1971-11-15

PRIVILEGE


Mr. G. W. Baldwin (Peace River):: Mr. Speaker, I rise on a question of privilege of which I have given notice to Your Honour under the appropriate rule and which I think affects all members of the House. It deals, of course, with the publication in a Canadian periodical of what is known as the Gray report. Mr. Speaker, the facts appear to be simple and I can be quite brief. We all know that in response-


Some hon. Members:: Speak up.


Mr. Speaker:: It is a little difficult to hear the hon. member for Peace River. Perhaps we might have silence and the hon. member might use his louder voice so that we can hear him.


An hon. Member:: And start over again.


Gerald William Baldwin: I was saving that for the moment of outrage, Mr. Speaker.
I will repeat that I rise on a question of privilege notice of which I have given to Your Honour and which affects the rights and privileges of all members of the House. It deals, of course, with the question of the publication in The Canadian Forum of the so-called Gray report. The facts are simple, Mr. Speaker, and I can be quite brief.
In response to growing pressure on and requests to the government to examine the whole question of foreign ownership in Canada a special committee or task force was set up under the guidance of the Minister of National Revenue (Mr. Gray), at that time Minister without Portfolio. This fact was well known and from time to time numerous questions were asked in the House about the report which was being prepared and about the nature and time of its release. For example, on November 30, 1970, as found on page 1621 of Hansard, the Parliamentary Secretary to the Minister of Industry, Trade and Commerce, talking about the report on the late show, said:
It is being studied at the present time. As soon as it is printed and available, the report will be considered in consultation with the principals of the industries concerned in Canada and with the provincial governments concerned.
At page 3567 of Hansard for February 19, 1971, in response to a question by the hon. member for Winnipeg North Centre (Mr. Knowles), who asked about this report, the Prime Minister (Mr. Trudeau) said:
Yes, Mr. Speaker, we are taking such steps-
That is to obtain the report.
-and I think it is safe to gamble on the fact that we will overtake by far the New Democratic Party and the statement of its policy.
There was a clear indication that it was the intention of the government and the Prime Minister to publish the report. At page 5298 of Hansard for April 27, 1971, the Parliamentary Secretary to the Minister of Finance said:
The hon. member will be aware that the Minister of National Revenue (Mr. Gray) has under review the whole matter of foreign ownership and that we are anticipating a full and comprehensive report on this subject.
Subsequently, admissions were made that the report was available and was in the hands of the cabinet.
At the end of last week, Mr. Speaker, what purported to be a copy of the report or of some portion of the report at one stage was published by a Canadian magazine, The Canadian Forum. A press conference was held at which Professor Rotstein, a person connected with that publication, indicated that the statement published was in fact what it purported to be and that he felt it to be in the general interest of the country that publication should be made. So far, Mr. Speaker, there has been no official denial that the material published was a true copy of at least part of the documents and reports in the hands of the government. I feel that I and all other members of the House have a justified cause of complaint and grievance which can only be reflected by a question of privilege such as I have raised today.
My argument is reinforced by a statement Your Honour made on October 27 last, as recorded at page 9076 of Hansard. At that time the hon. member for Battle River was attempting to secure the unanimous consent of the House to put a motion under Standing Order 43 and, in circumstances where there was some parallel, Your Honour said:
I have serious doubts about the hon. member's motion. Basically, I think it is a privilege motion-
I marked those words at the time. Those words of guidance by Your Honour are reinforced by a citation from Blackstone. I am glad to put Your Honour and Blackstone in the same bracket and call upon these authorities for support.
Where governments make public statements about the existence of reports of committees and task forces which inquire into matters the public are concerned with and which are currently the subject of discussion and debate both in the House and outside the House, there is and ought to be, where the taxpayers' money is used for that purpose, an equitable and certainly a moral obligation on the part of the government to produce such a document to the House. I think there is far too much secrecy. Far too many political games are being played with inquiries and reports of this kind and there is far too much hole in the

November 15, 1971
Foreign Ownership
corner skulduggery which is causing the public confusion and anxiety.
Finally, Mr. Speaker, I suggest that when a matter of this kind has proceeded to the extent to which this has it comes into the public domain and certainly there ought to be an obligation upon the government to publish. It was for this reason that I made a proposal through a private member's bill to this effect. In my view, either the government deliberately allowed the contents of the document to be made public for either domestic or international political reasons, and there is a fair suspicion that this could be the case, or else it was so negligent and so slovenly in its handling of security in this matter that it allowed the document to fall into the hands of the publisher of The Canadian Forum. There was either a theft in the dark of night because of slipshod and slovenly security or we have here the tattletale "Gray" of a deliberate leak.


Some hon. Members:: Oh, oh!


Gerald William Baldwin: It was either nonfeasance or misfeasance. In addition to the precedents I have alluded to may I quote citation 106(2) of Beauchesne's Fourth Edition which says:
The dignity and independence of the two Houses are in great measure preserved by keeping their privileges indefinite. If all the privileges of Parliament were set down and ascertained, and no privilege to be allowed but what was so defined and determined, it were easy for the executive power to devise some new case, not within the line of privilege, and under pretence thereof, to harass any ... member and violate the freedom of Parliament.
For those reasons, Mr. Speaker, I suggest to Your Honour that there has been a violation of the privileges of this House and of every member of this House, and I have sought this opportunity to bring this matter, by way of grievance, to the attention of the House.


Mr. Speaker:: The hon. member for Peace River has given the Chair due notice under the provisions of section 2 of Standing Order 17. There is little need for the Chair to say that the matter involved in the hon. member's proposed question of privilege is one of general interest. The report itself, to which the proposed motion alludes, deals with problems which are, I am sure, of concern to all hon. members. It seems to me that those conditions or circumstances alone should not be all-persuasive in determining whether the proposal of the hon. member should be judged a prima facie question of privilege.
It would appear that two conditions are set out in the hon. member's notice. In the first instance the hon. member suggests that the Prime Minister has allowed the so-called Gray report to be made available to unauthorized persons. To me, it seems that the release of the so-called report is more a matter of administration which may be brought before the House in due course under the provisions of our well established and recognized procedures for debate and decision.
The second aspect of the matter is the suggestion that the failure to table the report within a prescribed period of time, or at all, is a breach of parliamentary privilege. I know of no authority to support this contention. The House is well aware that in point of fact numerous reports of a like nature never see the light of day-I refer, of course, to parliamentary light of day-and, indeed, successive governments have frequently refused to table

them. In the circumstances and on the basis of long-established precedents, it is difficult to agree with the suggestion that there has been a breach of parliamentary privilege which should be further considered by the House or referred to a parliamentary committee.
In the statement he has just made the hon. member suggested that this question was being brought before the House as a matter of complaint or grievance. It may well be so. There may well be a legitimate grievance. I cannot give an opinion on this point but, if I may say so, there is a long way between a grievance and a question of privilege. The Chair has come to the conclusion there is no prima facie case of privilege that ought to be considered by the House at this time.



QUESTIONS ON THE ORDER PAPER

[Stage Direction]
(Questions answered orally are indicated by an asterisk)

Mr. Nielsen: Has the Department of Regional Economic Expansion paid funds under the Regional Development Incentives Act to Mondair Aviation Limited of Montreal and, if so, how much and for what purpose?


Hon. lean Marchand (Minister oi Regional Economic Expansion):: No.


SOCIAL WELFARE WORK-ALLOCATION OF GRANTS FOR EDUCATIONAL PURPOSES
Mr. Orlikow: 1.	What amount has been allocated under the welfare training grants to help pay for the education of people desiring to improve their qualifications in the field of social work?
2.	How many people are now at recognized professional schools under the provisions of these grants?
3.	What are the amounts of the bursaries provided?
4.	Has any money been allocated for research projects in the field of social service?
5.	Have any plans been developed for research into appropriate use of sub-professional staff in the field of social welfare?


Hon. John C. Munro (Minister of National Health and Welfare):: 1. During the current fiscal year $160,000. has been allocated under the Welfare Scholarship and Fellowship programs.
2.	Thirteen scholarship and 25 fellowship recipients are currently undertaking studies in recognized professional schools of social work.
3.	The basic value of a welfare scholarship is $2,500. and that of a welfare fellowship is $5,000. for a full-time academic year of 12 months, and pro-rated if the period of study is less than 12 months.
4.	Yes. $475,000. has been allocated in the current fiscal year.
5.	The Welfare Grants Division has funded a research project on an Experiment in the Development of Welfare Aides, conducted at the Children's Aid Society of Vancou-
Novenrber 15, 1971

ver, B.C., in 1970, and is currently funding another research project on the deployment of social work graduates from universities and community colleges across the country.


REGIONAL DEVELOPMENT ACT-GRANTS MADE TO PRODUCTION OR CONSUMERS CO-OPERATIVES
Mr. Laprise: Were any grants made to production or consumers' co-operatives under the Regional Development Act and, if so (a) how many received grants (b) for what amount (c) how many jobs were thus created?


Len Marchand: Yes. (a) 12; (b) $1,824,748; (c) 513.


BELLECHASSE CONSTITUENCY-ALLOTMENT OF SYLVICULTURE PROJECTS
Mr. Lambert (Bellechasse): Has the government allotted sylviculture projects to anyone in the constituency of Bellechasse and, if so, to whom or to what company?

Hon. jean Marchand (Minister of Regional Economic Expansion): No. However, under the second ARDA agreement, the federal government contributed toward reforestation projects, initiated by the Department of Lands and Forests of Quebec, in the districts of Talon, Patton, Ashburton and Bourdages.


ARDA PROGRAM-STUDIES MADE IN NORTHWESTERN QUEBEC ON TOURISM AND RECREATION
Mr. Laprise: Was any study made on tourism and recreation in the northwestern area of Quebec under the ARDA program and, if so, were the results of this study published?


Len Marchand: Yes. Under the ARDA program, the federal government contributed one-half of the cost of a study commissioned by the Department of Tourism, Hunting and Fishing of the Province of Quebec. The study was not made public.


PURCHASE OF LAND BY FOREIGNERS
Mr. Yewchulc: By province and territory, how many acres of land have been purchased by foreigners to date?


Mr. J. A. Jerome (Parliamentary Secretary to President of Privy Council):: The federal Government does not have the information requested.


ASSISTANCE TO PROVINCES UNDER TECHNICAL AND VOCATIONAL TRAINING ASSISTANCE ACT
Mr. Orlikow: Under the formula for the equitable distribution among the provinces of federal contributions under the Technical and Voca-
Questions
tional Training Assistance Act for financial assistance to the capital cost of training facilities, what amount has been paid, or will be paid, to each province, expressed both in dollars and as a percentage of the total amount each province is entitled to receive under the formula and what amount remains to be paid or will be paid to each province under the formula from March 31, 1967 to 1971?


Hon. Otto E. Lang (Minister of Manpower and Immigration):: The Capital Assistance Program was begun in 1961 under the Technical and Vocational Training Assistance Act and continued under the Adult Occupational Training Act of 1967 which set a limit on the total amount payable to each province. According to this formula, the distribution of the total provincial entitlement both in dollars and percentages is shown in the following table:
	($)	(%)
Nfld.	35,063,200	3.1P.E.I.	7,100,000	.6N.S.	51,391,200	4.5N.B.	42,811,200	3.7Que.	373,940,800	32.6Ont.	349,506,400	30.5Man.	56,646,400	4.9Sask.	58,291,200	5.1Alta.	79,203,200	6.9B.C.	90,122,400	7.9Y.T.*	612,000*	.1N.W.T.	1,359,200	.1Total	1,146,047,200	100.0
"In accordance with the regulations before the present formula came into effect, Yukon Territory was paid $957,820.
All provinces received their full entitlement prior to September, 1971, except Newfoundland, whose $4,130,393.95 balance of entitlement is payable during the current fiscal year.


REGIONAL ECONOMIC EXPANSION ACT-GRANTS TO INDUSTRIES IN COMPTON CONSTITUENCY
Mr. Latulippe: Have any industries in the constituency of Compton been subsidized by the Department of Regional Economic Expansion since the Act for the provision of such grants to industries was passed and, if so (a) which ones (b) what amount was granted to each such industry?


Len Marchand: The following companies have been offered incentive grants under the Regional Development Incentive Act for projects in the constituency of Compton.
(a) Company	<b) Estimated Amount
of Offer
Chemcell Ltd.	$ 20,100
Industries Ben Angus Ltee	51,602
Bestar Ltee	9,047
Syl-Ester Wood Products Corp. Ltd.	553,566
C. A. Moreau Inc.	36,300
Salaison Ideale Ltee	88,538
Frontenac Plywood Door Co.	19,552
Raymond Boisvert Sportwear Inc.	19,500
Thomas Bonar & Co. (Canada) Ltd.	34,600
Confection Stornoway Inc.	8,400

November 15, 1971
Questions


ROYAL COMMISSIONS
Mr. Latulippe: 1.	Since the Right Hon. Lester B. Pearson became Prime Minister, how many Royal Commissions and Commissions of Inquiry were established?
2,	What was the title and cost of each?
3.	Who was the Chairman of each commission?


James Alexander Jerome: I am informed by the Prime Minister's and Privy Council Offices, The Department of National Health and Welfare and The Prices and Incomes Commission as follows: (a) 21; (b) and (c) See following statement:
Title of Commission
Total
Cost	Chairman of Commission
Bilingualism and Biculturalism
Irregulatities in processing claims under l'rairie Farm Assistance Act	
TCA Overhaul and Maintenance Base, Winnipeg, Manitoba	
Crash of TCA Aircraft at Ste-Thcrcse	
Export Marketing Problems of Salt Fish Industry in the Atlantic Provinces	
Dorion Inquiry	
Irregularities in 1963 Federal Election -B.C	
Inquiry into Freshwater Fish Market	
Inquiry into Group D. Salary Increases	
Working Conditions in Post Office Department	
Inquiry into Mr. Justice Landreville	
Inquiry into Complaints made by one George Victor Spencer	
Inquiry into matters relating to one Gerda Munsinger	
Farm Machinery Costs	
Security	
Status of Women in Canada	
Hay River	
Indian Claims Commission	
Commission of Inquiry into Mail Transport in Montreal	
Commission of Inquiry into the Non-Medical l.'se of Drugs	
Prices and Incomes Commission	 1909-70

 1971-72
'Deceased.	(to sept. 30, 1971.) (approximately)
$9,029,305	Mr. A. Laurendeau* Dr. A. D. Dunton Mr. J. L. Gagnon
17,957	Hon. II. \Y. 1'ope
55,340	Mr. D. A. Thompson
21,038	Hon. G. S. Challies
42,116	Mr. T. B. Finn
180,053	Hon. F. Dorion
14,107	Hon. N. T. Nemetz
39,611	Mr. G. H. Melvor
7,193	Hon. J. C. Anderson
78,960	Hon. A. Montpetit
55,831	Hon. I. C. Hand
13,099	Hon. I). C. Wells
54,708	Hon. W. F. Spence
1,568,768	Mr. G. L. Barber
406,586	Mr. M. W. Mackenzie
1,947,281	Mrs. J. Bird
15,923	Hon. W. G. Morrow
202,071	Dr. L. Barber
5,210 2,263,354	Mr. H. Carl Goldenberg
i Oct. 15, 1971 569.000 2,068,527 818.000	Gerald Le Dain, Q.C. John II. Young


NATIONAL REVENUE-COST OF INCOME TAX FORMS PRINTED PRIOR TO OCTOBER 14, 1971
Mr. Knowles (Winnipeg North Centre): Were income tax return forms, guides and any other materials for the year 1971 printed prior to October 14, 1971 and, if so, will such materials have to be re-printed because of the tax changes announced on October 14, 1971, and what is the total cost of the forms, guides and other materials to be discarded?
Mr. ]. A. Jerome (Parliamentary Secretary to the President of the Privy Council): Mr. Speaker, income tax return forms, guides and any other materials for the year 1971 were partly printed prior to October 14, 1971, and such materials will have to be partly reprinted because of the tax changes announced on October 14, 1971. The total cost of the forms, guides and other materials to be discarded will be approximately $50,000.


IMMIGRATION FROM REPUBLIC OF IRELAND AND NORTHERN IRELAND FROM 1960 TO 1971
Mr. Robinson: 1.	How many immigrants has Canada received from Eire in each year 1960 to 1971 inclusive?

2.	How many immigrants has Canada received from Northern Ireland in each of the same years?


Otto Emil Lang: Immigrants admitted to Canada from the Republic of Ireland and Northern Ireland 1960 to June 30, 1971.
	Republic of	Northern
	Ireland	Ireland
I960	799	10351961	415	6881962	452	9511963	590	17431964	680	18471965	861	19341966	1774	24001967	2181	26441968	1545	14771969	1235	14911970	1123	16201971 (June 30)	447	43212102	18262
November 15, 1971


BILINGUALISM BONUS
Mr. Robinson: 1.	Since the beginning of the program, how many public servants received additional pay for being bilingual (French and English)?
2.	What is the total amount paid by year for public servants for bilingualism?
3.	How many English speaking public servants receive additional pay because they also speak French?
4.	How many French speaking public servants receive additional pay because they also speak English?


James Alexander Jerome: 1. and 2. See return to question No. 1,391 deposited with the Clerk of the House of Commons on October 4, 1971.
3.	and 4. None.


SPECIAL GRANTS FROM FEDERAL GOVERNMENT
Mr. Robinson: 1.	During the fiscal year 1970-71 and 1971 to date, what requests were made for special grants from the government?
2.	How many were accepted and how many were rejected?


James Alexander Jerome: This information can only be obtained by searching the files, the cost of which in manpower and time would be exorbitant or prohibitive.


MOTION TO ADJOURN UNDER S.O. 26 THE CANADIAN ECONOMY FOREIGN OWNERSHIP-NECESSITY FOR RELEASE OF REPORT TO CABINET IN VIEW OF PUBLICATION IN &quot;THE CANADIAN FORUM&quot;
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 necessity for the release by the government of the report on foreign ownership prepared by or under the direction of the Minister of National Revenue (Mr. Gray) in view of the publication by The Canadian Forum of a document alleged to be a part of the said report.


Mr. Speaker:: The Chair has received due notice from the hon. member for York South of his intention to request leave to move the adjournment of the House to discuss the matter set down in his notice under the provisions of Standing Order 26. This notice has given me an opportunity to give very serious consideration to this matter and to the suggestion that the debates of the House should be adjourned later this day for the purpose of considering the matter alluded to in the hon. member's proposed notice.
As the Chair stated a few moments ago in relation to the question raised by the hon. member for Peace River by
Inquiries of the Ministry
way of a question of privilege, the matter proposed for discussion at this time by the hon. member for York South under the terms of Standing Order 26 is undoubtedly one of general interest. It seems to me that a debate on the proposed motion would produce a repetition of the debate on the question of economic and political relations with the United States which was the subject of a most interesting and exhaustive discussion as recently as the third and fourth of this month.
The primary question to be asked before the matter is put forward for debate at this time is whether a new dimension of sufficient import has been added to a question which has been under debate on many occasions during the current session, and which I am sure will be debated again in the days ahead, so as to justify a special debate in this sitting under Standing Order 26. My response would have to be in the negative. The question of whether the so-called report should be released at this time is, to my mind, a matter of administration and not a matter which should be resolved under the provisions of Standing Order 26. With respect, I suggest to the hon. member and to all hon. members that in any event the matter should not be resolved by way of debate under Standing Order 26. As the hon. member knows, there are available to him other methods and opportunities to deal with this question.



ORAL QUESTION PERIOD


Hon. Robert L. Stanfield (Leader of the Opposition):: Mr. Speaker, I should like to ask the Acting Prime Minister whether, in view of the interest and the confusion created by what government sopkesmen have admitted is part of a draft report to the cabinet, the government will now release the full text of this report, generally referred to as the Gray Report, so that the Canadian people can debate the issues with all the information in front of them?


Hon. Mitchell Sharp (Acting Prime Minister):: The
answer to that question, Mr. Speaker, is no. The government has made it clear that it does not think cabinet documents should be published. What has appeared so far, as the Prime Minister has said, is an early draft of a study prepared for the government in connection with the whole question of foreign ownership. The government still has this matter under consideration and when it has reached a decision on policy-and, of course, this study is not a statement of government policy-it can then decide what kind of information might at that time be published in connection with its decision.
9554

November 15, 1971
Inquiries of the Ministry



FOREIGN OWNERSHIP-DISCUSSION AT FIRST MINISTERS' CONFERENCE-SUPPLYING OF REPORT TO CABINET TO PROVINCIAL PREMIERS-POSSIBLE SCREENING MECHANISM

['Mr. Speaker, I direct a supplementary question to the Secretary of State. In view of the fact that the Minister of National Revenue has said this question should be addressed to the Minister of Finance and as the Minister of Finance has already answered by saying he is not in receipt of any such request or recommendation, would the Secretary of State look into the reported statement by the Chairman of the CRTC in Manitoba that this question is currently before Parliament and get the matter straightened out with the Chairman of the CRTC?']
Robert Lorne Stanfield: should like to ask the Acting Prime Minister whether the subject of foreign investment and the control of foreign investment in Canada will be discussed at the conference of first ministers currently taking place, and, if so, whether the government of Canada will place before the first ministers of the provinces a full copy of the report made to the government so that at least the premiers of the provinces will have before them all available information-all the information which is before the government.


Mitchell William Sharp: It is the
intention of the government, as soon as it has reached a decision on this very important question, to make its views known publicly. I would think there would also be some prior consultation with the provinces which, I am sure he realizes, would be very much affected by any decisions that might be made. The question of whether this particular study, which is only one of those before the government, should be made public in whole or in part would be a decision to be made later but, as I said in answer to the first question, I would not think that anyone in this House would recommend that secret cabinet documents should be made public. Whatever is to be made public should be a matter for government decision.


Robert Lorne Stanfield: The Acting Prime Minister did not say whether the matter would be placed before the conference of premiers. I should like to ask him whether, in fact, there exists a cabinet document stating: "The main policy approach to the issue of foreign ownership should be the creation of a screening mechanism." Is there any such cabinet document?


Mitchell William Sharp: This, of course, is a matter of cabinet secrecy and I am bound by my oath not to disclose what goes on in cabinet.



David Lewis: (York South): I should like to ask the
Acting Prime Minister a question arising out of the answers he has given, from which I would conclude there are studies before the cabinet as well as documents requiring actual decisions by cabinet. May I ask the Acting Prime Minister whether the government would seriously consider publishing studies that are not binding on the government, with a clear statement that they are not government policy, so there will be available to Members of Parliament and the people of Canada information on the extent of the problem that Canadians are now anxious to know about?


Mitchell William Sharp: Mr. Speaker, I think the dimensions of the problem are very well known. It has probably been the most debated subject in the country. It has been debated by members of the hon. gentleman's own party within which, of course, there are differences of opinion as to how important the matter is.
In any event, what I think would be welcome from the government is a statement of its decisions. Then, of course, studies could be presented to illustrate the nature of the problems and the reason the government arrived at its decisions. I do think that if studies are to be published now which purport, as it has been alleged this one does, to be government policy, it would add not to clarification but to even further confusion.


David Lewis: Mr. Speaker, no one but the Acting Prime Minister has suggested that this study, alleged to be part of a government study, is government policy; no one has suggested that to my knowledge. In view of the fact that the government, particularly the Prime Minister, have often emphasized the need for people to participate in decision-making, is the refusal of the government to publish this information, which is all I am asking about, that would assist the Canadian people to understand the process of decision-making on this issue and therefore to appreciate better the decisions that may eventually be announced, explainable by reasons other than those the minister has given?


Mitchell William Sharp: No, Mr. Speaker. I think the reasons are very clear. Since there has been a debate on the issue for so many years during which a great deal of information has been placed before the public, I think it is important for the government to reach a decision.


Some hon. Members:: Hear, hear!


Mitchell William Sharp: When that decision is made, at that time I think the government can also reach a complementary decision as to whether and how it may publish supplementary information. But I repeat what I said, that we have not lacked material on this subject. What we should have now is government decision, and this is what the government wants to proceed to do.


POSSIBLE LOSS OF PRODUCTION AND JOBS BY U.S. PARENT COMPANIES CLOSING CANADIAN SUBSIDIARY OPERATIONS-ACTION TO PREVENT
David Lewis: Mr. Speaker, I am delighted to hear that at last the government thinks a decision should be made; that is one important step forward. In view of present United States policies which may well affect jobs in Canada as a result of the export of subsidiary plant operations from Canada to the United States by parent companies that would find it more profitable to carry on those operations in that country, may I ask the Acting Prime Minister whether the government is giving immediate consideration to setting up some machinery that would prevent Canadians losing production and jobs in the near future?


