1971-11-02

ROUTINE PROCEEDINGS


Hon. Donald S. Macdonald (Minister oi National Defence):: Mr. Speaker, I wish to announce today that a decision has been made by the Department of National Defence to lay-up the hydrofoil Bras d'Or for a five-year period because a reassessment of Maritime Command's requirements has scaled down its priority. However, I would like to emphasize that research into hydrofoils will be continued by the department, and that the Bras d'Or could be reactivated at any time should circumstances alter.
The cost of maintaining the hydrofoil over the five-year period, including the basic cost of constructing storage facilities at Halifax, will be approximately $1 million. The Bras d'Or project began in 1961 with the awarding of a contract to the de Havilland Company for a development study of an all-weather hydrofoil craft. Cost of the construction project to date is approximately $52.2 million.
The decision which has been taken on the Bras d'Or results from the defence priorities for the department as announced in the white paper on defence in the 70's which was issued in August of this year.
The first main priority of defence policy is the protection of sovereignty and the surveillance of Canadian territory and coastlines. The acquisition of new equipment for Maritime Command must reflect this policy, and extensive studies have been conducted. Top priority calls for the replacement or major overhaul of the Argus long-range patrol aircraft. Moreover, although a major ship procurement program for Maritime Command is nearing completion, the question of replacing older surface ships, particularly with some ships capable of operating in heavy ice conditions, is one facing Canada in the next decade and for which planning and resources will be required. These factors and considerations have, therefore, lowered the priority of the hydrofoil, which began as an experimental project based primarily on an antisubmarine role.
The initial sea trials, covering both calm and rough waters, of the Bras d'Or were successful. However, completion of these trials did not mean that the development stage of the hydrofoil was finished, or that the stage had been reached where design of a production model was possible.
The cost of proceeding with the next stage in development work on the Bras d'Or would have been an estimated $4.5 million over a three-year span. However, it is estimated that possibly another $20 million or more would be required before proceeding to the stage where production could begin. Forecasts also show that production in the number which Maritime Command could have utilized-in the neighbourhood of 10-would have cost more than $20 million each. Some foreign countries which had shown an interest in the Canadian project have subsequently made it clear that acquisition of this type of vessel is also well down on their latest priority list. Because of the factors which I have stated-costs, lowering of priority, and no outlook for foreign sales at this time-it was decided for the present to limit future work to research and studies within the department.
If further trials or testing are considered necessary, the Bras d'Or could, as I have said be reactivated. Canada has developed considerable expertise on high-speed hydrofoils designed for ocean conditions, and it is considered desirable that research and study work should continue in this field.
I should also make it clear that because it is a development craft the Bras d'Or is not suitable in its present configuration for any general purpose use within Maritime Command. This, therefore, precludes its use as a patrol or search and rescue vessel.


Mr. J. M. Forrestall (Dartmouth-Halifax East):: Mr. Speaker, the announcement by the minister today is going to be received with very deep regret not only by those involved in military matters in Canadian life but by everyone who is involved in the research and development of the hydrofoil Bras d'Or. I must say that the minister's reasoning for the cancellation of the program at this time barely stands up to quick scrutiny. On very close examination I think many of the reasons he has given will not prove to be adequate.
In commenting on the announcement at this time it needs to be said that the total investment by Canadian taxpayers in the Bras d'Or is some $52 million. Part of that expenditure, of course, was brought about by a fire on the vessel. In these circumstances, the decision not to spend the additional $3 or $4 million required to complete the full evaluation and research program in connection with the hydrofoil is a wrong decision. It could be said that what we have done is to put $52.2 million worth of mothballs into a million dollar garage. In my view the government had a responsibility to complete at least the basic research work so that we could pass on to our allies the fruits and results of a full evaluation of the feasibility of the hydrofoil in open sea naval operations and related work. This we have not done and I think it is deeply to be regretted.

November 2, 1971
Lay-up of Hydrofoil "Bras-d'Or"
I hope the minister will find an early opportunity, possibly during consideration of his estimates, to explain in greater detail exactly what he means when he speaks of ongoing work in the field of hydrofoil use. I should like him to tell us where he intends to carry out this work and also to explain in detail what will happen to the Bras d'Or at the end of the five-year storage period. Will it be sold, or otherwise disposed of? Hopefully it will not be dealt with in the manner in which the Bonaventure was disposed of, at a substantial loss to the Canadian taxpayer. The minister should also tell us whether the government intends to make available to our NATO allies, if it has not already done so, the fullest possible evaluation of the results obtained and studies carried out to date in order that the research work which has been done is not totally lost.
Again, I say it is to be regretted that the minister, probably in line with the decision to freeze the defence budget, should have found it necessary to cancel the Bras d'Or program, particularly at this critical time near the end of the development and research stage.


Mr. Doug Rowland (Selkirk):: Mr. Speaker, it is hard for me to deal on its merits with the minister's decision to place the developmental hydrofoil Bras d'Or in storage.
To my mind the decision is one more addition to the increasingly long list of unsupportable blunders in equipment purchases and development made by successive ministers of defence both Liberal and Conservative, blunders which have arisen out of a failure to define clearly the role of our defence forces. In this situation difficulty is bound to arise when it comes to supplying those forces with appropriate equipment. It is this same omission which has virtually destroyed the morale of all but a few units of the Armed Forces. In another sphere it has made officer recruitment and the retention of officers in the service a problem of crisis proportions. It is the lack of a clear understanding of the role of the forces which has made it difficult for the government to arrive at sane decisions concerning equipment.
The money wasted by the Department of National Defence over the past dozen years as a result of bad decisions relating to equipment would, if totalled, probably eliminate this year's projected budgetary deficit. There was the Arrow, the Bobcat, DATAR, the CF-5 and, now, the hydrofoil, the latter representing $52 million down the drain or at least shelved, and a further million dollars as the cost of shelving it. No doubt the replacement of maritime patrol aircraft has a higher priority than the Bras d'Or project but I doubt very much whether this applies to the gas turbine destroyers presently being completed, given the current role of the navy which is largely the protection and surveillance of our coasts. These destroyers were constructed at phenomenal cost at a time when the real need was for coastal craft and heavy Arctic icebreakers. Here is the hidden gaffe in the minister's statement, and this is why it is difficult to discuss the statement on its merits.
I think this decision points out, first, the need for the government to define a defence posture and to stick to it, and within the framework of that policy to seek co-operation with other governments and nations in the matter of
[Mr. Forrestall.J
weapons development, as many of the European nations are now doing with some success.
Second, the decision underlines-and this is of even higher national priority-the need for the development of a national science policy within which defence research can be accommodated. We must do the things that we are good at and adopt an integrated approach to our research projects so that there will be a spill-over from one area to another, thus reducing costs and improving the saleability of the items that we decide to produce. I am arguing for specialization, and this can only take place effectively within the context of a national science policy. The hydrofoil, despite its potential, has by virtue of this decision become simply another costly blunder in the purchasing policy of the Department of National Defence, and I think it is a shame.


Mr. Romuald Rodrigue (Beauce):: Mr. Speaker, I would be inclined to congratulate the Minister of National Defence (Mr. Macdonald) who has just announced that the Bras d'Or project has been dropped. Needless to say, the experience was unfortunate for Canada, because we sank $52.2 million in the project without getting really good results.
That experiment was made after others by the Armed Forces; in fact, there was the development of the Bobcat tank by the Army, and the Arrow aircraft by the Air force.
The minister says that it will cost approximately $1 million to lay-up the Bras d'Or for the next five years. Now I wonder what the cost would have been if it had been decided to go on with further testing. We know that the initial cost of the Bras d'Or project had been estimated at $10 million and that it has now reached $52 million.
I hope that the Department of National Defence will now devote more time to the study of programs advocated by the Canadian Armed Forces, in order that we may not have to deplore further large investments for such costly items as the Bras d'Or hydrofoil.



ORAL QUESTION PERIOD


Hon. Robert L. Stanfield (Leader of the Opposition):: Mr. Speaker, I should like to ask the right hon. Prime Minister about consultation with the provinces particularly in light of the press release issued by the Minister of Manpower on October 27 in which he said that "we have had very useful consultations with the provinces concerning the implementation of the local initiatives program". Would the Prime Minister inform the House whether, in the course of these discussions with the provinces about the local initiatives program, the province of Quebec put forward its reservations about sharing in the cost of and
November 2, 1971

administering community projects, and whether any change is intended in the projects as a result?


Hon. Otto E. Lang (Minister of Manpower and Immigration):: Mr. Speaker, the provinces generally, and I think Quebec in particular, seem to be quite agreeable to the procedures we have adopted with regard to the municipal side of the local initiative program and to the consultations that will occur prior to any approval of applications under that program.
In the case of the community organization side of the local initiatives program, I do not know whether the point was made at the early consultation stage but the point was made by the Minister of Finance from Quebec yesterday in respect of municipal programs that they would not be involved in the administration of them and they would not want it to be taken that they were in any way undertaking any commitment to finance or complete projects which began under that program. Of course, this has been our assumption and understanding from the beginning.


Robert Lorne Stanfield: Mr. Speaker, did the Minister of Finance of the province of Quebec not make the point yesterday that the province would not involve itself in any community projects other than those which had already been approved by the province?


Mr. Speaker:: Order, please. Of course, the question as asked is hardly in order. The Leader of the Opposition asked whether the province did not make such and such a position clear. I would think a question asked in those terms would not be in order. I am sure the Leader of the Opposition would want to rephrase it.


Robert Lorne Stanfield: Mr. Speaker, does the Minister of Manpower accept these reservations expressed by the Quebec Minister of Finance yesterday as being such that would enable the province of Quebec to take full advantage of his proposals?


Otto Emil Lang: Yes, Mr. Speaker, although some of the press reports would not seem to carry that import. As I understand it, there seems to be full agreement on co-operation regarding the initiatives side of the program. With regard to the other side, it simply means we will be doing in regard to that province as in regard to the others. Administration by the regional offices and Canada Manpower centres will lead to the approval of projects and will not involve the province in any new or additional types of expenditures.



FEDERAL-PROVINCIAL RELATIONS ARRANGEMENTS FOR GREATER CONSULTATION IN LIGHT OF REPORTED CRITICISM BY ONTARIO TREASURER

Robert Lorne Stanfield: Mr. Speaker, I have a question for the Prime Minister relating to the same matter of consultation with the provinces. It arises out of reported comments of an extremely critical nature by the treasurer of the province of Ontario about
Inquiries of the Ministry
the lack of consultation in dealing with the latest United States economic measures. In view of this criticism I should like to ask whether any arrangements are being made for more adequate and more continuous consultation with the provinces in relation to meeting United States economic measures, and any adjustments in our policies that might be required in the future?


Right Hon. P. E. Trudeau (Prime Minister):: Mr. Speaker, it might be worth while to remind the House that prior to 1968 these meetings between the finance ministers of the federal and provincial governments were held about once a year. Since 1968 we have initiated the practice of holding them about quarterly, or about four times as often as was the case before. We have repeated that if there were any need for special meetings or representations we would have them. The provincial ministers come to Ottawa and various ministers, including the Minister of Finance and myself, do meet them, but there is a limit to the possibility of being able to conduct the financial affairs of the country on the basis of daily consultation between 11 governments.



LABOUR CONDITIONS


Mr. T. C. Douglas (Nanaimo-Cowichan-The Islands):: Mr. Speaker, I have a question for the right hon. Prime Minister arising from the meetings which the Minister of Finance held with the provincial treasurers, at which meetings the representatives of the government of Manitoba revealed their unemployment projections for 1972 and the first two quarters of 1973, ranging from 5 per cent to 6 per cent seasonally adjusted. Were the federal representatives at this conference able to submit any projections as to their estimates of unemployment for that period, and did they differ materially from the projections submitted by Manitoba?


Pierre Elliott Trudeau: Mr. Speaker, I am not aware of projections that might have been submitted by the federal government. Perhaps the question might be asked of our Minister of Finance when he is in the House. As regards Manitoba, all I would say is that if the government of Manitoba sees this type of unemployment I wish it would do something about it.


Thomas Clement (Tommy) Douglas: Mr. Speaker, the Prime Minister might have told us what the Federal government is going to do. That would have been helpful. May I ask the Prime Minister whether the government of Canada is now in a position to give the House and the country its projections of the estimate of unemployment over the next year or year and a half? Surely if the government of Manitoba can provide this sort of data the federal government must have some estimates.


Mr. Speaker:: Has the hon. member for Bellechasse a supplementary?


Mr. Adrien Lambert (Bellechasse):: No, Mr. Speaker.
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November 2, 1971
Inquiries of the Ministry


Mr. Speaker:: The Chair therefore recognizes the hon. member for Prince Edward-Hastings.



INCOME TAX


Hon. George Hees (Prince Edward-Hastings):: Mr. Speaker, I have a question for the Prime Minister. As three provincial treasurers, those of Ontario, Quebec and Alberta, have urged the government, because of the great complexity and length of Bill C-259, not to try to meet its present timetable of getting the bill through by the end of the year in order to allow time for lengthy examination and submissions from the public as well as examination in this House, is it the intention of the government to introduce a separate bill containing only the proposed tax exemptions and allowances proposed in Bill C-259 which would be assured of quick passage and leave the remainder of Bill C-259 for the detailed and more lengthy examination it deserves?


Pierre Elliott Trudeau: This may be the hon. member's suggestion. I do not understand it to be that of the provinces.


George Harris Hees: It is.


Pierre Elliott Trudeau: If it is, Mr. Speaker, I am sorry that they are taking this easy line which the hon. member is of just doing the popular things now and waiting to do the unpopular things after an election. This is not-


Mr. Speaker:: Order, please. The Chair will recognize the hon. member for a supplementary and then we will go on to the next questioner and eventually return to this subject which appears to be a very popular one this afternoon.


George Harris Hees: As the Prime Minister's answer indicates that the government obviously does not intend to do this, I should like to ask a supplementary. Is this not an example of the usual bullheaded Liberal arrogance and stupidity?


Mr. Speaker:: Order, please.


George Harris Hees: Lift your head and let us have an answer.


Mr. Speaker:: Order, please. Five members are seeking supplementaries. We will return, as I said, to this subject later but we have to move on for the moment.


EXTERNAL AFFAIRS
Mr. Mark Rose (Fraser Valley West):: Mr. Speaker, my question is directed to the Minister of the Environment. In view of the concern expressed by Canadians about the
{Mr. Lambert (Bellechasse).]
nuclear test at Amchitka and in view of the fact that a United States court yesterday ordered the public release of a number of hitherto secret government reports on the subject except for two vital ones, those of the Environmental Protection Agency and the Council for Environmental Quality which I understand are still secret, is the minister in possession of these reports or has his department made any attempt to secure them?


Hon. lack Davis (Minister oi the Environment):: We have requested access to them, Mr. Speaker.


Mark Willson Rose: Mr. Speaker, my supplementary is directed to the Minister of National Defence. I should like to ask the hon. gentleman the same question I asked him last week about emergency measures for the west coast in the event of a disaster. The Secretary of State for External Affairs said at that time our best protection was to pray. Has there been any reconsideration of this prayerful posture and, if so, what additional precautionary safety measures have been planned?


Mr. Speaker:: Order, please. That question of course is not in order. The hon. member was recognized for the purpose of asking a question which should be in order. The hon. member might like to rephrase the question and then the Chair will recognize the hon. member for Bellechasse.


Mark Willson Rose: Has there been any reconsideration of the safety precautions or emergency measures and, specifically, what precautionary measures have been planned?


Donald Stovel Macdonald: Mr. Speaker, I thank the hon. member for the question. The national emergency measures co-ordinator has been in touch with the co-ordinator of civil defence for the province of British Columbia and he has been informed that as a result of the high degree of interest in that province measures, including the following, have been taken. In addition to the normal complement of radiological measuring instruments, further equipment has been sent into the Prince Rupert civil defence zone. His civil defence co-ordinators have been advised to double-check their monitoring procedures. Local co-ordinators have been advised to give supplementary instructions to monitors. British Columbia civil defence has been providing the media with information on request. Additional information is being provided by the British Columbia organization about the nature of precautionary measures to be taken in the event of tidal waves. As a result of federal-provincial civil emergency arrangements-


Mr. Speaker:: Order, please. I am sure the minister realizes that this kind of information should be given on motions. I appreciate that the hon. member asked a question and the minister, having heard the question, is entitled to respond briefly or to seek leave to return to motions. I would think that the minister would agree with this.


Mark Willson Rose: I have a further supplementary question.


Mr. Speaker:: The Chair will return to the hon. member in a moment. I committed myself a moment ago to give an
November 2, 1971

opportunity to the hon. member for Bellechasse to ask a question because we are still on the first round of questions. Immediately thereafter we will return to the hon. member for Fraser Valley West.


Mark Willson Rose: I should like to direct my question to the Prime Minister. On previous occasions the right hon. gentleman has declined to make personal representations to President Nixon, but since voices are being raised with increasing insistence that the Prime Minister become more personally involved, I wonder whether the Prime Minister is yet persuaded that a direct appeal by him even at this eleventh hour might be effective?


Pierre Elliott Trudeau: I am still of the opinion that the nearly unanimous resolution of the House of Commons speaks with even greater authority than I do.



AGRICULTURE


Joseph Adrien Henri Lambert: Mr. Speaker, I have a question for the Minister of Agriculture.
Considering the conflicting reports published in the newspapers with regard to the storage of powdered milk, would the minister tell the House whether the total production is taken up by national and international markets or if the Canadian Dairy Commission must store part of it?


Hon. H. A. Olson (Minister oi Agriculture):: Mr. Speaker, I am not quite sure to which report the hon. member is referring.


Joseph Adrien Henri Lambert: Mr. Speaker, I should like to put a supplementary.
I did not refer to any reports. I am merely putting a question to the minister. Newspapers have published contradictory figures on the storage of powdered milk and my question is as follows: Can the minister tell this House whether the total production of powdered milk for the current dairy season is being absorbed by the domestic and international markets, or whether the Canadian Dairy Commission must store some of it?


Horace Andrew (Bud) Olson: We have been supplying the domestic market with skim milk powder and we have also sold rather large quantities in the export market. At the present time we do not have any great amount in the inventory although there is still some there, but I can advise the hon. member that all of it has been committed for sale during the balance of this dairy year.
Inquiries of the Ministry


Joseph Adrien Henri Lambert: Mr. Speaker, I should like to put another supplementary.
For the information of industrial milk producers, would the minister tell this House how surpluses stored during 1971 compare with those of 1970?


Horace Andrew (Bud) Olson: There is a decrease in the amount in storage.



CANADIAN NATIONAL RAILWAYS


[Stage Direction]
Right Hon. ]. G. Diefenbaker (Prince Albert): I wish to direct my question to the Minister of Transport. It has to do with a situation that has developed in the province of Saskatchewan and I think generally in the western provinces on Canadian National Railways lines. There is a tie-up of livestock cars with the result that shipments of livestock to eastern Canada are being curtailed drastically and if this situation continues it can only result in lower market prices and heavy losses to the western producer. This information comes to me from George Beilhartz of Northern Livestock Limited in Prince Albert. Will the minister investigate this matter and do what he can to ensure that CNR shall provide these cars? Otherwise the farmers who have gone into mixed farming and into cattle will find themselves in an impossible situation.
Hon. Donald C. Jamieson (Minister of Transport):: Yes, Mr. Speaker. The Minister of Agriculture took notice of this question for me. I have already initiated some inquiries and I hope to have an answer for the hon. member tomorrow.



LABOUR CONDITIONS


Mr. Lincoln M. Alexander (Hamilton West):: I should like to direct a question to the Prime Minister regarding the 470 persons to be laid off by Inco at its Port Colborne refinery. Has the government had talks or does it intend to have talks with Inco in order to prevent this from happening?


Pierre Elliott Trudeau: I would have to ask the question of either the Minister of Labour or some other minister. I have not had talks with the company.



NOVA SCOTIA-INQUIRY AS TO RELEASE OF NEW FIGURES ON EMPLOYMENT AND UNEMPLOYMENT BY STATISTICS CANADA

Mr. Robert C. Coates (Cumberland-Colchester North):: My question is directed to the Minister of Industry, Trade

November 2, 1971
Inquiries of the Ministry
and Commerce. Have any new statistics been released by Statistics Canada since those produced by Statistics Canada in the middle of October with regard to employment and unemployment in Nova Scotia?


Hon. Iean-Luc Pepin (Minister of Industry. Trade and Commerce):: Not to my knowledge, but I will inquire further.


Robert Carman Coates: Has any information been provided to the CBC with regard to employment and unemployment in Nova Scotia that has not been made available to the House and to the country?


Jean-Luc Pepin: I am not sure, Mr. Speaker. My hon. friend is probably referring to the detailed analysis of the first set of statistics we obtain every month regarding unemployment, and this is a public document. If that is what he is referring to, everybody has access to it.



NOVA SCOTIA-BASIS OF CBC TELEVISION NEWS REPORT

Robert Carman Coates: should like to direct a supplementary question to the Parliamentary Secretary to the Secretary of State. Will he have his minister make an examination of the CBC national news of last evening so that a determination can be made whether or not there is any basis in fact for the news report on employment in the province of Nova Scotia or is this no more than a figment of the reporter's imagination?


Mr. Speaker:: The hon. member for Annapolis Valley.


Robert Carman Coates: I should like to hear from the parliamentary secretary and, if not, there must be a parliamentary secretary to take the question as notice.


Mr. Barnett J. Danson (Parliamentary Secretary to Prime Minister):: The parliamentary secretary is not present today but I will transmit to him the hon. member's representation.



AGRICULTURE


Mr. J. P. Nowlan (Annapolis Valley):: My question is directed to the Minister of Agriculture. In view of the desperate plight of many if not the majority of farmers in eastern Canada, particularly Atlantic Canada, at the present time, is the minister's department considering or attempting to assess the possibility of an income stabilization program for Atlantic Canada farmers somewhat akin to the Lift program for western farmers?


Horace Andrew (Bud) Olson: Not exactly in the same terms but we have had a number of discussions with representatives not only of provincial governments but also of the industry on some commodities such as potatoes, eggs and others so that we could be helpful in the difficult situation they have now. I might say that we are making some progress although we have not reached

a consensus on what would be the most useful action to take to improve markets immediately for some of these commodities.


John Patrick (Pat) Nowlan: I thank the minister for his answer as far as it goes. While the government is perhaps considering an over-all program and particular programs with regard to particular commodities, is the minister prepared to respond favourably to the specific request of the Nova Scotia Hog Producers Association in their desperate plight and attempt to bring about a quarterly payment on hogs rather than at the end of the year because if they have to wait until the end of January they will all be bankrupt?


Horace Andrew (Bud) Olson: Mr. Speaker, I do not agree with the last comment in the preamble to the question, but I think the hog producers in Nova Scotia are aware that a payment will be made if the price falls below the support level. Those figures will not be available to us until the end of the calendar year.


Mr. Speaker:: Order, please. The Chair will recognize the hon. member for Huron on a supplementary question, but I think this is an appropriate time to remind hon. members that we have gone through more than half the question period and there are some 30 members seeking the floor. Some of them should resign themselves immediately to the certainty that they will not be called today.



EGGS-SUGGESTED ACTION TO CONTROL IMPORTS FROM UNITED STATES

['Mr. Speaker, I am not aware of the case to which the hon. member is referring. I will investigate it and discuss with the Secretary of State for External Affairs whether he can provide an answer.']
Mr. R. E. McKinley (Huron):: Mr. Speaker, I wish to direct a supplementary question to the Minister of Agriculture. In view of the fact the minister announced a fowl buying program in an endeavour to assist in raising the price received by egg producers in Ontario, and as it has been brought to my attention that United States eggs are again coming into Ontario, thus negating that program, is the minister going to do anything to prevent U.S. eggs taking over the market in Canada?


