1973-07-03

ELECTORAL BOUNDARIES READJUSTMENT ACT


Mr. Speaker:: Order. It is my duty, pursuant to section 19 of the Electoral Boundaries Readjustment Act, Chapter E-2, Revised Statutes of Canada, 1970, to lay upon the table of the House a certified copy of the report of the Electoral Boundaries Commission for the province of British Columbia.



ROUTINE OF PROCEEDINGS


Mr. John Rodriguez (Nickel Belt):: Mr. Speaker, I rise pursuant to Standing Order 43 on a matter of urgent and pressing necessity arising from the "Economic Circumstances and Opportunities" report for Ontario tabled in the House last Friday by the Minister of Regional Economic Expansion.
In view of the statement in the report that Northern Ontario's best chances lie in tourism and the services industry, and in view of this very shallow and prejudicial view of one of Canada's wealthiest resource areas, and since this view can only perpetuate the colonialist-


Mr. Speaker:: Order, please. I have to interrupt the hon. member, and seize upon this opportunity as we begin a new parliamentary week, to remind hon. members that they should limit these introductory remarks to so-called motions under Standing Order 43. I think, generally speaking, that hon. members in reflecting on the use of this rule, Standing Order 43, may feel that if we are to allow a continuation of a practice which has developed over the last months and years, in order to make it half acceptable hon. members should not make speeches in support of the motions which they propose to present for the consideration of the House.


Some hon. Members:: Hear, hear!


John R. Rodriguez: Mr. Speaker, I move, seconded by the hon. member for Oshawa-Whitby (Mr. Broadbent):
That this House unanimously condemns both the analysis and short-sighted solutions to northern Ontario's economic problems, and further instructs the minister to table immediately in this House an industrial strategy for northern Ontario which would integrate industrial development and the primary resources of the region.
[ Translation]


Mr. Speaker:: The House has heard the hon. member's motion. Under Standing Order 43 this motion requires the unanimous consent of the House. Is there unanimous consent?


Some hon. Members:: Yes.


Some hon. Members:: No.


Mr. Speaker:: As there is not unanimous consent the motion cannot be put.

[ English]


ELECTORAL BOUNDARIES READJUSTMENT ACT
Hon. Allan J. MacEachen (President of the Privy Council) moved: for leave to introduce Bill C-208, to suspend the operation of the Electoral Boundaries Readjustment Act.


[Stage Direction]
Motion agreed to, bill read the first time and ordered to be printed.


Hon. Robert L. Stanfield (Leader of the Opposition):: Mr. Speaker, my question is to the Minister of Consumer and Corporate Affairs. It arises out of the increase in farm costs of over 6 per cent during the first quarter and the increase in the basic cost of feed which is up over 18 per cent. I should like to ask the minister whether the government is now going to take comprehensive action to control

July 3, 1973
Oral Questions
the price of what the farmer has to buy in order to avoid further significant upward pressure on the cost of food?


Hon. Herb Gray (Minister of Consumer and Corporate Affairs):: Mr. Speaker, any new policy initiatives will be announced in the House in the usual way.


SUGGESTED INQUIRY INTO INCREASED FARM COSTS- GOVERNMENT ACTION
Robert Lorne Stanfield: Mr. Speaker, a supplementary question. The minister will perhaps recall that on May 29 he took under consideration a suggestion that he should set up a special investigation under the Inquiries Act into the rising production costs of farmers. I should like to ask the minister whether he has now fully considered this suggestion and whether the inquiry has been initiated or will be initiated shortly?


Herbert Eser (Herb) Gray: Mr. Speaker, my consultations with my colleagues on this have not been completed.


SUGGESTED IMPOSITION OF PRICE CONTROLS- GOVERNMENT POSITION
Robert Lorne Stanfield: Mr. Speaker, a further supplementary, to the Minister of Finance. In view of the difficulties that the Minister of Consumer and Corporate Affairs seems to be having in making a decision, I should like to direct a question to the Minister of Finance. In view of the upward pressure on farm costs and the fact that about 40 per cent, I think, of our economy is involved in supplying farmers one way or other, is the government now reviewing its approach of examining the food industry separately in terms of prices, and is the government now considering a comprehensive attack by means of a freeze and a medium term control policy as the only realistic and fair way to attack escalating food prices?


Hon. John N. Turner (Minister of Finance):: Mr. Speaker, with respect to food prices, the government is still of the opinion that the problem is the imbalance between demand and supply and that the suggestion offered by the hon. gentleman would not be effective.


AGRICULTURE
[Stage Direction]
Mr. A. P, Gleave (Saskatoon-Biggar): Mr. Speaker, a supplementary question in respect of the cost of food and the farmers' returns addressed to the Minister of Industry, Trade and Commerce or whoever is speaking for him this afternoon. There are ample stocks of rapeseed on hand for export at the present time, as a matter of fact there are some 22.8 million bushels in stock in elevators. Will the minister remove all restrictions on the export of rapeseed, including requirements for licences for export, so that

farmers may hope to keep up with increasing costs of production.
Mr. Herb Breau (Parliament Secretary to Minister of Industry, Trade and Commerce):: Mr. Speaker, I will take the question as notice. The minister should be here in a moment.


Mr. Gleave:: A supplementary question, Mr. Speaker.


Mr. Speaker:: Order, please. There are obviously a number of supplementaries to be asked on this subject. Perhaps I should recognize the hon. member for Saskatoon-Biggar on a supplementary, then the hon. member for Lisgar, and then we will move to the next subject, when I will call on the hon. member for York South. For the moment, I will recognize the hon. member for Saskatoon-Biggar on a supplementary.


Alfred Pullen Gleave: Mr. Speaker, I am sorry that the responsible minister is not in the House to answer these questions. I am quite prepared to hold them until such time as he is here. With your concurrence, Sir, perhaps I might be given this privilege.


Mr. Speaker:: The hon. member will be recognized, if circumstances permit, later on. The Chair will recognize the hon. member for Lisgar on this question, and then the hon. member for York South.


REQUEST FOR ASSURANCE OF ADEQUACY OF SUPPLY OF FEED FOR LIVESTOCK IN VIEW OF EXPORT LICENSING BY CANADA AND UNITED STATES
Mr. Jack Murta (Lisgar):: Mr. Speaker, my question is in the same vein and is directed to the Minister of Industry, Trade and Commerce or to the Prime Minister.


An hon. Member:: The minister is here now.


Jack Burnett Murta: Mr. Speaker, may I ask the Minister of Industry, Trade and Commerce, in that case, if he can tell the House whether he is satisfied that the new export licence arrangements of the United States and Canada, designed to assure minimum required levels of feed for livestock and poultry for the next few months, will be adequate to meet our present demands for that period of time.


Hon. Alastair Gillespie (Minister of Industry, Trade and Commerce):: Mr. Speaker, this is a fairly complicated question on a very important subject. I will try to answer as briefly as I can. As far as a general comment is concerned, I cannot say that we have all the answers yet. Both the Department of Agriculture and my own department have been in active consultation with authorities in the trade in Canada and with United States officials. We expect to get further information. In the meantime we have been able to take the following decision: The Department of Industry, Trade and Commerce will accept export permit applications for those commodities placed under control on June 29, provided that these are supported by copies of the contracts in existence on that date for shipments up to October 15. Exporters are being requested to forward such applications and supporting documentation
July 3, 1973

in the mail, postmarked not later than midnight, July 5, to the export and import permits division of the Department of Industry, Trade and Commerce. Applications for permits covering other contracts will be examined on a case by case basis.
There is just one other brief comment-


Mr. Speaker:: Order, please. The minister is making a statement that normally ought to be made on motions. My suggestion to hon. members is that we now attempt to conclude the first round of questioning, after which the Chair will return to the hon. member for Lisgar and the hon. member for Saskatoon-Biggar, and recognize hon. members on additional supplementaries so that we may elicit additional information on many points.


EXTERNAL AFFAIRS
Mr. David Lewis (York South):: Mr. Speaker, I have a question for the Acting Secretary of State for External Affairs or for the Prime Minister, whoever can give us the information. Can we be informed as to the latest report with respect to the two Canadians of the ICCS who are in Viet Cong hands.
[ Translation]


Mr. Pierre De Bane (Parliamentary Secretary to Secretary of State for External Affairs):: Mr. Speaker, I shall provide a reply to the hon. member, but in English unfortunately because it was drafted in that language.

Our information indicates that the two officers were seen by South Vietnamese workers in the late afternoon of June 28, and they were in conversation with PRG troops at the time. We are also informed that they were seen on June 29 or on the morning of June 30 and they were safe and well. The fact is that Captains Patten and Thomson are with PRG troops in an area which appears to be controlled by the PRG, that the PRG is bound to accept responsibility for their safety and good treatment under the terms of the protocol of the ICCS, and that our delegation in Saigon has made this clear to them.


David Lewis: Has there been any information as to the welfare of these two officers since June 30, or is June 30 the last date on which anything was heard about them, and about their being well?
[ Translation]


Pierre De Bané: Mr. Speaker, we are obviously in constant contact with the other members of the International Commission of Control and Supervision. The Secretary of State for External Affairs is to meet his counterparts in Helsinki; the national Finnish troops are in Viet Nam. We keep on asserting that article 12 of the Paris Agreements should be applied, that is that the Canadian troops now in Viet Nam must enjoy diplomatic immunity and we hope that these prisoners will be immediately released.
Oral Questions


David Lewis: Mr. Speaker, I am aware of article 12, but what I would like to know is whether the office of the Secretary of State for External Affairs or the Department of National Defence received reports today from our troops in Viet Nam?


Pierre De Bané: No, Mr. Speaker, I have received no information in the past few hours, but I have every reason to believe that the information I have just given, that is, that the two members of the Canadian contingent are safe, is still relevant; and we are continuing our attempts to have them freed under the terms of the four party agreements.


VIET NAM-INQUIRY AS TO WHETHER TWO CANADIAN OFFICERS ATTACHED TO CONTROL COMMISSION WHO DISAPPEARED WERE ON OFFICIAL BUSINESS
Mr. Allan Lawrence (Northumberland-Durham):: Can
the parliamentary secretary inform the House whether the two officers were on official business or whether the government of Canada believes it makes any difference?


Pierre De Bané: Mr. Speaker, the PRG delegation takes the position that the issue revolves in part on the question of whether or not Captains Patten and Thomson were on ICCS duty when they engaged in the field trip. We do not consider that is an issue. The two officers, when they went on this field trip, were not engaging in an ICCS investigation and they had not been directed by the ICCS to make the field trip. They were, however, engaging in a normal activity that members of the Canadian and other delegations have conducted from time to time since arriving in Viet Nam. They were maintaining liaison and contact with the two South Vietnamese parties in their geographical area. That is, of course, a necessary and entirely legitimate activity for members of ICCS teams to facilitate their ICCS duties.
From the beginning of our participation in the ICCS-
[ Translation]


Mr. Speaker:: Order, please. It seems to me that the hon. parliamentary secretary's reply goes beyond what was asked in the question put to him. He might perhaps revert to motions to make a statement on which the members of the opposition parties might then comment.


Pierre De Bané: Very briefly, Mr. Speaker, our problem is that the Canadian contingent now in Viet Nam has diplomatic immunity under article 12 of the Paris agreements, on a round the clock basis, of course. It is quite clear that if an official representative or a member of the Canadian delegation goes shopping or crosses the street, he must, in our view, enjoy diplomatic immunity for the entire duration of his stay over there.

July 3, 1973
Oral Questions


VIET NAM-DATE OF RELEASE OF TWO CANADIAN OFFICERS ATTACHED TO CONTROL COMMISSION WHO DISAPPEARED
Mr. G. W. Baldwin (Peace River):: Mr. Speaker, I wish to direct a supplementary question to the Minister of National Defence under whose jurisdiction and authority these officers are serving. Can the minister inform the House when he expects these officers may be released under the circumstances which have been related?


Hon. James Richardson (Minister of National Defence):: Mr. Speaker, the Chief of Staff is in hourly contact with General Me Alpine in Saigon. We have the information that has been revealed to the House by the parliamentary secretary. But I have no further information to add.


Mr. Speaker:: The minister can assume that the question was asked of him through the chair.
[ Transla tion]


Mr. Grafftey:: Not at all, Mr. Speaker. The question is much more specific. Please excuse me. I may have expressed my question poorly.


Mr. Speaker:: Order. I think it would be simpler if we allowed the minister to reply to the question to whomsoever it was addressed.


Mr. Jamieson:: Through you, Mr. Speaker-


Some hon. Members:: Hear, hear!

[ Translation]


REGIONAL ECONOMIC EXPANSION
Mr. Adrien Lambert (Bellechasse):: Mr. Speaker, I should like to put a question to the Minister of Regional Economic Expansion.
Further to his discussions with the Quebec authorities concerning the changes to be made in the special areas program, does the minister intend to make an announcement to the House that we might be made aware of the results of those talks?


Donald Campbell Jamieson: As I have stated on a number of occasions, a federal-provincial work force is now discussing the papers and supplementary documents which I tabled on Friday. To date, no conclusions have been reached, but this is to be expected since the subject is a complex one. I hope to be able to say something definite on the result of these talks within a fortnight.
[ Translation]


DESIGNATED AREAS-DISCUSSIONS WITH QUEBEC-POSSIBLE REVIEW OF POLICY
William Heward Grafftey: I should like to put a supplementary question, Mr. Speaker.
Mr. Minister, I wish to ask the following question: As a result of your conversations with the Quebec government-


Mr. Speaker:: Order. Would the hon. member kindly put his question to the Chair rather than directly to the minister?


William Heward Grafftey: Mr. Speaker, I would like to put a supplementary to the minister.
Do you intend, as a result of your talks with the province of Quebec, to alter the federal government policy on designated areas?


Donald Campbell Jamieson: The situation is that the objective of our negotiations with the Province of Quebec and, indeed, with the other provinces, >s to take advantage of economic opportunities regardless of where they happen to exist in a province rather than keeping within geographical dividing lines. In other words, there will be some changes in the so-called special areas or designated areas.


William Heward Grafftey: Mr. Speaker, I wish to ask a supplementary question.
Does the hon. minister intend to change his regional development policy before the end of this year?


Donald Campbell Jamieson: Yes, Mr. Speaker. I have already indicated that this is the intention. We, of course, must have a federal-provincial agreement as the basis of our operations. So before anything could be announced specifically it would be necessary for it to be incorporated into a federal-provincial agreement. As I mentioned, I hope to secure at least a general developmental agreement with Quebec and some other provinces in the near future.


Mr. Speaker:: I see there are a number of hon. members wishing to ask supplementary questions. The House will have noticed that 20 minutes or so have elapsed and we still have not completed the first round of questions. For the moment, the Chair recognizes the hon. member for Bellechasse.
[ Transla tion]


PROJECTS TO FEDERAL DEPARTMENT
Joseph Adrien Henri Lambert: Mr. Speaker, I wish to direct a supplementary question to the Minister of Regional Economic Expansion.
Under the new policy which the minister intends to announce very shortly, will the larger municipalities be able to negotiate their respective projects directly with the department or will they have to continue making applications through the provincial planning agencies?
July 3, 1973


Donald Campbell Jamieson: Without in any way trying to be evasive, I think it is hypothetical to a large extent. If we are dealing with a specific subject, and if a particular municipality were to be invited as part of a federal-provincial agreement, then we could negotiate directly with that municipality. Generally speaking, however, in the first instance it would be the government of a particular province, in this case, Quebec, which would ask for designation.


AGRICULTURE
Jack Burnett Murta: Mr. Speaker, I should like to return to the first question I directed to the Minister of Industry, Trade and Commerce. Is the government satisfied at this time that the present arrangements between Canada and the United States will avert any further escalation of feed costs, and also will the government assure the House that feed mills in Canada will not run out of soybean meal in the forseeable future?


Alastair William Gillespie: Mr. Speaker, it is precisely because of the uncertainty regarding such questions as supply and price that the government acted last Friday by imposing export controls on the listed commodities, seven all together. That is also the reason my statement, in answer to the hon. member's first question, indicated a procedure for determining what the forward commitments might be. It is only after we have determined these forward commitments that we would be in a position to indicate whether an export permit should be granted, giving due and important allowance to domestic supplies.


Jack Burnett Murta: Mr. Speaker, I have a supplementary question in that connection. In view of the quantities of our committed export orders I should like to ask the minister whether we can be assured of operating for the period of our proposed embargo or restriction?


Alastair William Gillespie: I think it is too early to give an answer to that question, Mr. Speaker.


REQUEST FOR REMOVAL OF EMBARGO ON EXPORT OF RAPESEED-AMOUNT OF RAPESEED MEAL ON HAND AND POSSIBLE SUBSTITUTION FOR SOYBEAN MEAL
Alfred Pullen Gleave: Mr. Speaker, I have a further supplementary to the question I asked earlier. In view of the ample supplies of rapeseed on hand which will leave X numbers of supplies after the end of this crop year, so there is no justification for restricting exports, will the minister immediately remove any dis-
Oral Questions
rupting effects that now exist in the export of rapeseed and discontinue the policy of requiring permits for export?


Alastair William Gillespie: Mr. Speaker, I cannot give that undertaking. I have already indicated that a procedure has been adopted for the purpose of processing applications for permits and for determining what the supply situation is. I can give the undertaking that the government is most concerned about continuing to have available supplies for our traditional customers and to safeguard their interests.


Mr. Speaker:: The Chair will recognize the hon. member for Saskatoon-Biggar for a last supplementary question, and will then recognize the hon. member for Dauphin followed by the hon. member for Victoria.


Alfred Pullen Gleave: Mr. Speaker, in view of the fact that the mills which process rapeseed meal have ample supplies on hand and there is no shortage of rapeseed meal, has the minister or the Minister of Agriculture made an accurate survey to ascertain the amount of rapeseed meal on hand and whether it can be substituted for soybean meal?


Alastair William Gillespie: That survey is currently underway, Mr. Speaker.


OIL SEEDS-POSSIBLE INTRODUCTION OF TWO PRICE SYSTEM
Mr. Gordon Ritchie (Dauphin):: Mr. Speaker, my supplementary question is directed to the Minister of Agriculture. Is the government considering a two-price system in respect of oil seeds, a lower domestic price with a higher export price?


Hon. E. F. Whelan (Minister of Agriculture):: No, Mr. Speaker.


Mr. Speaker:: The Chair will recognize the hon. member for Yorkton-Melville shortly.


EXTERNAL AFFAIRS
Mr. Allan B. McKinnon (Victoria):: Mr. Speaker, my question is for the Minister of National Defence and is supplementary to the subject raised by the hon. member for York South. As it was felt necessary some three weeks ago to issue instructions confining our observers to their quarters for their own safety, does he now feel it is normal for them to be going on missions on their own without authorization or contact with the Viet Cong, but strictly on their own hook?


James Armstrong Richardson: Mr. Speaker, our personnel are performing the duties given to them.


Allan Bruce McKinnon: Mr. Speaker, I have a supplementary question. Can the minister tell the House whether these

July 3, 1973
Oral Questions
two men were covered by the Paris Agreement when engaged in this function? If not, what will this oversight mean in respect of their personal safety, and why were they in the area if they were not covered?


Mr. Speaker:: Order, please. I have the impression that the question was asked earlier. If I am wrong perhaps the minister would like to reply. If he does not reply the Chair will recognize the hon. member for St. Catharines.


VIET NAM-POSSIBLE REMOVAL OF TROOPS ON &quot;HMCS KOOTENAY&quot;
Mr. Trevor Morgan (St. Catharines):: Mr. Speaker, my question is also directed to the Minister of National Defence. Having regard to the fact that the Canadian naval vessel Kootenay is at the moment anchored off Viet Nam, what steps is the minister taking to remove the troops from Viet Nam so an incident such as this will not occur again?


James Armstrong Richardson: Mr. Speaker, the Kootenay is in Singapore and is available if required. Our regular evacuation procedures are in place if required. We are planning tentatively to return all our peacekeeping forces at the end of July.


FINANCE
Hon. Marcel Lambert (Edmonton West):: Mr. Speaker, my question is directed to the Minister of Finance. In light of the increase in the prime interest rates by the major banks in the United States and rumours of a further increase in the prime rates here in Canada, would the minister consider making a statement tomorrow or on Thursday on the full range of interest rates here in Canada, what the government proposes to do about them, and also how the government proposes to take any further action to that it took on Friday last?


John Napier Turner: Mr. Speaker, the hon. gentleman is really asking me to make a statement on future interest and exchange policy.


Marcel Joseph Aimé Lambert: No, that of right now.


Some hon. Members:: Hear, hear!


John Napier Turner: Mr. Speaker, I think any Minister of Finance would be tempted into that course at his peril.


Marcel Joseph Aimé Lambert: Mr. Speaker, the difficulty of hon. members in the House arises from the fact that the government seems to have aimlessly drifted into the present position, and hon. members would like to know what the government actually is doing about interest rates.


John Napier Turner: Mr. Speaker, I think we have had some very thorough economic debates in this House since the beginning of the year.


LOANS TO FARMERS, FISHERMEN AND SMALL BUSINESSES-REQUEST THAT MINISTER DIRECT CHARTERED BANKS TO ALLOCATE MORE FUNDS TO ATLANTIC PROVINCES
Mr. Jack Marshall (Humber-St. George's-St. Barbe):: Mr. Speaker, in view of the fact that the press release issued by the minister on Friday indicates that he agrees that lending institutions are not providing funds in the volume required to meet current demands of farmers, fishermen and small businessmen, and in view of the fact that the interest rate has now increased, is the minister going to adopt specific guidelines to be followed by the banks, particularly in the Atlantic provinces, to direct more moneys into loans going into that part of the country, which so far has received an almost negligible amount?


John Napier Turner: Mr. Speaker, these interest rates under the guaranteed loan programs were not, at the rates then in force, attracting funds into these programs. The hon. gentleman will notice that the direct lending programs of the government were not effected. As to the specific substance of the question, the Governor of the Bank of Canada and I have made it clear to the chartered banks that we wish them to exercise priority allocations for farmers, fishermen and small businessmen in all parts of the country, and businessmen generally in slow-growth areas.


An hon. Member:: What was their response?


LOAN TO ALGERIA-REQUEST THAT FLOATING INTEREST RATE FORMULA APPLY
Mr. Sinclair Stevens (York-Simcoe):: Mr. Speaker, my question is also directed to the Minister of Finance. In view of the press release issued by the Minister of Finance, just referred to by my colleague, in which he announced a floating rate formula for farm, fishing and small business loans at an initial interest rate hike of three-quarters of one per cent, bringing interest rates to those people to T3/ per cent, would the minister inform the House of a similar formula to be implemented and to apply to the $100 million line of credit proposed by Canada to Algeria to help their businessmen, which facility had an instant effective rate of less than 7 per cent?


John Napier Turner: No, Sir.


REQUEST THAT THERE BE NO FURTHER IN CREASE IN INTEREST RATES ON MORTGAGES
Mr. Edward Broadbent (Oshawa-Whitby):: Mr. Speaker, my supplementary question is directed to the Minister of Finance. Without making any commitment about the government's future policy on interest rates in general, will the minister assure the House that whatever happens to interest rates in general the government will take steps

July 3, 1973

to see there will be no further increase in interest rates for mortgages?


John Napier Turner: Mr. Speaker, I have already dealt with that subject. I can give the hon. gentleman no such assurance.

[ Translation]


ROYAL VISIT
Mr. Real Caouette (Temiscamingue):: Mr. Speaker, I should like to put a question to the Prime Minister.
We all know that Her Majesty the Queen is now in Canada. Can the Prime Minister tell us whether she is the guest of the Canadian government or of the governments of the provinces where she has been or where she will soon be going?


Right Hon. P. E. Trudeau (Prime Minister):: Mr. Speaker, the federal government alone and the members of the Privy Council can advise the Queen as to her conduct and her statements in Canada. However, it has happened in the past, for an anniversary, a celebration, or a provincial centenary that a province has asked the federal government to intervene at Buckingham Palace to invite the Queen, and this was the procedure followed for the present visit. The Queen came for the centenary of Prince Edward Island and was invited by the federal government at the request of the provincial government. The same holds for her Ontario visit. However, as for her visit on the occasion of the centenary of the Royal Canadian Mounted Police, it was the federal government which invited her. She is here especially for that occasion, but since the centennial celebrations will be held in the western provinces, the invitation was drawn up in co-operation with those provinces.


David Réal Caouette: Mr. Speaker, I have a supplementary question.
Was there at any time an invitation sent to Her Majesty the Queen by the province of Quebec to visit part of that province?


Pierre Elliott Trudeau: No, Mr. Speaker, not for the last few years.
[ English]



POSSIBLE INVITATION TO HER MAJESTY TO GIVE ROYAL ASSENT

['There is a presumption it will have expired, because I will now call orders of the day.']
Gerald William Baldwin: Mr. Speaker, I have a supplementary question. I should like to ask the Prime Minister whether he would consider, before Her Majesty the Queen leaves Canada, asking Her Majesty if when she comes back on the next trip to open the Commonwealth Conference, she would give Royal Assent to such bills as this parliament may pass between now and the time she returns.
Oral Questions


Some hon. Members:: Hear, hear!


Pierre Elliott Trudeau: Mr. Speaker, the question really is predicated on the assumption that parliament will be sitting during the Commonwealth Conference. I think that will be extremely difficult because, although the House of course is free, the city will be heavily laden with visitors of all kinds and it might be undesirable to have parliament sitting during those particular days.


Some hon. Members:: Oh, oh!


An hon. Member:: Closure.


Pierre Elliott Trudeau: However, so far as this side of the House is concerned, we are perfectly happy to sit as long as all the parties would like.


Some hon. Members:: Hear, hear!


Pierre Elliott Trudeau: I just want to make it clear that no member should expect to use any of the spare rooms at Sussex Drive.



Mr. Steven E. Paproski (Edmonton Centre):: Mr. Speaker, my question is directed to the right hon. gentleman. In view of the fact that the Prime Minister is planning a short visit to Edmonton, the oil capital of Canada, and in view of the fact that Liberals are very hard to find in this great city, would the Prime Minister like me to try to gather the odd Grit for the occasion and, if no, why not?


Some hon. Members:: Oh, oh!


Pierre Elliott Trudeau: Mr. Speaker, I remember that before my last visit to Edmonton the hon. member asked exactly the same question. I could not get an answer in, but he could not be found in the crowd of 7,000 Liberals who turned out.


Some hon. Members:: Hear, hear!


URBAN AFFAIRS
Mr. Don Blenkarn (Peel South):: Mr. Speaker, my question is for the Minister of State for Urban Affairs. Can he advise the House how much land has been bought on a land banking basis with the $100 million set aside for that purpose this year?


Mr. Speaker:: Order, please. I have to interrupt the hon. member to remind him that a question in those terms should be placed on the order paper.

July 3, 1973
Oral Questions AGRICULTURE


SOYBEANS-DISCUSSIONS WITH UNITED STATES OFFICIALS- REQUEST FOR ASSURANCE OF ADEQUATE SUPPLIES FOR CANADIAN MILLS
Mr. Lome Nystrom (Yorkton-Melville):: Mr. Speaker, my question is a supplementary on soybeans and it is directed to the Minister of Agriculture. Has he been in contact with United States officials over the weekend and, second, can he now assure or give a guarantee to Canadian mills that they will have an adequate supply of soybeans?


Eugene Whelan: Mr. Speaker, our officials have been in contact as late as today with United States officials. As the Minister of Industry, Trade and Commerce has stated, the final figures are not available at this time but they should be shortly, today or tomorrow, so that we will know exactly what our needs may be and what the United States intends to do with long time Canadian customers of the United States for this product.


ROYAL CANADIAN MOUNTED POLICE
Mr. Otto Jelinek (High Park-Humber Valley):: Mr. Speaker, my question is for the Solicitor General who is absent from the House today. However, I understand from his office that the Minister of National Health and Welfare will answer my question. In the light of the fact that there have been numerous reports of ground transport harassment by RCMP personnel at both the Toronto airport terminals, and because the RCMP have in fact been causing a great deal of inconvenience to many passengers at the airport, could the minister- advise the House what regulations the RCMP are supposed to be enforcing regarding the airport limousine concession, as well as the loading and unloading of passengers and luggage? Who, in fact, is responsible for these regulations being implemented-


Mr. Speaker:: Order, please. The question asked in those terms-again I suggest to hon. members-should be placed on the order paper. If there is urgency about the matter, possibly the question should be asked at the time of adjournment in the usual way. If there is urgency to the extent that, in the opinion of the hon. member or of the minister, a reply should be given now, certainly I have no objection. If the minister would like to reply briefly, he will be recognized for the purpose.


Otto John Jelinek: May I conclude the question by asking the minister to let the House know when we can expect changes to take place so that passengers will not have to worry about the police as well as the existing terminal two monster.


Mr. Speaker:: Order, please.


HARBOURS
Mr. Eudore Allard (Rimouski):: Mr. Speaker, I should like to put a question to the Minister of Regional Economic Expansion.
In view of the decision made by the Quebec government to promote the construction of a supertanker port, could the minister tell the House whether he had any discussions with the Quebec government about this project as well as about the steps to be taken in an attempt to solve the water pollution problem?
[ English]


Donald Campbell Jamieson: Mr, Speaker, with regard to the latter part of the question, it would be more properly directed to the Minister of the Environment. On the broad question of whether I have had discussions with regard to port development as part of regional economic expansion in the province of Quebec, the answer is yes. This is one of the subjects now being discussed and to which I referred earlier.
[ Translation]


Eudore Allard: Mr. Speaker, I should like to put a supplementary question to the Minister of the Environment.
Can he say whether the Canadian government has set up any program with a view to protecting the shores of the St. Lawrence River and Gulf, in case the Quebec government project would materialize and supertankers would sail along our shores?


Mr. Speaker:: The hon. member will realize that the question put in such terms is hypothetical.


UNEMPLOYMENT INSURANCE
Mr. Lincoln M. Alexander (Hamilton West):: Mr. Speaker, I should like to direct a question to the Parliamentary Secretary to the Minister of Manpower and Immigration. In the light of the fact that the Unemployment Insurance Act makes it mandatory for the advisory committee to review the Unemployment Insurance Act with respect to rates, coverage and benefits, after which time it is supposed to file a report with the Governor in Council within six months following the end of the year, I should like to ask the parliamentary secretary whether in fact this report has been filed. If so, when does the minister intend to table it in the House, and if he has not received it as yet would he advise us why he has not?


Mr. Mark MacGuigan (Parliamentary Secretary to Minister of Manpower and Immigration):: Mr. Speaker, I shall have to take notice of the question, but I would say that the advisory committee did meet on Friday.
July 3, 1973

Mr. Alexander- Perhaps the parliamentary secretary misunderstood me. I was not referring to the specific directions that were given to the advisory committee with respect to the abuses which were going to be considered. I am talking about the specific statutory demands made on the advisory committee, and I hope the parliamentary secretary will look into that.
 * *


CANADA PENSION PLAN
Mr. Stanley Knowles (Winnipeg North Centre):: Mr. Speaker, may I direct a question to the Minister of National Health and Welfare. In view of the fact that this part of the session is lasting longer than had been anticipated, will the minister now make an effort to introduce, before we rise for the summer adjournment, his major bill to amend the Canada Pension Plan? I refer to the one that will deal with the ceiling on annual escalation and will also deal with the raising of the YMPE, the yearly maximum pensionable earnings?


Hon. Marc Lalonde (Minister of National Health and Welfare):: Mr. Speaker, I do not see any way in which this bill could be introduced before late in the fall.


Stanley Howard Knowles: Mr. Speaker, is it still the commitment, or at least the hope, of the government that this amending legislation will be in effect by January 1?


Marc Lalonde: I do not remember ever having made a commitment that it would be in effect by January 1, but it would be our hope that it would be in effect as soon as possible in the next year. If January 1 proves to be possible, we will certainly facilitate it.


INCOME TAX
Mr. Reg Stackhouse (Scarborough East):: Mr. Speaker, I wish to direct a question to the Parliamentary Secretary to the Minister of Manpower and Immigration. In light of the way in which the computer of the Unemployment Insurance Commission shut down after deducting roughly $24 million more in taxes than it should have from benefit cheques between January and June, and in light of the fact that recipients will have to wait until next year to get their money back, would the minister and the government consider some way by which the recipients could receive a refund before that date?


Mark R. MacGuigan: Mr. Speaker, I am not sure that this is not a question which is more validly directed to the Minister of National Revenue, but
Oral Questions
as I understand it the law does not provide for any such refund until the taxation period has expired.


Reginald Francis Stackhouse: Mr. Speaker, in the absence of the Minister of Manpower and Immigration, and in the absence of the Minister of National Revenue, may I ask the Prime Minister if some consideration could be given by the government to making a special concession to the numbers of people who have suffered through no fault of their own but through the fault of this government agency?


Herbert Eser (Herb) Gray: Mr. Speaker, I will be pleased to bring the hon. member's representation to the attention of the Minister of National Revenue.


CORPORATE RETURNS-LACK OF AVAILABILITY OF FORMS-REQUEST FOR EXTENSION OF FILING DATE
Mr. Walter Baker (Grenville-Carleton):: Mr. Speaker, I would like to direct a question to the Prime Minister in the absence of the Minister of National Revenue. In view of the fact that thousands of large and small businesses in Canada must file their corporate income tax returns by July 31, 1973, and that it will take at least three weeks to make the appropriate forms available to these taxpayers, would the minister consider extending the date for filing such returns by one month in order that the taxpayers, their accountants and the department will not be put to unnecessary expense, delay and confusion?


Herbert Eser (Herb) Gray: Mr. Speaker, I will be pleased to see that the hon. member's question is brought promptly to the attention of the Minister of National Revenue.


CITIZENSHIP
Mr. Duncan M. Beattie (Hamilton Mountain):: Mr. Speaker, I wish to direct a question to the Secretary of State. In view of his recent statement that almost one million eligible residents have yet to apply for Canadian citizenship, could the minister tell me if he will use the facilities of Information Canada to try to convince these people that citizenship in this country is a worthwhile goal and, secondly, has he given special consideration to waiving the citizenship fee for old age pensioners who qualify?


Hon. Hugh James Faulkner (Secretary of State):: Mr. Speaker, I will be pleased to consider the first option, and at this moment I am not considering the second.

July 3, 1973
Oral Questions


SUGGESTED AUTOMATIC GRANTING TO FORMER MEMBERS OF ARMED FORCES
Duncan M. Beattie: Mr. Speaker, if the minister will not give consideration to the second question regarding the waiving of the citizenship fee for old age pensioners, would he give special consideration to the automatic granting of citizenship to members of the Armed Forces, particularly those who served in two world wars and in Korea?


James Hugh Faulkner: Mr. Speaker, I have discussed this matter with the hon. member previously, and with members on this side of the House. Both options, the question of the senior citizens and the members of the Armed Forces, are very attractive propositions. I am just not yet in a position to consider them.


INDIAN AFFAIRS
Mr. Frank Howard (Skeena):: Mr. Speaker, I wish to direct a question to the Minister of Indian Affairs and Northern Development. A couple of weeks ago I asked him when he would be in a position to make a statement to the House regarding the position of the government with respect to aboriginal rights and the recognition thereof. The minister at that time, usually loquacious, was reticent and said "soon". Is he in a position now to amplify on "soon" and tell us when we might expect a statement to be made?


Hon. Jean Chretien (Minister of Indian Affairs and Northern Development):: Sooner, Mr. Speaker.


Frank Howard: Mr. Speaker, that was a favourite expression of my foster mother, the implications of which I won't relate at the moment. However, may I ask when the document with respect to aboriginal rights currently before cabinet might be approved?


Joseph Jacques Jean Chrétien: Mr. Speaker, we are still considering this matter and as soon as we make a decision, I shall be pleased to inform the House.


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


Mr. Hellyer:: Mr. Speaker, my question was for the Minister of Transport who has left the chamber for a moment. I understand he will be back, so perhaps I could reserve my position in the queue if the question period has not expired by that time.


Mr. Speaker:: There is a presumption it will have expired, because I will now call orders of the day.



GOVERNMENT ORDERS


[Stage Direction]
The House resumed, from Friday, June 29, consideration of the motion of Mr. Drury that Bill C-196, respecting the 1976 summer Olympic games, be read the second time and be referred to the Standing Committee on Miscellaneous Estimates.
Mr. Speaker:: The President of the Treasury Board (Mr. Drury).


Mr. Drury:: Question.


Mr. Speaker:: Is the House ready for the question?


Some hon. Members:: Question.


Mr. Speaker:: Is it the pleasure of the House to adopt the said motion?


Some hon. Members:: Agreed.


Stanley Howard Knowles: On division.


Mr. Speaker:: Carried on division.


[Stage Direction]
Motion agreed to, bill read the second time and referred to the Standing Committee on Miscellaneous Estimates.

[Stage Direction]
The House resumed, from Wednesday, June 27, consideration in committee of Bill C-192, to amend the Income Tax Act (No. 2)-Mr. Turner (Ottawa-Carleton)-Mr. McCleave in the chair.
The Chairman:: Order. When the committee rose on Wednesday, June 27, that part of clause 1 of the bill found on page 1 and page 2, down to the end'of subparagraph (b), was under consideration.
On clause 1-Deduction from corporate tax: manufacturing and processing profits.


Alfred Pullen Gleave: Mr. Chairman, I cannot see why we should make these reductions in corporate tax, and I cannot see how we can expect them to reflect increased activities in the community. The only way we could justify supporting these tax concessions and accelerated depreciation writeoffs would be if the move benefited the people of Canada as a whole and, speaking personally, benefited the community in which I live.
Recently there was a prolonged strike, or work disruption in the city of Saskatoon. It was a dispute between Dominion Tar and Chemicals-Domtar as we call it and the people who work in its Saskatoon plant. It lasted all winter. Two or three weeks ago Domtar said, "Boys, this is the end of the road. We are going to close down the plant." So far as I know to this point in time, Domtar has closed down the plant.
July 3, 1973

When I was in Saskatoon during the weekend I met some people at the Indian-Metis friendship centre. They were concerned about how they could use the timber concession of that particular company and how they could persuade the provincial government to help or co-operatively to take over the plant and maintain the job opportunities it provided. I do not know whether anything like this will transpire, but I am very opposed to passing a bill or accepting a proposal that will reduce taxes to corporations which deal in such a cavalier fashion with the people who worked in this plant in particular and the taxpayers of Saskatoon in general.
When the company closes down that plant, Mr. Chairman, the taxation basis of the city will be affected. At the same time as we are providing tax concessions to the corporation, they are removing their operations from Saskatoon, which means that the ordinary taxpayer of that city will have to pick up the tax load which the corporation abandons at the local level. This matter must be of little concern to the corporation if they are prepared to close it out. It is only a small plant, involving a small number of people and small timber limits. Farmers have been cutting that timber as a part-time job. The attitude of the corporations is, if they lose that income, so what? If the people who have been trucking the pulpwood into the plant lose their wages, are unable to meet payments on their trucks and lose them, so what?
I am not in agreement with the minister's suggestion that we reduce taxation to these kinds of corporations. In this particular instance, Mr. Chairman, the rip-off is very close to home. I hear the terms "good corporate citizen" and "good corporate behaviour," and they are very nice; they are heartwarming phrases and I love to hear them. But such is not the case here. It would not have stretched the resources of that corporation to keep the plant working in Saskatoon. The workers were not asking for excessive benefits. They were not asking for the moon. But it was more than that particular multinational corporation was prepared to concede.
I do not suppose it would make very much difference to the balance sheet of that company whether the plant operated or not, but the taxation cuts the minister proposes to give the corporation will mean something to it. A reduction of tax from 49 per cent to 40 per cent will be a real bonanza. But it will be no comfort to the people working for the company who will find themselves out of a job and walking the streets. It is companies of this type that are getting the biggest benefit. Taking an average for the last ten years of the portion of profits on which a business is taxed shows, for retail merchants, 90 per cent and for wholesalers 87 per cent. But when it gets to this type of company the rate is much less. We are giving the breaks to the wrong people. Maybe we should have been giving the tax cuts to the worker, the private individual. If we had been doing that, perhaps the workers in this particular company would not have asked for anything more and maybe it could have continued to operate. It is a different method of approach, but it may very well have worked.
One thing is certain, the approach we are taking now just is not working, Mr. Chairman. This is the principal
Income Tax Act (No. 2)
reason why I find it impossible to support this bill. We are continuing the very economic and fiscal approaches and programs that have not worked in the past, and this government now proposes to reinforce failure. This is what they are proposing, reinforcing a failure of policy. This policy has failed, on the first count, to relate to the communities in which companies operate. On the second count it has failed to provide the jobs and the business expansion that we need. That, after all, is what this policy, the regional expansion policy and other policies are supposed to do, but they have not done it. We should therefore be looking in another direction for different policies and objectives in order to achieve what we want for Canada.
I sometimes wonder what are the objectives of the government. I have not heard them say that they are committed to 3 per cent as a level of acceptable unemployment. I understand that the Unemployment Insurance Commission is geared to 4 per cent; that is, at 4 per cent the fund is supposed to be self-liquidating. But we do not get it down to 4 per cent, and when it remains at 6 per cent and costs the government money, instead of trying to get it down they conduct a witchhunt and charge those who are forced to draw unemployment insurance benefits with exploiting the system. Mr. Chairman, it is not the worker who is exploiting the system; it is the system that is exploiting the worker unmercifully. It is exploiting local communities such as Saskatoon and other parts of the country. I am not going to cite the others, but will speak of what I know.
We have seen refineries closed in Saskatoon while corporations draw these tax benefits. Gas, oil and petroleum companies, with one of the worst records of payment of corporate taxes, move their facilities from Saskatoon and Moose Jaw and concentrate them in a few large centres in the interests of efficiency and productivity. Then they tell us that they must increase prices otherwise they cannot carry on. The net result of removing plants from these centres to one big centre and of increasing their so-called total efficiency, is an increase in price.
I do not think any government in Canada's history has been more thoroughly hoodwinked and bamboozled than the present government. I do not think any government was ever taken to the cleaners so thoroughly as this government. The men in corporate offices must be laughing themselves silly thinking about this government trying to push through legislation that should have been abandoned as of May 8, 1972. But here the government is; it cannot bring itself to sober up the next morning after the bad night before and say, "Wait a minute. Let us take a reading of the situation before we start off again on the same kind of trip." This is ridiculous. You cannot justify this measure at the national level and you cannot justify it at the community or local level. Nor can you justify it as serving the interests of Canadians. Really, it is hopeless. Is it too much to ask that such policy be reviewed or changed?
It is hopeless to think that members of the official opposition will vote against this measure and defeat it; they said they will not. They, too, like this policy. I can think of some language to describe it, but do not want to use those words in the committee. The official opposition

July 3, 1973
Income Tax Act (No. 2)
likes to go along with these concessions, with this reckless sell-out of the interests of the Canadian taxpayer. They will go along with this sell-out, with this waste of money and waste of earning power. I find their attitude past understanding.
I say that corporations should be taxed at the same rate as the individual taxpayer. By all means give them the same rights of depreciation as you give to the ordinary businessman and farmer. But let the corporations do their share in carrying this nation; let them make their contribution to this nation so that we can do the things that need to be done in a growing community. This does not mean that we will necessarily pour all the money we get into welfare. Some of it will go toward economic growth, some into housing and some into social services that we need such as roads and rail development.
If I were to give tax concessions to any industries in Canada, Mr. Chairman, I would look at the rail transport industry because it needs improving. If you want to consider that part of our transportation system and that part of Canada's industry that needs rebuilding, that needs to become more efficient, I submit that you should consider the rail transportation system because it could serve as an effective method of tying Canada together and transporting goods and services which this country needs. I would not give tax concessions to the oil and mining companies. I would take a good look at transportation, at rail services in particular, because those are the services that would tie Canada together and help us to operate as a solid economic community.
We should not keep insisting that railroads are not public utilities, that they are really private corporations out to make money, and that they are self-supporting. Really, they form one part of our transportation system, the first objective of which should be the movement of goods and services at the least possible cost. We are spending hundreds of millions of dollars in building super highways to carry goods that should be carried on our railroads.
One of our problems is that we do not have a good economic policy for Canada, the result being we limp from one mistake to another. One policy is built in isolation and another is introduced in isolation: the total economic fabric of Canada is not considered as a whole.


Paul Theodore Hellyer: Exactly. That is the most sensible thing you have said.


Alfred Pullen Gleave: Thank you very much. It is rare that I get kind words from the hon. member's quarter of the House.


Gerald William Baldwin: It is very rarely that you earn them.


Alfred Pullen Gleave: Mr. Chairman, I do not mind the hon. member for Peace River being a smartypants if he likes. If it pleases him to indulge in a little humour at my expense, he may do so. One of my friends asked a question this afternoon and a member of the official opposition told him he ought to go to Tijuana. I do not know why he suggested that the hon. member should go to Tijuana. I can think of a place to which I should like to send some hon. members of this House, and it would be much hotter than Tijuana.


An hon. Member:: You are getting off the track.


Alfred Pullen Gleave: Yes, I sometimes get off the track. I hope that after this government gets rid of its particular hangup over this budget and the policy hang-ups from which it suffers, it will begin looking at Canada as a whole and start to develope a policy which, meets the needs of Canada. A good place to start would be at the meeting with the four western premiers which is to take place next month. I sincerely hope that the asinine suggestion of the Minister of Justice, to the effect that we should begin by scrapping the Crowsnest pass rates, will not represent the point of departure of the government when it meets with the four western premiers next month. If that is the government's attitude, if that represents its opinion, I sincerely hope it will call the meeting off because it will do more harm than good. So far as western Canada is concerned-


Robert Jardine McCleave: Order, please. It was not agreed the other day that we would deal with clause 1 by breaking it down into several factors, as I indicated to members of the committee at the beginning of our discussion today. I think the hon. member is going perhaps a little far afield and I suggest he return to the matter under consideration. It has been pointed out to me that his time has expired. The hon. member for Joliette is recognized on the same portion of clause 1.
[ Translation]


Mr.   La Salle@: Mr. Chairman, I would like to comment briefly the clause of the bill under consideration; it is a very important clause for the Canadian producers and businessmen. I would personally like to say that I shall support this tax advantage which the government must give to the corporations. I believe it can-mind you, I do not say it will-create new jobs.
In the course of my few comments, I would like to urge the minister to control very closely the application of this law. Of course, if a businessman really wants to recognize the problems which we are facing, he can use these advantages to multiply jobs, which have been lacking for a long time in Canada. We also know quite well that he may also take advantage of this tax cut under all kinds of circumstances. Thus, I think that it is important for the responsible department to keep a very close watch on the industrialists who will take advantage of the provisions of this bill.
We know perfectly well the difficulties we are now facing, and we also have a system of supply and demand. We know that costs are continuing to increase, and we are still wondering what the government is going to do to put a brake on this increase, to help the consumer who is worried because he finds himself in an untenable position.
I think that this measure is still quite adequate, particularly since it can be reconsidered in a year's time, at the request of 60 or more members. I think that it is a very sensible suggestion, for in a year's time it might be difficult to see the repercussions of this act, and it is for this reason that the department must not neglect to keep a close watch on this field.
There is also much talk of increasing the consumer's purchasing power, which might perhaps help with the

consumption of Canadian products and also give thousands of individuals the chance to earn the minimum wage. There are, undoubtedly, many valid suggestions to be made. The minister might even be invited to consider the possibility of taking steps to increase the minimum wage, which is totally inadequate, because of today's cost of living.
I would also like to make a few comments on the statement we have just heard from the hon. member for Saskatoon-Biggar (Mr. Gleave). He accused the government of failing to introduce suggestions liable to help us and he severely blamed them about the measure they are proposing today.
Again, Mr. Chairman, I cannot help talking a little about these words, in light of the attitude of his party towards the government since last January. Today, they are ready to vote against the government about this measure and I think I am right when I say that it is after having ensured that the Progressive Conservative party would support it. However, if that party did not support it, in the light of the experience we have been living since January 4, I have the clear impression that the New Democratic Party would support the government.
Thus, I have serious doubts about the opinions of the hon. member who was speaking on behalf of his party because I am forced to recognize that on several occasions since January that party has openly and very deliberately betrayed principles it had been defending for a long time. What the hon. member said a few moments ago is nonsense, I think, and if the government occasionally makes such a big error, in short, if they should not administer the country-and I think that we have several occasions of condemning them-


Robert Jardine McCleave: Order, please. I ask the hon. member to give the Chair his attention for a moment. The subject matter we are dealing with does concern a proposed reduction in the taxes of corporations. However, it was agreed that we would deal with pages 1 and 2 of Bill C-192, "Deduction from corporate tax: manufacturing and processing profits". The hon. member should be dealing with that subject at this stage of the debate. When we go on to other parts of clause 1, the hon. member may find topics which concern his argument and he could advance them at that time. The committee did agree that we would deal with this clause in several sections.


Mr.   La Salle@: Thank you, Mr. Chairman.
So, coming back to this bill, as I am invited to do, I think that the businessman in general has a very direct responsibility and I would, of course, urge the minister responsible to increase the meetings with those responsible businessmen and owners of industries. I think it would be a way of going out and getting advice, suggestions which are absolutely necessary if we want to correct, to improve the situation at this time. The businessman being more aware of his responsibility, particularly when it comes down to creating jobs, and considering that advantage which the government offers him, I think that it is a must for this government to do more to invite the businessman
Income Tax Act (No. 2)
to take his responsibility and participate in finding the solution likely to improve the situation.
In any case, I am convinced that the businessman will not be able to continue to progress if the difficulties which we face now are allowed to continue. The bill before us which provides certain benefits will not have the anticipated effects if the responsible businessman does not understand the situation in which we live and does not answer the invitation of the department to improve the economy of the country.
Those are the few comments I wanted to make. I would also like to say that the government, while believing that this bill will produce beneficial effects, should not underestimate certain suggestions which have been made in this House and which I think would have created jobs.
In my opinion, we should have further considered granting the old age security pension as early as 60, which would have created thousands of jobs for younger people. This is a valid suggestion. I doubt it can produce the expected results. The implementation of those measures will never be exceedingly watched. I also think that other suggestions had the same objective, which is to give jobs to all Canadians. We should further consider those suggestions made by hon. members and wisely try to increase the number of jobs in this country.
Those are the few remarks I wanted to make. I hope that this measure will be reconsidered if it so deserves, in view of its lack of implementation as suggested by the department and desired by the government. However, I would be quite glad if this measure proved to be the incentive that would permit the government to reach its objective.


Mr. Orlikow:: Mr. Chairman, we are being asked to give approval to the proposal of the Minister of Finance that corporation taxes be cut from the present 49 per cent to a new, lower rate of 40 per cent. I have opposed this proposal by the Minister of Finance for a number of reasons. I have done so principally because it seems to me that the real purpose of a system of taxation should be to bring the benefits of increased productivity and increased wealth to the people and, particularly, to improve the lot of those who are among the lowest income earners. The fact is that the taxation system which has been in existence for the last 25 years or more has done nothing to improve the lot of the people in the low income brackets. The system of taxation under both Liberal and Conservative governments has done precisely the opposite: it has permitted the rich to get richer, and the poor to get less of the total wealth of the country.
If there are hon. members here who doubt this statement and think it is merely part of my political philosophy, an aspect of my partisan nature which I do not wish to disavow, I would refer them to a speech made by the chairman of the Economic Council of Canada, Dr. Ray-nauld, to the Empire Club of Toronto on February 2, 1973, as reported in the Globe and Mail. Let me quote several paragraphs of this speech so as to convince hon. members that the point of view I have expressed is not just one which is held by those who belong to the New Democratic

July 3, 1973
Income Tax Act (No. 2)
Party, but that it is shared by some of the most highly qualified and non-partisan people in the country. Mr. Raynauld stated:
The most recent study in Canada shows that 20 per cent of family units at the lowest end of the income scale receive 4.3 per cent of total income, and half of that is in the form of transfers from government. At the other end of the scale, the richest 20 per cent of family units receive 45 per cent of total income.
He went on to say:
The Canadian tax system in 1969 was extremely regressive at the lower end of the income scale. That is, over-all effective tax rates were higher for the poor than for the rich.
Corporate, sales and property taxes were found to be regressive. The only tax in the entire system which was progressive over all incomes was personal income tax.
Then Dr. Raynauld said:
According to the Economic Council of Canada's definitions of poverty ranging from an income of $2,013 for an unattached person to $5,368 for a family of five or more, 22 per cent of all family units in Canada are poverty-stricken.
That is the picture as presented to us by the chairman of the Economic Council of Canada. Despite this, we find the Minister of Finance making a proposal which will further tip the taxation system in favour of greater returns for those in the high income brackets as compared with those in the lower income brackets.
It has been argued that corporation taxes need to be cut because corporation profits are not large enough. I suppose that what one considers large enough is a relative matter. For the person who is benefitting from increased corporation profits, any tax is too much. If one looks at the financial pages of the Globe and Mail, the Financial Post or the Financial Times one sees there has been a sharp increase in the profits of Canadian corporations. Let me put on record again, as I have on other occasions, some of the figures. Almost a year ago, on July 28, 1972, the Globe and Mail reported that corporation profits continued to rise, with an advance of 24 per cent in a quarter. On June 29 of this year the Globe and Mail carried a story headlined "Profits after tax rise 30 per cent in quarter from a year earlier." It began:
Profits after tax of Canadian companies for the first quarter rose almost 30 per cent from a year earlier, according to a final report on business sampling of 296 corporations. The profit rise, which continues a trend that began in the third quarter of 1971, follows increases from a year earlier of 16 per cent and 24 per cent for the third and fourth quarters of 1972 respectively. The largest year to year gains were registerd by the paper and forest, construction and materials, base metals and real estate groups.
Let me pause to comment on that last item. According to the table in the Globe and Mail which accompanied this article, real estate profits increased by 125.8 per cent in the first quarter of 1973 as compared to the first quarter of 1972. Is it any wonder that the price of housing is increasing at a fantastic rate? Is it any wonder that not only people in the lower income brackets but those in the middle income brackets are finding it increasingly difficult, if not impossible, to make the payments necessary to buy any kind of house at the present time? It is not at all surprising when one realizes what has happened to the cost of mortgages, when one realizes that the mortgage interest rate for a house is now approaching 10 per cent, and when one sees that the profits made by the banks in

Canada have increased substantially in each of the past three or four years.
On December 2, 1972, the Globe and Mail carried a lead story headed "Profits of eight chartered banks rise 23.2 per cent to $229,956,000". This was the increase compared with the year 1971. Yet the banks are being permitted-that is too gentle a phrase, Mr. Speaker-the banks are being encouraged to increase their interest rates, supposedly so as to slow down the inflationary process. In effect, however, the banks will make larger and larger profits in consequence of these higher interest rates and the cost will be passed on to the consumer.
One can go through the Globe and Mail almost every day and find company reports. We find on May 1, 1973, a report which indicates that Canada Packers showed a profit increase to over $14 million from $10 million a year before. That is an increase of some 40 per cent. According to the Globe and Mail on April 19, 1973, Texaco had a profit increase of 15.2 per cent in the first quarter of this year. According to the Globe and Mail of April 19, for the first three months of 1973 INCO estimated profits to be $36 million, up from $18,689,000. Ford Motor Company has already announced that next year's cars will be up $300 or $400 in price to the consumer. Ford Motor Company reports profits for the first three months of 1973 of $37.6 million, compared with $23.2 million a year earlier, yet they have made it very plain that their prices will go up next year.
In spite of these very sharp increases in corporate profits we are being asked, in all seriousness, by the minister to approve a reduction in corporate taxes from the present 49 per cent to 40 per cent. I suggest to the Minister of Finance that there is no evidence that corporations need this reduction in taxes in order to continue making more than adequate profits, and there is no evidence that a decrease in the corporate tax rate will persuade them to invest large sums of money in new plants and equipment, as the minister expects them to.
Companies invest in new capital equipment and machinery if they expect their sales will be of such a nature that they will not be able to fill their orders with the plant and equipment they have. I suggest to the minister that not only are their profits at a level where they do not need this tax cut, but if the minister really wants corporations to invest large amounts of capital in modernizing, improving and increasing their plant capacity the best thing he could do would be to reduce personal income taxes. The minister should not proceed with this decrease in the rate of corporate taxes; he should reduce substantially personal income taxes, particularly for people in low and middle income brackets. I am thinking of the 22 per cent who are still living in poverty and the very large percentage of people whose earnings are in the neighbourhood of $6,000 to $10,000 a year. With prices as they are today, these people are not able to do anything, or very little, in the way of saving; they have to spend every cent they make in order just to live. If the minister wants to persuade the corporations in this country to increase their productive capacity, he should show them a sharply increased market for the products they produce; and the way to create that sharply increased market is to cut
July 3, 1973

drastically the income taxes of people in the lower income brackets.
Every study which has been carried out has indicated that Canadians are great savers, they put a substantial percentage of their incomes into insurance policies, bonds, and so on. But that is true only of the people in the upper income bracket, people earning $15,000 a year and up. These are the people who are already saving, if anyone is saving, and these are the people who will benefit from the proposed tax cuts. These are precisely the people who do not need any more assistance from the government. These are the people who have already done very well as a result of tax policies of this and former governments in the past quarter of a century.
It is my suggestion that the minister should turn away from more tax concessions for those in the upper income bracket. He ought to go a step further than his budget in which he brought forward an income tax reduction of 5 per cent with a minimum tax cut of $100 for every person who pays income tax. He ought to increase substantially that tax cut, as this would benefit the people who need it most, instead of providing the benefit to those who are already doing very well. This would accomplish what the minister seemed to think necessary when he first proposed this corporate tax cut: his objective was to get the corporations of this country to improve their productive capacity.
Instead of this corporate tax cut, we ought to be discussing a further cut in personal income taxes, particularly for people in the lower brackets. For these reasons it is my intention to vote against this bill. I would urge the minister to give consideration to reversing this proposal and to make tax cuts where they ought to be made, in the income taxes of those in the lower income brackets.


Lorne Edmund Nystrom: Mr. Chairman, I should like to say a few words at committee of the whole stage of this bill. As we have already indicated many times, the government should not go ahead with this bill. One of the things that concerns me very greatly when I look at the proposals before us, and one of the things I hope the minister will comment on when he speaks later, is the way corporations may be affected by some of the proposals in the United States, announced by President Nixon, under the runaway plant legislation and other legislation now being discussed in that country. I should also like to hear some reaction from the Conservative Party regarding the Nixon proposals. The manufacturing sector of this country is 58 per cent foreign-owned or controlled and basically United States corporations control it.
As I understand the Nixon proposals, a lot of the extra benefits in the way of profits that might be reaped by corporations could indeed end up in the treasury of the United States. This is something members of this House should take very seriously. If we cut taxes for corporations operating in this country and find that the extra benefits could go to the United States, there is hardly any purpose in cutting taxes here.
The number one proposal that concerns me is Mr. Nixon's legislation dealing with runaway plants. My understanding is that if 25 per cent or more of the products of United States businesses or multinational corporations operating in this country go back to the United States,
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such a company can qualify for runaway plant status in the U.S. Many of us know that numerous American multinational corporations sell 25 per cent or more of their products in the United States. They would qualify under the runaway plant legislation if 25 per cent of the products went to the United States and if they made new investment in this country of 20 per cent or more in terms of expanding their capacity or adding to their plant.
As I understand it, the American legislation will apply if the tax rate in a foreign country-the foreign country in this case being Canada-is less than 80 per cent of the rate in the United Stares. I suggest that after this tax bill becomes law, our tax rate in effect will be less than 80 per cent of the tax rate in the United States. The current corporate tax rate in that country is 48 per cent, and 80 per cent of that would be 38.4 per cent, which is the threshold rate. But if you look at the effective rate you find it is lower than that if the manufacturing companies take advantage of the fast write-offs, the 50 per cent write-offs for a two-year period. If you add all this together you find that many of the manufacturing companies in this country can indeed come under the scope or umbrella of the runaway plant legislation proposed by President Nixon, and would then be taxed in the United States to make up for the taxation that is lost in this country. If that is the case-I think the minister should try to clarify this when he takes part in the debate-then this bill is a farce and a scandalous piece of legislation. Indeed, for that reason alone it should not become law in this country.
I understand, also, that another possibility under the American taxation legislation proposed is that if a company operating in a foreign country is able to take advantage of what they believe to be too many tax loopholes or tax holidays, that company may indeed have to pay at the American rate of tax as if it were operating in the United States. Of course, at present they are taxed only on the profits that are remitted to the parent company in the U.S. But if the proposals of the President go through, as I understand them, and if the tax loopholes are judged to be too generous, the company may have to pay taxes in the United States according to the going rate in that country.
I think this is a very important consideration in our study of the bill before us, and it is something upon which all members should reflect. I think that the Minister of Finance owes it to us and to the country to make a statement regarding the proposed tax changes in the United States and how they will affect corporate activities in this country, and indeed corporate taxation of U.S. companies operating in Canada.
I know that some members of the Conservative Party are concerned about this legislation and have expressed doubts and scepticism about it, but I would like to see them retionalize their support of this bill based upon the proposals of the United States. Many of us may think that perhaps Mr. Shultz or Mr. Nixon will not go ahead with these proposals and that maybe they will take Canada into account. We have often held that glimmer of hope about the United States, but in fact quite often they do not consider us in their total scheme of things. A recent example in the embargo which they imposed upon soybeans, which greatly affects farmers in many parts of the

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country, particularly poultry farmers. What I am suggesting is that the United States may show the same lack of courtesy or generosity toward us if they introduce their proposed runaway plant legislation.
Another point that I want to make, and on which I believe the minister owes the country an explanation, is this. If corporations and manufacturing companies in this country do get greater tax incentives, I wonder what they will do with the money, how they will spend the money that they will gain from the greater tax cuts and tax benefits. I am told by officials of the Department of Industry, Trade and Commerce and of Statistics Canada that if a corporation increases its profitability, it does not necessarily invest more in capital expenditures in this country or anywhere else, no matter which country may be involved.
In 1970, for example, corporate profits of the manufacturing sector in this country were not that high. We found that $3,223 billion was invested in capital expenditures for expansion of the manufacturing sector in this country. In 1971, when corporate profits went up, the investment in new capital expenditures actually declined to $2,994 billion in Canada. In 1972, according to the Department of Industry, Trade and Commerce, profits again went up, but new investment by manufacturing companies again went down, this time to $2,956 billion. So I think the Minister of Finance owes it to the country to guarantee us that the extra benefits and profits of corporations resulting from this tax cut will be reinvesting in this country, in expanding their facilities and creating more jobs, because I and members of my party have serious doubts that one will actually follow the other.
There are one or two more points that I want to make. I would like to see the Conservative Party clarify the position that they are taking on this bill. I think they are being somewhat hypocritical in many ways. I noted, for example, that just last Wednesday or Thursday in the House when I asked the hon. member for Dauphin, in reference to the corporate tax bill, whether he was satisfied with the fact that the benefits would apply only to the manufacturing companies, he said as recorded at page 5137 of Hansard.
In answer to that, Mr. Chairman, I believe in being fair: If we have it for one, we should have it across the board.
In other words, the hon. member for Dauphin said that if we apply tax cuts to manufacturing corporations in this country, we should apply them to the resource industry, the mining companies and all other industries operating here. If that is the position of the Conservative Party we have a right to know more about it. The oil companies are enjoying their most profitable year in the history of this country, and if we are to give them a corporate tax cut I think the people of Canada will be very interested in knowing more about the policy of the Conservative party.
Another point that I think should be made in this debate is that this cut for the manufacturing industry will help some areas of the country much more than others. I do not want to sound like a person who is concerned more about the prairie region or some other region, but I think that is a fact. Just consider where the manufacturing industries are concentrated in Canada. You will find them mostly in the golden horseshoe of southern Ontario, in Montreal and

perhaps in the city of Vancouver, but particularly in southern Ontario. If the manufacturing industry is to benefit from this bill, if it is to expand its facilities and create more jobs, where will they be creating more jobs and investing? It will not be in nothern Ontario, the Prairies, the Maritimes or indeed in much of Quebec or northern Canada.
I think that is another consideration that must be taken into account when parliament judges the bill before us and decides whether corporate taxes should be cut for the manufacturing sector, because this bill, along with much of the legislation presented to us, is a hodge-podge, and ad hoc approach to the economy of this country. It will not solve very much because it is a piecemeal approach. Instead, Mr. Chairman, what parliament and the government should be doing is developing an industrial policy that will apply to the entire country, that will benefit people in all parts of the country, not just those living in the golden horseshoe area and other such areas where there is a lot of secondary industry. This bill alone will not help the people of the constituency of Yorkton-Melville, or of the Nickel Belt riding, because we do not have large manufacturing bases in those parts of the country. This governmental policy, like so many others, will favour the have regions rather than the have-not regions. That is going about the solving of our economic problems in the wrong way.
I would argue with the Minister of Finance that we could more effectively build up the economy of the country if we spent the $500 million that the corporate tax cuts will cost the taxpayers on equalizing freight rates. That would do more to strengthen the Canadian economy. If we were to put $500 million into equalizing freight rates for the Prairies, the Maritimes and northern Canada we would be enticing a great deal more development to those parts of the country and we would be providing jobs in a much greater and real sense than we will be doing through the bill now before us. All too often I have heard small businessmen, farmers and ordinary citizens in my constituency say they would like to start a small business or manufacture some small items in that area, but they cannot undertake this because of the freight rate structure that discriminates against processed goods being moved from the Prairies to the markets in central Canada.
We would cure one of the economic ills of the country if we tackled this structural problem in our economy This is something we should do, instead of outbidding the Americans, or trying to outsmart the Americans because of the DISC program or whatever other programs they may introduce to affect corporate activity in Canada. We must stop playing those games. We must tackle some of the real problems in the economy. Some time today I would like the Minister of Finance to give us his latest information on the proposed Nixon tax changes in the United States, particularly on the runaway plant proposals, so we can be sure that if we lower corporate taxes in Canada to 40 per cent, and indeed even lower than that, many Canadian corporations will not be caught by the runaway tax legislation in the United States and end up paying taxes to the U.S. treasury that they could be paying to the Canadian treasury. If that happened, this bill would be a complete
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farce. It would be an outrageous thing to perpetrate on the people of Canada.
The other Nixon tax proposals could be just as bad if corporations were enjoying too great a tax holiday or were receiving too big a hand-out in a foreign country. In that way the purpose and effect of this bill would be nullified. The Minister of Finance must answer some of these questions. If he does not answer them adequately, I do not see how the Conservative Party in all honesty and integrity could consider supporting this bill.


David Réal Caouette: Today, Mr. Chairman, we have had a very good example of the way the New Democratic Party always strongly criticizes private enterprise, corporations and those who, under Bill C-192, will be granted a 9 per cent tax reduction.
The member who has just spoken said for example "What will they do with the money"? Listening to them, one might believe that corporations, millionaires, in other words those who have money pile up that money in a bedroom corner and never touch it. What happens is exactly the opposite. The benefits are actually used to invest into other economic fields and therefore create other jobs.
However, Mr. Chairman, one should always remember that under present circumstances the use of technology and, new inventions helps to increase considerably the Canadian output without creating a single job. With fewer jobs n Canada, our current output is probably 30 to 40 per cent higher than previously.
Our problem is not related to the output but to the distribution of the existing output. The hon. member for Saskatoon-Biggar (Mr. Gleave) said that Domtar is closing in Regina. Obviously the employees who are on strike will lose their jobs and will no longer pay any income tax in Regina, nor will those who live in Saskatoon.
Mr. Chairman, it is fair to say that if people do not work and cannot afford to purchase anything, they will pay less tax. That is why I have always objected to useless strikes that create more problems than solutions and, in certain places, they accuse me of anti-unionism. This is not true. But we need a union serving the employees and not employees serving union leaders, as we now have. And among these union leaders, we can see some members of the New Democratic party who distribute boxing gloves instead of conciliation-


Robert Jardine McCleave: Order, please. I regret to interrupt the hon. member, but the part of clause 1 that we have agreed to consider this afternoon deals with proposed corporate tax reductions for the manufacturing and processing areas of the economy.


David Réal Caouette: But, Mr. Chairman, I believe I can relate all I am saying to those clauses of Bill C-192. When I refer, for instance, to the closing of a Domtar plant, I mean a manufacturing and processing plant also and an hon. member from the NDP referred to it a while ago. As a matter of fact, I do not think you
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interrupted him because he was speaking about Domtar and what I wanted to tell the hon. member in reply is that if there is a shut-down at Domtar why don't the members of the NDP set up plants like Domtar? Instead of always criticizing industries, corporations, let them start some plants and hire workers. Nothing prevents them from doing it. It is much easier to destroy what others have established then to build.
Mr. Chairman, this afternoon I wish to expose the unfair attacks against personal initiative and private enterprise. All that pertains to private enterprise must be demolished, according to those people, and what is state enterprise should be accepted. By the way I say that even the New Democratic government that was just elected in Manitoba, was ashamed of the name New Democratic Party. Premier Schryer said: I am not a socialist, I am a social democrat. It is absolutely true that he said that. He also said: I am not against private enterprise. I am for it.
Here in this House, we hear those people talk against private enterprise, against industries, against corporations to which, according to them, no assistance should be given. As a matter of fact, they say: Instead of granting corporations a 9 per cent tax cut, why not reduce freight rates, why not use elsewhere the $500 million that such a cut would release in order to reduce personal income tax? We are in favour of such a proposal but we also are in favour of promoting personal initiative and private enterprise, two elements that enable a country to develop normally.
Mr. Chairman, I said a while ago that corporation leaders do not pile up their millions in bedroom corners but invest them. They create new enterprises, build, enlarge their plants and increase their production. Why? Their objective is to meet consumer's needs. But if there is something wrong at the other end, we should find a solution but without destroying others.
Those socialists look like a guy who sees a castle on a mountain while he is living in a hut in the plains. Because he is displeased with his hut, he says: "Let's destroy the castle." And having destroyed the castle, he finds himself still living in the hut. But what is left of the castle? Absolutely nothing. That is exactly what all socialist countries in Europe did.
Mr. Chairman, I do not think that the 9 per cent decrease will create much employment in the country and I said so a few moments ago. With the use of new techniques it is evident that full employment is only a fraud, a utopia in Canada. What we need is a distribution system to ensure effective distribution of resources which belong to us, to the consumer. Instead of speaking of production only, let us try to increase the purchasing power of consumers by allowing a tax reduction, as we do for corporations, by granting a national dividend to increase purchasing power, which will result in boosting production and creating maximum employment in which I believe.
Full employment is a utopia unless we establish a dictatorship like in the USSR where four or five men are employed to do the work of one and where the five are paid as if there was only one. That is where one can see high wages: $55 or $60 a month. In Czechoslovakia, in Italy, in France, workers get starvation wages; in Canada, where we enjoy a standard of living that is relatively higher than anywhere else in the world, after the United
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States, people are still not satisfied. They would like to abolish our constructive potential. Private business should also disappear to satisfy a political party, among others.
Mr. Chairman, the hon. member said earlier: What will they do with the money? When they get a wage increase, what do they do with the money? The same thing applies, but on a smaller scale. In the business area, why not take the same action as has just been taken in Temiscaming South where the CIP closed down one year ago? Through the support of the Department of Regional Economic Expansion, the Department of Finance and the province of Quebec, former employees of the CIP share in the management of the new business which will cost approximately $12 or $13 million. The government contributes $5 million, plus $5,000 for each job created-there will be 400 or 450 jobs-and workers themselves contribute over $1 million from their future income. This is what we call share-taking and the establishment of a business which I am sure will be profitable. Why is the same thing not advocated within the New Democratic party? Private business will be respected and personal initiative is encouraged to contribute, to take part to the re-opening of the plant in Temiscaming South.
Mr. Chairman, it is very fine to be ever critical of free enterprise and personal initiative, to say that all corporations are thieves, that they gather money to hide it, but this is not true. Those funds, those profits are used to further expand the corporations. No matter whether it creates new jobs or not, there is still economic expansion. As I said earlier, this money is invested in the same sector or in other sectors and contributes to a large extent to the development of the natural resources of Canada.
So, if the hon. member does not know on what the Progressive Conservative members rely to take position on this bill, I am sure that he will understand the full details we give and why we support this bill, which will not help at all create new jobs but will nevertheless spur the economic expansion of Canada.


John R. Rodriguez: Mr. Chairman, the main purpose of this bill is to stimulate economic growth and, obviously, to result in jobs for Canadians. We know that the largesse proposed in this bill will not go to those who show initiative and entrepreneurship; we know that it will accrue to the large, multinational corporations in manufacturing and processing. Where I come from, we are well acquainted with one of those multinational corporations. I want to consider that particular corporation, what its behaviour was in the past and what it will be in the future in terms of what is proposed in this bill. The company I am thinking of is the International Nickel Company of Canada which would qualify under this bill for the fast write-off of equipment, and tax cuts.
For example, Mr. Chairman, International Nickel Company's clear profit was $94,200,000, yet they paid no taxes and the government gave them a tax credit of $2,800,000. In the period 1966 to 1971 INCO's net earnings were up about $581 million. They paid income tax at an effective rate of 17.2 per cent. In fact, Inco has managed, with the help of the government, to accumulate deferred taxes of $238,400,000. If we are to call a spade a spade, these deferred income taxes are in reality an interest-free loan from

Canadian taxpayers. If the money is individually collected, it represents a sizeable amount. The ordinary taxpayer, on the other hand, has no choice; he must pay the full rate of income tax every year.
It is amazing to hear the hon. member for Temiscamingue talk about welfare and entrepreneurship. I suggest to you, Mr. Chairman, the "welfareism" is in the side of the corporations which are receiving hand-outs from the taxpayers of this country, while the entrepreneurship is experienced by every Canadian who works very hard for his buck and has paid every bit of tax assessed on his income. Of course, if the individual does not pay his tax on time there is a penalty of 5 per cent on the amount he owes. Another example of what I mean is the UIC, which has collected more than it ought to have collected and a person has to wait until the end of the fiscal year before claiming a refund. And so it goes on.
The minister's rationalization in applying this program to companies like Inco is that it is necessary for the creation of jobs. That is where the incongruity occurs. If we look at Inco and try to apply the minister's logic we may well ask, where are the jobs? For instance, I find that in July, 1971, the number of hourly-rated employees of International Nickel was 18,224. By March, 1973, that number had decreased to 13,588. In addition, roughly 2,000 salaried personnel lost their jobs in the process. Thus, in less than two years 6,000 jobs have disappeared from that company alone. Despite all the tax concessions, deferred taxes, fast write-offs, depletion allowances on new mines, and so on, we find that the work force in my area has gone down by some 6,000 in less than two years.
No doubt the minister will counter my argument by suggesting that the tax cuts are needed for economic stimulation. Let us look at the kind of stimulation International Nickel needs. The president of International Nickel said recently when speaking to a group of metallurgists in New York:
We expect to produce more finished nickel than in 1971, even though we will mine and process some 30 per cent less ore.
It is obvious what the company is doing. In order to make greater profits the company has to high-grade; in other words, by using high grading techniques it is able to take out less ore but produce more nickel. Mr. Grubb-I think he is well named-the president of the company, further expected that there would be an annual wage and salary saving of $120 million. So when corporations like that feel the squeeze and want to increase profits, they may resort to high grading techniques, and if cutbacks in any form are needed they cut back on the number of jobs. They let attrition take its course and do not rehire workers to replace those who have retired.
Is the minister satisfied with that kind of performance? The president of the company is not satisfied with the company's performance in the first quarter of 1973, although earnings rose by about 18 million over those of one year ago, to $36 million. Although the president is not satisfied, he said:
We have the most efficient and flexible nickel production complex in the world. The past two years have served as a good test bed for this assertion. We think our earnings performance, though
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far from satisfactory, has proved that we can operate profitably at well below capacity.
Surely the company can operate below capacity and still make profits because it is mining high grade ore and processing the highest quality of ores. Surely that is the rationale presently behind the company's operation.
My other point, Mr. Chairman, is that the province of Ontario tried this sort of thing. It hoped that employers and companies would upgrade their machinery and increase employment. It introduced such legislation because the federal government was proposing the fast write-off legislation. All that has happened, if one takes as an example International Nickel, is that companies like that have used fast write-offs in order to improve their machinery. They have further automated their operation, resulting in employment cutbacks. Actually, the machinery used for the new nickel refinery at Copper Cliff was not even bought in Canada; it was purchased in the United States, where the jobs are. I suppose the provincial government, in making grants available to industry, hoped that the number of jobs would increase. Instead, companies introduced more technological innovations and bought more machinery and the new jobs did not materialize.
Speaking about the $56 million that the provincial government of Ontario had made available in this regard, John White, the minister then responsible, said that the expenditure of that $56 million by Ontario created not one identifiable job and may have subsequently eliminated certain programs. What happens is obvious, Mr. Chairman. The parent of the subsidiary purchases machinery in the United States, or in Sweden or in the country in which the parent company is located. It does so on behalf of its subsidiary.
What ought to be the thrust of any kind of tax system? It seems to me that a tax system ought to try to equalize the burden of those who are paying taxes in this country. For the past 12 years I have listened to many comments from the provincial government as well as from the federal government. When I speak of the provincial government I am speaking of the government of Ontario which is run by the Tories. The federal government at present is run by the Liberals. We know what they have said and how they have claimed that the tax structure has been adjusted. They claim that they have equalized the tax burden.
Let me refer to the Swadron report. It was put together by a fellow named Byron Swadron who was the head of a committee which sat from 1951 to 1969. During the 18 years or so during which the committee sat, and during which period we were told there would be tax changes and that the tax burden would be equalized, some interesting facts emerged. For instance, it is interesting to note that in 1951 the bottom 20 per cent of our population earned 6.1 of the income in Canada. Eighteen years later-after 18 years of so-called adjustment by provincial and federal governments-we find that the bottom 20 per cent earned 6.9 per cent of the total income in Canada, increasing their portion by .8 per cent. The next 20 per cent of the population earned, in 1951, 12.9 per cent of the income. Eighteen years later, in 1969, that part of the working population earned 13.3 per cent of the income.
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The converse holds true for the top 20 per cent, which earned 40 per cent of the total income in Canada in 1951. In 1969 their share had been reduced to 38 per cent. We can see the degree of adjustment that has taken place. It is apparent that the adjustment has benefited most the top 20 per cent of the working people of Canada and we have done nothing to redistribute wealth for the benefit of our working poor. It is also interesting to note that the bottom 40 per cent of the work force in this country worked between 40 and 48 hours per week. The report also reveals that the wealthy failed to disclose 50 per cent of their income. Those are interesting facts.
The federal government has spoken about reforming the tax system. It therefore seems to me that redistribution of incomes should be paramount. This bill, as constituted at present, does nothing to redistribute wealthy. It will only serve to further swell the financial veins of corporations in Canada. I suggest that if we are concerned about the tax system in Canada we ought to be cognizant of the fact that wealth has to be redistributed, and the tax system is the best way of doing it. It seems to me, and I am certainly no economist, that if you put more money into the hands of the working poor of this country, you would stimulate the economy. I am sure the corporations would garner their profits from resulting increased sales to the people of this country. I suggest that we should bring in an amendment to rename the bill the "corporate welfare benefit program", because indeed it is a welfare program and it is corporate in nature.
I urge members of the committee to vote against the bill. I know that several Conservative members who call themselves progressive are concerned that this bill will do nothing for the small businessman. I suggest that Conservative members join us in defeating this bill. They have stated on many occasions that they would like an election; they are ready to go to the polls. I and my party are also prepared to go to the polls on this issue. This is an issue we can explain to the people of Canada. It is one they will understand. They certainly know that after deductions they have barely enough left to buy a box of kleenex. I ask hon. members to vote against this bill.


John Edward Broadbent: Mr. Chairman, I had not planned to contribute to the debate this afternoon. However, after considering some of the arguments made in support of this economically and socially irresponsible measure of the government, I thought it would be useful to say a few words.
The case for a corporate tax reduction rests exclusively on an argument that says by making such a reduction we can guarantee an increase in employment. This is quite apart from the question of equity or sharing the tax burden between individuals and the corporate sector of Canada. That is another argument which would not at all justify a reduction in taxes for the corporate sector.
The real point has to be made. It is said that by cutting back 9 per cent of the corporate tax, somehow we are going to create more employment for the people of Canada. There is not one authority or one economist, in Canada or outside who would be able to present to his professional colleagues in economics an argument that could draw a

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causal connection between this kind of tax reduction and job creation. Why not? The answer is simple. In our kind of economy, if you have a potential for expanding, selling goods and making a profit, you are going to move in that direction. You are going to expand in any case. If you are offered a chance by this government to reap greater profits, with no assurance that you are going to sell your goods, why would you expand sell or hire more employees just to have your goods pile up in storage and go unsold? You would not do that: it is palpably obvious that you would not do it. You would produce exactly the way you intended to produce, quite apart from the tax reduction, and reap the great benefit of tax gain provided by this measure. You would reap, in a year when profits in the corporate sector are at almost unprecedented levels, even higher profits. The argument in support of a corporate tax reduction- which has to be job creation-has not and cannot be made.
Any reason for supporting this measure is lacking. Any member of parliament who wants to consider the question of taxation, the fairness of the tax burden and the fact that 20 per cent of our population lives at or below the poverty line, a very large percentage of who pay taxes, must oppose this bill. If it cannot be justified in terms of job creation, it certainly cannot be justified in terms of sharing the tax burden among the various sectors of the Canadian economy.
I know I speak in vain when I urge the members of the Conservative Party to reconsider this bill and oppose the government. I know there is nothing better than this bill to reveal their corporate souls. If they are interested in having an election, nothing could be better in terms of squarely facing the issue of what kind of society we want to develop than the issue of the tax burden in this country. If they would support us on this and oppose the government, they would get a lot of support from the ordinary people of Canada, if not a high degree of exuberance on Bay Street in Toronto.
The government is abandoning the progressive methods it revealed within the first three months of this parliament by bringing in increases in pensions, reductions in taxes for lower income people and improved housing legislation. It is abandoning that initial, positive, progressive thrust by bringing in these corporate tax proposals. I hope it will not continue in this direction. Unless it continues to rely, literally and politically, on the people to my right for support, it will not continue in office with this type of legislation.


Robert Jardine McCleave: Order, please. Does this complete the discussion on the first block under clause 1, namely, pages 1 and 2 down to line 32 in the English version and line 38 in the French version?


Some hon. Members:: Agreed.


Robert Jardine McCleave: The committee will proceed to block two which commences with subparagraph (2) at the bottom of page 2 and concludes at line 34 on page 3 of the English version and line 33 of the French version. I will call the carriage of the clause at the end of considering clause 1. If there are any amendments, we will deal with them in the order they are presented. I think that was the

agreement. The committee will then proceed to block three, which commences with subparagraph (3) and continues to the bottom of page 4.
The discussion in committee is now on this particular block which was agreed to earlier in our proceedings.


Stanley Howard Knowles: Have you missed block two?


Marcel Joseph Aimé Lambert: Mr. Chairman, I apologize; I was adjusting my own timetable in consequence of other changes which were being made. There is nothing very much to be said about block two.


Some hon. Members:: Block two?


Marcel Joseph Aimé Lambert: I had hoped we would get an explanation from the minister as to the precise proportions within block two, but I suppose the committee decided it would not be necessary.
In connection with the third portion of this bill under discussion, starting on line 34 on page 3, I want to repeat some of the things I said on second reading and to point out to hon. members as well as to the public generally that the measure is much more restricted in its application than certain people have been led to believe. It seems to me that everyone who belonged to the Chamber of Commerce or to the Canadian Manufacturers' Association thought they would be the recipients of the goodies dispensed by the government on May 8, 1972. During the whole of the election campaign the Minister of Finance was very careful not to disclose what would be the guidelines, or limitations imposed on this so-called 10 per cent cut in corporate tax for the manufacturing and processing industry. Everybody thought: Well, I am in the manufacturing or processing industry and therefore the taxes of my company will be decreased to 40 per cent. But that is not the case.
Let us see the purpose behind the provision in the budget of May 8, 1972. Hon. members may recall the press release of December 28, 1972, in which the minister oulined in communique form the income tax regulations as they applied to manufactured and processed products. After any manufacturer had read that, he would know that the Minister of Finance was not Santa Claus. Up until that time it appears the CMA executive and others had felt that the Minister of Finance was a generous Santa Claus. But on December 28 when he published his release they discovered that Santa Claus was not the hon. John Turner.
In any event, what was the purpose of the minister in introducing this provision? We know that in December of 1971 the United States had enacted tax legislation establishing DISC. It was to be used as a vehicle to obtain more favourable tax treatment of profits from the export of goods and services. It is estimated that the federal tax rate applicable to the export of goods and services will now be around 36 per cent, with a minimum level of about 25 per cent on profits which United States companies derive from exports.
Canadian authorities, Canadian business and, for some reason, many of the United States subsidiaries became very concerned about what was happening in the United
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States as a result of DISC. First, they felt there would be increased competition from United States exports in the Canadian domestic market. There was a possibility that with the tax deferral which, in effect, is a tax cut as far as these United States subsidiaries are concerned, production would tend to shift away from subsidiaries and the Canadian market would increasingly be served from the United States. That is a possibility.
The second point is this: if United States exports were cheaper in the Canadian market, they would be cheaper to the same extent in the market of a third country and correspondingly more competitive against Canadian commodities going to that third market. For this reason there might be a shift to United States manufacturing facilities. Then there was supposed to be an incentive to put new investment into the United States rather than into Canada, and this would diminish the content of capital investment in Canadian industry.
However, it is remarkable that the United States, having given on the one hand, would then propose to take away with the other. We now know that under the so-called Shultz proposal the United States treasury has put forward new tax measures which would impose tax currently on earnings of controlled foreign subsidiaries of U.S. corporations if the subsidiary were to benefit from low tax rates or other tax-related advantages however effected. In other words, the United States now proposes to retaliate not only against firms affected by DISC but against all United States subsidiaries in Canada which are subject to a new tax rate. Thus, the minister, in seeking to benefit a certain limited section of Canadian industry, now attracts a countermeasure which would more widely affect the operations of United States subsidiaries in Canada, not only those dealing with commodities but those dealing in services and know-how.
This is the difficulty one has to envisage in light of the minister's statement that this particular feature of his 1972 budget was to counteract DISC. Would it not have been better-I ask this question rhetorically-to look at the whole of the Canadian corporate sector and, since the economy required stimulation at the time, to have effected a tax cut across the board? After all, not all the manufacturing and processing industries in Canada are labourintensive. On the other hand, we know that many corporations in the service industry, such as construction, are highly labour-intensive. A tax cut to them would have placed them on an equal competitive footing with foreign interests. After all, in the construction field, for instance, a large United States constructor, particularly one who starts by designing the plant, does not compete with Canadian firms who could do the same sort of work.
We have many areas in which consultative services are provided by foreign firms who compete against Canadian firms which are labour-intensive to the same degree as are manufacturing and processing firms. There are many sectors of manufacturing and processing that are highly automated, whether they be at the secondary industry level or otherwise. I have personally never believed this so-called myth put forward by the leader of the NDP that Canada's employment problems could be solved by a much greater concentration on secondary industry.
Income Tax Act (No. 2)
Certainly you can improve the employment picture by employing people in all segments of the Canadian economy. Roughly 60 per cent of economic activity in Canada is concentrated in the production of services. If there is to be stimulation and a proper discharge of the responsibility of the government of Canada in respect of the country's economy, providing an adequate climate for the development of the service industry, I would think that the minister should have done something for the service industry.
This is all very nice for manufacturing and processing, but what are some of the factors that will have an effect on manufacturing and processing? I suggest there will be a vast increase in the amount of paperwork involved. Perhaps the minister does not believe a manufacturing firm will be involved in a great deal more paperwork when attempting to disentangle its profits from manufacturing and processing as distinct from its other sources of income. This may be disruptive. I am thinking of the bigger concerns, not the small manufacturing or processing firms. This will require a very costly type of expenditure in sorting out the different profits.
The paperwork carried on in so far as the provision of goods and services to the public at the lowest possible cost is concerned is an overhead and must be passed on to the customer. Admittedly, since it is part of business expense the Government of Canada is going to pay at least 50 per cent, so it seems to me that to some degree this highly selective measure will be self-defeating.
We know, too, that larger corporations with larger administrative costs will likely benefit less proportionately from this measure than the smaller firms, and this is where I suggest the third weakness in this measure is to be found. I have in mind incentive. Incentive is restricted to the profit from the production of goods and will not directly motivate the expansion of activity related to the sale of services and goods, the sale of know-how. So that, again, is a negative feature and the measure becomes less attractive.
There are no doubt benefits which will go to a very select number of people, but this will not be the bonanza some people thought it would. The Minister of Finance was not a Santa Claus when he spoke on May 8, 1972, although many people in Canada thought he was. I suppose they may have come to the conclusion that if the minister was in a frame of mind to accord this type of tax cut to one segment of the Canadian economy, sufficient pressure might be brought to bear on the minister in order that possibly next year, when he was in a minority position, he might hand out another slice of the economy. People thought he was a good fellow. They realize that this administration has performed many cartwheels in the last few months and they felt that perhaps another segment of the Canadian economy could benefit in the same way.
Having said that, I should like to turn to the press release of December 28, drawing attention to it in a general way as I know some of my colleagues will speak at greater length about the complexity of determining those profits. Let us consider what areas are not covered by this legislation. This matter was first raised in a question by one of my colleagues, the hon. member for Peel South.

July 3, 1973
Harbour Commissions Act
When discussing this matter he said that the measure would eliminate construction. But what about the manufacturing of asphalt: will it be covered? There are many other aspects of construction that are left out. I suppose the crushing of gravel would be left out because gravel would be sold as a commodity which is extracted from a mineral source. What about those corporations that exist in the Atlantic provinces and on the Pacific coast which process and distribute fish?


Robert Jardine McCleave: Order, please. It being five o'clock p.m., it is my duty to leave the chair in order that the House might proceed to the consideration of private members' business.
Progress reported.



PROCEEDINGS ON ADJOURNMENT MOTION


The Acting Speaker (Mr. Boulanger):: It is my duty, pursuant to Standing Order 40, to inform the House that the questions to be raised at the time of adjournment are as follows: the hon. member for Hillsborough (Mr. Mac-quarrie)-Transport-Alleged planned freight rate increase in Atlantic provinces by Canadian National Railways-Request that minister take steps to prevent; the hon. member for Nickel Belt (Mr. Rodriguez)-Regional economic expansion-Northern Ontario-Government action following discussions with provincial ministers and officials; the hon. member for Grenville-Carleton (Mr. Baker)-Agriculture-Eastern Ontario-Request for aid to farmers because wet conditions prohibit planting of crops.



PRIVATE MEMBERS' PUBLIC BILLS


Mr. T. C. Douglas (Nanaimo-Cowichan-The Islands) moved:: That Bill C-2I, to amend the Harbour Commissions Act, (Nanaimo Harbour Commission), as reported (without amendment) from the Standing Committee on Transport and Communications be concurred in.


[Stage Direction]
Motion agreed to.
Thomas Clement (Tommy) Douglas: that the bill be read the third time and do pass.

He said: Mr. Speaker, as hon. members know, the purpose of this bill is to make it mandatory for the Nanaimo Harbour Commission to have five members, three of whom would be appointed by the governor in council, one by the city of Nanaimo and one by the regional district board. This bill had second reading and was referred to the Standing Committee on Transport and Communications. When the bill appeared before the committee, officials of the department were present and pointed out, quite properly, that the ports and harbours committee had been established to look into the whole question of harbour commissions across Canada. I appreciate the fact that this committee is studying the question of harbours, but I urged the standing committee to pass this bill on two counts: first, that the ports and harbours committee will likely not report for some time and then it will take some time to pass the legislation dealing with harbours generally and, second, and more compelling, that there is an immediate situation in Nanaimo.
The harbour in Nanaimo, because of its strategic location and because of the deep water facilities I think is destined to play the part of the major port of Vancouver Island and the Department of Transport has had plans for the enlargement of port facilities. The Nanaimo Harbour Commission has been working on such plans. A special task force of the Department of Transport is studying the matter of location and it is expected that they will report this fall. It is therefore important, if the Nanaimo harbour facilities are to be enlarged, that the city of Nanaimo and the surrounding municipalities which make up the regional district have an opportunity to participate in the planning so that there can be maximum co-operation and co-ordination.
I am very glad to report that the Standing Committee on Transport and Communications shared that view and recommended to the House that this bill be passed. I want to thank my colleagues of all parties on that committee for the support which they gave. I hope the House will see fit to pass this bill so that in the period which lies immediately ahead-a period of expansion for the Nanaimo harbour-we will have the fullest possible co-operation by all those who are interested in this development.


Mr. Joseph-Philippe Guay (Parliamentary Secretary to Minister of Transport):: Mr. Speaker, I would like to say at the outset that I have taken good note of the element of time and the work that the hon. member for Nanaimo-Cowichan-The Islands (Mr. Douglas) has put into this particular bill. The representation that he made at the committee level, where he appeared also as a witness, and the other representations he has made no doubt are the reason the government is prepared to accept this bill.
I should like to say that in proposing to increase the number of members on the Nanaimo Harbour Commission from three to five, the hon. member is not proposing a major change in the act. It is in fact an addition that may bring about better representation of the various sectors of the public interested in the present as well as in future operations of the port.
What we are concerned about, however, is that opening the act at this time and allowing such a change in it may prompt others to bring in similar requests that may come
July 3, 1973

from other harbour commissions which, quite properly, would like also to increase their membership. When in 1964 the Harbours Commissions Act was passed, one of the main objectives was to bring about some uniformity not only in the operation, maintenance and administration of harbour commissions but also in their representation. It seems that in agreeing to this change today we will be opening the door to other commissions to request the same thing. In our opinion, it would be unfortunate to allow a change for one board when there might be a case for similar readjustment in the number of commissioners on all harbour commissions.
Another reason why such a change, although good in itself, should not be agreed upon is the fact that a new National Ports Council was formed about two years ago to deal with exactly the kind of proposal that is put forward in a private bill by the hon. member for Nanaimo-Cowi-chan-The Islands. The National Ports Council has already met twice in the past year and its steering committee is working on an over-all ports policy which will deal with representations from harbour commissions and probably extend the membership in order to give wider and better representation. We understand that to this over-all ports policy now being considered by the National Ports Council various existing types of registration will also be examined. What we are doing today is changing an existing act before we have the benefit and the advice of the representatives of the National Ports Council.
There might have been another way to change the number of commissioners. Perhaps this could have been done by an administrative amendment instead of through a private bill. In this case, a simple administrative procedure would have been sufficient. It would have given to the people of Nanaimo the kind of representation which they feel their harbour needs. However, for the reasons given by the hon. member for Nanaimo-Cowichan-The Islands in presenting his bill in the first instance, and in his representation today, we will not object or oppose the passing of the amendment. As I said, the idea may be good, it might be constructive and it will probably answer the needs of those who would like to have better representation on the Nanaimo Harbour Commission; but what was worrying us was the timing. Since there is some urgency in making this change at this time, let us be assured that we will not embark upon a succession of private bills to increase the number of members on each and every harbour commission. The minister agrees to Bill C-21.
Motion agreed to and bill read the third time and passed.


Mr. Reid:: Mr. Speaker, I believe there might be agreement to going back into committee of the whole and proceeding with Income Tax Act (No. 2) at this time.


The Acting Speaker (Mr. Boulanger):: Is it agreed that the House now resume in committee of the whole on Bill C-192?


Some hon. Members:: Agreed.
Income Tax Act (No. 2)



GOVERNMENT ORDERS


[Stage Direction]
House again in Committee on Bill C-192, to amend the Income Tax Act (No. 2)-Mr. Turner (Ottawa-Carleton) - Mr. Boulanger in the chair.
Marcel Joseph Aimé Lambert: Mr. Chairman, we resume consideration of Bill C-192-
Here I would like to raise another question. This does not apply to the operating of an oil or gas well, but what happens to the product produced out of a gas absorption plant and then sold in some liquified form? These are things that become very difficult and they are to be covered by rules prescribed, by regulation. We have not seen the full import of such regulations so in effect we are now looking at the tip of the iceberg. As a result, there may be some very disappointed people who are actually engaged in manufacturing and processing but who are beyond the stages that might appear to be included or covered under this definition.
There are many other questions I could ask, but I know that a number of my colleagues have taken part in many discussions on this particular provision and I think I will allow them to put those questions. They are as able to do so as I, and perhaps can more effectively ask these questions. Because many of them have particular situations in their own constituencies they are much more informed on those situations than I. It is likely that we will return to the consideration of this clause because it is really the nub of the definitions and guidelines for this whole provision.


Lorne Edmund Nystrom: Mr. Chairman, before I make a comment or two I would like to know whether the hon. member for Edmonton West would answer one short question.


Marcel Joseph Aimé Lambert: Mr. Chairman, I will answer a question if it is relevant to the bill.


Lorne Edmund Nystrom: Mr. Chairman, it is relevant to the bill and to the remarks of the hon. member concerning the bill. He implied that the tax structure applied to the service industry. Are he and his party in favour of the tax cut applying across the board to all corporations, or just to the manufacturing and service industries?


Marcel Joseph Aimé Lambert: I said that so far as I
was concerned, if the minister's purpose was a general stimulation of industry then a tax cut across the board applicable to all corporations would have been more effective for the Canadian economy. Certainly it would cost more; I admit that. But then the question becomes, what is the net cost to the Crown with respect to greater economic activity, in turn providing greater returns under our income tax and also our excise tax? I would also want to look at it on the basis of net cost. It seems to me, from the general point of view, that it would have been far preferable to have gone into a general tax cut of that nature, but not necessarily open-ended, as we have indicated.
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July 3, 1973
Income Tax Act (No. 2)
If the hon. member wants me to start another speech with regard to the argument that is made that a time limitation on a tax cut is of no great value, I would ask him what about the tax cut that was made for 18 months by the previous minister of finance? At that time I did not hear any of these criticisms that have now emanated from certain sectors of the economy and from certain political factions. Frankly, I thought that those engaging in this were merely demonstrating small-time politics. Furthermore, Mr. Chairman, no minister of finance is going to say that even these present tax cuts will be permanent, because if circumstances so dictate and it is felt by the minister of finance of the day, whoever he may be-


John Napier Turner: Or she may be.


Marcel Joseph Aimé Lambert: The minister is being very gallant and says, "Or she may be." If circumstances so dictate, changes will be made, and without notice.
But reverting to the answer that the hon. gentleman hoped to get, I say that in order not to attract retaliation from the United States because of a specific tax measure, a general tax cut would have been far better to counter whatever effect DISC might have, and would provide greater economic stimulation. If a general tax cut had been introduced, many of the people whom the hon. member thinks support his party would have been very appreciative because they would have been working not only at the salaries they anticipated but at much greater wages in an expanding economy.


Lorne Edmund Nystrom: Block three deals with definitions of Canadian manufacturing and processing profits. I would like to know whether the minister will make a general statement or answer some of our general questions on Mr. Shultz's tax proposals in the United States. This is as appropriate a time as any to tell us whether he has been in contact with American officials, and whether he has conducted any study on the possible effect of these tax proposals, for instance concerning the runaway plant, and so on. Has he any information of their effect on the Canadian economy if this bill is passed? Further, in drafting this bill did he consider exempting from its provisions any foreign-owned or foreign-controlled manufacturing plant in Canada? I ask my questions based on the fears I have with respect to the effect of Mr. Shultz's proposals on corporations in this country. Will the minister elaborate a bit on the American tax changes and the effect they may have in Canada?
[ Translation]


Mr. Beaudoin:: Mr. Chairman, I think that Bill C-192- [English]


Lorne Edmund Nystrom: On a point of order, Mr. Chairman, I wonder if the minister intends to make a statement later on, or does he want to reply to my questions now?


John Napier Turner: Later on I will make a short statement.
[ Translation]


Léonel Beaudoin: Mr. Chairman, I think that Bill C-192 should certainly help manufacturers make a reasonable profit and favour reasonable expansion of their plants,

those which are producing news print or any other good sold in the United States, namely those which signed multi-year contracts with American firms. For the past few years, the Canadian dollar has been on par with the U.S. dollar.
Clause 3 now under study contains a weakness we must remedy.
For instance, we read, and I quote:
-"Canadian manufacturing and processing profits" of a corporation for a taxation year means such portion'of the aggregate of all amounts each of which is the income of the corporation for the year from an active business carried on in Canada as is determined under rules prescribed for that purpose by regulation made on the recommendation of the Minister of Finance to be applicable to the manufacturing or processing in Canada of goods for sale or lease; and
(b) "manufacturing or processing" does not include
(i)	farming or fishing,
(ii)	logging,
(iii)	construction-
Mr. Chairman, those three sectors, especially farming and logging, affect us deeply because their leaders are those who make the least profits. That 9 per cent cut could certainly help them and constitute the difference between a profit and nothing; in addition, it will encourage both the farmers and the fishermen, and above all the logging industry, since unemployment insurance has recently gone up from $100 to $110 per week in some cases, and seasonal workers can often get welfare benefits during the winter season. The heads of farming and logging operations could keep their employees longer, knowing that they could benefit of a tax exemption of 9 per cent in 1973, one of 8 per cent in 1974 and another of 7 per cent in 1975.
To my mind, this bill should apply to farming, fishing, logging as well as to construction.


Donald Alex Blenkarn: Mr. Chairman, I should like to make a few remarks and then ask the minister a number of questions as to the applicability of what is manufacturing and processing profit and as to the definitions concerning the businesses that are exempt even though they would otherwise be treated as manufacturing or processing.
The hon. member for Edmonton West suggested that smaller corporations might be better off than larger ones. I suggest that smaller corporations are hurt by this complicated scheme because they do not have the accounting staff to deal with all the problems of determining their new tax rate. Perhaps the minister could explain to the House the formula under which we determine what is a profit applicable to a reduction and what is a profit not applicable to a reduction. The formula that I have seen is rather interesting and I am sure will probably defy the intelligence of most of us, but perhaps the minister can explain it.
The way I understand this act is that if a company is engaged in fishing, say, has a fishing fleet and cans the fish, presumably somewhere along the line it stops being a fisherman and starts being a manufacturer of canned salmon, for argument's sake. I presume we have a trem-dous problem in determining to what extent the profit is
July 3, 1973

applicable to catching the fish and to what extent it is applicable to canning the fish. Perhaps the minister can explain whether a company that is involved in fishing is completely exempt or is not completely exempt because fishing is an exempted business. This problem is troubling many of us and I should like the minister to reply.


John Napier Turner: Mr. Chairman, with the consent of the committee I shall take first the question put to me by the hon. member for Yorkton-Melville. He was concerned about the possible effect of American tax legislation upon Canadian industry or Canadian business consequent upon the House passing the measures now before committee. He is concerned that some of the proposals of the United States treasury to deal with so-called runaway corporations would have the indirect effect, if implemented, of transferring tax revenue from the Department of National Revenue to the United States treasury.
As I said on second reading, when I dealt with that point, what is now before Congress in the form of trade reform proposals and tax proposals that are supposed to reinforce those proposals in protecting American jobs and American export prospects, are merely proposals. We do not have any precision in this field or the text of this legislation; we have just a general description of what the proposals might be. Moreover, the proposals are changing from week to week. The United States treasury has already issued further clarification and amendments to the proposals without producing anything in textual or bill form, so it puts us in a difficult position as it does every other country in the world. We must try to analyse at this stage exactly what type of animal we are dealing with.
Undoubtedly, Congress is going to have a great deal to say about how these proposals are eventually going to emerge in legislative form. Wilbur Mills, chairman of the House committee which deals with taxation, has already suggested that there would have to be certain amendments to these proposals. He has given this suggestion in general statement form; he has not a piece of legislation to deal with. So we have proposals that have not been reduced to legislative form, that are still being amended and are subject to lengthy congressional hearings. The current situation in that country will make them even more complicated.
The Americans have indicated that they are willing to negotiate the bilateral effect of any proposal or legislation once it achieves congressional approval. So the position the committee and the House find themselves in is that we should act now. We cannot wait to see what the congressional history of proposals now in rather inchoate form is going to be. We do not know what the congressional reaction is eventually going to be, nor what the legislation is possibly going to be.
I can say to the hon. member and the committee that if the legislation that eventually emerges, if it does emerge, prejudices Canadian industry as a consequence of the interreaction of the legislation now before the committee and the American legislation, whether that be American trade legislation or tax legislation or if it were to have the effect that the hon. member described, of transferring tax revenues by reason of the technical interreaction of these
Income Tax Act (No. 2)
two measures, at that time the government would be prepared to act. We are dealing now with a hypothetical situation in futura.
I should like to deal now with the question put by the hon. member for Peel South. As I have said to the House before, the definition of manufacturing and processing is deliberately left in general terms subject to the definition on page 4 of the bill. The hon. gentleman is quite right when he says that in any operation there may well be sources of income that are primary resource sources, then a processing source, then a manufacturing source, then a distributive source and retail source, and so on, and that only the manufacturing and processing sources of income qualify for the lower tax rate of 40 per cent or 20 per cent, as the case may be, depending on the size of business, or for the capital cost allowance or the accelerated depreciation.
I set this forward when I spoke last December to the Canadian Tax Foundation and described the method for the allocation of income for this purpose. I set this out more specifically in a press release of December 28, which was tabled and sets out the proposed regulations dealing with manufacturing and processing profits.
If I may deal with small manufacturers, we have eliminated virtually all small manufacturers from any allocation problem at all because of the accounting and legal difficulties that would be faced by businesses of $50,000 net income or less in any given year. So in that case I do not think there is really much problem.
We have applied a different formula for larger businesses. What we did was this: to arrive at a formula, we retained two national accounting firms, one of which was to work on one alternative, and the other to work on the other.


Sinclair McKnight Stevens: What is the name of the firms?


John Napier Turner: They were Clarkson Gordon and McDonald Currie & Co. Actually we gave them the work and asked them to give us the best accounting formula for allocating and separating these kinds of income. We gave them two methods that had been suggested to us by the accounting profession, and both companies worked on the problem and arrived at the same conclusion. The method I am about to refer to was described to the Canada Tax Foundation on November 28-


Sinclair McKnight Stevens: Was it not in December?


John Napier Turner: The speech was made on November 28. I followed it up with more precision in defining manufacturing and processing incomes on December 28, in the press release. I am referring to the speech I made one month earlier, in which I highlighted these suggestions.
We felt that the formula to be employed should be most influenced by those factors which contribute most to business profits. We asked ourselves, what are those key factors? Surely, those key factors should be basic to any type of business; they should be reasonably easy to measure and should be recognized as commonly important in a

July 3, 1973
Income Tax Act (No. 2)
formula of this kind. I suggest that the two factors that pass this test are those of labour and fixed capital, and in one form or another they are virtually always present in any manufacturing or processing operation. We have developed what we believe is a mathematical tool that will enable us to determine the rate that should apply to a company's total income and to the part attributable to income from manufacturing.
I do not think I need go into the way the formula operates. I am willing to say that I set it out clearly enough for 1,700 people that night who listened in Toronto when I addressed leading tax accountants and lawyers of the country who have to deal with these problems. We received comments from many of them and the consensus seems to be that this method is the best way of proceeding. We did not begin the operation with any preconceived idea of what should be done. We started with a number of alternatives, on the basis of independent advice, and have arrived at this type of formula.


Donald Alex Blenkarn: Mr. Chairman, perhaps the minister will go a little farther than he has in connection with determining what portion of the corporate profit is applicable to manufacturing and processing, and complete his remarks with respect to the statement he gave in December.
Let me ask the minister about the cost of the system. Surely with respect to many corporations the reduction in tax could well be in the order of one or 2 per cent, yet the additional accounting and inter-office costs, including the cost to the Minister of National Revenue of collecting the tax, may well nullify the effects of this tax. I am wondering if the minister could give the committee his thoughts in connection with the cost of collecting and the cost of accounting, which is very likely to be borne by the corporations involved. Second, I should like the minister to explain how corporations involved in manufacturing-I am speaking of smaller corporations enjoying profits of $50,000 or less-are somehow to be exempt from these accounting costs.
Surely what the minister is saying is that it is so difficult to do this that the small manufacturing corporations are to be charged on a 20 per cent rate, and that we are not going to worry about profits resulting from distribution, sales, and so on. I should like the minister further to explain to this committee how small corporations enjoying small profits and engaging in some manufacturing business, or partly in some manufacturing, are to be protected from the costs envisaged by this system of collection.


John Napier Turner: Mr. Chairman, let us deal with the problems of the small manufacturer. All the corporation's active business income for purposes of taxation will be treated as manufacturing and processing profits if that corporation meets all the following tests. First, its active business income together with that of any other Canadian corporation with which it associates is $50,000 or less. That is the current qualification for the small business rate of taxation which at present is 25 per cent and which will be 20 per cent under the proposal before the committee.
Second, its gross revenue from the sale of goods which it manufactures or processes in Canada-and where custom

processing is involved we take the gross revenue for manufacturing or processing in Canada of goods for sale or lease by another person; in other words, we are considering here a custom processor-is greater than 75 per cent of its total gross revenue from all active business that it carries on. In other words, if the manufacturing or processing component is at least 75 per cent, there is no problem with allocation.
Third, it is not engaged in any of the activities specifically excluded from manufacturing and processing in subparagraphs (i) to (ix) of proposed section 125.1(3) (b), which is now before the committee.
And fourth, it does not carry on any foreign active business.
If it meets these qualifications, and if it can establish that its gross revenue from the sale of goods which it manufactured and processed in Canada is 75 per cent of its total income, there is no problem with allocation. There is no need to allocate beyond that.
What of businesses that do not qualify for the small business rate? The formula puts together two allocations in order to establish the amount of income that will qualify for the reduced rate. First, it looks at the total manpower bill and the portion of that bill devoted to manufacturing activity. Second, it looks at the total fixed capital of the corporation, and at the amount of that fixed capital utilized in its manufacturing activity. Then it places the amount of manufacturing labour and capital over the total labour and capital, and that is the proportion of the corporation's eligible business income which is taxed at the reduced rate.
That is not a difficult proposition. Most corporations can allocate the manpower requirements attached to a particular operation. They know how much their labour costs. That calculation is carried out in most businesses. It is not hard to allocate how much of your total fixed assets you are devoting to the manufacturing or the processing component of your business. These components are already isolated in the minds of most businessmen. Certainly, the treasurer or comptroller of any company will not experience any difficulty in isolating these components, because they are isolated for the purpose of keeping some control over business costs.
Clearly any business that does not know what its labour costs are or does not know what its fixed assets are and how much should be allocated to any particular operation is in trouble. That is why I am saying that this really is not a complicated process, because those two main components, labour and fixed capital, are known. Therefore, if you relate the manufacturing and processing component to the total labour and capital component, you will have a pretty good idea of how much in come you should apply with respect to this tax.


Donald Alex Blenkarn: Mr. Chairman, would the minister clarify one more thing. Do I assume that if a corporation is importing into Canada all of the components, doing minor assembly in Canada, selling the goods in Canada, and 75 per cent of its revenue comes from sales of what it put together, although in fact it did not do anything but assemble, it receives this tax break if its revenue is under $50,000?
July 3, 1973


John Napier Turner: Mr. Chairman, if 75 per cent of its total gross revenue is from manufacturing and processing in Canada, the fact that it is converting imported goods into manufactured goods would not disqualify it as a small business. My assistant deputy minister keeps reminding me that the interpretation of any bill, of course, is the problem of the Minister of National Revenue and the courts. Whatever I say here does not bind them, but that is the intention.


Sinclair McKnight Stevens: Mr. Chairman, following the question and answer proceedings, I wish to continue with one or two questions. In answering an earlier question, the minister stated he feels that most small businesses really have no problem. In answering a later question, he itemized the four mandatory requirements they must meet before they are included in the sense that they get their tax reduction. Both of those answers bothered me to some extent. Item (c), which the minister referred to, deals with the complete range of items that are in fact not included under manufacturing or processing and item (d) with respect to foreign active business that might be carried on by a small business.
Can the minister deal with the last and indicate to the committee what the government has in mind, granted it could be interpreted in a different way. What do they have in mind when they say foreign active business? My colleague from Peel South referred to the situation where a small business within the terminology imports some goods and sells them in Canada. I would like some clarification of the term "foreign active business".


John Napier Turner: Mr. Chairman, if a small business in this country had a branch which carried on business in a foreign country, the fact that it imported raw material from a foreign country and manufactured or processed it in Canada would not mean it was carrying on a foreign active business. The business activity would be a Canadian business activity. In other words, one can import goods, manufacture and process them in Canada and export them, and be carrying on business within Canada. It would not fall under the disqualification of "foreign active business", which means doing business outside of Canada. In that particular isolated example given by the hon. member it would not be disqualified.


Sinclair McKnight Stevens: Mr. Chairman, I wish to deal with a more general question, one we should deal with as early as possible in considering this bill. Can the minister give the committee any indication of a comparable taxation system in the United States or perhaps in European Economic Community countries. Certain members to my left indicated earlier in this debate that they felt unduly liberal treatment was being given to certain Canadian corporations, and it would be helpful if the minister could indicate what in fact are the comparable taxation treatments in those countries to which I have referred.


John Napier Turner: Mr. Chairman, I can give some of them. Of course, it is very difficult to compare tax rates. There are federal state taxes, federal provincial taxes and all sorts of incentives under different circumstances and so on. In Canada, our national rate of
Income Tax Act (No. 2)
income tax for business is now 49 per cent. It will decline to 46 per cent over a period of years to 1976 under the tax reform legislation of my predecessor. We are recommending immediately 40 per cent on manufacturing commencing in 1973. You must add to that, of course, provincial corporate tax. In Ontario, Quebec and some other provinces that is added on top of the rate of 49 per cent.
In the United States, the general tax rate is 48 per cent, but you have to look at some recent proposals. Under DISC, the effective tax rate is reduced on export profits to approximately 36 per cent and a much lower figure in certain circumstances. In fact, if you look at the marginal costing regulations under DISC, you can have tax rates in the United States now in direct competition with Canada on manufacturing and processing anywhere from 28 per cent to 35 per cent. That is the tax rate with which we are competing.
There is a 7 per cent tax credit in the United States, and this reduces their tax by a further 7 per cent on the cost of most machinery and equipment purchases. There is the class life depreciation rule which permits U.S. taxpayers to presume for tax purposes that the useful life of all equipment is 20 per cent less than normal.
The United Kingdom has a corporate tax rate of 40 per cent. Pursuant to their recent budget, they now permit all machinery and equipment to be depreciated at the rate of 100 per cent. They have allowed all equipment to be expensed which gives them a tax rate considerably lower than 40 per cent.
In France the rate is 50 per cent. In Germany it is 52 'A per cent, but 15 Vi per cent of the profits are distributable if you can work out a method of distributing your profits every year. There are ways of doing that and you can get a 15'/2 per cent tax cut. In Japan it is 32V* per cent, but only 26 per cent is distributable.


Sinclair McKnight Stevens: Distributed 100 per cent.


John Napier Turner: Depending on the percentage. This is only a very general comparison. It ignores state or provincial income taxes. It also ignores the fact that many tax measures exist in every industrial country in the world which causes any country's tax rate to be different from the statutory tax rate. This practice has been increasing in recent years.
I can give the committee an analysis of some length of all the depreciation allowances, investment allowances, rebates and tax credits. This would show that every industrial country in the world is attempting to encourage investment in production facilities and a manufacturing base into which its primary resource industries and service industries can fit. We hear a lot about employment in service industries. You have to transport goods and you need a computer facility. Service industries do not exist unless there is a manufacturing and processing base. This shows we are in a very competitive world tax picture.


Alfred Pullen Gleave: I see that farming is excluded. What about the sort of farm operation which involves a feed lot? As far as I am concerned, it is pretty much a matter of processing grain into feed. Will the concession apply? Can

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Income Tax Act (No. 2)
this type of operation be classified as manufacturing at some stage and get the advantages set out here?


John Napier Turner: If it is "processing" in the natural meaning of the word, either in the agricultural or the fishing fields, it would qualify.


Alfred Pullen Gleave: It would qualify?


John Napier Turner: If it is processing.


Alfred Pullen Gleave: What about a seed-cleaning plant? If a seed-cleaning plant is processing grain in an urban area I suppose it would qualify. Would it qualify if it were in a rural setting? The investment in such a plant and the volume handled can be quite considerable.


John Napier Turner: Here again I wish to avoid, if possible, becoming an interpretative oracle specifying how this will be applied in every situation, but the definition of "processing" is "the transformation of a substance from one form into another". If that were to apply to the particular situation here, a case could be made.
[ Translation]


Léonel Beaudoin: Mr. Chairman, I would like to ask the Minister of Finance (Mr. Turner), a supplementary related to the question asked earlier by the hon. member for Peel South (Mr. Blenkarn), as to whether a small company in the manufacturing, processing, or operations sectors-I want to be clearly understood-the manufacturing, processing, or operations sectors, for example logging-is required, under this legislation, to keep three different accounts, or whether these accounts are added together for the purposes of the tax reduction provided under this bill?


John Napier Turner: It is clear that, in the forestry process, one begins, in a certain sense, with the primary operations and ends with paper pulp, does he not? It is therefore obvious that the person producing paper pulp is a manufacturer.
Each stage of the process must be analysed to determine whether the quality of the product provides entitlement to tax reductions. The Department of National Revenue is now looking into this matter on behalf of various companies, so as to clarify each term in the Act for them.
But in my capacity as Minister of Finance, I still do not know the final decision on the interpretation of the Act. Therefore, if the hon. member has constituents, or small companies in his constituency, who require information, he can always tell them to contact the Minister of National Revenue (Mr. Stanbury), or suggested to them that they ask the same questions to the Minister in writing.


Léonel Beaudoin: Mr. Chairman, I have a supplementary question.
Does the minister mean to say in the report that as of now, under the provisions of the bill, small companies must, to be on the safe side, keep different accounts for operations and processing?


John Napier Turner: That is not necessary.


Léonel Beaudoin: It is not necessary?


John Napier Turner: No, Mr. Chairman.


Sinclair McKnight Stevens: Continuing the line of questioning I have been following I should like to go back to the reference to small business in the minister's press release dealing with the regulations under the clauses we are now reviewing. Various items are listed, including farming, logging, construction, and so on. If small businesses are active in any of these directions they are excluded from the benefits of this tax reduction. First, I would ask why this provision needed to be so severe. Did the minister not consider introducing a percentage-say, for example, that provided small businesses were not engaged in these fields to the extent of more than 10 per cent or 25 per cent, they could qualify? It would be much easier then for most small businesses to live with the regulations than if they have to decide whether they fall within any of those activities which are listed.


John Napier Turner: Let me deal, first of all, with the reason for specifying an exclusion. Obviously we are dealing with manufacturers and processors, defining them in accordance with the term as generally understood in the language and in business, subject to the eventual administrative interpretation by the Minister of National Revenue or by the courts. So this exclusion, which applies throughout, applies also to small business.
The hon. member then puts a more specific question. He asks why the exclusion is so brutal, why it excludes any activity rather than a percentage of activity. That would take me longer than two minutes to explain, so, if I may, I will call it six o'clock and take the subject up at 8 p.m.


The Assistant Deputy Chairman:: It is my understanding that the hon. member for Sudbury would like to present a committee report. Accordingly, I need an order from the committee to rise and report progress. Is that agreed?


Some hon. Members:: Agreed.
Progress reported.



ROUTINE PROCEEDINGS


Mr. J. A. Jerome (Sudbury):: Thank you, Mr. Speaker. I missed the opportunity earlier to report the capital punishment bill which we have considered in the Committee on Justice and Legal Affairs. I am grateful to hon. members for agreeing to revert to presentation of reports in order that I may have the honour to present the Sixth Report of the Committee on Justice and Legal Affairs.
July 3, 1973



GOVERNMENT ORDERS


[Stage Direction]
The House resumed consideration in committee of Bill C-192, to amend the Income Tax Act (No. 2)-Mr. Turner (Ottawa-Carleton)-Mr. Boulanger in the chair.
Gérald Laniel: Shall I call it six o'clock?


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


[Stage Direction]
AFTER RECESS

The House resumed at 8 p.m.

[Stage Direction]
The House resumed consideration in committee of Bill C-192, to amend the Income Tax Act (No. 2)-Mr. Turner (Ottawa-Carleton)-Mr. Laniel in the chair.
Gérald Laniel: Order, please. When the House rose at six o'clock the committee was considering subparagraph (3) of Bill C-192 which can be found at pages 3, 4 and the upper part of 5.


John Napier Turner: Mr. Chairman, I think we were talking about the question posed by the hon. member for York-Simcoe in respect of the problem of excluding the definition of manufacturing and processing found at page 4 of the bill, and then applying that to the allocation of manufacturing and processing profits, which is found in the proposed income tax regulations tabled at the request of the hon. member for Edmonton West.
The question was why in the case of a small business a corporation attempting to qualify for the low rate on processing profits should not be engaged in any of the activities specifically excluded. I suppose the first comment I should make is that the mere fact that a small manufacturing corporation cannot qualify for the special rule, that is to say, the special rule which exempts a corporation from the allocation rule, does not represent a severe penalty. It merely means that a corporation cannot automatically qualify for the reduced rate, but it can use the formula in order to benefit in relation to manufacturing and processing income. In other words, if it could allocate successfully, as most companies can, the labour content applied to manufacturing and processing, that proportion of its fixed assets allocated to manufacturing and processing, there would be no trouble.
The basic reason for the rule I think is apparent. Consider a company that is principally in the primary manufacturing business, or a primary manufacturer, which does some secondary manufacturing and processing. For example, a gravel quarry, which is primary, which does some processing of the raw gravel, and 90 per cent of the profit of this company is derived from the quarry operation and
Income Tax Act (No. 2)
10 per cent from processing. Without this rule more than 75 per cent of the company's income would fall under the term "manufacturing or processing", to use the words in the bill, but it should not be able to qualify 100 per cent of its business income as manufacturing or processing income. In other words, the amount of its activity may not reflect the amount of profit from that activity. The special rule in the bill is designed to deal with this type of situation.
I suppose the rule is arbitrary, but it must be in order to maintain simplicity. The whole purpose of the rule is to provide a simple test for the smaller corporations, and therefore any attempt we might make to be more flexible, more selective or more scientific would make the regulations more complex and, therefore, self-defeating in terms, of what we are attempting to do in the first place; that is, to make the whole matter a little more simple.


Sinclair McKnight Stevens: Mr. Chairman, perhaps I might put a further question to the Minister of Finance dealing again with his release of December 28. I would ask whether he might perhaps elaborate on the formula referred to in describing what "ML" stands for. It is pointed out that it is 100 over 75, which I understand means there is a $25 addition to the labour content of $75 in order to have a certain overhead component in the calculation.
The minister mentioned earlier that the two professional firms, Clarkson Gordon and McDonald Currie advised him. I was wondering what information they gave to justify this as being an equitable relationship between iabour content and general overhead. Would the minister agree that, because of certain of the regulations, in any event it is very unlikely such a firm would qualify for the full tax reduction suggested, in other words from 49 per cent to 40 per cent, particularly as it refers to "the lesser of"?


John Napier Turner: I am not sure what the hon. member is getting at in his argument.


Robert Lorne Stanfield: The formula is simple.


John Napier Turner: I would like to take the hon. gentleman through the formula. What it says is that the manufacturer's profit for the purpose of the rate reduction is its active business income earned in Canada, other than its resource profits; then the following equation is applied to those profits: ML plus MC over TL plus TC. That means the proportion of labour costs attributable to manufacturing and processing income plus that proportion of fixed assets attributable to manufacturing and processing income over the total labour cost plus the total fixed asset cost. It is very simple, and I think I have explained the language that the hon. member wanted.
As to whether this is the best formula, we sought advice, independent of the advisers I have, from the accounting profession as to which method was the simplest, most equitable and easiest to operate, as well as least expensive in the allocation of income, and this was the advice we received. As I said earlier before the dinner break, I think that since any business that knows where it stands is able in any event to allocate its labour costs, to itemize those

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costs against various aspects of its operation, if it can locate its percentage of fixed assets against its total process and parts of that process, and if it has any idea of where it stands in terms of cost control, this formula makes sense, because the two primary elements in the manufacturing operation are labour costs and capital.


Sinclair McKnight Stevens: Mr. Chairman, do I take it from the minister's comments that he is not able to offer us tonight the actual background reason that his advisers gave for the setting of those two formulae? I am referring also to the 100 over 75 reference. What I am mainly after is whether the minister could indicate if there is a range. If they are suggesting there is a $25 component for every $75 of labour, did his advisers indicate that, in the case of certain companies that may be affected by this act, the range could have been $30, $40 or $15? Was there a range or did they, quite fortunately, pick exactly the formula that was applicable to all operations?


John Napier Turner: These are arbitrary figures. One has to take decisions. We examined the problem within the Department of Finance and the problem was also examined within the Department of National Revenue. We sought advice and we evaluated it, and then we made our own decision. Certainly the reaction we have received from those cognizant of a rather technical field both in the legal and accounting professions seems to substantiate our opinion that this is a relatively fair way to assess it.


Sinclair McKnight Stevens: Mr. Chairman, may I put a further question to the minister. On page 4 of his release he refers to various components that will go into the total labour content of his formula, and he mentioned that it will not includes fees paid to independent salesmen. I felt it would be helpful if he could define more fully for the committee what he means by "independent salesmen". Does this simply refer to salesmen on a commission basis, or in what way did he distinguish between an independent salesman and, presumably, some other type of person when using this term?


John Napier Turner: The hon. gentleman is quoting from a press release. The wording will be more precise in the regulations. What we wanted to include were those labour costs and fixed asset costs that were directly attributable to the manufacturing or processing aspect. The indirect cost will have to be taken into account as well. An independent contractor or salesman, somebody in the distributing, retail or sales process, is of course outside that direct process, and that is why we wanted to keep it outside the direct total labour cost.


Sinclair McKnight Stevens: If I may start a more general line of questioning, Mr. Chairman, may I remind the minister that in committee he was questioned with respect to the percentage of businesses in Canada that he believed will have the benefit of this legislation if the bill passes. Could he tell the committee whether he has any more up to date information on the percentage of businesses in Canada that will actually feel the impact of this bill and, secondly, to what degree are they foreign controlled?


John Napier Turner: I will try to be as specific as I can. Let us look at the number of corporations that are eligible. There will be approximately 110,000 tax paying corporations in Canada, of which 100,000 will be small corporations, that is to say having a taxable income of less than $50,000. Approximately 10,000 of the small corporations will have manufacturing as their principal activity, and they should receive the 20 per cent rate on their entire taxable income. