1971-11-26

ORAL QUESTION PERIOD


Mr. H. W. Danforth (Kent-Essex):: I should like to address a question to the Acting Prime Minister, Mr. Speaker. Because of the tremendous importance of the automobile industry to the economy and job opportunities, especially in Ontario, and because Premier Davis has indicated that his government would strenuously oppose any negotiated changes in the pact that would or could result in loss of Canadian employment, will the Acting Prime Minister assure the House that representatives of the Ontario government will be invited to participate in these negotiations?


Hon. Mitchell Sharp (Acting Prime Minister):: No, Mr. Speaker. I cannot, of course, give that undertaking but we would be very happy to have representations from the Ontario government at any time.


Harold Warren Danforth: Because of the public concern about this very serious problem, will the government not consider an early statement to the House dealing specifically with the manner in which these negotiations will be carried on as far as the provinces are concerned, whether or not there is now a relationship between the negotiations and the removal of the American surcharge against Canadian imports, and dealing specifically with the areas in the auto pact on which the United States seeks renegotiation?


Mitchell William Sharp: Mr. Speaker, I think I have made it plain on a number of occasions that the Canadian government is not negotiating the removal of the surcharge. The surcharge was imposed unilaterally by the United States. We are prepared to co-operate with the United States in dealing with common problems, but I can assure the hon. member that the auto pact is not a means of negotiation to get rid of the surcharge. The decision about the surcharge is one to be made by the United States in light of their whole balance of payments problem.



CANADA-U.S. AUTO PACT-STAGE OF DISCUSSIONS- ANNOUNCEMENT OF GOVERNMENT POSITION

Mr. Edward Broadbent (Oshawa-Whitby):: Mr. Speaker, is the Acting Prime Minister in a position to inform the House at what stage the negotiations are now on the auto
pact, forgetting the surcharge question? The auto pact discussions have been going on for some time. Can the Acting Prime Minister advise when the government will be in a position to announce its position on the auto pact?


Mitchell William Sharp: We have had a number of discussions recently with the United States at the official level, Mr. Speaker. There has not been an occasion recently for ministers to meet on the question, but it has been discussed at some length and in some depth by officials of the two governments. I cannot say when the question will be settled.


John Edward Broadbent: In view of the fact that Canada has had a net deficit in balance of trade figures in the automotive industry of approximately $1,716.4 million during the auto pact years that is, from 1965 to 1971, would the Acting Prime Minister take steps to correct the profoundly erroneous impression left by the CBC National News last night at eleven o'clock when the auto pact was described as being "heavily weighted in Canada's favour"?


Mitchell William Sharp: Mr. Speaker, if it helps at all to say things in this House that become known in the United States, I thank the hon. gentleman for his comment which will help to correct that impression and I should like to endorse it.



RECONSIDERATION BY NATIONAL ENERGY BOARD OF REFUSAL OF NATURAL GAS EXPORT APPLICATIONS

Mr. Eldon M. Woolliams (Calgary North):: Mr. Speaker, may I direct a question to the Acting Prime Minister. Since trade negotiations are going on or should be going on with the United States, can he assure the House now that the decision made in reference to the export of natural gas, which forms part of the trade discussions or should be part of the trade discussions with the United States, was not brought about with any idea of retaliation? If not, will the government ask the National Energy Board to review its decision?


Mitchell William Sharp: Mr. Speaker, as the hon. gentleman knows-I think he was in the House when the relevant legislation was approved-the government cannot interfere in the discussions that go on or in the decisions made by the National Energy Board. If the National Energy Board had approved the export of gas, the Canadian government would then have been asked whether it approved. However, when the National Energy Board decides that there is not sufficient gas to permit export to the United States, that is a final decision of the National Energy Board.

November 26, 1971
Inquiries of the Ministry


Eldon Mattison Woolliams: Mr. Speaker, may I follow that up. I am not asking the cabinet to veto the decision. That is a question of law. What I am asking involves a simple question of fact and not a question of law. Will the government ask the board to review its decision? There is nothing in the legislation to prevent the government saying to the National Energy Board, will you review your decision, will you review the evidence and see if you cannot go farther inasmuch as the United States has approached the U.S.S.R. and may take from that country part of its natural gas and crude petroleum requirements, thus cutting Canada off? It is important.


Mitchell William Sharp: Mr. Speaker, it is not the intention of the Canadian government to ask the National Energy Board to review its decision. That would seem to us to be a kind of interference with what Parliament intended should be a purely objective finding.


Mr. Baldwin:: Come now. Don't be so coy.


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


Mr. Alexander:: Mr. Speaker, it is not a supplementary to the question just asked.


Mr. Speaker:: Order, please. If it is not a supplementary to that question, perhaps the hon. member will allow the Chair to recognize the hon. member for York South and then return to the hon. member for Hamilton West.



LABOUR CONDITIONS


Mr. David Lewis (York South):: Mr. Speaker, in view of the absence of the Minister of Industry, Trade and Commerce who would have been here if he were not out of the country, may I ask the Acting Prime Minister a question arising out of a report that the number of jobless expected as a result of the American surtax is much lower than the number indicated by the Minister of Industry, Trade and Commerce when the $80 million assistance legislation was introduced. Has a new survey been made and what is the result of that survey with regard to the extent of the impact of the American surtax on Canadian manufacturing?


Mitchell William Sharp: Mr. Speaker, I think the Acting Minister of Industry, Trade and Commerce will be prepared to answer that question.


Hon. Alastair Gillespie (Acting Minister of Industry, Trade and Commerce):: Mr. Speaker, I have been informed that a working paper was prepared which reviewed the figures from the point of view of the effects of the surtax on Canadian employment and that this working paper indicated that the effect might be considerably smaller than the first figures had indicated. That is all I can say at this time. This question is under continuing review on the part of the government.


Gerald William Baldwin: On what date will the information be leaked?


David Lewis: Obviously the first figures cited by the Minister of Industry, Trade and Commerce in September-I do not recall the exact date-were exaggerated figures suggested by the companies involved. May I ask the acting minister what the figure is in the latest working paper as to the effect of the surtax and whether the figure of 44,000 is correct? May I also ask the acting minister whether or not the $80 million has already been committed to various companies in this country?


Alastair William Gillespie: Mr. Speaker, on the first point, I believe that the figure of 44,000 is close, although not precise. With respect to the commitment of the $80 million, as of November 25 there were approximately 250 applications received of which 60 had been approved. The total grants with respect to the applications received were in the order of $8 million of which $1,285,000 has been approved. The total number of persons involved in these applications is 10,000 with respect to those received, and 3,700 with respect to those approved.


David Lewis: In view of the figure just given by the minister that only some 3,000 are involved in the grants approved and only about 10,000 in the applications, where does the $80 million come in and what about the remainder of the 44,000-odd employees who are supposed to be affected by the surtax? Where exactly are we in the program?


Alastair William Gillespie: Mr. Speaker, the hon. member will appreciate that applications are being received every day. We are hopeful, as I am sure the hon. member is, that it will not be necessary to commit the whole $80 million. The $80 million is a standby, if needed. We hope it will not all be needed.


Mr. Speaker:: Order, please. I believe the hon. member for Hamilton West wanted to ask a related question a moment ago.



INDUSTRY


Lincoln MacCauley Alexander: I wish to direct a question to the Acting Prime Minister. Has the government considered the request of the Auto Parts Manufacturer's Association that the government provide special tooling assistance grants to help meet this industry's present difficulties and, if so, when will a statement be made in this regard?


Mitchell William Sharp: Mr. Speaker, I have heard the hon. member's representations and I will take them into account.
November 26, 1971



TRANSPORT


Right Hon. J. G. Diefenbaker (Prince Albert):: My question is directed to the Minister of Transport. It concerns the chronic and critical situation respecting boxcars, particularly on the prairies where there are insufficient boxcars to meet the needs for export of wheat and, indeed, lumber industries are also finding that they cannot ship the products they have available. I know the minister has no authority over the CPR, but will he call together both railway companies in order to see what can be done in this connection? At the same time, I ask the minister about the closure of the CNR car repair shops at Winnipeg and Pointe St. Charles recently. All over western Canada there are cars stored in various yards in a state of disrepair and non-repair and therefore unuseable. The situation is of such serious importance that I ask the minister to give immediate attention to doing something to jack up these railway companies to the realization that action is necessary.


Mr. Speaker:: Order, please. I am not sure whether that was a question, a series of questions or an address, but the minister might reply to the question asked by the right hon. member.


John George Diefenbaker: They are all part and parcel of the same thing.


Hon. Donald C. Jamieson (Minister of Transport):: Mr. Speaker, I compliment the right hon. member on his fine speech.


Some hon. Members:: Hear, hear!


Donald Campbell Jamieson: I suspect he is not aware that as a result of his earlier representations some 18 Members of Parliament chose yesterday to meet with spokesmen for the two railways here in Ottawa. I arranged that meeting in Ottawa on the very subject he has raised. Last night I met with the president of Canadian National Railways and received from him a new paper, which I have not yet had a chance to read, about what they are proposing to do with regard to the grain situation. His judgment was that there has been an improvement this year compared with previous years and they are hopeful this improvement will continue.


John George Diefenbaker: I suggest the minister go out west to the various yards in smaller towns away from the main yards and see for himself the number of cars piled up there. With regard to this report of the CNR, has that been leaked yet?



DEVELOPMENT OF NEW SYSTEMS APPROACH FOR MOVEMENT OF GRAIN

Mr. A. P. Gleave (Saskatoon-Biggar):: Would the minister also take into account the statement made by a vicepresident of one of the major railways at a meeting of Wheat Pool delegates in Saskatchewan that it is essential to develop a new systems approach if we are to move the
Inquiries of the Ministry
volume of grain which it appears we shall be called upon to move in the future?


Donald Campbell Jamieson: Yes, Mr. Speaker. If the hon. member is supporting that idea, I do as well. I believe a new systems approach is necessary, but I think the hon. member will also agree that the block system, which is itself something of a new approach, has already improved the situation to some degree.



IMMIGRATION


Gerald William Baldwin: Mr. Speaker, I have a question for the Acting Prime Minister. Is the government aware that Canada is being used as a depot or staging point in connection with large-scale illicit traffic in smuggling aliens into the United States through Canada, and is any action being taken in this regard?


Mitchell William Sharp: I cannot accept the statement made by the hon. member but I will make inquiries to find out whether there is any substance whatever to his charge.


Gerald William Baldwin: Since there seems to be some problem within the cabinet at the highest level about bringing in amendments to the Immigration Act, will the government make a statement on motions at the first opportunity indicating its position in this regard, and will it also take the initiative in referring this whole matter to the appropriate standing committee so it can investigate it and make a report to the House and to the government?


Mitchell William Sharp: As I say, I cannot accept the initial statement made by the hon, member, but I will make inquiries to see whether there is any substance whatever to the charge.



AGRICULTURE


Mr. Murray McBride (Lanark-Renfrew-Carleton):: Mr. Speaker, my question concerns a subject of urgency to the agricultural industry. I address it to the Minister of Agriculture or, in his absence, to the parliamentary secretary. Having regard to the almost unanimous request by the provinces, including the Minister of Agriculture for Alberta, Mr. Horner, for the rapid passage of national agricultural marketing legislation, will the minister now recommend that Bill C-176 be called for swift passage through this House?


Mr. Marcel Lessard (Parliamentary Secretary to Minister of Agriculture):: Mr. Speaker, I thank the hon. member for having asked that question. I can assure him that the Minister of Agriculture took note of the representations of the provincial ministers of agriculture.

November 26, 1971
Inquiries of the Ministry
When the opportunity arises-and we hope it will be soon-we can discuss this bill which we trust will be passed quickly.


Mr. McIntosh:: On a point of order, Mr. Speaker, I am sure the hon. member who asked that last question misinformed the House and the people of Canada in the preamble to his question. The national marketing board proposal was only accepted by the ministers of the prairie provinces with respect to chickens.



AIR CANADA


Mr. John L. Skoberg (Moose Jaw):: In view of the statement in Air Canada's manual to the effect that the aim of customer service is to provide the highest possible standard of service at any time and in all conditions, will the Minister of Transport tell us whether he is prepared to explain to the House why telephone calls to Air Canada requesting reservations are invariably answered by a recording indicating that all reservation lines are busy?


Mr. Speaker:: Order, please. The hon. member will appreciate that this kind of question should normally be asked in some other way. I would not think that in those terms the question is in order. If the hon. member thinks he can rephrase it or put it in another way, he will be allowed a supplementary.


John Leroy Skoberg: I will rephrase the question, Mr. Speaker. Will the Minister of Transport initiate an investigation into why it is that all Air Canada reservation lines to Montreal are invariably answered by a busy signal?


Donald Campbell Jamieson: My
first answer, Mr. Speaker, is that I regret this inconvenience to Air Canada customers. Second, I am delighted that so many people are recognizing that this is the way to fly. I will be glad to look into the matter for the hon. member.


Mr. E. B. Osier (Winnipeg South Centre):: Mr. Speaker, may I ask the Minister of Transport why it is easier to get information about Air Canada movements by using the members' line to Winnipeg and asking the Winnipeg office than by using the office in Ottawa?



FISHERIES


Mr. James A. McGrath (St. John's East):: Mr. Speaker, I should like to direct a question to the Minister of Fisheries. Has the minister examined the bill passed by the Massachusetts legislature on November 8 which extends the boundary of that state for purposes of fisheries and environmental protection to a point 200 miles offshore, 
and is the minister prepared to advocate similar action on the part of Canada since this seems to indicate a change of attitude on the part of the United States?


Hon. Jack Davis (Minister of Fisheries):: I have made inquiries, Mr. Speaker, but I have not yet seen this legislation. It would seem to me to be ridiculous. There could be no possible parallel in Canada. If the hon. member is suggesting that Newfoundland alone declare a 200-mile limit, then I think he should talk to the government of that province.


James Aloysius McGrath: In view of the abysmal ignorance of the Minister of Fisheries and the Secretary of State for External Affairs because of not having seen the bill, I am going to send a copy to them for their education and edification.



AGREEMENT BETWEEN UNITED STATES AND 14 ICNAF NATIONS IMPOSING QUOTA ON YELLOWTAIL FLOUNDER-CANADIAN ACTION RESPECTING CONTINENTAL SHELF

Mr. John Lundrigan (Gander-Twillingate):: Mr. Speaker, has the Minister of Fisheries been apprised of the recent agreement between the United States and the 14 nations of ICNAF in zone 5, the southern zone of the northwest Atlantic fisheries, to impose quotas on certain species of fish, especially yellowtail flounder, and are similar moves being planned by Canada to curtail the present overfishing of that species on our own continental shelf?


John (Jack) Davis: Mr. Speaker, since Canada has taken the initiative with respect to the establishment of quotas I think we can take some credit for that agreement as well.


John Howard Lundrigan: Has the minister's office been informed of the presence of 40 to 50 Russian and Polish trawlers on the Grand Banks which are overfishing this particular species to the extent that Canadian fishing vessels have had to leave the area, and what action is the minister taking?


John (Jack) Davis: Mr. Speaker, we are kept aware daily of the presence of foreign fishing fleets off our shores. As to whether these fleets are overfishing a particular species in a particular area, I would have to make further inquiries.


James Aloysius McGrath: A further supplementary question, Mr. Speaker.


Mr. Speaker:: Order, please. The Chair will recognize the hon. member for St. John's East on a final supplementary but we will move on to the next question immediately thereafter.



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

James Aloysius McGrath: Mr, Speaker, I address my supplementary to the Secretary of State for External Affairs, in view of the importance of this matter to Canada, and to the Atlantic provinces in particular, is the minister prepared to initiate bilateral talks with coun-
November 26, 1971

tries fishing on our continental shelf with a view to determining their attitude toward any action we may take to extend our fishing jurisdiction to cover our continental shelf?


Mitchell William Sharp: Mr. Speaker, this is a very hypothetical question. As the hon. member knows, we have probably been more active than any other country, as well as more successful, in dealing in a practical way with the problems both of the territorial seas and the fisheries, and I give all credit to my colleague the Minister of Fisheries-


Mr. Speaker:: Order, please.


James Aloysius McGrath: Mr. Speaker, I give notice that I shall discuss this matter at ten o'clock.



PENSIONS


Mr. Stanley Knowles (Winnipeg North Centre):: Mr. Speaker, my question is of concern to three ministers, the Minister of National Defence, the Solicitor General in his capacity as the minister responsible for the Royal Canadian Mounted Police, and the President of the Treasury Board, but I shall direct it to the President of the Treasury Board. In view of the commitment made some time ago that something would be done about the matter, can the President of the Treasury Board say what progress is being made in making the necessary arrangements so that retired members of the armed forces and RCMP personnel will get their pensions escalated without having to wait until age 60?


Hon. C. M. Drury (President of the Treasury Board):: Mr. Speaker, I cannot report any positive conclusions as yet. I think the hon. gentleman well appreciates that the scale of benefits and timing of both the police and national defence pensions are based on a rather different career concept than those for the ordinary public servants, and the application of all the rules which are appropriate to public service superannuation do not equally apply to the armed forces. This is the reconciliation we are trying to work out now.


Stanley Howard Knowles: Mr. Speaker, would the minister like to speak further on this matter some night next week at ten o'clock?



NATIONAL DEFENCE


Mr. J. M. Forrestall (Dartmouth-Halifax East):: Mr. Speaker, my question is directed to the Minister of National Defence. It arises from reports that when the
Inquiries of the Ministry
basic defence production-sharing agreements with the United States were signed in June of 1963 there was a private agreement that a balance would be maintained over the long haul. My question flows from that and has to do with the award to Boeing recently by the United States government of a contract for $5.6 million for the development of a hydrofoil for use by the U.S. navy and other NATO forces. Will the minister explain to the House whether there is any connection between this and the fact that we have now mothballed our own hydrofoil, the Bras d'Or, and whether it had anything to do with current negotiations in respect of defence production-sharing arrangements?


Hon. Donald S. Macdonald (Minister of National Defence):: Mr. Speaker, I can say that it has nothing to do with the defence production-sharing agreement. No doubt the fact that the United States wanted to proceed with the development of a hydrofoil with retractable foils may have motivated them in not wishing to participate in the development of our hydrofoil, but this, of course, was a decision taken by them. I do not think there is a direct connection here in so far as the defence production-sharing agreement is concerned.


