1971-10-20

OFFICIAL REPORT

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

[Stage Direction]
Published under the authority of the Speaker of the House of Commons by the Queen's Printer for Canada
24372-1}
Available from Information Canada, Ottawa, Canada
[Stage Direction]
Wednesday, October 20, 1971


Hon. Mitchell Sharp (Secretary of State for External Affairs):: Mr. Speaker, I would like to table copies in English and French of the Canada-U.S.S.R. General Exchanges Agreement which was signed today by the Chairman of the Council of Ministers of the Soviet Union and the Prime Minister of Canada.



QUESTIONS ON THE ORDER PAPER

[Stage Direction]
On the order: Questions on Order Paper Mr. Speaker: Shall this order stand?
['Stand.']
Some hon. Members:: Stand.


Mr. Speaker:: Stand.



[Stage Direction]
On the order: Notices of Motions for the Production of Papers.
Mr. Speaker:: Shall this order stand?


Some hon. Members:: Stand.


Mr. Speaker:: Stand.



ORAL QUESTION PERIOD


Hon. Robert L. Stanfield (Leader of the Opposition):: Mr. Speaker, I should like to ask the Acting Prime Minister a
question about the agreement he has just tabled. Did Canada press for a provision in that agreement relating to the free flow of information between Canada and the U.S.S.R. and freer access by Canadian writers and journalists to examine and report on life and developments in the U.S.S.R., because if we are talking about cultural exchange in a meaningful way this surely includes-


Some hon. Members:: Order.


Mr. Speaker:: Order, please.


Robert Lorne Stanfield: -life in its many facets in both our countries, despite all the static opposite.


Mitchell William Sharp: Mr. Speaker, the agreement which has just been signed pledges both countries to facilitate exchanges on a broad basis, scientific and cultural exchanges, exchanges of all kinds, between the peoples of the two countries. This is, of course, subject to the laws of the respective countries, but I would think this agreement does mark another step forward not only in relations between our two nations but also to the extent that it indicates that the Soviet Union itself is prepared to see greater exchanges of the kind which I know the Leader of the Opposition as well as myself would like to see happen.


Robert Lorne Stanfield: Perhaps the Acting Prime Minister did not hear my question because of the noise coming from behind him. I should like to ask the hon. gentleman whether in relation to this agreement the government of Canada pressed for some provision regarding the free flow of information between the two countries and freer access by Canadian writers and journalists to examine and report upon affairs and developments in the U.S.S.R.?


Mitchell William Sharp: The purpose of this agreement is to facilitate exchanges. It is to enable authors, writers, artists and scientists to exchange views with their counterparts in the other country. We did not, of course, press to change the laws of the Soviet Union. That is a matter, as I am sure the hon. gentleman will agree, for the Soviet authorities to decide for themselves. What we are interested in and what this agreement does promote is exchanges of information between the two countries and it therefore contributes to the purpose the Leader of the Opposition has in mind.


Robert Lorne Stanfield: With regard to the visit of Premier Kosygin, can the Acting Prime Minister give us any indication whether any specific results have come out of the discussions between the representatives of the two governments in connection

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Inquiries of the Ministry
with trade relations between Canada and the Soviet Union and, if so, when the House may learn of those results?


Mitchell William Sharp: During the discussions an extensive exchange of views on trade matters took place. It seemed to us that both in Canada and in the Soviet Union there is a desire to promote greater trade. We talked about the renewal of the trade agreement which is due to expire shortly and agreed we would resume discussions on that agreement at the beginning of the year. I think all the discussions which took place indicated the desire of both countries to promote trade.


Mr. Stanley Knowles (Winnipeg North Centre):: Mr. Speaker, in the absence of the Prime Minister may I ask the Secretary of State for External Affairs whether the government will shortly be in a position to make a statement to the House, for the information of the country, concerning the results of the discussions between the Prime Minister and Mr. Kosygin respecting persons in the Soviet Union who wish to emigrate to other countries, particularly those who desire to be united with their families, and also on the question of the rights of Jewish and other cultural and ethnic groups in the Soviet Union?


Mitchell William Sharp: I am quite sure that the Prime Minister, when he comes to the House, will be happy to answer questions of that kind. As to the rights of Jews in the Soviet Union there has, of course, been an opportunity for Members of Parliament to ask Mr. Kosygin these questions directly in a committee of the House. So from both sources I think we shall learn a good deal.


Stanley Howard Knowles: In view of the fact that what we heard this morning in the committee room was off the record, it being understood that we are supposed to treat it in that way, may we have an early public statement by the Prime Minister?


Mitchell William Sharp: Mr. Speaker, I am sure that the Prime Minister will be very happy, when he returns to the House-he is with Mr. Kosygin now-to answer such questions.


Right Hon. J. G. Diefenbaker (Prince Albert):: Mr. Speaker, since this matter comes under the direct jurisdiction of the Secretary of State for External Affairs I would ask him whether or not discussions took place with Premier Kosygin with reference to the exchange of consular representatives between Canada and the Ukrainian Republic so as to enable people of Ukrainian origin to visit the old land, without unnecessary and almost insurmountable delays, as well as people from the Ukraine to visit their relatives in Canada?


Mitchell William Sharp: Mr. Speaker, we did not discuss specifically the question of exchanging consular representatives but the whole spirit of the discussions that took place encourages the visits that the right hon. gentleman and I both hope for.


John George Diefenbaker: I should like to know the basis upon which the minister was encouraged by something which was not discussed.


Mitchell William Sharp: Mr. Speaker, I think I was quite specific. The right hon. gentleman asked me about consular representatives and I answered that that was not discussed. The general question of exchanges and visits of Canadians to the Soviet Union and of Soviet citizens to Canada was discussed.


John George Diefenbaker: Will the minister, having now gone that far, elucidate what conclusions he came to in his optimistic state of mind in regard to what might take place in consequence of these discussions?


Mitchell William Sharp: An improved exchange of citizens of our two countries, visiting one another and helping to promote understanding on both sides.



RESPONSE OF PREMIER KOSYGIN TO CANADIAN


Mr. Jack Marshall (Humber-St. George's-St. Barbe):: Mr. Speaker, I have a supplementary question for the Acting Prime Minister. Could the Acting Prime Minister advise the House what was the reply of the Soviet premier to Canada's plea for immediate conservation measures in regard to fish stocks on the east and west coasts of Canada, and did the Canadian government ask the Soviet Union to enter into a bilateral agreement in regard to establishing fishing quotas, especially in relation to fishing off the east coast?


Hon. Jack Davis (Minister of Fisheries):: Mr. Speaker, the question of conservation of fish stocks off both our coasts was discussed.



REASON FOR REFUSAL OF SOVIET UNION TO SIGN AGREEMENT ON ARCTIC SOVEREIGNTY

Mr. Erik Nielsen (Yukon):: Mr. Speaker, I have a question for the Acting Prime Minister. In view of the failure of the government's stated objective to obtain a mutual agreement with the U.S.S.R. on Arctic sovereignty, could he advise the House as to the reason for the refusal of the Soviet Union to sign such an agreement?


Mitchell William Sharp: Mr. Speaker, I do not think it is right to say that the Soviet and Canadian governments are not agreed on the objectives. The Soviet government, however, was concerned or had some misgivings or objections in regard to the signing of a treaty. They have not in any way refused to co-operate with us in promoting our mutual objectives in the Arctic; indeed, they offered to co-operate most closely.


Erik Nielsen: Mr. Speaker-
October 20, 1971


Mr. Speaker:: Order. I believe the hon. member for Humber-St. George's-St. Barbe wishes to rise on a point of order. I realize that he wants to ask a supplementary, and if that is his point of order I will return to him in a moment.


Jack Marshall: Mr. Speaker, my point of order is that the Minister of Fisheries did not answer my question. I asked him what the answer was to our plea and the minister replied that the matter was discussed. I know it was discussed. Could he answer my question?


Mr. Speaker:: I think we are getting confused. We might allow the hon. member for the Yukon to ask a supplementary and then I will recognize the hon. member for Humber-St. George's-St. Barbe.


Erik Nielsen: Mr. Speaker, may I ask the Acting Prime Minister whether he is prepared to inform the House of the contents of the agreement that the government wished to obtain with the U.S.S.R. with respect to Arctic sovereignty? If so, would he do so on motions on another occasion when there is more time?


Mitchell William Sharp: Mr. Speaker, before the Soviet delegation under Premier Kosygin leaves Canada a communique will be issued expressing the views of the two governments on the matters that have been discussed, and perhaps this might serve as the basis for further questions.



RESPONSE OF PREMIER KOSYGIN TO CANADIAN


Jack Marshall: May
I pose my question to the Minister of Fisheries again and ask whether he would elaborate briefly on the discussions with the Soviet Premier on conservation of fish stocks? Is there anything definite to hope for?


John (Jack) Davis: Mr. Speaker, we endeavoured to describe the plight of the fishermen, particularly the Canadian inshore fishermen, and the Premier of the U.S.S.R. said that he would consider our representations carefully.



CRITICISM BY PREMIER KOSYGIN OF UNITED STATES ECONOMIC POLICY

Mr. Eldon M. Woolliams (Calgary North):: I have a supplementary question for the Acting Prime Minister. In light of the questions that have been put recently in reference to negotiations on the United States surtax and in light of the fact that the distinguished guest of this country criticized United States policy while visiting Canada, may I ask if that was done at the request of the Prime Minister-


Some hon. Members:: Oh, oh!


Eldon Mattison Woolliams: -or did our distinguished guest do that on his own?


Mitchell William Sharp: Mr. Speaker, although I think the question is frivolous I want to say
Inquiries of the Ministry
that Mr. Kosygin is quite well able to express his own views on anything.


Eldon Mattison Woolliams: On a question of privilege, Mr. Speaker, if anybody is frivolous it is the Secretary of State for External Affairs.


Some hon. Members:: Oh, oh!


Mr. Speaker:: Order, please. The hon. member for Skeena.



MANPOWER


Mr. Frank Howard (Skeena):: To come back home again, Mr. Speaker, I should like to direct a question to the Minister of Manpower and Immigration. With respect to the job vacancy survey conducted by the minister's department which took four years, employed 106 persons and cost more than $3 million, would the minister be prepared to explain why the data from that survey will not be available until the end of the year?


Hon. Otto E. Lang (Minister of Manpower and Immigration):: Mr. Speaker, the work being done on the job vacancy survey is of a developmental nature and will be extremely important and valuable when the results are sufficiently firm to be the base for firm conclusions and planning. This is the whole point of it. The work is developmental; it is coming along very well and before long we will have regular reports as a result of it.


Frank Howard: Inasmuch as the minister evaded the question completely I wonder if I could ask him whether there would be any connection between the job vacancy survey program and the incompetence with which it has been handled and the fact that his department's job placement program has declined more than 30 per cent in the last four years while his departmental staff has doubled and the cost has doubled?


Mr. Speaker:: Order, please. I suggest to the hon. member that the question is argumentative and in the form of debate. It is hardly acceptable when put in those terms.


Frank Howard: Could I rephrase the question and ask the hon. gentleman if he would be prepared, perhaps tomorrow because of the urgency of the matter, to take the opportunity on motions to explain the job placement program of his department and the fact that it has failed and that all he is doing is building a bureaucracy?


Mr. Speaker:: Order, please.



EXTERNAL AFFAIRS


Mr. Real Caouette (Temiscamingue):: Mr. Speaker, I would like to ask the hon. Secretary of State for External Affairs a supplementary question.
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Inquiries of the Ministry
He told us earlier that there would be exchanges between the U.S.S.R. and Canada in the technical, scientific and cultural fields. With regard to cultural exchanges, can he say that there is no question of exchanging some of the freedom we enjoy here in Canada for the slavery that prevails over there?


Mr. Speaker:: Order, please. The hon. member for Edmonton West.


FINANCE
Hon. Marcel Lambert (Edmonton West):: Mr. Speaker, my question is directed to the Minister of Finance. Would the minister advise the House precisely at what level the conference between representatives of his department and their counterparts in the provincial administrations will take place and what will be the agenda of the discussions this week? Do they tie in with the announcement made by the minister last week or do they have to do with further discussions on Bill C-259?


Hon. E. J. Benson (Minister of Finance):: Mr. Speaker, the discussions that are going on are dealing with the announcement I made last week on Thursday, basically, and are preparatory to a meeting of the Ministers of Finance which is to take place as soon as we can possibly arrange it, which will be early in November.


Marcel Joseph Aimé Lambert: Mr. Speaker, could the minister indicate at what target date he is aiming for the conference of ministers and will the provisions of Bill C-259, particularly those elements involving co-operation between the federal and provincial governments, be a particular part of the agenda of that conference?


Edgar John Benson: Mr. Speaker, the meeting is to take place as early in November as possible. Obviously it cannot take place before tomorrow because of certain other events which are taking place. The earliest dates we have had people indicate might be possible are in very early November. Of course Bill C-259, or the tax proposals, will be part of the discussions that take place with the Ministers of Finance of the provinces, as well as the economic outlook and the proposals I announced to the House last Thursday.


PRESENCE IN SPEAKER'S GALLERY OF CHAIRMAN OF COUNCIL OF MINISTERS OF UNION OF SOVIET SOCIALIST REPUBLICS
Mr. Speaker:: May I be allowed to call the attention of hon. members to the presence in the Speaker's gallery of the distinguished Chairman of the Council of Ministers of

the Union of Soviet Socialist Republics, Mr. Alexei Kosygin.


Some hon. Members:: Hear, hear!


Mr. Speaker:: As hon. members know, this is the first official visit to Canada of the head of the government of the Soviet Union. For this reason and for many others, it is an occasion of considerable significance.
All members of this House are confident that the visit will prove to be a fruitful one. We hope that the discussions on matters of mutual interest will contribute to the growing friendly relationship between our two countries. Hon. members are particularly appreciative of the occasion they had this morning to submit representations directly to Mr. Kosygin, and to engage with him in a frank and open discussion of matters which preoccupy us all.
We hope, sir, that you and your colleagues, including the Chairman of the Council of Ministers of the Georgian Soviet Socialist Republic and the Soviet Minister of Maritime Shipping, will enjoy your stay in Canada, in Ottawa, as well as in the other cities which you will visit during the days ahead.

We trust that everywhere you will be cordially welcomed by Canadians of good will who seek co-operation between nations and peace throughout the world. Once again, Mr. Prime Minister, we wish you and your colleagues a most cordial welcome in Canada and more particularly in our country's Parliament.


FINANCE
Mr. G. W. Baldwin (Peace River):: Mr. Speaker, I should like to ask the Minister of Finance whether he would take the earliest opportunity to make a statement giving some indication to the House of the effect of the meeting held recently in Europe of officials of the ten countries and in particular whether there is any reason to believe that the United States surcharge may be lifted before Christmas?


Edgar John Benson: Well, Mr. Speaker, we are of course represented at the officials' meeting. There has been some contact back and forth with the officials there. When they return to Canada I will take my hon. friend's suggestion under consideration.


REGIONAL ECONOMIC EXPANSION
Mr. T. C. Douglas (Nanaimo-Cowichan-The Islands):: Mr. Speaker, may I direct a question to the Minister of Regional Economic Expansion arising out of. the meeting
October 20, 1971

of the Atlantic Provinces Economic Council which is being held. In view of the criticisms of the DREE programs, describing them as crude, unsophisticated and unco-ordinated, and the statement by the minister's own former deputy that the results of the DREE programs have been disappointing, is the minister in the process of assessing the programs of his department and does he intend in the near future to announce any revamping of the programs in light of criticisms which have been levelled at them so far?


