virtue of a federal government appointment?


John Napier Turner: (a) 457. (b) Supreme Court of Canada, 9; Federal Court of Canada, 12; Ontario, 140; Quebec, 107; Nova Scotia, 17; New Brunswick, 17; Manitoba, 23; British Columbia, 47; Prince Edward Island, 7; Saskatchewan, 31; Alberta, 36; Newfoundland, 9; Northwest Territories, 1; Yukon Territory,
1.


AVERAGE SALARY OF JUDGES
Mr. Lambert (Bellechasse): What was the average salary in (a) October 1971 (b) October 1965 of judges appointed by the federal government?


John Napier Turner: (a) $30,582; (b) $19,351.
Inquiries of the Ministry


POST OFFICE-CHRISTMAS MAILING DEADLINES
Mr. Nesbitt: With reference to a recent coloured pamphlet issued by the Post Office Department concerning Christmas mailing deadlines and also announcing Season's Greetings to all and and sundry (a) how many of these pamphlets were purchased (b) were tenders called for the printing of these pamphlets and, if so (i) how many tenders were submitted (ii) what was the name of the firm that was awarded the contract (c) what was the total cost of the pamphlets?


Joseph Julien Jean-Pierre Côté: (a) 2,000,000. (b) Yes. (i) 15; (ii) Montreal Lithographing Ltd. (c) $54,100.


QUESTION PASSED AS ORDER FOR RETURN
Mr. Robinson: 1.	How many meteorological service centres are there in Canada and where is each one located?
2.	Does the government intend to expand the meteorological service and, if so, in what way?
3.	To what extent is meteorological information obtained by satellites?
4.	To what extent does Canada integrate its meteorological service with other countries?
Return tabled.


Mr. McGrath:: Mr. Speaker, I would like to ask the parliamentary secretary when I can expect answers to my questions Nos. 1278 and 1279 which have been on the order paper since April 6 and deal with the Department of Regional Economic Expansion?


James Alexander Jerome: Just as soon as possible, Mr. Speaker.



ORAL QUESTION PERIOD


Hon. Robert L. Stanfield (Leader of the Opposition):: Mr. Speaker, I wish to direct a question to the Prime Minister who I was interested and pleased to see has requested a meeting with the President of the United States. In view of the fact the Prime Minister has rejected suggestions over the past three months that it would be a good idea for him to meet with the President of the United States, can he tell the House what specific factors now make it desirable for him to have a meeting with the president?


Pierre Elliott Trudeau: Mr. Speaker, I have never rejected the idea of a meeting with the President. On the contrary, I said he was to visit Canada in the spring some time. The question was one of timing. The timing is more appropriate now and that is why the meeting will happen now.


Robert Lorne Stanfield: As I understand it, the meeting is taking place at the request of the Prime Minister. Can the right
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November 29, 1971
Inquiries of the Ministry
hon. gentleman say what specific matters he wishes to discuss with the President-what specific matters form the basis of his request for a meeting with the President at this time?


Pierre Elliott Trudeau: It seems to me rather apparent from the news media that the President is meeting with a number of leaders at this time, friends of his, allies of the United States, and it does seem appropriate that at this point Canada should be meeting with the President of the United States to discuss multilateral and bilateral questions.


Robert Lorne Stanfield: I had hoped the Prime Minister was doing more than just getting into line with the other distinguished visitors.


Some hon. Members:: Oh, oh!


Robert Lorne Stanfield: I am sorry if I have said anything offensive to hon. members opposite.


An hon. Member:: Thanks for the apology.


Robert Lorne Stanfield: Since the meeting has apparently been scheduled for late in December, can the Prime Minister tell the House today whether he intends to disclose to the House the policy of his government with regard to foreign investment before meeting with the President, or will the meeting with the President take place before the government's plan with regard to foreign investment is disclosed?


Pierre Elliott Trudeau: I am afraid I cannot answer that question. My understanding is that the date of my meeting with the President has not been finalized. It is therefore not possible for me to answer the question until I know when the meeting will take place.


Mr. David Lewis (York South):: My supplementary arises from one of the answers the Prime Minister gave. May I ask whether it was he who asked for the meeting with the President of the United States or whether an invitation was extended to him by the President in the first place?


Pierre Elliott Trudeau: The approach was made by my office to the President of the United States in the first place.


David Lewis: Would the Prime Minister be good enough to inform us how long ago this approach was made by his office and also whether in making this approach any specific matters were mentioned as a proposed agenda for the discussions.


Pierre Elliott Trudeau: The approach was made some time last week. At that time the decision had been made for the Secretary of State for External Affairs to meet with Mr. Rogers in Washington and it was hoped that my meeting would follow that one as soon as possible so that I might be able to follow up some matters which the Secretary of State for External Affairs had discussed with Mr. Rogers. As to subjects on the agenda, there has not yet been an agreement as to the agenda. With regard to the particular question asked by the hon. member, I know of no specific subject which was mentioned; it was just that it would be good for us to get together to discuss multilateral and bilateral questions.


David Lewis: May I ask the Prime Minister specifically, if he thinks he can inform the House, whether he intends to discuss the following questions with the President, namely, the 10 per cent surtax, other proposals like DISC and the job incentive program, and in particular the policy at which the government may have arrived at with respect to the control or supervision or surveillance of foreign investment in Canada?


Pierre Elliott Trudeau: I cannot answer specifically with respect to any of those subjects until the agenda has been established. They are certainly the type of question we would be interested in discussing together, but, as I say, the agenda has not been established and I do not know whether it will include those specific subjects.


Mr. S. Perry Ryan (Spadina):: I have a supplementary question, Mr. Speaker, for the Prime Minister. Is the Prime Minister going to reassert to President Nixon personally the position that Canada should be exempted from the surcharge because the government floated the dollar last year?


Pierre Elliott Trudeau: Mr. Speaker, these representations of mine will be made to the President. If it is in the public interest that I say exactly what went on at our meetings, then I shall do so. I do not yet have the agenda so I cannot assure the hon. member that I will be making any specific recommendations.


Sylvester Perry Ryan: Is the Prime Minister going to ask the President whether or not the United States government has a list of conditions for the removal of the surcharge on Canadian imports?


Pierre Elliott Trudeau: Mr. Speaker, I will take note of the hon. member's suggestion and the suggestions of other hon. members and decide what questions I want to ask the President.


David Lewis: I have a further supplementary, Mr. Speaker, for the Prime Minister. Would he give an undertaking to the House that when the agenda has been agreed upon-at that time I suppose the date will also have been agreed upon-he will inform the House on motions of the subjects that have been put on the agenda for discussion with the President?


Pierre Elliott Trudeau: Mr. Speaker, if I have the agreement of the President to that course I shall consider doing so. I am not certain whether we would want to make the agenda public before the meeting takes place. It is possible that we would not cover all the subjects or that we might cover others that are not on the agenda.


Mr. H. W. Danlorth (Kent-Essex):: Mr. Speaker, I direct my question to the right hon. Prime Minister. Does he
November 29, 1971

anticipate an announcement of a settlement of the major negotiations between Canada and the United States on the automobile pact in the near future, as intimated by the Secretary of State for External Affairs, or does he anticipate that this may be one of the matters he will discuss with the President at the forthcoming meeting?


Pierre Elliott Trudeau: Mr. Speaker, it depends on the state of the negotiations on that particular subject which have been going on, as the hon. member knows, for a long while. It also depends on when my own meeting with the President takes place.


Mr. Speaker:: Order, please. The Chair will recognize the hon. member for Egmont on a supplementary and then a last supplementary from the hon. member for Nanaimo-Cowichan-The Islands.

I will then recognize the hon. member for Portneuf.



THE CANADIAN ECONOMY


Mr. David MacDonald (Egmont):: I have a question, Mr. Speaker, arising out of an earlier question raised by the Leader of the Opposition concerning the government's proposals in regard to foreign investment. In light of the Prime Minister's answer last week in the House, to the question whether or not the full Gray report plus other studies would be tabled in the House that an announcement might be made within a week or ten days and in view of the fact he then said outside the House that perhaps he would wait until after the annual meeting of the Conservative party before releasing these materials, inasmuch as this suggestion seems to indicate that these materials are available, and since the Prime Minister might want to distinguish between the recommendations contained in the Gray report and other supporting materials and the government's own decision, would the government give consideration to making them available early enough both for consideration by the people of the country and also-


Mr. Speaker:: Order, please. I am wondering whether the hon. member has now completed his question.


Pierre Elliott Trudeau: Mr. Speaker, I am surprised that the hon. member admits that the Conservative party has not made up its mind on this subject yet but could do so within the next ten days. I am looking forward to seeing what their position is. It would be a surprise to us if the Conservative convention took a clearcut position on this or on anything else.


Robert Lorne Stanfield: A supplementary question, Mr. Speaker.


Mr. Speaker:: Order. I indicated a moment ago that I would recognize the hon. member for Nanaimo-Cowi-chan-The Islands on a final supplementary. The hon. member for Portneuf should then be recognized and the
Inquiries of the Ministry
Chair will return to this matter and recognize the Leader of the Opposition and the hon. member for Egmont.



EXTERNAL AFFAIRS


Mr. T. C. Douglas (Nanaimo-Cowichan-The Islands):: Mr. Speaker, my question is for the Prime Minister. In view of the fact the government has repeatedly said that it has no intention of negotiating exemption of Canada from the 10 per cent surcharge imposed by the United States, may I ask the Prime Minister whether the government has now abandoned that position and the reason of his meeting with President Nixon is to negotiate Canada out from under the 10 per cent surcharge?


Pierre Elliott Trudeau: The answer to both questions is no, Mr. Speaker.


UNEMPLOYMENT INSURANCE
Mr. Roland Godin (Portneuf):: Mr. Speaker, I wish to direct my question to the Minister of Labour.
Can the minister indicate why those who apply for unemployment insurance benefits and who qualify have to wait five or six weeks to receive their first cheque?
Does the minister appreciate that a whole month without salary is too long and very hard to bear-


Mr. Speaker:: Order, please. The hon. member is now making a speech. In my opinion, the first question is in order. The minister might wish to answer that part of the hon. member's remarks.


Hon. Bryce Mackasey (Minister of Labour):: Mr. Speaker, if the hon. gentleman has any specific cases in mind I will personally intervene to speed up the procedure.


Roland Godin: I have a supplementary, Mr. Speaker.
Can the minister say whether the Commission is considering the possibility of improving its procrastinating way of doing things?


Bryce Stuart Mackasey: Mr. Speaker, we are always looking for ways and means to improve the efficiency of the department.


Mr. Speaker:: Order, please. I believe there are a few supplementaries to the first question. The Chair will now recognize the hon. member for Egmont.

November 29, 1971
9958_________________________________
Inquiries of the Ministry THE CANADIAN ECONOMY


FOREIGN INVESTMENT-REQUEST FOR PUBLICATION OF OFFICIAL REPORT TO CABINET AND OTHER STUDIES
David Samuel Horne MacDonald: Mr. Speaker, I think the Prime Minister is still suffering from some confusion. Would he indicate whether he is willing to make available the reports and the various supporting studies that have been made in connection with the Gray inquiry prior to the enunciation of the government's position in order that there might be some public participation in the consideration of these various documents before a final decision is arrived at by the government?


Pierre Elliott Trudeau: Mr. Speaker, when I replied to that type of question the other day I said it was mainly a matter of preparing material, having it printed, translated and so on. That was the reason I could not give a specific date. Let me repeat that I will urge the minister to do so as soon as possible in order that the Conservative party may clarify its thinking on this matter.


Robert Lorne Stanfield: Mr. Speaker, I should like to ask the right hon. Prime Minister whether, in view of the interest he has expressed about the views of the Conservative party, he will accept its advice a little more quickly than he did in respect of unemployment?


Some hon. Members:: Oh, oh!


Mr. Speaker:: Order, please. The Chair will recognize the hon. member for Nanaimo-Cowichan-The Islands on a supplementary question.




Thomas Clement (Tommy) Douglas: Mr. Speaker, in view of the fact that the press has quoted a spokesman from the Prime Minister's office as saying that the Prime Minister and the President had agreed on the desirability of holding a meeting for the purpose of discussing the surcharge, related economic matters and international relations, I should like to ask the Prime Minister whether he is telling the House that a spokesman from his office was not authorized to make such a statement and whether, indeed, these are the three main subjects for discussion by the Prime Minister with the President?


Pierre Elliott Trudeau: Mr. Speaker, I know the agenda has not been agreed upon by the President and myself. I am not aware of what my office may have said in respect of possible subjects for discussion. As I answered the leader of the New Democratic Party, this is the type of thing we are likely to discuss but there is no agenda set yet.


INDIAN AFFAIRS
Mr. Don Mazankowski (Vegreville):: Mr. Speaker, I should like to direct my question to the right hon. Prime Minister. In light of the statement by the Minister of Indian Affairs and northern Development to the effect that he was not aware of the telegram sent by the Prime Minister's principal secretary to the President of the Indian Association of Alberta, will he advise the House whether he is aware of the contents of this telegram and, if so, does it reflect his position on this matter?


Pierre Elliott Trudeau: Yes, Mr. Speaker, I know of the existence of the telegram, but I would have to refresh my memory as to its content in order to answer the hon. member's second question.


Donald Frank Mazankowski: Are we then to assume that the powers of the Minister of Indian Affairs and Northern Development have been usurped by the Prime Minister's office?


Pierre Elliott Trudeau: No, Mr. Speaker, but-


Mr. Speaker:: Order, please. The question is entirely out of order.


REGIONAL ECONOMIC EXPANSION
Mr. Edward Broadbent (Oshawa-Whitby):: Mr. Speaker, I have a question for the Minister of Regional Economic Expansion. Has his department made a grant to Union Carbide of Canada to build a manganese alloy furnace at Beauharnois, Quebec?


Mr. Speaker:: Order, please. My impression is that questions of this type ought normally to be put on the order paper. I know that in past days or weeks hon. members have asked questions about individual applications and individual loans made by the minister's department. A question of a similar type was asked last week. I wonder whether hon. members might not think that such questions should be placed on the order paper. If every member were to ask about individual loans or applications concerning his constitutency we might find ourselves spending much of the question period on such questions dealing with individual applications. I really think questions should be more general. The hon. member might like to rephrase his question.


John Edward Broadbent: Mr. Speaker, I shall try to do that. If the answer to this unacceptable question is in the affirmative, can the minister indicate to the House whether he is aware that such a grant will result in the loss of some 350 jobs in Welland for the creation of a mere 70 jobs in Beauharnois and, if so, does he think-
November 29, 1971


Mr. Speaker:: Order, please. I would think that the supplementary is hypothetical.




Mr. W. B. Nesbitt (Oxford):: Mr. Speaker, I have a question for the Secretary of State for External Affairs. Is it the intention of the government to make a formal protest to the Soviet Union in view of the very large nuclear explosion reported to have taken place in the Soviet Union this morning?


Mitchell William Sharp: Mr. Speaker, I will certainly consider whether there would be anything useful to be served. We have made it very plain to all those who have recently exploded nuclear devices that this is contrary to Canadian policy and that we hope they will cease all nuclear testing, but of course if we had to make a protest against every such explosion, including those made by all the great powers, I would be spending a great deal of my time on that.


Wallace Bickford (Wally) Nesbitt: Mr. Speaker, can the Secretary of State for External Affairs tell us if it is government policy to send specific protests only to the United States of America when these things take place and otherwise just make generalized remarks and utter platitudes at the United Nations?


Mr. Speaker:: Order, please. The question as asked is not in order. The minister might wish to reply quickly and generally, but I would have to find that the hon. member's question is slightly irregular in its terms.


Mitchell William Sharp: No. As the hon. member knows, Mr. Speaker, we have recently made a protest to China on its most recent explosion.


COMPETITION BILL
Mr. Steven E. Paproski (Edmonton Centre):: Mr. Speaker, I have a question for the Minister of Consumer and Corporate Affairs. Will the minister complete the answer to my question which was cut off in mid-sentence by Your Honour calling orders of the day last week and which Your Honour said, as recorded at page 9763 of Hansard, might be pursued today. The question again is, will the minister withdraw the controversial competition bill before the end of this session and have it redrafted in an acceptable form?


Hon.   Ron. Basford@Minister of Consumer and Corporate Affairs: Mr. Speaker, I have made clear since last June 29, when the bill was read the first time, that it would not be proceeded with by the government at this session but that after receiving useful and constructive comments from people it would be reintroduced next session.
Inquiries of the Ministry AGRICULTURE


FARM ADJUSTMENT PROGRAM-ADDITIONAL FUNDS AVAILABLE TO FARM CREDIT CORPORATION TO OVERSEE OPERATION
Mr. A. P. Gleave (Saskatoon-Biggar):: Mr. Speaker, I have a question for the Minister of Agriculture. In view of the statement that he is proposing to proceed with the farm adjustment program and in view of reports that the Farm Credit Corporation will oversee the program in part in co-operation with the provinces, can he inform the House concerning the amount of additional funds the federal government intends to make available to the Farm Credit Corporation for this purpose?


Horace Andrew (Bud) Olson: Mr. Speaker, I am sure the hon. member knows that the House approved an item of $16 million in the main estimates this year to deal with the small farm development program.


Alfred Pullen Gleave: Mr. Speaker, do I take it then that the Minister of Agriculture wishes to leave the impression that $16 million will finance the type of program he has in mind?


Horace Andrew (Bud) Olson: No, Mr. Speaker, but there will be further estimates in subsequent years and, based on the experience we gain during the next few months, we will come before the House with an appropriate amount.


LEGISLATION RESPECTING DEVELOPMENT OF NATIONAL FARM PROGRAM
Donald Frank Mazankowski: Mr. Speaker, I have a supplementary for the Minister of Agriculture. In view of the fact that the technical committee which is designed to develop a national farm program is due to meet in Ottawa tomorrow, can the minister indicate whether it will be the intention of the government to introduce legislation for the development of a national farm program or will this take place within the framework of existing legislation?


Horace Andrew (Bud) Olson: Mr. Speaker, the purpose of the technical committee meeting tomorrow will be to reconcile the differences between the provincial governments' proposal and the proposal I laid before members of the House and the committee about eight months ago. I might add that there is very little difference. That is the purpose, not for a wide-ranging agricultural program.


QUEBEC-REPRESENTATIONS TO FEDERAL GOVERNMENT-COMPENSATION FOR HOG AND EGG PRODUCERS' LOSSES
Joseph Adrien Henri Lambert: Mr. Speaker, I should like to put a question to the Minister of Agriculture.
Since Quebec pork and egg producers have incurred losses of approximately $16 million over the last 12 months, partly compensated by the Quebec government, could the minister tell the House whether he has received any official representations from the Quebec Minister of

November 29, 1971
Inquiries of the Ministry
Agriculture asking the federal government to compensate part of these losses?


Horace Andrew (Bud) Olson: Mr. Speaker, I have already announced a specific program under the Agricultural Stabilization Board with regard to eggs and it has had a very beneficial effect in the market place even at this ealry date. I have also announced that as soon as the figures are available for the 1971 year we will probably be making deficiency payment on hogs, but we need to have the figures first.


Joseph Adrien Henri Lambert: I should like to put a supplementary question, Mr. Speaker.
I realize perfectly that a policy has been established. My question does not concern the future program, but the year which is ending. Since this policy is inadequate, as has been demonstrated, would the Minister of Agriculture be prepared to consider this situation seriously in order to avoid the numerous failures which will necessarily happen in this field?


Horace Andrew (Bud) Olson: Mr. Speaker, I do not understand the purport of this kind of question and representation because certainly if there is a deficiency payment after the figures are in for hogs it will be paid for hogs produced all through 1971 right back to January of this year.


Joseph Adrien Henri Lambert: Mr. Speaker-


Mr. Speaker:: The hon. member could perhaps meet the minister after the question period and they might reach an agreement on a question which could be put tomorrow.


INFORMATION
Mr. G. W. Baldwin (Peace River):: Mr. Speaker, I should like to ask the Minister of Justice a question. In light of the many leaks which have been plaguing the government, would he now consider introducing or will he introduce during the next session a freedom of information bill which would do a great deal to get rid of this problem? I would be prepared to offer him my bill which now stands on the order paper.


John Napier Turner: Mr. Speaker, I want to thank the hon. member for the co-operation he gave me in introducing and passing the Statutory Instruments Act which goes a long step toward making regulations public and reviewable by Parliament. The other step he mentions ieone which I will take under consideration.




Mr. Heath Macquarrie (Hillsborough):: Mr. Speaker, I should like to direct a question to the Secretary of State for External Affairs on the grave situation involving India and Pakistan. Has the government departed from its view that it is still not efficacious to have the matter brought before the United Nations and can he advise what advice is being given to Canadian nationals in the area?


Mitchell William Sharp: Mr. Speaker, on the first question, we have been discussing this with a number of countries including members of the Security Council and so far none of them feels it would be helpful in bringing about a settlement to have the matter brought before the Security Council at this time. That position may change with time but that seems to be the position now. On the second question, we have given warning to our nationals in both east and west Pakistan to get out of the areas where there are hostilities and also to be prepared to move out of that country if the situation worsens.


THE MINISTRY
Mr. Eldon M. Woolliams (Calgary North):: I should like to put my question to the Prime Minister. In light of the unfortunate illness of the Minister of Energy, Mines and Resources who has been unable to attend the House for some time, is it the Prime Minister's intention to appoint a minister to take over that portfolio because of the serious effect of the minister's absence on matters that affect Canada, particularly the relationship between Canada and the United States, and would that appointment be made before the discussions take place on whatever matters the Prime Minister is going to discuss with the President of the United States?


Pierre Elliott Trudeau: Mr. Speaker, the hon. member knows that there are two acting ministers and in certain cases we have even named a third acting minister to meet this unfortunate situation.
Let me say once again that I do not know for certain the date of the meeting and therefore I cannot give the hon. member that assurance. I do not know sufficient at this time about the health and future condition of the Minister of Energy, Mines and Resources to answer the other part of the hon. member's question, but certainly this matter is very much on my mind and I will act as soon as necessary.
[Mr. Lambert (Bellechasse).l
November_29, J_971


NATURAL GAS-REQUEST FOR STATEMENT ON STEPS TO ENSURE EXPLORATION PROGRAMS TO GUARANTEE CANADA'S FUTURE NEEDS
Thomas Clement (Tommy) Douglas: In
view of the findings of the National Energy Board regarding the inadequacy of gas supplies to meet Canada's future needs, would the Prime Minister undertake to have whoever is Acting Minister of Energy, Mines and Resources make a statement to the House at an early date as to what steps the government is taking to ensure adequate exploration programs to guarantee adequate supplies of gas for Canada's future needs?