J. Michael Forrestall: So that the record will be clear on this matter, is the minister aware or can he confirm that when the initial agreement was signed in June of 1963 there was appended to it a further document in which Canada agreed to keep a balance over the total period?


Donald Stovel Macdonald: Mr. Speaker, I would remind the hon. member that, as I pointed out in the House last week, the administration of this agreement and, indeed, its negotiation are not the responsibility of the Minister of National Defence. I will, however, draw the hon. member's question to the attention of my colleague who might like to advise the House on this point.



CANADA-U.S. PRODUCTION-SHARING-REQUEST FOR TABLING OF ANCILLARY AGREEMENT ON MAINTENANCE OF BALANCE

John George Diefenbaker: Mr. Speaker, my supplementary question arises out of the question of the hon. member for Dartmouth-Halifax East. Will the minister table in the House the ancillary agreement in connection with joint defence expenditures which was made on June 7, 1963? It has never been tabled. It has been spoken of on a number of occasions, and it would be very helpful if it could be tabled now.


Donald Stovel Macdonald: Mr. Speaker, I would remind the right hon. gentleman, as I pointed out to the hon. member for Dartmouth-Halifax East, that the administration of this agreement is not within the administrative responsibility of the Minister of National Defence. I will, however, bring the suggestion to the attention of my colleague who is responsible for this.

November 26, 1971
Inquiries of the Ministry AIRPORTS



TORONTO-SELECTION OF NEW SITE

Mr. Norman A. Cafik (Ontario):: Mr. Speaker, I should like to ask the Minister of Transport whether he is in a position to give any information to the House as to what, if anything, is happening regarding the new airport location for the metropolitan Toronto area?


Donald Campbell Jamieson: Not a
great deal more than when I answered a question a few days ago, Mr. Speaker. Proposals have been made to the province of Ontario. The last word I had from them was about two days ago, indicating that they needed a week or ten days to complete their review of them. I am ready to meet them whenever they so indicate.


Norman Augustine Cafik: Mr. Speaker, I should like to ask whether any target date has been set within the department for making an announcement on this important subject in order that both levels of government can work toward meeting that deadline?


Eldon Mattison Woolliams: It will leak out, don't worry.


Donald Campbell Jamieson: Mr. Speaker, I cannot give a date because it would be my hope the decision would be one made jointly by the province and ourselves. That is our intention, and everything will depend on just how quickly our negotiations with them can be completed.



POST OFFICE


Mr. Thomas M. Bell (Saint John-Lancaster):: Mr. Speaker, I have a question for the Postmaster General, and I might say I leaked this question to him just before 11 o'clock.


Some hon. Members:: Oh, oh!


Thomas Miller Bell: Further to the plan to integrate urban transportation services, and further to the assurances that have been given that there will be compensation for the salaries of employees and for equipment, would the government also consider extras for dislocations that the contractors personally might suffer in view of the three-year term of the contracts they are going to lose?


Hon. Jean-Pierre Cote (Postmaster General):: Mr. Speaker, the only information I can leak now is that I do not know if there will be compensation, although assurance was given in respect to the purchase of their trucks and their equipment. Some of them will even be asked to be integrated into the Post Office Department. In addition they have the assurance that we have to give them at least three months' notice before cancellation of the contract. If the hon. member is talking about other compensation on top of that because of the loss of business that might have been had over the years, I do not know what the final criteria will be.



NEGOTIATIONS WITH LETTER CARRIERS UNION ON HIRING OF CASUALS

Hon. W. G. Dinsdale (Brandon-Souris):: Mr. Speaker, may I say by way of preface that we are pleased to see that the Postmaster General has agreed to meet with the letter carriers union to negotiate-


Mr. Speaker:: Order, please. The hon. member should ask his question. I must bring to the attention of the hon. member for Brandon-Souris and others that there are less than ten minutes left before the end of the question period.


Walter Gilbert Dinsdale: Mr. Speaker, my comments were related to the question I am going to ask.


Mr. Speaker:: Order, please. The hon. member has been here long enough to know that he should not make comments before asking a question. The hon. member should ask his question.


Walter Gilbert Dinsdale: Mr. Speaker, may I put it in these terms. Now that the Postmaster General has agreed to meet with the letter carriers union to negotiate an agreement on the casual hiring issue pending an appeal to the Public Service Staff Relations Board, will he inform the House when this very important meeting will take place?


Joseph Julien Jean-Pierre Côté: Mr. Speaker, that very important meeting has taken place. I received a letter from the president of the letter carriers union at 12 o'clock noon yesterday and we met at two o'clock in my office. The decision we took at that time was that we would have further meetings between officials of my department and officials of the union all next week.



SCIENCE


Mrs. Grace Maclnnis (Vancouver-Kingsway):: Mr. Speaker, I should like to direct a question to the Minister of State for Science and Technology. In light of his statement at the time of his appointment last August that one of his first tasks would be to examine the recommendation of the Science Council for the creation of an institute to study the problems of population growth, is he prepared to give an early report on the results of his examination?


Alastair William Gillespie: Mr. Speaker, I am sure hon. members will appreciate that on occasion one is misquoted. I was answering a question at that time as to the relationship of the Science Council to the ministry and the recommendation in their report on population control on a world-wide basis. I indicated that that and other recommendations of the Science Council would be taken under study by my ministry.


Winona Grace MacInnis: Mr. Speaker, can the minister give us an indication of the gestation period required for the birth of this forthcoming report?
November 26, 1971



FISHERIES


Mr. Lloyd R. Crouse (South Shore):: Mr. Speaker, I should like to direct a question to the Minister of Fisheries. In view of the serious decline in herring resources off the Atlantic coast of Canada, will the minister make a report to the House at an early date on the results obtained through his departmental studies of this matter along with any recommendations which may be made for the preservation and retention of this important species at the national as well as the international level?


John (Jack) Davis: Mr. Speaker, this matter has been receiving serious study for several years. We are not absolutely sure of the size of our herring resource. Nor have we been convinced there has been a serious decline in the resource. Still our department moved, two years ago, to limit the tonnage of our herring fishing fleet and, more recently, to limit the capacity of new plants being built to process herring.


Lloyd Roseville Crouse: Since there are a large number of herring seiners presently tied up in Atlantic Canada, which indicates there are no herring to be caught, is the minister giving any consideration to limiting the processing of the fish caught to processing only for human food inasmuch as continuation of processing for fishmeal may decimate the stocks still further?


John (Jack) Davis: Yes, Mr. Speaker. The policy has been to shift as much as possible of the catch to herring for food purposes since this produces the highest income for fishermen. I must also point out that, while some vessels are being tied up as the hon. member suggests, we are in our second highest producing year in history.


Mr. Speaker:: Order, please. May I suggest to hon. members that we should try in the last four minutes of the question period to have shorter questions, shorter answers and fewer supplementaries. The hon. member for Cape Breton-The Sydneys.



POST OFFICE


Mr. Robert Muir (Cape Breton-The Sydneys):: Mr. Speaker, my question is for the hon. and gentlemanly Postmaster General. Some weeks ago I raised the question of the existing anomaly whereby assistant postmasters in staff post offices were receiving a higher salary than the postmasters who have the major responsibility. At that time the hon. gentleman stated that a new contract was being negotiated and he felt that a settlement was imminent. I wonder whether the hon. gentleman can give us either a progress report or a final report on this very important subject?
(Translation]


Joseph Julien Jean-Pierre Côté: Mr. Speaker, I have yet to receive a final report on the matter, but I
Inquiries of the Ministry
shall try to give an answer in this regard as early as possible next week.



AIRPORTS


Mr. S. Perry Ryan (Spadina):: Mr. Speaker, my question is directed to the Minister of Transport. Can the minister tell the House to what extent the federal government is participating in studies of the need for a waterfront airport in Toronto, and is a particular study being made of the problems of servicing such an airport?


Donald Campbell Jamieson: Mr. Speaker, we have no current plans-I have made this statement in the House on several previous occasions-for a waterfront airport in Toronto. This is not included in any of the planning we have at the present time. I made this statement a year or more ago and have repeated it several times since.
* *
*



ADMINISTRATION OF JUSTICE


Mr. John Gilbert (Broadview):: Mr. Speaker, my question is directed to the Solicitor General. In view of the intention of the government not to proceed with Bill C-192, the Young Offenders Act, at this session, and as one of the major criticisms is that there is a lack of diagnostic and treatment centres across the country, will the Solicitor General meet with his counterparts in the provinces to develop a program to solve the shortage of treatment and diagnostic centres?


Hon. Jean-Pierre Goyer (Solicitor General):: Mr. Speaker, the standing committee considered the whole matter and I should prefer straight off that hon. members agree on a report so that I can make the improvements to the bill which, as I said, we are prepared to improve.



BROADCASTING


Mr. J. P. Nowlan (Annapolis Valley):: Mr. Speaker, my question is directed to the Acting Prime Minister. In view of the continuing reports from Quebec that the province intends to grant broadcasting licences, I wonder whether the Acting Prime Minister can tell us if it is still the policy of the federal government that the CRTC is the sole agency to grant broadcasting licences in Canada?

November 26, 1971
Inquiries of the Ministry


Mitchell William Sharp: Yes, Mr. Speaker. That is right.



TRANSPORT


Mr. David MacDonald (Egmont):: Mr. Speaker, my question is for the Minister of Transport. With reference to the recent report of the Canadian Safety Council that there has been a 26.9 per cent increase in the number of deaths through the use of snowmobiles and in view of the minister's own report of November 19 suggesting that there should be legislation enacted in respect of the noise level, lighting, shielding of moving parts, brake lights and so on, I wonder whether the minister has moved forward to provide legislation in this area and whether or not there has been any consultation with the various snowmobile producers in order to effect some of these changes in this year's models?


Donald Campbell Jamieson: There are several parts to that question, Mr. Speaker. There is no need for additional legislation. What is now on the books gives the authority to make further regulations. We propose to do this in the areas the hon. member has mentioned. There is ongoing consultation with the manufacturers. In fact, the report I tabled had to do with last year's models and some of the improvements we suggested have been implemented in this year's models.


Mr. Speaker:: The hon. member for Egmont might be allowed to ask a supplementary and then I will recognize the hon. member for Grand Falls-White Bay-Labrador.


David Samuel Horne MacDonald: Could the minister give an indication to the House in the next few days concerning the kind of regulations that will be brought forward as well as agreements on the part of the manufacturers in respect of model changes necessary for this year?


Donald Campbell Jamieson: Yes, I would be glad to do that. I already have in fact, and the report itself suggests the areas where regulations would be desirable.



AIR TRANSPORT


Mr. Ambrose Hubert Peddle (Grand Falls-White Bay-Labrador):: Mr. Speaker, I have a question for the Minister of Transport while he is already warmed up. Is the minister prepared now to reply to my question of November 4 with regard to the transfer of Royal Air Force maintenance activities to the United States Air Force base at Goose Bay?
(Mr. Nowlan.]


Donald Campbell Jamieson: Yes, Mr. Speaker. I have an answer and indeed I apologize to the hon. member for not having given it before. The reason for the transfer is purely and simply the deterioration in the condition of the ramp used previously by the RAF. This is being repaired. When these repairs are completed matters will revert to what they were before. They will go back to using the ramp in the normal fashion. I believe it is anticipated that the repairs will take something like six months.



PUBLIC SERVICE


Mr. John Burton (Regina East):: Mr. Speaker, I wish to direct a question to the Acting Prime Minister. Is the government contemplating any changes to the Public Service Employment Act which would make clear that a public servant is not contravening the act when he displays a political poster at his own home or on his own personal property. I ask this question in view of an answer to a question which I received earlier this week.


Charles Mills (Bud) Drury: Mr. Speaker, this is obviously a question which cannot be answered in one word. I would be glad if the hon. gentleman would give me some of the circumstances.



INDIAN AFFAIRS


Mr. Don Mazankowski (Vegreville):: Mr. Speaker, my question is directed to the Minister of Indian Affairs and Northern Development. As a result of the discussions which are taking place with the Indian Association of Alberta and representatives of the Cold Lake Band and the evidence being presented before the Standing Committee on Indian Affairs and Northern Development, can the minister indicate to the House whether he now intends to take any initiatives toward satisfactorily resolving the school crisis in northeastern Alberta?


Hon. Jean Chretien (Minister of Indian Affairs and Northern Development):: Mr. Speaker, my position has always been the same, and the children must return to school before I consider changing it. As to discussion of the action to follow, I am prepared to consider any representations submitted.


Donald Frank Mazankowski: A supplementary-


Mr. Speaker:: Order, please. We have gone beyond the question period. Perhaps the hon. member might be allowed a supplementary. I understand the hon. member for Ontario is exercised by the fact that he has not had a
November 26, 1971

supplementary. I will first recognize the hon. member for Vegreville.


Donald Frank Mazankowski: Thank you very much, Mr. Speaker, for your indulgence. I should like to ask the minister one more supplementary question. Is he disposed to undertake discussions with the Indian people of northeastern Alberta on a long-term educational program, in a consultative way, in order that they may have a say in the self-determination of their educational rights?


Joseph Jacques Jean Chrétien: Mr. Speaker, I am willing to start discussions with the Indians of northern Alberta as soon as the children return to school.
I have already discussed this matter with the chief of Keeheewin and I am to confer Tuesday with the chief of Saddle Lake about the future policy. As far as Cold Lake is concerned, we require, before any settlement is considered, that the children first return to school.


Mr. Speaker:: Order, please. The hon. member for Ontario on a supplementary.



INDUSTRY


Norman Augustine Cafik: Indeed, Mr. Speaker, I am exercised, but a little exercise will not do any harm, considering my weight.
I have a question for the Minister of Industry, Trade and Commerce and in his absence would like to direct it to the acting minister. In light of Dofasco's and Stelco's announcement of a 4 Iper cent to 5 Iper cent price increase on galvanized sheet steel to take effect this Sunday at midnight, and with a view to preventing damage to Canadian firms which are trying to export manufactured goods to the United States, would the minister investigate the possibility of a voluntary rollback in these price increases by Dofasco and Stelco?


Alastair William Gillespie: Mr. Speaker, we are all impressed by the energy of the hon. member for Ontario. He has galvanized the House on more than one occasion.


Some hon. Members:: Oh, oh!


Alastair William Gillespie: I think I should point out that ours is a market economy and that these sort of relationships are normally those which are determined between suppliers and customers. However, having said that, I will undertake to make inquiries and see if there are any implications for Canada's export trade.


Mr. Speaker:: Order, please. I must point out that I was under the impression that the hon. member for Ontario was rising for the purpose of asking a supplementary question. A number of other members were seeking the
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floor who were not recognized because they had already had an opportunity to ask one question, and I was trying to give an opportunity to as many members as possible to ask questions. As a result I think an injustice has been done to some members but I will try to make up for that when we meet on Monday. Orders of the day.


Mr. Adrien Lambert (Bellechasse):: I rise on a point of order, Mr. Speaker.


Mr. Speaker:: Order. The hon. member for Bellechasse on a point of order.


Joseph Adrien Henri Lambert: Mr. Speaker, while I respect the authority and competence of the Chair, I regret that no member of our party has had any opportunity to put one single question today. This makes me better understand to what extent certain minorities can sometimes suffer-


Mr. Speaker:: Order. I suggest to the hon. member that when I looked in that corner of the House, none of his colleagues tried to put a question. If, during the next question period, either the hon. member or any of his colleagues have questions they wish to ask, I shall recognize them as I always do.


Joseph Adrien Henri Lambert: Mr. Speaker, I rise on a question of privilege.


Mr. Speaker:: Order. The hon. member for Bellechasse on a question of privilege.


Joseph Adrien Henri Lambert: Mr. Speaker, I must mention that I rose several times. I deeply regret that the Chair did not see me. I understand that I sit at the other end of the House but in all justice, I must say that I rose several times.
noon)



GOVERNMENT ORDERS


[Stage Direction]
The House resumed, from Tuesday, November 23, consideration in committee of Bill C-259, to amend the Income Tax Act and to make certain provisions and alterations in the statute law related to or consequential upon the amendments to that act-Mr. Benson-Mr. Honey in the chair.
The Chairman:: In accordance with the statement of the Parliamentary Secretary to the President of the Privy Council, as recorded at page 9777 of Hansard for November 22, 1971, the committee will now proceed to consideration of sections 14 to 19 inclusive, 22 to 26 inclusive, 28, 32, 33, 34, 36, 37, 50 to 59 inclusive, 104 to 108 inclusive, 122, 130, 131, 132, 138 to 142 inclusive, and 208 to 211 inclusive, dealing with business and property income. I must bring to the attention of the committee that sections 15, 16, 18,
24372-6BJ

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56, 57 and 58 have already been agreed to. Shall section 14 carry?
On clause 1-section 14: Sale of goodwill and other "nothings".


Mr. Lambert (Edmonton West):: Mr. Chairman, this general heading covers a great number of things. There are some items that may have been discussed, although the schedule that Your Honour has read out does not in any way correspond with the list I had because I have no reference, under business and property income, to sections 55, 56, and what have you. But that matters little, because I agree that section 14 is the one which should be the lead section. This section deals with "nothings" and goodwill. So far as the taxpayer is concerned there are many things in this bill that are nothings. They do not do him any good. And for the rest of it, the goodwill being generated by the bill for the government is almost down to a nothing level.
If I may have the attention of government members, divorced from some of the major conversations that are going on, I would like to make some points in connection with the section. I know that the hon. member for Winnipeg South Centre likes to make noises while sitting in his seat, showing his lack of knowledge of the bill.


Edmund Boyd Osler: On a point of order, Mr. Chairman; some hon. members may have been speaking, but I was one of the few who had not said a word until the subject was mentioned. Then, I said quite loudly, "Say something interesting and we will listen."


Russell Clayton Honey: That is not a point of order.