Hon. Jean Marchand (Minister oi Regional Economic Expansion):: Mr. Speaker, I have followed fairly closely what has happened in the Atlantic provinces. It is true that the department has been criticized, with reason, I believe, in some cases. We shall remedy what is wrong.
Obviously, the hon. member has forgotten part of it, because even the chairman of APEC has stated that he supported the department and that, on the whole, he was satisfied, even if there were deficiencies.
At any rate, the report that was published includes some very serious errors, and we are considering all that. We shall, no doubt, correct what needs to be corrected. But to claim that, as a whole, the programs of the department have been inefficient is to make an altogether gratuitous statement based on prejudices.


Thomas Clement (Tommy) Douglas: In view of the fact that the chairman and others indicated that their main criticism was levelled at the fact that the programs were ad hoc and were lacking in long-term planning and co-ordination, does the minister intend to make a statement to the House regarding any long-term targets which his department is establishing and, if so, when may we expect such a statement?


Jean Marchand: Mr. Speaker, we do a lot of
planning with the Atlantic provinces and it would take too long to enumerate all the cases. I do not feel that I ought to do it now. I shall certainly have the opportunity of indicating to the House to what extent we have worked with the provinces in order to achieve long term objectives. This opportunity will no doubt be offered to us in the near future, and I shall seize it with pleasure.


ATLANTIC PROVINCES-REQUEST FOR INDICATION OF DEPARTMENTAL GOALS AND STRATEGY
Mr. David MacDonald (Egmont):: In view of the fact that not only the recent APEC report but an earlier and much more direct report of the minister's own agency, the Atlantic Development Council, suggested a strategy and some specific goals with regard to the development and economic improvement of the Atlantic region, and as the latter report has been on the minister's desk for some months, I wonder when the minister will be in a position to indicate to the House and to the people in the Atlantic provinces what particular goals and strategy will be acceptable to his department and to the government?
Inquiries of the Ministry


Jean Marchand: Mr. Speaker, we have already accepted several recommendations made by the Atlantic Council, among others the establishment of a management institute as well as a labour institute. We have accepted several others, but it would take too long to list them. Some appear to us to be unacceptable and unrealistic. The APEC report contains gross errors. For example, it is mentioned that there is an extensive centralization in the department-


Mr. Speaker:: Order. I do not think that the minister now wishes to make a general statement. We should allow the hon. member for Malpeque-

The hon. member for Malpeque has a supplementary question, then I will return to the hon. member for Egmont.


RENEGOTIATION OF PRINCE EDWARD ISLAND DEVELOPMENT PLAN
Hon. J. A. MacLean (Malpeque):: In light of the fact that the development plan which is in force between the government of Canada and that of Quebec with regard to eastern Quebec has been amended and extended, I believe, and also that consideration is being given to doing the same with regard to the development plan in northeastern New Brunswick, has there been any request from the government of Prince Edward Island to renegotiate or amend the comprehensive development plan which applies in that province to make it more effective?


Jean Marchand: Not to my knowledge, Mr. Speaker. The agreement with Prince Edward Island was renegotiated barely a year ago. Elections were held shortly after and the people seemed quite satisfied.
In any event, as soon as the government of that province makes a request, we will be happy to discuss the matter with the minister responsible, should he feel that there are weaknesses in the present program.


ATLANTIC PROVINCES-REQUEST FOR INDICATION OF DEPARTMENTAL GOALS AND STRATEGY
David Samuel Horne MacDonald: Perhaps the minister did not hear me correctly. I was referring to the Atlantic Development Council, which is his own agency, not to the Atlantic Provinces Economic Council. In view of the fact he has indicated that some of these recommendations may have been implemented and some are not acceptable, and since there has been no clear statement from either him or his officials as to what the over-all view of the department is as to the effect of this strategy, could he indicate, not in detail now, when he might be in a position to make a clear statement and also whether, in view of the many questions raised about consultation with regions, any steps are going forward to consult adequately with
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the regions in order that a fully acceptable Atlantic development strategy can he evolved?


Jean Marchand: Mr. Speaker, if I start answering that question, you will stop me, undoubtedly with reason.
I am asked to give the opinion of the department on all the reports. As I said a few minutes ago, I hope to be able soon to give the opinion of the department on the bulk of the recommendations that were made.


FAMILY INCOME SECURITY
Hon. Martial Asselin (Charlevoix):: Mr. Speaker, yesterday I put a question to the Parliamentary Secretary to the Minister of National Health and Welfare and he referred me to the minister. I would therefore like to direct my question to the Minister of National Health and Welfare.
The Quebec Minister of Social Affairs recently announced that negotiations with the federal government concerning the new family allowances program had come to a standstill, and had even been broken. Can the minister tell whether, after his discussions with the Quebec government, and more particularly with the Minister of Social Affairs, he intends to change the national family allowances program in order to reconcile it with the needs of the province of Quebec?


Hon. John C. Munro (Minister of National Health and Welfare):: It is too early to say what changes there will be, if any. Discussions will be going on with the government of Quebec on this matter, and I can only advise the House as to what specifically will happen after those discussions have taken place.


Martial Asselin: I should like to ask a supplementary question, Mr. Speaker.
Can the minister assure the House that the consideration of this important matter will be continued or does he feel that the doors are closed to any further discussion? Also, is the minister going to meet soon with his Quebec colleague to resume negotiations?


John Carr Munro: I do not believe at all that the discussions on this matter are over.




Mrs. Grace Maclnnis (Vancouver-Kingsway):: My question is for the Secretary of State for External Affairs. In
(Mr. MacDonald (Egmont).J
view of the resolution passed last Friday by this House calling on all nuclear powers to stop testing nuclear devices and, in particular, urging the cancellation of the test at Amchitka scheduled for later this month, would the minister be prepared to approach nations favourable to this resolution at the United Nations with a view to bringing its content before the General Assembly for discussion and decision this year?


Mitchell William Sharp: We expect that the issue of a comprehensive test ban will be brought before the first committee and in due course it may be brought before the General Assembly. We will be working with the other countries interested to prepare a suitable resolution.


Winona Grace MacInnis: I think the minister missed the point of my question. I was asking if he would be prepared to take the initiative in approaching other countries to get them together with a view to preparing a draft resolution along those lines and bringing it before the United Nations?


Mitchell William Sharp: In these kinds of matters we have lots of friends and lots of allies. We will be working with them to prepare a suitable resolution which will, I hope, get the support of the world against any testing by any country in the world.


Some hon. Members:: Hear, hear!


DISCUSSION WITH PREMIER KOSYGIN OF POSSIBLE NUCLEAR TEST BAN
Robert Lorne Stanfield: should like to ask the Secretary of State for External Affairs or the right hon. Prime Minister whether the subject of a nuclear test ban has been discussed with Premier Kosygin during his visit and whether the government of Canada has received any assurance that the government of the U.S.S.R. subscribes to the Canadian view in this regard?


Mitchell William Sharp: We have had some discussion, and in the communique that will be issued after the conclusion of this visit our two governments will go on record as being in favour of a complete test ban. Of course, we do differ in some respects as to the modalities. The Soviet Union and ourselves do not entirely agree as to how best to achieve that complete test ban.


Mr. J. H. Horner (Crowfoot):: Mr. Speaker, I wish to direct a supplementary question to the right hon. Prime Minister. In light of Canada's withdrawal from the United States economic environment and our acknowledged friendship with Russia, as expressed so well today, can it be expected that the missile bases at La Macaza, Quebec, and North Bay, Ontario, will be reactivated with Russian missiles in the near future?


Some hon. Members:: Shame!


Right Hon. P. E. Trudeau (Prime Minister):: No, Mr. Speaker.
October 20, 1971


OPPORTUNITIES FOR YOUTH PROGRAM-REQUEST FOR CONTINUATION OF PRESENT POLICY
Mr. Roch La Salle (Joliette):: Mr. Speaker, I would like to direct a question to the hon. Secretary of State. Considering the interest that young people are taking in the Opportunities for Youth Program and the fact that the government has probably discussed that question recently, could the minister give us the assurance that this policy will be continued and, if not, would he be able to make a statement on that matter?


Hon. Gerard Pelletier (Secretary of State):: Mr. Speaker, no final decision has been made yet on that matter, but it seems to me that before long I will be able to make a statement concerning this program.


UNEMPLOYMENT INSURANCE
Mr. Doug Rowland (Selkirk):: Mr. Speaker, my question is directed to the Minister of Labour. Is the minister giving consideration to removing the regulation which treats severance pay as income for the purpose of calculating unemployment insurance benefits in light of the fact that a number of inequities have arisen from that situation?


Hon. Bryce Mackasey (Minister of Labour):: No. Mr. Speaker. We have been reviewing the regulation in order to limit possibly the apportionment of severance pay over a maximum of 32 weeks, thus eliminating or preventing the danger of people being denied unemployment insurance as a result of having worked a full 20 weeks prior to the 32 weeks, but we certainly have no intention of withdrawing that feature of the act.


PUBLIC SERVICE
Douglas Charles Rowland: Mr. Speaker, I wish to direct a supplementary question to the President of the Treasury Board. Has he taken any steps to ensure that severance pay owing to former employees of the federal government who have been laid off is being provided to them much more rapidly than has been the case in the past, in light of the fact they must live on severance pay for a number of weeks before they can get unemployment insurance? I mention in particular over 40 people from the Canadian Armed Forces base, Gimli.


Mr. Speaker:: Order, please.


Hon. C. M. Drury (President of the Treasury Board):: Mr. Speaker, my colleague, the Minister of Supply and Ser-
Inquiries of the Ministry
vices, has been conducting a review of pay operations in his department, and one of the objects of it is to speed up this process to which reference has been made.


THE CANADIAN ECONOMY
David Réal Caouette: Mr. Speaker, I have a question to direct to the Minister of Regional Economic Expansion.
A short while ago, he was dealing with long term programs for the Maritimes. Since the announcement of the new federal winter works program, are the Manpower Centres now empowered to hold talks with the municipalities of Canada-and not only of a part of the country-in order to launch immediately or as soon as possible projects which can be authorized?


Jean Marchand: Mr. Speaker, this question should rather be directed to the Minister of Manpower and Immigration, who has jurisdiction over Manpower Centres. I submit that the present negotiations between the provinces and the federal government should continue before Manpower Centres are authorized to consider any application.



INCOME TAX ACT


Mr. Jack Murta (Lisgar):: Mr. Speaker, I wish to direct a question to the Minister of Finance. Has the government considered the recommendation made by the CRTC in July that section 12(l)(a) of the Income Tax Act should be amended so as to include as a legitimate expense broadcast advertising on television and radio stations providing a service to Canadians?


Edgar John Benson: This has not been considered by the government to the present, Mr. Speaker.


Jack Burnett Murta: In view of conflicting statements made in Manitoba I would like to ask the Minister of Finance whether he has had any consultations with the chairman of the CRTC with respect to their call for amendment of section 12(l)(a) of the Income Tax Act and, if so, can he inform the House as to the nature of those consultations?


Edgar John Benson: Mr. Speaker, there has been no consultation whatever. The matter has not been considered by my department in any way up to the present time.


Gerald William Baldwin: That will be in the budget for November.


Edgar John Benson: For next week. It's every Thursday.
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UNITED STATES IMPORT SURTAX-CHANNEL OF CANADIAN REPRESENTATIONS TO U.S. GOVERNMENT

Mr. R. N. Thompson (Red Deer):: Mr. Speaker, I wish to direct a question to the Minister of Finance. In light of the recent statement by Senator Frank Church to the United States Congress, which was a rather accurate and useful outline of the heavy impact the American surcharge is having on the Canadian economy but is reported to have been made at the initiative of and-


Mr. Speaker:: Order, please. The hon. member should ask his question.


Robert Norman Thompson: I am coming to it-from information provided by two Canadian journalists because it was not available from other Canadian sources, would the minister inform the House whether the government is limiting its representations to the American government to diplomatic channels, through the State Department, or is it dealing with such power centres as the President's office or such prestigious centres as the House and Senate Foreign Relations Committees?


Edgar John Benson: Mr. Speaker, the government of Canada deals with the government of the United States, not with individual senators or congressmen. Our representations are made in that manner.



POST OFFICE


Hon. W. G. Dinsdale (Brandon-Souris):: My question, Mr. Speaker, is for the Postmaster General. In light of the statement by a senior official of his department, as well as by the hon. member for Winnipeg South Centre, that within nine years Canadians will be paying 26 cents to mail a letter in Canada, continuing the upward spiral that began in 1968, will the minister indicate what steps he is taking to improve the service so this exorbitant cost will be avoided?


Mr. Speaker:: Order, please. The hon. member must recognize that he is dealing with a situation that may happen in nine years time and so the question should perhaps be placed on the order paper. In any event, he is asking for a general statement and I would think that kind of statement normally ought to be made on motions. The hon. member might like to rephrase his question along those lines.


Walter Gilbert Dinsdale: Thank you, Mr. Speaker, for your admonition. I deliberately included the phrase, "the upward spiral that began in 1968." In view of the fact that the postal service is the basic communications system in Canada, would the minister indicate what steps he is taking to avoid this continuation of exorbitant costs?


Mr. Speaker:: Order, please. The hon. member is simply repeating the question he asked in the first instance, and I

told him that the question was not in order asked in those terms.


Walter Gilbert Dinsdale: On a point of order-


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


Walter Gilbert Dinsdale: On a point of order-


Mr. Speaker:: The hon. member for Brandon-Souris rises on a question of privilege.


Walter Gilbert Dinsdale: On a point of order, Mr. Speaker, I thought I had rephrased the question in such a way as to make it a matter of urgency. Let me put it in these terms, Mr. Speaker. Is it the policy of the government to insist that the Post Office Department make a profit, and is the same policy applicable to the CBC.


Mr. Speaker:: Order, please. The hon. member knows that the Chair indicated the question was not in order. The hon. member cannot rise on a point of order and ask a question which, in my view, is similar to the one that has been ruled out. If the hon. member thinks there is urgency, he has a right to come back at the time of adjournment. The hon. Leader of the Opposition.



MANPOWER


Robert Lorne Stanfield: Mr. Speaker, I wish to direct a question to the Minister of Manpower and Immigration about Operation Retrieval, a matter about which there was considerable concern a couple of years ago and about which complaints have been renewed. Would the minister make a statement at an early date indicating what improvements have been made with regard to this operation during the last couple of years since it has been under criticism, and what results are being attained in light of the criticism to which the program is presently being subjected? Could the minister make a statement at an early date?


Otto Emil Lang: Mr. Speaker, I shall certainly look into the question of making a statement at an early date about the tremendous benefits to Canada of retrieving back to it some of our-


Mr. Speaker:: Order, please. We are obviously getting into debate.



EXTERNAL AFFAIRS


Mr. Raymond Rock (Lachine):: Mr. Speaker, I have a question for the Secretary of State for External Affairs. Were there any talks with Premier Kosygin that would
October 20, 1971

eventually lead to the joining of our two continents by a causeway across Bering Strait in order that North America can join its railway and highway systems to those of the Soviet Union?


Mitchell William Sharp: Mr. Speaker, I think this is another of the questions that might be put on the order paper.