Mr. Speaker:: I suggest to the hon. member that that question is not entirely supplementary, though I appreciate it is closely related to the others. As the question has been asked, the Chair will allow the minister to reply and then the Chair will recognize the hon. member for Peace River.


Mitchell William Sharp: Mr. Speaker, I assume the hon. gentleman is referring in particular to the DISC proposal.

November 15, 1971


David Lewis: And the job incentive plan.


Mitchell William Sharp: And the job incentive plan. The problem here is not simply that of subsidiaries in Canada. The DISC proposal and the job incentive plan would affect Canadian-owned companies just as much as those that are subsidiaries of parent companies in the United States.


FOREIGN OWNERSHIP-PARTICIPATION BY PROFESSOR ROTSTEIN IN PREPARATION OF REPORT TO CABINET
Gerald William Baldwin: Mr. Speaker, I should like to ask the Minister of National Revenue whether Professor Rotstein participated in or in any way contributed to the preparation of the report to which the Prime Minister has referred as being a secret cabinet document?


Hon. Herb Gray (Minister of National Revenue):: No, sir.


FOREIGN OWNERSHIP-SOURCE OF MATERIAL APPEARING IN &quot;THE CANADIAN FORUM&quot;
Right Hon. I. G. Diefenbaker (Prince Albert):: Mr. Speaker, I think we can clear up a great deal with the Minister of National Revenue here, because this looks like Gray's elegy and not Gray's eulogy. I should like to ask him simply whether these quotations which have appeared in The Canadian Forum came from any official document in the possession of the minister, and has he any idea how they were obtained?


Herbert Eser (Herb) Gray: Mr. Speaker, I would draw the right hon. gentleman's attention to the statement issued by the Prime Minister's office on Friday which said that the article in The Canadian Forum is based on only one draft of a study prepared for official discussion at one stage in the preparation of documents to be submitted to cabinet. I have no knowledge at this time as to how any information may have reached The Canadian Forum in an unauthorized way.


John George Diefenbaker: Mr. Speaker, it is a strange thing that the minister has to give secondary evidence regarding this matter. I did not ask him what the Prime Minister said or what somebody in his office answered. I want to know whether the quotations that appeared in The Canadian Forum are in any way representative of the recommendations of the task force. That is the question. Can he not answer that or must he have the assistance of the Prime Minister's staff?


Herbert Eser (Herb) Gray: Mr. Speaker, there is nothing I can usefully add to my previous answer.


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


Mr. Real Caouette (Temiscamingue):: No, Mr. Speaker.


Mr. Speaker:: I will recognize the hon. member for Temiscamingue in a minute.

For the moment the Chair will recognize the hon. member for Prince Edward-Hastings and then move on to
Inquiries of the Ministry
the hon. member for Temiscamingue and reward him for his patience. If hon. members want to return later to this burning subject, they may do so. For the moment the Chair recognizes the hon. member for Prince Edward-Hastings.


FURTHER RESEARCH INTO ESTABLISHMENT OF SCREENING MECHANISM TO CONTROL FOREIGN INVESTMENT
Hon. George Hees (Prince Edward-Hastings):: Mr. Speaker, I have a supplementary question for the Acting Prime Minister. Is the government now giving consideration to or actually undertaking further research into the recommendation contained in the Gray report that the government should establish a screening process to control foreign investment in Canada?


Mitchell William Sharp: Mr. Speaker, this is one of several methods that have been proposed. I think it has come from every side of the House and certainly from many people throughout the country.


George Harris Hees: As the government has had a full six months to consider this matter, would the Acting Prime Minister advise the House when the government intends to break away from the stultifying immobility which it has indulged in for quite a long time and get on with the job of dealing with this matter?


Some hon. Members:: Oh, oh!


Mr. Speaker:: Order, please. The question is
argumentative.


CANADIAN BROADCASTING CORPORATION
David Réal Caouette: Mr. Speaker, I should like to put a question to the Secretary of State.
This week's issue of Quebec-Presse-a separatist and probably pro-FLQ newspaper-contains three costly ads paid by the CBC. Is the Secretary of State aware of the fact that federal funds are thus used to finance the revolutionists of Quebec-Presse?


Mr. Speaker:: This question might perhaps have been placed on the Order Paper, but since it is the first question put on behalf of the party of which the hon. member is the leader, I shall allow the minister to answer it.


Hon. Gerard Pelletier (Secretary of State):: Mr. Speaker, as I do not read the paper referred to by the hon. member for Temiscamingue, I am in no position to decide whether the allegations he made before putting his question are right or wrong.
As for the ads in that paper, I promise to inquire as to how and why they were put there and for what purpose the CBC has them published, and I shall then be able to forward that information to the hon. member.
24372-45}

November 15, 1971
Inquiries of the Ministry


THE CANADIAN ECONOMY
Mr. James A. McGrath (St. John's East):: Mr. Speaker, I should like to direct a question to the Acting Prime Minister which is supplementary to my leader's question. Is the Gray report or a draft copy being made available to the provincial premiers at the conference currently taking place in Ottawa? If so, is the government prepared to make a copy of that draft report available to an appropriate standing committee of the House?


Mitchell William Sharp: The
answer to this question, Mr. Speaker, is no. As I said earlier, cabinet documents are not made public.


James Aloysius McGrath: May I ask the Acting Prime Minister whether the general subject of foreign investment is on the agenda of the first ministers' conference?


Mitchell William Sharp: I do not think so, but any provincial premier is free to make reference to it if he wishes. We do not intend to raise the question.


FOREIGN OWNERSHIP-TIME OF STATEMENT ON GOVERNMENT POLICY-TABLING OF REPORT TO CABINET
Mr. T. C. Douglas (Nanaimo-Cowichan-The Islands):: Mr. Speaker, in view of the promise made by the Prime Minister and today by the Acting Prime Minister that the government proposes to release to members of the House a white paper or some other form of statement outlining the government's decision in respect of foreign ownership, may I ask whether we can expect such a statement before the Christmas recess?


Mitchell William Sharp: Mr. Speaker, I cannot give a definite answer. I know it is the desire of the Prime Minister and the government to reach a decision as quickly as possible.


Thomas Clement (Tommy) Douglas: May I ask whether the Acting Prime Minister will undertake to assure the House that when such a statement is released the report to the cabinet by the Minister of National Revenue will also be made available at the same time in order that members may have the benefit of the study and the data upon which these decisions have been made?


Mitchell William Sharp: Mr. Speaker, there will be several studies put before the cabinet before any decision is made; in fact, there are several before the cabinet now. This is only one study, as the Prime Minister has already said and, as I said before, I do not believe that cabinet documents should be released. I think the government should make a decision as to the publication of a report but that it should not, of course, release cabinet documents.


Some hon. Members:: Oh, oh!


Mr. Speaker:: Order, please. 1 suggest to hon. members that we will have to try to limit the number of supplementary questions. We have spent a great deal of time on this same subject.


An hon. Member:: As we do all along.


Mr. Speaker:: I will return to the hon. member in a moment, but I recognize first the hon. member for Annapolis Valley on a supplementary.


FOREIGN OWNERSHIP-NUMBER OF DRAFT STUDIES
Mr. J. P. Nowlan (Annapolis Valley):: Mr. Speaker, my question is for the purpose of seeking further amplification of the answer given by the Minister of National Revenue to the question posed by the right hon. member for Prince Albert. The minister replied by quoting what was said by the Prime Minister's office on Friday, that this was a first draft of the study. Will he inform the House what stage the study has reached now? Is there a second draft, a third draft and a fourth draft, or is there only one draft?


Herbert Eser (Herb) Gray: Mr. Speaker, I think it is clear from the statement issued by the Prime Minister's office-


Some hon. Members:: Oh, oh!


George Harris Hees: What do you have to say?


John George Diefenbaker: What a gramophone record!


Herbert Eser (Herb) Gray: Mr. Speaker, I think it is clear from the statement issued by the Prime Minister's office that the document on which The Canadian Forum article is based is not a document which was submitted by me to cabinet.


FOREIGN OWNERSHIP-PARTICIPATION BY &quot;CANADIAN FORUM&quot; PERSONNEL IN PREPARATION OF REPORT TO CABINET
Mr. Thomas M. Bell (Saint John-Lancaster):: Mr. Speaker, the minister said that Professor Rotstein was not involved in the preparation of this report. Can he say whether anyone from The Canadian Forum was in any way involved in the preparation of the Gray report?


Herbert Eser (Herb) Gray: Not to
my knowledge, Mr. Speaker.


Mr. Speaker:: Order, please. Again I suggest to hon. members, in spite of the suggestion made a moment ago, that we should not spend the whole question period on supplementary questions, thereby depriving other members of the opportunity to ask their questions which I am sure they are anxious to pose. I will recognize the hon. member for Annapolis Valley on a supplementary.


FOREIGN OWNERSHIP-INVESTIGATION OF POSSIBLE LEAKING OF REPORT TO CABINET
John Patrick (Pat) Nowlan: Mr. Speaker, in view of the fact the Prime Minister carried out an investigation some time ago in respect of a leak involving the B and B commission report, does the Prime Minister or the government now intend to carry out a survey or an inquiry through the RCMP to find out what happened and how this leak occurred?


Mitchell William Sharp: Mr. Speaker, inquiries are already being made but whether the RCMP will be involved is still a decision to be made.
[Mr. Pelletier.)
November 15, 1971


FOREIGN OWNERSHIP-STUDIES BEING USED BY CABINET IN ARRIVING AT POLICY
Thomas Clement (Tommy) Douglas: wish to ask a question for clarification, Mr. Speaker. The Acting Prime Minister spoke of several studies being before cabinet, but the general understanding we have had from statements made by the Prime Minister is that the Minister of National Revenue was charged with the responsibility of preparing a report for cabinet. May I ask whether the report from the minister is before cabinet and is that report the basis upon which the government is acting, or are there a number of other studies and by whom have they been prepared?


Mitchell William Sharp: Mr. Speaker, as the hon. gentleman knows, for me to review what is going on in cabinet would be for me to break my oath. What he said is right. The Minister of National Revenue was asked by the Prime Minister to see that some studies were prepared. Some of them are before the cabinet. There are also, of course, other studies because this is a very large subject that covers many aspects of government policy including foreign policy.


REGULATIONS TO PROTECT FARMERS WITH CROP STILL IN SWATH AGAINST POSSIBLE LOSS OF QUOTAS
Mr. Craig Stewart (Marquette):: Mr. Speaker, my question was for the minister responsible for the Canadian Wheat Board but as he has left the House I shall address it to the Acting Minister. Because of the amount of crop still out in swath in western Canada and particularly in Manitoba, and as this grain will not be combined until spring, and because under the new quota system these farmers will not be able to take advantage of the earlier specified delivery dates, does the government intend to introduce regulations so these farmers will be protected against possible loss of quota under these circumstances?


Hon. Martin P. O'Connell (Minister of State):: Mr. Speaker, I will take this question as notice on behalf of the minister.


Mr. Speaker:: The hon. member for Oshawa-Whitby. Order, please. Perhaps the hon. member for Marquette might be allowed a supplementary and the hon. member will then be recognized.


Donald Craig Stewart: Thank you, Mr. Speaker. Because of the loss of income to many farmers in western Canada, would the minister ask the Canadian Wheat Board to investigate the situation?


Mr. O'Connell:: Mr. Speaker, I will draw that question to the minister's attention also.


THE CANADIAN ECONOMY
Mr. Edward Broadbent (Oshawa-Whitby):: Mr. Speaker,
Inquiries of the Ministry
I have a question for the Acting Prime Minister. In view of the disclosure in the so-called version of the Gray report which has been published by The Canadian Forum that Canadian banks are not doing what they ought to in terms of investing in Canadian industry and thus creating jobs in Canada, can the Acting Prime Minister inform the House whether or not the government intends to do something about channeling the investment dollars of Canadian banks more generally into Canadian industry?


Mitchell William Sharp: Mr. Speaker, I must repeat that the report which has been abbreviated and appears in The Canadian Forum is not a statement of government policy. When government decisions are made, and I hope they will be made soon, they will be announced.


John Edward Broadbent: Mr. Speaker, I was not asking the Acting Prime Minister if it was government policy. What I was asking him, and I shall repeat it, is whether the government is giving serious consideration to changing the regulations actually pertaining to Canadian banking to ensure that a greater percentage of investment dollars coming from Canadian banks go into the Canadian sector of the economy?


Mitchell William Sharp: Mr. Speaker, it is obvious from what has been revealed that this is one of the matters which has been brought to the attention of the government, but the government still has to make its decisions.


FOREIGN OWNERSHIP-REQUEST FOR COMMITTEE REFERENCE TO DETERMINE WHETHER REPORT TO CABINET WAS LEAKED
James Aloysius McGrath: Mr. Speaker, I have a supplementary question for the government House leader. Is the government prepared to refer the subject matter of the article that appeared in The Canadian Forum, which is alleged to be a copy of the Gray report, to an appropriate standing committee so that the committee may call witnesses to determine whether or not this was a deliberate leak?


Hon. Allan J. MacEachen (President of the Privy Council):: No, Mr. Speaker.


AIR TRANSPORT
Mr. Warren Allmand (Notre-Dame-de-Grace):: Mr. Speaker, this question is for the Secretary of State for External Affairs or the Minister of Justice. In view of the major hijacking which took place in Canada on Friday, is the government now ready to ratify the convention on hijacking and introduce articles in the Criminal Code to deal with the matter? I asked this question about a month ago and the government promised to take action.


Hon. John N. Turner (Minister of Justice):: Mr. Speaker, on the international front dealing with the issue of hijacking, Canada signed a convention at The Hague last December regarding hijacking of aircraft and a further convention was signed at Montreal last September dealing

November 15, 1971
Inquiries of the Ministry
with other offences against aircraft, including sabotage. Both these conventions will be ratified as soon as some incidental amendments are made to the Criminal Code, which I intend to bring forward in the very immediate future.


THE CANADIAN ECONOMY
Robert Lorne Stanfield: Mr. Speaker, I should like to ask the Acting Prime Minister a question. In view of the statement of the hon. gentleman and the Prime Minister that the material published in The Canadian Forum is not to be taken to be government policy, but also in view of the fact that the government has not said it is not government policy, and because of the resulting confusion that exists in the country, is the Acting Prime Minister prepared to give the House any time within which the government will undertake to reach a decision and eliminate the confusion that is bound to do nothing but damage to the economy when there is already an excessive amount of unemployment and uneasiness?


Mitchell William Sharp: Mr. Speaker, I can give assurance that the government would like to remove the confusion which has arisen from the unauthorized publication of this study. I think it serves to underline the inadvisability of having these preliminary studies published in this way because it leads the public to believe that this is government policy. But I assure him we are anxious to make a government decision as quickly as possible.


FEDERAL-PROVINCIAL CONFERENCE INDICATION TO PROVINCES OF ISSUES UNDER DISCUSSION WITH UNITED STATES AND FEDERAL GOVERNMENT POLICY
Hon. Marcel Lambert (Edmonton West):: Mr. Speaker, my question is directed to the Acting Prime Minister. Without reference to any statements which may have appeared today in respect of the conference of first ministers, particularly that by Ontario with regard to a new joint economic committee to establish economic goals for Canada, I wonder whether the government intends, through the Prime Minister or some other cabinet minister at the conference, to indicate to the provinces what issues are presently under discussion with the government of the United States and just what policy the government is adopting in respect of these particular subjects?


Mitchell William Sharp: Mr. Speaker, I cannot speak for the Prime Minister concerning how far he may want to take the first ministers of the provinces into his confidence on these matters, but one of the problems we have at the moment is that the position of the United States itself is rather unclear. We are having a series of meetings, one of which is going on today, at

which we are attempting to get some clarification of the aims and objectives of the United States, but until we know that more completely it is very difficult for us to convey anything to anyone.


Marcel Joseph Aimé Lambert: Mr. Speaker, I was asking whether the government would merely indicate to the provinces, Alberta and Ontario, for example, which have made very serious representations in this connection, what subjects are being discussed with the United States and whether the provincial authorities will be brought into the vital discussions in these negotiations?


Mitchell William Sharp: I must repeat what I said, but perhaps I might take advantage of this occasion to say that one of the things which is not under discussion is negotiation of the 10 per cent surcharge. The Canadian government has refused to negotiate that. There are some problems that the two countries are discussing. I say this because it has been suggested in the public press that somehow we are going to bargain energy policy against the 10 per cent surcharge and there is absolutely nothing to that.


CREATION OF HEMISPHERIC CURRENCY AND TRADING
Mr. S. Perry Ryan (Spadina):: Mr. Speaker, I have a supplementary for the Acting Prime Minister. As the United States Under Secretary of the Treasury, Charles Walker, suggests that the solution to the present surcharge and currency problems may be the creation of hemispheric currency and trading blocs, is the government prepared to consider such a formula for North America as part of bilateral talks with the United States at this time?


Mitchell William Sharp: Mr. Speaker, no such proposal has been made to us by the United States and we have not proposed it to them.


Sylvester Perry Ryan: Mr. Speaker, will the minister assure the House that a statement on negotiable and non-negotiable Canadian trade and economic goals will be made to the House before any substantive bilateral deal is made with the United States in these areas?


Mitchell William Sharp: Mr. Speaker, I think we have made it very clear that we are not prepared to negotiate for the removal of the 10 per cent surcharge. We have said to the United States-I have said this publicly as have other members of the government-that we would like to help the United States overcome its balance of payments problems because this affects us but we are not negotiating for the removal of a tax which was placed on our trade unilaterally without negotiation.


UNITED STATES PROTECTIONIST MEASURES- PARTICIPATION BY CANADA IN EUROPEAN GOVERNMENT TALKS TO ACHIEVE COMMON FRONT
Mr. Lloyd R. Crouse (South Shore):: Mr. Speaker, I wish to direct a supplementary question to the Acting Prime
November 15, 1971

Minister. There are growing reports that western European governments are trying to hammer out a common front to deal with the United States surcharge and other protectionist moves. In order to avoid the complete isolation of Canada in this crisis, is the government attempting to participate in any meaningful way in such European talks?


Mitchell William Sharp: No, Mr. Speaker, other than that the Minister of Finance is a member of the Group of Ten in which the leading financial and economic countries of the world are represented. We have, of course, been talking to the United States at all levels-ministerial, official and so on-to try to discover what are the problems that are concerning the United States in their trade relations with us. So we are not isolated in any way. Indeed, Mr. Speaker, we are making as much progress with the United States as anyone else.


Lloyd Roseville Crouse: As one further supplementary-


Mr. Speaker:: Order, please. I suggest to hon. members that we have to give an opportunity not only to other members but to spokesmen on behalf of other political groups. There has to be some proportion with respect to questions and, subject to returning to the hon. member in a moment, the Chair will now recognize the hon. member for Selkirk.


Lloyd Roseville Crouse: Mr. Speaker, this question is directed to the Acting Prime Minister and is supplementary to the question I posed a moment ago. At that time he stated that we were participating in the discussions, or rather that our Minister of Finance was participating in the discussions held by the Group of Ten. As the Acting Prime Minister is aware, the finance ministers were to meet on November 24 but that meeting has now been deferred until well into December. There is obviously a difference of opinion over what valuation should be put on currency and on gold-


Mr. Speaker:: Order, please. The hon. member should ask his question. He was recognized for the purpose of asking a supplementary question.


Lloyd Roseville Crouse: Yes, Mr. Speaker. My question is this: has the government made it clear to the European countries that Canada will not be a party to any package deal that would imply appreciating the Canadian dollar over par vis-a-vis the U.S. dollar?


Mitchell William Sharp: Mr. Speaker, we have not heard any proposal of that kind, and certainly we have not advanced any proposal to revalue the Canadian dollar over its present level.


THE CANADIAN ECONOMY
[Stage Direction]
Inquiries of the Ministry
train into the loss of this document. I wonder if the government is also considering reversing current government policy which requires that government documents be confidential unless otherwise designated so that all government documents would be public documents unless otherwise designated by the government?
Mitchell William Sharp: Mr. Speaker, I am sure I speak for all those who have been charged with responsibility for government when I say that unless there are confidential relations between public servants and the government the whole system breaks down, and that is what is at issue here.


FINANCE
David Réal Caouette: Mr. Speaker, I should like to put a question to the Acting Prime Minister about the Group of Ten of which he has just spoken and which decides to some extent of the western world's behaviour.
This morning, in the newspaper Le Devoir, one could read the following:
Monetary ping pong: one week without results-
That meeting was held last week.
Can the Acting Prime Minister tell us when the next international monetary ping pong game will take place?


Mitchell William Sharp: Mr. Speaker, I am not certain. There was a postponement of the meeting. It was to have been held earlier in December and the Secretary of the Treasury of the United States proposed a deferment for a short period. Therefore I cannot answer the question directly. However, I do suggest to the hon. gentleman that in these matters some ping pong among the Group of Ten sometimes may be as useful as ping pong can be in other connections.


FEDERAL-PROVINCIAL CONFERENCE PRESENTATION OF ECONOMIC AND EMPLOYMENT GOALS TO PROVINCES
Mr. John Lundrigan(Gander-Twillingate):: Mr. Speaker, I wish to direct a question to the Acting Prime Minister. In view of the request by the provinces that the government and the Prime Minister spell out their short and long-term economic and employment goals for the country, will the Prime Minister be presenting these to the provinces at the present conference, and will an opportunity be taken in the immediate future to make them clear to the House and to the country?


Mr. Doug Rowland (Selkirk):: Mr. Speaker, I wish to Hon. Mitchell Sharp (Acting Prime Minister): Mr. Speak-direct a question to the Acting Prime Minister. A few er, I gather the hon. gentleman is referring to some discus-moments ago he indicated there was an investigation in * sions that have taken place at the federal-provincial con-

November 15, 1971
Inquiries of the Ministry
ference with which I am not familiar. Therefore I will take his question as notice.


UNITED STATES IMPORT SURTAX-GOVERNMENT PARTICIPATION IN MULTILATERAL NEGOTIATIONS FOR REMOVAL
Robert Lorne Stanfield: Mr. Speaker, I wish to direct a question to the Acting Prime Minister. In view of his statement a few moments ago that the government was not prepared to bargain for the removal of the 10 per cent surtax, do I take it from this that the government of Canada is not prepared to participate in any multilateral arrangements leading to the removal of the surtax?


Mitchell William Sharp: No, Mr. Speaker, that is not the implication of what I said. The implication of what I said is that the United States does not have the right to put on a surtax and say, "Now you must bargain your way out of it." That is the position we have taken. I am sure that if we put a surtax on United States goods and asked them to bargain their way out of it they would refuse, and so have we. We feel we can do better by co-operating in overcoming the problems that led to the application of the surcharge.


POST OFFICE
Hon. W. G. Dinsdale (Brandon-Souris):: Mr. Speaker, my question is for the Postmaster General, but in his absence and in view of the urgency of the matter perhaps the Acting Minister could reply or take notice of it. What steps is the government taking to deal with the threatened strike by the letter carriers of Canada in several major urban areas?


Mr. Speaker:: Perhaps while the question is being pondered the Chair will recognize the hon. member for Churchill.


Mr. Speaker:: The hon. member for Broadview.


Walter Gilbert Dinsdale: On a point of order, Mr. Speaker-


Mr. Speaker:: Order, please. The hon. member for Brandon-Souris rises on a point of order.


Walter Gilbert Dinsdale: With respect to the question I asked, Mr. Speaker, there seems to be nobody responsible for the Post Office in the House today, and I wonder if I could-


Mr. Stanbury:: I will take it.


Walter Gilbert Dinsdale: 
Mitchell William Sharp: Mr. Speaker, I think the Postmaster General will be in the House tomorrow and I will direct the question to him.


INCOME TAX ACT
Mr. Robert Simpson (Churchill):: Mr. Speaker, I wish to direct a question to the Minister of National Revenue. Is he in a position to say whether he or his department is in receipt of a recommendation from the chairman of the CRTC that amendments should be made to section 12(a) of the Income Tax Act with respect to moneys paid out for advertising to other than Canadian owned news media?


Herbert Eser (Herb) Gray: Mr. Speaker, it would appear that what the hon. member is referring to is a matter of tax policy and as such it would fall within the purview of the Minister of Finance rather than that of the Minister of National Revenue.


Robert Simpson: Mr. Speaker, I direct a supplementary question to the Secretary of State. In view of the fact that the Minister of National Revenue has said this question should be addressed to the Minister of Finance and as the Minister of Finance has already answered by saying he is not in receipt of any such request or recommendation, would the Secretary of State look into the reported statement by the Chairman of the CRTC in Manitoba that this question is currently before Parliament and get the matter straightened out with the Chairman of the CRTC?



ADMINISTRATION OF JUSTICE


Mr. John Gilbert (Broadview):: Mr. Speaker, I wish to direct a question to the Minister of Justice. In view of the statement by the Minister of Justice that the holding of inquests impairs a fair trial for the accused, what steps does he intend taking to cope with this very serious situation?


John Napier Turner: Mr. Speaker, I did not hear the first part of the preamble.


John Gilbert: I will repeat the question. In view of the statement by the Minister of Justice that the holding of inquests impairs a fair trial for the accused, what steps does the minister intend taking to cope with this serious situation?


John Napier Turner: Mr. Speaker, I did not quite put it that way in Toronto. I said there were two
November 15, 1971

aspects of coroners' inquests that disturbed me. One is that there is an indistinct difference-


Mr. Speaker:: Order, please. Perhaps the question should be put directly and the minister might reply directly. I have often quoted long established precedents to the effect that during the question period we should not rehash speeches made outside the House. The only way this can be done is by asking the Prime Minister, or someone else on behalf of the government, whether a statement represents government policy. Certainly nothing can be gained by going over what was said or what was not said outside the House. The minister might like to reply directly to the question rather than by reference to his speech.


John Napier Turner: There are certain aspects in provincial coroners' acts relating to the treatment a suspected accused may receive before coroners' inquiries, and the publicity attaching to those inquiries, which I should like to bring to the attention of the provincial Attorneys General at the next meeting of the uniformity conference.


Mr. Speaker:: The hon. member for Cape Breton-East Richmond.



ROSTER SYSTEM-ATTENDANCE OF MINISTERS

Mr. Donald Maclnnis (Cape Breton-East Richmond):: did not rise at any time to ask a question but I will take advantage of your generosity, Mr. Speaker.


Mr. Speaker:: I hope the hon. member has a question because we are running short of time. However, I have recognized him and if he has a question certainly he has a right to ask it, now that he has been given the floor.


Donald MacInnis: Thank you for your generosity, Mr. Speaker. I shall take this opportunity to ask the Acting Prime Minister if he is aware that 22 ministers are absent today and if the appearance of the Minister of National Revenue means that the roster system is breaking down? If that is the case, can we expect ministers, whether on the roster or not, to answer appropriate questions put to them?


Mitchell William Sharp: Mr. Speaker, the reason for the many absences is that most of the ministers on the roster for today are attending the federal-provincial conference.


An hon. Member:: Twenty-two?


Mitchell William Sharp: I asked the Minister of National Revenue to appear today because he was going to be unavoidably absent later in the week.


Gerald William Baldwin: He might as well have stayed away.


Donald MacInnis: It is not by way of a compliment to the minister that he is in attendance here today, but is the
Inquiries of the Ministry
Acting Prime Minister aware that the Minister of National Revenue is the first minister of this government who has attended the House when he has not been on the roster?


Some hon. Members:: Oh, oh!



REQUEST FOR IMPLEMENTATION OF INSURANCE PLAN TO COVER DRUG COSTS

Mr. P. B. Rynard (Simcoe North):: My question is for the
Acting Prime Minister. In view of the fact Senator Croll's report on poverty indicates the immediate necessity for a drug care insurance plan for many of the poor, those on pensions and low income, who often do not have the necessary funds to purchase the drugs prescribed by their doctors and who end up as costly hospital casualties, I should like to ask the Acting Prime Minister if he would give sympathetic consideration to bringing in a plan right away?


Mitchell William Sharp: Mr. Speaker, the government will give sympathetic consideration to the hon. gentleman's request.


Mr. Speaker:: Order, please. Although we have reached the end of the question period, hon. members might agree to allow the hon. member for Hamilton West to ask the last question. I think other hon. members who are rising now have supplementaries but they have had the floor once during the question period. This is not true of the hon. member for Hamilton West.



POST OFFICE


Mr. Lincoln M. Alexander (Hamilton West):: I should like to direct a question to the Minister of Communications- never mind about Hamilton, they will win the next game- dealing with the strikes that exist in the city of St. Catharines and which have been accelerated by sympathy strikes in Hamilton. I wonder if the Minister of Communications has a statement with respect to those strikes in effect right now, in view of the fact he indicated he is speaking for the minister responsible for the Post Office?


Robert Douglas George Stanbury: have no information of that kind, Mr. Speaker, but I shall be glad to make inquiries from the minister responsible for the Post Office, the Postmaster General, and ask him to convey the information to the hon. member.


Mr. Speaker:: Orders of the day.
9562

November 15, 1971
Income Tax Act



GOVERNMENT ORDERS


[Stage Direction]
The House resumed, from Wednesday, November 10, consideration in committee of Bill C-259, to amend the Income Tax Act and to make certain provisions and alterations in the statute law related to or consequential upon the amendments to that act-Mr. Benson-Mr. Honey in the chair.
The Chairman:: In accordance with the statement of the hon. President of the Privy Council, as recorded at page 9528 of Hansard for Wednesday, November 10, 1971, the committee will now proceed to consideration of the sections dealing with capital gains, being sections 38 to 55 inclusive, 3, 71, 73, 85, 87, 88, 89, 96 and 111. I assume that it is the intention of the committee that this grouping is for the purpose of debate and that we will deal with each clause separately. Is that assumption correct? Shall section 38 carry?
On Clause 1-Section 38: Meaning of Capital Gain and Allowable Capital Loss.


Marcel Joseph Aimé Lambert: Mr. Chairman, it is not my view that the clauses should be dealt with separately, but that we would ultimately take a separate vote on these sections. I believe the discussion on section 3, that is the one that makes the first general declaration with regard to capital gains tax, should open the discussion generally to hon. members. With the greatest respect, there is no way that one can accept section 3 without accepting the principle of a capital gains tax, the matter that is going to be under discussion. I do not think there will be any problem.
We have before us what I think is the first discussion in committee of the radical departure from former decisions on what is income for purposes of income tax. In dealing with previous sections, we have found new concepts with regard to exemptions or allowances, such as child care expenses and the workers allowance. This is the first time we have come to the other side of the question, the determination of what additional income and new kinds of income have to be considered with respect to the impact of the Income Tax Act.
The first time that the subject became a reality in relation to the taxation system in Canada was at the time of the publication of the white paper in November, 1969, when a capital gains tax was proposed. To say that this became one of the most controversial of the radical departures from the then existing pattern of Canadian income tax is perhaps the understatement of the year. I think hon. members will agree with me that in the deliberations of the Committee on Finance, Trade and Economic Affairs, no subject raised more controversy than this question of the capital gains tax. It involved many facets which may not appear before us today, yet they all drew their inspiration from the idea of the imposition of a capital gains tax.
It might be worth while to discuss whether one should consider a capital gains tax at this time, the nature of the economy being what it is. After all, this is not a question of an increase in the progressive rates of income tax, with

all of its inflationary implications, nor is it an increase in corporation income tax with inflationary implications; rather, this is a move into an entirely new field of imposing taxes on capital gains. A lot of people have a misconception of capital gain as we know it in Canadian law. Our friends to the left talk about land speculation as being the biggest area of capital gains, but they do not read their law reports. It is very easy to talk about speculative land profits and the fact that these generally escape taxation. Therefore, it is suggested, these profits are wages levied by speculators and which ordinary citizens must pay.
But that is not the case and has not been the case for years. Oh, yes, there are individual cases no doubt where a farmer owning land abutting urban property is able to sell it as one big parcel and make a gain over its value as farmland because that land is to be used as urban residential or commercial land. That does happen. But, Mr. Chairman, let him develop that land himself; let him subdivide that land himself rather than sell it to a development company or to an individual who will develop a subdivision and the law will provide, as it has provided for years, that the funds resulting from that transaction are to be taxed at income tax rates. If you want to know why, in many instances, there has been an increase in prices of subdivided land, I say, trace the increase back to the impact of the Income Tax Act. The developer or the individual selling always looks at the price on a net or take home basis. And who is paying the tax? The purchaser of the lot is, of course, since that part of the cost is passed on, just as inflationary wage demands and increases in taxes for either individuals or companies are passed on to the consumer. It is always the consumer who ultimately pays.


Some hon. Members:: Hear, hear!


Marcel Joseph Aimé Lambert: And who is the consumer? Who but the Canadian citizen. There is no difficulty about that. That is simply and understandably political science and economic fact, and anyone who dares to deny that concept must take the prize for shoving his head into the deepest, darkest sack. This is as true as that we are standing here this afternoon.
Now comes the idea of a capital gains tax and we ask, is it time for that? I make the suggestion that it is wrong at this time, when one compares present times against those of two years ago when the economy was on a much better basis and people generally felt a little easier about the imposition of this new tax. This is going to be a new tax; let no one misunderstand that. The Canadian public will have to accept the new tax. It is not one that is to be deductible from income tax or for which we will get a credit.
Although the Estate Tax Act is to be eliminated, any tax paid under the head of capital gains is not going to be treated as an offsetting credit against any succession duty of any province. That is an entirely different matter. Any deemed realization on death, because of the inclusion of capital gains in the hands of the legatee, as provided for in this act, will call for the payment of income tax. For instance, where a farmer wills his farm to members of his family, they will pay income tax at the increased rate because there may be a capital gain there. It is argued
November 15, 1971

that there is no federal estate tax; but every province, bar one, has either a succession duty or estate tax, or intends to impose one. The matter of whether there should be such impositions is being discussed at another place in this city at this very time. Because there is no offsetting credit, the Canadian taxpayer in that position will be paying additional tax. Why should he pay additional tax? Is it because big brother government is better qualified to spend the money and requires the money? Is that why? We want to know about this. I know that our friends on my left think that by directing the spending of money, they can spend it to much better advantage than the private individual. Oh, yes.


Mr. Peters:: At least we will be sure how the money will be spent.


Marcel Joseph Aimé Lambert: That is all right; but the hon. member must then admit that he is foolish on occasions in spending his own money, and that he cannot make good decisions.


William Arnold Peters: Not at all.


Marcel Joseph Aimé Lambert: That is so; we all admit that we do not always make good decisions, but we do not say that somebody else should be able to tell us how to spend our money on all occasions. Nobody suggests that except members of the NDP.
I wish to raise a question which will be argued at greater length by some of my colleagues and by myself when we discuss this matter further. In view of the international situation, the complexity of the corporate side of income tax and the fact that the question of capital gains is involved in this, and in view of the complicated provisions with regard to international income which also involve income tax and the fact that the provinces have demanded a deferral of the implementation of a goodly portion of this bill, I wonder whether the question of the imposition of a capital gains tax should not be deferred as well. That is one position. That matter will be argued and examined.
At present, because of the time limitation at this particular stage of the debate and because I wish to bring forward an amendment, I will turn immediately to a quick review of those proposals in the white paper dealing with capital gains and see how the present proposals stack up against them. First, Mr. Chairman, you will recall that capital gains were to be included 100 per cent in income, at marginal rates, and, second, any gains could be offset by losses on capital only. Third, there was to be a valuation day. The only value to apply was the value on that day, except in the case of government bonds. In that case a sort of recapture on loss was allowed. Fourth, principal residences were to be subject to a capital gains levy, with certain periodic allowances. Fifth, and here I refer to one of the more emotional and controversial proposals which lots of hon. members seem to have forgotten, there was to be a provision with regard to a deemed realization, effective every five years, on shares of widely held corporations. This was one of the most misunderstood provisions and was certainly one that raised lots of "spooks" among the Canadian public. There was to be a capital gains tax on personal property that was quite restrictive.
Income Tax Act
What is the new proposal? I do not have time to read what was said in the Report of the Standing Committee on Finance, Trade and Economic Affairs. I will do that at some time in the future. First of all, we have half the capital gains and half the capital losses being considered at marginal rates. This means that the maximum rate will be about 30) per cent. This is calculated on the basis of the maximum average federal and provincial rate being 61.1. In Manitoba, Alberta and some other provinces it is higher, but in Ontario and Prince Edward Island the rate is 61.1. This means the capital gain would be taxed at 30.5 per cent; in other words, half the capital gain at the marginal rate of 61 per cent. This is approximately the equivalent or perhaps a little less than the United States rate.
The second matter is gains versus losses. If there are insufficient losses to offset the gains, there are two ways of dealing with the matter. The first is by the purchase of a forward annuity, and the second is the write-off of accumulated or unaccounted for surpluses at $1,000 per year against income with no time limitation. The exception, of course, is listed personal property which comes under other rules that are not germane at the moment. The purpose of valuation day is to create an option under which you may use that valuation only or, second, market cost, whichever is higher, in calculating capital gains or market, cost if it is lower, in calculating losses. If one has opted for the option of valuation day, frankly there can be areas which may call for some retroactivity. We will examine that later.
Taxation of capital gains on the principal residence has been abandoned, except under certain circumstances. There is an abandonment on the deemed realization of widely held shares. That concept is gone.
Last is the matter of personal property. There was a welcome increase in minimum sale value to $1,000 per unit. There are some particular circumstances that limit averaging. It is unfortunate that the act does not cover this one area, although there have been many representations with regard to farm lands. It will not be news to the committee that I will advance an amendment with regard to this, and it will be consistent with the amendment I put forward for the consideration of the finance committee. It was voted down by the government majority. Many of my colleagues are going to expand on the point that there should not be any capital gains tax on the disposition of farmlands for bona fide farming purposes. Whether it is by sale, a gift from husband to wife or father to son or by way of a legacy, we should not impose on farmers a penalty for efficiency or good husbandry, a penalty which will serve to drive them out of business or break up the farm. This is the point. It is so easy. We have seen many ways of driving people out of business, including farmers, such as imposing taxes at the time of death. I want to talk later about estate taxes. There is a capital gains tax at the time of death because it is a disposition with a deemed realization. Even though there are some minor provisions in the act that we are trying to alleviate, it seems to us that this is quite wrong.
Agriculture is in a tough enough position as it is. It is a most difficult position. May I say in passing that the $1,000
24372-46 (

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Income Tax Act
a year allowance provided in the act for the years of occupancy applies whether it is an 80 acre farm or a 2,500 acre farm. Regardless of the size or the value of the land, this $1,000 allowance is an across the board exemption. This is wrong. Therefore, I move:
That paragraph (b) of section 3 as set forth in clause 1 of the said bill be amended by inserting in lines 15 and 21 on page 2, immediately after the word "property" in each said line, the following: "other than land used in farming as defined in this Act and"


Marcel Joseph Aimé Lambert: Mr. Speaker, I apologize for not having had the opportunity of translating it, but I think that the French-speaking members have understood what I said.


Russell Clayton Honey: The Chair might ask the advice of the committee. I was under the impression we had before us sections 38 to 55 inclusive and then section 3. If the Chair is in error, I ask the advice of hon. members. My information is that we are dealing in accordance with the statement of the President of the Privy Council, with sections 38 to 55 and then section 3. We can certainly change this in accordance with the wishes of hon. members.


Mr. Knowles (Winnipeg North Centre):: Mr. Chairman, I think the understanding is that we have before us at this time sections 38 to 55 inclusive and the other group that begins with section 3 and ends with section 111. The understanding is that the Chair having called section 38, we are dealing with all these sections including section 3, 111 and so on and that we handle them in the same way we have handled the other groups of sections. The only difference between what Your Honour has said and what I think is our understanding is that what we have here is not two separate groups, but one group consisting of sections 38 to 55 inclusive and the group that consists of sections 3, 71, 73, 85, 87, 88, 89, 96 and 111.


Marcel Joseph Aimé Lambert: Frankly, Mr. Chairman, this disposition with regard to grouping had its origin with me. Section 3 was specifically exempted from an earlier discussion because, as I indicated, section 3 is the section that first sets out capital gains. Section 38 starts in with the specifics. I ask Your Honour to look at section 3 which appears at page 2. Line 12 reads:
(i) the aggregate of his taxable capital gains for the year from dispositions of property other than listed personal property, and his taxable net gain for the year from dispositions of listed personal property.
For that reason, I have moved to exempt farm property as defined. The definition of farming appears in section 248. We will then be squarely on target, because I cannot put this amendment with regard to section 38.
.30 p.m.)


Russell Clayton Honey: The Chair understands precisely. It was just in order that there might be no misunderstanding at a later date. The committee has heard the hon. member for Winnipeg North Centre and the hon. member for Edmonton West, so we can proceed on that basis.
The question the Chair must resolve, however, is an immediate one. It is the acceptability from a procedural standpoint of the amendment of the hon. member for

Edmonton West. It does seem that if this amendment were accepted I would be permitting a private member to do something which lies within the prerogative of the Crown, that is, to take a financial initiative. The hon. member might be able to dissuade me from this view; I am merely making an initial observation and I shall invite assistance from the committee. However, it does seem to me that if farmland is made exempt, revenue with respect to capital gains would be lost to the Crown, there having been a shifting of the incidence of taxation. Possibly hon. members can assist me on that point.


Marcel Joseph Aimé Lambert: Yes, Your Honour. I put it to you that any possible amendment, according to the interpretation you have suggested, must result in a shifting of the incidence of taxation. But no quantum of tax has been fixed with regard to farmland. No quantum has been fixed in this particular area. It is proposed in a general statute that there shall be a tax levied five years hence, but, with the greatest respect, what incidence of taxation is there? There is no special amount which is to be raised. It seems to me incidence of taxation relates to a quantum of money which is to be raised by the government by certain means in certain circumstances. We are now considering an event in the future. There are no revenues which are projected from this particular source, nor will there be in the future. I put it to Your Honour that in these circumstances if we follow your argument, no amendment was possible with regard, for example, to the child care allowance. To vary the statutory age limit from 21 to 18 would have meant increasing the scope of child care allowance, thus resulting in a shift in the incidence of taxation. Then again, as I recall it, an administrative change was made, without any accompanying resolution on the part of the Crown, with regard to the transfer of property in trust for minors.
This matter was discussed on Wednesday afternoon last. A change was made in the age, from 19 to 18. It may be we shall see further changes with regard to the age as a result of discussions which have taken place. If the suggestion which Your Honour has made is adhered to, then, as I understand it, outside of crossing a "t" or dotting an "i" or the substitution of one word for another so as to better express an idea, an ordinary member has no possibility of proposing changes to a statute of this type, and this I cannot accept.
We are not proposing tax increases. It is said I have introduced proposals for tax reductions. I have. This is, I agree, a proposal for a general tax reduction covering farm lands. But it does not disturb the indidence of taxation in any way. I am working within the confines of that act. I am not enlarging the scope of farming as defined in the legislation. Farming remains as defined in the act-a definition which covers even beekeeping. Had I proposed amendments to the definition clause, had I, for instance, sought to enlarge the scope to cover, say, trout farming or pheasant farming or some type of farming which is not included in the present definition, Your Honour would doubtless feel constrained by the limitations he has indicated to rule that the amendment was out of order as being beyond the scope of an hon. member who is not a member of the government.
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I suggest Your Honour might review what I have said and perhaps consider some of the implications of the limitations suggested by the Chair. The subject will be debated in any case and we could perhaps obtain further clarification.


Russell Clayton Honey: Are there other members who wish to make representations on the point of order which has been raised? If not, I shall recognize the hon. member for York South.


David Lewis: Mr. Chairman, I rise to take part in the debate partly because of the observations made by the hon. member for Edmonton West and partly to deal with the problem which arises from what is before us-lack of necessary information concerning foreign control of Canada's economy.
I was not surprised when the hon. member for Edmonton West twitted our party for insisting that there should be a capital gains tax and that it should be 100 per cent of the capital gain. I say, without meaning any offence to the hon. gentleman or to his hon. friends in the Conservative party, that there is a basic difference of approach. He is concerned about gains by corporations and business. We are concerned about the lack of gains by the ordinary people. He is concerned about enabling those who make a great deal out of capital gains to retain those sums. We are concerned that the tax system should be equitable, that the rich and the powerful should fully pay their share of taxation in order that the burden falling on the poor and the less wealthy might be reduced.
Every time some section of the community gets a tax exemption, whether it is an oil corporation or a mining company or a guy playing the stock market, the rest of the community have to make up for it because government services must continue. Government services have increased over the years and will continue to increase in a modern civilized society, and somebody has to provide the funds with which these services can be carried on. Every time that the wealthy and the powerful are exempted from a share of the tax burden that they ought to carry, the less wealthy and the less powerful have to carry that part of the burden.
I am not surprised that the hon. member for Edmonton West takes the position that I have always known is the position of his party, but he makes the general statement that, in effect, he is opposed to all capital gains at this time; that this is the wrong time to impose a capital gains tax. Then, for reasons which are not very difficult to understand he zeroes in on capital gains resulting from the sale of farm land.
Again, in the way in which that approach necessarily ends, he does not make any suggestions that would really protect the farmer. He makes a blanket proposal that all land transactions be free of capital gains tax, which I suggest to you, Mr. Chairman, would result in speculation on farmland of a sort which would undo what I believe the hon. member wants to achieve. The worst thing that could possibly happen to young people who may want to go on the farm is that speculation on farmland be allowed to go on because there is no capital gains tax. This would result in the price of farmland going up, and thus the
Income Tax Act
prospect of starting farming becomes a thousand times more remote for the young farmer than it is today.
My colleagues will be making some amendments, or will be proposing some, Mr. Chairman, which I hope you will be able to accept. They will deal with legitimate aspects of farmers' problems, aspects which it seems to us the government's advisers have never even looked at let alone tried to solve. I will leave it to them to deal with the details, but I want to indicate three objectives, which we believe a capital gains tax as it relates to farmers ought to seek to achieve. In order to achieve those three important objectives certain situations ought to be exempted from capital gains tax. I do not mean a blanket exception of all farmland, which would invite speculation, but concrete exemptions in particular situations affecting the farmer and the future of the family farm.
The first objective is to exempt farmers from the tax so as to protect the family farm as a continuing and viable entity. One of the ways this is done-and this is the second objective-is to allow farmers to invest income which they gain from selling their land to purchase another farm-if they want to purchase another farm-and make the operation of that farm their principal or sole source of income. That is a legitimate exemption that must be considered by the House. The exemption must also try to achieve the objective of ensuring that when a farmer hands his farm on to his sons or heirs they should be able to take over the farm without having to pay any capital gains tax, again to preserve the family farm unit, to make it viable and able to survive.
Finally, we think that since the farmer, like the small businessman, has no opportunity, as the industrial worker or management has, of having some share in an industrywide pension plan, and can only have a kind of security for himself in his old age either by buying insurance to give him an annuity or qualifying for the Canada Pension Plan-he has no opportunity like industrial workers, management and so on of joining in some kind of negotiated industry plan-we believe that this legislation ought to enable the farmer, or allow the farmer, to invest his capital gains in a retirement savings plan, which would then become taxable as income when he draws his benefit annually or monthly as a pension.
In addition to this, if there is any increase in the value of his farm and machinery as a result of his own productive efforts and that of his family, results that frequently are achieved only by mortgaging his future in order to make his farm more economic and viable, then if he desires to do so he should be enabled by law to invest that increase in value in a retirement plan so that in this way he has a pension waiting for him at retirement. As I say, most of the methods of providing for a pension for city folk are not open to the farmer.
We believe this kind of protection for the farmer is justified and necessary and would not lead to land speculation in the way in which the hon. member's amendment would lead. My colleagues who are more knowledgeable in this field than I can claim to be will deal with this aspect at great length later on in this debate, but in view of the amendment before the committee I wanted to indicate immediately what is our thinking on this subject. We have always taken the position-and we do not retreat from it for a moment-that what should be taxed is the

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income of people without regard to the source of that income; we except only those exemptions that human considerations make necessary, such as the exemptions to which I have just referred.
We think there is no reason why a person with an income of $10,000, $5,000, or $20,000 a year from capital gains should be able to have it taxed at half its value whereas the worker and everybody else pays on his full income. There is no reason in the world why the speculator, whether on the stock market or anywhere else, or the person who benefits from a windfall profit that is not due to any particular efforts of his own, should be taxed on that return at a much lower tax rate than people who earn wages or salaries, the small businessman and others who work hard for every dollar they have.
We have always taken the position on this issue, subject to the practical, humane exceptions that must always be made in decent tax legislation, of supporting the principle expressed in the Carter report on taxation. We believe this legislation now before us is another example of the double standard that governs the decisions of this government, and treats the man or woman who benefits from capital gains in a way that is unjustifiable in terms of tax equity.
In the few minutes remaining, I want to draw the committee's attention to another aspect of capital gains. One of the major reasons, in our view, why a capital gains tax is essential, particularly in Canada, is that the absence of such a tax has been one of the important reasons that Canadian investors have been tempted, and have yielded to the temptation, to sell out Canada to foreign corporations. The achieving in many cases of very large incomes as a result of the sale to or merger with a foreign owned corporation, and the achieving of very large incomes as a result of selling out Canadian plants, branches, industries, or mining claims or rights to minerals under the surface of the land without having to pay any tax on it has always been a great temptation or incentive to Canadian owners to sell out to foreign owners.
One of the side reasons we support a capital gains tax based on an equity tax system is that it would take away this incentive or temptation to sell out Canada to foreign corporations. At least, this would take away any important, if not all, incentives and temptations. I have said in this House and across the country on many occasions, particularly since I have been honoured to hold the position I now occupy, that I reject the notion that anyone has done wrong to Canada because they wanted to do wrong. I reject the suggestion made by many people that Canada has been raped by the United States. I suggest there can be no rape where there is invitation and consent.
The fact is that Canadian industry, political leaders and major Canadian investors have over the years invited foreign corporations, even begged them, to come into Canada and denude our non-renewable resources, build plants in Canada and the like. This is our fault and the fault of all Canadians having investment capital, and that means large Canadian corporations, including banks. This is the fault of Canadian political leaders of successive federal and other government in this country over the years. They have thought there was a fast buck available and sold Canada out without regard for future conse-

quence, with the result that Canada has been the only country in the world to my knowledge that has permitted foreign investment without limit, without rule, without regulations-without anything. Anybody was welcome to come in and take away Canada's resources and do with them what they might, with the exception of certain areas which have arisen in recent years, namely banking, the media of communication and uranium. This is one of the things they have allowed to happen, that element of our society which is concerned only with maximizing their profits and not with the welfare of future Canadians.
One of the elements has been the absence of a capital gains tax, and one of the reasons Canadian people have permitted this to continue for more than 100 years is that successive governments have deliberately kept the Canadian people ignorant about the extent to which the Canadian economy has been controlled. Any information which successive governments have had has been kept secret on the basis of one excuse or another. As a result, the people of Canada did not know what was happening to their country and to their economy, and did not know how or even that this was affecting their lives now and would affect the future generations of this country.
It is the habit of Canadian governments to keep Canadian people ignorant about this important subject which is the very life blood of their economy and their future, and a good example of this is what has taken place in respect of the Gray report and the documents relating to it. All this sanctimonious nonsense of the Prime Minister and Acting Prime Minister, and all this sanctimonious hypocrisy about being tied by the oath of secrecy and cabinet documents does not impress any intelligent Canadian one iota. The government knows how to release papers, and it would not break any law of Canada if it released them, except information that is in the narrow sense of the word strictly cabinet information or a cabinet document, quite apart from what is in the wider sense of the word a document or information to which Members of Parliament and the people of Canada are entitled.
The most significant statement made by the Acting Prime Minister today, if you listened carefully, as I am sure you did, was to the effect that when the government has made its decision on policy, it will bring forward its decision and at that time will consider what part if any of the information should be made available to the Canadian public. That is what the Secretary of State for External Affairs said, but what does that mean?
It means the government is determined to make a decision some time, and I am glad to hear it will make it some time within the next two or three years because it has taken two years for consideration, and it will then release that part of the information which will support its decision. However, it will continue to keep secret the rest of the information the Canadian people ought to have in order to make any judgment about the decision the government will have made. The government is not only going to make a decision on policy, it is going to decide how much we Members of Parliament ought to know about the subject and how much the people of Canada ought to know about it. At times such as these and on issues such as these, the Members of Parliament and the people of Canada ought to know every bit as much as the government knows regarding the situation in this country.
November 15, 1971

We do not want doctored and carefully selected evidence that will support the government's decision.


Mr. Guay (St. Boniface):: Mr. Chairman, I should like to ask a question of the leader of the New Democratic Party.


David Lewis: Mr. Chairman, the hon. member must have my permission to ask a question, and if he was rising to ask that, let me say that I do not intend to grant that permission.


Joseph-Phillippe Guay: I rise on a point of order.


Russell Clayton Honey: The hon. member is rising on a point of order.


Joseph-Phillippe Guay: The hon. leader of the New Democratic Party has been talking about selling out Canada. Why is it members of his own party-


Some hon. Members:: Order, order.


Russell Clayton Honey: Order, please. The hon. member is not making a point of order, but rather asking a question.


David Lewis: I do not know what kind of so-called point of order the hon. member was putting-


Joseph-Phillippe Guay: You don't practice what you preach.


David Lewis: We certainly do, Mr. Speaker. Let me tell the hon. member for St. Boniface that if I ever wanted to preach I would not go to him to get my sermon.
At this time in Canadian history, in this difficult situation regarding Canada's economy, we are entitled to all the information that is in the hands of the government relating to the extent foreign control is having an effect on our economy.
I will conclude in two or three sentences, Mr. Chairman, and I will make them shorter than usual. Let me point out that the United States policy of the surtax, the job incentive program and the DISC program will affect many countries in the world, not only Canada, in respect of trade. When the Acting Prime Minister said today that DISC and these other programs would affect Canadian-owned corporations as well as United States subsidiaries he was of course right, but he was right only to the extent that Canadian corporations and others in the western world will be affected by the closing off of trade. In that way, we will be affected and Canadian corporations will be affected. But-and this is one of the points made in the Canadian Forum summary, or version, or whatever it may be-because of the extent of United States control of our economy Canada is in danger constantly of having subsidiary operations in Canada closed down or reduced so that Canadian jobs are lost, so that operations are exported from Canada to the United States. In that field Canadian corporations will not be affected. I therefore say I hope the Canadian people will recognize that the government's refusal to make these documents public is a betrayal of its duty to Canada.


Joseph-Phillippe Guay: Mr. Chairman, I should like to know if the remarks of the Leader of the New Democratic
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Party are relevant to the point at issue, at the moment. I suggest they are not.


Russell Clayton Honey: Order, please. The hon. member for York South has concluded his remarks, but it seemed to the Chair in the last two or three moments he was perhaps going a bit wide in so far as relevancy was concerned. However, in fairness to the hon. member, in his introductory remarks he tied in the matter of future investment in Canada with capital gains. The Chair listened very closely to the hon. member and, on balance, I believe he was relevant.


Mr. Nesbitt:: Mr. Chairman, I think we all appreciate that the well-known oratorical style of the Leader of the New Democratic Party has inflamed some quarters of the House, and certainly has brought what he had to say to the attention of hon. members. I can only hope that the very enthusiastic and vigorous manner in which the Leader of the New Democratic Party has dealt with the wickedness of control of the Canadian economy by foreigners will also be evident in his approach to the subject of labour unions with which he is quite familiar. I have no doubt that he will explain his views in that regard on the next occasion.
The subject of capital gains, which is presently before us, is not a new concept of income. I do not want to take up the time of the House in going into the background of the matter, but for some time at least some forms of capital gains have been taxable. For instance, if a person invests every few days in the stock market I believe it has been established-and I think the original case was called the Northrope-Strachan securities case-that this is in effect the basis of his income. If a person makes an investment in the stock market today, makes another investment four years later and receives a profit, it is clear that this income is not taxable. However, if he did the same thing every day it would be taxable. So, in some respects, the concept of capital gains is not altogether new.
When politicians, journalists and others get up on the platform or on the soap-box, as it is sometimes described, they tend to oversimplify the whole problem we have had in respect of exemptions. If we were to ask the man on the street if he believed there should be a tax on capital gains he would probably say "sure" and if asked why, he might say, "if some of these birds can make a fast buck on the sale of a farm which happens to be located where an airport is to be built or if somebody buys some penny stock and makes a fortune on it, should they not be taxed on this?" I do not believe there is any disagreement on that score.
However, the capital gains question is a highly complicated one. It is not something over which we should get carried away in some emotional, dogmatic approach such as we heard from the previous speaker. I believe we must be a little more pragmatic about it. We should look at some of the more complex aspects of a capital gains tax. The Income Tax Act, for instance, has many exemptions. For example, if you should have a very large income you pay a different rate than you would pay if you had a lower income. There are many such examples of provisions which are made for social and equitable reasons and we are prepared to accept them. Apparently the framers of

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Income Tax Act
the bill, in proposing this capital gains tax, have not given very much thought to the exemptions and the different rates which exist in respect of income tax. I do not believe there is any doubt that most members of this House-and one never wants to say "all" because there may be one or two exceptions-in all parties agree with the principle of a capital gains tax. The difference between some points of view in this House and others is in respect of the exceptions and the different rates which may be applied.
It has been pointed out by my colleague, the hon. member for Edmonton West, that farmers and perhaps fishermen may need assistance in this regard. There may be a case for an exemption from the capital gains tax in respect of the passage of a farm to another person and with regard to farms used for bona fide farming purposes. I have in front of me the amendment moved by my colleague the hon. member for Edmonton West which makes this very clear. Apparently the hon. member for York South had not had the time to carefully consider the amendment, because from what I heard he was apparently a little confused about the exact meaning of the amendment. The hon. member for Edmonton West has explained why-and others of my colleagues will also do so-farming should be exempt from the capital gains provisions. I think the same might apply to small businesses. For example, a man and wife may own a small grocery business into which they have plowed the profits over the years-which perhaps were dammed few-and when the business is sold an exemption should be made for such a situation. Again, for the same reason as in farming, working capital is pretty low in most small businesses, and the tax to be paid, even over a period of ten years, might well use up the working capital involved.
Another type of exemption might be made with respect to prospecting. Here, I am not referring to prospecting operations carried out by such huge mining corporations as Noranda and Inco, which use their own planes and electronic equipment. I point out that there are still a few areas of Canada in which individual prospectors work, trying to locate new, natural resources. I believe an exemption might be made in such cases with respect to any profits up to certain defined limits. The same type of exemption should apply to certain types of new industries. An exception should be made with respect to any capital gain made by those industries.
Then, Mr. Chairman, there is the question of employee profit sharing plans. I think the parliamentary secretary is well aware that the government's tax proposals would work a hardship in certain technical areas on employee profit sharing plans.
Another question which has been alluded to, and no doubt will be mentioned again, is that concerning certain provinces. The federal government proposes to give up the estate tax, and in lieu of that impose a capital gains tax. Undoubtedly some of the provinces will move into the estate tax field, as a result of which Canadians in certain parts of Canada will, in effect, be taxed doubly as compared with Canadians in other places. This would be unfair, and exemptions might be made in those cases.
There is also the question of applying different rates. It may not be wise to give complete exemptions with respect

to some of the examples that I have cited. It might be wise to have capital gains taxed at different rates for different kinds of industries. There is a concept of taxation other than that of equity. My hon. friends to my left are always harping on the dogmatic approach that they have to the principle of equity. Mr. Chairman, everybody realizes that the principle of equity is very important, but it is not the only principle involved in taxation. As I mentioned previously, my hon. friends to my left are concerned about dividing up the melon in smaller and smaller pieces so that everybody gets some, but so far as I am concerned it is a lot more advisable to encourage the melon to grow so that we will have more pieces to divide. I believe the growth aspect is a much more practical approach.
The equity principle evolved in the London School of Economics back in the 1930's, and it was very important in poverty stricken England of those days when there was class stratification. Hon. members to my left talk about members of other parties being dinosaurs. So far as I am concerned, Mr. Chairman, some of my hon. friends in the NDP are economic pterodactyls. They have learned nothing and forgotten nothing, like the Bourbon kings of France after the French revolution. They do not know that there are other principles than that of equity.
Members of other parties in this House are interested in the principle of equity, but we are also interested in having more results of production to divide, something which does not seem to interest my hon. friends to my left. Their's is the typical approach of stirring up class hatred. This has always been part and parcel of the propaganda of the NDP. They have not been able to play a new tune for years and years.


William Arnold Peters: The old one is so popular we don't need to.


Wallace Bickford (Wally) Nesbitt: It certainly didn't prove to be popular in the recent Ontario election, but there may have been some bad players in the orchestra.
Now, leaving these pleasantries aside, Mr. Chairman, I say that the government should give careful attention to the costs of collection. I would like to know if the parliamentary secretary has any figures which would give us some idea of the costs involved in collecting the taxes that will be imposed under these proposals. I would also like to have an estimate of the amount of money that is likely to be collected in capital gains tax if the present proposal is adopted. We know that sometimes the cost of collection rises to the point where imposing the tax may not be advisable.
I can well recall that during the time when I served on the Canada-U.S. Parliamentary Committee our American colleauges said time and time again, "For heaven's sake don't make the mistake of getting into a capital gains tax; the costs are so heavy." This was the opinion expressed by both parties on the other side of the border. They said, "We wish we could get out of it; but now we are in it, we have the administrative services set up, and it isn't so easy to get out of it."
The appropriateness of the timing of these tax proposals has already been mentioned. That, of course, is a matter of opinion. It might be all right to bring in these proposals at the present time with modifications such as those that I have suggested, that others of my colleagues
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have suggested, and that perhaps members on the government side may suggest. But without any modification of the proposed rates of taxation, and without any modification with respect to exemptions, I cannot help but feel that it may be a very bad mistake to present these proposals at the present time, in the present state of the economy, and faced with the uncertainty of what the provinces might do.
Unless consideration is given by the government to the modifications that I and others have suggested, it might be unwise to bring in these proposals for at least a year, or perhaps two years. More time should be given to studying the types of exemptions that might be made and the different types of rates that might be charged to different industries. These are things the government has not considered as yet, and that should be considered before proceeding with this measure.


Mr. Mahoney:: Mr. Chairman, the hon. member for Oxford asked a couple of specific questions. On the basis of estimates of 1972 incomes, it is anticipated that capital gains tax collected from corporations in the first year of the new system will account for about $50 million in revenues, and that capital gains tax from individuals will account for some $80 million in revenues.
It is also anticipated that the costs of collection will be in line with those which we are experiencing with the present Income Tax Act, in that the new bill does continue to present a workable self-assessing income tax system. In 1970, the last year for which I have any information, the cost of collection was 73 cents per $100 of revenue.


Mr. Burton:: Mr. Chairman, the absence of a capital gains tax from the Canadian tax system has been a glaring loophole that even the Liberal government could not altogether overlook. Consequently, it had to come up with some solutions to the problems created by that loophole. As a result, we now have this very lightweight proposal which provides many concessions that demonstrate that the government has bowed to the wishes of wealthy people and of large corporate interests. The absence of a tax on capital gains, within the framework of an over-all tax system, simply encouraged people to take their profits in the form of capital gains rather than in some other form that would result in a fair tax assessment being made against them.
With respect to the comments made during the debate so far this afternoon, there are a few points to which I would like to draw attention. We must keep in mind that in dealing with the subject of capital gains, essentially we are dealing with two different types of institutions and two different forms of activity where capital gains will come into play. The first is the area of corporations, corporate activity and its related aspects. This is reflected in the gain in capital value achieved by corporations within their own framework of operations which is then shown in the valuation as far as shareholders are concerned. That, along with other factors, results in a change in the valuation of shares held by individuals or institutions in these corporations. The government proposals have given every possible consideration to the situation of shareholders and corporations in order to minimize the problems they might face.
There is a second category, that is people carrying on an activity in other than a corporate pattern of operations. This involves holdings in terms of a residence, holdings in the form of a small business, in the form of farming or fishing activities and other small enterprises which are controlled by an individual or a small group of individuals on an unincorporated basis. The government has shown very little concern for this form of economic activity. It is another example of the discrimination evident in drafting and developing the tax bill now before us. Every possible consideration has been shown to corporations and corporate activity, but very little to the individual who is having a difficult time surviving against the economic strength of those corporations in today's economy.
Another area of activity concerns the financial paper held in many forms by individuals and corporations. The government has shown a surprising lack of consideration for the situation of the individual. There is some response from the government in terms of changes made with respect to the handling of capital gain on the principal residence of an individual, and I suggest that the government should have shown the same consideration to other people hurt by the capital gains proposals or where there is a potential for such damage.
This has been referred to in the context of farming activity. I know the hon. member for Edmonton West has moved an amendment in this regard and I want to acknowledge, as did the leader of my party, that I do not question his motives. But I do suggest, Mr. Chairman, that in addition to the motive we have to look at the content of the amendment and ask what it will actually do. I have a copy of the amendment before me and it proposes to exclude from any calculation of capital gains, ". . . other than land used in farming as defined in this act . . This would totally exempt farm lands from any consideration of capital gains, no matter who, what or what for.
I would ask the hon. member for Edmonton West and his colleagues in the Conservative party to give careful consideration to what this amendment would do. Would it actually help the farmer? I suggest not, in its present terms. If farming is exempted from capital gains tax what will be the results? I suggest the result will be a rash of speculative activity in farm lands beyond anything we have seen up to the present. There have already been serious problems in southern Ontario in particular, in the periphery of the large urban centres. A lot of this speculative activity has made things very difficult for farmers honestly attempting to carry on a farm operation. I suggest that the effect of this amendment placed before us by the hon. member for Edmonton West will be exactly opposite to what is intended; in fact, it will hurt the farm and farmers rather than helping. I hope we give serious consideration to the amendment and do not proceed with it in the form in which it now stands.
When we come to deal with the principle of capital gains as such, I think we have to fill this loophole within the framework of our tax system. The argument against the capital gains tax is that it weakens the incentive of individuals. But it must be acknowledged that in fact when the proposals in the white paper were announced originally-and I am certainly no defender of the white

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paper-the stock market did not collapse or slump; in fact, it rose. That was the reaction of the financial market to the government's announcement of the proposed introduction of a tax on capital gains.
I think the most glaring error in the bill as it concerns the treatment of income and the treatment of economic financial gain is the fact that the concern is not with how much money, but rather how it is made. This is a very important distinction. One thing that can be said for the Carter Commission Report is that it enunciated the philosophy that "a buck is a buck". This should have been followed by the government in a consistent fashion rather than the patchwork solutions contained in Bill C-259.
I want to make it clear, too, that I am no defender of the Carter Commission Report. It proposed a rational tax system and some principles to which those of us in this party can subscribe-the principles of equity, redistribution of income, the philosophy that "a buck is a buck". The over-all thrust of the Carter report however was an attempt to point the way to maintain and save the existing economic system without effecting fundamental changes.
As I have already said, we certainly agree that a capital gains tax should not be imposed on a taxpayer's principal residence. We also feel that it is vital to make provision for dealing with the situation and problems of farmers in order that family farms may continue as viable institutions as a result of the application of this act. The leader of the New Democratic Party has already proposed a provision allowing farmers to invest their capital gains in retirement savings plans, the proceeds of which would be taxed when received as income. He also proposed a rollover provision providing that farmers who may wish to sell one farm and invest the proceeds of the sale in another farm may continue their farming operation without being liable to pay capital gains tax.
Another real area of concern has to do with land legacies, and the passing of land from farmer to son. According to my understanding of the bill before us, if land is passed on by way of sale through an agreement for sale or by way of inheritance, there is to be a deemed realization of a capital gain and someone must pay tax on this deemed realization of a capital gain. There may be people who can meet the bill and pay in cash. Others may pay the bill over a period of time, as is already provided for in taxation legislation. Nevertheless, because of the very nature of agriculture and farming operations, many farmers will find it impossible to pay the tax which may be levied under the act on any capital gain without destroying the viability of the farm unit. It seems to me that careful consideration must be given to this matter. Farmers should either be exempt from the provisions relating to the deemed realization of capital gains which would apply when family farms are passed on within the family, or else they must be given adequate time for paying the tax on capital gains which must be paid.
The subject of capital gains received a good deal of study by the Standing Committee on Finance, Trade and Economic Affairs of the House of Commons. In this area we received many representations. Members of the New Democratic Party listened to those representations carefully. Very often those representations were framed in

such a way as to suggest that they were being made on behalf of the average or typical Canadian taxpayer. Yet, very often the so-called average typical Canadian taxpayers went to the expense of having the briefs printed. They spent money on travel and accommodation and spent the necessary time to appear before the committee and protest against the capital gains tax. I suggest that many of the people who appeared before the committee-and I am in no way criticizing them for appearing or suggesting that they should not have the right to appear-certainly were not typical of the average Canadian taxpayer. Many of those people probably were able to deduct the expenses associated with their appearing before the committee from their personal taxable incomes, or from the incomes of the corporations on whose behalf they were appearing.
As I said before, we noted, when the white paper on tax reform was announced and when subsequent discussions took place, that the stock market did not collapse. It did not collapse when it was announced that there was to be a capital gains tax, because the pleas of those who opposed the capital gains tax were discounted by the facts. For the members of the New Democratic Party, the introduction of a full capital gains tax, which none the less takes into consideration some of the situations I have already mentioned, remains a sound and necessary principle if we are to have any form of an equitable and just tax system. Thus I hope that the government, in giving these matters consideration, will make the necessary changes in the bill in order to take into account suggestions which have been made to the government by members of this party.


Mr. Murta:: Mr. Chairman, I welcome the chance to speak on the capital gains tax provision, especially as, in my view, it will affect the farming areas of Canada. I believe that the capital gains tax will be a tax which, when it is administered, will completely disregard the nature of the farm economy. In my opinion, this tax will seriously hamper the growth of an already troubled farm economy. Agricultural development will be seriously hindered as a result of this tax.
Many economists say that Canada does not lack the capital which is needed for expansion but that Canadians are too hesitant about investing their savings. I dispute this, Mr. Chairman. In my district there are definitely limited amounts of money available for farm and business expansion. Until the present, capital gains were one of the sources of investment income. Now, those gains will be taxed. This measure, combined with government tax measures affecting credit unions and the complete destruction of the incentive for foreign investment to come here, will definitely cut down available moneys which are desperately needed for expansion in the rural areas of Canada. I will save my criticism regarding the taxation of credit unions and express it on another occasion. However, I will make one point. Credit unions, especially, serve a tremendously useful purpose in that a credit union's loosened credit restrictions have often made moneys available to farmers and small businessmen when there was no other source available. Now these loosened credit restrictions are to be seriously curtailed.
My purpose today, Mr. Chairman, is to point out to this committee that there is a great deal of urgent concern among the agricultural community and that the present
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draft regulations represent a very real and immediate threat to the viability of agriculture. There is both concern and conviction with regard to this matter. It is thought that the provisions of the act applying to farms have been prepared without a full recognition of the effects of these provisions. If they are not further amended, they will have a depressing effect on the ability of farmers to maintain a viable income generating operation. If this capacity is lost or materially reduced, the implications for Canadian agriculture will, I believe, be most unfortunate.
My concern about Bill C-259 derives from the fact that I believe insufficient recognition is given to the unique and special nature of farming. I would, therefore, like to point out two of the main areas which I believe merit consideration and attention in the development of tax laws. There is, first, the high investment and low return nature of farming. It has long been recognized that the ratio of investment to return in agriculture is extremely high. Not only is this a characteristic of agriculture, but the problem is further compounded by a moderately high risk factor associated with the varieties of climate and market with which farmers and agricultural producers in general have to contend. Second, one must consider the family farm itself. This factor has been alluded to before in this debate.
The second aspect in which farming is almost unique is that the same operation remains in the same family from generation to generation. This applies to farms in a more general way than to other businesses. The reasons for this are manifold. I will not deal with them in detail at this time. Briefly, however, farming skills are most commonly attained by farm youths who are involved in the operation during their growing years. In many cases they build equity in the farm in return for labour. A related consideration, of course, is that the high investment and low return characteristic of agriculture discourages new entrants. In view of this, I believe that the transfer of an ongoing farm operation between generations should not in any way be hampered by further taxes which cannot be borne by the ongoing operation.
From looking at the various sections of the legislation, Mr. Chairman, I am convinced that farming has not been considered adequately. The provisions of Bill C-259, as they now apply, represent one of the most serious issues that has confronted agriculture in many years. A few weeks ago we talked a great deal about the grain stabilization bill and the effect it would have on farming in western Canada. I believe that the long run implications of the taxing legislation, Bill C-259, will have a far more serious effect on farming than any proposed legislation has had to this date.
There is, as I understand it, absolutely no provisions for farms to be transferred within a family, except to a spouse, whether by sale or inheritance without immediate realization of capital gain. This would be true of the sale or transfer of a farm to a son or inheritance by the son from the father. This problem can be avoided in many cases by good estate planning or incorporation of farms. However, even the death of a son who holds the common shares in a corporation could result in the realization of a taxable capital gain while the father is still in active
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charge of running the farm. This would create serious financial problems. However, I do not believe that it should, in all cases, be necessary for a farmer to incorporate in order to achieve stability and continuity of the farm business within the family. Payment of the capital gains tax out of the tied up assets of an on-going family farm operation could, and probably would, be disruptive and place the continuation of the enterprise in jeopardy.
Tax legislation should not be of a nature that would preclude the possibility or increase the difficulty of internal transfers. Neither do I believe that the tax structure should be such that it would have the unfortunate effect of tending to lock people into agriculture for purely tax considerations. If this piece of legislation is looked at on the basis of its long-term effects, this could very well happen. I very strongly urge the government to have another look at the capital gains tax as it affects farmers, with the view to a possible modification of it in terms of the transfer of a farm from father to son.
Also, Mr. Chairman, while the federal government has, as far as its own funding is concerned, given up use of estate and gift taxes, this does not settle the question of what may happen if the provinces impose these taxes. Under these proposals, farmers are still potentially faced with double taxation on the farm on inheritance, something which should be avoided at all costs. We have seen what has happened in Manitoba and Saskatchewan where the governments have stepped into the gap left when the federal government dropped the estate and gift taxes. We will very shortly have in these two prairie agricultural provinces a form of double taxation on some farms, not all farms but some farms. To alleviate this problem, I suggest that in the case of any province imposing estate or succession duties, a tax abatement system be introduced by the federal government so that the amount of capital gains tax payable could be reduced by the amount of succession duties payable by the producers in those particular instances.
The present proposal in section 40(2)(c), as I understand it, is that a farmer may opt for either exemption from capital gains on his principal residence or exemption of $1,000 on disposal of the farm, including his principal residence. I would like to raise one or two points in this connection. First, I think it should be provided that an incorporated farm business qualifies for these exemptions in respect of both the $1,000 provision and the principal residence provision. Also, under the provisions of the bill a farmer must be in residence on the farm for each year for which he qualifies for the $1,000 farm exemption option. This can create real problems for a great many people in the farming community.
There are a great many farmers fully occupied in farming who do not have their principal residences on their farms, but for reasons of education for their children and other social amenities live in an adjacent town or village. It should be possible for the farmer to utilize that $1,000 option provision for the years in which he was engaged in farming even if he was not a resident on the farm. This would also solve other problems relating to the use of the farm home by the son while both work on the farm, and the retirement of the farmer from the farm while the farm continues to be worked by the son or hired help, without sale or the transfer of it.

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I also believe, Mr. Chairman, that it should not be necessary for the purposes of using the $1,000 per annum option for the sale of the farm to include the sale of the principal residence. Many farmers will, on retirement, wish to retain their homes. While the exemption for the $1,000 per year as applied to principal residence is desirable, it appears to be an attempt to treat the farmer in the same manner as a city dweller who is exempt from all capital gains on his principal residence.
Another provision that I think should be made in the legislation relates to the sale of a part of a farmer's land. As I read the bill, it would not be possible, unless under expropriation, for a farmer to sell land and reinvest the proceeds in the same or another farm without realization and taxation of capital gains. There are many circumstances when a reorganization of the farm business requires disposal of land and purchase of either other land or depreciable assets for the farm business. This is particularly important for a farmer who wishes to change to production of another agricultural product, such as a prairie wheat farmer who starts into cattle, hogs, or poultry. Public policy has in recent years emphasized the necessity of farmers to adapt their productions to market conditions. The capital gains tax provision now proposed would introduce a necessary rigidity. There should be no realization of capital gains on such reinvestment. This will be a real problem for many farmers and we request that it be taken into account.
Also, I would like to point out that for persons who do not need to invest their capital gains in their own enterprises, the annuity arrangement permits extensive averaging. The farmer who wishes to reinvest in farming should have the corresponding option I have suggested. There will also be many cases where the farmer will suffer capital losses on disposal of property. If he is faced at that time with new investment in the reorganization of his business, the backward averaging provision may be of little use to him, or unavailable. I recommend that in such cases a forward averaging over a period of years be provided for the farmer.
These, Mr. Chairman, are basically the areas where I find amendments should be made to the legislation. The transfer of a farm within a family, whether by sale or by inheritance, without the realization of capital gains is probably the most important area to be dealt with. I think it is absolutely necessary that the government take another look at this area because, as I have mentioned before, the family farm is a special problem in relation to other segments of our society. The $1,000 exemption for the principal residence should be amended to include farm corporations because they are becoming increasingly more numerous and are very much a part of modern day farming.
To conclude my remarks, Mr. Chairman, I do not believe that the points I have made are entirely beyond realization or would be unacceptable for the government to bring in as amendments to the tax legislation. As I tried to stress earlier, farming, because of its very nature, is unique when compared to a great many other businesses and it should be treated as such in any taxation proposals that are brought forward.


Some hon. Members:: Hear, hear!


Mr. Thomson:: Mr. Chairman, I should like to ask the parliamentary secretary a question having to do with the depreciation allowances with respect to farm machinery. When I have done so I should like to make a comment or two on that item. I understand that under the new act what might be called a capital gain arising from the trade-in of capital equipment will be taken directly into a farmers' income.


Patrick Morgan Mahoney: I am sorry. Is the hon. member speaking about the present bill or the existing act?


Roderick J. (Rod) Thomson: I am referring to the legislation before us. Will the residual value of a piece of farm machinery, when it is traded in, be taken directly into farm income, and not considered to be a capital gain?


Patrick Morgan Mahoney: To the extent that it constitutes recaptured depreciation, it is income. The only way in which capital gains would arise would be if a farmer were fortunate enough to sell a piece of machinery for more than he originally paid for it, the item of equipment having been acquired after the system comes into effect.


Roderick J. (Rod) Thomson: I am still not clear about the position, but if I am in error, I hope the minister will correct me. The present system of dealing in farm machinery appears, now, to be out of line, in the sense that machinery companies allow a big mark-up in the value of pieces of farm machinery traded in near the end of the depreciation period. Then, the farmer has to pay what might be called an outrageous price for the new machine. Neither price reflects the true value of the equipment. It seems to me that if my understanding of the hon. gentleman's reply is correct, there would need to be a considerable adjustment of the mechanism now operating in the farm machinery market. Take, for instance, a combine which sells for $10,500. A farmer wishing to buy it will get a $5,000 trade on an old combine of his which is worth only $2,000.
I telephoned a farm machinery company to ask what their procedure was and they indicated they were already responding to the new situation by giving a cash discount and placing a truer value on the used machine. I am really wondering whether the depreciation schedule as now set up should be allowed at all. If a farmer is allowed to take a figure for depreciation of $10,000 when the value of his equipment is only $7,500, then the assumption with which we have begun is an unreasonable one. Possibly the parliamentary secretary would care to comment about this aspect in a moment or two, but it appears to me the whole system will have to be changed. The present situation illustrates the way in which systems are built up when the rules are one way. If the rules are changed, something different has to be done.
I should like to make a few comments, now, on another difficulty which arises with respect of the imposition of a capital gains tax on farm land. The last speaker pointed out that the administration of laws of this kind is extremely difficult. I have in mind problems which have arisen in connection with estate tax in the past. Perhaps these arose not because the estate tax in itself was so much out of line as because the people administering it did a poor job, in
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my opinion. Let me give the committee an illustration. I know a case of a house in a small town being valued for estate tax purposes as if it were situated in a city. It was not the true value. It was not possible to get a price of that sort for the house. But the officials insisted it was a true value. I believe it would be difficult to arrive at an accurate value of farm land for capital gains purposes. I have recently been arguing with the Minister of National Revenue on behalf of a farmer in my constituency about the value of a particular piece of farm land. In effect, I said: If the department is so certain that their value is a correct one, why do they not take the land at their price in payment of the tax the department says the farmer owes.
I suggest to the parliamentary secretary that the assessment of the value of a farm when it passes from father to son should bear some relationship to the capacity of that farm to produce well. Even this will present difficulties. For example, the price paid for a quarter-section of land purchased to round out an economic unit might well not bear a true relationship to what it was worth on the open market. Farmers sometimes pay much more than the true value of land in order to start a son farming or round out an economic unit. I am sure the government does not wish to penalize anyone in particular, but it appears to me there is room for debate here and considerable room for friction between the department involved and the individuals directly concerned.


The Deputy Chairman:: 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 Temiscamingue (Mr. Caouette)-Air Canada-Request for DC-9 Air Service in Rouyn-Noranda Region; the hon. member for Yorkton-Melville (Mr. Nys-trom)-Grain-Wheat-Statement by Minister of Supply and Services on necessity for two-price system-government policy; the hon. member for Central Nova (Mr. MacKay)-Harbours-Pictou, Nova Scotia-Implementation of plans for improved facilities.


Patrick Morgan Mahoney: In response to the point raised by the hon. member for Battleford-Kindersley I would grant that the existing income tax law providing for straight-line depreciation and no recapture of depreciation applicable to farm equipment may be a contributing factor to the way in which some of the pricing mechanisms have been built up in connection with the farm equipment industry. It would certainly be the sort of thing which would encourage a policy of writing up the true value of a trade-in on the one hand and of the price of the new equipment to be sold on the other. I understand that the pricing mechanisms of the farm equipment companies are overdue for an overhaul according to suggestions made by those who have studied this question with particular concern. I would say that the amendments presently before the House would-at least remove one obstacle to a significant revision of this pricing mechanism.


Mr. Gundlock:: Mr. Chairman, the parliamentary secretary suggested in his answer that amendments to the Income Tax Act might correct this ambiguity. Or did I misunderstand him?
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Patrick Morgan Mahoney: If the committee will excuse me, I suggested amendment might remove one obstacle. I am not for a moment suggesting it is a cure-all.


Deane Roscoe Gundlock: That is exactly what I am saying. We are not talking about the Income Tax Act itself; we are talking about income tax reform. The immediate subject under discussion is capital gains made by farmers. I should like to know what the parliamentary secretary is really saying. Is he going to tell us tomorrow that this matter will be corrected by the Income Tax Act or the regulations made pursuant thereto? We have plenty of time, so why does he not tell us now what he is really saying?


Patrick Morgan Mahoney: Mr. Chairman, I am sure that when the hon. member has had an opportunity to read my answer in Hansard tomorrow it will come through to him a little more clearly than it apparently has at the moment.


Deane Roscoe Gundlock: Mr. Chairman, we have had the opportunity of reading Hansard on so many occasions and also the act. What we are doing today is discussing capital gains as they relate to farmers. We are not talking about the Income Tax Act as such. According to the press, the parliamentary secretary from Calgary South has lamented the ineffective opposition in the debate on this bill, and now he tells me to read Hansard. The parliamentary secretary says that we are so ineffective, and I want to be effective. Since he is so worried about our ineffectiveness, he should be so magnanimous as to tell us why.
To turn to the amendment, I support it fully. Let me go back some eight or ten years to a time when we were discussing this matter in this House. As reported at page 4191 of Hansard for May 1, 1961 I said:
I am in the particular category of farming which the hon. member mentioned. That is what is commonly known as the category of family farms. I do not think it is the intention of this government-although it may have been the intention of former governments-to remove every other farmer, as I think was mentioned, or the small family farmer.
I wish to emphasize that. One of the previous speakers was a member of the Liberal government and he spoke about a very important act that meant a great deal to Canada, particularly to our farmers. The present government had an answer to its policies as recently as last week in Saskatchewan, but the amazing thing is that the parliamentary secretary today is speaking in exactly the same vein as the hon. member to whom I referred spoke ten years ago, because he is suggesting that the family farm should close down.
The hon. member can sit there and chuckle if he likes.


Patrick Morgan Mahoney: I am shaking my head, not chuckling.


Deane Roscoe Gundlock: It is about time he shook his head. There are a lot of other people a little closer to home who will be shaking their heads, too. The parliamentary secretary has failed to answer a very pertinent question.
I should like to refer to something I said very recently, and which I have been saying for over ten years. It is rather like the little boy butting his head up against a stone wall, but repetition is the only way to get through to the government and finally, to give credit where credit is due, I think the government is beginning to listen. I was

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referring to the advisers of the government and asked how in the world a practical politician, such as the Minister of Finance or his parliamentary secretary, could dream up such a bill as this. I know the Chair will call me back to the amendment in a moment, but at page 8969 of Hansard for October 22, I quoted remarks made at page 8335 of Hansard by an hon. member opposite, who had this to say:
I suggest we should have a minister whose primary concern would be the co-ordination of the economic policies of all these departments and the development of general economic policies. I suggest we should have a minister of state for economic policy who would undertake this task.
By coincidence, I read on the front page of the Globe and Mail that the premier of one of our greatest provinces has called, in effect, for the same thing, namely for doing away with waste and duplication and for a joint study to decide economic goals. In deciding what our economic goals are to be we must necessarily consider farmers and small businessmen, though here we are referring in particular to farmers. We are talking about farmers and small businessmen who have built up some sort of estate, and whose heirs or successors are required to sell part of the estate to pay tax on the death of those fanners or businessmen. If you are against taxes you are popular, but we must be realistic. I quoted earlier from a speech I made here in the House dealing with the lack of regulations under the Income Tax Act regarding an exemption for the cost of rock picking. Let me now refer to section 30 of this bill which relates to land clearing exemptions.
In my area of the country there are very few trees, unlike that area around Regina, but we do have a lot of rock. Over a period of 30 years my expense for rock picking has amounted to about $50 per acre. I am not allowed to deduct that expense from the cost of my farming operation. Every other expense is spelled out, and to me rock picking is an expensive operation. This expense is not allowed under the Income Tax Act and it is not allowed apparently under this bill. If I sold my land, I would not be allowed to deduct that expense before calculating any capital gains tax, yet the clearing of that rock contributed to the increased value of the land. I will not be allowed to deduct the capital gains tax as an expense under the Income Tax Act, therefore there will be double taxation. I would be very happy if the parliamentary secretary would explain the situation. I feel this is a legitimate expense which should be allowed as a deduction under either the Income Tax Act or as a cost in calculating capital gains tax.


Patrick Morgan Mahoney: Did I understand the hon. member correctly to say that he was not allowed to deduct the cost of clearing land from his taxable income?


Deane Roscoe Gundlock: As usual, the hon. Parliamentary Secretary did not understand. I was referring to the removal of rocks from farms in certain areas. This involves a great expense but is not covered as a cost of land clearing such as clearing brush, trees and blasting stumps. Perhaps you will refer for a moment to section 30 of this bill which refers to these exemptions. It refers to the removal of trees, brush, stumps and such things but it does not refer to rocks. I pointed out that I had spent perhaps $50 an

acre on rock picking, and I was not allowed to deduct this as an expense in calculating income but that this would contribute to the value of the land and therefore the capital gains tax. In that way, I would pay double taxation.


Patrick Morgan Mahoney: Mr. Chairman, I am sure the appreciation of land value as a result of the work and investment the hon. member has put into it through rock removal would be reflected in the land value at this point, and any appreciation in value up to the time of the new system with the capital gains included in the tax base would not be subject to the capital gains tax. I do not think the hon. member is right in suggesting there would be an element of double taxation for the kind of expenditure he has made in the past, and certainly for that kind of expenditure in the future. If it is not a deductible item under the Income Tax Act, but it did contribute to the increased value of the land, it would be a capital cost that would come into the cost base in calculating the capital gain.


Deane Roscoe Gundlock: That is what we are looking for in this amendment, some sort of assurance in this regard. The hon. parliamentary secretary says he is not sure when he is talking about the future. That is the whole point of the debate. We want some assurance now for the future when we talk about capital gains in relation to agriculture. This is not a new subject. I talked about it ten years ago. The situation existed under an old law passed by the government of which the parliamentary secretary is a member, and existed for a short period even under a different government. We are now facing the same situation, and we want some assurance that a deduction will be made to allow for this kind of expense either under the Income Tax Act or the capital gains tax. This is what we are talking about and I should like to have an answer.
Apparently the parliamentary secretary is not going to say anything, and that almost leaves me without words, so I will just quote again because the agricultural people of this country are listening and want to know what is to be done. Small businessmen in many constituencies, and even those in big towns like Calgary, have an interest. All these people are affected by the agricultural communities and they want to know about this capital gains tax. Perhaps the parliamentary secretary would listen for a moment and give us an explanation. I should like an explanation about that part of the capital gains tax which requires that an individual has to be a resident in Canada in order to avail himself of these exemptions. This sounds to me as though we would have to bring back the body of a man who died outside the country in order to take advantage of the exemptions to the capital gains tax. It looks as though we will wind up with a lot of bodies here.
I have received a number of letters from farmers regarding this proposed capital gains tax and I should like to read one. This man met me at the airport yesterday before leaving to return to Ottawa. He said: "Dean, we are old friends. What are we going to do about this? I have written to the Minister of Finance, Mr. Benson, and I have written to Mr. Mahoney. I have not had any answer. What can I do?" I said: "Apparently they are not listening in the House of Commons, but I promise that if you will give me permission I will read your letter into the record on
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Monday when we will be talking about capital gains." The letter is dated November 14, 1971 and reads as follows:
Dear Sir,
I hope you will read this letter to the House of Commons, at Ottawa.
I read Hansard so I am pretty well posted. I can't see why this government can't separate the good legislation from the bad. Take the income tax bill, it helps some people and hurts others.
If they do away with the depreciation on farm machinery and put the capital gains tax on the farms, it will put the family farm out of business.
I could say a lot more, but think these are the most important points right now.
Sincerely yours,
A. J. Walks
After he handed me this letter, Mr. Walks pointed out that he is a life-long Liberal. I was aware of that because we are good friends. I told him he did not have to point this out to me but he said to me, "Say it; I have written the Minister of Finance and the parliamentary secretary and have had no answer. Now, I come to you." Mr. Chairman, and Mr. Parliamentary Secretary, I believe you understand what this man meant. People engaged in agriculture are not having a very good time because of the high rates of interest and so on. I hope the parliamentary secretary, and through him the minister, will consider for a moment that there might be a bit of difference between agriculture, small business and what we might call the "fast buck boys".
I have before me an article which appeared in a newspaper in western Canada entitled "Cattlemen gain tax concessions". I might say a word of commendation for my colleague, the hon. member for Crowfoot, in this regard because I believe it was mostly due to his efforts. I would hope that perhaps the farmers and small businessmen in western Canada-I put it that way although I really do not mean it in that way-as well as businessmen in all Canada would receive some of the consideration due to them. I think the government could perhaps stand this portion of the bill in order to have another look at it. It is not necessary that we in the opposition have credit for this. This is something that is needed by the country.
The other day I pointed out that a year ago in Three Rivers, Quebec, the chain stores had advertised pork at 19 cents a. pound for halves and quarters, and beef at 39 cents a pound for halves and quarters. Something has to be wrong with a government administration that would allow such a situation. This goes right back to the people who have worked for years and years in agriculture and who at their retirement age are faced with such a situation. I say there must be some realignment in the government administration. I realize this is another point. There probably are controls. The United States is looking after its business, and quite rightly so. I believe it is time Canada looked after her business. There is an old axiom to the effect that if you do not look after your own business someone else will. This is exactly what will happen to the party opposite. If it does not look after Canada's business, somebody else will and that will be a great day.


Mr. MacKay:: Mr. Chairman, in speaking in support of the amendment proposed by my colleague from Edmon-
Income Tax Act
ton West I hope to do so without being bombastic or long-winded, but it occurs to me that perhaps there is a quote from a great man which might relate to what is being discussed today. I believe it was William Jennings Bryan who said, in assessing the importance of the farm to a country's economy, that if you destroy the cities and leave the farms intact the cities will spring up by themselves, but if, on the other hand, you do anything to diminish or destroy the farms there will be grass growing in the streets of every city in the land. This may be, as I said at the outset, a little bombastic, but there is an element of truth in it. I believe the government would be remiss if it underestimated the effect the family farm, and farms generally, have on the economy of this country. I think there is an excellent case to be made for exempting farms from the capital gains provisions. It would seem obvious to every thinking Canadian that the time has possibly come in this country when it is necessary to have some capital gains provisions if it is proposed to tax the wages of a worker.
I suppose in some instances it is only equity to also tax the fruits of speculation and short-term gains by speculators. It may even be necessary to tax some forms of short-term real estate transactions. What disturbs me, however, in looking at the effect of capital gains on the family farm, and indeed on real estate in general, is that at the present time we are in a very unsatisfactory state so far as federal-provincial agreement is concerned on taxation generally. Last June the Minister of Finance said something to the effect that he was proud to announce that the federal government was abdicating the fields of gift and estate taxes and instead was substituting a capital gains tax. Yet we find that at the present time many provinces, with encouragement from the federal government, intend to remain in the estate and gift tax field if certain financial arrangements are made in this regard. It seems to me that what we need more than anything else in reference to capital gains, specifically in relation to farms and real property, is a national approach to taxation.
If one looks at the records, one finds that the provinces, and many responsible people in government and in business, feel that something must be done to integrate and correlate taxes on a federal, provincial and even on the municipal level. It is good business to do this. It is not only good business, it is good for national unity. I do not see why something cannot be done to defer or to exempt to some extent some types of capital gains, particularly as they relate to assets held for a long time by working people and, in the particular context of the debate this afternoon, by people who have farms.
I would suggest that it is one of the most onerous of taxes to apply to people who have put a great deal of work into building up a farm, who have already paid tax throughout their working lives in respect of the moneys they have earned and the moneys they have used to purchase and to improve farms in order to build up a worthwhile asset not only for themselves but for the whole community. For the government to impose a capital gains tax on these people under these circumstances is, in my opinion, almost immoral, particularly when one finds there is no general agreement among the provinces as to

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whether some sort of arrangement will be made with the federal government on an abatement or other similar basis regarding estate tax.
Thinking back over the events of a few days ago when the hon. member for Crowfoot and the Parliamentary Secretary to the Minister of Finance engaged in a very interesting bit of repartee on capital gains with reference to the basic herd concept, I remember that previously I had thought the government had not given sufficient consideration to the experience that was available in the United States of America with regard to the concept of a capital gains tax. Listening to the exchange between those two hon. gentlemen reinforced my belief. I wish I were more expert in the tax field and could speak with more authority, but it seems to me there is much to be learned from the American experience with regard to long- and short-term capital gains and other aspects of taxation which the Americans have had a chance to refine over a long period of time-certainly longer than we have had, particularly with respect to capital gains.
I think it would be in the best interests of the country- and so far as that goes, of the government-if serious consideration were given to treating farmers in a definite and specific way that would exempt them, at least at this time, from the provisions of a capital gains tax. I do not think there is anything to be gained by imposing such a tax at this time, given the present state of the agricultural and national economy. I want to be definite about this. I am not opposed to the concept of a capital gains tax. I think that probably the time has come in this country when it is necessary to have it. What I am opposed to is the method, the haste, the uncertainty and the mechanics used by the government to impose such a tax at this time.
It is a matter of record that many nations-and not only undeveloped nations-do not find it necessary to have a capital gains tax. I believe that Japan, Australia, South Africa and France have no capital gains tax. I may be wrong and maybe the parliamentary secretary will disagree with. I cannot swear that this is true, but I believe it is. I believe that Belgium, Germany, Holland and Italy have a tax only on speculative gains. If this is true, I would think that an excellent case could be made in this country for exempting certain types of assets from a capital gains tax.
I do not think anyone would quarrel with taxing speculative gains, whether those gains be made in the stock market or in the real estate market. They are a fast buck method of gains and I do not think anyone would disagree with taxing it. But I think it is morally wrong, and I think the government would find it politically indefensible in years to come, to impose a capital gains tax on family farms and not take immediate steps to get together with the provinces, and even the municipalities, to stop the very real possibility developing of double taxation, at least in theory, as the proposal now stands.


Walter Gilbert Dinsdale: Mr. Chairman, I wish to support the amendment proposed by the hon. member for Edmonton West with respect to the application of capital gains tax to farming enterprise. In view of the remarks that have already been made on this matter, there is no need to deal with the capital gains concept: I am sure that all hon. members agree that the time has come when some reve-

nue should be derived for the public treasury from capital gains.
Whenever this subject was discussed in the House, particularly in recent years following the appointment of the Carter royal commission, I recall that the argument advanced was that the Canadian economy was not sufficiently mature or developed to contemplate adding capital gains tax to the existing income tax and corporate tax measures. However, Mr. Chairman, we must remember there was the same resistance to the introduction of income tax when it was first applied in Canada on a temporary basis during World War I. What was regarded as temporary to meet the exigencies of war has become permanent to the extent that it is now accepted without too much protest by all citizens of Canada. The concept of a capital gains tax has been going through the same process of evolution with regard to acceptability.
Canada, in terms of its economic development, is still largely dependent upon primary rather than secondary production. Those who have a substantial interest in the processes of primary production argue that to apply a regressive capital gains tax at this stage in our economic development would have a decidedly negative impact on our gradual movement toward emphasis on secondary production. Those who engage in developing the resource industry have much justification in the argument they make, that there should be no undue exacting of tax from this part of our productive processes at this particular time in our development. I am not going to engage in a discussion on the general aspects of primary producers other than to focus-and I think this is the purpose of the amendment-on the capital gains tax as it would apply to farming as part of our primary production industry.
I want to link it with the seemingly negative attitude of the government toward the agricultural industry, as has been manifest in its policy initiatives since it assumed office in 1968. I refer to the Lift program, the Lower Inventory for Tomorrow program-which was immediately re-named by the farmers whom it was supposed to benefit as the Lower Income for Tomorrow program- more recently Bill C-176, the agricultural products marketing bill, and the subject that was debated quite extensively in this House during the present session, the grain stabilization bill. I do not think it is unfair criticism to say that each of these legislative initiatives has had a negative reaction from the primary producers, the farmers, who have indicated that they feel that government policy generally is out of tune with the agricultural industry. I should like to suggest, Mr. Chairman, that this argument can justifiably be applied to the application of a capital gains tax as outlined in the voluminous legislation before us.
I want to turn to page 569 of the bill which gives the definition of "farming" for the purpose of the act. At the top of the page the marginal note "farming" appears and the definition as follows:
"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-
November 15, 1971

That is a very broad definition of the agricultural industry and it may be necessary to further delimit the terms of reference. For example, "maintaining of horses for racing" is rather a unique category of farming that might be excluded as an essential part of the industry.
In supporting the amendment I would suggest to the parliamentary secretary and the government that at this stage of development of the agricultural industry, when it is obvious that very serious economic hardship is being suffered by our farmers, there is every argument to be made that the proposed amendment is one of the best ways of avoiding further serious deterrent to the progress of the industry.
I do not have to outline the statistics or the pattern that has evolved in the past couple of decades. More and more of our farmers have been leaving the industry. It is part of what the sociologists call the rural-urban drift. Judging by government policy initiatives that I have outlined briefly, the government has accepted that the drift from the farm to the cities is an inevitable process and has decided that any policies it initiates will accelerate the process. How else can the pattern that has evolved in legislative initiatives over the past two or three years in this House be explained?
I think farmers are quite justified in resisting as strenuously as they can through farm organizations and personal protests what the government has been trying to do. Members of this House who represent farming communities have been vigorous enough in the debates on the grain stabilization bill to demonstrate to the government that it is moving in the wrong direction in dealing with the so-called farm problem.
There are still many arguments pro and con the imposition of a capital gains tax, as has been demonstrated in the debate thus far. Surely the government will accept the amendment and remove entirely from the application of capital gains tax the agricultural industry, perhaps with a narrow definition. It does not necessarily have to include horse racing. Farmers engaged in primary production are finding it increasingly difficult to comprehend the rationale of their industry at the present time, as is demonstrated by the movement of farmers from the land and by the increase in the size of farms as farmers move toward corporation farming. If this process continues to be encouraged by the government, we will have corporate farms rather than family farms and then the problem of capital gains will be resolved even if there is an exemption as recommended in this amendment. Though we have had extended debates on agricultural problems over the last few months, the government obviously has not accepted the reasonableness of our arguments.
I should like now to deal with the broader social implications of legislative initiatives as represented in this further attack on the integrity of the family farm. Perhaps this applies to western Canada more than it does to other parts of the farming economy. There is a social problem involved in the imposition of a capital gains tax which would eat at the very foundations of the preservation of the family farm, which would have serious implications with respect to the growth of our urban population at the expense of the rural population and which would aggravate and compound the social and economic problems
Income Tax Act	-
that are increasing in the large metropolitan communities at such a rate that local government is not able to cope.
It is in urban communities that you find the major social difficulties, the problems of pollution and the problems associated with the decline and disintegration of the family as a basic social unit. That is where you will find the greatest deliquency and crime; that is where you will find problems associated with the drug culture which is espoused by young people. That problem is exercising governments at all levels to a great extent today. All these basic social issues have their origin in the phenomenon which has been part of the twentieth century, of the accelerating drift of the rural population to the big, booming metropolitan communities.
I do not think it is inevitable that this situation should persist. It is not a natural phenomenon. I think we will find, as is already occurring, that more and more young people will be moving out of the big city because there is a repeated lowering there in the quality of life associated with the pursuit of some of the basic values which are not necessarily connected with economic and fiscal values. Economic and fiscal values were perhaps the prime motivating forces in the earlier part of the twentieth century. It is significant that young people today are repudiating these values and emphasizing the qualify of life as measured in human values rather than as measured in economic and fiscal values.
Any step put before the government which will encourage the slowing down of the so-called rural-urban drift should, I think, receive the wholehearted support of members on all sides of the House. We have here an opportunity to do that. Without destroying the broader intention of section 3, in particular, of Bill C-259 we can do it by removing entirely from the legislation the application of a capital gains tax to certain groups.
Let me say again that we may require a further redefining of the agricultural industry. The government has already brought in numerous amendments and amendments to amendments, so there is no problem in this respect. Certainly, enough has been said already about this particular item. Yet we can demonstrate that the family farm should be preserved at all cost. We are moving very gingerly into the capital gains field. The rates of tax will not be applied at the regular level of income or corporation tax. Actually, certain exemptions have already been brought in by the government through its legislative initiative. For example, the basic division between securities and other forms of property is one attempt by the government to differentiate between the kinds of assets that should be taxable under the proposed capital gains provision.
I strongly recommend that the parliamentary secretary and the government accept this amendment. They have proposed many amendments of their own. The government has been reluctant to accept any amendments proposed as a result of committee hearings held prior to committee of the whole discussion at which Bill C-259 was discussed. Surely they can accept at least one amendment proposed by members of the opposition. It is designed to protect a fundamental, primary industry-the agricultural industry-from further erosion, to preserve the family

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farm and to slow down the drift from rural to urban communities, a drift which is having such a deleterious effect on the quality of Canadian life.
Rather than encouraging that process, let the government introduce legislation the aim of which, as opposed to the aim of the grain stabilization bill, of the Lift program and of the farm marketing bill, is to encourage farmers to stay on the land. Let them take a policy initiative that will encourage farmers to stay on the land, and encourage the preservation of rural values which to a large extent have been destroyed by the rapid and disastrous depopulation of our rural communities.


Mr. Korchinski:: Mr. Chairman, may I call it six o'clock?


Gérald Laniel: Is that agreed?


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


[Stage Direction]
AFTER RECESS

The committee resumed at 8 p.m.
Stanley James Korchinski: Mr. Chairman, this afternoon the hon. member for Edmonton West moved an amendment which was of primary concern to farming areas throughout Canada. I will not be revealing any secret to the House when I say that many farm communities in Canada have been fighting a losing battle under the present administration. Under the circumstances, it is difficult to understand why at this time another tax is being loaded onto the backs of our farmers. Any explanations we have had from the government have attempted to prove that what is being done is necessarily good for the farm communities.
This afternoon the parliamentary secretary stated that the taxes collected will be in the order of $50 million from corporations, and $80 million from individuals. He can correct me if I am wrong on this. The tax burden will not be on the corporations, as the members of the New Democratic Party claim. This money will come from small businessmen, enterprisers and struggling individuals. These people have been paying the bulk of the taxes up until this time.
In a young country like Canada I fail to see why it is necessary to burden everyone with a capital gains tax. A capital gains tax sounds very nice. However, we must realize that the burden will be on the individual. I do not think we are so smug to suggest that we have all the money we need, that we should not have savings or that no one in this country should make money. It will be a sorry day for this country if efforts are bent upon finding loopholes whereby people will avoid paying taxes. This, surely, will not build a better Canada. I know the NDP philosophy inside out. I was born into it; I lived it.


Mr. Gleave:: Did you go to school, or something?


Stanley James Korchinski: The hon. member asked if I went to school. I heard the philosophy inside out. It is falling out of my ears. It will fall out of the hon. member's ears also. I do not know whether he realizes it, but it will affect his

farm and his neighbour's farm. I do not care if it affects the hon. member's farm, but I am concerned about his neighbour. In reply to the member's question, yes, I did go to school. I have heard the comments of the leader of the New Democratic Party.


An hon. Member:: Socialism!


Stanley James Korchinski: You can call it socialism or anything you like. For the sake of $130 million, I wonder whether this country needs the NDP philosophy. I want to differentiate between capital gains that are speculative and those earned by inflation, general increases in prices. There is not very much wrong with taxing an individual who makes money by speculating. I do not argue with that. However, I do have one argument. I am talking about the farmer who made his child pick rocks and roots, and the businessman who struggled to put his child behind the counter. These people kept their children home from school in order to build a viable unit. Suddenly, for the sake of a philosophy that has been continuously pushed by the New Democratic Party, we have to swallow a philosophy of a group of people who do not amount to a hill of beans.


Some hon. Members:: Hear, hear!


An hon. Member:: Slave labour.


Stanley James Korchinski: It is slave labour. Capital gains are earned through slave labour. This bill does not suggest that a child will receive a minimum of $1.75, $2 an hour or whatever it may be. All the bill says is: You have it, and you must give it to us. This is the philosophy of capital gains. I do not mind the speculator being taxed. I want to differentiate from real and imaginary capital gains. Imaginary capital gains are inflation. Inflation increases prices.
It was interesting to listen to some of the speeches of the NDP. When the hon. member for Edmonton West moved a motion, they disagreed with it. Did they move a subamendment? No. They were afraid to do that. They wanted to put us in a position where it would appear that they wanted to do more for the farmer than the farmers of this party. They do not want to put their words into action. They do not want an amendment for only one reason-it defies their philosophy.
How can a leader who has always worked on behalf of labour tell me he is working on behalf of farmers? Does he realize for one moment what it is like to have to spend all your money, nothing brushed off, breaking stones, as my seatmate mentioned this afternoon? Does he realize that every bit of ditching meant a capital gain on the land? If you work hard to leave something for posterity, then one day they want it. It does not matter to them that every time you did that your assessment went up on your land and you paid your taxes accordingly.
Oh yes, they say, "If you don't pay it, somebody else will." Let me tell the leader of the NDP that the farmers who went out to work and made improvements on their land paid taxes to the municipalities for roads and other improvements that the men who are sitting as labour representatives now enjoy. They pay income tax, but so
November 15, 1971

does the farmer-if he ever makes a dollar. We built the roads, the schools and paid for the teachers. We did everything else as well. But we are to pay taxes in the way now laid down for us, and if you turn around and make a capital gain because you have struggled like a devil, you have to pay a capital gains tax.
Why do I support the amendment? The people to my left do not understand. Their leader will never understand what it is like. He cannot mislead me because I know the difference between digging soil, digging rock and picking one's pocket. I find it hard to understand how the NDP movement can come to us and say, "You are all right, but this is what it will do." They suggest there will be speculation in land. The hon. member for Regina East said so in the course of his remarks. Speculation, he predicted, would become rampant and the amendment, if adopted, would encourage it. Why did he not move a subamendment to cover the situation? Maybe they will come out with one after my speech. You never know. Maybe we can get them out of their corner.


Mr. Woolliams:: They said the white paper did not go far enough.


Stanley James Korchinski: Let me tell the hon. member this. If we do not adopt the amendment, every time a farmer has a capital gain on his land he will seek to recover the amount of the capital gain on the price at which the land is sold. As a result, farmland will cost more. I know I would do this. If a capital gains tax were applied to my land, I would try to recover the amount. The price of land would obviously go up. Judging by his comments, the hon. member for Regina East does not realize that a man has to get his money out of the land.


John Stratford Burton: I do not think he is going to get it.


Stanley James Korchinski: For a long while he was getting it. I know a lot of people who have gone into farming on that basis.


Mr. Saltsman:: Speculators.


Stanley James Korchinski: That is right. There is nothing wrong with speculation.


John Stratford Burton: I thought you did not like speculators.


Stanley James Korchinski: There is nothing wrong with speculators in certain fields. If this tax were applied to people who have more than they require for a livelihood, fine and dandy. I am thinking of those who speculate in stocks and bonds. But when a man tries to set up a viable unit as a farm, it is not done for speculative purposes but to provide, he hopes, a reasonable living for himself and his family. That is the difference when it comes to speculation. If the hon. member has some money left over and uses it to speculate, I would say tax him. But when a man is trying to provide a living for himself and his family, I would never describe that as speculation but as a struggle for existence.


John Stratford Burton: That is not what the amendment says.


Stanley James Korchinski: The point is that the NDP is not posing any kind of amendment or subamendment. We have moved an amendment.
Income Tax Act


John Stratford Burton: There has been no ruling on your amendment.


Stanley James Korchinski: I do not wish to become involved in an argument with the hon. member for Regina East on that point. The chair may wish to ignore him or it may wish to ignore me.


Joseph-Phillippe Guay: You may meet your "Waterloo."


Stanley James Korchinski: Let me tell the hon. member that about six NDP-ers have run against me in my lifetime, so that remark does not hurt my feelings one bit.


John Stratford Burton: Tell us about Assiniboia.


Lincoln MacCauley Alexander: Tell us about Ontario.


Stanley James Korchinski: It does us a lot of good sometimes to stir up the hornet's nest to my left. I have always been outspoken when it comes to expressing my views about the government: now it is the turn of the NDP. They do not like to hear these things, maybe because this capital gains tax proposal is part of their philosophy, part of their creed. They believe that provided somebody has a little more than you have, you have to get it from them.


Some hon. Members:: Hear, hear!


Eldon Mattison Woolliams: It is like voting against a salary and taking it.


An hon. Member:: That is another question.


Stanley James Korchinski: I do not want a capital gains tax at this time. However, I admit there are speculators. I am not so naive as to suggest there are not. But we differentiate between right and wrong. There can be proper taxation and there can be improper taxation. But to tax everyone on a capital gain is wrong. In these few minutes I have pointed out the difference between the two. I think the government should look carefully at the matter and make a differentiation. Let us not impose a capital gains tax overnight and then discover we are in a mess. Let us not find that having got ourselves into this position, we cannot back out of it. An amount of $130 million out of a total budget of $13 to $14 billion is not very great.


Max Saltsman: What's $130 million?


Stanley James Korchinski: It depends where it comes from. The parliamentary secretary has already indicated that $80 million will come from individual taxpayers and $50 million from corporations. The hon. member is arguing against himself.


Max Saltsman: Would the hon. member permit a question? Has the hon. member-


Russell Clayton Honey: Order, please. Is the hon. member rising on a point of order?


Max Saltsman: I wonder whether I could direct a question to the hon. member. Has he made any calculation to see how much of the capital gains tax would come from the farming community and how much from the industrial community?

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Stanley James Korchinski: I have not made any calculation of that sort, and neither has the questioner.


Some hon. Members:: Hear, hear!


Stanley James Korchinski: But let me say this to the questioner: Whether $1 million or $2 million came from the farming community, I think he would admit that the farming community is not in a position to give up that amount at this particular time.


Mr. Osier:: Mr. Chairman, I have a couple of points I should like clarified. We are talking about capital gains made on farms, but it seems to me that the motive of the present system in this country is profit. Profit can only be derived from a system that is backed by capital investment. As far as three out of the four parties in this House are concerned, there is nothing wrong with capital investment.
I think there are two classes of people who have to be considered when we talk about capital gains tax, of which I am fully in favour. Having invested capital, you expect to make a profit and also a capital gain. Profits and capital gains should both be taxed. However, there are two classes of people in Canada who are in a unique position and should be considered-the good guys and the bad guys, as it were. In this case, the good guys are the farmers and the small businessmen. I suggest that for "small businessmen" we use the definition that the government of Canada has used in other parts of this legislation, namely, someone who has accumulated no more than $400,000 worth of profits. Up to that point they are small businessmen, at least according to the way in which the government treats their profits. I suggest it is also reasonable to treat such small businessmen in exactly the same way on the subject of capital gains.
I make one simple request to those on the government side who are listening to me tonight, and it is this. As the previous speaker said, it will not cost the people of Canada a lot of money. In fact, in the long run it will probably save them a lot of money because it will ensure that the profit system will still work and that the private investment system will still work. I refer to allowing the genuine farmer-I leave it to the government to define what is a genuine farmer-and the small businessman, and I have suggested a definition for a small businessman, to take advantage of the same provision, when a capital gain is realized at death, that applies under the Estate Tax Act. I suggest the government give the estates of these two categories five years in which to pay the estate tax that is levied at death. In that event the family would continue to operate the family business. The farm and the family store are both springboards from which we have developed this country, a country that is just beginning to arrive at a take-off position.


Max Saltsman: Mr. Chairman, I listened with great interest, as did all members of the committee, to the hon. member for Mackenzie, who I hope will shortly return.


An hon. Member:: He hasn't left.


Max Saltsman: I am delighted to see him behind the curtains. As always, I listened to him with a great deal of interest, though I was a little surprised by his rather

immoderate stance this evening since I have always known him to be a man who is very careful and cautious in debate and who always qualifies the remarks that he makes. I know how concerned he is that he not be misunderstood, that he be fair to everyone in his contribution to the proceedings in the House. This is why I was rather surprised by his comments on the amendment, which I felt were rather intemperate in spots.
I think we would agree with him to the extent that farmland that is passed on to members of the family unit who continue to farm it should receive special consideration. However, the amendment does not make that provision. What it provides is that all land used for farming be exempt from capital gains tax. If we were to accept that kind of proposition, I think we could equally put forward the same proposition on behalf of small businessmen in the community. There are small businessmen as well as farmers in the hon. member's constituency.
How would these businessmen feel if the farmers were able to pass on their land free of tax, whereas if they passed on their small stores, or whatever it was, they were subject to tax on a capital gain? Surely all components of a particular community should be entitled to the same consideration and justice. After all, they all hang together. Merchants and farmers are to a certain extent dependent upon each other, which is why I was rather surprised to hear him say that only farmers should be exempt.
I was particularly surprised that he should criticize my party's position in not moving an amendment to the amendment. We did in fact look at it with a view perhaps to moving a subamendment, and had it made sense we would have done so. It is difficult to add to something that is pretty senseless in the beginning. Therefore, we want to move an amendment later in the proceedings which will indicate our position more clearly, rather than support an amendment we now feel is essentially bad.
A case can be made for farmers being granted exemptions of various kinds. Everyone in this party knows how difficult the situation can be for a farmer who has built up assets and then has to dispose of them, being subject to a tax he may not be able to meet. We are very much concerned about this. For that reason my colleagues have urged that various measures be applied. We think there should be a long-term exemption when the assets are being passed on from one member of the family to another. But if one member of the family decides to get out of farming and sells the land for real estate development, what is the rationale for granting an exemption on that type of speculative sale? Every speculator in our society would ask for an exemption-and we feel there has to be fairness among speculators.
We have talked about equity among working people and among various classes in our society. But if the hon. member for Mackenzie thinks speculators in general should be subject to a capital gains tax, how can he with any sense of fairness say that only one type of speculator shall be excluded from the provisions of the tax system? I know he is a fair man and I am quite sure that if he reconsidered some of his remarks he would realize this suggestion just does not stand up on the basis of equity.
November 15, 1971

It may be that the absence of a capital gains tax has contributed to the decline of farm prosperity in this country. A few years ago farmlands were the subject of heavy speculation. People were raising the price of farmland with the result that a farmer's son could not buy from the father at the price being asked. One difficulty facing agriculture in this country is the result of overcapitalization of land and the inability to derive an effective return from the land. The amendment we are considering will not help the farmer but might exacerbate the situation in which he finds himself. For that reason I find it difficult to support this amendment and look forward to a more suitable one being moved later.


Mr. McCutcheon:: Mr. Chairman, I do not think anyone in this chamber is not in favour of equity in taxation or would not applaud the application of a capital gains tax on windfalls. I am talking about the so-called extravagant gains we hear so much about which some entrepreneurs have made on the stock-market and others who have reputedly made tremendous gains on the real estate market. I think I speak for everyone here when I say these people should pay a fair tax. But I suggest we are putting out an awfully big net to catch the few who have profited in the way in which I have suggested. It will, in fact, catch many of those who have scrimped and saved to put together a few bucks for a rainy day out of their salaries and wages from factories and industries or their incomes from the little corner grocery Store to which the hon. member from Halifax-East Hants referred to the other day as being a mamma and papa type of business.
It is interesting to note that with all this talk about people making inordinate profits from the stock-market, a study of the results of stock-markets in this country over the past 10 years does not show profits of anything like those suggested. As a matter of fact, I am informed that the professional investors in Canada are not looking today at stocks for great growth factors but are investing in mortgages and bonds.
I do not think this amendment will have the effect for which our emotional patriots are calling, that is, to buy Canada back. If there was any time in the history of this country when we needed risk capital for expansion and the provision of jobs, this is the time. We are discussing an amendment which would have the effect of relieving farm property of the capital gains tax. I suggest, with great respect, that small, independent businesses could well be included under this umbrella. It is not the time in the history of Canada to implement this capital gains tax. Perhaps my reason is a little vague to some hon. members.
We will have a valuation day for farm property and independent businesses, no matter where they are situated in Canada. There has never been a time when the selling price of farm property has depreciated more than it has in the last couple of years under this government. The same argument pertains to small businesses which are now going begging. I had occasion to look at a farm in my area which would have brought $100,000 two years ago had it been put on the market.


Some hon. Member:: Are you buying?
Income Tax Act


Maclyn (Mac) Thomas McCutcheon: Not at those prices. I would be afraid to offer $75,000 today because I do not think there is a buyer on the horizon who would touch it at anything like that price. Yet this is the time we are going to value farms and put on the capital gains tax. I am optimistic. I am looking forward to the day when we get rid of this government-


Some hon. Members:: Hear, hear!


Maclyn (Mac) Thomas McCutcheon: -and the value of a farm or a piece of property will return to what it was and should be. This government intends to grab such property because it is to be valued right now, while it is depressed, at fire-sale prices.
I am also disturbed that every small, independent business in this country is in virtually the same boat. I refer to grocery stores, independent hardware stores and many other small, independent businesses. The thrust of this legislation is toward the elimination of independent businesses. This is found all through the legislation. The unfair treatment accorded these citizens has been ably pointed out during the debate. Small, unincorporated businesses are unable to take advantage of the provisions that are readily available to big business and big government bodies. The mandarins in the government service would much rather be able to place a person on a punch-card and put him through a computer than have to deal with an independent businessman who thinks for himself.
This legislation would appear to be designed with only one thought in view, and that is to make the federal government independently rich by obtaining more money at the expense of the taxpayer who has two other jurisdictions on his back. I refer to the provincial and municipal governments. No thought has been given to the fact that it is the same individual who must pay all three levels of taxation. I submit that capital gains should not be implemented at this time because of depressed land values, depressed property values and lack of investment funds for development programs.
It is interesting to note that John Meyer, writing in the Montreal Gazette of October 6, 1971, said that we need investment to create jobs. He said:
Canada has the fastest growing labour force, relative to population, in the western world. The cost of creating jobs for the entries into the labour force is on the rise. The investment required to create a new job in conventional manufacturing is around $25,000; in advanced manufacturing-an oil refinery as an instance- around $70,000. The trend towards rising investment per job created is accelerating with each technological advance.
One might ask what cost is involved in developing a job in agriculture. Someone might say it would be somewhere between $25,000 and $70,000. I, however, very much question if it can be done at those figures. To create an efficient job in agriculture, in my humble opinion, would require the accumulation of a minimum of $75,000 to $100,000 of capital. How can that be done if we implement a capital gains tax on farms? Mr. Meyer continued:
At the same time, successive federal governments have laid the foundations for, and erected most of the structure of, the most comprehensive and generous welfare structures in existence. The generation of the income to finance it, is already straining our resources.

November 15, 1971
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I say "amen" to that. People are also bothered by fear and frustration in respect of the direction in which we are going in this country. They are frustrated over tax reform and the fear they have concerning the proposed competition act, which is another classic example for the Canadian people of "big brother" government knowing best.


Wallace Bickford (Wally) Nesbitt: A real dandy, that one.


Maclyn (Mac) Thomas McCutcheon: Yes, a real dandy. They have fear over the Canada Development Corporation which is really causing concern among business people. There is fear in respect of the workings of the regional development program.
So I say this would be an extremely good time for the Minister of Finance to come forward with an amendment, or to agree to this amendment so that farm and agricultural properties could be exempt. Then, as we progress with this bill he might do the same for small business. Farmers should not be called upon to pay capital gains tax on their equipment. This is a retrograde step; it cannot be classed as anything else. Because of the terrible pricing structure we have, farmers have been able to survive only because of the depreciation they have been allowed on their equipment. They have had to have good equipment in order to be efficient. About the only thing they have left is a little depreciation on the equipment they use. Farmers who had given exceptional care to their equipment were able to get a little more use from it over and above the depreciated value. Now even this avenue is to be closed.
I admit that the rate for recapture is not as high as it is on income tax, but none the less it is a major consideration. There will no longer be any point maintaining the equipment, because they will not be able to remain in business. They might as well wear it out as rapidly as possible and, when it is done, throw it in a fence corner and collect some of the government's welfare payments.
In conclusion, Mr. Chairman, I would like to quote again Mr. John Meyer, who in this article is talking about the tax reform bill and, in particular, pension funds. He summarizes the whole business of this tax measure in these words:
Beyond these considerations is the fact that the reform measures impose generally higher taxes on production and on savings at a time when increases in production and the generation of savings have never been in greater need of encouragement. They also impose unrealistic financial structures on business activity at a time when business activity has never been in greater need to recognize reality.
For all that, the sheer complexity of the legislation still is cause enough to delay its implementation. Parliament is being asked to pass judgment on a bill in a matter of months, which has been close to ten years in evolving to its present stage. It's being required to grapple with totally new concepts which, in the amount of rewriting that is having to be done, not even their authors clearly understand.
It's simply too much and is recognizably too much. Mr. Benson should make clear now that he'll settle for passage of the generally non-controversial sections of the bill while holding over, for continuing discussion and amendment, the controversial sections. That would be the first step. The second step would be to withdraw those portions of the bill which drag on business activity.
For the benefit of the hon. member for Winnipeg South Centre, who was not paying attention, I again say that the

author of this article was Mr. John Meyer. I would recommend that he read some of Mr. Meyer's articles. They make more sense than the Minister of Finance.


Alfred Pullen Gleave: Mr. Chairman, the proposal in the bill is to levy a capital gains tax on farmland, and the amendment which is before the House would exempt farmland from such a tax. I would like to address myself to the manner in which those who propose to levy a capital gains tax on land will establish the basis upon which to assess that tax. I want the minister to tell us upon what basis, on valuaton day, are his officials going to establish the value of land. I ask the minister this question: Are you going to take the market value?
It seems to me that there are three alternatives for deciding the value of land on valuation day. The officials may decide to take the productive value of the land and attempt to establish that as the value. Alternatively, they may decide to work from the property tax basis, the existing tax assessment basis of the land. The minister and his parliamentary secretary may find this very amusing, Mr. Chairman, but I want them to answer because it is important to me as a farmer and it is important to my neighbours.
If they want farmers to hire assessors to put a valuation on our land on that particular day, in a manner satisfactory to the department, I want them to tell us that while we are still studying this bill-because one of the most important factors in the equation is not the amount of tax that will be levied on capital gains but the method by which the valuation of the land for farming purposes will be established at that point in time. I think it is up to the minister and his parliamentary secretary to answer that question before these sections of the bill are passed.
Let me remind the Minister of Finance that when we asked the minister in charge of the Wheat Board to consider net income as a factor in the provisions of his stabilization bill, he replied that nobody could satisfactorily establish the level of net income. Mr. Chairman, if no one can satisfactorily establish the level of net income, then I say by definition you cannot establish the value of the land, which is certainly one of the major factors in production costs.


Edmund Boyd Osler: Hooey.


Alfred Pullen Gleave: It isn't hooey at all; it is a fact. If you don't know that, you don't know very much.


Mr. Orlikow:: He doesn't.


Edmund Boyd Osler: I don't know very much, but I do know that.


Alfred Pullen Gleave: Mr. Chairman, any economist worth his salt will tell you that the cost of owning land is one of the major factors in the cost of production of farm products.


Edmund Boyd Osler: In Assiniboia I asked a bunch of farmers what their land was worth, and they told me. They knew.


William Arnold Peters: They sure told you on election day.


Alfred Pullen Gleave: They will say anything to greenhorns in Assiniboia, and grain traders are their favourite mark.


Edmund Boyd Osler: Not being a greenhorn, they told me anyway.
November 15, 1971


Alfred Pullen Gleave: Fair enough. But I think it is the responsibility of those who propose to levy this tax to tell us the basis upon which they will establish the valuations.


Edmund Boyd Osler: You are just mad because the prices are down since the NDP government got in out there.


Alfred Pullen Gleave: The NDP government didn't have that much to do with it.


Edmund Boyd Osler: That is what they tell me.


William Arnold Peters: That was a very small minority you were talking to.


Edmund Boyd Osler: I was talking to the ones on the farms, not in the city.


Russell Clayton Honey: Order, please. The hon. member for Saskatoon-Biggar has the floor.


Alfred Pullen Gleave: The other matter to which I should like to call the attention of the committee, as I have before, is the effect on farm machinery prices and the method of operating and trading in farm machinery that this legislation will have. I have asked if this factor has been considered, but I have not received an answer. The hon. member for Lambton-Kent spoke just before me and he touched on the subject. He said, "What are you going to do? Run the old piece of machinery into the fence corner?" He was coming to the heart of the matter.
As a practice, across the country farm machinery has been traded in. The dealer has taken it off the hands of the farmer and in due course has disposed of it. In order to operate in this way he needed a margin and a market for the machinery. But the system worked. I say to the minister and his parliamentary secretary that they are in the process of destroying this system, whether they know it or not, and I do not think they know much about the way business operates on the farms and in the small towns of this country. One can only come to the conclusion that they do not know, or they do not give a damn. It may be the latter.
If we are going to set up a system of taxation which makes it impossible for the method that has been used in the past to operate, then we must consider whether the new method is more, or less, effective and efficient in terms of cost. I do not think this has been figured out, but if it has I would be glad to know about it. If the parliamentary secretary or the minister will rise and tell me, I am quite prepared to sit down and listen. Mr. Chairman, I address my question to those gentlemen. I should like to know whether they have considered this matter and if they can advise the House what changes will take place and how they will be affected.


Some hon. Members:: Hear, hear!


An hon. Member:: No answer.


Alfred Pullen Gleave: Mr. Chairman, if they are not prepared to answer, I shall continue. When a government comes to this House and to the country and proposes a new taxation system, they should be prepared to tell the House and the people affected how it will work and how it will affect
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their standard of living and their way of doing business. I cannot be indifferent to a method of taxation which will affect the people in Saskatoon-Biggar, the people who live in the city of Saskatoon and do business there and the surrounding rural area.
What shocks me is the government's indifference to the situation of the ordinary citizen, whether he is operating as an individual or as a member of a co-operative. I have received a great many letters which I have forwarded to the responsible minister, but these have not been answered to my satisfaction. We are suffering, and have suffered from the policies and machinations of this government as they affect farmers in western Canada through the Lift program and others. Before any new policy is introduced, those responsible for it should be able to tell this House what the effect will be on the ordinary citizen because it is the ordinary citizen, Mr. Chairman, who pays the taxes and who either survices or does not survive under such policies.


Mr. Alkenbrack:: They can like it or lump it!


Alfred Pullen Gleave: Like it or lump it is right. That is why I have posed these questions and have brought this matter before the committee. I am not concerned about particular ideologies; I want to know how the ordinary individual is going to survive under it, and I have not had an answer.


Mr. Benson:: Mr. Chairman, a couple of questions have been raised which I think deserve answers. The first is about the value of farmland at the beginning of the system. The beginning of the system is defined as valuation day. First of all, the value of the farmland on that day will normally be its fair market value. This is established in the same way as it is for estate tax. The owner of the land, when it is ultimately sold, will indicate what the value was at that particular time. That will be compared with the bank of knowledge that the Department of National Revenue will accumulate with respect to sales of similar farmland in the particular area around the time of the beginning of the system.
Beyond this there is the protection in the case where somebody has bought farmland and it has gone down in value at valuation day. It may be sold at some time in the future and what the owner is getting is not really a capital gain per se but a recovery of the decrease in value between the time he bought it and valuation day. There is a provision to take care of such circumstances. This, generally, is the system.
I think if my hon. friend looks back at the problems that have arisen for the provincial and federal governments under the Estate Tax Act and the Succession Duty Act he will find that there has not been a great deal of difficulty in establishing these values. First of all, it is established by the person filing the return and then it is up to the Department of National Revenue to say whether they agree. I think there have not been any great litigation problems in this regard.


Alfred Pullen Gleave: Mr. Chairman, in reply to the statement of the minister may I say that my personal experience in representations from my constituents has shown that there has been a considerable problem in establishing market value. I shall put it to the minister this way.

N ovember 15, 1971
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Usually, the Department of National Revenue will consider what a similar piece of land to the one in question has sold for in the community in recent years, maybe two or three years before. They will say, "Here is a quarter section of comparative value. This was the value placed on it, and therefore the parcel of land in question has this value." This is how market value is arrived at, and I suggest to the minister that it is in no way accurate. I have seen land values drop drastically in the last three years, so it cannot be a yardstick for what went before.
Let me put it to the minister again. In establishing value, do I understand correctly that it is not proposed to take into consideration in this equation the productive value, and it is rot proposed to take into consideration the assessed value?


Edgar John Benson: Mr. Chairman, I hope the people who read this speech will also read the speech of the leader of the New Democratic Party with respect to the value of farmland.


Alfred Pullen Gleave: That is all right. In no way is the minister scaring me with those remarks.


Patrick Morgan Mahoney: The hon. member is the biggest Tory in the House.


An hon. Member:: What's wrong with being a Tory?


Edgar John Benson: Mr. Chairman, I should simply like to say that I disagree with my hon. friend. There are always disputes between individual taxpayers and the Department of National Revenue. If he will look at the number of cases that have gone to court over the value of farmland, he will find that over the years the number has been very small. This matter has been settled quite equitably- agreed, after argument.
I am sure that my hon. friend would argue about his farmland just as other people would argue about theirs. They will look for a low value and the Department of National Revenue will look for a higher value, and finally they will settle on something which is still below market value. There have been very few court cases in this regard. Since my hon. friend says that this is a terrible problem, will he tell me the number of court cases that have arisen in this regard?


Lincoln MacCauley Alexander: That does not matter. Court cases do not always show what is going on in this regard.


Alfred Pullen Gleave: Mr. Chairman, I have not the slightest idea how many of these cases have gone to court. I suspect that there are not many. Let me point this out to the minister. Not far from where I farm in my constituency, an individual came to me a couple of years ago and said, "I transferred a quarter section of land and the Department of National Revenue says that I did not transfer it at the right value. They say that land is worth much more than the value at which I transferred it." He asked me what he could do and I said I did not know but that I would talk to the people concerned.
Mr. Chairman, that man did not go to court. He paid the $500. This matter cost him $500 and, as I say, he did not go to court. And why not? Because going to court would have cost him twice $500 and the people in the department

would have taken that matter so far up the line that his tongue would have been hanging out before they would have settled with him.


Patrick Morgan Mahoney: Mr. Chairman, I am sure, in view of the announced intention of the NDP government of Saskatchewan to impose succession duties, that there will be an impulse on the part of taxpayers to reach a fairly equitable value as a base value for succession duties on the one hand and as a base value for the capital gains tax on the other.


Alfred Pullen Gleave: Fine, Mr. Chairman. I am getting all the political answers from the other side of the House.


Some hon. Members:: Oh, oh!


Alfred Pullen Gleave: Neither the minister nor the parliamentary secretary have proposed before this committee a fair and reasonable way of arriving at the value of land on valuation day.


An hon. Member:: But you people will be imposing succession duties.


Alfred Pullen Gleave: Thank you, that is fine. However, Mr. Chairman, succession duties have not yet been introduced. They may be introduced. That is not our concern here. We must deal with our responsibilities here in the House for those people, and the minister should answer this question. When you talk about market value, you do not take into consideration the productive capacity of the land or the assessed value. The market value is the most unreliable method of arriving at the actual value of a piece of farmland.


An hon. Member:: Oh, oh!


Edgar John Benson: Mr. Chairman, my hon. friend is saying that the amount you can sell a piece of land for is the worst way of determining its value.


Alfred Pullen Gleave: Right.


Edgar John Benson: I disagree with that. I would say that if I owned a piece of farmland, the best way of determining its value is to see what I can get for it. You do not determine value by saying what it would produce or what it might produce in future. You determine its value by what you can sell it for. That is what fair market value means.


Alfred Pullen Gleave: But, Mr. Chairman, on valuation day the value might be depressed.


William Arnold Peters: I wonder what this provision will do to the empires of some hon. members opposite.


Some hon. Members:: Oh, oh!


Gérald Laniel: Order, please.


Alfred Pullen Gleave: Let me tell the minister, if he does not already know, and the parliamentary secretary-


Patrick Morgan Mahoney: The NDP had better throw that Tory out of the party.
November 15, 1971


Alfred Pullen Gleave: -that at this point in time, if you go to any real estate broker in Saskatoon and place in his hands some good farmland, some good wheat land which is in and around that area he will advise you, if he is a good real estate broker, not to offer it for sale. Under those circumstances, how would you at this point in time arrive at fair market value, since values are depressed? Three years from now values may be different, and three years ago they were quite different. I am pointing out to the committee that the fair market value determination is an unreliable method of arriving at the value on valuation day.


Edgar John Benson: Mr. Chairman-


Gérald Laniel: Order, please. Is the minister rising on a point of order?


Edgar John Benson: I wish to say simply that if someone bought land four years ago and it went down to a market value below the value at which he bought the land, and if the land then increased in value, the increase up to the level of his previous cost would not be taken into account in calculating capital gains in the future.


Alfred Pullen Gleave: I suppose, Mr. Chairman, that will not resolve this question because we do not seem to be on the same wave-length.


An hon. Member:: Thank goodness.


Alfred Pullen Gleave: I am trying to point out-I am very serious about this-that the method which the government is proposing to use to establish the value of farm property is altogether unreliable. I am shocked and very much concerned to hear a responsible minister say that this is a reliable method of arriving at the value of farm property. I am sure that those sitting on this side of the House who are farmers and who know how farm values can fluctuate, will be as much concerned about this as I am.


Some hon. Members:: Hear, hear!


Alfred Pullen Gleave: They will be worried about the methods to be used in arriving at property values. I can only say, for goodness sake change your methods and start taking into account actual productive values and assessment values. Add something else to your equation, for goodness sake, or you will create real hardship for the farming population of Canada.


Edgar John Benson: May I answer the question, Mr. Chairman? I find it rather astounding that anyone in the opposition would say that the selling price of something, or the amount that something is worth now does not represent what that particular product or article is worth.


Alfred Pullen Gleave: The minister does not know what it is worth. Nobody knows.


Edgar John Benson: No matter whether you speak of a house or any other article, the market value of the article at that time is what you can get for it and what you can sell it for.


Robert Lorne Stanfield: But the price may be depressed.


Stanley James Korchinski: Mr. Chairman, I listened with interest to the remarks of the hon. member for Saskatoon-Biggar and I conclude that he is on the right track.
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Patrick Morgan Mahoney: But in the wrong party.


Stanley James Korchinski: Notwithstanding what the Minister of Finance has said, the value to be placed on a farm property on valuation day can in no way be considered as accurate if the proposed method is used. It will be contested and argued about, and this question will be dealt with in the courts for years to come. The minister should be prepared to concede that there is a relationship between assessed value and market value for valuation purposes. Any formula used should take advantage of such basic factors in arriving at property value. With regard to my land, one quarter section is not worth as much as the next quarter section. In no way can anyone say that one quarter section should be assessed at the same rate as another quarter section. I therefore suggest that there should be some relationship between assessed value and market value at least for valuation purposes. The assessor should consider the assessed value on valuation day.


Edgar John Benson: If I might just define "fair market value"-


Gérald Laniel: Order, please. The Chair finds it difficult to allow the minister and hon. members to follow this procedure. Unless an hon. member asks a question of the minister or the parliamentary secretary, it is best to let the hon. member complete his remarks or at least complete his point before giving an explanation. This would be more productive to the work of the committee than interjection. The normal procedure would be more useful to the committee.


Stanley James Korchinski: Thank you, Mr. Chairman. I will not be long. I want to point out to the minister that unless there is a set formula there will be a great deal of litigation, argument and unnecessary expenditure which no one in this country should be expected to meet. They should not have to do this for the sake of a minister or a department that is not prepared to establish a fixed amount. In this way they would know the price when the property was sold.
It is entirely wrong to use the method used in the income tax department whereby a property is worth the same as another property in the area which has been sold. I have already stated that I have land in a section. You cannot tell me that two quarters of land in the same section are worth the same amount. There are certain factors which must be taken into consideration such as road allowances, proper drainage, proper slope, better contour and productivity. Certain land has greater productivity. The department does not know that. It simply asks the ag. rep. what he thinks. In other words, they accept the opinion of the age. rep. An individual may have a better appreciation of his land than the ag. rep., but theoretically they accept the value established by him.
I may have missed the point, but it is my understanding that the hon. member for Saskatoon-Biggar argued that it is necessary to establish a formula. That formula should be established before we get into argument, litigation and unnecessary spending. It is bad enough to be taxed later. Who wants to fight the government, with all its resources? Because people do not have the unnecessary resources, they throw in the towel. Why should anyone in this coun-
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try admit that he is guilty simply because a few officials in the department suggest he is wrong? The minister should carefully consider this question and come up with a formula, rather than involve individuals in unnecessary squabbles with the department, which I am sure the department does not want. I am sure the individual will find it absolutely unnecessary.


Edgar John Benson: Mr. Chairman, I find it very unusual for the hon. member to say that the government should dictate a value, with regard to farmland, which nobody can appeal. I think the use of a fair market value, which is what a willing vendor will accept from a willing purchaser, is a much better way of establishing the value of land. If the vendor thinks that the valuation is wrong, he can appeal to the courts. I am very surprised that members opposite would like us to have some dictatorial policy whereby we can say that an individual's land is worth so much and he cannot appeal it.


Stanley James Korchinski: Is it other than dictatorial, the way you want to do it?


Robert Lorne Stanfield: The problem is that prices are so depressed under your policy.


John Stratford Burton: Mr. Chairman, I think the hon. member for Saskatoon-Biggar has raised a very important question with regard to the valuation of farmland. I was amazed at the answer of the minister. In a very blase fashion he indicated we will use the same method that has been used with regard to estate taxation in establishing market value.


Edgar John Benson: Fair market value.


John Stratford Burton: Fair market value. The minister has not had very much contact with western Canada if he accepts that simple proposition without any qualification. He does not know what is going on; he does not know the situation; he does not know what is happening; he does not know the real problems that families in western Canada face. The minister had better wake up and find out what is going on before he does this country any greater disservice than he has in recent months.


Patrick Morgan Mahoney: Compare your speech with the speech of the leader of your party.


John Stratford Burton: I know the speech of the leader of the New Democratic Party very well. I hope the member for Calgary South looks at it very carefully. If he reads it enough times, he might then have some understanding of it.
There are some deficiencies in using a fair market value as stated by the minister. What happens with respect to what he calls the fair market value-in other words, the value of land prices in the immediate neighbourhood where the particular parcel of land under consideration is located? What are some of the considerations that come into play? First, you have what I call the urban pressures, pressures of buying up land for urban purposes. If there is a capital gain involved, an arm's length transaction, a case can be made for dealing with that on a fair and square basis.
However, when that affects the value of other land which is not involved in that transaction, it is an unreal

situation. You are then forcing a farm family that is located near another parcel of land which was bought for a purpose which may not have anything to do with agriculture, to accept that valuation. In many cases, these people are forced to leave farming. They are forced out of agriculture. That has happened in the past. It will happen in the future unless the minister comes up with a different method than he has just given to the committee.
There is another fact that should be kept in mind. That is the fact of a farmer who buys a piece of land to add to his operation. He may purchase an incremental unit. He may want to add to his operation for a sound economic reason. He may be prepared to pay more for that additional land than he would be prepared to pay for his farm as a whole, an average price for his entire farm unit. That is simple economics. It makes sense. The farmer may find it worth while to pay more for a piece of land to add to his farm unit. It may make his over-all operation more economical. It may pay him to do that. That may be a perfectly sound decision on his part. On the basis of what the minister said, the higher land value for that parcel of land will affect the establishment of the fair market value for all farm units in the immediate neighbourhood. It is an unreal approach. It is not in accordance with the situation on the rural scene.
There are some alternatives to which we can turn in establishing valuation. We now have a good deal of technical and sophisticated information available on the basis of land assessment and farm management programs that are carried on in many provinces. Through these programs, and our working together with some of the provincial agencies, it will be possible to come up with a fair market evaluation for farm property on "V" day. Land prices are very often the most volatile components of the entire capital farm structure. During periods when the economy is buoyant, when prices are relatively good, there is an upward pressure on land prices. This pressure is accentuated by technological processes. Farmers are obliged to add to their farm units in order to make their operations economic, since in many cases they are bound to employ large machines for which they have to pay high prices. Then, when there is a turndown in the farm economy, such as we have experienced in recent years, land prices decline. A farmer is often locked in. He has a good deal of capital tied up in machinery upon which he is bound to make sizeable payments.
Then, again, he is possibly making payments on the land he holds and he often finds difficulty in meeting demands for such payments. The difficulties in recent years have been pretty serious. The current index of farm prices in Saskatchewan is about 90 per cent of the 1961 level, according to figures put out by Canada Statistics. During this phase of the economic cycle on the farm scene, land is undervalued, in some cases. This could be of serious consequence to farmers since they can assume valuation day will be either in a few months in the future or in the past, depending on what date is to be announced by the government. The government is ignoring these factors entirely in the approach it is taking. There needs to be a total review of this legislation if it is not to contribute further to the decline in Canada's farm economy.
November 15, 1971


Edgar John Benson: If I might make a comment, I would suggest to the hon. member's farmer friends in Saskatchewan that on valuation day, whenever it may occur, they should jot down the value of their farms as compared with the price at which other farms are selling on that date, and file it away. But make sure that the valuation is a fair one, because if they value it too high, and die, their successors will have to worry about Saskatchewan succession duties.


John Stratford Burton: I can assure the Minister of Finance that the farmers of Saskatchewan have a great deal less to worry about with regard to possible succession duties than about any legislation to be brought in by the Minister of Finance.


Edgar John Benson: No, Sir, not over the capital gains tax.


Marcel Joseph Aimé Lambert: Mr. Chairman, earlier this evening I intimated I wished to make a comparison between the proposals contained in the white paper and the report of the finance committee last October. It is strange that few, if any, members from the government side who sat on the committee have taken part in this debate to draw attention to places in which the bill before us varies from the recommendations in the committee report or, if they accepted the report, to what degree they disagree with the proposals in Bill C-259.
It is obvious to me that a muzzle has been imposed on members opposite with regard to these things, because it is patently strange that a number of government supporters sat through months and months of hearings on the white paper, together with members on this side of the House, and then with regard to certain proposals-and even those which have been watered down-those members, in various localities, and I must say that some of the protestations seemed, in the phrase used by the parliamentary secretary, to be home cooking for local consumption, stated they would voice loud and clear their objections to some of these proposals-


Patrick Morgan Mahoney: On a point of order, Mr. Chairman, since the hon. member for Edmonton West was the only opposition member of any party who sat on the meetings of the finance committee long enough to vote on the report, his pride and pomposity in this area are understandable. But the point is that members on this side of the House have participated in this debate throughout.


Robert Lorne Stanfield: Mr. Chairman, if the parliamentary secretary and the minister are going to set such a poor example to this committee, interrupting speakers on phony points of order, I think they have a very heavy responsibility to discharge. I call upon the parliamentary secretary and the minister, while he is here, to comply with the rules of this House.


Some hon. Members:: Hear, hear!


Patrick Morgan Mahoney: If I might finish my point of order, Mr. Chairman-


Gérald Laniel: Order. The Chair must point out to the hon. member that his point was not a point of order. Although the proceedings in committee are not as strict as they are in the House, hon. members should not take
Income Tax Act
advantage of points of order as a means of entering into debate.


Patrick Morgan Mahoney: I was just coming to the conclusion of my point of order.


Gérald Laniel: Order. I cannot accept the premise of the parliamentary secretary's observation. If he wishes to raise another point of order I am ready to let him have the floor, but I do not think the point he has just made is anything more than a point of debate.


Patrick Morgan Mahoney: On another point of order, then, I can only suggest that it is understandable that members on this side should not feel it necessary to speak in this debate on every subject since more than one of them participated in the decisions of the finance committee.


Gérald Laniel: I want to be fair to all hon. members but I should say that in my opinion the committee has nothing to gain by discussing the participation or non-participation of hon. members in the work of the committee. I do not think we shall make very much progress in that way. Besides, I do not think such remarks can be relevant to the sections which are before the committee.