Marcel Joseph Aimé Lambert: The hon. member's contribution is an indication of his knowledge of what goes on in this House, both with reference to bills and otherwise.
On Wednesday, the Leader of the Opposition made a proposal to the government that certain sections of the bill which were acceptable to the Official Opposition should be proclaimed, and that a number of other sections should stand deferred, not to take effect as law until a day to be fixed by proclamation by the Governor in Council. This proclamation would be subject to an affirmative resolution of the House of Commons. I want to reiterate that proposal because it is absolutely germane to the group of sections we are discussing today, for within this group we have things as diverse as the basic herd, straightline depreciation, co-ops and credit unions, and trusts-whether they are affected by international income, whether they are foreign trusts, or purely domestic trusts. The sections dealing with those matters have been the subject of very great concern and controversy in the country. The government has indicated that it may bring in some future amendments.
There is also a great deal of confusion in the minds of the public, reinforced by the majority of the provinces and reinforced by the professional associations most concerned, the lawyers and the accountants, the chambers of commerce and the manufacturers associations, with regard to proposals concerning corporate taxation. I am not going to go into detail, but those proposals are so complex and their effects are going to be so wide-sweep-
[TER ALThe Chairman.]
ing that not even the government fully understands their impact. It would be better to take more time to study the proposals and defer the date of their implementation. We know what they are. The government has indicated that it would be prepared to consider these matters and bring in further amendments. But why start people off on the wrong foot when it is fundamentally unsound to do so. I just cannot see that, Mr. Speaker.
I am going to put on record what was indicated and why this deferral should take place. The Leader of the Opposition, and I repeat it today, says that sections 6, 8, 20(12), 62, 63, 109, 110 and 117 could be brought in now because we have long advocated tax cuts, as well as other provisions, and these are the ones that apply now. Certainly, I do not think anyone would disagree that there are complexities in the working allowance provision, in the child care expense provision, as there are some rather illogical situations in that field. Then, there is the increase in the basic exemptions to $1,500 and $2,850, as well as all the other details, including the revised rates schedules under section 117. All those matters are within the proposal to the government. I understand that the cabinet is now considering the matter, and I hope by Monday we will have a satisfactory answer.
Why do we say that? First of all, let us look at the preliminary report from the other place, No. 47, as published by the Senate Committee on Banking, Trade and Commerce. This is a very interesting and a very studious document prepared primarily by supporters of the government. I put it to the hon. parliamentary secretary that it is not a document that can be lightly dismissed. I add a word of caution to the government. I understand that the committee in the other place has taken quite a determined stand with regard to a number of these proposals and that, notwithstanding the attitude of the government, amendments are going to be put and carried which conform to the wishes and recommendations of the other place. I can see some difficulties for the progress of this bill if that should be the case. Certainly, it will take more than the extremely short period of time that this gover-ment normally allows the other place to consider legislation.
From what I hear there are a number of the government supporters in the other place who are most unhappy with certain provisions in this bill, those dealing with international income, for instance. However, I understand that the government does intend to introduce some amendments to those sections. What are they to be? At one minute before midnight are we going to see those amendments, when the professions and all concerned will not have a chance to examine them? May I commend to hon. members the Senate committee report, because the answers of witnesses certainly clarify a great deal more of this bill than has been clarified in this House where we have a more restricted discussion than if we were in a standing committee and could directly examine the officials from the Department of Finance and the Department of National Revenue involved in the preparation of this bill.
The government has shown a very cavalier attitude with respect to major changes in the Income Tax Act by dismissing or putting aside the views of the provincial governments. After all, the provincial governments have
November 26, 1971

equal jurisdiction with the federal government in the income tax field, both corporate and personal, but one would think that they were in this field on sufferance. There is at the present time merely an agreement as to the sharing proportions and the collectability of income tax. We know there are divergent views. For instance, the province of Quebec says that it collects its own income tax and other provinces are making threatening noises because of the insensitivity of the federal government to their views.
This document was produced by the federal government which only has a 50 per cent interest in the income tax field, yet it insists that this will be the law. As I said, this is a cavalier attitude and not in keeping with the principle of partnership between the provincial administrations and the federal government administration of this country. It is a complete rejection of that. Last week the provinces made their views known and the majority of provinces, both in number and population, told the federal government that Bill C-259 should be deferred. But the Minister of Finance said, no, that it would go into effect on January 1, 1972. What right does he have to say that? Merely because he is the sponsor of the bill? Constitutionally, it is wrong to say that. It is a "take it or leave it" attitude.
Let me refer to paragraph 12 of the communique put out following the federal-provincial conference. It refers to a number of matters arising out of Bill C-259. This is the great paragraph showing the laconic way in which the government treats this. It reads:
The federal and provincial governments expressed their views on the above matters and related aspects. A diversity of views exists.
According to paragraph 13, the federal government explained the need to implement tax reform on January 1, 1972 and to continue certain undertakings as to levels of revenue to the provinces. How good of it to do so, Mr. Chairman. How downright condescending the federal government was to the provinces which, in income tax matters, have as great an interest as the federal government has. The federal government has laid down a number of conditions. It has said that provincial tax statutes must conform to the federal statute. The provincial administrations have told the federal government that they cannot do this in many instances.
Let me single out the province of Ontario, the province with the largest provincial government in the country. Ontario is the source from which by far the greatest proportion of income tax comes. It is the province that harbours by far the greatest number, if not the majority, of corporate organizations in this country. That province says that it cannot alter its corporation tax act in such a way that it will be effective on January 1, 1972 and conform to the federal statute. The net result will be that businesses operating in the province of Ontario must deal with two separate corporate taxation acts. I appeal to hon. members who have a knowledge of business and who are accountants or lawyers to say how they would care to operate a business firm in the province of Ontario in 1972 under two separate corporate taxation acts. The federal government cares a fat lot about that.
Income Tax Act
It would appear, unless I hear to the contrary, that members on the government side care not a tittle about that; not even those who come from the province of Ontario care. I suppose their attitude will be, "Tough luck." Well, I hope they see every officer of a corporation in the province of Ontario who will be affected by this and explain their attitude on this bill. Let them say why they support it. I see that the Parliamentary Secretary to the Prime Minister, who is a businessman in Ontario, has just entered the chamber. I should like to see him telling his business associates in Ontario that two corporate tax acts will operate in 1972, if this bill goes through. Whether he likes it or not, his own business interests will be affected. Let him explain if he is prepared to accept that, and why he is prepared to accept that. He was a member of the finance committee when the white paper was being examined. Certainly, there have been changes, and he advocated some changes. They have been introduced into the bill. I give him credit for that. I will ask him, however, just as I would ask others like him, if he is prepared to tell his business associates in the province of Ontario that the federal government has the right to call the tune with regard to the taxation of corporations in Ontario and that the province of Ontario, which has equal jurisdiction, has nothing to say on this subject.
Think of the confusion that will arise in 1972 in the handling of transactions, with the federal government handling them one way and the provincial tax statute saying they must be handled another way. And remember, Mr. Chairman, this is the law. This is not the Temporary Wheat Reserves Act that the government can try to set aside at will. You know, other governments act differently in these matters. This government cannot say that the law of the province of Ontario with regard to corporation taxes can be set aside by the administrative officials of the Department of National Revenue, by the officials or authors of this bill in the Department of Finance or by the government of Canada. This government does not have the right to say that. It is that simple. There has to be accord. That accord is not there.
In my own province, which has an equal right, there is no accord. Yet the federal government says, "Tough luck; we are going ahead. Conform." Is that the way to maintain confederation? I do not think so-unless some people place greater emphasis on certain cultural aspects. If they do, that is their choice. However, from an economic, financial and fiscal standpoint, this sort of attitude does more than almost anything else to alienate people in various sectors of the country. I want to warn hon. members.


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


Some hon. Members:: Carry on.


Russell Clayton Honey: Does the committee consent unanimously?


Some hon. Members:: Agreed.


Marcel Joseph Aimé Lambert: Mr. Chairman, I thank the members of the committee for their courtesy. I hope I can maintain the continuity of my remarks. I want to warn hon. members. If there is a feeling of alienation, it is

November 26, 1971
Income Tax Act
not limited to the province of Quebec. I do not support that movement, yet it exists in western Canada. Oh, the government should know this, especially if it ever thought that it understood western Canada. That same feeling exists right within the province of Ontario. The Premier of Ontario and several of his ministers last week made strong statements with regard to fiscal and economic matters in Canada. They insisted that there shall be partnership between the Federal government and those of the provinces and that international trade accords shall not be concluded unilaterally with the federal government, that there should be close consultation with the provinces involved.
The auto pact is a case in point. As recently as yesterday Premier Davis said that there should not be any changes in that pact without the full accord of the province of Ontario. The province of Alberta says that there shall be no change in national energy policies affecting the export of oil and gas without prior consultation with, and the agreement of, the province of Alberta among others. The provinces have their interests and surely to goodness the federal government, in the spirit of confederation and in the spirit of partnership that is basic to confederation, must listen. It is for that reason, Mr. Chairman, that I say that most of this bill should stand deferred, except those parts relating to tax cuts.
There is one further point that I want to make on this aspect. I want to read an excerpt from an editorial in a publication that is well known to the hon. member for Outremont. The editorial was taken from the Canadian Chartered Accountant of November, 1971. I think some colleagues on the finance committee are conversant with that publication, which may be considered as the professional bible of that body. The editorial is headed "Tax-manship Brinksmanship".
Paragraph 3 reads:
If every chartered accountant who has responsibility for giving tax advice, whether in industry or in public practice, were to drop everything and devote the remaining time to an in-depth study of the new legislation and its accompanying regulations, it is still doubtful whether this would be sufficient to provide all taxpayers with pre-implementation advice.
How true that is. Those lawyers who are also concerned with tax matters could be included as well. There are further observations. I wonder how many members of this House availed themselves of an opportunity that was offered a few weeks ago under the sponsorship of the finance committee. A team of experts from the Institute of Chartered Accountants produced a highly informative, and as uncomplicated as possible, audio-visual presentation of the major provisions of Bill C-259 in this very building. At no time did more than a dozen members attend, although every member of this House received prior notice. By arrangement with the government House leader, the sittings of this House were so arranged that those interested in fiscal matters could attend those demonstrations which lasted all day. I now quote the final paragraph of this editorial:
Without being the slightest bit cynical, we offer as a final suggestion that all Members of Parliament take the CICA Tax Reform Course before they presume to pass the legislation into the law of the land!

About 10 or 12 members of this chamber attended that course. I had an exchange with the hon. member for Winnipeg South Centre a minute ago. We hear many members who have not even cracked the covers of this book, say "agreed". It could be written in Urdu, Hindustani, or Swahili or in any other language. They would still say "agreed". They do not have the slightest idea of what is in this bill or the implications of it.


Mr. Marchand (Kamloops-Cariboo):: Oh!


Marcel Joseph Aimé Lambert: The hon. member for Kamloops-Cariboo says that he knows. I suppose he knows that the bill increases the exemption to $1,500 and that sort of thing. Those are the saleable items. Will he tell me how the government proposes to handle trusts, international income, small businesses, minerals, petroleum and natural gas? Will he tell me how the mines in his constituency, as well as other parts of his province, are going to be handled and what they are saying about it? He says "agreed". He dismisses the representations from the mining associations in his province against the provisions of this bill as they affect the major industries in his province. The hon. member is one of those who regularly says "agreed" and wants to pass on to something else. I will come back to section 14 later.


John Stratford Burton: Mr. Chairman, the discussion today on business and property income includes quite a number of areas of interest. Some of the areas included in the scope of business and property in the summaries of the legislation which have been published and made available to members have already been dealt with to some extent in this debate. There may be some overlapping of discussion on some of the items that have already been considered by the committee. I would like to deal with a number of points concerning business and property income because those items include a number of very important points that deserve consideration by the committee.
The first point I would like to raise concerns the change that is being proposed which will allow corporations in the future to deduct from their taxable income interest on money borrowed to buy shares in other corporations. This is quite an important point. I am very interested in some of the rationale that has been presented by the government on this point.
I wish to quote from the Summary of 1971 Tax Reform Legislation which was tabled on June 18 along with the other budget papers. It has been referred to by some members, including myself, as the "brown paper". I understand in the accounting world they occasionally refer to it as the "blood paper". I quote what that paper has to say about this particular matter:
The present tax system does not permit a corporation to deduct interest on money borrowed to buy shares of other corporations because the dividends on these shares are normally tax-exempt. To encourage Canadian ownership and investment, the bill provides a full deduction for interest on money borrowed by a corporation to buy shares in any other corporation. The present system allows a deduction for individual taxpayers and this is retained.
This deduction for interest provides a substantial incentive for Canadian corporations to invest in other corporations and permits them to compete on an even footing with foreign corporations. Assuming a tax rate of 50 per cent, the cost of borrowing money for share purchases will be cut in half.
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I acknowledge there is undoubtely some change vis-avis the position of a Canadian corporation compared to a foreign corporation. How the Canadian corporation is covered is another matter. As I understand the situation, this provision will be available to any corporation which is properly set up in Canada, whether that corporation is controlled domestically or by foreign interests of one sort or another.
It is highly ludicrous for the government to suggest that this is going to encourage Canadian ownership and will help to reverse the tide, especially in light of the present situation. Some of the most recently available figures show that today some 63 per cent of Canadian industry is controlled from outside Canada. Because all of these companies are properly incorporated within the law in Canada, those companies controlled by foreign interests are able to take advantage of this new provision. How this is going to secure a great degree of Canadian ownership in our economy is very difficult to see. It really indicates the ludicrous lengths to which the government is willing to go in order to try to justify some of the rather dubious proposals in the white paper.
Another area which is being treated under business and property income in some of the summaries is the matter of entertainment and related expenses. This has been dealt with already in the debate on some of these sections. I only refer to this matter because it is generally considered as coming within the scope of business and property income. Here again, we have an example of the type of discrimination that exists in terms of the way different Canadians are treated in determining their taxation. Entertainment expenses are allowed on a very wide basis. In fact, the government very markedly backed off from the restrictions that were proposed in the white paper in 1969. They have now restored the status quo in many respects, the only added restriction being that there is some limitation with respect to the location at which conventions and so on may be held if expenses are to qualify as deductible. I suppose some companies will not be able to hold conventions in Miami, the Bahamas and other such places in future. The government backed off when it came to allowing expenses for yachts, camps, lodges and golf course facilities. I do not think the minister could have left these things in the legislation within the area of deductible expenses and still presented a credible picture.
But what has been done with respect to employees? Strict ceilings and severe restrictions have been imposed with regard to what an employee may claim as a tax deductible expense. It is a clear case of treating one class of taxpayer in a different manner from another. Once this law is put into effect I believe the people will recognize just how phony are some of the claims the government is making for it.
I turn now for a moment to the question of depreciation on rental buildings. This comes within the area of business and property income. The so-called "red paper" of June 18 states in this regard:
The legislation provides that in future each rental building costing $50,000 or more will be placed in a separate capital cost allowance class. As each building is sold the taxpayer will bring into income recaptured depreciation or deduct a terminal loss.
Income Tax Act
Under the present system all buildings of a particular construction are pooled and the day of reckoning can be indefinitely postponed by adding new buildings to the pool.
This is a welcome change. Under the present act, some landlords and owners of real estate were getting away with murder. We agree with this change.


Marcel Joseph Aimé Lambert: The tenants will just pay higher rents.


John Stratford Burton: The only drawback is that there will be a tendency on the part of some landlords to recover at least part of the loss of benefits by increasing the rents of those who are occupying these buildings. This is a question which deserves further consideration. We should look for means of ensuring that landlords will not be able to do this.


Marcel Joseph Aimé Lambert: No federal authority there.


John Stratford Burton: I now turn briefly to consider the proposal for changing the accounting system used by professional people. They will now be required to adopt an accrual accounting system rather than report income on a cash basis. This will do away with a good deal of the monkeying with the works that goes on at present, and to this extent we believe the provision is worth supporting. I note that transitional rules are set out for the taxpayers who are being required to switch over from the cash basis to an accrual basis. It is reasonable to do this, and we have no objection.
However, there is no such provision for transitional rules in the case of others who may wish to change over to an accrual accounting system. I have in mind farmers and fishermen who are given an option; they can remain on a cash basis or they can change to an accrual basis. Some hon. members may feel there is no need for transitional rules in these cases, since these people have an option. However, it should be borne in mind that in the light of other proposed changes, fishermen and farmers may in effect be forced to change from one system to the other. It seems to me that this requires further consideration.
As I read section 19 which is before us I note that it appears to deal with the provision by virtue of which some publications, such as Time and Readers' Digest, qualify to be treated differently from other taxpayers. Well, Mr. Chairman, we have made our stand on this matter clear on many occasions and we hope it will be given consideration by the government. Other provisions include the discretionary authority given to the Minister of Finance with respect to such matters as bank reserves-he is allowed to approve or, perhaps, to determine, what reserves shall be required. At the same time, with respect to other institutions such as credit unions, a different situation might arise.
In all, a number of important considerations are involved in this area of the bill. We hope the government will give consideration to making changes in response to some of the points which have been raised. I believe it is in the best interests of the government itself to make some of these changes if they hope to be in a position to present a credible picture to the public whenever this legislation may be passed into law.

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Mr. Aiken:: I wish to make one comment, Mr. Chairman. I intended to put a question to the hon. member who has just spoken. I have heard one or two members make the assertion which he has just made, namely, that taking professional people off a cash accounting basis and putting them on an accrual basis will do away with some of the monkey work which is going on.
For the life of me I cannot understand where that idea comes from. A cash receipt basis for a professional man or anybody else means that when he receives money he pays tax on it, and if he does not receive money he does not pay tax on it. The new method means that a businessman will estimate during the year what he might receive and then, at the end of the year, estimate what he might not receive. And between the two, somewhere or other, he guesses what his income amounts to. I cannot see how anybody could feel there is any improvement in the system by placing professional people on an accrual basis. To my mind the accrual basis is the one which is full of opportunities for finagling, double entries, write-offs of estimated losses and so on. The accrual basis opens the door wide for a businessman who can afford an accountant to take advantage of all the write-offs and concessions in such a way as to do the government in. On the other hand, the person who pays tax on money he receives is entering into a straightforward and honest arrangement.
I do not see this new system lasting forever. Farmers and others are entitled to retain the cash receipts system. I have yet to hear from the government why it is that it feels anybody will benefit from placing professionals on an accrual basis, which will leave the door open wide to what is an excellent opportunity to chisel the government through the manipulation of such tools as write-offs, estimates of revenue, delaying the submission of accounts and so on. To my mind, the situation would be nonsensical.