Horace Andrew (Bud) Olson: Mr. Speaker, we could take some action along those lines but we should recall that during 1970 large quantities of Canadian eggs were shipped to the United States.



Mr. Andrew Brewin (Greenwood):: Mr. Speaker, my question is addressed to the Prime Minister. In light of the sentence of five years imprisonment imposed on the Dean of Johannesburg under the Terrorism Act for what in effect was opposition to apartheid, and in light of Canada's and the United Nations' frequent expression of abhorrence of that system, will the government express to the government of South Africa its deep concern and hope for clemency in this case?
November 2, 1971


Pierre Elliott Trudeau: Mr. Speaker, I am not aware of the case to which the hon. member is referring. I will investigate it and discuss with the Secretary of State for External Affairs whether he can provide an answer.



POLLUTION


Mr. David MacDonald (Egmont):: Mr. Speaker, my question is for the Minister of Transport. It has been some time since the minister has given us any word with regard to the likely raising or pumping out of the Irving Whale which still poses a very grave pollution threat to the north coast of Prince Edward Island. Has there been any decision yet with regard to a contractor to deal with the problem, and can he give any indication of when the problem will likely be resolved?


Donald Campbell Jamieson: No,
Mr. Speaker, there has been no action. The tender call is out, as I advised the House and the hon. member some time ago. So far as I am aware the various parties are preparing their submissions, but they have not been returned to date. As soon as they are I will let the hon. member know, and he can look at them if he wishes.


David Samuel Horne MacDonald: In view of the fact it is highly unlikely because of the lateness of the season that any action will be taken effectively to remove this threat before the winter and spring, can the minister advise whether any officials of his department are taking interim measures to make sure that over the next six to eight months substantial deterioration of the vessel will not occur?


Donald Campbell Jamieson: Yes, Mr. Speaker, an investigation has been undertaken. I am not sure of the technical method but I believe it was by use of a small submarine and a diver. They have looked over the hull and are satisfied there has been no leakage. There was some seepage from the hull at one point, not very much, but this was determined to have been oil from the engine of a very light variety. The bulk of the cargo is all right.



NATIONAL PARKS


Mr. Craig Stewart (Marquette):: Mr. Speaker, I wish to direct a question to the Minister of Indian Affairs and Northern Development. Before the summer recess the minister stated in the House that public hearings would be held in Manitoba in late 1971 or early 1972 concerning the government's master plan for Riding Mountain National Park. Can the minister now tell the House the definite dates of the public hearings in Manitoba, as many groups want to present briefs?
Inquiries of the Ministry


Hon. Jean Chretien (Minister ol Indian Aiiairs and Northern Development):: Mr. Speaker, as soon as the date is set, it will be made public. Interested groups will be informed of the date and place of the public hearings but I cannot give it at the present time.


Hon. W. G. Dinsdale (Brandon-Souris):: Mr. Speaker, can the minister give us his assurance that when the hearings take place they will be held in western Manitoba, preferably in the city of Brandon?


Mr. Speaker:: Order, please. I suggest to the hon. member that this is a representation rather than a question.



MANPOWER


Mr. Edward Broadbent (Oshawa-Whitby):: Mr. Speaker, I wish to direct a question to the Minister of Manpower and Immigration. Although the government has refused to table its forecasts of unemployment for the coming months, would the minister at least consider providing to the House, through a statement or in some other form, his information as to the number of jobs the recently announced winter works programs are expected to create during the winter months?


Otto Emil Lang: Mr. Speaker, we have also indicated we would tend to avoid doing that partly because of the number of indirect jobs as well as direct jobs that may be involved. Under the local initiatives program our target is to create the greatest possible number of jobs from the project applications that may be submitted.



ON THE JOB TRAINING-REMOVAL OF EXCLUSION OF MUNICIPALITIES FROM GRANTS

John Edward Broadbent: While not accepting that answer, Mr. Speaker, I would like to try another question. Following the requests of a number of municipalities for changes in the on the job training aspects of the program, which currently exclude municipalities from the right to receive grants for on the job training, and following suggestions that they could usefully retrain some people, would the minister seriously consider changing the regulations that exclude municipalities?


Otto Emil Lang: Mr. Speaker, we are having consultations specifically to test what alterations or improvements might be made in the program. In particular, there might be a case for including in it those activities of municipalities that are carried on in some regions by municipalities themselves and which are carried on by private contractors in other regions.

November 2, 1971
Inquiries of the Ministry



LOCAL INITIATIVES PROGRAM-SUGGESTED REMOVAL OF 30 MAN-MONTH REQUIREMENT-NUMBER OF PROJECTS APPROVED

Mr. John Lundrigan (Gander-Twillingate):: Mr. Speaker, I want to ask the minister a supplementary question. Would he reconsider the restrictive aspects of the local initiatives program, such as the 30 man-month requirement, so that small municipalities can take advantage of that program?


Otto Emil Lang: Mr. Speaker, the minimum requirement of 30 man-months is designed to limit to some extent the number of applications we will be considering. Since we expect under this popular program, more applications than can be approved in any case, we are encouraging municipalities where possible to combine parts of programs into one larger program to meet this minimum limit.


John Howard Lundrigan: Would the minister tell the House how many projects have been approved to date under the LIP program?


Otto Emil Lang: Mr. Speaker, the applications are beginning to come in. I do not imagine that approval has been made to this point, but it should not be long before we begin to have approvals.



AIR TRANSPORT


Mr. Gerard Laprise (Abitibi):: Mr. Speaker, I have a question for the hon. Minister of Transport.
In view of the continuous increase in the passenger traffic between Montreal and certain Abitibi centres, as Val-d'Or and Rouyn, especially due to the James Bay development, could the minister tell us if action will be taken to improve the air service between Montreal and Rouyn-Val-d'Or?


Donald Campbell Jamieson: Mr. Speaker, I would have to take notice of that question and find out the details for the hon. member.



AIRPORTS


Mr. Colin D. Gibson (Hamilton-Wentworth):: Mr. Speaker, I wish to direct a question to the Minister of Transport. Has there been any progress in the selection of the second major airport site in southern Ontario, and has the minister heard from the government of Ontario?


Donald Campbell Jamieson: No,
Mr. Speaker. On this particular project I have not heard from the Minister of Transport of the government of

Ontario, but I am sure I will be hearing from him within a matter of the next few days.



BRIDGES


Robert Lorne Stanfield: Mr. Speaker, I wish to direct a question to the Minister of Transport. Some time ago the minister indicated that he was reconsidering a specific plan with regard to access to the Vancouver International Airport. I would like to ask the minister whether he is now approaching the end of his revision and, if so, whether he has consulted, in the course of this revision, the local organizations that have expressed great interest in this project?


Donald Campbell Jamieson: The
answer is yes on both counts, Mr. Speaker. We believe we can resolve the matter of the type of access to be provided, but what we cannot do at the moment is assure that there will be ease of access for air travellers, which was the reason we got into the matter in the first instance. We will be asking the local groups concerned and the municipalities if they can find some way to have a bridge built which will ensure speedy access to the airport and one which can be operated on a toll-free basis or some similar system.



MANPOWER


Hon. Martial Asselin (Charlevoix):: Mr. Speaker, I would like to give the Minister of Manpower and Immigration the opportunity of clarifying a question directed to him by the leader of the opposition.
Since newspapers report that the Quebec minister of finance has expressed some reservation on behalf of his government in connection with the administration of programs initiated by the federal government and that the minister replied that the difficulties had been wiped out, can he indicate whether the federal government has found a new formula to meet the requirements of Quebec concerning the administration of programs which the federal government is promoting to fight unemployment this coming winter?


Otto Emil Lang: Mr. Speaker, I do not know that I can add anything to the answer I gave earlier in regard to this matter. So far as I know the procedures in regard to the program are satisfactory.
November 2, 1971


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


Some hon. Members:: Oh, oh!


Martial Asselin: Mr. Speaker, I wish to ask a supplementary question.
Can the minister tell if the Quebec finance minister has approved the formula put forward by the federal government regarding programs which the latter intends to implement in order to fight unemployment during winter or if he has put restrictions on the implementation of these programs?


Otto Emil Lang: Mr. Speaker, the Minister of Finance has indicated that they welcome the initiatives which we have taken and, administratively, I think we are working very well together.


Mr. Speaker:: The hon. member for Humber-St.
George's-St. Barbe. The hon. member has caught both the Speaker's eye and the Speaker's ear.



LOCAL INITIATIVES PROGRAM-AVAILABILITY OF INFORMATION TO ORGANIZATIONS IN REMOTE AREAS- PROVISION OF QUOTAS

Jack Marshall: That was my parade square voice of 25 years ago, Mr. Speaker. I should like to direct a supplementary question to the Minister of Manpower and Immigration. It has to do with the local initiatives program as it affects community organizations and local groups. I am referring to areas that are far removed from manpower centres. Could the minister advise us what steps are being taken to give those organizations and groups information? Also, is he considering quotas for those people in remote areas where unemployment is greatest?


Otto Emil Lang: Mr. Speaker, as far as the municipalities are concerned, it is expected that the provincial co-ordinator in each case may supply application forms and information to the municipalities within the province. Manpower centres are fairly widespread and, of course, some mobile services bring these services even closer to the municipalities and community groups interested. As far as the question of distribution is concerned, we have, of course, the objective of distributing the available money among the regions in relation to unemployment. This principle will tend to be-


Mr. Speaker:: Order, please. We are running short of time. Both answers and questions should be brief. Is the hon. member rising on a further supplementary?


Jack Marshall: Mr. Speaker, I think the minister missed the purport of my question. I am not referring to municipalities. I am referring to that portion of the program which concerns local and private groups and how they can apply to manpower centres-


An hon. Member:: Where there are no municipalities.
Inquiries of the Ministry


Jack Marshall: -where there are no municipalities. They are far removed from those centres and not getting information.


Otto Emil Lang: Mr. Speaker, the information is readily available. I am sure if they simply write to or phone the manpower centre they will get it.


Mr. Speaker:: Order, please. The hon. member for Comox-Alberni.



INDIAN AFFAIRS


Mr. Thomas S. Barnett (Comox-Alberni):: Mr. Speaker, I have a question for the President of the Treasury Board on behalf of the weak and impoverished Minister of Indian Affairs and Northern Development who told us on Friday that it was physically impossible to build six schools. Would the President of the Treasury Board play the role of the good doctor and inject a little financial muscle into the Minister of Indian Affairs and Northern Development so that he can fulfil his constitutional and treaty responsibilities to the Indians of the Saddle Lake-Athabasca region?



INQUIRY OF THE MINISTRY

Mr. Robert Muir (Cape Breton-The Sydneys):: Mr. Speaker, my question is for the Prime Minister. In light of the outburst of the hon. member for Lanark-Renfrew-Carle-ton on television and in the House yesterday regarding the right hon. gentleman's recent announcement concerning the Glace Bay heavy water plant, would the Prime Minister consider appointing him as parliamentary secretary to the cabinet minister from Nova Scotia who would educate him on the subject?


Mr. Speaker:: Order, please. I assume that this is a representation rather than a question.


Robert Muir: Mr. Speaker, could I rephrase my question?


Mr. Speaker:: Perhaps the hon. member has another question to ask since the first one was not acceptable procedurally.


Robert Muir: Mr. Speaker, may I ask the right hon. gentleman if he will take that step, thus preventing any more of these demented diatribes from a disappointed deacon?


Mark Willson Rose: That was very good.



POLLUTION


Mr. Randolph Harding (Kootenay West):: Mr. Speaker, I have a question for the Minister of the Environment. Is

November 2, 1971
Inquiries of the Ministry
the minister aware of the serious pollution problem being created in Lake Superior on the United States side by the dumping of 67,000 tons of taconite waste rock daily into the lake by the Reserve Mining Company?


John (Jack) Davis: Yes, Mr. Speaker.


Randolph Harding: Have representations been made to the United States authorities or to the International Joint Commission by the minister or his department regarding this problem and, if so, with what result?


John (Jack) Davis: Mr. Speaker, our staffs have been in close consultation both with the Council on Environmental Quality and the Environmental Protection Agency of the United States, and discussions have been going on with respect to industrial practices on boths sides of the border.



MANPOWER


Mr. H. W. Danforth (Kent-Essex):: Mr. Speaker, I wish to direct a question to the Minister of Manpower and Immigration. My question has to do with the tragedy that is now becoming apparent. In view of the loss of thousands of tons of fruit and vegetables because of the lack of available labour during the harvest season despite high unemployment, will the minister now look into this problem to see if adequate plans cannot be made for the coming season in order to circumvent such a tragedy?


Otto Emil Lang: Mr. Speaker, we endeavour in every way possible to meet manpower needs with regard to harvesting. Perhaps the hon. member might remind his colleagues of this situation should they criticize the Caribbean workers program in another summer.


Harold Warren Danforth: A supplementary question, Mr. Speaker.


Mr. Speaker:: Order, please. We are running short of time.



LABOUR CONDITIONS


Mr. Donald Maclnnis (Cape Breton-East Richmond):: Mr. Speaker, I have a question for the Prime Minister arising out of the false newscast last night which was supported by the Premier of Nova Scotia. I ask the Prime Minister to ask the Minister of Regional Economic Expansion to make the Premier of Nova Scotia aware of the deplorable situation of the mining industry in Cape Breton.


Mr. Speaker:: Order, please. That is a representation rather than a question. I am sure the hon. member appreciates that.


Donald MacInnis: Mr. Speaker, I asked the Prime Minister whether he would ask the Minister of Regional Economic Expansion to make the Premier of Nova Scotia aware of something. I wish to ask a supplementary also.


Mr. Speaker:: Order, please. Perhaps the hon. member might ask another question. I have ruled that his previous question was not a question but a representation. If the hon. member wants to ask a question, of course he will be recognized.


Donald MacInnis: Mr. Speaker, may I direct a further question to the Prime Minister. Since he indicated recently in Nova Scotia that he does not believe in the use of the courts to bring about settlements, would he consider the situation in which Cape Breton miners face the prospect of having to go to court in order to recover unemployment insurance benefits which were wrongfully taken away-I use the word "wrongfully" because that was the word used by the present chairman of Devco-and make a statement to the effect that miners need not spend money to get back from the government what was unlawfully taken from them?


Pierre Elliott Trudeau: Mr. Speaker, I will take note of the representation of the hon. member.



CRIMINAL CODE


Mrs. Grace Maclnnis (Vancouver-Kingsway):: Mr. Speaker, my question is for the Prime Minister. In view of his encouraging remarks at Darmouth last Friday, is he now in a position to tell us the approximate date of what he referred to as the "upcoming debate on abortion"?


Pierre Elliott Trudeau: Yes, Mr. Speaker, if the opposition parties can tell us when the present debate before the House will terminate.


Some hon. Members:: Hear, hear!


Mr. Speaker:: Order, please. The hon. member for Vancouver-Kingsway has a supplementary question. The Chair will recognize her and then the hon. member for Abitibi.


Donald MacInnis: Mr. Speaker, may I ask the Prime Minister whether he would be willing to put before the House legislation which would allow Parliament to decide whether or not all references to abortion should be taken out of the Criminal Code?


Pierre Elliott Trudeau: No, Mr. Speaker; that is not what we said we would do in the Speech from the Throne to which the hon. member is constantly referring.


Mr. Speaker:: Order. I think the hon. member for Abitibi wishes to ask a supplementary question.

I recognize the hon. member for Abitibi for the purpose of a supplementary to a previous question. Otherwise, we have reached the end of the question period.
November 2, 1971



MANPOWER


Gérard Laprise: Mr. Speaker, I would like to ask the Minister of Manpower and Immigration a question about the local initiatives program recently announced.
We know that in some ridings such as Abitibi several parishes are not organized into municipalities. Could the minister say how those parishes will be able to apply for grants under the program dealt with in the recent announcement?


Mr. Speaker:: Order. It seems to me the question has just been asked. The hon. member might not be satisfied with the reply. In any event, the question has been asked and the minister answered it.

Orders of the day.



GOVERNMENT ORDERS


[Stage Direction]
The House resumed, from Monday, November 1, 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. Laniel in the chair.
The Deputy Chairman:: When the committee rose last evening, section 117, with an amendment proposed by the hon. member for Winnipeg North Centre, was before the committee. Sections 117, 118, 119, 120, 146, 147, and 204 had been grouped together for the purpose of debate.
On Clause 1-Section 117-1972 rates.


Mr. Lambert (Edmonton West):: Mr. Chairman, arising out of the amendment proposed last night by the hon. member for Winnipeg North Centre-


Mr. Saltsman:: I rise on a point of order. I might bring to your attention, Mr. Chairman, that I called it ten o'clock last night. Might I continue with the remarks I commenced at that time?


Gérald Laniel: I am sure the hon. member for Edmonton West will not have any objection.


Max Saltsman: Thank you, Mr. Chairman. My apologies to the hon. member for Edmonton West whose remarks I always listen to with great interest.


Some hon. Members:: Explain.


Max Saltsman: Last night I spoke in support of the amendment moved by my colleague, the hon. member for Winnipeg North Centre. I stated at that time that it was
Income Tax Act
one of the most brilliant amendments that had ever been put forth, certainly one of the most sensible ones that had come before this House. I am very proud to support it.
There is quite a history to the attempts of the hon. member for Winnipeg North Centre to get the idea of a tax credit accepted. The wording of his amendments was such that the Chairman of the committee did not find them acceptable. The hon. member very carefully studied the instructions from the Chair and managed to satisfy the Chair with this amendment. In an attempt to get justice for those at the lower income levels, on another occasion the hon. member for Winnipeg North Centre attempted to increase the exemption for single people from $1,500 to $2,000 and for married people from $2,850 to $4,000. I think that at this time these are really the only acceptable levels. In fact, they are minimum acceptable levels. That particular attempt did not meet with success. The government did not view that amendment with favour. Throughout all that time, the hon. member never gave up the idea of the tax credit system. In light of this particular history and the very sensible amendment before us, the government should soften its opposition somewhat, if not because of the obvious merits of the proposal then at least because of the valiant attempts of the hon. member for Winnipeg North Centre to bring this matter before the House.
There are a number of very great advantages to the amendment before us. The amendment seeks to provide what amounts to a tax credit of $500 for every single taxpayer. It will remove approximately $75 in taxes from every person who is subject to tax. This is a good amendment in the sense that it is universal. Everyone will receive some benefit from it. The high taxpayer as well as the low taxpayer will receive this particular form of credit. Therefore, it should be widely accepted.
Unlike our present system of exemptions under which the benefits tend to escalate and improve the more income a person has, the major benefits from this particular proposal will accrue to the people at the lower income level. On a percentage basis, they will receive a higher benefit. That is really where the benefit should be given. It means that those at the lower income level who are married will receive virtually the same treatment as they would receive if the married exemption were $4,000 under an exemption system. Those at the higher income levels would still receive what amounts to a $75 reduction in their taxes. However, unlike the present system, they would not receive a greater benefit with a higher income. The advantage of this tax credit system is that it can be adjusted at any time to the needs of society with far greater precision than the system of exemptions which we now have.
To use a recent example, the government wants to encourage employment in Canada. The government has proposed a tax cut of 3 per cent on taxable income, part of which is to take effect this year. It will take full effect next year. Let us look at this proposal for a 3 per cent tax cut. What sort of benefit would a person who had to pay $50 in income taxes receive? He would receive a $1.50 tax reduction at the lowest income level. Surely, that is the level at which the greatest stimulation is required; that is the level at which people have a need to purchase more commodities. A taxpayer with a tax liability of $3,000 will receive

November 2, 1971
Income Tax Act
$90 under the 3 per cent tax cut. How can something like that be accepted as just? Why should a taxpayer at that level receive a greater tax relief? It merely results in an increase in his ability to save rather than his ability to consume. We can see how illogical this system is from an economic point of view. Rather than a tax cut, it would be better to give a tax credit. In that way those at the lower end of the income scale would receive a substantial benefit. Those at the upper end of the income scale, while they would receive some benefit, would not have their benefits escalated because they have a higher tax liability. This applies to the entire tax system.
We have been very critical of the system of exemptions as compared to tax credits because of this particular effect. The hon. member for Winnipeg North Centre pointed out the effect of the $650 exemption for old age pensioners over the age of 65. He pointed out that those at the lowest level of income will receive a $650 benefit. Those at the higher end of the income scale will receive almost 50 per cent more in benefits. It does not make any sense, and certainly does not jibe with any concept of equity. What is often overlooked when we compare the tax credit system with the exemption system is the incentive effect which exists under the proposal advocated in the amendment before us. We know that some people who are perhaps worst off in our society are not always the ones on welfare but what we call the working poor, those who go to work every day. The minute their income exceeds $2,000 they are obliged to pay tax on it. Even under the proposal in the tax reform bill, they would still have to pay tax if their income exceeded $2,850. It seems to me that the greatest measure of relief should be given to this group of working poor in our society. Even when children are taken into account in calculating their exemptions, many people who are working will still be paying tax, although they are at poverty level or below it.
The proposal before us, which would virtually eliminate the next $500 of income from taxation, or, in the case of a couple, the next $1,000, has the advantage of the built in incentive. Instead of a person losing 17 per cent at that level of income, the loss would only be 2 per cent. That is an enormous incentive to go out to work and do somewhat better than a person might otherwise feel compelled to do.
The increased cost of living in the last number of years has substantially raised the point at which we consider a person to be living in poverty. The amendment recognizes this. It would allow a person to be free of tax or to be taxed only minimally at a level below $4,000. One of the difficulties about the tax system as it now stands, the system of exemptions, is that the marginal rates need to be much higher than would be required under a system of tax credits. We hear a great deal of complaint about how progressive our tax system is when, in fact, it is not as progressive as marginal rates would indicate. The Carter Commission pointed out that while marginal rates in Canada seem to be exceptionally high, in fact almost no one pays those high rates, certainly not at the level of 70 per cent and above, because of such factors as the 10 per cent dividend tax credit, the special concessions people get if they invest in resource industries, and so on. And now that the government proposes to abolish estate tax it

seems that some will receive a substantial sum of money as an inheritance and will not be required to pay tax on it at all.


An hon. Member:: Unless he lives in one of the provinces which retains the estate tax.


Max Saltsman: elusion that the best way of doing so is by granting tax relief to those who need to make purchases and whose incomes are insufficient to meet their needs, with the result that if they received an additional amount of money they would spend it. For all these reasons, I commend this particular amendment to the House.


Mr. MacEachen:: I rise on a point of order, Mr. Chairman, to advise the committee concerning discussions which have taken place among the House leaders in respect of the manner in which we propose to deal with the next grouping of items of the bill.
First, we shall continue with the grouping upon which we began discussion yesterday, including proposed sections 117, 118, 119, 120, 146, 147 and 204. When these have been completed, we will begin another grouping, consisting of sections 9, 10, 11, 12, 13, 15, 18 and 20. It is our expectation that it might be possible to complete these today. As hon. members know, Wednesday and Thursday will be opposition days so we will not be able to resume our discussion of this bill until Friday, at which time we hope to return to section 8 and complete it on Friday.
We will then consider a series of sections which might be regarded as clean-up sections, or sections relating to the major subjects that we have been discussing. This grouping consists of the following sections: 16, 67, 69, 70, 72, 74, 75, 76, 77, 78, 81, 126, 144, 145, 148, 149, 198, 199, 200, 201, 202, 203, 205, 206, 207, 248, 249, 250, 251, 252 and 254. It is our expectation that it might be possible to complete this work on Friday.
On Monday, November 8, we will begin a new grouping, consisting of sections 28, 29, 30 and 31. These have to do with farming issues, such as the basic herd and so on, and following completion of that work we will commence the discussion on capital gains. Under this general subject we would list the following sections, at least tentatively: sections 38 to 55 inclusive, section 3, 9, 71, 73, 85, 87, 88, 89, 96 and 111. There does seem to be some duplication in regard to section 9. We would hope that we can complete the discussion on the capital gains provisions as soon as possible, perhaps early in the week.