Pierre Elliott Trudeau: I will transmit the representation of the hon. member to the Acting Minister of Energy, Mines and Resources.


CONSUMER AFFAIRS
James Aloysius McGrath: I should like to direct a question to the Minister of Consumer and Corporate Affairs. In view of the widespread interest in this matter and in view of the interest and approval of all parties in the House during the debate on Friday that action should be taken, does the minister intend to take the necessary action to control in this country advertising on television aimed at children which is especially apparent at this time of the year?


Hon. Ron Basford (Minister of Consumer and Corporate Affairs):: I read the debate with interest and I am sorry I was not able to participate in it last Friday. I think I made the position quite clear some time ago when I said that I welcomed the adoption by broadcasters of a voluntary code, that we would see how it worked, that we urged people to live up not only to the letter but to the spirit of the code, that we were intending to enforce as vigorously as we have over the last three years our campaign against misleading and deceptive advertising, and that after we had seen the two programs in operation for some time it would then be the appropriate time to judge the degree of their effectiveness.


James Aloysius McGrath: Does the minister intend to recommend to his colleague, the Secretary of State, that immediate action be taken by the CBC in view of the fact that their voluntary code does not take effect until next year?


Stanley Ronald Basford: My understanding is that the code was to be put into effect as soon as possible, but I will take up the matter with the Secretary of State so far as the CBC is concerned.


ADVERTISING PRACTICES OF SNOWMOBILE MANUFACTURERS
Mr. W. C. Scott (Victoria-Haliburton):: I have a supplementary question, Mr. Speaker. Does the minister plan to
Inquiries of the Ministry
investigate advertising practices by snowmobile manufacturers that mislead the public and very likely contribute to the dangerous use of all-terrain vehicles?


Stanley Ronald Basford: The law relates only to misleading, deceptive or untrue advertising. If the hon. member thinks that certain types of advertising are in fact untrue or deceptive, I wish he would speak to me and bring them to my attention. If they are unlawful in the view of the law officers of the Crown, action will be taken.


AGRICULTURE
Mr. Arnold Peters (Timiskaming):: I should like to direct my question to the Minister of Agriculture. In view of the fact that a shortage of milk for butter and cheese has developed, will the minister give consideration to opening a quota for industrial milk so as to help to maintain our cheese and butter industries in Canada?


Horace Andrew (Bud) Olson: As I have said, we may be short about eight or ten days supply of butter out of the whole year, but already some adjustments have been made in the market-sharing quota for industrial milk in Ontario and Quebec. Under the new arrangement this now comes under the provincial marketing agencies, and I think they are prepared to increase the quota so that there will be greater supplies for the increasing market.


William Arnold Peters: In light of the fact that Ontario and Quebec have a market-sharing quota arrangement under the auspices of the federal government, will the minister, through the Canadian Dairy Commission, ask that this be reviewed immediately so that we will not lose any more of our butter factories and cheese factories in Ontario?


Horace Andrew (Bud) Olson: The responsibility for that and the assignment of milk to these various factories lies within provincial jurisdiction, not that of the Canadian Dairy Commission.




Mr.   Chas. L. Caccia@Davenport: My question is directed to the Secretary of State for External Affairs. Does the government intend to protest against the United States underground nuclear test which was conducted in Nevada last week?


Mitchell William Sharp: As I said in reply to the hon. member for Oxford, I do not think it would be useful to make protests on all nuclear tests, and in this particular case the venting that took place does not seem to have reached Canada.

November 29, 1971
Inquiries of the Ministry


POLICY RESPECTING OPENING OF NEW EMBASSIES
Mr. Jack McIntosh (Swift Current-Maple Creek):: My
question is directed to the Secretary of State for External Affairs. Does the recent opening of a Canadian embassy in Algeria represent a change in policy by the government, which was formerly directed toward reducing Canadian representation in foreign countries?


Mitchell William Sharp: There has been no further reduction in representation in foreign countries, and a gradual increase in the number of new missions which have been opened since that time. I think we are in a much stronger position to proceed with openings after having closed some of marginal importance.


REQUEST FOR PUBLICATION OF PLAN FOR RATIONALIZATION OF HANDLING AND TRANSPORTATION
Mr. John L. Skoberg (Moose Jaw):: My question is for the
Minister of Agriculture. In view of the fact the railway companies have had access for some time to the proposed plans for the rationalization of grain handling and transportation, which I understand is now in cabinet, can the minister say when the proposed plan will be made available to the prairie governments, Members of Parliament, and all farm organizations in order that they will also have the privilege of seeing what the plan is all about?


Horace Andrew (Bud) Olson: I will take notice of the question, Mr. Speaker.


AGRICULTURE
Mr. R. E. McKinley (Huron):: I have a question for the Minister of Agriculture. In view of the low prices corn producers have been receiving this year, which the minister said are partly due to lack of storage facilities, is the government giving consideration to the representations which I understand have been made to it for assistance in regard to corn storage facilities, and how soon will a program be announced?


Horace Andrew (Bud) Olson: I am not sure how soon we can announce the program, but the hon. member has accurately described the situation in that we are giving urgent consideration to some proposals that would increase the amount of storage before the next crop comes in. I can also advise the hon. member that corn has moved up about 14 cents a bushel in the last few days.


Robert Elgin McKinley: Can the minister say whether the assistance for corn storage will be for commercial corn storage or on the farm?


Horace Andrew (Bud) Olson: Certainly it would be to increase on-farm storage, but we are hopeful we can find a satisfactory way of increasing commercial storage as well.


Mr. William Knowles (Norfolk-Haldimand):: One of the
programs suggested was accelerated depreciation for on-farm storage. Would the minister give consideration to the same plan for commercial storage designated specifically for use by farmers?


Horace Andrew (Bud) Olson: That is one of the proposals under
consideration.


CORN-REQUEST FOR STATEMENT ON MEASURES TO RELIEVE PRODUCERS' DIFFICULTIES
Harold Warren Danforth: I have a supplementary question for the Minister of Agriculture. In light of the very great difficulties experienced by Canadian corn producers during this year's harvest season and in light of various reports that have been made to the government in this regard, can the minister indicate when he will be able to make a statement in the House with regard to government policy and a solution to this very grievous problem?


Horace Andrew (Bud) Olson: No, Mr. Speaker, I cannot, but I can advise that only last week I had a further representation from the Ontario Grain and Feed Dealers Association-the people who operate some of the commercial elevators in Ontario. There were some new and interesting proposals that we have only had for a few days.


SUGGESTED MEETING OF INTERNATIONAL GRAINS
Alfred Pullen Gleave: In view of the statement made by the minister in charge of the Wheat Board during his trip to Australia that Australia and Canada have agreed that the international pricing of wheat should be done on an orderly basis within a fixed price range, is it the intention of the minister or the government to ask the International Wheat Council to press for a meeting of the signatories of the International Grains Arrangement to achieve this objective?


Horace Andrew (Bud) Olson: I am sure the hon. member is aware of the fact that within the last few days a meeting of the council was held in London. He has no doubt read the press reports relating to that matter. On a ongoing basis Canada has always indicated interest in international commodity agreements of this nature but of course they are only useful as long as they are adhered to.
(Mr. Sharp.]
November 29, 1971

Inquiries of the Ministry



[Stage Direction]
FORTHCOMING MEETING OF PRIME MINISTER AND U.S. PRESIDENT-EFFECT ON PROPOSED VISIT BY PRESIDENT '	NIXON TO CANADA
[u'Mr. Speaker, as far as I am concerned they do not need a direct pipeline to the government because I think all our 350 or 390 manpower offices in Canada are well aware of that information and any little municipality or association or \xabgroupe-ment* may avail itself or it by calling on any of these 350 or more manpower centres which have all the information necessary and are ready to help.']
Robert Lorne Stanfield: Mr. Speaker, earlier the Prime Minister indicated that one of the principal factors in his request for a meeting with President Nixon at this time was the more desirable timing. I should like to ask the Prime Minister whether this is related to the proposed visit of President Nixon in the spring. Does this mean that President Nixon's visit to Canada will be cancelled or will it take place, and is the Prime Minister's meeting in addition to that?


Pierre Elliott Trudeau: Mr. Speaker, I may have misunderstood the question but I shall attempt to answer what I heard. This is in addition to the meeting which will take place in the spring. There is no change of that plan.



Mr. John Burton (Regina East):: I should like to direct a question to the Minister of Manpower and Immigration but in his absence I shall direct it to his parliamentary secretary or whoever is answering for the minister. Has the minister received a telegram from the President of the Saskatchewan Association of Rural Municipalities protesting that the local initiatives program will be of little value to small urban communities and rural municipalities in Saskatchewan? If so, is the government taking any action to make it possible for such local governments to make greater use of this program than is now possible?
1Translation]


Mr. Marcel Prud'homme (Parliamentary Secretary to Minister of Manpower and Immigration):: Mr. Speaker, I must admit that I am not aware of such a telegram but I should be greatly surprised if it contained an allegation to the effect that the local initiatives program cannot assist smaller municipalities, groups or associations.
The program covers initiatives and if smaller municipalities, groups or associations in these smaller municipalities have enough initiative, I am sure they will be able to avail themselves most successfully of the program now established by the government.


John Stratford Burton: Is the government considering any means whereby it might vary the proposed 30 man-month minimum limit so that it will be possible for some municipalities to take greater advantage of the program?


Marcel Prud'homme: Mr. Speaker, I believe that the hon. member's suggestion deserves consideration. Furthermore, if it became absolutely impossible for some municipalities, associations or groups to take advantage-


Mr. Speaker:: Order, please. The parliamentary secretary's reply is hypothetical. The hon. member for Winnipeg South Centre.


LOCAL INITIATIVES PROGRAM-AVAILABILITY OF INFORMATION TO SMALL MUNICIPALITIES
Mr. E. B. Osier (Winnipeg South Centre):: I should like to ask the parliamentary secretary a supplementary question on the same line. What steps is the government taking to ensure that small municipalities that do not necessarily have a direct pipeline to the government get correct information ypon which they can go ahead and make their plans concerning local initiatives?


Marcel Prud'homme: 

VETERANS AFFAIRS


Mr. J. Chester MacRae (York-Sunbury):: Mr. Speaker, I have a question for the Minister of Veterans Affairs. Is the minister taking the necessary steps to see that the December cheques payable to war veterans allowance recipients, pensioned veterans and their dependants will be mailed in time to reach them before Christmas?


Hon. Jean-Eudes Dube (Minister of Veterans Affairs):: Mr. Speaker, these cheques are not mailed by my department but by the Department of Supply and Services. I do not know exactly what day of the month the cheques are usually sent but I shall make it a point to see that our veterans get their cheques before Christmas.


Mr. Speaker:: Orders of the day.



GOVERNMENT ORDERS


[Stage Direction]
The House resumed, from Friday, November 26, 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.
[Stage Direction]
November 29, 1971
Income Tax Act
The Chairman:: Order, please. It is the understanding of the Chair that the committee will now proceed to sections 36 to 41 inclusive, 82 to 84 inclusive, 89, 112, 121 to 125 inclusive, 129, 143 and 181 to 197 inclusive dealing with corporations and shareholders.
On clause 1-Section 36: Railway companies.


Mr. Lambert (Edmonton West):: First of all, Mr. Chairman, I was just wondering whether in that list read out you included all the appropriate sections that deal with corporations. For instance, I did not hear sections 123 and 124 mentioned, even though I may have heard 125. I have not got the list before me but sections 82 to 95 and 181 to 197 all deal with corporations. It seems to me any list would be incomplete, unless we were to deal with them all. I should like to be able to do that because there may be some disposition later this day in looking at some sections which-


Russell Clayton Honey: Order, please. The Chair has some difficulty in hearing the hon. member for Edmonton West. Would hon. members please give their attention to the work of the committee?


Marcel Joseph Aimé Lambert: Thank you, Mr. Chairman. I see my genial friend, the hon. member for Labelle is acting today-I am sorry, that used to be the name of his constituency-


Mr. Clermont:: I rise on a point of order, Mr. Chairman. I have had the honour in the past of representing the Labelle riding. Now, it is my privilege to represent that of Gatineau.


Marcel Joseph Aimé Lambert: Mr. Chairman, I apologize to the hon. member. I had no intention of giving offence to the people of the Gatineau riding, this was a mistake.
In future, I shall call the hon. member the Parliamentary Secretary to the President of the Treasury Board. In this way, I am sure we shall get along very well.

Mr. Chairman, at this point I would almost issue a challenge to the hon. parliamentary secretary to take this Committee through the complexities of the sections, and explain in what way Bill C-259 differs from the white paper provisions with regard to corporations. I think it is fair to say, as I was pointing out on Friday afternoon, that if any particular groups of sections require more time to be spent in studying them, in order that we may understand them, it is these particular groups. We have heard representations from professional bodies, from the Chamber of Commerce and from businesses, of all types. We heard representation from the tax foundation only a fortnight ago. The competence displayed at the annual meeting of the Canadian Tax Foundation two weeks ago at Vancouver vastly exceeds the professional and technical competence that is available to both the Department of Finance and the Department of National Revenue. It was the considered opinion of the Tax Foundation that more time should be made available for an examination of these particular sections in order that we may see whether they will accomplish what they were designed to accom-
(Mr. Speaker.]
plish, and also in order that departmental officials may be in a position to explain the complexities of these sections to business representatives who may ask for rulings or for some indication of the meaning of the blessed statute.
You know, Mr. Chairman, one must repeat this, and I will repeat it. There is no prerogative in the Crown in the presentation of a tax statute that is against the wishes of the public. Not only is it against the wishes of the public; it is also against the desires of the public as well as the understanding, particularly the understanding. If one seeks any reason as to why Bill C-259 or a substantial part thereof should be deferred, it is found precisely in this group of sections dealing with corporations and their shareholders. I will not pretend that I can explain to the House these provisions or that I can even track a tenuous way through their complexities. The hon. member for Outremont and my colleague on the finance committee, the hon. member for Laurier, will resist any challenge with regard to taking anyone through the complexities of these sections. They would be the first to resist any such challenge. If such hon. gentlemen who have great professional knowledge and competence with regard to tax matters confess their failure to being able to take anyone through these particular sections; if they cannot advise clients as to the meaning of the sections and what action should be taken in order to conform with them, and if they cannot at the same time advise clients as to the preferable course to be taken for the better conduct of their business, who on earth can interpret these sections with any degree of equanimity?
There is a further reason for my suggesting that the bill should be deferred, and it is this. The government was closely questioned today on something that has been the subject of public controversy for the past two weeks, the degree of foreign ownership of Canadian industries and the foreign ownership policies of the government. To all hon. members on the government side who are so prone to say: "Carried, carried"-


Mr. Gibson:: Let us make some progress.


Marcel Joseph Aimé Lambert: -may I suggest, and particularly to the hon. member for Hamilton-Wentworth, that the restrictions on small businesses contained in this bill constitute a complete prejudging of government policy on foreign ownership. I say that because the members of the Committee will be asked to adopt certain restrictions with regard to small business which may be at complete variance with the ultimate policy regarding the foreign ownership of Canadian business that will be announced by the government. Are we to take it that the restrictions contained in section 125, I believe, will not apply, or that they are government policy now? After all, section 125 defines a Canadian controlled private corporation and the small business provisions will apply only to Canadian controlled private corporations. The small business changes brought in by the government are a far cry from the recommendations of the House of Commons Standing Committee on Finance, Trade and Economic Affairs. To that extent, the parliamentary secretary must feel some chagrin, because he was chairman of the committee and presided over its deliberations when it came to these conclusions and many others having to do, particularly, with small, incorporated businesses.
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I will ask the parliamentary secretary this: is he prepared to justify section 125, which is entitled, "small business deduction". Is he prepared to accept the ceiling of $400,000 cumulative of taxable income; is he prepared to accept the provision that even if the company is a public one, because its earnings are restricted, it will not be entitled to the small business deduction based upon the provision regarding the $50,000 annual total profits for the year? Is he prepared to accept the situation in which a company, owned in part by a foreign concern or individual, which has operated for a generation or more in this country, which employs Canadian labour entirely and which has been Canadianized as much as possible, will nevertheless be driven out, because the ordinary rule regarding corporate taxation will apply to it? Will the parliamentary secretary and members of the committee accept the situation in which a distributing firm handling equipment or tools or goods from overseas is to be thrown to the wolves? That is a very specialized business. The overseas parent company saw fit in the past to establish a Canadian branch. Notwithstanding the fact that the management of the company is Canadian, that its employees may have worked for 25, 30 or 35 years for the company in Canada, is that company to be tossed to the wolves.
I predict, Mr. Chairman, that in the industrial heartland of this country and in the oil sector of Alberta, that is, Calgary and Edmonton, many firms will close as a result of the restrictions in section 125. They will close because they will not be able to operate as a result of increased taxes. I want the parliamentary secretary to pay particular attention to my remarks. Some time today, I hope he will answer these questions and attempt to justify the thrust of these small business restrictions contained in section 125. I am very serious about that. They are the ones that demand an answer.
Do hon. members support the idea of disqualification because of foreign ownership-and incidentally a total disqualification-of small business? Do they support the principle that if a small business does become disqualified by reason of being sold or absorbed by a public corporation or foreign interests there shall be a retroactive assessment for recovery of taxes? There is a recapture of tax because of the changed status. I wonder if hon. members opposite are prepared to accept all of this.


Sylvester Perry Ryan: They did not know about it before.


Marcel Joseph Aimé Lambert: My colleague, the hon. member for Spadina, says possibly they do not know about it.


Jack Sydney George (Bud) Cullen: That is his second mistake.


Marcel Joseph Aimé Lambert: I wonder whether the hon. member for Sarnia-Lambton is prepared to support this type of legislation in light of the across-the-border interests in his city. Some people in Sarnia conduct business in Michigan, and some people in Michigan have business interests in Sarnia.


Gerald William Baldwin: That is his second mistake. His first is belonging to that party.
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Marcel Joseph Aimé Lambert: This is very interesting, Mr. Chairman. If I wanted to be difficult, I could pick on Mr. Speaker whose constituents have business in New York State and vice versa. The citizens of New York State own businesses on the Canadian side of the St. Lawrence. Will there be imposed on us some degree of reciprocity if we impose instalment one of the foreign ownership policy of the government? That is what this is, instalment one. I do not know whether instalment one will agree with the rest of the book. Considering the lack of planning that goes on across the way it may be at complete variance with it, yet the committee is being asked to approve section 125 and the principle of foreign ownership involved in that section. Frankly, it is a nonsensical position. Until the government sorts out its priorities with regard to foreign ownership, section 125 should not be passed.
One of the chief offenders against this particular section is the province of Ontario where most of the corporations in Canada are located. More corporations are located in Ontario than in any other province or grouping of provinces. Certainly, business in Ontario pays far more income tax than the totality of the rest of Canada. However, it is impossible to change the Ontario corporation tax act to make it mesh with these particular sections. It is not possible to do so. I am going to repeat what I said on Friday afternoon. This government has only a partial interest in corporation tax.
The hon. member for Hamilton-Wentworth should advance this argument on behalf of his constituents. During 1972, the corporations resident in his constituency will have to conduct their affairs under two different corporation tax sections.


Colin David Gibson: I rise on a question of privilege, Mr. Chairman. Most of my people are working people, employees. I have very few corporations in my constituency.


Marcel Joseph Aimé Lambert: That is indeed a real question of privilege! The hon. member thinks that to identify with the word "corporation" is anti-labour. Some members think that the word "corporation" leaves a nasty taste in the mouth. Those people who are doing business and employing people in the hon. member's constituency are operating corporations. It is a corporation when two painters put the word "limited" behind their company name. I can also refer to the constituency of the hon. member for Bonaventure-Iles de la Madeleine. Any company in Quebec with the letters "Inc." or the word "limite" behind its name is a corporation. This applies where two small individuals are running a trucking business. I am not talking about the big corporate organizations. As we mentioned in discussing section 74, even a husband and wife who incorporate their grocery store, dry cleaning business or whatever it is, are operating a corporation. If those are not the people about whom the hon. member is concerned, then he is wrong.
In any event, any small business that is incorporated in Ontario is going to have to operate under two different sections. What right does the federal government have to say to the provinces that they must amend their acts in order to conform with ours? The federal government has no greater jurisdiction with regard to income tax than do the provinces. The only reason we have one main act is the ease of collection and universal interpretation. How-

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ever, we all know that for years the provinces have been entitled to a certain share of the revenue. The federal government has no business telling the provinces that they must change their acts to conform with the federal act. The provinces were not consulted with regard to the changes in the corporation tax, yet they have an equal right to impose that tax. The hon. member can make a speech. I would love to hear him make a speech defending the stand of the government on this form of taxation.


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


Some hon. Members:: Carry on.


Russell Clayton Honey: Is there unanimous consent that the hon. member for Edmonton West continue?


Some hon. Members:: Agreed.


Marcel Joseph Aimé Lambert: I prefer to yield to the hon. member for York South whom I know has a pressing engagement. I can come back to this debate. I will yield to the hon. member. Perhaps, too, there will be contributions from the hon. member for Hamilton-Wentworth and other members over there who seem to be pretty vocal.


Russell Clayton Honey: Before I see the hon. member for York South, perhaps I might refer to the point of order which was raised earlier by the hon. member for Edmonton West with respect to the sections included in this group. It seems that sections 85 and 127 are the only ones which the Chair did not read-


Marcel Joseph Aimé Lambert: Not 127. I did not say
127. Section 127 concerns the logging tax deduction and is not related to this at all.


Russell Clayton Honey: Then, it appears that section 85 is the only one which is not in the group as read. Perhaps by consent we could include section 85 in this group. Is that agreed?


Some hon. Members:: Agreed.


David Lewis: I am sorry I could not help with the numbers of the sections, Mr. Chairman. My hon. friend from Winnipeg North Centre is away this afternoon, an event which should be marked, and he has the list.
I shall be very brief. I shall not follow the approach taken by the hon. member for Edmonton West. I rise to make two or three short points as strongly as I can. There are proposals in the sections now before the committee to which my hon. friends and I take strong exception. We object to the increases in the dividend tax credit from 20 per cent to 33 1/3 per cent.


An hon. Member:: Even though it is grossed up?


