1971-11-05

ROUTINE PROCEEDINGS


[Stage Direction]
Hon. Allan ]. MacEachen (President of the Privy Council): Mr. Speaker, there have been some discussions about the hours of sitting for next week, especially in respect of an arrangement that might make it possible for Members of Parliament to be present in their constituencies on Remembrance Day to attend ceremonies to which they have been invited without the necessity of making extraordinary efforts to be back in the House on the following day. I have been attempting to meet that favourable objective and at the same time save the hours that might be lost as a result of not sitting on Friday.
If it is agreeable to the House I would suggest that we pick up the hours lost on Friday, a week today, by sitting an additional hour on Monday from 10 p.m. to 11 p.m., and an additional two hours on Tuesday from 11 a.m. until one o'clock on government business. This time would be equivalent to the time lost on the succeeding Friday. If that is acceptable, the House will rise on Wednesday, November 10, and stand adjourned until November 15, 1971. If I have the unanimous consent of the House I should like to move a motion to that effect.
Mr. G. W. Baldwin (Peace River):: Mr. Speaker, we in this party are quite agreeable, although it should be understood that the normal routine proceedings and the question period will be at two o'clock on Tuesday rather than at eleven so that government business will not be interrupted by nasty questions.


Mr. Stanley Knowles (Winnipeg North Centre):: Mr. Speaker, the proposal made by the President of the Privy Council is in accordance with our discussions and we are happy to give our agreement.


Mr. Gerard Laprise (Abitibi):: Mr. Speaker, we are also in agreement with those proposals.


Mr. Speaker:: Is there agreement for the President of the Privy Council to propose a motion?


Some hon. Members:: Agreed.


Mr. MacEachen:: I move:
That, on Monday, November 8, 1971, the time of adjournment of the House shall be 11 p.m., provided that proceedings pursuant to Standing Order 40 shall be taken up at that time;
That, on Tuesday, November 9, 1971, the House shall meet at 11 a.m., rise at 1 p.m. and resume its ordinary hours of daily sitting at 2 p.m., provided that Government Orders shall be taken up between 11 a.m. and 1 p.m., and that the daily routine of business shall be taken at 2 p.m. in that sitting;
And that, when the House adjourns on Wednesday, November 10, 1971, it shall stand adjourned until Monday, November 15,1971.


Mr. Speaker:: Hon. members have heard the motion. Is it the pleasure of the House to adopt the said motion?


Some hon. Members:: Agreed.


[Stage Direction]
Motion agreed to.

Mr. David MacDonald (Egmont):: Mr. Speaker, under Standing Order 43, in view of the obvious imminence of tomorrow's five-megaton blast, and in light of the recent events involving the excavation of a second hole on Amchitka Island for a possible further detonation of a nuclear device, and because of the announced atmospheric nuclear explosion by the government of France and the likelihood of other countries continuing their own tests, I move, seconded by the hon. member for St. John's East (Mr. McGrath):
That the government of Canada immediately request the Secretary General of the United Nations to immediately declare a one-year moratorium on all nuclear tests, so that the United Nations during that period might complete a permanent agreement to end all nuclear testing.
In view of earlier representations by this House and the nature of the motion, I feel the House might be disposed to pass the motion without debate and I urge the House to do so.


Mr. Speaker:: Hon. members have heard the motion proposed by the hon. member for Egmont. Is there unanimous consent?


Some hon. Members:: Agreed.


An hon. Member:: No.


Mr. Speaker:: There is not unanimous consent.


David Samuel Horne MacDonald: Mr. Speaker, on a matter as important to the people of this country and the members of this House as this is I believe we should have some explanation. I was unable from my seat to hear any objection.
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November 5, 1971
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Mr. Speaker:: Had the hon. member been sitting in the Speaker's Chair he would have determined that there was objection.


Mr. Frank Howard (Skeena):: Mr. Speaker, because of the unanimous decision a moment ago I think my chances might be equal to those of the President of the Privy Council. I should like to seek the consent of the House under Standing Order 43 to move a motion, seconded by the hon. member for Winnipeg North Centre (Mr. Knowles). The urgent and pressing necessity is apparent in the following motion:
In view of the spontaneous and massive objections and protests that have been developing in Canada from all areas since the United States announcement to proceed with the Amchitka bomb test and inasmuch as there is an overriding need for the Prime Minister, even at this late moment, to communicate directly with the President of the United States of America expressing the concern, dismay and objections of all Canadians about the proposed Amchitka blast, with the hope that the bomb test will be cancelled, this House urges upon the Prime Minister that he immediately communicate with President Nixon and so express that concern, dismay and objection.


Mr. Speaker:: The motion proposed under the terms of Standing Order 43 requires unanimous consent. Is there unanimous consent?


Some hon. Members:: Agreed.


Some hon. Members:: No.


Mr. Speaker:: There is not unanimity.


Frank Howard: Mr. Speaker, I wonder if we might have some explanation from the government benches as to why they object to this course of action?


Mr. Speaker:: Order, please. The hon. member knows this is debate and that this is not provided for under the terms of Standing Order 43.



ORAL QUESTION PERIOD


Hon. Marcel Lambert (Edmonton West):: Mr. Speaker, my question is addressed to the Minister of Finance. In light of the decision of the United States Senate finance committee to authorize additional powers to the President with regard to the imposition of an excise tax on automobiles imported from Canada and an additional surcharge, as well as its recommendations regarding DISC, could the minister now expand upon his statement yesterday that the Canadian government could be in a position to take appropriate counter-measures in the event that such action might be taken by the government of the United States?


Hon. E. J. Benson (Minister of Finance):: First of all, Mr. Speaker, I think it very unlikely that the President will take action with regard to changing the level of the surtax or imposing an excise tax. As a matter of fact, the United States administration have indicated several times that they would like to get rid of the surtax as soon as possible when stability of world currencies can be established and some other trading guidelines given. However, if they were to take such action we could take action in respect of taxes very quickly in this House. Of more concern to the government is the DISC program which was recommended in an amended form by a committee of the Senate. Of course this proposal has to go to a joint meeting of the two committees of the House of Representatives and the Senate and then the legislation has to go through both chambers. However, we are watching very closely to see what kind of DISC proposal ultimately comes out, if one does emerge from these consultations between the two Houses, and are considering what action we would take in that case.


Marcel Joseph Aimé Lambert: Does the minister agree that this is a dangerous escalation, and is the Canadian government taking further initiatives both in regard to this move and also with regard to settling the international exchange situation which seems to underly the whole problem of the surcharge and our relationship with the United States?


Edgar John Benson: First of all, Mr. Speaker, I do not consider it an escalation. They have simply granted authority to the President. In the United States the President has to have underlying authority in order that he may take action, whereas in Canada action on taxation under any circumstances can be taken by an announcement in this place. With respect to the DISC program, the announcement would indicate that it is in a much modified form from the form put forward by the administration, but if passed as recommended by the Senate committee it would still be very damaging to Canada, and we have protested officially with regard to the DISC program.
With regard to the underlying situation, talks took place in Ottawa yesterday and there will be further meetings. The next meeting of the Group of Ten is to be held later this month in Rome.



UNITED STATES IMPORT SURTAX-PRESENTATION BY AMERICAN OFFICIALS OF LIST OF GRIEVANCES AT MEETING IN OTTAWA

Mr. Edward Broadbent (Oshawa-Whitby):: In the discussions which took place yesterday in Ottawa on the United States surtax, did the American officials present to the government of Canada their list of so-called grievances?


Edgar John Benson: (Minister of Finance): No, Mr. Speaker, there is no list of grievances on either side. What took place yesterday was a discussion of various problems on both sides. Such talks have been going on for quite a long time in an effort to work toward a solution on both sides of matters that are annoying each country.


John Edward Broadbent: Was the Canada-U.S. automotive agreement specifically discussed and, if so, what particular changes were recommended by the Americans and what

November 5, 1971

response to these proposals did the Canadian government make?


Edgar John Benson: I would rather not disclose the individual items that were discussed.



REVIEW OF INCOME TAX BILL PROVISIONS AFFECTING INDUSTRY IN LIGHT OF POSSIBLE U.S. ECONOMIC ACTION AND REPORT BY CANADIAN SENATE

Gerald William Baldwin: In light of the potential or proposed United States action and the urgent need to take every possible move to strengthen Canadian industry, as indicated in the interim report of the Senate Finance Committee, will the government even at this late date review its position on the tax bill and delay implementing those provisions which have an unsettling and deteriorating effect on the Canadian economy?


Edgar John Benson: That is the hon. member's opinion. We intend to proceed with the tax bill.


Mr. Speaker:: Does the hon. member for Shefford have a supplementary?


Mr. Gilbert Rondeau (Shefford):: No, Mr. Speaker.


Mr. Speaker:: I shall give him the floor in a few minutes. We will carry on with supplementary questions on the present subject and I shall call on the hon. member for Shefford as soon as possible.



UNITED STATES DISC PROPOSAL-CONTINGENCY PLAN-CONSULTATION WITH PROVINCES, BUSINESS, LABOUR AND ECONOMIC EXPERTS

Mr. lames A. McGrath (St. John's East):: I have a question for the Minister of Finance. In view of the enormous potential threat to the Canadian economy posed by the DISC plan, is the government formulating any contingency plan to meet the situation and does the government propose to hold some sort of hearings or consultations with business, labour and economic experts as well as the provinces to meet the threat posed by this program?


Edgar John Benson: Mr. Speaker, first of all we have to see how the DISC plan emerges. As I have indicated, we are quite a long way from that and it will not be too late then. That is the only time at which we would take action.



AUTOMOBILES-POSSIBLE EXCISE TAX ON CANADIAN AUTOMOBILE IMPORTS IF UNITED STATES TAX IMPOSED

Mr. Robert P. Kaplan (Don Valley):: My question also is for the Minister of Finance. With reference to the possible automobile excise tax in the United States, is the government prepared to impose an excise tax on Canadian imports of automobiles from the United States to produce an equal countervailing against American protectionism?


Edgar John Benson: Mr. Speaker, I consider that to be a hypothetical question.
Inquiries of the Ministry



UNITED STATES DISC PROPOSAL-PUBLICATION OF PART OF FOREIGN OWNERSHIP REPORT TO CABINET DEALING WITH OPERATIONS OF AMERICAN MULTINATIONAL CORPORATIONS

['Mr. Speaker, I want to be courteous to the hon. member and I will not refuse to give further consideration to the possibility of talking to the other House leaders about this matter. However, I would be dishonest if I indicated to him that there would be any change in attitude on the part of the government in joining at this time in passing a further resolution. I think my hon. friend appreciates that. On the second question I really cannot provide an up-to-date answer.']
Mr.  R. Gordon L. Fairweather@Fundy-Royal: Mr. Speaker, in light of the DISC threat will those sections of the Gray Report dealing with the behavior and operations of United States multinational corporations be made public? I asked this question of the Prime Minister the other day, and I hope that we now can have an answer.


Edgar John Benson: I would have to take that question as notice, Mr. Speaker.


Mr. Thomas M. Bell (Saint John-Lancaster):: As a final supplementary question, Mr. Speaker, is it a fact, because the Minister of Finance has come into the chamber today on a day he should not be here, thus incurring the wrath of the Prime Minister, and has given all these meaningless answers, that finally he is desperately worried about the United States economic measures?


Some hon. Members:: Oh, oh!



Stanley Howard Knowles: Mr. Speaker, I had a question I wanted to put to the Prime Minister. I assume his absence is due to the departure from Ottawa of President Tito, so may I put the question to the Acting Prime Minister. I believe my hon. friend, the President of the Privy Council, would like to enjoy notoriety for a moment or two. Now that 119 members of the House have wired President Nixon reminding him of the opposition of this House to the Amchitka test, will the Acting Prime Minister take up with the Prime Minister the possibility, even at this late date, of his joining with us in expressing the hope that this blast will be cancelled by President Nixon?


Allan Joseph MacEachen: Mr. Speaker, I do not think I need to take the point up with the Prime Minister because I have already discussed the matter with him. He, of course, joined with other members of the House in the formal resolution passed by the House of Commons indicating the view of the House with respect to this test. It was his view that it was entirely up to other hon. members whether they wished to sign this telegram, and that a further signature would not add anything to what had already been done by the House in a formal resolution.


Stanley Howard Knowles: Mr. Speaker, as a supplementary question I wonder if the Acting Prime Minister can tell us whether the resolution passed by the House on October 15 was actually communicated to the President and, if so, by what method?

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Allan Joseph MacEachen: Mr. Speaker, I am not in a position to tell the hon. gentleman exactly what procedure was followed, but I understand it was communicated to the government of the United States by the Department of External Affairs, as it was to other governments.


Stanley Howard Knowles: I have a further supplementary question, Mr. Speaker. In view of reports from the United States that Canada is not among the countries that formally protested, will the Acting Prime Minister look into this, and if the resolution was not formally communicated to the President will he see that this is done?


Allan Joseph MacEachen: Mr. Speaker, I will look into it. I feel certain that the resolution was communicated to the government of the United States but I will find out, if possible, whether the resolution was actually put in front of the President. I cannot answer that question now.


David Samuel Horne MacDonald: Mr. Speaker, I wish to direct a supplementary question to the President of the Privy Council in his dual capacity as House leader and Acting Prime Minister. In view of the motion I presented this morning, would he be willing to confer with the House leaders of the other parties to determine if there would be general agreement to pass it, or a similar motion, without debate in order that the Secretary General of the United Nations might call for a one-year moratorium on nuclear testing by all nations, thus eliminating what seems to be a major barrier to the United States preventing them from not going on with their test, namely, concern for their own defence and security?


Allan Joseph MacEachen: Mr. Speaker, I take it that the hon. member is properly bringing this matter before the House because he does express, I think, the sentiments of all hon. members. I think what separates us at the moment is the question of whether a further resolution will add to the strength of what has already been done by the House of Commons. We take the view that what has already been done is strong evidence of the feelings of this House and that any further action by the House would serve to weaken what has already been done.


David Samuel Horne MacDonald: A supplementary question.


Mr. Speaker:: Order, please. The Chair will recognize the hon. member for Egmont on a supplementary and then the hon. member for Shefford.


David Samuel Horne MacDonald: I think the minister has not really answered the question. My motion was a good deal different. Would the minister indicate whether he would not consider seriously with the other House leaders a motion that could be passed unanimously and directed to the Secretary General of the United Nations? Second, are any steps being taken to determine whether a second test is being planned for Amchitka Island as was reported yesterday and again today?


Mr. Guay (St. Boniface):: Question your own party for the solution.


Allan Joseph MacEachen: Mr. Speaker, I want to be courteous to the hon. member and I will not refuse to give further consideration to the possibility of talking to the other House leaders about this matter. However, I would be dishonest if I indicated to him that there would be any change in attitude on the part of the government in joining at this time in passing a further resolution. I think my hon. friend appreciates that. On the second question I really cannot provide an up-to-date answer.



NATIONAL DEFENCE


Gilbert F. Rondeau: Mr. Speaker, I should like to put a question to the Minister of National Defence.
Further to his statement this morning with regard to pay increases in the Armed Forces in order to establish pay parity between the Armed Forces and the Civil Service of Canada within the next two years, would the minister say whether he intends to announce that his department will soon reassess the necessity and the role of the Canadian Armed Forces so as to be able to meet adequately the needs of Canada in 1971?


Hon. Donald S. MacDonald (Minister of National Defence):: Mr. Speaker, I already made such an announcement in the White Paper on National Defence.



ASSURANCE RESPECTING NO INCREASE IN RENT AND OTHER COSTS OF PERSONNEL FOLLOWING PAY RAISE

Mr. J. M. Forrestall (Dartmouth-Halifax East):: I have a supplementary for Santa Claus too. On behalf of the 85,000 or 90,000 people in the Canadian Armed Forces I wonder if the minister could give some assurance to members of the forces that he will not increase rents or the costs of meals and other recoverable cost items within the defence structure?


Donald Stovel Macdonald: Mr. Speaker, as the hon. member knows, there have been long-term policy announcements with regard to bringing into balance rents for permanent married quarters. Therefore I cannot give the undertaking that the policies under way will not be carried out as needed. Where certain payments have been based on income, of course where income has gone up payments will have to go up too. In general terms we are trying to arrive at the basis that, if compensation is to be on the same basis as the civil community, services to be paid for will of course have to be on the same basis.
November 5, 1971



POSSIBLE ADJUSTMENT OF ARMED FORCES


Mr. David Anderson (Esquimalt-Saanich):: Mr. Speaker, my question is supplementary to previous questions asked of the Minister of National Defence. Will the changes in pay outlined in his press release today lead to further changes in the retirement ages of our forces personnel and their pension rights? In other words, by bringing their pay more in line with the civil service will we be making other adjustments as well?


Donald Stovel Macdonald: Mr. Speaker, if the hon. member is referring to the age of retirement, of course very different factors apply to members of the Canadian Armed Forces and of the Mounted Police than apply to other members of the civilian community. I do not anticipate any changes there. With regard to pensions, of course the pay increases also carry with them a requirement incumbent on the government to make further contributions to the pension fund. I must confess that I really do not understand the full import of the hon. member's question.



THE CANADIAN ECONOMY


Hon. Martial Asselin (Charlevoix):: Mr. Speaker, I have a question for the Minister of Finance.
I would like to know if, in his meetings with provincial finance ministers, a wage and price freeze was considered and in the affirmative, if provinces indicated to the minister that they would agree to waive their jurisdiction in that field supposing the federal government would decide to implement this policy in order to fight inflation.


Edgar John Benson: Mr. Speaker, as I recall, this question did not arise.



CANADIAN NATIONAL RAILWAYS


Mr. Walter C. Carter (St. John's West):: Mr. Speaker, my question is directed to the Parliamentary Secretary to the Minister of Transport. Does he have an answer to the question I posed yesterday concerning the lay-offs at the Canadian National dock in St. John's?


Mr. Gerard Duquet (Parliamentary Secretary to Minister of Transport):: Mr. Speaker, we are advised by the Canadian National that at first they thought employment could be found for these employees. This is why the lay-off notices were rescinded. But as they failed to obtain
Inquiries of the Ministry
contracts, they re-issued the notices. This is the only explanation for their decision. CN usually get their contracts through public tenders, and they are now seeking new ones in oVder to re-hire their employees.



INVESTIGATION OF UNION CHARGES THAT ST. JOHN'S DOCKYARD INEFFICIENTLY OPERATED

James Aloysius McGrath: Mr. Speaker, may I direct a supplementary question to the parliamentary secretary in the absence of the minister who is supposed to be here today, according to the roster. Since the pending lay-offs are an urgent matter, will the parliamentary secretary communicate with the minister and undertake to investigate charges made by the unions that this Canadian National dockyard in St. John's, Newfoundland, is inefficiently operated and hence unable to compete with other docks?


Gérard Duquet: Mr. Speaker, I will certainly transmit the remarks of the hon. member to the minister.



SCIENCE


Frank Howard: Mr. Speaker, may I direct a question to the Minister of State for Science and Technology. Will the hon. gentleman convey to the House the results of the studies by scientists working for the Canadian government of the large amount of detailed scientific data and studies on nuclear bomb testing that has been received from the United States over the last couple of years, with reference particularly to the proposed bomb test that is to take place tomorrow at Amchitka?


Hon. Alastair Gillespie (Minister of State for Science and Technology):: Mr. Speaker, I appreciate the representation of the hon. member. I cannot give him the undertaking he seeks.


Frank Howard: Mr. Speaker, I rise on a question of privilege. Surely this is a preposterous situation. This was a matter of such concern that it prompted the government to act in the first instance and now it does not know what happened to the resolution that the House passed on this matter. The Minister of State for Science and Technology has completely evaded the question about the evaluation of existing studies.


Mr. Speaker:: Order, please. That is debate and not a question of privilege.



TRANSPORT


Mr. Cliff Downey (Battle River):: Mr. Speaker, in view of the suggestion by the Canadian Transport Commission

November 5, 1971
Inquiries of the Ministry
that Canada's two major railways should combine their off-season transcontinental passenger services, may I ask the Minister of Transport-in this case I direct the question to his parliamentary secretary-whether the minister can assure us that the government of Alberta will be consulted on any transport changes, as has been requested by the premier of the province, since Alberta is one of the two landlocked provinces of Canada?


Gérard Duquet: Mr. Speaker, the Canadian Transport Commission made their suggestion only recently, and I can say on behalf of the minister that such a suggestion was at first approved. I understand very well and I hope that hon. members will understand also that this matter is most important; it requires a thorough study and certainly consultations.