Mr. McCleave:: Mr. Chairman, I think the significance of the changes announced by the President of the Privy Council, which I gather is acceptable to the House leaders, is that two of the sections we shall next be considering, namely sections 28 and 29, have been grouped with sections 30 and 31, which are to be discussed on Monday next. Sometimes we designate Friday as fish day in the House of Commons, and in this case we are designating Monday as farming day, since sections 28 deals with farmers and section 29 deals with the basic herd concept. Sections 30 and 31 also deal with other aspects of farming operations.
I think it is important that we do put some kind of tag on these provisions so that we will know whether it is the farmers who are supposed to crowd back here early on Monday to take part in debate or whether it is the fishermen, lawyers or the like. I think it is useful to have that point on the record. The effect of the amendment with regard to immediate business is that we are going to take a whole flock of small items on Friday, but that we are
Income Tax Act
taking a very large and substantial item on Monday, namely the taxation provisions in respect to farmers.


Mr. Knowles (Winnipeg North Centre):: Mr. Chairman, in a sentence or two may I just confirm that the list of sections read out by the President of the Privy Council does represent what was agreed to today by the House leaders of the various parties. I might also state that the hon. member for Halifax-East Hants has done what needed to be done, namely to emphasize that we have made one change from the grouping we agreed to the other day, namely to separate sections 28 and 29 from the grouping they were in and to bracket them together with sections 30 and 31, so that we have a group of four sections dealing with farming matters, such as the basic herd and other considerations.
The other category that we are planning for debate but which we have not yet set up will, of course, be the grouping of sections that deal with the taxation of cooperatives and credit unions. The assumption is that these will follow the groups that have been indicated today.


Gérald Laniel: Is the Chair to assume that the committee accepts that agreement? It is very difficult for the Chair to call this an order because there might be some changes to the time schedules, but this statement could constitute a flexible agreement for the guidance of the committee.


Stanley Howard Knowles: Mr. Chairman, I think it can be said that this does represent an agreement or a target. Perhaps it should also be on the record that in each case the Chair will call the first section in the grouping.


Gérald Laniel: Is that agreed by the committee?


Some hon. Members:: Agreed.


Marcel Joseph Aimé Lambert: Mr. Chairman, I want to make a few more points with regard to section 117(l)(a), which sets out the scale or schedule of tax rates and seals the fate of Canadian taxpayers over the years to come. The hon. member for Waterloo had a good deal of complaint about what he thought was the favouritism shown those in the higher income groups by the reduction of the top rates. He also complained about eliminating the estate tax. I want to point out to him some facts of life with regard to these rates and also indicate the effectiveness of the estate tax.
Whether he knows it or not, there is an estate tax in every province, bar one. The two socialist governments of our provinces have indicated that they are going to implement an estate tax effective January 1, 1972. The hon. member is the official voice in this House of the New Democratic Party in matters fiscal, but I am sure that the farmers in the three prairie provinces, particularly in Saskatchewan and Manitoba, as well as the farmers in the province of Ontario will really welcome the reimposition of an estate tax plus the introduction of a capital gains tax. Of course, the NDP, and I would think perhaps the people of certain parts of Saskatchewan will be more than interested in this, suggest it is fine to reintroduce the estate tax and have a capital gains tax, but they want the capital gains tax to be double the rate provided for in the

November 2, 1971
Income Tax Act
bill. I should like to see the hon. member for Waterloo go out to Saskatchewan, for instance, or even to Waterloo and explain this to the farmers there.


Max Saltsman: I will on Friday.


Marcel Joseph Aimé Lambert: He says he is going on Friday but by that time no one will hear him. I want him to understand that there is a Succession Duty Act in the province of Ontario; there is one in the province of Quebec; there is one in British Columbia and there will be one in each of the provinces of Saskatchewan and Manitoba. I presume there are some in the Atlantic provinces. All that happens under the act as it now exists is that there is an estate tax levied. There was also an assessed tax under the provincial succession or estate tax act. The two were mixed, however, but the end result was that a tax was paid to one or the other. After the tax was paid, as in the province of Quebec which retained its rights under the Dominion-provincial agreements, whatever was paid in respect of succession duties was a credit under the estate tax assessment to the federal government. Therefore, there was an elimination of double taxation to some degree.
The federal government in the present case proposes to remove the estate tax, but that does not eliminate the provincial estate tax. Therefore estate tax or succession duties will still have to be paid in the provinces, except Alberta where I am told the government has decided not to re-impose the estate tax or succession duty. The net result is that everybody has to pay the estate tax and have added a capital gains tax which is, in effect, a tax on deemed realization on death. Perhaps I have not interpreted this correctly, but my understanding is that the capital gains tax will not be considered a credit towards succession duties levied by the provinces, and therefore there will be an additional tax. We are told there are no additional taxes coming out of this package, but that is not so. There is an additional tax and the people of Canada should know about it. This so-called simplification is in many ways like a shell game; now you see it, now you don't. That is what the Minister of Finance tells us about this simplification, that everyone is to be brought under the one hat, but the hat is of a larger size and the Canadian taxpayer is being asked to wear it.
As was pointed out last night, we are being asked also to simplify one tax rate by combining what had been formerly the income tax portion, the old age security portion and the social service portion. This is now all under one heading, but this does not allow the federal government any abatement of income tax toward the provincial income tax, or for any greater allocation of funds. Any province that wants to increase its revenue will have to impose additional income tax. That is already the case in some places and I am not worried about it. In fact, in some provinces there may be a greater sense of responsibility because if they desire to spend more money that will result in the imposition of larger and additional taxes.
How do we calculate what is to be the total rate. Members have only been looking at federal rates of income tax, for instance the bracket of up to $500. Section 117(l)(a) says the income tax will be $85, or 17 per cent.

That is not going to be the case. There must be added the conversion factor under this table, because the provincial conversion factor for the purpose of calculation so far has shown this at 30 per cent. Incidentally, there is going to be an amendment to this table.
In other words, from $500 to $1,000 the tax shall be $85 plus 18 per cent of the difference between $500 and $1,000. Then, there shall be added for the individual 30 per cent of the federal rate, which in this instance becomes 5.1 per cent, making a total of 21.1 per cent. This morning the Minister of Finance, in speaking to the provincial finance ministers, had this to say:
We have made our best estimates about revenue yields of the new tax system. But from the beginning we have recognized that some degree of uncertainty as to these yields will exist until we have actual experience under the new system. We have said we will guarantee for three years that provinces receive no less than they would under the existing system, a length of time that we have felt sufficient to permit accurate assessment.
The tax base upon which provincial taxes are calculated is slightly smaller than the existing base. To receive the same amount of revenue, provinces will need to express their new tax on the smaller base at rates slightly above present rates. I want to emphasize again that this would not result in a higher level of provincial taxes . . .
Our original calculations produced a conversion factor of 30.2 over 28, which was rounded down to 30 over 28. We are now prepared to suggest that the conversion factor be adjusted to 30.5-that is, rounded up to the nearest half point instead of down-as a more appropriate expression of the provincial rates required to maintain the same revenue. Our guarantee will therefore be based on provincial tax rates converted by 30.5 over 28.
The minister then added that the period of guarantee would be extended from three years to five years. In a final summation, he said:
To make it perfectly clear, the federal government is prepared to guarantee for five years the revenue yield of the new system as compared with the existing system, provided that provinces establish new rates for 1972 no higher than the rate derived from a conversion factor of 30.5 over 28.
I do not know what the reaction of the provinces was to that, but to hon. members I would say that this results in just a slightly higher total rate of tax to the individual taxpayer. It is actually using the federal rate multiplied, plus the result of the multiplication of the federal rate which is not 30 but 30) per cent. So, if one were to take the table in the bracket of $2,000 to $3,000, which is the table under section 117(l)(d) where the rate is 20 per cent, the total combined federal and provincial tax will be not 26 per cent but 27 per cent at the marginal rate, an increase of 1 per cent in the marginal rate. You see, therefore, how quickly the rates of individual taxpayers have gone up. The Minister of Finance says we will use a factor of 30) as against 30, and immediately tax rates go up because of an increase in the provincial sector. It would be interesting now to make the conversion, shall we say, in the top bracket of $60,000 which federally is 47 per cent. The rate before this had been 61.1 per cent with the provinces but will now go up to 61.33), I suppose 61.34. Strangely enough, percentagewise one will see the difference. I indicated there was a difference of 1 per cent in the total of the taxable bracket of $2,000 to $3,000, but over $60,000 the increase is only one tenth of one per cent.
November 2, 1971

With regard to the amendment, I have looked up the statistics for the taxation year 1970-71. A tax credit of $75 in the personal income tax field according to a reduction calculation results in a reduction of some $550 million in the revenues therefrom. I notice the parliamentary secretary is nodding his head in general approval of this as being the figure. We are considering a whole year on this basis. The $225 million the minister promised on October 14, as a result of the 3 per cent reduction in tax payable by individuals for the year 1972-73, frankly would not be necessary if a tax credit were now given. A tax credit system is the objective of the move by the hon. member for Winnipeg North Centre, and is one with which we fully agree because we have from the very outset, even before anyone else spoke about it, argued in favour of tax credits. In order to be credible in this I believe I must accept the principle of the amendment and I do so quite willingly. I have some reservation concerning the validity of the ruling with regard to the amendment. I say that merely on a personal basis. The amendment having been accepted, however, I now say we are quite prepared to support it.
The tax credit as proposed would give much more relief from tax in the lower income groups than would the proposed 3 per cent the minister has proposed for the 18 month period beginning July 1, 1971. I want to make quite clear that while I recognize the cost to the treasury in diminution of funds, it is not necessarily a total loss. It is in the first instance, but there is a multiplier effect and there is a recapturing of some of this money that the government forgives in the way of income tax because it is picked up through the sales tax, through an increase in economic activity and so on. On October 14 the minister said that the purpose of the tax cut was to stimulate the economy and that the government was prepared to put into the national spending pot some $350 million. Then, it hopes to recover a given portion of this through the increase in economic activity, more jobs, higher incomes and more income taxes both from the personal point of view and the corporate point of view. Therefore, one must not look at such a tax cut as representing a cost to the national treasury of $550 million. We have taken off $225 million with regard to the 3 per cent tax cut, which would be the exchange, and I would say there would be a good deal more revenue generated by the increased economic activity so that the net cost, bearing in mind the social purpose of the tax cut, would be more than compensated by the benefit to the individuals receiving the same. To that extent, therefore, I hope the committee would see fit to support the amendment.


John Edward Broadbent: Mr. Chairman, it came as a bit of a surprise to us that the hon. member for Edmonton West would support this rational, sensible and equitable proposal. We welcome the support for this serious amendment. One of the persistent and unfortunate facts of so-called tax reform in other countries in the past 30 years has been that it almost never resulted in any significant shift in income in any of the advanced industrial countries, this country included. I should like the parliamentary secretary to look at a work which might be of interest to him. I refer to Professor Titmus' study of income distribution and social change over a few years ago in England. I hope he would have a look at it and seriously assess the
Income Tax Act
comments made concerning a full variety of so-called approaches to tax reform which have resulted not in redistribution of income but rather in the maintenance of the present income patterns in society. I suggest that the present tax proposals, the hundreds of pages of them that we have before us, really amount to a continuation of this lamentable tradition. We have had a number of proposals in a number of areas, and I would like to comment on each of them by way of a brief preamble to the specific amendments.
[DOT]	(3:50 p.m.)
The capital gains tax has at last been introduced in this country, the last country in the western world to do it. Instead of taxing all the capital gains as part of one's income, in the typical Liberal fashion it has been decided to tax only 50 per cent of these gains. The worker pays tax on all of his taxable income, all his earned dollars if you like. But the man who clips coupons, who makes a gain in the stock market in Toronto, will be able to continue that wonderful tradition and will pay tax on only half of what he gains.
[DOT]	(3:50 p.m.)
We have made reference to the estate tax proposals which again benefit the rich, notwithstanding what the hon. member who preceded me said. Incidentally,-I am sorry he has left the House-it has always been made clear by our members, particularly by our western members, that there is no intention to tax the small family farm estates. A distinction has always been made by this party in that regard and it is unfortunate the hon. member for Edmonton West did not point out this fact, since I suspect he is well aware of it.


Robert Jardine McCleave: Sanctimonious guys.


Mr. Howard (Skeena):: Take it easy.


John Edward Broadbent: I will refrain from commenting on the interjection of my good friend to the right. Perhaps he will join in later. I do not make these points in jest and, as a matter of fact, I respect my hon. friend very much. I make these points in all seriousness. I think that a tax system in a democratic society is or should be one of the most important means of bringing about some equity in terms of income distribution. If this party has said on a number of occasions that this is not being done in our society, apparently it is necessary to go on saying it because we are not getting the kind of change that we think is desirable.
The third item seems to me frankly discriminatory. It is the proposal that workingmen get an exemption for work expenses so long as they do not exceed $150. The provision says nothing about the junior jet set executives who will entertain their friends in Toronto and be able to claim exemption at a much higher level than the ordinary working people.
The fourth point in the current tax proposals is the continued taxing of people whom the Economic Council of Canada says live at the poverty level. There is no decision to go beyond that kind of economic barbarism. There has been no introduction of the tax credit system which, as has been mentioned many times, is a much

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more equitable basis for taxation than is the changing of the level of exemptions so favoured by this government.
Finally, in words of the Minister of Finance, we have the proposal to reduce corporate income tax by 7 per cent, which is said to be an important spark or incentive for industrial expansion. I do not know any serious economist who would argue that the corporation really conducts its investment plans on the basis of expected increases or decreases in taxation levels. It seems to me that they operate always on the basis of profit levels, what they really think the market would provide in positive or negative terms. Therefore, I think that a 7 per cent tax relief for corporations is really a colossal give away to the corporate sector of this society.
Having made all these points, and I think they are worth making about the present system of taxation in Canada, especially underlining the present proposals that are supposed to constitute tax reform, I would like to make one or two brief comments about the amendment of the hon. member for Winnipeg North Centre. It seems to me that what it would do is something that all the other items that I have mentioned avoid doing, that is to provide relief in terms of degree where it is most seriously needed. What it really amounts to is a $75 deduction for most taxpayers. What is important about this from the point of equity is that $75 is a hell of a lot more to an average or poor man than it is to a rich man and therefore, as has been said by those who have supported the proposal, this is real economic justice. By passing this amendment we would help the unorganized worker in Halifax, the poor farmer wherever he is, the organized worker in Oshawa, Hamilton or Vancouver, and, in short, bring early, important and immediate benefits to many of the average and poor people. Therefore, I think it is desirable from that point of view.
The effect of such a reduction to these people who put most of their money into the economy directly as opposed to high income people who devote a substantial percentage of their income to investment would be an immediate economic stimulus to the economy, and therefore the net effects over a year or so, in terms of economic costs alone, could well be positive. In other words, if it is true that it would cost about $515 million to put this proposal into effect right now, the economic spin-off effect in terms of its impact on the economy could perhaps exceed that loss of revenue if the stimulus on the economy is as positive as a number of us think it would be. Therefore, on grounds of equity, and in terms of the criteria of economic efficiency for the economy as a whole, I urge support of this amendment.


Romuald Rodrigue: Mr. Chairman, I consider the amendment brought forward by the hon. member for Winnipeg North Centre to be worthwhile and important, seeking fiscal relief for a group of people who would certainly appreciate it, particularly those in the lower income group. I therefore support the amendment and hope the House will adopt it.
This amendment would save all taxpayers approximately $75 a year. For some, the amount may seem small, but for those in the lower income group a 2 or 3 per cent increase in income would be most welcome. It would have
practically the same results as boosting exemptions to $2,000 for single persons and $3,300 for a married couple.
The amendment seems very realistic to me, particularly at the present time when the cost of products and services is rising from one week to the next.
Another reason why I support this amendment is that it would leave in the hands of the people a good deal of money. The hon. member for Waterloo (Mr. Saltsman) mentioned a while ago that this amount would be around $450 million. That would be an injection of money in additional purchasing power into an economy which is slowing down. It is exactly what the government is trying to do at this time, by implementing new programs.
We are specially concerned in this debate on the Income Tax Act about the fate of people in low income brackets. As a matter of fact, the amendment proposed by the hon. member for Winnipeg North Centre aims at saving them a certain amount of tax money.
As members of the Social Credit party, we have repeatedly suggested basic exemptions of $3,000 for single people and of $5,000 for married persons. But, even if this amendment does not meet with the goals we had called for, it seems to us that it represents a step forward towards that objective.
The adoption of that amendment may create some technical difficulties. But in my opinion, we should not be tied down by this detail.
With respect to the difficulties that the provinces might encounter concerning what tax percentage should be set up, some of them may not be satisfied. But we should not forget that some provinces have been asking for a greater share of the taxes. I fail to see why those provinces should hesitate to increase their income tax percentages if they have to, considering that it would be a good thing anyway for Canadians to know, once and for all, how much tax they have to pay to the federal government, and how much to provincial governments. This tax credit would mean additional income in the hands of people who really need it.
I hope that the Parliamentary Secretary to the Minister of Finance (Mr. Mahoney) will take my remarks into consideration and give serious thought to the amendment proposed by the hon. member for Winnipeg North Centre, in which we join and which we fully support.


Robert Jardine McCleave: Mr. Chairman, I would like to deal with the substance of the point raised by the hon. member for Winnipeg North Centre. I should like also to give notice that later I will be dealing with some technical points arising out of section 146(9)(a) on page 395 which relates to the disposition of property by trusts. I shall do that after we have dealt with the amendment before us. I hope to persuade everybody that I am trying to keep a rather amorphous debate within limits as much as possible.
I would like to add my support to that of the hon. member for Edmonton West for the amendment moved by the hon. member for Winnipeg North Centre, and which was accepted by the Chair. Two speakers earlier we heard the remarks of the hon. member for Oshawa-Whitby, that delightful fellow. I think he and I share a

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great admiration for a great stalwart in the political spectrum, John Stuart Mill. However, I think the hon. member might tend to look down his nose a bit at the Tories in regard to the matter of tax credits. Indeed, I suspect he could find himself on the road to Damascus and, while he was undergoing conversion, might notice that all the people raising dust in front of him on that road were members of the Conservative party who were initially sponsors of the idea of tax credits in this country. If he wants proof positive of this statement he would look at the very thoughful presentation that was made to the Finance Committee by the government of the province of Ontario. I notice that government lacked nothing in popular support when it went to the polls very recently, so it must be blazing some trails.
In any event, Mr. Chairman, I know there is a school of thought that believes that anything the hon. member says is the gospel truth and, even though I and others of my ilk have gone down that road to Damascus in front of him, that anything we say is not to be believed. I know there are enough characters of that kind in the press gallery. I am just stating a fact. Let me get to the guts of the amendment before us because that, after all, is what we are being asked to decide upon, although I do like to keep history straight from time to time. It is one of my preoccupations.
What the amendment moved by the hon. member for Winnipeg North Centre proposes is to give those on lower incomes an exemption of up to $75 on their income tax, assuming they are taxed from zero to $75. Then, from that point on everybody would be given an exemption of $75 on the personal income tax they pay. I do not think we should lose sight of the fact that from $75 down to zero, that is for those people who earn $500 taxable income or less per year, the benefits are in diminishing proportions, whereas for those over that figure they are on a quantum basis of $75 across the board. Apart from that, I think it can be regarded as a tax credit, as my hon. friend from Edmonton West has labelled it.
The advantage of the proposal is that it provides a very large sum for the economy. My hon. friend from Edmonton West thinks it would be in the neighbourhood of $550 million a year, if I heard his calculation correctly. I, myself, have worked it out at $532.9 million a year. But in any event, we are dealing with more than half a billion dollars that would be pumped into the economy as a result of the amended Income Tax Act that we are being asked to pass in this parliament. But the greater advantage is that it is not a lump sum left in any one particular person's hands or in the hands of any one group. Except for the group I have noted, this sum is divided amongst the population on the ratio of $75 per person. Each of us can look around and determine that if he or she had $75 more in his or her pocket or purse that that money would be infused, indeed enthusiastically infused, back into the economy. In that sense, because the effect of it is spread from one end of the income earning spectrum to the other, I think it probably has a greater advantage than the proposal made to us by the Minister of Finance.
As you will recall, Mr. Chairman, in an act of extraordinary repentance on a Thursday evening a few weeks back, the Minister of Finance did suggest a certain cut in income taxes over a specific period of time, with the
Income Tax Act
purpose of getting mpney into the economy. I suggest the formula we have now before us gives everybody a crack at using the money that will come back to us-or will not be extracted from us, I guess would be a better way of putting it-for clothing, for food, for education for our children, for a better car or a Japanese radio set or heaven knows what. There are so many different ways to spend money, and I am sure we will all spend it. This proposal commends itself. It is a better approach than the one suggested by the Minister of Finance.
We should also accept the fact, because we have to be fiscally orthodox to a certain extent and we have to be almost close to paying our way if we cannot pay our way at certain times, that if we vote for the amendment presented by the hon. member for Winnipeg North Centre, as I intend to do, we cannot accept the alternative presented by the Minister of Finance. This seems to be a quicker and better way of achieving what he is trying to do, which is get money back into the economy when the economy needs it, no matter whether you call it a tax credit system or anything else. The proposal commends itself to me. I do not think we should be looking at two things. I prefer one, and I prefer the one I intend to support in a few minutes.


Mr. Matte:: Mr. Chairman, I should like to say a few words in favour of the amendment. To all intents and purposes, it aims at increasing the basic exemption to $2,000.
It is timely, because if we stop and think of the Canadian who earns $2,000 a year, we know full well that this amount is far from adequate. The individual who earns that amount can barely pay his room and board. I say "barely" because he still has to get clothes for himself, and he has other unavoidable expenses. All hon. members, and specially the Minister of Finance (Mr. Benson), will surely recognize that $2,000 a year is clearly inadequate.
Consequently, is it reasonable? Is it logical then that this individual should pay $85 in income tax? Mr. Chairman, to ask the question is to provide the answer. This is something which is absolutely illogical, something which does not make any sense. In other words, before being in a position to provide for essentials such as food and clothing, the individual who earns $2,000 will have to pay $85 in income tax. That is overdoing it! This is why if such an amendment was passed, we would deal with the basic injustice from which the small wage-earner suffers.
Apparently the government is always inclined to think that there are no small wage-earners having a $2,000 yearly income. On the contrary, they do exist. There are people in some areas or at least in some constituencies who actually receive an income which is not over $2,000. This means that these people who are hard up and can scarcely make both ends meet are compelled first and foremost to pay $85 in income tax to their government. This is truly shameful.
I think that under the proposed amendment this situation is being improved upon, and that the individual who is in a truly bad predicament and who is being paid a very low salary is being treated a little bit more fairly.

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It would then be quite fair, as the amendment suggests, to reduce the rate from 17 to 2 per cent. I therefore approve this amendment without any qualification.