David Lewis: Even though it is grossed up. I notice that in the booklet originally distributed by the department, the booklet entitled "Summary of 1971 Tax Reform Legislation", among the examples chosen in connection with this subject is the case of a person whose marginal tax rate is 25 per cent. Then, there are cases of persons whose mar-

ginal tax rate is 40 per cent and 60 per cent respectively. An attempt is made to show, and it is shown, that the person whose marginal tax rate is 25 per cent would gain from this particular change in the dividend tax credit.


Mr. Francis:: It is true.


David Lewis: Of course, it is true. But it is not relevant. Let me say to the Minister of Finance and to the hon. gentlemen opposite who support this provision that this is the kind of red herring which may fool the hon. member for Ottawa West, but which does not fool me. I should like to know how many Canadians having a marginal tax rate of only 25 per cent own any shares in corporations which are worth more than a goldarn. Of course, they may own the occasional share or two receiving, maybe, a dollar and a few cents on each and amounting to a total dividend of $6 or $7 each year. But this example to which I have referred is merely an attempt to mislead.


Cyril Lloyd Francis: I should like to ask the hon. member whether, in working out the arithmetic, he believes the new proposal is more favourable to those in the higher brackets, or less favourable.


David Lewis: I will tell the hon. member for Ottawa West that I do not know the exact answer.


Cyril Lloyd Francis: It is less, and you know it.


David Lewis: I have not worked out the details and I wish the hon. member would stop jumping out of his seat. All I can tell him is that I am not impressed by an example which tries to tell me that a fellow whose marginal tax rate is 25 per cent has an interest in these comparisons at all. The point is that here is another concession to those who derive their income from dividends to the point at which it is important. To compare this with dividends derived by a man who may have a few dollars a year from that source is to talk irrelevant nonsense. Furthermore, anyone who understands the Canadian economy knows that as far the volume of investment is concerned-not the number of investors, but the volume of investment-the most important role is played by corporate investors. The largest amount of investment in a corporation, if it is of any importance, is held by other corporations.
So all this exercise, as far as helping individuals is concerned, seems to me to be totally unacceptable and the mere change in the tax credit is objectionable to us. Similarly we object to the proposals to reduce corporate income tax over a period of time to 46 per cent from its present level. We object to the whole concept. We object to the double standard which is shown throughout this legislation, and I have called attention to only one example of it.
The whole of the tax legislation we are now discussing makes us unhappy because we take exception to the double standard which is employed, the different treatment accorded to those who are making their money out of capital gains, which are to be taxed only to the extent of 50 per cent, or through special concessions to mining or oil corporations, or through dividends, and so on, as compared with that accorded to the working man and woman whose taxes are deducted at source. Over and over again,
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the standard applied to the rich is much more favourable than that which is applied to the ordinary Canadian.
I rise merely to emphasize a point which has been made by some of my hon. friends over and over again. We do not intend to go on making these points ad nauseam. It appears we cannot change the government's view with regard to some of them and we do not intend to keep on talking and putting our arguments forward without serving a useful purpose for the Canadian Parliament or the Canadian people. But we believe that every time an issue of this kind comes up it is our duty to place our position on record, for we are against treating the corporations and the rich with silk gloves while placing the real burden of the tax system on the middle class and those living at a low income level.
Before I sit down I wish to make it clear as leader of my party that we have nothing in common with most of the objections raised by the spokesmen for the Conservative party. We have nothing in common with the hon. member for Edmonton West when he sheds tears for the corporations, or with the kind of objections he is raising to the legislation. We may sometimes be wrong. No doubt we are. But we are interested primarily in the protection, in our view, of the poorer sections of the community and of the middle income people. To the extent the corporations, or people with a great deal of wealth, pay less, that much more has to be contributed by those who have little. That is the history of this new tax system. This proposal makes a few desirable changes but does not basically alter the inequities from which our taxation system has suffered. It is for this reason that I cannot agree with the suggestion the leader of the Conservative party made the other day outside the House, and I think inside the House, though I was away on the day it may have been made, in regard to passing the entire bill, bringing certain sections of it into force immediately and then waiting some months for the others. This seems to me the kind of suggestion that derives from an element of society which really does not need or deserve the concern of the members of this House.
We want some basic changes made to the provisions having to do with co-operatives and credit unions so as to ease the burden of taxation where it should be eased. We do not think it is of any value to keep on talking on the bill for a further period of months; we have already talked about the bill for a long time. Neither do we intend to fold up unless the government is prepared to see the justice of certain representations that have been made, and to make substantial changes to the law in regard to the taxing of co-operatives and to other provisions in the bill. If these substantial changes are not made, it is our duty to continue fighting for them. I took this opportunity of rising for a few minutes to make clear that I do not share the suggestion made by the leader of the official opposition, any more than I share the tears shed by spokesmen of the Conservative party over the penurious corporations that are affected by this legislation.


Edmund Boyd Osler: Would the hon. member permit a question that revolves around a statement made by Premier Schreyer, quoted in the Winnipeg Free Press. I am sorry I cannot give him the date from the reproduction that I
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have, but I will send it to him if he wants it. He was griping about some statements made at a convention of his party and said that his government should concentrate on economic development which will provide the most jobs for people. Then, his industry minister said that he was tired of all this ideological hang-up that had been shown and stated that the bulk of the industry in Manitoba is private and deserves their support.
In view of the statements that the leader of the NDP has just made about Canadian corporations, most of which are small and to which we are trying to give some measure of support, would he tell us what is his philosophical position? Does he believe that small corporations are worthy of some support, as do the premier of Manitoba and the industry minister of Manitoba?


David Lewis: If the hon. member for Winnipeg South Centre understood what he has read he would find no difficulty reconciling what I said and what the premier of Manitoba said. I agree with the premier of Manitoba, and so does my party. We accept the fact that most of our economy is privately owned and controlled, and if we had an opportunity of doing something about it as a government, either federally or provincially, we would look forward to a mixed economy for a long time to come, if not forever; I do not know. By all means, we agree that the smaller corporations have to be given the opportunity to live and to make a fair return on their investment. I have no doubt that the minister of industry in Manitoba is prepared to have the Manitoba Development Corporation assist any industry that provides jobs, whether that industry is privately or publicly owned.
On that score, there is no difference between him and me or between the provincial party in Manitoba-that is, the majority of them-and the federal party. I have no difficulty reconciling the two. All I am saying is that, whether it is a small or a large corporation there ought to be an equitable tax system that ensures we all carry a fair burden of taxation. I particularly object to the increase in the dividend tax credit from 20 per cent to 33 per cent, because I am not convinced from what I have seen that this does not give a very positive advantage to those who make a large part of their income from dividends. I frankly admitted I had not made a lot of calculations, and I do not accept the tables provided by the department as the final word. Only experience will show. A good many other matters have to be taken into consideration, such as total income, marginal rates and so on. I am not at all convinced that this change is a change for the better as far as a more equitable tax system is concerned.


Edmund Boyd Osler: Mr. Chairman, I have found the reference to this report and will provide it for the information of the House. It is the Winnipeg Free Press for November 22, 1971.


Donald Frank Mazankowski: Mr. Chairman, I am delighted to participate in the debate on this very important section of the tax reform bill dealing with the taxation of the operations of small business corporations. Certainly, I do not put myself forward as an expert on taxation but I do happen to have had some experience operating a small business, and it is from that standpoint that I should like

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to make a few points for the consideration of hon. members on both sides of the House.
It is obvious to me that this legislation-in fact, the whole concept of the provisions with which we are dealing this afternoon-is the product of academics and theorists who have very little experience with, or knowledge, of, the day to day workings of a small business, its ups and downs, the vagaries of the country's economy both internationally and nationally, the whims of the weather, and the responsibility one has of meeting one's commitments, discharging his various obligations and meeting the weekly payroll, while at the same time attempting to eke out a reasonable living for oneself. I am sure the drafters of this bill have never had to deal with their bankers, friendly or otherwise, in order to meet the day to day expenses of operating a business or the meeting of overdrafts. I happen to be in the automobile business and have to deal with trade-ins, accounts receivable and all the ramifications which come forth in such an operation. There is no provision whatever in the bill that appears to me to be an incentive to small business.
I should like to ask the spokesman on that side of the House how in the name of heaven he can suggest that this proposal is an incentive to small business, as is suggested in the summary of the 1971 tax reform legislation. In the competition bill-we do not know whether it is still in the House or out of the House; right now, I suppose it is in a state of limbo-there are some guidelines or criteria established for what we refer to as misleading advertising. If an intelligent man found an advertisement misleading, that would constitute a contravention of the bill. I would certainly suggest that after reading page 37 of the Tax Reform Summary one could very easily be mislead into believing that this bill is the salvation of small businesses. Unfortunately, it is not. Those responsible for drafting this legislation are also responsible for proposing the wholesale extinction of small businesses in this country. We only have to face the reality of the business climate of this country to know how uncertain the existence of small business is in Canada.
In my part of the country, about 35 per cent of the economy is in the form of small business enterprises. The business climate in this country is very uncertain at this stage. We have pressures on the international economy which not only affects small businesses but large businesses as well. We know that bankruptcies are at a 10-year high. Businesses, particularly in my part of the country, have to rely to a large degree on the ups and downs of the agricultural industry, and that industry is affected in a very disastrous way. In other words, this is a period of gloom and doom for the people in that industry.
We see the proposal is that in 1976 corporation incomes of $50,000 or more will be taxed on the basis of 46 per cent rather than 50 per cent, which is a reduction of 4 per cent. At the same time, small business corporation taxes will be increased from 21 to 25 per cent, which is an increase of 4 per cent. I know there are ramifications in respect of the distribution of dividends and what not, but that is another of the complexities of this bill I want to discuss. Many rational observers of the tax reform bill, including the members of the legal profession, have advanced major

criticisms in respect of this area of the tax reform legislation which affects small businesses. Certainly, it is in this area that the private entrepreneurs have difficulty in affording the required expertise of professionals to file their tax returns in such a way that they may derive the greatest benefit from the provisions of the law.
Certainly, nowhere in this tax bill do I see any incentive for small businesses. Let us look for a moment at the number of corporations this bill affects. The Guardian issue of 1970 provides some very interesting statistics in this regard. Based on 1967 tax returns, some 88 per cent of firms operating in Canada, filing Canadian tax returns, reported income below $35,000. These proposals strike at the very heart of business in this country. A total of 81,366 firms of the 92,239 for which data was on file, fall into this category. If we are to stifle that massive part of the business economy of this country, certainly we are going to lead ourselves into wholesale unemployment, worse than we have today.
People in this type of business are providing jobs. They are certainly working more than eight hours a day. As a matter of fact, as a result of government regulations we find they are working perhaps 15 or 16 hours a day, eight hours in production and another eight hours in order to abide by the rules and regulations prescribed by the government. If we continue to work in the direction of destroying the initiative of small corporations, we are going to aggravate the economic situation in this country beyond all possible cure. Instead of increasing the tax on small business corporations, we should decrease it.
It is my belief it is in the area of small business that we have the most effective and efficient operation, the best innovations which have provided new jobs and the development of facilities we would not otherwise have. I recall the formation of the Versatile Manufacturing Corporation which started out as a one-man operation. It was a small business in the city of Winnipeg. It grew to the point where it is now a large exporter of Canadian machinery products. This corporation has served a very useful and viable purpose, to the advantage of the agricultural community of Canada. It has become the exporter of a great deal of machinery to the United States. This corporation started as a one-man operation. He joined forces with another and they developed a system of hydraulic engineering service for combines. This, in turn led, to the development of grain augurs and swathers. Today, this company produces a great deal of farm machinery. It is a wonderful Canadian organization and I should like to see more of the same type. I believe more operations of this type could be encouraged by government incentive, combined with the expertise and ambition of the type possessed by Mr. Robinson of the Versatile Corporation.
In passing, I might suggest that one-third of the small businesses with an income of less than $35,000 per year exist in western Canada, but over the past few years they have experienced a very difficult time. We only have to look at the report of the Barber commission on farm machinery to understand the situation. We find there is one area, that of the dealer distribution of farm machinery, that is not out of line in respect of price increases in this country. It was made abundantly clear that farm machinery dealers were discounting their sales to the extent of 15 per cent in order to remain competitive,
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hopefully, to survive. However, when we look at those farm machinery dealers in the three prairie provinces, we find that because of the slowing down of the agriculture industry a number of companies have either had to consolidate or go broke. That is perhaps the only advantage one has of running his own business. He has the privilege of going broke.
We see a consolidation of business taking place without any corresponding initiatives by the government to overcome the economic plight which they face. Instead, this government is moving in the opposite direction. We see a massive consolidation of small corporations which become big corporations. Small businesses, particularly in rural areas, are the lifeblood of small communities. I notice that the Minister of Agriculture has now redirected the Department of Agriculture toward the provision of stronger rural communities. Perhaps this has occurred as a result of the ministers of agriculture in the prairie provinces taming the minister in respect of his agricultural adjustment policy. This, in my opinion, is long over due. We need a new enthusiasm for small corporations, small businesses and private, independent intrepreneurships so that they might be fostered and developed. We do not see any provision for that in this tax bill. It is for this reason I rise in my place today to make a most vigorous objection to this provision in the bill.
There are now, I believe, five provinces which have urged this government to postpone implementation of this measure which bears on corporate domestic and international income. It is far to complex. Certainly, the Leader of the official opposition put forward very recently a compromise proposal that we pass the sections of the bill which deal with the increased exemptions and so on, because we would seem to be getting into a situation here where we are running a race with the clock. I believe a tax bill of this nature, magnitude and complexity should not be proceeded with on the basis of a race with the clock. So, I believe the Minister of Finance and members on the opposite side of the House owe it to themselves, and to the people of Canada, to urgently consider the proposal put forward by my leader.


Edmund Boyd Osler: Mr. Chairman, may I ask a question of the hon. member?


Donald Frank Mazankowski: When I am finished, Mr. Chairman, he can ask me a question. The other point which concerns me is the whole climate in which small businesses must operate and the fact that consideration of small business is generally absent from the formulation of government policy in this area. We know that governmental policy is influenced by big business and big unions. I believe everyone in this House of Commons should examine very seriously exactly where we are headed in the matter of small business in this country, because I believe there is something about small business which is unique. A man must have an opportunity to develop his potential to the maximum of his ability so that he might utilize his initiative in a spirit of pride. The trend to bigness and the trend to big corporations produces an important part of our problem today. The labour unrest and the pressure of big unions have been a result of our total approach to bigness. As I
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said before, the dominating forces of both unions and big business play a very important role in respect of government policy. We know small businessmen do not have an effective organization and therefore are not readily able to analyse and influence government decisions. They lack the opportunity, the expertise and the organization to put forth their proposals in a firm and articulate way.
The other point is that small businesses lack any political clout because they do not control large blocks of votes.
I believe members in this House of Commons who have small business entities and enterprises in their constituencies certainly should rise in their places to urge the government to give some consideration to streamlining this bill so that it would be easily understood by the average person and small businessman generally. These are the average people who look upon the government as infringing upon the decision-making functions they have. When we have a situation wherein 46 per cent of the gross national product is being extracted by the three levels of government, we find we have a network of regulations which do nothing but bring about increased frustration and anxiety for the average businessman. I would hope, throughout the reshaping process which is taking place in this country in respect of small business, that the government would step back a little and have a look at the situation in an objective way because the three bills before us now-Bill C-259, the competition bill and the amendments to the Labour Code-could very well change the whole structure of the small business community in this country.
Rather than the small businessman being soaked with an increased rate of taxation, I would hope there would be some incentive for new independent entrepreneurships to develop, to grow and to help the economic climate in this country, because in that manner I believe we would develop major corporations such as Versatile, the Canadian farm machinery manufacturer in Winnipeg. I would also hope that we would make it possible for more organizations such as this to develop. While governments probably have assisted organizations like Versatile in some way, I believe as we look around this country we will see there are many more innovators, if I may use that word, who could develop products which could be sold both domestically and internationally. In this way jobs could be provided for Canadians, revenue for governments at all levels, and certainly a better climate of enthusiasm in this country.


Edmund Boyd Osler: I have a very small interjection, Mr. Chairman. I wonder if the hon. member for Vegreville has any suggestions to make in respect of his concern about the race with the clock to which he referred. I wonder whether he has any suggestions concerning how we could beat this clock instead of being confused by it. It has occurred to me that in the mother of Parliaments, where the Conservative party happens to be the majority party at the moment, they worked out a time allocation which enabled them to consider the whole vast problem of entering into ECM in a matter of a week. If the party in Canada shares the enthusiasm of the party in Britain in respect of time allocation, I wonder whether some way might be found to deal with this tax bill which, although complicated, is somewhat less complicated than the ECM problem in

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England. I am wondering if the hon. member intends to make some suggestion to his House leader about time allocation which would help us follow the example of that party in Great Britain in the mother of Parliaments, which we all admire and which we have often had invoked as a precedent to us.
I would also suggest briefly to the hon. member that when he talks about helping small businesses get off the ground, as it were, he look at page 37 of the plum coloured summary, because he will see that this is exactly what this government proposes to do. On that page we read:
The rate will be 25 per cent on the first $50,000 of business income of Canadian-controlled private corporations.
The incentive will stop, however, at $50,000 in any one year, and of course will stop at the accumulation of $400,000 because we do not want large corporations to take advantage of an incentive that is meant specifically for small ones. If they did they would be getting something that they did not need and to which they would not be entitled, so individual taxpayers and the small corporations would have to make up the difference. It seems to me also that when the hon. member uses Versatile as an example, he uses an excellent example.


Mr. Alexander:: I rise on a point of order, Mr. Chairman. It has been stated, and I think it continues to be stated, that we in the opposition are attempting to filibuster the bill. I want to go on record as saying that when comments are made by way of long speeches rather than questions, the filibustering comes from the other side.


Russell Clayton Honey: Order, please. The hon. member for Winnipeg South Centre has the floor.


Edmund Boyd Osler: I am sorry my purpose was misunderstood. In my own small way, I was trying to make an interjection and not ask a question. I am sorry that my delivery was not sufficiently clear to get this across, but it really is meant to be an interjection and not a question.
As I was saying, Versatile is the product of two ingenious men, not one, of Robinson and Pacosh. It is my understanding that they started and developed their company by using the perfectly legal device of grouping quite a number of small companies until they were able to get the thing off the ground and consolidate into one, which became Versatile. I think they launched it with $5 million at that point; but until they got up to the point at which they could employ $5 million of equity capital they were using this device which we are proposing to retain here, by means of which a small company can obtain tax concessions until it grows. They had something like 11 companies. I am not sure of the exact number; it is a long time ago. It was only after they consolidated that they became a big company. The reason for their phenomenal success was twofold: one, their great brains in the mechanical engineering field, and two, their great perception in the marketing world because they set up a marketing system which was somewhat unique. They were able to pretty well steal a march on their competitors from as far north as Edmonton, as far south as Texas and as far east as Pennsylvania. I am proud they are in Winnipeg and I hope they will remain, although I have heard
(Mr. Osier.]
rumours that they were thinking of moving out because of the high taxes they pay now in Manitoba. I hope they will not do that because the short term should not be measured against the long term, and sooner or later they will get tax reductions, even in Manitoba, when the government changes there.
I did want to interject my delight in the thought that perhaps members of the opposition were becoming time conscious and were thinking of coming up with some suggestions for time allocation, in the hope that they really understand that this proposal does genuinely help small businesses and therefore merits their support, if the sentiments they have been expressing are their true sentiments.


The Deputy Chairman:: Order, please. Before I give the floor to the hon. member for Vegreville, perhaps I should make a comment to the committee to clarify which sections are under study at this time. It was brought to the attention of the Chair by the hon. member for Edmonton West that last Friday, November 26, the committee accepted sections 36 and 37. The committee is proceeding now with the study of sections 38 to 41 inclusive, 82 to 85 inclusive, 89, 112, 121 to 125 inclusive, 129, 143 and 183 to 197 inclusive.


Marcel Joseph Aimé Lambert: I rise on a point of order, Mr. Chairman. Somehow or other sections 36 to 41 slid into this group. We want to look at the subject matter of section 36, which is on railway companies and which we passed on Friday. Section 37 is on scientific research. We also passed that on Friday. Section 38 is the opening section on capital gains. We had that section under discussion on another occasion, and as a matter of fact there is an amendment and a subamendment to section 38. Section 39 deals with capital gains. Section 40 is headed "general rules". It has nothing to do with corporations except as it might incidentally apply to corporations. Section 41 determines the meaning of taxable net gain from dispositions of listed personal property, which has nothing to do with corporations and shareholders, except inferentially when they list personal property. I do not know how corporations could list personal property. I suppose they can have paintings, jewels and so on, but it seems to me that there is a better point of departure than through this group of sections. I did not want to make my comment publicly and I was doing it privately, but events have overtaken me.


Gaston Clermont: Mr. Chairman, did I hear you say sections 183 to 197? Shouldn't it be sections 181 to 197?


Gérald Laniel: I did mean sections 181 to 197. [English]
Following the remarks of the hon. member for Edmonton West, the Chair wishes to seek the advice of the committee regarding the sections that should be studied at this time. It is very difficult for the present occupant of the Chair to judge the relationship between one section and another unless I make a thorough examination at this time. Therefore, I would invite either the parliamentary secretary or the hon. member for Edmonton West to make
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some kind of suggestion by which the committee could abide.


Marcel Joseph Aimé Lambert: It is very simple, Mr. Chairman. I read out the first block of sections that is not very relevant. Then, we come to section 82 which is included in Your Honour's list, subdivision h-corporations resident in Canada and their shareholders. The heading of the section is "taxable dividends received". That section has to do with shareholders. So, let us hinge the discussion on section 82, and all the other sections will remain as read out.


Gaston Clermont: Mr. Chairman, I think sections 38 to 41 deal with capital gains.


Gérald Laniel: Am I to understand that we would not consider at this time sections 38 to 41, which were read out at the opening of the committee this afternoon, so those sections which will be called will be from section 82 onward. Shall section 82 carry?