ALLEGED INADEQUATE TRANSPORTATION AND TERMINAL FACILITIES FOR GRAIN

Mr. A. P. Gleave (Saskatoon-Biggar):: Mr. Speaker, in the absence of the Minister of Transport may I ask his parliamentary secretary whether, in view of the statement by Mr. Gibbings of the Saskatchewan Wheat Pool that transportation provided for grain is inadequate, that terminal facilities need to be reviewed to see if they cannot be made adequate for the handling of our grain, and that we have lost sales and have had to turn down sales because of this inadequacy, there has been any consultation between the minister of Transport and the minister in charge of the Wheat Board to see if this situation can be improved?


Mr. Speaker:: Order, please. I hope the question has now been asked, and I hope the parliamentary secretary can reply briefly. I suggest to hon. members that an attempt should be made to shorten questions. If each question takes more than a minute and the answer is just as long, the number of questions that can be asked is cut down.


Gérard Duquet: Mr. Speaker, I share your point of view, but I would prefer to consider the matter further before giving an answer.



INDUSTRY

[Stage Direction]
SHOES-REPORT OF INVESTIGATION BY ANTI-DUMPING [DOT]	TRIBUNAL
Mr. Georges Valade (Sainte-Marie):: Mr. Speaker, I have a question for the Minister of Industry, Trade and Commerce, following his statement that the government had established an inquiry commission to examine the Antidumping act.
Considering that the opposition has made many representations in favour of shoe manufacturers, could the minister tell us when he expects a report on this matter and what the government intends to do with

regard to the many lay-offs in that industry, at the Red Carpet Shoe Company, for example, where they have dismissedi


Mr. Speaker:: Order.


Hon. Jean-Luc Pepin (Minister of Industry, Trade and Commerce):: Mr. Speaker, first of all I should like to set the facts straight. The problem of leather shoe imports has been submitted to the anti-dumping court so as to get from it, under section 16, a ruling on the prejudice suffered by this industry.
So, before taking or considering the possibility of taking unilateral measures, this government, under that section of the act, must obtain the views of the anti-dumping court.


Georges-J. Valade: Mr. Speaker, I should like to put a question which is not supplementary but which is intended to clarify my first question. When does the government expect to receive a report on the results of this investigation carried out by the anti-dumping court?


Jean-Luc Pepin: The anti-dumping court is carrying out this type of investigation for the first time, because it is under a recent amendment that it now has this capacity. We do not know exactly how long this will take. Normally, the anti-dumping court, so I am told, makes its rulings within 90 days, more or less, in a matter of dumping.
I hope that it will also be possible then to assess the prejudice, but the investigation will have to be quite exhaustive. How long it lasts will depend on the evidence which is heard and on the quality of information presented to the anti-dumping court.


Mr. Speaker:: Order.


Hon. Theogene Ricard (Saint-Hyacinthe):: Mr. Speaker, does the minister mean that the advocated steps will compel manufacturers to reopen, after they had to close as a result of heavy sh.oe imports?


Jean-Luc Pepin: Mr. Speaker, since I do not know what will be the opinion of the anti-dumping court, it is difficult for me to comment on that.


Mr.   Jacques-L. Trudel@Montreal-Bourassa: Mr. Speaker, I rise on a point of order.


Mr. Speaker:: Order. The member for Montreal-Bourass-a on a point of order.


Mr. Trudel:: Mr. Speaker, I think that the answer of the Minister of Industry, Trade and Commerce has not been given through the interpretation system. There has been a delay and we have been unable to hear what the minister had to say.



PARLIAMENT HILL


Mr. Jack McIntosh (Swift Current-Maple Creek):: Mr. Speaker, my question is directed to the Acting Prime
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Minister and arises out of the security measures that were implemented on Parliament Hill during the last several days as well as the apparent lack of communication or co-operation between the Royal Canadian Mounted Police and the security staff of the House of Commons. What were the special instructions issued to the RCMP on this occasion and, in particular, were any special instructions issued that would prevent members of this House from proceeding to their offices on any of those days-


Some hon. Members:: Oh, oh!


John (Jack) McIntosh: -or is this the first indication of a police state?


Allan Joseph MacEachen: Mr. Speaker, I can assure the hon. member that there is no indication of a police state in anything that has happened on the bill. As my hon. friend knows, the building and the security staff of the House are not matters for the government. However, I will make inquiries with respect to that part of the question having to do with the RCMP.


Mr. Donald Maclnnis (Cape Breton-The Sydneys):: supplementary question, Mr. Speaker. While the minister is making those inquiries will he assure the members of the House that on future occasions such as the last two we have experienced-the hon. member for St. Boniface is shooting off his face again-


Mr. Speaker:: Order, please. The hon. member who has the floor should be allowed to ask his question.


Mr. Maclnnis:: On a question of privilege, Mr. Speaker, I have the floor and I am asking a question. I would, ask the Chair to pay special attention to the member who used to come from St. Boniface. If he has anything to say, he should have the guts to get up and say it.


Mr. Speaker:: Order, please. Perhaps the hon. member might ask the question he wanted to ask. Then we will proceed because there are just about five minutes left before the end of the question period.


Joseph-Phillippe Guay: I rise on a question of privilege, Mr. Speaker. It is twofold. First, I wish to advise Your Honour that I would like to ask a question today. Second, I would like to advise Your Honour that we would like to keep the hon. member healthy and alive for a long, long time.


Mr. Speaker:: Order, please. I suggest to the hon. member that this kind of question of privilege is not very helpful if we are to proceed effectively before the end of the question period. Will the hon. member for Cape Breton-East Richmond kindly ask his question and we will then proceed to the next subject.


Donald MacInnis: Briefly on the question of privilege, Mr. Speaker, I think thehon. member should acknowledge-


Mr. Speaker:: Order, please. I seek the hon. member's co-operation. I do not think the matter should be proceeded with further by way of a question of privilege. I appreciate the hon. member has a supplementary to the question asked by the hon. member for Swift Current-Maple Creek.
Inquiries of the Ministry


Donald MacInnis: I just thought I should be thanked for giving the hon. member an opportunity to open his mouth and get to his feet. Will the minister ensure that on future occasions, such as the state visits that have taken place in the last few weeks, any security measures will be properly co-ordinated with the security staff of the House of Commons so that the situations that developed will not be repeated?


Allan Joseph MacEachen: Mr. Speaker, the hon. member's suggestion seems to be reasonable and I will investigate whether it is possible to do that.



INDIAN AFFAIRS


Mrs. Grace Maclnnis (Vancouver-Kingsway):: My question is for the Minister of Indian Affairs and Northern Development. In view of the recent Supreme Court decision that a native Indian woman should not have been deprived of her Indian status by reason of her marriage to a non-Indian, is the minister now preparing amendments to the Indian Act to give effect to this decision?


Hon. lean Chretien (Minister oi Indian Affairs and Northern Development):: Mr. Speaker, we are now in the process of deciding whether to refer the ruling of the federal court to the Supreme Court of Canada; when the court has reached a final decision, we will act accordingly.


Donald MacInnis: In the meantime is the minister taking steps to see that no other native Indian women are deprived of their Indian status for this reason?


Joseph Jacques Jean Chrétien: Mr. Speaker, statements were made in this House to this effect, but as long as the matter is before the courts, the registrar of my department is not performing the same duties as before in connection with newly-weds.



EDUCATIONAL FACILITIES IN NORTHEASTERN


Mr. Don Mazankowski (Vegreville):: I wish to direct my question to the Minister of Indian Affairs and Northern Development. Can the minister advise the House whether any new initiatives have been taken with a view to overcoming the impasse caused by the developments that have taken place on the reserves in northeastern Alberta and, if so, will he undertake to inform the House what steps are being taken to ameliorate the situation in northeastern Alberta?


Joseph Jacques Jean Chrétien: Mr. Speaker, I am doing everything possible to solve the problem. I am constantly in
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touch with everyone who can help us. The hon. member might contact the new premier of Alberta. In fact, when I suggested discussing the problem with him, he refused.


Mr. Speaker:: Order, please. The hon. member for Vegre-ville has a supplementary. I suggest to hon. members that we should try to limit the supplementaries in the remaining three or four minutes.


Donald Frank Mazankowski: Has the minister had a change of mind with regard to visiting the reserves in northeastern Alberta, which would do a lot to overcome the problem and give the minister an opportunity to view the situation at first hand and particularly-


Mr. Speaker:: Order, please. The hon. member has asked the question.


Joseph Jacques Jean Chrétien: Mr. Speaker, I am willing to visit the northern Alberta reservations as soon as the children are back in school. I do not think that the situation could be improved by my visiting at an earlier stage.



ROYAL CANADIAN MOUNTED POLICE


Mr. Robert McCleave (Halifax-East Hants):: My question is to the Solicitor General. It is a hardy perennial. Can the minister advise where the case now stands with regard to overtime pay for members of the Royal Canadian Mounted Police?


Hon. Jean-Pierre Goyer (Solicitor General):: If the hon. member goes on, he will have me working overtime.



NATIONAL DEFENCE


Mr. Colin D. Gibson (Hamilton-Wentworth):: Mr. Speaker, I have a question for the Minister of Supply and Services. As tenders on the Canadian Arsenals plant in Toronto were due two months ago, can the Minister of Supply and Services please inform the House whether he has reached any decision on the sale of the plant and, particularly, how the employees will be affected in view of the unemployment situation?


Hon. James Richardson (Minister of Supply and Services):: Mr. Speaker, the government was prepared to sell the Long Branch plant of Canadian Arsenals but none of the bids that we received was satisfactory either in amount or, particularly, concerning our terms about continuing employment of present employees. Therefore our decision is to keep the plant in operation and to do every-

thing possible to increase the work load. I am pleased to say to the hon. member that this decision means there are no lay-offs contemplated at the Long Branch plant of Canadian Arsenals.


Some hon. Members:: Hear, hear!



COMMUNICATIONS


Mr. Lincoln M. Alexander (Hamilton West):: I wish to direct a very important question to the Acting Prime Minister. In light of the fact the Elkin report to the Ontario Human Rights Commission on visible minority performers in advertising concludes there is little doubt that racial discrimination occurs in mass media advertising, in that the image of the Canadian population reflected in Canadian advertisements is biased in the sense that we tend to see a country made up of whites with very few Asians, Indians, Eskimos or blacks, and in light of the fact that this is a multicultural society emphasizing, among other things,-


Mr. Speaker:: Order, please. I am sure the hon. member realizes that according to the rules a question cannot be asked in those terms. The matter raised by the hon. member is important. The question, however, should be asked in a more direct way. It seems to me that the hon. member is now making a speech.


Lincoln MacCauley Alexander: I will get right to the point, Mr. Speaker. Will the minister review all government let contracts from this point of view, hopefully to deal only with firms and advertising agencies which actively adhere to the general principle of Canada being a multicultural society, and will he ensure that all government publications and advertisements demonstrate the ethnic and racial diversity of Canada?


Allan Joseph MacEachen: Mr. Speaker, the question raised by the hon. member is important, complicated and comprehensive. With regard to his over-all objective, I am sure we share his point of view, but how it can be done is a matter that will have to be looked into.


James Aloysius McGrath: Paul Martin would be proud of you.


Some hon. Members:: Hear, hear!


EXTERNAL AFFAIRS
Mr. Barry Mather (Surrey-White Rock):: I have a question for the Acting Prime Minister. Has a request been received from the city of Vancouver for payment of approximately $30,000 for extra police costs reportedly incurred during the visit of Premier Kosygin to Vancou-
November 5, 1971

ver and, if such a request has been received, will favourable consideration be given to it?


Allan Joseph MacEachen: Mr. Speaker, I do not know whether any such request has been received. I will make inquiries and hopefully an answer will be given to the hon. member later.



HOUSING


Mr. lack Marshall (Humber-St. George's-St. Barbe):: My
question is for the Minister of State for Urban Affairs. Under the local initiatives program and particularly the accelerated housing program, can the minister advise if he has had any consultation with the provinces with a view to putting some impetus into projects that will provide homes for those who are poverty-stricken and cannot take advantage of low-cost housing because of the down payments and rates of interest?


Hon. Robert K. Andras (Minister oi State for Urban Affairs):: Mr. Speaker, this kind of consultation between officials of Central Mortgage and Housing Corporation and the provincial housing authorities is taking place all the time. It has again been accelerated in the face of the $113 million that is being brought forward from next year to accelerate employment as well as low-cost housing during the next few months.



NATIONAL DEFENCE


Joseph-Phillippe Guay: My question is directed to the Minister of National Defence. Is any consideration being given to adjusting the Armed Forces wages to reflect the higher value of the German mark which has the effect of reducing living standards for our troops and their families stationed in Germany?


Donald Stovel Macdonald: Mr. Speaker, the answer to this question is yes, this is being considered. This problem has arisen from a number of quarters so far as it affects the Canadian Armed Forces in Europe. The difficulty, of course, is to try to find some permanent basis on which to adjust pay in view of the rapid changes that are taking place in international currencies. At the moment the matter is under investigation.


Mr. Speaker:: The hon. member for Athabasca.
_______________________________9371
Inquiries of the Ministry



INDIAN AFFAIRS


Mr. Paul Yewchuk (Athabasca):: Thank you, Mr. Speaker, I am glad you have finally recognized me; I was beginning to feel that my ability to speak in this House on behalf of the constituents of Athabasca was being curtailed. May I ask the Minister of Indian Affairs and Northern Development a question. A few days ago I asked him whether he had had a chance to review the fifth committee report dealing with Indian education and he said he was studying it. Would he now indicate to the House whether he intends to implement any of the recommendations in this report and, second, whether he intends to bring this report forward for debate in the House in the near future?


Joseph Jacques Jean Chrétien: Mr. Speaker, I have studied that report and we are presently considering what recommendations could be accepted. There is however a very difficult problem: I promised the Indians that they would be consulted on the development of any new policy. I discussed that on several occasions with the president of the Canadian Federation of Indians who are not in a position presently to submit their own recommendations on this very important problem.



NATIONAL DEFENCE


Mr. Doug Rowland (Selkirk):: Mr. Speaker, my question is for the minister of National Defence and is supplementary to the earlier questions regarding the welcome announcement that armed forces' pay will be brought more into line with civilian scales. Can the minister indicate whether or not the increases in salaries will result in a significant reallocation of funds as between personnel, maintenance and the purchase of new equipment?


Donald Stovel Macdonald: Mr. Speaker, it will, of course, have that effect since the amounts paid to personnel will be going up. However, I should make it clear that at least part of the sums will not be found in the current budget and there will be a supplementary estimate for this purpose. To the extent that the pay increase relates to increases for the current fiscal year, this is, of course, contemplated in the present budget. To the extent that there is a pay parity element involved, this will be the subject matter of a supplementary estimate.


Douglas Charles Rowland: May I ask the Minister of National Defence whether, in the adjustments made for special pay, reserve force personnel will now receive a seagoing allowance just as they receive flying pay, submarine pay and diving pay?
24372-34}

November 5, 1971
Inquiries of the Ministry


Donald Stovel Macdonald: Mr. Speaker, I shall have to inquire and I will report to the hon. member on that point.



INCOME TAX


Marcel Joseph Aimé Lambert: Mr. Speaker, I have a question for the Minister of Finance. In view of the decision by International Utilities to relocate its head office in the United States as a result, in part, of the anticipated tax changes, and in view of the contents of the interim report of the committee on banking, trade and commerce of the other place dealing with international investment, is the minister now going to make a review of the provisions of Bill C-259 to see whether he can bring in some modifications in regard to it?


Edgar John Benson: First of all, Mr. Speaker, this company has been in touch with us and Bill C-259 is not the basic reason for their move. The difficulty was that being a United States company they had to live under two sets of laws and regulations, both United States and Canadian, and that was the main reason for their attempt to come under only one set of tax laws.
Second, I have already indicated that the sections regarding international operations will be reviewed. Most of them do not come into effect until 1976, though the passive income provision does come into effect in 1973. In view of the Senate committee report and other representations that have been made, we are taking another look at these sections, as I have indicated before.



EDUCATION


Mr. D. Gordon Blair (Grenville-Carleton):: Mr. Speaker, my question is for the Acting Prime Minister. I put this question forward as one which might form the basis for a discussion at ten o'clock. Is the Acting Prime Minister aware that as a result of recent changes in rules respecting grants made by the National Research Council, the Canada Council and other agencies of the government of Canada there has been a drastic reduction in the number of graduate students in Canadian universities from underdeveloped countries? If he and his government are aware of this, are they prepared to take measures that will ameliorate this rather serious situation?


Mr. Speaker:: Order. I gather from the hon. member's introductory remarks that he has made his own ruling and wishes to come back at ten o'clock.



TAXATION


Jack Marshall: Mr. Speaker, I have a question for the Minister of Finance. Would he advise the House what action he intends to take on the suggestion made by the Pulp and Paper Association that they be given tax relief in order to make the paper industry more competitive?


Edgar John Benson: Mr. Speaker, we have been studying this matter and have asked the association, which made representations in many areas much earlier in the year, to submit to us additional information. We are gathering this information from them particularly to compare their tax position in Canada with the tax position of their competitors in other countries.


EXTERNAL AFFAIRS
Mr. Randolph Harding (Kootenay West):: Mr. Speaker, I have a question that is really a supplementary question to the Acting Prime Minister. In view of the fact that Japan has officially protested the proposed Amchitka test three times in the past few days, including a final attempt by their ambassador today, I would ask the Acting Prime Minister, since personal intervention will apparently not be made by the Prime Minister, whether the government would consider making a special approach through our ambassador in Washington to President Nixon to express our concern over the coming test and to request that it be cancelled?


Allan Joseph MacEachen: Mr. Speaker, I will convey the hon. member's representations to the Secretary of State for External Affairs whom I shall be seeing later in the day,


Mr. Speaker:: Orders of the day.



GOVERNMENT ORDERS


[Stage Direction]
The House resumed, from Tuesday, November 2, consideration in committee of Bill C-259, to amend the Income Tax Act and to make certain provisions and alterations in the statute law related to or consequential upon the amendments to that act-Mr. Benson-Mr. Laniel in the chair.
The Deputy Chairman:: When the committee rose on Tuesday, November 2, 1971, section 18 and an amendment proposed by the Minister of National Revenue were

November 5, 1971

before the committee. Sections 9, 10, 11, 12, 13, 15, 18 and 20 has been grouped for the purpose of debate. Sections 9, 10, 11, 12, 13 and 15 were agreed to. The question is on section 18.
On clause 1-Section 18: General Limitations.


Robert Jardine McCleave: Mr. Chairman, I want to ask a technical question that arises out the wording to be found on page 56 of the bill, in subsection (4) of this section, which deals with the limitation of deduction of interest by certain corporations. I gather that the purpose of this subsection is to ensure that a foreign owned corporation does not skim off money from its Canadian subsidiary operations by means of some dodge involving interest rates or charges. The minister and the department are making an attempt, with which I must say I agree, to see that any such practice is stopped. The technical problem that I should like to raise relates to paragraph (A) which uses the phrase "the corporation's paid-up capital limit". I wonder if that wording is sufficiently precise to achieve what the minister hopes to achieve, or whether it might be better to use simply the words "paid up capital"?
noon)


Mr. Mahoney:: I cannot put my finger on it immediately, but I am advised there is a definition of the term elsewhere in the act and I will endeavour to find it for the hon. member.


Robert Jardine McCleave: There is a definition elsewhere. It is referred to in section 89(1). I have read that section as well, but I still think it would be worth while for the parliamentary secretary to look at this in order to determine whether the government is achieving what it has set out to achieve. I do not want to hold up the subsection because of that point, but the government advisers might take a second look at this. They can always re-open the matter later.


Marcel Joseph Aimé Lambert: Mr. Chairman, I should like to return to the point I was making the other night regarding section 18(l)(a). I realize there are other sections which deal with business expenses, but I am not at all satisfied with the suggestion of the minister, and I feel that the parliamentary secretary has completely misunderstood my idea. I do not intend that members of the House who are professionals should have an additional advantage, but they should be allowed to deduct the legitimate expenses of attending professional conferences. I have in mind lawyers attending the Canadian Bar convention or the Canadian tax convention, or doctors attending a convention of the Canadian Medical Association. I should like to have the ear of the parliamentary secretary in order that he might understand this point.


Patrick Morgan Mahoney: You are plugged into this system.