Mr. Gilbert:: Mr. Chairman, the amendment of the hon. member for Winnipeg North Centre is so clear, concise and convincing that I will restrict my remarks this afternoon. I was impressed by the hon. member's amendment, as well as by the argument in support, presented by the hon. member for Waterloo and the hon. member for Oshawa-Whitby, for the reason that the amendment contains within it the principle of universality. If there is one principle that ought to be applied today in these matters, it is the principle of universality. In the past we have got into great trouble in the provision of certain programs because we attempted to get away from the principle of universality. Here is an opportunity for us to apply this principle across the board to all Canadians.
I am sure that past objections of the parliamentary secretary to the effect that the tax credit system was difficult to impose have been cleared away as a result of the amendment that was brought forward yesterday evening by the hon. member for Winnipeg North Centre. The parliamentary secretary has always suggested that implementing the tax credit system would be too difficult. If we implement a tax credit system, we shall give some recognition to the late Mr. Carter, who was responsible for the Carter commission report. We shall honour him, because one of the fundamental recommendations in the Carter report related to the implementation of the tax credit system. In such a system Mr. Carter saw enshrined the principle of equity and fairness. That principle would apply to all Canadians. So, Mr. Chairman, I think we ought to honour and respect the man who has tried to bring about equity and fairness in our tax system.
I think Mr. Carter might be sadly disappointed if he were here today, because we are not adopting one of his suggestions, namely, that we reduce the personal income tax rate from 80 per cent to 50 per cent. That suggested reduction was based on the premise that we would also include in this bill two other major principles of taxation, one being the principle of a full capital gains tax and the other the principle of integrating all incomes that a person receives. We have sadly deviated from the principles laid down by Mr. Carter.
At present we have the opportunity to implement the tax credit system. I hope some members of the Liberal party will speak in support of this principle. Thus far, the debate with regard to the reduction of 15 per cent, or the reduction of $75 across the board, has been carried by members of the opposition. I was happy to hear the hon. member for Edmonton West support the principle we support, Mr. Chairman. He is the first lawyer I have known who, in a 20 minute speech, could speak for 15 minutes against the principle and for the last five minutes in favour of it. Perhaps as he looked skyward and saw the lights in the ceiling of the chamber he saw the light of conversion on the road to Damascus, so to speak.


An hon. Member:: Hallelujah, brother.


John Gilbert: I was rather happy to hear what he said in the last five minutes of his speech. He was under that

divine direction which gave him insight, foresight and the necessary articulation for supporting this amendment.


Marcel Joseph Aimé Lambert: Mr. Chairman, may I ask the hon. member a question? I wonder if the hon. member for Broadview has had the patience and opportunity to read from the earliest committee reports of the examination of government officials and the minister on the white paper and the advocacy then of the hon. member for Edmonton West for the tax credit system?


John Gilbert: I am very happy the hon. member has come around to supporting our position. It really does not matter which party brings forth an amendment to implement the tax credit system. The important feature is that it is brought forward. We in the New Democratic Party brought it forward. We are very proud and happy that the hon. member for Edmonton West is supporting this principle.
Yesterday the Minister of Finance for Ontario recommended, on behalf of the province of Ontario, a tax credit system. He indicated the unfairness of the present system to people in the lower income brackets with regard to sales, property and income taxes. Maybe we will be able to persuade the adamant, stubborn parliamentary secretary that this proposal is fair. He shakes his head. This indicates that he opposes the tax credit system. Is it any wonder that we in the opposition become so frustrated when the government takes this position?
I notice the hon. member for Scarborough West is in the chamber this afternoon. He is a brilliant economist who supported Walter Gordon. He is known as one of the whiz kids of Canada with regard to economic theories. I invite the member for Scarborough West to state why he, as a member of the Liberal party, will not support this amendment. I would like to hear his explanation. As I said in my opening remarks, it is only the members of the opposition who have participated in this debate. The parliamentary secretary has sat back and smugly waited for us to fall by the wayside.
It has been pointed out that the hon. member for Don Valley has not participated in this debate. He comes from the affluent society, the upper middle class of Don Valley. I would like to hear what he has to say with regard to the impact of this amendment on the people of Canada. If I thought he would get up and speak, I would immediately sit down. I am attempting to persuade him and the member for Scarborough West, both men who have had experience in the field and know what the impact will be, to get up and let the people of Canada know just what is wrong with the amendment proposed by the hon. member for Winnipeg North Centre. This amendment has been described as brilliant. I agree. At the beginning of my remarks, I said I would be brief. I have been very brief. I resume my seat on the assumption that some Liberal members will either speak for or against this amendment.


Mr. Ritchie:: Mr. Chairman, I wish to say a few words on this amendment. It has considerable appeal. I wish to add a few ideas on the averaging formula in the bill and its relationship in the future.
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The rates on the progressive income tax for the so-called middle income group have some curious financial implications. To some extent, they are a tax on inflation. Inflation has risen as high as 6 per cent a year. It rarely has been lower than 3 per cent a year. This is a result of fiscal dividends. As a taxpayer's income increases, he moves into higher brackets and, accordingly, pays relatively higher taxes. The new tax structure moves substantial payments into income for this so-called middle income group, mainly capital gains, research scholarships and other things. Even at the lower end of the scale, the so-called unemployment insurance coverage may now be extended to include teachers and salaried workers earning a substantially higher amount of money. This fiscal dividend becomes important.
In light of the fact the amendment will reduce the tax in the lower bracket and the fact the $75 will be applicable to each bracket in some ways the proposal can be likened to the so-called temporary surtax which has now been removed. The surtax did something in that it was at least a tax on a tax on income. Those at the bottom of the scale contributed very little. Those who paid a lot of tax contributed substantially more. Through the progressive tax for the middle income group, governments each year, even in times of inflation and without any real growth, substantially increase their tax take in the income tax field.
With regard to the matter of averaging, I commend the government for making a very modest attempt at general averaging provisions. This is long overdue. In my particular profession, it is necessary to spend many years preparing to earn a living. I did not make any money until I was 34 years of age. I received less than $1,000 a year. Then, I was pitchforked into a fairly large and substantial income. I do not know if this income is too much. However, I suggest that the progressive income tax creates economic distortions, particularly in the high salaried area. We might well consider the implications of this. A person's take home pay really reflects what society thinks he is worth or what he is able to command in society, whether or not this is always economically sound. In essence, people receive their take home pay plus taxes. However, we still persist in considering the gross salary or gross income of a person before taxes and on this basis make our assessment of how much he earns, whereas we should really be considering the individual's take home pay.
The very modest, general averaging proposition by the government is a backward averaging, 110 per cent in one formula. If it is above 110 per cent in the immediately preceding year or 120 per cent of the average income for the immediately preceding four years, you get the beginning of an averaging formula. It is useful. It should be of some value when salaries are increasing rapidly, as they often do between the ages of 40 and 50 and particularly in the 50's. However, there is no real way of increasing or giving a true averaging on a downward grade. This should be dealt with in the tax structure whenever possible. For people who reach a peak in their 50's, and must of necessity have a reduced income later, there is no provision for averaging on the downward trend. If a true averaging could be carried out, and I admit this would probably result in large and formidable changes in income tax
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revenue, it might help our economic system substantially. If there were a true five year average it might reduce the demand for wage increases. For many years, farmers have been able to do this and it does not seem to have created enormous difficulties for the Department of National Revenue. In any case, the present averaging proposal is a step in the right direction. If it proves a sensible one and works to advantage we would be well advised to proceed with it further in the years ahead.
In the matter of income and annuity averaging, I should like to draw the attention of the parliamentary secretary to one feature which may not have been mentioned. The annuity must be bought within two months of the end of the taxation year, as the bill is presently drafted. This may be doing a disservice to the very people the legislation is designed to help. I have in mind a man who once in a lifetime sells a house or a business for a lump sum of money. Not being used to chartered accountants and so on, he may be unaware that this provision applies to him. If he must take action before the normal date on which he computes his income tax he may well find that the legislation does not help him.
In essence, the amendment put forward by the hon. member for Winnipeg North has much to commend it. I would support it in a general way. I would even support it on the basis that if it is to replace the 3 per cent cut in the personal income tax, whatever the equivalent is, then that should be built into the amendment, or something like it. I believe it would do much for the present state of the economy to provide increased income for the lower income group. I noticed in dealing with cases this summer that many of the lower income group were better off taking welfare, particularly if there were three or four children in the family, than working at occupations where their incomes would be subject to tax. I will clarify this statement by saying that if the government can accept the equivalent of 3 per cent income tax I would be happy to support the amendment in some way which could be worked out.


Mr. Latulippe:: Mr. Chairman, I am happy to say a few words on the amendment under consideration.
The object of this amendment is to reduce the tax rate on the first $500, from 17 per cent to 2 per cent. It is therefore with pleasure that I wholeheartedly support this amendment, because I know that Canadians already pay too much taxes.
We know that rates and taxes make the economy more sluggish and prevent its progress. This amendment to the Income Tax Act will reduce the already too heavy tax burden of the Canadian taxpayer. The latter would thus gain a small benefit or a small reduction in taxes; even if it is not much it is better than nothing at all.
It is our duty, as citizens and representatives of the people, to take part in the discussion and support this amendment, and if that had been possible, I should have liked to say more on this subject.
We support this amendment, and commend the hon. member for Winnipeg North Centre (Mr. Knowles) for

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having moved it, slipped it among the others, which will enable Canadians to breathe a little easier.
I am convinced that by carrying on with the considerat-iion of this legislation, we will manage to find other means to alleviate the tax burden of taxpayers, so that the law may be more logical and that taxpayers pay less and less taxes.
I know that the tax legislation means a substantial increase in taxes. Taxes are reduced in certain areas but increased in others.
Since all citizens may benefit from the proposed amendment, we are prepared to support it.


Mr. Kaplan:: Mr. Chairman, I did not intend to speak at this time. I have nothing much to say, in fact. My contribution on this particular subject was to have been my vote. I intend to vote this amendment down, or contribute to voting it down. But I thought it was funny to sit here and listen to the two opposition parties argue about which was further down the road to Damascus and which one was being blinded by the other's dust. Sitting on this side I must say that those two parties, the Conservative party and the New Democratic Party, are very much alike.
This is a situation which disturbs me very much. I would not support the amendment, but I would very much welcome a true Socialist alternative before the people of Canada. I would be glad to see a party which stood for a new concept of industrial democracy, a party with its own sense of social justice, a party with new ideas.


An hon. Member:: What about the amendment?


Robert Phillip Kaplan: What we find, if I can put it in a gentle way, is a group of benign chisellers who come before us in a well-meaning manner saying something like this: "You have proposed a minimum wage of $1.75. Why not make it $2.00? You have proposed $1,400 as the minimum exemption. Make it $2,000-we will settle for $1,800." This is their style. They are quite satisfied with the social order. I regard my party as being a more revolutionary party than theirs.
I can remember when I was a little boy listening to the hon. member for York South on the radio. He was saying then exactly the same thing that I heard him say a month ago during the Ontario provincial campaign. The people of Canada, he said, are not fools; they will reject the old line parties. That statement is the oldest line in Canadian politics.


The Chairman:: Order, please. With respect, I think the Chair is able to conduct the proceedings of this committee more to the advantage of hon. members if, when an hon. member rises in his place, he indicates to the Chair why he is rising. This will give the Chair the opportunity to recognize him. I recognize the hon. member for Hamilton West.


Lincoln MacCauley Alexander: Mr. Chairman, I do not need any gratuitous remarks from the Parliamentary Secretary to the Minister of Finance. With all due respect to the Chair, I did point out that I was rising on a point of order. My point of order is this: I have been sitting in this chamber
(Mr. Latulippe.]
for days listening to contributions that had some merit. Having heard the Chair admonish and chastise those hon. members who did not follow the rule of relevancy, my point of order is that we on this side had hoped the hon. member for Don Valley would make a fantastic contribution-


Some hon. Members:: He did.


Lincoln MacCauley Alexander: -as he was challenged to do by the hon. member for Broadview. But instead of that we listened to fairy tales. With all due respect, I think the hon. member's remarks have been irrelevant to the subject matter under debate this afternoon.


Russell Clayton Honey: Order. I think I should say to the hon. member for Hamilton West that I was unable to ascertain that he was rising on a point of order because his microphone was not switched on. However, it did seem to me that perhaps the hon. member for Don Valley, who has the floor, was wandering a bit and I would invite him to come back to the subject matter of the bill.


Robert Phillip Kaplan: Mr. Chairman, as it happens I was just coming back to my main point, which was to indicate that I regarded the benign plea for an extra $75 across the board as one that we should reject. I was characterizing it in terms of the whole behaviour of the New Democratic Party. May I finish in one more sentence? Decade after decade this party, which purports to have something new and which rejects, it seems to me by its own words, the "old line", proves it is the same old party, a party where power is inherited, as is its leadership.


Max Saltsman: Mr. Chairman, I have a few additional comments to make on this amendment. If this committee ever required an endorsation of the amendment and arguments to support it, I think we have had them from the hon. member for Don Valley. Not once did he deal with the substance of the proposal we are debating. Faced with the logic of our argument and the justice of our stand, the Liberal party have resorted to vile rhetoric, to wild benal-ity. I would have expected from the hon. member for Don Valley far more than the kind of performance he has given us.


An hon. Member:: He made an excellent contribution.


Max Saltsman: He may have made a contribution to this debate, and it is understandable that there are divisions of opinion and people with differing views, but if the hon. member has differing views and has some substantial disagreement with this amendment, why did he not say so? Whether we are nice guys or whether we are not, whether on occasion the New Democratic Party and the Conservative party happen to agree, has really nothing to do with what we are discussing. We are discussing something that is of vital importance to almost six million taxpayers in this country. If there were any need for reassurance to us on this side that we are on the right track and that the government does not have any substantial or good reason for rejecting this amendment, then we received that assurance by the intervention that has just been made.
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Randolph Harding: Mr. Chairman, I intend to speak very briefly on the amendment before the House. The remarks of the Liberal member for Don Valley disappointed me. According to him, any time the government brings forth a tax measure we always try to increase the benefits. In this particular case we are talking of those in the extremely low income tax brackets. I want to inform the hon. member that apparently he has not done his homework on this particular phase of the legislation.
To prove my point, all I have to do is refer to the cost of living index. The present personal tax exemptions were set in the year 1949, and at that date the cost of living index stood at 77.4 per cent. Today, it stands at 134.7 per cent. What we are attempting to do is to raise the exemptions for a single person from $1,000 to $1,650. This represents a 65 per cent increase. Over the period I have referred to, the increase in the cost of living has been over 74 per cent, so even with our figure we are not catching up with the increase in the index since 1949, the year on which the exemptions were based.
This is why the hon. member for Winnipeg North Centre moved his amendment which seeks to cut the tax rate on the first $500 of income from 17 per cent to 2 per cent. What is wrong with that? This will give the working people of this country, the pensioners and those on fixed incomes who are in desperate straits, the opportunity to pay less income tax. This country in the year 1971 is much wealthier than it was in 1949 when the present rates were set. It is sheer idiocy and nonsense for Liberal members across the aisle to laugh and to vote this amendment down. If the government is not prepared even to bring the rate up to a level that reflects purchasing power today, then it is not doing the job it was elected to do.
This is a good, sound amendment, one for which we have been fighting. Organizations across the country, old age pensioner groups and so on, have been asking in hundreds and thousands of letters and telegrams they have sent to Members of Parliament that legislation of the kind that is reflected in our amendment be supported. I suggest hon. members opposite do so, if not for themselves at least for those they represent.


Joseph Adrien Henri Lambert: Mr. Chairman, I consider it as my duty to support the amendment moved by the hon. member for Winnipeg North Centre (Mr. Knowles). As this amendment aims at an immediate reduction of personal income tax, 1 think we must support this amendment if we consider the facts which have already been analysed in the course of the preceding debates on clauses 109 and 110.
Small enterprises must absolutely benefit from a tax reduction in order to be in a position to protect as much as possible their sources of income and to invest more in order to better serve their environment. The survival of those small enterprises which contributed so much to the development of this country must be assured.
I also consider that this tax reduction must be applied immediately to the workers who contributed in a fantastic way to the development of this country, namely to the increase of the gross national product to which I drew the
Income Tax Act
attention of the Chair last week when sections 109 and 110 were under consideration.
I also think that the small shopkeepers in our cities and villages are doing a lot for the people. For them to survive, they should also benefit from tax exemptions because if we continue along the same lines, overtaxation will eliminate some of them year after year. And when our small shopkeepers, grocers, butchers, and so on stop operating the corner stores and extending the weekly credit needed by our families, particularly the larger ones, low-income families will be deprived then of that service.
Mr. Chairman, farmers also are overtaxed. Production costs are increasing from day to day, and it is enough to look ever so little at the situation to realize that it is worsening from day to day.
Mr. Chairman, if I had more time I would read a letter I received today from an industrial milk producer in my riding who complains because he had to convert his business. He was forced to choose either one of the two types of production, whole milk and industrial milk, in which he was engaged. He opted for industrial milk production, which is liable to reduce considerably his income. If we do not immediately grant this category of producers a tax exemption, we once again run the risk of seeing a greater number of people leave their farms to become welfare recipients and costly dependents of the community. And then, the governments through their finance ministers will ask those who are still working and are lucky enough to operate a business to carry a heavier tax burden in order to maintain the unemployed.
In such circumstances, the whole House should get together to adopt the amendment calling for immediate reduction of personal income tax.
Mr. Chairman, sometimes, and this is most unfortunate, some hon. members, seeing opposition members rise to take part in an important debate such as the one on Bill C-259, believe they are filibustering, or just trying to delay the proceedings of the House and the passage of such an important piece of legislation.
I should like to take the opportunity to show that our parliamentary system is useful and necessary and that all hon. members, whatever party they belong to, have an important role to play as spokesmen of the people of Canada.
It is therefore upsetting, Mr. Chairman to see them right and left, playing at representing opposition members as useless or as members who are only seeking to delay the business of the House.
If the government is not satisfied with our parliamentary system, all it has to do is introduce amending measures and if it wants to remove the opposition, it should say so frankly. As a matter of fact, it is not for our own pleasure that we rise and claim more equitable legislation for all social classes.
We are not favouring a social class in particular, but we want an equitable and rational personal and corporate income tax, and the government should not go beyond a reasonable rate.
Considering the representations that are made to us, we find the government is going beyond a reasonable rate, it does not pay any attention to the taxpayers' ability to pay, thus jeopardizing the security and the freedom of

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Income Tax Act
individuals as well as the development of the Canadian family.
If the government wants to get the money needed to finance its own services and to provide the Canadian people with the services they are asking for, we must proceed with a thorough reform of our tax structure as well as of our monetary structure which has become a cancer within Canadian society. And once society has become basically "cancerous", one can hardly keep quiet and hide the truth from the whole population.
This is why I think that the proposed amendment should go through, in the best interest of the whole population, because it is of the kind that will ensure fairness to individuals, to small tradesmen and businessmen, who all have a place in society. In fact, they have to remain in existence in order to serve the community. But if their survival is to be ensured, we will have to cut their income tax, and thus give them a chance to expand and provide improved services in their neighbourhood. By so doing, they will allow Canadian society to advance.
This is why I support this amendment, and I hope it will carry.


Russell Clayton Honey: Order, please. Before I recognize the hon. member for Winnipeg North Centre, perhaps I might be permitted to advise members of 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 Vancouver-Kingsway (Mrs. Maclnnis)-Criminal CodeInquiry as to debate on abortion; the hon. member for Halifax-East Hants (Mr. McCleave)-Air Transport- national policy-possibility of Canadian Pacific Airlines becoming second trans-Canada carrier; the hon. member for Brant (Mr. Blackburn)-Labour conditions-Ste. The-rese, Quebec-lay-off of employees by General Motors- government action.


Stanley Howard Knowles: Mr. Chairman, I believe the effect of the amendment that is now before the House is quite clear to all hon. members. It proposes a tax cut. It proposes it in a way which perhaps is fairer than any tax cut which has ever been put before this House of Commons for a vote. Most tax cuts give more to those who have than to those who have not. This one would provide a decrease in the amount to be paid on the first $500 of taxable income for every taxpayer in Canada. It would provide the same number of dollars for those in the lower income brackets that it provides for those at the top. Since there are more taxpayers at the lower end of the scale, that is where most of the dollars would go. I suggest this proposition is perhaps fairer than any this House has ever dealt with by way of an income tax reduction and I hope the committee will give this amendment its support.


Mr. Mahoney:: Mr. Chairman, first of all I should like to congratulate the hon. member for Winnipeg North Centre on the modest manner in which he has endorsed his handiwork. I think we are all indeed impressed by the

result of his labours. I could not help but be, having listened to his testimonial.
I should make a number of comments on the various items which have been raised to date during the debate on this particular block of sections. First, I should say I do not propose to rehash my side of the debate on the relative merits of tax credits as opposed to the exemption syndrome. This was discussed at length in the debate on section 109 which dealt with the exemptions. All that has been passed and this is now a matter which has been decided by the House because the House has passed the sections which set the new exemptions. However, I do wish to congratulate myself for not having risen in respect of the matter again raised by the New Democratic Party members, particularly the hon. member for Broadview, in respect of his security blanket which is fashioned from what he imagines Mr. Carter said. Again, I shall not reiterate at length the comments I made a few days ago in reminding the House what Mr. Carter said. Mr. Carter did not recommend a tax credit system. He recommended an exemption system such as we have, with tax credits in certain cases. Those who use Carter as an authority for the substitution of a tax credit system for the present exemption system are stretching their authority rather far.
I should also say to the hon. member for Broadview that I did not suggest that a tax credit system is too difficult. What I did suggest-and I agree with the comments of the hon. member for Winnipeg North Centre when he introduced his original proposal in that regard-was that there would have to be different tax credits for different family circumstances, and so on, it would not, in fact, be a simpler system than the one we have had up until now and the one we propose to continue under the new bill. I would suggest also that the exemption system can achieve the same result as a tax credit system and that it is equally flexible. Furthermore, of course, it does have the great advantage-since you can achieve everything under a tax exemption system that you can achieve under a tax credit system-of being familiar to the Canadian taxpayers. The important thing in either system is not that you have a tax credit or a provision which exempts a certain amount of income from taxation, but it is the rate schedule which applies to the income which is to be taxed.
Then, we had the comments of the members of the New Democratic Party on the question of top marginal rates. Again, I do not think the complete story can be told on that particular point without consciously considering the inclusion of the capital gains in the tax base. I think these are the facts. There is a feeling in Canada that, somehow or other, there is a great mass of wealthy taxpayers who are avoiding taxation and that if somehow we were to get them into the tax collector's net there would be a great reduction in tax at the lower level. In the 1971 issue of taxation statistics which apply to the 1969 taxation year, out 7,363,963 taxpayers in Canada 190 reported incomes of $200,000 and more. A further 1,553 reported income of $100,000 a year or more. Even if you confiscated all the income of those people over their basic exemption, you would not make any significant difference in the tax burden which the other Canadian taxpayers have to bear. The inclusion of the capital gains in the tax base will go a very long way in making sure that those people pay a
November 2, 1971

fairer share of taxes than they heretofore have. We assume that these are precisely the people who are able to arrange their affairs in such a way as to minimize the tax attracted under the present system because of the noninclusion of capital gains in the tax base.
The hon. member for Edmonton West discussed at some length that various rates and the suggestion advanced by the Minister of Finance today to the provincial treasurers. I am not sure the hon. member appreciates that the suggested rate-the 30.5 over 28 formula that was advanced by the minister-is not necessarily the tax rate the provinces will adopt but is merely the ceiling which the federal government has indicated to them. If they do not exceed that ceiling they would be entitled to receive the revenue guarantee offered by the federal government. Of course, one would have to apply it to individual tax rates in each given province at the present time in order to arrive at the final figure of provincial taxes.