Donald Frank Mazankowski: I merely wanted to reply to the question raised by the hon. member for Winnipeg South Centre. I can assure members of the House that I will not be as longwinded in my answer as he was in his question. His first question was whether we were disposed to speed up the process. I believe that my leader offered a logical proposal, and if members on the other side in their wisdom wish to accept this proposal, I am sure it would speed up the process significantly. But it seems that hon. members on the opposite side of the House consider that when there are any concessions to be made, they have to be made by the opposition rather than by themselves.
With regard to the debate that is taking place in the United Kingdom with respect to the European Economic Community and their participation, I understand the debate was merely a matter of the resolution and as yet the bill has not received final passage. The full details of the bill will be examined later.
Getting back to the incentive with respect to small businesses, perhaps it is because I am not a tax expert that I cannot understand, but it seems to me when a small business has its income tax increased from 21 per cent to 25 per cent, that is not an incentive. It is a very simple matter of narrowing the gap between small corporations and large corporations. I object to this very much. I would say if the government truly wanted to offer an incentive to small private businesses to get started, they could have gone the other way perhaps, thinking of many Canadians desirous of establishing their own business to the benefit of all Canadians.
With respect to the matter of Versatile, he is right. Versatile was co-founded by two men, and this was allowed to I believe in my remarks. I believe the leadership was provided by a Mr. Robinson, and a man by the name of Pacosh was taken in who happened to be an engineer. I would not want the impression left that there was only one man. The success of the company resulted from the combined expertise of Mr. Robinson and Mr. Pacosh.
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Marcel Joseph Aimé Lambert: Mr. Chairman, I wish to resume the argument I was making at the conclusion of my first round. If we look at the proposals for the taxation of corporations, I think it is necessary that we look at what we have now, what was proposed in the white paper and what all of these sections now represent. Incidentally,
I have found another section which has nothing to do with this subject, section 122 and it is on the list. It deals with inter vivos trusts and not in any way corporations and shareholders.
We know that at the present time we have what is generally known as the two tier system, that any corporation whose income is less than $35,000 in a taxation year will pay at a base rate of 21 per cent plus any surtaxes or what have you that are in existence; at or over $35,000 the rate climbs to 50 per cent plus surtax if any. This two tier system has had an historical development. As I recall, the 21 per cent first applied to the first $20,000 and ten or eleven years ago that was increased to $35,000, bearing in mind the devaluation of money over the period of time and other requirements.
One would have hoped that the only change made now would be to generally take into account the inflationary change. Business understood the two tier system. I can assure you, Mr. Chairman, and hon. members, that I cannot tell which excited the most comment, the deemed realization every five years on shares of widely held companies, the capital gains tax on principal residence or the elimination of the two tier system dealing with the taxation of corporate business. The latter seemed to excite everybody. It was universally condemned with the exception of those academics who think that they are such intellectual purists and who insist upon this so-called principle of equity or as it is sometimes described, absolute neutrality between classes of taxpayers. These people have never been in business and would not know how to run a peanut stand or a service station. They do not know the problems of getting a small business started, running it and developing it so that it is a viable operation supporting the owner and his employees. It was with the same reaction, it seems, that members of the Senate Committee as well as members of the standing committee of the House of Commons received these protests that the two tier system should go and that everybody should be taxed in the same way. I just cannot see why there should be neutrality, Mr. Chairman.
Coming back to the point I have made time and time again, Mr. Chairman, it seems to me that the taxpayer's understanding of a tax, and his willingness to pay under a tax system, are just as important as administrative convenience or some fancy theories of the tax experts. This blessed bill seems to have forgotten the taxpayer, though he is the one having to bear the tax. He must understand the tax he pays, whether he is in business, whether he is a wage earner or is on a salary. Is there some God-given right that enables administrative officials to devise a tax system, put it on the back of the taxpayer and then have him treated like a dumkopf, simply a dumb head? Is he supposed to be thankful that he is going to support a system of taxation whether or not it is understandable? Certainly, the philosophy behind the white paper on tax changes has something to do with being a taxpayer who has to produce, not simply with someone on a salary

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which has its source in someone else's productive energies and abilities.
We have moved away from the white paper proposals, except that there is a vestige of integration left in the "gross up" in credit involved with regard to the elimination of the 20 per cent dividend tax credit. A mild form of integration is involved there. Thank goodness we did away with the nonsense of "closely held corporations", "widely held corporations" and the distinction between "Canadian corporation" and "foreign corporation".
Let us see what is before us now. I should like to deal with section 123, "Rate for corporations". My colleague from Vegreville has already spoken about this section. At the present time, corporate taxes on corporations are paid regardless of nationality of ownership. I suppose it might be said that there is neutrality. Those people who were the great exponents of neutrality between taxpayers should look at the present act. There is neutrality regardless of size or nationality of ownership and the tax rate is 21 per cent on the first $35,000 of the taxpayer's income and 50 per cent on the excess.
As we know, and as is explained in the bill, the general rate of tax will be 50 per cent-in 1972 and that will reduce by one percentage point per year until it reaches 46 per cent in 1976. There is to be a continuing general abatement of provincial taxes at 10 per cent and, to replace the 21 per cent, there is to be a much more restrictive reduction with regard to the general rate for small businesses. There are also some transitional provisions that appear in the interim transitional rules in section 51. We need not go into them at present. It must be noted that for corporations a rate has been suggested that includes the "standard" provincial rate and that there is a 10 per cent provincial abatement as under the present system. But the decrease to 1976 will reduce federal revenues only. So, we must see what the provinces will do. After all, at the last dominion-provincial conference of a fortnight ago, it was set down clearly that if provinces want to get additional revenues, there is a flexibility for them to tax. We know that in certain provinces the total corporate tax rate is much above 50 per cent. In Manitoba and Alberta there is a form of surcharge. Ontario is the only province that imposes the basic 50 per cent.
If one examines the flow through of ideas from section 123 to 124 and then looks at section 125 which is entitled, "Small business deduction", it will be seen how difficult it is to disagree with the interpretation placed on section 125 by the hon. member for Vegreville. Underlining what he said, I invite the parliamentary secretary to explain section 125, and particularly the last paragraph of section 125(1) which reads in part:
. . . the reference in this subsection to '25%' shall be read as a reference to '24%' for the 1973 taxation year . . .
Let him explain the deductions. You see, the section says that there may be deducted from the tax otherwise payable under this part a certain amount. The tax payable under this part actually is 50 per cent, declining down to 46 per cent in 1976. So, there may be deducted from whatever figure appears under "tax otherwise payable" an amount equal to 25 per cent of the figure derived from the formula that is given. According to the last paragraph

of subsection (1), in place of "25 per cent" you must read in subsequent years, 24 per cent, 23 per cent, 22 per cent and 21 per cent. Therefore, the deduction from the tax normally payable will be on a reducing basis. A company availing itself of the small business provision will be fixed with regard to the rate of tax. Let us look at the rate for 1974: it is 48 per cent. According to section 125, in 1974 the deduction shall be 23 per cent. Unless I am wrong, 48 less 23 leaves 25. Therefore, the rate for small business is forever fixed at 25 per cent. They will not get any additional advantage, as provided for in section 123. I may be wrong. The hon. member for Vegreville may be wrong. If we are, we invite the parliamentary secretary to show where we are wrong in interpreting this particular subsection. It seems to me that here there is a grave difficulty.
In discussing restrictions that are imposed under section 125 I really want to discuss the provisions of subsection 2(a) saying, "a corporation's 'business limit' for a taxation year is $50,000, . . . ". I should have liked to see a platform or a plateau in a two-tier system introduced which would have brought the former limit of $35,000 up to $50,000. That is the spirit I should have liked to have seen on the part of the government in an attempt to comply with the realities of inflation. It would have been so simple, so very simple, to bump up the $35,000 figure to $50,000. Business would have understood just what was being done and the government would have acknowledged the inflationary situation, as it has done in the past, by increasing the limits to conform with the realities. That would have been the fundamental reason for that action. Individuals are now enjoying much higher incomes; they are not real incomes but much higher dollar incomes bearing higher tax rates.
Why will not the government give businesses the benefit of the type of thinking that has been extended to individuals. But, no, we are to introduce a very complicated system and there is a limit of $50,000 within one year. Once the accumulation of taxable income reaches $400,000, the small business provisions or privileges will no longer apply to that business. Why, at $50,000 a year, under inflated dollar values, it will take a business about eight years to accumulate $400,000 of inflated dollar income. I invite the parliamentary secretary, in whose constituency there are many small businesses and who knows something of business, he having been in business, to comment on this. Under inflation you can reach the figure of $400,000 just as quickly as you could have reached $275,000 under the present provisions. I think we all recognize that that would have been quite unfair. If such a level was unfair then, why should it not be unfair now? It seems to me that business will not thank the government for introducing these restrictions.
Furthermore, if companies are in a group, if they are associated with one another in a taxation year, and they have filed a certain type of agreement, the minister must consider them all as being part of a group and the small business provision does not apply to them. There must be some relation between this provision and old section 138.1 will look. I see, having looked, that this is not like old section 138(a) of questionable parentage under which the minister was given great discretionary powers to determine who were associated companies. This is an indica-
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tion where discretionary powers are granted to the minister,
I now come to the third matter. I referred to this in my speech earlier this afternoon. If a company is controlled by a public company or non-Canadian ownership interests, it cannot in any way qualify for the small business provision. I think the parliamentary secretary owes the committee a very serious and detailed explanation. Is this to be the thrust of the government's foreign ownership policy? I do not want to return to that in great detail, but is that going to be the thrust?
Other companies which may not qualify for the small business provision are companies without Canadian active business income. In other words, they may not qualify if the income is from investments. Corporations that have Canadian business income can only use the rate for that income and not foreign income, interest income, or other passive income. Why the distinction? If a Canadian company has foreign business income, why can it not use the provisions of the small business section? If it has business income from non-Canadian sources, why should it not be able to use that? There are many answers required to a multitude of questions. Before this committee should even be asked to pass these sections, there must be some answers. I can go on and on with regard to these particular subsections.
What about these ineligible investments and all of these things that come under sections beyond section 125? I wonder if the parliamentary secretary is now in a position to reply to this series of questions. We cannot participate in an intelligent debate until we know the position of the government. I have directed several questions to him. I hope we can get some answers. I do not want to embarrass the parliamentary secretary. I know the minister is not here this week and the Minister of National Revenue will be taking over later. The Parliamentary Secretary to the Minister of Finance is likely participating in some rejoicing as the result of a certain football game which was played in the rain.


Mr. Marchand (Kamloops-Cariboo):: What do you mean?


Marcel Joseph Aimé Lambert: The hon. member for Kamloops-Cariboo should not boast about the weather in his province after that kind of a show for the Grey Cup.


Gerald William Baldwin: Mr. Chairman, I am moved to make a few comments on this aspect of the bill. I am interested when I see the faces of members in the government benches. I am sorry the hon. member for Winnipeg South Centre is not in the chamber. He was here a few minutes ago. He did not hear the very reasonable answer by the hon. member for Vegreville with regard to the length of time that is being spent on this bill. He complained about this and made a comparison with legislation in the United Kingdom. I agree with and want to reinforce the answer given by the hon. member for Vegreville.
The debate in the United Kingdom, in the Mother of Parliaments, if I can use the hallowed phrase which the hon. member for Winnipeg South Centre used, was on a simple motion on the question of whether or not the United Kingdom should enter the common market agree-
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ment. This is to be followed by a number of legislative proposals. The debate on the motion was limited to eight days by agreement. The labour party has made it quite plain that it intends to debate, as long as possible, the issues involved in the legislation which will deal with the type of agreements to which the United Kingdom will be asked to subscribe in order to bring her into the common market.
I hold no brief for the labour party. They may have just cause for doing that. However, there is this distinction to be made. The government bringing in the legislation in the United Kingdom is a Conservative government. I think it is notorious that a Conservative government always brings in good, sound legislative proposals.


An hon. Member:: They allocate time.


Gerald William Baldwin: Of course, they do. In this case the opposition agreed to eight days on a motion. What happened here when the hon. member for Skeena attempted to move for the approval of the unanimous recommendation of the Standing Committee on Indian Affairs and Northern Development? The government cut off debate after one day. When do we have a situation in which the government will allow this House to debate one motion for eight days? There is the distinction.
It is well known that any government of Conservative persuasion will inevitably bring in good legislation.


Some hon. Members:: Oh, oh!


Gerald William Baldwin: I see that no one challenges me on that score. It must be accepted. The hon. member for Hamil-ton-Wentworth rose on a question of privilege because he represented a constituency of simple, working men.


Colin David Gibson: I did not say "simple". They are hard-working men.


Gerald William Baldwin: I was thinking of their representation, that is all. Surely, he must realize that on the question of incidence of taxation, with the possible exception of capital gains tax, taxation is always an element in the charges which are passed on by business, corporations and individuals. This cost is always passed on to the consumer, regardless of whether it is for services or goods. The incidence of taxation, whether it is bad or iniquitous, inevitably falls on the back of the consumer. It does not really matter whether you represent corporations or simply consumers.
I want to follow up the point raised by the hon. member for Edmonton West last Friday, and repeat it today. It bears directly on this group of sections with which we are now dealing. I hope the parliamentary secretary will have time to absorb the very searching and brilliant questions asked by the hon. member for Edmonton West in order to reply to them when I have completed what I have to say.
The issue with regard to the wisdom of taking this group of sections, together with others to which we have referred, and deferring their ultimate implementation to some time in the future certainly appeals very strongly to me. It should also appeal to other members of this committee. We are now beginning to see, hear and read that an increasing number of Canadians are terribly concerned about what will be the ultimate effect of many of

November 29, 1971
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the proposals, including those before us today. What will be the impact of these provisions upon the economy and industry, whether it is business industry, labour people, farm people or agriculture? It is becoming increasingly apparent that the proposal advanced by my leader and approved by my hon. friend from Edmonton West and the rest of this party is gaining wide acceptance.
There was an editorial in the Ottawa Citizen today approving the suggestion. The words used were "split the bill". We are not precisely engaged in that exercise. We understand that the government is determined to get the bill passed and we are trying to facilitate its passage as well as we can. But what we do want is an opportunity for those sections which must be passed, and which are obviously required at this time, to be enacted, to be implemented, as they will be upon Royal Assent. When that happens, all the clauses of the bill to which a delaying clause is not attached will become law. I think it is desirable that the clauses to which I have referred should be enacted and implemented. We shall be prepared to do even more than we are doing now to facilitate the passage of the bill so that there may be a completion of this debate, and I hope hon. members to my left in the New Democratic party and the Creditistes can be persuaded to join us in seeking that the bill is passed if an arrangement of the kind I have mentioned is made. But it should be clear that the sections which in our opinion are repugnant or undesirable or unclear and in need of amendment will be the subject of a proclamation motion. This would mean they could only be implemented upon what is known as an affirmative resolution continuing the proclamation being brought into the House, debated and approved.
These are the issues which are being discussed at various levels at the present time. I have every hope that the government will be persuaded to see the merits of the proposal which the Leader of the Opposition has made. I say this because it is becoming apparent that all sections of our economy and of our social structure believe it to be a sensible one. The business writers in all the newspapers of the country are not legion in number, I know, but they do speak for a substantial section of the community and they have almost universally declared that a compromise of the kind I have described should be adopted. I heartily agree with the pertinent remarks of my hon. friend from Vegreville as to the need to encourage small business as part of the economic and social structure of the country.
Just the other day the Retail Merchants Association, which reflects the views of thousands of small business people said: In the name of Heaven defer these provisions in the bill. As for the farmers, I have been out west twice in the last ten days or so, over each weekend. The farm population is concerned without exception about the impact of this bill upon them. They are not clear as to what its ultimate effects may be. They have said: You are right. The proposition advanced by the Leader of the Opposition amounts to a sensible and reasonable compromise without loss of honour on either side. Defer the bill. The members of this party believe that is a tactic which is eminently suitable.


Colin David Gibson: No doubt.


Gerald William Baldwin: The experts, the so-called experts, from the legal profession, the accountants and the tax experts, have all said practically the same thing. I realize there are also those who say: Let us settle the uncertainty. We do not like the bill, but at least let us have it. I do not think that is the correct attitude. We should be derelict in our duty if merely because we were unwilling to take the time to give the legislation the careful, though limited, scrutiny we are giving it at present from this side of the House, we should let the bill pass regardless of the consequences which might arise when it was finally implemented and the taxpayers had to worry about it. I recall, reading about this subject, that when the income tax was first enacted in this country it was called a temporary war income tax. That was in the days of the first world war. Its temporary nature has long been forgotten and these proposed amendments will become a burden fixed on the backs of taxpayers next year, the year after, the year after that and for many more years to come. The view of the minister and of the parliamentary secretary seems to be: blessed are the taxpayers of Canada, for they shall walk in the valley of permanent despondency.
It is for all these reasons that I support the proposal by my hon. friend the Leader of the Opposition. It would not be very damaging for the government. There is no question that further amendments to the bill are even now being considered. If I were a betting man and allowed to bet in this House I would venture a large amount of money that today, on the desks of members of the minister's staff, numerous amendments are awaiting consideration. I would prophesy that large numbers of amendments to this bill are even now being considered and when we go into the next session, the last pre-election session, I would be very surprised if the minister did not bring down an act to amend the Income Tax Act as amended by Bill C-259.1 do not think there is any question about that.


Colin David Gibson: What about the pressure of Canadian nationalism and so on, and foreign ownership generally? Don't you think we should get on with these things?


Gerald William Baldwin: A very interesting question. I would estimate that this bill, Bill C-259, was before the cabinet for several months. This delay in processing the legislation through the rigid and antedeluvian structure the Prime Minister has set up-


Colin David Gibson: Time spent in consultation, so that the people might know what was being done.


Gerald William Baldwin: After all that, he wants us to put the bill through in a very few weeks. As to the entire subject of foreign ownership, it is only because somebody saw fit to exercise his own judgment-I do not say he was necessarily right in doing so-in deciding to make public the information the government had before it that the people have any idea about the government's thinking on the question.


Colin David Gibson: You are begging the question.


Gerald William Baldwin: This government has been sitting on a decision on foreign ownership for long enough to hatch all the eggs this country needs for the next ten years. I suggest the hon. member has raised a non sequitur. It is
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eminently desirable that this bill be not hastily rushed through the House; it would be wrong to do so. There is no doubt at all that it will be substantially amended at the next session of this House.
All we are asking the government to do at the moment, if lack of clarity is the question bothering people in the country, is to say that it accepts the proposition of the Leader of the Opposition that the bill be passed, but that the implementation of clauses that need clarification, that to some extent are undesirable, that need to have added to them other sections so as to make them workable, be postponed in order to offer the officials of the department an opportunity to speed up the amendment process in which they are now engaged, and to enable the business community, including farmers and others engaged in agriculture, to examine at leisure exactly what is going to be the effect of the legislation when passed. In that way, we can work together in that measure of harmony and co-operation that is so essential to securing those amendments that the minister will bring down in order to make the legislation more desirable. I am as satisfied as I possibly can be that thousands and thousands of people, including those who should be knowledgeable of these things, have yet to determine what in their opinion will be the ultimate impact of this legislation. I am sure there are those in the department who are conscientious, honest and hard working who believe the same thing.
Surely, our suggestion would restore a measure of confidence to the economic life of this country and to the business and agricultural community, unlike the situation today where there is no confidence at all. I think that a declaration by the government that, in its view, the proposition made by the Leader of the Opposition should be accepted would do more than any other thing to revive confidence among leaders and those who follow them in the economy and business life of this country. I venture to say that when and if the President of the Privy Council or the Minister of Finance stands up and says that yes, Mr. Stanfield, the Leader of the Opposition, is correct in his proposal-


Colin David Gibson: A point of order, Mr. Chairman.


Gérald Laniel: Order, please. The hon. member for Hamilton-Wentworth on a point of order.


Colin David Gibson: I respectfully submit that the use of a member's name is out of order. I would ask the hon. member not to refer to another member of this House by name.


Gerald William Baldwin: The hon. member is quite right. I was only quoting from memory a newspaper reference to the name of Mr. Stanfield, and that is all.


Colin David Gibson: You have been around here long enough to obey the rules.


Gerald William Baldwin: I was talking about the question of confidence, and as long as we have interruptions like that from those who support the government, obviously there can be no confidence in the government. There are some parliamentary secretaries who have indicated through speeches in this House on this issue that they lack confidence in the government.
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An hon. Member:: That is not true.


Gerald William Baldwin: That is as true as anything I have said today. Confidence is what we need here. This government is showing today an obvious bias against private initiative, enterprise and incentive. The major legislative programs are set up in such a way as to constitute the destruction of initiative and incentive, things that made this country what it is today.
I think we all recognize that in the social structure we now have there is a duty cast upon us to apply certain minimum standards of support. But we are not seeing this, we are seeing much more. We are seeing a situation where the government of this country deliberately, and with design and malice, is directing its attention toward providing sanctions, punitive sanctions, against those who are prepared to work in the expectation that initiative ought to be rewarded.


Gérald Laniel: Order, please. I regret having to interrupt the hon. member but his time has expired, unless he has unanimous consent to continue.


Gerald William Baldwin: I would be glad to carry on if requested, Mr. Chairman.


Gérald Laniel: Would the committee give unanimous consent to allow the member to complete his remarks?


Some hon. Members:: Agreed.


Gérald Laniel: Before giving the floor to the hon. member for Peace River, perhaps I should take this opportunity of announcing the proceedings on the adjournment motion tonight. It is my duty, pursuant to Standing Order 40, to inform the House that the questions to be raised tonight at the time of adjournment are as follows: the hon. member for Nanaimo-Cowichan-The Islands, finance; the hon. member for St. John's East, fisheries; the hon. member for Winnipeg North; power.


Gerald William Baldwin: May I thank the committee for its courtesy. When I have concluded, as requested by the hon. member for Sarnia, I think it was, I shall identify the authorship of these remarks.
I list some of these measures I have referred to which have been proposed in recent months. There were some of the farm program bills, part of the competition bill, part of the labour code and the so-called new aspects of the tax bill. It is true that the latter bill has been reduced in severity from the drastic proposals of the white paper, but it still contains real punishment for those who believe in the value of the individual enterprise system. When one has been threatened with a great injustice, one sometimes accepts a smaller injustice as a favour. This is the philosophy of the Prime Minister, the Minister of Consumer and Corporate Affairs and the Minister of Finance. They make a great threat and then reduce it, and as a result the smaller injustice seems almost to be a friendly act. An injustice occurs when the many are denied reasonable rewards and recognition for their contribution and others are unduly rewarded.
The twilight of our society grows on us when we see the extent of excessive government intervention and control

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as it spreads through the land-in our farms, our businesses, our industries and our factories. We have built great shining temples as monuments to, and luxurious housing for, the bureaucrats. They are the new high priests of society, and we worship at their altar. If this twilight turns, as it surely will, into the dark night of an unhappy and cheerless life, we can blame none but ourselves. Because we will have built the abyss into which we shall slide, and have constructed the darkness which prevents us from seeing the precipice.
That was a speech that I delivered last Saturday night at the nominating convention for the hon. member for Palliser.