Marcel Joseph Aimé Lambert: The system may be plugged into your ear but I want it plugged into the grey matter, and that is something different.
I should like to have the disability in respect of the interpretation of the statute removed so that the fact a Member of Parliament draws a stipend here, which is likely greater than his professional income, does not bar him from claiming that legitimate expense. A professional
Income Tax Act
who is a member here and attends a professional conference should be entitled by law to deduct those expenses. That is to say, a lawyer or a doctor in practice should be able to claim these expenses, although only at a marginal rate. This is not a claim for total expenses, compensation or reimbursement, but he should be entitled to put this in as a deduction, thereby reducing his taxable income, to gain the benefit of that fractional, marginal rate. That is all a lawyer in practice is able to do, and that is the limit of my representation which I hope will find a reasonable reception.
Let me suggest to the parliamentary secretary that if an hon. member attends the Canadian Tax conference he might improve his personal knowledge, and thereby be of assistance to this House. A lawyer attending the Canadian Bar Association conference on a specific segment of criminal law or perhaps constitutional law, would improve his knowledge as a Member of Parliament and he should be legitimately entitled to that allowance. All this means is that if I earn $1, $200 or $300 as a lawyer, and the rest of my income is my parliamentary stipend, I should not be barred from claiming these expenses to the same extent allowed a full-time practitioner.


Patrick Morgan Mahoney: It is my understanding of the law that the hon. member can claim these expenses against his professional income. He cannot reduce his parliamentary stipend by claiming such expenses, but if he has a professional income as a lawyer, an accountant or a doctor, as the case may be, the expenses connected with earning that income, including the cost of attending certain conferences and so on, are allowed as an offset against that part of his income. He cannot get his parliamentary salary or wage reduced, because that is not professional income or wage. This is the purpose of the tax free expense allowance an hon. member is entitled to, if he feels he must incur that expense to carry out his duty as a member.


Marcel Joseph Aimé Lambert: The interpretation
placed on this subsection is that your major income must come from your profession, and that is quite impossible under our circumstances. This is what I wanted to change; that 50 per cent bar.


Patrick Morgan Mahoney: I will certainly take the question under advisement. I will read Hansard and have the officials read Hansard as well, because we may be misunderstanding the hon. member's point.


Gérald Laniel: The committee has been considering the amendments moved by the Minister of National Revenue on October 22, which may be found at pages 8934 and 8935. Does the committee wish me to dispense with the reading of the amendment?


Marcel Joseph Aimé Lambert: Mr. Chairman, the reference you have made to certain pages in Hansard may be correct, but if you referred to the particular subsections it would be helpful. I have them before me and do not need to read Hansard, but your reference would require us to scurry back through the pages of Hansard.


Gérald Laniel: If I understand the hon. member correctly, he wishes me to relate the amendments to the particular sections.


Marcel Joseph Aimé Lambert: That is right.

November 5, 1971
Income Tax Act


Gérald Laniel: The amendment by the Minister of National Revenue relating to section 18 of the bill is to be found at pages 55 to 58. Does the committee wish the Chair to read it?


Stanley Howard Knowles: I do not think it should be read, but I think it should be included in Hansard at this point as if it had been read.


Gérald Laniel: Does the committee agree that the amendment be included in Hansard as though it had been read at this time? 1 could read it if hon. members so desire.


Patrick Morgan Mahoney: I think the hon. member for Edmonton West has made a helpful suggestion. Some of these subsections we are dealing with run on for several pages and it would be helpful to have them enumerated more specifically. The first amendment is to section 18(2)(a); the second is to 18(4); the third is to 18(5) and a further one is to 18(7).


Marcel Joseph Aimé Lambert: And 18(2)(b) as well.


Patrick Morgan Mahoney: Yes, section 18(2)(b) as well. You are correct, Sir.
[Editors' Note: The amendment referred to follows:]
(b)	a portion of the amount or of the part of the amount described in paragraph (a) may reasonably be considered to be an amount that, but for section 21. would have been deductible in computing the income of the corporation for the year in respect of interest paid or payable by it on outstanding debts to specified non-residents, and
(c)	subsection (4) is or would be. if this Act were read without reference to section 21, applicable in computing the income of the corporation for the year.
notwithstanding section 21, that proportion of the portion described in paragraph (b) that, but for this subsection, would
(d)	be added by virtue of section 21 to the capital cost to the corporation of depreciable property acquired by it, or
(e)	be deemed by section 21 to be exploration, prospecting and development expenses incurred by it in the year,
as the case may be. that the amount determined under paragraph (4) (a) in respect of the corporation for the year is of the amount determined under paragraph (4) (b) in respect of the corporation for the year shall not be so added or be so deemed, as the case may be.'
That section 18 as set forth in clause 1 of the said Bill be amended
(a)	by striking out lines 13 to 18 on page 55 and substituting the following:
'(a) interest on borrowed money used to acquire land, or on an amount payable by him for land, or
(b)	property taxes (not including income or profits taxes or taxes computed by reference to the transfer of property) paid or payable by him in respect of land to a province or a Canadian municipality,'
(b)	by striking out lines 14 and 15 on page 56 and substituting the following:
'in computing its income for the year in respect of interest paid or payable by it on outstanding debts to specified non-residents that'
(c)	by striking out lines 8 to 19 on page 57 and substituting the following:
'(a) that was payable by the corporation to a person who was, at any time in the year,
(i) a shareholder of the corporation who, either alone or together with persons with whom the shareholder was not dealing at arm's length, owned 25% or more of the issued shares of any class of the corporation and who was
(A)	a person not resident in Canada, or
(B)	a non-resident-owned investment corporation, or
|(ii) a person described in clause (i) (A) or (B) who was not dealing at arm's length with a shareholder described in subparagraph (i), and'
(d)	by striking out lines 39 to 46 on page 57 and lines 1 to 21 on page 58 and substituting the following:
'Limitation on application of section 21 where ss. (4) applicable
(7) Where
(a) section 21 is applicable in respect of an amount or a part of an amount specified by a corporation resident in Canada in its election under that section that, but for that section, would have been deductible in computing its income for a taxation year.


Gérald Laniel: Is the House satisfied?


Marcel Joseph Aimé Lambert: We are on the same wave length for once.


Gérald Laniel: Shall the amendment carry?


Some hon. Members:: Agreed.
Amendment (Mr. Gray) agreed to.


Gérald Laniel: Shall section 18 as amended carry?


Some hon. Members:: Agreed.
Clause 1, Section 18, as amended, agreed to.
On Clause 1-Section 20: Deductions permitted in computing income from business or property.


Gérald Laniel: Now, the committee will proceed to section 20 at page 61 of the bill. There is also an amendment by the Minister of National Revenue which appears in Hansard for October 22, at page 8935. The amendment reads as follows:
That section 20 as set forth in clause 1 of the said bill be amended
(a)	by striking out line 26 on page 63 and substituting the following:
'Discount (f) an amount paid in the year in satisfaction on certain Df the' obligations -
(b)	by striking out lines 16 to 23 on page 64 and substituting the following:
'the amount by which the lesser of the principal amount of the obligation and the amount so paid in satisfaction of

November 5, 1971__________________COMMONS DEBATES_____________________ 9375
Income Tax Act
the principal amount thereof exceeds the amount lor
which the obligation was issued, and
(ii) in any other case, hall ol the amount by which the lesser ol the principal amount ol the obligation and the amount so paid in satisfaction ol the principal amount thereof exceeds the amount for which the obligation was issued.'


Robert Jardine McCleave: Mr. Chairman, my question on section 20 will be brief. Your reading of the amendment points up the fact that, substantially, the new provisions here as compared to the old Income Tax law involve subsection 1(f) of section 20 dealing with the discount on certain obligations. I think perhaps it would be helpful if the parliamentary secretary could briefly tell us why this change has been presented in this bill.


Patrick Morgan Mahoney: Well, Mr. Chairman, the basic concept here of course, is that certain types of payments, while perhaps technically of a capital nature, are really indistinguishable from income. For example, if a bond sells at a discount, at 97 per cent of the principal amount, in addition to the interest on the bond that 3 per cent, when the bond is retired or matured, would be considered as income.


Robert Jardine McCleave: I take it that would be regarded as income in the year in which the bond was redeemed and not averaged out over the intervening period. Am I correct in that?


Patrick Morgan Mahoney: Yes, Mr. Chairman.


Marcel Joseph Aimé Lambert: Mr. Chairman, I do not know that there is anything particularly new or contentious in these subsections. However, I should like to point out that it seems they are almost incidental within the confines of personal income. As a matter of fact this section deals with expenses which may be deducted from gross income to arrive at the taxable income. In fact most of the subsection deals with corporate income, for instance, the cost of issuing shares, the cost of issuing other obligations, the discounts on the issuance of a commercial bill and matters of this kind which certainly are not personal income. This is a sort of omnibus catch-all type of section. To that extent, I do not find there is anything particularly wrong with it except that when we get to subsection 11 we get into the computation of foreign taxes on income from property exceeding 15 per cent and foreign state income tax. There is a point here on which I would like to make a certain comment.
I think there has been some advantage in this, although I do not know quite how it is covered under the treaty- and this matter is covered by a treaty. This particular provision under subsection 12 of section 20 as it appears at page 74, I suppose one could call the "Windsor clause". No doubt the Minister of National Revenue had something to do with this particular clause. If a state adjoining Canada should impose a state income tax, and there are a number of Canadians working in that state, hitherto the state income tax was not allowable as, shall we say, an offset on the Canadian income tax that would be payable by a resident of Canada on income earned abroad. I think if we can be satisfied that the United States has extended
reciprocal provisions to Americans working in Canada, we should do the same for our citizens working in the United States. I am much happier seeing Canadians working in Canada if they are living in Canada, but I think this is a reasonable and just provision. After all, it is pretty tough if you have a legitimate income tax rebate against your income or part of your income and are not able to get appropriate adjustment for it.
With regard to subsection 13, I would suggest that again is much more a corporate matter. As a matter of fact, this is one of the propositions relating to transfers of foreign income where you can have a dividend declared by an affiliate-and we will come later on to the definition of what is a foreign affiliate-and then transfer it to another affiliate, have a tax exempt surplus and then transfer it into Canada. I would like to have an explanation concerning why this subject is dealt with under this particular section which deals primarily with expenses, and yet concerns a declaration of exemption from income or a tax exempt status of a dividend received from a foreign affiliate with a tax exempt surplus.


Patrick Morgan Mahoney: Mr. Chairman, this whole section 20 of course deals with deductions from income generally. Detailed provisions regarding tax treatment of dividends of foreign affiliates are dealt with in sections 90 to 95 inclusive. This is merely the superstructure and declares that that type of payment is an allowable deduction from income. On the question the hon. member raised regarding subsection 12, yes, the United States does recognize in its tax laws provincial income tax paid in Canada.


Gérald Laniel: Shall the amendment carry?


Some hon. Members:: Agreed.
Amendment (Mr. Gray) agreed to.


Gérald Laniel: Shall section 20, as amended, carry?


Some hon. Members:: Agreed.
Clause 1, Section 20, as amended, agreed to.


Gérald Laniel: The Committee will now proceed to a group of sections that were identified as cleanup sections by the President of the Privy Council.


Robert Jardine McCleave: Mr. Chairman, may I raise a point of order? I understood that, first of all, we were to complete section 8 and then, as you said, we were to deal with a number of sections. I believe that if the government is ready to dispose of section 8, it would perhaps provide us with a few interesting moments before we get involved in a lengthy bit of housecleaning.


Patrick Morgan Mahoney: I had spoken privately to the hon. member whose amendment to section 8 is before the committee, and I regret not having anticipated this question. The cabinet did not have the opportunity yesterday to consider the possible amendment to that section, that might be agreeable, and accordingly, with the indulgence of the committee, I would ask that that section continue to stand. I am not too sure what the timing will be in view of the fact that next Thursday is a holiday, but I assume that

November 5, 1971
Income Tax Act
at some point next week the cabinet will be meeting, so I hope that we can deal with this some time next week.


Stanley Howard Knowles: Mr. Chairman, we were so advised, and I may say that we are quite prepared to let section 8 stand until we have word from the government that it has decided to do something about it, hopefully in the right way.


Mr. Rodrigue:: Mr. Chairman, having listened to the Parliamentary Secretary, we are prepared to let section 8 stand until the cabinet can discuss the possibility of bringing in amendments. I hope that there will be further consultations between the House leaders of the various parties and that hon. members will be told when that section is to be dealt with here.


Gérald Laniel: Is it agreed that section 8 shall stand?


Patrick Morgan Mahoney: If I understand the import of the suggestion of the hon. member for Beauce, I would be quite prepared to undertake to give, say, two days' notice of when we would be ready to call section 8 again.


Some hon. Members:: Agreed.


Gérald Laniel: As I was saying, the committee will proceed with the consideration of an important group of sections which are related to the main sections that have been studied up to this time. The list is as follows: 16, 67, 69, 70, 72, 74 to 78 inclusive, 81, 126, 144, 145, 148, 149, 198, 199, 200 to 207 inclusive, 248 to 252 inclusive and 254. As was done previously, all these sections will be open to discussion, but the Chair will call the first one for the purpose of obtaining approval to the consideration of this group of sections. Shall section 16 carry?
On clause 1-Section 16: Income and capital combined.


Robert Jardine McCleave: I think the committee will be thrilled to know that I do not intend to make a general speech on our housecleaning operation, but I have a brief question with regard to section 16. Since subsection (3) of section 16 is new, may I ask the parliamentary secretary to report briefly why this subsection has been put in the bill?


Patrick Morgan Mahoney: Is the hon. member referring to subsection (2) or to the whole of the section?


Robert Jardine McCleave: Simply to the addition that is made to the present law.


Patrick Morgan Mahoney: Subsection (1) is a continuation of the present law, and subsections (2) and (3) carry forward, with some slight modification, the rules of the present law concerning the treatment of bonds under bonds issued at a substantial discount by tax exempt organizations. Under these rules, the discount may be treated as income in the hands of the first taxable Canadian holder. The treatment of discounts on bonds issued by taxable organizations has already been discussed under section 20. That is the big change in the section.
Subsection (4) is a continuation of the existing one, and subsection (5) is a technical provision that makes it clear

that the blended payment rule in section 16(1) does not apply in cases where this discount is regarded as income.


Stanley Howard Knowles: I merely rise to say what I think is in the minds of all of us, that it would take more ingenuity than most members in the House possess to make a general speech on this collection of sections. So, I suggest that we take them seriatim.


Gérald Laniel: Does the committee accept the suggestion of the hon. member for Winnipeg North Centre that we call every section one after the other and allow discussion on each of them as they come? Shall section 16 carry?


Some hon. Members:: Agreed.
Clause 1, section 16 agreed to.
On clause 1-Section 67:	General Limitation re
Expenses.


Marcel Joseph Aimé Lambert: This is one of the sections that can be readily missed by a taxpayer because, notwithstanding the fact that in certain areas or certain sections of the bill stated expenses are allowed to be deducted, this is the little door right down in that back corner which gives the assessor a way to disallow deductions by simply quoting the following:
In computing income, no deduction shall be made in respect of an outlay or expense in respect of which any amount is otherwise deductible under this Act, except to the extent that the outlay or expense was reasonable in the circumstances.
This provision gives the assessor a straight discretion and it leads in so many instances to the biggest hassle between the taxpayer and the assessor. The parliamentary secretary might wish to consult the Minister of National Revenue as to where the balance lies. Perhaps the assistant deputy minister in the Finance Department who deals with taxation could also say from his experience in the tax field where the balance lies. I know that you can make a statute so rigid that you cannot get a break from the assessor now and then. On the other hand, what I do not like to see are funk holes whereby a taxpayer reading a section wherein it is stated that he shall be allowed certain expenses in relation to earned income, and then when he makes his claim, finds that under section 67 the assessor says "I do not think the expenses are reasonable under the circumstances".
We all know that if there is a serious question about an item it can go further up the line, and ultimately to a court. This is one of those sections under which neither the Tax Review Board nor the Federal Court of Appeals would substitute their discretion for that of the assessors. They will say it is not a matter of law. The Tax Review Board might, however, but certainly no member of what had been the Exchequer Court, and which will now be the appropriate division of the Federal Court, will substitute the court's discretion for that of the assessor which, by the time the case gets to the court, is the opinion of the minister. Who says they are not reasonable under the circumstances? These statutes cannot be written merely for administrative convenience. This is one point where I will stop, right there and then, if the criterion is to be always the administrative advantage. The taxpayer has a
November 5, 1971

tough enough fight as it is without our loading the dice against him all the time. This is one of those sections that, if it were in a contract, would be in superfine print. I want to get a full explanation.


Patrick Morgan Mahoney: Mr. Chairman, as the hon. member noted, this does continue a provision that is in the present act. It is basically to provide that an outlay or an expense is deductible only to the extent that it is reasonable.


Marcel Joseph Aimé Lambert: Why don't you say so?


Patrick Morgan Mahoney: The words "in respect of which any amount is otherwise deductible," that appear in this section are there to make it clear that the limit also applies where the deduction is indirect rather than direct. An example of that might be where a person paid an exorbitant amount of money for a capital asset, which he then depreciates, and the depreciation, an indirect deduction from income in this sense, would have to be reasonable and be related to a reasonable capital cost.
On the basic question of jurisprudence, Mr. Chairman, I can only say that I do not think the courts have ever been particularly shy in accepting the responsibility of determining what is or is not reasonable. It is a mixed question of law and fact. Usually, when it comes under a taxing statute more often it is a question of fact, and they will exercise their jurisdiction and discretion in determining whether the taxpayer has been reasonable and perhaps whether the tax assessor has been unreasonable in his interpretation of the transaction.


Marcel Joseph Aimé Lambert: I hate to disagree with the parliamentary secretary's opinion, but if there is an indication that there is an appeal on a point of law to a particular court-and we must remember that in many instances on this point appeals only lie on a point of law- the matter of reasonable interpretation gets terribly short shrift on application to the court. This is what I am questioning all along the line. This is why I feel there are some difficulties here.
It would be better with respect to this question of reasonableness if a direct indication were given in bold letters in conjunction with the main section dealing with expenses, rather than having it tucked away in the position that I have described of being in very fine print. I say this because when we come to consider sections 66, 69 and so forth, the subject matters are entirely different.


Duncan Gordon Blair: Mr. Chairman, I am interested in the comments which are being made by the hon. member for Edmonton West. I wonder if I correctly understood what he has said. If I have not correctly understood, then I am sure he will appreciate that my difficulty in following him lies in my being this far away from him in the chamber at the present time. Does the hon. member suggest that the present test of reasonableness for this type of expense should be replaced by some codified, arbitrarily defined one outlining the categories of expense? Is he suggesting that?


Marcel Joseph Aimé Lambert: Mr. Chairman, I am sure that in that outer-limits post which he occupies the hon. member missed what I was trying to say. This subsection deals with expenses required to earn an income, from a
Income Tax Act
business or otherwise. There are various sections in which these things are determined. For instance, we have considered them under section 18. I ask the hon. member to look at section 18(l)(a) which reads:
In computing the income of a taxpayer from a business or property no deduction shall be made in respect of
(a)	an outlay or expense except to the extent that it was made or incurred by the taxpayer for the purpose of gaining or producing income from the business or property;
But, on the other hand, section 67 reads:
In computing income, no deduction shall be made in respect of an outlay or expense in respect of which any amount is otherwise deductible under this Act,-
An amount that would be deductible under section 18(l)(a).
-except to the extent that the outlay or expense was reasonable in the circumstances.
Section 18(l)(a) does not say anything about reasonableness, and there is a flat indication that in many instances section 18 does not speak of any limitations. It is related to the earning of income from the business or property.
Using the example given by the parliamentary secretary about indirectly controlling the nature of the expenditure, whether it is reasonable or not, let us say that the proprietors of a high rise apartment, a high class one, instal some equipment in the lobby which is of a particularly high quality. This, of course, affects the level of depreciation, and I think the hon. member for Grenville-Carleton will agree with me that it affects the quantum of depreciation. If on the one hand the assessor, and through him, the minister, says, "No, this is far too elaborate; this is not reasonable with regard to this particular building," I point out that section 18(l)(a), and section 16 and section 67 are in conflict. Is it the taxpayer or is it the assessor who is going to determine what is reasonable? I would go further; would the court at the appropriate level, exercise its views or its discretion and decide whether that particular type of capital expenditure was reasonable under the circumstances?