Marcel Joseph Aimé Lambert: But, Mr. Chairman, the Parliamentary Secretary will agree that the 30.5 suggested by the minister this morning is the equivalent of what we call the basic 28.


Patrick Morgan Mahoney: It is intended to replace it and it certainly is roughly equivalent to it, yes. The point, however, is that under the tax bill the tax reductions for about two out of every three taxpayers-and the complete elimination of income tax in respect of one million is envisaged-will be borne by the federal government and the rates which have been suggested to the provincial governments will be rates which will permit the provincial governments to collect as much provincial income tax under the new system as they are presently collecting. The federal tax generally will result in a reduction of taxation for most Canadian taxpayers.
The amendment the hon. member for Winnipeg North Centre has before us is not, of course, acceptable to the government. The hon. member for Waterloo ascribed to the hon. member for Winnipeg North Centre, in almost as glowing terms as the member for Winnipeg North Centre himself used in respect of his amendment, most of the adjectives in the litany of saints. The only one he forgot was "irresponsible". In this particular case the government, in proposing tax amendments has to determine just what kind of budgetary considerations are acceptable for the continued prosperity and the economic growth of Canada and its good government. Certainly, a tax reduction which I think has been rather accurately estimated as costing between $450 million and $550 million is not one which the government would regard as responsible in addition to those which have already been made.
I notice hon. members opposite have been very generous in suggesting that perhaps the Minister of Finance could be allowed to abandon some of the other things he has suggested to stimulate the economy and to put more money into the hands of Canada's taxpayers. I thank them for that generosity, but I think that as long as this government is here this government is the one that must accept the responsibility for determining what the best tax measures are.


Some hon. Members:: Hear, hear!
Income Tax Act


Patrick Morgan Mahoney: Finally, the hon. member for Dauphin raised the question of the requirement that for income averaging an annuity be purchased within two months of the end of the taxpayers' year. As a matter of fact, that item is dealt with in section 61 which was adopted by the committee yesterday and the averaging provisions that are now before us are the general averaging provisions under the Income Tax Act. However, I think the hon. member will appreciate that since the individual taxpayers' taxation year coincides with the calendar year, and since he must file his return by the end of April, that decision has to be made some time before the end of April, so the two months after the end of the taxation year was regarded as reasonable.


Gérald Laniel: Is the committee ready for the question?


Some hon. Members:: Question.


Gérald Laniel: The question is on the amendment of the hon. member for Winnipeg North Centre. All those in favour please rise. All those opposed please rise.
Amendment (Mr. Knowles, Winnipeg North Centre) negatived: Yeas, 42; Nays, 64.


Gérald Laniel: The text of the next amendment proposed by the Minister of National Revenue is to be found at page 8949 of Hansard for October 22. Shall the amendment carry?


Robert Jardine McCleave: I am sure that in the excitement of the vote, Mr. Chairman, your voice did not quite carry through although ordinarily it is strong, clear and pure. I wonder if you would mind repeating the point about the amendment please.


The Acting Chairman (Mr. Boulanger):: The question is on the amendment which was proposed by the Minister of National Revenue. The text is to be found on page 8949 of Hansard for October 22. The amendment reads:
That section 117 as set forth in clause 1 of the said bill be amended by striking out subsection (8) thereof on page 312


Robert Jardine McCleave: I am glad that I am reminded of it, Mr. Chairman. I asked the parliamentary secretary the other day why the section was being deleted, and I think he owes us an explanation.


Patrick Morgan Mahoney: It is being deleted only temporarily and, as a matter of fact, if we had been dealing with this bill in consecutive order, it would already have to be replaced in section 82. The amendment is simply to delete a provision in section 117 which, when we reach it, will be inserted in section 82 and a further amendment to the same effect is proposed. The subsection being deleted is a provision to deal with a situation where a taxpayer's married exemption is reduced by reason of dividends received by his spouse and where neither the taxpayer nor his spouse can use the dividend tax credit involved. The deleted provision will be replaced by a new subsection in section 82.


Gérald Laniel: Shall the amendment carry?


Some hon. Members:: Agreed.

November 2, 1971
Income Tax Act
Amendment (Mr. Benson) agreed to.


Gérald Laniel: Shall section 117 as amended carry?


Some hon. Members:: Agreed.
Clause 1, section 117, as amended, agreed to.


Prosper Boulanger: Shall section 118 carry?
On Clause 1-Section 118-General Averaging


Marcel Joseph Aimé Lambert: Section 118 has to do
with averaging and it is a new provision. With regard to this principle of averaging, we must recognize that the present Income Tax Act contains a number of averaging provisions which would tend to smooth out the progressive rate structure of a taxpayer who has an unusually high income in the year because he has received certain specified types of income during that year. For instance, if he has been repaid a lump sum out of a pension plan, if he has exercised his rights under an employee stock option plan, or if he has had a property on which he has claimed depreciation, has sold it and there is a recapture of the capital cost allowance, he may then average out. However, there are limitations as to that.
In any event, Bill C-259 will eventually eliminate all the present averaging provisions except those applicable to farmers and fishermen, and it will replace them with two averaging provisions available to all individuals. First, there will be a general averaging provision which applies regardless of the type of income, and second, an income averaging annuity provisions which applies only where special types of income have been received. The use of the latter does not affect the first type. In other words, the utilization of the second form of averaging will not affect the first form because the latter will be instituted directly and automatically by the Department of National Revenue.
The general averaging proposal we are considering in section 118 follows that contained in the white paper. It will apply in any year in which the individual's income is (a) at least 110 per cent of the immediately preceding year, and (b), 120 per cent of the average income for the four immediately preceding years. Let us illustrate this by an example.
Let us assume that in the four preceding years the income was $30,000 but in the fifth year, for some particular reason, the income goes to $36,000. Now, let us apply the tests to see whether that $6,000 could be averaged in any way to smooth out the rather dramatic escalation that there will be in tax due to the progressive tax system. Under the first test, that is, at least 110 per cent of the immediately preceding year's income, 110 per cent would be $33,000. So therefore since the income is $36,000 it has passed test (a). Now, let us look at test (b), which says that the income has to be at least 120 per cent of the average income for the four immediately preceding years. If you take 120 per cent of $30,000 it comes to $36,000, and so, unfortunately, the income does not exceed the 120 per cent of the average of the four immediately preceding years. There is no averaging excess, and therefore there is
[The Assistant Deputy Chairman.)
no way that the general averaging will be available. So, one has to be very careful about this.
I suppose that to consider this we could go into certain refinements. But in the year of death of a taxpayer, for instance, the averaging formula will be read as if the percentages in what I call (a) and (b)-the (a) being 110 per cent of the preceding year, and the (b) being 120 per cent of the four preceding years-as though those percentages were 100 per cent, and this concession is not available if the executors elect to file a separate return in respect of rights or things receivable at death. This is another very complicated provision of income tax for consultants and auditors. But let us have a look at the transition. This does not come into effect in 1972. The general averaging provision I referred to is not available for 1972, and in the years 1973, 1974 and 1975 the formula will be applied as if condition (b), that is, the 120 per cent of the four immediately preceding years, were to read respectively one, two and three years, so that by 1976 it will be into the full four years.
The existing averaging provisions deal with employee stock options, the sale of inventory and receivables, authors, and combined income and capital receipts, and may be used by individuals for tax years ending in 1972 and 1973. These are matters of detail. The present averaging rules covering recaptured capital cost allowance and incorrect inventory valuation will continue for individuals for the taxation years ending before 1976. Neither the new general averaging provision nor the transitional provisions are available to corporations which, under the present act, can average on certain of these items, such as recaptured capital cost allowance.
It is said that these rules are somewhat more generous than those proposed in the white paper, and to that extent I suppose they are an improvement. Mr. Chairman, it was very easy to improve on the white paper. May I say that I do not know who was responsible for all of these changes. I do not think the finance committee should take any credit here because, frankly, the moves in here are so elaborate and complicated that they go beyond the ken of the average member of this House to thread his way through them, and we would need the advice of tax consultants. So, while we recognize that some of the new sections are going to provide some benefits, all taxpayers should know that there are limits to them. Having said that, Mr. Chairman, I am quite prepared to accept the changes made, to the extent that they are an improvement over the white paper. They are not as generous as individuals might have wanted, but I think they are better than what had originally been offered.
In his statement today to the provincial finance ministers, the Minister of Finance indicated that undoubtedly there would have to be many amendments next year and in the following year to provide for inequities that might show up, and that in any event, if there were inequities that could not be corrected by changes in the Income Tax Act in the immediate future there would always be a form of relief that could be granted under the Financial Administration Act. From past experience, Mr. Chairman, I can say that holding out this hope of relief under the Financial Administration Act is almost like telling an individual he may be forgiven his sins providing he can climb up and see the Lord Almighty to get forgiveness.
November 2, 1971

Clause 1, section 118, agreed to.
On clause 1-section 119-Averaging for farmers and fishermen.


Gérald Laniel: Shall section 119 carry?


Robert Jardine McCleave: Mr. Chairman, this section deals with the averaging formula for farmers and fishermen, and it provides substantially what we have had in the law previously. But perhaps it would be useful to have on the record an answer to a question that I would like to present to the parliamentary secretary. I present this question for the reason that we have had some changes in the circumstances of fishermen, particularly as the result of the war against pollution. I am thinking more particularly of the swordfish fishery in my riding.
I suspect that the modifications that are presented to us are really so insubstantial compared with the former law that they are not worth elaborating on, but I would like to give the parliamentary secretary a chance to do that also. It might be helpful if he can indicate that there can be averaging for fishermen who suddenly find themselves in periods of loss because they are no longer allowed to carry out their trade, to go to sea to catch swordfish because of the mercury pollutant level that has been established in those fish. Perhaps they are being hurt by foreign trawlers in offshore waters, and the like. I think it would be worth while if the parliamentary secretary made a statement. I do not expect, a long one. I do not expect, if you will pardon the expression, a Newfoundland-type debate. However, I should like the parliamentary secretary to say something about the points I have raised.


Patrick Morgan Mahoney: Mr. Chairman, the only change is that the word "taxpayer" has been changed to "individual" in this particular section, as in another section; otherwise the purport of the section is the same. That is the only modification. The hon. member is quite correct in suggesting that fishermen may average down as a result of losses to their income from the causes he mentioned.
There is one point I should like to take under advisement, however, and that is his suggestion that perhaps a fisherman has completely left the fishing trade. I would not want to give an off-the-cuff answer on that point. For example, if as a result of problems in the swordfishing industry a fisherman has abandoned his occupation as a fisherman and has gone to work elsewhere, that is something we shall consider. I should like to take that point under advisement. However, so long as he is still a fisherman, certainly he can average down.


Robert Jardine McCleave: Mr. Chairman, so that we do not hold up the committee unnecessarily on this point, could we not agree that if the parliamentary secretary needs to examine some of the points I have mentioned in order to reply, that he be allowed to come back to these points and speak to them, and that otherwise the section be passed?


William Gordon Ritchie: Mr. Chairman, may I ask the parliamentary secretary a question about subsection (7) which relates to rents or trust income from farming or fishing? Does the wording of the subsection imply that that portion of a
Income Tax Act
trust income that arises from farming or fishing can be averaged?


Patrick Morgan Mahoney: Mr. Chairman, is the hon. member dealing with section 119?


William Gordon Ritchie: I am speaking on subsection (7) to be found on page 319 of the bill.


Patrick Morgan Mahoney: Mr. Chairman, this provision has been in the act from time immemorial. It is a relieving section and is to make sure that for purposes of averaging that type of income is farm income. I suppose this problem would relate quite closely to the problem I left up in the air when answering the hon. member for Halifax-East Hants. For example, if a farmer leaves farming but rents the farm to someone else, then that rental is considered as farming income and therefore can be averaged back against the years when he was in active business.


Gérald Laniel: Is section 119 agreed to?


Some hon. Members:: Agreed.
Section 119 agreed to.


Robert Jardine McCleave: Mr. Chairman, perhaps this section could carry, with the proviso I made that if the parliamentary secretary needs to reopen discussion on the points I raised, he be permitted to do so in order to deal strictly with those points.


Patrick Morgan Mahoney: Mr. Chairman, I will certainly clarify the points of the hon. member, and I agree that if we must reopen discussion on that part of the section, we will reopen it.
On clause 1-section 120: Addition to tax re income not earned in a province.


Marcel Joseph Aimé Lambert: Mr. Chairman, with regard to section 120 I want the parliamentary secretary to verify what is meant by the words "Addition to tax re income not earned in a province". Does that mean that if part of the income is earned in a province and part is earned in a territory, all the income shall be deemed to have been earned in Canada, or does this in some way say that the individual who has lived for a period in a particular province and then has gone out of the country and earned income for the balance of the year shall be assessed on the basis as though he had earned the income within the province?
I ask this question because section 120(1) provides that there shall be added to the portion of the tax that is payable under the federal portion an amount that bears the same proportion to 30 per cent of that tax that the amount of the income which is earned outside of the province bears to the total income. Does that not mean that if the income earned outside the province were 25 per cent of the total income, there would have to be added 7} per cent of the tax payable?
It seems to me that here we talk about the proportion that the income earned outside the province bears to the total income for the year. If that exteriorally earned income is 25 per cent of the total, then the portion of the

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Income Tax Act
tax with respect to that shall be 25 per cent of 30 per cent of the tax that is payable under the federal rate. I want to know whether I am correct in this assumption.


Patrick Morgan Mahoney: Mr. Chairman, the purpose of this provision is to impose an extra tax where there is some income not earned in a province. I suppose the most conspicuous case would be income earned in the Northwest Territories or the Yukon. This brings the tax back up to the general level as if one included provincial taxation. The additional tax corresponds with provincial taxes, and while they may be imposed they are not likely to be less than 30 per cent. That is why 30 per cent was chosen. I suppose the absence of an amendment on our part to change that figure to 30.5 per cent by reason of the points the hon. member raised earlier is very clear evidence of our intention to try to pass tax cuts at the federal level along to individual taxpayers.


Marcel Joseph Aimé Lambert: Mr. Chairman, I am not satisfied on that last point. I think there may have to be a change here in that since the guarantee is now to be at 30.5 per cent we may find ourselves using that figure. Be that as it may, the government may have agreed to the 30 per cent figure because it would be rather complicated to bring in an amendment providing for that extra one half of one per cent. Therefore the federal government may well agree to accept a shortfall in taxes resulting from the difference between 30 per cent and 30.5 per cent. That is quite all right.
I made some remarks last night with regard to subsection (2). The province of Quebec is the only province in which subsection (2) will apply, because this is a specific exception in the bill. Here is provided a deduction of 3 per cent of that portion of tax that is payable on and related to income earned in a province, and is with regard to the provision of schooling allowances. I suppose that 3 per cent to cover the schooling allowances of the province of Quebec is introduced in lieu of the youth allowances program which is an extension of the family allowances program that exists in all the other provinces. Perhaps the parliamentary secretary could confirm whether my understanding is correct in this regard.


Patrick Morgan Mahoney: Yes, Mr. Chairman. The hon. member's understanding is correct.


Gérald Laniel: Shall section 120 carry?
Clause 1, section 120, agreed to.
On clause 1-section 146: Definitions.


Gérald Laniel: The question is now on the amendment moved by the Minister of National Revenue for the Minister of Finance. It is found at page 8955 of Hansard for October 22. The amendment reads as follows:
The French version of section 146 as set forth in clause 1 of the said bill be amended by striking out lines 31 to 33, on page 397 and substituting the following:
"b) a titre de cotisation a une caisse ou a un regime enregistre de pensions ou en vertu d'une telle caisse ou regime enregistre,"


Patrick Morgan Mahoney: Mr. Chairman, this amendment to the French version only is simply to change the wording used to describe a registered retirement pension fund to make it conform to language used in other parts of the bill.
Amendment (Mr. Benson) agreed to.


Gérald Laniel: Shall the section as amended carry?


Robert Jardine McCleave: Mr. Chairman, I indicated to the parliamentary secretary that I have a question arising out of paragraph 9 on page 395. That paragraph concerns events in the taxation year and provides:
Where in a taxation year a trust governed by a registered retirement savings plan
(a)	disposes of property for a consideration less than the fair market value of the property at the time of the disposition, or for no consideration, or
(b)	acquires property for a consideration greater than the fair market value of the property at the time of the acquisition-
These appear to be rather puzzling events. They seem to indicate transactions not really taking place at arms length but where someone operating within several companies, one of which is operating a registered retirement savings plan, is disposing of property at a considerable loss or disposing of the property and making artificial adjustments or getting much more than it is worth. Perhaps I have simply restated my puzzlement. I ask the parliamentary secretary exactly what we are trying to do here. I notice that this is a new provision added to the law.
I also have another question which involves a substantial number of people, particularly employees of Simp-sons-Sears and similar organizations. Perhaps in the few minutes remaining before six o'clock the parliamentary secretary would again state the changes proposed in this section and the next, particularly the section that deals with registered retirement savings plans. I think the answer to my question and a general statement on the government's philosophy would be helpful to us.


Patrick Morgan Mahoney: Mr. Chairman, section 146(9) is part of the new rules concerning the investment operations of a trust for retirement savings plans. As the hon. member has said, it requires that amounts shall be included in the income of the annuity under a plan where the trust property is sold for less than its value or greater than its value. It is assumed that such a situation would only arise where there was a non-arms length transaction, if not between the trustee and the person who is buying and selling then certainly a non-arms length relationship between the annuitant and the person from whom the trustee was buying or selling. The intent is to prevent a trustee using the plan to confer a benefit on the annuitant or someone named by him and thus perpetuating a tax avoidance.


Robert Jardine McCleave: I thank the parliamentary secretary for the explanation. I cannot see any reason why we should not have such a provision in the section to prevent abuses. With regard to my other question, perhaps the parliamentary secretary could be a little more general and give the committee and the country, through Hansard, an explanation of the one or two proposed substantial changes that are being introduced with regard to registered retirement savings plans.
November 2, 1971


Patrick Morgan Mahoney: Mr. Chairman, the particular question regarding the Simpsons-Sears plan actually arises under section 147. However, I suppose it is appropriate to deal with both of them at the same time because the registered retirement savings plan is very similar in scope. The general rules for these plans have not been changed but the contribution limits have been increased. Rules are added to govern the investments that may be made by the trust, and so on. We were talking about one of those rules when dealing with subsection (9). Also, the present special tax treatment for a return of contributions on death is cancelled.
The definitions in this subsection are the same as in the present subsection 79B(1) except that definitions have been added for non-qualified investments and qualified investments. We will get to them when we reach section 204 in this group of sections. Trusts for plans in existence will not be required to dispose of non-qualified investments that they now hold. The non-qualified investments are defined in paragraph (l)(e) of section 146 as property acquired by the trust after 1971.
Transitional clause 61 in part III of the bill, at page 695, provides that property acquired after June 18, 1971, and before January 1, 1972, be deemed to have been acquired by the trust on January 1, 1972. Only investments by trusts for retirement savings plans come under the new rules. It is possible to have a non-trustee plan in such a case when dealing with a licensed annuity company, an endowment insurance policy or something of that nature which as long as it is issued by a corporation approved by the governor in council as a seller of investment contracts. That type of non-trustee plan is not subject to this particular problem.
The complaint of Simpsons-Sears and similar organizations concerning deferred profit-sharing plans under section 147 relates to the taxation of lump sum withdrawals. The old formula for taxing such a lump sum was contained in section 36. That was one of the special averaging positions that the hon. member for Edmonton West was discussing a few moments ago. That is replaced in the new bill by the general averaging provision which the committee has just adopted.


Stanley Howard Knowles: Mr. Chairman, my question to the parliamentary secretary is one in the course of which I shall ask him about certain relationships. For example, we have on the federal statute books the Pension Benefits Standards Act and there are similar pieces of legislation on the statute books of some of the provinces. I believe most of these statutes run more or less parallel. I should like to know whether the requirements laid down in this section with respect to registered retirement savings plans meet the conditions spelled out in the statutes to which I have referred.
At the same time, could the parliamentary secretary tell us what the relationship is between this statute and the Blue Book-at least it used to be called that. I think the colour has changed, and instead of its being put out by the Department of National Revenue it is now put out by the Department of Insurance. In other words, this is a question about relationships. Do these things all hang together?
Income Tax Act


Patrick Morgan Mahoney: Do I understand the hon. member to be referring to the investment discretion left to a trustee under the Pension Benefits Standards Act or are we talking about vesting provisions and various other items which require that a pension be fully vested within a limited period?


Stanley Howard Knowles: I am directing my question to the general requirements in the Pension Benefits Standards Act. It is in relation not to any specific subsection but to the whole of section 146.


Patrick Morgan Mahoney: The registered retirement savings plan is, of course, a man's own pension plan. It is fully vested. The money which goes into it is his own. Thus, the provision in the Pension Benefits Standards Act which requires employers' contributions to be vested in certain minimum periods of time does not apply. There are no provisions in this bill which would be parallel to the type of provision to which the hon. member has referred.


Stanley Howard Knowles: In other words, it is correct to say we have now reached a stage at which control over pension plans generally is not through the medium of the Income Tax Act but more directly through the Pension Benefits Standards Act and similar legislation in the provinces?


Patrick Morgan Mahoney: That is correct. Of course, the Pension Benefits Standards Act applies only to those to whom the Canada Labour Code applies. I suppose most of the other 95 per cent of employees in Canada are affected by the provincial legislation which I understand to be uniform throughout the country.


Stanley Howard Knowles: And this bill applies to all taxpayers.


Patrick Morgan Mahoney: That is correct.


Marcel Joseph Aimé Lambert: I have a number of questions to ask with regard to this section, which is a lengthy one and extremely complex; as a matter of fact, it covers some ten pages of the text of this bill. I think I shall approach them seriatim from subsection (1) onwards.


Stanley Howard Knowles: Why not call it six o'clock?


Marcel Joseph Aimé Lambert: May I first refer to subsection (l)(g). What is a qualified investment? The parliamentary secretary, at my request, met with a delegation from the British Columbia Teachers' Federation who put forward a brief on behalf of members of the federation and members of the Alberta Teachers' Federation who participate in a registered retirement savings plan covering some 3,500 members. The funds are invested in a credit union which then lends the money to teachers in remote areas of British Columbia to provide them with housing accommodation and certain other amenities. There is a considerable fund of money invested in these particular notes and this is the only way in which the result I have mentioned can be achieved. Actually, such credit union notes do not qualify for acceptance under the definition of what is known as a qualified investment.
I want to know what consideration has been given to the proposal put forward by the teachers. Is there to be any
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undertaking given that an appropriate regulation will be passed under subparagraph (iv) of paragraph (g) or is this whole program-a very laudable one designed to bring about a result which cannot be achieved in any other way-to be knocked on the head?
I do not know why it has been assumed that these teachers could produce, out of thin air, housing for themselves in remote areas of the constituency of the hon. member for Comox-Alberni, for instance, or of the hon. member for Skeena where normal lending agencies, including Central Mortgage and Housing Corporation, declined to lend money for the building of homes for teachers. Out of sheer necessity the teachers have formed this co-operative, and the only way in which the co-operative could get funds was to obtain them on the basis of notes provided through a registered retirement savings plan.


An hon. Member:: Six o'clock.
At six o'clock the committee took recess.


[Stage Direction]
AFTER RECESS

The committee resumed at 8 p.m.
Gérald Laniel: Is the committee ready for the question?


Patrick Morgan Mahoney: Mr. Chairman, the hon. member for Edmonton West is just arriving.


Marcel Joseph Aimé Lambert: Mr. Chairman, I apologize to hon. members but there is a thing called a slow elevator around this place and I took one. I think the hon. member for Kamloops-Cariboo should be talking about the particular matter about which I am going to speak because there are many teachers involved. At six o'clock I was talking about section 146(l)(g) which has to do with qualified investments under registered retirement savings plans. I was indicating that the B.C. Teachers' Federation had a supplementary pension plan whereby funds were paid into a national trust company under the trust plan and were then transferred to a credit union run by the B.C. teachers under the security of a note. These funds were then used by the borrowers, the teachers, to build homes in central and rural areas of British Columbia.
Some 1,250 teachers participate in this registered retirement savings plan in British Columbia, and there are 72 in Alberta as of July 1, 1971. The amount invested in the fund at that time was $1,650,000. The plan is designed to enable members of the plan to designate at the time of subscribing to the plan and at annual intervals thereafter the amount to be contributed to each of the investment income sections and the equity section. Funds contributed to the investment income sections are paid over to the trustee who is free to invest in notes of the B.C. federation and co-operative association so long as the association is prepared to receive them at current rates.
Under the new section that describes what is a qualified investment the notes signed by the teachers' federation co-operative are not qualified. They will not be covered by this section unless some change in the bill is made by the

government so as to include this type of investment under the heading of "qualified investment". The government can either make a specific amendment to this effect or utilize the provision contained in section 146(l)(g)(iv) which provides:
-such other investments as may be prescribed by regulations of the Governor in Council made on the recommendation of the Minister of Finance-
The plan to which I have referred provides a supplementary pension for the teachers, most of whom are within ten or 15 years of retirement and want to supplement their pensions with a savings plan. They started teaching at a time when teachers' salaries 'were very low and therefore the contributions to and interest in their pension plans are rather slim.
I think the teachers have done a very fine job, not only on their own behalf but also in providing credit funds for building homes and other facilities for teachers in outlying areas where no other credit facility will venture. Central Mortgage and Housing Corporation will not go to these areas, the banks will not go and the conventional insurance companies will not go. It seems to me it would be a tragedy if some rather too rigidly drawn provision- which, by the way, is an amendment to the Income Tax Act-should knock this completely on the head.
I have been talking to the solicitors representing the teachers' federation and co-operative, and they have not been able to devise any other way whereby the form of security is one that would qualify under the presently enumerated paragraphs of section 146(l)(g). Therefore I make this plea to the parliamentary secretary, and through him to the minister, that since the teachers' federation have presented their case to the government, the government should be able to decide now whether this will be allowed to go forward.
I also want to make reference to section 146(2) which deals with the acceptance by the minister of registered retirement savings plans. It seems to me that in the past an almost scandalous situation has existed whereby the Minister of National Revenue and his officials have held plans in abeyance for a long time. I want to know whether this situation has now been cleared up and, if so, under what conditions. Or am I confusing this with some other type of plan?


Patrick Morgan Mahoney: Pension plans.


Marcel Joseph Aimé Lambert: Then that is fine; I shall withdraw my comments in that regard. But what I am concerned about is this: In the case of non-acceptance by the minister, what recourse does an individual have? Does he have any appeal if certain steps are taken? Surely it would not be to the Tax Review Board-but would an appeal lie to the Federal Court? Perhaps the parliamentary secretary would consult his officials, who have much more detailed knowledge of this legislation, and tell us what is the situation. After all, subsection (2) provides:
The minister shall not accept for registration for the purposes of this act any retirement savings plan unless, in his opinion-
This is great, because it is tied to the opinion of the minister and his ability to exercise discretion as to adherence and compliance with certain requirements laid out in
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the section. I should like to know what recourse an individual or a group of individuals might have who want to qualify a bona fide registered retirement savings plan which the minister or his officials have deemed not to comply with the subsection. To some extent the same thing would apply to subsection (3) where we find the words, "The minister may accept", and so on.
Let me turn to subsection (5) and again ask for an explanation from the parliamentary secretary. While there is a modification here, I should like him to confirm that the date February 28 is still the operative date in respect of any registered retirement savings plan. If an individual wishes to exercise his option during the first two months of 1972, can he qualify for a registered retirement savings plan for 1971 and be entitled to deduct the appropriate contributions made in 1971 from his net income before arriving at his taxable income?
Then I should like an explanation of subsection (6). What can be done for the disposition of non-qualified investments? May I say here that I have run into problems where a taxpayer has changed his or her mind regarding a registered retirement savings plan. The contribution was put forward but the deduction was not made on the income tax return. As a result of misunderstandings we do encounter situations where an individual may be chastised, or it may be put to the taxpayer that he furnished improper information in the return. I suppose every case depends on the circumstances. In any event, I should like a full explanation of subsection (6).
We then have a whole series of new subsections-(9), (10) and (11). I should like an explanation from the parliamentary secretary in respect of these. This section has 16 subsections, but many of the others are carried forward from the present act and I need not go into them in detail or get explanations in that regard.


Mr. Hogarth:: Mr. Chairman, I should like to reply briefly to the remarks of the hon. member who has just spoken in respect of the position of the B.C. teachers regarding section 146(l)(g). As the hon. member has suggested, the B.C. Teachers' Federation sent representatives to Ottawa to meet with all persons concerned, including the B.C. caucus, to discuss problems which have arisen pertaining to the provisions of section 146.
As I understand it, the Parliamentary Secretary to the Minister of Finance will be commenting on this matter shortly. But as I understand it, the government is extremely sympathetic to the views of the B.C. teachers who have a particular form of investment which, as it now stands, offends the provisions of the bill before this House. Theoretically, we should move to amend the act in order to correct this deficiency. However, the B.C. caucus in unanimity has taken up the problem with the Minister of Finance, his parliamentary secretary and officials of the department and we are assured that by virtue of the provisions of section 146 regulations will be passed to accommodate the peculiar position of the B.C. teachers pertaining to their investment in their retirement savings plan.
We ask, as the hon. member for Edmonton West has asked, why it is that we do not move to amend the act? The government's position and the position of the B.C. caucus is precisely that any move to amend the statute at
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this stage would pro.bably accommodate many other situations which offend the substance of the provisions we are considering in section 146 and would permit further tax avoidances which section 146 as it now stands is designed to prevent.
There is no doubt in the minds of the B.C. caucus that the government will be moving more or less with the passage of this act to provide by regulation-


Marcel Joseph Aimé Lambert: What is the B.C. caucus?


Stanley Howard Knowles: What group is this?


Douglas Aird Hogarth: As far as we are concerned, the B.C. caucus is made up of government members on this side of the House. The government will be moving by regulation to accommodate this organization and such other organizations in the country that can show themselves to be bona fide and within the purview and substance of this particular provision of the bill.


Marcel Joseph Aimé Lambert: It is very touching to note that there is a sub-party or sub-group in this House which seems to have taken up the cudgel. It is quite proper that B.C. members should do that. I, too, met with the B.C. teachers. It came to my attention, through another source, that they were down here to see me. I did speak about this on a previous occasion, and that possibly inspired the hon. member to make some inquiries.
I must say the suggestion that the government will pass regulations governing this and other bodies, if they can show they are affected in the same way, is one thing. But this does not deal with the problem of individual members of the teachers' federation who want to know whether they should continue making payments into the retirement savings plan. They want to know now, not six months hence. They are not interested in the suggestion that in the normal course of events-and that is very slow when it comes to the Department of Finance and the Department of National Revenue-regulations will be passed permitting these people to go forward.
Since their plan was registered, legal and in existence, nothing should be done now by bringing in an amendment to the act which would nullify the present plan and its arrangements. It is perfectly bona fide, and surely to goodness the 1,200 or more members in this savings plan are entitled to an answer now. I trust the parliamentary secretary will give an answer, or at least an undertaking to answer. I do not want to indicate the name of a particular official because he is not in a position to answer in this House, but he is here and has had a good deal to do with this. At the committee hearings he would be questioned by me and other members.
This question goes back many months. I am sure there is good will all the way but I am concerned about the time element and what the people who participate in this plan are to be told. What are they to do? Are they to suspend their payments? After all, they have an obligation under their contract with the trust company. Would they place themselves in default, and would their contract be in
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default if they did not make the payment? This is a question which must be answered.


Mr. Pringle:: Mr. Chairman, I should like to say a few words with respect to this section. I believe the hon. member for Edmonton West has missed the main point made by the hon. member for New Westminster. While we are all in sympathy with the predicament in which the B.C. Teachers' Federation retirement savings plan is involved, we have all been well briefed and have thoroughly discussed this matter on behalf of the teachers' federation. We must also realize that by virtue of the fact that it is a change or a departure from a previous list of the type of investment which can be accepted by the Minister of Finance, there are also such organizations as the B.C. central retirement savings plan and there will be others.
With regard to the time element, I think we all understand that the proclamation of the bill will not be made on the day the bill is passed. This will give the Minister of Finance plenty of time in which to hear submissions from various other organizations. I am quite confident that the B.C. Teachers' Federation would be sympathetic to similar types of organizations in other parts of Canada which may have within their organizations the criteria to obtain agreement from the Minister of Finance that a change should be made and that they should be included as well. I think this is the vital and important feature to be considered.
Amendment of the bill on behalf of the B.C. Teachers' Federation retirement savings plan would be acceptable, I presume, so far as we are concerned. It certainly would be so far as I am concerned and so far as my colleagues are concerned. We feel, however, that the more appropriate way would be to provide them with the necessary legislation through regulations subsequent to the passage of this bill. Therefore, I would support my colleague from New Westminster and I should like to assure the B.C. Teachers' Federation that we certainly feel, after exhaustive examination and discussion, that this is a better method by which to bring about a solution to the problem and to provide them with the necessary machinery so that they will be able to carry on without any problems in the interim. I would therefore hope we can continue on that basis on behalf of the federation.


Mr. Anderson:: Mr. Chairman, I shall be brief because the hon. member for Edmonton West, the hon. member for Fraser Valley East and I all heard the same representations from what one might call, in all kindness, a very good lobby group and we might all say much the same thing. The question of the slowness and the uncertainty which has been raised is something which hits just about every other group affected by this section.
Candidly, I cannot see that it is a serious objection. I should like to point out that the particular plan we are talking about is one which is financed out of the pockets of the teachers who contribute. It is not the situation of a company or its employees contributing to a fund which they in turn-although they call it a retirement fund-use for the purpose of the business of the company. This is not a device to do something outside their control; it is a legitimate way of protecting themselves for the future, after retirement. I am sure many members know that

until very recently the provisions for the retirement of teachers in British Columbia and Alberta had been very poor.
The hon. member for Fraser Valley East raised the point that the British Columbia central retirement savings plan, which is substantially the same as the B.C. Central Credit Union, has exceptions in respect of the regulations for the British Columbia teachers. Will those exceptions apply in a generic sense to other organizations just the same as to the British Columbia central retirement savings plan and other such schemes?
I quite agree that the government is correct in its attempt to plug the hole in the income tax regulation whereby it is possible to put money into a retirement savings plan, lend it back and have it used by the company and thus be a device by which to get around the tax law. In at least these two instances, however, I feel the people have acted in good faith in setting up such a scheme.
I should like to know exactly what the proposals are in respect of the regulations and whether not only these two but similar organizations might be involved. While we have talked consistently about the B.C. teachers' retirement pension plan, there is a similar plan in operation in the province of Alberta. This is not strictly a matter of personal interest to British Columbia, in my opinion: we are dealing with an issue which is general to the country at large. I promised to speak briefly, Mr. Chairman, and I trust I have done so.


Robert Phillip Kaplan: Mr. Chairman, I should like to add a word of dissatisfaction on my own part with the way in which the government proposes to deal with deferred profitsharing plans which are in effect, which have been in existence and under which in many cases very considerable contributions have been made. Under the present law a deferred profit-sharing plan is an extremely attractive way in which to save for retirement. The employee of a company makes contributions and at retirement, under the present law, he has been able to draw out the substantial sum that has been built up during his working career and invest it in a small business. In the case, for example, of the Simpsons-Sears deferred profit-sharing plan, this is frequently done.
The proposals in the bill before us permit continued favoured treatment to the pay-out provided that the retiree invests his savings in a pension. If he continues to do what has been traditional in the past, that is, if he takes the money out and invests it in a business or in other capital assets, it is taxed at an extremely heavy rate compared to the previous treatment it enjoyed. I would ask the parliamentary secretary to the Minister of Finance to give consideration to the possibility of permitting this continued favourable treatment for investments in preferred profit-sharing plans, especially when the assets are withdrawn and used for investment in the capital assets of a business.
It is one thing for someone who has saved all his working life in a deferred profit-sharing plan and who retires, draws the money out and spends it on improving his home or in some other form of consumption, say in retirement
November 2, 1971

travelling or making gifts or something of that nature, but it is another where a person continues to invest the money but rather than investing it in an annuity he invests it in a small business or in a capital asset. For these people there are ways of providing a more equitable tax treatment.
The parliamentary secretary will recall the days when the finance committee operated and a number of methods of achieving this result were put forward. I proposed one myself and I am disappointed that it was not possible for the minister, in the bill which he proposed, to consider this important situation. I hope that the parliamentary secretary will not inform me that all hope should be abandoned, because if that is the case it will be a grave setback to the deferred profit-sharing plans of many corporations which have been of great benefit to the country.


Mr. Thomson:: I have a question for the parliamentary secretary. Has he received many representations regarding the particular item mentioned by the hon. member for Don Valley?


Patrick Morgan Mahoney: I should say that the only representation I have received on this particular item has been from the Simpsons-Sears deferred profit-sharing plan. However, that is a personal answer and does not necessarily reflect the representations that may have been received either by the minister or by the Department of Finance. I am afraid I do not have an assessment of what the volume of representations may have been in that respect.


Roderick J. (Rod) Thomson: The question which I intended to ask was whether there were many companies that had this type of plan. Logically, if a great many companies had this type of plan, maybe they should receive general consideration. I wonder if the government has looked at this question to see whether they might give more equitable treatment to these employees.


Patrick Morgan Mahoney: Of course, the problem here is not only one of more equitable treatment, but perhaps I will deal with that when I have an opportunity to respond to the various general representations that have been made. There are a number of companies, probably a couple of dozen-I am reminded of Dofasco, the Dominion Foundry and Steel Company-that have this type of set up, as well as Simpsons-Sears and one or two of the oil companies in my own area; and there are a few others.
It is not a plan that is widely used in terms of the business community, but where it is used it is certainly one to which the people who have implemented it seem to have a very deep attachment. The problem that arises here and to which they are really objecting is the substitution of the current very favourable averaging provisions under section 36 of the present act on some payments taken out of the deferred sharing plan. Section 36 will continue in effect under the new tax regime for contributions made up to the end of the current year, but for contributions made in 1972 and beyond, the general averaging provisions which the committee approved earlier today will apply and the favourable averaging provisions under section 36 will be replaced by those provisions.


Thomas Clement (Tommy) Douglas: Mr. Chairman, I rise for the purpose of asking the parliamentary secretary whether he will comment on the matters which have been raised with respect
Income Tax Act
to the B.C. teachers' retirement plan. I do not think there is any necessity to repeat what has already been put before the parliamentary secretary. We would like to know what amendments he would be prepared to move or to accept, particularly with reference to the one point at issue in section 146(g), or whether there is some way under the regulations by which he proposes to deal with the situation which has been described-because there is no doubt that in section 146(g) the government is trying to prevent some of the abuses that have taken place.
There is always the possibility of a retirement plan being used to benefit the members in some way other than just for retirement purposes. But I think it is fairly clear from all the data which I have seen and from discussions with those who are interested in this plan that the B.C. teachers' retirement plan has not been used to benefit the members directly but has become a co-operative that has made it possible for teachers all over B.C. to borrow money to build houses. The advantage has been that the interest rates are fair and reasonable.
More important, the interest rates are uniform across the province, with the result that a teacher in Tofino can borrow money at the same rate as a teacher in Vancouver or Burnaby. This has been very helpful in providing housing accommodation for teachers all over the province of British Columbia. I do not need to labour the point; I am sure the minister is familiar with it. I understand that the representatives of the B.C. teachers' retirement plan discussed the matter with the parliamentary secretary and received a very sympathetic hearing. My reason for rising was to ask the parliamentary secretary whether he has reached any conclusion regarding how this problem might be resolved.


Patrick Morgan Mahoney: Mr. Chairman, I certainly did not intend to avoid responding to this question. However, it seemed to me that there was a certain amount of home cooking going on around the chamber and I wanted to give all hon. members who wished to get their cases on the record an opportunity to have their say before I answered. However, if no other hon. members wish to discuss this point I shall be delighted to deal with it now.
The B.C. central retirement savings plan, which is the creature of the B.C. Central Credit Union, and the B.C. Teachers' Federation retirement savings plan, which operates through the B.C. Teachers' Federation Co-operative Association, both made very persuasive arguments to the government in respect of the problem with which they are confronted-the intervention at this point of the sections defining qualified investments. There is no question that the method by which these organizations have invested up to this point their extra pension funds-and of course this is over and above the statutory pensions with which B.C. teachers are provided in the ordinary course of events by the school boards, and so on-is not at present, under the bill before us, an authorized investment. The hon. member for Edmonton West described that rather fully so I will not reiterate what he said.
Hon. members have noted that the reason for defining qualified investments is to prevent the eventuality of a taxpayer who has deferred taxation as a result of the provisions of the tax bill that permit retirement savings to be accumulated tax free and tax deferred until the bene-

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Income Tax Act
fits are drawn out to somehow or other filter back and become available for the personal use of the taxpayer or of people who are not at arms length with him. So there are some general rules provided in the bill that will govern that situation.
There is provision in section 146(l)(g)(iv) for the Governor in Council, on the recommendation of the Minister of Finance, to prescribe by regulation additional types of investments to those specifically enumerated or referred to in the section. It is the intention of the Minister of Finance to recommend to the Governor in Council that regulations be adopted which will effectively solve the problem of the two bodies with which we are concerned.


Some hon. Members:: Hear, hear!


Patrick Morgan Mahoney: I am not in a position at this point to give the details of those, but I am sure the criteria will involve the number of members of the credit union and perhaps even the longevity of such a credit union before it starts to offer its securities for this purpose. However, I can give the assurance to hon. members-there have been representations from all sides of the House and in particular, I am reminded, from the B.C. caucus, whoever they may be-that I am sure when the recommendations are made public the organizations concerned will be satisfied. I am also conscious of the problem that the hon. member for Edmonton West emphasized, of the necessity of these organizations to know now that their investment policies will not be proscribed in the future. I am pleased to have the opportunity to give that assurance, and I hope they will now be able to proceed with an easier mind.
Hon. members have raised other matters in the course of the debate. I think that in responding to the specific questions of the hon. member for Battleford-Kindersley I perhaps answered the hon. member for Don Valley as well, in dealing with the rather specific problems that were raised by the Simpsons-Sears deferred profit-sharing plan management, among others. I am sorry the answer is not more favourable, but the proponents of that plan and of other profit-sharing plans have presented their case very eloquently to the Minister of Finance and to the department.
I can assure the House that there is no retroactive penalty or effect in the provisions of the bill with respect to those plans, but for future contributions beyond the end of the current year the general averaging provisions, rather than the very favourable averaging provisions which pertain under section 36 of the present act, will apply. The general averaging provisions are not in fact as advantageous to the taxpayers as those special provisions are in the case of lump sum withdrawals from deferred profit-sharing plans.
The hon. member for Edmonton West has raised a number of specific questions involving subsections (5), (6), (9), (10) and (11).


Marcel Joseph Aimé Lambert: And subsection (2).


Patrick Morgan Mahoney: And subsection (2). I am getting a little confused, as we call "bingo" here, with the subsections of section 146. I will deal with these seriatim as well. So far
as subsection (2) is concerned, this is the same as the present subsection 79B(b). This subsection, together with subsection (3), describes the requirements to be met by a plan if it is to be accepted for registration by the Minister of National Revenue. The plan must provide that the proceeds be taken as an annuity for life. The whole purpose of retirement savings plans is to provide for those who cannot become members of a pension plan, or people who have an inadequate pension plan, to defer tax on amounts set aside for retirement income. For this reason the rules concerning these plans, and in particular the rules about the use of proceeds, are designed to be comparable to the rules under which pension plans operate. With respect to subsection (5)-


Marcel Joseph Aimé Lambert: Mr. Chairman, the particular point I raised was not so much questioning the regulations or requirements of the plan but what provision is there if there is an honest difference of opinion? Is it the minister's decision that is final, and where do we now turn, if at all, for any particular type of appeal? Here I am relying on the encyclopedic knowledge of the officials.


Patrick Morgan Mahoney: I would refer the hon. member to section 172(3). If when he has perused that he has further questions, I will be pleased to answer them or try to answer them. Dealing with subsection (5) this, again, is the same as the present provisions of the bill in subsection 79B(5), except that the limits on the amount of a premium that may be deducted from income have been increased. The new limits are, first, where the individual is a member of a registered pension plan to which contributions are made by an employer, an amount that when added to the amount deducted by him for the year of the pension plan contribution does not exceed the lesser of $2,500 or 20 per cent of his earned income, and where the individual is not a member of a registered pension plan, the limit is the lesser of $4,000 or 20 per cent of his earned income. The present limits of $1,500 and $2,500 are replaced by the limits of $2,500 and $4,000 to which I have referred. No change has been made with regard to the limit of 20 per cent of earned income.
With respect to subsection (6), Mr. Chairman, this is part of the new rules for the investment of trust and other savings plans. It provides relief for the penalty imposed for non-qualified investment. This should be read in conjunction with subsection (10) which requires that the cost of a non-qualified investment made by a trust should be included in the income of the annuitant. Where a trust disposes of a non-qualified investment an amount equal to that amount included in the purchase cost may be deducted from the annuitant's income. If a non-qualified investment is disposed of for less than cost, then only the proceeds of disposition may be deducted.
With respect to subsection (9), again this is part of the new rules. It requires that the amounts shall be included in the income of the annuitant under the plan where a trust sells trust property for less than its value or buys property at greater than its value. I think I dealt with this matter at greater length in response to a question by the hon. member for Halifax-East Hants. One would not ordinarily expect such an eventuality to arise except in transactions that were not at arms length, and this to

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avoid a tax deferred income to people with whom the annuitant is dealing on a non-arms length basis.
Subsection (10) imposes a penalty where a trust governed by a registered retirement savings plan acquires a non-qualified investment or uses trust property as security for a loan. The penalty is an amount equal to the cost of the non-qualified investment or the value of the property used as security, and requires that it be included in the income of the annuitant under the plan. And, as I mentioned earlier, that should be read in conjunction with subsection (6).
Subsection (11), again, is part of the new rules concerning investments of a trust for retirement savings plans. The definition of qualified investment for retirement savings plans does not include life insurance contracts, but this will permit a trust to hold certain kinds of insurance contracts. The policies described are the same as those which may be held by a trust for a deferred profit-sharing plan as described in section 198(6) of the bill. The cash surrender value must not be less than the amount insured at a certain time before the seventy-first birthday of the insured person.
I think, Mr. Chairman, that I have responded to the specific questions which have been asked. If I have missed any, I welcome reminders from hon. members opposite.


Thomas Clement (Tommy) Douglas: Mr. Chairman, may I ask the parliamentary secretary a question? I know that those who are interested in the B.C. teachers' retirement plan will be most appreciative of the statement just made by the parliamentary secretary. There is no doubt that this question can be dealt with much more expeditiously by regulation than by a complicated amendment here. Is the parliamentary secretary in a position to make any commitment that such a change in the regulations will be made almost immediately after the act is proclaimed, in order that there may not be any gap in time during which the matter of investments could be called in question?
If there is any hiatus in that regard, serious legal complications could result. If the parliamentary secretary could give me an assurance in this regard it would ease the minds of those who are concerned about this matter.


Patrick Morgan Mahoney: Mr. Chairman, without being able to say when the provision will be promulgated by the Governor in Council, I can assure the hon. member that its terms will be such that no gap will exist.


Mr. Knowles (Norfolk-Haldimand):: Mr. Chairman, I rise to ask the parliamentary secretary whether he thinks that the legislation respecting profit-sharing plans will have the effect of phasing out this type of arrangement between employer and employee. I ask this question because I feel that this type of arrangement with the employees of certain companies has gone a long way toward maintaining excellent employer-employee relations and has worked to the benefit of both employer and employee. I wonder if the people who have such profitsharing plans are satisfied with the legislation. In fact, I know they are not completely satisfied. Does the parliamentary secretary think that those people can live with
Income Tax Act
the legislation, or will it have, as might be suggested, the effect of phasing out such arrangements?


Patrick Morgan Mahoney: Mr. Chairman, it should not have that effect and I do not think it will have that effect. I believe the effect will be this: it will treat this type of plan, which is a method of providing for retirement savings, in exactly the same way as it treats other methods of providing for the same eventuality. Both registered retirement savings plans and pension plans will be so treated. Lump sum payments with respect to those plans will be treated in a similar fashion rather than being given the extremely favourable treatment under section 36 of the present act.


Marcel Joseph Aimé Lambert: Mr. Chairman, the parliamentary secretary referred me to section 172(3). Most of us are not familiar with this part of the bill because these are entirely new sections. I notice that that section comes in a total block dealing with the Tax Review Board and the Federal Court of Appeal, and therefore any commentary on these matters ought to be made when that section is considered. This is a very convenient block which I hope we will get to before too long.


Robert Jardine McCleave: Mr. Chairman, I would ask a short question that arises out of a phrase on page 390, subsection (2)(a)(i), which provides:
(a) the plan does not
(i) provide for the payment of any benefit before maturity, except by way of a refund of premiums-
My question arises out of that phrase and may interest the B.C. teachers, among others. Since this is rapidly becoming a country of nomads in which people cross provincial boundaries, my question is pertinent. A person may work for a short while as a teacher in British Columbia, Nova Scotia or what-have-you and then move. All that person can look for, I take it, will be a return of premiums paid with respect to this plan. I take it that the language of this subsection means that he cannot get interest on the money that is being applied to these savings plans and that after letters are exchanged back and forth that person may get his money returned without any other benefit or interest. In other words, he merely gets a straight cash return. Am I correct in assuming that?


Patrick Morgan Mahoney: Mr. Chairman, the word "premium" and the phrase "refund of premiums" have rather unusual meanings in this section. I would refer the hon. member to the definition section contained in subsection 146(l)(f) in the case of "premium" and to subsection 146(l)(h) in the case of the definition "refund of premiums". Essentially, however, the hon. member is correct. The plan, to qualify, must provide that the proceeds will be taken as an annuity for life, and the only thing that the member may get back is his contribution.


Gérald Laniel: Is the committee ready for the question? Shall section 146 as amended carry?


Some hon. Members:: Agreed.
Clause 1, section 146, as amended, agreed to.
On Clause 1-section 147: Definitions


Gérald Laniel: The committee will now proceed to consideration of section 147. The Minister of National

November 2, 1971
Income Tax Act
Revenue, for the Minister of Finance, has moved an amendment to section 147, at page 408 of the bill, which reads:
That the French version of section 147 as set forth in clause 1 of the said bill be amended by striking out line 14 on page 408, substituting the following:
contribuable etait un employe qui etait un beneficiaire en vertu'
Shall the amendment carry?
Amendment (Mr. Benson) agreed to.


Gérald Laniel: Shall section 147 as amended carry?


Some hon. Members:: Agreed.
Clause 1, section 147, as amended, agreed to.
On Clause 1, section 204: Definitions


Gérald Laniel: The committee will now proceed to study the last section of this grouping, section 204 at page 490 of the bill. Shall section 204 carry?


Marcel Joseph Aimé Lambert: Mr. Chairman, I should like to make a suggestion with regard to this part, even though I have not consulted my colleague for Halifax-East Hants. This section really forms the last part of the series that starts with section 198 with regard to taxes on deferred profit-sharing plans and revoked plans. Actually, this is the last part of part X of the bill. It seems to me that consideration of this part ought to be deferred until we deal with this matter in the bill, because in that way debate could be much more cohesive and manageable.
I am sure that when we come to section 198 the hon. member for Don Valley will be interested in making some observations because we shall be dealing with deferred profit-sharing plans. There are some changes and modifications in that area of the bill. It seems to me that in this circumstance we could move directly to section 9 which is the opener of the next series.


Patrick Morgan Mahoney: Mr. Chairman, in view of the small change contained in part X, I wonder if that whole part could not be dealt with at the same time. There is not much in it.


Marcel Joseph Aimé Lambert: I want to have a look at that, Mr. Chairman.


Stanley Howard Knowles: Mr. Chairman, I think it might be better to accept the suggestion of the hon. member for Edmonton West. Section 204 was obviously omitted from the long list that was read today, because it was already in the grouping we are now considering. I suggest we could agree to transfer section 204 to the other grouping, after consideration of section 203.


Gérald Laniel: Am I to understand that the suggestion of the hon. member for Winnipeg North Centre is that section 204 be grouped with the numerous sections which will be studied next Friday along with sections 200, 203 and 205?


Stanley Howard Knowles: That is right, Mr. Chairman.


Gérald Laniel: I understand there has been agreement of the committee to study section 204. I invite
[The Deputy Chairman.)
the comments of the parliamentary secretary before we agree to this.


Patrick Morgan Mahoney: Mr. Chairman, I understand that the whole of part X, including section 204, is included in Friday's menu to be dealt with after we deal with section 8 which has been stood. I think we will be quite agreeable to that suggestion.


Gérald Laniel: Is it agreed that section 204 be stood and included in the group of sections to be examined next Friday?


Some hon. Members:: Agreed.
Clause 1, section 204, stands.


Gérald Laniel: Pursuant to an order accepted Friday of last week, the committee will now proceed to the consideration of sections 9 to 13 and sections 15, 18 and 20.
On clause 1-section 9: Income from business or property


Robert Jardine McCleave: Mr. Chairman, in these eight sections we are being asked to consider, with regard to two of them- namely, section 15 on page 48 and section 18 on page 57- that most of the provisions relating thereto are new. With regard to the rest of these sections, I notice that the law that is proposed is the law already in existence. It strikes me we are getting into remarkably little new ground in dealing with these particular sections.
It might be helpful to the discussion if the parliamentary secretary would lead off in a general way to indicate the new ground that is being broached. Also, since we have not reached the section on capital gains, perhaps he could indicate whether the definitions or income provisions incorporate the new capital gains provisions. I will have some technical questions to ask as we go through them. This might be a reasonable point of departure on the tail end of a rather successful day.


Marcel Joseph Aimé Lambert: Mr. Chairman, in this group of sections I wish to deal with section 10(1) which has been somewhat modified. As far as the taxpayer is concerned, this has been done very badly. Will the parliamentary secretary indicate if there is an existing regulation or if it is proposed to put in any regulation which will not materially affect section 10(1)? This deals with the valuation of inventory property. It reads:
For the purpose of computing income from a business, the property described in an inventory shall be valued at its cost to the taxpayer or its fair market value, whichever is lower, or in such other manner as may be permitted by regulation.
Just what method may be permitted by regulation? Are any other methods now in existence and, if so, what are they? Are there any methods in contemplation which may be brought in by regulation and, if so, what are they? If not, is the last phrase "or in such other manner as may be permitted by regulation" put in by the draftsman merely as a type of caution that he has provided for the eventuality that there might be some way in which the subsection is too restrictive? Can the parliamentary secretary give us an explanation?
November 2, 1971


Patrick Morgan Mahoney: Mr. Chairman, section 10(1) is identical to the provisions of section 14(2) of the Income Tax Act. It has remained unchanged since the last major revision of the act in 1949. I am advised that the government has not heretofore prescribed any regulations under the authority granted by this section.


Marcel Joseph Aimé Lambert: Why put in the word "modify"? Has somebody put a second dot to an "i"?


Patrick Morgan Mahoney: The expression "modification" refers to the over-all section. Previously there was subsection 14(1) of the bill which was repealed in 1958 without changing the numbers of the subsequent subsections. This is the modification. It is a housekeeping chore.


Gérald Laniel: Is the committee ready for the question?
Clause 1, sections 9, 10 and 11 agreed to.
On clause 1-section 12: Amounts to be included as income from business or property.


Gérald Laniel: On clause 12, the committee has in front of it an amendment moved by the Minister of National Revenue, for the Minister of Finance. [Translation]


Mr. Gray moved:: That the French version of section 12 as set forth in clause 1 of the said Bill be amended by striking out line 7 on page 26 and substituting the following:
"(ii) deduite, en vertu de l'alinea 20(l)n) ou du paragraphe 20(7),"


Gérald Laniel: Shall the amendment carry?
Amendment (Mr. Benson) agreed to.


Gérald Laniel: Shall section 12 as amended carry?


Marcel Joseph Aimé Lambert: Mr. Chairman, I want to pause on one of the new paragraphs and draw to the attention of the committee what I call a drafting nightmare. Section 12(l)(e) reads:
(e) any amount
(i)	deducted under paragraph 20(l)(m) (including any amount substituted by virtue of subsection 20(6) for any amount deducted under that paragraph) or subsection 20(7), or
(ii)	deducted under paragraph 20(l)(n) or subsection 20(7).
Let us now go to the key paragraph, section 20(l)(m)
which appears at line 10 on page 66. It reads:
subject to subsection (6), where amounts described in paragraph 12(l)(a) have been included in computing the taxpayer's income from a business for the year or a previous year, a reasonable amount as a reserve in respect of-
It then refers to goods and services. Even for a lawyer who is presumably somewhat familiar with legal language we have here, first, a direction that there shall be included in the income for a year from a business or property such of the following amounts as are applicable and so on. That is all right. That is our general direction-arriving at some income to be included in business income.
Then we read about any amount which has been deducted under a further subsection, 21(m), including any
Income Tax Act
amount which was substituted by virtue of another section if any amount deducted under that paragraph was from a further subsection. Then we go to 21(n) and we find a further reference back. Surely to goodness something better than that could be devised. How are we to understand such things as this? And this is supposed to be, not for large corporations but for small businesses such as grocery stores or service stations. Their tax auditors, who are not high-priced tax advisers, must wallow through verbiage of this nature. We just wonder where we are getting to.


Patrick Morgan Mahoney: Again, I have to profess to the same degree of perplexity as the hon. member feels when he reads this clause for the first time. But the fact is that these are carryovers from the existing Income Tax Act rather than anything new.


Stanley Howard Knowles: I thought this was reform.


Marcel Joseph Aimé Lambert: This is supposed to be reform.


Patrick Morgan Mahoney: In the mind of the government, reform involves basic principles rather than semantics. I can only say this. Obviously, this is not one of the areas of complexity about which the members of the Canadian Bar were complaining, because they have been working with this since 1949.


Marcel Joseph Aimé Lambert: That does not make a bit of difference. It is almost facetious for the parliamentary secretary to say this is existing law and it is already in force. We have heard a great many complaints about the complexity of the Income Tax Act. The minister is asking for the re-enactment of provisions. As far as he is concerned, he is back to square zero. The fact that it existed before means nothing. If these sections were nonsensical, they continue to be nonsensical and this House will be even more nonsensical if it were casually to adopt a provision which is meaningless to most people. This particular item has been flagged; it is not a case of bumping up against it for the first time.


Patrick Morgan Mahoney: Mr. Chairman, a particular provision of sections 20 (m) and (n) allows the deduction from taxable income for the year of amounts which a taxpayer anticipates he will have to spend in meeting commitments entered into for the sale of goods, services, and so on. In the case of (n) there is provision for the deduction of amounts in anticipation of the sale of property. The provision in section 12 simply requires that this be brought back into income if it is actually realized. This is the usual practice followed in dealing with various reserves which a taxpayer is allowed to make out of business income. I do not see that there is the amount of confusion here the hon. member is suggesting, at least in the minds of the people who deal with this subject.


William Gordon Ritchie: I should like to ask the parliamentary secretary a question in connection with section 12(l)(b) concerning the amount receivable with respect to property sold or services rendered in the course of business. It says:
Unless the method adopted by the taxpayer from computing
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November 2, 1971
Income Tax Act
income from the business and accepted for the purpose of this part does not require him to include any amount receivable in computing his income for a taxation year unless it has been received in the year.
Will this be further defined in other sections of the act?


Patrick Morgan Mahoney: This is the same kind of provision as is contained in section 85(l)(b) of the existing act. An example I can think of in this section which is fairly common is the permission given to contractors to report on a complete contract basis rather than on a cash basis in respect of contracts running through more than one fiscal year.
Clause 1, section 12, as amended, agreed to.
On clause 1-section 13: Excess of proceeds over undepreciated capital cost.


Robert Jardine McCleave: I have one question arising out of section 13. This is on page 34. It deals with a new provision in the law, that is, subsection (8) which deals with property disposed of after ceasing business. Normally, in winding up a business, everything goes at once so you liquidate in an orderly fashion and are left, presumably, with nothing but money which then finds its separate ways and a court order disposes of the whole operation. I was wondering what particular area this clause is reaching into. Is it the individual who has incorporated as a grocery store and then has wound up the grocery business and is left with an asset on which he has claimed depreciation? Over the years the grocery store flourished, and therefore he is liable to make his peace with the income tax department before he sells the property. Perhaps the parliamentary secretary can tell us precisely what is involved here, and also why it is involved.


Patrick Morgan Mahoney: Mr. Chairman, this section is a new section. It clarifies the rates applicable when a business property is sold after the taxpayer ceases to carry on business. It provides that the rates shall apply to terminal losses and to recaptured capital cost allowance in the same way as though the business were still being carried on.


Robert Jardine McCleave: In other words, he cannot take advantage and throw it into another fiscal year: he is caught within the year in which his business ceases during the time in which his business ceased to operate? Am I right in that assumption?


Patrick Morgan Mahoney: I will have to take that question as notice and supply the hon. member with an answer.


William Gordon Ritchie: Mr. Chairman, on page 29, subsection (4) refers to subsection 20(5a) modified. I should like to ask the parliamentary secretary in what manner it has been modified.


Patrick Morgan Mahoney: Mr. Chairman, we shall have to compare that with the present section of the Income Tax Act before I can supply the answer. I can give no obvious response.


John Gilbert: Mr. Chairman, I should like some information from the parliamentary secretary. On page 34 of the bill one finds subsection (8) about which the hon. member for Halifax-East Hants posed a question. I should like the

parliamentary secretary to tell me whether this section is the recapture of depreciation section. If it is, is there any substantial change in this recapture provision compared with the provision in the old act?
While I am on my feet I would ask the parliamentary secretary whether as a result there has been any change in the tax rate. Let me give him an example. Supposing that a person who owns a small business has assets totalling $10,000. During the time he is in business these assets depreciate to $8,000. Then he subsequently sells his assets for $12,000. What recapture is there in those circumstances and what rate would apply? How much would be recaptured and what effective rate would apply?


Patrick Morgan Mahoney: In the example the hon. member has given, the taxpayer would have a $2,000 recapture and this is ordinary income. No particular rate would apply; it is just regarded as income.


William Gordon Ritchie: Could the parliamentary secretary inform me which sections deals with property that is disposed of at less than its depreciable value?


Patrick Morgan Mahoney: Could I ask the hon. member to give the number of the section? We are dealing with quite a large block of sections here.


William Gordon Ritchie: That is what I am not sure of. As I understand it, there is a section that deals with depreciated property. If a taxpayer sustains a loss on a property that he sells below its depreciated value-the so-called terminal loss section, I believe-which section of the act will cover that situation?


Patrick Morgan Mahoney: Terminal losses are covered by the regulations under the Income Tax Act and are not dealt with in the present bill.


Joseph Adrien Henri Lambert: Mr. Chairman, I would like to ask the Parliamentary Secretary to the Minister of Finance (Mr. Mahoney) to explain the meaning of subsection (4) of section 13 on page 29:
Insurance and compensation proceeds
Does this subsection apply, for instance, to compensation paid to a farmer under crop insurance and does it mean that such compensation would be regarded as income, even if the crop lost was not fully covered by insurance supposed to cover losses the farmer may incur?


Patrick Morgan Mahoney: Mr. Chairman, I am sorry, but the translation did not come through well enough for me even to get the section number to which the hon. member was referring. Could I ask him to repeat his question more slowly for the benefit perhaps of the interpreter?


Joseph Adrien Henri Lambert: Mr. Chairman, I see that we sometimes misunderstand the interpretation. I feel that the interpreters are not to be blamed, but the communication is rather difficult. This problem which the Parliamentary Secretary to the Minister of Finance (Mr. Mahoney) faces does not upset me at all. I know that there is an explanation for that.
November 2, 1971

My question was as follows: Concerning subsection (4) of section 13 on page 29, which states:
Insurance and compensation proceeds
I should like to know whether compensation which would be paid to a farmer under crop insurance following a loss suffered during the year could be considered as a taxable income.


Patrick Morgan Mahoney: Mr. Chairman, I think the answer to that question is yes. Crop insurance normally replaces income. If the insurance proceeds replace income, then those proceeds are themselves income. The premiums payable on the insurance are deductible, of course.
While on this same section, the hon. member for Dauphin asked a question about what change had been made. The change to this section is the addition of lines 30 to 37 inclusive on page 29 of the bill. That is all new.


Russell Clayton Honey: Members of the committee appreciate that there is a proposed amendment to section 13. If it is agreeable to the committee we might deal with that at this time and then the Chair will put the section as amended. The amendment appears at page 8934 of Hansard for October 22, moved by the Minister of National Revenue for the Minister of Finance. It reads as follows:
That section 13 as set forth in clause 1 of the said bill be amended by striking out lines 1 and 2 on page 35 and substituting the following:
(11) Any deduction made under subparagraph 8(l)(j)(ii) of this act or subsection 11(11) of The
Shall the amendment carry?
Amendment (Mr. Benson) agreed to.


Russell Clayton Honey: Shall the section as amended carry?


Some hon. Members:: Carried.
Clause 1, section 13, as amended, agreed to.


Russell Clayton Honey: Shall section 15 carry?
On clause 1-Section 15: Appropriation of property to shareholder.


Robert Jardine McCleave: Mr. Chairman, there are two new provisions here and I should like to deal with one of them. I did ask a question earlier of the parliamentary secretary which arose in part from the new provisions on page 48, but obviously capital gains are not dealt with here. The section I intend to raise is subsection (5) which deals with a shareholder who has the benefit of an automobile. I suppose in some ways this is the counterpart of an employee who has the benefit of an automobile.
I take it this provision really deals with the income of people in Canada. If a corporation which is not even resident in Canada or does not carry on business primarily in Canada provides the use of an automobile for a shareholder and he does not meet the entire cost of the automobile-this is a simplification of the situation-it must be counted as income. Am I correct in interpreting this provision in that way?


Patrick Morgan Mahoney: This is very comparable to the provision we discussed under section 6(l)(e) when we were dealing
Income Tax Act
with an employee who had the use of an automobile provided by his employer. This deals with the situation where a company provides an automobile to a shareholder and makes that a taxable benefit.


Marcel Joseph Aimé Lambert: If you look at section 6(l)(e) and section 15(5) you will see that they are the stand-by charges for automobiles. The wording is the same and they are subject to the same disabilities or difficulties. Why should there be a difference if the automobile is leased or owned by the employer? Why should there be a different formula? If the car is owned or leased by the company, why should this make any difference to the shareholder? This suggests that section 6(2) is applicable mutatis mutandis with section 5, so we are dealing with precisely the same sort of thing. Why is this not on the basis or theory that there is an aliquot portion per month or value of the automobile? Why is it not on that basis?
The hon. member for Calgary Centre asked what sort of solution is to be provided for the difficulties of an automobile salesman. A salesman on straight commission might be using a demonstrator car for his personal use. It may be a very valuable car. Two weeks later he may be using a standard model which has a much lower value. This could easily be true of a salesman who works for a multi-model agency. I will not name one because I might offend hon. members who have a liking for a different automobile manufacturer. But if you walk down a few blocks from this edifice you might find a Chevrolet, Oldsmobile, Cadillac agency. A salesman there might be furnished with a Chevrolet car for a period of a month, then he might be given an Oldsmobile and, subsequently, a Cadillac. There is quite a difference in the selling price of those vehicles. How do you work out this formula in that situation?
If the taxpayer happens to be a shareholder in the company owning the dealership, the same questions would have to be asked. Why should there be these differences? Why is this not simply worked on the basis of a proportionate value of the automobile, because in cases where different automobiles are made available you run into trouble. This question of leasing or owning a car involves the use of a different formula, particularly under section 6, and that is a lot of nonsense.


An hon. Member:: That is part of the weekly
swindle-sheet.


Patrick Morgan Mahoney: I think it is the practice of the Department of National Revenue, where an individual is both an employee and a shareholder, to look at him as an employee for this purpose. We did not run into that kind of confusion, or at least that was my experience when I was in both positions and had a company car. Those were the good old days.


Marcel Joseph Aimé Lambert: All I can say is that the parliamentary secretary's confusion must be compounded, because section 6 is worse than that.


Patrick Morgan Mahoney: The question raised the other day by the hon. member for Calgary Centre regarding salesmen for automobile companies is one we have undertaken to look at. There is a problem which is recognized, and certainly
24372-28)

November 2, 1971
Income Tax Act
any rectification of that problem will be effective for the whole of the 1972 taxation year.


Marcel Joseph Aimé Lambert: Why is there a different formula in respect of leasing compared with owning an automobile? Section 6 ties into section 15 by cross-reference, so my remarks regarding the complications of section 6 are fully germane. Why is there a distinction between leasing and owning a vehicle? It provides for different formulas for charging a taxpayer who operates a vehicle under lease or one that is owned.


Patrick Morgan Mahoney: The value of the unit is what is assessed for the purpose of the taxpayer. There is obviously a different cost to the employer depending on whether he leases or owns the car provided the employee or the shareholder, and hence the value is different.


Marcel Joseph Aimé Lambert: With the greatest respect, I find that this is similar to determining the value of a horse by its rear end. It is the benefit to the taxpayer or the employee that is important. It is that benefit which is being taxed; it is not what the employer has to pay for the car that is involved. What is the value to the employee, that is the question? You may have two salesmen working for competing companies. There may be more advantages to one company in leasing cars than the other because one is bigger and is entitled to a fleet discount.
There are no hard and fast rules which apply to leasing vehicles. We have two salesmen doing the same blessed thing, driving similar cars, yet you are going to charge one more than the other, which is quite conceivable under a leasing agreement, yet the benefit to each is precisely the same. It matters not one whit what the owner or employer has to pay for the vehicle. That has nothing to do with it. What is involved is the benefit to the employee. If a salesman for Procter and Gamble gets a standard Chev. leased by a company, and another salesman gets the same kind of car leased by a much smaller soap distributing company which has to pay more under the leasing agreement, is the minister or the parliamentary secretary saying that the salesman for the smaller company is to be charged more for the benefit he receives? This is patent nonsense.


Patrick Morgan Mahoney: I am inclined to agree with the hon. member. This certainly is nonsense. The value of the benefit to the employee is not based on whether he is given precisely the same car as his neighbour. The value to him as an employee is based on a great number of variables, including the amount of use the employee has for the car. Employee "A" may be given exactly the same car model as employee "B", but employee "A" gets considerably more benefit from that car because he drives it 4,000 miles on his annual holiday and things like that, whereas employee "B" does not. So the only criterion from a practical point of view that the income tax department can use in assessing the value of the benefit is the cost to the person providing that benefit. The value to the particular person receiving the benefit depends entirely on how much he uses it. All these are variables which will change from person to person. There is no practical way in which to measure it from that point of view.


Russell Clayton Honey: As the committee knows, there is a proposed amendment to section 15. The amendment appears at page 8934 of Hansard for October 22. Shall the said amendment carry?
Amendment (Mr. Benson) agreed to.
Clause 1, section 15, as amended agreed to.
On clause 1-section 18: General limitations.


Robert Jardine McCleave: Mr. Chairman, once in a while a person has a nightmare in which he dreams he is dealing with tax reform on the floor of the House of Commons. I find myself involved in such a nightmare now. More particularly, my anguish arises out of trying to understand what is meant by subsection (2) at page 55. This is something which has been added to the law and in that sense I suppose it qualifies as reform if one could understand what in effect it means. This deals with the question of what one can claim on the ownership of land. I presume it really is an attempt to control speculation in land, or at least to see that speculation in land does not automatically by itself draw tax benefits, because in part the section provides:
-except to the extent that the taxpayer's gross revenue, if any, from the land for that year exceeds the aggregate of all other amounts deducted in computing his income from the land for that year.
As one goes through the whole thing it is like the music that goes around and around and one wonders where it comes out. I will put my bafflement in this way: Am I correct in understanding it is really to discourage speculation in land, that is, that people simply are not to be allowed to hunt around the edges of our rapidly growing cities, pick up land and enjoy certain tax benefits as a result of so doing? In other words, if land is so acquired it must be land which can bear its share of the taxes of this country? If I have asked the wrong question perhaps the parliamentary secretary could give some enlightenment on th ephilosophy of this subsection.


Mr. Benson:: Well, Mr. Chairman-


Some hon. Members:: Hear, hear!


An hon. Member:: The hon. gentleman has returned.


Stanley Howard Knowles: Welcome to Parliament.


Edgar John Benson: Mr. Chairman, here we are dealing with people who buy land who really are not in the business of dealing with land. That is, they are not in land trading and buying and selling all the time so that they have profits and losses from it but, rather, are buying land on what one might say is a speculative basis. These are people who might write the particular cost against other income. Under the new section this will be added to the inventory value of the land and, when he ultimately sells it, it would be subject to a tax; but this will become part of his costs and not operating expenses which he can write off with other income.


Robert Jardine McCleave: I would not fault the minister for this approach although I believe from a practical sense the once-in-a-lifetime deal in land has attracted income taxes
November 2, 1971

in the past. I am aware of one man in Halifax, for example, who has spent the last 15 years trying to reverse a decision made that long ago. However, I ask: Where does the difference lie between a fellow who jumps in for the purpose of speculation and the fellow who jumps in for the purpose of being a land developer? Does a person have to buy more than one parcel of land in order to qualify in the latter category, or must his income position be different? Or how does he achieve the hallowed position of a respectable land dealer rather than the unhallowed position of a speculator in land?


Edgar John Benson: The position is exactly the same as under the existing law. Had we moved, as originally proposed in the white paper, to the point where gains were fully taxed, this question would not arise; but in a situation where we are to tax capital gains at half rates we will have the same problem of distinction between what is a capital gain and what is a trading profit as we presently have. Here it is a matter of case law and decisions by the courts.


Robert Phillip Kaplan: Mr. Chairman, would the minister indicate if any consideration is being given to the introduction by regulatio nof a more realistic capital cost allowance schedule. Th eproblem to which a solution is addressed arises because an undue and unrealistic amount of capital cost allowance is available for buildings beyond the amount of actual depreciation. It is thi sproblem area which leads to the apparent unfairness in the tax system.


Edgar John Benson: Mr. Chairman, first of all, it does not apply to this particular section with which we are dealing since it deals with lan donly. The matter of the capital cost allowance, as I have said, is a matter to be reviewed by the government in due course. We have asked for submissions, with regard to a capital cost allowance, from various interested parties including the Canadian Manufacturers Association. I think the whole system of capital cost allowances will have to be reviewed. I should like to emphasize, however, that until this thorough review is carried out there is no intention on the part of the government to change the present capital cost allowance schedules.


Marcel Joseph Aimé Lambert: Mr. Chairman, I will start right at the very beginning, on section 18 (1) (a). I think this is the area in which one can come up with a personal beef or bleat for Members of Parliament and others who may find themselves in a simila rposition. I would say it is also possible for a member of a provincial legislature to be in a similar position.
The lawyer, the accountant, the medical practitioner or the engineer, by being a full-time parliamentarian, is reduced in his professional capacity to an almost nonoperating basis; he has little or no income from his business or profession. However, he will attend, for instance in the case of lawyers-and remember he does not have an independent office-the annual convention of the Canadian Bar Association because he is particularly interested in this House in being a specialist in, shall we say, the law of the sea, the law of the air or perhaps, now, the law of pollution control. He may be a specialist in criminal law and he will go to the Canadian Bar, but he has little or no professional income: it may be merely
Income Tax Act
nominal and certainly would be less than 50 per cent of his parliamentary stipend.
.50 p.m.)
I put it to the minister that the interpretation of section 18 (l)(a) is that he would not be entitled to his expenses, although there is another section that deals with convention expenses and so forth, yet this is an outlay of expense except to the extent that was made by the taxpayer for the purpose of gaining or producing income from his business or property. He is not gaining any income from his business.
The hon. member for Laurier could attend an annual convention >r some of the periodic conventions of the Canadian Tax Foundation or of the Institute of Chartered Accountants to improve his knowledge so as to make him a better member of the House. I have been to several conferences of the Canadian Tax Foundation and I hope it has given me greater knowledge and greater facility in dealing with tax matters. Yet I have gone to the tax department and they have said I was not entitled because I am not a practising lawyer, my connection with the law firm is purely tenuous because I am a full-time member of the House. I find it rather strange that a Member of Parliament cannot go to one of these professional conferences within his own competence in order to keep himself up to date and to improve his professional knowledge so as to make him a better Member of Parliament. I would like to hear the views of the minister in this connection.


Edgar John Benson: I would say that hon. members cannot have it both ways. We have an expense allowance which, by legislation, is tax free. If a Member of Parliament is practising law as well as being a Member of Parliament, which many members used to be able to do-I agree that now it is difficult to do so because this is a full time job-he could deduct such expenses as my hon. friend mentioned. If a person has chosen, instead, to be a Member of Parliament he cannot deduct any expenses, but he does have the advantage of the tax free expense allowance.


Marcel Joseph Aimé Lambert: But that is in connection with many other claims from his constituency. There is no reason why a Member of Parliament should not be on the same basis with regard to attending those conferences as are members of the minister's department who attend these conferences by the dozen.


Some hon. Members:: Hear, hear!


Marcel Joseph Aimé Lambert: This also applies to the officials of the Department of National Revenue. I get to know them at these conventions-because they are always there.


Edgar John Benson: All that is wrong here is that we should change the members of the House of Commons and Senate act in order to allow the government to pay such legitimate expenses as these, which would not be taxable benefits. I see nothing wrong with it. If my hon. friend wanted to make such a proposal I can assure him that the government would give it every consideration.


Marcel Joseph Aimé Lambert: That is the wrong way to do it.

November 2, 1971
Proceedings on Adjournment Motion


William Gordon Ritchie: At page 55, subsection (3) reads:
In subsection (2), "land" does not include (a) any property that is a building or other depreciable property affixed to land-
I should like to ask whether, if a taxpayer has property which under subsection (2) is not eligible for interest property tax deduction except as revenue from that, the definition of land on which there is a building becomes depreciable property in relationship to the land on which it is placed. Also, on page 56 paragraph (b) reads:
the land subadjacent to any property described in paragraph (a)-
Does this also apply to (c)?


Patrick Morgan Mahoney: Mr. Chairman, subsection (3) of section 18 excludes certain items from the provisions of subsection (2), and of course included among that are buildings or other depreciable property affixed to the land. So subsection (3) is a list of exclusions from subsection (2).


William Gordon Ritchie: If there is a building on a piece of property which applies under subsection (2), can the depreciation be deducted from the taxpayer's income other than what is applied in subsection (2); that is, can it be deducted from a source of income other than on that land?


Patrick Morgan Mahoney: I think that on studying this section the hon. member will realize that depreciation as such does not come into the question. If there is a depreciable asset fixed to the land it does not come within the provisions of subsection (2), and therefore the question of interest on borrowed money and property taxes is not the subject of the deduction as referred to in section 18(2). The depreciable property is the test, but in talking about section 18 we are not talking about the deduction of depreciation of capital cost allowance from income.


Russell Clayton Honey: Order, please. Before I see the clock it might be useful, for continuity of the record-because I understand the committee will not come back to this section until Friday-to mention that the section is subject to an amendment moved by the Minister of National Revenue, for the Minister of Finance, but not yet dealt with, appearing on pages 8934 and 8935 of Hansard for October 22.
Progress reported.



PROCEEDINGS ON ADJOURNMENT MOTION

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

Winona Grace MacInnis: Mr. Speaker, in deliberately keeping the matter of abortion from being discussed in the House of Commons, the government is guilty of a series of very unfair and very cruel acts. It is forcing unknown numbers of women to bear unwanted children, with all the terrible consequences to them and to society. It is forcing women on low income to face the horrors of a back street operator or the do-it-

yourself procedures which cripple and kill. It is forcing women who can afford it to go to foreign countries for an abortion.
Last year 1,649 Canadian women had to seek such help in New York state. I understand that 44 per cent of them were from the province of Quebec alone. It is forcing uncounted other women to run from hospital to hospital in Canada trying desperately to find one that will help them while the clock ticks remorselessly on and the authorities, with eyes averted from their misery, pass by on the other side.
It is permitting those who are opposed to abortion to force their will on the majority in Canada who believe, equally strongly, that abortion should be legalized. All these things are going on while the government washes its hands and refuses to accept responsibility for a situation which it alone can change. Yet last Friday the Prime Minister (Mr. Trudeau) told a high school class in Nova Scotia that women should be the ones to decide whether they should have the legal right to have an abortion if they want one. The young folk applauded loudly, quite unaware of the fact that the Prime Minister is unwilling even to have a debate on abortion in this House this session, as he promised a year ago.
He told the students that he would be very much influenced by the overwhelming feeling of women. He said, "I don't feel I can speak with great authority on this because I am not a woman." Yet when I asked him this afternoon if he would bring in a measure to take abortion from the Criminal Code and allow the elected representatives of the people to vote on it, he completely sidestepped the question. He and his government are the only ones who can bring such a measure before Parliament. Why don't they do it?
To leave the law as it is now simply means that they are on the side of those who are opposed to abortion and are determined to force that position on everyone else, regardless of what it does to women in every part of Canada. Let there be no mistake about that. I can only hope that this attitude will arouse freedom-loving women and men to bring organized pressure on the government in order to show it how wrong it is.
The forces which today are preventing changes in the abortion law are the same ones who for years were successful in keeping birth control illegal and which will resist government action for effective methods of birth control across Canada. These are the forces responsible for unnecessarily large numbers of abortions. These are the forces causing untold suffering and injustice to thousands of women who should have the right to consult their doctors and seek an abortion safely, legally and openly.
On November 20 a large group of Canadian women are coming to Ottawa to impress upon the government the fact, as the Prime Minister told the students in Nova Scotia, that women should be the ones to decide whether they should have the legal right to an abortion. I trust that he will give them that opportunity by having a debate on the subject in Parliament and then by introducing legislation to take abortion out of the Criminal Code and leaving it, as we leave all other medical procedures, a matter between the patient and her doctor, thus allowing both
November 2, 1971

sides to practice their principles freely without either side trying to force its beliefs on the other.


Barnett Jerome Danson: Mr. Speaker, I am pleased to participate in this debate with the hon. member. This is a subject which raises deep emotions among all of us. I would question the phraseology of the hon. member for Vancouver-Kingsway (Mrs. Maclnnis) in saying the government is deliberately postponing facing this issue. The government liberalized the existing legislation and made it far more humane through amendments to the Criminal Code.
In the Speech from the Throne the government said it would set aside a day for debate on this issue, but the fact is that the government simply has not committed itself to further amendments. It said it would set aside a day in the hope that this subject, which is sensitive to all of us, could be aired. Regrettably, the progress of business of the House and the priorities involved have delayed the doing of many things which the government would wish to do. But to say it refuses to accept responsibility is, I think, somewhat unfair. The Prime Minister (Mr. Trudeau) did, indeed, in Halifax make a statement similar to that attributed to him by the hon. member. But the people in their wisdom have not elected very many women to the House of Commons.


Stanley Howard Knowles: Wisdom?


Barnett Jerome Danson: The woman that has been elected to this House certainly represents her constituents with great credit. I came here from a dinner given for some of our guests from Yugoslavia, Mr. Speaker, and when they heard that I would be answering the hon. member for Vancouver-Kingsway, the only woman member of the House, they expressed surprise that there was only one woman in the House of Commons. I do not think that reflects particular credit on us. Perhaps women make the ultimate decision in some matters. Yet the men here represent men and women and they are given the responsibility to take into consideration the representations of women and the influence that they bring to bear on our lives.
We must consider the representations made by the hon. member for Vancouver-Kingsway. It is not an easy matter. Progress, regrettably, comes more slowly than one would wish. The hon. member for Vancouver-Kingsway represents a viewpoint. She states that if women are not to be allowed to make this decision, women will be demonstrating on Parliament Hill. We should be guided by her remarks and remember, indeed, that this is not total representation and that there are many women expressing this viewpoint.



AIR TRANSPORT-NATIONAL POLICY-POSSIBILITY OF CANADIAN PACIFIC AIRLINES BECOMING SECOND TRANS-CANADA CARRIER

Robert Jardine McCleave: Mr. Speaker, I understand that the Minister of Transport (Mr. Jamieson) has escaped back, alive and well, to the mainland from Newfoundland in the company of Mr. Smallwood and that I am to have the pleasure of hearing the parliamentary secretary reply to my question.
Proceedings on Adjournment Motion
The question that I raise at least once a year is about the possible extension of Canadian Pacific Airlines service into Atlantic Canada so that there will be two national airlines serving from coast to coast. The Minister of Transport looked a little askance when I asked this question the other day. He thought that I simply meant to give CPA the profitable run between Montreal and Halifax. I assured him, and this is my view on the subject, that such national service means service from Bonavista to Vancouver Island and from the forty-ninth parallel to as near the North Pole as one can go. Let there be no doubt about that-I am not asking for any privilege for Canadian Pacific Airlines.
If government policy is rearranged in this direction and Canadian Pacific Airlines is allowed to compete in Canada east of Montreal, I hope that it will not compete on the profitable runs only but that it will bear some of the burdens borne by other airlines; in other words, that it will become part of the national air policy to service all parts of Canada. Or, to put it in more vulgar terms, I hope that it has to take the skim milk as well as the cream.
I raise this matter because I think the feelings of opposition members should be made known on national matters and should be placed on the record. I know that aviation economics is not the most delightful subject for a company controller to dabble in, that airlines are having a great deal of trouble making profits, that the regional airlines play a most important part in the Canadian picture, and that in Atlantic Canada Eastern Provincial Airways has done a tremendous job. One cannot simply ask Canadian Pacific to burst holus-bolus into the picture; the economics of airline transportation must be considered carefully before any such decision is made.
It should also be noted clearly for the record that there must be a cabinet directive before the Canadian Transport Commission can even consider extending Canadian Pacific Airlines service in eastern Canada. If the cabinet is silent on the matter, Mr. Pickersgill, as head of the Canadian Transport Commission, will be justified in refusing to consider the matter at all. I know the Minister of Transport was not quite as frank as he usually is when dealing with the question asked in this regard the other day by the hon. member for Central Nova (Mr. MacKay). He seemed to imply that the cabinet does not have a role in this, whereas I suggest that it does.


Mr. lack Cullen (Parliamentary Secretary to Minister of National Defence):: Mr. Speaker, the Minister of Transport (Mr. Jamieson) has asked me to respond to the hon. member for Halifax-East Hants (Mr. McCleave). In speaking to him earlier, he planned to be here this evening. There were some last minute changes in his schedule. I disagree with the hon. member for Halifax-East Hants that the minister looked somewhat askance when he heard the question. I have never known him to look that way in this House. He is a pretty forthright, honest member of the treasury benches.
The present transcontinental air policy clearly sets out the framework under which Air Canada and Canadian Pacific operate. In terms of this policy the minister has consistently raised with Air Canada, in the interests of the travelling public, the continuous need for improved ser-

November 2, 1971
Proceedings on Adjournment Motion
vices between Halifax and the rest of the major trunk lines operating across Canada, and I understand that the management of Air Canada are sympathetic to these needs.
In so far as the extension of Canadian Pacific services to Halifax is concerned, this would be a matter for referral to the Canadian Transport Commission under the existing policy prescribed for the two major carriers on domestic trunk routes and the sharing formula which is well known to the hon. member. The government is continuously keeping an eye on the changing patterns of travel growth in Canada, and if any policy changes are required as a result of this the House will be informed in the usual way.
In conclusion, I noted that the hon. member was honest enough, as he usually is in his presentations in this House, to recognize the area of aviation economics and to recognize this particular area of involvement and concern.
LABOUR CONDITIONS-STE. THfiRfeSE, QUEBEC- LAY-OFF OF EMPLOYEES BY GENERAL MOTORS- GOVERNMENT ACTION


Mr. Derek Blackburn (Brant):: Mr. Speaker, my remarks this evening arise out of a question I put to the Minister of Regional Economic Expansion (Mr. Marchand) last Friday. It related to the imminent lay-off of 665 workers at the General Motors Plant at Ste. Therese, Quebec. I asked the minister if he would consider the argument put forward to him personally by representatives of local 1163 of the United Auto Workers. The argument was to the effect that if all workers worked a shorter work week, no lay-offs would be necessary. The minister replied that this would not be practical, for if this were done for one industry it would have to be done for all such industries facing lay-offs. The answer also implied that it would be too costly.
I would like to outline the argument put forward by local 1163 to the minister. The proposal by the union local was based on research carried out by Professor Sydney Inkerman of McGill University. Now that the 665 workers have been laid off they will be receiving $77 per man per week in unemployment insurance benefits. Based on a six-month period, which is a reasonable assumption, this expenditure will cost the federal government $1,331,330. Some of this money will go back to both the federal and Quebec governments to the extent of $83,802 in taxes.
For their computations, the union uses as its example one married man with a child. In the brief the union stated that the family would be paying $100 per month for rent and $151 for food, for a total of $251 per month. The remaining income from unemployment insurance would be taxed for such things as clothes, cigarettes, gas, etc. The union argued that the company should not lay off anybody but that all should work a four-day week. In addition, the government would pay 80 per cent of the net earnings for all employees for the fifth day.
The cost to the government, over the same six-month period, would be $1,311,336. This alone would be a saving to the government of $20,000. In addition, the 665 workers, over the six-month period, would contribute $28,528 to the Unemployment Insurance Commission. This, coupled with the employer's contributions, would amount to

$57,057. Now that the 665 workers have been laid off, these contributions are lost. Moreover, if the men laid off had been kept on the job they would be paying $28,129 to the Quebec pension fund and, with comparable contributions from the company, the total contribution would be $56,259. Again, this money has been lost due to the lay-off.
The amount of money the laid-off workers would have paid in the form of federal income taxes, had they been employed over these six months, would amount to $295,659. Another sum of $197,970 would have been paid into Quebec income taxes. Again, this money has been lost. In addition, if these 665 men were still employed they would have had $312 left over after food and rent costs each month. Over a six-month period the 665 men now laid off would have had $1,244,999 to pump into the consumer market. Sales taxes would have amounted to $99,599. Medicare contributions, now lost, would amount to another $45,645 from both employer and employees. Had the UAW, local 1163, recommendations been accepted it is very possible that the federal government would have received $352,716 in revenue and the Quebec government would have received an added $399,475, for a grand total of $752,191 in revenue.
So far as the company is concerned, by accepting the union argument or proposal it would have taken 39.2 hours of labour per unit-in this case, per automobile- but under the present situation, with the lay-off of 665 men it is going to take 42 hours of labour per unit.
Mr. Speaker, cost of materials would remain the same, operating overhead or fixed costs would remain the same. In short, and in conclusion, the UAW's proposal would not have cost the company any more, neither would it have cost the government any more. But now that 665 men have been laid off the government will lose income tax revenue, it will have to pay out benefits in unemployment insurance, purchasing power has been reduced, the Quebec pension fund will suffer and Quebec medicare premium income also will suffer.


Mr. John Roberts (Parliamentary Secretary to Minister of Regional Economic Expansion):: Mr. Speaker, I should like to thank the hon. member for having raised this question. His inquiry in the House and his speech tonight indicate his concern over the situation we face at Ste. Therese. I should add that the hon. member for Terrebonne (Mr. Comtois) has approached the minister several times as a result of his concern for the people who are involved in these lay-offs. I should like to congratulate the hon. member for presenting to us the research prepared by the UAW local. If it is anything to the House, I must confess it was rather dense. I do not mean it was unintelligent; I mean it was densely packed with statistics in support of the argument presented. I should like to look at it again tomorrow to make sure I am not getting any percentages mixed up.
However, as the minister indicated in the House when this question was raised, he was sceptical of the approach which had been suggested, partly on account of the precedent it might create in other sectors of the economy. I do not think the hon. member addressed himself to the question of what the effect of such an approach might be in other areas as distinct from the automobile sector of the industry in Ste. Therese. This scepticism is all the more
November 2, 1971

justified in that there is an alternative approach to dealing with these problems, one which seems to be fruitful in its effects.
As the minister indicated in this House, he discussed with members making representations to him the procedures under Manpower that will assist these workers with their problems. As a matter of fact, both the company and the union at Ste. Therese have been contacted by the Canada Manpower consultative service and it was agreed that the establishment of a joint committee under the Canada Manpower adjustment program would be deferred until January 1, 1972, when we will know a little more definitely exactly what the situation of the 600 workers laid off at Ste. Therese will be, whether the lay-off will
Proceedings on Adjournment Motion
prove to be temporary, as we hope is the case, or permanent.
Many of the workers laid off are entitled to supplementary unemployment benefits amounting to over 90 per cent of their regular earnings for varying periods of time while on lay-off. It is due to this fact that the lay-offs have just become effective at the end of the month, and demands placed on Canada Manpower consultative services for assistance have been very limited, at least up to the present. As soon as those who have been laid off have visited-


Mr. Deputy Speaker:: Order. I regret to interrupt the parliamentary secretary, but the motion to adjourn the House is now deemed to have been adopted. Accordingly this House stands adjourned until tomorrow at 2 p.m.
Motion agreed to and the House adjourned at 10.25 p.m.


Wednesday. November 3. 1971