Mr. Ritchie:: Mr. Chairman, I should first like to speak, as did the two previous members, about the lack of an option among taxpayers in the professions to choose to use either the cash or the accrual basis. I have had some personal experience of this, and I should like to detail it.
I think the figures given by the hon. member for Regina East must be wrong. When I first started my practice I was advised by my accountant to adopt the accrual basis. He told me it would be a little hard at first but in the long run I would be much better off. I could not agree more with the hon. member for Parry Sound-Muskoka who said that the accrual basis does offer the professional, particularly if he operates his own business, many ways to avoid paying tax in his later years when his earnings are higher. This can be done by not writing off his losses in the early years but writing off very large amounts, as he is able to do, in his later years.
In my profession at the moment this question of adopting either the accrual or cash basis is of no great significance. Under medical plans today payments are usually made within about two months, so it does not matter which system you choose. However, I went into a dentist's office the other day and saw a sign indicating that all work had now to be paid for in cash, that no one was to

ask for any credit, and that patients were not to contemplate contracting for more dental work than they could afford to pay for within a week or so. This notice was given because of the new income tax regulations that were to come into force on January 1, under which the dentist would be prohibited from extending credit. The optimistic assumption, of course, was that the bill would be passed by that time.
The important consideration for a professional man, of course, is not how much work he has on his books but how much money he has in his pocket when his work is finished. I think the lack of an option in the change-over from a cash to an accrual basis is a serious mistake. I do not think any of the witnesses for the government who appeared before the committee when it discussed the white paper on taxation made any claim that tax revenue would be increased.
Let me read what the Canadian Dental Association had to say about the accrual in its brief to the finance committee when the white paper on taxation was being considered. As reported at page 43:129 of the committee report for May 14, 1970, they said:
In the White Paper the Government proposes that dentists be required to report their income on the accrual basis of accounting rather than the cash basis which is now permitted and that receivables and work in process at implementation date be brought into income in accordance with a specified formula. The government believes that the tax postponement permitted by (the cash basis of accounting) has given professionals an unwarranted advantage by comparison to the rest of Canadians.
I think the assumption of the government that the professionals had an unwarranted advantage may have caused them to over-react. I do not think that that is borne out. Certainly, as far as dentists are concerned, who are still largely paid out of the patient's own pocket, the accrual basis is detrimental.
The brief continues:
The dentist would be loath to provide services if he knew that the account would not be paid for some period of time. The view has been expressed by a number of dentists that if a dentist is required to pay tax on his accounts receivable, the natural tendency would be for him to reduce his accounts receivable to a minimum with the result that a dentist would carry on his practice on a cash basis. Any restriction of credit policy would deny dental services to persons until they had sufficient funds to pay for the services.
This does become a social problem. If the patient cannot pay, the dentist must decide whether he will make no charge for his services or put the amount in his books. Then, not only does he not receive payment, he will also have to pay a penalty to the government by way of income tax. As I say, it is too bad that the option is not extended in this new tax bill.
An accrual basis may be a more tidy way of doing things, but from the practical point of view it means a tightening up of accounts, and to some extent services will not be as good as they were previously. It may be a good thing for everyone concerned from a financial point of view, but as I say professional services will suffer to some extent.
I cannot see how the accrual system is going to bring in more money. Over the life span of a professional, less money will be paid into the federal government's coffers. If a professional has to pay a large amount of tax on
November 26, 1971

money that he did not receive in his early years, the chances of his establishing himself are diminished. This will in turn increase his desire to join a group through which he is paid a salary, and as a result he will be reluctant to go to the smaller communities where he would have to buy equipment that would otherwise be available to him at a clinic. These rural areas will find increasing difficulty in attracting dentists. To this extent the absence of an option will be detrimental to rural communities, since they do not have resources of their own to establish members of the profession in the area and to place them on a salary for their first few years.
I should like to make a few remarks about building depreciation. This provision is badly drawn. The rural communities in particular will feel the effect of the new rules governing building depreciation under which depreciation, interest and property taxes will not be deductible from income derived other than from the premises. This provision was designed, as I understand it, to catch the very large professional income groups using a building or an apartment block in order to delay indefinitely payment of tax. However, I should like to point out that tax will be recoverable at death, and that provision also includes depreciation. Therefore, in my opinion under these rules the full amount will be recovered no matter how much is outstanding. It is likely to be formidable, and the taxpayer may find himself owing more to the Income Tax Department than the building is worth. I think putting the limit at $50,000 is putting it too low in this modern day and age. One can hardly build a chicken coop for $50,000 today. I should not like to say what the limit should be, but I think $50,000 is too low.
In a small community of the type from which I come, there is practically no mortgage money available from large institutions as there is in cities. For this reason, this clause becomes particularly important. The construction of buildings for rental as stores, factories and plants must take place as a result of an individual in a community being willing to put up the money and carry the mortgage. In most small communities, rentals tend to be too low to carry the mortgage. At present time this measure will be detrimental to the building of new enterprises in small communities.
A good portion of new construction is carried on by one individual who builds the building and another who rents it as a retail outlet, factory or something similar. As a result of this regulation that every building valued at $50,000 or more must stand on its own, higher rents will have to be charged. A survey in my town indicates that rents are lower than the cost of carrying a building, that is depreciation, paying the mortgage and property taxes, at least for the first ten years. This means there will have to be longer term financing and that there will be less activity.
It seems to be particularly advantageous to professional people to build apartment blocks. They can be managed by the professional individual who owns them. This type of investment was useful to that type of taxpayer. Some studies indicate that 45 per cent to 50 per cent of apartments have been built by this type of taxpayer. With this new measure there will be a massive rearrangement of
Income Tax Act
investment in order to carry an apartment building. There will have to be the continuation of private funds for investment in real estate, and almost certainly higher rents will have to be charged. The hon. member for Regina East suggested that this increased cost should not be passed on to the tenant, but I do not see how the landlords can help but pass it on, certainly in respect of new apartment buildings. The result will be that commercial rents will increase in the immediate future.
Having decided to look after one loophole in the tax structure to prevent the acquisition of apartments with the deferment of tax indefinitely, I think the government has overstepped the mark. I do not suggest these people should be allowed to do this indefinitely. There should be some limit. However, this particular proposal will mean that those who have property in small rural communities will pay taxes at a higher rate. Investment dollars can only be spent once, and I think this measure will have the tendency of increasing the transfer of investment dollars away from rural communities. There is extremely little investment in rural communities today because large companies will not locate in these areas. In light of the economics of the situation one cannot blame them, but to that extent I think this provision will cause a reduction in the financial base of small communities, and I am not sure the government will have accomplished very much.
One might suggest that these taxpayers will invest in something else, such as annuities or retirement funds. I do not think that is right. The individual who invests in real estate is of a special type. If he is not allowed to invest in real estate he is not likely to buy annuities, life insurance or become involved in some other form of investment he does not understand.
At one o'clock the House took recess.


[Stage Direction]
AFTER RECESS

The House resumed at 2 p.m.
The Assistant Deputy Chairman:: Order. The hon. member for Calgary North.


Eldon Mattison Woolliams: Mr. Chairman, I wish to say a few words this afternoon with reference to the tax legislation before us as it affects professional people. I have the feeling that when this provision was drafted whoever did the drafting had never met a payroll and did not understand the situation in respect of a private practice, be it as a chartered accountant, a doctor or a lawyer.


Mr. Benson:: Nonsense.


Eldon Mattison Woolliams: This may sound like nonsense, but I think the biggest nonsense is the minister and the whole bill, which should have been withdrawn. I know something about the background of the minister and I do not think he ever had it better financially than he has now. However, I am prepared to stay on the subject of the tax bill.
I was saying that I do not believe any of those fellows who drafted this section had ever met a payroll. Somebody asked me if I have. If my good friend across the way
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Income Tax Act
would like to pay the salaries of the employees in my office, I would very much appreciate it. I am saying basically that lawyers who have big corporate clients for whom they have a bill on the books are usually paid. However, lawyers who have a general practice deal with all kinds of cases, and in many instances it may take several years for a client to pay his account. This may be the situation even in respect of a small account, because often these people do not have the money and must pay it by instalments. Sometimes an account may be on the books for a period of two or three years because of the financial position of the client. Now, lawyers will have to pay tax on that account.
Previously, these people were on a cash basis. The 99.9 per cent of lawyers and accountants who were on the cash basis now are to be asked to pay income tax on the accounts receivable. This means, if they pay tax at the rate of 37 per cent or 40 per cent, they will be paying that rate on the accounts receivable which are on the books and which may or may not be collected. I suggest this will create a situation in offices where people will try to avoid the tax legislation by setting up files and not, of course, billing out those files.
To me this whole proposal is preposterous, and I would have thought the minister would have withdrawn this section, especially after what had been said when the white paper was being studied by the committee. This means that the young lawyer or doctor who starts up would have to go to the bank in the first year to borrow money on which to live and with which to pay the tax before the money comes in from the accounts receivable. In other words, this will kill the initiative and ambition of young people in starting out on their own, whether they are in the legal profession, the profession of accountancy or in any other profession. The provision in the bill is a little better than the white paper proposal. At one time, the government wanted to put a tax on work in progress. Hon. members will recall that during committee study of the white paper, I wondered how a gynaecologist would bill on his work in progress. If the foetus were two months old would he bill for one sixth of his fee? The same thing applies in a law office to work in progress.
I know something about the management of a small law office, of how difficult it is to meet the payroll, pay the rent and meet all other costs. In recent times office rents have gone up 200 per cent to 300 per cent. A lawyer might start off an account by writing one letter. Would he have to pay tax on the fee received for that? It might be the first step in the administration of an estate, yet he would be expected to pay tax on that work in progress. Such tax laws create situations that encourage fraud. Lawyers in small offices will not be able to afford to put accounts receivable on their books. I would like to hear the minister explain why he wants this provision in the bill. There was no loss of taxation when the system involved payment on a cash basis. If a case began in 1968, was billed a year later, and the account paid in 1969, then the tax was paid in 1969 when the fee was received. Now, a lawyer may have to pay tax on an account which he may never collect.
This will create an impossible situation for lawyers, accountants, and medical general practitioners.


Edgar John Benson: Nonsense.


Eldon Mattison Woolliams: The minister says this is nonsense. I do not know. I know something about his background, and I doubt if he has ever operated a small accountant's office. If he has, then I am surprised that he favours this proposal. The situation is different when an accountant belongs to a big national firm dealing with large corporations. If the firm charges the CPR or the National Trust, it knows its account will be paid. But the lawyer who defends John Blow on a small criminal charge, a quasi criminal charge, or in a civil case may not receive his fee for two or three years. Before the introduction of legal aid, many lawyers involved in divorce work carried clients for four or five years before finally writing off those accounts. Under the proposed system, a lawyer will have to pay 40 cents on the dollar on an account that he has not even collected.
This is all part of the Liberal philosophy. The Liberals want big farms, big law firms, big accounting firms. It is only the big man who will be able to afford this system, not the little man. I am shocked at this kind of legislation. I say it came down the legislative pipe because whoever devised it never practised either as an accountant or as a lawyer in a small office, and had the experience of meeting wages, rent and other expenses. Whoever devised this section must have joined a big firm at the start of his career. Mr. Speaker, I believe Canada is still a young country, and I think it is good for young lawyers to start off by opening their own offices, putting in telephones and hiring their own secretaries. This shows they have ambition and initiative. Those are the qualities that built this country. The lawyer, the accountant and the doctor are men who serve society.
I am not talking about the fellow who does corporate work. Once a law firm gets the account for, say, the Bank of Montreal, that account stays with the firm year after year. The firm may hire a young lawyer on salary, and after 20 years he may join the partnership. Such firms can afford this legislation, but the little firms cannot. Again, it is all a question of big government and big business. Under this legislation, including sections of it other than the ones under discussion now, the little Canadian's initiative will be killed and stifled.


Edmund Boyd Osler: The little fellows are going to get a lot or reductions.


Eldon Mattison Woolliams: Mr. Speaker, there is that member from Winnipeg who speaks very little but, when he does, always speaks sitting down. I have always said he should say, "Thank goodness my grandfather was born before me."


Edmund Boyd Osler: Would the hon. member permit a question?


Eldon Mattison Woolliams: Certainly, and I hope the hon. member makes the front page of the Winnipeg Free Press with his question.


Edmund Boyd Osler: In view of the hon. member's allegation that nobody does anything for the middle man, I wish to ask him if he has read those portions of the tax bill which indicate that millions of people are going to benefit from tax reductions?


Eldon Mattison Woolliams: That is really a very intelligent interjection. I appreciate the exemptions that the bill provides. We
November 26, 1971

on this side of the House have asked for them. Twice over the last three years I voted to have exemptions increased. Certainly, there are some good things in the bill. The government could not draft a bill this big, with 190 amendments, without hitting something good. But the over-all effect of the bill must be considered. Lawyers and accountants say that this document is so complex that nobody knows what the tax law will be. Certainly, some people will have higher exemptions, but by the time they get those exemptions, with the cost of living constantly rising as a result of the government's policies, the exemptions will look pretty small.
Further, Mr. Speaker, in reply to the hon. member's question I would point out that the government has extended the unemployment insurance scheme to include a large number of people who will never benefit from it. The result is a new tax against those Canadians, and that will eat up the exemptions they get through this bill. When Liberals talk about the candy in the bill, I reply that there isn't much candy in it. When the bill is enacted Canadians will find out this too late.
The government is trying to ram the bill through by offering to cut personal taxes by 3 per cent and corporate tax by 7 per cent. It says that Canadians will not get these tax cuts unless we put the bill through.


Stanley Howard Knowles: That isn't in this bill.


Eldon Mattison Woolliams: I know, but that is the attitude of the government; it says that whatever happens, the provisions of the bill can be made retroactive. The other night I pointed out that the capital gains tax could be as high as 61 per cent. If such a tax had been in effect when the grandfather and the father of the hon. member for Winnipeg South Centre were living, it would have had a terrible effect on them. Knowing the record of his father and his grandfather in western Canada, I say that they would have opposed such a tax.


Marcel Joseph Aimé Lambert: Mr. Chairman, in my intervention this morning I indicated reasons for supporting the stand of the Leader of the Opposition in proposing deferral of the proclamation of a major portion of the bill. I want to add one further observation in regard to that. Of course, such deferral would involve a change of the effective date of January 1, 1972, for a major portion of the bill. As a result of the deferral, the date for its coming into effect could be postponed until April 30 or June 1 next. However, then we could have the nonsense of the estate tax continuing as law and, on April 30 this act coming into force with the provision that effective January 1 the estate tax would be replaced by the capital gains tax. In addition, there would be the nonsense of the uncertainty with regard to capital gains tax during the interval. However, there is no problem with accepting the principle of the effective date of the law being the date fixed for the proclamation. It could be July 1, foi example or later.
As an added reason for a deferral I am going to repeat the argument I have made on previous occasions, that it is absolutely essential that the federal government and the provinces somehow sort out the jungle being created as a
Income Tax Act
result of the withdrawal of the federal estate tax and the continuation of the provincial succession duties, with some provinces wanting to go in on an estate or succession duty that now do not have them, but without there being any mutual credits as between succession duties and the capital gains tax. I have not heard one member from the government benches say that they have even considered the matter. Elimination of the federal estate tax with the continuation of the provincial succession duties and the imposition of a capital gains tax will mean an increase in taxation for the Canadian public. There is no provision for mutual credits as there are now between succession duty and estate tax when one is federal and the other is provincial. There are mutual credits but not under this act, and none have been negotiated.
Not everybody will be taxed for estate or succession duties but there will be a large number across the land. In case some people believe that only the rich will be taxed, let us look at values of farm lands across the country. In Ontario, corn land may be worth $600 or $800 an acre. In the west, in what used to be my constituency, farm land can be worth $350 an acre. In the west 1,000 acres is not an extraordinarily large farm, although it may be in Ontario. At $600 or $800 an acre it does not take long to get a value of about $300,000 for only the farm land and, in addition, there is the value of the buildings and the livestock. These are the people who will be hit by this multiplicity of succession duties and capital gains taxes. Those who are envious are strong advocates of estate taxes and want to destroy what hard work has built. In other words, there are people who want to say to Canadians and others in every generation that we must go back to square one- everybody out of the starting gates at the same time in every generation.


Mr. Brewin:: Very sound!


Marcel Joseph Aimé Lambert: The hon. gentleman says "Very sound". That is a great way to run the country, a great way to build the country! That is the most patent economic nonsense that could ever be put forward. It arises from the 19th century philosophy that was meant to try to break up estates. It is not justice, it is injustice.


Stanley Howard Knowles: It is an attempt to build the country, not private fortunes.


Marcel Joseph Aimé Lambert: By so-called redistribution to those who have not earned it and do not deserve it.
I want now to turn to particular points raised by the hon. member for Regina East, and to continue some arguments advanced by my colleague from Calgary North with regard to conventions and expenses. These now are a long way from the white paper proposals. However, there is a rather odd philosophy abroad that because a person derives benefit from some expenses that are allowed for the purpose of earning his living, say business expenses whether it is sole ownership or an incorporated company, that there is something inherently wrong in this. It is tabbed "lush expense account living". No one talks about the multitudes of public servants who go to local, national and international conferences on an expense account paid by the government, although they derive benefit from that. No one talks about union officials who go to local national and international conferences or conventions
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Income Tax Act
and do rather well by them. They derive the personal benefit but the union is not taxed. The union is not taxable, so what difference is there? Mining companies are entitled to send delegates to mining conferences and pay their expenses, but these are deductible because they contribute to earning the income of the company. Some mine workers are sent by their union, on an expense account. The union does not worry, however, because it does not pay income tax. Yet we are told it is wrong for the company to be allowed the expense of sending its representatives. If one is going to be logical then let us insist that some change be made with regard to union delegate's expenses in this example.
The same applies to professional associations. If the Canadian Bar Association or the Canadian Medical Association sends delegates to international conferences, they pay the expenses. Admittedly the individual renders certain services but a trip to Europe is not hard to take nor, by the same token, is a trip to the ILO at Geneva, but nobody pays income tax on that.