SHORTAGE OF CANADIAN TRAINED MEDICAL DOCTORS AND PERSONNEL-REQUEST FOR STATEMENT ON GOVERNMENT PROPOSALS
Mr. P. B. Rynard (Simcoe North):: Mr. Speaker, my question is for the Minister of National Health and Welfare. On October 6, in reply to a question, the minister told the House that he had been in consultation with the Association of Medical Colleges and the Canadian Medical Association concerning the shortage of Canadian trained medical doctors and medical personnel. Is the minister prepared to make a statement to the House in the very near future outlining his proposals to combat the shortage of doctors and Canadian trained medical personnel?


John Carr Munro: Mr. Speaker, I think the hon. member is aware of the various measures we have already implemented to deal with this shortage. We have the health resources fund of $500 million which is being gradually used up over the years in conjunction with the provinces for the building of many new medical schools, some of which are now under way and some of which have been completed. We are also meeting with the various health associations in order to develop paramedical personnel who will relieve our medical manpower to a very great extent.


Philip Bernard Rynard: Is the minister prepared to act on the suggestion of the Canadian Medical Association and build more Canadian medical schools for Canadian medical students?


John Carr Munro: Mr. Speaker, the health resources fund is there. It is being utilized to a very great extent by the provinces now in getting new medical schools under way. I expect that it will continue to be used by the provinces to expand this type of endeavour.


Philip Bernard Rynard: A further supplementary question, Mr. Speaker.


Mr. Speaker:: Order, please. We have almost reached the end of the question period. There are only a few minutes left. I wonder if we might recognize two or three other hon. members before the end of the question period and limit supplementaries.
* sf:	*


INDIAN AFFAIRS
Mr. Randolph Harding (Kootenay West):: Mr. Speaker, I have a question for the Minister of Indian Affairs and
Inquiries of the Ministry
Northern Development. In view of the recent protest by a spokesman for the Eskimo people of Igloolik in the eastern Arctic that a construction company was showing discrimination in its hiring practices against the Eskimo people in the area, has his department investigated this complaint and, if so, with what results?


Hon. Jean Chretien (Minister of Indian Affairs and Northern Development):: Mr. Speaker, we are now investigating. The Northwest Territories commissioner, some officials, and the member for the Northwest Territories are to meet with representatives of the company in Edmonton on Friday to discuss this matter, and we hope that all errors will be rectified by next week.


CANADIAN NATIONAL RAILWAYS
Hon. J. W. Monteith (Perth-Wilmot):: Mr. Speaker, on September 22 I directed a question to the Minister of Transport concerning the possible deterioration of service and possible lay-off of CNR employees in the Stratford-Sarnia area. He said at that time he would be glad to take notice of the question and get an answer for me at a later date. Four weeks have gone by, and I understand that the timetables are to be changed at the end of October. May I have an answer soon?


Hon. Donald C. Jamieson (Minister of Transport):: Mr. Speaker, I apologize. I did in fact send a letter of reply to some of the affected employees in the region and I ought to have sent a copy directly to the hon. member. I will see that he gets it today.


REGIONAL ECONOMIC EXPANSION
Mr. J. M. Forrestall (Dartmouth-Halifax East):: Mr. Speaker, my question is for the Minister of Regional Economic Expansion. The other day he undertook to reply to a question respecting the signing of an agreement with the province of Nova Scotia. I wonder whether, in replying to that question, he could undertake to say if it is now the policy of the government to create in Nova Scotia, particularly in the special areas, a Crown corporation or secretariat which would oversee the implementation of programs developed under DREE?


Jean Marchand: Mr. Speaker, we are discussing with the government of Nova Scotia all possible means of fostering economic growth in that province. We are also considering the possibility of establishing a Crown corporation. If, as will probably be the case, we come to an agreement

October 20, 1971
Inquiries of the Ministry
with the Nova Scotia government on this matter, it will be done. However, for the time being, it is far too early even to call this a plan.


POST OFFICE
Mr. Gerard Laprise (Abitibi):: Mr. Speaker, I have a question for the Postmaster General.
In a speech on June 2, 1971, the minister said that studies were under way on the conversion of the Post Office Department into a Crown corporation. Are the studies completed and can we expect an early statement?


Hon. Jean-Pierre Cote (Postmaster General):: The studies are completed, Mr. Speaker, and the government has to make a decision on that matter.


Mr. Speaker:: Order, please. We have just about reached the end of the question period but perhaps the hon. member for Hamilton West might be allowed to ask a question.


THE CANADIAN ECONOMY
Mr. Lincoln M. Alexander (Hamilton West):: Mr. Speaker, I would like to direct my question to the Prime Minister. Since we now have the $1 billion employment support program and since he must approach the provinces soon with respect to targets regarding employment, can the Prime Minister now give some indication as to the projections or targets he has as a result of this program recently brought to light?


Pierre Elliott Trudeau: Is there time?


Lincoln MacCauley Alexander: Mr. Speaker, perhaps I could repeat the question directed to the Prime Minister of Canada.


Pierre Elliott Trudeau: Is there time, Mr. Speaker?


Lincoln MacCauley Alexander: In view of the fact that the government has recently brought down its $1 billion employment support program and in view of the fact that the Prime Minister will be meeting with the provinces soon to discuss this matter, and as it is necessary to have some projections or targets regarding employment and unemployment for the balance of the year and for 1972, could the Prime Minister now indicate whether he has any projections in mind in this regard?


Pierre Elliott Trudeau: Mr. Speaker, I might say that it is a little late to ask me questions if the hon. member wants a very elaborate answer. I think the answer has been given by the Minister of Finance who, in answers to questions, has

said that we want to have the lowest possible unemployment.


Gerald William Baldwin: Does the Prime Minister still believe the Minister of Finance?


Lincoln MacCauley Alexander: Mr. Speaker, the Minister of Labour has stated that, at best, governments have averaged about a 4.8 per cent level of unemployment. Are the government's policies now aimed at achieving at least that lower level of unemployment and, if so, is the government aiming for this target in 1972?


Pierre Elliott Trudeau: Mr. Speaker, I really cannot give a figure. I have heard a member of the NDP in this House mention a figure of 4.5 per cent and I have heard some Conservatives mention that figure too. We are aiming for a really low figure.


Erik Nielsen: Well, I must say that is different.


Mr. Speaker:: Order, please. We have gone beyond the end of the question period. I note there are some hon. members who did not have an opportunity to ask their questions. I feel particularly guilty about the hon. member for Kootenay West who was anxious to ask a supplementary. Perhaps he will be given priority tomorrow to pursue the matter which he initiated today. Orders of the day.


GOVERNMENT ORDERS
[Stage Direction]
The House resumed, from Tuesday, October 19, 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:: Order, please.


Mr. Mazankowski:: Prior to the adjournment hour last night, I was making reference to the impact which the measures outlined in Bill C-259 will have on the agricultural community and the benefits for the associated business community directly related to the industry of agriculture. I was referring specifically to the effect of the capital gains tax, the elimination of the straight line depreciation on farm machinery and the corresponding impact that it will have on the future sale of farm implements, which will, directly and indirectly, affect the rural business community. There are other individuals who feel likewise.
I wish to quote from a letter I received from a tax consultant in the town of Lloydminster, Saskatchewan. He acts as an income tax consultant and accountant for over 800 taxpayers, mainly farmers, small incorporated businesses and small corporations. I quote from the letter dated June 28, 1971:
While it is early to assess the many, many ramifications etc., of the tax changes it does seem to us that another blow has been struck at agriculture and small business.
October 20, 1971

While the capital gains tax implications are of course obvious little has been said that a much greater tax disadvantage for the farm community will be effected by the changing over of farm depreciation from Part XVII straight line to Part XI diminishing balance. Indeed, we have found here over the years that the greater part of capital accretion by the farm community has been from capital gains, tax free, on sales and trades of farm equipment rather than the retention of earnings for capital purposes. This is despite the fact that often great self denial is required by the farm community, particularly the young, to get ahead and acquire the large amounts of capital necessary to operate economically.
It is strange too that small incorporated business is to face a tax increase while large public companies are going to enjoy a gradual reduction. As to big business many of the benefits, depletion, tax incentives through depreciation etc., are going to remain. Oil, mining, banking, finance and insurance groups are to be little affected.
I do not think there is any doubt that the majority of the small businesses are found in the western part of Canada. Of course, if an area still relies on much needed capital in order to develop and expand, the future expansion of small business is going to be drastically hindered as a result of the measures proposed. The over-all impact will put the farmer or small businessman, who is directly and solely dependent upon the agricultural industry, in a very tight squeeze.
Last night I referred to the hardships that will be imposed as a result of the treatment of co-operatives. In all sincerity, I do not believe that the matter of co-operatives has been given enough sympathy by the Minister of Finance and his advisers who are piloting this legislation through the House. This morning a number of the members of the party to which I have the honour to belong met with officers of the Alberta Wheat Pool. They reiterated the reservations they have with regard to Bill C-259, reservations which strike at the very heart and spirit of the co-operative movement. They told us that if the measures which appear in Bill C-259 are implemented, it will mean an increase in taxation by about 700 per cent. If this is so, the funds can only be acquired through additional revenues. A direct additional cost will have to be imposed on the farmer on the delivery of his grain.
With your permission, Mr. Chairman, I wish to read a portion of the brief submitted to our caucus this morning with regard to Bill C-259. I quote:
Co-operatives in Canada, despite being simply a form of business enterprise, have been singled out since 1948 for certain provisions for income tax purposes, which are both good and bad. The worst feature is being made worse by Bill C-259.
The existing Tax Act makes provision for the deduction from income of patronage dividends and Bill C-259 does likewise. This is a commendable provision which recognizes that earnings can be distributed according to patronage as well as a return on capital.
It turns out that to co-operatives, in which the users are also the owners, this is a desirable situation and in cases such as ours- entirely equity financed, it is highly desirable and essential for the continuanace of such a form of business enterprise.
Unfortunately, there is a limitation to the provision for deductibility. In the existing Tax Act this is found in Section 75(3):-
This formula, in the manner in which it has been applied, has not worked to any appreciable disadvantage to our Association in the past. The provision, which we believe wrong in principle, has not only been retained in Bill C-259, but it has been cleverly rearranged in such a manner as to make it, to some extent, an effective tax on capital rather than on earnings. The 3 per cent figure has been changed to 5 per cent and the deduction of interest
Income Tax Act
on other than bank loans has been changed to interest only on borrowing from members.
Reference is made to a recent proposal offering amendments to the present bill contained in Votes and Proceedings No. 189. The observation of the officials of the wheat pool in this instance is that they will have very little effect on their operations. These amendments may help some of the smaller co-operatives, but they will have little effect on the operations in which such co-operatives are involved. I see that Your Honour is giving me the eye to indicate that my time has expired. I would like to complete the brief, Mr. Chairman, but I realize that requires the unanimous consent of the House.


Gérald Laniel: Order, please. It does require the unanimous consent of the House. Does the House agree to allowing the hon. member to complete his remarks?


Some hon. Members:: Agreed.


Donald Frank Mazankowski: I thank hon. members for their cooperation. I want to put this submission on the record because it is very important to the western grain economy and to co-operative movements which provide a service but are not necessarily in competition with private enterprise. I quote:
The only occasion a co-operative such as ours could use this provision-
Here they are referring to the amendment that is proposed.
-advantageously would occur when its earnings were relatively low and this would be a level too low to effectively service our capital. The ultimate result therefore, of these provisions would be to effectively institute a minimum tax on co-operative earnings which amounts to a tax on capital rather than on earnings. This is a discriminatory provision against a taxpayer wishing to distribute earnings based on patronage rather than on capital, which would effectively destroy this form of business enterprise.
Under Bill C-259 and the amendments proposed therein, it will be imperative to distribute some tax paid money to service our capital structure. In this regard, there is no provision to allow for any tax credits to a member-shareholder comparable to that for a recipient of dividends from a corporation. Rather than request such a provision, we feel it would be much simpler and more correct in principle, to delete the limitation imposed by the capital-employed formula.
No other western country imposes, so far as we are aware, such a penalty on the co-operative method of doing business.
I do not believe that in this day and age, having developed hand in hand with the co-operative movement, we should be instituting tax measures which would destroy the whole principle upon which co-operatives are founded. The proposal put forward in the bill strikes at the very principles of the movement and I appeal to the minister to take these submissions into consideration with a view to ensuring co-operators of the degree of equity which has been spoken of in so many of the documents put forward by the government in support of its tax proposals. If organizations such as the Alberta Wheat Pool, whose success or failure depends largely on the agricultural community, fail to survive, it will only mean a much greater cost in the distribution and handling of grain, an increase which will directly affect farmers. We know the government has proposed a policy by which it intends to reduce

October 20, 1971
Income Tax Act
the amount of grain held in storage. This would only aggravate the situation, because the producers themselves will have to provide additional storage facilities at an extra cost to them.
With these words I urge the parliamentary secretary, who I know has some sympathy with the Alberta Wheat Pool and other pool operations, to take cognizance of the submissions which have been made in the hope that more equitable treatment may be given to these organizations.


Frank Howard: Mr. Chairman, it is difficult to look at the totality of the tax bill before us without at the same time examining the budgetary revisions which were announced by the Minister of Finance the other evening in the light of what they mean both to the economy and to the taxation structure. The discussion upon which we are now engaged provides us with an opportunity to look backward a little and see what has occurred in the last number of years. I do not normally look back, re-read the record and quote from speeches I have made in the House in the past. I would not do so today, except to indicate that at this point in time we find ourselves in almost the same position economically as the position in which we found ourselves when I first had the privilege of taking my seat in this chamber.
In 1957, in the session which followed the election of that year which resulted in a change of government insofar as party labels were concerned, I indicated during the debate on the Speech from the Throne that I considered unemployment to be the most important question confronting Canada. That situation has continued with very little change for the last 14 years; it has not ceased to preoccupy me during my involvement in the affairs of this chamber. I do not particularly enjoy alluding to statistics because one tends to look at them as if they were theoretical items, not as representing human beings. None the less, statistics afford a quick and easy way of identifying a particular problem. The government examines such matters as unemployment on the basis of statistical analyses, altering and adjusting the basis upon which they are prepared from time to time. The following figures were given to the House by the Minister of Labour and I take them as being accurate and well researched. In the period from 1958 to 1962 the rate of unemployment was in excess of 6 per cent. In the period between 1962 and 1970 it was 4.8 per cent. In the final year or two of this period the figures showed a steady increase. At the moment, unemployment is running at about 6.4 per cent. The figures for this decade so far have been consistently above, or, rather, above the average of, the unemployment rate in the years between 1958 and 1962.
Over this length of time, in this 14 years, two political parties, one Liberal and the other Tory, have been in power. We have had three Prime Ministers, including the present one. Yet despite the change in prime ministers, the change of personalities in office, the change in ministers of finance, the change in government as far as political labels are concerned, the story has been the same during all that period, namely, that there is something badly wrong with the economy. In a land of great wealth, of great potential, of great natural resources and great human resources, we have witnessed the succession year after year of a level of unemployment in excess of 6 per (Mr. Mazankowski.J
cent during a large part of those 14 years. We have seen the level of unemployment high during the summer months when it was supposed to decline, taking into account the climatic situation in Canada.
In these circumstances I believe we are entitled to ask ourselves: Why is this so? The Canadian people should be asking themselves this question. Despite changes in government, changes in individual ministers, why does the same common thread of sickness prevail throughout the economy? I believe the answer is a simple one, and it indicates the direction in which government is oriented as far as economic philosophy and economic understanding is concerned. It indicates there is not one iota of difference between the Progressive Conservative party and the Liberal party. In this respect they are identical.