Duncan Gordon Blair: Now that the hon. member has explained his point more fully, I feel it is possible for me to make one or two comments on it. The first thing that I think should be said is that there is no conflict between sections of this kind but they impose different tests for different purposes. So far as an expense of this kind is concerned, the first and absolute test is that it must be made in order to earn income and not for some other purpose, such as to provide clothes for the proprietor of the business. The second test is that it must be reasonable in relation to the nature of the enterprise and so on.
I do not profess to have had complete experience in the field of tax law, but I have never heard people object to the concept that expenses of this type must be reasonably related in the circumstances to the condition of the taxpayer and the type of business conducted. In saying all this, I make no comment at all on the example given by the hon. member for Edmonton West because, as he pointed out, he was talking about capital expense and capital cost allowance which may fail to be determined under different principles.


Marcel Joseph Aimé Lambert: No, they don't.

November 5, 1971
Income Tax Act


Paul Yewchuk: Mr. Chairman, I am a little intrigued by the last portion of this clause which reads "except to the extent that the outlay or expense was reasonable in the circumstances". I think it is very easy to understand that' what one person considers reasonable another persojn may consider completely unreasonable. It seems to me that there could be a lot of confusion as a result of this provision unless the government is prepared to present a series of guidelines as to what would be reasonable in the circumstances. Under the present situation, I suppose what they have in mind is an arbitrary power given to somebody to review what the person filing the income tax return believes to be reasonable. Who would make the original judgment of what is reasonable? Would it be some bureaucrat who could then force court action? Is some sort of appeal board being established? I wonder if the parliamentary secretary could clarify these points?


Patrick Morgan Mahoney: Mr. Speaker, I would refer the hon. member to section 169 and following with regard to appeal provisions. When he has had an opportunity to peruse them, I will be glad to deal with any questions on what the appeal rights are. However, I understand that there is a possibility we will be dealing with these sections later today.
I really do not believe that the hon. member is serious in suggesting that the government should arbitrarily establish guidelines in this area rather than leave the test of reasonableness to be determined in the courts. Of course, the initial dealings between the taxpayer and the Department of Revenue are through a tax assessor, but if the taxpayer disputes the ruling of the tax assessor he has the right of judicial appeal. So far in our society we have not devised a more ingenious way or a more satisfactory one of arbitrating disputes between the government and citizen than through the courts. I think the courts are generally regarded as being impartial and performing well. When the hon. member looks at section 169 and following, he will note that there are tribunals available which would allow a speedy and inexpensive determination of the matter before it gets to the federal court and the Supreme Court of Canada.


Paul Yewchuk: I realize that section 169 deals with that, Mr. Chairman, but in view of the tremendous authority which seems to be given to the tax assessor in this case, I was wondering what guidelines he has to follow and who sets them in determining reasonableness?


Patrick Morgan Mahoney: It is just a question of fact, Mr. Chairman, in each case. If somebody claims that he should be able to write off $20,000 for a Rolls Royce because he is a shoe salesman, the assessor might decide that was a questionable expenditure and that a Chev would do just as well. This is the problem. I could spend all afternoon, I suppose, reciting a litany of examples but when you get down to it, these things arise when there is a disagreement between the taxpayer and the tax assessor as to what expenses are reasonably incurred in earning income. So far at least we, as a government, feel, and I think most Canadians would agree, that the test of reasonableness is not an unreasonable test and that in fact the courts function rather well in determining it.


Robert Jardine McCleave: I should like to enter this discussion, Mr. Chairman. I think it is important because if one examines the bible, and I use the Canadian Master Tax Guide, the CCH publication, there are pages dealing with the question raised by the hon. member for Edmonton West, followed by the hon. member for Grenville-Carleton and the hon. member for Athabasca. Some of the litigation has been extraordinarily expensive and sometimes the Supreme Court of Canada comes into the field very late, after taxpayers have been subjected to certain procedures and practices and the ultimate court that we have overturns the decision of the lower court. It is at least a fruitful field for the lawyer and the chartered accountant, if a somewhat puzzling field for the taxpayer.
I think I would have to agree that the courts should be given pretty wide latitude to determine the meaning of what is reasonable in the circumstances. We can never really get away from that. However, I would point out to the parliamentary secretary that when taxpayers are left in doubt and when they have to incur vast legal expenses to solve the problem, some day perhaps section 67 could be redrafted in better language.
I shall not go through the cases I have read, but I would note that a large number of them seem to be trying to draw that subtle line between what are the expenses of earning an income and those expenses which are more likely of a capital nature. Perhaps I can illustrate it with one case from the CCH report. A heavy storm created considerable damage to a cottage which was used by its owner for rental purposes. He put the roof back on the cottage and carried out repairs to bring it back to its former condition. These were held to be expenses properly incurred and reasonable in the circumstances to earned income. Being a sensible fellow, he decided that the next storm was not going to do that type of damage if it could be prevented. He extended and strengthened the retaining walls, taking an ounce of prevention to head off a ton of headaches. It was held by the courts that the retaining wall was a capital expense and was not reasonable in the circumstances for earning an income.
When you get into that sort of situation, and the tax returns are filled with that sort of thing, then you realize that more precise lines should be drawn for the guidance of those people in Canada who pay taxes.


Duncan Gordon Blair: Mr. Chairman, may I intervene again for a few minutes. It seems to me that the Jonathan opposite has made some deluded comments. Exception has been taken to the use of the word "reasonable" in the language of the section. Actually, the example the hon. member for Halifax-East Hants gave us relates to something else, namely, the test whether or not the expense was necessary for the earning of income. I think one would look in vain for cases in which the question of whether expenses are reasonable was brought up in court and for cases in which expenses had been challenged. On the other hand, one would find many cases in which the test was whether the expense was necessary to earn income. That is the question tested in many cases.
I make this suggestion. It would be a somewhat dramatic departure if this House were to consider interfering too much with language like this which has been in the stat-
November 5, 1971

utes for many years and is well understood in industry, in the accounting and legal professions. Language such as this, or a provision such as this, is only exercised in exceptional cases in which new situations arise. I also suggest this: neither this House nor any other house can attempt to foresee, in advance, all such detailed problems which may arise and we cannot make provision to cover them.


Robert Jardine McCleave: Mr. Chairman, again, I hate to quarrel with as distinguished a member of the House as the hon. member for Grenville-Carleton. If he looks at the cases he will find that battles have been fought over the reasonableness of expenses, as opposed to battles fought about expenses incurred under capital expenditures and expenses incurred for the earning of income. For example, there is a delightful case in which a company sponsoring a baseball team for purposes of advertising and promotion asked the court to determine that this was a reasonable expense.


Gérald Laniel: Is the committee ready for the question? Shall section 67 carry?


Some hon. Members:: Agreed.
Clause 1-section 67-Agreed to.
On clause 1-section 69-Inadequate considerations


Robert Jardine McCleave: Mr. Chairman, I rise again. I will call this the Aunt Minnie and the white elephant section, to identify it, for members of the committee. The Aunt Minnie provision of course is suggested but not spelled out in section 69(l)(c), which reads:
(c) where a taxpayer has acquired property by way of gift, bequest or inheritance, he shall be deemed to have acquired the property at its fair market value at the time he so acquired it.
I suppose that there are Canadians who find themselves in a strange position by having gifts thrust upon them that they could not possibly want, gifts like old antiques, say, or Aunt Minnie's white elephant or pink elephant. If she leaves it to you, you are stuck with the beast and stuck with the possible tax you may pay with regard to this elephant or other gifts of a similar, unwanted nature. I wonder if the parliamentary secretary could reassure us by saying that people are entitled to refuse bequests or gifts which put them in a somewhat outlandish position with the income tax department.


Patrick Morgan Mahoney: Mr. Chairman, it is my understanding that a person is entitled to refuse a gift, just as one is entitled to refuse other property. I do not think the Income Tax Act affects this right in any way. I suppose that if this did happen, a person could always re-transmit the gift to a charitable institution like a university which is willing to accept almost anything. I do not think there is any practical problem here.


Marcel Joseph Aimé Lambert: Mr. Chairman, contrary to what the hon. member for Grenville-Carleton would expect, perhaps, I think that this provision which is new, and particularly section 69(l)(c), is there to protect the taxpayer from the clutches of the capital gains tax, which we will come to in due course. Here we have at least a base for the establishment of the value of something
Income Tax Act
received by way of gift, bequest or inheritance. A person shall be deemed to have acquired the property at its fair market value. Of course, there may be some argument as to what is fair market value. However, the recipient of a bequest will not suddenly find himself facing a demand which,is based on the amount of the original cost to the original owner. This section says that the individual shall be deemed to have acquired the gift or bequest at its fair market value, and that value is a matter for circumstances to decide. I think that is the only way to protect the taxpayer from, shall we say, difficulties which might arise under the capital gains tax provision to which we shall come. That is the only new portion in the whole of section 69, and I think it is quite appropriate that it be included here. May I call it one o'clock?


Gérald Laniel: It being one o'clock, I do now leave the Chair.
At one o'clock the committee took recess.


[Stage Direction]
AFTER RECESS

The Committee resumed at 2 p.m.
Paul Yewchuk: Mr. Chairman, I am certainly no expert on taxation.


An hon. Member:: Agreed.


Paul Yewchuk: I have no background to indicate that I should be an expert. There are some phrases, words or terminology in this bill of which I, as an ordinary citizen, would like to know the meaning. In several subsections there is reference to "arm's length". Can the parliamentary secretary give us an official definition of the words "arm's length"?


Patrick Morgan Mahoney: Mr. Chairman, "arm's length" is the concept where a person is dealing with someone other than a member of his immediate family, for example. If my recollection is correct, there is no specific definition of "arm's length". There is a statement that certain relationships are deemed not to be arm's length, such as a deal between yourself and your wife or yourself and your mother. On the other hand, there may be transactions between people who do not fall within the defined relationship which might also be non-arm's length, as a result, for example, of a transaction between you and a company that your father controls. These are again questions of fact which are subject to the statutory definition that certain relationships are deemed not to be arm's length. This would be decided in the courts if the dispute arises.


Paul Yewchuk: Mr. Chairman, I wonder whether or not one's first cousin is at arm's length?


Jean-Luc Pepin: What about your mother-in-law?


Patrick Morgan Mahoney: If the hon. member wants to look at section 251, he will find the definitions. I wonder if the purposes of the committee are going to be served by questions dealing with the existing law. I put this very politely and calmly. We are dealing with a tax reform bill. There are many sections in which there are no significant

November 5, 1971
Income Tax Act
changes. I am happy to provide answers. The officials of the Department of Finance will be happy to satisfy members inquiries on situations of this nature, but I wonder if the committee is the place to do this or whether specific questions which involve the application of the existing tax law and so on might not be dealt with privately. We will be delighted to answer these questions, but as one member of the committee to other members of the committee, perhaps the committee of the whole might better use its time than dealing with matters like this.


Robert Jardine McCleave: Mr. Chairman, I think the parliamentary secretary has raised a very important question, but he may have opened up the largest can of worms in his parliamentary career. We are dealing with taxation reform with a remarkably limited number of members. This has been the experience so far. I wonder whether this is a bad way of proceeding with perhaps the most important measure this Parliament is going to be asked to enact. Your Honour should have ruled the parliamentary secretary out of order and should probably rule me out of order before we get into a debate that goes far beyond the particular subsection we are being asked to consider.
In defence of my colleague, the hon. member for Athabasca asked a question that really deals with the techniques that have existed up to this time. I have been in charge of looking after the first sections of this measure. I hope that by four o'clock I will be discharged of my responsibility so that I can go home and live happily ever after. I have concentrated on the new provisions in the law so that those people who are interested in income tax reform or changes will be able to find out from reading Hansard on Monday where the changes are actually taking place. The hon. member for Edmonton West, who cannot exactly be regarded as a tax novice, raised a question this morning about the operation of a particular section which the committee passed a short while ago. I am not going into that debate again.
The hon. member for Athabasca, I think very properly, is at least interested enough to attend this afternoon, and he wants to find out what an arm's length transaction is. The parliamentary secretary has kind of sloughed him off by saying that this is something that is well known in the law. The parliamentary secretary is probably quite right about that, but the hon. member for Athabasca also has a responsibility. He has to decide whether he will give his approval to this income tax measure or will not, and in that sense he is living up to his responsibility in a very fine way.
I think we are straying from the point, but if the parliamentary secretary wants to open up cans he should be prepared to see what is within them. I conclude by saying that I do not think it serves the purposes of a very important measure to start questioning whether people should ask about existing law. I had always thought the purpose of change was to examine everything and to make observations about everything, and this the hon. member for Athabasca has done.


Gérald Laniel: Order, please. I think I should, as Chairman of the committee, make a statement at this time. I feel that the hon. member for Athabasca was
completely right in asking his question. I am not going to intervene in this debate, except to say that as Chairman of the committee I am here to apply the rules. The question as put by the hon. member for Athabasca was within the four corners of the rules and was relevant. It is for the committee to decide how it will operate. I think up to now it has done a good job with the co-operation of all hon. members and I think that, as far as possible, we should follow the pattern that has been established.


Paul Yewchuk: Mr. Chairman, I rise briefly to indicate my resentment of the implication of the parliamentary secretary that only lawyers and accountants should participate in the debate on this tax bill.


Some hon. Members:: Oh, oh!


Paul Yewchuk: That is what he is saying, and I place the Minister of National Defence in the same category. He thinks only he has the right to speak on this bill. As I said this morning, I am no tax expert but I do represent the riding of Athabasca which is populated by all sorts of people, not only lawyers and tax experts. If we were to carry through the suggestion of the parliamentary secretary and the Minister of National Defence, it would mean that we would have nothing but lawyers and tax accountants in the House of Commons.


Gérald Laniel: Order. The committee should return to subsection 69. If the hon. member has a question to raise, he may do so, but I do not think the committee will gain anything by pursuing this kind of exchange.


Paul Yewchuk: In that case, Mr. Chairman, may I place my question again before the parliamentary secretary to see whether I can get a decent answer. Would he give me a definition of the expression "arm's length"?


Patrick Morgan Mahoney: Mr. Chairman, I regret that the hon. member misinterpreted the intent of my remarks. I shall read section 251 into the record:
(1)	For the purposes of this Act,
(a)	related persons shall be deemed not to deal with each other at arm's length; and
(b)	it is a question of fact whether persons not related to each other were at a particular time dealing with each other at arm's length.
(2)	For the purpose of this act "related persons", or persons related to each other, are
(a)	individuals connected by blood relationship, marriage or adoption;
(b)	a corporation and
(i)	a person who controls the corporation, if it is controlled by one person,
(ii)	a person who is a member of a related group that controls the corporation, or
(iii)	any person related to a person described by subparagraph (i) or (ii);
(c)	any two corporations

November 5, 1971

(i)	if they are controlled by the same person or group of persons,
(ii)	if each of the corporations is controlled by one person and the person who controls one of the corporations is related to the person who controls the other corporation,
(iii)	if one of the corporations is controlled by one person and that person is related to any member of a related group that controls the other corporation,
(iv)	if one of the corporations is controlled by one person and that person is related to each member of an unrelated group that controls the other corporation,
(v)	if any member of a related group that controls one of the corporations is related to each member of an unrelated group that controls the other corporation, or
(vi)	if each member of an unrelated group that controls one of the corporations is related to at least one member of an unrelated group that controls the other corporation.
(3)	Where two corporations are related to the same corporation within the meaning of subsection (2), they shall, for the purposes of subsections (1) and (2), be deemed to be related to each other.
I am sure the hon. member will not be able to understand that unless I read the definition of "related group", "unrelated group" and so on. I shall be glad to do that if that is the wish of the hon. member.


James Aloysius McGrath: Mr. Chairman, I find it a little difficult to follow the parliamentary secretary. I wonder whether he would repeat what he has read a little more slowly and also repeat the definition. Perhaps then we might be able to understand the definition of "arm's length". What we are asking for is a simple definition of the term "arm's length", not what is provided in the act. We want to know how the parliamentary secretary and his officials understand that term.


Patrick Morgan Mahoney: Mr. Chairman, there is no simple definition of "arm's length" or "non-arm's length" transactions. I must apologize to the hon. member for that simple fact.


Cliff Downey: Mr. Chairman, for purposes of clarification, since today's Hansard will be providing information for many taxpayers, I think we should ask the parliamentary secretary to carry on with his reading so that those of us who are not lawyers will have a clearer grasp of the situation that exists in the expression "arm's length".


Patrick Morgan Mahoney: To continue my reading, Mr. Chairman, section 251(4), which deals with groups, provides as follows:
In this act,
(a)	"related group" means a group of persons each member of
which is related to every other member of the group; and
(b)	"unrelated group" means a group of persons that is not a
related group.
(5) For the purpose of subsection (2),
Income Tax Act
(a)	where a related group is in a position to control a corporation, it shall be deemed to be a related group that controls the corporation whether or not it is part of a larger group by whom the corporation is in fact controlled;
(b)	a person who had a right under a contract, in equity or otherwise, either immediately or in the future and either absolutely or contingently, to, or to acquire, shares in a corporation, or to control the voting rights of shares in a corporation, shall, except where the contract provided that the right is not exercisable until the death of an individual designated therein, be deemed to have had the same position in relation to the control of the corporation as if he owned the shares; and
(c)	where a person owns shares in two or more corporations, he shall as shareholder of one of the corporations be deemed to be related to himself as shareholder of each of the other corporations.
(6) For the purpose of this act,
(a)	persons are connected by blood relationship if one is the child or other descendant of the other or one is the brother or sister of the other;
(b)	persons are connected by marriage if one is married to the other or to a person who is so connected by blood relationship to the other; and
(c)	persons are connected by adoption if one has been adopted, either legally or in fact, as the child of the other or as the child of a person who is so connected by blood relationship (otherwise than as a brother or sister) to the other.


Paul Yewchuk: Mr. Chairman, may I take a moment to thank the parliamentary secretary for his comprehensive answer, which is just what I wanted, and this whole kafuf-fle would have been avoided had he paid serious attention to my question in the first place.


Cliff Downey: After listening to the definition of "at arm's length" I am convinced that the poin^ raised by the hon. member for Halifax-East Hants has some validity. It had reference to common-law relationships, and I should like to know how such a common-law relationship, as well as other relationships of this kind, fit into the "arm's length" section of the bill.


Patrick Morgan Mahoney: The matter of a common-law relationship does not come into this, because the people are not married and therefore are not involved. As to the other relationships, I will leave this to the hon. member. If he would care to list them rather than leave me to speculate, I would be pleased to attempt an answer.


Cliff Downey: If two people were living under the same roof in the same house, and for all practical purposes seemed to be man and wife, could we say that dealings between them involving the transfer of shares or property might be considered to be a transaction at arm's length?


Patrick Morgan Mahoney: This involves a question of fact. If they are married, obviously this is not at arm's length. Are they married?


Cliff Downey: They are not married.


An hon. Member:: For all other purposes they are.


Patrick Morgan Mahoney: I suppose I should read section 251 into the record again. It states in part:
For the purposes of this act,

November 5, 1971
Income Tax Act
(a)	related persons shall be deemed not to deal with each other
at arm's length; and
(b)	it is a question of fact whether persons not related to each
other were at a particular time dealing with each other at arm's
length.


Paul Yewchuk: Mr. Chairman, I am still not clear as to whether two people living in the same household, not having a legal marriage contract, but dealing with each other, are considered to be dealing at arm's length.


Patrick Morgan Mahoney: The hon. member must simply take the act as it is. It depends on the facts. I could re-read the section if Your Honour does not think I would be repeating myself.


Paul Yewchuk: This is very important to my constituents, as it is to the constituents of many other members, since a variety of situations exist in this country. People are living together without the benefit, or detriment, whichever way you look at it, of a marriage contract, and they want to know what is the legal position in this case.


Patrick Morgan Mahoney: I am afraid I am not able to give a legal opinion on hypothetical situations. If the hon. member would give me the facts of the situation he has in mind I would be delighted to attempt to give an opinion.


Cliff Downey: Is the parliamentary secretary, with his knowledge of the law and his experience, aware of any cases in the past which have been contested on the basis of this type of situation?


Mr. Schumacher:: Mr. Speaker, I should like to ask the Parliamentary Secretary if this section is new or carried over from the old Income Tax Act?


Patrick Morgan Mahoney: This is carried over from the previous act, Mr. Chairman.


Paul Yewchuk: If the parliamentary secretary refuses to answer my question, perhaps we should ask the minister to come in to carry on with this debate.