Mr. Saltsman:: Mr. Chairman, I have been following the debate and can only come to the conclusion that our whole taxation system is in an incredible mess, particularly in the area of corporate taxation. In no section of this bill is there less evidence of any tax reform than in the proposals dealing with corporate income. In fact, we are continuing a system that has been in place for a long, long time, a system which to some extent was unworkable before and will be even more unworkable now. I am interested to note that the opposition finds itself in a position, in respect of taxation changes, to be as critical as ever. I think, by and large, our whole approach to corporate taxation has failed completely, and we should be taking a second look at this situation. During the years in which we have studied our tax system we should have been able to come up with something more successful in respect of corporate taxes. Most of the suggestions of the opposition were thrown away and we now find ourselves back where we were at the beginning. All we have succeeded in doing in respect of corporate taxes has been to shift their impact. Corporate taxes in Canada have actually become sales taxes which are passed on to the customer. There is growing evidence that this is what is happening.
All our attempts to extract income from the larger corporations have met with less than success. If we look at the amount of tax governments are collecting as compared to the amount paid by corporations, we find there is a decline. More and more funds are coming from individuals and less from corporations. Everybody wants to collect money from the corporations, but at every turn of the wheel the corporation has managed to outfox the tax collectors of this country. We must take this fact into account. We are talking about extracting funds from corporations, but it seems the corporations wind up as the winners in that kind of an encounter. We have considerable evidence that present corporation tax acts are insignificant and inefficient. Our corporation tax laws reward the inefficient and penalize the efficient individuals in this country. Corporation tax is collected from companies that make money. We find many corporations which are using valuable resources in this country but are not paying taxes. It seems to me that the world source of resources should be husbanded. Perhaps this idea does not make a great deal of sense. It seems very obvious that we must come up with a taxation proposal a great deal better than the one now under consideration.
This government seems completely lost as to how to handle corporations. The government has responded to all kinds of pressure, contrary to what my friends in the party to the right have said. The government has not accepted its responsibility. Twice the government has proposed changes in this legislation, and each change has made the legislation worse and less understandable. All we have done has been to make more work for tax lawyers and chartered accountants. Even the professionals do not understand the ramifications of this tax reform as they relate to corporations. There is a lot of headscratch-ing going on among Canadians who are trying to comprehend this bill. Many people are trying to understand how to advise clients about the ramifications of this measure. I wonder whether the government itself understands this bill. The government brought it in and changed it, and when we make adjustments we must try to understand those adjustments as they take place. There is apparently no logic, clearly definable goal or purpose to what is being proposed. In many ways, this tax system goes contrary to our Canadian economy, and I have made reference to this before.
It is important to look at our present aim to see where the changes suggested should occur. The absence of a capital gains tax has probably done more to encourage foreign ownership of Canadian industry than anything else. As a result of this measure, we will have a one-half capital gains tax, which in itself does contain an element of encouragement. For many years we have been in favour of incentives to corporations in the form of dividends, tax credits and other things. In fact, there has been an acceleration in the terms and the amount of foreign ownership in this country. There has been an absolutely miserable policy in respect of corporation tax and our tax system generally to present to Canadian industries. We are now being asked, through the legislation before us, to deal with corporations in a way that will continue the same situation. The present measure no longer continues the 20 per cent tax credit. We are now faced with a 33 per cent tax credit. There is going to be a one-half capital gains tax, but again this will differentiate between one kind of income and another.
This government has been unsuccessful in previous legislation in stopping the sell-out of Canadian industry, and I suggest the legislation now before us will also be ineffective. This is a very serious matter. This country is in danger of losing its entire economy, and I do not think we should encourage a tax system which will contribute to the sell-out of our own industries. We should not exclude foreign ownership from Canada. Foreign ownership can be helpful and there are a number of examples in western Canada which indicate that foreign ownership is advantageous, but we should be selective in this regard. We must exercise some selectivity in respect of applications for foreign ownership and decide which applications might be helpful and which might not. Up to this point we have refused to do so, and we still refuse. Our tax incentives have obviously failed, and our system does not provide the revenue required. To the extent the treasury is depressed, the taxpayers who pay taxes on wages and salaries pay more. The average taxpayer is at the mercy of our tax collector and has little or no opportunity to control the system.
[Mr. Baldwin.!
November 29, 1971

All the arguments put before us in the past regarding the prevention of the sell-out of Canadian industries are now being put to us again. These arguments are no more convincing than they ever were. We have had a chance to examine the background of these arguments and we know what they mean. One of the benefits of having been a member of the committee which examined the white paper on taxation was the privilege of travelling around the country, speaking to a lot of people and learning how they feel about our tax system. One of the most impressive presentations to the committee was made by a chartered accountant and a farmer from British Columbia. I am not sure, but I believe his name was Mclvor. I have not had an opportunity to look at it, but it was an impressive brief. When he first made his argument, I believe members of the committee were saying, "Oh no, this man has to be a bit of a kook". However, he was a chartered accountant and could not be dismissed that lightly. He also had been president of the British Columbia association and this made it even more difficult to dismiss him. His performance, and the logic of what he was saying, made it impossible to ignore what he was telling the committee. This man was making the argument, perhaps more effectively than I am at the moment, that our corporation tax has failed to achieve its purpose. He argued for a form of a value added tax in which one would pay for the resources as they were used.
There are two ways we could move. Both of them, in my view, are more desirable and effective than the suggestion before us. Certainly, the government has had sufficient time to examine the alternatives to corporation taxation, rather than following the discredited principles we have before us at this time. One way in which we could have moved is that suggested in the Carter royal commission report, and that is the integration of personal and corporate taxation. The government toyed with the integration idea. The white paper suggested integration with a capital gains tax. The effective integration would have been to remove, to some extent, the present corporate tax structure and replace it with something else. This would have had the great advantage of simplifying the tax system and bringing all sources of income into the tax base because the integration proposal of the royal commission called for a full capital gains tax. The capital gains would have been added to the base and been calculated on that level.
The government's argument, as I understand it, is that full integration at the present level of corporation tax would be too costly, and would deprive the government of the revenue it requires; but that is true only if we leave the corporate tax at the present rate and there is no reason for that. We could have adjusted the corporate tax rate in order that the government could obtain the revenue it would require and have the degree of equity, fairness and simplicity that was available through the integration proposal that was not accepted. The government's ludicrous proposal in the white paper of having half integration has all the problems of a half capital gains tax, as well as the problem of having the whole thing fouled up with two systems running side by side. Also it would fail to obtain the full benefits, if there are any, from the present system as well as fail to get the real benefit from 24725-3
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the integration proposal. I do not know why the government brought in the half integration system, unless it was deliberately looking for a way to destroy that proposal, but certainly it came under heavy fire and the government withdrew it.
When one reads the Carter commission report, it emerges quite clearly that the Carter commission, had all industry in Canada been Canadian and had all the owners of industry in Canada been Canadian, probably would have recommend the abolition of the corporation tax and the substitution of a more effective way to tax corporations by taxing the resources they use. The reason this could not be done is that such a system would confer a substantial benefit on the United States treasury and on United States holders of property in Canada. Because we have so much foreign ownership, even an attempt to design our tax system becomes a nightmare. What might be an acceptable and perfectly valid approach becomes unacceptable and we are not able to carry it out because of the high degree of foreign ownership which exists in Canada.
If we should go to a value added tax, and many European countries are now moving in that direction and there has been some discussion in the United States of moving in this direction, there would be a tax on the amount of goods corporations use in the manufacture of whatever they are doing or on the services they provide. This would take care of many of the troubles we have in our tax system. We have had tremendous discussions concerning how we should handle the non-taxable benefits of people who work for corporations or who are self-employed. How should we handle the expenses of the car, the convention, the hotel, the meals these people consume or the entertainment they provide. Every proposal which has been attempted has broken down for one reason or another. I suggest that with a value added tax these things would be of less concern. If they wanted to do more advertising or more entertaining, they would pay for it and it would not be deductible from their future corporate tax. In fact, society is subsidizing all kinds of marginal things. Non-taxable fringe benefits have been subsidized in the past.
At this time, I do not wish to become involved in an extended debate on either the integration system or the value added tax system. First of all, there is not too much time and second, with the exception of the integration proposal, we certainly do not know too much about the value added system at this time. All I am trying to point out is there were alternative approaches which might have been taken to the whole problem of corporation tax, and in the face of the failure of the corporation tax to really accomplish some of the purposes we set out, the government should have seriously discussed these other proposals rather than rejecting them, I think to some extent out of hand, because they did not conform to the traditional pattern. The government, in fact, did not seem to have enough courage to really want to bring about tax reform. It wanted to use the words and talk about tax reform, but there is really no instinct or no commitment on the government side for a genuine tax reform system for Canada.
So, we are continuing with a system of corporation tax that retains some shabby concepts. Under the legislation

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we are debating at this moment, it is less important in this country how much a person earns than how he earns it. The wage and salary earner must continue to pay full tax on all his earnings. If a person should be receiving dividends rather than wages and salary, he would pay less tax. If part of those dividends incorporate capital gains, he pays even less tax. If he has dividends from an oil company or a natural resource industry he gets a further break, and so on in our society. This is something to which I personally object a great deal. It is also something to which my party is very much opposed. I refer to this concept of inequal treatment. We think it serves the people in our country very badly. We think it serves the interest of the development of industry very badly, that the corporation tax as we now have it is unfair and is in a large measure responsible for many of the ills and inefficiencies which exist in this country because we have failed to look at its inadequacies.


Mr. Flemming:: Mr. Chairman, I am impelled to offer a few remarks concerning this portion of the tax bill owing to the fact that I am anxious to support the suggestion which has been made by the hon. member for Edmonton West, reinforced by the hon. member for Peace River, when they tried to impress upon everyone within sound of their voice the general desirability of passing a portion of this monstrous bill and leaving the controversial and unacceptable parts to future discussion and future examination. In this way, we could ensure that this whole bill, which after all is a matter of great consequence to the Canadian public, would be taken in stages rather than inflicted upon the people in its entirety. So, I rise for the purpose of supporting that argument and I hope it will meet with some consideration by the government.
I am not expert enough in the rules of this House to know whether or not a large bill with as many sections as this one has could be passed subject to proclamation, and then various sections proclaimed when the government decides that it is appropriate to do it. Personally, I see nothing wrong and no reason why that course should not be applicable to this bill. It seems to me to be fair and desirable, if the government wishes to have the whole bill passed, that they introduce as part of the bill a proclamation clause so that the various sections can be proclaimed as it develops that those sections should be proclaimed. I realize that any suggestion coming from over here will not necessarily be treated with tremendous respect, but I hope that this suggestion which has been advanced by the hon. member for Edmonton West and the hon. member for Peace River this afternoon and which, I understand has been advanced also by the Leader of the Opposition,-I hope my friend, the hon. member for Hamilton West will not take me to task when I say this-will meet with favourable consideration by the government.
In the white paper proposals there were certain suggestions regarding corporate taxation. I do not wish to go into the details of what took place at the various hearings which the committee held, sometimes in the east and sometimes in the west of Canada, but it has been suggested that they took these proposals to the people for the purpose of securing their opinion. I might say, as a member of that committee, that I never saw or heard tell

of any proposals which received as much opposition as did the white paper proposals almost in their entirety. So, if the government learned anything from the hearings which were held by the committee, surely they must have been impressed with the fact that in general terms the proposals were undesirable and unacceptable to the majority of the people of Canada.
I happen to think that the government is wrong in its approach to the whole question. I have said before, and I repeat it because I think it bears repeating, that they could have accomplished the changes that they wished to accomplish by amending the statutes which have been in existence in connection with taxation ever since the inception of parliament, and certainly those in connection with income tax dating back to 1917. There is no reason the government could not have taken what is acceptable to them and then added or taken away from that as it suited them. We would then not have had such a complex and difficult bill to understand. I am not the only one who says that it is difficult to understand. We have had chartered accountants and lawyers who said that they were bewildered by it and were unable to digest it.
So, I submit that the nearest approach to retaining something that is good in the present statute would be for the government to carefully consider the addition of a proclamation clause to the bill, following which it would proclaim from time to time certain sections as the staff and the general public seem to understand them and as they appear to receive that degree of acceptance which would be necessary.
The white paper proposals were examined by the committee under the very capable chairmanship of the parliamentary secretary who is piloting the bill this afternoon. I say to you, Mr. Chairman, that he handled those hearings in a most distinguished way and brought great credit to himself and to the government. I am glad to see him occupying the position he does here this afternoon in piloting this bill. I think that he is more likely to accept some of our proposals than is the other parliamentary secretary who was here last week, at least I hope that is the case, Mr. Chairman. On June 18, in his budget speech, the Minister of Finance modified the proposals in the white paper. He acknowledged that the proposals were unacceptable, not only to the business community but also to a number of provinces. As a result, the government decided to modify the existing system for taxing corporate income rather than introduce a comprehensive new system.
Then, as you know, within the last month or so the government has decided to accept the recommendation that has been advanced from this side of the House on a good many different occasions that they stimulate employment by a reduction of taxation. In other words, what the government acknowledges is that they are willing by a reduction of taxation to encourage private business to employ at least a portion of the people who are presently unemployed. That is what the minister said in his speech. As a consequence, the corporate tax has been reduced by 7 per cent of the amount payable. I hope that the parliamentary secretary will digest this. When the government accepts the proposal that it is going to take 7 per cent of the corporate tax as a means of stimulating employment and the economy, surely that means that
November 29, 1971

when they changed the tax laws, thus increasing taxation, they must have been wrong. I do not criticize them for this reduction as I think it was necessary and I am sure every member of this House hopes and expects that some benefit will result.
I turn now to the 20 per cent dividend tax credit that is being replaced by 33 1/3 per cent. I do not propose to go into that matter in detail because it is rather complicated. I cannot follow the argument that to increase the dividend tax credit will not stimulate the ownership of companies by Canadians. I cannot see how it could fail to have that effect.
I should like to speak now about small corporations with annual incomes of up to $50,000. Under the present act the rate is 21 per cent on income up to $35,000, and under the proposed legislation it starts at 25 per cent but the amount on which that would apply is raised to $50,000. As an alternative to the present lower rate of corporate tax on the first $35,000 of income the government has introduced a small business credit to be available only to Canadian-controlled private corporations. This restriction excludes from the eligible group any private corporation controlled in any manner whatsoever by non-resident persons or by some combination of non-resident persons and Canadian public corporations.
The credit is applied to reduce the federal corporate tax and is computed initially at 25 per cent on no more than $50,000 of business income of each taxation year. The rate of credit is to be decreased concurrently with the decrease in the general corporate tax rate to 24 per cent in 1973, and by a further one percentage point per year until it reaches 21 per cent in 1976. Corporations may continue to claim the credit until such time as they have accumulated and retained $400,000 of earnings.
Since the credit is to be granted at the corporate level it has been found necessary to retain the present detailed associated company provisions, with minor modifications, and the present provision for ministerial discretion in order to restrict the amount of benefits which might be claimed. Both the $50,000 annual limit and the $400,000 retention limit must be allocated annually amongst companies which form an associated group.
I believe that a degree of foreign ownership is beneficial. I believe if you have participation in the management of a company and it brings with it the research it has established as being desirable, and the experience of its operation, it tends to distribute more jobs. I think Canadians should try to emulate this sort of thing and learn from it. Foreign ownership does not necessarily mean ownership within the United States of America. In my province there are companies controlled by the British and some by the French, and in every case they bring ideas to the country. To say that all investment of foreigners should be kept out is ridiculous and I do not subscribe to any such doctrine.
To my certain knowledge there are companies that have been doing business in Canada for 25, 30 or perhaps even 50 years and have acted as good corporate citizens. If they have established a reputation and have conducted their business in accordance with the laws of Canada, then to say that they cannot receive a particular tax benefit seems 24725-31
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to me to be rank discrimination. I repeat, these companies have established a reputation for living within the laws of Canada, being good, law-abiding citizens, paying their people well and abiding by the labour laws of the country.
I want also to speak about the total business limit of $400,000. That is what they will be allowed-


Marcel Joseph Aimé Lambert: That is taxable income.


Hugh John Flemming: That is right. What will probably happen is that they will be able to use the benefits of the lower tax rate for expansion and to make themselves more efficient, and at the end of the period they will be prevented from selling it even to one of those good corporate companies which I mentioned earlier. By being obliged to retain it, they will not have the liquid funds to carry on because they have been put back into equipment and general improvements in the plant. It seems to me that some consideration might be given to the question of corporate taxation as it applies to companies with a long record of satisfactory performance in accordance with the laws of this country.
If the government in its wisdom, or lack of it, decides that in future things will be changed and there will be no foreign ownership of business in Canada, that is their right. But they should at least present it to this Parliament and the people of Canada for approval. It is my opinion that the people of Canada will not approve it. It is my opinion that the government will go out of business on that issue. If they want to do it in the future, possibly there is some justification. But I submit, Mr. Chairman, that we cannot say to corporate citizens who have had satisfactory business relations and who have contributed to the building of flourishing communities, "You are no longer welcome in Canada and you must get out". I do not think the people will support that kind of attitude and will say to the government, "You are the ones who should get out."
That is my contribution relative to the small business provision. I know something about small business. I know something about frozen assets, about small businesses not having ample funds and not having a great deal of liquidity. Nevertheless, small business is helped a good deal by government taxation policies. Compared with taxes which large corporations pay, the tax rates of small businesses are somewhat favourable. The government reduced corporate taxes by 7 per cent in 1971 with the idea of stimulating business. I believe in that policy and I hope, as I am sure we all do, that it will bring benefits and improve employment and the general economic situation of the country.
We must bear in mind that developments taking place from day to day may affect some of the things that governments can do. I do not pretend to be an expert on oil and gas. The other day the National Energy Board decided that we did not have a sufficient surplus of natural gas for additional export and that we should not export more than had already been approved. I am sure we all recognize that the National Energy Board comprises a group of men who are anxious to do a good job and perform a worth-while service for the country.

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Nevertheless, I submit, Mr. Chairman, through you to the parliamentary secretary that since there is a demand for this product, since our neighbours to the south want it, it would be the essence of common sense for the government to say to those exploring for oil and gas, "Not only will we make the tax laws applying to you beneficial; we will make them even more beneficial than they have been." It seems to me that you will not get people to risk their money for holes to be dug in the ground in search of oil and gas unless there is a reasonable prospect that at some point they may receive some benefit from the venture. After all, they will drill many dry holes in the process.
The government, I submit, should be encouraging exploration because a market for gas has been established. I have found that when there is a demand for a product, people do their best to produce it and meet the demand. When there is demand, people will always attempt to fill it. The government, however, will not acquire for this country additional supplies of oil and gas if it imposes taxes so onerous that people will not undertake the risks associated with the finding of those products.
My time has almost expired. I urge the parliamentary secretary to note what has been said about small business. There is one more thing I want to say. If an owner should dispose of a small business, what would be the difference to him if he were to dispose of it to a Canadian owner as opposed to a foreign owner? It seems to me that someone should rise and in simple language tell the members of the committee just what is the position of the owner of a small business and what he can do in this regard. I realize that some may say, "Why do you not read the bill?" I much prefer to hear an expert who is familiar with the bill and has studied it explain to the committee what he has discovered. I hope that before long we will receive in this committee a simple explanation. How will the owner of a small business be affected if he sells his business to Canadians or if he sells it to foreign owners? What will be the difference to him?
I come back to my first observation. I do not understand why the proclamation provision should not apply to the entire bill. It could be proclaimed if the government, after it has discussed the matter in this chamber, feels it is desirable to do so in the interests of the people of Canada.


Marcel Joseph Aimé Lambert: Mr. Chairman, in resuming the discussion on section 125 dealing with small business may I say that the committee should know that under section 125(2) the maximum deduction in any one year is, as has been mentioned many times, $50,000. There will be a $12,500 deduction in 1972, reducing to $10,500 in 1976 and subsequent years. However, that is but one opinion. The truth of the last observation depends upon the correctness of the interpretation-and I trust the parliamentary secretary will speak about this-which the hon. member for Vegreville and I made regarding where the deductions apply to the 25 per cent figure referred to in section 125(1).
The $50,000 is a corporation's business limit. Those words come right out of the legislation. Also, the hon. member for Carleton-Charlotte made the point that once a company has reached the level of $400,000 of taxable

income-and it need not have reached it at the rate of $50,000 a year for eight years, because the corporation could have made $100,000 in one year-the total or, shall we say, maximum qualification is exhausted.
Here we have a total business limit minus a cumulative deduction account operating at the end of the immediately preceding year. Mr. Chairman, total business limit and cumulative deduction account are two brand new terms which have been introduced into the Income Tax Act, and neither the departmental officials nor the professionals have been able to settle on the items that go to making up these so-called totals. Unless one can get an absolutely clear appreciation of these terms it will be impossible to determine what is the result of the business operation for the year. I think the Minister of Finance gave the impression, as did some people talking about the provisions affecting small business as disclosed in June, that the government was being very generous to small business. Frankly, that is absolutely the reverse of the truth.
First, $35,000 has been eroded by inflation and the devaluation of the dollar. The net result is that it is much easier to get to $35,000 and then go to the higher rate. The government is the beneficiary of this progression from the lower to the higher tier. Actually, the so-called low rate as a small business incentive is considerably less attractive than the former one. The annual taxable income is less than $35,000.
In an extreme situation, an otherwise qualified corporation that earned taxable income of $400,000 in the first year of the new system and paid no dividends would be eligible for a $50,000 small business deduction in that year but no subsequent deduction. A corporation accumulating taxable income would only be eligible for the small business deduction on its income each year until its taxable income totalled $400,000. It would then cease to qualify for the small business deduction. You have to contrast this with the present system whereby the low rate on the first $35,000 applies indefinitely.
It will be noted that taxable income is an important factor in the cumulative deduction account, so the $400,000 maximum amount will be net in respect of business losses but will include non-business income and capital gains. We note that in other areas the low rate cannot apply to non-business income or non-domestic income, yet the accumulation of $400,000 of taxable income will include non-business income and non-Canadian income. Therefore, small business is doubly hit.
Surely, equity suggests that if the company is to be taken out of the category of small business by having reached the $400,000 ceiling, this should apply only to the total income which qualifies for the lower rate. In other words, active businesses earning Canadian income are the only ones that qualify for the lower rate. Justice says the $400,000 ceiling should apply to the total of that type of income and not bring in all the others which now qualify for the lower rate and on which the government, under the act, will exact a 50 per cent rate or whatever will be the appropriate rate by 1976.
Let us look at ineligible investments under sections 188 and 189. Further complexities arise where ineligible investments are made; for example, where a corporation
November 29, 1971

uses excess funds to purchase portfolio securities rather than to pay dividends or to expand the business. This is quite the thing. All sorts of businesses must have reserves set aside for a rainy day. Management would be most imprudent if having some spare cash it did not pay dividends which would attract taxation or did not engage in unwanted or unneeded business expansion, if it did not put it aside in securities investments lasting longer than a year. However, those are ineligible investments and the returns thereon will be taxed as non-business income. On one hand, it will push the total income toward the $400,000 ceiling but they have to deduct it from the otherwise income of the company in order to qualify for the lower rate.
Ineligible investments under the bill are defined as being all property acquired after 1971 that are not used to produce income from an active business. However, excluded from the term ineligible investments are bank deposits and bonds. I presume government bonds will qualify as eligible investments because they are government bonds. However, if they are bonds, for example, of some electric utility company they would become passive income not in the ordinary course of business and therefore would be disqualified.