Eldon Mattison Woolliams: In Alberta they were saying there was no difference between the Liberals and the NDP.


Frank Howard: Unofficially, none of them will disagree with that statement. They may quibble and disagree about small, insignificant points but when it comes to their basic, underlying attitude toward the economic system both the Liberals and the Conservatives are married, gleefully and happily, to the idea of this system; it is this preconception which has brought about the unemployment levels which exist today and which have existed every year for at least 14 years. Both the Liberals and the Conservatives believe their purpose in life, as they get to office, is to serve the economic system rather than serve the interests of the people. They say that their purpose in office is to create an atmosphere within which private enterprise and the capitalist system feel comfortable. They say that by doing that the benefits that flow from that system will come to the people, and that the people will thereby benefit.
I submit that that is the difficulty. It is not whether one party is in government and the other not, or that one is more incompetent than the other-I think they are equal in that regard. It is simply a question of the attitude they have as to what should be the prime force in the nation, and what should be the orientation of government toward the people and the economy.
Some years ago when Walter Harris was Minister of Finance and National Housing Act interest rates were pegged somewhere in the neighbourhood of 5 per cent or 5.25 per cent, I am not exactly sure which at the moment. At that time, Mr. Harris stood up in this House and said- this was before I was a member of the House but I subscribed to Hansard at that time and recall reading this-that it was the intention of the government to increase interest rates applicable on CMHC loans in order to attract into the homebuilding market more money from insurance, trust, mortgage and loan companies. This policy has successively been followed by every Minister of Finance since Mr. Harris, and interest rates have been increased, not for the purpose of providing housing for individuals and families in the nation but to make it more lucrative for money lenders, loan sharks and interest hounds to invest their money. In consequence, we have had a doubling of interest rates over this 16-year period since that time.
October 20, 1971

The purpose of increasing interest rates was not to serve the interests of the people, or to build better quality homes or lower cost homes; the purpose of government policy was to make it more profitable for the insurance and trust companies and those with money in their pockets to lend their money, since they refused to lend it unless the interest rate was increased.
Let me give a further indication that the orientation of government policy has not been directed toward helping farmers or workers but rather primarily toward assisting industry. When the Liberal government was in office not many years ago it imposed a special 5 per cent tax on industry. This was supposed to dampen pressures created by capital and construction projects undertaken by industry, to cool down that section of our economy. The 5 per cent tax that was levied on industry came into the coffers of the treasury and subsequently was repaid.
At the same time the Liberal government imposed another 3 per cent tax on industry and on workers up to a maximum amount, which meant that the heavy burden of this tax fell on the wage earners, farmers and so on, of this nation to enable the government to pay back industry. That, Mr. Chairman, was the political orientation of a party under the capitalist structure, including those who run industry, who obviously also run government.


Erik Nielsen: Pretty sneaky.


Frank Howard: It was not sneaky at all; that is the way they do things. That is standard practice. There was not anything sneaky about it; this was done right out in the open. They told us that they were going to do it and we blithely went along with it. By "we" I mean the general public and the country at large, who probably did not give it that much attention.
What the Minister of Finance did the other night was another example of adjusting tax rates, not to assist the farmers or workers of the nation or to increase the purchasing power in the hands of the six or seven million people in the work force, but rather to assist industry. Otherwise, why is it that the farmers, workers and fishermen end up with a 3 per cent reduction in tax and industry ends up with a 7 per cent reduction? Is one twice as important as the other? Let us examine what this tax reduction means to a single man earning $8,000 a year. According to the tax tables, with the reduction in tax announced the other night by the finance minister, this individual will save the grand total sum of $19.26 over the whole year. Actually, he will save only half that sum this year because the new reduction applies only to the last half of the year.
I am glad at least one cabinet minister is paying attention to my remarks, the Minister of Indian Affairs and Northern Development, and he had better do so because most of the people under the jurisdiction of his department, namely the Indians, do not come this high in terms of income level and therefore will not be affected by the new tax reduction. They will remain at the bottom of the income ladder, at the same level of poverty. I hope that something will take place within the minister's department to elevate the income levels of the Indian people so that they will find some benefit from these tax reductions.
Income Tax Act
Now take the case of a married person with two children and an income of $8,000. He will save a grand total sum, next year not this year, of $13.44. Is that not a fantastic and generous gift on the part of "Santa Claus Benson"? Let me also examine the taxation statistics for the last year for which they are available, the 1971 edition which was released a few days ago. It is of interest to note that all employees classified here-and there are 6,312,000 of them-had an average annual income in 1969 of $6,047, and this income has not been increased much since then. A married person with two dependants, with an income of $6,000 a year would get a tax reduction, not this year but next year, of exactly $4.32. Such generosity, I know, is hard to accept.
Let us take the case of a farmer with an average annual income during that year of $5,106, or a fisherman with an income of $5,048. A farmer with two children, or for that matter a fisherman with two children, will benefit under this great and generous Liberal government to the extent of $4.32 next year. If they have a similar income this year, then they will benefit by only $2.16 since the tax reduction is effective for only the last half of this year.
By contrast let me show how one industry, in particular, using the corporation law of the nation, using loopholes in laws passed by successive governments of this country, is able to cheat the Canadian taxpayer and industry itself of $2,300,000 within the next two-year period. A decision is to be made on October 25, just a few days from now, when Atlantic Sugar Refineries Company Limited proposes to sell its business and assets-it does not propose to sell the company as such but just the business and assets-to a wholly owned subsidiary called Acadia Pulp and Paper Limited. Atlantic Sugar already owns Acadia Pulp and Paper'Limited; it is the parent company and it proposes to sell its business and assets to that wholly owned subsidiary. It might be said that this is a normal corporate transaction, that it is done every day. I do not know how they propose to do it, probably by an exchange of shares or something of that sort.
The president of Atlantic Sugar, Mr. W. J. R. Paton, a gentleman who just the other day suggested we continue selling out this nation to the United States, made a speech in which he said:
-the proposed transaction-
That is, selling the business and assets of Atlantic Sugar to Acadia Pulp and Paper.
-is to increase the after-tax earnings of the company and its subsidiaries, considered as a unit.
Do you know what is happening? Atlantic Sugar Refineries Company Limited is making a profit and Acadia Pulp and Paper Limited is losing money but the same man owns both. As matters stand now, he cannot charge the losses of Acadia Pulp and Paper Limited against the income of Atlantic Sugar. He has to pay taxes on the income of Atlantic Sugar. However, if he sells the assets and business to Acadia Pulp and Paper he will be able to charge the losses of the pulp and paper company against the profits of the sugar operation as one unit. That way he will end up cheating you, Mr. Chairman, and me and

October 20, 1971
Income Tax Act
every other Canadian citizen out of $2,300,000, the tax which Atlantic Sugar would otherwise have to pay.
This great, friendly Liberal government seems to say this is perfectly all right. While Atlantic Sugar Refineries Company Limited saves itself, and denies a tax revenue of $2,300,000 to the federal treasury over the next few years, Santa Claus Benson says to some of its employees, "We are going to give you a benefit of $4.32 in tax refund next year, if you are married with two children and earn $8,000 a year."


Stanley Howard Knowles: Ho, ho, ho!


Frank Howard: I am sorry, I misread one line-if you are married with two children and earn $5,000 a year. When there is $8,000 in income he says the saving will be $13.44. But next year Atlantic Sugar Refineries Company Limited, that great Canadian group that wants to sell the rest of us out to the United States, will save $2,300,000 by the simple process of share transfers and stock transfer arrangements. Is that fair, Mr. Chairman? Do you consider that it is equitable, that it is decent? This is robbery, thievery from the treasury and I do not mind saying this outside the House, too. If those friends of Atlantic Sugar over there who are looking askance at me-


Mr. Mahoney:: A point of order, Mr. Chairman.


Gérald Laniel: The hon. parliamentary secretary rises on a point of order.


Patrick Morgan Mahoney: I wonder if the hon. member would identify the source of the tax tables he is using. Certainly, they seem to be monthly figures rather than annual figures in terms of the reduction of tax.


Frank Howard: The parliamentary secretary had some glowing statements to make about the state of the economy a little while ago and he was in error then. When he gets the opportunity, perhaps he would like to tell the country what the tax tables are likely to be.


Patrick Morgan Mahoney: A further point of order.


Gérald Laniel: The hon. parliamentary secretary on a point of order.


Patrick Morgan Mahoney: Mr. Chairman, do I take it that the hon. member admits they are so unauthentic that he cannot identify them or that he does not care to do so?


Frank Howard: No, the hon. gentleman need not take that at all. I simply said to him that in making statements about how well this government is handling the unemployment situation in this nation he has been wrong. He is not adverse to standing up, so perhaps he would like to take the opportunity of saying what the tax structure is likely to be. If these are erroneous computations which I am using I am afraid I have no other source than Canadian Press which says they were confirmed on Monday by the Finance Department. The department says that at this stage it does not intend to release sample tax levies as it usually does. So these figures are what Canadian Press says it gleaned from the tax department.


Gérald Laniel: Order, please. The Chair is being as lenient as possible because of the point of order,

but the time of the hon. member expired a couple of minutes ago. Unless he gets unanimous consent, he will not be allowed to pursue and expand his remarks. The hon. member for Calgary North.


Eldon Mattison Woolliams: Mr. Chairman, in following the speech made by the hon. member who was one of the aspiring leaders of the New Democratic Party, I could not help but believe that speech was made today solely for the purpose of trying to win a few more votes in the province of Ontario.
There is one answer I should like to make to that kind of speech. When the hon. member talks about the amalgamation of assets of the sugar company and the pulp and paper company which are owned by the same people, this type of fiction must be exploded. I am sure the New Democratic Party would be the first to protest if the company that is losing money closed its doors and threw another thousand men and women out of work. So if management can operate with an initiative-


Frank Howard: Are you a shareholder?


Eldon Mattison Woolliams: No, I am not a shareholder nor am I a member of the union. Now, you fellows listen for a few moments because I want to make this point.


Frank Howard: I don't mind listening so long as it is the truth.


Eldon Mattison Woolliams: The primary purpose and objective of this initiative which brings companies together seems to me to be to keep men and women employed. You cannot have it both ways. The NDP says it is terrible when a business which cannot make money unites with another one which can. But by doing that about a thousand people may retain their employment and that is the purpose of the free enterprise system. In Saskatchewan, the old CCF party did that. The former treasurer, who graduated with me, seemed to be pretty enterprising and he left the province with several million dollars. This is all beautiful talk for the hustings, to excite people about big corporations uniting and stealing from the treasury. If corporations can organize their business to maintain a high degree of employment in this country, I am all for it.


Some hon. Members:: Hear, hear!


Eldon Mattison Woolliams: Although we in this party disassociate ourselves from the NDP, we believe that taxes should have been cut. I suppose it would take an expert to say how far you can go in cutting personal income and corporate taxes. However, corporate taxes were not cut to give the corporations more profit but in order to create more employment, and to enable corporations to compete in the United States market, thus enabling us to keep that market, particularly at a time when we have this surcharge and trouble with the exchange.
This Fabian philosophy is trotted out every time there is an election. Unemployment is always the fault of the other party according to the Socialist movement, whether in Canada or Europe. During the last depression in Britain, Ramsay McDonald was the Labour leader and if my figures are correct six million people were unemployed. We saw the failure there. We also saw the failure of Harold
October 20, 1971

Wilson and what happened to the United Kingdom under his regime.
I suggest-and I say this not without tongue-in-cheek- that it would be less than sanity for the heart of the industrial belt of this country to go NDP because then we would have more trouble so far as the economy of this country is concerned. Even now Saskatchewan investors are going to Alberta because they do not feel secure in that province, just as they did not feel secure under the other experiment. That is what determines whether there will be unemployment. The important factor is confidence. If there is not confidence there cannot be full employment. The reason I asked my question today was the headline which deals with the economy. Our distinguished guest, Mr. Kosygin, criticized United States policy and said it was killing jobs in Canada. There is nothing wrong with this headline, but I say it is not good for our negotiations with the United States. In order to get the surtax removed and get a better deal from the United States in so far as our trade relations with the purchasers of our commodities are concerned-and we are also their best purchasers-I would have hoped we could continue negotiations at a high level.
If Mr. Kosygin or the leader of any other nation comes into Canada and starts interfering with our negotiations with the United States, then we can only have more difficulty with the United States and more unemployment in Canada because such things just do not help our negotiations with our neighbour. I know one has to negotiate from strength. But I cannot believe that such statements would add strength to our negotiations. I would have thought the Prime Minister would have indicated that, although he appreciated the visit of a distinguished guest, he did not appreciate the premier of another sovereign state coming to Canada and interfering with our external relations with another nation. That is why I asked the question. If that question is frivolous, then the person who is frivolous is the Secretary of State for External Affairs because so long as we cannot negotiate with the United States we will have further unemployment and further economic problems. We may even have another budget if this government lasts.
Having said that, I want to make a few other comments. My good friend to the left always asks me if I am a shareholder. I understand that the corporations of Canada are owned by Canadians. I hope they are and if they are not I hope we can get greater Canadian participation. I have the right to go into the market and buy stocks. My friend receives the same salary I do and he can do the same thing. I want to deal with the subject with which I was dealing the last day on which I participated in the debate, the resource industries. I wish to place on the record some recommendations made by the Independent Petroleum Association of Canada. I want to do so because, as I said on the last occasion I spoke on this subject, not only does our resource industry provide employment to thousands of Canadians but there is also a reflection in the tertiary industries, particularly in the province of Ontario where the petroleum industry spends $4 million or $5 million on equipment. This is important to the economy of the whole country. Therefore, it is very
Income Tax Act
important we make certain that our resource industries have an equal competitive position with the resource industries of other nations. That is why I wish for a few moments to discuss the question of depletion which is so important to the oil, gas and mining industries.
The Independent Petroleum Association of Canada continues to feel that the abandonment of the depletion concept, as it is generally understood in the world-wide oil industry, and its replacement with the concept of earned depletion will not attract the necessary capital to the Canadian petroleum industry. The Independent Petroleum Association believes that taxpayers with oil and gas income should be entitled to gross depletion similar to the situation in the United States. If the government is unalterably opposed to the gross depletion concept, then, the association states it is their belief that earned depletion must be made more meaningful than in the proposals in the tax reform legislation. It must be made more meaningful in two ways; more meaningful to the industry through assistance and encouragement and more meaningful to the industry through obtaining information so that they know what is really meant by the term "earned depletion".
The Independent Petroleum Association states:
In this connection, our Association recommends that all 'Canadian exploration and development expenses' as defined in Section 66 (15) (b) of Bill C-259 should be included in determining the earned depletion base. To avoid any abuse in the sale of properties between companies it is suggested that the income from such sales should be credited to 'Canadian exploration and development expenses' and thus the total earned depletion base is unchanged. We also recommend that tangible equipment such as wellhead equipment and tubular goods for productive wells, battery equipment, processing plant costs and other equipment necessary to recover hydrocarbons be included in the earned depletion base.
It is interesting in passing to point out that most of the well equipment, battery equipment, processing and plant equipment is manufactured in eastern Canada. So we should keep a healthy base and give a proper depletion allowance to these companies so that they can build up a reserve and, in that way, carry on further exploration and development work because this will benefit the industrial base of Canada.
The submission of the association continues:
Certainly the risks of the oil and gas business are of sufficient magnitude to warrant similar treatment in respect to depletion as that afforded the mining industry.
It is illogical that depletion on future production income from producing properties at January 1, 1972 should have to be earned without recognition of the expenditures made in the exploration for and development of such properties prior to November 7, 1969. We recommend that the effective date for eligible expenditures be retroactive to January 1, 1949, after reduction for the amount of any depletion allowed since that date.
That is something for which the industry has been waiting for a long time, even before the amendments in the bill and even during the time we formed the government. The association has something to say about Canadian ownership. They say:
Our Association is deeply concerned that Canadian individuals and corporations have sufficient incentive to make direct investments in the oil and gas business and, more particularly, that in Canada they be placed on an equal footing taxwise with foreign citizens and corporations in making such investments. Independent Petroleum Association of Canada is gratified that the principle

