1971-11-09

GOVERNMENT ORDERS


[Stage Direction]
The House resumed, from Monday, November 8, consideration in committee of Bill C-259, to amend the Income Tax Act and to make certain provisions and alterations in the statute law related to or consequential upon the amendments to that act-Mr. Benson-Mr. Laniel in the chair.
The Deputy Chairman:: When the committee rose last evening section 28 of clause 1 was under consideration.
On clause 1-section 28: Farming business.


Mr. Hees:: Mr. Chairman, the sections we are considering now, those dealing with farm problems, are another example of the great number of complexities contained in this bill which require a great deal of examination not only by the House but by the public. Time is required to allow public bodies, particularly farm organizations in this case, to come to Parliament, appear before the agricultural committee and make submissions in respect of their views concerning how these clauses could and should be improved for the good of the farm population of Canada. Time is required so that the suggestions and submissions to be presented to the agricultural committee by the farm groups of Canada could then be thoroughly examined by members of the House in order to make sure that when this bill is finally passed the country will have good legislation and not an uncertain and unsatisfactory act as would seem to be the indication at this point in time.
It is for these reasons that the provincial governments, when they appeared here last week, strongly urged the federal government not to try to maintain its present timetable of completing the consideration of this bill by the end of the year, but to allow more time for thorough examination. These are the reasons the Official Opposition has urged the government to split this legislation into two bills. The first would consist of the exemptions and allowances found in the present bill. Such a bill containing those tax exemptions and allowances would pass the House quickly and become effective.


Gérald Laniel: Order, please. The Chair feels it is not easy to intervene at this time, but although the hon. member's remarks are very interesting and concern the whole question of taxation he will note that the procedure normally followed in Committee of the Whole is for hon. members to restrict their remarks to the clauses before the committee at that time. The committee has agreed to
group different sections of the bill for the purpose of discussion. The hon. member has gone much beyond that and I hope he will come back as quickly as possible to the four sections which are before the committee at this time.


George Harris Hees: Mr. Chairman, I was just on the point of returning to the specific question of agriculture. I have simply referred to the reasons why it is desirable to deal with this legislation in a different way.
In reading the sections of the bill that apply to agriculture with which we are dealing at present, it is quite apparent that those responsible for drafting this bill are certainly not farmers, and not men acquainted with agriculture as a business and its associated problems. There is no doubt at all that in the past there have been flagrant violations by business corporations through loopholes which existed in the tax legislation of the day. But the flagrant misuse of the legislation in the past was not something that was done by farmers. It was something that was done by business corporations. There is no reason for treating farmers in the same way and penalizing them heavily for the sins of business corporations in the past, because in their zeal to close these loopholes so far as business is concerned, those who have drafted this bill have created hardships for farmers in general.
What this bill does is to decrease the incentive to stay on the farm and make a career of farming. Unfortunately this is taking place just at a time when there is a particular need to attract energetic, aggressive young men to stay on the farm and make a career of farming. After all, farming is still the basic industry of this country. The people of this country rely on farmers to produce the food they need during the year. If we do not make it attractive for people to remain on farms and continue farming, we will be in a sorry plight so far as the food we need is concerned as well as the food we export every year which provides us with very important revenue and foreign exchange.
In the province of Ontario today-I would think this would apply to most provinces but it certainly does in Ontario where my constituency is situated-the average age of farmers is between 45 and 55. It is apparent from this fact that young men are simply not farming today. They are leaving the farms, going to cities and making their careers there. The reason they are doing so is that it does not seem to the young people of today that there is an economic future in farming. One of the reasons for this view is the very unsympathetic attitude adopted by the federal government toward farming and farmers in general. One examples is found in the fact that the government is engaged in the process of phasing out the basic herd concept. This is very damaging indeed to dairy farmers in Canada, as all dairy farmers know only too well. We have pointed this out to the Minister of Agriculture over

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and over again, but he has turned a deaf ear and does not seem to be interested. He is determined to proceed along the path he has chosen.
The second way in which the government has shown it is not interested in the welfare of farmers is by the introduction of the capital gains tax which will make it very difficult, if not impossible, for a farm, as a viable economic unit, to be passed from one generation to another. Anyone who has examined this legislation knows very well that payment of the capital gains tax which will be levied against the farm when possession changes will require the disposal of at least part of the assets of the farm to pay the tax. This will, of course, further decrease the size of the farming operation, and make it less economic and less likely to survive in today's increasingly competitive farm conditions.
For these reasons I feel that the government should eliminate the proposed capital gains tax as it applies to farms. I think it is important for the government to remember that farmers are in a special category. They cannot pass on any increase in costs, because the prices of their produce are not set by the farmers themselves, but by international, national or provincial forces which are completely beyond the control of the farmers themselves. Thus their prices are completely out of their hands. Their costs are going up steadily, and this is the reason they are caught today in a serious economic squeeze. For this reason, the application of the capital gains tax will make it increasingly difficult, and in many cases impossible, for farms as we know them today to continue as viable operations.
Therefore I say to the government they must realize that farmers are in a special category, and they must start treating farmers in a manner which will make it possible for them to continue to farm economically; which will make it attractive for farmers' sons and daughters to stay on the farms instead of leaving for the cities and factories as they are doing at present. If the government does not do this, in a short period of time this country will find itself in a deplorable situation. We will be short of food because, in a little while, we will be unable to resuscitate farms that have been allowed to run down in the production of the food we need.
So I strongly urge the government, the Minister of Finance and the Minister of Agriculture, to start looking at farming and farmers in the way they have long deserved, and to bring in the kind of legislative measures which help, and do not hinder, the farming operations of today.


Mr. Horner:: Mr. Chairman, last evening I was dealing with the subject matter of section 29 concerning the basic herd concept and I said that the capital gains tax in essence has changed the approach of the tax legislation to the basic herd concept. I was appalled that tax reform legislation has been studied for a number of years and yet the government apparently has not considered any other approach to this question. In fact, it appeared to me that in the tax field extensive research and examination had been undertaken on everything but agriculture.
What is the purpose of studying a bill in committee of the whole? It is that the minister and his parliamentary

secretary may have the experts with them. Any questions asked can be readily answered. The sources of information are there. Last evening I asked a couple of simple questions. I asked whether they had considered the method by which capital gains tax is applied to the livestock industry in the United States and the use of a similar application in Canada. I told the parliamentary secretary that if he did not know the effect of that application in the United States he should not turn it down but should consider it. Then he replied that they really did not know and his officials before him really did not know.
I warned him that the application of a capital gains tax to the livestock industry in the United States had been in force for a period of years, and I cautioned him that my question was only a lead-in. Really, Mr. Chairman, I was appalled that in preparing a tax bill 707 pages long, which was at least three years in the making, they had not even considered how a capital gains tax is applied to the livestock industry in the United States.


Mr. Mahoney:: On a point of order, Mr. Chairman, the hon. member's attributions of comments to me are a grotesque misrepresentation of the question and answer period that we had last night. I hate to ruin your script, Jack.


John (Jack) Henry Horner: Mr. Chairman, the record will bear out what I said. The parliamentary secretary said he did not know, and he was kind enough to say, "I won't say no; I will consider it." He said he would give the facts today. He said we would be back here at eleven o'clock today and he had reason to believe that this subject matter would be up for debate. He said he would then tell the House how the capital gains tax is applied to the livestock industry in the United States.
I point out, Mr. Chairman, that I was not the first member on my feet today. Before I started to participate in the debate the Chair had asked whether this section would carry. Why is this matter so important? The hon. member for Dauphin put the answer on the record last night. We participate in the North American market, and that applies particularly to the livestock industry. We may be divorcing ourselves from the Americans on questions concerning armaments and the like, but I repeat that our livestock industry shares in the North American market.
Our farmers and ranchers must remain competitive. In ranching and farming the first thing that has to be paid is the taxes. No matter what business you are in this is the case, and it is particularly true in ranching and farming. You have to pay the taxes. First you pay the land taxes, then you pay the income tax, and now you will be paying the capital gains tax.
Last night the hon. member for Dauphin also dealt with the disappearance of the basic herd. Until now the basic herd has been allowed to grow but after December 31, 1971, according to the provisions of this bill, the basic herd ceases to grow. If a man has already built up a basic herd then, out of the goodness of heart of the Minister of Finance, he can maintain it, although he will have to pay capital gains tax on the increased value. But no new basic herds will be allowed to develop.
In the United States the basic herd is still allowed to grow. The Americans have a growing policy. Nixon, the
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President of the United States, and Connally have both said they are out to reverse the American import-export trading trend by a total of $13 billion. Agricultural products are one of the United States' greatest exports. They want to get into the European market with their agricultural products. We in Canada want part of the North American market and part of the international market.
Again I put the question to the tax experts who are assisting the minister and the parliamentary secretary: how does capital gains tax apply to the livestock industry in the United States? I have the facts here on how it applies. The second question I pose is: are they prepared to give the livestock man in Canada the same break as the U.S. livestock man gets in the application of a capital gains tax?


Gérald Laniel: Order. The Chair wishes the hon. member to be fair. He knows that only the minister and the parliamentary secretary may answer his questions in the House of Commons. He should not direct his questions to anybody else, only to persons who are qualified to be members of the House.


John (Jack) Henry Horner: Mr. Chairman, I thought I was being vividly clear, but in my anger I suppose I wasn't. I was directing my questions through you to the Minister of Finance who is in his place and has his officials before him. The hon. member for Calgary South should know what the livestock industry means to this country. I will take my seat the minute either one of them is prepared to indicate that he will answer the two questions I have posed.
Last night the hon. member for Calgary South said, "Tomorrow at eleven o'clock I will have the facts. We will burn a little bit of midnight oil and we will get the facts." But apparently he is not prepared to put them on the record. They have not said that they will answer my questions. I will repeat them until I get some answers. I am sure they would not want this legislation to pass in ignorance. Surely as legislators we must be knowledgeable about it. If we do not get the answers we must persist until we do, or we must put the answers on the record ourselves and, as I indicated, I am prepared to do that. Considering the generous mood of the parliamentary secretary last might, I want to give him and the minister the opportunity to say they know the livestock industry in Canada has to be competitive with the United States and that if the livestock man in the United States is getting a better deal in the application of the capital gains tax to him they are prepared to consider that.
I could move an amendment to section 29 very easily, but sometimes I find that governments are reluctant to accept amendments from opposition members. Instead I make the request that section 29 be stood until the government has had ample opportunity to study the point that has been made so well by the hon. member for Dauphin and myself, that we share in the North American market and are in fierce competition with the United States.
If the price of beef cattle goes up in Canada, then in come American cattle. If the price goes up in the United States, our cattle move freely into that market. That market has been a safety valve for the Canadian cattleman for years and years. We must remain competitive if we are to stay alive in the livestock business.
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Surely one of the key cost factors in any business is taxation. It is only fair that the minister accept the suggestion that section 29 be stood and that the whole matter with regard to the basic herd be reconsidered. Is he prepared to do that? He sits glum and silent, as if somebody had thrown a pail of cold water down his neck.


Mr. Benson:: You have got the floor.


Mr.   Homer@: I am disappointed at the hon. member for Calgary South because sometimes Calgary boasts of being the cow town of Canada and sometimes tries to win the favour of the livestock men. The hon. member for Calgary South should win a little favour right now by honouring the pledge he made to me last night that he would burn the midnight oil and today put on the record how the United States capital gains tax is applied. It would seem that somebody got to him in the intervening hours and told him to sit there and not say a word, to let us blow off steam. He should rise and put the record straight in regard to how the United States capital gains tax is applied to livestock.
I want to explain vividly how the basic herd operates in Canada. The basic herd principle has operated as a growth factor. A farmer in the livestock business could purchase cattle, pay income tax on the money involved, put them into a basic herd and when he retired he did not have to pay income tax on the proceeds of the sale of the basic herd because he had paid income tax on the money going into the herd when it was being acquired. Section 29 says in effect that if you have a basic herd on December 31 you can keep it but we will not allow any more basic herds to be established nor will we allow the basic herds that are established to grow. In other words, they are cutting off the growth factor in the livestock aspect of agriculture.
How does the United States capital gains tax apply to livestock? If you have stock, bulls or females, for over two years you can treat them on a long-term capital gains basis-in essence, the same as our basic herd would be treated with the application of the capital gains tax. The parliamentary secretary nods his head in a negative manner.


Mr. Bigg:: He doesn't know.


Patrick Morgan Mahoney: Only one year-12 months.


John (Jack) Henry Horner: If it is only one year that improves the situation.


An hon. Member:: Sure it does.


Some hon. Members:: Hear, hear!


Patrick Morgan Mahoney: It does not improve the hon. member's accuracy.


John (Jack) Henry Horner: It does not bear witness to my accuracy? I think the committee and you, Mr. Chairman, can bear witness to the fact that I begged and pleaded with the parliamentary secretary to put his accuracy on the record first but he did not believe it could stand up. He did not have the nerve to put his accuracy on the record first; he
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did not have the nerve to disobey his senior. He wants to climb up the political ladder so he is a "nicey, nicey" boy.


Mr. lerome:: Be serious.


Mr. Danson:: He is not climbing; he is being elevated.


Mr.   Homer@: I am glad the hon. member added that he is not climbing, he is being elevated. That is it exactly. He knows how to be elevated; it is through being a "nicey, nicey" boy to his superiors. That is not the role that Calgary wants him to play.


Barnett Jerome Danson: It is through ability.


John (Jack) Henry Horner: It is my information that there is a two-year holding period for cattle, females and bulls, and for horses. The American provision is to this effect:
Long-term capital gain treatment will not apply to the sale of cattle and horses acquired after 1969-
This is a new departure.
-unless they have been held for at least two years for draft, breeding, dairy or sporting purposes.
That is very different from our concept. If they are held for two years, in essence they can be put into what we in Canada classify as the basic herd and come under the application of the capital gains tax which will apply on that capital asset. There is no doubt in my mind that a rancher involved in the livestock business-this is the gut issue-is in a better position than his counterpart in Canada after the application of the capital gains tax when the basic herd is dispersed.
I ask the parliamentary secretary and the Minister of Finance through you, Mr. Chairman, if they really think that a rancher in Canada is in much better shape than his counterpart in the United States? Let us examine the situation and see what a rancher in the United States has to contend with. Does he have to feed all through climatic conditions like ours or can his cattle run throughout most of the winter? Everybody knows the answer to that. He has a weather advantage in raising cattle. If we are to compete with him we need a tax break in regard to land costs or in the application of the capital gains tax to the capital asset.
Who is in the better position with regard to proximity to the market? The American ranchers have to feed 220 million people and this tremendous market is close at hand. How far is the midwest from the large population centres of California, Chicago and the eastern states? Not too far. They can move their cattle to population centres north, south, east and west. Ranchers in this country can move cattle to the population centres of central Canada and a portion of the lower mainland of British Columbia, a long way from the ranching areas of western Canada. We are at a disadvantage in regard to both climate and market. We do not have as many people to feed and they are a long distance from the ranching areas. On top of that, this government proposes to bring in a capital gains tax which will remove the basic herd concept and is more detrimental to us than the capital gains tax is to our competitors in the United States.
Already the government is saying, "get rid of the small farmer", and there is no doubt in my mind that they have the same intention regarding ranchers. The rancher does

not come to the government begging for assistance or handouts; he wants an even break. What kind of break is he getting? The hon. member for Calgary South is afraid to rise and put the facts on the record. The Minister of Finance smugly sits there and does not answer. The rancher has not come to this government or other governments asking for interference or handouts but he is a skilled lobbyist when it comes to demanding a fair break.
Let us examine the record. Are there a lot of ranchers that have to be put out of business? Are we overproducing livestock?


Frederick Johnstone (Jack) Bigg: They are all free men.


John (Jack) Henry Horner: The opposite is true. The minister in charge of the Wheat Board comes out with a regrazing program. The former premier of Saskatchewan came out with low-interest loans to encourage farmers to go into the livestock business. What are we setting the trap for? Is the livestock man a sucker? He is not, but he comes here and argues that he should be given equal treatment with his competitors.
We are not overproducing in Canada. In fact, we have absorbed a great deal of beef from the southern hemisphere without harming our livestock industry. From time to time cattlemen have complained about the importation of Australian and New Zealand beef, but we have survived.


Gérald Laniel: Order, please. I regret to interrupt the hon. member but I do so to inform him that his time has expired.


Patrick Morgan Mahoney: Mr. Chairman, if the hon. member were to open his ears perhaps he might be able to hear better what is being said here. In the first place, I wish to make it clear that I did, indeed, undertake to look into this matter last night and I came prepared with an answer. At no time during the debate last night did I indicate that the government had not looked at the United States capital gains system because it is obvious that the government has looked at that legislation as well as at other capital gains systems. The United States does not have a tax concept identical with the basic herd rules which have been applied in practice in Canada in the past, but it does permit capital gains treatment on the sale of livestock held for draft, breeding or dairy purposes if it is held more than 12 months from the date of acquisition. For their purposes livestock includes not only cows, horses, sheep and swine but also mules, donkeys, goats, fur-bearing animals and other mammals.
Treated as a capital gain, the United States tax on disposal of a herd could be higher than the tax which would apply to a capital gain of a like amount in Canada. In the United States one-half of a capital gain is included in income and with a top personal rate of 70 per cent the effective rate on such gains would be 35 per cent. In addition, under the recent tax reform in the United States the untaxed half of a capital gain is treated as a tax preference item and subject to additional tax. The additional. tax is a minimum tax of 10 per cent which is applied to part of a preference item under a special for-
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mula, and it could effectively add about one additional percentage point to the level of tax.
There are a number of differences, Mr. Chairman, between what is regarded as a capital gain in Canada and what is so regarded in the United States. To some extent this is just a reflection of modifications made in the Canadian tax system from time to time to meet our own particular needs. For example, if I may refer to an industry that concerns people coming from the province of Alberta, in 1962, on the instigation of the government then in office, Parliament passed legislation the effect of which was to include the proceeds of oil properties in income and, at the same time, to permit the immediate deductibility of the cost of oil properties. That, of course, is precisely what is suggested with respect to the acquisition of breeding stock, and so on, after January 1, 1972.


Mr. Danforth:: Mr. Chairman, this matter is of such vital importance to the Canadian agricultural industry that we must, if we are to represent farmers across this country adequately, deal in much greater detail with the matter we are considering. The parliamentary secretary has admitted that this bill is designed to phase out progressively the basic herd concept. That shows what the government thinks about that particular aspect of farming and demonstrates the government's attitude toward the entire farming business. I therefore wish to direct some questions to the parliamentary secretary and to the Minister of Finance. The officials sitting in front of them may be able to help with the answers.
Would the parliamentary secretary or the minister tell us the basic philosophy behind the government's approach to taxation in the farming field? Has the government considered that the farming industry is not in the same category as other corporations and businesses across this country? We are not just dealing with some type of business; we are dealing with an industry whose peculiarities have been recognized by various governments throughout our history.
Without doubt, in attempting to revise the tax system the government has made a strong attempt, as is evident by the instructions given to those who drafted this bill, to plug loopholes. Some of our larger corporations took advantage of the admitted weaknesses in the old act and, by hiring able accountants and good corporation lawyers, were able to evade certain taxes. Without doubt, many millions of dollars that should have been paid as taxes were not paid and were siphoned off for the benefit of these corporations through various loopholes in the old legislation. Having read some parts of this bill, there is no doubt in my mind that the government has tried deliberately and meticulously to close many of these loopholes. I do not quarrel with that. I think that is good and sound.
In bringing forward this basic revision of the tax structure I do not doubt that the government felt, as do the majority of people generally in Canada, that if the tax system were made fairer, if everyone paid his share of taxes, there could be a general reduction in tax rates. The government felt, in other words, that those who were least able to pay would pay less tax and that in Canada we should adopt a tax system that would be workable, plausible and acceptable. However, in their zeal to make this possible and to follow this prescribed and commendable
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path they failed, I think, to consider the vagaries of the agricultural industry. They failed to realize that basic principles applying to business corporations and larger industries do not apply to the same degree to smaller businesses and to farming. That is why we are so incensed at what seems to be a deliberate attempt on the part of the government to put through legislation that could adversely affect the livelihood of farmers in Canada.
My colleague has spoken about the fact that we must compete in the North American market. This market is vital for the Canadian agricultural industry. Since the industry can sell in Canada to only about 20 million customers, the industry must export a great deal in order to survive. The very nature of agriculture today makes it imperative for Canadian farmers to employ the very latest methods, the latest implements and the latest scientific techniques. All these are very costly to employ, and if the market is small our farmers cannot use these new techniques because the per unit production cost will be too high. On the other hand, if 30 per cent or more of our cattle production and agricultural production in general can be exported to international markets, Canadian farmers can survive because per unit costs of production will be lower and there will be some chance for profits. If the tax advantage that agriculture has enjoyed in the past is tampered with, if the tax position of agriculture is made less attractive under the provisions of the bill we are considering, as I suspect is happening, the position of agriculture will be precarious indeed.
So I return to my opening statement and ask the government to tell us, before hard and fast positions are reached from which it will be almost impossible to deviate, what the government's basic philosophy is in its approach to the taxation of agriculture. Is the government aware that by removing the basic herd concept it will be destroying the incentive in the future for people to take up that kind of farming? Is it aware that the capital gains tax will make it almost impossible for farms to be handed down from generation to generation? Is it aware that the very nature of farming, and especially the very nature of livestock raising, is not simply a one-generation process? It is not like selling shares, obtaining a sum of money, building a factory and being in business in a matter of months. Building up the basic herd concept with specialized breeding stock sometimes takes two or three generations. In many instances today it is the grandfather who takes pride in the output of a grandson. It is not something that has been developed over the course of two or three years. I wonder whether the government is aware of this.
Something that has troubled me greatly-I wonder too whether the government is aware of this-is the ramifications, especially where the agricultural industry is concerned, if this legislation is passed and the provincial governments are not sensitive to the provisions of this legislation with regard to agriculture. What happens if this taxation of farmers is only a small part of the entire package and farmers and farm businesses are faced with additional estate and income taxes imposed at the provincial level? These are questions to which we must have answers before we are prepared to pass these sections of the bill.
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We want to know where farmers will stand in the future. We want to know what the basic view or thrust of the government is where farmers are concerned. Is this measure designed to extract from the farming community the greatest possible revenue for the government while gambling that the farmers can stay in business? Is this the view? Has any consideration been given to a policy that will bring about a viable agricultural industry in order to sustain many thousands of families and provide a high standard of food for Canadians? What is the thinking of the government? This is what we are interested in and must know. This is what the cattlemen, hog producers, tobacco growers and producers of fruits and vegetables across this country are asking today. To date, the only source of information has been chartered accountants. The stock answer of every chartered accountant I or any farmer has queried is, "I am sorry, we haven't the foggiest idea; this bill is massive and complex and it is going to take time to digest." This is not good enough. While it is being digested, processed and regulations drawn up, if the basic concept is that farmers are going to pay a higher degree of taxation the ultimate result will be the destruction of too many substantial farm units across the country that we cannot afford to lose.
Something that has been causing increasing alarm among those in agriculture has been the disposition of our basic herds, high production dairy animals and some of our top-notch breeding herds because of the fact the economic climate today is not such as to create an incentive for these businesses to continue. The economy of today is such that there is a balancing of the scale. Good, substantial farmers may or may not have a possibility of getting out of farming. Unfortunately, a tremendous number of farmers are in debt to such a degree that they cannot get out unless they are forced to do so. I am speaking of those who still have a choice. If they are undecided now, my fear is that the imposition of a greater tax load, which cannot be passed on to any other source but must be taken out of the dwindling profits of their business, will cause the whole agricultural economy to collapse. As all hon, members are aware, this would be to the detriment of Canada.
These are some of the questions we feel must be answered before we proceed too much farther with these sections of the bill.


Mr. Downey:: Mr. Chairman, I have one or two questions I wish to ask the parliamentary secretary. One is with regard to the definition of farming as found on page 569 of the bill. It reads:
"farming" includes tillage of the soil, livestock raising or exhibiting, maintaining of horses for racing, raising of poultry, fur farming, dairy farming, fruit growing and the keeping of bees, but does not include an office or employment under a person engaged in the business of farming;
How would a farm manager or a son who may be working for his father and endeavouring to get into the business fit in here? Are any concessions going to be made with regard to whether he will be considered a farmer, and will he be eligible for the normal deductions of a farmer at the time he is entering into farming operations? I am referring to someone working for a farmer in the capacity of manager.


Patrick Morgan Mahoney: If a farm manager or son were employed in that capacity, he would be an employee and would report the income he receives from the proprietor of the farm as personal income. Of course, the amount of wages or salary paid to him would be an expense of the farm and deducted from the farm gross income when calculating the taxable income.


Cliff Downey: This would not help a farm manager. Suppose he had a portion of the ownership of the farm at the time and had a few cattle or something else upon the owner's property and was trying to establish himself. We are interested in some provision for him while he is trying to become established. There are many cases of farmers working in oilfields, roughnecking on drilling rigs, who are having a hard time. Has any thought been given to extending the definition of farmers to include this type of situation?


Patrick Morgan Mahoney: Mr. Chairman, the person in the situation the hon. member described would be a farmer in relation to the activities he carries on with the cattle or whatever he was operating. If he were operating a part of the land on shares and so on, his personal status would be determined by what he is doing. To the extent that he is receiving salary or wages he is an employee. To the extent that he is farming or raising cattle in some way on shares, he is a farmer and reports his income as such.


Cliff Downey: Is it correct to say that if 51 per cent of his income came from work outside the farm he could not be classified as a farmer?


Patrick Morgan Mahoney: No, Mr. Chairman, that is not correct. The hon. member should refer to section 31 which reads:
Where a taxpayer's chief source of income for a taxation year is neither farming nor a combination of farming and some other source of income-
Certainly in the situation that the hon. member described where a person is being paid to manage a farm, and also running his own herd this is his own farm income. However, the principle or chief source of income would be a combination of farming and some other source of income. I think the exclusion at the beginning of section 31 takes him out of the category of general farmer and away from the limitations to which the hon. member has referred.


Cliff Downey: What I am interested in is the proportion of income. My point is that there must be a definite income ratio. At what point can a man be classified as a farmer? Just what is the criterion? Is it something which is at all negotiable? Is it a matter for a ruling by the department? Is there any humanity being exercised in this regard?
noon)


Patrick Morgan Mahoney: Again we are in an area where it would be a question of fact, subject to the usual right of appeal under the act. If the hon. member were to describe a particular situation to me I would be glad to refer it to the revenue department and obtain an opinion as to how the ruling would go. I imagine it might be very difficult for a person who derived 5 per cent of his income from farming and 95 per cent from other sources to convince people
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that he was a farmer in the first year. On the other hand, someone who had been carrying on a farming operation for years and whose income from farming had dropped, for some temporary reason, to 5 per cent of his total income in a particular year might still be allowed to continue on the basis that he was a farmer.
While I have the floor I must apologize to the hon. member for Crowfoot for an error I made in connection with timing as applied to herds in the United States. He was right in referring to two years. This is an instance where they did change the timing from a one-year period to a two-year period in their 1969 tax revisions.