Russell Clayton Honey: Order, please. It being six o'clock, I do now leave the chair.
At six o'clock the committee took recess.


[Stage Direction]
AFTER RECESS

The committee resumed at 8 p.m.
Gérald Laniel: Order. When the committee rose at six o'clock the hon. member for Edmonton West had the floor on sections 82 to 85, 89, 112, 121 to 125, 129, 143 and 181 to 197.


Marcel Joseph Aimé Lambert: Before the dinner hour I was discussing the effect of sections 188 and 189 on ineligible investments. I think the dinner hour came at a fortunate moment because I had the impression I was treading on shaky ground in arriving at my definition as to what might be eligible investments. When I said that government bonds might qualify but not those of an electric utility I found I was not completely right. Neither would qualify if the maturity of the issue exceeded one year.
I find it extraordinary that a company having funds in excess of its day to day working capital requirements should encounter such a restriction. The size of the reserves might still be well within the sum necessary for the prudent and efficient management of the company's affairs, yet the only thing it is permitted to do with this money is keep it on deposit with a chartered bank or a trust company or buy short-term issues. On no account must companies invest in anything which reaches maturity after one year. So, for example, investment in longterm bonds, which the government has a great desire to encourage, is forbidden. Let us consider which ones are eligible.
Income Tax Act
any bond, debenture, mortgage, hypothec, note or other similar obligation
(A)	of or guaranteed by the government of Canada,
(B)	of the government of a province or an agent thereof,
(C)	of a municipality in Canada or a municipal or public body performing a function of government in Canada,
(D)	of a corporation, commission or association not less than 90 per cent of the shares or capital of which is owned by Her Majesty in right of a province or by a Canadian municipality, or of a subsidiary wholly-owned corporation-
Strangely enough, companies cannot invest, in these circumstances, in any obligations, even the Canada Development Corporation. One of the bright stars which is very much in the government's eye at the present time is on a muted note. It blows its trumpet about projecting some life into that otherwise moribund body. I would have bet last June that this was to be a non-starter. I still think it will be a non-starter, nothwithstanding the fact that some people have got together to form the board. In any event, the obligations of the Canada Development Corporation do not qualify under this particular section. All investments are required to be subject to the one principal requirement that they mature not later than one year after the date of issue of the obligation.
Then there are a number of other ways whereby money can be invested, but I am surprised this limitation has been put on this sort of investment. I should like to know what is the difference between interest on a treasury note and that on a Dominion of Canada medium-term bond. Perhaps the parliamentary secretary can tell the committee why this disabling restriction was applied at this particular point.
Where there is an ineligible investment, a special tax will be levied equal to 25 per cent of twice the cost of the investment or 25 per cent of the corporation's-this is another new term-"preferred rate amount" minus the net amount on which it has previously paid tax under this provision. The definition of "preferred rate amount" in section 189(4)(c) once again is complex, but normally it would be amounts on which the corporation had previously claimed the small business deduction minus an allowance for dividends paid. I apologize for the language, but this is pure Greek. Then there is a comment which reads as follows:
Perhaps an indication of the complexity of some of these terms, their computation and their inter-relationship is the fact that the bill as drafted appears to extend eligibility for the small business deduction by the simple expedient of making ineligible investments and subsequently disposing of them. This unintended benefit will obviously be removed prior to enactment into law.
It will be very interesting to see how quickly the appropriate amendment will be made if this is something that has winnowed its way through the gate and escaped attention. Business might have been able to do something about it on an interim basis, but as long as you qualify by certain dates you will be all right. The comment continues:
The thrust of the intended procedure is to ensure that the 25 per cent small business deduction is available only where the funds are used to expand the business or have been brought to personal tax by dividend distribution. The corporation can no longer be used to shelter excess funds from personal tax unless the excess

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funds are invested in short-term paper or bank accounts. This exception will be relatively unattractive.
For the life of me I cannot understand the treasury's or the government's preoccupation with excess funds that are ultimately going to come to the government anyway in the form of tax but which in the interval are going to be put to work either in government obligations or in obligations in some other concern. They are invested and are a reserve against unforeseen eventualities. They are part of an accumulation used for expansion, not this year but next year or the year after.
I want to be as charitable as possible, but this is not the first time I have run across this sort of thing. When dealing with Treasury years ago I came across the idea that once a dollar has been made, the Crown had the right to take its share at once. Since when has it had that right? What God-given right has the Crown to say that as soon as $1 is earned by business, the Crown gets its share; that the Crown must exact its pound of flesh? It will ultimately get its share, but straight away envious eyes are cast on those dollars.
As a matter of fact, that was the motivation behind the proposal in the white paper for the work accomplished accrual basis. As soon as the work had been completed, presumably the dollars had been earned and the Crown was entitled to its share. I have heard the Minister of Finance himself say that the Crown had the right to its money. Nothing could be further from the truth, yet at this particular juncture we have another example of this philosophy.
The two-tier system of tax assessment was inserted into the legislation precisely to assist small business to accumulate capital for expansion purposes, so that small business did not have to pay out dividends that would be subject to tax, that it would not have to spend money immediately in the year in which it was earned. It was allowed to accumulate capital since other avenues of financing were not open to small business.
I have heard Liberal Ministers of Finance expound on this theory of what they were doing for small business. The two-tier system was introduced by a Liberal administration, and I use a capital "L". Then it was expanded by Hon. Donald Fleming when he was Minister of Finance so that small business was able to accumulate capital for expansion purposes. Now we have the present administration acting on God knows what philosophy of taxation. From cover to cover of this blue-covered book there are disincentives, and this is one of them. As I say, this money will come to the Crown in due course. The fact that it is invested, that it is earning income, that it is going to produce a substantial expansion of business or that it may be paid out as dividends where it will attract its full share of taxation, matters not; there will be a disincentive at this particular point. This is one of the more regrettable features.
As chairman of the committee on finance, the parliamentary secretary will recall that when we put together our recommendations we thought there would be something akin to the two-tier system to help small business, which quite frankly is having one hell of a time competing not only nationally but internationally. I would ask the committee to reject section 125 and section 189.


Mr. Ritchie:: Mr. Chairman, the original purpose of the reduced rate-the two-tier system for small business-was to allow small business to accumulate capital in larger amount than corporations. The original thought was that small business had a distinct disadvantage when it came to procuring money to assist business expansion compared with larger corporations. Indeed, I do not think there is any doubt that that was the case. The problem arises here of so-called equity of taxation. If one company for various reasons can procure capital to expand its operations faster than some other company as a result of its size or its situation, then equity of taxation becomes difficult to accomplish.
During the hearings on the white paper on taxation many representations were made in regard to the small business deduction. No one that I am aware of felt that the premise of a two-tier system for taxation of companies was not a valid one. Large companies who felt no need for this system agreed that a strong business sector made up of small corporations was valuable to the country. There was no argument that the small company receiving taxation benefits that would not aid in the growth of the country and would not aid in increasing the economic status of our industry. In the proposals in Bill C-259 it is obvious the government has retreated a great deal from the idea of a two-tier system. It has so hedged the act that the benefit will not be really as great as it has been. I think this is unfortunate.
Wherever one goes in this country one finds that representatives of small business companies say it is becoming more difficult for them because the tax structure, the various actions of our government and the happenings in the market place seem to be placing small business at a disadvantage. Yet at this time the government has chosen to increase the disadvantages which were present in the old act. I believe this is regrettable because in the last few weeks, by the action of the U.S. through its surcharge and DISC proposals and because of the European Common Market, we face a general darkening of the trade outlook. A country such as Canada, with its scattered and small population, needs the ingenuity and entrepreneurship of our very important individual Canadians in order to provide the jobs that are so necessary for our expanding labour force of the seventies.
I view with considerable regret the action of the government in respect of the taxation of small business. I should like to discuss the small business deduction. Generally speaking, the proposal is that the taxable income of all corporations will generally be subject to a single federal corporate tax rate, which for 1972 will be 50 per cent and which will be reduced, starting in 1973, by one percentage point a year to a rate of 46 per cent in 1976 and subsequent taxation years. What will happen next year applicable to small business is something I do not believe the minister has pointed out, in view of the fact that it is to be a 7 per cent reduction for the year 1972 in corporation tax.
The special rules will apply to Canadian-controlled private corporations as defined in Bill C-259, section 125(6)(a). All resident private Canadian corporations that are not controlled either by non-residents, public corporations or a combination of both, will qualify for a special
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incentive. The incentive will take the form of a deduction from the company's tax otherwise payable-section 125(1). The deduction will be computed at the rate of 25 per cent for 1972, reducing by one percentage point a year commencing in 1973 to a rate of 21 per cent for 1976 and subsequent taxation years, of the least of, first, the company's taxable income from an active business for the then current year-section 125(l)(w)-and, second, the company's business limit for the year, business limit being defined as $50,000-section 125(l)(c) and section 125(2)(a).
Then there is the difference between the company's cumulative deduction account and its total business limit, a total business limit being defined as $400,000-section 125(l)(d) and section 125(2)(b). Then, again, the amount by which the company's total taxable income for the year exceeds an amount calculated under a formula with respect to foreign taxes paid by it-section 125(l)(b). The cumulative deduction account of a company is defined by section 125(6)(b) as the aggregate of its post-1971 taxable income plus four-thirds of certain taxable dividends received, less certain deductions. Taxable income includes all income from active business, investments, dividends, capital gains or otherwise, less applicable losses.
The cumulative deduction can be reduced by the company paying dividends to its shareholders-section 125(6)(b)-and in addition there are complex rules which allow the company to deduct its outstanding refundable tax in respect of ineligible investments and its dividend refund under section 129. Because the amount of the deduction is to be reduced concurrently with the reduction of the general corporate rate, the effect will be to maintain an effective rate of tax of 25 per cent payable by a corporation which qualifies for the small business deduction.
Since the total business limit is based on the company's aggregate total taxable income, dividend payments used to reduce the amount of the total business limit must be calculated on a comparable basis and, therefore, four-thirds of all dividends paid are to be deducted from the company's total taxable income-section 125(6)(b)(iii). This calculation takes into account the grossing-up of the dividend by the taxpayer when he computes his personal income tax.
Turning now to capital losses, a corporation's business limit and cumulative deduction account are the main criteria on which the small business incentive provisions are based. The cumulative deduction account requires the calculation of a corporation's aggregate taxable income for the relevant period of time. In calculating taxable income no account is taken of capital losses except to the extent they reduce capital gains. We submit that for the sole purpose of determining entitlement to the small business incentive a corporation's capital losses should be taken into consideration, since these losses will probably be reflected in an impaired working capital position. The company will be less able to grow and will run the added risk of exceeding its business limit and total business limit at the time when it can least afford to lose the incentive tax reduction.
What about the total business limit? The small business incentive provision places pressure on the shareholders of a company to draw out the reserves of the company as it
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nears the $400,000 level. The government's aim, as stated at page 39 of the Summary of 1971 Tax Reform Legislation, is the following:
The main objective of continuing the incentive is to provide private corporations with funds for use in their business.
If that is the aim, why should small business be forced to pay out money by way of dividends that it requires for working capital, even though the recipients of these dividends could loan them back to the company and replace at least part of the working capital? It must also be remembered that the payment of dividends will, generally speaking, result in tax being paid by the recipient, so that the full amount of the dividend will not be available to be reinvested in the company.
We believe that in order to preserve the government's aim as stated above, the incentive provisions should not contain the limit of $400,000 on the aggregate of taxable incomes but they should be based on annual active business profits with the $50,000 annual limit on those profits. Otherwise, the small business will be forced to pay out its working capital as it approaches the $400,000 level. The concept of cumulative deduction account, on which the incentive provisions are based, is concerned with taxable income upon which tax has been or is about to be levied. Therefore, a particular company's cumulative deduction account must be reduced by 25 per cent-the amount of the exigible tax-in order to arrive at what is available to the company for working capital purposes. Thus, the total business limit represents only $300,000, rather than $400,000 of working capital reinvested in the company, assuming only business income.
Turning to the matter of dividends, curiously enough it may be more expensive for the shareholder of a small business to take the dividend than to leave it in the company. At page 9 of the summary it is stated:
The 33 per cent reformed dividend tax credit completely offsets a corporate rate tax of 25 per cent.
The summary says that if a company which is eligible for the small business incentive pays out all its after-tax income as dividends to its shareholders, the effect would be that all of the company's earnings would be taxed at the marginal rates of its shareholders. However, this is based upon the shareholders receiving the entire amount of the tax dividend credit already added to their income for grossing-up purposes.
Under the bill, the shareholder is only entitled to deduct four-fifths of the amount grossed up from his taxable income under section 121. The extra deduction of the extra one-fifth is dependent on the provinces. Thus, when on page 36 of the summary the table in column 1 discloses a situation where a shareholder taxable at the 25 per cent level would pay no further tax over the amount paid by the company, this is dependent on the province of his residence having accorded him a similar tax credit. If there is no such credit, the extra tax payable by the recipient of the dividend would be $20. Even if there is a full 100 per cent tax credit, the proposal for crediting of dividends will result in more tax being paid in the short run than if working capital had been retained to enable the company to grow.

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There would appear to be a further anomaly in the suggestion that companies will be allowed to reduce their total business limit by the amount of dividends paid to their shareholders. The payment of dividends presupposes that the company has cash on hand or cash otherwise readily available to it for this purpose. This would be cash not otherwise required for business purposes. But the purpose of the incentive is to allow the company to grow, presumably by plowing back its earnings. Therefore, the company which has surplus cash which it can use for the payment of dividends will be in a position to retain the small business incentive for a longer period of time than a company earning the same before-tax business income but requiring all its cash for business purposes.
We recognize that the payment of dividends by a company eligible for the small business deduction will often result in the payment of tax by the recipient of the dividend so that the total tax on the dividend will be at the personal rate of the recipient shareholder, but the combined effect of the two tax bites will usually be less than the top rate of corporate tax, even when this has been reduced to 46 per cent. This will result in the decision to pay dividends and keep the total business limit below $400,000 rather than to reinve'st the earnings in the company and pay the top corporate tax rate thereon. This is not consistent with the intention of the small business incentive provisions, although it would appear to be consistent with the scheme of the small business shareholder treatment to tax corporate earnings at the rate of the individual shareholder.
I should like to speak now of associated corporations. In order to prevent the proliferation of companies for the purpose of the small business incentive, the bill perpetuates the concept of associated corporations under section 125 (3) and (4). The rules are similar to those under the present act but it does mean that associated corporations will allocate the $50,000 business limit among the members of their group and the $400,000 total business limit will be determined for the group as a whole.
There is an apparent paradox here. It is of interest to note that with the effective corporate tax rate being increased to 25 per cent from the present federal rate of 21 per cent, companies now earning no more than $35,000 per year will pay more tax than at present, while companies now earning between $35,000 and $50,000 per year will pay less tax. It hardly appears equitable for the very small business company to have to pay more tax while at the same time a relatively large corporation will receive a tax deduction.
So I think the government has gone a long way toward nullifying the effect of the small business incentive provision for the company earning below $35,000. Whereas under the old system that company had the advantage of 29 per cent as opposed to large corporations, under the new legislation it would be much less, the difference between 25 per cent and 46 per cent as opposed to 21 per cent, so that the reduction is by one-third. This comes at a time when we say that we should be giving small businesses aid.
What are the incentive restrictions? When a company which was receiving the small business incentive reduction becomes a foreign-controlled corporation, it will be

required to pay any tax savings previously received under the incentive. These are to be repayable over a five-year period. This will certainly impede foreign takeovers of small businesses. I believe that the repayment requirement constitutes an undue hardship and penalty. If the reason for the deduction was to help the company to grow, then in our submission all that should occur is that when a company becomes foreign controlled it should no longer be eligible for the deduction.
The new, foreign shareholders would not receive the benefit of the incentive except that perhaps the company's surplus on hand might be larger than if it had paid the regular rate of corporate tax. However, if all of the surplus had been paid out by way of dividends to the old shareholders, the new shareholders would not be receiving any benefit from corporate surplus on hand.
If two companies that are eligible for the small business incentive become associated or amalgamate with each other, and if as a result of the amalgamation their combined cumulative taxable income exceeds $400,000, they will not have to repay the amount of the incentive they have respectively enjoyed but the benefits of the incentive will no longer be available to the new company, nor is repayment of the incentive required if the company becomes a public company but, of course, the low rate will no longer be available to it.
What are the investment restrictions? Ineligible investments are defined as every conceivable type of investment except cash, certain bonds and short-term notes. These investment restrictions are much too narrow and should be expanded to include all reasonably short-term and liquid investments. If the small business incentive has as its purpose to allow companies to grow, it should be given to those who cannot easily raise money on the market. Surely these companies should be allowed to have a reasonable reserve on hand to expand their business.
After all, companies cannot each year expand their business by a specified amount. It must come in fits and starts, and it would be reasonable if moneys were allowed to be accumulated at the incentive rate so that when an opportunity presents itself the company can make an expansion which would be reasonable for it. Companies should be able to have a reasonable reserve on hand not being immediately used for business purposes, and this reserve should be allowed to be invested properly without tax penalty or disadvantage.
To those who have studied the bill, such as accountants and so on, one of the major technical problems with the general small business incentive proposal would appear to be the substantially increased requirement for record keeping.


Gérald Laniel: Order, please. I regret to interrupt the hon. member, but the time allowed to him has expired unless he receives unanimous consent of the committee to continue. Is there such consent?


Some hon. Members:: Agreed.


William Gordon Ritchie: Thank you, Mr. Chairman. I shall shortly complete my remarks. As I was saying, one of the criticisms is that there would be a substantially increased requirement for record keeping. This is a criticism which in my opinion may fairly be applied to all the proposals as
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they affect both individual and corporate taxpayers. But the major burden would appear to fall upon the corporation. The incentive proposals as contemplated will greatly add to the increase in paperwork. This is for corporations that will not have the back-up ability to easily take care of it. We all realize that it costs money to take care of the paperwork. I would respectfully suggest that the proposals should be carefully re-examined in order to attempt to reduce the bookkeeping.
Is the establishment of a total business limit really necessary, or could the simple business limit test work effectively in conjunction with adequate policing safeguards such as the active business test? In my view, these questions should be answered before the proposals are enacted into law.


Max Saltsman: Mr. Chairman, listening to the debate I hoped that I might hear something about how these business incentives relate to the well-being of our society, how they relate to the wage and salary earners of our society- but I have not heard much along that line. At the risk of being rude I raise this question: What happens to the majority of people in our society who are not eligible for these special grants?
It is my understanding that something under 100,000 people in Canada would be eligible for the special tax treatment outlined under the small business grants. What happens to the others? The simple fact is that the change the government has made from the original white paper to the present proposals means that $315 million more every single year will be available as a result of the changes. In the original white paper proposals and on many other occasions the Minister of Finance stated that this particular change, the change away from the split rate on corporations, would raise government revenues by $400 million a year. The projection is that if it is based on 1968 incomes the government would increase its revenue by $75 million, and if it is based on 1972 incomes the revenue would be increased by $85 million. Deduct that figure from the projected increase that they stated initially, of $400 million and you get $315 million.
All of us here are sympathetic to the problems of small business. Some of us have been in business and know that the small business needs assistance in getting off the ground. I have no reluctance in seeing such assistance provided. I am sure all hon. members would agree with that statement. But the real question that arises is, what we are suggesting is necessary for all small businesses, and is this the best way of proceeding with assistance?
It is the scatter-gun approach, still the old approach. The tax rate has been changed, allowable ceilings have been changed, but it is the old story-if you spread it around some of it is bound to do some good. If only a small amount of money was involved, perhaps there would be some kind of justification. But when you are asking the wage and salary earners of this country to pay something like $400 million a year on the offchance that it will provide a positive stimulus to some business, I think a much better system is required.
The Carter commission suggested that the split rate on corporations, the differential between the two kinds of
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corporations, be abolished and that instead a more positive way of assisting small business be sought. The Commons committee that examined the white paper proposals and the various other tax proposals which came before it had great difficulty trying to find an acceptable formula that would reduce the cost to the treasury, reduce the burden on the wage and salary earners and at the same time find an appropriate way of assisting small business. I am sorry that the committee and the government failed to find an answer and now have to return to the old system and the scatter-gun approach.
What is the difference? There are some differences between the present proposals and the old system. The chief difference is that the larger corporations, eligible for the preferred rate under the split rate, will not get it because if their profits exceed $50,000 they are out of the picture. Previously, the legislation applied to the first $35,000 profit of all corporations. That is an understandable and acceptable method. In my view there is still considerable evidence that most of the money that will be handed out in this way will not be used for expansion or increasing efficiency of business but will simply be a bonus to some of the self-employed in this country.
Mr. Chairman, I should like to paraphrase some of the submissions made to us in the maritime provinces during the hearings on the white paper on tax reform. If anybody wants a more definitive picture I will be glad to find the relevant portion in the committee minutes so that he can examine it himself. On one occasion a group of maritime businessmen appeared before the committee and argued very positively the need to maintain the system in its present form, saying there was an imperative need for small business to continue receiving the preferential tax treatment because, after all-and it is a very compelling argument for those of us from central Canada-they are very short of capital in the Maritimes and this is an extra reason why entrepreneurs there should be entitled to this kind of tax break.
Of course I am sympathetic, except that there are a number of flaws in that argument. One is that most of these people were investing their money outside the Maritimes and another is that most of their businesses had not expanded in years and the extra tax savings went for purposes other than business expansion. This does not apply just to the Maritimes, of course, Mr. Chairman; it applies all across the country except that it is a more poignant argument in that part of the country.
In fact, the savings have not been used to develop business as was intended. On the contrary, I think if we wanted to look at the argument very closely we could see that by providing these incentives to businesses that do not require them-I want to differentiate between businesses genuinely in need and deserving of the consideration of this House and the taxpayers of Canada-many businesses have not expanded and have no trouble getting the money they require for their operations, yet they are getting this tax benefit.
This leads to an accumulation of surplus and makes things difficult because they cannot get it out of the business. They have all kinds of profits accumulated and if they try to get it out it will be subject to marginal tax rates. Therefore, there are all sorts of shenanigans of income stripping, splitting up of companies and such tech-
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November 29, 1971
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niques. Some companies are likely to say, "We have to use up this surplus we have acquired at the differential tax rate, so why don't we pad the others a little?" What was supposed to be a spur to efficiency turns out to be simply a nice, fat cushion to pad them for a number of years, encouraging inefficiency.
While the objective of assisting small business is worthy and one which I think we should be pursuing, in my view the way we have approached it is all wrong. It has been costly and has had the opposite effect of what was intended. I think the proposals should be scrapped; they are the same kind of approach with, admittedly, a different mechanism. By introducing this new legislation the government thinks it has closed all the loopholes.
Even the most sanguine people in the government-I am speaking not only of those in the political part of the government but of those who are government advisers and tell the government how things should be done-will know that from here on in that surplus of up to $400 million for small business will be an irresistible lure for anyone looking for ways in which to advise people to get out of paying certain taxes. Periodically they will come to us and say, "This has become a hopeless mess. Let us take this provision out because people have found a way of working around it. Let us take it out and replace it with a preferential tax rate of 15 per cent, say."
They will say that because the tax system will not have worked as we all thought it would work. How often have we gone through this in the House merely because the tax system had not worked as we thought it would. The accumulated surpluses will work against efficiency in the management of business operations. We have been forced to admit that our legislation has been a failure and we have said, "Let us clean up this thing. Let them take it out at a rate of tax below what it would normally be and start all over again."
We are starting on the same path that got us into this trouble before. I think this is important and we must be careful about what we are doing. If you start out to help, but then go the opposite way, what you will be doing in some cases will be worse than useless. This, to me, appears to be the situation at the moment regarding this section concerning the corporate program. I am suggesting, Mr. Chairman, that the wage and salary earners of this country are being asked to pay $400 million more in taxes than they would normally be required to pay under existing legislation.
Actually, in this case, I think the figure should be reduced to $300 million. That is still a very substantial amount to take from the wage and salary earners of this country for a program that will not be effective or that will be only marginally effective and will lead to all kinds of new difficulties in the taxation of corporations in this country. Also, it will further remove the real possibility of providing a much better level of assistance to small business than is contemplated in the program before us.


Marcel Joseph Aimé Lambert: Mr. Chairman, sometimes when we get involved in debates like this our hopes sink very low. Our spirits may sink. However, after listening to the hon. member for Waterloo, I am always brought
[Mr. Saltsman.1
back, shall we say, to the realities of what makes this economy tick. The hon. member is a charming fellow; you could not ask for better. But I do not know where he learned his economics, I do not know where he learned his principles of taxation, and I do not know whether at times he is paying lip service to the doctrinaire stands of his party or is coming out with some new theories.


Some hon. Members:: Oh, oh!


Marcel Joseph Aimé Lambert: I hope the hon. member will stay. I am not going to castigate him.


Max Saltsman: I want to improve my knowledge of economics.


Marcel Joseph Aimé Lambert: I think I heard the hon. gentleman say that there are certain programs, not necessarily those contained in this tax bill, which hold out an incentive or a particular inducement to small businesses. According to the hon. gentleman, some economist-he remains nameless because I do not think he can substantiate this-says that this will cost the country $400 million per annum.


Max Saltsman: It was not an economist. The Minister of Finance said that.


Marcel Joseph Aimé Lambert: I do not know who said it, but that is the most unadulterated tripe that could be peddled by anyone. That statement regarding the $400 million presupposes that there is that amount taken out of the stream of economic activity and somehow buried, secreted, burned or wasted somewhere else. Of course, that is not so at all. To the extent that such incentives to small business provide jobs and provide the scope for advancing or expansion, if the impact of tax does not bring about a passing on of an increase in prices then the whole national economy gains, and particularly those people that the hon. member is ever wont to come to the defence of, the people who are not engaged in business on their own behalf.
Let us look at the $400 million that the hon. member says will be the cost of such a program of incentives to small business through the two-tier system, or whatever one may want to call it. Surely to goodness we know and he knows, and if he does not know it is high time he did- and it would be far more honest of him to admit that this is a fact-that an income tax increase whether imposed on business, on salaried individuals or on persons earning wages, is passed on at the first opportunity. And who ends up paying the increase? John Customer does. The Canadian public ends up paying it. And who is the gainer? The Minister of National Revenue.


An hon. Member:: Not personally.


Marcel Joseph Aimé Lambert: I mean, the government. The Minister of National Revenue epitomizes the government. It is the government and not the minister personally that ends up as the gainer. And what does he do with the money? I know that the NDP approves of money being taken into public coffers that shall be subject to the direction of some faceless individuals, suddenly become genies, who frankly have not made a success of their own affairs but are great in telling others how they should run theirs.
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Sir Stafford Cripps-I must be careful with the name- said that all the bureaucracy that was hired by the Labour government that came to power after the end of the Second World War was engaged in economic production. Of course, he was the greatest of the dreamers and of the bureaucrats, and the whole system fell like a house of cards pushed by a child. Why, Mr. Chairman? Because it only took a child to knock out so many of the things that were set up under those wildly idealistic, theoretical dreams that had been dreamed up over the years by people in books and by others-and none of them had ever run a business, none of them had ever faced the need to finance inventories, none of them had ever faced the problem of meeting a payroll.


An hon. Member:: The hon. member for Waterloo did.


Marcel Joseph Aimé Lambert: The hon. member for Waterloo may have, but he was not then a dedicated member of the NDP. Since then he has sold out, so that he does not need to worry.


An hon. Member:: He sold out in more ways than one.


Max Saltsman: That is not true.


Some hon. Members:: Oh, oh!


Marcel Joseph Aimé Lambert: He no longer runs a business.


Max Saltsman: The hon. member should say what is correct and get the facts straight.


Marcel Joseph Aimé Lambert: He no longer runs a business successfully.


An hon. Member:: Move two seats to the right, Max.


Marcel Joseph Aimé Lambert: You know, this is funny. I always find that the NDP are awfully good at telling other people how to run their business. For themselves, however, they do not apply the same rules.


An hon. Member:: Is that true, Max?


Marcel Joseph Aimé Lambert: They are arch capitalists. They abide by the orthodox rules. They work hard. I do not deny that when the hon. member for Waterloo was in business, he ran close to having ulcers. His blood pressure was up and he had sleepless nights.


Max Saltsman: That started when I came here.


Marcel Joseph Aimé Lambert: He made money, Mr. Chairman.


An hon. Member:: He made millions.


Marcel Joseph Aimé Lambert: He kept people operating. He provided jobs.


Gérald Laniel: Order. The hon. member for Waterloo is rising on a question of privilege.


Max Saltsman: I am sorry I have to rise on this question of privilege, Mr. Chairman. While the remarks of the hon. member for Edmonton West are very interesting, I hope
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he will confine his comments to the subject before us rather than a Dun and Bradstreet evaluation of my affairs.


Gérald Laniel: I think it is the function of the Chair to decide that.


Marcel Joseph Aimé Lambert: The only reason I am spending an unduly long time on my friend, the hon. member for Waterloo, is because of the extent of the affection which the House has for him.


David Lewis: Don't be jealous.


Marcel Joseph Aimé Lambert: The hon. member told us that the conduct of small business by Canadians under a system that has been in existence for over 20 years, and certainly at the present level of income tax at $35,000, 25 per cent, a two-tier system for 11 or 12 years, if my memory serves me right, has been wasteful from the point of view of the national economy. We have not heard too much about how he would replace the present system, what incentives he would give to small business and how the system he advocates would provide even one more job. After all, the hon. member must be concerned about jobs. The hon. member for Laurier knows that. He argued the same point. He maintained that same point of view in the finance committee.
This country runs on the jobs that are provided. People are interested in jobs. They want a new job or a proper job in order to provide a roof over their head, enough food for their family and some return for the future. This is what the ordinary individual is concerned about. I do not care whether he earns $50,000 a year or $5,000 a year, depending on his capabilities-we all have that same philosophy. This is what we must devise as the groundwork for a tax system, one that is based on incentives.
Man is a curious individual. Maybe I am subjective on this. I always work better with a carrot, some incentive or goal ahead of me, rather than the restrictions and disenti-tlements of strict regulations and so forth. Incentive is what we must have in Canada. After all, we are not only competing on the national scene but in the international market place. This is becoming tougher and tougher. This bill is full of disincentives; nothing more is contained in these sections on corporations. I have been going over the group of sections that Your Honour's sharer of the chair read to us as being the subject matter of today's discussion. I think that less than 50 per cent of the sections are new. Most of these are headed "tax on" or "additional tax on". Bearing in mind the various ramifications, it is almost impossible to pick out any sections that are carried forward from previous legislation.
I have been able to come up with eight or nine sections which I will be prepared do discuss with the parliamentary secretary or the government House leader, as I did last Friday afternoon, in order to show that this debate can produce some degree of understanding in certain places. We use this House as a forum to expose the weaknesses or advocate the strong points of legislation. This is what I have been endeavouring to do, albeit at the same time working out a list of sections which, after consultation between now and ten o'clock, I hope to be able to put before hon. members for acceptance.

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Max Saltsman: He just took a breath. Now he has a second wind.


Marcel Joseph Aimé Lambert: The hon. member should know that I can shift gears very quickly. The hon. member provided me with an almost unparallelled opportunity for a philosophical dissertation on the difference between the New Democratic economic philosophy and that of the party which I represent. The Minister of Justice is looking at me with a quizzical eye. Is he inviting me to give a dissertation between Liberal economic philosophy and that of the Conservatives?


John Napier Turner: I was just going to suggest that if you let out your clutch you would strip those gears.


Some hon. Members:: Hear, hear!


Marcel Joseph Aimé Lambert: The minister is exhibiting a bit of impatience. We would welcome the minister's legal knowledge or legal opinion. Before he came into politics he was with what is possibly Canada's leading tax advisory firm. It would have been very instructive to have the minister take us through some of the clauses on drafting sections which have been brought forward. The minister can grin. He knows damned well he can't do it.
I now come to the restrictions on small business and the matter of ineligible investments. It must be pointed out that the one quality or characteristic that defines ineligible investment is its ownership at the end of the tax year. It is not what you had six months ago that worries the tax man. It is that which you have at the end of a tax year. This can invite, shall we say,-

How would I say that in French-corporations purge themselves at the end of the financial year?

In other words, they purge themselves of anything which would be ineligible. On the other hand, one week thereafter they go right back into the old bath, if that is not mixing metaphors too much. They step out of the dirty water they are supposed to be in, stand lily white on a new bath-mat and say, "Here I am, all nice and clean," As soon as they finish the inspection they go back into their comfortable bathwater, which is not so clean but which from their point of view is much more remunerative. Outside of the fact there might be some pretty substantial brokerage charges on one hand, the cost of getting in and out of these investments, there would be no other disincentive against this move.
I admit the tax people would be here within eight or nine months, or maybe even less, with a hole-blocking amendment to the act but at the present time the sections in question are deficient to that extent. I shall not say it is wrong to point these things out because various firms of chartered accountants have been quick to advise their clients of them.
The last point with which I should like to deal concerns a restriction which I feel is most amazing, namely, that a company which has been enjoying a small business status

loses its qualification should it become no longer Canadian-controlled. Where a Canadian-controlled private corporation which has the benefit of the small business deduction ceases to be Canadian-controlled but remains a private corporation, a special tax is exigible equal to 25 per cent of its preferred rate amount minus four times the tax paid on ineligible investments less any refund thereof.
I shall repeat part of that and ask hon. members across the way who happen to be chartered accountants, this question. If a corporation remains a private corporation, there would then be a special tax equal to 25 per cent of its preferred rate minus four times the net tax paid on ineligible investments. Where is the sanctity of this formula? What is the rationale? Why four times the tax paid? Is it an arbitrary figure? I ask the parliamentary secretary to explain. In effect this will mean the recapture of the small business deduction benefit previously received minus the allowance for dividends previously paid.


Gérald Laniel: Order. I regret to interrupt the hon. member, but the time allotted to him has expired.


Some hon. Members:: Carry on.


Gérald Laniel: The unanimous consent of the committee is needed. Is it agreed?


Some hon. Members:: Agreed.


Marcel Joseph Aimé Lambert: Under this formula, if a private corporation ceases to be Canadian-owned it loses its status of a private corporation and becomes subject to a tax of 25 per cent of its preferred rate as a small business less four times the tax which would be payable on the ineligible investments, less any refunds. What should have been said there is "four times the net tax paid on ineligible investments".
All this means is that small businesses which had previously received certain benefits will be obliged to refund them. This becomes pretty tough, Mr. Chairman. Suppose there has already been a benefit amounting to $400,000- on the income, but not on taxes. Tax will be 25 per cent. After all, that is what it is, 25 per cent of $50,000. In 1972 the maximum tax on $50,000 will be $12,500; in other words, one-quarter. So one arrives at $12,500 each year for eight years, which comes to $100,000. So the penalty imposed upon a Canadian-controlled private corporation which ceases to be Canadian-controlled will be $100,000 in tax recaptured.


Steve Eugene Paproski: That's not much.


Marcel Joseph Aimé Lambert: Not much? One hundred thousand dollars! I can hear a lot of people saying this is a good feature because it will keep small private corporations Canadian-controlled. That may be. But remember, the owners of these Canadian-controlled private corporations may sell by way of merger to another Canadian corporation at which time the tax is not exigible. Control could change voluntarily on sale of control to non-residents or on sale to a Canadian private corporation controlled by non-residents. It could also occur involuntarily on the death of a Canadian controlling shareholder who bequeathed his shares to a non-resident heir.
November 29, 1971

The situation here could become extremely difficult. Suppose citizen A, a Canadian, owns controlling shares in corporation X. By his will he bequeaths his interest to his son who, just before his father's death, decides he will live in the Bahamas or, even better, he does not go to the Bahamas-because that is a voluntary decision-but is posted abroad by the international company for which he works, and is resident abroad. The son might be working for a Canadian international firm, say in Australia or in Indonesia-working for the Canadian nickel interests out there. He inherits the shares from his father in this Canadian-controlled private corporation. And what happens? The small corporation's status is lost. That is a completely involuntary result of this operation.
That is the effect of the law. Mind you, the tax would not become exigible if control was acquired by a Canadian public corporation or if the company itself went public though it appear that in both these cases subsequent conversion to a private corporation controlled by nonresidents would trigger the tax. But for a private company to go public is something which is accomplished only at great cost. It is not too easy a step. Frankly, if a private corporation goes public it means it has abandoned the thinking behind the two-tier system; it is going public because it wants access to public sources of finance. That is the principal reason it voluntarily abandons its status as a private corporation.
It certainly appears that the required refund of the small business deduction tax saving is likely to depress the price a non-resident is prepared to pay for the shares of the corporation, particularly where the price placed on the shares is close to break-up value. When taken together with the deductibility of interest on money borrowed to buy shares, it should place acquisition-minded Canadian corporations in a better competitive position vis-a-vis their non-resident competitors.
That may be so, but I say that in many instances this will not be the result. As I have already said two or three times this afternoon, this is part of the policy of the government in regard to foreign ownership. Or is it? Certainly is an expression of it. Yet we are asked in a backhanded way to define Canadian policy on foreign ownership by the piecemeal discussion of various clauses of a tax bill. To me this is quite wrong and reinforces my earlier argument and that of my colleague for Peace River, as well as the argument of the Leader of the Opposition, that these particular sections must be deferred so the government can make up its mind what it is going to do about foreign ownership. Why ask us to place the cart before the horse? In fact, you usually know what kind of horse and what kind of cart, but in this instance the government has not even spelled out the kind of nature of either the horse or the cart.
It may be that I shall want to address further remarks tonight to this subject, but I would appreciate it if someone would allow me to negotiate the various sections I want to discuss so that we can make some progress.


Gérald Laniel: Shall the amendment carry? The hon. member for Waterloo.


Max Saltsman: Mr. Chairman

Income Tax Act


Gérald Laniel: Order. I thought the hon. member for Laurier was leaving his seat. The Chair recognizes the hon. member for Laurier.


Mr. Leblanc (Laurier):: Mr. Chairman, I did not intend to participate in the debate but after hearing the hon. members for Waterloo (Mr. Saltsman) and Edmonton West (M. Lambert) who were on the Committee of Finance, Trade and Economic Affairs, I could not resist the urge to say a few words on the corporate income tax.
I challenge the hon. member for Waterloo to prove the accuracy of the figure of $400 million. I have studied the summary of the bill of fiscal reform published when the budget was brought forward on June 18 last. It contains instances of changes to the income tax payable by corporations during the first year of the new system's implementation. Based on 1968 incomes, the increase would have amounted to $20 million and on 1972 incomes, it will amount to $30 million.
The member for Waterloo could perhaps explain how he arrived at the figures quoted in the House? In addition, he delivered, as usual, a rather eloquent speech and I wish to congratulate him, especially for his comments on incentives for small businesses.
As mentioned by the hon. member for Edmonton West, the Creditistes must again explain not only how we have provided for incentives in Bill C-259, but how they would have proceeded to perform such a task.
Evidently, the legislation is complex. Speaking to the Canadian Tax Foundation last week, the Minister of National Revenue (Mr. Gray) stated that we are living in a rather complex industrial community and that when we want to make exceptions in a legislation to make sure that incentive will only be profitable to the small business, we are compelled to establish some formulas to be certain that contrary to what is provided under the present act, big corporations do not benefit from incentives provided to small businesses.
The hon. member for Edmonton West said that corporations are now purging themselves. They do purge themselves for a very simple reason: so that the surpluses accumulated before December 31, 1949 be freed and distributed free of charge to the shareholders, which means that for the shareholders who are going to receive them, these will be non-taxable. This seems interesting enough as an incentive.
Corporations are also purging themselves so that surpluses accumulated since 1949 become non-taxable, by paying only 15 per cent, so that they be distributed free of charge to shareholders. We realize then that companies might be prompted to purge themselves so that their shareholders benefit from the generosity of the federal government under the bill now considered, in the course of transitional periods, because, obviously, beginning in 1972, the new act shall be effective.
As the hon. member for Edmonton West was saying, incentives to the small business serve to encourage Canadians to invest in Canadian corporations; at the present time, that does not seem to be happening. In fact, an analysis of statistics relating to investments by Canadians shows that such investments take the form of bond purchases and bank deposits, rather than investments in

November 29, 1971
Income Tax Act
Canadian corporations. I suggest that the new law should provide incentives to encourage Canadians to invest in Canadian societies.
There was some mention of "four times something".
Of course, some mathematical formulas are set in the bill. Indeed they had to be to save the hon. Minister of National Revenue the trouble of making rules on ways and means of implementing the new legislation and perhaps to invite him to use his controlling authority more sparingly.
Many theories are brought forward in the discussion of those figures. Some say it could harm Canadian industry, but that has not been substantiated. However, if sections of the bill really hurt the national economy and employment promotion, I am convinced that as soon as there will be evidence of it, and even before that, the government will have enough far-sightedness to make the necessary amendments.


Max Saltsman: Mr. Chairman, I had hoped to spare the committee a third dissertation in one day on this particular section.


Mr. Benjamin:: Don't do it.