October 20, 1971
Income Tax Act
of permitting 'non-qualifying' corporations and individuals to write-off expenditures in the oil and gas business against their ordinary income has been recognized in the tax legislation-
That is one thing they go along with.
-but we strongly urge your government to reconsider the limited write-offs, namely 20 per cent declining balance per annum, which are provided in the legislation and to allow Canadian individuals and corporations to write-off such expenditures immediately against income. We continue to believe that the inordinate risks of the oil and gas exploration business require immediate write-offs to attract the very large amount of capital required in the years to come. We do believe Canadian investment should be encouraged, and we are concerned that such investments will not be attractive to Canadians unless such write-offs are provided.
In the oil and gas industry, or in any of these industries, large pools of risk capital are required. To encourage people, to motivate them to put money in those resource industries, you have to make the investment attractive by allowing a fairly high return, because without a high return investors will not take a chance in a big risk venture. Otherwise, they would be better advised to buy bonds at 8 per cent or 9 per cent. That is why it is said that Canadians have the biggest savings accounts pro rata of any nation in the world. It may be that we should have legislation of the kind which would encourage people to take a risk, and when they take that risk they should get a return commensurate with it. That is the most important part. When we are competing, particularly with the United States because we live beside them, our depletion laws should be on all fours with those of the U.S. so that our corporations, in their development and exploration, are on an equal footing. My friend to the left of me will find that if we have an equal opportunity we will be able to have an equally low rate of unemployment.
The rate of unemployment in the U.S. is lower than in Canada and we will only achieve equality, at least with the U.S., with all the resources we have, by this method. In fact, we should be doing better. We should not have a 7 per cent unemployment rate when they have 5 per cent unemployment, in a country with resources that have not been touched. We are only going to achieve that if we encourage the investment of risk capital and if we have laws that are at least competitive with those of our competitors. Exploration is rather like the automobile business, although that business does not involve high risk. Those corporations that are exploring for gas and oil in Canada are also doing so in other areas, even in communist nations. When I was in Yugoslavia this summer I found American companies doing business there. How did this come about? The state makes a contract with, say, Shell Oil or Standard New Jersey under which the state puts up 50 per cent of the money and the company puts up 50 per cent. They have guarantees over a period of time which give those countries full employment. If the communists can do it, surely we can do it here in Canada.
This brings me to the matter of Canadian ownership. We will only achieve ownership of our resources or of any other industry when we create a tax climate which encourages risk capital and encourages Canadians to put their money into their own corporations. This brings me to the next point. I want to deal with stock options. We hear from the NDP suggestions that taxes for the little

man should be lowered and taxes for corporations should be increased. I repeat that they are overlooking the fact that it is the corporations which hire these people. They pay them the wages that the unions demand and they meet union demands in negotiations. The idea is to give employment. I am sure that my friends must be against full employment in Canada, unless they thrive on adversity so that they can win polls.


An hon. Member:: That is closer to the truth.


Eldon Mattison Woolliams: It is said that an effective method of increasing Canadian ownership is to encourage the formation and growth of Canadian companies. In the oil and gas industry, highly motivated technical personnel are an essential ingredient for success. The parliamentary secretary will appreciate the fact that when we developed our industries in western Canada, particularly in Alberta, it was not capital that came first but rather people from the U.S. with know-how who came to assist us with their knowledge and experience. They came from the U.S. and other places and assisted us in the development and exploration, which led to great success, particularly in Alberta where we had the findings of natural gas and crude petroleum in great quantities in the early 1940's. In order to encourage such personnel, in order to stop the brain drain and to give employment to those people who are unemployed today, it has been necessary to have some stock options. My good friends to the left will say that I am making a speech for the corporations. I am not making a speech for the corporations, I am making a speech for the people of Canada.
I know that when our corporations are healthy, when they show a profit, when they are developing, expanding and trading, we have fuller employment and we can give better working conditions and better wages to the workers. The unions then can negotiate with the corporations and obtain a higher standard of living by getting more income and better fringe benefits for their members. Surely that is the attitude we should take, unless my friends to the left want to adopt the other extreme position and say that we should abolish all free enterprise and let the state own everything. Then, one has to ask oneself how many strikes would be permitted. The right hon, member for Prince Albert once said in a debate some years ago that .there were 93 strikes in Crown corporations in Saskatchewan and that 53 of them were settled by compulsory arbitration. When the state takes over completely, that is what happens to labour.
I see my time is just about up and I will complete my remarks in one sentence. When personnel are given stock options, with proper regulations, to encourage the expansion and development of corporations, there will be fuller employment.


Mr. Flemming:: Mr. Chairman, one would assume from looking at Bill C-259, which is about three inches thick and contains about 700 pages, that it would furnish any speaker with sufficient ammunition for making a speech without any difficulty. However, I find I do have difficulty and the reason is that this bill is so ponderous and so complex that I submit an ordinary member who has some other interests to think of cannot possibly digest properly what is in it. As a consequence, he is working at a disad-
October 20, 1971

vantage in talking about it item by item. I think, however,
I will acknowledge that this is a most important bill. Presumably it is the condensation of all the measures relative to income tax that have been in existence since about 1917.
I believe that the hon. members opposite find just as much trouble in speaking on this bill as I do, because none of them have been speaking. No speeches have been made from that side in connection with the bill. The minister rises and says a few words, and from then on it is the opposition that carries on the debate. I believe the hon. member for Calgary South is the only member who has spoken.


An hon. Member:: There were four yesterday.


Mr. Deachman:: Mr. Chairman, I wish to rise on a point of order. I am sure the hon. gentleman would not want to leave on the record a statement that there have been no speeches from this side when the record clearly shows that there were. I am sure that is not the way in which he would wish to deal with the House. In all fairness he would want to correct that, I am sure.


Eldon Mattison Woolliams: There were so few that I would not mention them.


Hugh John Flemming: The hon. gentleman is probably right. I would not want to deliberately misrepresent the situation, but I did not happen to hear them. If they made them apparently they were not important enough to cause anyone on our side to be sufficiently impressed to talk about them. It seems they may have spoken but they said very little of any consequence.


Some hon. Members:: Hear, hear!


Patrick Morgan Mahoney: It just means that you do not listen.


Hugh John Flemming: I cannot answer both the Postmaster General and the hon. member for Calgary South at the same time. Good speeches have been made by members on this side of the House, and they have put forward constructive suggestions, but apparently very few cabinet ministers are interested in them. Generally speaking, there are very few ministers here to listen. Remember, Mr. Chairman, this is a bill which affects the livelihood, welfare and well-being of all Canadians, yet cabinet ministers do not think it important enough to sit and listen to the debate. I will make an exception of the Postmaster General who usually is here.
Unless the parliamentary secretary from Calgary South is making more notes than I think he is, the constructive suggestions made by hon. members on this side are falling on deaf ears and empty benches. That is not good enough. On something as important as a 700 page bill, involving the well-being of practically all Canadians of adult age, surely we are entitled to have cabinet ministers listen to our representations. With the exception of a handful of faithful supporters, very few government members are here to listen to what we have to say. I repeat, that is not good enough.
The interpretation to be drawn from this is that everything in the bill is cut and dried, and will be passed, with
Income Tax Act
the exception of a few minor amendments which the Minister of Finance has described as being largely technical in character. So I submit that the changes could have been made, and should have been made, by amendment to existing legislation rather than through this unwieldy document. The changes could have been shown at every page as they were made, and as we went along we could see what was in the original act as well as the proposed changes. In that way, we would be able to compare them. It seems to me this would be the intelligent way to go about making changes in the Income Tax Act.
We Conservatives believe in retaining what is good of the old. We discard what has outlived its usefulness, but we retain what is good. I think hon. members opposite should learn that lesson from the philosophy of the Conservatives. They should consider deleting as required, and then adding on what they think is in the public interest. But because they have not done this, I believe they deserve criticism.
In simple language, the meaning of the word "conservative" is a person who is disposed to maintain existing institutions and views. I submit there is no need for a 700 page bill with all its difficulties and complexities. All that was required was a condensation of the old act, which has been in existence since 1917, with the appropriate deletions and additions. I am not the only one who feels this way. The Canadian Pulp and Paper Association, in a brief submitted in September, 1971, had this to say:
We urge that, during the stage leading to adoption of the bill by Parliament, careful consideration be given to further suggestions that will be forthcoming from the public.
In this connection, the time available for study of the bill before passage and implementation for January 1, 1972, is extremely short. The bill is a most complex one, with new concepts and definitions. It will take many months for tax specialists to be able to understand its full impact and determine all the ramifications of the many new proposals. It is difficult to see how members of Parliament, with their many other responsibilities, will be able to understand fully the effects of the proposed reforms in the few weeks that will be available for study of the bill.
So, Mr. Chairman, I submit that the government is wrong in the way it has gone about this. It would be much more to the advantage of all of us, and of the Canadian people in general, had it gone about the matter of changes by way of amendments.
But since we started to discuss the bill, a special announcement was made by the Minister of Finance last Thursday. I think some of the things he announced then should have been announced quite a while ago. He was urged to make those changes, but I am prepared to concede that it is better late than never. His announcement has been referred to as a budget. In it he outlined tax reductions and other changes in the fiscal policies of the government. He started out by saying:
In terms of production, employment and prices, the Canadian economy is on ... course . . .
That reminds me of what used to be said about the man who underwent surgery-the operation was a success but the patient died. The minister says that everything is on course. Mr. Chairman, everything is on a very bad course, a very serious course. The minister reports that unemployment has increased. That is a matter of real concern to every member here. It certainly is a matter of real

October 20, 1971
Income Tax Act
concern to me. Nobody wants to see a lot of unemployment in Canada.
Then, on page 2 of his speech we find reference to what he was going to do about the situation. I am not going to review his decisions item by item. Hon. members are familiar with them to quite an extent, but I do believe that the conclusion he reached, that he will have a $1 billion deficit, is something which deserves serious thought by all members. Generally speaking, this will mean an inflationary situation. I am not going to criticize the need for a deficit at this time, with the unemployment figures the way they are, but I maintain that the government deserves to be censored because it ran deficits in the public accounts when times were good and the economy was bouyant. When times were good and the economy was bouyant the government should have been restricting its expenditures, and living within its budget, preparatory to the situation that has developed now. When times are hard I think that deficit financing is quite justified, but I object to it during good times. The government is guilty of gross mismanagement of the fiscal situation. My friend from Calgary South will have to take his share of the blame.


Patrick Morgan Mahoney: This is the first time we have been accused of having had good times.


Hugh John Flemming: When was that said?


Patrick Morgan Mahoney: Just now.


Hugh John Flemming: Our present inflation is the result of poor budgeting over a period when the economy was buoyant, and the parliamentary secretary cannot dispute that. When private enterprise was active and willing to carry the ball, it should have been allowed to do so. But the government was stupid enough not to allow private enterprise to do that. The parliamentary secretary can take his share of blame for that, too. Private enterprise needed labour, materials and money; but then the public sector moved in and became a competitor of private enterprise. It competed in those very areas in which private enterprise was willing to engage. So, the public sector went into competition with private enterprise and that is partly the reason for our present serious situation.
I am going to talk a bit about the adverse effect of the American import tax. I happen to be one who feels that anyone who is realistic and reasonably fair will understand the difficulties facing the government of the United States of America in its balance of payment position and in the situation that existed. I submit that when they imposed these import duties, Canada should have been automatically exempted from them. I submit, Mr. Chairman, that this is where this government fell down. This government did not conduct itself in a way that would have brought about Canada's exemption from the effects of the 10 per cent import tax. Members of the government had said certain things. Apparently there was a breakdown in communications and, consequently, Canada was not exempt from the provisions of the import tax. Even as late as when the Prime Minister made his trip to Moscow, what did we find was being said? The Prime Minister said that Canada has increasingly found it important to diver-
(Mr. Flemming.]
sify its channels of communication because of the overpowering presence of the United States of America and that this was reflected in the growing consciousness amongst Canadians of the danger to our national identity from the cultural, economic and perhaps even military point of view.
If I had a customer to whom I was selling 85 per cent of my exports, I do not think I would go out of my way, when in a strange country with which my customer was not too friendly, to make any statements about the channels of communication with that customer. It appears that the channels of communication are pretty nearly closed at present. There is an almost complete lack of communication between ourselves and Washington at present. And so, I ask, what are we to do about this? That is a good question. What is this government prepared to do? They have never told us. Telling us has never seemed important. They have never told us what they intend to do.


Eldon Mattison Woolliams: Let Mr. Kosygin make the statement.


Hugh John Flemming: We know that when the United States imposed these extra import duties, Canada was not exempt, as it usually has been. So, I ask, what has brought this about, Mr. Chairman? Why is it evident to us today that there is this change in attitude? This government must take full responsibility for that change in attitude; there is no question about that, not a bit. There ought to be no question about their explaining this matter. The government's own supporters should see to it that the government explains why this situation has come about.


Some hon. Members:: Hear, hear!


Hugh John Flemming: I could go on and on-


An hon. Member:: That's pretty weak.


Hugh John Flemming: I wonder if everyone knows that we buy as much from the United States as Japan, Great Britain, the Common Market and Western Germany combined. Canada, with 20 million people, buys that much. Why, Mr. Chairman, we are very close to the Americans; we live on the same continent. Not only do we live on the same continent; we live here under conditions of great friendship.


Eldon Mattison Woolliams: That is right.


Hugh John Flemming: That is the way it always was, and therefore something must have happened. I do not know what it is; but the government must know, and it is up to this government to explain to the Canadian people how this change came about and why it came about.


Mr. Reid:: The Americans do not want to play it our way anymore.


Hugh John Flemming: All right, they do not want to play it our way. What are we to do? The hon. gentleman says that they do not want to play it our way. Are we to say that we will not sell them our gas or oil? What shall we do with our oil? To whom can we sell it? We do not drink it. What can we do with it?


Patrick Morgan Mahoney: Ask the NDP, don't ask us. Keeping it is their idea.
October 20, 1971


Hugh John Flemming: The point, Mr. Chairman, and I say this with great respect to the hon. member for Calgary south, is that the government has blundered hopelessly and mismanaged our affairs.


Some hon. Members:: Hear, hear!


Hugh John Flemming: I am surprised that the government's own supporters sit there like a flock of sheep and stand for it.


An hon. Member:: Come off it, now.


Patrick Morgan Mahoney: The hon. member does not really mean that.


Hugh John Flemming: I am surprised at my hon. friend from Madawaska-Victoria.


Mr. Corbin:: The hon. member can do better than that.


Hugh John Flemming: I am surprised that my hon. friend for Madawaska-Victoria just sits there and does not say anything. I have great respect for him, of course-


Eymard G. Corbin: Mr. Chairman, I have a great spokesman in the Minister of Finance.