John (Jack) Henry Horner: I admire the honesty of the hon. member for making that correction. It used to be one year but, frankly, they found there was too much hanky-panky so they made it two years, which is a little more rigid. When the parliamentary secretary spoke of 12 months I said this would be better for the stock raiser. That remark led me to believe that the parliamentary secretary did not understand the concept at all, when he did not believe that 12 months was better than two years.
I understand that when the parliamentary secretary rose to speak he made the remark that I should keep my mouth shut and my ears open. That is an awful remark to make to a fellow by the name of Jack Horner. I well remember the old nursery rhyme: Sticks and stones may break my bones but names will never hurt me. I also recall the saying-it is one the parliamentary secretary should remember: Stones that are hurled with harsh intent, a man can use to build his monument. The hon. member can hurl all the stones at me he likes, but that will not further the debate or elevate the discussion in any way. Nor does it elevate the parliamentary secretary as the Parliamentary Secretary to the Prime Minister suggested should be done.
I am quite serious about this question of the application of the capital gains tax to the basic herd. Perhaps I should explain the effects a little further. What the basic herd does is to allow ranchers or dairymen to pay income tax on money as they earn it. When they retire or sell out they then sell the basic herd as a capital asset. They do not have to pay income tax on the sale of the capital asset. With the application of the capital gains tax they will have to pay capital gains tax on the increased value of the capital asset. But they will not be required to pay income tax on the capital asset. We have to take a look at the averaging principle to see how this applies.
In this tax legislation we are being presented with an averaging principle applicable to all people. The basic purpose of this principle is to take into account the application of the capital gains tax. How will the averaging principle affect the farmer? The parliamentary secretary says it is the same as it was. He says there are no changes. I ask this question. With the advent of the capital gains tax, is the averaging concept as useful to the man engaged in the livestock industry? That is the crux of the matter. The answer is no.
Let me give an example, Mr. Chairman. Suppose I am in the livestock business and I am getting along pretty well. I have had some good years and I average. Suppose I averaged last year the preceding five years right up until 1970. Let us suppose that through no fault of mine I suffer
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a severe heart attack and have to sell out. I have a basic herd. Capital gains tax will apply on the basic herd but I will not have to pay income tax on the proceeds of the sale. Under this legislation, if it comes into effect, let us suppose a young farmer has averaged up until last year. He has no basic herd because he cannot build up a basic herd. He has averaged every year he can average. He has to sell out through no fault of his own. What effect does the averaging have? He cannot average because he has averaged all his five preceding years. This bill does not provide a forward averaging principle for a farmer. No way. Suppose he has suffered a heart attack and cannot work and his family has to be provided for. He cannot put the money into a government annuity. He has got to buy a house and live somewhere else. He has to pay. The averaging principle is not as good now with the introduction of the capital gains tax. The livestock man needs a basic herd concept as well in order to ensure that he can put aside money which will not be taxable in the event he has to sell out and still live. It is as simple as that.
I cannot understand the cold, heartless attitude of the government. While I do not like it, while I complain loud and long, I can understand their attitude toward the wheat farmer. They say: the farmers are producing too much wheat; we must get them out of business. It is a negative attitude but at the same time I can understand what they are thinking. I do my best to alter their thinking in this regard. But there is no similar situation involving the livestock men. They are not overproducing. Indeed, many consumers across Canada will say they are not producing enough and this is why the price of beef on the table is so high.
Why is the government trying to get rid of the men engaged in the livestock industry on the one hand while on the other the minister responsible for the Wheat Board says he intends to provide $40 million over the next ten years to get more people involved in the livestock industry? Why are we taking these steps on the one hand and destroying the competitive position of the industry on the other? It is beyond my comprehension. I have tried and tried to understand it. I lay awake most of last night trying to figure out the reasoning of the government in this regard. The American rancher can put cattle into a holding position provided he has kept them two years. They do not call it a basic herd down there. In essence, Mr. Chairman, what he has is a capital asset, and if he sells out he is not subject to high taxation rates on the sale.
A little while ago the parliamentary secretary said that these things have to be considered. He said the United States farmers pay a higher rate of tax, that the top rate was 70 per cent. Who gives a hoot what the top rate is? Only a very few ranchers fall within the rop rate, about one-quarter or one-tenth of one per cent. They are people like Bing Crosby, though he would probably regard his ranching operations as income from another business.
I am talking here about the heart and the guts of the ranching industry. Certainly the average rancher does not fall within the top brackets. Indeed, they are in a lower bracket than they are in Canada. Let the parliamentary secretary rise to his feet and correct himself in this

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respect, because that is the fact. This bill will hurt the cattle industry in Canada, a cattle industry that will be and has been subject to severe competition on the North American market.
I do not have to recite to the House the effect of the outbreak of foot and mouth disease in 1951 because it is well known. As a result of that outbreak we were cut off from the North American cattle market and right away cattle prices dropped ten cents a pound. We have just recovered from that low of the early 1950's. Although the outbreak of foot and mouth disease did not hurt the cattle industry as such in Canada, it did cut us off from the North American cattle market and caused a drop in price. That is why I ask whether we should adopt a piece of legislation that almost does as much harm and certainly hampers and hinders the cattle industry of Canada.
It has been suggested that I want to hold up this bill. I do not want to hold it up for the sake of holding it up, but I am on sound and firm ground when I contend that in this bill we are being coldhearted to the best part of Canada's agricultural industry. We are being insensitive. I do not think any adjective would be too strong to describe the attitude displayed by the parliamentary secretary and the minister in this debate and their reluctance to put forward facts. When goaded to they then have to correct themselves later and accept the facts I put forward.
People ask me why it is Liberal policies have been so firmly rejected in western Canada. These policies have not been bad in all cases; the reason is the callous attitude adopted by the government. For example, the Prime Minister says in Winnipeg, "why should I sell your wheat", showing an indifference that people out west have not recovered from yet. The attitude that the government is displaying toward the livestock industry in removing the basic herd contributes to the indifference.
Westerners are generous, bighearted and will soon forgive a man and give him a second chance. But that man has to show interest and concern for the west. He has to demonstrate that he is learning and is sympathetic to western problems. This government has not shown that it is. Operation Lift was an example. The government said to the farmers: "Here it is; buy it. If you don't like it you can lump it, because we are going to eliminate the surplus of wheat." The farmers did not like it and they had to lump it.
Then the government introduced its grain stabilization bill and there was much heated argument over it. The prairie agricultural ministers came to Ottawa to discuss it and asked the government to reconsider it because it was unacceptable. But the government said: "No, we are not going to make any changes to the bill". Here once again I am on solid, concrete ground. The government has not even studied the application of the capital gains tax to the U.S. cattle industry, yet they are prepared to implement such a tax as far as the Canadian cattle industry is concerned. Once more this shows lack of concern and indifference.
I am thankful, Mr. Chairman, that this lack of concern and indifference has fully registered on the people of western Canada. If the hon. member opposite gets to his feet and says that the hon. member for Crowfoot is just a loud mouth and does not know what he is talking about,

that he is just blowing off steam and if we hear him out it will be all right, then that is one thing. But when he stands up and says that I should keep my mouth shut so my ears can hear and then 15 minutes later has to correct himself and say that I was right and he was wrong, then whose ears should be opened, would you say, Mr. Chairman? I think that illustrates who it is that should be listened to.
I led into this subject as gently and as quietly as I could with all the finesse that I could muster last night. I started to ask a few questions. I asked whether the government had considered the United States situation and the parliamentary secretary was kind enough to say: "Well, we will not make a decision yet; we will take a look at it". Again today I suggested that if the government does not like having to listen to my repeating myself and haranguing the government about its callous indifference, let the hon. member opposite stand clause 29 so it can be reconsidered. They can indicate that they are not going to buy my suggestion, or adopt the United States system, but let them say they will take a look at my suggestions and also examine the application of the capital gains tax. Then at least the government will indicate that its ears are open and that some of the comments made on this side of the House are penetrating. But apparently the government is not even prepared to do that.
As I look across the House I observe that the great defenders of government farm policy are nowhere to be seen. The great advocates on the Prairies, these great defenders of agricultural policy, these livestock and grain men, are just not around. They are all represented by one man who looks as though he might be prepared to speak on this subject, and I hope he does. I think he is indicating that he will, so at least I have been penetrating his ears, something that I can assure the committee is appreciated in all corners of the House.
This issue is an indication of why government policies are not accepted in western Canada. The minister in charge of the Wheat Board gives us the answer: "Well, I guess we didn't sell our story well enough". What did the Prime Minister say in Calgary this summer about Bill C-176? He said that the people out there had been listening to false prophets. He also said: "You Liberals in western Canada have not sold the story well enough". No matter what the story is, Mr. Chairman, it has to be sold if it is to be accepted. You have to convince people that the government is interested in them, that the government is trying to help them. Once they are convinced of that you can then explain how you are going to help them. However, if a man is convinced beforehand that you are not trying to help him he will not listen to you. He will not take your medicine or benefit from the salve that you rub on his wounds.
I have pointed out vividly that the United States cattleman is in a better position in respect of capital gains than is a Canadian. I have pointed out why we should be in a better position. Cattlemen in the United States have proximity to large markets. They have a favourable climate. The livestock industry in Canada suffers from pretty severe winters. Let the hon. member for Meadow Lake tell us about ranching in northern Saskatchewan. Let the hon. member for Dauphin tell us about the situation of ranch-
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ers up north. They will tell you about the winters. Perhaps some of the ranchers in the foothills close to Calgary South may enjoy a climate somewhat equal to the climate many ranchers experience in the United States. However, not all of us can live in the sheltered belt of the foothills; not all of us can enjoy the Chinooks in the southern part of that province. Many of us have to raise cattle where the going is tough. We should have a tax break in order to be competitive.
We might ask the former head of the products division of the Department of Agriculture, Ralph Bennett, about this situation. He has addressed many groups across Canada and has said that the price of our cattle always hinges upon the price in the United States, on what is going to market in the United States and on what is going to market here. The price received is governed accordingly.
When we look at the price received we must take a look at the cost of production. We must look at the costs in order to arrive at the net position of the livestock man. Is the livestock man in Canada in a better net position than the livestock man in the United States? No. Machinery costs and all other costs right down to a lariat are higher in this country. I once used the word "lariat" and the press never forgot it. Even a lariat can be bought more cheaply in the United States than in Canada. The price of fencing, wire, machinery, saddles, lariats and all these things used in the livestock industry is less in the United States than in Canada. Taxes on land are another item. The taxes on ranch land in the United States are no higher than they are in Canada. In fact, land cost in some areas is cheaper in the United States.
I notice, Mr. Chairman, that you are about to interrupt me and therefore I shall finish very quickly. There is no doubt in my mind that the cost of production is cheaper in the United States than it is in Canada and therefore we should have a tax break and not a tax increase.


Patrick Morgan Mahoney: Mr. Chairman, I should like to make it very clear that we are always willing to accept the more worth-while suggestions of the hon. member and are quite prepared to stand section 29 if that is the disposition of the House.


John (Jack) Henry Horner: Thank you.


The Chairman:: Perhaps the Chair did not understand. Is there a suggestion that section 29 be stood?


Patrick Morgan Mahoney: Yes, Mr. Chairman. Of course we are still debating sections 28, 30 and 31.


Russell Clayton Honey: The Chair would like to put the matter in order to make sure that representatives of all groups are agreed. The suggestion is that section 29 of this group be stood and that the committee proceed with its consideration of sections 28, 30 and 31. Is that agreed?


Some hon. Members:: Agreed.


Mr. Burton:: Mr. Chairman, may I ask what the intention is in terms of proceeding further with clause 29 if it is to stand?


Patrick Morgan Mahoney: I beg your pardon. I did not quite catch the question.
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John Stratford Burton: I want to find out what the intention of the government is or what action the hon. gentleman has in mind in respect of proceeding with this section. Is it to stand on an indefinite basis?


Patrick Morgan Mahoney: Yes, indefinitely. Obviously we will have to come back to it some time.


Russell Clayton Honey: Is the committee agreed that section 29 shall stand.


Some hon. Members:: Agreed.
Clause 1, section 29, stands.


Mr. Nesbitt:: Mr. Chairman, the agricultural sections in this tax bill are of great interest and concern to anyone involved in the agricultural industry either directly or indirectly. One very worrisome part is section 29 which the parliamentary secretary has suggested be stood indefinitely. As a result of this section being stood I shall not comment on the question of the basic herd other than to say I very much hope that when arrangements are made concerning how to deal with this particular section the government will agree to send it to the Standing Committee on Agriculture so that witnesses may be called and points of view presented in order that we may have a much better understanding of the dangerous possibilities of this section as it now stands. The parliamentary secretary has indicated that the government is very glad to receive constructive suggestions which would improve the legislation, and therefore I hope his seniors will follow out his good will in this regard. There may be other sections of this tax bill which should also be referred to the committee, but I will make my comments in that regard on another occasion.
One further argument for sending this bill to the committee is that while it is all very well for the government to say that the matter of tax reform has been under public discussion for many years-and we agree that it has- while there was discussion in very general terms of tax reform agriculture-wise and every other way when the white paper on taxation presented by the minister was before us, no one in the country, including members of this House, knew what the specific proposals were to be concerning tax reform in general and agriculture in particular until June 18 last. As has been mentioned in the House on many occasions, even the tax experts in the country do not understand the full implications of the bill. Certainly certain parts of the bill could be passed now, as has been suggested by my colleague the hon. member for Prince Edward-Hastings. I believe this would be a good idea because it would benefit the taxpayers in the lower income brackets and the elderly. Certain parts of the bill, however-not only section 29 but others as well-I believe should be referred to the Standing Committee on Agriculture because it is quite obvious that the bill has been drafted by law officers of the Crown who are not familiar with farming. This fact is quite obvious because of the way in which the bill is drafted. One cannot blame them because they are law officers of the Crown and it is their business to draft legislation. But it is difficult to draft good legislation when you are not familiar with the type of industry for which you are legislating. It would be very helpful if not only section 29 but also the other sections were referred to the committee.

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I cannot understand why there is such a great rush to shove this legislation through by the end of the year. Perhaps the Prime Minister has set a deadline for the Minister of Agriculture, the Minister of National Revenue and the Minister of Finance and has said that it must go through-period. Although I cannot see any great reason for the rush, perhaps the government may be considering an election and wishes to be in a position to say that it got the tax bill through in a hurry. That may be the reason, but even from the government's point of view this may not be helpful since it might cause a good deal of flak against the government. We heard a good deal about tax reform through the years and about how great it would be. Now that we have the legislation before us, an enormously complex document of 595 pages of small print plus hundreds of amendments with the possibility of more, surely there is no hurry to rush it through in five or six weeks. It should be given careful consideration.
Having said that, I suggest there is another point which the parliamentary secretary might take into consideration. In the sections that we are now discussing the government does not seem to be particularly interested in changing the basic concept with regard to the taxation of farms and farm businesses. Certainly it will be very difficult for farms to pass from father to son and for farms to be kept in the family. It is true that the tax can be spread over a period of years, but if you are going to deplete the working capital of a family farm corporation or a family farm this will cause serious problems in carrying out the farming operation. Most farms are pretty short of working capital as it is, and certainly this kind of legislation will not help.
It has been alleged by a number of members in the House and by competent authorities in agriculture outside the House that the taxation which under these proposals is to be levied on agriculture may have the effect of not only driving people out of the farming business but of preventing younger people from entering the farming business. This has been mentioned by the hon. member for Wellington-Grey-Dufferin-Waterloo, the hon. member for Prince Edward-Hastings, the hon. member for Kent-Essex and by others who have some concept and some knowledge of what they are talking about, not to mention various agricultural organizations which have commented on the matter. It is a pretty serious problem if there is any substance to these allegations, namely, that farming may well cease to be the basic industry of Canada, which it still is, and become a very minor industry provided it is not wiped out altogether.
The government, I have noticed, is almost in a panic when allegations are made regarding our environment. If somebody says that our waters are being polluted and that in five years we will cease to have fresh water in Canada, the government virtually panics and takes great pains to check into such allegations. I am not opposed to the government doing that, but when the government decides to look into some of these matters it is highly selective. The government moves quickly on matters that have an emotional appeal to the public such as insecticide poisoning which is dangerous to people or wildlife. These matters are looked into by the government even when

such allegations prove to be incorrect after further study, as now appears to be the case with DDT. However, when much competent opinion is expressed in this case that the present proposals will put farming out of business, there does not seem to be any rush by the government to look into the matter, to hear these complaints or to send these sections of the tax legislation to a committee for further study.
It seems to me that if there is any kind of substantial or serious allegation that the basic industry of our country will be put out of business, it should be given careful consideration. There is no doubt that some of these allegations may be pretty hairy, so to speak, pretty wild. I am sure some of them are. On the other hand, there is sound and well informed advice in this regard and I think the government would be well advised to look into this advice before it moves so hastily and for no reason, as anybody can see.
The government should consider everything that is presented in the House and we should hear experts on why tax changes should be made. We do not want to drive the agricultural industry out of business. We do not want to become dependent on imported food. Just imagine anyone being told five or ten years ago that Canada might become an importer of food such as butter or milk. I gather from what the Minister of Agriculture said the other day that pretty soon we will be faced with importing butter and milk products before the end of the year because we are facing a shortage. This is something we should consider very carefully. We should consider the social implications, our international trade, our relations with the United Stated and many other things that are of concern in this case. For this reason, a careful study should be made.
I have touched on these matters in general and I will have more to say on them later. However, I am glad to hear that the parliamentary secretary has stood section 29 and I hope he will use his influence to send that section concerning the basic herd concept to the committee on agriculture. I also hope that this will be possible with other sections as well. As I have already said, we are dealing with many far-reaching problems with respect to the future of agriculture in this country, and I can see no reason for hastily passing these four sections without proper study when clearly they were drawn up by people who have no knowledge of farming or agriculture.


John Stratford Burton: I was pleased to hear the statement of the parliamentary secretary a few minutes ago when he undertook to stand section 29 concerning the basic herd provision in the income tax bill, and I trust that the time allowed for consideration will result in some satisfactory solution to the problem. The parliamentary secretary is aware of some of the suggestions made by members of our party and of the fact that we did press for a change in the government stand on this matter. Contrary to the impression which the hon. member for Crowfoot attempted to leave a few minutes ago when I stepped out of the chamber for a few minutes, members of my party have been very active on this matter. I say this without in any way denigrating the efforts of some of his colleagues as well as of himself on this particular matter.
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When the government has this matter under consideration I hope it will give adequate consideration to the situation of small as well as large livestock producers. The position of the small and medium livestock producers must be given serious consideration. The small producer is often in a difficult position because he may not be able to afford or may not find it economic to acquire the skilled assistance and the expertise that may be necessary to take full advantage of the provisions which may exist in the tax law. In fact, some provisions may operate in a different way for a small, individual producer than for a large producer or a large incorporated enterprise. When the government reconsiders the matter, I hope it will give full consideration to the particular problems of small and medium livestock producers because I think the government has admitted in relation to other proposals which have been brought before the House and comments which have been made by ministers and officials of the government from time to time that a real problem exists in Canada with respect to small farm operators who are living on a low farm income. Ways and means must be found to assist these small farmers to expand their operations and to develop viable economic units. This should be taken into account in the framing of tax proposals concerning the treatment of livestock producing because one of the major areas of agricultural production and expansion is centred in livestock production.
Some real problems exist in Canada at present because more and more of our livestock production is becoming concentrated in the hands of large producers and of corporate enterprises carrying on specialized operations where in fact the owner of the operation is completely or far removed from the operation itself. It is a different sort of situation, an entirely corporate type of situation, compared with the traditional links that have existed in the family farm type of operation, or an operation in which there was an association between the ownership of the operation and the labour input of the operation. Thus I hope the government will give the fullest consideration to the operations of small producers and will come up with proposals that can be passed by Parliament and meet with the approval of all interested parties in this regard.
There is just one other aspect I want to raise, and I hope I may be permitted to place it before the government at this time. If the parliamentary secretary has any comments to make on this proposition I would be pleased to hear what he has to say. Yesterday it was noted in the debate that the effect of the change with regard to the basic herd provision would be to force many farmers to change over to an accrual type of farm accounting from the cash type of farm accounting, even though the option exists in the act. However, the practical effect would be to force many farmers to move over to an accrual type of accounting. It seems to me that this poses some other problems because there are many instances of farmers who are engaged in a mixed livestock and grain operation. Those farmers may be forced or may feel that their best option is to go into a livestock type of operation. But that still leaves the grain operation to be considered, particularly in the prairie provinces. The parliamentary secretary and the government will be aware that a farmer
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has no real control over the time when he may be able to market his grain. This is entirely dependent on the setting of quotas. The question of when market opportunities may arise is determined entirely by the decisions of other people. The farmer does not have control over his own situation. He cannot exercise control over when to ship his products to market.
I think the parliamentary secretary will agree that this is one of the basic reasons for keeping the cash accounting option open for farmers. This is one of the factors. But what is the situation with respect to a mixed livestock and grain operation? Will the farmer who finds himself in a position of having to switch over to accrual accounting with respect to his livestock operation be forced to use accrual accounting with respect to his grain operation? It has been suggested to me that this in fact would be the case. This would pose many serious problems for many farmers.
There are many farmers who, in recent years, have been forced to keep the grain they have produced in storage for a period of several years, in some cases for periods of up to five years. This, of course, would mean that a serious problem would be faced by some of these farmers who had been forced to keep their grain in storage for an extended length of time. Thus I hope the parliamentary secretary will be able to comment on this matter and also consider any changes that may have to be made or should be made in order to clear it up.
There is one other point I want to take up at this time. It has to do with a section which is not before the committee at this moment but is related to our considerations at this time. I refer to section 12(l)(gr) as found on page 26. Section 12(1) provides for amounts to be included as income from business or property. Paragraph (g) then deals with the matter of payments based on production or use. It reads:
(g) any amount received by the taxpayer in the year that was dependent upon the use of or production from property whether or not that amount was an instalment of the sale price of the property (except that an instalment of the sale price of agricultural land is not included by virtue of this paragraph);
That does provide for an exclusion so far as this paragraph is concerned, but I want to clarify with the parliamentary secretary whether that means that there are other instances where in fact such an instalment of the sale price would be included in the computation of income? Are there other circumstances where this would be the case? I would hope the parliamentary secretary would be able to clear up this point when we are on a discussion of farm matters.
I also want to ask some questions with regard to section 31 of the bill, following up on the questions which were raised by the hon. member for Battle River. Section 31, of course, has to do with the matter of losses from farming operations.
As I understand the answers given by the parliamentary secretary to some of the questions posed, if it is considered that a person is engaged in a farming enterprise such that his object is to gain income from that enterpise, even though he may be combining his line of work with farming, or in fact at the same time he is carrying on another line of business, possibly carrying on a business of some sort, a store operation, a trucking operation, or possibly
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he is working for a wage-there are many instances near large urban centres where a person is living on a farm and is gaining some income from the farm and at the same time he is working for a wage, and I suppose in many cases actually making more by way of taxable income from his other line of work than he is from the farming operation itself, nevertheless the entire line of work he is carrying on might be regarded as one operation in many respects-my understanding is that if in fact a loss is incurred in the farming operation in circumstances such as that he will be able to write off that loss in computing his taxable income. I want to clear that matter up.
I am interested in knowing just how far the scope of this section extends. What are the guidelines? Is this simply a discretionary section where in fact the Department of National Revenue will have to develop its guidelines, will have to develop regulations as time goes on? Or just what is the case? I would be interested in knowing more about the concept involved in this particular section.
I suppose I might even make reference to the fact that there are some farmers who are also Members of Parliament. What is the situation with regard to them? Are they to be included? I do not wish especially to draw attention to that, but it is simply one example of the type of situation that may exist and that should be considered.
I also want to deal with the question-it may have been adequately answered already by the parliamentary secretary-that has to do with the problem of the variability of farm income. If I understood the parliamentary secretary correctly, there may be a situation where a person is engaged in farming together with another line of work, and in some years his major source of income may be from farming but in other years he may have a very low level of income from farming or may incur a loss. What then is the situation in this regard? There are any number of combinations of circumstances that a person might run into and that might occur, and I would like to have further clarification from the parliamentary secretary on this matter as well.
I want to conclude by saying that I am happy the government has agreed to reconsider the section concerning the basic herd. I hope some way will be found to come up with an adequate solution to this problem because I think it is very important to the future of the agricultural industry. It is a very important matter in relation to programs which might be carried on by this government and by the governments of various provinces in an attempt to diversify the agricultural industry, to expand livestock operations, and thus to work toward a more healthy agricultural industry than we have at the present time.


Patrick Morgan Mahoney: Mr. Chairman, the hon. member for Regina East posed so many questions that perhaps I should take the opportunity to answer them, at least as much as I can, while they are fresh. Personally, Mr. Chairman, and I am very much aware of the contention of the Canadian Cattlemen's Association that somehow the removal of the basic herd concept would impel ranchers to move from the cash to the accrual basis, I must say that so far the continuity of the logic of that argument has escaped me. That, of course, is one of the reasons why we

have suggested that we not deal with section 29 at this time.
At the moment, of course, with the basic herd a rancher pays for his stock with tax paid dollars. In a sense he is paying a little more tax in advance so that he will have a tax-free capital gain out of it at the end, if he feels this kind of planning is presumably to his advantage. Just why the farmer would feel impelled to switch from the cash to the accrual accounting system as a result of this particular provision in the bill, I do not know.
I think I should point out to the hon. member, and to the cattlemen, that they have drawn an analogy between this situation in which, if the rancher or the farmer did decide to make this move, would be a voluntary move and the provision for the move to the accrual accounting system by professionals. In the case of professionals, of course, the changes in the act will require that they change from cash to accrual accounting. It was felt appropriate that some transitional provisions be allowed in that case. In the case of farmers and ranchers any such change from a cash to an accrual basis would be voluntary and the desirability of transitional provisions is not apparent.
The hon. member referred to section 12(l)(g). This, of course, is a section that remains unchanged from the existing act and the exclusion of agricultural land was noted. The type of property that would be included in that would be other resource properties, for example, mining property, the sale price of which is in essence related to prospective production although it may be expressed in capital terms. That is type of situation which this particular section, one of long standing, is intended to cover.
The parameters of the gentleman farmer and his definition have been discussed here and basically this comes under section 31(1). The section says:
Where a taxpayer's chief source of income for a taxation year is neither farming nor a combination of farming and some other source of income-
What is contemplated is that he is a bona fide farmer and is not just dabbling in farming as a hobby. There are no regulatiohs under this section and there is no change in it from the existing act. The question of whether he is or is not a hobby farmer is one of fact. It is one that is open to appeal through the usual procedures if the taxpayer disputes the initial ruling of the assessor. I am afraid I cannot be very helpful to the hon. member in defining that much further.
As I indicated earlier to the hon. member for Battle River in reply to a similar line of questioning, particular situations can certainly be referred to the Department of National Revenue and we can get examples of what the rulings have been in these situations in the past. I did suggest to the hon. member that in all likelihood a person would have some difficulty if only 5 per cent of his income was derived from farming and 95 per cent from other sources. It might be difficult for him to establish himself as a bona fide farmer in the initial circumstances. On the other hand, if he had been and was a bona fide farmer and for some reason or other his farming income had dropped off, there is no reason to think that he would be excluded as a farmer. It is my understanding that once he is a farmer or his income is derived from farming and
November 9, 1971

some other source, the special averaging under section 119 is available to him.


John Stratford Burton: I have a couple of follow-up questions. I may have missed something that the parliamentary secretary said with regard to section 12(1), but my question was related to the bracketed portion of that section on page 26. Is there some other area which would bring in an instalment of the sale price of agricultural land-unless the parliamentary secretary is suggesting the case where agricultural land was sold for mining purposes or something like that? Was that what he meant?


Patrick Morgan Mahoney: No, Mr. Speaker, I just wanted to make it clear that agricultural properties are excluded from this whole provision. If an agricultural property is sold for cash in the customary way on an agreement for sale or with a mortgage back there is no problem but you can have a situation where agricultural property is sold for a share of the crop over a period of years. While we want to be sure that this is regarded as an income transaction, when it comes to other resource industries, a mine or oil property or something like that, we also want to make sure that a similar sale of agricultural property is regarded as a capital transaction rather than an income transaction.


John Stratford Burton: With regard to the situation concerning accrual accounting that the parliamentary secretary responded to, will it be possible-


Russell Clayton Honey: Order, please. I have to interrupt the hon. member to report progress. I would not want him to ask the question and then not give the hon. parliamentary secretary time to reply.
Progress reported.


Mr. Deputy Speaker:: It being one o'clock I do now leave the chair.
At one o'clock the House took recess.


[Stage Direction]
AFTER RECESS

The House resumed at 2 p.m.


Mr. Frank Howard (Skeena):: Mr. Speaker, pursuant to Standing Order 43, I seek the permission of the House to move a motion of urgent and pressing necessity, namely: That this House, knowing that tankers and freighters are frequently smothering or poisoning our undersea gardens and that there is loss of marine life as a result thereof and having the desire to co-operate with the Minister of the Environment in his declaration that we must take a coastal initiative herewith refers to the
Bell Canada Rates
Standing Committee on Environmental Pollution the question of the need to extend Canada's jurisdiction seaward to include the continental shelf and slope.
The urgency of the matter is so self-evident that I do not desire to embark on any explanation.


Mr. Speaker:: The hon. member might find it difficult to do this under the terms of Standing Order 43. He will first need the unanimous consent of the House. I will inquire whether he has this unanimity. Is there unanimous consent?


Some hon. Members:: Agreed.


Some hon. Members:: No.


Mr. Speaker:: There is not unanimity. The hon. member's motion cannot be put at this time.



MOTION TO ADJOURN UNDER S.O. 26 COMMUNICATIONS BELL CANADA APPLICATION FOR INCREASED RATES- REQUEST FOR INVESTIGATION

Mr. David Lewis (York South):: Mr. Speaker, I ask leave, seconded by the hon. member for Winnipeg North Centre (Mr. Knowles), to move the adjournment of the House under Standing Order 26, for the purpose of discussing a specific and important matter requiring urgent consideration, namely, the indefensible application by Bell Canada Limited for a substantial rate increase in a year of record profits and the need to examine the purposes of the requested rate increase and, generally, to seek more effective ways of preventing Bell Telephone from abusing its monopoly position to exploit its customers.


Mr. Speaker:: The hon. member for York South (Mr. Lewis) has given the Chair due notice of his intention to request leave to move the adjournment of the House for the purpose of debating the matter stated by him. There is little doubt that the matter raised by the hon. gentleman is of national interest and of much concern to Canadians generally. Having said that, it remains for the Chair to determine whether the proposed matter meets the requirements of Standing Order 26 in that the question is such that it requires immediate and urgent consideration by this House.
It does seem to the Chair that Parliament, by virtue of the Railway Act, has delegated its authority to the Canadian Transport Commission and has established machinery and procedures for the purpose of dealing with applications for rate increases by the Bell Telephone Company.
It also appears to the Chair that the hon. gentleman, in the main, is asking for a review or a reconsideration of the statutory powers of the Transport Commission. That is my understanding of the closing words used by the hon. member in his notice and I quote, "to seek more effective ways of preventing Bell Telephone from abusing its monopoly position to exploit its customers". It may well be that such a review or reconsideration of the powers of the commission might be desirable, but it does not seem to
24372-40$

November 9, 1971
Inquiries of the Ministry
me that a debate under Standing Order 26 is the appropriate or the effective method for such a review.
I appreciate that the hon. member for York South might feel that it may be futile to debate the matter after the commission has taken a decision, but as the Chair stated on June 22, 1970, the normal functions of a statutory body in relation to an application for an increase in tolls should not constitute a matter for urgent debate under the provisions of Standing Order 26.



ORAL QUESTION PERIOD


Hon. Robert L. Stanfield (Leader of the Opposition):: Mr. Speaker, I wish to direct a question to the Prime Minister. Was the Minister of the Environment stating government policy when he suggested that Canada would extend her pollution control zone 100 miles into the Pacific and 400 miles off the coast of Newfoundland? If this represents a statement of government policy, does the government propose to introduce legislation and might we expect to receive such legislation in the near future?


Right Hon. P. E. Trudeau (Prime Minister):: Mr. Speaker, I am informed by the minister that he never made such a statement. I would be interested, for the record, to know where this quotation comes from.


Robert Lorne Stanfield: It comes from a speech made by the Minister of the Environment yesterday; that is where it comes from.


Some hon. Members:: Oh, oh.


Pierre Elliott Trudeau: Is the hon. member quoting the speech?


Robert Lorne Stanfield: I was paraphrasing the speech.


Some hon. Members:: Oh, oh.


Robert Lorne Stanfield: Mr. Speaker, if I were to make a long quotation from the minister's speech the Prime Minister would be among the first to object.


Mr. Speaker:: Order. Perhaps the Chair would be the first to object. The hon. Leader of the Opposition might like to ask a supplementary or to rephrase the question.


Pierre Elliott Trudeau: Quote his words.


Robert Lorne Stanfield: I am asking the Prime Minister whether the Minister of the Environment was stating government policy when he said yesterday that Canada should extend her pollution control zone 100 miles into the Pacific and 400 miles off the coast of Newfoundland.


Pierre Elliott Trudeau: Not only was he not stating government policy, but he did not make the statement he is quoted as having made.


Mr. Speaker:: The hon. member for York South.


Some hon. Members:: Hear, hear.


Mr. Speaker:: I apologize to the hon. member for York South. He will have to wait for the applause. The hon. Minister of the Environment is rising on a question of privilege.


Mr. Davis:: On a question of privilege, Mr. Speaker. In the course of a carefully prepared address yesterday, I made no reference to extending anti-pollution activities 100 miles or 400 miles beyond our territorial limits. I did, in an early part of the speech, describe the extent of Canada's continental shelf, and those mileages which the Leader of the Opposition mentioned are the mileages which correspond to the outer limit of our shelf.


Mr. Speaker:: Order. There seems to be debate as to what was said or what was not said, and that matter cannot be raised by the hon. gentleman or by the opposition as a question of privilege.



INQUIRY AS TO ANNOUNCEMENT OF REGULATIONS COVERING TERRITORIAL WATERS

Robert Lorne Stanfield: supplementary question, Mr. Speaker. I have no intention of entering into debate. I should simply like to ask the Minister of Transport at this time whether he can indicate to the House when the government will be announcing the regulations necessary for it to fulfil its limited objective with regard to the control of pollution within our territorial waters.


Hon. Donald C. Jamieson (Minister of Transport):: anticipate it will be within a matter of a few weeks. I cannot give the hon. member an exact date but a draft has been prepared and circulated to the various interested parties for comment. I do not anticipate there will be a delay of more than a few weeks.


Mr. Speaker:: I think the Chair should recognize the hon. member for York South.



COMMUNICATIONS


David Lewis: Mr. Speaker, I wish to address a question to the Solicitor General. Can the minister inform the House whether personnel of the R.C.M.P. and/or personnel of any department of government have been ordered to investigate, and whether they are investigating, the books and related documents of the defunct Toronto Telegram concerning the manner in which it sold its subscription lists and goodwill to the Toronto Star, or any related subjects?


Hon. Jean-Pierre Goyer (Solicitor General):: Mr. Speaker, I am not aware of that, but I will be glad to inquire and report to the hon. member.
November 9, 1971



SALE OF TORONTO &quot;TELEGRAM&quot; ASSETS-REQUEST FOR INVESTIGATION OF POSSIBLE TAX EVASION.

David Lewis: While waiting for this minister to inform us, perhaps tomorrow, may I ask the Minister of National Revenue whether he can inform the House whether he has ordered an inquiry or investigation into the manner in which the Toronto Telegram sold a part of its assets and the manner in which it has arranged for the future sale of other parts of its assets, to make certain that this scheme is not one which is deliberately intended to evade tax liability which would otherwise arise in the recapture of write-offs for depreciation and similar write-offs?


Hon. Herb Gray (Minister of National Revenue):: Mr. Speaker, under the terms of the law passed by this Parliament matters of the sort referred to by the hon. member are confidential. I can assure him that the department will be carrying out its responsibilities.