Max Saltsman: I have been'persuaded by my colleague that I should not do it, and since I value his judgment very highly I should like to contribute just a few remarks to this debate, particularly in response to some of the arguments made by the hon. member for Edmonton West who I see is trying out a government seat. Although the polls are somewhat better than they have been for his party, I think he is being unduly optimistic.
I always listen with great interest to the remarks of my hon. friend from Edmonton West because they are remarks that are seldom heard-seldom since the eighteenth century anyway. I think the last time such views were held was in a book entitled "The Fable of the Bees" by Bernard Mandeville. The argument was essentially that of the hon. member for Edmonton West and it ran something like this: We should encourage the luxurious consumption of the well-to-do because, after all, the poor benefit because the rich hire chimneysweeps, the rich need people to look after their gardens, the rich require clothes which need buttons sewn on, and all kinds of things. So we should see that the rich have lots of money and that no one takes their money away because, after all, they provide employment and where would society be if the rich did not have the money to provide employment?
This is basically what my friend thinks. I for one have never suggested that the money which goes to business or the money which goes to those who already have it is locked away somewhere and is not used. That is not the argument at all. The money is used. The question is, for whose benefit is the money used and whether that is the best way to stimulate our economy. This is known as the trickle-down theory. If you have enough rich people with all kinds of consumption or investment plans, then everybody else must benefit. This might have been a valid enough theory in the seventeenth or eighteenth century,
[Mr. Leblanc (Laurier).l
but surely our economics have advanced beyond that point.
I think the issue in this debate is whether the $400 million given under the old program and the $300 million under the proposed legislation is best used to help the economy by being dispersed in the way suggested. I think not. This is the argument I have been attempting to make. I also heard the hon. member for Edmonton West say that if we do not give business some of these advantages and tax benefits, prices will rise. What I believe he is really saying-I hope I am interpreting him correctly-is that business will take what it wants to take regardless of what we do with our tax system; that we can increase taxes or put off giving certain benefits but they will still take what they want to take.
I think there is some evidence that this is what is happening, but it hardly seems pertinent to the debate before us. More importantly, however, I want to meet the direct challenge the hon. member attempted to put to me when he asked what I or my party would do to replace the present legislation since we have said we are interested in helping small business. We are very concerned about this. He asked what we would do rather than have this $400 million bonanza. I think that was a fair question.
Since some personal elements have crept into this thing-there has been reference to myself as a small businessman-I might say I have been in business for about 25 years and therefore have some experience. I have even met a payroll on occasion, and on occasion did not meet it because we did not have the money. So I believe I am qualified. Somebody has put the stamp on me and I can now talk about these unholy measures which are restricted to somebody who has met a payroll.
Let me recall some of my experiences. My opposition to this arises from my experience. At a time when I desperately needed help, this legislation was of no help to me. A small businessman needs help when he is not in a profitable position and is attempting to get off the ground. He does not need it when he has a profit position of $30,000 a year. Some of these people do not get off the ground. The way to help them is not by giving them an additional reward when they have made money. They do not need it then. However, they do need it when they are starting up.
One of the finest programs the government introduced is one which unfortunately the banks have never extensively promoted. I am speaking of the small businessman's loans program by which a person could go to a bank and obtain $35,000 payable over a long period at a low rate of interest. That was of more value in getting people started in business than anything else. Another thing which has been of value has been reduced depreciation. A small businessman needs assistance in the way of an initial loan. He needs it in the way of assistance if he is going to do research if he should be in that kind of field. He needs it to help him in marketing. He needs it in his contacts.
Perhaps he even needs a preferential buying arrangement. He needs it to build up his inventory if he should be in the retail trade. He perhaps needs it in the way of a tax deferral if he can indicate he is in an expansionary period. All these are legitimate ways, in my view, to assist small businessmen. They are ways to help small businessmen to
November 29, 1971

a much greater degree than the proposed measure. And, I suggest, Mr. Chairman, at infinitely less cost.
What are we really talking about? If my hon. friend from Edmonton West is really concerned about helping small businessmen, those who are trying to get started and those for whom he feels strongly-and I am sure he does-why does he not suggest measures such as an expansion of the small businessman's loans and depreciation allowances in the first years in business? After all, they are willing to do this for the large mining corporations. We give them a three-year tax holiday? They are willing to do it for the oil companies, but where is it for the small businessman?
This is something Carter recommended. There are many ways, I know from experience, in which small businessmen can be assisted. The idea of giving them tax benefits after they have made up to $50,000 profit is laughable. If you want to give them a tax benefit on the Mande-ville fable, or the trickle-down theory, if you want to use eighteenth century economics, fine-and by the look of this bill, this is what we are doing. But if there is any genuine concern for helping the little man get off the ground and giving him help when he needs it, then this legislation is not the way to do it and it cannot be justified on those terms.
I ask hon. members to consider what I have said because the hon. member for Edmonton West-and perhaps some of his colleagues feel as he does-thinks our opposition to the $400 million give-away is opposition to assisting business. Nothing could be further from the truth. We are very anxious to assist business, and small business in particular. If a business is profitable, it has less claim to my sympathy or to my tears. Any kind of tax on business is probably going too far so far as the Conservative party is concerned. I see that the Conservative party is very envious of the Liberal party's ability to open the purse-strings of business and are hoping that they might have a nice little poke at that bag themselves. This is understandable.
We are not so blessed. Those purse-strings remain tightly closed to us. The unions do not get these tax free allowances. I hope there will be debate along the lines I am suggesting, and that we turn our thoughts to more significant ways of helping small business in this country instead of blathering about giving additional rewards to those who are already making significant profits and do not have to show that they are prepared to use those profits for the needs of their business, for providing employment or for the benefit of the country.


Marcel Joseph Aimé Lambert: Mr. Chairman, better it should be my day in the House today to point out some of the deficiencies in the legislation, than that the House be deemed to have looked at these things and just dismissed them or passed them very cavalierly. I hear from the background something about a concept in economics. That hon. member's economics would not get him out of the woodwork in a service station, if we were to apply them. I should like to see him run a business.
In any event, a number of able briefs have been presented to the government. Unfortunately, this type of operaincome Tax Act
tion in committee of the whole prevents any hon. member discussing these briefs with government officials or even with ministers. We have had a succession of parliamentary secretaries who have been taking turns at doing House duty. As we say in French-

Silent as the grave.

They give no information. The only one who has been able to speak at any time is the hon. member for Calgary South, and he has done more to alienate certain personalities in the opposition than contribute to the efficacy of the debate. Certainly he has not contributed to any greater knowledge.
Some excellent briefs were put forward to the government by the Canadian Bar Association, the Canadian Institute of Chartered Accountants, a number of major chartered accountants firms, the Canadian Manufacturers Association, mining associations and a number of other business organizations. They represent large and small interests. But if there is such a thing as an amalgam of small businesses or individuals, such as the Canadian Congress of Labour, and if it wanted to get off its collective stern and get something down on paper where it would be of some benefit to its membership, it would be discharging its responsibilities instead of abdicating them.
Those bodies exist for the purpose of advancing the interests of their members and it is a good thing that some of them do. If one relied upon the silence that we get from certain quarters, one could pass any type of petition. I am sure the hon. member to my left would like to sign one that advocated his own hanging.
In the brief of the Canadian Bar Association there is one observation which should go on record-and may I say that in its approach the Canadian Bar is not unfriendly to some of the spirit of the legislation, particularly in this section. I do not quite agree with all it says, but they point out some of the inconsistencies. Here, again, is something that is not included in the 150-odd amendments that have been brought forward. I think the Minister of Justice should lay the whip to some of his draftsmen again. He had them under the gun all spring and summer to produce Bill C-259. In any event, the following statement is made in the brief:
Basically, it is hoped to clear out the 1971 undistributed income on hand and the 1971 capital surplus before the earnings or gains under the new system are distributed.
I suppose that various Ministers of Finance have dreamed of what they claimed to be vast reserves hidden somewhere under layers of corporate camouflage. But financing has been so difficult that I am surprised that any Minister of Justice or any of his advisers should continue to be under the illusion that so much money was hidden when people were desperate for money. I remember when years and years ago they said that Canada had billions and billions of bushels of wheat, but somebody had lost sight of the fact that a good number of people had been able to dispose quietly of their stocks. They were not going to let government regulations stand in their way of liquidation. The same thing happens here. The brief continues:
Once these historical anomalies are cleared up, the system should

November 29, 1971
function with relative ease. We wonder, however, why complications were added to some of the amounts which were to become of historical interest, such as paid up capital deficiency, so that current situations continue to apply to them. Any simplification of the rules for what amounts are attributed to what accounts or "pots" for the purposes of shareholder distributions would be most welcome. Of all the confusing concepts in the new legislation, none is more difficult than the pot contents set out in the definitions in section 89.
If hon. members would look at section 89 they would see that there we have a reference to pot contents. It is a difficult thing under the act to define what is in this particular pot. The other day I saw a diagram on mineral taxation where reference was made to storage bins, to particular mixing bins and this sort of thing, and finally some sort of amalgam came on at the end. I do not think even the author or the artist knew what on earth had come out in the end. The brief goes on to state:
We believe there are too many pots and too many difficult calculations to make to determine what amount is in what pot. In the definition of paid up capital deficiency, for example, all but one of the ten subsections which must be examined cross-refer to other provisions of the statute or involve complicated definitions contained in other paragraphs of subsection 89 (1). Almost all of these cross-references lead to further cross-references or definitions, which are not helped by the erroneous cross-reference in (IX) to subsection 111 (l)(b) which should be to subsection 111 (l)(a). Yet, essentially, the section is defining only the amount of a capital deficit with which existing corporations will enter the system. In most cases, there will be no necessity to make the calculation because the corporation will not have a capital deficit anyway. We believe there must be a simpler and clearer way to enact one operative section which would set out in logical sequence the rules for taxation of future distributions of those corporations entering 1972 with a capital deficit.
That is the nature of the criticisms that appear in the brief entitled "Canadian Tax Reform-A Review". I could go on and pick out some more but because of the time factor and as a result of discussions I have had with representatives of the other parties, with the exception of the Creditistes-

There was nobody in the House at that time.

I am prepared to propose to the parliamentary secretary that the Chair call the following sections which we have up for discussion tonight, along with another one which did not form part of this group but is related to it and which we would be prepared to have included. If the Chair would call the following sections, I think the committee might generally be disposed to pass them. Certainly members on the government side would welcome this.
Perhaps the Chair might call sections 181, 182, 183, 185, 187, 191, 193, 195 and 197, and outside the group of sections that was before Your Honour today which referred to bankrupt corporations and is merely a carry forward of existing legislation and causes no problems, section 128. I think there would be disposition as far as we are concerned to accept those clauses this evening and then call it ten o'clock.


Gerald William Baldwin: The spirit of Christmas has got into the hon. member-Santa Claus.


Leslie Gordon Benjamin: You guys are being too nice.
(Mr. Lambert (Edmonton West).]
Income Tax Act


Marcel Joseph Aimé Lambert: We make progress.


Gérald Laniel: Is it agreed that the Chair now call the sections enumerated by the hon. member for Edmonton West?


Mr. Knowles (Winnipeg North Centre):: Yes, Mr. Chairman; but I was just going to ask if there are any government amendments to any of these sections.


Gérald Laniel: There do not appear to be any amendments on these sections, so I shall call them one by one.
Clause 1, sections 181 to 183 inclusive, agreed to.
Clause 1, sections 185, 187, 191, 193, 195, 197 and 128, agreed to.


Gerald William Baldwin: Mr. Chairman, perhaps I might ask before you get in your exalted position in the Chair, and our having made such great progress today, what particular sections the government will see fit to concentrate on tomorrow. Perhaps the government House leader or the parliamentary secretary would suggest some sections which would permit hon. members on the other side of the House to make a contribution for a change.


Steve Eugene Paproski: That will be the day.


Mr. MacEachen:: Mr. Chairman, tomorrow we will call division I, sections 166, 167 and 168; division J, sections 169 to 180 inclusive; followed by part XV and part XVI, sections 220 to 247 inclusive; followed by what has mysteriously been called residuals.


Marcel Joseph Aimé Lambert: Ten o'clock.
Progress reported.



PROCEEDINGS ON ADJOURNMENT MOTION

[Stage Direction]
A motion to adjourn the House under Standing Order 40 deemed to have been moved.
The Acting Speaker (Mr. Boulanger):: The hon. member for Nanaimo-Cowichan-The Islands (Mr. Douglas).


Stanley Howard Knowles: Mr. Speaker, since it is a few minutes before ten o'clock I wonder if the hon. member for St. John's East (Mr. McGrath) could be called first.


The Acting Speaker (Mr. Boulanger):: Is it agreed?


Some hon. Members:: Agreed.



FISHERIES-SUGGESTED TALKS WITH OTHER COUNTRIES TO DETERMINE REACTION TO POSSIBLE CANADIAN EXTENSION OF JURISDICTION TO COVER CONTINENTAL SHELF

James Aloysius McGrath: Mr. Speaker, on Thursday, November 25, my colleague, the hon. member for Gander-Twillingate (Mr. Lundrigan), and myself directed questions to the Secretary of State for External Affairs (Mr. Sharp) asking if he was aware of the bill
November 29. 1971

passed by the legislature of the state of Massachusetts extending the fisheries jurisdiction of that state to 200 miles or 100 fathoms, in other words, to take in their continental shelf. The minister replied, as reported at page 9872 of Hansard:
Mr. Speaker, I was not aware of it. I will certainly make inquiries to see what has really happened and look at the implication for Canada.
On the following day, Friday November 26,1 directed a similar question to the Minister of Fisheries (Mr. Davis) and received the following reply at page 9918 of Hansard:
I have made inquiries, Mr. Speaker, but I have not yet seen this legislation. It would seem to me to be ridiculous. There could be no possible parallel in Canada. If the hon. member is suggesting that Newfoundland alone declare a 200-mile limit, then I think he should talk to the government of that province.
Mr. Speaker, I was alarmed, to say the least, to learn that the Secretary of State for External Affairs, the minister charged by Parliament with the responsibility of looking after our foreign interests, would not be aware of a bill passed in the Massachusetts legislature and held to be constitutional by the Supreme Court of that state, extending their jurisdiction up to 200 miles or taking in effective jurisdiction of the continental shelf on that eastern seaboard of the United States.
It is even more alarming when we learn that our Minister of Fisheries, who is charged with the responsibility of looking after the interests of our fishing industry, would suggest in reply to a question in this House that he had not seen this act of the legislature of Massachusetts which was passed on November 8, ratified by the governor of the state on November 16 and subsequently upheld by the courts of that state as constitutional. The action taken by Massachusetts flowed from a meeting of the governors of the New England states which took place last summer, at which they adopted the following resolution:
New England governors resolve to urge extending limit to 200 miles-
Whereas, the virtual extinction of New England's offshore fisheries resources by foreign factory vessels is a clear and present danger to the region's commercial fishing industry; and
Whereas, the continued exploitation of this irreplacable natural resource threatens the stability of the region's marine environment; and
Whereas, the need for intelligent management of New England's marine resources requires the extension of jurisdiction over living marine resources beyond the present 12-mile limit;
Now therefore be it resolved that the New England Governors' Conference hereby urges the New England congressional delegation and the executive branch of the federal government to lend their full support to passage of emergency legislation which would extend fisheries jurisdiction 200 miles from our nation's shoreline or to the one hundred fathom curve. We are convinced this policy is essential to both the health of our regional maritime economy and our nation's ecological balance.
That resolution was passed by the governors of the New England states in July or August of this year and was followed by an act of the legislature of the state of Massachusetts aimed primarily at bringing pressure to bear on the government of the United States to act to protect the fisheries of the New England states. Mr. Speaker, the commercial fishing industry is much more important to the provinces of Atlantic Canada than it is, I say with respect, to the New England states of the United States, yet no similar action has been taken in our country.
Proceedings on Adjournment Motion
No action has been taken notwithstanding repeated urg-ings in this House by hon. members, myself included, and notwithstanding the formation of a special committee of the fishing industry called the Save our Fishery Association which has been formed by participating members from the Atlantic provinces and the province of Quebec. Its aim is to bring pressure to bear on the federal government to act and to protect this vital Canadian resource which has been threatened as a result of overexploitation by the foreign fishing fleets that frequent our shores.
One of the ten points in the program put forward by the Save our Fishery Association states that they would be applying maximum pressure to have the federal government clarify its position on continental shelf control and have controls implemented before the end of 1973. If these steps are not taken, said Mr. Etchegary, chairman of the Save our Fishery Association, in the near future we will have no inshore fishery in Canada.
This is cause for much concern in my province of Newfoundland where thousands of people directly and indirectly depend on the fishing industry for their livelihood. This important industry is threatened with extinction because we as a nation have been unable to take the necessary steps to protect it. This industry is vitally important to the Atlantic provinces of Canada and to the province of Quebec. It is obvious that unilateral action must be taken by Canada. The precedent is there. We now have jurisdiction over the resources underneath our continental shelf, in other words, over the oil resources and so on.
It follows that we should have the same jurisdiction over resources above our continental shelf. Those resources are there. We are exploiting them now. Those resources are providing many jobs for Canadians and taxes for the economy. The industry is very important in the Canadian economy yet, Mr. Speaker, we do not seem to be able to translate this concept into government policy. The Secretary of State for External Affairs does not seem to be interested enough in the importance of this issue to obtain the necessary bilateral agreements with the countries that exploit our fisheries and to take the necessary unilateral action to declare sovereignty over our continental shelf in order to protect our fishing industry.


Mr. Eymard Corbin (Parliamentary Secretary to Minister of the Environment):: Mr. Speaker, despite all the static raised in this House regarding a certain bill passed by the Massachusetts legislature, one wonders what there was to be excited about for that bill went completely unnoticed in the Boston newspapers. I took the bother of checking both the Globe and the Herald, and the bill in question did not receive so much as a mention.
The fact of the matter may be that our friendly American neighbours may finally be waking up to the serious threat of the depletion of our oceanic resources. Canada has been leading in this field for a number of years. We have taken positive action. We have already acted positively to curb this threat and we will continue to lead in this area at every meeting, at every domestic conference and at every international conference.
November 29, 1971

Proceedings on Adjournment Motion
The Massachusetts enactment purports to extend the jurisdiction of the state off its coast for the purpose of the management of the fishery resources to 200 miles or 100 fathoms, whichever is the greater. It is of interest as reflecting the attitude of one American state on the importance of the Law of the Sea matters. Enforcement of this legislation would, I believe, involve certain constitutional questions in the United States upon which it would be inappropriate for me to comment. It should be noted, however, that the United States government continues to claim and enforce only a three-mile territorial sea and a further nine-mile fishing zone.
With respect to further development of the Law of the Sea by international agreement, the United States government has indicated that it would support a maximum 12-mile limit for the territorial sea and/or fishing zone, with provision being made for some preferential rights for coastal states in fishing resources beyond 12 miles.
The Canadian government has been pressing, particularly in the context of the forthcoming Law of the Sea conference, to achieve international agreement on the management of coastal fisheries beyond the limits of the territorial sea and exclusive fishing zones. Canada is seeking to obtain recognition of the coastal states' right to manage coastal fisheries for conservation purposes and to reserve for its fishermen a preferential share of those species which are vital to its coastal population.


James Aloysius McGrath: By the time the government begins to act there will be no fishery left.



POWER-PROPOSED JAMES BAY HYDROELECTRIC PROJECT-REQUEST FOR PUBLICATION OF REPORT ON ECOLOGICAL EFFECTS

Mr. David Orlikow (Winnipeg North):: Mr. Speaker, on October 29 I asked the Minister of the Environment (Mr. Davis) whether he would make public the survey which his department is conducting into the ecological effects on northeastern Quebec and Ontario which would result from the proposed power project which the government of Quebec is planning for the James Bay area. The reply of the minister was somewhat evasive. He said if the studies were ready he might make them public or available to interested environmental groups. What is involved here is probably the largest project of its kind ever attempted on the North American continent. Half a dozen or more rivers are to be diverted, huge dams are to be built, an ocean port constructed, thousands of square miles of trees are to be cleared and billions of dollars are to be expended in order to produce electric power, a large part of which will be sold to the United States.
Some of the most eminent scientists in the employ of the government and some of the people most actively interested in the problems of environment have questioned the whole concept. They have pressed the government of Canada not to permit this tremendous project to go ahead with such breakneck speed until some of the very important questions of its effects are assessed. We know from experience the very bad effects which followed the building of the Bennett Dam. We know of some of the bad results of the building of the Aswan Dam in Egypt.

The Canadian government, which has repeatedly said we must be concerned about the problems of the environment, is saying virtually nothing in this case. In connection with the proposed trans-Alaskan pipeline and tanker route down the British Columbia coast, the Acting Prime Minister (Mr. Sharp) said in this House on May 4:
It is time to ensure that the protection of our natural heritage becomes a major priority of public policy-
Large new engineering projects should not be undertaken before adequate information is available on the environmental risks which would be entailed.
This is precisely the question which we ought to be asking ourselves about the project with which the Quebec government is going ahead. This project will have an effect on the people of Quebec, a possible effect on the climate of Hudson Bay as well as an effect on people of northern Ontario and northern Manitoba. The whole ice floe in the Hudson Bay may be affected. The operation of the port of Churchill in Manitoba may be completely disrupted.
Dr. Lloyd M. Dickie, of the Bedford Institute at Dartmouth, Nova Scotia, one of Canada's top scientists, recently warned that man-made projects such as the James Bay project may alter our climate. He pointed out that the Gulf of St. Lawrence and the Gaspe climate has warmed by seven degrees since the St. Lawrence Seaway has been built. He predicts the opposite will happen if the James Bay project continues unaltered.
We are talking about an area which is of vital importance to the wildlife of the North American continent. This is one of the major areas for wild geese flight and the trapping of beaver. Close to 10,000 Indians who live in the area have vigorously protested against this project. This does not mean we ought not to go ahead with the project, but surely in light of the effects of the Bennett Dam on the Indian who lived behind it, the Department of Indian Affairs as well as the Department of the Environment should be expressing concern. They should be looking at the situation and protecting the Indians in the area.
Instead, what we find is the same kind of indifference, the same kind of silence as was encountered while the Bennett Dam was being built, and the effects will be a disaster of the kind that followed the building of the Bennett Dam. I urge the government to abandon its policy of silence and tell the people of Canada what, if anything, it has learned as a result of its studies of the damming of a number of rivers and the building of very high dams.


Mr. Judd Buchanan (Parliamentary Secretary to Minister of Indian Affairs and Northern Development):: Mr. Speaker, the first part of the question dealt with the environmental aspect and I would like to deal with its first.
In August, the Minister of the Environment (Mr. Davis) agreed with the competent authorities in Quebec to set up an informal task force composed of experts drawn from Environment-Canada and various provincial departments. The task force would make a preliminary evaluation of the impact of the project on the environment, evaluate the relative importance and sensitivities of the various elements of the ecosystem that will be affected,
November 29, 1971

map out the further in-depth studies to be conducted and, finally, report simultaneously to Ottawa and Quebec.
Since the studies are being carried out jointly with the province of Quebec, the concurrence of the province will be required before the reports can be made public. The Minister of the Environment made that clear in reply to a question by the hon. member for Winnipeg North (Mr. Orlikow) on October 29, as reported on page 9151 of Hansard.
As far as the portion of the hon. member's observations dealing with the Department of Indian Affairs and Northern Development is concerned, may I say that the area affected by the proposed developments in James Bay contains a population of 5,500 native people comprising seven Indian bands and a number of Eskimo families. Their traditional pursuits will undoubtedly be affected by the proposed development as much of the wildlife is confined to the river valley areas. The probable effects are being studied.
Needless to say, the proposed development is bringing to the fore the question of Indian interests in the land in which they have lived and toiled for so many years and which was transferred to the province of Quebec in 1898 and 1912. In recent years, Indians have expressed a great deal of concern about rights not only in Quebec but in the whole of Canada. The National Indian Brotherhood and
Proceedings on Adjournment Motion
the respective provincial associations, with financial assistance from the government, are playing a leading role in researching their rights. The Department of Indian Affairs and Northern Development is also directly concerned with the determination of the nature and quality of the Indian interests in the land of the province of Quebec, in the James Bay area in particular, and the study of this subject is continuing.
On the provincial side, early in 1967 Quebec created a commission to study the integrity of its territory. That commission, commonly referred to as the Dorion commission, published a part of its report concerning the Indian domain in February, 1971. The conclusions and recommendations of the report are known, but the views of the government of Quebec on the report have not as yet been expressed.
During the same period the Indians of Quebec Association submitted various briefs to the government of Quebec. One of them concerned territorial rights and another concerned fishing and hunting rights. Meetings and discussions between the association and successive governments in Quebec have taken place. To date, however, agreement has not been reached. Negotiations are continuing on this particular aspect of the question and the department is keeping in close touch with the Indians of Quebec Association on these and related matters.
Motion agreed to and the House adjourned at 10.18 p.m.

Tuesday. November 30, 1971