Eldon Mattison Woolliams: The hon. member had better not say that in his constituency, because he will never be returned to this House.


The Chairman:: Order, please. I regret to interrupt this exchange, but the time of the hon. member who has the floor has expired.


Some hon. Members:: Continue.


Russell Clayton Honey: Is there unanimous consent for the hon. member to continue?


Some hon. Members:: Agreed.


An hon. Member:: The hon. member finished, and not a minute too soon.


Hugh John Flemming: Mr. Chairman, I heard someone saying something about my finishing not a minute too soon. Apparently there is not unanimous agreement.


Some hon. Members:: Carry on.


Some hon. Members:: Agreed.


Eymard G. Corbin: The hon. member knows that we like listening to him.


Hugh John Flemming: Mr. Chairman, I want to say a word or two about the pulp and paper industry. There is a large plant located in the constituency of the hon. member for Madawaska-Victoria. It is one of the eight pulp and paper mills of New Brunswick. Speaking in general terms, I believe that that industry is having a difficult time at present. I will not go into the reasons. They stem, partly, from the imposition of the import duty, partly from losses connected with the premium on United States funds, and so on. I happen to be in the lumber business and know something about it. As I say, there are eight pulp and paper mills in New Brunswick which have made representations to the government on behalf of the pulp
Income Tax Act
and paper industry concerning the tax bill. They ask for certain considerations, and I support their request. These mills, as I say, are located in New Brunswick at Edmund-ston, Atholville, Bathurst, Newcastle, Saint John-there are two mills in that city-St. George and Nackawick.
We have at present the Department of Regional Economic Expansion. This department is doing a good deal to stimulate industry all across the country. I give them credit for this. However, they are not in a position and I do not think the statute allows them to do that which would be helpful to the pulp and paper industry.
In the province of Quebec and to some extent in the province of New Brunswick, there are many pulp and paper mills that were established a good many years ago. Their machinery is obsolete and they are not able to compete. Yet, within a few miles of the location of one of these mills, the department is establishing a new mill. They make a large grant to pay for new machinery in the new mill, so at public expense, Mr. Chairman, this company is given the competitive advantage of up to date machinery and equipment. As a consequence, they are able to produce in a much more competitive way than other companies. Possibly the government might consider, and I ask the parliamentary secretary to take note of this, that obsolescence as well as expansion of pulp and paper plants justifies the investment of public funds. I belong to that group of people who feel it is just as important to maintain an industry already in existence as to establish a new one. It is also much less expensive.
I do not think the attention of the Department of Regional Economic Expansion should be directed entirely to expansion of an existing industry or creation of a new industry. Not too long ago I read an article in a Montreal newspaper about the pulp and paper mills in Quebec. According to this article, the machinery in many of these mills is obsolete. They are not able to compete with mills which have more modern machinery. I ask the Postmaster-General to keep this in mind. When sitting around the executive council table, he might make representations with regard to pulp and paper mills in his and other provinces which have obsolete equipment. I am not going to impose on the good nature of the House and go on at length. Although I have not completed all my remarks, I will not speak any longer. I appreciate the generosity of hon. members on both sides in allowing me to continue beyond my time. Perhaps I will complete my remarks some other time.


Some hon. Members:: Hear, hear!


Eymard G. Corbin: Will the hon. member permit a question? Does he agree that to a certain extent part of the problems that the pulp and paper industries in Canada have is a world glut situation, an overproduction problem, which they have lived with in recent years and, just as important, problems of mismanagement or lack of good management within the industry? Does the hon. member agree that to some extent that is part of their problem?


Hugh John Flemming: In the first instance, Mr. Chairman, I do not disagree. However, I do not feel capable of judging the management of the pulp and paper industry in Quebec

October 20, 1971
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and New Brunswick in particular. I do not know. I was under the impression that they were pretty well managed. When you try to sell them anything, they do an awful lot of chiselling in order to get the price down. If that is good management, I think they are pretty well managed.


Philip Bernard Rynard: Mr. Chairman, it is always a pleasure to follow the hon. member for Carleton-Charlotte who, I am sure, is greatly respected by all members of this House. His sincerity has never been in question. He has had a tremendous amount of experience. We listened to his remarks with a great deal of interest.
There is no question about it, we are dealing with a very complex bill. When there are some 97 amendments to a bill, you know it is complex and complicated. No one has to tell you this. Lawyers and accountants find it impossible to interpret this bill. Outstanding tax authorities think it will take up to one year before interpretations can be validated. Lawyers are advising their clients to wait until this measure is passed before making any wills or changing any legal documents of consequence. Business has been uncertain and frightened, and has been afraid to move since the white paper on taxation reform was first introduced. There are now 97 amendments under scrutiny.
Many parts of the bill will be changed and rewritten. All of this discussion about tax reform took place before the 10 per cent American surtax on imports was applied. This makes the complexity of the problem far greater. It is almost impossible for anyone to speak in this House on this subject with any degree of authority. We must ask ourselves about American investment in Canada. Is the United States going to apply a 25 per cent surtax on dividends from investments in this country when we so desperately need capital investment? What will be done with pension funds? Will that apply to all with over a 10 per cent investment in the United States? How many people will be affected? How will it affect us economically? There have been no explanations in the House about that situation.
Even though we are a part of the problem, we wonder why, instead of blasting the Americans for the last year, we were not going about making trade arrangements similar to the auto pact which is so valuable. It started in a small way. I was in the House the day the bill regarding auto transmissions was introduced. That was the start of the auto pact. Why has this pattern not been pursued with more vigor for the past two or three years so that this 25 per cent of our export trade would not be affected now? The auto pact gives Canada a half billion dollar trading advantage. Why were other fields of trade not explored in order to open new markets in which we could be competitive?
Everyone is aware of the acute problems connected with United States trade. The Americans, in spite of inflation, followed the Marshall plan which set up Germany, Japan and Taiwan and many other countries as trading rivals. The other day I was told of a nationally known American firm which set up subsidiaries in two other countries. One company could ship into another country and undersell companies in that country. The other company, in turn, could ship back to the parent company and sell back to them at a lower price than they could manu-

facture it. It is quite apparent that the Americans, who have not done anything about their dollar since the Bret-ton Woods agreement, had to do something. They were literally financially bleeding to death as a result of their deficits. In spite of seeking freer trade in the field where we can best compete, it seems that for the past year we have been trying to annoy the Americans at every turn. I wonder why? We try to slight them by running to meet and cultivate new friends, people with philosophies entirely different from ours.
I believe Canadians should always get preferential treatment in their own country, whether they are manufacturers, professional men, business men or working men. But I do not believe we should castigate anyone else for our own faults or for the position in which we now find ourselves. I noted that the other day the Prime Minister had the courage to admit that the government had made a miscalculation. Oh, Mr. Chairman, it would fill a book. Then again, the cuts we have made in our NATO forces, the defence policies we have followed, our "one China" policy, are not such as to make friends of Japan or the United States or Europe. Why keep on insulting our Canadian friends in the United States? Mr. Chairman, there are more French Canadians in the United States than there are in the whole of Canada. There are more Canadians in the United States than there are in Canada itself. Yet through the press and the CBC we keep on insulting them.
We send our emissaries to the United States to bring back our trained professional people. We sent people down there on one occasion to my knowledge; they advertised and set up a cocktail party in an attempt to win back to this country scientists who had left Canada to go to the United States where they were able to find greater opportunities. No wonder the adventure was a failure. How did we treat them when they were here? I asked a question about this today. I asked why we had to turn down 640 Canadians who were fully qualified to enter our medical schools, while accepting over 1,000 students from foreign countries whose standards are lower than ours and who can ill-afford to give up the services of these people.
Consider, for a moment, the size of the deficit. Federally it will amount to more than a billion dollars. In Ontario, it will soon be more than half a billion dollars. Where will this money be found? These are a few of the questions which should be answered. And with what pangs of conscience shall we recognize the answers when we think of the plight of the 600,000 who are presently unemployed, and of the trading picture in the light of recent events?
I could go on to speak at length on this subject. I could talk about the difficulties we encounter in our efforts to compete with foreign countries where wages and costs are much lower. But I want to be fair to the Canadian labouring man and to Canadian industry. We must remember that a wage-earner in Canada pays around 40 per cent of his dollar in taxes as compared with 20 per cent in some of the countries with which we are competing. So the Canadian worker is bound to demand more money than his counterpart abroad. Industry is obliged to charge more for the same reason. There are only two ways of competing successfully in such a situation as this-one is
October 20, 1971

to increase production and the other is to employ better machinery which would turn out products faster and more cheaply. I do not see the government moving in this direction at all.
I wish to speak now for a few minutes on the subject of credit unions. I have spoken on this issue before. I believe it is an important one for the Canadian people, particularly for those who live in the small country places. These are the people who work among themselves, the friendly people, the people who know one another. It is a great advantage for them to be able to do business among themselves. The basis upon which these credit unions are set up is that members who have a certain amount of money make it available for borrowing by people who need it, and the rate of interest is much lower than that which is commercially available on the finance market. We should assess the activities of these credit unions on the basis of answers to such questions as: How do they operate? How are they run? What do they do with any profits received? Do they accumulate reserves? Who administers them?
All the credit unions with which I have been familiar have been controlled by a board of directors. Most of them have set up committees to deal with loan applications, determine whether funds are available to meet any requests and whether a loan should be made. Neighbours and friends know the backgrounds of applicants better than anybody else. They are in a position to judge their ability to repay any sums advanced. Nine times out of ten, debtors will do a better job of repaying loans in these circumstances than they might had they borrowed from an outside source. About the only form of levy presently imposed on credit unions is paid to the credit union league. In Ontario this amounts to $1.50 and I assume the arrangement is similar in other provinces.
The credit union league is a body set up to keep credit unions healthy and give them advice. The federal government now advances a proposal to tax the reserves built up by the unions. But these are the very reserves which provincial governments have insisted should be set up. I have looked over the record, and I know of no case in which anyone has lost any money on investments in credit unions. Yet about 80 per cent of all the credit unions in Canada have assets amounting to less than $500,000. In Ontario, where some 1500 credit unions are operating, the amount in reserve is around $45 million. A guaranteed fund has been set up and is regulated by provincial legislation in the Province of Ontario-I expect there is similar legislation in effect in other provinces across Canada.
Many of those who are connected with the operation of small credit unions in rural communities are, by the nature of things, inexperienced in money management. Many of these people need advice. They are not professionals in the field of investment. It is a very good thing that the unions should have the benefit of this provincial supervision and of the reserve which has been established. It seems to me that federal tax legislation in this field would necessarily be in conflict with provincial thinking-that there would be direct conflict with regard to the determination of what might be regarded as excessive reserves by Federal authorities. It is not unlikely that many of the smaller credit unions would be scared of ever reaching the paws of government taxation, and prefer to
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close down their organization. If there were many such decisions it might be embarrassing. The situation might even be a difficult one for the stabilization fund of the Ontario Credit Union League to handle.
Bill C-259 proposes to tax credit unions in the same manner as other corporations are taxed. But corporations operate on the basis of a permanent capital system, as do most businesses. Capital in a credit union is share capital only; it does not include loans by members. Limits are placed on the amount which can be deducted from capital and it cannot be reduced below 5 per cent of the amount of members' capital employed. Credit unions do not require permanent capital in order to conduct their operations; they lend money as they get it when members' savings are made available to them. In effect, a credit union is just a big family, borrowing from those who have money and lending to those who need it. This is a simple explanation of the way in which a credit union works, as I see it. Let the federal government keep out of this.
Dividends paid on credit union shares represent the cost of doing business. The savings of members are called shares. They really amount to risk capital in the event of liquidation. The shares are savings deposits and they may be withdrawn on demand. They do not appreciate in value; you get the same amount back. Therefore, they do not yield a capital gain. The dividends on members' shares have always been treated as ordinary interest income and are taxable, and any member of the credit union pays tax on any dividends he receives. He pays personal tax as well, so therefore you have double taxation. The credit union disburses practically all of its income, generally speaking, and is taxed at whatever rate it is taxed at on personal income.
It is interesting to note that credit unions have today over $5 million in assets, and have just over that in numbers of members. In little communities across Canada they are performing a very useful service indeed. They make financing and credit available to look after the needs of the community at a low rate of interest compared to the finance companies. Therefore, it seems to me to be folly of the worst kind, and unjustified in the community life of Canadians, to subject any small credit union to taxation, when the government already tax interest or dividends that come into the hands of the fellow who has lent the money.
If I have time, Mr. Chairman, I should like to dwell for a moment or two on the subject of accounts receivable. I know that the general rule is that taxpayers who are in business must compute their taxable income on the billed basis. I realize that the government will say that this measure is bringing the situation up to date and putting the professional class in the same position as businessmen. I also know the government says that it is not contemplated that professionals will have to estimate the value of their work in progress at the end of the year unless they want to do so. But this recognizes the fact that work in progress is very difficult to evaluate until it has been completed and an account rendered.
I should like to know how this provision is going to affect OHSIP, which is national health insurance. Sometimes the government is two or three months behind with

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its accounts. Is the government going to levy a tax not only on accounts that have been paid but also on accounts that will not be paid until the new year? The same situation would prevail if the government introduced a den-ticare plan, because there too the payment of accounts would lag behind. If the government is going to levy tax on outstanding accounts, then it is getting the use of money that it should not have.
The government would probably argue that if these accounts are not collected they could be written off the next year. However, the government has brought in a national medicare plan so we hope that no calamity of that sort will occur. Although I am talking about my own profession, the same is true of other fields as well. I feel that this approach of the government is wrong. When this question comes up for further discussion, I should like to see some of these problems rectified. The switch from a cash basis to a billed basis for computing income requires special provisions to cover the amounts that have been billed and not collected at the start of the system. Special rules will have to be made in taxing deferred income, and this matter will require the attention of the committee and surely some amendment.
To recapitulate, tax will not be levied on bad debts or even those legitimately considered to be doubtful of collection, though these will be difficult to assess. In addition, according to what I have read the minister does not believe that any real hardship will be caused to the professionals to whom I have referred. However, I have pointed out that this is not so. After all, it is the government that runs medicare, and if they happen to be two or three months behind in making payment this will cause a problem. It will be taxation on money not received. There should be some amendment made to the bill to take care of this time lag.
The same situation prevails with the man who holds bonds that mature on November 30. If he pays his income tax quarterly, he would have to compute his interest on those bonds at quarterly intervals even though he had not yet received that interest. The government is doing a bit of monkey shining that it would not allow anybody else to do, and quite frankly I do not think the government could collect this money in any court of the land. The same can be said of Canada savings bonds and other bonds.
I could go on to talk about the field of dental care, but let me dwell for a moment on the provisions of this bill as they affect farmers, though I intend to say more about this at a later stage. The basic herd and straight line depreciation are going to be phased out. Livestock farmers will be able to establish a basic herd as at December 31, 1971, which I guess they will call "D Day". Any gain thereon will be tax free, but no additions to the basic herd may be made after that date. When livestock is sold after that date, the sale may be considered to be out of the basic herd or the other herd, subject to special rules and regulations. I suggest that this provision will need looking into.
Assets acquired after December 31, 1971 must be depreciated in accordance with the diminishing balance system. I am not entirely clear what is meant by that. If proceeds from the sale of assets depreciated on the straight line basis exceed the cost, this excess is a capital gain.


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


Some hon. Members:: Carry on.


Russell Clayton Honey: Is it agreed that the hon. member for Simcoe North shall continue?


Some hon. Members:: Agreed.


Philip Bernard Rynard: May I thank the committee for its courtesy, and I will be very brief. The present $5,000 limitation will continue so far as hobby farmers are concerned. In addition, any amounts of interest and property taxes not deducted because of this limitation may be applied to reduce any proceeds on the eventual sale of the farm. The treatment of the income gained from farming will be brought more into line with tax treatment of other businesses. Perhaps it would be embarrassing to you, Mr. Chairman, if I asked you how you felt about this. The result of reforms in this area will be that probably farmers will be taxed more heavily. The fact that no new additions can be made to the basic herd as established at December 31, 1971 and that sales must be deducted will obviously adversely affect the farmer; I cannot see how it will do otherwise.
The diminishing balance rate for assets acquired after December 31, 1971 will be at twice the straight line rate, the same as in other businesses. Some benefit does exist in so far as there is a faster write-off in the earlier years. However, the farmer is forced to calculate the undepreciated value of his assets each year. It is impossible to deduct more than the original cost of an asset. The measure is subtle and probably means that the farmer's taxable income will be greater.
A farmer may elect to claim either a complete exemption on his farm house and one surrounding acre-no capital gain will be calculated when he sells his farm or his house though farm machinery and barn will still be subject to capital gains-or to deduct $1,000 per year against the value of all his farm property including his house. For many farmers this will not mean much but farmers who sell to developers will face a large tax bill. Today, Mr. Chairman, many farmers are faced with this very thing.


Mr. Gleave:: Mr. Chairman, I have just a few words to put forward some ideas to this committee at this time. It seems to me that the government is not offering tax reform as much as a tax change. At the same time, according to the statement made in the House the other day, large amounts of money are being made available immediately in order to pull the economy out of a tailspin, so in essence two proposals are before the House. It would seem to me that it is rather important to this country that these proposals be co-ordinated. But this does not seem to be the case, Mr. Chairman.
Agriculture is facing difficult times as a result of the U.S. surcharge, and before that as a result of action in the European Common Market, and before that as a result of the pending decision of the United Kingdom to consider entering the Common Market. We have not developed
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policies for agriculture which will meet these circumstances. All the tax bill does for agriculture is devise new methods of imposing new taxes on the person who is trying to survive on the farm, as well as on the co-operatives which he has built and used as an extension of his farming and marketing power. The slowdown in agriculture and farming in significant parts of Canada gives rise to unemployment. The government is attempting to persuade us that this situation will be met with the money they will make available for loans or grants for crash programs this winter.
I fail to see, however, where the planned thrust to get the economy going emerges in this total program. Indeed, I think its real shortcoming is the fact that it is not a total program but a patchwork or an ad hoc program. The whole tax approach is patchwork and the program is a patchwork. The government does not say to us in clear terms that collectively these programs will correct the unemployment situation. In the last two or three days I have listened to questions put to the government asking what their objective is and what they think these programs will achieve by way of reducing unemployment. The answers do not come through clearly; rather, there is evasion. This is the thing that disturbs me about the whole approach of the government.
Last night I was reading the Country Guide, a magazine of some standing published in western Canada by one of the major grain companies. In an article entitled "Agriculture's Stake in the New U.S. Economic Policy" our position is examined. One would expect that when the government brings forth a policy for the coming winter or the longer term it would take agriculture's stake into account, but it does not. I am sure we are looking at the same thing on the employment side. When people in my city become unemployed and start looking for jobs they find themselves against a blank wall. When I ask them if they went to the manpower office they ask to what purpose. They will go to the Unemployment Insurance Commission or answer advertisements in the newspaper but when I ask if they look for training they ask, training for what? There are reports and charges that people become professionals at dodging from one training slot to another.
My main purpose this afternoon, Mr. Chairman, is to persuade this government to take an over-all look at the needs of the Canadian economy and to build the forward thrust and confidence we so badly need to enable ordinary business to invest with confidence and so that the co-operatives, which are an important part of the total business in my area, will know where they stand. At present they are wondering if they are going to have to change their structure in order to comply with these new tax proposals. They should have confidence that they can continue to meet the demands made upon them by the people who created and use them. We need a forward thrust and a real motive in the economy toward employing people and creating the things that we can use and the things that we want. If we could get this kind of co-ordination then, as we go through this tax package, hopefully we could bring in some amendments which would make it a worthwhile and workable document.
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Mr. Skoreyko:: Mr. Chairman, when I spoke on this measure the other day I dealt with a number of items, some of which I consider to be anomalies in the bill. I said I hoped the government would take into consideration some of the recommendations made by the opposition. Most of us on this side of the House are concerned about this massive 707 page bill which is before us because, not only is it complicated in its makeup, but it represents a danger to the Canadian taxpayer. There is an absence in this bill of provisions which we on this side of the House have been advocating. We are concerned about this.
I suppose I might place on the record some of the omissions about which we are concerned. We are concerned about the absence of provisions to stimulate the resource development industry. We are concerned about the absence of provisions to create funds for land acquisition, to guarantee low income homes in the country which every politician in Canada talks about but about which nobody does anything. We are concerned about the ramifications in Bill C-259 in respect of shifting the tax burden. When I talk about shifting the tax burden I should say I believe there is a good clause in this bill which would relieve thousands of taxpayers of the small amount of tax they have been paying in the past. I believe they will appreciate that.
I think it is disgraceful, however, that the very rich should, under this measure, have their taxes reduced. In order for the government to continue to bring in a given amount of money required to run the nation the tax load is shifting to the middle income groups. This no longer represents the petty larcency of which this government has been guilty on so many occasions. This, in my opinion, is grand larcency in its extreme. In respect of the high inflationary measures this government has undertaken in the recent past I was hoping sorhething would be incorporated in Bill C-259 to correct some of these mistakes. What has the government done in terms of stimulating certain industries, particularly the resource development industry, and especially the mining industry? I am not too close to the industry itself although I know a number of people in it. The anti-inflationary measures adopted by this government a year ago have created chaos in the mining industry, particularly in the Vancouver area. A number of companies in that region of Canada today lie dormant awaiting some action on the part of the government so that at least they will be offered a little encouragement through having funds made available to them at reasonable interest rates for purposes of further expansion and development.
Speculative investment in the mining industry has been curtailed because of the government's action in slowing down the economy generally. I know of two or three well-known Canadian companies with holdings in Northern British Columbia, which also have holdings in Brazil and Chile, which have closed down their British Columbia operations and moved into other parts of the world in order to expand their operations, notwithstanding the fact that the political climate might not be as stable as it is on the North American continent. What then have the antiinflationary measures of this government done? I suggest the resource industry is the heaviest loser, not only in terms of production but also in terms of lack of incentive

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to develop and expand. Employment opportunities, direct and indirect, have a great impact on the Canadian labour force. Surely, no one need remind the government that in that area much more could be done. The anti-inflationary measures have seriously reduced the level of investment not only in mining but also in the gas and oil industry. There has been a serious reduction in exploration, and Bill C-259 in the face of all the government has done in the past year will hinder the development of these industries still further.
No other industry in Canada can generate a chain reaction in respect of employment as quickly or as efficiently as the mining industry. The government's responsibility to that industry is to make the tax structure of this nation palatable to that industry. Oh yes, we have programs. We have the regional expansion and development program. Through that program, literally millions of dollars have been distributed into certain areas of the country. Where has this money gone? It is difficult to establish where it has gone and the reason. I believe it would be reasonable to ask the minister of that particular department to provide this House with figures concerning the number of jobs that have been provided under that specific program. This program discriminates against certain areas and regions of Canada. I should like to know what that program since its inception has generated in terms of putting people to work.
Yesterday I talked about one of the shortcomings in the bill. I referred to the $150 allowable as a deduction for tax purposes for an individual who in order to ply his trade must buy certain equipment. Most businesses are allowed all proven or certified expenses. Most businessmen drive a company car to work and charge a large portion of that expense against their taxes. The individual who, by reason of his trade or profession, must have certain tools or equipment in order to hold on to his job or to continue to work in that kind of employment is allowed to deduct $150 a year for the replacement or the purchase of additional equipment. If you allow a business, regardless of whether it is large or small, to charge against its income all legitimate expenses that are created by reason of the operation of that business, then is it unreasonable of me to ask the government to consider the plight of the individual who has $300, $400 or $500 worth of equipment. I am thinking, for example, of a plumber or a garage mechanic who must have $1,000 worth of equipment. It is not inconceivable to find many mechanics losing $300 or $400 worth of tools in a year. They leave tools in cars, some of them get stolen and some of them literally walk away. To allow $150 is, I suppose, a step in the right direction but I should like to point out that if you allow businesses, large or small, to charge against earned income all reasonable expenses necessary for the maintenance of those businesses, then I do not think it is at all unreasonable to suggest that the same should apply to the man who, by reason of his type of employment, has to incur expenses in connection with the tools of his trade.
How important are tax reductions, particularly if the tax deductions are in the right area? I think it would be fair to say that the government should take a quick look at the automobile industry in Canada and what can be
|Mr. Skoreyko.]
done in that area. We know that recently, in the face of the 10 per cent surtax in the United States, the government has offered Canadian industry an $80 million assistance program. However, one of the things we have failed to examine-I am not against foreign car sales in Canada but I should like someone to examine the matter carefully-is the reason Toyota, Mazda or Volkswagen have increased their sales in the last two years by tremendous percentages over the Canadian or U.S. made automobiles. As a matter of fact, Canadian automobiles in certain areas have lost some of the Canadian market.
I have not checked but I believe there is a federal tax on Canadian automobiles which makes them higher in price than the same automobiles built and sold in the United States. Surely, if you want to stimulate an industry, the removal of that tax would have a tremendous chain reaction in so far as jobs are concerned. This might have been one of the areas to which Bill C-259 could have given some consideration. I have referred only to the automobile industry because I think that, in the light of the $80 million allocated by the government recently, this is a really good example where maintaining a tax on a Canadian built product and allowing massive shipments of imported automobiles into the country to replace Canadian made cars will put the Canadian manufacturer in the position of selling cars built in Canada at a higher price than the same cars built in the United States, which is unfair. This applies not only to the automobile industry, but I imagine it applies also to the television manufacturer, the refrigerator manufacturer and the stove manufacturer. The tax is there, and shortly some consideration should be given to this point.
I want to deal now with a number of the items in a bill which is so vast that it is virtually impossible to cover any portion of it in the time that is allowed us under the rules. I just want to put on the record some of the items of income that will now become taxable. For instance, one half of certain income becomes capital gain. I do not wish to deal with that again today because I dealt with it two or three weeks ago when I spoke. Then, there are payments under an income maintenance insurance plan to which the employer has made a contribution, the contribution paid by an individual in 1967 to be deductible from any payment he receives. Then, there are allowances paid under the adult educational training program, not including the portion of a person's living expenses while living away from home during his training, and allowances paid under the textile and clothing board. There are the scholarships and bursaries with the $500 exemption, and I dealt with those the other day. Consider the family that needs assistance, the smart lad who gets a $1,000 bursary and who is then charged a tax on 50 per cent of it. That is a generous contribution .
By putting together new personal exemptions, new tax rates and new items of income, figures will show that a man earning a certain salary today, allowing for increases over the next ten years, will be far worse off than had we stayed with the present tax system. Let me give an example. If an individual today earned $9,750 for a taxable income of $8,000, allowances of $1,500 plus $100 plus $150, and we assume that his wages increased by 8 per cent a year, promotional plus usual increase, then in 1978 his income will be $15,472, and his taxable income would be
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$13,722. In 1972, his tax on $9,750 will be $2,193.50, which combines federal and provincial, and in 1978 this individual will pay $4,327 in tax. In other words, Mr. Chairman, I am saying that in six years his income has increased by 60 per cent, and his taxes have increased by 97 per cent.
.20 p.m.)


Patrick Morgan Mahoney: How much more does he get to keep?


William Skoreyko: How much more will you get to keep when your tax bill goes from 50 per cent to 97 per cent? Do you get much more to keep? I repeat that in six years his income has increased by 60 per cent, and his taxes have increased by 97 per cent. I ask the parliamentary secretary to tell me how much more he has to keep.


Patrick Morgan Mahoney: They are your figures.


William Skoreyko: They are researched figures. They do not lie. But if there is any doubt about the figures that I have put on record, I ask the parliamentary secretary to take pencil and paper tomorrow, if he is capable, and figure out if I am right or wrong.


Walter Gilbert Dinsdale: Mr. Chairman, the last time I had the opportunity to take part in this debate was on the occasion when the members of the Official Opposition were endeavouring to get the government to postpone the long, tortuous process that has been involved in the discussion of fundamental tax reform. On that occasion it was felt that the Canadian economy, as a result of government mismanagement, had entered into a period of crisis that was aggravated by the fact that we had been living under the shadow of the threat of the white paper, and now under the ponderous weight of a piece of legislation that is almost as large as the family bible but, I can assure you, not as enlightening. Recent events, in fact events within the last week, have vindicated the members of the Official Opposition for the position they took on that occasion. At last the government recognized that we were living under the shadow of a major economic crisis and, as announced by the Minister of Finance on Thursday evening last, it took belated emergency action.
To illustrate the point that we have been making since the House resumed early in September, I want to deal with one or two specific parts of this bill which I hope will indicate that the government is not only confused in its approach to fundamental tax reform but also that within this ponderous volume itself there are measures that are contradictory. Other hon. members have dealt with vital and important matters with respect to the well-being of the Canadian economy, the impact that this bill will have, the deleterious effect it will have on the resource industries, the agricultural industry and so forth. In the short time at my disposal, I want to demonstrate that this bill will have a very detrimental impact on the charitable contributions that might become available to public organizations such as universities, museums, churches, or any other similar organization engaged in voluntary charitable activity.
It seems that the government has a penchant for moving in on voluntary initiative on the part of the citizens of Canada. Only recently, through changes to the Post Office regulations, privileges with respect to the use of the mails
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that encouraged important charitable activities of organizations such as the War Amps, the attack on tuberculosis and other organizations dealing with problems experienced by the disabled, were withdrawn from those organizations. Now, here is another example of the government intruding more and more on the initiative of the individual Canadian, moving forward with its big brother complex, and seemingly not aware of what it is doing. On the one hand, it is saying that it wants to encourage this sort of voluntary activity, but on the other hand specific clauses in this bill will have a severely discouraging effect on the amount of charitable contributions that will be available for institutions of higher learning and museums.
To get right to the heart of the matter, I point specifically to clause 70 in Part I of the bill, a Part which runs for some 200 pages in this 700 page volume. I doubt that even the parliamentary secretary has read the bill in detail in order to become aware of the contradictions that exist within it. Clause 70(5) reads:
Where in a taxation year a taxpayer has died, the following rules apply:
(a)	the taxpayer shall be deemed to have disposed of each property owned by him immediately before his death that was a capital property of the taxpayer (other than depreciable property) and to have received proceeds of disposition therefor equal to the fair market value of the property at that time;
(b)	the taxpayer shall be deemed to have disposed of all depreciable property of a prescribed class owned by him immediately before his death and to have received proceeds of disposition therefor equal to,
(i)	where the fair market value of that property at that time exceeds the undepreciated capital cost thereof to the taxpayer at that time, the amount of that undepreciated capital cost plus 1 of the amount of the excess, and
(ii)	in any other case, the fair market value of that property at that time plus 1 of the amount, if any, by which the undepreciated capital cost thereof to the taxpayer at that time exceeds that fair market value;
I hope that when the parliamentary secretary makes a contribution to this discussion he will explain that in plain English. This bill goes on for page after page, hundreds of pages, with this kind of gobbledygook. No wonder the people of Canada are confused. No wonder the legislation is having a harmful effect on the buoyancy of the economy. Let me put this in plain English for the sake of the parliamentary secretary.
Clause 70(5) provides that a deceased taxpayer shall be deemed to have disposed of each of his capital properties, other than depreciable property, immediately before his death for its fair market value at that time. Clause 70(5)(b) provides in effect that depreciable property of a deceased taxpayer is deemed to have been disposed of at the average of its undepreciated capital cost and its fair market value at the date of death. Where property has been left by a taxpayer to his spouse or to a trust fund for the benefit of his spouse, these deemed dispositions may be deferred until the property is actually disposed of or until the spouse's death, but this in no way eliminates the tax liability; it merely postpones it.
Let me give the parliamentary secretary some specific examples of what will happen. If, under a will, an individual leaves to a university, religious organization or community charitable camp his summer property, includ-

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ing surrounding land, which cost him $10,000 in 1972 and which is worth $35,000 at the date of his death in 1980, he will be deemed to have disposed of his property immediately before his death for $35,000, resulting in the realization of a capital gain of $25,000, one half of which, or $12,500, will have to be included in computing his income for the year in which he died.