Stanley Howard Knowles: That is paid for by the government.


Marcel Joseph Aimé Lambert: It is paid for by the
association or by the government, but it is the individual who is the beneficiary and is tabbed with "expense account living". It was said that it is between individuals that equity must exist. I know some government officials in Ottawa who spend up to 150 or 170 working days of the year attending conferences and meetings outside the city on behalf of their department. They continue to draw salary and all allowances, but hotel bills are paid. They enjoy the higher scale of living at these conventions and meetings and this is alleged to be that "lush expense account living". Let us be fair and look at all the facts related to expense account living as it affects everyone.
It is proposed to disallow memberships in certain types of clubs. It is an undeniable fact of life that a great deal of business is transacted over the luncheon table, or over a drink,-


An hon. Member:: Or at the golf course.


Marcel Joseph Aimé Lambert: Or at the golf course, of course. You know, businessmen will continue taking public servants and prospective clients they want to influence to a hotel or a club for a meal. They will get a receipt for their lunch or dinner. Oh, yes, that will continue. But they will not be able to go to the club at which you must pay a membership fee in order to attend. It seems to me that these provisions were written by some people who were jealous because they could not belong to certain clubs without paying the necessary fees, and deduct such fees while others could. I do not know. This is all open to question. It seems to me that there is discrimination, absolute discrimination, in regard to this and that an attempt is being made to pick out certain groups and certain institutions in order to discriminate against them. I see the hon. member for Chambly shaking his head. What is the difference between membership in a club and-


An hon. Member:: It is the hon. member for Labelle.

ro[ Translation]


An hon. Member:: Nor for Chambly but for Labelle.


Marcel Joseph Aimé Lambert: I beg your pardon, I meant Labelle. The hon. member for Labelle (Mr. Dupras) did not seem to believe me at that time.

I will ask this. What is the difference between privileges flowing from a membership in a club and the privilege of being able to buy hockey tickets for games of Les Canadi-ens. These season ticket holders are a club of a kind, and you are privileged if you can buy those tickets. A business concern can deduct the cost of those tickets as an expense. Therefore, the membership cost connected with belonging to a club in which one can entertain clients should be in the same category. Let us be logical about this. Either you take all such clubs and permit deductions, or you throw them all out.
I agree that there can be abuses. There is no way you can hold a bar mitzvah for your son and invite 500 or 600 prospective clients and write off the expense as a business expense. When I was attached to the Department of National Revenue that actually happened. Someone actually attempted this. Or, you could not write off the cost of, say, a 135-foot launch, or of one of those rather fancy yachts that larger businesses may use, or of some types of hunting or fishing lodge. However, amounts reasonably expended for the promotion of business should be allowed. I think, myself, that the proposed provisions go too far in that regard. There is a lack of logic in their presentation. The position adopted by the government has deviated more than somewhat from the position the government took in its white paper. It is the taxpayer who must be considered, Mr. Chairman. It is not government administration or the convenience of that administration. It is the taxpayer. Some people seem to think that the taxpayer is someone who exists in isolation, that he is a rather fat bird whose feathers may be plucked and, in some cases, whose throat may be slit. The taxpayer does not exist for the benefit of government bureaucracy. The government bureaucracy exists because of the taxpayer.
May I now mention professional expenses? The hon. member for Calgary North indicated that too often people have thought that, "Oh, well, in the past professionals enjoyed an advantage." Strangely enough, if one looks at the history of taxation one will see that in 1917, when the Income Tax Act was introduced, everybody was assessed on a cash basis. People were assessed when income was earned and received. It was earned then on a cash basis. Changes were made with regard to business practices. For instance, accounts receivable might be used at the bank to establish a line of credit. The government, seeking ever more revenues, decided that business must include accounts receivable; in other words the tax would apply on a sales basis not merely cash. In order to determine its income for taxation purposes, a business had to include sales. The change was made in regard to business. Over the years there have been continuing erosions. They have now reached the point that professionals have to prepay part of their taxes.
Incorporated business now has to pay tax more or less on a monthly basis, one month pretty well after the income is earned. Actually, there is no repayment for
November 26, 1971

business now. So, those supporters of the government on the finance committee and others who said that this was merely restoring the balance between business and the professional are wrong. They do not understand the law. The Income Tax Act does not insist on the prepayment of income taxes in any other type of operation. That is right, Mr. Chairman. Actually, at the beginning of the fiscal year you must estimate your income and then pay on a quarterly basis in advance. That tax must be paid in advance. If there is a short fall at the end of the year, you pay interest on that short fall. No other type of occupation in this country has to do that, Mr. Chairman. None. Yet, in some sort of spirit of getting even, or of so-called equity as between taxpayers, the government, in reaching a halfway station as between its original position and the position in the white paper, has said that professionals will have to pay their income tax on an accrual basis.
The lack of logic in the white paper proposals is just as bad as the lack of logic in this proposal. If you want to do justice to professionals and bring about equity, remove the prepayment provisions and the provisions requiring interest to be paid on short falls in tax payments. If you do that you will bring about justice as between the two groups. Now, it is said that the professionals will be assessed on an accrual basis that is based on billings. But nothing has been said about removing the prepayment provision. I do not think the hon. member for Calgary North mentioned that. Not only must you estimate your billings, 50 per cent of which you may not ever touch or collect, but you must prepay tax on the basis of estimated income. We hope that the accruals in billings will be subject to adequate write-off provisions. I think the man who devised this system has not the slightest idea of how professions conduct business and what is involved in the relationship between the doctor, the lawyer or the dentist and the client.
My colleague, the hon. member for Dauphin, told me this morning that in his home town in Manitoba a notice has been posted in a dentist's waiting room which states "Because of tax changes all work from here on in shall be on a cash basis. No billings." That is now being done in Ontario in anticipation of the passage of this bill. They will not go to the expense of issuing accounts and all the paper work that is involved.


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


Lloyd Roseville Crouse: Mr. Chairman, I am not sure if the hon. member wanted to continue.


Marcel Joseph Aimé Lambert: That is all right.


Lloyd Roseville Crouse: I wish to make a few comments on this bill. Ever since its introduction, Bill C-259 has been a nightmare for large and small businessmen and Canadians generally. We are faced with a massive bill which is incomprehensible to laymen as well as to tax specialists. Some idea of the concern among Canadians was evident only this week when some 38 of the leading businessmen, representing the wealthiest and most influential enterprises in this country, came to Ottawa for private talks with the Prime Minister and the leading members of his
Income Tax Act
cabinet. When we see this turn of events, we must ask ourselves just what is going on and why our business leaders are disturbed. The answer is that the legislation prepared by the government is unacceptable to the vast majority of Canadians who are concerned about the turn of events and the direction in which they are being led by the present government.
Today, we are dealing with the business and property income section of what is commonly referred to as the "Benson bungle". This section covers a wide field. The summary provided by the minister lists no less than 13 headings covering taxation on business, property, business goodwill, membership fees in recreational and social clubs, entertainment and convention expenses, rental property and vacant land, taxation of the professions, farmers and fishermen, co-operatives, credit unions, mutual funds and investment corporations, estates and trusts and special rules for valuing trust property, trust interests and partnership interests for capital gains tax purposes. This is quite a plateful, Mr. Chairman, and it is only one section of this massive bill. This is why I claim it is a nightmare for Canadian businessmen and Canadian accountants.
All of these new demands for increasing amounts of funds from Canadian corporations and individuals cannot help but cause us to wonder why the government needs to increase its tax levels. We cannot help but wonder if these new tax levels are necessary to provide Canadians with better services or if this new power is sought in order to change our entire Canadian way of life. After all, the power to tax is the power to control. Unless this power is used wisely, we may well lose many of our basic freedoms under a paternalistic government which keeps saying "Have no fear, big brother will look after you."
I happen to be one of those who questions the present course being followed by this government for it is now evident that excessive socialism has killed business expansion in Canada. This was made evident to us only this week. It is now evident that socialism has destroyed initiative and it has placed a premium on individual incentive. My constituents continually ask me why the government requires more taxes and what it is doing with all the money. In my opinion, the scope of government operations and responsibilities has been expanded beyond the financing of essential and desirable services at the national, provincial and municipal levels. For example, with regard to this business and property income section, we read that farmers and fishermen may continue to calculate income on a cash basis and retain the special averaging provisions. The basic herd and straightline provisions are phased out. The explanation of these provisions reads:
The new legislation continues to permit farmers and fishermen to compute their income on a cash basis and to average their income every five years.
That is a very interesting rule, Mr. Chairman. Many who live on the east coast of Canada are vitally concerned that within the next five years we will not have a fishing industry. The averaging of income over that period will not present any real concern for our fishermen. In a recent article, Mr. W. E. Moffatt, president of the Nova Scotia Fish Packers Association, stated that the industry will collapse within the next four or five years unless the

November 26, 1971
Income Tax Act
Canadian government acts on its own to extend fishing zones in the Atlantic.
This is an example of what little thought has been given by the government when preparing this tax law. They lump everyone together. They assume that everyone is making money, but unfortunately such is not the case. It has also become clear that the government's increasing influence over the economic climate in which business, labour and all active participants in the economy function, is having a serious effect on business expansion. Therefore, it has become of paramount importance that these participants and governments improve and make effective communications and working relationships with each other.
In addition to establishing working Canadian financial policies, the government must consider its international financial and trading relationships. We are faced with a startling fact at present. We must realize that the total expenditures by governments, including transfer payments, now represent more than one third of the country's total outlay on goods and services. They require levels of taxation which place a heavy burden on individuals and corporations and, in fact, upon all the productive resources of the country.
It is suggested that the degree of participation in the economy by the three levels of government, federal, provincial and municipal, may well have reached the saturation point and the complex relations between the various levels of government should not be allowed to obscure the fact that all tax revenue is collected from one and the same source, namely the individual taxpayer. Much of the government outlay is for essential services and much needed capital facilities, but in a rapidly growing and increasingly urbanized economy, there is a continuous demand for additional facilities and services. This poses a real need for evaluating those proposals put forth by any sector of the economy and for establishing some system of priorities.
A substantial share of the government's expenditures now go for social welfare purposes or simply represent transfers of income. I believe it is important that the federal government assign proper priorities to the activities of its various departments. The increase in the population and a more developed economy have resulted in the expansion of government operations. New welfare programs have been undertaken for the alleviation of unacceptably low living standards. While many of these programs are obviously socially desirable it should be recognized that the inflation which faces us today is due in no small measure to the expanded social welfare programs which have been instituted during the past decade. Furthermore, the resulting high tax level is having an adverse effect on our ability to remain competitive in world markets.
I believe there is urgent need for greater discipline and restraint on the part of all three levels of government when authorizing expenditures. Taxpayers can reasonably demand that their elected representatives should exercise the same care when spending tax dollars as they themselves must use when spending their own money. Government expenditures should be restrained so that on

the average, over the business cycle, they do not grow faster than the gross national product. Efforts must be made to reduce the tendency of departments to engage in costly projects because they have unused funds in their budgets. I say this as a result of my years of experience on the Public Accounts Committee. Many times, when examining expenditures, we were told by the Auditor General that certain projects were continued for a further year simply because an amount had been voted for these programs but had not been used. Notwithstanding the fact that circumstances had changed and that it would have been better for the country had those developments been halted, decisions were taken to continue them. I believe this method of spending public funds should be thoroughly reviewed by the cabinet. If need be, bonuses could be offered to departments which did not use all their funds. In any case, something ought to be done to alter the present system.
I also believe that taxpayers should, as far as possible, be made aware of the extent to which they contribute to revenue through multiple taxation. Demand for the continuation of existing programs or for the establishment of new ones might be more restrained if a policy of full disclosure were applied so as to represent clearly to the taxpayer the impact such measures would have upon him and upon other productive elements in our society which already carry such a heavy tax burden. The complex relations between the various levels of government should not be allowed to obscure the fact that whether raised by one government or another, tax revenues all come from the same source, ultimately. The tax burden on the Canadian economy has become so heavy that it cannot fail to have serious and adverse effects. I believe it is vital to the well-being of this nation that there should be constant liaison through appropriate structures to bring the various taxing authorities together to the end that optimum results might be achieved at minimum expense to the public.
On the subject of budgetary procedure, I believe present arrangements are in need of revision, so as to permit the Minister of Finance, after making the necessary provision for security, to supplement the undoubted resources of the public service by seeking advice from outside quarters. It is now evident that despite the claim by those who now sit on the front benches opposite that they would practice what they call participatory democracy, no effort is being made to put this principle into practice. It would seem to me and to many Canadians that this promise has become a hollow phrase. It is evident from the number of briefs submitted to members of all political stripes that the Canadian business community is vitally concerned and very much confused. Quite frankly, it is showing a lack of confidence in itself, in Canada, and, certainly, in the government. This is a consequence of the many changes which have been made or proposed to the bill we are discussing today. When we see before us the proposals for changes in the various sections, amendments to those proposals and still further amendments to those amendments we cannot but recognize that the government is operating in a fog of uncertainty.
It is for this reason that I suggest the Minister of Finance should consider bringing in outside experts when putting his budget together. I realize this was tried in the
November 26, 1971

days of Walter Gordon, and that it was received then with some dissent in the House.


An hon. Member:: Some dissent, indeed.


Lloyd Roseville Crouse: It met with dissent, not because of the principle involved, but because of the manner in which the minister proceeded to carry out that policy. He carried it out in secrecy. There was a behind-closed-doors cloak and dagger quality about it which gave rise to the dissent to which I have referred. Had the minister clearly made known to the House his intention to hire a group of experts from outside, I believe hon. members would have approved the action. Such a course would give whoever adopted it an insight into thinking at the grass roots level, which is what the government claimed to have in mind when it sought a mandate in 1968, though, of course, nothing was ever done about it. Had the Minister of Finance followed such a course on this occasion, it is not likely he would have brought in a tax bill which is not acceptable to individuals, not acceptable to the business community and whose results can only be harmful to the future progressive development of this country.
I will not be facetious and say I have read the bill; I doubt whether there are many members in this chamber who have read this voluminous list of proposals put forward by the Minister of Finance. As I scan the bill I am concerned that in the formulation of tax policies primary emphasis has been placed on raising income, while little or no emphasis has been placed on the almost numbing effects of taxation of Canadian enterprise, business and initiative.
I submit that the need is for tax policies that will not discourage development or economic growth. I cannot help but wonder, as a concerned Canadian, just how many dollars worth of business expansion has been lost to this country since the Minister of Finance brought in his white paper on taxation. The confusion and frustration began at that point and without any clearcut objective or knowledge of where we were going, the business community, the investor and entrepreneur, sat still.
Where I come from in Atlantic Canada we know that a ship that embarks on a voyage must first be prepared. We know that the captain must take his chart and his compass and sit down and study the course on which he will sail or steam. Obviously, as a rule of thumb this is the practical way to do anything. I have not yet seen the Minister of Finance do this, and I commend it to him as a good course to follow. People like to know where they are going. Then, when the captain plans the voyage he does not tell the crew to show up on the Monday, Tuesday or perhaps Wednesday; he tells them which day he will sail and there is a definite time within which they can prepare for the voyage. This is all I am asking the Minister of Finance to do. He should stop waffling around, making amendments to amendments to amendments to a 707-page bill, because this can only produce confusion compounded for the Canadian people.


Gérald Laniel: Order. I regret to interrupt the hon. member, but his time has expired.
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Stanley Howard Knowles: Mr. Chairman, I intervene this afternoon for a few minutes because I should like to comment on some of the remarks made by my close neighbour, the hon. member for Edmonton West. In his speeches today he covered a good many subjects but he seemed to be in fullest flight when he was talking of expense account living.


Marcel Joseph Aimé Lambert: The logicality of it.


Stanley Howard Knowles: I agree with him that equity is called for. If we are going to be critical of expense account living, we must apply that criticism across the board. Persons should not get a hidden addition to their standard of living in that way, whether they be employed by private industry, the public service, trade unions, professional associations or other non-profit organizations. So perhaps I can start by saying that we agree that concern in this area should be expressed across the board.
However, it seems to me that what we have before us in this tax bill is the question of expense account living in so far as the taxpayers are called upon to pay 50 per cent of it. The hon. member talked about the expenses of trade union officials, public servants of various governments and representatives of various professional associations. When those people go to conventions or incur expenses that they charge back to their employer, organization or association, it is the association that checks those expenses and is responsible for seeing that its treasury is not being exploited.
Let me tell the hon. member that trade union officials do not get away with unnecessary expense account living; their expenses are checked and examined by union delegates. I can also tell him, having had the experience on three occasions of being a delegate to the International Labour Organization at Geneva, the expenses being paid by the federal government of Canada, that when one goes on a trip like that and submits an expense account to the government, that account is checked very carefully.
I remember once having an account corrected because, owing to weather conditions, we were not able to leave Geneva as planned early in the morning but had to stay until mid-morning or later, with the result that I had an extra breakfast in Geneva that had not been originally planned. So I charged for this breakfast on my account. My colleagues around the House know that I am not a lavish eater.


Some hon. Members:: Oh, oh!


Stanley Howard Knowles: Yet my expense account was corrected and the amount of that one breakfast deducted because it was not provided for under the arrangements that had been made. I did not object to paying for that one breakfast; the few Swiss francs it cost did not amount to much. However, the point I am making is that when employees of the public service are on expense accounts, those accounts are checked very carefully by the treasury, and later by the Auditor General. And that is as it should be. I suggest the same practice is adopted by other associations. I can only assume it is adopted by the Canadian Bar Association, the Canadian Medical Association, and so on. Nevertheless, the people

November 26, 1971
Income Tax Act
who pay the shot should make sure they are not being exploited.
In the case of businesses that are subject to income taxation, the taxpayers are called upon to pay 50 per cent of the expense accounts. This is why it is the responsibility of the tax collector to see to it that the people of Canada are not being overcharged.


Marcel Joseph Aimé Lambert: And you know they are not.


Stanley Howard Knowles: My hon. friend says that they are not.


Marcel Joseph Aimé Lambert: If the business is in a loss position, the taxpayer pays nothing.