NATIONAL SECURITY


Mr. Real Caouette (Temiscamingue):: Mr. Speaker, I should like to put a question to the Prime Minister.
Yesterday during his visit in Quebec City, the Prime Minister mentioned an anti-wreckers legislation and stated to his listeners that the federal government was drafting one. Is the Prime Minister ready to tell us when the government plans to present such a bill in Parliament?


Pierre Elliott Trudeau: I am afraid, Mr. Speaker, that the member has been wrongly informed. I did not refer to the legislation, but on two occasions, I think, once during a press conference and another time at the CEGEP, the matter of anti-wreckers legislation has been brought up by one of my questioners. This is what I said and what the House already knew: As a result of the expiry of the exceptional legislation last December, we have presented a resolution suggesting that the House should deal with the matter, saying that we would be pleased to know the views of members of the other parties regarding the importance of such a law.
I repeated what we had then said in the House, namely that I thought there was a loophole in the present laws when it comes to facing certain violent and anarchic situations.


Mr. Speaker:: Does the hon. member for Temiscamingue wish to put a supplementary question?


David Réal Caouette: Yes, Mr. Speaker.
I appreciate the Prime Minister's answer, but I should like to know, since this is a criminal matter which is under federal jurisdiction, whether the organizers, that is fellows like Chartrand, Laberge and others, would definitely be considered as organizers of "wreckers" demonstrations, such as the ones that we have experienced-
Inquiries of the Ministry


Mr. Speaker:: I do not feel that the question, as put, is in order. Unless the hon. member is prepared to change the wording, he will appreciate that it is impossible for the Chair to let him put his question.


David Réal Caouette: Mr. Speaker, I shall rephrase it.
Would such a legislation be directed against the organizers of "wreckers" demonstrations?


Mr. Speaker:: There again I believe that the question, as put, is hypothetical.



PRICES AND INCOMES COMMISSION


George Harris Hees: Mr. Speaker, I have a question for the Minister of Consumer and Corporate Affairs. On January 18 last the chairman of the Prices and Incomes Commission promised to carry out a series of research studies into the question of inflation and to make public the results before the end of the year. Have these studies been completed and when may we expect the results to be made public?


Hon. Ron Basford (Minister of Consumer ajid Corporate Affairs):: Mr. Speaker, I know that that commitment has been fulfilled by the commission and that a great deal of research work is underway, but I shall have to inquire of the chairman exactly when he expects publication of this work.



ROYAL CANADIAN MOUNTED POLICE


Right Hon. J. G. Diefenbaker (Prince Albert):: Mr. Speaker, in order to allay the fears and the anxieties of members of the Royal Canadian Mounted Police, I should like to ask the Prime Minister whether he is prepared to give his assurance that the government has no plans at the moment nor does not intend to remove the "Royal" from the designation "Royal Canadian Mounted Police".


Pierre Elliott Trudeau: That is the first I have heard of this suggestion, Mr. Speaker, but I will be prepared to take it under consideration.


Some hon. Members:: Oh, oh.


John George Diefenbaker: Mr. Speaker, petulance is no answer, even for the Prime Minister. The same kind of frivolous answer was given when I asked last year whether the Queen's Printer was going to be abolished, and the change took place during my absence.


Some hon. Members:: Oh, oh.


John George Diefenbaker: I was absent because of illness.


Mr. Speaker:: Order, please. Perhaps the right hon. gentleman would ask his supplementary question.

November 9, 1971
Inquiries of the Ministry


John George Diefenbaker: I would ask the Prime Minister this, Mr. Speaker, and I do not want a frivolous reply. Is it or is it not a fact that this government now has plans to remove the word "Royal" from that designation? That is a simple question.


Pierre Elliott Trudeau: Well, Mr. Speaker, if the member will look at my answer tomorrow in Hansard he will find I said that this is the first I heard of such a suggestion. Therefore, it follows that we have no such plans.


John George Diefenbaker: That is fine.



NATIONAL DEFENCE


[Stage Direction]
Mr. ). M. Forrestall (Dartmouth-Halifax East): Mr. Speaker, I wonder whether I might direct a question to the Minister of National Defence arising out of the continually mounting cost in respect of the DDH program. I should like to ask the minister whether he could indicate to the House if any of the four ships will get out of the river yards before the end of this year and perhaps he might indicate whether plans are being formulated to complete the work on these ships either at the government dockyard in Halifax or at one of the east coast yards.
Hon. Donald S. Macdonald (Minister of National Defence):: I can inform the hon. gentleman that the plans for the ships are as I mentioned before the Standing Committee on External Affairs and National Defence; that is to say, three of the ships will be delivered from the yards during the course of 1972 and the fourth during the early part of 1973.


Mr. Forrestall:: Mr. Speaker, I wonder if the minister could indicate to the House whether he would be prepared, sometime prior to the end of the year, to give a statement at the earliest possible opportunity to the Standing Committee with regard to the cost estimates of this program to date.


Donald Stovel Macdonald: As the hon. member knows, Mr. Speaker, I gave a very elaborate statement on the contract to the committee. I would be prepared, however, during the course of the committee's consideration of departmental estimates, to go again into the question if the committee wishes.


J. Michael Forrestall: Mr. Speaker, my further supplementary is to the Minister of National Defence. I should like to ask him whether he would be prepared to answer the first part of my earlier question, that is, is the department giving consideration to having the completion of the final work on the DDH's done in the dockyard at Halifax or in one of the east coast yards.


Donald Stovel Macdonald: I suppose even after the ships are delivered, and have undergone their trials, there

may be some work to be done on them as a result of the trials. It depends on how much work. Essentially, I would not think any work prior to commissioning would be done in east coast yards. These ships would be completed in the manufacturing shipyards.



POSSIBLE SALE OF CF-5 AIRCRAFT TO VENEZUELA- PURPOSE OF REPLACEMENT BY TWO-SEATER VERSION

Mr. Doug Rowland (Selkirk):: Mr. Speaker, I do not know whether my question is supplementary but it relates to the possible sale of 20 CF-5 aircraft to Venezuela and the statement that they would be replaced in the Canadian Armed Forces by a two-seater version. I should like to ask for what purpose the two-seater version would be employed.


Donald Stovel Macdonald: Mr. Speaker, as indicated in the white paper on defence published in August and as I indicated in response to a question last week, it would be the intention to use some of the CF-5 aircraft for the purpose of replacing the T-33 aircraft which is now at the end of its life as the advanced trainer. The proposal would be either to convert existing single aircraft or if there were sales under the aegis of my colleague, the Minister of Industry, Trade and Commerce, to construct additional duals.



POSSIBLE PURCHASE OF HIGH SPEED AIRCRAFT-PURPOSE OF TRAINING IN USE OF HIGH SPEED AIRCRAFT

Douglas Charles Rowland: Mr. Speaker, is it anticipated that the Department of National Defence will be purchasing additional aircraft capable of speeds in excess of Mach I and if so what kind and for what purpose. If not for what purpose are these trainers to be employed?


Donald Stovel Macdonald: Well, I might remind the hon. member that the CF-101 aircraft as well as the CF-104 will continue in service, probably until the end of this decade. It is for that purpose that training in advanced high-speed aircraft is desirable.



REASON FOR SALE OF CF-5 AIRCRAFT

George Harris Hees: Mr. Speaker, since the minister assured us a year ago when questioned on this matter that the CF-5 was completely satisfactory for the use of the Canadian armed forces, and would be used by the Canadian armed forces, I should like to ask now why the government is in such a hurry to sell these planes.


Mr. Speaker:: Order, please. That, of course, is a debating point. The Chair will recognize the hon. member for Dartmouth-Halifax East, who raised this matter in the first instance, for a last supplementary and then go on to the next subject.
November 9, 1971



THE CANADIAN ECONOMY


Mr. T. C. Douglas (Nanaimo-Cowichan-The Islands):: May I direct a question to the Minister of Industry, Trade and Commerce. In view of the meeting which was held at the end of last week between high Canadian and United States officials, is he now in a position to convey to the House the measures which the U.S. government is requesting Canada to adopt in order to obtain some amelioration of the economic steps which President Nixon announced on August 15?


Hon. Iean-Luc Pepin (Minister of Industry, Trade and Commerce):: No, Mr. Speaker. These conversations will be continuing.



ALLEGED DESIRE OF UNITED STATES THAT CANADA REVALUE DOLLAR

Thomas Clement (Tommy) Douglas: In
view of the statement which appears in the New York Times quoting certain American officials to the effect that the solution of the American balance of payments problem requires a revaluation of the Canadian dollar, may I ask if this is one of the proposals that has been put before the Canadian government, and is the minister able to assure us that the fact the dollar was allowed to increase 9 per cent since May 1970 is all that the Canadian government is prepared to do at present?


Jean-Luc Pepin: Personally I am not aware that this suggestion might have been made to the Canadian government, but I will take notice of the question for the Minister of Finance to answer tomorrow.


Thomas Clement (Tommy) Douglas: May I ask the minister whether he is telling the House that after discussions of last weekend, he is still not able to tell the people of Canada what the preconditions are?


Mr. Speaker:: Order, please. The hon. member is asking the same question as he did in the first instance.



CONSUMER AFFAIRS


Mr. P. B. Rynard (Simcoe North):: I should like to address a question to the Minister of Consumer and Corporate Affairs. In view of the fact a recent survey on drug prices was carried out in Canadian cities by the Department of National Health and Welfare, was the minister abrogating his duties or did he ask the Department of National Health and Welfare to carry out this survey?


Mr. Speaker:: Order, please. I suggest to the hon. member with respect that the question asked in those terms is not in order. I will not go into the details of the question as aked, but it is certainly not acceptable from the procedural standpoint.
Inquiries of the Ministry


Philip Bernard Rynard: May I then ask the Minister of Consumer and Corporate Affairs whether he ordered this survey.


Stanley Ronald Basford: This particular survey was, of course, ordered by the Minister of National Health and Welfare, but the two departments and the two ministers have worked very closely together on this program.



INDIAN AFFAIRS


Mr. G. W. Baldwin (Peace River):: I should like to ask a question of the acting Minister of Indian Affairs and Northern Development whose day it is to languish in the House. Is there any intention on the part of the government in respect of a treaty Indian called Cardinal, whose conviction was upheld by the appellate division of the Supreme Court of Alberta for an infraction of the game act of the province, despite the defence of the treaties under which this Indian lives, to facilitate an appeal to the Supreme Court of Canada and help to defray the costs of counsel for the Indian?


Hon. Martin P. O'Connell (Minister of State):: I will bring that question to the attention of the minister when he returns.



REGIONAL ECONOMIC EXPANSION


Mr. Robert Borrie (Prince George-Peace River):: I have a question for the parliamentary secretary to the Minister of Regional Economic Expansion. In view of the special agreements with Newfoundland, New Brunswick and Nova Scotia to finance road and bridge constructions in these provinces, is the department preparing plans to designate north of the 52nd parallel in British Columbia as a special area to provide financial assistance for the construction of roads and paving of the Alaska highway?


Mr. John Roberts (Parliamentary Secretary to Minister of Regional Economic Expansion):: This is not the minister's day in the House, but I will bring the question to his attention. I think I can say, in a general way, that it is the practice of the department to keep suggestions of this kind under constant review.


Some hon. Members:: Hear, hear.


Some hon. Members:: Oh, oh!


Mr. Bell:: They even told him to get a haircut.

November 9, 1971
Inquiries of the Ministry



CONSULTATIONS WITH UNITED STATES-REASON FOR DISCONTINUANCE

['No, Mr. Speaker, no such invitation was tendered. But, unless I am mistaken, the Prime Minister or President of Cuba, whatever his title may be, has come to Canada before. In fact, he has visited the province of Quebec. He did not come to Ottawa, but he was given a cordial welcome in Quebec.']
Mr. Eldon M. Woolliams (Calgary North):: Mr. Speaker, my question is directed to the Prime Minister. Yesterday the hon. Leader of the Opposition asked the Secretary of State for External Affairs about his consultations with the provinces in connection with energy exports, referring of course natural gas and crude petroleum, to the United States, and also with reference to the consultation going on between Canada and the United States. In reply, and I paraphrase what he said at that time, the minister said that the talks between the United States and Canada are not going on at the present time. Would the Prime Minister tell us why it is these consultations have ceased at this time, in view of the fact that the United States is requesting more energy from Canada, and that means the export of natural gas?


Pierre Elliott Trudeau: Well, Mr. Speaker, they are requesting, and they are indeed buying, more energy from Canada at this time. Concerning the talks themselves, I answered this question about a month ago and gave the reasons for the change. We are not yet in a position to resume them.


Eldon Mattison Woolliams: May I put this question, Mr. Speaker? I think I can put it very simply. Could the Prime Minister now tell the House why those talks have ceased? Perhaps I could put it even a little more clearly. Have those talks ceased because this is a form of retaliation by the government against the imposition of the surtax by the United States, which is discriminating against western Canada at this time?


Mr. Speaker:: Order, please. The second part of the question, as asked, is argumentative. Perhaps the Prime Minister might reply to the first part of the question.


Eldon Mattison Woolliams: I will rephrase it then, Mr. Speaker. I did not intend it to be argumentative.


Mr. Speaker:: Order, please. The hon. member will be recognized for that purpose.


Eldon Mattison Woolliams: Thank you very much. Could the Prime Minister tell us what are the reasons that those talks have ceased? Is the reason I suggested one of the reasons that the talks have ceased?


Mr. Speaker:: Order, please. The hon. member was given an opportunity to rephrase the question. He did not rephrase it, he just repeated it along with his argument. I suggested to him that it was in the form of an argument. Maybe the Prime Minister should be allowed to reply briefly, and then the Chair will recognize the hon. member for Shefford.


Eldon Mattison Woolliams: Well, Mr. Speaker, may I rephrase it and leave out the last part?


Mr. Speaker:: Order.
[Mr. BeH.J


Eldon Mattison Woolliams: Mr. Speaker, I don't think it is argumentative, with the greatest respect.


Mr. Speaker:: Order, please. I allowed the first part of the question. I indicated that I had no objection if the Prime Minister wanted to reply to it.


Pierre Elliott Trudeau: Mr. Speaker, there is a certain kind of chicken that lays an egg, and then turns around and eats it. I think that is what the hon. member is doing.


Some hon. Members:: Hear, hear.


Some hon. Members:: Oh, oh.


Eldon Mattison Woolliams: Mr. Speaker, I am going to treat that answer with the kind of contempt it deserves. I would say to you, with the greatest respect, this Prime Minister needs the kind of defence he got this afternoon, because he is not capable of answering.


Some hon. Members:: Oh, oh.


Mr. Speaker:: Order, please. I doubt whether the hon. member has improved the situation at all. He saked an argumentative question. It was ruled out of order, and it is still ruled out of order. The hon. member for Shefford.



Mr. Gilbert Rondeau (Shefford):: Mr. Speaker, I wish to direct a question to the Prime Minister.
Following the Cuban Prime Minister's decision to visit many countries, has the Canadian government or the Prime Minister invited him to visit Canada, as other communist heads of state have done recently?


Pierre Elliott Trudeau: No, Mr. Speaker, no such invitation was tendered. But, unless I am mistaken, the Prime Minister or President of Cuba, whatever his title may be, has come to Canada before. In fact, he has visited the province of Quebec. He did not come to Ottawa, but he was given a cordial welcome in Quebec.



COMMUNICATIONS


Mr. Arnold Peters (Timiskaming):: Mr. Speaker, in view of the newest application by Bell Telephone to the Canadian Transport Commission for increased telephone rates, I would like to ask the Minister of Transport if it is the intention of the government to make a submission to the Canadian Transport Commission before the legal deadline of December 10, in order to protect the interests of the Canadian public?
November 9, 1971


Donald Campbell Jamieson: Mr. Speaker, although in most matters I answer in this House for the Canadian Transport Commission, this is a matter which comes within the purview of my colleague the Minister of Communications.



HARBOURS


Mr. Elmer M. MacKay (Central Nova):: Mr. Speaker, I have a question for the Minister of Transport. While at the same time expressing my appreciation for the work which is being done to improve the ferry facilities at Caribou, Nova Scotia, could the minister tell us whether there is any chance of implementing the third phase of the long arranged and awaited port improvements for the town of Pictou, in view of the widespread dissatisfaction being expressed by the Board of Trade and local industry?


Donald Campbell Jamieson: Yes, Mr. Speaker. I will be glad to send the hon. member a copy of the latest report. I was down to take a look personally at the situation recently. There are some plans for improving it, but I think there are some differences of opinion at the local level as to what should be done.



POLLUTION


Mr. Jack Marshall (Humber-St. George's-St. Barbe):: Mr. Speaker, I wish to direct a question to the Minister of the Environment. In view of the fact there are marginally profitable pulp and paper mills in regions possessing little alternative employment, would he advise if the government will contribute to the cost of additional pollution controls incurred under the terms of the pulp and paper effluent regulations when production processes are modified or improved?


John (Jack) Davis: Mr. Speaker, provisions for assistance for existing plants is being discussed. I might add that under the present income tax regulations it is possible to get a two-year write-off of new investments of this kind.



BOWATER-REQUEST FOR SPECIAL CONSIDERATION FOR COMPANY IN VIEW OF HIGH COST OF INSTALLING CONTROLS

Jack Marshall: As a
supplementary question, Mr. Speaker, in view of the fact that the President of Bowater Pulp and Paper Mills at Corner Brook has indicated that it will cost $11 million to introduce the anti-pollution measures, would the minister investigate this allegation in order to help this company avoid a situation which could cripple completely the economy of that city?
Inquiries of the Ministry


Hon.   Jack. Davis@Minister of the Environment: Mr. Speaker, I would be surprised if the investment required would add up to one-tenth of that amount.



PULP AND PAPER EFFLUENT REGULATIONS-INQUIRY AS TO EFFECTIVE DATE

Frank Howard: Mr. Speaker, I wish to direct a supplementary question to the Minister of the Environment. Since the pulp and paper effluent regulations do not now apply to any mill in Canada, would the minister be able to set out some timetable of expectations when, as a result of negotiations or desire on the part of his department, those regulations will come into effect with respect to all the mills that now exist?	*


John (Jack) Davis: Mr. Speaker, those regulations apply now to any mill under construction or any mill built in the future. They will apply on a negotiated basis, often through the provinces, to existing mills as well.


Frank Howard: Mr. Speaker, I am quite aware that what the minister just said is contained within the regulations. I asked, since the regulations do not apply to any existing mill, and their application is going to be negotiated with each mill, can he set out any expected timetable as to when they will be applicable?


John (Jack) Davis: As I said before, Mr. Speaker, they do apply now to mills which are under construction. For existing mills the timetable will be set by negotiation mill by mill, having regard to the economic circumstances of the firm and the community in question.


Frank Howard: As a further supplementary question, Mr. Speaker, since the minister is completely evading the issue, would he be prepared to refer this subject matter to the Committee on Environmental Pollution?


Mr. Speaker:: Order, please.



POSSIBILITY OF LEGISLATION TO EXTEND CANADIAN CONTROL BEYOND TERRITORIAL SEA LIMITS

Mr. John Lundrigan (Gander-Twillingate):: Mr. Speaker, my question is related to the broader issue of pollution of the seas. In view of his statements yesterday can the minister say whether he plans to introduce any legislation to extend Canada's pollution control authority beyond the territorial sea limits set out in existing legislation?


John (Jack) Davis: The
answer is no, Mr. Speaker.



INQUIRY AS TO AGREEMENT WITH FRANCE CONCERNING CONTROL OF OIL EMISSION INTO THE SEA

Mr. James A. McGrath (St. John's East):: Mr. Speaker, I would like to direct a supplementary question to the Minister of Transport. In connection with the proposed regulations under Bill C-2, which are now presumably in the drafting stage, can the minister tell the House whether agreement has been reached with the government of France with respect to the implementation of the provi-

November 9, 1971
Inquiries of the Ministry
sions of this bill off the south coast of Newfoundland and in the area of St. Pierre and Miquelon?


Donald Campbell Jamieson: Mr. Speaker, I cannot say for certain whether a legal agreement has been reached between the government of Canada and the government of France because, I repeat, that would presumably be a matter for the foreign ministers of both countries. I can say that I, personally, have visited St. Pierre and Miquelon and have discussed it on a personal basis with the governor. An operational plan has been agreed to by both parties, but whether or not that plan has yet been implemented by any treaty, I am afraid will have to be answered by the Secretary of State for External Affairs.


Mr. Speaker:: Order, please. We will be running short of time soon and there are quite a number of supplementar-ies yet to be asked. The hon. member might ask the last supplementary on this subject, then we will go on to the other questions.


James Aloysius McGrath: As a supplementary, I should like to ask the Prime Minister if agreement has been reached with the government of France regarding that country's treaty rights off the south coast of Newfoundland with respect to St. Pierre and Miquelon. I am thinking of this Parliament's provisions with respect to pollution control and conservation.


Pierre Elliott Trudeau: Mr. Speaker, I do not believe those various matters are under discussion. The matter of fisheries is under discussion and, at an earlier stage, I believe the matter of seabed resources and mineral resources had been under discussion. However, I know of no treaty having, been reached, subject to the answer of the Minister of Transport that the Secretary of State for External Affairs may have negotiated something of which I have no knowledge. I can say there has been no agreement reached in a formal manner.



REGIONAL EXPANSION


Mr. Raymond Rock (Lachine):: Mr. Speaker, I have a question for the Minister of Regional Economic Expansion and in his absence for his parliamentary secretary. Why was an advertisement placed in the Montreal Gazette last week by his department entitled "Des Subventions a la mesure de votre industrie" not printed in English?


Mr. Speaker:: That question should be placed on the order paper.



POLLUTION


Mr. Robert Simpson (Churchill):: I have a question for the Minister of the Environment and I shall endeavour to ask it as a supplementary to previous questions on the subject of pollution being caused by effluent from pulp and paper mills. Can the minister say whether further discussions have taken place between officials of his department and the government of the province of Manitoba on the pollution being caused by the Churchill Forest Products Company at Le Pas, Manitoba, where the minister himself indicate no pollution control was in effect at the present time?


John (Jack) Davis: Yes, Mr. Speaker, there have been discussions between our own departmental officials and those of the province of Manitoba. A program has been discussed and the schedule will incorporate the new standards which have been announced.


Mr. Speaker:: Order, please. The hon. member for Churchill will be allowed a supplementary, but I have to bring to the attention of hon. members that there are just a few minutes left before the end of the question period. I am counting on their co-operation on behalf of their colleagues.


Robert Simpson: I wonder if the minister could indicate whether any deadline has been set for the proposals to be put into effect?


John (Jack) Davis: I think so, Mr. Speaker, but I do not have them in mind.



CANADA-U.S. AUTO PACT-POSSIBLE ALTERNATIVE FOR SAFEGUARDS-GOVERNMENT POLICY.

Mr. Edward Broadbent (Oshawa-Whitby):: I have a question for the Minister of Industry, Trade and Commerce. Can the minister inform the House whether the government of Canada last week presented to the American officials a proposal which they would accept as a replacement for the safeguards which currently exist in the Canada-U.S. agreement on automobiles?


Jean-Luc Pepin: I cannot answer that, Mr. Speaker, except by saying that the discussions on the subject of the automotive agreement are continuing. On my left side, I have people saying that Canada should have abandoned the safeguards a long time ago, while on the other side I have people who say-


Mr. Speaker:: Order, please.


Gerald William Baldwin: How about the people behind you?


Mr. Speaker:: Order, please. At this time I must bring the hon. minister to order. The hon. Leader of the Opposition.
November 9, 1971


John Edward Broadbent: My supplementary to the Minister of Industry, Trade and Commerce is to ask whether the government presented to the American officials an alternative proposal to the safeguards, and does the government at present have a policy position which it would consider as an acceptable replacement of the safeguards which exist?


Jean-Luc Pepin: I believe we have one, Mr. Speaker, but it would not be terribly wise to announce it today.



THE CANADIAN ECONOMY


Robert Lorne Stanfield: should like to ask the Minister of Industry, Trade and Commerce a question arising from the survey of investment intentions conducted by his department which shows an intention to increase investment in construction, machinery and equipment by a mere 3 per cent in 1972 as opposed to 10 per cent this year. Could the minister tell the House whether his department or the government proposes to adopt any measures to stimulate investment which will encourage employment?


Jean-Luc Pepin: The statement is more intelligent than the use that is made of it, Mr. Speaker, because it points out a number of factors that are changing now. Among those is the announcement recently made by the Minister of Finance of cuts in taxation for corporations and individuals.



AIR TRANSPORT


Mr. P. V. Noble (Grey-Simcoe):: My question is for the
Minister of Transport. Has the government decided to continue to support parent companies in the development of the STOL airliner, the DM C-7, or is a better solution to the problem under consideration?


Donald Campbell Jamieson: Mr. Speaker, if the hon. member is referring to the DH C-7, the de Havilland aircraft, which I assume he is, there has been no change since I made the announcement some time ago. We are continuing to give encouragement to that particular project.
Inquiries of the Ministry



CANADIAN BROADCASTING CORPORATION


Mr. Robert C. Coates (Cumberland-Colchester North):: have a question for the right hon. Prime Minister. Has his attention been drawn to a telegram sent to him by miners from Springhill, Nova Scotia with regard to a proposed program announced by the CBC about the 1958 mine disaster and their strong objections associated with this program? If so, has the Prime Minister taken any action on the subject?


Pierre Elliott Trudeau: Mr. Speaker,
I do not have any notice of that telegram and I will look into the matter. However, even if I have received it, I do not suggest that I would make any attempt to control the CBC. I would merely refer the matter to the Secretary of State for consideration and perhaps transmittal to the CBC.
*_ * *


EXTERNAL AFFAIRS
Mr. Heath Macquarrie (Hillsborough):: I should like to direct a question to the Minister of Agriculture who, according to the roster, is here today. In light of the serious marketing difficulties of the potato growers of eastern Canada and considering the terrible food shortage among Pakistan refugees in India, is the minister considering taking some initiative in assisting in a crash program to provide vast quantities of dried instant potatoes to the people in dire need in India as requested by Oxfam of Canada?


Mr. Muir:: The minister is still in Assiniboia.


Mr. Marcel Lessard (Parliamentary Secretary to Minister of Agriculture):: Mr. Speaker, in answer to the hon. member's question, I can assure him that all foreign aid is extended through the External Affairs Department. However, if the hon. member is asking the Agriculture Department to supply potatoes to any one, as he is suggesting it, we will be pleased to comply with his request since there seems to be a surplus on the market at this time.


Mr. Maurice Foster (Algoma):: I have a question for the Minister of Industry, Trade and Commerce. In view of the recently announced policy proposal of the United States Atomic Energy Commission to continue the embargo on enriched Canadian uranium for the United States market to the late 1970's from the previously announced date of July, 1973, does the Canadian government intend to for-

November 9, 1971
Inquiries of the Ministry
mally protest this policy proposal to the United States Atomic Energy Commission?


Jean-Luc Pepin: Mr. Speaker, this temporary embargo-and I underline temporary-was established in 1964 and still exists. We have protested, as a government, on a number of occasions. The protest I remember most vividly is the time three ministers of the Canadian government gave a note to the ambassador of the United States in Ottawa saying that this measure was a "non-GATTable" one, if I may use that word. We have repeated these views since, and we are preparing to make them known again to the United States Atomic Energy Commission.


Maurice Brydon Foster: Can the minister say if access to the United States for Canadian Uranium market is one of the items on the agenda of the mid-November GATT talks, and if so can the minister say if all reasonable pressure will be applied to have the United States market open to Canadian uranium in mid-1973 as was previously provided in the United States policy?


Jean-Luc Pepin: I think I have mentioned before, Mr. Speaker, that this is one of the items on which we have strong views to express to the United States.



SHIPPING


Mr. Thomas S. Barnett (Comox-Alberni):: My question is for the Minister of Transport. Are all subventions paid by the water transport committee to coastal steamer services being terminated as of the end of the year or is it only the service on the west coast of Vancouver Island which is being singled out for this action?


Donald Campbell Jamieson: I do
not recall any general withdrawal of subsidies, Mr. Speaker. I know there have been some in different parts of the country. Perhaps the best thing I could do is advise the hon. member that I will get details for him from the Transport Commission.



POLLUTION


Robert Lorne Stanfield: have a question for the Minister of the Environment arising out of the statement at the bottom of page 13 or 14 of his recent speech to which reference has been made. He referred to action taken beyond our territorial limits. In view of the fact that the minister has indicated legislation

will not be introduced, I should like to ask whether it is his view and the view of the government that this kind of action is now authorized by the government?


John (Jack) Davis: Mr. Speaker, the action to which the Leader of the Opposition refers is one in self-defence or self-protection taken in the event of a tanker breaking up or in the event of a ship containing toxic chemicals being in difficulties near our shore but, conceivably, outside our territorial limits. I stated that it would be essential for Canada to act in its best interests and, indeed, the best interests of all countries and to deal with that kind of situation at once.


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


Mr. Speaker:: Order, please. We have just about run out of time. The Leader of the Opposition may ask a supplementary, after which the Chair will recognize the hon. member for Temiscamingue.


Robert Lorne Stanfield: Mr. Speaker, may I ask the minister whether he proposes to exercise his judgment and make a decision as to when this kind of intervention should be made beyond our territorial waters?


John (Jack) Davis: Mr. Speaker, I am sure that if that action were taken, it would be only taken with the support of the government as a whole.



AIR CANADA


David Réal Caouette: Mr. Speaker, I would like to ask a question to the Minister of Transport.
I asked him several times in the House if he could not appeal to Air Canada so that it may improve its service in Rouyn-Noranda. Is the minister in a position today to say if eventually and very soon Air Canada will be willing to provide DC-9 service in that region?


Mr. Speaker:: I feel that such a question should be put on the order paper or discussed on adjournment.



GOVERNMENT ORDERS


[Stage Direction]
The House resumed consideration in committee of Bill C-259, to amend the Income Tax Act and to make certain provisions and alterations in the statute law related to or consequential upon the amendments to that act-Mr. Benson-Mr. Honey in the chair.
On Clause 1-section 28-Farming Business
Russell Clayton Honey: When the committee rose earlier, section 28 was being considered. Shall section 28 carry?
November 9, 1971


John Stratford Burton: Mr. Chairman, when the committee rose at one o'clock, I was in the process of asking the parliamentary secretary some questions about the group of sections we were discussing. I wish to pursue a couple of matters that I feel have not been dealt with adequately. Specifically, I wish to ask the parliamentary secretary to clarify what the situation will be if a farmer carrying on a cattle and grain operation decides, for a variety of reasons, to go to an accrued accounting system, which would apply to his cattle operation. For instance, it may be better for him to do this. Is he then forced to make his calculations with respect to his grain operation on an accured accounting basis, or would it be possible for him to deal with his grain operation on a cash basis.
I ask this because there are special problems facing many grain farmers in Canada who, by force of circumstances may be circumstances in which, since one portion of their operation may be in livestock, it would be of benefit to them if they could switch over to an accrued accounting basis. My question is this: In a situation like that, can they use the two systems?


Patrick Morgan Mahoney: No, Mr. Chairman.


John Stratford Burton: Mr. Chairman, is the government giving further consideration to bringing in changes in this regard? Has it received representations on this matter. What is the situation? Is any change possible? Why can the government not consider allowing both types of accounting procedure to apply to the type of operation I have described?


Patrick Morgan Mahoney: Mr. Chairman, the right of farmers and fishermen to report on a cash basis is regarded as an option that is beneficial to them. So far as I am aware, there have been no serious representations to the effect that we should allow them to pick the accrual method of accounting for any particular aspect of their operation where it is to their tax advantage to do so and, at the same time, allow them to retain the general benefit under section 28 with respect to reporting on a cash basis. I am not aware of any serious representations in this regard. Actually, I am not aware of any representations like these, other than those that the hon. member himself may be making now.


John Stratford Burton: Mr. Chairman, I think the point has been raised earlier. Of course, I am not sure what the definition of "serious" might be.


Patrick Morgan Mahoney: I am not suggesting the hon. member is not serious.


John Stratford Burton: I was under the impression that this matter had been raised, and that it had received some consideration. I know there may be complexities in dealing with this matter. However, it deserves further consideration and I hope the government will give it that further consideration.


Patrick Morgan Mahoney: Mr. Chairman, I certainly was not trying to imply that the hon. member was not serious in his suggestions at this time. I ought to say that we have received, during the course of the whole tax reform debate, literally tens of thousands of letters and it is quite possible that some such suggestions came forward. How-
Income Tax Act
ever, there is no instance of such a representation standing out, so far as I can recall.


John Stratford Burton: Mr. Chairman, I still cannot understand why the government thinks it would not be possible to make some provision like that. If there is an explanation, I would be interested in hearing it. It seems to me that the problem here ought to be considered in the light of some of the points I raised before the noon adjournment. I think the government should bear those points in mind in framing sections of the act that specifically affect the agricultural industry.
May I briefly move on to section 31, which I had mentioned to the parliamentary secretary before lunch. The section deals with losses derived from farming operations and the right to write those losses off against income derived from another source. I want to mention to the parliamentary secretary the problem involving farmers who are just starting up their operation and who are incurring heavy losses, or some losses at any rate, in the initial years of the operation. I mention a hypothetical situation which I think can easily be translated into reality.
Let us say a farmer is starting up in a manner which would certainly meet the requirements of the government and the Department of National Revenue; in other words, he is a bona fide farmer. In the initial years of his operation he incurs losses. Since the averaging provisions are weighted over a five-year period, the incidence of his income in future years may be such that he will not gain much benefit from the averaging provisions. I just want to ask, first, whether a farmer starting up his operation and incurring losses, and at the same time engaging in other work which he must often do in order to survive and in order to be able to carry on his new farming operation, can qualify under the provisions of section 31. Also, how will this situation fit within the framework of the time period that is involved. How will this provision work in that period before the farmer can put himself in the position of actually earning an income, as defined for taxation purposes?


Patrick Morgan Mahoney: Mr. Chairman, I think the hon. member will appreciate that perhaps the term "qualify" under section 31 is not proper because section 31 is a limiting section rather than a section that offers any particular advantage to a bona fide farmer. What it does limit is the opportunity for people only dabbling in farming to offset their losses against other sources of income. There is no reason why a person entering into farming for the first time cannot avail himself of the opportunity of offsetting his losses not only against farm income, but against other sources of income. The whole question of fact revolves around whether or not his chief source of income is a combination of farming and other income as a lump or whether, really his chief source of income is whatever profession or business he is carrying on elsewhere and his farming activities are a hobby arrangement.


John Stratford Burton: Mr. Chairman, I appreciate the comments made by the parliamentary secretary on this matter. I am glad to have the assurance he has given us, although some of the problems involved in averaging still exist, particu-

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Income Tax Act
larly as they apply under the new rules which were under discussion earlier, and with regard to the basic herd problem.
There is one other area which I want to explore briefly with the parliamentary secretary. It has to do with section 28 of the bill. This concerns the question of cash accounting and accrual accounting. As I understand it, section 28 provides an opportunity to farmers to use a cash accounting basis when reporting their income. At the same time, there is a provision that a farmer can switch over to accrual accounting only with the concurrence of the minister, and only upon such terms and conditions as the minister may prescribe.
I note there is a general rule under which the minister can lay down terms and conditions for any switch-over to accrual accounting. Does the taxpayer have any rights? Does the taxpayer, who may either find it to his advantage or feel he is being forced to switch over from cash accounting to accrual accounting, have any rights in the field now before us in terms of any transitional rules? I raise this because obviously the switch-over from one system of accounting to another can pose some real difficulties for the taxpayer. In view of some of the provisions of the bill, the government must feel there is some advantage in some cases to an accrual system of accounting. They have written into the bill in a number of places transitional rules which allow a time period to make adjustments or changes.
Unless I missed some point with regard to any changeover that farmers may wish to make from cash to accrual accounting, I see no provision which will give the taxpayer any rights in terms of being able to take advantage of any transitional rules in order to make the adjustment and the change-over more easily. I would like to have the comments of the parliamentary secretary on this matter. Are there any such transitional rules within the act that are not subject to discretionary authority in the hands of the minister and, if there is no such provision, is the government prepared to give any consideration to changes along this line?


Patrick Morgan Mahoney: Mr. Chairman, in this particular case there is no provision for transitional rules. The hon. member is quite right. However, the point he is missing is that the switch from cash to accrual accounting would be voluntary as far as the farmer is concerned. It has not been considered particularly appropriate to provide transitional rules that will take care of that situation because presumably he would not make the decision to switch unless it was to his advantage to do so.
On the other hand, when we talk about accrual accounting that professional people have to do from the beginning of the new tax system on, we are talking about a situation where we are requiring them to change from cash to accrual accounting and where this is being imposed upon them by a change in the law rather than a voluntary act on their part. It does seem appropriate to have transitional provision in this situation.


John Stratford Burton: Mr. Chairman, I wish to comment on what the parliamentary secretary has just said. I recognize the point he has made that the matter of changing over from cash to accrual accounting by a farmer is a voluntary proposition, whereas in fact it is being required for some

other occupational groups. At the same time, it still leaves open a question which, as the parliamentary secretary indicated this morning, is still under debate. While there is no provision under the proposed law that will force a farmer to change over from cash to accrual accounting, in fact there may be provisions in the law where the practical consequences of the provision, and I refer to the basic herd provision, will be that the farmer has no choice or finds in the long run that is the only way out for him, to make a switch-over from cash to accrual accounting.
The parliamentary secretary indicated this morning that he did not quite follow the argument being made by some people in this regard that this would be the effect of the proposals, particularly as contained in section 29. However, he wanted to have section 29 stand so that the government could give the problem raised further consideration and try to gain a better understanding of some of the objections raised. In light of this situation, the matter of transition from cash to accrual accounting for farmers requires and deserves further consideration as well. I commend such an approach to the parliamentary secretary. I hope he will follow a course of action similar to that which he followed this morning.


Patrick Morgan Mahoney: Mr. Chairman, I really do not think the hon. member wants us to stand this section. I am sure he would want to leave the option open to farmers to report on a cash basis. Transitional provisions, where appropriate, are contained in Part III.


John Stratford Burton: I rise on a question of privilege, Mr. Chairman. I do not know whether the parliamentary secretary was implying this or not, but I want to make it clear that there was nothing in my remarks that could be interpreted as suggesting that I do not want farmers to have the option open to them of staying on a cash accounting basis.


Patrick Morgan Mahoney: I am sorry, Mr. Chairman. I understood the hon. member to suggest that we should treat this section as we did section 29 and stand it while we consider his suggestion. I was simply saying that I do not agree that standing this particular section will serve the purpose, because I am sure we all want to pass this section. The transitional provision are comprised in Part III of the bill rather than in Part I. That would be the appropriate place to introduce transitional measures such as the hon. member is suggesting.


John Stratford Burton: Could the parliamentary secretary tell us whether he is prepared to give consideration to this question of transitional provisions?


Patrick Morgan Mahoney: The only thing I can say is that we are continuing seriously to consider all representations. As to what disposition will be made, I cannot forecast, but I really doubt that in this particular case transitional provisions will be permitted. However, we shall study the matter. As the hon. member is aware, the representatives of the Canadian Cattlemen's Association have been visiting various Members of Parliament and officials in the Department of Finance for the past few days trying to persuade them of the validity of this argument that somehow or other something in this bill will impel ranchers to switch from a cash to an accrual basis. Up to now, the
November 9, 1971

validity of their argument has escaped me, but it is before us and we are listening to the representations very seriously.


Philip Bernard Rynard: Mr. Chairman, I think all of us recognize the important place the farmer occupies in this country. When we look into the future we see that the population will be doubled in the year 2,000. Today, over half the population of the world is lacking in either quality or quantity, and in many cases it is quality. In Canada in the year 1900, one man was able to produce enough food for one other person. Today, a farmer produces enough food to feed approximately 40 people. I mention this because it shows the extent of the increase in the productivity of the farm sector in Canada.
Over the years, Canadian agriculture has been built up to the place where we have been a net exporter. Particularly is this true of certain classifications. Our cereals have been in demand in many countries in the world which would have run short of food if they had not had the granaries of Canada to supply that grain which we can produce cheaper than anyone else in the world, with the exception of the United States. The farm unit of 1900 has come from the binder and reaper to the huge combine of today which threshes as it cuts. From the farms, the grain goes to the elevator to be stored for shipment elsewhere and in grain alone we were able to reach close to $1 billion in exports. This will underline the importance of the farm sector.
On the dairy farms of Canada, cattle are being shipped to many of the nations of the world. Our cattle are in Japan, Australia, Mexico, South America, Italy, almost any country in the world. The Canadian farmer deserves a pat on the back for what he has done in the breeding of cattle. I am pleased to know that the section containing the basic herd provision has been allowed to stand because a farmer who was able to build a basic herd has reaped tremendous dividends. From these herds came the cattle which were exported. I am sure the Minister of Finance knows of many farms that have been brought up to a high standard as a consequence of this provision, with the result that breeding cattle was shipped from them all over the world. If these cattle were not exported, they were used to upgrade the breed in Canada. So today we have cows of the Holstein breed producing upwards of seventeen to twenty thousand pounds of butterfat per year and the world average is about six thousand pounds. This is an illustration of what a terrific job the Canadian farmer has done.
I well recall one farm operation. It is a very interesting farm operation which is carried on today by the sons of the original owner, and the basic herd was started with cattle obtained from the sale of the Mount Victoria, just outside the City of Montreal. Those of you who have been in the cattle game will remember that one of the herd's sires which was sold was the Emperor of Mount Victoria, and the other one was Marksman. These two animals left their imprint across the whole of the Holstein field, not only in Canada but in the United States. The same thing can be said of beef cattle produced, and I regret very much that similar procedures will not be possible under the new bill so that a young man could start to build his basic herd as a previous generation could do.
Income Tax Act
To make myself clear, in establishing a basic herd you buy your cattle and can add to them from time to time. If you have to borrow you pay interest on that money. If you have earned it, you pay income tax on it. In any event taxes are paid on the investment, so the government can not have it all its own way.
After the herd is established and producing, the farmer will upgrade that herd, knowing that he will get a higher price for his animals if they are more desirable and will produce more. This is an incentive for every farmer in the purebread livestock field. Take the Purina people who are one of the big animal feed companies on the North American continent. They have developed a herd from grade cattle. The production of this herd went up from somewhere around 8,000 to over 14,000 or 15,000, pounds of butterfat annually if I remember correctly. All these cattle grew in value over the years.
Now, I want to congratulate the minister and the parliamentary secretary on allowing this basic herd provision to stand. It is interesting to note that in the early days of the budget our understanding was, and it was made clear across the country, that estate tax would be wiped out when capital gains tax came in because it was to take its place. Now, there seems to be some hedging on this principle and the government is saying: Well, if four provinces come in then we shall collect the tax. This is like saying: Boys, come and get the taffy; all you have to do is walk across the floor. It is my contention that this section of the bill should be set aside until the government has consulted with the provinces and knows what the provinces are going to do. Otherwise, you are going to have one province taxing more than another province and we will end up with the same hodge-podge tax structure that we had before. If this does not turn out to be the worst jumble when you are through with it that you have ever heard of, I am missing my guess.
Farms are being abandoned across Canada at a rapid rate. I am sure the parliamentary secretary knows this. You ask the government if it is their purpose to drive the farmer off the land and in his place put the large food operator and chain stores. Well, this would be a great combine, wouldn't it? They would set prices at whatever figure they required in order to obtain a profit. It is my belief that in many cases we should try to encourage more farmers to stay on the land and raise their families. I think it would be to the benefit of all Canadians to accept the principle of subsidizing these farmers on small farms up to a certain rate of production on their cattle, pigs, sheep and other livestock so that they could stay on the farm and raise their families there. From a social standpoint, this would be very desirable when we consider that at present there are 600,000 unemployed in this country. This would allow the farmer to raise his family on a farm, rather than having to move them off the farm to become a statistic on the unemployment rolls in some city.
If you ask why it is that many boys and girls leave the farm today, the answer is perfectly obvious. During their young lives they have seen their father and mother working and struggling to make ends meet while their counterparts in the cities are well dressed and have all the material advantages. So, is it any wonder that when the

November 9, 1971
Income Tax Act
opportunity comes the young people leave, especially when the government does away with those incentives that are needed so badly in the farming industry today?
President Nixon has stated that United States farmers will not be forgotten in the period of adjustment and surcharge, and he promised to provide price support levels for farmers in order to permit the free movement of commodities in world markets. These include direct payments to bring returns up to a specified goal. This is a vital matter both in Canada and the United States, inasmuch as many of our products have to be exported and compete in markets of the world. This indicates that if the door to world trade in agricultural products is allowed to slam shut in the months ahead, the consequences to the Canadian economy will be disastrous. Where would we be today had we not sold $1 billion worth of grain two years ago? If hon. members review the financial picture that year they would soon discover where we would have been.
The Minister of Agriculture seems convinced that market prospects are bleak indeed-


Russell Clayton Honey: Order, please. I regret to interrupt the hon. member but I have been listening to him carefully and I was hoping that fairly soon he would deal with the three sections now before the committee, section 28, which deals with the method of computing the income of a taxpayer engaged in a farming business, section 30, which deals with expenses incurred in clearing land, levelling land and laying tile drainage, and section 31, which deals with losses incurred by farming where the chief source of income is not necessarily from farming. Essentially, these are all matters concerned with the calculation of a farmer's income. I hope the hon. member will try as much as possible to keep his remarks relevant to these sections.


Mr. McCleave:: Mr. Chairman, may I speak to the point of order? I was listening to the remarks of the hon. member for Simcoe North, and I thought he was trying to take a rational approach to the problems confronting farm operators in Canada. I am a little at a loss to know whether we should hold ourselves strictly to the exact wording of the sections before us or whether we should not be allowed to carry on a debate on legitimate matters of tax reform. That is a big question for the Chair to answer, but it was my understanding when we embarked on our study of individual sections or groups of sections that we would be allowed to range reasonably far so long as we stayed within the general confines of the measure before us.
I thought the hon. member for Simcoe North was discussing taxation in terms of the problems it creates for farmers, which I should have thought was hardly ranging over the whole waterfront of taxation reform. If that is the case, then I think he should be allowed to continue his remarks. I think Your Honour would have to agree that he is not a member who strays wide and far, but generally keeps within the very narrow limits. I would hope Your Honour would be inclined to be reasonably generous- indeed, I must say Your Honour has been so in this whole debate and I make no criticism whatever of the Chair- and allow a certain latitude of debate.


John (Jack) Henry Horner: On the point of order, Mr. Chairman, there is a moot point in which I think the Chair might be interested. Section 29 deals with the basic herd. If the government now decides to change it, then the transitional period in section 28 will have to be changed, too. Section 28 provides that where the income for a year shall be deemed to be an amount equal to-and then a computation follows. In other words, it might be beneficial for a man in the livestock business who does not have the advantage of establishing a basic herd to go on the accrual system. Once he does that, he cannot revert to the cash system because under section 28 he is locked in. Therefore, since section 29 has been stood, section 28 would appear to be interrelated. That point may not have caught the attention of the Chair up to now.


Russell Clayton Honey: Is the hon. member for Saskatoon-Big-gar rising to the point of order?


Mr. Gleave:: Yes, Mr. Chairman. I should like to point out that I raised this question yesterday evening. The parliamentary secretary said, as reported at page 9444 of Hansard:
In the spirit of the debate we are entering into I am quite prepared to try to range over the field of taxation of agricultural enterprises. I do not think there has been very much in the speeches we have heard until now to indicate that we are dealing strictly within the terms of the four sections before us. I suggest, on the basis that the points are important, that they must be dealt with at some point during consideration in committee of the whole. Perhaps if we deal with them in the context of these four sections being our opportunity to deal with agricultural matters specifically, we will not have to re-cover the same ground when the particular sections involved come up for discussion.
The parliamentary secretary then went on to point out that we had dealt with and agreed to the averaging provisions, but that this should not necessarily preclude our debating them again. I did not disagree with the parliamentary secretary at the time. In fact, I intervened on the point of order only to try to establish how we should proceed. I have to agree with the parliamentary secretary that there are matters outside these four sections that do come within the ambit of our discussion. Even though one subclause has been allowed to stand for discussion at a later point in time, I think we must still refer to it from time to time in order to relate other proposals that we shall be making to that particular provision.


Russell Clayton Honey: The Chair only wants to comment that I interrupted the hon. member for Simcoe North, not with the intention of trying to hold the hon. member or any other hon. member closely within the confines of the three subclauses. However, I want to say to all hon. members that the Chair does have a responsibility. Notwithstanding the opinions of the parliamentary secretary and the hon. member for Saskatoon-Biggar, both of whom I respect very highly, the occupant of the Chair from time to time is the one who has the responsibility to make such decisions.
The hon. member for Halifax-East Hants and the hon. member for Crowfoot are very good advocates. I have no intention of attempting to limit the debate beyond what is reasonable. I must say I thought I should draw to the attention of the hon. member for Simcoe North that he might have been going a little wide of the subject when
[Mr. Rynard.J
November 9, 1971

dealing with export markets. This, I believe, does relate to agriculture but I think the hon. member for Saskatoon-Biggar has pointed out it might be reasonable to confine references to taxation to those relating to the farming business. I think if we did that, no one would be confined too closely.


Philip Bernard Rynard: Mr. Chairman, I realize the bind you are in because this is a very complex bill. I would say immediately that it should be referred to the committee on agriculture because it is so complex. If we are to be limited to any one point in it, then we will not have sufficient field, as the hon. member for Saskatoon-Biggar has pointed out, in which to do what we must do. We must try to cover the field on it or we will have to come back to it again and again.
I suggest without hesitation that it be referred to the Committee on Agriculture. I want to thank those members who have helped define how far this debate should go and along what lines. I am sure, Mr. Chairman, no one understands better than you the complexities of this bill, because you were raised on a farm and grew up in a farming community. You know what I am speaking about when I say that agriculture in Canada has developed to the point where we are proud of it. We do not want to sacrifice it through some bill which would tax everything which comes along. It was my distinct understanding that when the capital gains tax came in the estate tax was to go out. Now, we find there is some hedging on this which disturbs me because I feel most members thought this would be the case. Now, there would seem to be an attempt to have both types of tax because if the estate tax is established in four provinces it will likely spread across Canada, either in that form or in some other form which will be substituted for it.
Because I believe it is very apropos, I want to say that between the years 1949-1970 the average disposable income of the Canadian people after taxes and deductions has just about tripled, whereas food prices are about one and one-half times what they were in 1949. I am talking about the good deal the consumer gets in buying food. This does not take into account either that Canadians are eating more meat, poultry, fruits and vegetables. Putting it another way, it took the income from 20 hours of work in 1949 to buy one week's supply of food for a family of four. In 1970 just about half the number of hours were required. One may ask why this is so, and why the farmer has had such a small increase in the price of the products he grows. It simply means that each man in agriculture today is producing far more than his predecessor. With his machinery and the available technology, he is growing new grains and is using fertilizers. As a matter of fact, for every man engaged in agriculture a job is created for four other people. It is probably worth-while to note that the machinery and equipment which the farmer buys today costs him two to three times what it cost in 1949, and he receives less than 50 per cent of each dollar spent as compared to 60 per cent in 1949.
These are the points I wish to bring to the attention of the parliamentary secretary. The tractors, trucks and machinery used by the farmer have all been produced in industry where there have been strong labour unions to bargain for the increases in wages. As hon. members may
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have noted, nothing like this has occurred in the farm sector, nor has there been any special benefit or shorter hours for the farmer over that period of time. It comes back full circle to the point that if the farmer is not going to be viewed in the light of what is transpiring, is not to be given the opportunity to build up, develop and obtain something for his labour and, in the final analysis, be able to accumulate an estate which will not be taken away by estate taxes or capital gains taxes, he will have no incentive to keep on farming.
There is another point with which I should like to deal. This is the matter of the hobby farm which involves perhaps the millionaire who makes his living in some other line of work but establishes a farm and brings in thoroughbred cattle to the area. I could name dozens of these people. They improve the breed of cattle. Some of these people actually live on these farms. I want to ask the parliamentary secretary what is proposed in respect of this type of farmer, and how it is proposed that he be treated. Some of these people, as the parliamentary secretary knows, have sold animals valued at $50,000 or $60,000. I could name these people. They have provided bulls and other animals to the small farmers in the community. This has helped the other farmers upgrade their animals. In the long run, this is of great benefit to the farming community. I would ask what the thinking is on this whole matter.


Patrick Morgan Mahoney: Mr. Chairman, we propose to continue to treat hobby farms exactly as they have been treated in the past. They can offset their farming expenses against farming income and then take any net loss and deduct $2,500 of that from their other income and then take half the difference of the balance of loss up to an aggregate of $5,000. I am sure if the hon. member for Simcoe North had had an opportunity to do his own research rather than rely on the notoriously unreliable research department of the Progressive Conservative caucus, he would not have misrepresented as he did the position of the government on the offered, collection agreement in respect of succession duties with the provinces which choose to go into the death tax business.
The hon. member suggested that the federal government somehow was reneging on the commitment contained in the June 18 budget, and in this bill, to discontinue the collection of estate and gift taxes. That is simply not true. It could not be further from the truth. The federal government has said that in four provinces which do not presently have the machinery to collect these taxes-and this excludes the provinces of British Columbia, Quebec and Ontario-if those provinces adopt for themselves a fairly uniform succession duty system, the federal government, through the Department of National Revenue, will for a fee collect those taxes for the provincial governments. But it is very clear it would be the provincial governments that would be levying the taxes and it must be in respect of provincial governments which are not presently levying taxes of that nature. This, of course, is the result of a request from certain provincial governments who have expressed an interest in possibly levying that sort of tax.


Philip Bernard Rynard: Mr. Chairman, I thought the parliamentary secretary would have learned by now that people in glass

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houses do not throw stones. He talks about research. I want to refer him to the research the Department of Finance did when the minister was out a half billion dollars on a couple of occasions. He should not bring up the matter of research now. He should be ashamed to do it, sitting alongside the Finance Minister. I would like to ask whether it was the intention of the government to say to the people of this country and to members of this House that they were abolishing estate taxes and were replacing them with a capital gains tax. This was my understanding of it. Now, they come along and say, "if you boys want more estate taxes, we will collect them for you". I leave it to the judgment and to the wisdom of hon. members here to decide if that is not coaxing them into collecting more taxes. They misled the public.
.40 p.m.)


Some hon. Members:: Hear, hear!


Alfred Pullen Gleave: I have a few remarks to make regarding what the parliamentary secretary pointed out, namely, that there is nothing in the bill that would force a farmer to operate on the accrual system. This reminds me of the old army gag which was, "we cannot make you do it, but we can surely make you wish you had". That is about the size of it, because if no change is made in the section which was set aside for the time being, then many farmers who have a combined livestock and grain production would probably find some problem in using the accrual system for livestock, for beef and dairy herds, for swine, sheep and so on. If they did that, it would compel them to do the same for the grain part of their operation. The difficulty with the accrual system arises in the west particularly in connection with the grain or cash crop, because farmers might be in the position of having to put a value on the inventory and pay taxes on the sale. They may have to borrow money to pay the tax on a yearly basis. I want to make this point again, since it seems to have been overlooked.
In considering these sections, one sees that there are some other factors which should be taken into account. Another matter is the capital gains tax. In the first section with which we are dealing, we find that a fairly simple method of declaring income is to use straight-line depreciation, and the standard practice on most farms is to use the straight-line method in setting up depreciation, sometimes an old machine is traded in for a new machine, and the new machine is paid for. In this type of transaction, the capital recovery method will be used, that is capital gains, and under this method, when the deal is made any difference between depreciated value and trade in value of the used machine is deemed to be an actual income, half of which will be taxable. Those who favour the capital gains tax will ask "why not, since the individual made a capital gain?"
However, I would like to call to the attention of those responsible for drafting these provisions to the fact that these sections will have the effect of changing to a considerable degree the method of buying and selling machinery in western Canada. I suppose that this would also apply to eastern Canada and to other parts of the country. There is no actual cash gain in this transaction. Generally, the farmer will be forced into a position where, instead of following the general practice of trading in old machin-

ery, which gave him the advantage of setting it off for depreciation, he will be purchasing new machinery at the best discount price that is offered. He will not be trading in the old machine but will rather auction it off and half of whatever money he makes on it will be subject to tax, or else he will leave the machine on the farm and not bother with it. This provision will drive down the market value of machinery. I certainly expect this to happen if no provision is included allowing farmers to operate as they have been doing in the past.
It may be the considered opinion of those responsible for drafting the bill that a change should be made. If that is their opinion, then perhaps they may be willing to say so, but I wonder whether the full effect of the proposals have been thought through and considered by those who are making changes in this act. I may say, for the information of those responsible, that a major dealer in western Canada has suggested to farmers that if they want to purchase a machine for cash he will give them a handsome discount and if they want to bring in their old machine he will call an auction sale and sell it for them. This is one way of doing business, although it is not the general practice. It results in some inconveniences and in some serious adjustments in the methods of farmers purchasing machinery and of dealers selling machines to farmers.
So I bring this to the attention of those responsible. I do not know whether or not they wish to consider it. Perhaps they do not give a damn. If that is so, then let us forget about it, but the farmer will care what this does to him because I know very well that farmers trade in their machines and thus recover in book value some amount on the old machine on which they will have to pay tax. But they will not have any cash money with which to pay it. Actually, no money comes into his pocket as a result of the deal, and so he will not be very happy. It is an added cost to his operation. There is actually no real profit.
You get back to the same thing as you do with grain on the accrual system. If you make money, you can pay some tax on it, but if you do not make money, and a profit is merely imputed to you and you have to pay tax on that because of some bookkeeping procedure; it is pretty rough on you. As I say, I do not really know whether those responsible have considered this, whether they have bothered to go to machinery dealers and farm organizations, and listen to how these deals are made.
I know that the farm organizations have made representations to the minister. At least I have a letter saying that they made representations to him, and they have complained bitterly that he, and the others responsible, ignored their submissions. Whether this particular matter was discussed and the people concerned did not understand it, or chose to ignore it, is something I do not know.
If this section is allowed to stand today, I hope that those responsible will use part of the weekend to talk to some of the dealers and farmers, and as a result become better prepared to deal with the section and make some adjustments to it. I really cannot see how a capital gains tax could apply to those kinds of operations. Essentially, in those cases it is not really a capital gain in the same way as a capital gain is realized when one purchases a
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piece of real estate, sells it a number of years later, and makes $2,000, $1,000 or $500 on the transaction. There is quite a difference between the two.
With respect to the cash accounting system and the accrual system, it seems to me there should be no question about the farmer's right to choose. If we are going to follow the provisions made for the basic herd, then there should be a provision that if a farmer or rancher wants to put his cattle herd on the accrual system he may leave the rest of his operation to be accounted for on the cash system. This is a situation which has to be recognized, and steps taken to deal with it. I hope the minister will give these matters some consideration.


Mr. Ritchie:: Mr. Chairman, I think that a discussion on section 28 dealing with the assessment of a farmer's income for income tax purposes opens up the whole subject of taxation of the farming industry in Canada. As I understand it, primarily section 28 has been lifted from the old income tax act, but when we consider the way in which it will be amended in the future, we must examine it carefully.
In my opinion, this new tax bill will bear heavily on the farming population. It will change their mode of farming, change their manner of living, and change the whole taxation structure as it relates to farming. Provision for a capital gains tax applicable to farming is the main feature added to section 28. Up to the present, capital gains have not been a factor in the farming industry, but now substantial tax payments must be made on them.
It has been said that over the years, as a result of ministerial discretion and taxation rulings, capital gains have largely been included in income, the exception being with respect to farming, some property income, and stock market gains. Now, stock market gains will be taxed, but for the stockholder the value of the dollar with which he will have to pay his capital gains tax will be reasonably related to the investment he made. But this will not be the case with farming.
Due to the low liquidity of farming over the years, due to the tendency for an individual to be a farmer for a certain period of his life, say 20, 30, 40 or 50 years, capital gains become more important to a farmer. I really do not see how you can have an estate tax as well as a capital gains tax applied to the farming industry. You can have one or the other, but I doubt that you can have both. If you have both the result will be a tax jungle because a number of provinces have indicated they are going to retain and even increase estate taxes. Premier Schreyer of Manitoba, my home province, says he feels that the estate tax should stay. He has said that $5 million would be lost to the province if it were eliminated. This is not an enormous amount of money, but considering that the average Manitoba gain from estate tax is around $3 million, it appears that he hopes to retain that tax, and probably increase it.
If a farmer should die without making some provision, his estate may well be faced with a substantial tax burden and a capital gains tax on the land. All his depreciated property will revert to its original cost, so that the $15,000 tractor which had depreciated to $5,000 may very well be
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valued at its original price. In other words, the depreciation has been recovered. In addition inventory on the farm will automatically become cash income so far as the government is concerned. It could easily happen that 15,000 or 20,000 bushels of grain would be sitting on the farm because there would be no market and no quotas, yet the estate must settle on the basis that this is readily turned into cash. Similarly, with livestock. Even though it is not readily saleable, the estate will be faced with the problem of turning it into cash. Then, the farm estate is faced with the considerable problem of capital gains.
The problem of taxation in farming deserves much more importance than it has been given. We have to consider the competition of the Canadian farmer, and so we must look at our overseas markets. In grain, we are in competition overseas with the biggest producer of grain in the world, the United States. Some of the sales that the United States has made since 1967 have been phenomenal, and our farmers must meet this competition. For instance, the dollar value to farmers in the U. S. of soy beans crushed and exported increased by 60 per cent. In the past ten years, per capita consumption of vegetable oils in the United States increased by almost one half. Exports of wheat, corn and milo to Japan increased by 650 per cent in the past ten years. All of these products are in competition with ours. The United States government has repeatedly warned their farmers that agriculture is regarded as a growth industry, and the means by which rural America can share in the nation's growth. Most of United States agriculture's potential for market growth is in world trade, not in the home market. If the United States were to quit fighting for export markets it would have to cut back sharply in its production. Every year perhaps one-third or more of the acreage in the United States is lying idle or growing reduced crops. This becomes most important when considering the tax structure of our own industry. Further statistics show how important the United States regards its agriculture exports. Last year the record was $7.5 billion and this year the goal is $10 billion. We have to ask ourselves how we can help the farming industry in the export market.
We must look at the growth potential of the market here and in the United States. The population increase has dropped substantially and the growth rate which was 2.5 per cent a few years ago is now 1.5 per cent. In the United States, it is one per cent or less. Technology in agriculture enables us to grow increasing amounts of food, but if we have less mouths to fill the surplus will have to be exported to the other markets in the world. Our main competitor here is again the United States, although in meat products we have the continental North American market.
To return to taxation, the farmer is faced with more taxes than he has paid in the past and, as a result, the farming industry cannot expand and will support fewer people. It will be less able to meet the export challenges. If it were not for the grain export industry, Canada might be a major importer of agricultural products because there are some things we cannot grow in this country, such as citrus fruits. In 1968, there was actually a net agricultural deficit.
Now, I propose to deal with taxation as it applies to income earners and farmers throughout Canada. Most farmers operating small farms operate on a cash basis,

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and the more one sees of it the more attractive it becomes in many ways. The Income Tax Act offers such things as the accrual basis or the unincorporated farm, but all of them have disadvantages. The advantage for the small, unincorporated farm of a reduced rate of taxation was evident in the old legislation, but this has been partially wiped out by raising the tax from 21 per cent to 25 per cent and by the projected decrease of the corporation tax to the end of 1972 back to 43 per cent and the proposal to drop it in the future to 46 per cent. There is no doubt in my mind that in coming years it is likely that corporation tax will decrease, thereby making the unincorporated farm less attractive.
In the future, the farmer will have to get his money from savings, from what is left after his personal income tax is paid. Through farm credit and so on, governments have been providing money for farmers to expand and buy new equipment but many people believe that this has created an unhealthy situation. Many farmers are burdened with a government loan and are faced with problems when the market drops. The government is the landlord. I do not think the government should own the bulk of the land. Often a farmer will spend a lifetime paying off a mortgage to the government. This is one area where we will have to consider the matter of farm income. The vast amount of money lent to farmers on farm credit has, on the whole, been beneficial but after certain changes perhaps these loans should not be made. I think this is a very onerous tax structure.
Most farmers need money to pay for their land, their house, and their living expenses. The amount that will be left to them after they have paid their taxes will not be greater than it was before. The new personal tax rates are no better than they were previously and, after farmers have paid their income tax, they will not necessarily retain more income out of which they can carry on farming and save as well. That, I think, is cause for concern. In days when farm costs were relatively low, and when farm capitalization was low, personal income tax rates did not matter nearly so much. These rates, however, will become increasingly important in the future as it becomes more and more costly to farm and as farm capitalization rates increase. A tractor costing $15,000 is commonplace these days and a half section, three quarter or even complete section in western Canada is considered minimal as a farm unit. These units must be paid for out of the income an individual can generate. However, the progressive rate schedules in the income tax legislation militate against an individual's being able to put away money in an orderly way so that he can meet his debts.
Under the new personal income tax rates, a man earning $8,000 per year or so will pay as much as or perhaps a little more than he paid in the past. The report on the white paper proposals for tax reform by the Standing Senate Committee on Banking, Trade and Commerce had this to say at page 17 of that report:
-your Committee is gravely concerned that the White Paper proposals would increase the burden on married couples with incomes ranging from approximately $8,500 upwards, thereby including those taxpayers who are generally described as the middle income group. In addition, the proposed rates schedules do not give effect to the fact that all of the provinces will probably (Mr. Ritchie.]
not adopt a uniform tax rate of 28 per cent of the new federal taxes so that the effect on the middle income group will therefore be more extreme because there will be more taxpayers in that category and closer to the top levels of that category. This middle income group is the group in Canada that must be relied upon in the main for skilled technical training and executive and managerial ability.
I am sure that many will agree that a farmer today must exercise technical, managerial and executive abilities.
We should also consider our middle income groups and see how they will fare as compared with middle income groups in the United States. The report I alluded to, goes on to say at page 18:
The increased tax rates applicable to the middle income groups would increase the already existing adverse disparity between rates applicable to such groups under the Canadian and the United States tax systems, and would have the inevitable effect of contributing to the gradual emigration of skilled workers and those with executive talent from Canada.
The committee could not agree with certain statements made in the white paper which compared Canadian and United States income taxes. Since we are dealing with taxation, any such comparison is significant.


Gérald Laniel: Order, please. I regret to say that the hon. member's time has expired.


Robert Jardine McCleave: Mr. Chairman, may I suggest that the committee may be agreeable to allowing the hon. member to complete his remarks. His is a reasoned speech.


Gérald Laniel: Is that agreed?


Some hon. Members:: Agreed.


William Gordon Ritchie: Thank you, Mr. Chairman. May I say, in closing, that these progressive rates of income tax are especially important to farmers who must, out of income retained after taxes have been paid, find the money with which to pay for farm operations.
I ought to have mentioned that in the white paper the question of income splitting is discussed. We are told that income splitting in the United States brings certain advantages. I am reminded that in North Dakota, the state which is just across the border from my province, a man earning $30,000 a year who splits his income will pay only about $5,000 in taxes, whereas in Manitoba a man earning a like amount would pay considerably more, around $12,000. When you consider the difference in taxes paid, it is small wonder that people across the border who can save their money can cross over to Manitoba and buy up almost half a section every year.


Elmer MacIntosh MacKay: Mr. Chairman, at the outset I wish to disassociate our research department from anything I have to say, so that they will be absolved of any blame and will not bear any discredit for my remarks. In view of the remarks made by members on the other side of the House, I agree with the comments made by my colleague, the hon. member for Simcoe North. I agree that probably our own research department is not too deficient, especially when one considers the inaccurate and optimistic statements that have emanated from the research department of the government side and their failures to conform to economic reality.
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Having said that, I wish to address myself briefly to a couple of subsections of section 28 dealing with aspects of administration, and then to some of the other subsections related thereto. First, may I ask the Parliamentary Secretary to the Minister of Finance whether, for the purposes of section 28(1), the government intends to include fishermen? That is, when we speak of the possibility of people in the farming business being able to make use of the cash method of accounting, are we to include fishermen as well?
Section 28(1) reads in part:
For the purpose of computing the income of a taxpayer for a taxation year from a farming business, the income from the business for that year may, if the taxpayer so elects, be computed in accordance with a method (hereinafter in this section referred to as the 'cash' method)-
I am wondering if the government intends to give fishermen the benefit of this type of privilege that is given to farmers. If so, I suggest with deference that this should be specifically spelled out in section 28(1). I also wonder, when we consider subsections (4) and (5) of section 28, whether there may be difficulty in determining especially in the case of subsection (5), what type of income is being referred to. Probably the difficulty may be resolved if one looks at some of the definitions of income in sections 5, 9 and 56 of the act. Possibly there may be an onus there on the taxpayer as there is with respect to subsection (4), when we talk about the value of certain items that might be included in inventory.
It seems to me, when we consider these particular questions, of onus that we must, of necessity, consider the important step that the government has taken with regard to section 163(3), namely, introducing for practically the first time in this legislation, so far as I am aware, the concept that the burden of proof, at least for the purpose of assessing penalties, is on the department. If I am able to stay within the rules of relevancy, it seems that this is something that has not been dealt with to any extent so far in this discussion. I feel this is a very important point. The Income Tax Act, as well as the proposed legislation, are very complex. They will affect most Canadians very directly.
In connection with the philosophy of permitting the taxpayer to put down the burden of proof to a limited extent, I think the government is to be commended. However, I suspect it would be far better if this philosophy were carried on throughout the act. For example, as opposed to the Criminal Code, it is not in the spirit of the philosophy of section 163(3) that a provision be permitted that gives an information laid under the Income Tax Act a pre-eminence over the same or related type of information under the Criminal Code.
Section 244 refers to an information or complaint. It reads:
An information or complaint under this Act may be laid or made by any officer of the Department of National Revenue, by a member of the Royal Canadian Mounted Police or by any person thereunto authorized by the Minister and, where an information or complaint purports to have been laid or made under this Act, it shall be deemed to have been laid or made by a person thereunto authorized by the Minister-
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This is the part to which I object:
-and shall not be called in question for lack of authority of the informant or complainant except by the Minister or by some person acting for him or Her Majesty.
This is not in the spirit of the very commendable attitude shown by the government in section 163(3). I question whether it is a good provision to have because it permits the government, through its agents in the department, to take away a defence that would be available under the Criminal Code. I do not think the Income Tax Act should be pre-eminent over the Criminal Code.
Section 243 is also interesting. It states that if a person has the unfortunate experience of running afoul of the Criminal Code and the Income Tax Act, and the criminal courts assume jurisdiction as the result, and I quote:
-the court has in any prosecution or proceeding under this Act, no power to impose less than the minimum fine or imprisonment fixed by this Act and the court has no power to suspend sentence.
This is repugnant as well, and should be looked at. I do not say this in criticism only, but in good faith hoping the parliamentary secretary will take it under advisement. In considering this bill as a whole, it is a fair comment to say that this is not so much tax reform as a tax revision. Although there is a need for a substantive and complete revision, we should not neglect the area of administration, and the attitude and procedures adopted by the departmental officials. There are some quite rough procedures involved in the provisions of this act, section 231 and following. While they may be necessary in some cases, they should be carried out with the greatest possible respect for the rights of Canadians. With this in mind, I raised this particular point.
There is another matter of more than ordinary interest. I do not think it has been dealt with, although I may have been absent for part of the time. In addition to the points raised by my colleague, the hon. member for Simcoe North, there is another factor that affects the well-being of the farmer, any land owner or taxpayer. He seems to get "whipsawed", not only because of the fact that estate taxes are being contemplated or retained by the provinces and capital gains are being imposed by the federal government, but we are told by knowledgeable tax accountants when having property appraised and making elections under this so-called tax free zone how taxpayers will value their property. Waiting patiently in the wings is the municipal assessor. He takes a considerable bite from the savings or revenues of most Canadians. The average Canadian does not care to whom he pays the tax. He only knows that when he pays, it hurts.
I can readily see the case of a tax appeal in a municipality. A man may obtain the services of a professional appraiser and have his property valued for his own particular purposes as high as is fair and reasonable for the concept of capital gains. When appealing his taxes at the municipal level, he will be asked whether he has had his property appraised recently. Being under oath, he will naturally have to say yes. The municipal assessor will probably thus get information that will completely destroy this man's chances of having his property appraised for taxation purposes on the same basis as those in that particular district.
We have imposed upon the Canadian taxpayer a rather cruel dilemma right from the bottom to the top as far as

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taxes are concerned. Unless the federal government is prepared to take administrative steps to give an abatement to a taxpayer or to avoid some of these rather obvious difficulties, the person with much real estate will be jeopardized to a very great extent. I realize that much of what I could say has already been said by those more able than myself, but I did wish to bring these points before the committee. I thank the committee for its attention.


William Arnold Peters: Mr. Chairman, with regard to these four sections, the government has received considerable advice from farm organizations. It is now receiving considerable advice, unwelcome though it may be, from the opposition members concerning a very specific problem. The problem is, how to properly tax rural agriculture and at the same time not put the agricultural industry out of business, particularly as a farm unit, and the role that a farm unit has in a community. Bill C-259 may create disparity between communities and the rural sections that make up the rural way of life in our nation.
The government has not been prone to take advice. In this field, many in the opposition who are offering advice do not have the latest word on the subject. We have seen the government proven wrong before. They were certainly proved wrong yesterday in Assiniboia. At a late date they took their bill to the farmer in western Canada and he gave his answer. The answer was not the one the government sought. It has almost destroyed the credibility of the minister responsible for the Prairie Grain Stabilization act. Therefore, the government should be very cautious about bulling through a piece of legislation, particularly as it affects farmers.
The parliamentary secretary has agreed that further consideration should be given to subsection 29. I ask him to agree to stand the other three sections which affect farmers, and I ask him to do this in order that these matters be referred to the Standing Committee on Agriculture. The cattlemen have expressed to Members of Parliament a number of fears present in their minds with regard to the future of their industry, fears which are applicable to other segments of agriculture as well. The parliamentary secretary has told the committee that he does not understand these representations, that he does not understand the basis of their objections. I can sympathize with him. I myself have some knowledge of this subject but I do not profess to understand it, or how it works. The government has shown that it does not know everything about agriculture. Frankly, I would think the late J.C. would be hard-pressed to understand all the facets of Canadian agriculture. The agriculture committee is the forum at which these subsections would secure the attention of all the organizations which are interested. Their representatives would appear before the committee and make representations.
Surely, Mr. Chairman, the point of tax legislation is to raise revenue without at the same time killing the golden goose, or taxing one segment of the economy along lines which it cannot support. I have always found farmers to be in a totally different position from anyone else when it came to finance, when it came to getting what they believe they deserve from governments, when it came to their

ability to pay taxes or their ability to provide a product whose price in many cases does not cover the cost of the operation. The mere fact that they have been able to stay in business is proof of their ingenuity. I suggest we should apply some of the ingenuity of the farm community to devising a tax structure so that we can get out of the agriculture industry a fair tax return for the Canadian public while at the same time maintaining both the rural economy and the level of food production that the nation requires.
Maintenance of the rural economy is an important consideration; I shall not go into all its facets now, but it includes preservation of the environment, the quality of the lives of the people who live on the farms and of those in the communities they sustain. We should bear in mind that it would be a serious thing indeed to jeopardize the national food supply. And we should be thankful that our food is presently produced at a very reasonable cost in a nation where incomes are fairly high and where a high standard of living is enjoyed. We have done very well and I suggest that the bureaucrats should not suddenly declare that they know all the answers, and know how to extract taxes from this industry, without taking into account all the other considerations involved. It is very nice, no doubt, to get an accrual income out of agriculture. They sure as hell should have tried to get that out of agriculture in western Canada when for five, six or seven years, grain was lying in the fields. Nobody could have liquidated their grain because it was not a saleable commodity. Farmers can remember when they burned grain because it was cheaper than cutting wood-and all they had to do was to supply an axe and some muscle to cut the wood.
It is all right for a doctor, for example, to say that the extra money the government wants to collect can be considered as income. Most doctors today have decided that instead of following the medical scale of returns for visits as set out by colleges of physicians and surgeons they will follow their own scales. Most of the money, anyway, is paid by the federal government in conjunction with provincial governments under various medicare schemes. Compare the situation of professional people with the situation in which farmers often find themselves. They may have large stocks of a commodity on their premises but they are not able to sell it.
In the case of grain, a government agency has been set up to dispose of it, and when the government itself has not been able to sell a product it seems foolish to me that the Department of National Revenue should say to a farmer: You have an accrual income from the products you have on your farm and now you must make a cash payment to us. Mr. Chairman, that is one heck of a good way of socializing agriculture in Canada. I heard the parliamentary secretary say he was against socialism. Yet here is a way of socializing farms. Look back over the last 15 years of the history of western Canada. Had we enforced payment of taxes under an accrual system related to what was produced by those farms we would today own most of the farms in Canada, including those which have oil wells under them.


Patrick Morgan Mahoney: What are you complaining about?
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William Arnold Peters: I am not that kind of socialist. Maybe supporters of the Liberal party are. I do not believe we have to steal from the farmers by means of the tax structure, by establishing an accrual system which makes them pay on the commodities they produce before they sell them. That is actually what the subsection before us will do under the guise of providing equality for the farm taxpayer when compared with others who have been forced into adopting the accrual system.
The parliamentary secretary asked what I was complaining about. Mr. Chairman, in Saskatchewan they elected a CCF government which was a pseudo-socialist government. One of the first acts of that government was to pass a law providing that no farm could be foreclosed for non-payment of taxes. I am sure that had there been an accrual system in effect, the law would have applied to income tax as well. No true socialist, no one who has socialistic leanings, would approve a tax structure whose main purpose was to get control of the land into the hands of the government. Surely, we would pay for the land, we would make concessions, we would do a number of things. But we would not steal it by imposing an unfair tax structure.
I don't know all the answers. I have never been able to determine how a basic herd was established in the first place or how it can be increased. The income tax authorities did not understand it very well, either. I remember my father discussing it with them. At one time he was in charge of the economics department of the federal Department of Agriculture in Ottawa, on loan as an economics adviser from the government of Ontario, so he did have some knowledge about this. Yet he ran into continued difficulty with the income tax department over this complex question of a basic herd. He educated them for some days and I dare say he came out of the discussions very well. Although some of the farmers in my area had not established a basic herd, they were not on an accrual basis, either.
I am reminded of a problem that I once had with the Ontario government over a blind pensioner. Walking down the street one day the pensioner met the welfare officer. He told the welfare officer that he had just sold a cow and a calf, and when he was asked how much he received for them replied he had got $275 for the cow and $60 for the calf. Whereupon the welfare officer returned to his office and cut off his pension, reporting to Toronto that he had received $260 for the cow and $60 for the calf and that this should be regarded as income.


Mr. Knowles (Winnipeg North Centre):: You have just lost $15.


William Arnold Peters: My arithmetic is of no help, but the story is the same.


John (Jack) Henry Horner: He was selling a capital asset.


William Arnold Peters: I found it very difficult to persuade the department of welfare in Toronto that just because this pensioner had received this very substantial sum for the cow and the calf the money was not all profit. He had had to feed the cow for three years; he had to clean the stable, provide a barn and do everything else necessary to proincome Tax Act
vide sustenance for the cow, including cutting hay and planting grain. I explained that the calf happened to be a by-product of the energy he had expended, and that if the farmer received as much as $20 or $30 clear profit on the transaction he was doing real well. After lengthy telephone calls, the welfare department finally agreed that the amount received was not a profit, that it was not similar to getting a job at a factory and being paid for your labour. Many factors were involved in the production of a cow and a calf and only a small part of the payment was profit.
The same is true of accrual income. After all, how is a farmer going to be fair to the tax department and to himself? I am sure the Minister of Finance understands the problem. Rich farmers in Kingston must have come to see him occasionally when he was an accountant to ask him to prepare their books. I suggest that with the limited amount of information with which they would provide him, he would be very hard pressed to do an honest job of accounting on their behalf.
After all, farmers have not had an accountant's education. Their bookkeeping is sloppy. Whenever they sell an animal the proceeds are put in the bank and they make payments when they have to. Then, at the end of the year, they know whether they have made a profit and they supply the income tax department with information that satisfies them. Normally, most farmers do not pay very much tax because at the end of the year they do not have very much income.
In view of the provisions in this bill, the farmers are going to need specialized assistance. Is the minister suggesting that he will accept Farm-Can figures or is he going to accept only the Department of Agriculture figures? I see the adviser to the minister indicating he does not know what that is. The government has been trying to get a uniform accounting system and have asked the farmers to send in all their bills and receipts each month so the government can compute a farmer's income. They come up with a profit or loss figure rather than an accrual figure and the two systems are totally different. The Ontario government is working out the same kind of system with the agricultural college at Guelph, because they realize that farmers often do not know whether or not they are making money.
I remember talking to a farmer who had a herd of pigs. He told me the price of feed had gone up, that things had happened to the market and that he was going to lose $10 on each little pig. I asked him why he didn't go to the stable with a hammer and hit them over the head before they cost him $10 each, and he looked at me as though I were crazy. He was not sure even after he had sold them whether he had lost $10 or made $10. It is not so much a question of farmers cheating; they simply do not know what is their financial position. This is why they require specialized help in preparing their accounts. This will allow the government to collect the proper tax. If the farmers are overly generous with the government, they go broke. If they are not, the Minister of Finance squeals for more money. This is why special consideration must be given our farmers.
I am not talking about industrialized farms or vertically integrated farms. I am talking about the bulk of the farmers in our rural economy who run a farm with their

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families and who wish to leave the farm to their sons. The sons stay on the farm instead of getting an education or a large income in industry.


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


William Arnold Peters: Are you sure my 20 minutes is up, Mr. Chairman?


Some hon. Members:: Continue.


Gérald Laniel: Order. It is my duty, pursuant to Standing Order 40 to inform the House that the questions to be raised tonight at the time of adjournment are as follows: the hon. member for Simcoe North-health; the hon. member for Grenville-Carleton-education; the hon. member for Selkirk-public service.
The hon. member for Meadow Lake.


Robert Jardine McCleave: Mr. Chairman, may I rise on a point of order. I do not think the hon. member for Timiskaming was trespassing beyond his time or over-stretching the patience of the committee. I am sure we would all like to hear him complete his speech, if Your Honour would be pleased to recognize the hon. member for Meadow Lake afterwards.


Gérald Laniel: I must have the unanimous consent of the committee to let the hon. member continue his remarks.


Some hon. Members:: Agreed.


William Arnold Peters: I will not abuse the privilege. I was only making an impassioned plea on behalf of the farmers who I believe have a different type of problem from that of other people. They have never budgeted for lawyers fees, for accountants fees or for bookkeeper's fees. They are really not in a position to establish an accrual accounting system at this time. The minister is here, and I know he comes from a municipality which is surrounded by a rural area. I only suggest to him that we stand these other three sections and refer them to the Agriculture Committee for study. I mentioned that the Canadian Federation of Agriculture had made representations. Other farm organizations also have made representations, all of which have hinged on these two or three particular problems. The solutions suggested have not been identical in each case but the representations have been sincere. I therefore ask the minister to give consideration to some study of the problem by the agriculture committee. We will be with this legislation for a long time. I am not suggesting we will be with the income tax bill as such for a long time, but that we will have to live with the income tax act for a long time.
I realize the government believes we should have larger, more economical farms. I also realize there is an advantage in having large, easy to understand units. I am sure, however, the government will also agree there is a large number of voters in this country who are either one generation removed from the farm, or who may even still be close to the rural economy, who believe there is a way of life in Canada in ownership of land which does not involve only the hobby farmer but which involves a way

of life which is to be protected. I therefore make the plea that the minister consider referring this to a committee where we can specifically hear people on the particular subjects of concern. It would even seem to me that if this section were omitted when the bill is passed that would not be too bad. We could use the exceptions which are already there and, for a period of time, give consideration to what the best method is to solve this problem. The minister may have a better suggestion, but I make the plea that at least he give consideration to our obtaining some information from the farm organizations themselves concerning what might be a more equitable farm tax structure, without at the same time making it more difficult and more expensive for people to carry on in medium and small-sized farms in Canada today. We should make it possible for those people to continue the normal way of life they have chosen.


Mr. Cadieu:: Mr. Chairman, I listened to this debate with a great deal of interest. I could not help but note the manner in which the parliamentary secretary, who comes from that great cattle country in the Calgary area, answered the hon. member for Crowfoot this morning when he was speaking on the very important topic which we were debating at that time. I am sure that when he goes back to his constituency he will have a little explaining to do to some of the cattlemen in that great area where cattle have been produced for so long and so well. I believe the hon. member for Crowfoot made a very important point when he referred to the situation of the Canadian cattlemen as compared with the position of the cattlemen to the south, and the problems our cattlemen face which are not faced by cattlemen in the United States. He referred to climatic conditions and many other conditions such as population. We must be on a competitive basis. I certainly think that the hon. member for Crowfoot got right down to the meat of the problem which these cattlemen face.
We must have competition. I am glad we do have competition among the livestock people. This is what the livestock men have fought for through the years. This is what they want to see continue. I believe the government was very lax in studying the situation of the United States cattlemen with regard to the basic herd. Since the government has not looked into this, I think that instead of standing only section 29 we should stand also sections 28, 30 and 31. If we stand one section, I believe we should stand all four sections because they are all very much connected. If we are to scrap the basic herd concept-and this has been talked about-then we might just as well scrap a good many of the livestock men because they will be forced out of business altogether. We might stop and think about the amount of money the various provincial governments have lent, for the purpose of setting up young farmers in areas which are adaptable to livestock production. For the life of me I do not understand, when we have the provincial governments trying to do something about keeping these boys and girls on the farms and providing them with a low rate of interest in order to get set up, why the federal government should be putting on this squeeze.
I am sure many of these people would not be very interested in continuing much further because it is
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already very difficult for them to become established on a farm. After taking a good look at the situation, I cannot understand why this government would come in with such a bill. I do not think the government is listening to the people or is paying attention to what is going on in respect of the farm population. I would have thought the government would have given much more study to this matter. When one looks at the farming situation today, it is evident that farmers have not been able to pay the minimum wage. I think this is a shame.
I do not understand why farmers should not be able to pay the minimum wage and thereby be in line with those enterprises which they have been instrumental in establishing in the first place. For instance, why should not the livestock man or the farmer be able to pay the same wages that are paid by telephone companies, power companies and highway construction companies. The farmers are the people who were instrumental in bringing about these developments. Now, they find themselves in a predicament. We talk about unemployment. It is terrible to think of the number of people who are unemployed.
If you go to a farm or to a ranch and try to hire a man you will see what you are up against, because in some provinces what farmers are getting for their produce does not even provide them with a minimum wage. I think this is a shame and the government should take a good, hard look at these provisions before they talk about what they will do with the basic herd concept.
Farmers find themselves in a predicament. I made a check on this in my own district very recently-and it is a pretty good district. In certain sections of that country I could scarcely find a farmer who could make a go of it unless he was subsidizing his holdings through some other method-his wife was teaching, nursing or working in other ways to help subsidize the farm or the farmer was moonlighting, driving a school bus, doing construction work or some other work in order to keep his farm together. If the government does not know this, it should take a look at the situation. Very few small farmers today can make a go of it without subsidizing their farms. This should not be the case.
If this bill passes, farmers will be driven off their farms, and I think this is a shame. I have taken a good look at what is going on in the farming community and I find that the trouble lies in the fact that farmers are forced to produce at lower prices than have prevailed for years. You get 60 cents for barley, 40 cents for oats and $1.20 for No. 3 wheat. This is what the farmer is up against. This government will make it utterly impossible for him to stay on his farm. I cannot for the life of me understand why the government does not listen to the people and find out what is going on. People in Saskatchewan made their opinions known last night. The government should take a good look at the situation before coming in with a bill such as this.
I believe that the basic herd concept has been set up by regulation. I am not sure that it has been set up under the act. I think the four sections should be stood. They should be sent back to the committee on agriculture for further recommendations. It is a waste of time for us to sit here and debate such a bill, and it is almost impossible for the
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House to pass these provisions on farm taxation. If these sections are sent to committee, the committee might come up with a sound report and we might find out what the basic herd concept really means. Many of the basic herds that have been set up are registered herds. Many young people who in the past few years have been starting out in the farming business have not been able to establish a basic herd, and they will be very disappointed. I do not know why they should want to carry on and I do not understand why the government would not want to do something about this problem. They will find that these provisions will destroy many pure-bred herds.
I should like to make a few remarks regarding the capital gains tax on used machinery. We must take into account the cost of new machinery now as compared with what it was three or four years ago. If a farmer has to pay capital gains tax when he trades old machine for new machinery, at a time when he must pay almost twice as much for a new machine, I do not see how he will ever be able to buy machinery for farming.
We do not need to confine ourselves to the Prairie. Let us consider any rural area and we will see how disappointing it is for the sons and daughters of farmers to be unable to carry on the family farm. It is next to impossible and I do not know how many will be able to do it. Several provincial governments are trying to help out farmers in this situation, but here we have the federal government wrecking the whole works in trying to bring in a bill such as this.
I do not see any point to standing only section 29. I believe the four sections should be stood because they are related to each other. I do not know where the government thinks it is going with this kind of legislation affecting the farming population of Canada.


Mr. Guay (St. Boniface):: Would the hon. member allow a question?


Gérald Laniel: This can only be done with the permission of the hon. member who has the floor. Does the hon. member for Meadow Lake allow the hon. member for St. Boniface to ask a question?


Albert C. (Bert) Cadieu: I did not hear the question, Mr. Chairman.


An hon. Member:: It has not yet been asked.


Gérald Laniel: The Chair was only seeking the acceptance of the hon. member.


Albert C. (Bert) Cadieu: Yes, Mr. Chairman.


Joseph-Phillippe Guay: I would ask the hon. member for Meadow Lake a question with reference to the basic herd. What is the difference between a young couple who are being helped by the provincial government and his own situation on the farm, where he has a large herd of cattle? In other words, the hon. member has a large stock of cattle, while the young couple has not yet established one. Could the hon. member explain the difference between his case and that of the young couple?


Albert C. (Bert) Cadieu: Yes. There is no difference, because my farm could not carry on if it were not for my sons whom I want to set up. There is no difference at all between the young couple who get a loan from the provincial govern-
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ment and my sons who receive my assistance in setting up a farm.


Mr. Howe:: I do not want to take up too much time today because yesterday I made some comments with reference to these items. However, there are one or two matters on which I should like to seek the advice of the parliamentary secretary. One of them arises from the brief of the Canadian Federation of Agriculture which contains a section headed "Guidance to the farmer". It reads:
The problems for the farmer in dealing efficiently with the problems he faces in the period of transition to the provisions of the new bill will be very real, and it is important that he be as fully aware as possible of what he should do to set his records in proper order, and in all other respects arrange his affairs to his best advantage. The problems involved in establishing valuation day records of assets, and valuations on them, are one example here.
We very much approve the government's intent to prepare working guides to aid taxpayers in such problems. These should be clear in layman's terms and widely distributed.
I hope the government takes note of the words "These should be clear in layman's terms," because that is the difficulty with this bill. It is very complicated for the ordinary individual, and in fact many of us in the House of Commons have great difficulty with it and are not sure that we understand it.
One should be prepared, we believe, directed to the specific problems of farmers.
I presume this one has been prepared, but I wonder whether during its preparation the farming organizations were asked for their advice. They are the representatives of the farmers. I would think that before a pamphlet such as is described here is sent to farmers, the farm organizations should have an opportunity to examine it and determine whether it does the job it is supposed to do.
Although section 29 has been stood, there are one or two questions about it that still perturb me. There are matters the government should take note of when deciding what to do about the section. Earlier today the hon. member for Simcoe North talked about people who raise special breeding herds to be sold for breeding stock. From time to time we hear about people who have developed outstanding animals. I have a particular interest in this matter.
One of my constituents has been breeding Charolais cattle-in fact two people have been doing so-and just the other day one of those cattle was sold for $53,000. No doubt the income tax people have already heard about it. I wonder what the provisions in this bill would do to an individual like that, who spends a lot of time raising pure-bred stock and eventually has the satisfaction of going to a sale and getting a price-not always as high as the one I have mentioned-for an animal to which he has given great attention, keeping records of blood lines and doing all the things that lead to good breeding. This is a special case. There is another special case that should be considered. As I mentioned yesterday, there is the case of the junior farmer or 4-H club member who is given an animal each spring to rear and who sells it at a fall fair. Representatives of packing companies attend the fall fairs and bid on such animals. Generally the young person gets more than the market value of the animal. But there is one particular case that has come to my attention.

Young people have won what we call the Queen's Guineas at the Royal Winter Fair in Toronto. I am not sure how much that amounts to in cash, but I well remember that some years ago a steer that won the Queen's Guineas at the Royal Winter Fair was sold for about $5 a pound on the hoof. Such animals are bought by firms such as Simpsons, Eatons or meat packing companies, for promotional purposes. Sold at that price, the cash realization, taking into account the value of the prize, was around $7,000 or $8,000. Such things have to be taken into consideration when examining this bill.
My hon. friend from Meadow Lake and other hon. members have argued that all these sections dealing with agriculture should be stood. Personally, I do not know why this voluminous bill was brought in at this time and why a deadline was set to get it through by the end of this year. After all, it will affect the lives of practically everybody in Canada. It is important to a great many people. So far as many of us can see, only those people who will receive increased income tax exemptions and who will be taken off the income tax rolls will benefit from it. But probably by the time the bill goes through and is enacted the cost of living will have increased to such an extent that their so-called savings will have melted away.
Therefore I would add my voice to those who are suggesting that not only should these sections be stood for the time being and sent to a committee for further consideration, but I think more time should be taken to examine all sections of the bill to ensure that when it is passed it will represent the best job that can be done on tax reform.


Robert Jardine McCleave: Mr. Chairman, for the next few minutes I will not engage in small talk on farming but deal with large philosophical questions. That will give Canadian Press a chance to go out and have a glass of water until approximately 5.27 p.m., since I became dead in their eyes as the result of a speech I made last week in this debate.
I would like to make one remark and raise several questions regarding this part of the debate. This arises out of the fact that as I travel through part of my constituency I am struck by the number of small farm places that have been vacated. In other words, I am struck by the death of small farming operations in my part of Canada. I believe that this sort of thing is also happening in other parts of the country.
To establish the bona fides for my remarks let my say that none of my ancestors for at least two generations of which I am aware, nor I myself, has been qualified to run a farm-and if we attempted to do so we would immediately find ourselves in great peril. So I am not posing as an expert on the death of the small farm, but I am posing perhaps as a philosopher on the question of why this sort of thing should happen. In East Hants one can see a prosperous community of farms and also many farms that have been vacated. Therefore we know that the institution of the small farm is imperilled.
Mr. Chairman, it is very difficult to gather one's thoughts when there is such a babble from the backbenches on the other side, even though it does not appear on the record. There is one question I wish to ask the parliamentary secretary. Granted that a new income tax act should not only be a document of reform to overcome some of the problems I have mentioned on about 15 or 20
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occasions in this debate-it should also be a document to point the way to the future.
From the philosophical point of view, I wonder if the parliamentary secretary or the minister could tell us whether there is anything in this document which tends to save the small farming operation in Canada. Frankly, I do not think there is. But perhaps there was some good intention which was lost in the discussions and which would show that our children and grandchildren could adopt farming as a way of life. I think I should have first put the question: Is there any way that one would be encouraged to establish a farm? The second question would be: Will there be any incentive to operate a small farm unit?
These are basic questions and I do not think we have the answers. We have been dealing with questions regarding farming operations of monumental size, but if we are to establish some sort of equity in taxation we should also establish a policy with regard to what we want to build in Canada. When I drive down the highway for about 20 miles in East Hants and see 40 or 50 vacant farm buildings, I must ask the question here and I think I should have an answer.


Patrick Morgan Mahoney: Mr. Chairman, a number of questions have been raised by hon. members. I am sorry that the hon. member for Central Nova was not able to remain, because he asked some of them. However, most dealt with appeal, enforcement and administration sections of the bill rather than those currently under consideration, so perhaps an opportunity will arise to respond to the hon. member when those sections are before us. I do not think I should take the time of the committee now to respond to them, since he is -not here. However, I should like to congratulate him on the fruits of his own research as opposed to that of the research department referred to earlier.
During the afternoon there have been a number of suggestions that something could be accomplished by referring these sections-not just section 29 but others-to the Standing Committee on Agriculture. I think hon. members opposite are doing a disservice to committee of the whole which is charged with the responsibility of dealing with this bill, and also to the work of the Standing Committee on Finance, Trade and Economic Affairs. Over a long period of time the latter committee heard representations from agricultural organizations and individuals concerned about agriculture and had the opportunity to report and make recommendations.
The hon. member for Battle River was very active in this regard, as was the hon. member for Dauphin and the hon. member for Regina East who served full-time on that committee. They are men with an agricultural background. In addition, on a number of occasions we were honoured with the presence of the hon. member for Kent-Essex, and on one or two occasions we even had the hon. member for Crowfoot join us when matters of particular interest to him were being considered.


John (Jack) Henry Horner: When time permitted.
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Patrick Morgan Mahoney: Hon. members opposite, as well as those from this side of the House who served well on the committee, had opportunities to advance the views they are now advancing. The Finance Committee has done its work and nothing useful would be served by agreeing to the suggestion that has been made.
The hon. member for Wellington-Grey-Dufferin-Water-loo was not able to remain for the answers to his questions, but perhaps he will read Hansard. I should point out that the area of information services to which he was alluding is the function of the Department of National Revenue which will be bringing forth various publications for the guidance of taxpayers under the new system. Accordingly, the hon. member might wish to raise that matter with the Minister of National Revenue, but I seriously doubt that the Department of National Revenue will be in a position to finalize the material until Parliament has passed Bill C-259 and it has become law.
The question of the desirability of this information getting into the hands of taxpayers might impress itself on all members of the House. I very much agree with the hon. member that it is desirable that taxpayers be informed very soon, and in layman's language, of the best way to adapt, where necessary, their business practice to the requirements of the new system. Until that time comes I think it would be regrettable if many taxpayers who do not already find that their business affairs require them to rely on professional tax advisers paid money to people currently advertising their services in anticipation of the forthcoming tax system. Until the tax bill becomes law, those tax advisers are not in a very good position to give concrete advice on matters of real application under the forthcoming law.
I reiterate that I hope the general body of taxpayers does not take the bait of the many advertisements that are appearing on a "scare" basis inviting them to spend money in anticipation on a bill that has not passed Parliament. The Department of National Revenue will be making a real effort to give explanatory material in layman's language which will, hopefully, eliminate the necessity for professional tax advice for all but the small minority of taxpayers who now find themselves in need of that kind of advice. I thank the hon. member for giving me the opportunity to put that comment on the record. The hon. member went on to raise the question of breeding stock which had also been raised by the hon. member for Simcoe North. Rather than repeat that answer, and as he is absent, I would refer to the answer I gave the hon. member for Simcoe North.
The hon. member for Halifax-East Hants invited me to participate in this debate on a philosophical basis. Mr. Chairman, I have enough trouble trying to do what I think I am competent to do without discussing agriculture on a philosophical plane.


John (Jack) Henry Horner: You are wise there.


Patrick Morgan Mahoney: Accordingly, Mr. Chairman, I must decline that very wise and thoughtful invitation.


John (Jack) Henry Horner: Mr. Chairman, I would like to pose a few brief questions with regard to section 28. The parliamentary secretary tended to reject the concept of referring section 29 to the Standing Committee on Agriculture. I do
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not know whether he was going to refer section 29 or all these four sections to that committee, but he seemed to reject that idea. Perhaps when he rises again he could give the committee a preview of exactly what study will be given to section 29 now that it has been stood.
Surely they did not just stand it in order to enter it again in the same form. Surely they would like to convince us that they will thoroughly examine it to see whether it is detrimental to the industry. I would not like to see it entered first thing tomorrow and our debating the same thing again. The parliamentary secretary should give us a preview of the government's thinking now that we have agreed to stand section 29. Will they be soliciting the advice of stock breeders and cattlemen? How will this apply to breeding stock in hog production? This is a very important point, because pathogenetic pre-breeding stock in the hog industry is an important facet of that industry.
Could the parliamentary secretary also outline for us, briefly, the purpose and meaning of section 28(4) which concerns with changes in residence and tax payable by those who are no longer resident in Canada? Could he tell us what implication this subsection has with respect to the computation of one's income tax, whether on a cash or accrual basis?


Patrick Morgan Mahoney: Mr. Chairman, the hon. member has invited me to indicate what is the nature of the consideration that will be given to section 28 that was stood at the suggestion of the hon. member and with the agreement of hon. members on this side of the House.


An hon. Member:: The committee stood section 29.


Patrick Morgan Mahoney: I would simply say that it seems appropriate for us to be given the opportunity to study the record of the debate on that section and the remarks made yesterday and today. As the hon. member is well aware, representations from the Canadian Federation of Agriculture have recently been received and the Canadian Cattlemen's Association has been bringing its views forcibly to the attention of Members of Parliament. Obviously, I am not in a position to indicate, nor do I intend to convey the impression that I can indicate, what if any changes may result. Nor may I indicate any timing as to when possible changes might be expected.
The hon. member asked a question regarding section 28(4). I did not have the opportunity of reading that rather lengthy section while the hon. member was asking the question. I will take the opportunity to look at it and will try to respond to his question before six o'clock.


Frederick Johnstone (Jack) Bigg: Mr. Chairman, I have in my hand the brief of the Canadian Cattlemen's Association. What strikes me about this presentation-and I am sure the parliamentary secretary will agree with me-is the very reasonable argument it puts forward. The cattlemen of Canada, among whom we may include mixed farmers who are in the beef industry, enjoy an enviable record. They have never come to the government hat in hand and asked for special consideration.
If you read this brief carefully-I am sure the parliamentary secretary has, although it was addressed to the

Minister of Finance-you will see that it is couched in the typical and modest understatements of the best cattle breeders and mixed farmers of Canada. They are not asking for special consideration. If you read the brief, however, it is plain that they are not overly happy about Bill C-259. I would put the last paragraph of the brief on record for the convenience of those who wish to refer to it. It reads:
However, this brief itself is not enough. We believe this issue is so important to agriculture that we herewith request an opportunity to meet with the proper authorities to discuss these matters and to offer more information if requested to support our case.
I do not hold myself out as an expert in the field of cattle breeding although I have had experience as a ranch-hand and was raised on a farm. I have lived with these people all my life. They are worried about the implications of Bill C-259. They are particularly concerned about those sections of the bill that affect agriculture. They ask, in which direction is agriculture going and what is to be the future of cattlemen and farmers in general?
Cattlemen are not confined to western Canada. I suggest that as many head of cattle are produced in other parts of Canada as are produced in western Canada. This question affects vitally the cattle breeders of Ontario, Quebec, the Maritimes and British Columbia. Thousands of cattle are raised in the Fraser Valley. If they are not raised, they are fattened. When you speak of the cattle industry you speak not only of the raising but of the fattening, improving, marketing and selling of cattle.
The Cattlemen's Association is worried about some of the implications of this bill. The question of the basic herd was thoroughly discussed and I was pleased that section 29 was stood. I hope it will be stood long enough to permit consultation to take place between those concerned and the government. We want no more short cuts, no matter how well meaning they may be. We want no more talk about ministers being ready to go to jail, and all sorts of horrible consequences that may follow if one breaks the law. We want to make sure that the law as passed has been brought into being through full consultation with people whose living and future depend on our doing a good job with this bill.


Some hon. Members:: Hear, hear!


Frederick Johnstone (Jack) Bigg: Nothing is more serious to the people of Alberta than any infringement upon the rights of cattlemen and mixed farmers to stay on their farms and run them in their own way. I say what Mark Antony said to the crowd: If I am wrong, I apologize: however, I am sure I am right.
Every part of this brief is couched in the typical understatement of outdoor men, men who are not self-conscious, who are not worried about petty things but who are worried about their basic freedoms and their right to remain free and independent. They do not like coming to the government and asking for special consideration. These men believe-I say this with great conviction-that every Member of Parliament believes in supporting their basic freedoms. They expect to be treated as fairly and as equitably as every Canadian expects to be treated.
These people are capable of producing the finest beef cattle in the world. They are a great credit to their profes-
November 9, 1971

sion and to their personal integrity, ambition and labour. They know their profession-and beef raising in Canada can qualify as a profession. These men are not merely entrepreneurs; they are experts. They do not dabble in this field. They produce the finest range cattle in Canada. They will put on your plate the finest beef that is to be found anywhere-good Canadian beef steak. In their own mild way they say they want to be consulted. They do not say, "We demand this." They want to be consulted, as they have a right to expect. As far as every member of my party is concerned, we will make sure that they are consulted.
As I said, I am not an expert on beef raising. Those in the Canadian Cattlemen's Association are experts in this field. They have taken the trouble of consulting among themselves in order to bring forward the short and concise document we have before us. This must be considered if common sense is to apply to sections of the act relating directly to this association. If we do not do that, we are delinquent.
The hon. member for Crowfoot is to be congratulated on making such a strong presentation that the government has seen fit to stand section 29. This brief should be carefully read-the last paragraph in particular-because it contains very detailed and precise information which the government requires before these sections of the bill can be included in a permanent income tax act which will be equitable to cattlemen. In the brief they say their concern about Bill-259 derives from insufficient evidence being given to the unique and special nature of farming. I have said this before and the hon. member for Crowfoot and others on this side of the House have said it in no uncertain terms.
Farming is not just another business. It is a way of life. On the farm you do not punch a clock or count the hours. Anyone not engaged in the process of raising beef does not know how many unpaid hours a cowboy works. If a cow becomes sick in the middle of the night or is having a calf, the cowboy is up all night. He must act as a midwife and a nurse. His hours are not cut off by a union time-clock. If he is worth his salt-and he normally is-he is on duty 24 hours a day. You cannot define that in terms of union wages.
The whole family is involved in the process of raising cattle. I have seen a housewife wrap her coat around a calf, put the calf behind the stove and feed it with her child's bottle. She cares for it until it is able to stand and return to its mother in the barn. What in this act gives recognition to this different and special nature of farming? Is it a capital gain when you raise a small herd and produce the finest beef in the world? Is it a capital gain, or is it a question of deferred wages for the whole family? The housewife on the farm often rides out on the range to help her husband round up the cattle. She has no relief from taxation. The husband has no relief from taxation in the normal sense of the word.
Today we are all involved in seeking security and perhaps rightly so. Where does the family farmer and rancher stand with regard to the Canada Pension Plan? As the Minister of Finance and all members know, you cannot join the Canada Pension Plan unless you show a net profit
Income Tax Act
on your farm or ranch. How many small farmers or ranchers have the know-how or can afford to keep proper books? Of these, how many earn $800 after expenses are paid? That is the minimum amount necessary to join the Canada Pension Plan. Even the maximum pension is not magnificent, yet you have to show at least $4,700 net profit. That would be an exception.
It is true that some ranchers in western Canada show considerable profit, but we are talking about averages. We in this House make rules for the average Canadian, the small farmer, the small rancher and the average person who started off with a quarter section of land and no money. After a lifetime on the land, they may have built up a big spread. I repeat, this is only deferred wages.


An hon. Member:: You don't know what you are talking about.


Frederick Johnstone (Jack) Bigg: Someone has said I do not know what I am talking about. I have the scars of labour on my body to show that I know what I am talking about. I worked on a homestead. It required a great deal of work.
In western Canada there are many broken farms and broken lives. These people have put 20 or 30 years into working hard on the farm. They have received very little in the way of monetary return. They receive some reward, the freedom of being their own boss. They have received a reward by changing a bog, sandhill or a piece of stony ground into a viable farm. This is not capital gains; it is deferred wages-small wages at that.
Some couples have worked hard for 40 years on a quarter section of land which is stony, bony and full of stumps. They have drained it, cared for it, fertilized, seeded and harvested it. They had to borrow the money and had to pay excess prices for freight rates on farm machinery. They have received depressed prices for their product. An improvement from a $10 quarter section to a $50,000 viable farm is not a capital gain. That is utter and ridiculous nonsense. I do not know how anyone could say this is all wages or all capital gains. I would hate to have to do that job. This is unfair to those who took a raw quarter section of land and made it into a viable farm. They have already paid for it with blood, sweat and tears. They spent many hours of long, hard work during the cold Canadian winters. They put their lives into this investment, yet there are those who say this is a capital gain.
The members of the Canadian Cattlemen's Association are heroic people. They do not want to be called heroes. They want to be left alone to run their operations. When they pay for a farm with labour and deferred wages, they want the right to leave it to their children or grandchildren, unencumbered by unnecessary taxation.
My friends to the left, who are avowed socialists, say that this bill is too socialistic for them. It has an air of compulsion about it that they do not like. They are to be commended for this. This is a form of compulsion by taxation. In a great many cases it is confiscation by taxation. The Canadian Cattlemen's Association does not shriek independence or secession. They have thought about it but that is not the way they behave. They spend too much time working to sit around and talk about revolution. They want evolution. They want us to work

November 9, 1971
Income Tax Act
out a square deal for them. Even if they do not say what is equitable, it is up to us to determine this for them. Many provisions in this bill are not equitable. It is not equitable to treat farming like every other profession in this country. It is not the same.
Farmers do not have union hours or fair employment practices. They do not have equal treatment of women. I should like to see the women of this country get up and talk about that. I should like to see them get behind the housewife on the farm and ask for a fair deal for these women.
.50 p.m.)
Would you like me to talk about child labour for a while? Have you any idea of the kind of labour a child often puts in on the farm, unpaid except for bare grub? And they are leaving the farms in droves. Not only are their parents incapable of making a living under present conditions, but when a greedy government comes along intent on treating deferred wages as a capital gain, saying, "We want our share," it is no wonder they decide not to continue as their parents have done, breaking their backs to improve stony land. I do not think the government should have any part of it.
But I go along with the brief the Canadian Cattlemen's Association has presented. They ask to be treated as gentlemen. There is no word in their brief of revolution or secession. There is just a plea for equity. It is not equity to take deferred wages and call it capital. The farmers have paid with their labour for every dollar which has gone through their hands. They have paid in higher freight rates, in a lower standard of living, in their employment of other people, in their production of the finest food of any country in the world. I am thinking now about beef, although I might say the same about wheat and about a great many other Canadian agricultural products. As I say, we have been asked to consider a gentlemanly and mild brief from this organization. The plea it contains is: Do not act further until you have held the kind of consultations which this government has always claimed to support.
The government opposite is not the first which has consulted the people. But if this is their boast, and if they intend to put it into action, I beg them to take this brief and give it the consideration which has been requested. There is no rush. Canadian cattlemen and ranchers have been in existence for 100 years. There is no rush to get this bill through in the next three weeks. These people will not be satisfied unless they are consulted. It will not be good enough for us to sit down in the absence of consultation and make rules to govern members of the Canadian Cattlemen's Association, tie up their assets, take away their land and restrict their ability to build up basic herds. I remind the committee that the record of these people is excellent.


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


Patrick Morgan Mahoney: Mr. Chairman, I undertook to respond to the question asked by the hon. member for Crowfoot regarding section 28(4). That provision applies where a farmer who has reported his income on a cash basis leaves Canada and becomes a non-resident. It operates, in

effect, to put him on an accrual basis at the time of his departure so that cash receipts attributable to his period of operation of the farm business prior to giving up residence become taxable. Under the general Canadian tax law personal taxation is levied on the basis of residence but cash receipts after the farmer has left Canada attributable to business operations carried on while he was resident here are properly taxable.


John (Jack) Henry Horner: Are they charged against the land he left, or would the government search him out wherever he might be?


Patrick Morgan Mahoney: I do not think other countries would necessarily enforce the act for us, but any taxes due would be chargeable against whatever assets he left in Canada including any interest he might have in any land.


John (Jack) Henry Horner: If he had sold the land, would the new owner have to discharge the liability for tax?


Patrick Morgan Mahoney: No, there is no lien on the property of anybody else but it is possible, of course, that there might be a balance payable to him under a mortgage, and that could be attached. But nobody else would be called upon to pay the revenue department any money which was not owed the taxpayer.


Alfred Pullen Gleave: I notice the parliamentary secretary said it would be the same as the accrual method. According to the section as I read it, the assets which this individual possessed in terms of land or livestock or grain, particularly under the accrual method, would go into inventory. Would the total amount be taxable in that year?


Patrick Morgan Mahoney: To the extent that it was inventory it would be income for the year. But there are, of course, provisions for reserves. Is the hon. member speaking of the non-resident in this case?


Alfred Pullen Gleave: No.


Patrick Morgan Mahoney: Then we are not dealing specifically with the person who has given up Canadian residence.


John (Jack) Henry Horner: Six o'clock.


Mr. MacEachen:: I rise on a point of order, Mr. Chairman, to indicate to the committee that after consultation we have agreed to return at eight o'clock to the grouping of sections we were dealing with before this present grouping, beginning with section 74 and continuing that group. When we complete that group tonight or tomorrow we will call division I, sections 150 to 168 and division J, sections 169 to 180 and part 15, sections 220 to 244.
If these clean-up sections are completed we can return tomorrow to the grouping of sections we have been dealing with up to this moment, namely, 28, 30 and 31. On Monday next we can begin discussion on the capital gains section. I have already indicated the sections we will deal with under that heading-they are to be found at page 9251 of Hansard for November 2, 1971.


Robert Jardine McCleave: This is the understanding which has been agreed upon as to the orderly disposal of the bill.


Stanley Howard Knowles: That is our understanding also. Is it likewise clear that we shall go to
November 9, 1971

the capital gains section on Monday, no matter where we are at six o'clock tomorrow.


Allan Joseph MacEachen: Right.


Gérald Laniel: Is the suggested program agreed to?


Some hon. Members:: Agreed.
At six o'clock the committee took recess.


[Stage Direction]
AFTER RECESS

The committee resumed at 8 p.m.
Russell Clayton Honey: Order. As the committee will recall, on Friday last the Chair raised a question as to the procedural acceptability of the motion proposed by the hon. member for Edmonton West to amend section 74. It might be helpful if at this point the Chair mentioned that at the time of the adjournment at six o'clock this evening it was agreed, by special arrangement made earlier this day, that the committee would proceed to the consideration of sections previously under consideration. If hon. members would like me to put them on the record, the sections the committee now has before it are 74, 75, 76, 77, 78, 81, 126, 144, 145, 148, 149,198, 199, 200 to 207, 248 to 252 and 254.
As I have said, when the committee last considered this grouping the hon. member for Edmonton West proposed an amendment to section 74 in respect of which amendment the Chair expressed some doubt as to its procedural acceptability. Unless other hon. members wish to be of assistance on the question of its procedural acceptability, the Chair is prepared to make a ruling now on the amendment.
I took under advisement the amendment moved last Friday by the hon. member for Edmonton West. The effect of the amendment, if passed, would be to shift the incidence of taxation from one taxpayer to another. It seems to me that it would little matter that the financial initiative of the Crown permits it to initiate a taxation proposal if it were then open to any hon. member to propose, by way of amendment, a different substantive scheme of his own. In his argument on the procedural aspect of the amendment, the hon. member for Edmonton West referred to the altering of the balance of ways and means. I indicated that my concern was whether the amendment would shift the incidence of taxation and later the hon. member for Edmonton West was kind enough to direct his remarks to that point.
At the outset I should mention that an alteration in the balance of ways and means has not been a factor in decisions made to date in this committee. It seems to me that in modern day practice it is impossible for any hon. member to move an amendment on a taxation matter that would not affect the balance of ways and means. If this were the only consideration to be applied in determining the procedural acceptability of a motion, I would think that in this day and age no motion could successfully pass the test. Here I should like to refer to Beauchesne's Fourth Edition, citation 268, and read it into the record:
Income Tax Act
Though it is the function of the committee of ways and means to impose rather than to repeal taxes, example of the repeal of taxation effected in this committee are to be found upon the journals. Proposals tor the variation or modification of taxation can therefore be made in the committee; but these proposals must be grafted upon the financial scheme submitted by the government, and must not affect the balance of ways and means voted for the service of the year. Amendments, therefore, can be proposed to substitute another tax, of equivalent amount, for that proposed by the government, as an alternative duty, the necessity of new taxation, to that extent, being already declared on behalf of the Crown.
(2) An amendment proposing to substitute probate and legacy duty on real property, as an alternative for inhabited house duty imposed by resolution has been admitted.
Hon. members who are familiar with this citation will know that the authority quoted for that statement dates back to 1852 and 1853, and also the next statement, "See also similar proposal to substitute a duty on soap for a duty on newspapers". It seems to the Chair that the authority on which this citation is founded pre-dates confederation. I emphasize the latter part of the citation because it seems to me that it is an authority which must be of importance to us in considering the matter before us. That authority, in the latter part, reads as follows:
According to modern practice such an amendment is out of order. Even if the exact equivalence in the amount of the yield could be guaranteed (which is manifestly impossible), the objective that the incidence of the tax proposed would be extended to persons previously exempt would be fatal to such an amendment.
On October 25, 1971, at page 9013 of Hansard, in considering the amendment then proposed by the hon. member for Portneuf I stated that the Chair must first preserve the principle of the financial initiative of the Crown. On two or three occasions during the proceedings on this bill the Chair accepted amendments which purported to reduce taxation across the board in a general way.
On those occasions citation 265, paragraph (1) of Beauchesne's Fourth Edition was used as an authority. On the other hand, the proposed amendments which have been disallowed by the Chair, including the amendment proposed by the hon. member for Portneuf, were proposals which on the one hand reduced taxation but which on the other hand attempted to shift the incidence of taxation. It was the latter aspect, in these cases, which the Chair was unable to reconcile with the principle of the financial initiative of the Crown as stated in paragraph 2 of citation 263 of Beauchesne's Fourth Edition. That citation reads as follows:
The principle that the sanction of the crown must be given to every grant of money drawn from the public revenue, applies equally to the taxation levied to provide that revenue. No motion can therefore be made to impose a tax, save by a minister of the Crown, unless such tax be in substitution, by way of equivalent, for taxation at that moment submitted to the consideration of Parliament; nor can the amount of a tax proposed on behalf of the Crown be augmented, nor any alteration made in the area of imposition. In like manner, no increase can be considered either of an existing, or of a new or temporary tax for the service of the year, except on the initiative of a minister, acting on behalf of the Crown; nor can a member other than a minister move for the introduction of a bill framed to effect a reduction of duties, which would incidentally effect the increase of an existing duty, or the imposition of a new tax, although the aggregate amount of imposition would be diminished by the provisions of the bill.

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It seems to me that the hon. member's proposed amendment would inevitably shift the incidence of tax as between spouses and undoubtedly in many cases would increase the tax of one of the parties. I should like to assure the hon. member for Edmonton West that I have carefully reviewed the ruling of Mr. Speaker on December 11, 1969, as the hon. member asked me to do and to which he referred in his argument. With respect, that precedent is not analogous to the situation now before the committee. It seems to me that what the hon. member for Edmonton West attempted to do on that occasion was to introduce a flat fee basis for a transportation tax which would provide an equivalent return to and in lieu of the tax provided for in the bill.
In the case before the committee, I suggest no equivalency in return is being sought. But here again, as in the precedent cited, there would be a shifting of the incidence of taxation. In the case before us the hon. member would initiate or increase a tax for persons not now subject to tax. I realize, of course, that there would also be a decrease in taxes for other taxpayers. The decrease in total might well be greater than the increase. In any event, there is no suggestion that they would be equivalent. Having made the distinction, it seems to me I do not need to consider at this time whether the citation in May is based on a well founded precedent.
With respect to the comments of the hon. member for Peace River on the proposed amendment as it applies to subsection (5), it seems to me that the Crown has set forth in that subsection a proposal to impose taxation in certain cases. This is a statement of the financial initiative of the Crown. If the purpose of subsection (5) is to provide the Crown, through a minister, a method of imposing taxation in certain cases, it is open to an hon. member to make an across the board reduction in the rate of taxation, but it is not open to him to initiate a proposal which would shift the incidence of taxation which is implicit in the proposal of the Crown as set forth in subsection (5). For these reasons I must regretfully decline to put the motion moved by the hon. member for Edmonton West.


Mr. Lambert (Edmonton West):: Mr. Chairman, of course I accept your ruling, although I am, if I may say so with respect, reserving my opinion with regard to its exact effect. With regard to whether Your Honour's ruling, I shall re-examine whether it conforms with the authorities, not Beauchesne-which I suggest is limited and somewhat dangerous on these particular points-but May where perhaps there are many authoritative sources of reference.
In any event, having established this point I will now look at the substance of the whole of section 74. My only regret in putting the amendment as I did is that I had not included subsection (4) of section 74 because that too is affected in part by the principle I am against. Outside of the fact that this has been a so-called rule-not quite from immemorial days because the Income Tax Act goes back to 1917 and I doubt very much whether this particular provision was one of those at that time-I wonder why in this day of changing social concepts with regard to this question, apart from, we might say, an ethereal sphere of abuse, there is the insistence at this point, with the consequences which I have raised, that in very legitimate cases for which the child care exemption, incidentally, was
[The Chairman.]
designed to provide, there is now to be a denial because of non-qualification or disentitlement under section 74(3) and the arguments I advanced the other day.
I would like to hear from the parliamentary secretary, since the whole thing is back on the table for re-enactment, why there is this particular insistence or objection to the points that I have raised and why the government would disentitle those people whom I have enumerated from the benefits of the child care provisions and the workers allowance.


Patrick Morgan Mahoney: This question has been answered two or three times, obviously not to the satisfaction of the hon. member. The problem here involves opportunities for income splitting, which would not be equitable to taxpayers who are not self-employed and do not have that opportunity. In the opinion of the government it would be most unfair to open up this opportunity to self-employed people when it will be denied to people on salaries or wages.


Marcel Joseph Aimé Lambert: May I point out, with the greatest respect, that the parliamentary secretary is comparing apples with oranges. We are not concerned here with people who are employed by others. I find the answer absolutely incomprehensible. This is no case of a wife who is an employee of her husband who is an employee of someone else. Why bring these people into the act? It is totally irrelevant to compare these people with those who are self-employed.
Take the case of the person who is the principal owner of a limited company, no different from the man across the street in the same type of business. Yet in the one case the wife who comes to work for the business-quite legitimately so-will be allowed all the advantages under the Income Tax Act that I have pointed out, while if the business is not incorporated the law says that the wife is not only not considered as a separate taxpayer but she is not a worker and is not entitled either to child care benefit or to workers allowance.
If the parliamentary secretary can say that there is no justification for that comparison, then he is welcome to it, but these self-employed people whom I have mentioned are no different from the man who owns three shares which control the small company, the other share being held by the lawyer to make it a private corporation. Remember that some of them are getting the benefits, and the individual who works as an employee suffers because his wife cannot get these benefits. If she is working for someone else, she will certainly be getting the benefits whether she is working in a company or a private business. She will get these benefits so long as there is not this husband and wife relationship.	.
What is even more nonsensical, if they are not husband and wife but have a common law relationship-the woman is the man's mistress-she will be entitled to collect whether the business is incorporated or whether it is a sole ownership. There again I wonder why this particular advantage should be granted. Or is it that this time the state does go into the bedrooms, because it certainly has gone into the bedrooms and it vouches for the credentials.
November 9, 1971


William Marvin Howe: Mr. Chairman, we have been discussing this point for some time. This is one reason why the bill has been discussed for so long. This is a matter that will mean a great deal to small businessmen. It is incomprehensible to me why the parliamentary secretary should say that this will open a great door to misuse and that these people will do something very bad. Let him go down and meet some of these people. They are not crooks; they are people who are interested in paying their own way and in being good citizens. Did he discuss this provision with any small businessmen? I wonder whether any discussions have been held with the people who are involved.
Earlier today we were talking about the basic herd concept with regard to agricultural matters and we found that not too much discussion had taken place with agricultural organizations. Here we have a similar situation. I cannot see why the government cannot give in a little once in a while and make it possible for the small businessman or the small farmer whose wife works hard to keep him in business and off the welfare rolls so that he can be independent and run his own show in our free enterprise system.
I cannot for the life of me see that this would make much difference to the amount of money that this government would take because, after all, if a man pays his wife a wage he cannot claim her as an income tax exemption. I cannot see any reason for the stubbornness of the government in not giving in on this small point which could be so important to a great many people.


Cliff Downey: I should like the parliamentary secretary to tell us the estimates of the department regarding the amount of revenue that this possible loophole would create. I am wondering how much research has gone into the preparation of this section. Was it the type of research that was so evident this morning when the hon. member for Crowfoot was discussing the basic herd concept and the parliamentary secretary, with the Minister of Finance and with all the high-priced help they have around them- as was pointed out so well this morning-had not looked into the simple matter of comparing the ranchers' situation in Canada with that of our friends south of the border who are our competitors?
We heard the parliamentary secretary tell the hon. member for Crowfoot to keep his ears open as well as his mouth, but ten minutes later he came back to apologize to the House for having made a mistake. I was wondering whether the same kind of thought and research had gone into the section which we are considering so far as concerns the amount of revenue that this supposed loophole would create. It was certainly adequately pointed out the other day that this is merely a piece of legislation on morality, or immorality if you prefer, which would not allow a man and his wife to work as a team and to adjust their income in any way they see fit, to their advantage. This is a very important concept and I would like the parliamentary secretary to come forward with some estimate. I would like to find out what the department has done with regard to revenue estimates.


Patrick Morgan Mahoney: Mr. Chairman, the matter, as I explained a number of times on Friday and no doubt will have the
Income Tax Act
opportunity to explain a number of times before this evening is over, is not one of revenue: it is a matter of equity. I suppose a casual observer of this procedure- particularly referring to the very active part the hon. member for Battle River took in the deliberations of the Standing Committee on Finance, Trade and Economic Affairs-could not help but remark on the amount of time being devoted during this procedure to matters that are carried over verbatim from the old act and do not involve changes or reform at all. It is really quite interesting to me to witness this particular procedure.
However, the question in this case is not one of revenue at all. It is simply one of equity and of not-I know the hon. member for Edmonton West appreciates the point- affording to self-employed people an opportunity for income splitting that is not available to other taxpayers.


Marcel Joseph Aimé Lambert: That is a lot of nonsense. [Translation]


David Réal Caouette: Mr. Chairman, is there such a difference between employing one's wife, son or daughter in any business? I think that the point raised by the hon. member for Edmonton West (Mr. Lambert) is perfectly valid. Why should employing the son or the daughter be different from employing the wife in a business run by the husband? Then why not exempt from tax the wife on the same basis as the daughter, the son, the nephew, the niece or any other relative?
Where is the difference? I would like to hear the Parliamentary Secretary to the Minister of Finance (Mr. Mahoney) tell us how one can manage to be fair in income tax matters.
The hon. member for Edmonton West was perfectly right to raise that point and the parliamentary secretary ought to consider it. Why does he not consider it?


Mr. Yewchuk:: Mr. Chairman, I also want to ask a brief question of the parliamentary secretary, dealing with the same point. It appears that if there are two businesses operating side by side in a small town, and in each case the husband wants to employ his wife, her wages will not qualify as a business expense deduction for income tax purposes. But if two men decide to swap wives for business purposes, with each man hiring the other's wife, they will be money ahead because they can then have their wives file their own income tax returns. This is a ridiculous situation. I recognize that this is not a criticism of the legislation that is proposed but is a criticism of the law as it exists.
The government should give serious attention to this promotion of wife swapping for business purposes. It is an outrageous situation. I asked the parliamentary secretary a question the other day and he did not answer it. I asked him, was it correct that so far as the income tax laws are concerned the wife is really a nonentity. She is not considered as a human being when she works in her husband's store. She is in the class of a machine which fulfils a function but does not qualify for recognition as an employee. That is a very reprehensible kind of rule, one which any decent individual in a position of authority would be anxious to improve.
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I would like some explanation from the parliamentary secretary of how he thinks this provision is more equitable. I cannot see anything equitable about it. It seems to me that in the interests of progress, of removing our income tax rules from the medieval era in which women were not recognized for their efforts, in order to modernize the situation and give the legislation a truly progressive appearance, this kind of simple change would go a long way toward that end. I wonder if I could have an answer from the parliamentary secretary.
I want to point out, Mr. Chairman, that the parliamentary secretary was not even listening to the question and has made no effort to get up and answer it. I would like an answer.


Patrick Morgan Mahoney: I did listen long enough to ascertain that it was entirely fatuous.


Mr. Alexander:: Mr. Chairman, the charming parliamentary secretary has reached a conclusion and I was prepared to listen to his reasoning until he introduced the word "equity." This is where he hung himself. The hon. member for Edmonton West gave a very telling example of what could happen with the section as it now stands. A small businessman can take advantage of the act of incorporation, with his wife playing an important part in the business and able to receive income. The businessman, through the devious means of incorporation, would be able to charge off his wife's wages in computing his income.
Here we are talking about a husband and wife situation. But let us deal with another situation to which this principle has equal importance, that of man and wife in a common law union. I ask the parliamentary secretary not to bring in the red herring of what is a common law union.


Patrick Morgan Mahoney: Give us the ground rules.


Lincoln MacCauley Alexander: You are the one who has to answer the questions. You are the one who is in government. I am throwing out these propositions in order to impress upon the parliamentary secretary that the use of the word "equity" was in error. A common law union is recognized in many instances in law as a valid union. I am not talking about paper and marriage certificates but about a union which is recognized in law. Reflecting upon the example given, the husband and wife involved in an incorporated company, and comparing that with the man and woman in a common law union, would the parliamentary secretary be prepared to admit that the word he used was wrong and that he should not have used the word "equity"? In fact, if he is going to talk about equity perhaps he should be amending that section to include the common law union.
I know that the government has wisdom, expertise and brains enough for its purpose with respect to this bill to defend it, and living under a common roof would be a good start. If we are to talk about equity, let us not be fatuous; let us be honest and change the section so that we have equity. As long as the situation remains as it is now, and as long as we and the parliamentary secretary can bring in the type of situation we have referred to, we can no longer talk about equity.

I would hope that the parliamentary secretary would use another word. I see the hon. member from St. Catharines wagging his tail and I don't know why.


An hon. Member:: Because you are barking.


An hon. Member:: That's a flipper; it isn't his tail.


Lincoln MacCauley Alexander: Maybe the problem is money rather than equity. Would the parliamentary secretary be prepared to say that he used the wrong word, or is he going to stick with what he says here and what he is giving to the Canadian people and say that this is a situation of equity?


An hon. Member:: He doesn't understand it.


Patrick Morgan Mahoney: No, Mr. Chairman, I am not prepared to withdraw my suggestion that this is a question of equity. However, I think the government would be quite prepared to entertain any definition that the hon. member might care to propose-


Lincoln MacCauley Alexander: I gave you a start.


Patrick Morgan Mahoney: -anything which would place common law relationship in a position relatively comparable to the family unit in more conventional circumstances. So far, achievement of that objective has defied our ingenuity, but I am sure the hon. member would be able to advance suggestions.


Lincoln MacCauley Alexander: I am glad the parliamentary secretary dragged me into this debate by my heels, because I think he said it was beyond the government's ingenuity. That leaves me cold. As a matter of fact, it does not surprise me.


Some hon. Members:: Hear, hear!


Lincoln MacCauley Alexander: I would suggest, in all sincerity, that working in concert and in a spirit of co-operation with all the brains and expertise there is on the other side of the House and with the co-operation of this side of the House, it might be wise to stand this section. I know we are not playing games, Mr. Chairman.


Some hon. Members:: Oh, oh!


An hon. Member:: There they go.


Lincoln MacCauley Alexander: Mr. Chairman, I do not know who prevents members of the government from speaking. That is not my business, but I will have the opportunity to be on that side soon and I will find out. But surely when we try-


An hon. Member:: Come on over.


Joseph-Phillippe Guay: Things are better over here.


Lincoln MacCauley Alexander: I will, any time you want to give up the reins of leadership. Your side of the House is extremely poor, so the Gallup poll says. We are prepared and have been prepared to take over. Let us get back to the subject. I was trying to make a good point. We have a responsibility here, gentlemen, and you are just wasting my time, your time and the time of the people of Canada.
November 9, 1971

Now that the parliamentary secretary is interested in equity, as we are, and is so interested in taking us under advisement, in a spirit of co-operation, and in view of the fact that he seems to have dug a hole from which he cannot escape, I ask humbly and in all sincerity-


An hon. Member:: Don't overdo it.


Lincoln MacCauley Alexander: I am not overdoing it. Would the parliamentary secretary be prepared to say that I have a point? Would he be prepared to sit down and look into it further so that we might come up with an amicable and truly equitable solution? As he will not withdraw the word, would he be prepared to stand the section?


Patrick Morgan Mahoney: Mr. Chairman, it is not the hon. member whom I would take under advisement-I did that some time ago-it is his ideas that I would like to consider, since he obviously has been giving a great deal of thought to this question in the several days it has been under discussion in the House. As a prerequisite to his request for standing a particular section I think he might wish to outline in detail the extent to which his ideas have developed.


Mr. Ricard:: Are you prepared to accept them?


Lincoln MacCauley Alexander: Mr. Chairman, I do not believe the parliamentary secretary is taking me or members on this side of the House very seriously.


An hon. Member:: How can he?


Lincoln MacCauley Alexander: I am trying to show to him, in all sincerity and honesty, that what we have here is not equity.


An hon. Member:: Right.


Lincoln MacCauley Alexander: If he is prepared to accept my argument, then rather than being facetious-


Patrick Morgan Mahoney: I was trying to take the hon. member seriously.


Lincoln MacCauley Alexander: I suggest that we should be serious and stand this section. The parliamentary secretary should not attempt to embarrass me by saying he would like to hear me develop my arguments. In the two or three examples which I gave, the parliamentary secretary should see that they show conclusively that there is no equity. If he is prepared to accept that, then I withdraw what I said about having him withdraw the word. Let us say there was some doubt, and I think there is. Would the parliamentary secretary be prepared to go that far? He is extremely difficult to convince but I know, Mr. Chairman, that he has compassion and understanding. I have seen him operate here in the past week and a half-


An hon. Member:: Don't make us cry.


Lincoln MacCauley Alexander: -and when things become tough he is always prepared to say that we should stand this thing down and have another day to discuss it. I do not know why the parliamentary secretary cannot at least give us that courtesy. This section bothers members on both sides of the House, and notwithstanding the fact that those on the government side have not spoken I know they are as sincere as we are. All we want is an opportunity to look
Income Tax Act
into it further and see if we cannot work out a solution which we can call equitable. We may fail, but at least we would have given it the old college try. That is all I am asking and this is the last time I shall be on my feet regarding this matter. If the parliamentary secretary has at least some doubt he will agree we must stand it down until we look into it further. That is all I ask.


Mr. Paproski:: He had a heart when he was an ordinary member, but not any more.


Mr. Thompson:: He never had it then, either.


Robert Jardine McCleave: Mr. Chairman, I think I raised this matter originally about seven or eight days ago, and I am surprised that the government has decided, in the glowing words of the Prime Minister, that sex should be kept out of the bedrooms of the nation but it should not be kept out of the income tax law. I think members of the committee, including the parliamentary secretary, will recall that I said that the law which we have is so much hypocritical boloney, and I gather that the answer the hon. member for Hamilton West received tonight simply reinforces that point.
I shall make my points briefly. All we were trying to do in the opposition, and all we are trying to do now in regard to the amendment of the hon. member for Edmonton West, is to bring a little justice into the lives of very small people. These small people, in a sense, are the backbone of Canada, if you want to equate us with a nation of small people instead of large people and will a people who are prepared to work miserably long hours for miserably small returns and not feel that there is any economic bondage or servitude attached to that work.
The fact is that the section the hon. member for Edmonton West is trying to remove through his amendment is holding in servitude those people who earn less than $4,000 a year. It is as simple as that. I spoke a couple of days ago on this matter. I spoke on joint incomes-not on individual incomes but on joint incomes-which together come to less than $3,650 a year. We cannot bring justice to that group by passing the law as it is, yet the government's and the parliamentary secretary's intransigence prevent justice and the benefits of income tax reform being available to all Canadians.
We have somehow drawn a great big line and said that when two people live together and are married-and circumstances might be different if they were not married, but I will not go into that situation at this point; I will talk strictly on the amendment-and run a little business that does not earn enough to make it worth their while to incorporate, they will not get justice from the Parliament of Canada.


An hon. Member:: Shame.


Robert Jardine McCleave: Is that something we can be proud of? Can we hold our heads high? When I go home and talk to my kids I can say that if I have done nothing else this week, at least I have tried to do something in this area. I am not sure that we shall be successful, but at least I can hold my head high. At least the hon. member for Hamilton West and others on this side of the House can say, "We
24372-42J

November 9, 1971
Income Tax Act
tried." However, since it is difficult to administer section 74(5) of the Income Tax Act we must all bow our heads before the great god of efficiency and say "On division" when we are asked to pass this subsection.
I submit that the failure, in the circumstances I have outlined, to give tax relief is a criminal abuse of responsibility. If we had any guts at all we would stand this section. The parliamentary secretary told me last week-I say this in all justice to him-that this is a matter that has bothered the income tax people for years and years and they were asking for a solution. If it bothers them that much, let us stand this section for another couple of weeks, pass everything else in the bill before us, in this 5-pound package of cure-all, and give people a chance to work on it We should tell some bright soul to work on this question on a 24-hour basis until he can come up with a hard answer. If we do not do that, we are not worth our salt as parliamentarians.


Mr. Kaplan:: Mr. Chairman, I wish to say a few words on this issue. Members of the opposition have made a heartrending plea for this section to be stood and to let somebody work on it on a 24-hour basis until a solution is found.


Some hon. Members:: Hear, hear!


Robert Phillip Kaplan: It may be that this problem came to the attention of certain hon. members just this afternoon even though they were active members on the Standing Committee on Finance, Trade and Economic Affairs at the time these problems were considered.


Marcel Joseph Aimé Lambert: But they were not considered.


Robert Phillip Kaplan: If they were not considered-


Marcel Joseph Aimé Lambert: They were not
considered.


Robert Phillip Kaplan: -I ask whether hon. members opposite felt that they had general responsibility to discuss this matter as long ago as 1952 or 1953 when this provision was first introduced into the act.


Robert Jardine McCleave: Let us discuss it as it now is.


Robert Phillip Kaplan: It has been alleged that the government's failure to propose some sort of solution to the problem constitutes a criminal abuse of responsibility. What about the responsibility of the opposition? They are not proposing a solution.


Robert Jardine McCleave: Yes, they are.


Robert Phillip Kaplan: So far as I have heard, they are not offering any formula for dealing with the very real problem of income splitting, which I admit raises problems of equity. I grant that there are inequities in the administration of the Income Tax Act. It is not a divine law, far from it. We all know that. But do opposition members honestly feel that if another 24 hours were spent on this section we would come forward with any solution?
The same argument applies to the other matter they have raised about the backbone of our country. I admit that there is a problem in the area of people who are

living common law. I wish there were some way to define the common law relationship so that it would be possible to give extra exemptions and benefits to people living in that state. But how is that to be done?


An hon. Member:: You are against those people.


Robert Phillip Kaplan: The hon. member for Hamilton West has suggested that if we had any heart we would stand this section for another 48 hours and consider the matter. Does he think that in another 48 hours we could solve a problem that people have been thinking about for two decades without being able to solve? I do not think a further 48 hours will make much difference. I think people who suggest this are building up false hopes-


Russell Clayton Honey: Order, please. Is the hon. member for Athabasca seeking the floor?


Paul Yewchuk: I am sorry, Mr. Chairman. I thought the hon. member for Don Valley had concluded his remarks. I wanted to speak. However, since he still has the floor I will say no more.


Russell Clayton Honey: It was obvious to the Chair that the hon. member still wanted to speak. With respect, I think another hon. member should not seek the floor until the hon. member speaking has finished.


Robert Phillip Kaplan: Mr. Chairman, I should be glad to hear from the hon. member.


Russell Clayton Honey: The hon. member for Athabasca.


Paul Yewchuk: Mr. Chairman, the hon. member for Don Valley has accused the opposition of not coming forward with a solution. Obviously, he did not listen to what hon. members said during the past hour or so. It is equally clear from the answer the parliamentary secretary gave me that he was not listening either. He suggested that if you ask a fatuous question you will get a fatuous answer. I therefore want to explain in a little more detail, for the benefit of those on the other side of the House who have not been listening, what the situation is and what the solution ought to be. I hope they will co-operate.
The situation is this. If a man employs his wife, the tax structure penalizes him in that the wife cannot fill out a separate income tax return and declare her own income. She can only do that if she works for someone other than her husband. Let me give an example of what I mean. I will use round figures to make this simple. Suppose there are two businesses operating and they are across the street from each other. Let us say that they are not incorporated and that each business brings in a taxable income of $25,000 a year. In one case let us say that a man employs his wife and pays her a salary of $5,000 a year. You would expect that he would pay taxes on $20,000 and that she, in theory, would pay tax on the $5,000 that she has earned. However, the husband must complete his return to show that his income is $25,000. This means that the tax on the wife's $5,000, the income that is added to his income, is in the 50 per cent bracket.
Let us now suppose that through agreement these two businessmen employ the other's wife in their business. When those wives fill in their income tax returns they will pay income tax at the rate of 15 per cent or 17 per cent, or
November 9, 1971

whatever the case may be, on the $5,000 they earned. In each case there is a saving to the business of over $1,000. It is easy to see that this kind of provision has not been included in the legislation.


John (Jack) Henry Horner: The government is not concerned about equity.


Robert Jardine McCleave: Nor with tax reform.


Paul Yewchuk: Why is that so? Would the parliamentary secretary explain it to me? I am not an expert on taxes- but I am greatly concerned about the ordinary man who is trying to make a living, and about his wife who may be interested in helping him get ahead and make progress-


An hon. Member:: In a family enterprise.


Paul Yewchuk: -in a family enterprise. Why does he think it is more equitable to make the woman who prefers to work for her husband pay tax of 50 per cent rather than 15 or 17 per cent, the rate which would apply in the example I have used? I do not think there is anything fatuous about that question.


John (Jack) Henry Horner: Mr. Chairman, I rose rather slowly. I expected the parliamentary secretary to rise and answer the very clear, straight-forward question posed by the hon. member for Athabasca. The government worked for two or three years on this legislation. It brought in a white paper which was debated across the country. The main theme of it was equity. In fact, the whole concept of it was equity. The Minister of Finance has taken little part in this debate. Can he not understand it? Can he not defend this bill? I pose those two questions. Why is he not defending the equity that he so proudly boasted was the concept and purpose of the white paper?
Why could we not have a simple answer to the question posed by the hon. member for Athabasca? It was a simple, fair question. Where is this government that has concern for the average man? In 1968 they campaigned across Canada. They said there would be a just society for every man, woman and child, no matter what their financial status might be. The government has now dragged out the worn-out phrase that it is administratively difficult. Have they not heard of the computer? You feed in a question and you get an answer.


Patrick Morgan Mahoney: Is that the way it works?


John (Jack) Henry Horner: We are now getting a smart remark from the parliamentary secretary. They tried to project the administrative impossibility after the grain stabilization bill. That is an amazingly weak case they are building. When the minister in charge of the grain stabilization bill appeared before the Standing Committee on Agriculture he said it would cost $1.5 million a year to administer the program. Where can they stand on this question of administrative impossibility?


Gérald Laniel: Order, please. I am sure the hon. member will agree that his last remarks do not relate to the section before the committee. His opening remarks were preliminary but he is now referring to another piece
Income Tax Act
of legislation that was before the House. I do not think it relates to the bill before us and the sections being studied.


Robert Jardine McCleave: I rise to speak on a point of order, Mr. Chairman. I and my colleagues would like to more fully understand the purport of Your Honour's ruling. Section 74(5) 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.
In the preceding section we were dealing with husband and wife businesses which are not incorporated and where income is deemed to be joint in the hands of one person or another. I think this is what the hon. member for Crowfoot was talking about. If I and my party are wrong on that, we should have some elucidation. This is an important principle. We thought we were squarely within the subsections of section 74.


Gérald Laniel: Order, please. I do not think the hon. member can ask the Chair to interpret the remarks of the hon. member in relation to a subsection which is being studied at this time. It was the impression of the Chair that the hon. member was referring to another piece of legislation. Perhaps I misunderstood.
In any event, the Chair has to make its own decision. I invite hon. members to stay as close as possible to the debate on the section before the committee. That is the only way the committee can make progress on this legislation. The hon. member for Crowfoot.


John (Jack) Henry Horner: I think the hon. member for Don Valley is rising on the point of order. We want to kill as much time as possible. Let's hear him out.


Gérald Laniel: Order, please. The Chair intervened to interrupt the hon. member for Crowfoot. If the hon. member for Crowfoot wants to complete his remarks, he may do so. It was not the impression of the Chair that the member for Don Valley was rising on a point of order.


Robert Phillip Kaplan: I am not rising on a point of order, Mr. Chairman; I want to continue the debate.


John (Jack) Henry Horner: Then I still have the floor. The hon. member for Don Valley has contributed much to the debate. There will be ample time for him to contribute and lend his wisdom to the debate when I have completed my brief remarks on section 74(5) with regard to unincorporated small businesses. I was dealing with the situation that was outlined very clearly by the member for Athabasca. Since that time the Minister of Finance has entered the chamber. He has not witnessed much of the debate and has contributed very little to it.


Edgar John Benson: You, too.


John (Jack) Henry Horner: Well! We have a brilliant remark from the Minister of Finance. The minister wants to have this legislation passed by Christmas. A few more remarks like that and it may be next Christmas.


Edgar John Benson: Are you threatening Parliament?


John (Jack) Henry Horner: Am I threatening Parliament?

November 9, 1971
Income Tax Act


Edgar John Benson: Yes.


John (Jack) Henry Horner: I am trying to elicit a sensible comment from the Minister of Finance. Who am I, a lonely backbencher in the opposition, to threaten Parliament? How could I threaten Parliament? That was a ridiculous remark by the Minister of Finance. He could not threaten me with anything.
I was referring to the clear and simple example stated by the member for Athabasca. He referred to two businesses operating across the street from one another. Both were earning in the neighbourhood of $25,000. The wives worked for their husbands. The husbands could not deduct their wives' wages. They each have to pay income tax on $25,000. If they exchanged the work of the wives and paid them accordingly, they could each claim a deduction of $5,000. I am not explaining it as well as the member for Athabasca. I could take more time but I want to hear the reply of the Minister of Finance. He has now entered the Chamber and has shown a preparedness to make a contribution.
Before the Minister of Finance entered the chamber I said that he went across the country with the white paper. He said that equity was the principle of tax reform, to bring about equity was its purpose. The hon. member for Athabasca suggested that section 74(5) would not bring about equity for an unincorporated, small business. Surely the Minister of Finance cannot stand on the defence that it is administratively difficult or that it is not administratively efficient. We have had many things that are not administratively efficient, one of them being the Canada Pension Plan. Medicare may be another.
I referred to the grains stabilization bill but before I could get the words out of my mouth Your Honour cut me off in a way that suggested I should not get into that question. Far be it from me to get into a debate on that matter. The government admitted that the administrative costs would amount to $1 i million.


Gérald Laniel: Again I hesitate to interrupt the hon. member but I must remind all members that the committee is dealing with specifics. This is not the time for hon. members to engage in general debate. I realize that hon. members may have all kinds of opinions as far as these subjects are concerned, with respect to which hon. members might wish to question the policies of the government. The purpose of the intervention by the Chair is to help hon. members and to help the committee.


John (Jack) Henry Horner: I assure you, Mr. Chairman, that I shall not refer again to the grain stabilization bill. I had no intention of taking part in this debate until I heard the example set forth so clearly by the hon. member for Athabasca. The parliamentary secretary would not rise and say yes or no. It was a simple question. This bill is presented on the basis of equity. The hon. member for Athabasca showed that there were inequities produced by this legislation.
After I had risen the Minister of Finance suggested I had threatened the committee. I am surprised, Mr. Chairman, that you did not rise to caution him that this was not parliamentary language. I said, "Answer the problem.
(Mr. Horner.]
Answer the equation set forth by the hon. member for Athabasca."


Joseph-Phillippe Guay: Wait until you get the "blues."


Mr.   Homer@: Only cabinet ministers and the parliamentary secretaries get the "blues," Joe. You and I don't.


Mr. Barrett:: Oh, you may soon, when you take over from Baldwin.


Robert Jardine McCleave: The whole country gets Benson's blues.


An hon. Member:: Oh, oh!


John (Jack) Henry Horner: Yes, the whole country suffers from Benson's blues. While I am speaking about the Minister of Finance may I say there have been rumours around that he is not going to run again, that he does not want to face the people after this tax bill. I do not know whether there is any truth in these rumours, but there are rumours that he will not run in the next election and that the Liberals will not have him as Minister of Finance after the next election, on any basis.


Gérald Laniel: Order. I do not wish to intervene unduly in the debate, but I think the hon. member should try to co-operate as much as possible. The committee is studying one specific section of this legislation and the Chair invites the co-operation of hon. members. I am sure the hon. member for Crowfoot would not want other members of the committee to disregard directions from the Chair, so I hope, again, he will accept my invitation to address himself to the section before us.


Edgar John Benson: Mr. Chairman, I rise on a question of privilege. I will simply say that the hon. member opposite has tried to inpute motives to me. I have no motives. I am in favour of having good tax legislation in Canada, the best we can possibly have. I like to listen to members such as the hon. member who has the floor. I will simply say that what he says is not relevant; it does not mean very much. He tries to shout very loud and it is often said to me that people who shout loudly really do not have much of an argument.


Gérald Laniel: Order. Here again, the Chair must say that this is not a question of privilege. These are only matters of opinion. I think the hon. member for Crowfood should be allowed to complete his remarks.


John (Jack) Henry Horner: Mr. Chairman, I apologize. I did not intend to get into this debate.


Mr. Faulkner:: I have heard that one before.


John (Jack) Henry Horner: Somebody said, "I have heard that before". I did not intend to impute any kind of motive to the Minister of Finance but I heard the remark he made imputing motives to me, first, and Hansard will bear me out. He felt I had no right to reply, no right to retort. I say the Liberal party will not have him as Minister of Finance when they go to the people in the next election because they cannot go to the people with this bill, a bill which is full of inequity, including this section 74(5).
The hon. member for Athabasca posed a simple question in a sensible, pleasant, quiet manner, one which exemplifies the character of the hon. member.
November 9, 1971


Steve Eugene Paproski: And of our party.


John (Jack) Henry Horner: But the smug parliamentary secretary is afflicted with the dreaded disease of tunnel vision.


Some hon. Members:: Oh!


Mr.   Homer@: I see you frown at me, Mr. Chairman, and wonder what this disease is. Perhaps I might be allowed to explain. Tunnel vision comes to those who have risen to such a position so important that they see only straight ahead; they do not see to the sides.


Edgar John Benson: On a point of order-


John (Jack) Henry Horner: This tends to bring about a narrow view-


Gérald Laniel: Order. The Minister of Finance.


Edgar John Benson: On a point of order, Mr. Chairman, I think the comments of the hon. member for Crowfoot have little to do with our debate. If he wants to criticize individuals he can do so outside the House. I do not think he should impute motives to the parliamentary secretary, to myself or to other members of the House. I respect the hon. member very much. I have always listened to his point of view and I think the government has listened to his point of view. We may not agree, but on a point of order I think he is not right in doing what he is doing.


Gérald Laniel: The Chair is finding itself in a difficult position. Points of order are being raised which are not points of order. Hon. members are aware that the rules of the House can only be effective if they are respected by those who participate in the debates. They too have a responsibility for maintaining order in the Chamber.
I do not think we will make much progress by having these exchanges between members on one side and the other. I would invite hon. members to assume their responsibilities and to maintain the standard of debate in this House. The hon. member for Crowfoot.


John (Jack) Henry Horner: Mr. Chairman, I do not feel very good about the degeneration of the debate. The exchanges between the Minister of Finance and myself lend nothing to the debate, I agree, and I find the situation regrettable.


Edgar John Benson: Very well. Then talk about the bill.


John (Jack) Henry Horner: I am quite upset by this situation. The minister again interjects and tells me to talk about the bill.


Some hon. Members:: Hear, hear!


John (Jack) Henry Horner: I intend to talk about the bill. I intend to talk about the bill for as long as I can or until the minister or his parliamentary secretary assure me that the question raised by the hon. member for Athabasca will be answered. Both the minister and his parliamentary secretary sit in their seats without answering the question. This is why I rose and said the question needed answering.
We are debating equity. We are debating the concept contained in the white paper. This bill is a by-product of the white paper and the discussion on the white paper. If we cannot get an answer in the House of Commons to a
Income Tax Act
simple question, then where can we get an answer? If we cannot get an answer in committee of the whole, with the tax experts before the representatives of the people, then where can we get an answer in a representative democracy?


Robert Norman Thompson: Do not call them experts.


John (Jack) Henry Horner: I am being kind and perhaps the good Lord above will forgive me for being too kind, but one has to be generous in this business. Since the amendment of the hon. member for Edmonton West has been ruled out of order, surely the Minister of Finance and his parliamentary secretary can admit that there is a train of thought here that leaves a doubt in the minds of many citizens and should be resolved.
I want to see clause 74 pass as quickly as possible so we cam make progress, but in order to make progress we must have answers. That is a simple fact of life in a democratic society. In a totalitarian state where rule is autocratic, no one gets any answers; but in a democracy we should get answers, particularly when this House is in committee of the whole and the minister's two tax experts are before the people's representatives.
I shall say no more at this time, but I hope that the Minister of Finance or his parliamentary secretary answer the simple question put by the hon. member for Athabasca and answer it in a straightforward manner. Then I am sure we will make some progress. But if we start indulging in cat-calling we will never make progress, and I regret the Minister of Finance involved me in this sort of thing.


Patrick Morgan Mahoney: Mr. Chairman, I should like to note for those who are statistically interested that we started discussion on this particular section at 2.45 on Friday afternoon and carried it forward until four o'clock. We have been dealing for almost an hour and a half with the same section, which is a carry-over from the previous bill-


Mr. Maclnnis:: Mr. Chairman, a point of order.


Patrick Morgan Mahoney: I answered this specific question twice on Friday.


Gérald Laniel: Order, please. The hon. member for Cape Breton-East Richmond on a point of order.


Donald MacInnis: Mr. Chairman, the Chair has been very quick this evening to call to order members on this side of the House. If the parliamentary secretary is going to start lecturing the committee on the time spent on sections of the bill, I think it is the duty of the Chair to call his attention to the fact that he himself is out of order.


Gérald Laniel: Order, please. The Chair appreciates the remarks of the hon. member and has nothing to add.


Patrick Morgan Mahoney: Mr. Chairman, as I was saying, this is a provision that has been carried forward from the existing legislation and does not involve any change or reform. The particular question posed by the hon. member for Athabasca was asked a number of times on Friday and he will find it answered at pages 9385 and 9386 of Hansard. I have answered the question twice already tonight, I note

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Income Tax Act
from my "blues". I do not know on which page my answers will appear in today's Hansard; however, I would be delighted to send him the page references as soon as it is published.


Marcel Joseph Aimé Lambert: Those answers are wrong.


Robert Jardine McCleave: Mr. Chairman, I think the obvious riposte that comes to any sensible person on this side of the House is: No matter what the answer is, is it government policy? If it is, is it going to be changed? Whether this policy has existed for 10, 20 or 30 years, is it policy that is not capable of change? Are we stuck with the law of the Medes and the Persians which varies not and oppresses forever? That is really the essence of the question of the hon. member for Athabasca and the hon. member for Crowfoot. Before I died at the hands of the Canadian Press at three o'clock last Tuesday afternoon I can remember asking that question myself.
No matter what the law is, is it fair or unfair? The Minister of Finance is now in the committee and I would direct the question to him specifically so as not to waste time beating about the bush. The parliamentary secretary is simply trying to shore-up injustice or explain it away. I ask the Minister of Finance this question: Has the government reconsidered the position of husbands and wives within the framework of section 74 of the proposed Income Tax Act?
If it has, has the government decided that the old law should be carried on, or is it prepared, in light of some of the vigorous representations that have been made- though some of them were presented mildly and clemently, as in my case-to look again at the situation? Those are questions that I hope the Minister of Finance will answer. I do not Want to hear the old phonograph record played back by the parliamentary secretary; let me hear the voice of the government speaking to this matter.


Edgar John Benson: Mr. Chairman, I would simply say that this is a very difficult problem with regard to which I have a great deal of sympathy. However, there is no way to deal with it unless you move to a family unit concept of taxation, and the government has freely admitted it is not prepared to so move. The reason is that it does not know what would happen and has not looked it through far enough. We admit that it might be possible to resolve the problem if we were to move to a family unit concept, but we are not prepared to do so because we do not know all the implications of such a move or whether we would be able to look at it in the future.
I said in my white paper and also in my coloured paper that was published afterwards that we wanted to study the problem further and deal with it some time in the future. I do not know how to deal with it at the present time, but I would very much like to hear some suggestions from hon. members opposite as to how to deal with the problem without creating great loopholes in the taxation system as presently constituted.


Robert Phillip Kaplan: Mr. Chairman, I should like to say a word or two on this question of administrative convenience. This is a concept that it is unpleasant for a government to put forward as a defence but I think one or two things can

be said for it and perhaps should be said at this time. I should like to remind hon. members opposite that when the white paper was first introduced-


Some hon. Members:: Order.


Edgar John Benson: He has 20 minutes too.


Robert Phillip Kaplan: -objections were taken to the capital gains proposal. I cannot remember whether it was the hon. member for Edmonton West or the hon. member for Halifax-East Hants who said that this was a proposal that would make this country into a nation of thieves or tax evaders. Because how would the government know whether a capital gain had been realized until it was reflected in an income tax return? There would be an irresistible temptation to exclude it when reporting tax.


Donald MacInnis: A point of order, Mr. Chairman.


Gérald Laniel: The hon. member for Cape Breton-East Richmond on a point of order.


Donald MacInnis: Mr. Chairman, my point of order arises from the fact that no member of this House can get up and interpret remarks of someone on the other side of the House and put that forward as being-


Patrick Morgan Mahoney: Certainly you can't.


An hon. Member:: Old blabbermouth is at it again.


Gérald Laniel: Will the hon. member state his point of order?


Donald MacInnis: I have made my point of order, but the yakking from the other side of the House is something I do not have to put up with. I can stand here all evening. If it is killing time they want, I am prepared to co-operate. No member of this House, whether or not he had expert advice over the dinner hour, can interpret the remarks of hon. members on this side of the House.


Edgar John Benson: Mr. Chairman, on a point of order, in spite of the filibuster going on on the other side of the House members on this side have a right to say something. We are equal in this House and if we try to interpret what others are doing we have every right to do this, as my hon. friend has a right to interpret what members on this side say. It is a matter of debate. If there is to be a filibuster in this House, bear in mind that members on this side have every right to participate.


Gérald Laniel: Order, please. The point made by the hon. member for Cape Breton-East Richmond would seem to me to involve a restriction on the rules to prevent members commenting. I did not see the point he seeks to make. It is difficult for the Chair to judge. I had the impression that the hon. member for Don Valley was more or less making a very general statement.


Donald MacInnis: Mr. Chairman, further on this same point of order and on the point of order raised by the minister, I would draw your attention to the fact that the hon. member for Don Valley was interpreting the remarks of hon. members on this side of the House. To my knowledge, members on this side of the House are only trying to
November 9, 1971

interpret the legislation and are seeking explanation from the government in order to arrive at a proper interpretation. Therefore, a member on the government side should not stand up and place his own interpretation on the remarks made on this side of the House, whether he or we had expert advice over the dinner hour.


Gérald Laniel: Order, please. I do not think the hon. member has a point of order. He is opening the debate further at this time. It is already difficult enough for the Chair to keep the debate within the confines of the bill and relate it to the sections which are being studied. I would ask for the co-operation of all hon. members. I am not passing judgment on the interpretation of hon. members on either side concerning how far they can go in this debate, but so far as the Chair is concerned the hon. member for Don Valley was close to the subject and no further away than other members.


Donald MacInnis: Mr. Chairman, the minister referred to my remarks and I would ask him if on Monday next he would make available to me-


Gérald Laniel: Order, please. The hon. member should not ask a question of the minister because he did not have the floor. He rose on a point of order when the hon. member for Don Valley was speaking. The floor belongs to the hon. member for Don Valley unless the hon. member has another point of order to raise.


Donald MacInnis: The point or order arises from the cooperation made available to members of this House. I ask the minister this question, with regard to his point of order: On Monday next will he make the tax experts available to me over the dinner hour?


Edgar John Benson: Any time. You need lots of experts.


Donald MacInnis: Thank you.


Gérald Laniel: Order.


Donald MacInnis: I hope you get-


Gérald Laniel: Order. I am sure the hon. member knows that this is not a point of order. He could have asked such a question at any other time. The hon. member for Don Valley.


Robert Phillip Kaplan: Mr. Chairman, I was seeking to develop a concept of administrative convenience. I was using the analogy of the property of the taxpayer with a small capital gain. It is quite true that if a taxpayer has a small capital gain it is very tempting not to include it in his income. The point, however, that this might create a temptation to evade taxation is well taken. The answer finally put forward in the revised tax bill is that the ceiling for capital gains was raised so that 90 per .cent of the capital gains-


An hon. Member:: What section is that?


Robert Phillip Kaplan: Mr. Chairman, I said-


Gérald Laniel: Order, please. I would hope the hon. member would try as much as possible to co-operate with the Chair and the committee and relate as quickly as possible his comments to the section before us. The hon.
Income Tax Act
member is opening debate on the question of capital gains. Although we are looking at a very specific section, he has taken advantage of an answer that was given by the minister to the hon. member for Halifax-East Hants and has pursued it a little too far so far as the Chair is concerned. I think he should return to the subject matter before the committee.


Robert Phillip Kaplan: Mr. Chairman, the example I gave illustrates that the imposition of an arbitrary floor on that kind of exemption is an administrative convenience which works for the benefit of the taxpayer as it does for the revenue department. The temptation is removed, the consideration of eligibility is removed, and so on.
I developed that illustration because I think exactly the same principle applies to the question of income splitting between husband and wife. In effect, this bill and its provisions provide a floor on the splitting of income between husbands and wives. It will help to prevent taxpayers seeking tax avoidance. It will make it convenient for them and it will remove the consideration of determining what the appropriate income for the spouse is-and the spouse might as well be husband as wife-how many hours the spouse actually devoted to the business and what benefit the business achieved from those services. This is a simple instrument of administrative convenience with an element of equity. In the broadest sense it provides equity.


Robert Jardine McCleave: Mr. Chairman, I think it was long back that I raised the question originally or that the Minister of Finance raised the question with me. He asked what we on this side would do. The answer simply is that we would have accepted the amendment presented by the hon. member for Edmonton West. However, that issue is finished and he wants an answer. I say simply that what the government apparently has decided to do is to consider husband-wife transactions. Probably the amount of income tax that one could raise from that source would be very small.
I do not know how many husbands and wives would be in what I called earlier the mamma and papa proposition. On average, the type of transaction set forth in this section could not be too common. I would suspect the amount of revenue we are dealing with is under a couple of million dollars a year. For that we have taken the extraordinary step of condemning husband and wives to economic servitude as a unit. I do not think there is any common sense in the measure that was passed before. I do not know what Prime Minister was in office when it was passed. I am not pointing blame in that direction. All I do is look around and ask, why cannot we do better than this? Why can we not put a little sense into the laws that will not cause any problem to the national revenue department but will make life a little easier for people who run a business?
As I have said before-and I can prove it-these are businesses which on average earn less than $3,650 a year. That is not much of a return when one thinks of the return of the great taxpayers of the country. I do not think the country gets much revenue as a result of keeping this type of provision in the law and I do not think we get much of an answer when it is said that it is administra-

November 9, 1971
Income Tax Act
tively difficult to change the law. I am sure that it is administratively difficult to change anything.
Heavens above, a thought came to my mind but I suppose I should not follow it up. The point I make is that we hit the small people with this, yet we could take some of the load off their shoulders. We will not take anything great from the national revenue and I really cannot see why the government does not at least take a second look at the situation and try to do something about it. I would hope that that would be the case.


Robert Phillip Kaplan: I judge that my earlier argument did not find much sympathy on the other side of the House. Let me try one other. There is no spouse in this country who does not contribute in some measure to her husband's earning process, whether he is on salary, whether he himself is employed or whether he is the owner of a business. If they live together and love each other and if they work together, she does something to contribute to his income-earning process, and this even applies to Members of Parliament-in fact, particularly to Members of Parliament.
If that self-evident fact is conceded in the House, then we come to the question of where to draw the line. Are they not arguing, then, on the basis of equity for an extra deduction for everybody who is married, because whether you are on salary, whether you own your business, whether or not it is incorporated, whether you work in the city or in the country, if your wife contributes to your incomeearning process why should she not get a deduction for it? Then we come back to the point that I made earlier. If we do not put a floor on the deduction which we will permit, which is in effect what we do through the requirement for incorporation, we get everybody into this act justifying deductions.
We would expect our bureaucrats, the employees in the Department of National Revenue, to look into every one of these relationships, to assess it and determine whether or not some benefit is justified, what the value of the benefit is per hour, how many hours are spent and what result is achieved. These are all questions that I think hon. members, however much they would like to see this deduction, must surely admit defeat the equity of their proposal.


Some hon. Members:: Hear, hear!


Frederick Johnstone (Jack) Bigg: Mr. Chairman, the problem is certainly one of equity under section 74(5). We are trying to find a solution, along with the government, to a very troublesome problem. The income group that we are talking about is not composed of the $25,000 a year man; they are not Members of Parliament and their wives but they are the small people who are running little entrepreneur businesses such as hot dog stands and small fruit stands where the husband and wife are of necessity forced into 24-hour service to the public. They have little or no savings with which to buy into the Canada Pension Plan which, everyone will admit, has some merit. They are not able to benefit from the Canada Pension Plan because, in a great many cases, between the two of them they do not have $800 clear profit from their small business. They are

eating off their own hot dog stand and they are feeding their children fish and chips out of the family bin. Those are the people about whom we are worried and for whom we want equity. They are in the thousands.
Look at the figures of Statistics Canada and you will find how many thousands of people in Canada have an income of between $3,000 and $5,000 a year which today, according to Canadian standards, is below the poverty level. Those are the people about whom we are worried. They do not benefit from the Canada Pension Plan but they are under the aegis of this act. They pay very small income tax, if any, it is true. But when you have a net income of $3,600 a year an extra $100 in income tax constitutes a serious problem. It may mean nothing to the $30,000 a year man. Perhaps he can afford to pay 46 per cent of his income to the three levels of government, but when you are below $5,000 a year and with a family you cannot afford to pay taxes of any kind to anybody.
This is the small but very significant group of people about whom we are worried, and sarcasm will not help nor will comments back and forth across the House. Passing this 707-page document will not help them either. Under section 74 (5) we have an opportunity to pool our common sense, if any, and to come up with a sensible, agreeable and equitable amendment. I assure you that it would not take ten minutes to receive approval from the House. There would be unanimous consent from this side of the House if the government gave some kind of relief to this group of people earning between $3,000 and $5,000 a year. It is these people, who have no net profit and who cannot benefit from the Canada Pension Plan, about whom we are worried. We have a problem here.
There is no one in the galleries and I do not suppose the press will bother to put this in the papers, but the members of this party are worried about the problem. I have been sitting here during the debate of the last two or three days and most of the remarks I have made have been relevant. None of them has been sarcastic and I hope some of them have been to the point. The people of Canada are fed up with the time we are wasting here at $25,500 apiece per year, plus expenses. We sit around here and waste the time of the country on a document which, it is admitted, needs more than 100 amendments. Let us on this side of the House who have the interest of the small people at heart get together and put forward an amendment.
Do you have all the wisdom over there? Let us have a bit of co-operation. Let us have some participatory democracy. I myself did not come from the upper class. I came from the working class and I have achieved this pre-eminence in the House through the support of people who now ask me, "What have you accomplished?" We have absolutely nothing in the way of co-operation from the other side of the House in respect of Bill C-259. Personally, I am ashamed of myself but I am not nearly as ashamed of myself as I am of sitting here with 150 government members who are not budging one inch. All we hear from them is sarcasm and loud remarks. I would have thought that in the great Liberal Party two or three members would have had the courage to say that perhaps there is something in what we say.


Some hon. Members:: Hear, hear!
November 9, 1971


Gérald Laniel: Is the committee ready for the question?


John (Jack) Henry Horner: The hon. member for Don Valley was on his feet, Mr. Chairman, and we were prepared to let him speak. If he does not want to speak, a member on this side of the House is ready to do so.


Gérald Laniel: Is the committee ready for the question?


J. Michael Forrestall: Mr. Chairman, do not close your eyes to what is happening in the committee.


John (Jack) Henry Horner: Mr. Chairman, I hesitate to speak again because of the poor reception my remarks received on a previous occasion, but there is one point that I believe has not been emphasized sufficiently with regard to the implications of section 74(5). I am referring in particular to the exemption that a working mother can now claim in respect of her children. If a married woman is a wage earner she can receive exemptions, which in essence are benefits, when computing her income tax. But if she is working for her husband, under the provisions of section 74(5) she may not be able to claim her wages as an exemption. I agree that this is a debatable question, but she also loses out through not being able to claim exemptions for care for her children.
A second look must be taken at this matter. In answer to some of the questions I asked, the parliamentary secretary said that this provision is the same as in the old Income Tax Act and has been in the legislation for years and years. But, Mr. Chairman, there is a provision in this bill whereby working mothers can claim exemptions when they hire what in essence are caretakers to look after their children. A working mother can claim so much per child as an expense when she hires a caretaker. This changes the complexion of section 75(5) to some extent from that contained in the old Income Tax Act.
In our society we have gone to great lengths to educate men and women. Up until now the Income Tax Act has encouraged highly skilled, married women to stay at home. As a result we lose the benefit of the money spent on providing them with their skills. Now this bill encourages those people to contribute to society through the use of their skills, and I wholeheartedly thank the minister, his parliamentary secretary and those involved in drawing up the bill for providing a basic exemption on a per child basis for day care. This may be claimed by a working mother or a working widow.
Our argument concerns the husband and wife situation. If they are in an unincorporated partnership the wife cannot claim the child care exemptions provided in this bill. But if their business is incorporated the husband can pay his wife a salary and she can get the basic exemption for child care expenses. Also, she can contribute to the Canada Pension Plan and become eligible for unemployment insurance. The question is: Are we striving for equity? Is it good enough to say that it is too complicated to achieve? I see the hon. member for Don Valley shakes his head negatively. That is not good enough for him, and it is not good enough for me.
Income Tax Act


Robert Phillip Kaplan: On a question of privilege, Mr. Chairman, I would be reluctant to give the committee the impression that I agreed with anything that the hon. member just said.


John (Jack) Henry Horner: I did not hear the hon. member, but it is not important. The whole purpose of the bill is to create equity. If the business is incorporated, the wife can claim the exemption. If it is not incorporated, she cannot enjoy many of the benefits that the bill will provide. This bill is providing for forced incorporation of small business, of the small, corner grocery store, the small laundry or drugstore, in the same way as it provides for forced incorporation of farming operations. Are we attempting to destroy family enterprise? Is that the aim? Through this legislation are we attempting to destroy family enterprise in the running of the corner grocery store, the delicatessen, the laundromat and the drugstore? Is this the purpose of the legislation?


Patrick Morgan Mahoney: No, Mr. Chairman.


John (Jack) Henry Horner: Is this the aim, just as it is the attempt to destroy the small family farm? Does the government really mean to destroy family enterprise? These are the questions Canadians will ask all across the country. Having listened to the hon. member for Athabasca and to many other hon. members who have asked questions about this section, I can only conclude that that is the intention of the government.


Robert Phillip Kaplan: Then vote against it.


John (Jack) Henry Horner: It is a regrettable situation. I did not hear that remark, so I will ignore it. I would not want to accuse the hon. member of having tunnel vision once again.


Robert Phillip Kaplan: I can live with your accusations.


John (Jack) Henry Horner: That is a clear symptom of one afflicted with the dreaded disease of tunnel vision. I see it is ten o'clock, Mr. Chairman.
Progress reported.



PROCEEDINGS ON ADJOURNMENT MOTION

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

Philip Bernard Rynard: Mr. Speaker, over and over again during the last four years I have drawn the shortage of doctors to the attention of the House. On June 28, 1971, the Minister of National Health and Welfare (Mr. Munro) stated in the House that he expected there would be a meeting of the provincial Ministers of Health and that he would be making a full statement to the House on this matter.
On November 3, 1971, I asked the minister if he would make a statement to the House assuring the Canadian

November 9, 1971
Proceedings on Adjournment Motion
people that the government was prepared to do something about the shortage of doctors and the importation of foreign doctors. In reply to my question he advised me to obtain copies of his statements outlining the very meritorious things that the government has done. This is why I have become concerned, because I have been receiving more and more correspondence outlining the difficulty people experience in finding a family doctor or getting medical attention of any kind. I have even had many members of this House speak to me about the problem.
The minister is reported as saying that it is the consumer, medical and health services, who are to call the shots for the doctor. Surely to goodness, Mr. Speaker, if that statement is correct it is time he got off his seat and did something about it. At another meeting he went further and said that health care was a clear citizen's right; in our society no citizen shall go without medical and health care because of his incapacity to pay or because of geographic location. Those are two statements that he made. The Minister of National Health and Welfare on another occasion stated that the shortage of doctors was a myth. What, really, does this government think? One day they have a shortage and the next day they have not. This was a headline in "Canadian Labour" in 1969. In "World Affairs" in March, 1970, it was stated that in 1961 there was one doctor for every 800 people. The article went on to state that the ratio is slipping and Canada now ranks twentieth in doctor-population ratio.
In the previous answer to my question on the "late show" the government said the situation was improving all the time. No consideration was given to the point that only half of the doctors in practice are general practitioners. Many are in administrative posts. I would like to know how many are employed by the government. Dr. Roberts, president of the CMA, and Dr. Evans and Dr. Creary of the CMA have pointed out the gravity of the situation in medical manpower.
Ask yourself if the government realized its responsibility when it introduced national medicare. The responsibility was to build medical schools, to supply teachers and equipment, to educate all those who wanted to pursue a career in medicine and a responsibility in foreign affairs to stop bleeding the poor nations of the world of their MDs. It is criminal that underdeveloped countries- poorer by every standard-who struggle to educate their young people to be doctors find them enticed away by rich countries such as the United States and Canada. India, Iran and Turkey have tried to put a stop to this practice and other countries will have to follow. What will Canada, who is currently using 50 per cent of the import doctors, do to fill the shortage each and every year? If this supply were shut off tomorrow, the condition of medical manpower would become very critical.
We have young men and women dedicated enough that they want to practise medicine. Over 600 fully qualified students were refused entrance to our medical schools because of lack of space to train them. We could not even train the most outstanding students. It is clear we have to step up our enrolment to take in students who are dedicated but who may not have grade B marks. It has been
[Mr. Rynard.J
pretty well proven that grades have little to do with the performance of the doctor after graduation. It is the person and his dedication that counts. Let us quit being hypocrites and robbing the underdeveloped countries of their doctors and at the same time piously proclaiming the foreign aid we give to them.
Why has not the government followed the Hall commission report to supply the necessary manpower? The report was quoted long and often when the national medicare debate was before the House. Why has not the government brought in other measures to help? When will the minister listen to the advice of experts? It is obvious that he does not know, he wanders in the wilderness, because one day we are short of doctors and the next day we are not. I hope the minister is never in the position of having to wait a long time in an emergency ward of a hospital for medical attention. It would certainly give him time to ponder, if the occasion arose, to contemplate just how overworked are the doctors in the emergency wards.
Two-thirds of the people seen do not have serious or acute illnesses but are there because they cannot get an appointment to see a good practitioner. Some people require immediate care but often they do not get it. This does not lead to good preventive medicine. The seriousness of some cases is missed and the doctor is simply being pushed mentally and physically, his work suffers and the treatment of the patient is not as good as it should be.
What, then, do we do to correct this situation? The government could, under the health resources fund, immediately make funds available to the universities and provinces in order to provide the medical centres that are required to train the doctors we need. If possible, 2,000 medical students each year should be trained. This ought to be a first priority.
A manpower survey of the incentives required for a doctor to spend his first five years in general practice should be carried out. Staff should be provided with which to run our expensive medical schools all year instead of only three-quarters of the time. If this is arranged gradually we will be able to provide the doctors and facilities needed to give a high level of preventive medical care, which would cut down on hospitalization care and prevent or delay the onset of many chronic illnesses. The Canadian people deserve no less from this government than the ministerial implementation of the provision of adequate medical care for all Canadians.


Mr. Gaston Clermont (Parliamentary Secretary to President of the Treasury Board):: Mr. Speaker, in answer to the remarks of the hon. member for Simcoe North (Mr. Rynard) about the shortage of doctors, I will say that the government's efforts to increase the number of doctors graduated from our medical schools in order to meet the ever increasing needs of health services have often been discussed in this House.
As the hon. member pointed out, he has brought this subject to the attention of the House many times in the past.
The Minister of National Health and Welfare (Mr. Munro) has often said that the doctor per capita ratio in Canada is one of the highest in the world; we believe that
November 9, 1971

the ratio recommended by the Royal Commission on Health Services should be passed soon.
The number of graduates or undergraduates in mede-cine in Canada cannot be as low as the hon. member for Simcoe North claims. We are looking for means of improving access to and availability of medical care for all Canadians. For instance, the Department of National Health and Welfare finances studies in order to find various ways of relieving doctors of some tasks by giving them to medical personnel able to perform those services. Moreover, projects are set up to have nurses accompany doctors in order to provide the population with mobile health services. Recently, a special committee prepared a program to improve the training of nurses working in northern Canada where they are responsible for many duties normally performed by doctors. Furthermore, following recommendations of the national conference of paramedical personnel, a committee has been established for the purpose of setting up policies regarding recruitment and training of nurses to work in doctor's offices and contribute to offering improved services.
Those are examples of tasks which can be carried out by persons other than physicians, and this is likely to improve services to the public.
The matter is a complex one, involving problems of training, of recourse to professions related to the health field and of issuing of licences, all of which are being attentively considered by the department, as mentioned repeatedly by the Minister of National Health and Welfare and an increase in the quantity of health services does not depend exclusively on the number of physicians. Furthermore, many professional organizations are studying the problem in Canada. There is agreement on the necessity of resorting to supporting medical personnel, on the best use of the staff in related fields and on improved use of the technology made available.
Both at federal and provincial levels and within professional health organizations, there is a constant concern with improvement of medical services in Canada.



EDUCATION-DECREASE IN NUMBER OF GRADUATE STUDENTS FROM UNDERDEVELOPED COUNTRIES FOLLOWING CHANGES IN RULES RESPECTING CERTAIN GRANTS

Mr. D. Gordon Blair (Grenville-Carleton):: Mr. Speaker, I propose to ask a question about the problem of graduate students from underdeveloped countries studying in Canada at the present time. Canada has had a good record in admitting graduate students from underdeveloped countries, principally from Africa and Asia, and we have made a good contribution. At the same time, our country and universities have benefited from having in our midst these foreign students representing, as they do, the cultures of the developing countries.
At present, and unknown I think to most Canadians, a series of unrelated decisions by various levels of government has brought about a serious reduction in the number of graduate students from underdeveloped countries presently studying in Canada. I will enumerate three of the decisions of which I have been made aware. Perhaps there are others of which other hon. members have
Proceedings on Adjournment Motion
knowledge. First, by recent decisions both the National Research Council and the Canada Council have determined that no grants will be made to students unless they are landed immigrants of at least 12 months standing in Canada. This, of course, automatically rules out grants to any student except one who decides to become a landed immigrant and, presumably, is electing to become a Canadian citizen.
Second, the Canadian International Development Agency has shifted the balance of its activity. The number of scholarships which it is offering to graduate students from underdeveloped countries has been reduced. The purpose is to concentrate more on assisting education in underdeveloped countries and to encourage students, both undergraduate and graduate, to complete their university work at home.
The third factor is one which prevails in the province of Ontario and which I have no doubt exists elsewhere in the country. At the present time, provincial regulations limit the payment which any university in Ontario may make to a graduate student to $1,800 per year. As a matter of general policy our immigration department advises all intending student visa applicants that they must have at least $2,500 to support themselves while in Canada. For students coming from Asia or Africa there is a further expenditure for air fare which will perhaps amount to $1,000.
As I said before, these students who might otherwise work in universities in Ontario cannot hope to share in any research grants from either the Canada Council or the National Research Council. The result of the three separate types of decisions which have been made in Canada in the last year is that there has been a drastic reduction in the number of graduate students from Africa and Asia studying in Canada. I have some unofficial figures from a university in Ontario. They indicate that the student visa component of the university population in the present year has dropped over-all by only 2 per cent. In fact, in this particular university the number of graduate students from the United States has increased by 50 per cent and the number of graduate students from the United Kingdom has increased by 100 percent. The overall reduction has occurred at the expense of graduate students from the underdeveloped countries of Africa and Asia.
As I said at the beginning, the rather catastrophic decline in the number of graduate students presently in Canadian universities arises from a series of unrelated decisions. However, it seems to me that it is of such a character that it invites the serious consideration of all levels of government. This is my reason for raising the question in the House of Commons.


John (Moody) Roberts: Mr. Speaker, I congratulate the hon. member for Grenville-Carleton (Mr. Blair) for having raised this question. From the information he has presented to the House it seems that there is cause for considering whether the joint effect of several of these isolated decisions, taken no doubt for the best of

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Proceedings on Adjournment Motion
reasons in isolation, may have some over-all undesirable results.
I cannot speak this evening for all the agencies mentioned by the hon. member, but I can say that as far as the Canadian International Development Agency is concerned there has been little essential change in the rules covering the requirements leading to the granting of awards for graduate studies in Canada to students from developing countries. However, in recent years there has been a de-emphasis on the standard fields of study, for example, the general arts degree, as universities in the developing countries increase their capacity to absorb more students in traditional areas of study.
On the other hand, there has been an increased emphasis on the granting of awards for training in specialized studies, some of which are not given in Canadian universities but, for example, in technical colleges, teachers' colleges and mining schools. I am sure all the other agencies of government will consider very carefully the representations which my hon. friend from Grenville-Carleton has made to the House this evening.



PUBLIC SERVICE-EXPEDITING OF PROVISION OF SEVERANCE PAY TO LAID-OFF EMPLOYEES

Douglas Charles Rowland: Mr. Speaker, on October 20 I asked two questions respecting severance pay for government employees who had been laid off through no fault of their own. The questions resulted from a meeting I held in Gimli, Manitoba, attended by some 60 former employees of the Canadian forces base there. Most of them, if not all, were encountering severe difficulties. Practically every one of them had been faced with problems concerning severance pay in one way or another,. I therefore asked the President of the Treasury Board (Mr. Drury) the following question:
Has the minister taken any steps to ensure that severance pay owing to former employees of the federal government who have been laid off is being provided to them much more rapidly than has been the case in the past in the light of the fact they must live on severance pay for a number of weeks before they can get unemployment insurance?
In reply, the President of the Treasury Board said:
My colleague, the Minister of Supply and Services has been conducting a review of pay operations in his department and one of the objects of it is to speed up this process to which reference has been made.
That reply is not good enough. It has been taking up to three months in some cases for employees of the federal government who have been laid off to receive severance pay. At present they are not eligible to draw unemployment insurance until a certain portion of this pay has been used up. This being the case, it is necessary that they receive severance pay immediately upon termination of their services if they are to have anything upon which to live.
I have suggested to the minister in a letter that perhaps a percentage of the severance pay could be paid immediately on severance, leaving the complicated calculation as to exactly how much individuals are to be awarded until later. I hope this suggestion is being pursued. However, that is not the main reason for my question tonight. My reason for speaking has to do with a related question

which I addressed to the Minister of Labour (Mr. Mack-asey), that question being as follows:
Is the minister giving consideration to removing the regulation which treats severance pay as income for the purpose of calculating unemployment insurance benefits in light of the fact that a number of inequities have arisen from that situation?
In his reply the minister said he was not considering removing the regulation. I was glad to learn from the answer, though, that the department has recognized at least a small portion of the problem which has resulted from this regulation and is moving to correct it. I refer to the possibility that if a person lives on severance pay for more than 32 consecutive weeks he might be disqualified from drawing unemployment insurance for reasons which are too complicated for me to go into now. Once again that action, however welcome it may be, is simply not good enough. Severance pay should not be considered as income for purposes of calculating unemployment insurance benefits.
The first point to make in this regard is that severance pay is not specifically referred to in the act. Its inclusion as a type of income is the result of a regulation of the department interpreting the act. Those members of the House committee who studied the new Unemployment Insurance Act with whom I raised this question have expressed astonishment and concern that it should be so considered, and they said the idea that it might be so considered had not occurred to them. This suggests to me that in drafting the regulation which includes severance pay as income for purposes of calculating unemployment insurance benefits, the department may have gone beyond the expressed wishes of Parliament or, at least, misinterpreted them. That is point one.
Point two: In the case of the former employees of the Department of National Defence the new regulation contravenes the manual which sets out their conditions of employment-the "A and A Manual". It is specifically stated in that manual that severance pay is not to be considered as income.
Point three: Severance pay is available to Department of National Defence employees as a result of an agreement negotiated between the employees and their employer. The regulation thus, in effect by the unilateral action of one of the parties, the government, deprives de facto the other party to the agreement, the employee, of one of the fringe benefits mutually agreed upon.
Point four: Severance pay was obviously designed to compensate persons laid off for such effects of the lay-off as lost sick leave, reduced pension benefits, lost furlough leave and to help compensate for the dislocation which inevitably results from being laid off, and so forth. If recipients of severance pay must now exhaust all or a portion of that severance pay before they become entitled to unemployment insurance benefits, then it no longer constitutes such compensation. It no longer constitutes such compensation unless, of course, the person finds another job immediately, in which case he has the severance pay free and clear. Surely the discrimination which results from this situation-the difference in treatment which is in fact meted out to those who immediately find
November 9, 1971

work and those who do not-is sufficient reason to get rid of the regulation.
Point five: If the severance pay is to be considered income, and if the Unemployment Insurance Commission is to consider those in receipt of severance pay as being employed-and all have been notified to this effect-why [DOT] should not the time they are living off their severance pay be considered pensionable time, for example? It is not, and that fact is simply another example of the discriminatory aspects of the regulation and another reason for its being repealed.
One final fact. In March, when the employees of CFB, Gimli, were being acquainted with the action the government would be taking on their behalf once they were laid off, officials of the Department of National Defence promised them both severance pay and unemployment insurance to assist them over this period. They now find it is an either/or proposition-either severance pay or unemployment insurance benefits. I know they were not deliberately misled but they were misled none the less, and the lack of deliberation does not diminish in any way their resultant difficulties. Let us just get rid of the regulation in question.


Gaston Clermont: Mr. Speaker, I shall reply only to the question put by the hon. member for Selkirk
Proceedings on Adjournment Motion
(Mr. Rowland) to the President of the Treasury Board (Mr. Drury), as found at page 8859 of Hansard, and not to the one he put to the Minister of Labour (Mr. Mackasey). I quote:
-Has he taken any steps to ensure that severance pay owing to former employees of the federal government who have been laid off is being provided to them much more rapidly that than has been the case in the past, in light of the fact they must live on severance pay for a number of weeks before they can get unemployment insurance? I mention in particular over 40 people from the Canadian Armed Forces base, Gimli.
The President of the Treasury Board gave the following reply:
Mr. Speaker, my colleague, the Minister of Supply and Services, has been conducting a review of pay operations in his department, and one of the objects of it is to speed up this process to which reference has been made.

I am informed that the process is that the employing department, in this case National Defence, is required to requisition final pay cheques, including severance pay. The Winnipeg office of Supply and Services was able to get out final pay cheques within 48 hours of receiving requisitions. There were some instances where the employing department failed to include severance pay in their cheque requisitions but these omissions have now been corrected.
Motion agreed to and the House adjourned at 10.29 p.m.

Wednesday, November 10, 1971