Erik Nielsen: The only thing that is left to tax is the corpse.


Walter Gilbert Dinsdale: Also if, under his will, an individual leaves to a charitable organization a fully rented factory building or apartment building which might be used for a senior citizens home, for example, which cost him $400,000 in 1972 and which at the time of his death in 1980 had an undepreciated capital cost of $200,000 and a fair market value of $700,000, he will be deemed to have disposed of the property for $450,000 immediately before his death. This will result in the addition to his income of the whole $200,000 of capital cost allowances taken during his lifetime and, in addition, he will be treated as having realized a capital gain of $50,000, one half of which, or $25,000, will also be required to be included in his income. We are speaking about inanimate property.
I am afraid, Mr. Chairman, that my time is running out. If we were to use the legal terminology, namely, inter vivos-I think that is the proper legal term, as I think some of my lawyer colleagues will agree-and make charitable gifts by way of inter vivos, the position would be even more serious.


Erik Nielsen: It would be reductio ad absurdum.


Walter Gilbert Dinsdale: I am sure the minister will appreciate this. Let me give another example quickly. Paragraph 69(l)(b) provides that where a taxpayer has disposed of anything to any person by way of gift inter vivos, he is deemed to have disposed of it at its fair market value at that time.
As will be seen briefly, Mr. Chairman, from the foregoing examples, the income tax amending bill has created entirely new and onerous tax liabilities in respect of charitable bequests. Even though the legislation in paragraph llt)(l)(a) specifically mentions that there are new allowances for charitable organizations which are considerably more generous, the government is giving with the one hand and taking away with the other, which I suggest is fundamentally inconsistent and indicates the sort of confusion that has gone into the gobbledygook that constitutes a good part of this voluminous bill.
To bring evidence before the committee this afternoon in order to show that the government is acting contrary to some recommendations coming from the minority report of Commissioner A. Emile Beauvais of the Royal Commission on Taxation, contrary to recommendations which came from the Senate Committee on Banking, Trade and Commerce and contrary to recommendations made by the Standing Committee of the House of Commons on Finance, Trade and Economic Affairs, may I quote briefly, beginning with a quotation from the minority report of Commissioner A. Emile Beauvais, to be found at page 55 of volume 1. He was critical of a similar proposal in the majority report of the commission and stated:

According to the Report, when a gift was made of an item of property that had appreciated in value, a capital gain would be deemed to be realized and would be taxable. This might prevent many taxpayers from making gifts to universities, museums, etc. of valuable property that was not readily saleable, for example, an art collection. In such cases, I would not support this recommendation.
In the report of the House of Commons Standing Committee on Finance, Trade and Economic Affairs with respect to the white paper on tax reform, the committee recommended as follows at page 19:
To encourage gifts of works of art, manuscripts, scientific collections and so on, to public institutions, we also recommend an extension of Section 27(l)(b) of the Income Tax Act (which provides for deductions of gifts to Her Majesty in the right of Canada or a province) to include gifts to other Canadian public institutions which normally hold such objects for exhibition, study or research. We also recommend that capital gains tax provisions not apply with respect to such gifts.
Again, the report of the Senate Committee on Banking, Trade and Commerce reads as follows at page 61:
With respect to gifts of property to museums and other charitable organizations, the Committee wishes to retain to the extent possible incentives for the continuation of such gifts, while at the same time, not permitting taxpayers an unfair use of such donations for the purpose of realizing tax benefits not basically contemplated by the taxing statute. On balance, therefore, your Committee came to the conclusion that there should be no capital gains tax imposed on gifts of property to museums, universities or charitable organizations, but that a taxpayer not be permitted to deduct in the computation of his income a greater amount under Section 27(l)(a) of the present Income Tax Act than the cost (or value on Valuation Day) to him of the asset donated.
The legislation that I have referred to briefly, and unfortunately there is not time for me to pursue the matter further, flies in the face of the recommendations contained in the minority report of Commissioner Beauvais, of the recommendation of the Senate Committee and of the recommendation of the House of Commons Committee on these matters. I cannot believe, Mr. Chairman, that the government deliberately wants to discourage the greater participation of the people of Canada in the very necessary charitable activities of this kind. Any of us who are connected with universities today-I see we have the Chancellor of Brandon University with us; I happen to sit on the board of that university-are conscious of the rising costs of education, and these provisions are having a negative effect on the generosity of the public. In the United States, they make provision for generous assistance from the estates of people who have the wherewithal to make a worth-while contribution in money, property or some other assets which may be left in the will.
I hope I have convinced the parliamentary secretary, who has been listening most attentively while talking to his colleagues, that here the government is guilty. He represents the minister at this time. The government is guilty of confusion and contradiction within the very framework of the legislation itself, I could go on if there were time at my disposal, and give many, many other examples of the sort of confusion that exists in the legislation.
We have tried, those of us who are on this side of the House, to convince the government that this is not the time to be fiddling around while Rome burns. I think the Leader of the Opposition put it in these terms: you should not be shingling the roof when the house is burning down.
October 20, 1971

Obviously, what happened one week ago in this House indicates that the government has at long last recognized that, in economic terms, financial terms as well as in terms of unemployment and runaway inflation, the economic house of Canada is burning down. Why are we at this time, then, in such unseemingly haste to get through such a confused and discouraging piece of legislation? When we come to the clause by clause consideration, obviously we will have to take a fundamental stand on the contradictions that are represented in subsections 70(5)(a) and (b), which relate to matters I have discussed this afternoon.
The government has brought in over 100 amendments. This almost suggests a complete rewriting of the bill. While we are at this preliminary stage, I ask the parliamentary secretary to communicate to his superiors on the treasury benches that if they are really intent on making sense out of nonsense, they will have to go much further than 100 amendments. I do not think 1,000 amendments will straighten out confusion of the type I have pointed out this afternoon.


Erik Nielsen: Mr. Chairman, I have listened to some very great contributions in the debate on this bill. Very few have come from the other side.


Walter Gilbert Dinsdale: They simply have not read it.


Erik Nielsen: As my friend from Brandon-Souris says, they simply have not read it.


Walter Gilbert Dinsdale: They talk of faith, hope and no charity. They are doing away with charity.


Erik Nielsen: All that members opposite are capable of doing is making speeches by interjections which are just about as empty as their heads.
I knew we were in a time of very high inflation. I did not really appreciate just how serious the problem was until I picked up a copy of the Financial Times the other day. On the front page was a picture of the boss or master, the Prime Minister. The Minister of Finance was scowling at him. The caption on the picture reads "The Billion Dollar Brains". If that is an example of billion dollar brains, it must be the ultimate in inflation.
I was interrupted on the last occasion when I was talking about the contribution that the prospector makes to the mining industry. I intend to conclude those remarks at this time. I was saying that it is hard to exactly estimate what contribution the prospector has made. However, I have had some research done which indicates the following.
Prior to 1920, prospectors accounted for over 90 per cent of the mineral discoveries made. Those discoveries numbered 28. Second, by 1950, prospectors in competition with other methods of detection accounted for over 80 per cent of all other discoveries made to that time. They numbered some 75. Third, by 1960 prospectors as lone operators still accounted for 35 per cent of all metal discoveries made, some 59. By 1970, prospectors in competition with highly sophisticated remote sensing techniques, still accounted for almost 25 per cent of all metal discoveries made, some 30.
Income Tax Act
As hon. members know, the bill seeks to eliminate the incentives that heretofore existed to encourage prospectors to search for minerals in this country. As the figures which I have just disclosed to members suggest, remote sensing and other sophisticated geophysical and geochemical techniques have made significant contributions to metal discoveries in the past two decades. However, even today, in competition with the most modern tools of metal exploration, one out of every four new finds comes from a prospector. A prospector, with his pack on his back, braving the hardships of bush life and the relatively short season that is available to him, conducts his activities.
It may be interesting to note exactly how metal deposits are found. The large number of exploration companies now operating in Canada operate with essentially two methods. First, there are modern integrated programs using the best available combination of geological, geophysical, geochemical and other techniques. Second, and this is the one that interests the prospector, and the one clause 59 of the bill will hit hardest, there are invitations for submission of worthy mineral prospects for further development. Those invitations are made and the prospectors know it. This latter technique emphasizes property acquisition by a company from individuals or small time operators who are unable to meet the necessary expenditures required to further evaluate any given property. Usually, a mutually beneficial scheme is arranged between company and prospector when the mineral property is transferred to the company.
Under current legislation, income to the prospector from the sale of such properties is not taxable. Clause 59 (1) of Bill C-259 proposes to make the sale of such properties taxable. This taxation proposed by Bill C-259 will undoubtedly have the effect of slowing down prospecting activities to the point that they will no longer be attractive. Prospectors will feel that if the incentive has disappeared, what is the point of going out and searching for new mineral finds. It is going to slow down the new finds. Logically, it will slow down new mine production. It is going to have an effect on the over-all national economic pattern.


Walter Gilbert Dinsdale: No wonder the economy is slowing down.


Erik Nielsen: Precisely. That is just one small example. The member for Brandon-Souris has given others. Other members on this side have also given reasons why the economy is slowing down. The fact that it will no longer be attractive for prospectors to look for minerals because of this clause will result in a fewer number of prospectors. Canada's metal industry and general economic well-being will be adversely affected. I ask hon. members to consider the following criteria.
First, not all metal discoveries made are economic to the point that extraction of the ore can immediately be profitably pursued. In fact, a large number of these occurrences are initially sub-economic. They are put away on the shelf until such times as economic conditions make extraction profitable. Many such shelved occurrences wait ten years or more between discovery and production.
The prospector has been instrumental in placing such occurrences on what I like to call company shelves. In fact, recent estimates suggest that four production initia-

October 20, 1971
Income Tax Act
tions in any given year have depended on occurrences found in the past and put on the shelf to await improved market conditions. Take away the incentives for the prospector and soon Canadian companies will be using up their store of products on the shelf faster than they can be replenished. This is a fact that has escaped the engineers of this legislation.
The second criteria I ask members to consider is that prospecting is hard work. Many individuals have prospected for most of their lives and never found anything worth while. Relatively few have struck it rich, so to speak. In my submission, Canada needs prospectors and prospectors need incentives. By taxing income from the sale of mining properties we are eliminating incentive. I should like, therefore, to propose, backed up by the strong views of mining associations, chambers of mines, prospectors, chambers of commerce and others, that clause 59(1) on page 137, lines 8 to 37, be removed from the bill. This simple amendment would restore confidence to the prospector and leave him in the mining picture.
I wish to refer to a letter which was written to me last October by the Mining Association of British Columbia. Among other things, the Association dealt with the proposal to tax a prospector on his gains. I would remind you, Mr. Chairman, that after the White Paper had been published and submissions invited from interested parties, the Minister of Finance, I believe in August of that year, announced he would be making certain revisions in the bill. Some of them affected the mining industry. With respect to the minister's announcement in that regard, the Mining Association of British Columbia had this comment to make:
It is now obvious that the proposed revisions were announced on August 26 without the benefit of adequate prior consideration by the parliamentary committees-
That is a very sound observation. There was no consultation with the parliamentary committee on the part of the Minister of Finance before he made those announcements presenting revisions to the White Paper. The letter goes on:
-and without opportunity for consideration and representations by the mining industry.
We hear members opposite paying lip service and mouthing the principle of participatory democracy. Yet when they find themselves with an embarrassing bill on their hands, having rushed it into the House, they do not admit their mistakes, though it is evident that errors have been made. They find excuses. They excuse themselves by saying they only put the bill on the table in order that the public could participate by making submissions on the basis of which revisions could be carried out. Here is an instance of a situation in which all kinds of submissions were made by industry, following which the minister made changes without consulting the industry which would affected by those changes.
The letter goes on:
It is equally obvious that earlier recommendations by the industry
had been ignored and that the new proposals were tailored to meet the special requirements of one area and are only a small sector of the industry.
The Mining Association of British Columbia, after careful consideration of the revisions proposed by Hon. Mr. Benson on August 26, finds these revisions to the white paper to be entirely inadequate and unrealistic. Our recommendations concerning the original white paper proposals have already been conveyed to you and our position is only reinforced by these new proposals.
Representations were also made directly to the Minister of Finance, after he had announced these revisions, by MacDonald Consultants of Vancouver, a firm which has long been engaged in the mining business. They had this to say in a letter dated June 11, 1970:
Our work has directly and indirectly contributed considerable amounts of revenue to taxation coffers, and, provided an incentive atmosphere continues, we will likely contribute increasing amounts.
In the foregoing statement lies the key to our success: the amount of money paid into the taxation coffers. And therein also lies the key to the future of our country. For if an incentive atmosphere does not exist, then persons such as myself will have either to reconcile themselves to the humdrum life or find some other place which does have an incentive atmosphere.
The most cogent paragraph of the letter is the last:
Perhaps, Mr. Benson, you will be kind enough to keep this letter on file and if you go ahead with your proposals as you apparently are determined to do, you will accept this letter as our application for employment with our government. Perhaps if you accept our application for employment we shall not have to move out of our country but will be able to live under the benevolent government shield on the fruits of the endeavours of whosoever may be fortunate enough or lucky enough to be able to continue their endeavours under the new set of rules proposed in your white paper on taxation.
These are just two illustrations of the point I have been making. I could produce several more, but in the time available to me I wanted to quote from an editorial which appeared in the Financial Times of October 18, 1971, the most recent issue. The subject matter of the editorial is Mr. Benson's fiscal policy:
If the government is serious ... its next step must be to end the charade of the tax reform bill. The bill cannot and should not be rushed through parliament before Christmas. The government should accept the inevitable now. It should separate the parts relating to the personal income tax structure, which are acceptable. It should let the rest stand over. And it should announce its intentions immediately.
And that, Sir, is our position.


Some hon. Members:: Hear, hear!


Gérald Laniel: It being six o'clock, I must rise, report progress and request leave to sit again at the next sitting of the House.
Progress reported.
At 6 p.m. the House adjourned, without question put, pursuant to Standing Order.

Thursday, October 21, 1971