Patrick Morgan Mahoney: Mr. Chairman, my obligation here is to answer questions, and there is no way I can force the hon. members to understand the answers.


Cliff Downey: The answers we have received relate to one of the vital matters in this bill which contains 707 pages, and 99.9 per cent of the people in Canada cannot understand what is encompassed in these pages. They will be taxed in such a way that the bulk of them will have no knowledge of what is happening. It may be all right to give these smart aleck answers to members of this House-


Patrick Morgan Mahoney: Don't assume they are all as stupid as you are.


Cliff Downey: They may be stupid for not understanding what is encompassed in this 707 page bill, but it is very vital to parliamentarians to know what this bill is about, and to have a clear understanding of what is being done. Those people in the gallery should also understand so they can relate to the average taxpayer what is taking place. I cannot go along with the attitude of the parliamentary secretary, and I do not believe any member sit-

ting in this House exhibits that type of attitude. We cannot accept this concept of pushing bills through which we do not understand and the significance of which we have not been told.


Mr. Bigg:: I do not expect to be considered an expert in the law on taxation, but I should like to ask a direct question. Is a common-law marriage a marriage for the purpose of this act, or is it not?


Patrick Morgan Mahoney: I think it would be fair to say that if a couple were living under the same roof as man and wife it would be presumed they were not dealing with each other at arm's length, but there may be exceptions.


Cliff Downey: With some embarrassment I should like to ask a question regarding the relationship of homosexuals. This matter has been debated in the House and I am wondering whether there is anything in this bill that applies to this relationship. Is there anything in the bill that suggests this type of relationship is to be considered as dealing at arm's length?


Patrick Morgan Mahoney: I am not aware of anything in this particular section that would apply. However, the hon. member might have some particular qualification for identifying this.


Some hon. Members:: Oh, oh!


Gérald Laniel: Order, please.


Cliff Downey: I do not know what the hon. member for Calgary South was implying by that remark, but it was in tune with some of his other remarks this afternoon. He is taking a smart aleck attitude toward this whole situation. I asked whether this situation has been considered. Is there anything in this 707 page document to cover this situation? There must be something there in relation to this matter, particularly since this Parliament has taken action in relation to this matter.


Patrick Morgan Mahoney: In view of the depth of the hon. member's concern, I will inquire to see whether this matter has been studied. I am not aware of any studies into it.


Cliff Downey: Perhaps we could stand this section until the parliamentary secretary makes inquiries of some of his colleagues who must be aware of this situation.


Patrick Morgan Mahoney: I am afraid we cannot agree to that very serious suggestion by the hon. member.


Gérald Laniel: Shall section 69 carry?


Some hon. Members:: Agreed.
Clause 1, Section 69 agreed to.


Gérald Laniel: The committee will now consider' section 70 to which there has been an amendment moved by the Minister of National Revenue, which is to be found at page 8940 of Hansard of October 22.
On clause 1-Section 70-Death of a taxpayer.


Robert Jardine McCleave: Mr. Chairman, I realize the amendment is properly before us and I thank you for the identification of it. However, on page 172 of the bill there is a
November 5, 1971

substantial change in the existing income tax law, as well as on page 173. In accordance with the practice I have followed so far, I should like to have a statement from the parliamentary secretary on the record so that people who read the proceedings of this debate will understand what is intended to be done by the government.


Patrick Morgan Mahoney: Mr. Chairman, if I understand him correctly I believe the hon. member is asking for the explanation of the section and not simply of the amendments before us.


Robert Jardine McCleave: Yes.


Patrick Morgan Mahoney: This section provides special rules for computing the income of the taxpayer in the year in which he died. It contains most of the present rules and provides new ones for the taxpayer's depreciable and other capital property. It also provides rules for the evaluation of the property both in his hand, or of the estate or of the beneficiary, as well as special rules for such property when passed to his spouse.
Subsection (1) is the same as the existing law. Subsection 2 also continues the existing law. Subsections 3 and 4 are the same. Subsection 5 provides rules regarding depreciable and other capital property of the deceased taxpayer and deems him to have disposed of all that property immediately before his death, and to have received the proceeds equal to the value established by the subsection, paragraph (a) of that subsection deals specifically with capital property other than depreciable property and provides as a general rule that the fair market value at the time of death is the deemed proceeds of the disposition. Paragraph (b) covers depreciable property and provides similar treatment to that given nondepreciable property. Paragraph (c) provides that the taxpayer's estate or the beneficiary are deemed to have acquired this property. Paragraph (d) covers the case where the estate of the beneficiary has acquired a particular depreciated asset. At death an allowance is attributable to a portion of the proceeds of the distribution pro rated to all assets deemed to have been acquired at that time.
In respect of the specific amendments before us, one is to 7(6)(b) and deletes the words "other than taxable capital gains". This is a technical amendment and is related to a further amendment which will be moved when we reach section 108. It is proposed to add a definition of income of a trust to section 108, which will apply not only to this section but to several other sections which occur throughout the bill.


Robert Jardine McCleave: Mr. Chairman, I think I should like to make one other point briefly because we are wandering into the twilight zone which involves the question of appreciation and capital gains. I would hope that if we give our assent to this section-and I have no reason not to-that when we deal with the capital gains sections, if there should be substantial changes there, at least we would have the common sense to review this, too.


Patrick Morgan Mahoney: Yes, of course.


Marcel Joseph Aimé Lambert: At the bottom of page 173 in subsection 6(b) an amendement was introduced the
Income Tax Act
other day to the effect that the taxpayer, the spouse and the trust had to reside in Canada. This was not a provision in the original instance but has now been introduced. Why is there this particular limitation in respect of the exemption, that all the parties and the trust must be resident in Canada simultaneously.


Patrick Morgan Mahoney: The underlined words in the amendment to this section have been added to provide that the rules set forth in the paragraph apply only where the taxpayer and the spouse or the trust are resident in Canada at the time of the taxpayer's death. Without this addition, the roll-over could apply to non-residents and that is not the normal way of handling transfer to non-residents.


Marcel Joseph Aimé Lambert: If I may say so with respect, I am wondering why it is absolutely essential that all concerned must be residents of Canada at the time in order that there be a roll-over. I can think of cases where the husband, the taxpayer, is a non-resident but is the owner of property here in Canada. The devolution is to his spouse who is resident in Canada and the trust could be here in Canada. Why in such circumstances should the spouse be disentitled to the benefit of the roll-over? She is a Canadian resident in Canada. The trust is here in Canada and the property is here in Canada. He might happen to be resident somewhere else, perhaps for reasons of health or otherwise. The state says that it should not get into the bedrooms of the nation, so let us not become involved in an investigation, in respect of the Income Tax Act, concerning why the parties are not living together. The husband bequeaths the property to his wife who remains in Canada and sets up a trust with a Canadian executor or trust company. Here, we have a completely Canadian situation. But you say that in those circumstances they are tainted with some foreignness and therefore may not qualify. I do not understand it.


Patrick Morgan Mahoney: I think the hon. member has raised a set of circumstances which merit some looking into. Of course, the section is drawn with the idea that the property might roll-over out of Canada and thus be put beyond the writ of the Minister of National Revenue. However, I would be pleased to take a look at this particular set of facts which the hon. member has suggested in relation to this section. If indeed some change is indicated, we would be most pleased to bring it in at a later date.


Gérald Laniel: Shall the amendment carry?


Some hon. Members:: Agreed.
Amendment (Mr. Gray) agreed to.


Gérald Laniel: Shall section 70 as amended carry?


Some hon. Members:: Agreed.
Clause 1, section 70 as amended agreed to.


Marcel Joseph Aimé Lambert: Conditionally.


Gérald Laniel: We now have before us section 72. This section is amended and the text of the amendment is to be found at page 8940 of Hansard for October 22. Shall I read it?

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Income Tax Act


Robert Jardine McCleave: Please do not read it.
On Clause 1-Section 72-Reserves, etc. for year of Death


Marcel Joseph Aimé Lambert: Here again, Mr. Chairman, the same situation applies. I ask why must the transferor and the transferee be resident in Canada. Why must it be conjunctive, particularly if the transferee is resident in Canada and the property is in Canada.


Robert Jardine McCleave: Mr. Chairman, while the parliamentary secretary is pondering his reply to that very important point, could I also suggest, since this is a new provision, that we have a brief explanation for the record concerning why this is being proposed. I ask this because many people in an affluent society may leave very vast estates and perhaps not realize all the implications for those who will succeed to those estates.


Patrick Morgan Mahoney: Mr. Chairman, this section provides a special rule for the taxation year in which the taxpayer dies. It denies him the deduction in respect of certain reserves that he would normally be permitted, but it also provides an exception to this special rule for property of this kind which he leaves to his spouse or to a trust for his spouse if she and his executors elect to take advantage of it. If they do, the general rule is that deductions shall be made in computing the taxpayer's income for the year in which he died and corresponding amounts included in the income of the spouse or the trust. The amendment provides that the special rule covering such items of income as accounts receivable and the business carried on by the taxpayer in the year he died will apply only if the taxpayer and the transferee are resident in Canada at the time of the taxpayer's death. It is not intended that the rule apply where one or the other or both are non-resident.


Marcel Joseph Aimé Lambert: I am sorry, I may be a
little dense on this, but it seems to me that this section specifies when there shall be a denial of the setting up of the reserve. There is a denial of the setting up of the reserve. Why do you insist, in denying what you might say is a privilege to a taxpayer, that both the taxpayer and his wife be resident in Canada? I cannot understand the idea in this context of insisting that both be resident in Canada. Let us put the shoe on the other foot. The provision will not apply if either of the transferor or transferee is not resident in Canada, and presumably there would be an entitlement to a reserve.


Patrick Morgan Mahoney: The amendment does not go to the denial, it goes to the carrying forward, the election in the option, as I understand it. The amendment would come into play in section 72(2).


Marcel Joseph Aimé Lambert: I may have to ask someone to give me a private briefing session because I still do not get it. The conclusion which the parliamentary secretary has indicated in this section or elsewhere is the greatest breach of logic and development in the whole of section 72. We start out in section 72 by setting up exclusions of reserves. Does he mean to tell me that we have switched to the other side of the medal and are now granting a right in that section?
[The Assistant Deputy Chairman.]


Patrick Morgan Mahoney: Yes, Mr. Chairman.


Marcel Joseph Aimé Lambert: Surely to goodness, something is going wrong in that kind of drafting. This only leads to confusion. I am looking at a section which I deem to be an enumeration of exclusions of reserves, and yet half way through we come to just the reverse. Is that the explanation? I think it is nonsensical.


Patrick Morgan Mahoney: Subsection (1) is the denial and subsection (2) is an exception to that denial. It seems to me that this is a rather logical place to put it. The continuity is there, and it is better to place it right there than elsewhere in the bill.


Marcel Joseph Aimé Lambert: Now, the parliamentary secretary has said that this is an exception to the denial, but the exception to the denial seems to be based on the fact that both parties must be resident in Canada, so that if one of the parties is non-resident in Canada the exception would be granted.


Patrick Morgan Mahoney: Yes, the denial of the right would apply if either or both parties are non-resident. That is the result.


Gérald Laniel: Shall the amendment carry?


Some hon. Members:: Agreed.
Amendment (Mr. Gray) agreed to.


Gérald Laniel: Shall section 72 as amended carry?


Some hon. Members:: Agreed.
Clause 1, section 72, as amended, agreed to.


The Assistant Deputy Chairman (Mr. Boulanger):: Now, we will go to section 74 as amended, and the text of that amendment will be found at page 8941 of Hansard for October 22.
On clause 1-Section 74: Transfers to Spouse.


Robert Jardine McCleave: I have two questions arising out of section 74. The first one is that while the side note on page 177 reads, "gain or loss deemed that of transferor", the fact is that there is no specific provision within the act dealing with loss, but certainly there is with regard to gain. So, I think we should have an explanation of this omission.
The other question concerns something which has not been changed at all, that is section 74(5) which I call the "Mama and Papa" clause. We have had at least some contributions to the debate in that regard, although not much of a change in the law which would help good old Mama and Papa. The section about which I am really curious is the old one. It is the last part of section 74(5) which reads:
Where a husband and wife were partners in a business, the income of one spouse from the business for a taxation year may, in the discretion of the Minister, be deemed to belong to the other spouse.
For curiosity's sake I went to the bible that I have been using, the Canadian Master Tax Guide, to see whether there was much litigation or disputation between government and taxpayer with regard to the Mama and Papa
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section. I find that there is almost none, which suggests to me one thing, not that there is no room for improvement there but rather than the Mama and Papa type of business is apt to be run on such lines that there is not much profit from it, that Mama and Papa simply cannot afford the expensive litigation in the courts to determine their rights. I have made the point before that we have not made a proper examination of the provisions in the Income Tax Act relating to the small family business in this country operated by Mama and Papa as we have done in other areas.
When there are hundreds of millions of dollars involved, do we not all get excited in this parliament? But when there are cases of husbands and wives living on very submarginal incomes, operating small grocery stores, small garages or any small business that you would like to name, we simply have not given their problems close examination. I hope the parliamentary secretary will indicate that these provisions-admittedly we are dealing with piggy bank type operations-have received some examination by the department before we were presented with this large catalogue of tax changes.


Patrick Morgan Mahoney: The first point with which the hon. member dealt was the marginal note. In the section as it is, and particularly as it will be amended, there is a netting out of gains and losses to arrive at this end, and I believe that is the explanation.
As to the other question, I believe it goes back to the general area which was covered before. I am afraid that no satisfactory solution to the matter of the Mamma and Papa store has been advanced. We are still in the position where, as the hon. member has noted, some hardship may indeed fall where the husband and wife relationship is in this context a bona fide business relationship.


Marcel Joseph Aimé Lambert: Mr. Chairman, I want to take up the cudgels along with the hon. member for Halifax-East Hants to try to defeat this old rule that identifies as one a husband and wife participating in the same business, and which says that the spouse cannot be an employee of the other. The consequence of this provision will be that no child care allowance is claimable by the spouse if she has to go and work in her husband's business unless, of course, it is incorporated. This is where the nonsensical position comes about.
It may be a small business to which the total applicable tax rate might be 21 per cent, and for the individual paying on marginal rates this is not a very high income. But if the husband incorporates the corner grocery store, as the sole proprietor he may put a share in trust with his lawyer and that makes it a Limited company, but with no greater investment in it, except that now it has "Ltd." added to the name. The wife may now be hired as a clerk, and they may have to pay some unemployment insurance premiums for her. They will have to pay Canada Pension Plan contributions for her. That is one way in which they can be covered by the Canada Pension Plan. She in turn, will be able to claim the worker's allowance, and she would also be able to claim the child care allowance. But where there is no "Ltd." she will not get the child care allowance or worker's allowance. She is not able to con-
Income Tax Act
tribute to the Canada Pension Plan, and of course there would be no further point in paying insurance contributions on her behalf. That is the consequence of continuing section 74(3) in effect. And, of course, the same remarks apply to section 74(5), where the husband is a partner in a firm.
I have gone through this time and time again, yet there is a persistence on the government side in refusing to effect change, unless the store is incorporated. In fact, with a small business of that nature incorporation is a pure sham. I wonder why the government insists on the fiction and the sham of incorporation under these circumstances. I have heard it said that administratively it would be difficult for the Tax Department to keep track of these individuals if this change were made. That is founded on a lack of understanding of how much track the government does keep of individuals. It might have been valid 20 years ago, but today all the people involved here have social security numbers. If they file under unemployment insurance that will be another place where track of them will be kept. If they file under the Canada Pension Plan, that will be another place where track of them will be kept. And I am sure that we will see regulations with respect to worker's allowance and child care allowance. You can bet your bottom dollar that there will be regulations with respect to identification. Yet here, we persist in what I say is a nineteenth century concept of the relationship between taxpayer and spouse in matters of this kind.


Mr. Howe:: Mr. Chairman, when the hon. member for Halifax-East Hants raised this question originally I participated in the debate, and the parliamentary secretary did explain why husband and wife were being treated this way. But, Mr. Chairman, there are many people affected. You only need to walk around this city and you will see many small food stores that remain open in the evening. Probably the wife opens the store at eight o'clock in the morning and runs it until noon, then her husband takes over and later their children help. These people are earning a livelihood by providing a service to the citizens. They are not going on relief. Businesses of this type are being operated in all towns and villages in Ontario and throughout this great dominion in which husbands and wives work as partners.
If the husband hires somebody else to do the work that his wife might do in the store, a deduction can be made for that as an expense. But for the life of me, I cannot understand why it is not possible for the husband to hire his own wife to work in the store and get a deduction for that. The wife contributes to the success of the business. He should have a right to make deductions for her wages in the same way he would if he were hiring somebody else to do the work. Can the parliamentary secretary explain why this has to be made so tangled, why a man cannot hire his wife, pay her wages, and charge them off to the business? Is there any particular, definite reason? Will it cost the national treasury a lot of money if we allow this? Is there any estimate of that cost?


Patrick Morgan Mahoney: Mr. Chairman, the matter is purely one of trying to avoid leaving gaping loopholes in the law for people to take advantage of in order to avoid taxation. As I admitted in answering the hon. member for Halifax-East Hants, there is a hardship worked on husband and wife
November 5, 1971

Income Tax Act
situations where there is in fact a bona fide commercial relationship. However, so far no alternative has suggested itself that would allow us to resolve both problems satisfactorily, that is the one that the law, as it presently is, does resolve, plus the problem which hon. members have raised on two or three occasions during this debate.


William Marvin Howe: Mr. Chairman, the parliamentary secretary talks about a gaping hole. Again I ask how much will it cost the treasury of Canada to allow what we are seeking? We are told that this bill is tax reform. We are asking for a minor change that could help small businessmen to be more successful. Why not make the change we suggest, and then see whether any loopholes appear? The parliamentary secretary cannot say there will be a gaping hole until we do this and see what happens. If one appears, it can be taken care of by an amendment to the Income Tax Act next year. This act can be amended next year if you find a lot of people are bilking the government out of taxes that it thought it was going to get.


Patrick Morgan Mahoney: It is not a matter of revenue. It is a matter of equity, and the government simply does not see why small businessmen should be given the option of an income split when wage and salary earners are not going to have that option.


Frederick Johnstone (Jack) Bigg: Mr. Chairman, sections 72, 73 and 74 are all intertwined, but they have to be considered individually. There is a tremendous mixup here, and that has been demonstrated to us by the parliamentary secretary. It is suggested that there is some loophole in the government's right to take everything we own. Surely, this is a complete reversal of logical thinking. Throughout the history of the British parliamentary system, the onus has been placed on governments to prove to the taxpayers why governments should take money from them. It is not a question of whether or not a taxpayer is taking advantage of a loophole, but a question of whether a government has justification for taking away the money that the taxpayer has earned. We have gone around in a complete circle when we say it is up to the taxpayer to prove in a court of law, or even in this chamber, that he has a right to escape taxation. It is true that once the law is there, he cannot avoid taxation. That is why it is incumbent upon us as the only voice of the taxpayer to make sure that the law with which the government intends to strangle the citizen does leave some outlet for his private enterprise.
.00 p.m.)
It seems to me that over the centuries the married woman has been a neglected person, a second-class citizen. There are many ways in which women's rights are shouted from the housetops today. We hear about abortions and equal pay, but here is something equally important-the right of a woman to help her husband earn a living. As I read this section, there is very little relief for the family type of project. We will talk about the family farm later; but today in many small businesses the little woman comes in from watching her children and runs the grocery store.
I take great exception to the fact that the government thinks it has some God-given right to take every cent from our citizens unless they can prove they do not have a right

to the money. They only have a right to it, apparently, when the Income Tax Act says they have. I shall fight to the best of my ability in order to see that the law of Canada never gets to the point where we take over all the means of production for the family farm and the family business to the point where the individual has no rights.
I am worried about the Carter report. I am worried about the government taking the view that because a royal commission was established to look into our taxation system and some well known egghead has proposed an answer to all our problems, we should bow down and worship the written word. True, we paid for that report- but the Carter report is not the law of the Medes and the Persians which alters not. It is our duty to alter it, to amend this act which nobody seems to understand. I am supposed to be trained in the law and I flatter myself that I am as subtle as most ordinary people, but I find it difficult to understand this bill. There is no security whatsoever for the housewife in the small, unincorporated business. She has no real rights under the Canada Pension Plan and if her husband were allowed to pay for her, the competition from the large corporations-for whom I have very little sympathy-the chain stores, the great combines, the international corporations which are as dangerous as some governments-


John (Jack) McIntosh: Oh, hardly.