Stanley Howard Knowles: I am thinking of the general position of corporations that pay 50 per cent. My hon. friend says they do not pay if a company is in a loss position. If the expense accounts help to create that loss, I submit that in one way or the other it is a case of the taxpayers having to pay part of the expense. This is why I think the government is justified in putting in this bill provisions to curb expense account living. My only quarrel with this-and this was stated quite clearly by our two members on the committee when they issued their minority report-is that the government has soft-pedalled and backed away from the very sharp position that was taken on expense account living, firstly in the Carter report and later in the government's own white paper.
May I come back to the point of my hon. friend who sits to my right and say that we are agreed that the philosophy should be applied across the board that people should not get away with lavish expense account living, which can amount to a hidden increase in the standard of living. I also suggest that in all cases those who pay the shot are the ones who should see to it that there is no abuse. The private associations that are not taxable have a responsibility to see that there is no abuse in their case, but the taxpayers have a responsibility to see to it that they are not exploited in the case of businesses that are taxable. That is why I think this provision should be in the bill- and if we had our way its terms would be even stronger.


William Gordon Ritchie: Mr. Chairman, I should like to say just a few words about what has been said by the hon. member for Winnipeg North Centre. I have had some experience in respect of what he says, that taxpayers are paying 50 per cent. I attended three conventions of 75 I might have attended and found that the income tax regulations did not allow me to deduct any expense unless the bill was receipted-and it is usually impossible to get receipts for everything. There is not much leeway in the law in respect of expense accounts. If you want to live a lavish, expense account life you have to work at it. You would have to drop some of your other activities in order to accomplish this sort of living.
Let me say a little about the treatment of goodwill and "nothings". I think this is important in relation to this tax bill. The Minister of Finance said certain business expenditures have come to be known as "nothings" because taxpayers could not deduct them in the year incurred as

they were capital in nature, or over a number of years by way of depreciation as no assets were acquired on which this depreciation could be claimed.
Goodwill has been defined as an asset of this kind. If a taxpayer purchased a business, he could not deduct or depreciate the portion of his purchase price that related to the goodwill of the business. Other examples of "nothings" have been costs of incorporation and costs oi acquiring rights of an indefinite duration. "Nothings" under the old law are not deductible in the year incurred because they are capital in nature, and they are not depreciable because they do not give rise to an asset which is listed in one of the capital cost allowance classes.
Under Bill C-259 a new 10 per cent capital cost allowance class is created for "nothings". One-half of the cost of these assets will be depreciable, in line with the one-half rule for taxing capital gains and deducting capital losses. This new class would apply only to costs incurred after the new system commences.
The sale of goodwill under the old law means the proceeds on the sale of goodwill are generally tax exempt. Under the new bill, proceeds on the sale of goodwill owned at the commencement of the new system will be included in income to the extent of 20 per cent if sold in the first year, 22.5 per cent if sold in the second year, 25 per cent if sold in the third year, and so on until the thirteenth and subsequent years when 50 per cent of the proceeds will be included in income. One-half of the proceeds of the sale of goodwill connected with a business acquired or commenced after the start of the new system is credited to the "nothings" class.
What is the analysis of this? It sounds fairly simple but it is not. First of all, most of the key definitions with regard to the treatment of goodwill and "nothings" are found in section 14 of the bill. However, one key definition is found in section 54 and other very important provisions are found in section 24. In other words, the Minister of Finance's new treatment of goodwill and "nothings" is not only complicated in terms of new terminology, which I will refer to later, but the provisions of the bill itself are spread out, creating even more confusion. It would be preferable and certainly beneficial to everyone concerned if all the relevant provisions were more closely set out in the bill.
Speaking of the new terminology, in order for the Minister of Finance to create a new treatment of goodwill and "nothings" he had to create new terminology. For purposes of the new system, goodwill and "nothings" or similar intangible assets are referred to as eligible capital expenditures, or ECE. Here I refer to section 14(5)(b). There are certain requirements that eligible capital expenditures must fulfil. They are as follows. Eligible capital expenditure applies only to a business and not to investment property, which I think is difficult to define; eligible capital expenditure is the part of any capital outlay made after 1971 to gain or produce business income that is not otherwise deductible or depreciable; the cost or value of goodwill or other intangibles owned by the taxpayer at the end of 1971 are not eligible capital expenditures, and certainly the intangible assets with a fixed life are depreciable as class 14 property and are not eligible capital expenditures. Eligible capital expenditure does not include non-deductible current expenses, pay-
November 26, 197J.

ments to persons as shareholders, outlays or options to acquire depreciable property, the cost of interest in a trust or partnership, payments or cancellation or repayment of debt, or any outlay for the purchase of shares of a company.
Capital property is defined to exclude eligible capital expenditures as in section 54(b). This is just the definition of eligible capital expenditures. Depreciation of eligible capital expenditures is another matter. Here we get into something called CEC, or cumulative eligible capital. Cumulative eligible capital is defined to be 50 per cent of eligible capital expenditure incurred, minus cumulative eligible capital previously claimed as a deduction and cumulative eligible capital recovered as proceeds of disposition. This is to be found in section 14(5)(a). Taxpayers may deduct 10 per cent of their cumulative eligible capital, or CEC, on hand at the end of a taxation year.
The operation of the culmulative eligible capital pool is similar to that of a particular class of assets under the capital cost allowance system. CEC is on a pool basis by business so that the recapture and terminal loss provisions operate on a business basis. However, the 10 per cent deduction of CEC is provided by statute as opposed to regulation. When a taxpayer ceases to carry on a business there are terminal loss provisions for his CEC. However, if a spouse or controlled corporation continues the business, the terminal loss is denied and the CEC is assumed by the spouse or corporation. If the taxpayer sells the business after 1971 and part of the proceeds would be ECE to the purchaser, one-half of such part of the proceeds minus the CEC applicable to the business is included in the vendor's income.
Transitional rules reduce the 50 per cent taxation of proceeds of ECE to 20 per cent in 1972. This 20 per cent rate is increased by 2.5 percentage points per year until 1984, when the 50 per cent level is reached. Transitional rules also prevent the ECE of a non-arm's length purchaser to exceed the taxable proceeds of the vendor.
What about the analysis? In completing his income tax return the taxpayer must attempt to discover in this maze of new rulings whether he is in fact subject to the rules regarding eligible capital expenditures and attempt to discover how much cumulative eligible capital he has on hand at the end of a taxation year, whereupon he may deduct 10 per cent; and if he has sold the business he must attempt to discover whether part of the proceeds would be eligible capital expenditures to the purchaser and work out his taxation rates based on the formula contained in section 14(1).
In his summary of 1971 tax reform legislation the Minister of Finance says the government, in the first year of the new system based on 1968 incomes, will experience a $25 million loss of revenue due to the new deduction for "nothings" and for interest on money borrowed to buy shares. It is difficult to imagine how much revenue business will lose in its attempt to plow through the Minister of Finance's new rulings to find the deductions it has been promised under the new system. The Minister of Finance has made the new rulings in this area so complicated that is hardly worth the effort. Although this is another good example of the finance minister's determination to cause total confusion, one wonders why he has even made the effort since it results in a revenue loss for the government.
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In its August 20 brief on tax reform, the Canadian Bar Association recommended that the minister at least tighten up the bill with regard to the placement of provisions concerning goodwill and "nothings". The brief goes on to say:
-also the new terminology is bound to confuse when one considers that "eligible capital property" is excluded from the definition of both "capital property" and "depreciable capital property". We think a change of terminology is essential.
One would think that the Minister of Finance with all his intricate new phrases and concepts would at least be thorough. Unfortunately, here too he has failed. And the incredible aspect of his failure is that in dealing with the treatment of goodwill and "nothings" in the area of business and property income the minister has neglected to adequately define "business." Section 14(1), which deals with taxation of the proceeds of eligible capital expenditures, if a business is sold after 1971, is one of the main provisions in the area of treatment of goodwill and "nothings". Section 14(1), when applied, results in the creation of separate pools of cumulative eligible capital for each business carried on by the taxpayer. Yet, says the Canadian Bar Association:
-no assistance is given in the determination of what constitutes a business, the definition in section 248 being completely inappropriate for this purpose. Where a business is carried on in several divisions it would seem preferable to pool all property into one group for the purpose of section 14 and section 20(l)(b).
The Minister of Finance has also failed to include provisions for the valuation of "nothings" and goodwill on valuation day and to consider such property as non-depreciable capital property. The Canadian Bar Association calls this inequitable and goes on to say:
-we are cognizant of the difficulty involved in obtaining acceptable valuation. If it is unacceptable to treat such property as ordinary capital property then we strongly recommend that it should simply be classified as a separate class of depreciable property eligible for a 5 per cent capital cost allowance on a diminishing balance basis, with normal tax on half of any gain over capital cost allowances claimed. Such property could be deemed to have a zero cost on valuation day. It would be necessary to provide transitional rates for phasing in the capital gains tax and we would suggest that the appropriate figure is one-half of the percentages now provided for in transitional rules section 21.
In his treatment of goodwill and "nothings" the Minister of Finance has failed to set out relevant provisions more closely in the bill to avoid confusion. He should change the terminology in order to clarify the new provisions. He should define adequately the term "business" as it applies to section 14(1) and section 20(1 )(b) and he should treat goodwill and "nothings" as non-depreciable property and provide for the valuation of "nothings" and goodwill on valuation day.


Gérald Laniel: Shall section 14 carry?


Some hon. Members:: Agreed.


Marcel Joseph Aimé Lambert: No, Mr. Chairman. There is no question of section 14 carrying.


Gérald Laniel: Order. I asked if section 14 carried, and this was agreed.

November 26, 1971
Income Tax Act


Marcel Joseph Aimé Lambert: Mr. Chairman, I beg to differ. I was occupied in negotiations concerning the passage of a number of sections. There is a good deal more to be said concerning section 14. I would prefer if someone else would take the floor, because I wish to discuss certain matters with the parliamentary secretary.


An hon. Member:: Oh, oh!


Marcel Joseph Aimé Lambert: It is with regard to the passage of certain sections. If hon. members want to be awkward, I can be more awkward. I was negotiationg with my colleagues various points and sections on which we could agree and which could be passed before the expiry of the debate this afternoon. I want to communicate with the parliamentary secretary. Perhaps one of my colleagues might take the floor at this time; if not, I shall carry on and make the necessary observations with regard to this section.
I could raise the matter of section 19 and talk about the recommendations of the CRTC in respect of Reader's Digest and Time magazine, if it is the desire of hon. members.


Mr. Guay (St. Boniface):: This is not in there.


Marcel Joseph Aimé Lambert: If the hon. member for St. Boniface will consult the record he will see that section 19 has to do with the Canadianization of Reader's Digest and Time magazine and the restriction in respect of advertising. Does the hon. member wish more detail?


Joseph-Phillippe Guay: No, but I can tell you-


Gérald Laniel: Order.


Marcel Joseph Aimé Lambert: This section is within the group which can be discussed.


Joseph-Phillippe Guay: Mr. Chairman, I would like to direct a question to the hon. member for Edmonton West.


Marcel Joseph Aimé Lambert: Very well.


Joseph-Phillippe Guay: As for the section dealing with the one relating to the CRTC, I understand that it has nothing to do with this commission's recommendation regarding television. I agree with the hon. member in saying that this section applies to publications but not to television. I respectfully ask the hon. member for Edmonton West what comments he can possibly make in that regard?


Marcel Joseph Aimé Lambert: I can reply to the hon. member for St. Boniface that we are going to study section 19. It was recommended to extend this section so that it would apply not only to publications but also to radio and television.


Joseph-Phillippe Guay: I would like to put a supplementary to the hon. member for Edmonton West, Mr. Chairman.

In that case I would say that at the moment the bill does not take into consideration the recommendations of the
[The Assistant Deputy Chairman.]
CRTC in respect of television. You are saying it would require an amendment?


Marcel Joseph Aimé Lambert: Yes, it would require an amendment. First, however, I want to examine section 19 to see whether it should continue. A number of people in this country feel section 19 should not continue. That is a point I could raise. If someone wants to do that, I shall carry on my negotiations. Perhaps the hon. member wishes me to continue. I have here a number of examples to show that section 14 is also a bad section. This could take me until after four o'clock; therefore, perhaps I should yield to my colleague from Parry Sound-Muskoka, who wishes to speak on section 19, and I can continue my negotiations.


Gérald Laniel: Shall section 14 carry?


Marcel Joseph Aimé Lambert: No.


Gordon Harvey Aiken: Mr. Chairman, ever since the commencement of the debate on the question of professional income, speaker after speaker on this side of the House has endeavoured to obtain an answer from the government concerning the reason the government has chosen at this time to change the rules of the game for professional people.
The Parliamentary Secretary to the Minister of Finance is doing his best to pilot the bill through the House, and the parliamentary secretary who is taking his place today is doing his best to answer questions, with the assistance of the officials sitting before him. But he has not yet answered the question in which I am interested. Why has there been a change with regard to professional income? Until we get an answer to that question, section 14 will be stalled.
No change was made with regard to farmers and fishermen. I have no complaint about that. A change was made only for one group. I hope the parliamentary secretary will explain the reason behind the government's changing the method of collecting income tax from professional people. Many reasons have been advanced against such a change. I am one of those affected and I know the problem. I suspect the government's reason is extremely simple but unfair. I suspect the reason is that the government knows it will be able to collect a lot more tax from professional people in 1972. Professional people will start, in 1972, on an accumulation basis and they will have to pay tax as they bill. Assuming a normal business year, they will pay a full year's tax in 1972 and in addition they will pay tax on the outstanding accounts of 1971 which have not been collected and which, under the old system, were not written off.
Under the old system the operation was on a cash receipt basis and it was not necessary to go through an imaginary writing-off of imaginary receipts. If a professional person had bills that were not paid, he did not pay tax on them. I am not certain whether the adjustment period has been fixed at five years, but during the adjustment period every professional person in Canada will be paying an additional 20 per cent income tax to the federal government.
November 26, 1971

This was the same type of reasoning given a few years ago for setting forward the payment of corporation taxes. People asked how it would benefit the government to have corporation taxes paid two or three months earlier. The fact is that the taxpayer never catches up on those two or three months' payments until he dies or goes out of business. This is what is now proposed with respect to professional income. The professional will be paying 20 per cent more income tax for five years, if it is a five-year write-off period. We should be told if that is the reason.
Under the old system a dentist, doctor, lawyer, accountant or professional person of any kind kept a reasonably simple set of books. He totalled up what he received in fees, wrote off what it cost him to operate his business and paid tax on the remainder. Now these people will need to hire bookkeepers to keep track of all their billings and their bad debts. We should be told the reason for the proposed change.


Mr. Clermont:: Mr. Chairman, the hon. member for Parry Sound-Muskoka (Mr. Aiken), who just resumed his seat, mentioned in the course of his first remarks today on the sections under debate the changes brought about by Bill C-259 regarding professional income and he was wondering whether the purpose of those changes was not simply to increase government revenue.
I think the hon. member also mentioned in his speech this afternoon that small or big businessmen could also opt for the accountancy system of their choice. I think that two groups are entitled to this option under the current law: professionals and farmers.
The hon. member also had some misgivings in respect of accounts receivable. Let me give you an example. Supposing the accounts receivable of a professional amounted, as at December 31, 1971, to $5,000 and that these same accounts increase to $6,000 by December 31, 1972, only the increase of $1,000 would be considered for tax purposes and not the accumulated accounts receivable for the last 10 or 15 years.
Even the method suggested in Bill C-259, regarding professional income, would allow certain advantages, some of which I will detail, with your permission, at a later stage.
The hon. member for Parry Sound-Muskoka is not the only one who spoke on the income of professionals. The hon. member for Calgary North (Mr. Woolliams), the hon. member for Dauphin (Mr. Ritchie) and the hon. member for Edmonton West (Mr. Lambert) have also commented on the subject. As to the hon. member for Regina East (Mr. Burton), he has taken a completely different stand.
Several members have expressed concern about the government's proposal for a professional taxpayer to report income on the accrual basis. I should like to make a few comments to place the proposal in proper perspective. In the first place, this proposal affects only professional business; all other types of business except farming and fishing already report income on the usual basis.


Marcel Joseph Aimé Lambert: It is the old excuse.
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Gaston Clermont: Furthermore, their businesses have greater capital needs for inventory and other assets than does a professional business. Accordingly, I see no reason why a professional business will have difficulty in complying with this change in the method of reporting income. It should be pointed out that the professional will still have more flexibility than the wage earner in the time of reporting income. By choosing a fiscal year end early in the calendar year, the payment of tax may be delayed for one year.


Marcel Joseph Aimé Lambert: That is nonsense.


Gaston Clermont: Furthermore, the professional may have several months of work-in-process which does not have to be recorded. The wage earner has no choice but to pay his tax as he receives his income.

Mr. Chairman, the hon. member for Edmonton West has repeatedly referred to the work the Committee on Finance, Trade and Economic Affairs did last year on the white paper. He is aware that various professional associations have made representations. The white paper proposal was of far more general than the proposal contained in Bill C-259. The white paper actually referred to the preparation of income returns based on an accounting system covering accounts receivable and work in progress.


Marcel Joseph Aimé Lambert: That was sheer
nonsense.


Gaston Clermont: I believe that people are not frank when suggesting that the government has not carefully listened to some representations. As concerns entertainment costs and convention expenses, according to the white paper, bill C-259 allows deductions for some expenses.
Concerning extra revenues that the government could get in 1972 following the new methods proposed for completion of income tax returns, I may say that whether a professional makes his computation on a cash basis or on an accrual basis, I doubt very much that the government will get a much larger revenue.


Gordon Harvey Aiken: I have one question that was not answered, Mr. Chairman. I should like to take the example of a professional person, let us say a medical doctor, who when the new act comes into force has outstanding, unpaid accounts of $15,000. He has not paid tax on those because he has been on a cash received basis. Under the new system he cannot be charged for this $15,000 because it was not earned in 1972. In what way is he taxed on that, or does he get away without paying tax on his outstanding, unpaid accounts?


Gaston Clermont: Mr. Chairman, according to the illustration furnished by the hon. member, if a medical doctor's accounts receivable amount to $15,000 in 1971 and to $12,000 in 1975, he will pay taxes on the difference of $3,000 between the two incomes.


Marcel Joseph Aimé Lambert: Mr. Chairman, following consultations with my colleagues and representatives of

November 26, 1971
Income Tax Act
the other parties, I would ask that Your Honour call the sections which I shall enumerate. There has been general agreement that they be passed. First of all I would move the suspension of debate on section 14 so that we can deal with this matter.


Russell Clayton Honey: Is it agreed that debate on section 14 be adjourned for the purpose of proceeding with other sections?


Gaston Clermont: Mr. Chairman, the hon. member for Sudbury (Mr. Jerome), the Parliamentary Secretary to the President of the Privy Council, announced that the same sections would be discussed on Monday. On November 22, 1971, as recorded at page 9777 of Hansard, the hon. member for Sudbury said the following:
-business and property income, which would be commenced on Friday and concluded on Monday-
So, if such is the case, I am not against section 14 being considered later.


Marcel Joseph Aimé Lambert: Mr. Chairman, I think a false interpretation is given of the agreements between the leaders of the different parties since Monday we are going to discuss those sections grouped under the heading "Corporations" because the debate scheduled for last Wednesday has been postponed to Monday.
We are now dealing with business and property income. Since section 14 is the first one I asked that the debate on that section be postponed only because I wanted the House to carry certain sections.


Gaston Clermont: I have no objection, Mr. Chairman. [English]


Marcel Joseph Aimé Lambert: Mr. Chairman, if you would call sections 26, 36, 37, 138, 139, 140, 208, 209, 210, and 211 I think there would be disposition to agree to them.


Gaston Clermont: Mr. Chairman, I think I should suggest to the hon. member for Edmonton West that before sections 138 and 208 are carried we should pass the amendments moved by the Minister of Finance (Mr. Benson) and the Minister of National Revenue (Mr. Gray).


Marcel Joseph Aimé Lambert: Mr. Chairman, the hon. member is right. We shall pass them.


Russell Clayton Honey: The Chair agrees with the parliamentary secretary that with regard to the two sections he has mentioned amendments have been proposed by the Minister of National Revenue. Is the committee ready for the question on section 26?


Some hon. Members:: Question.
Clause 1, section 26, agreed to.
Clause 1, sections 36 and 37 agreed to.


Russell Clayton Honey: The Minister of National Revenue has moved an amendment to section 138, as recorded at page

8954 of Hansard for October 22. Shall the amendment carry?
Amendment (Mr. Gray) agreed to.
Clause 1, section 138, as amended, agreed to.
Clause 1, sections 139 and 140, agreed to.


Russell Clayton Honey: The Minister of National Revenue has moved an amendment to section 208, as recorded at page 8958 of Hansard for October 22. Shall the amendment carry?
Amendment (Mr. Gray) agreed to.
Clause 1, section 208, as amended, agreed to.
Clause 1, sections 209 and 211 inclusive agreed to.


Russell Clayton Honey: Does the committee wish to revert to section 14?


Some hon. Members:: Agreed.
On clause 1-section 14: Sale of goodwill and other "nothings".


Marcel Joseph Aimé Lambert: Mr. Chairman, section 14 deals with the sale of goodwill and other "nothings," or intangibles. The argument about this is old. Although officials of the department are fully cognizant of business arguments in this regard, they have failed to heed the representations of accountants and tax lawyers and have not listened to reasonable arguments. There are difficulties in certain areas. I am told that the whole concept of goodwill, as proposed by the government in this section, is unreasonable.
The taxation of the proceeds of the sale of goodwill without recognition of the cost can be a very serious problem. Let me give an example. We will assume that two companies which purchased goodwill for $1 million in 1971 resold it in 1974, and that in the first case the goodwill was resold for $2 million and in the second for $500,000. In one case, therefore, there has been an accretion of 100 per cent, and in the second case there has been a 50 per cent loss. In the case of the company that bought goodwill for $1 million and sold it for $2 million, the real gain is $1 million and the portion that is to be included in income, according to section 259, is $500,000 or 25 per cent. The portion that is taxable-deductible-or that may be treated as a capital asset is $500,000.
In the second case, where the proceeds of the sale represent half the original cost, or $500,000, there is still to be included in income 25 per cent or a total of $125,000. The real loss has been $500,000, yet the deductible portion, or that portion that is treated as a capital asset, is $250,000. Thus, the tax is appropriate to case A, but only in 1974, and is totally inappropriate in case B.
I am told that this results from the transitional rules that do not recognize the opening cost or value of goodwill. The provision should be modified to permit the valuation and amortization of existing goodwill at valuation day value and the deduction of this goodwill against subsequent sale proceeds and a capital gain or loss. The treatment of goodwill in this way would overcome many problems and would be much fairer.
It seems to me that goodwill is acquired in the way any other asset is acquired. On the acquisition of a business, an amount is paid for goodwill, which is recorded. It is
November 26,JL971

possible that it has been overvalued. If that happens, difficulties will follow. However, if the business has been well managed, if its reputation and the reputation of its officers has increased, there will be a profit when the business is sold and there will be a capital gain, if you accept that gain as a capital gain in principle. There is some question there. That gain is taxable. Yet if there should be a loss, it is only proper that allowances be made.
If $1 million was paid for goodwill when the business was acquired, and the business turns out to be what is commonly known as a turkey, or if the people who bought it cannot operate it and they sell it at the end of five years and the goodwill must be written down to $300,000, there is a capital loss. Surely, appropriate changes should be made to allow for this in the same way as allowances are made for tangible property that is acquired. I do not know why this provision is being perpetuated in this section.
May I call it four o'clock, Mr. Chairman?
Progress reported.


Mr. Deputy Speaker:: It being four o'clock, the House will now proceed to the consideration of private members' business as listed on today's order paper, namely, public bills, notices of motions, private bills.


Mr. Deachman:: Mr. Speaker, I understand there is disposition to consider item No.>
137, on page 17 of Routine Proceedings and Orders of the Day. That item stands in the name of the hon. member for St. John's East (Mr. McGrath).



PRIVATE MEMBERS' PUBLIC BILLS


James Aloysius McGrath: that Bill C-237, to amend the Broadcasting Act (advertising on children's programs) be read the second time and referred to the Standing Committee on Broadcasting, Films and Assistance to the Arts.
He said: Mr. Speaker, I thank the House for being disposed to give unanimous consent to bring this bill forward. This is a timely subject for discussion since we are now entering the season when television advertising will reach its greatest proportions. Perhaps to explain my principal reason for bringing this bill forward I can do no better than read the explanatory note which is as follows:
Children's programs have a captive audience. Although many of these programs are excellent and serve a useful purpose, they usually contain commercial messages directed at a highly impressionable and very susceptible audience.
The object of the bill is to prohibit advertising during the broadcasting of children's programs. More particularly, Mr. Speaker, the bill before the House is an ideal opportunity to discuss the whole topic of advertising
Broadcasting Act
directed toward children. It is particularly relevant at this time of year with Christmas and the advertising associated with this season.
The bill, as stated in the text, is to ban the broadcasting of advertising on children's programs. The principal objective of the bill-here I am being very realistic-is to focus public attention on this important issue and, consequently, to encourage public debate on what steps the federal government should be taking in this area. I will be dealing with my own views on this matter in a few moments, but before doing so I would like to state what I consider the problem to be. What prompted me to move this bill was the fact that as a parent I have become increasingly aware of the effect that television advertising is having on our children.
Television advertising is a refined and sophisticated way of selling a product. At times it runs the risk of crudely manipulating the needs and tastes of its viewing audience. In the case of children, it runs the risk of sadly misleading them. In fact, it is so common a part of our daily lives that few of us stop to look at the effect it is having on our children. Surely we as concerned legislators should begin to wonder if that effect is good or bad. I do not want to imply that television advertising is inherently evil or that it is an unnecessary part of our free enterprise system. I do want to stress that 1 personally feel it is in the best interests of a free market system that advertising be done on a fair and responsible basis with government providing general guidelines for the presentation of advertisements.
We have all seen the barrage of faddish gimmicks, tinsel toys and fantasy lands to which our children are subjected. We know the aura of fantasy which is created. The motivation in some cases is far from helping our children's normal development. Rather, the object is to spark and influence their imagination, indeed bringing pressure to bear on the parents through the children to buy a particular product. As a parent, I object to that.
I think there is growing concern throughout the country. Many people share my objection. For example, which one of us would permit a salesman to come to our door and ask to see our five, six or seven year-old child? Who in their right mind would permit their child to go to the door and be subjected to the high-pressured sales pitch which one normally gets from a door to door salesman? We would not have to think twice about this. However, we allow it to happen every day because every day we allow our children to be subjected to such high pressured salesmanship over television, perhaps even higher pressure than one would be subjected to by a door to door salesman. From the age of three, I firmly believe that our children should not be conditioned to programming their wants and desires on the basis of whatever television ad happens to be the most seductive at a given time.
It might be well to reflect for a minute on the situation in the United States because that is probably the greatest source of television programs that we view in Canada. Certainly it greatly influences the content of our commercial television programming. In December, 1970, two powerful U.S. federal regulatory agencies were sufficiently impressed with the importance of proper advertising for children that they decided to hold an unprecedented joint hearing into the issue. Both the federal trade commission

November 26, 1971
Broadcasting Act
and the federal communications commission, which are respectively responsible for unfair business practices and broadcast licensing, were very concerned.
In the early part of this month the federal trade commission held a week of hearings exclusively on children's advertising. They did so because, I think it is fair to say, there is an escalating war over children's commercials taking place in the United States between concerned parent groups, broadcasting networks and the television industry. I hope that we in this country can look to this example and prevent its occurrence hereby taking quick steps to prevent a similar situation from developing on our own airwaves.
I would like, briefly, to pass along some of the comments made at the FTC hearing earlier this month. For example, one witness suggested that in the midst of a drug culture crisis, ads on television make taking a pill or vitamins no more serious than eating candy. This is the kind of thing to which our children are being subjected. Another said that in most food commercials, children are encouraged regularly to gobble up foodstuffs that contain almost nothing but syrup and sugar. Nutritionists in the states have expressed concern over this and have even labelled it "sugarition". For another example, we have all seen ads which deal with instant transfiguration on television where an individual takes something and suddenly life is beautiful or at least substantially improved. This transfiguration occurs right before our eyes.
I could go on for some time with examples of this kind which can be seen daily over our two television networks. However, suffice it to say we all agree we should start improving these forms of advertising wherever possible. I believe we as legislators, and certainly the government of Canada, have a real responsibility in this area. I repeat, Mr. Speaker, we have a golden opportunity in this country to learn from the experience in the United States and what is happening there. We would be remiss if we did not seize this opportunity and take advantage of it.
There are some frightening statistics which underline the persuasiveness of television for children. For example, our research indicates that a great deal of work has been done in this area by Ralph Nader's centre for the study of responsive law. This demonstrates that in the United States the normal pre-school child watches an average of 54 hours of television a week. I think the same applies to Canada, although statistics are not available.
On April 6 a sample was taken. It would probably be misleading to take a sample during the Christmas season when television advertising reaches its peak. But the result of that sample showed that the CBC ran 54 advertisements between 11 a.m. and 11.51 p.m. Assuming that a child watches, on average, between three and four hours of television a day, in that period he would have to absorb some 26 commercials ranging from those dealing with personal hygienic problems to the advantages of consuming or buying certain types of cereals.
There is no question that television in Canada, as in the United States, has become saturated with this kind of commercial message aimed at influencing parents through the children. What do we know about the psychological effects of this form of advertising upon our chil-

dren? We know very little about it though it is an area of research which requires immediate attention. It has been calculated that children are subjected to some 350,000 television commercials by the time they leave high school. Is it not natural that they should grow to be deeply suspicious of a society which apparently lies systematically for profit? This is what happens many times in the course of the exaggeration and overselling we find on television today. Who knows, this may be one of the causes of the rebellion among youth which we are witnessing in our society.
I realize that both our public and private television networks have shown commendable initiative in preparing voluntary guides to govern their acceptance of advertisements aimed at children. One of these initiatives was taken quite recently-as a matter of fact within the past two months. The Canadian Association of Broadcasters, for example, has prepared and released a code of ethics to govern advertising on children's programs.. It is an impressive code. It is a step in the right direction. The CBC has initiated a similar code.
Although these documents reflect what I feel to be a sincere effort on the part of television networks to ensure that fair and well motivated advertising becomes the norm, I have one major reservation to make, commendable though these codes are. In explanation of my misgivings perhaps it might be worth while to quote from a press release of the Minister of Consumer and Corporate Affairs (Mr. Basford) who has some responsibility in this matter. On October 13 he issued a statement and a press release quotes him as follows-he is referring to the code of conduct for advertisers devised by the Canadian Association of Broadcasters:
This is a voluntary code, and its usefulness will be reflected far more in how well it is observed in letter and in spirit than in its actual wording. Adherence to its principles on radio and television will eliminate many of the cases for the frequent complaints which we have received about advertising directed at children. I hope that all advertisers will make a real effort to bring their messages into line with the code just as quickly as possible. We shall be watching with great interest.
The key word here is "voluntary". Regardless of all the good intentions in the world, advertising remains and will remain one of the basic sources of revenue for commercial television. I believe difficulty will arise if networks and local station managers refuse any part of this important source of income or place restrictions on it. I think it is a little too much to expect that they will do so.
The Minister of Consumer and Corporate Affairs has a great deal of responsibility in this area. He has many times, and justifiably so, boasted of the tremendous strides we have made in this country in the area of consumer protection. We are well ahead of the United States in many important respects. I would suggest to him that one of the ways of staying ahead would be to take the voluntary codes which have been promulgated by the CBC and CAB and have them enacted into law-incorporate them into the Broadcasting Act so that there may be no doubt as to the responsibility of broadcasters in this important area. They would know, then, exactly what their responsibilites were and would be in a better position to appreciate what was expected of them. I do not think we shall be able to take the action which is needed in respect of children's advertising if we rely upon con-
November 26, 1971

trols operated by the industry itself. I think it is necessary to make these regulations part of the law of the land.
I do not wish to be rash or arbitrary in imposing an unfair burden on business or advertising or the networks. All I am suggesting is that the codes which they themselves have provided be incorporated in the law. Surely this is not too much to ask. Further, I suggest that this bill be referred to one of the standing committees of the House, the committee on broadcasting, the committee on health, welfare and social affairs or the committee which usually handles consumer affairs questions.
It might be more realistic to suggest that the government make the appropriate reference. The committee would then have an opportunity to hear witnesses from consumer groups, from the industry, advertising agencies, government and the broadcasting networks. It would be able to evaluate the evidence and propose to the government a specific set of regulations to be included in the Broadcasting Act. With all these different sectors of society represented and placing their points of view before the committee, we could surely work toward an effective solution. I think it is important we should do so and that we should take the initiative in this regard, because I believe there is a serious crisis facing us in this area. After all, what could be more important than the welfare of our children?


Some hon. Members:: Hear, hear!


Winona Grace MacInnis: Mr. Speaker, I am very glad to be able to rise in my place today and support the resolution in the name of the hon. member for St. John's East (Mr. McGrath). This matter is of far more general concern than most people realize. It goes back a long way. I am sorry the Minister of Consumer and Corporate Affairs (Mr. Basford) is not able to be here today. We understood he would be here in order to listen to this side of the story.
When he and I were members of the joint committee of the Commons and the Senate which investigated prices a few years ago we had a great deal of work to do in connection with advertising, and the subject of advertising as it affected children arose on a number of occasions. As the hon. member for St. John's East has observed, it came up in connection with such products as cereals, toys, and so on, where commercial advertisers were, to put it plainly, brainwashing babies into bludgeoning their parents into buying goods which their parents did not want to buy in many cases, or could not afford to buy. I noticed that the Minister of Consumer and Corporate Affairs was very impressed at the time by the need for control in this direction.
The hon. member who has just spoken gave a good deal of the background behind television advertising for children. Increasingly, television is becoming a sort of built-in baby sitter in a great many homes. This is one reason why I think day centres and child-care centres are a far more acceptable alternative.
The minister seems to be preparing to settle for a voluntary code such as that put forward by the Canadian Association of Broadcasters. While voluntary efforts
Broadcasting Act
made by certain organizations to police themselves might be useful, we are becoming more and more aware that where self-interest is involved voluntary policing does not do a satisfactory job. Even the minister has been driven to that conclusion. Earlier this year he brought in a bill dealing with packaging and labelling and there were very loud cries from merchandising interests that they were perfectly well able to police their own industry in this regard. But the minister had reached a position where he realized that that sort of policing had some very wide loopholes and left a great deal to be desired; consequently he brought in his packaging and labelling bill.
Almost every piece of legislation that the minister has brought in has evoked shrieks of anguish from some commercial interests. Nevertheless, the minister proceeded with the legislation because he had been persuaded that, while voluntary codes might be useful to a certain extent, they are not satisfactory from the standpoint of the consumer.
There are some rather odd situations in connection with the labelling of textiles. The minister has introduced a bill to make the labelling of the fibre content of textiles compulsory, but he did not go further than the voluntary code in the matter of care labelling. In other words, although labelling of the fibre content was made compulsory, once the fabric has been purchased women are on their own in regard to washing it, ironing it, dry cleaning it, and so on. I am convinced that within a year or so the minister will be forced to take the second step and make care labelling compulsory. Certainly I am getting many complaints about inadequate care labelling under the present voluntary code.
An examination of the code issued by the Canadian Association of Broadcasters reveals cause for discontent. It does not propose to do away with commercial advertising on children's programs. It provides that advertisements should respect the power of a child's imagination and should not exaggerate service, product or premium characteristics or stimulate unreasonable expectations by children of their performance. Just what is meant by "exaggerate service" and by "stimulate unreasonable expectations" on the part of children? I find those words very interesting.
It goes on to refer to "avoiding undue pressure upon parents". Just what is undue pressure? Is undue pressure having a child nag his parents in a toy store to buy some expensive toy because he has been brainwashed by a television ad to do so? The code is full of tendentious language of this sort that is very hard to pin down.
I think the minister will be forced to deal with this advertising code in the same manner as he has dealt with similar voluntary situations. He will have to recognize that groups interested in profit from merchandising cannot be trusted to enforce regulations that they make against themselves. A good example of what I mean will be seen shortly. The minister is going to introduce legislation to prohibit use of flammable material for children's clothing, since a child could be enveloped in a sheet of flame if he got too close to an open fire, a candle or something of that sort. Jequirty beans have already been withdrawn from the market since it was discovered that half a bean can take the life of a child. People say that war is too important to be left entirely to generals. I think that commercial

November 26, 1971
Broadcasting Act
war is far too important to be left to those who are engaged in commerce. In both cases the victims should have something to say.
I want now to say something about the people on the other side of the fence, the victims of commercial advertising. I will say no more about the children at this point; the hon. member for St. John's East covered that subject very adequately. I have two pieces of evidence from parents groups, one of which is located in the city of Ottawa. The Citizen's Committee on Children sent a brief to all members on January 28 of this year on the subject of television advertising that was directed to children. Their brief pointed out that most advertisements directed to children are not only socially useless but are positively destructive of the values that many parents want to encourage. That is a reference to values other than material things such as toys or food that are commercially advertised on television.
The brief goes on to say that television advertisers, through attractive audio-visual techniques and continual repetition, create real desire in the child, thereby calculatingly utilizing children to bring pressure on their parents to buy the products advertised. For example, I may say they use Yogi Bear to tell the children that since the children are pals of Yogi Bear they should go along with him and get after their parents to buy cornflakes or some other kind of breakfast food that the advertisers want to sell. The brief goes on to point out that the television networks and local station managers are unlikely to refuse voluntarily this important source of revenue. I think that to expect them to do so would be rather like inviting one to give up one's lifeblood. To expect television stations to sacrifice this revenue and to consider the wellbeing of the community is just too much. The brief puts forward this resolution:
Be it resolved, that the Citizens' Committee on Children request the Minister of Consumer and Corporate Affairs to introduce legislation; and the Canadian Radio-Television Commission to amend existing regulations-
(1)	to eliminate commercialism, but allow underwriting of children's television programmes.
(2)	to prohibit all advertising material from programmes, or blocks of programmes, specifically designed for the pre-schooler.
(3)	to remove spot commercial advertisements and
(4)	to restrict public service announcements and programme promotion trailers to those topics pertaining to children's needs and interests, when the majority of the viewing audience is under 12 years of age.
This brief was submitted last January. Since the voluntary code is now out, I think we should go to the lengths proposed by the hon. member for St. John's East and provide, in the words of this bill, that no advertisements shall be permitted during the broadcasting of a program devoted to children. The other piece of evidence from parents is from Montreal in the form of a newspaper article of October 15 last. It reads as follows:
Guidelines controlling advertisements aimed at children have received a lukewarm reaction from a group of citizens dedicated to abolishing such advertisements.
"The guidelines leasen the evil, but we want the evil to disappear completely," said Marie Vallee spokesman for the Mouvement

pour l'Abolition de la Publicite aux Enfants-Movement to Abolish Advertisements Aimed at Children.
"Our aim is nothing short of the abolition of publicity aimed at children," she added.
The code of advertising to children announced on Wedesday by the Canadian Association of Broadcasters, was adopted voluntarily by CAB members.
Praised by consumers affairs minister Ronald Basford, the code requires radio and television advertising for children not to exaggerate the quality of products or service and to avoid undue pressure on parents.
As I say, I do not think that goes far enough. The hon. member for St. John's East made a further important point when he indicated that advertising commercials may well be responsible for a great deal of the dissatisfaction and turning away from the continual preoccupation with material interests that we see in so many of the younger people today. This television advertising may also be responsible for the extreme cynicism of children today. If you have known a child who had seen a toy advertised and then saw one in a store or got one for Christmas, and had it break down, indicating it was far less in quality than indicated during the advertisement on TV, you would appreciate the depth of cynicism that can be inculcated in children today.
A woman said to me the other day that she had noticed another thing in advertisements which is of importance. She said her little child came home and asked about the toy that she had on television and that had been bought for her. She said another little girl had told her that the toy cost only $1.95 but that her mother got one for $3.95 which was a far better toy. This is the sort of emphasis on competition and antisocial values imparted to children by television. This is the result, very largely, of television advertisements.
One further thing which has not been mentioned regarding television is the amount of violence inculcated in children when they see these weird animals running around, doing each other in, throwing each other off mountain tops and shooting at each other with guns. This all seems unrealistic and fairy tale-like. But this is only one step from watching cowboys running around, shooting up the town, or people dropping bombs and doing other things to each other which is beginning to be expected today as a regular occurrence. If a child is unable to get anything but that on television, he is unable to distinguish in his early years between fact and fantasy. When he grows up he is still unable to distinguish fact from fantasy. I would warrant that the man who recently hijacked an aircraft near Calgary was not very far from being unable to distinguish between fact and fantasy. He acted like a schizophrenic child.
I think commercial advertisements on television are thoroughly bad for children. I think they are bad for grown-ups too, but we can deal with that another day. In the meantime, I hope the House will give serious consideration to sending the subject matter of this bill to a committee. I should like to see it sent to the Standing Committee on Health, Welfare and Social Affairs, on which committee both the hon. member for St. John's East and I sit and at into which the minister can be drawn in order that we may brainwash him a little more thoroughly in this regard. Perhaps at such a committee session we could go over these things thoroughly to make sure we not only
November 26, 1971	COMMONS DEBATES_______________________________9945
get good packaging and labelling in respect of the food products we eat but to make sure we have proper regulations and laws to ensure that the products which feed the minds of our children are pure, unadulterated and not dictated by the self-interest of some manufacturer who wants to sell as much as possible regardless of the consequences.


Mr. Lloyd Francis (Parliamentary Secretary to Minister of Veterans Affairs):: Mr. Speaker, there was a bill standing in my name on the order paper today but I was very pleased to let it stand and give precedence to the bill we are now discussing, in view of its timeliness during the Christmas season and its importance in terms of policy which must be developed in this area.
I congratulate the mover of the bill, the hon. member for St. John's East (Mr. McGrath), and the hon. member for Vancouver-Kingsway (Mrs. Maclnnis) with whose remarks I find myself in substantial agreement. Unfortunately, I will have to restrict my remarks because of the limitation of time and because I know the hon. member for Algoma (Mr. Foster) is anxious to speak in this debate.
The hon. member who introduced the bill has on previous occasions raised this matter. He had a very interesting exchange with the Minister of Consumer and Corporate Affairs (Mr. Basford) before the Standing Committee on Health, Welfare and Social Affairs on March 16, 1971. The minister at that time recognized that a good deal of concern had been expressed by consumer groups, parent-teacher associations, committees for the welfare of children and other organizations concerning food and toy advertising which is directed not only at the adult, who will presumably make the purchase, but at the child himself.
The minister admitted that in a modern society this is a matter of very deep concern and one which was quite rightly receiving the attention of the Department of Consumer and Corporate Affairs and of the Canadian RadioTelevision Commission. He said on that occasion that it seemed desirable some attempt should be made to draw up acceptable rules according to which the television salesman, so to speak, should be able to bring his message into our homes and speak to our children.
The minister went on to point out that his department already has considerable jurisdiction over advertising. Under the Combines Investigation Act it has jurisdiction over misleading advertising generally, including, of course, television advertising. If there were in any advertising directed at children something which could be presented in court as materially misleading, that would be a basis on which to consider launching a prosecution under the Combines Investigation Act. As hon. members know, there has been greatly stepped-up activity over the last couple of years by the Combines people in investigating and prosecuting cases of misleading advertising.
Furthermore, the department has the responsibility, on behalf of the Canadian Radio-Television Commission, to review and approve food advertising on radio and television to ensure that it contains no element of fraud or misrepresentation within the meaning of the Food and Drugs Act and regulations. Such supervision is designed to ensure the truthfulness of advertising with respect to food products whether directed at adults or children. The
Broadcasting Act
responsibilities of the department, as the minister said, are quite precise, whereas the Canadian Radio-Television Commission has a much more general responsibility under its regulatory powers to determine the nature and kind of advertising that is carried on the electronic media.
The hon. member for St. John's East urged before the House committee that there be even closer liaison between the Department of Consumer and Corporate Affairs and the CRTC to see what jointly could be done to deal with the question of advertising directed at children. He agreed with the minister that it was necessary that there be greater in-depth studies as to what would be the best way of regulating such advertising on radio and television. The member suggested that any such study should include the advice of child psychologists and psychiatrists who would be able to assess the effect on a child of the constant barrage of high-pressure sales messages to which children watching television are subjected every day.
I understand that the complaints section of the Department of Consumer and Corporate Affairs has received a limited number of complaints about TV advertising directed at children and that most of these were received toward the end of 1970 during the Christmas toy buying season. That is why our debate is particularly appropriate at this time. One type of complaint which evidently related to toys-this was referred to by the hon. member for Vancouver-Kingsway-was that the commercials were likely to mislead children, through trick photography and the like, about the actual dimensions, the speed at which the toy ran or the parts that came with it, thus giving the impression that the toy being advertised was something other than what it really was.
Another type of complaint was that TV advertising of this kind could cause parents of very modest means to spend beyond their incomes and go into debt to buy advertised toys so as not to appear stingy or careless of their children's happiness. Feelings ran so high about the alleged malpractices or unethical or undesirable practices in the field of advertising directed at children that there emerged in the province of Quebec at least one organization specifically and exclusively concerned with the subject, calling itself the Movement for the Abolition of Advertising Aimed at Children.
It seems to me that while there are some special concerns related to advertising directed at children, the attention being paid to it is but one part of the proper questioning which is going on concerning the role of advertising in our society. Leaving aside the question of false or misleading advertising which everyone agrees should be eliminated from the market, there is a feeling in some quarters that there is an excess of advertising as such. We feel that we are being bombarded with demands to buy, and often in terms which bear little relationship to the actual merits of the product concerned and little attention to why we ought to buy.
I want to make it clear that I am not attempting to knock the role of advertising as such. Clearly, it seems to me, advertising plays a very important and necessary role in our type of society and economy. It helps to bring to the attention of the buying public the great variety of goods

November 26, 1971
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available to us in our relative affluence, and to let us know about the new products which the ingenuity of our system is constantly bringing forward. I none the less think it is a good thing that we should all be asking ourselves, consumers, manufacturers, retailers and advertisers alike, whether we have not gone overboard in this direction, whether we are not engaging in what someone described as advertising overkill and have pushed the amount of advertising to the point where it starts to become self-defeating. Some people have started to "turn off" on advertising in general because of their dislike of the quantity of it or the poor quality or poor taste of some of it.
In these circumstances, I find it a very encouraging sign, if I read the indications correctly, that some of the more thoughtful members of the advertising profession itself are now asking themselves the same questions and are re-examining in their minds the basic principles which should govern the use of advertising in our society. Both speakers who preceded me referred to the amount of cynicism generated in respect of advertising and the great dangers of the kind of cynicism which is inculcated in young minds. I think there should be a great deal more study in depth in respect of this question. If all of us should be examining our consciences as to how we think advertising fits into the kind of society which we want to have, we should be doing so even more with respect to advertising directed at children-for here we are dealing with less discriminating, more impressionable minds, the minds of those who are less able, perhaps, to distinguish between fact and fancy; less able to distinguish between reality and puffery.
I do not think I would go along with the proposition, however, that we ban all advertising directed at children. Advertising is a fact of contemporary society and it seems to me that it is unwise to attempt to insulate the child completely from such a fact. He will have to come to grips with it some day and it is well that he should start to come to grips with it, within the limits of his capacity, at a comparatively early age.
For that matter, neither the bill itself nor the hon. member who proposed it dealt with the question of who is a child and at what age a person ceases to be a child. Neither are the guiding principles to be incorporated in the legislation set out. Someone else would have to work out these. Someone will have to come to grips with the problem of what is a children's program. Some advertisements in respect of cereals have a plausible direction toward an adult audience. There would have to be an administrative decision concerning what age group a program is aimed at and what age group should or should not be exposed to certain advertising. There is a great deal which has not been brought out so far in this debate.
Because of the limited powers of discrimination which a young child has, far greater care must be taken with respect to advertising directed at children than is necessarily applicable to advertising directed at adults, lest the child acquire a totally distorted view as to what is reality. I think it is wrong, for instance, in any advertising directed at children that the impression should be given that a toy is much larger or faster than it actually is, that it will perform certain functions which in fact it will not perform, and that in normal purchase it comes complete with
(Mr. Francis.]
all sorts of additional parts which in fact must be bought separately. I also find particularly objectionable the so-called hard sell when directed at children.
Mr. Speaker, I hope you will excuse this philosophizing but I feel it is necessary for us to look at some of the fundamentals in order to come to the best understanding of this bill. I think the purpose of private members' hour is very well served by the introduction of bills of this nature in order to explore an area in which regulatory difficulties may be involved. We must ask ourselves what we are trying to do, what is our aim.
To revert to the discussion which took place in a committee of this House, I understand that there were further meetings between the Department of Consumer and Corporate Affairs and the Canadian Radio-Television Commission, and as a result of what took place voluntary codes emerged and discussions resulted between the department, the producers involved and the regulatory agencies.
Mr. Speaker, time does not permit me to develop some of the other themes I had hoped to develop. In deference to other hon. members who are anxious to speak in this debate, I shall conclude by saying I agree with the purpose of the bill and the views of the two previous speakers. However, I believe it would be wise and proper to have a full and complete debate, which I hope will take place in this House and in the other place. I look forward to the development of appropriate measures by the Department of Consumer and Corporate Affairs as well as the other regulatory agencies involved.


Gordon Harvey Aiken: Mr. Speaker, I shall take only a few minutes to discuss one aspect of advertising and the type of product sold to households and young people. I am referring particularly to popular breakfast cereals. A survey has been made in connection with breakfast cereals served to young people in the standard, well known boxes. The result of the survey is shocking, to say the least. It indicates that many of the breakfast cereals that are well known through television and newspaper advertising-particularly television advertising-are almost completely lacking in nutritional value.
There has been a good deal of comment on this. One of the comments referred to a notice on a cereal box. I do not have the exact wording but it said something to the effect that with milk and sugar "this cereal provides a balanced nutritional snack." When it was analysed it was found that the only value in the cereal bowl was the milk and sugar, and that the cereal itself contained no nutritional value.
What bothers me so much about this problem is that here we are in a land of plenty where we have goods on the shelves which housewives can buy in quantity, with great boxes apparently bursting with foods which provide energy, and yet we find that many of our children suffer from malnutrition. Experiments have been conducted in connection with some of these cereals. I do not want to single out any of them because the results were published long ago, just as the results of cigarette testing were published. However, it was shown that even the well-known breakfast cereals are almost completely lacking in nutritional value. Most of the best substances have been taken out of them. In fact, I understand that most breakfast cereals are now reconstituted. They appear to be in
November 26, 1971

their original form but in fact were reduced to flour or mush and later reconstituted, the end product being mostly air.
We make cigarette manufacturers put a notice on packages of cigarettes stating that the product can be dangerous to health. I do not think we can expect cereal manufacturers to advertise their product over the air and say they are no good, but I do say that cereal foods require a great deal more honest promotion. For this reason I support the purposes of the bill and hope it can be adopted in principle so that further study can be given to it and the many aspects of advertising that it covers, including the one with which I am particularly concerned.


Mr. Maurice Foster (Algoma):: Mr. Speaker, Bill C-237, sponsored by the hon. member for St. John's East (Mr. McGrath), refers to the effects of television advertising on young children. The hon. member has done a commendable job of reviewing the history of this problem in our society. He outlined some of the steps taken in the United States of America with respect to it and he mentioned the hearings that have been held in that country. I was impressed by the figures the hon. member quoted which indicate that a pre-school child spends 54 hours per week watching television. I know that he has several children, as I have, and that they probably had this number of hours of televiewing during their pre-school days.
I think it is important that we have an opportunity to discuss the bill this afternoon. I am sure the hon. member would want to see it thoroughly discussed. But I believe we should attempt to clarify in our minds what we are trying to achieve and the best way of achieving it. With respect to the bill which is before us, its operative proposal is that no advertising should be permitted during the broadcasting of a program devoted to children. I know that the sponsor of the bill is not a man of extreme views, but I wonder whether he has thought through the full implications of his proposals.
A number of children's programs are presently put out over radio and television. Some of them are good and some of them are bad. In saying this I, of course, tend to put in some subjective judgments. I believe that some of the programs are carried by the CBC without sponsorship, but I think I am correct in saying that the great majority of children's programs, both good and bad, are sponsored-that is to say, paid for by advertisers.
Broadcasting Act
The adoption of the bill could well mean that a large number of even good children's programs would disappear from the airways because of lack of sponsorship, unless the CBC or CTV were willing to accept the full cost of putting on those programs. This would require a pretty drastic re-examination of the budgets of both the public and private networks. I think it would be wrong for us to approve this bill, however much we may sympathize with its purposes, without knowing what the implications would be for those budgets.
It may be that the sponsor of the bill only intended that advertisements should not interrupt children's programs but should be grouped together at the beginning or at the end of a program, and did not mean that children's programs should not have advertising sponsorship. If this is the case, then I suggest that the proposal is one that might well be discussed by the CRTC with the sponsors of the programs in question, to see what effect this arrangement would have on their willingness to sponsor those programs. Until we know more about what the results would be, I think we should hesitate in granting approval to the bill.
In sounding this cautionary note I should like to refer to the remarks of the hon. member for Ottawa West (Mr. Francis), who so thoughtfull put forward the case for having rather special rules to govern the kind of advertising which should and should not be addressed to the impressionable minds of young children. He mentioned the broadcast code for advertising to children which was developed under the aegis of the Canadian Advertising Advisory Board and which has been agreed to by the Association of Canadian Advertisers, Incorporated, the Canadian Association of Broadcasters, the Canadian Toy Manufacturing Association, the CTV network, the Institute of Canadian Advertising, the Radio Sales Bureau and the Television Bureau of Canada. That code has also been endorsed in principle by the Canadian Broadcasting Corporation.
The code is very thoughtful and comprehensive and I should like to quote a few sections of it which, if strictly adhered to, should do away with a number of the practices which many of us have found objectionable with respect to advertising directed at young children.


Mr. Speaker:: Order, please. The hour set aside for the consideration of private members' business has now expired. It being five o'clock, this House stands adjourned until two o'clock Monday afternoon.
At five o'clock the House adjourned, without question put, pursuant to Standing Order.