Robert Lorne Stanfield: I am not calling for any disciplinary action, Mr. Chairman.


Some hon. Members:: Oh!


Robert Lorne Stanfield: However, I would point out to you that the parliamentary secretary, who is presumably responsible at the moment for piloting this bill through the House, has just defied your ruling. When you ruled he did not have a proper point of order he persisted in rising, and when you insisted he could not continue it he tried to create another phony point of order. I simply say, in all sincerity, Mr. Chairman-


An hon. Member:: Sit down.


Robert Lorne Stanfield: I will sit down when the Chair asks me to sit down.


Edgar John Benson: The Chairman is on his feet.


Gérald Laniel: Order, please. Again I ask the co-operation of hon. members. I do not think there is much to be gained by pursuing the point that has been the centre of discussion up to now. I suggest the hon. member should return to the sections under consideration by the committee. I am grateful to all hon. members who want to help the Chair at this time, but I think the best solution to the problem is to come back to the sections under study. Therefore, I would invite the hon. member for Edmonton West to complete his remarks.


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


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


Donald MacInnis: Mr. Chairman, my point of order will be very brief. I would ask the Chair for a ruling whether it is proper for a member of this House, particularly the hon.
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November 15, 1971
Income Tax Act
member for Calgary South, to reflect on the voting record of any other member of the House, as the hon. member did in his point of order. I would ask the Chair to rule him out of order in this respect.


Patrick Morgan Mahoney: On the same point of order, Mr. Chairman, I would remind the hon. member that I referred to participation, not voting.


Donald MacInnis: I think the blues will show that the hon. member referred to the voting record. But whether he did or not does not matter; he cannot reflect on the action of any member of the committee.


Gérald Laniel: Order. The Chair is aware of the rules and practice of this House according to which hon. members are not supposed to reflect on on other hon. members. I do not think any such reflection has been made. I have already invited the hon. member for Edmonton West to complete his remarks, and I urge the committee to give him the chance to do so.

The hon. member for St. Boniface on a question of privilege.


Joseph-Phillippe Guay: Mr. Chairman, I should like to ask the Leader of the Official Opposition how many times he has attended the meetings of the committee to which he refers.


Gérald Laniel: Order. I must point out to the hon. member that the point he has raised is certainly not a question of privilege. I would ask hon. members to cooperate as much as possible with the Chair to allow the useful work of the committee to progress.
The hon. member for Edmonton West.


Marcel Joseph Aimé Lambert: Mr. Chairman, I hope the parliamentary secretary will delve into his little green book and learn what constitutes a point of order. I am not afraid of him in debate, but I should like to make my argument on this particular point and not be interrupted by phony points of order and references to votes by pla-tooning members who had nothing to do with the committee beforehand. I know whereof I speak in that regard.
In any event, I do want to indicate what the committee had to say about capital gains. After all, we spent a good deal of time on this particular point, and this is the only public forum where we can make reference to the deliberations of the committee. In regard to the question of capital gains, the committee made this general recommendation:
As a general rule we recommend that one-half of capital gains should be taken into income. One-half of capital losses should also be taken into account, and be deductible without limit from the taxable half of capital gains realized in the same year.
This we have done generally.
If in that year the deductible capital losses exceeded taxable capital gains, an additional $1,000 of deductible losses should be deductible from other income.
This we have done, but how far is it removed from the original white paper that was being sold to the country as an extremely reasonable and safe proposition?

Where gains on the sale of an asset are fully taxable, as in the exceptions previously alluded to (mineral and timber rights, goodwill, leasehold interests and depreciable assets written off for tax purposes over a very short period of time) losses would be fully deductible.
I could go on to talk about the principal residence, but generally there is to a limited extent compliance with the recommendation of the committee. I say to a limited extent because there are some restrictions regarding ownership of a principal residence and the period of occupancy. If it is occupied only part of the time, then any capital gain is allotted between the period of residence and the period it is a revenue property.


Gérald Laniel: Order, please. Again I ask the co-operation of hon. members. It is very difficult for the Chair to hear what the hon. member for Edmonton West has to say, and I am sure other members have the same problem. With all due respect, I think he should be given a chance to complete his remarks. Although we are getting close to ten o'clock I think the committee wants to hear what the hon. member has to say.


Marcel Joseph Aimé Lambert: Mr. Chairman, I want to finish on this point about principal residence which we will deal with when we come to the sections concerned. The point is not free from difficulty. Particularly in the case of farmland there is the question of the allocation of any so-called capital gain when there has been a forced realization, such as expropriation of the property.
While on the subject of farmlands, I think the minister left the question of valuation in a quite unsatisfactory position. The options that are open to a farmer require a valuation one way or the other, it does not matter which. If he is going to claim an exemption on the disposition of the property for the principal residence and one acre of land, or perhaps a little more, according to the amount required for the proper enjoyment of the property, there still has to be a valuation of the farm and of the residence. If, on the other hand, he wishes to avail himself of the $1,000 a year allowance for the period he the taxpayer has occupied the farm, then a valuation must still be made at the beginning in order to enable him to determine which option to take.
There is one glaring deficiency in this $1,000 a year provision which I pointed out this afternoon. I hope the minister will explain to the committee why this arbitrary amount of $1,000 a year was fixed, because it applies to the 80-acre farm as much as to the 2,500-acre farm. The larger and more valuable farms, for example in western Canada, will be penalized under this formula. Quite frankly, a lot of the answers given the hon. member for Saskatoon-Biggar and the hon. member for Mackenzie are derived from a strictly urban-oriented philosophy with no understanding whatever of rural problems.
The advisers to the minister in this regard have what the hon. member for Crowfoot has said is tunnel vision in respect of this problem. They just cannot see some of the values from an urban point of view as compared with the view of the majority of members of this House who are urban oriented. They just do not have a clue, yet they
November 15, 1971

impose their version and thinking in respect of this type of proposal.
The proposal of capital gains realization on death in respect of a farm without a true rollover is, frankly, designed to discourage the continuation of the family farm. If there is a capital gains tax this will occasion the sale of the assets unless there has been an insurance policy to cover the cost of capital gains by providing liquid capital. There will have to be an undertaking of some obligation such as a mortgage to raise cash, or there will have to be a sale to provide the equity. In any event, there is a great shortage of capital on the part of farmers.
This is the point we are trying to impress, but this is the point that cannot be seen by hon. members with urban-oriented thinking. This is best illustrated by the attitude of the NDP. The urban wing of that party insists that farmland shall go through the same grist mill for the purpose of capital gains tax. I am surprised that government supporters from western Canada accept the idea that farmlands must go through a capital gains tax mill. It is inconceivable to me that they should support this. That is why I want them to put their courage in their mouths.
I could point the finger at individual members who have been pretty loud in their condemnation of these matters when talking to farm representations and farm organizations in western Canada. They took an entirely different attitude then. I challenge them now to stand up and justify putting farmlands which are to be continued as family farms in the same position. We are not talking about farms that change hands for real estate development; we are talking about the continuation of a farm.
Members opposite representing western constituencies have a lot of farming corporations in their areas. This is not a case of an absentee owner or a corporation using eastern or foreign capital. In some cases a progressive and advanced farmer will incorporate because his operation is better suited for incorporation. There is no provision for the principal residence on such a farm owned by a farming corporation which would allow him to escape the capital gains tax. There is no advantage there. The same privilege is not extended to the owners of a farming corporation although they are the farmers on the land. Often it is better for a father and son to incorporate than to form a partnership, but the capital gains exemption does not apply in such cases. Neither the $1,000 nor the principal residence provision applies in those cases.
I suggest that this is another result of urban-oriented thinking. A great deal has been said about members on this side regarding valuation. The minister has said that we should get a realistic valuation for the purpose of capital gains tax. We must consider the spectre of succession duties, and I pointed this out the other day. In many ways this is an abomination in this country, whether it is a provincial or a federal succession duty. In many instances this has been responsible for foreign ownership. It has caused many Canadians to prematurely dispose of family businesses. Where is the capital that is available to take up these opportunities? I suggest the available capital is foreign. In the province of Quebec this has been fantastic for years and it is fantastic today. This is the reason family businesses have been sold to strangers, whether they are from the United States or elsewhere. All you have to do is talk to the investment counsellor. They have lists the
Income Tax Act
length of your arm of businesses available simply because of the heavy succession duty looming on the horizon.
It is incomprehensible to me that we should gloat with self-satisfaction because the federal government is taking away the estate tax. Why is it taking it off? There is already in existence a succession duty. What you pay to the province you can get credit for from the federal government, or vice versa, keeping in mind succession duty taxes in the provinces and the estate tqx in the federal government.
May I call it ten o'clock, Mr. Chairman?
Progress reported.



PROCEEDINGS ON ADJOURNMENT MOTION

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

David Réal Caouette: Mr. Speaker, I regret the absence of the hon. Minister of Transport (Mr. Jamieson) since I was just directing a question to him a few days ago, concerning Air Canada service in northwestern Quebec. What I actually asked was whether it would be possible to replace the Viscount planes by DC-9 aircraft for the service to Val-d'Or, Rouyn, Earlton, North Bay and Toronto from Montreal-Ottawa.
Mr. Speaker, for three years I have been calling for improved Air Canada service. For three years also, petitions have been submitted and recommendations presented to Air Canada by our regional municipal authorities without any substantial improvement having been made to the service.
It is true that an evening service has been established between Montreal and Val d'Or-Rouyn, with a return flight the same evening. But the morning flight, from Montreal to Ottawa, Val-d'Or, Rouyn, Earlton, North Bay and Toronto does not generate sufficient interest from Air Canada. In fact, I have personally found out that at the Ottawa airport, local bureaucrats use the morning flight on their way back from Montreal, whereas people from Rouyn, Val-d'Or or Earlton are invited to remain on the ramp in Montreal because, they say, there is not enough room aboard the aircraft to take them to northwestern Quebec.
Mr. Speaker, I find this situation altogether unbearable, and if the present Viscount service cannot accommodate all passengers who want to fly to northwestern Quebec, I wonder why these Viscounts are not being replaced with DC-9 aircraft.
I have been told, by Air Canada as well as by Department of Transport officials, that the runways in Val-d'Or, Rouyn, Earlton, North Bay and Toronto are capable of accommodating DC-9 aircraft.

November 15, 1971
Proceedings on Adjournment Motion
For several months now, I have been receiving complaints day after day, from citizens in my area who are left behind at the Montreal airport and who cannot board the plane to Ottawa because other passengers travelling on the morning flight from Montreal to Ottawa are taking the place of those who wish to travel to my area.
The situation is the same on the Rouyn-Val d'Or-Ottawa-Montreal route. People from my riding have to transfer from one plane to another in Ottawa in order to get to Montreal, because civil servants get on Flights 391 or 390, from Ottawa to Montreal, a 125-mile jaunt, using up the space required for travellers coming from 300 or 400 miles away.
Mr. Speaker, I have pointed out this situation to the Minister of Transport. I made representations to Air Canada, but it seems they do not understand the situation. When we leave Montreal for the North, going through Ottawa in the morning, civil servants could use another flight leaving 20 or 25 minutes later. But no! We take the plane for Val d'Or and Rouyn, and then Air Canada employees tell us the service is not profitable.
On the flight servicing Montreal-Ottawa, Val d'Or, Rouyn, Earlton, North Bay and Toronto the plane is empty from Ottawa on. Obviously, that service is not profitable.
So, I ask the Minister of Transport to tell the bureaucrats in Ottawa to take another plane for Montreal and to leave us in peace on the flights to northwestern Quebec and northeastern Ontario.
Mr. Speaker, that is why I put a question to the minister the other day. More and more people travel by air. So the Viscount should be replaced by a DC-9, thus allowing twice as many passengers to travel between Montreal and my district.
This is no extraordinary request; it makes sense. It is nonsense to take people from Montreal, bring them to Ottawa so that they will get to Toronto on an empty airplane. Those who travel between Montreal and Ottawa should board a plane other than the one that serves northwestern Quebec.
I am told the landing strips in my area are in accordance with aviation standards and can accommodate DC-9's. There are enough passengers, particularly since discussions have started on the famous James Bay project, to justify the use of a DC-9 instead of a Viscount. I would like the Minister of Transport who, to my regret, is not in the House tonight, to consider this request so that my fellow citizens may benefit by a better air transport service.


Mr. Allen B. Sulatycky (Parliamentary Secretary to Minister of Energy, Mines and Resources):: Mr. Speaker, in the absence of the Parliamentary Secretary to the Minister of Transport (Mr. Duquet) I am pleased to be able to reply briefly to the hon. member for Temiscamingue (Mr. Caouette). While I can reply to most of his question, it seems to me that in part at least the problems are those of reservations being made and not being made, more than problems of facilities and of aircraft provided by Air Canada or the Department of Transport.
The hon. member's question to the minister on November 9 asked for an improvement in Air Canada's service

to Rouyn-Noranda and that DC-9 aircraft be considered. Both of those matters are being studied. The Department of Transport and Air Canada are very much aware of the change in demand in traffic flows to different parts of Quebec and Canada and there is continuous review by experts as to future requirements. Air Canada have just recently completed a study of passenger traffic to points in northwestern Quebec, the results of which indicated that the occupancy rate on most days was about 75 per cent. There was a problem on Fridays when the demand was greatest. However, this problem has been overcome by adding an additional aircraft.
I have a letter which fully explains the efforts which have been made and are being made to ensure good service to the hon. member's constituency. Since it is a little lengthy, I will not read it now but I will see that a copy is given to him; and I will bring to the attention of the Minister of Transport a number of additional points raised by the hon. member this evening.



GRAIN-WHEAT-STATEMENT BY MINISTER OF SUPPLY AND SERVICES ON NECESSITY OF TWO-PRICE SYSTEM-GOVERNMENT POLICY

['Mr. Speaker, on behalf of the Minister of Transport (Mr. Jamieson) I would like to reply to the question posed by the hon. member for Central Nova (Mr. MacKay). As one who spent some time in that delightful part of the country this summer I can understand his concern for the area. It is both understandable and commendable.\nThe matter of port planning, as we are all aware, is very much in the mind of the minister since the announcement of his ports policy some time ago. In the case of port facilities at Pictou, the changing demands by industrial and local users are known to the minister as a result of his recent visit to that area. I can assure the hon. member that every consideration will be given to representations which are received from the municipality and interested local groups.\nAs is the case with most planning, there is need for consensus at the local level as to exactly what course ought to be followed. I acknowledge receiving from the hon. member of a number of documents reflecting representations made and the position taken by people in Pictou on this subject, and I undertake to pass them on to the minister who I am sure will be very interested in them and will wish to study them before he makes a final decision.\nMotion agreed to and the House adjourned at 10.28 p.m.', 'Tuesday. November 16. 1971']
Mr. Lome Nystrom (Yorkton-Melville):: Mr. Speaker, on November 4 I posed a question to the Prime Minister (Mr. Trudeau). I asked him whether the Minister of Supply and Services (Mr. Richardson) was "stating government policy earlier this week in Assiniboia when he said a two-price system for wheat was now necessary, with a minimum price of $3 a bushel for wheat sold domestically in Canada."
At that time the Prime Minister said he did not understand what the minister was quoted as having said but he would look at it in Hansard, see what was said and then answer the question as to whether it was government policy. After the result of the by-election in Assiniboia the government may be convinced that this should be government policy. I hope that the Parliamentary Secretary to the Prime Minister (Mr. Danson) will look at the suggestion in a very favourable light when he replies.
The question of a two-price system for wheat has been debated for many years on the Prairies. For as long, and perhaps longer than I can remember, most of the major farm organizations have called for a two-price system. The Liberal Party itself while in government and in opposition at various times promised a two-price system for grain. I have here press clippings which demonstrate that in May, 1969, the Minister of Agriculture (Mr. Olson) said that a two-price system for grain was something that he supported in principle. I have another quoting a statement by the minister in charge of the Wheat Board when fighting in Cabinet for a two-price system for wheat. That press clipping, of January 19, 1971, reads:
The federal cabinet has rejected for the time being a proposal that a two-price system for wheat be introduced to help the western grain farmer with his income problems.
Otto Lang, the minister responsible for the Canadian Wheat Board, made the recommendation himself to cabinet about two months ago when the government was discussing the final details of his new grains stabilization policy, though he declines to acknowledge this.
November 15, 1971

It is well know that the party on the other side of the House has for many years advocated a two-price system for wheat which would pay for the first quality of grain a price substantially more than the farmer receives from sales on the international market. What I am asking tonight is whether the Minister of Supply and Services was stating government policy when he said in Assiniboia recently that we should have a two-price system for wheat with a minimum of $3 per bushel for the first 1,000 bushels sold. I think we need this, Mr. Speaker, and we need it soon if we are to keep as many farmers as possible on the land.
As things stand today, the farmer is subsidizing the consumer of bread in Canada. Other countries of the world subsidize or support the price of grain and the Canadian farmer competes not only against those wheat farmers but against the treasuries of their countries. The wheat farmer in Canada is at a distinct disadvantage. He is probably getting less today for a bushel of wheat than in 1949. We know that costs have gone up. But what has happened to the farmer? The price of a bushel of grain has gone down, despite the fact that his costs have skyrocketed.
These things that are inequitable will have to be changed if we are to preserve the rural way of life which is such an important part of the fabric of Canada. It can be done. I do not want to underemphasize the importance of this question. All the major farm organizations have called for a two-price system of grain. The $3 per bushel for the first 1,000 bushels would in most cases guarantee a farmer a basic income of $3,000 a year. After that he would receive whatever the international market paid, and today, as we all know, that is substantially less than $3 per bushel. If we do not achieve this we will be faced with the farmers moving off the land faster and faster every year. The task force on agriculture suggests that the government should become less involved and that farms become larger and more efficient. I do not want to see this happen because I think the farmer is efficient.
There is a real social value to the family farm, and the only way to preserve it is to help the average, small farmer by way of income. An equitable way of doing that is the two-price system for grain. If this is not done, the family farm will disappear and the small towns and cities may go with it. The choice may be basically a social one, but it is important that we spend money to help the farmer. This is what the farmer wants instead of the stabilization bill. It is one of the changes he wanted made in that bill. All of us realize that we must do something like this if we are to help the farmer.
I hope the minister will tell us what is government policy. I hope the congenial parliamentary secretary will say that within a short time we will have a two-price system for wheat and that the farmer will receive at least $3 per bushel for the first 1,000 bushels.


Mr. Barnett J. Danson (Parliamentary Secretary to Prime Minister):: I thank the hon. member for Yorkton-Melville (Mr. Nystrom) for referring to me as congenial. I refer to him as the congenital socialist from Yorkton-Melville. I think he will agree after the first flush of victory it is regrettable that Jim Hooker was not returned to the government side of the House so that there would be a voice
Proceedings on Adjournment Motion
for the western farmer to replace that so tragically lost by the sad death of the beloved Ab Douglas.
The minister's remarks were extemporaneous in Assiniboia and were confined to discussing the merits of the two-price system for wheat from a western viewpoint. He also pointed out at that time that there were other factors which would have to be considered before government policy on this subject could be finally determined.



Elmer MacIntosh MacKay: Mr. Speaker, on November 9 I raised a question with the Minister of Transport (Mr. Jamieson) concerning wharf facilities and other installations at the town of Pictou, Nova Scotia. At that time the minister answered that he had been to Pictou, had seen the particular problem referred to and would send me a report. In all fairness, the minister has not had time to do this. However, he was good enough to give me some information on the day the question was asked.
Tonight I want to put on record some of the particular questions I wish dealt with. I also want to acquaint the minister, through the hon. member for Rocky Mountain (Mr. Sulatycky), of some of the submissions made by notable persons and organizations in the town of Pictou and in the county of Pictou. It is readily apparent that the general area of Pictou county is undergoing an expansionary phase. We have several important industries adjacent to the town of Pictou and it is fair to say that Pictou will be a focal point in a rapidly expanding industrial area. At least, that is what we all hope for in that part of the country.
Although responsible officials of the town of Pictou and the county of Pictou are encouraged by the work being done by the Department of Transport in operating ferry facilities at Caribou, which is near Pictou, there is a feeling amount responsible persons and industrialists there that possibly the department should concentrate more on upgrading the wharf facilities and installations in the town itself-that is, in the port of Pictou-instead of spending a great deal of money in the outlying area of Caribou where there are certain physical obstacles which prevent the running of a satisfactory, modern ferry service. In other words, some felt when the announcement was made that it would be better to phase out the Caribou-Wood Island run and replace it with a more modern Pictou to Charlottetown run, using a more modern vessel of the type that is used on the Tormentine-Borden crossing or of the Bluenose type that is used at Yarmouth.
It has been said by the Board of Trade, by the mayor and town council of Pictou, by the Pictou county planning commission and by others that there is much to be said for implementing now the kind of plant and what improvements that have been, I suggest with deference, overdue for some time. I am told that the Caribou terminal suffers from difficult night navigating conditions. There is shallow water, a windy channel and somewhat short docks. So difficult are these conditions that on occasions it has been necessary to cancel runs because of wind and water conditions. A minor modification of present docking facilities in the port of Pictou would accommo-

November 15, 1971
Proceedings on Adjournment Motion
date larger and more modern vessels. Certainly, there are far better parking facilities and better conditions generally to accommodate the type of tourist traffic that results from better facilities than there are at present in the Caribou area.
I should like to read into the record part of a short statement made in the spring of this year by Mayor Clarence MacCarthy:
The town council of the town of Pictou has gone on record as being in full support of the proposals of the Pictou Chamber of Commerce respecting the following:
(1)	The extension of the present seawall to pier "C".
(2)	The construction of a new pier with a spur line railroad and
warehouse facilities-as well as ample open dock facilities.
The town council is in full agreement that the above mentioned facilities should be provided at the earliest possible date.
It has been well over ten years since the serious fire destroyed much of the harbour installations at Pictou. Immediately after the fire a three-phase, long-range plan was prepared. It was a reconstruction program for this port. Despite the implementation of phase 1 and phase 2, the town of Pictou still suffers from lack of wharf space. There have been a great many suggestions during the past few years. At the present time, other than the limited dock space at Ferguson Industries the only modern pier available is the existing concrete seawall and what is known as pier "C".
I urge the department to immediately implement the third phase of the original plan and extend the existing concrete seawall to the present pier "C". Recently, vessels have had to berth three and four abreast. The lack of space has resulted in difficulties to Ferguson Industries. At present, this firm is building a new ferry. This demand on their facilities has resulted in their having to turn down other jobs because there is not enough wharf space. With the present unemployment problem plaguing Pictou, as it is most areas of this country, it seems a shame that these conditions are allowed to exist. When ships are being loaded or unloaded around pier "C", the wharf is blocked to traffic on and off the pier, especially when railway cars are on the spur line.
A few moments ago I had an opportunity to give the hon. member for Rocky Mountain, who is representing the Minister of Transport (Mr. Jamieson) this evening, some material which was given to me. It illustrates some
of the recommendations from responsible persons and groups in the Pictou county area. I will not read these into the record but perhaps a couple of excerpts might be appropriate. The Pictou Board of Trade, in a brief submitted to the Department of Transport this year, stated that it is imperative that the Pictou port be upgraded.
As I already mentioned, there is a great need for additional wharf space. There is a rock ledge which apparently hampers certain types of vessels coming into the port of Pictou. I am informed that this is a fairly narrow ledge and could be removed by blasting. It would do a great deal to improve the conditions as far as deep sea fishing is concerned. I urge the Department of Transport, if this has not already been done, to undertake studies to determine the cost and feasibility of removing this particular obstacle.


The Acting Speaker (Mr. Laniel):: Order, please. I regret having to interrupt the hon. member, but the time allotted to him has expired.


Allen B. Sulatycky: Mr. Speaker, on behalf of the Minister of Transport (Mr. Jamieson) I would like to reply to the question posed by the hon. member for Central Nova (Mr. MacKay). As one who spent some time in that delightful part of the country this summer I can understand his concern for the area. It is both understandable and commendable.
The matter of port planning, as we are all aware, is very much in the mind of the minister since the announcement of his ports policy some time ago. In the case of port facilities at Pictou, the changing demands by industrial and local users are known to the minister as a result of his recent visit to that area. I can assure the hon. member that every consideration will be given to representations which are received from the municipality and interested local groups.
As is the case with most planning, there is need for consensus at the local level as to exactly what course ought to be followed. I acknowledge receiving from the hon. member of a number of documents reflecting representations made and the position taken by people in Pictou on this subject, and I undertake to pass them on to the minister who I am sure will be very interested in them and will wish to study them before he makes a final decision.
Motion agreed to and the House adjourned at 10.28 p.m.

Tuesday. November 16. 1971