Frederick Johnstone (Jack) Bigg: Not quite, but nearly.


Patrick Morgan Mahoney: Keep him on the party line, Jack.


Frederick Johnstone (Jack) Bigg: Yes, Mr. Chairman, I would expect the things I am saying to be said by any real Liberal. I suppose you could classify me as a left wing Conservative. There are no real Liberals in this country. I have not heard real liberalism coming from the other side of this House for the last 14 years.


Thomas Miller Bell: Paul Hellyer is the only one.


Frederick Johnstone (Jack) Bigg: I admit I am speaking Gladstone Liberalism. A square deal for the little people, not backed up by land and estates or large holdings in India, and foreign domination, that has all gone by the board. Let us not have the class war any more. In Canada an individual still has the right to earn a living and his wife has the right to help him. I am opposed to the many sections of this act which threaten that right.


Some hon. Members:: Hear, hear!


Frederick Johnstone (Jack) Bigg: I think we should expect the Liberal government to be the champions of the little people.


Patrick Morgan Mahoney: We are.


Frederick Johnstone (Jack) Bigg: I do not see it in this legislation. I do not see anything in this bill to protect the little businesses which are failing at the rate of some 3,000 a year. This cannot be blamed on the Leader of the Opposition because, if my memory serves me correctly, there has been a Liberal government in this country for five-sixths of the time.


Some hon. Members:: Hear, hear!


Frederick Johnstone (Jack) Bigg: Cheer-but the people of Canada have their eyes on you. You can beat on your desks, but they want to
November 5, 1971

know what you are going to do. This bill is not giving them the comfort and protection they deserve.


Colin David Gibson: It takes a million people off the tax rolls.


Frederick Johnstone (Jack) Bigg: Yes, and puts a million people on the unemployment rolls.


Some hon. Members:: Oh, oh!


Frederick Johnstone (Jack) Bigg: They would not be there but for the delinquency of your party. I would like to see you get to your feet and tell us what your plans are to give security to the small business people of this country. Mr. Chairman, may I have a little order?


Gérald Laniel: I was going to call for order. I admit I cannot hear the hon. member.


Patrick Morgan Mahoney: When you do hear him you might try and relate it to the bill.


Frederick Johnstone (Jack) Bigg: I have been waiting for 14 years for these gentlemen to get to their feet and give us the benefit or some of their views. I would ask them for the courtesy of being heard for a few minutes in this chamber to see whether I have not some liberal views which they might adopt.
It is a very sad day for the people of Canada if their capital is to be diminished by taxation. This is one country where individuals still have some vestige of right to earn a living.


Some hon. Members:: Hear, hear!


Frederick Johnstone (Jack) Bigg: I beg hon. members in this chamber, through you, Mr. Chairman, to make sure that such a thing as good will which is built up through a lifetime of hard work is not taken away because of an unfair fiscal policy or a greedy government. I do not care how well thought-out are these plans for spending other people's money. I think there is still a place in Canada for leaving some small part of the income in the family.
I should like to have a better answer for taking it away than merely saying these individuals have found a loophole in the law. That is an insult to them. I want to know why any government can think it has a right to my private property. I am a free enterpriser, but whenever I have had a chance I have voted for the social security which is needed for our older people who have worked all their lives. Under this so-called free, democratic system they have a right to the benefits. I believe they are entitled to the old age pension and to fair prices on the farm and in the store that they helped to build up.
I see in the Carter report a sinister attempt to do legally things that the people of Canada do not want. That is the only reason why a document such as this would be presented to an unsuspecting public. It is obvious that members of this House do not understand the legislation, so how can we expect the taxpayer on the farm or in the small store to have any respect for us if we pass a bill which we do not understand ourselves.


Patrick Morgan Mahoney: That is not the Carter report.


Frederick Johnstone (Jack) Bigg: I agree that we have not gone as far in this bill as the Carter report, but we have gone as far as the
Income Tax Act
Canadian people will stomach. We have gone as far as we can bamboozle them, as far as can be crammed into 707 pages of closely written claptrap. This afternoon I asked a simple question, was a common law marriage a marriage, or was it not? I wanted an answer, yes or no. It is simple. Everybody understands what we are talking about. The answers I want are not to be found by perusing these sections.
Say a man starts out when he is 21 and spends all his life building up a family business. When he retired, will he, his wife or his children be allowed to benefit from that business, or will some greedy government take away what he has built up and say, "What we are doing is legal. Back in 1971 we gave you a chance to make your representations through your member. We amended the act. The benevolent government brought in 101 amendments in one afternoon." Mr. Chairman, merely because we do not pass them all in half an hour we are accused of filibustering.


Patrick Morgan Mahoney: No, no.


Frederick Johnstone (Jack) Bigg: And I am accused of being delinquent.


An hon. Member:: No, no.


Frederick Johnstone (Jack) Bigg: Oh, yes, that is what it has come to. The delay will be said to be the fault of the Leader of the Opposition. It will be the fault of the opposition itself; all 70 members of the Official Opposition will be lumped together in this regard and 150-off members will say that they were held up because the Leader of the Opposition was not here to pass the bill for them. That is the sort of slippery attitude that we see exhibited on the other side of the House, and it is absolutely revolting for anybody who believes in the democratic process.


An hon. Member:: Filibustering will get you nowhere.


An hon. Member:: If the hon. member is having a hard time, why is his leader not here to help him?


Gérald Laniel: Order, please. The hon. member is having a hard time keeping to the amendment because of remarks from hon. members on the other side of the chamber. I wish hon. members would remain quiet.


Some hon. Members:: Hear, hear!


Frederick Johnstone (Jack) Bigg: Mr. Chairman, I am flattered by the attempts of the rabbits to get me off the bear tracks. I want some answers from the parliamentary secretary. A simple reading of this bill will not give me answers. The bill is not simple. The only thing that is simple and plain to understand is that: we are moving in on the free enterprise system. We are moving in on the family business unit and attempting to grind it down under the juggernaut wheels of Pharaoh.
If you introduce another four or five valuation days and another four five versions of the capital gains tax, you will destroy the whole free enterprise system of this country, as the Carter report suggested should be done. I have read the Carter report carefully and understand it, and it

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Income Tax Act
recommends socialism by legislation. This is the old, creeping game of trying to do legally and by subterfuge what you know perfectly well the Canadian people do not want. The first thing done by parties that openly espouse socialism is to claim they are democrats. Yet what is democratic about expropriating all the small businesses in Canada? Whether you do it at the rate of 10 per cent a year now, 20 per cent per year in two years or 25 per cent per year in five years makes no difference.
What is the rationale behind taking away all private property in Canada and using it for the purposes the government may think are good? I do not happen to think those purposes are good. I think that a man knows better what he needs and what is good for him than any government, no matter how beneficial it may think it is. That is where I stand and those are the principles on which I was elected.


Some hon. Members:: Oh, oh!


Frederick Johnstone (Jack) Bigg: I hear boos and catcalls and talk about success. I suppose I have been successful in presenting the facts as I see them. As I say, I have no quarrel with the concept of social security and no quarrel with the taxing of large corporations which have made unconscionable profits. I find nothing wrong with that. There is nothing extremely socialistic about that. When companies pile up excess profits in our cities, by all means tax them.
If companies hold to ransom young people who want to build homes, and if those companies charge exorbitant rates, we should look at them, tax the excess profits and allow the treasury to use such money for purposes of sewage disposal and cleaning up the air. Use that money to clean up the environment. Take it away from the people who are openly robbing the families of this country of their just right to a lot 50 feet in frontage and 100 feet in depth on which they can build a home. That our young people are so robbed is a disgrace in this country. I think all governments should look at all sources of revenue, but they should not raise it by taxing exorbitantly the small businessman and making it impossible for him to allow his wife and children that degree of reasonable comfort which even people on relief and others who are contributing nothing to the welfare of the country are enjoying.
People will not be interested in free enterprise if they are so heavily taxed. People will not be interested in opening the small store and giving the kind of service which only a small store or business unit can give if after 40 years of hard work they are not able to take care of their children and if the widowed spouse cannot enjoy the benefits of that hard work. Taxes which will dissipate such property are to be levied. This is wrong. When the tax becomes due, the property must be disposed of immediately, within six months, and consideration must be given to deemed profits.
The government will not even give the family unit time to make any money because someone in the Department of National Revenue will say, "We think you ought to have made "X" dollars in a certain period." These people would expect the women or children to dispose of their property quickly and pay to a greedy government "X" dollars immediately or suffer the consequences. Why cannot the department wait until prices go up, say, or the

time for selling is better? But no, the people concerned must sell the property now. We want the same deal for everybody; no one should be dealt with overly severely.
Mr. Chairman, after reading this bill very carefully and after hearing what I heard this afternoon, I am not sure that if I were left, say, $10 million I would not go to Nassau and see if I could not escape some of these provisions. I know that many people in this country are earning good fees by helping others to evade some of these laws which are supposed to be foolproof.


An hon. Member:: People like lawyers.


Frederick Johnstone (Jack) Bigg: Some people hire experts and accountants to help them evade the law, yet the small businessman who has built a family business must look ahead to the day when his family may have to sell the business.


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


Some hon. Members:: Carry on.


Gérald Laniel: The hon. member for Battle River.


Cliff Downey: Mr. Chairman, since this is a most important section, and since the remarks of the hon. member for Pembina have been most relevant, I think he ought to be allowed to continue.


Some hon. Members:: Hear, hear!


Gérald Laniel: Order, please. I must ask the unanimous consent of the committee to do that. Is there such consent?


An hon. Member:: No.


Robert Jardine McCleave: Mr. Chairman, I rise on a point of order. I believe the hon. member for Pembina may make further remarks because there were several interventions during his speech.


Gérald Laniel: Yes. The Chair will recognize the hon. member for Pembina.


Frederick Johnstone (Jack) Bigg: Mr. Chairman, I will not take up too much of the committee's time. If I have not made my point clear in the last few minutes, I will never make it clear. I hope it is clear. We should all take a good look at the principle behind the expropriating of family businesses. As I say, if I have not made my point understood in the last 15 minutes I do not think I could make it understood if I spoke for 15 hours on the subject. If I have not been understood, I am sorry and I feel sorry for the members of this chamber. It is a very, very important point and I am sure most hon. members know exactly what I am getting at. If they do not, I suggest that they read the Carter report again, thoroughly.
I admit that in the Carter report there are fine suggestions on how to stop those who are fleecing the Canadian people through escaping the payment of taxes due in legitimate fields of taxation. One of those taxation fields is that of excess profits. But when you get to the point of taxing every profit made, of taxing every benefit that
November 5, 1971

comes from free enterprise or family co-operation, I think you have reached the point of no return.


Thomas Miller Bell: Mr. Chairman, I bring to the attention of hon. members that we have had a very good debate this afternoon. The Parliamentary Secretary to the Minister of Finance has admitted that some important points have been raised. I hope the chief government whip will retract the press release in which he said that the House of Commons is no good, we have to do away with it and close it down. This report was contained in an article in the Citizen this afternoon.


Cliff Downey: Mr. Chairman, section 74(5) provides:
Where a husband and wife were partners in a business, the income of one spouse from the business for a taxation year may, in the discretion of the minister, be deemed to belong to the other spouse.
As with other taxation matters, the onus of proof lies on the individual taxpayer. This reminds me of a story that is going around. The Minister of Finance was driving along the highway in a big, black Cadillac. He was driving too fast and attracted the attention of an officer of the RCMP. The officer stopped the minister, went over to the big, black Cadillac and opened the door. Naturally, he was surprised to see the Minister of Finance. His only comment was "Oh, my God!" The Minister of Finance replied, "And don't you forget it."


Some hon. Members:: Hear, hear!


Cliff Downey: Sections such as this, where something is at the discretion of the minister, amply bear this out. The hon. member for Pembina has very ably pointed out the troubles that can arise from sections such as this. Why can we not allow a husband and wife team to arrange their income for taxation purposes to their best advantage? For the most part they do not do this. A husband and wife operating a small business do not have the finances to hire the best accountants and lawyers to look after their situation as do large corporations which have full-time staffs of tax consultants. We are trying to close a small loophole. It is as though there were something wicked about a married couple arranging their affairs to pay the least possible tax.
We can only assume that this government is trying to encourage immorality. If two people who are not married decide to live together under the same roof, they are able to arrange their affairs. One can work for the other. In this situation, they could arrange the best tax advantage. A taxation law such as this encourages immorality.


Some hon. Members:: Hear, hear!


Cliff Downey: This important concept should be discussed and amended. Our party will propose an amendment in this regard. I hope the amendment will be accepted. It may not be acceptable to this government, but I know it will be acceptable to the people of Canada.


Some hon. Members:: Hear, hear!


Gerald William Baldwin: The opposition always stands for morality.
Income Tax Act


Cliff Downey: We should be considering taxation policies that will encourage and increase the Canadian businessmen, not take away their piddling incomes and make them all slaves of the state. We should encourage small business. In the majority of small businesses, farms for example, the wife works side by side with her husband 16 hours per day year in and year out. Sometimes they work for 20 or 30 years without even a holiday until they retire. This is the loophole which the government is trying to close. The government says it wants to make them equitable, on a tax basis, with the employee. This is what they are doing. The man and wife team working 16 hours per day, bucking the prairie wind or operating a small grocery store from 8 a.m. until midnight, are the people who will be affected by section 75. I will not go any further at this point because we will be moving an amendment in order to try to rectify this situation.


Robert Jardine McCleave: Mr. Chairman, the amendment which will be moved shortly by the hon. member for Edmonton West has just been drafted. It might be called something that was inspired by the ill-considered intervention, not in debate but outside this House, of the chief government whip, the member for Vancouver Quadra. I always felt that if you had something you really wanted to pursue vigorously, you should have the guts to stand up and face your peers in the House of Commons and not do it by the backdoor route of assassination, the back alley route to the parliamentary press gallery.
If the Prime Minister and other top people on the government side ask what, for heaven's sake, went wrong in the House of Commons on a Friday afternoon, when all was supposed to be sweetness and good housekeeping on the provisions of the Income Tax Act which have existed for many years, they will get the answer from the chief government whip, "Mea culpa". It is a villainous attack on Members of Parliament in very serious deliberation to use the route which he did.
Some members, including myself, have questioned the method we are using to bring about tax reform in this country. At least it can be said to our credit that we are here sweating, struggling and straining while working on very complex and tough issues. We are trying to do it in a spirit of exchange with the parliamentary secretary. At least there is dialogue, however imperfect, in the people's forum. That is important. For the chief government whip to issue his attack upon all of us and our methods, which can only denigrate Parliament, it is a great disservice to this institution.
That comment having been made, I want to reinforce what I said previously about the portion of the act we are dealing with and the amendment that will be moved by the hon. member for Edmonton West. The problem we are dealing with is large to people with a very small income, it is of no consequence to people who have no problems in this world. This problem really concerns people whose joint income is below $3,650 a year. In this area it does not pay people to incorporate. By that simple action they will lose approximately $500. What advantages will flow from it in the long run?
We are dealing with two people with an income of less than $3,650 a year. They may be operating a small grocery store, a mamma and papa garage or a mamma and papa

November 5, 1971
Income Tax Act
boutique. If we cannot look after people like that we must consider our attempts in the field of tax reform to be unworthy. We are certainly going to do something for mining companies and for the "big guys". But if we cannot deal with two people who are trying to be good Canadians and raise a family on a small income, then none of us deserves to come back here. Accordingly, the hon. member for Edmonton West has written out his amendment and it will be presented as soon as Your Honour sees fit to recognize it.


Paul Yewchuk: Mr. Chairman, I want to make a brief commentary on this section since I find it a very unsetting one. This is in keeping with the theme of Liberal government policy for the past 31 years, namely to wipe out small entities to destroy family units. Certainly that is happening under this provision. I want the parliamentary secretary to explain why it is such a big sin for a husband to want to employ his wife in a small business and be so heavily penalized by our taxation laws.
A similar situation prevails with a husband and wife who set up a small company and she is a partner in the company, not an employee. Why should they be penalized by the provision that the income of the company is considered the income of one person? I think both of these provisions are destructive of the family unit, of family businesses such as small farms, corner stores, and so on. This kind of provision should be amended in order to promote small business.
We all know very well that most of the job opportunities in this country are provided not only by the huge corporations, which the government put forward as examples of the nth degree of efficiency; we must also realize that in the long run the family farm and the family business is still the backbone of society and the way its people earn their living. When we bracket sections such as this with the estate tax proposal of a year or two ago we see at once almost no hope for the family business to survive and to be passed on to the heirs and successors. It is a very bad principle to destroy units of this sort.
I think it is fair to say that many of the people who came to Canada during the last 50 or 100 years did so in the knowledge that in this country any individual with initiative should be able without too much difficulty to establish and to run successfully a business or a farming operation of his own. In view of this we must not allow this kind of destructive legislation to go forward.


Stanley Howard Knowles: Mr. Chairman, I do not want to delay the well heralded amendment that is coming from my hon. friend for Edmonton West, but perhaps he would be grateful for another moment or two in which to draft it.


Marcel Joseph Aimé Lambert: No, I have it ready.


Stanley Howard Knowles: In any case, some of the things that have been said during the last half hour prompt me to get briefly to my feet. I know some of the conditions that have been described by my hon. friends to my right do exist; there are cases where married couples have to work all kinds of hours to maintain their livelihood. Some of the stories have been pretty

heart-rending. Some people work 16 hours a day almost every day of the week and go 20 years without a holiday. I do not deny that this happens, but I suggest that these situations call for far more than simply adjustments in income tax; they call for a guaranteed annual income, for other means of recognizing the sanctity of family life in this country than simply acknowledging that it is all right for people to slave like this if they get an income tax adjustment. I hope that the government will respond to the arguments that have been presented this afternoon in a far more positive way than simply changing the Income Tax Act, important as that may be.


Marcel Joseph Aimé Lambert: Mr. Chairman, notwithstanding the fact that the other day we passed a subsection (6) which included a subparagraph (viii) which is related to section 74, the really operative clause dealing with this situation is the one before us. Subsection (3) provides:
Where a person has received remuneration as an employee of his spouse-
I suppose the masculine includes the feminine in the interpretation of statutes.
-the amount thereof shall not be deducted in computing the spouse's income and shall not be included in computing the employee's income.
Then subsection (5) provides:
Where a husband and wife were partners in a business, the income of one spouse from the business for a taxation year may, in the discretion of the minister, be deemed to belong to the other spouse.
We have the same principle here, though in the second instance this is discretionary. It will be interesting to see what criteria will be used by the minister to lump, within his discretion, the income of the two into the pocket of the one. I suppose there was a time when it was felt when this was income splitting and that there would be a reduction in the marginal rates; but it seems to me that this is secondary to the principle that we must now recognize, that we are in a different age. We now have far more women working. If women are working for their husbands, as I have pointed out and as I shall continue to point out ad nauseam if need be, if the husband is the principal owner of a limited company the wife can claim workers allowance or child care allowance in an appropriate case. She is also covered by unemployment insurance and comes within the Canada Pension Plan.
However, as long as such spouses are covered by section 74(3), and discretionarily so under section 74(5), they are not able to avail themselves of workers allowance and child care allowance and are not covered under the Canada Pension Plan or eligible for unemployment insurance. Therefore, it seems to me that since we are trying to urge women to work, including married women, they should not suffer from this disability.
Someone was talking about encouraging immorality. Certainly a man could pay his mistress to work for him, in which case she would get the advantage of child care allowance, workers allowance, and qualify for the Canada Pension Plan and unemployment insurance. Her husband doing the same work should be entitled to the same benefits, but in fact he is not entitled to any of them. This might be a very favourable incentive to men to take up
November 5, 1971

that type of casual relationship. In this way they could avail themselves of these benefits under the Income Tax Act.
We know there are other sections that define an illegitimate child as a child within the meaning of the act. There are all sorts of provisions in the act which remove what formerly were moral bars. If you adopt that stand in spite of those positions, then I must say you cannot now impose an artificial provision in respect of a husband and his spouse. For that reason I would move:
That section 74 be amended by deleting therefrom subsections (3) and (5), and renumbering subsection (4) in consequence thereto.


The Chairman:: Order, please. Hon. members have heard the motion moved by the hon. member for Edmonton West. Without accepting the motion procedurally, I invite hon. members to assist the Chair on the procedural aspect. I am sure the hon. member for Edmonton West and others will help me in this regard. I have some concern in respect of the deletion of two subsections in that this would change or shift the incidence of taxation. That is a preliminary thought but I ask hon. members to assist me if they wish.


Marcel Joseph Aimé Lambert: I have a little difficulty following the views of the Chair, in that amendments from both sides of the House have been accepted and denied although many of them have had the same effect; they have disturbed the balance of ways and means. An amendment accepted by Your Honour the other day, moved by the hon. member for Winnipeg North Centre, as well as one moved by the hon. member for Regina East, certainly disturbed the balance of ways and means; however, they were accepted.
This amendment does not pick on any particular class of taxpayer. It merely deletes certain subsections of this section which relate to separate taxes for spouses, either male or female. The wording of the section is that a person receiving remuneration as an employee of a spouse is entitled to certain things. This does not exclusively relate to a wife who receives remuneration from her husband; it also involves a husband who receives remuneration from his wife. A hotel business owned by a wife, of which the husband is an employee, should fall into this category. Unless the hotel is incorporated, the husband's salary is treated as part of the income of the wife. Therefore there is no more benefit to a so-called shareholder. All we are attempting to do is remove this discrimination. One person is an employee and the other is the employer. Either one could be the spouse and this is true in respect of a husband and wife operating as partners.
It seems to me that my amendment does not disturb ways and means to a greater extent than the motion of the hon. member for Winnipeg North Centre which the Chair accepted. The same is true of the motion put forward by the hon. member for Regina East. All I can say is that those two amendments were acceptable. I am not using them as examples and I am not taking into account any specific class of taxpayer. All I am saying is that people should be treated as individuals. Whether they are married or not should not have a bearing on the fact that they
Income Tax Act
are to be treated as individuals. Keeping in mind the Chair has accepted other amendments of this kind in the course of this debate, I suggest my amendment is in order.


Russell Clayton Honey: I direct one point to the hon. member's attention and I do so in order to indicate my concern in this matter. My concern is not directed to a disturbance of ways and means. I make this comment so hon. members can direct their remarks to it. My concern is related to the fact that a private member cannot do something which can only be done by the Crown.
There is a citation in Beauchesne which would appear to be the authority for a private member to move to reduce taxes. The view I have taken throughout this debate is that while such a motion is in order, it must be an across-the-board reduction and it cannot shift the burden of taxation from one taxpayer to another. That is the consistent view I have taken on other occasions when I have made rulings. It seems to me that if subections (3) and (5) are deleted, one taxpayer or another will pay more or less. That is my real concern.


Gerald William Baldwin: Mr. Chairman, anticipating that you might say what you have said, I prepared a few remarks on this point of order. Let us consider subsection (5) first, in light of the fact that there may not be any alteration at all, or a shifting of tax burden, we must consider the amendment on its own merits. We must assume that the minister is concerned and that the Chair is governed by a principle of equity. That being so, we must assume that only the minister in exercising his discretion will make a change shifting the incidence of taxation. I think there is no arithmetical means of deciding now whether there is likely to be or will be any shift in the incidence of taxation, particularly with regard to subsection (5). The subec-tion provides:
-the income of one spouse from the business for a taxation year may, in the discretion of the minister, be deemed to belong to the other spouse.
The word "may" is permissive. I would suggest, therefore, that the hon. member for Edmonton West is just taking away that permissive discretion which is otherwise granted to the minister. There is no firm means of determining there is any shift in the incidence. It is only a very slight walk to take us to subection (3). Is it not within the realm of possibility, or what we consider to be possibility-because there is not before the Chair any means by which to determine precisely what is going to be the change-that a husband and wife, working together in the circumstances which have been so eloquently portrayed by my hon. friends, could in fact create a larger income? There might be no shift at all.
These are all possibilities which we are examining here. May I say, with respect, that I challenge the Chair or anyone else to look at those two subsections and say there will be, there can be or is likely to be any shift in the incidence of taxation. It remains a possibility, but only a possibility. I say to the Chair that I believe the standard rule is that if the Chair approaches a question of the propriety of any motion and whether or not it is in order, then the onus falls upon those who say it is not in order-

November 5, 1971
Income Tax Act
and if Your Honour has any doubt I suggest it must be resolved in favour of the propriety of the motion.


Marcel Joseph Aimé Lambert: Due to the invitation of Your Honour to address myself to the question of shifting the incidence of tax, I would point out that this problem has been debated to a considerable extent in the past and in no case more extensively than on the basis of an amendment I moved when a bill was being considered arising out of the budget of 1970. The government at that time was proposing a 5 per cent excise tax on airline tickets. I proposed an amendment that would not change the balance of ways and means. With the greatest respect, I would put to the Chair that the question of balance of ways and means is the operative point and that the incidence of tax is of no consequence.
My motion finally was ruled out, based upon a citation in May's sevententh edition. I researched the citation and found that the editors of May's misreported the case, giving it a completely reverse meaning to what was the result. This meaning had been inferred from a decision of the chairman of the committee of the whole in the British House during World War I on a matter that was not debated. This is the sole citation that was used against the principle I invoked so far as the incidence of taxation is concerned.
No question has been raised concerning the balance of ways and means, but a decision of Your Honour has been given on two occasions accepting amendments which disturb the balance of ways and means. I will admit this does disturb the balance of ways and means, but so far as the question of incidence is concerned I say simply that the disability with regard to certain taxpayers will be removed and they will be treated as individuals. There will be no forceful pairing.
Under the circumstances I would invite Your Honour, now that it is four o'clock, to look at the judgment of His Honour Mr. Speaker in regard to the incidence of tax and the arguments I advanced on that occasion, basing myself on May's authority and the subsequent correspondence which ensued between the Clerk of the House and the editors of May's because I called into question the authorities that were cited against me.
I would call it four o'clock, Mr. Chairman.


Russell Clayton Honey: Does any hon. member wish to direct argument on the procedural points of this motion? I have had very forceful arguments from the hon. member for Peace River and the hon. member for Edmonton West and I should like to look into the matter. Particularly I wish to look carefully at the section and the proposed amendment because I do not want to make a decision until I am absolutely sure of the effect of the amendment if allowed.
Progress reported.


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


David Samuel Horne MacDonald: On a point of order, Mr. Speaker, I am sorry that the President of the Privy Council (Mr. MacEachen) has just left the chamber, because I
iMr. Baldwin.]
am not sure whether he can be called back. Earlier today he indicated he would take an opportunity during the day to confer with the House leaders and members of the kdministration concerning the possible acceptance, unanimously and without debate by this House, of a resolution with regard to a direct appeal to the Secretary General of the United Nations.
I wonder if it is possible, in view of the immediate need, to have a determination from the President of the Privy Council on this question. I am not sure whether he is still in the government lobby. If he is, I know that members on both sides of the House would be happy to hear from him. Earlier I had an opportunity to confer with the Secretary of State for External Affairs (Mr. Sharp) as well as the government House leader and I think they might be able to add some useful information at this point.


Mr. Deputy Speaker:: Order.


David Samuel Horne MacDonald: On a further point of order, Mr. Speaker, I note that the Minister of National Defence (Mr. Macdonald) and the Minister of State for Science and Technology (Mr. Gillespie) are here. I wonder whether either of them could speak on this matter or whether they have had an opportunity to speak to their colleagues about it, because i am sure the House would wish this question to be resolved this afternoon before we adjourn.


Donald Stovel Macdonald: Mr. Speaker, I apologize to my honourable clansman. I was paying close attention to the material on my desk and did not hear what he said.


David Samuel Horne MacDonald: Mr. Speaker, I wonder whether the minister or his colleague has had an opportunity to confer on the matter of an appeal to the Secretary General of the United Nations about a one-year moratorium on nuclear tests. I know that the Secretary of State for External Affairs at noon today appeared to be interested in this suggestion. I think it would be helpful if a statement on this important question were made on the floor of the House. We will not be meeting before the contemplated blast tomorrow at five o'clock and I think it would be helpful to have a statement today.


Donald Stovel Macdonald: I do not have an answer but I will go out and inquire.


Mr. Deputy Speaker:: Is the hon. member rising on a point of order?



PRIVILEGE


Donald MacInnis: rise on a question of privilege, Mr. Speaker. It arises from an article in this afternoon's newspaper in which the Liberal whip is reported as indicating a wish to close Parliament. As an employee of this House in so doing he cast a direct reflection on the Chair, and not only on Your Honour's position but on that of every member of this
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House. The following statement appeared in this afternoon's newspaper:
Mr. Deachman acknowledged his proposal to shut down the Commons from time to time would elicit outraged protests from some traditionalists. In particular he noted some would complain that shutting down the Commons would mean the loss on occasion of the daily question period.
"That wouldn't be the end of the world," he observed. "As it is, two thirds of the questions are irrelevant, out-dated or out-of-order."


Mr. Deputy Speaker:: Order, please. I want to draw to the attention of the hon. member for Cape Breton-East Richmond (Mr. Maclnnis) and of all hon. members Standing Order 17.1 suggest to the hon. member who raised the question of privilege, without in any way ruling on it, that it will have to be raised on another occasion. Standing Order 17 reads as follows:
17 (1) Whenever any matter of privilege arises, it shall be taken into consideration immediately.
(2) Unless notice of motion has been given under Standing Order 42, any member proposing to raise a question of privilege other than one arising out of proceedings in the chamber during the course of a sitting shall give to the Speaker a written statement of the question at least one hour prior to raising the question in the House.
I listened to the hon. member and have come to the conclusion that his question of privilege arises out of a statement which he alleges another hon. member made to the press; it does not arise out of proceedings in the chamber. The hon. member, like all other hon. members, must observe the provisions of the Standing Order. He would have to give His Honour notice in writing as required by the Standing Order.


Donald MacInnis: Mr. Speaker, you ruled that this is not a matter which arose in the House. This is a question on which I am not too sure. I, along with many other Members of Parliament, would like to hear from the hon. member who made this statement outside the House whether or not he was instructed inside the House by the Prime Minister (Mr. Trudeau).


Mr. Deputy Speaker:: I will recognize the hon. member for St. John's East (Mr. McGrath) in a moment. I do not think we should continue the matter much longer. In my opinion, rightly or wrongly, I have to rule that the matter did not arise out of proceedings in the chamber.


James Aloysius McGrath: On the point of order raised by Your Honour, I would respectfully submit that Standing Order 17 (1) clearly covers the question raised by the hon. member for Cape Breton-East Richmond. It reads:
Whenever any matter of privilege arises, it shall be taken into consideration immediately.
The fact is that this matter has just arisen by virtue of the afternoon edition of the Ottawa Citizen. I think there is a clear question of privilege involved. In accordance with the provision of the Standing Order, the hon. member raised the question immediately. The hon. member who is responsible for this statement in the press is one of the most attentive members in the House and it is a great disappointment to all of us that he should be casting a reflection on the proceedings of the House, because if the sessions of this House and the debates of this House-
Proposal of Member to Close Parliament


Mr. Deputy Speaker:: Order, please. I think the hon. member should not debate at this point the substance of the alleged press report. He rose on a point of order, quite properly, and I listened to his point with interest. He said that the first subsection of the Standing Order covers the matter. I think that the Standing Order has to be read in its entirety and I must rule that the matter raised by the hon. member for Cape Breton-East Richmond is governed by subsection (2) under which an hon. member would be required to give written notice to His Honour.


Donald MacInnis: I rise on a point of order, Mr. Speaker. I am prepared to accept your ruling, but at the same time I give at least verbal notice that this question will be raised at the first opportunity on Monday, at which time I will be prepared and will have done some research referring to the fact that when this member wishes things to go to committee he is making a ridiculous suggestion and that he lied to the House with respect-


Mr. Deputy Speaker:: Order, please.


Some hon. Members:: Oh, oh!


Mr. Deputy Speaker:: I know the hon. member feels very deeply about the matter, but the language he used is not acceptable in Parliament.


Some hon. Members:: Shame.


Mr. Deputy Speaker:: I think it would assist the Chair if all hon. members took a moment or two now during which the hon. member for Cape Breton-East Richmond might like to modify his statement.


Donald MacInnis: I will modify it in this way, Mr. Speaker. I said that this member lied in respect of the committee. I will withdraw that and say that on another occasion I stood in the House and called that member a liar. I supported this with evidence from the committee proceedings and from Hansard, and the Speaker of the day did not ask me to withdraw the statement. I have no intention of withdrawing from the truth. The truth is recorded.


Mr. Deputy Speaker:: Order, please.


Mr. Deachman:: Mr. Speaker-


Mr. Deputy Speaker:: Order, please.


Donald MacInnis: You are pushing your luck, fellow.


An hon. Member:: Go home and rest.


Donald MacInnis: Did you read that piece in the paper?


Mr. Deputy Speaker:: Order, please. I will recognize the hon. member for Vancouver Quadra (Mr. Deachman) because his name was brought into the debate, and I think that should be all. But I would ask the hon. member for Cape Breton-East Richmond whether on reflection he would not wish to modify his statement.


Donald MacInnis: On reflection, I repeat what I said before. I called him a liar in the chamber before and I supported it with written evidence from the committee proceedings and from Hansard, and the Speaker of the day did not insist that I withdraw it. The precedent has been established.
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Proposal of Member to Close Parliament


Some hon. Members:: Withdraw.


Mr. Deputy Speaker:: Order, please.


Mr. Peters:: Just because he lied before does not mean necessarily that he is lying today.


Mr. Deputy Speaker:: Order, please. Hon. members say "Withdraw". I do not think that is helping the situation. I am not asking the hon. member for Cape Breton-East Richmond to withdraw his statement, but I think for the sake of decorum of this institution the hon. member might like to modify his statement. The Chair does not want to be unreasonable but hon. members realize, I am sure, that I have a heavy responsibility in the chair to protect the rights and privileges of all hon. members. I hope that before I recognize the hon. member for Vancouver Quadra the hon. member for Cape Breton-East Richmond would modify his statement.


Donald MacInnis: I will put it this way, Mr. Speaker, with the assistance of the House, and say that in my first submission on the question of privilege I wanted one question answered, namely, whether the hon. member was following the dictates of the Prime Minister. That question not having been answered, I will modify my statement to this extent: just because the hon. member lied before, I have no proof that he is lying today.


Grant Deachman: Mr. Speaker, I certainly hope that the Chair will not make any ruling in respect of what has been said here this afternoon and that the matter can be dropped here. On a number of occasions in this House the hon. member opposite, for whom I hold no malice whatsoever, has referred to me as a liar. The record stands and will show that he has said that. I have heard him say the same thing about the Prime Minister (Mr. Trudeau), and so on. I am just one joined with others to whom he has given this label.
We respect the hon. member's judgment, he is an able member of this House and one for whom we all have plenty of respect, but he has one peccadillo that we have all observed. From time to time he frequently rises to call this or that cabinet minister a liar. When I find myself placed in that company I know it is a label that he retains for people in high places.


Donald MacInnis: Mr. Speaker-


Mr. Deputy Speaker:: Order, please. The hon. member for Cape Breton-East Richmond is rising on a point of order. I gave the hon. member for Vancouver Quadra some time because I recognize that it is an important matter for him, and indeed for all hon. members, but I wonder if it would have been better not to have recognized the hon. member for Vancouver Quadra. I hope that his remarks have not re-invigorated other hon. members. I would prefer to leave the matter now, since the hon. member for Cape Breton-East Richmond has indicated that he will give Mr. Speaker notice in the proper way, in accordance with the requirements of the Standing Order.


Donald MacInnis: On a point of order, Mr. Speaker, I rise to take strong exception to the fact that the hon. member for

Vancouver Quadra indicated that I have called a cabinet minister a liar. This is not the case. With respect to the Prime Minister-and this does not necessarily mean this Prime Minister-the proof is in the Hansard record. I can present absolute proof supported by one of that Prime Minister's cabinet ministers.
With respect to the suggestion about dropping this matter and the gratuitous remarks of the hon. member opposite that he is prepared to drop it, all I can say is that I am not disposed to drop it because the absolute proof is in the records of this House to support the statements I have made today. If he wants to drop it, it is because he knows I can produce that proof.



PRIVATE MEMBERS' MOTIONS


[Stage Direction]
The house resumed, from Monday, November 9, 1970, consideration of the motion of Mr. McGrath (St. John's East):
That, in the opinion of this House, the government should consider the advisability of introducing legislation to protect the privacy of every person against the improper disclosure of credit rating records and to protect the reputation of every person against misinformation contained in such records.
David Samuel Horne MacDonald: Mr. Speaker, we are resuming debate on a motion that was brought forward by my colleague, the hon. member for St. John's East (Mr. McGrath), almost a year ago to the day, on November 9, 1970, and because of the length of this session we again have an opportunity to debate it.
Before moving into the main body of my address I would like to point out that once again in private members' hour we are dealing with a motion that was supported by all parties a year ago, and the fact that action has not been taken on it indicates we have not resolved a substantial problem connected with private members' hour. On the previous occasion there was almost unanimous agreement that the motion be passed, yet simply because there is no machinery in many cases to move motions beyond debate in private members' hour this motion has remained on the order paper for a year.
I hope that during the interim the government House leader and others in the cabinet have had a chance to study this very reasonable motion with a view to having the substance of it referred to the Standing Committee on Justice and Legal Affairs where it could be more adequately dealt with than in this House.
In this debate we are dealing with the matter of credit ratings and the way in which they are used. Credit ratings are used not only to assess the nature of one's ability to pay one's debts but also to assess one's honesty and dependability as an individual. That affects jobs, promotions, appointments and the like. In essence, it affects the right of decent individuals to advance within a free society. We are wondering what response there will be from the government to take account of the rapid accumulation of information in credit card ratings, which is often best
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described as misinformation, containing typographical errors and irresponsible judgments.
To give an example, Mr. Speaker, just a few weeks ago I was phoned by a credit bureau with regard to an account that was outstanding and as the bureau employee spoke I told him that I would be interested in knowing what kind of information they had on my card. He began to tell me that once I had a telephone bill that I had not paid, in a town where I was working for a national chain store. I told him that was all very interesting, except that I have never been employed by any national chain store and had never had a phone bill in the place he mentioned. He became a bit embarassed and said, "Maybe we had better check back on some of this." I suddenly realized what it is to have misinformation accumulated in a file where it could be used against me any time in the future.
This motion deals specifically with the credit bureau rating systems and generally with the individual's right to privacy within our society. For over 200 years the courts have established that one of the fundamental principles of common law is that nobody, be he a state official or not, is empowered to enter on our personal property. Some provinces are now attempting to legislate in this area, and this points up the need to have some common standard.
We also have a long tradition that people are considered innocent until proven guilty. Yet the accumulation of credit information in this country has given rise to a situation in which a person can be found guilty without his knowledge, and as a consequence steps may be taken detrimental to him by those who otherwise might employ him, offer him credit or transact some other form of business with him.
Unless we apply stringent safeguards in our contemporary society we are in danger of losing the fundamental rights of privacy and property. Modern devices such as wire tapping, highly sophisticated microphones, cameras for surveillance and the establishment of computer data banks and processing centres must be controlled. If not controlled they can easily become the instruments of suppression and totalitarianism.
I realize that credit records are but one small sector of the larger question of privacy in the face of modern technology. However, the dissemination of credit information is one measure of the problem and is an area in which we can start to build a good system of checks and balances which will stipulate in law that uncontrolled and improper collection and the haphazard storage and distribution of confidential records, many of which are sold for commercial gain, will not be allowed, and in particular that the accumulation of inaccurate and hearsay information will definitely be counteracted by the individual's right to know and his right to clear away this kind of misinformation from the files.
As in all areas of technology, the pace of input into and output from any system is obviously going to be improved by innovation. Soon credit information will be computerized or microfilmed. The result will be a quantum increase in the availability of this information to those who might benefit from it. Finance agencies with quicker recall and improved facilities may find it advantageous to record the lives of customers in greater detail.
Protection of Privacy of Credit Records
The whole trend of modern technology clearly underlines the need for greater government involvement. It is all too obvious that a good deal of the information that goes into these files has nothing to do with the individual's ability to transact his business or handle his commercial affairs but can easily involve a lot of other affairs that are no part of the information on one's credit rating. The need for clear government regulations to cover collection agencies, their operation and the rating of the individual between federal and provincial governments is obvious.
It is a truism to say that massive credit is here to stay. Consumerism has obviously been built and made vital to the operation of the marketplace. Outstanding consumer credit in this country totalled $9.4 billion at the end of August, 1971, which over a three-month period represents a 3.8 per cent increase. For better or worse we are heavily entrenched in the wonderful world of credit.
I should like to outline some of the inner workings of a credit bureau. Most of them have automated file systems that are not computerized as yet. Their credit cards are retroactive to November, 1964, or for about seven years. Cards at a minimum contain court judgments, writs, bankruptcies, foreclosures, collections, marital status, general credit rating and such things as chattel mortgages, etc. At a maximum, according to the Canadian Association of Consumers, they include salaries, wages, resume on domestic life and even personality outlines. At the moment there is no standardized way of reporting credit profiles in Canada.
In Ontario, standard procedure when a member business of a credit bureau calls to check on an individual's credit is to simply read down that individual's credit card outlining derogatory information such as collections, etc., which have been marked in red pencil. In other words, they simply go down a list covering seven years and in some cases dating back 14 years. The decision to grant credit or not is arbitrarily decided by the member calling for the information. And, as it is well known, once an individual is tagged as having an overloaded credit rating it often affects not only further business transactions by the individual but also that person's chances of further employment or promotion in the community.
According to the statement of policy to ensure the right of privacy to consumers released by the Associated Credit Bureaux of Canada in 1970, "Credit bureaux will make known to any consumer their file content concerning that consumer." The flaw here is that the code is voluntary and a large proportion of credit bureaux do not belong to this organization. In many cases the individuals most affected by this improper information or misuse of information are so intimidated or so unaware of their rights that advantage can be taken of them. Last year, the Canadian Association of Consumers undertook in its own words, a nationwide survey of credit bureau attitudes and found that many credit bureaux are still reluctant to show files even if the person has recently been refused credit.
Because inadequacies still exist in the use of credit ratings, and the risk to individuals who are affected by them is still great, we are calling for realistic legislation and enforcement in this area believing it is the responsibility of the federal government to take this initiative. At
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present there exists in Canada no legislative regulation of data processing at the national level. Our party advocates controls to ensure that the privacy and reputations of Canadians are protected. In particular, all companies which collect information and dispense ratings and personal information on Canadian consumers which operate within federal jurisdiction should require a government operating licence and operate according to provincial standards.
The possible influence of companies with large amounts of economic, social and even political information on individuals is sinister. We strongly advocate the establishment of government studies and regulations relating to data collecting which, done in conjunction with the provinces, would set specified standards for the protection of the individual's rights and privacy.
In general I should like to give an illustration of the regulations that we might have so that the consumer would have rights under the law. These might be: first, that the consumer be told the name and address of the credit agency when he is denied credit, insurance or employment and it should be done at the time that he is refused; second, the consumer should be able to examine information in his file at the credit agency when credit action is taken against him; third, he should be told the sources of information in his file and to whom such information has been given; fourth, such data should be confidential, except for legitimate purposes such as a credit reference or job; fifth, disputed information should be reinvestigated with false data deleted, and notification of deletion sent to those who received erroneous reports within a specified period of time.
Sixth, he should be informed of investigations involving interviews with other persons about his personal life and have the right to be informed on the kind of questions which were being asked; seventh, he should be informed when adverse public record information is reported to a potential employer; eight, he should, after having access to record cards or a computer print-out, be able to bring legal action against those companies which do not comply with government regulations.
There have been some encouraging signs of governments coming to grips with this issue, most recently the province of Ontario. However, the federal government, which at very least should encourage guidelines to coordinate national standards for credit data organizations, has done very little in this field. The flow of detailed information is vital to the functioning of our modern society. However, the regulation and control of that information, when it affects an individual's livelihood, is equally important to the preservation of the individual's right to privacy in which we all so strongly believe.
Credit ratings are more than just optional measurements by which the honest gain and the dishonest are harmed. In a society that is increasingly based upon one's ability to have credit awarded or assessed, the credit rating is almost a matter of integrity, both financial and otherwise. It is disturbing that so little action has been taken federally on this important subject. I would hope when we are dealing with something as basic as the establishment of credit that we would feel it proper and necessary to take action on this matter as early as possible.

I would therefore like to move, seconded by the hon. member for Grand Falls-White Bay-Labrador (Mr. Peddle):
That the subject matter of the motion now before the House be referred to the Standing Committee on Justice and Legal Affairs.
I believe in committee this matter should receive more detailed and adequate consideration for the formulation of effective federal legislation.


Some hon. Members:: Hear, hear!


Mr. Speaker:: I have some doubts as to the exact terminology of the motion. The hon. member is actually making a substantive motion and should have presented it in other terms. In other words, the motion should be that this matter be not now considered but that it be referred to a Standing Committee. I am not too sure about the motion as proposed and I would read it now for the consideration of hon. members:
That the subject matter of the motion now before the House be referred to the Standing Committee on Justice and Legal Affairs.
I have no objection to putting the motion, but if hon. members have views to express or wish to object to it from a procedural standpoint, I would hear them. Otherwise I would put the motion.


David Samuel Horne MacDonald: On a point of order, Mr. Speaker. I do not want to take any more of the time of the House, but in reviewing the debate of November 9 last there was some concern that the actual detailed phrasing of the motion might have some difficulty in being accepted by hon. members. There seemed to be general acceptance of the thrust of the motion by all hon. members and therefore I feel that in order to assist the House, the substance of the information we are concerned about might best be conveyed to the committee that could be most adequately charged with responsibility for dealing with the matter before us.
This is an important matter and I believe all hon. members may want the Standing Committee on Justice and Legal Affairs to have the opportunity of considering it at length and then, hopefully, making useful recommendations to the House.


Mr. Francis:: Mr. Speaker, an amendment to a motion in this form is not, as I understand it, usual. It is not usual procedure for an hon. member to move that the subject matter of a motion before the House be sent to a committee. I do not know what provisions are made under the rules but it seems to me that this is a unique procedure and is improper.


James Aloysius McGrath: On a point of order, Mr. Speaker, my hon. friend has introduced this amendment because the same motion was debated in the present session on November 9 last. At that time there appeared to be unanimity in the House as to the substance of the motion. There was some question, however, regarding its precise wording. Since there was unanimity in this House with regard to the principle enshrined in the motion, my hon. friend wanted the subject matter of the motion referred to the Standing Committee on Justice and Legal Affairs where it would serve as a vehicle, so to speak, and provide an opportunity
November 5, 1971

for this entire subject to be aired, for witnesses to be called, and so on.


Mr. Speaker:: If there is unanimous consent, of course, the motion proposed by the hon. member can be put. I would think that it would be necessary, first, to discharge the motion originally before the House and put an entirely new motion to the House which would be debatable until five o'clock. If that is what hon. members desire, I will put the motion.


Some hon. Members:: Agreed.


An hon. Member:: No.


Mr. Speaker:: The hon. member for Egmont, seconded by the hon. member for Grand Falls-White Bay-Labrador moves:
That the subject matter of the motion now before the House be referred to the Standing Committee on Justice and Legal Affairs.


Cyril Lloyd Francis: On a point of order, Mr. Speaker, as I understand it there is a motion before the House, Is unanimous consent of the House not required before that motion may be withdrawn and another motion or amendment introduced?


Mr. Speaker:: Yes, and that is why I suggested that there had to be unanimous consent. I asked whether there was unanimous consent.


Cyril Lloyd Francis: No, there is not, Mr. Speaker.


Mr. Speaker:: This is an entirely different motion that is being proposed and it can only be put with the unanimous consent of the House.


James Aloysius McGrath: I wonder if it would not facilitate matters if we were to look upon the motion moved by the hon. member for Egmont as an amendment to the motion before the House?


Mr. Speaker:: I would be ready to consider that. Yet this is not an amendment; it is a new motion, and I wonder how the hon. member can indicate that a motion proposed in these terms can be considered as an amendment. I have very serious doubts about that. As I say, however, in my role here I am trying to help hon. members and facilitate proceedings and not impede them in any way. I would think that we would need some form of consent to carry out the hon. member's suggestion.


Stanley Howard Knowles: Mr. Speaker, I think Your Honour is quite correct and so is the hon. member for Ottawa West (Mr. Francis) quite correct in pointing out that what is proposed is unusual and perhaps irregular. May I also point out that there have been a number of occasions-not many, but enough to say that there are a number-when by agreement, indeed by unanimous agreement, the House has accepted the discharge from the order paper of the motion that was before it and the reference of subject matter thereof to a standing committee. I think the position of the hon. member for Ottawa West to the effect that the proposed amendment is irregular would be protected if we followed the other course. I suggest that Your Honour should ask the House if there is unanimous consent for that course.
Protection of Privacy of Credit Records


Mr. Speaker:: That is exactly what I did a moment ago. I indicated that what is proposed can only be done with unanimous consent. I thought that there was such consent. Now I will recognize the hon. member for Ottawa West.


Cyril Lloyd Francis: Mr. Speaker-


Stanley Howard Knowles: On a point of order, Mr. Speaker-


Mr. Speaker:: Order, please. I apologize to the hon. member for Ottawa West. I think the hon. member for Winnipeg North Centre has not yet completed his remarks.


Stanley Howard Knowles: What I wanted to say was this. In my view Your Honour should not ask for unanimous consent for the putting of the motion that was suggested by the hon. member for Egmont but, rather, unanimous consent for the proposition that the original motion be discharged and the subject matter thereof referred to a committee.


Cyril Lloyd Francis: Mr. Speaker, I appreciate what the hon. member for Winnipeg North Centre has been saying and I do not misunderstand him. It seems to me that the proper procedure would involve the usual kind of conference between representatives of the parties, so that there may be agreement on what is being done. I think a number of hon. members still want to speak on the motion presently before the House. Perhaps following today's debate there might be a conference between the parties involved and I think some agreement could be worked out for dealing with the subject matter of the motion which is an extremely important one and involves a number of people. It seems to me that that is the procedure which ought to be followed.


James Aloysius McGrath: Mr. Speaker, I wonder whether it might be possible to suspend further debate on the motion and proceed with some other matter until the House leaders have had a chance to discuss the proposal for referring the subject matter of the motion to the standing committee.


Mr. Speaker:: That, again, would require unanimous consent. Is there such consent?


An hon. Member:: No.


Mr. Speaker:: There does not appear to be unanimous consent.


Some hon. Members:: Agreed.


Mr. Speaker:: I will again try to ascertain whether there is unanimous consent for the proposition that the order now before the House be discharged and that the House consider a new motion to be proposed in terms of the motion suggested by the hon. member for Egmont.


Some hon. Members:: Agreed.


Some hon. Members:: No.


Mr. Speaker:: There is not unanimous consent. I suggest, with respect to hon. members, that for the 20 minutes left

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for we might continue the discussion on the motion before us, subject of course to the discussion which has been suggested.


Mr. Thomas S. Barnett (Comox-Alberni):: Mr. Speaker, the thought has occurred to me that in view of the suggestion which has been made, while I am making my remarks the consultation suggested might take place. I would not object if there were those discussions. I agree that the subject matter of the motion is most important. It is worthy of consideration by hon. members of this House and I think that giving those concerned an opportunity to appear before the standing committee might be a most useful exercise.
The hon. member for Egmont (Mr. MacDonald) obviously had a well prepared representation to make on the subject matter before the House as well as on related subject matters. If I remember correctly, he listed eight or nine points which he felt should be considered. I listened carefully to the hon. member and for the most part I agree with his suggestion. I am sure no one would quarrel with the idea that it is necessary for people who are operating businesses to have some basis on which to assess whether credit should be extended to an individual customer.
I suppose it is true to say, as the hon. member for Egmont suggested, that we will live in a society where a large volume of business will be transacted either on a long-term or short-term credit basis. Yet most of us in the course of our lives have observed occasions when knowledge, acquired through mechanisms developed in the business world for accumulating and recording information relating to credit ratings, is abused. Since the credit system is so firmly established and is in such wide use, I think some ground rules in law ought to be laid down for the governing of such operations.
One of the things that concerns me greatly-and I speak as one who has had experience of other people who have been involved in difficulties in this regard-is that no one seems to know just who has what information about us. I do not know how many credit bureaux have me listed on credit cards somewhere, either in Ottawa, British Columbia or in some other part of the country. There may be information about me tucked away in some central recording centre in Toronto for all I know.
As a matter of protection to the individual it should be defined that anyone holding such information must advise the person about whom they hold the information and, indeed, they should have to advise them what information they have. This in itself would provide protection to the individual against the recording and perpetuation of incorrect information about a particular individual. Perhaps it would do something to straighten out the circumstances that occur fairly frequently with regard to mistaken identity where the information that is presumably recorded about one individual relates to and is connected with another. This is one of the basics that should be required by law for all those who are involved in the operation and accumulation of credit information.
There has been a good deal of talk about the fact that we live in an acquisitive society. Perhaps a new term should be applied and it should now be called an inquisi-

tive society. For example, having been a customer of the B.C. Telephone Company for a good many years I recently had occasion to make application for the installation of a new telephone in another location. I was faced with the current application form which asked all manner of questions about me, my employer and various other things. Apparently it wanted some sort of guarantor. It struck me that this was going a bit far on the part of one of the public utilities in this country. The matter of who you work for really does not have anything to do with the B.C. Telephone Company installing a telephone in your residence.
I think that kind of inquisitiveness should be restrained by law, particularly by a telephone company which collects their charges in advance each month. I have no way of knowing to what organizations the B.C. Telephone Company may belong. I do not know how much of the information they acquire as a result of people making applications for telephones is passed on to other, unknown destinations. This is the sort of thing that is of increasing concern to more and more individuals.
As pointed out earlier in the discussion, this situation becomes rather frightening and horrifying with the advent of the computer. From time to time we have the feeling that we are going to simply become numbers or some sort of code on a tape and cease to have any identity as an individual, living human being. Apart from anything else, it might help to preserve the sense of human freedom and identity if citizens know that there are some legal ground rules laid down to govern the operation of recording and using information on which credit decisions can be based.


Mr. E. B. Osier (Winnipeg South Centre):: Mr. Speaker, I rise to speak on one aspect of this motion. Although it has been touched upon, perhaps it can bear expansion. There is a bird in this corner of the chamber, but we cannot find it. I do not know whether it is an early bird, late bird or what worm it is after.


James Aloysius McGrath: The hon. member is getting a sign from heaven not to talk out the resolution.


Edmund Boyd Osler: It is an outstanding observation that the sun shines on this side of the chamber, if it is coming from where the hon. member says.


James Aloysius McGrath: You need the inspiration; we don't.


Edmund Boyd Osler: I wish to speak about the computer aspect. Before I get into that matter, which was touched on last year by Mr. McGrath-


Some hon. Members:: Order.


Edmund Boyd Osler: I am sorry-the hon. member for St. John's East (Mr. McGrath). I feel that it can be expanded. I notice that other members feel the same. Before doing that I wish to say that the hon. member for Egmont (Mr. MacDonald) mentioned something that struck me, in the whimsical mood I happen to be in this afternoon. He was talking about checks and balances. I wonder whether he has been to Assiniboia this week and that put this in his mind. The farmers there are very cognizant of the fact they are not getting the cheques they thought they would.
November 5, 1971

It looks very much as though some balancing of budget will take place. In fact, I will be almost willing to bet on it.


Stanley Howard Knowles: Which way?


Edmund Boyd Osler: I will bet the right way. The hon. member for Egmont said the federal government has done very little in the field of regulation to help the individual against the sinister forces arriving on the horizon. With regard to the sinister forces, I completely agree. I think this is an oversimplification of a broad statement. It is like someone taking an old-fashioned broadsword to open a can. From my observations in Assiniboia this week, it seems typical of some members of this august House. As these things are catching up with the people in Assiniboia; they are also catching up with the members of this House.
It is quite evident from the record. Any person who can read will know that Bill C-252 was introduced in this House earlier this session and has a direct bearing on one aspect of the problem to which the hon. member was referring. At the time it was introduced, the Minister of Justice (Mr. Turner) said it was the beginning of a process that would cover the rest of the issue. We have no reason to doubt the integrity, good will or intention to follow through of the Minister of Justice. The simple statement that the federal government has done very little in this field is by the hour in Assiniboia catching up with the opposition.
I caution the member for Egmont to be a little more temperate because we do not want his party to get the reputation of saying those sorts of things to any greater extent than they now have. The hon. member forgets this government appointed a task force on justice and communications which has been working since February. It will report to the Department of Justice on more or less the same terms of reference as are contained in this motion. Perhaps that is why the member wants to change the motion. He feels there is no thunder to be gained by considering this motion any longer because the government has already acted on it.
With the greatest of good will, the government is in full stride of acting in this respect. It will do no harm to pass this motion. It will just put the seal of approval, or holy oil on a motion or body that is already moving in the direction suggested. There would be no harm passing it.


Thomas Speakman Barnett: Like most things, it will probably sit around gathering dust.


Edmund Boyd Osler: Reports cannot gather dust until they are finished and tabled. It is probably in the process of being written, so it cannot be gathering dust yet. As things go around here, dust does not settle very quickly but seems to stay up in the air most of the time, especially at this stage of the session.
As several of my colleagues have said, the problem of unregulated gathering of credit information can certainly be abused drastically in this computer age. Mastering knowledge has been aided by computers. Computers can master knowledge and use it to the detriment of individuals. This could not be done in former days because of the sheer mass of knowledge. I note that Dr. John Deutsch, chairman of a panel at a conference entitled "Computers,
Protection of Privacy of Credit Records
Privacy and Freedom of Information" held in May, 1970, put this quite succinctly. If I may quote from page 42 of "Instant World, a Report on Telecommunications in Canada", he said:
In the past, we've had a protection from the limitations of the written word. While a lot of information could be collected, it was cumbersome, it was difficult to find, certainly difficult to find quickly, and this has given the individual a good deal of protection as far as privacy is concerned. It was like looking for a needle in a haystack. Well, what's happened now is that we can indeed find the needle.
That is the nub of the threat that computers pose to mankind. They can be a wonderful servant but they can also find needles that they have no business to find, revealing information that used to be buried by the normal course of events.
The ease of collecting and disseminating credit information, thanks to the computer, brings to light a number of new problem areas. First of all, there is incorrect information which can be propagated and disseminated without disclosing the source of the information or anyone being able to check the information. Then there is misuse of information. For example, information on credit ratings could be misused by those directly related to the gathering of the information or by those who come across information in computer handling.
Last year my colleague the hon. member for Saint-Jacques (Mr. Guilbault) mentioned in his intervention on this motion that he had been closely associated with a large insurance company during his career. As reported at page 1020 of Hansard for November 9, 1970, he said:
I have had the opportunity to look at credit reports and I have often noticed, with disgust, that some of those credit reports contained information which had nothing to do with the financial situation of the persons involved.
Then he went on to say it was-
-information which has absolutely nothing to do with the financial situation, the steadiness and solvency of the individual involved.
So you can see that the information may have nothing to do with the inquiry that is made. That is bad enough, but when compounded by computer technology the problem is even worse. I presume the hon. member was referring to pre-computer days and the sort of reports that those of us who work in offices have often seen floating around. When this is added to the fact we are now in the computer age, you can see we really have a problem as far as the average individual is concerned. A person may be aware of various fragments of information that has been gathered by different sources. He may not be perturbed about these little bits and pieces of information that various people have on him; but if all these bits and pieces are gathered together by a computer a very extensive personal dossier could be compiled without his knowing it. He could be completely unaware of such a dossier and its contents.
Because the computer industry has grown so quickly and is still in a state of flux, I see no hope on the horizon for a self-regulating body that one could look to to police the industry and to cure some of its ills. Therefore, it is only right and fitting that motions of the sort we are discussing today should be moved and that the govern-

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ment should take the action that it is now in the full process of taking. After all, there is a real problem here.
I should like to think that when we consider both the present motion and the actions that the government is putting together as a package, we consider also the following recommendations very seriously. First of all, the licensing of data banks which would gather, store and disseminate this kind of information; second, that regulation of the sale and disposal of information stored in these banks be made mandatory; third, that regulation of international links between data banks be built into the industry. We would then know exactly what information is leaving Canada and what is coming into Canada. I think every Canadian is horrified that sooner or later the ultimate will arrive and in a little basement in an office in New York every scrap of information on every single person in Canada will be available. Certainly this would be a poor state of affairs.
I have other comments to make, Mr. Speaker, but it is five o'clock and I am afraid I will not be allowed to go on unless the House allows me a little longer.


Some hon. Members:: Five o'clock.


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

Monday, November 8, 1971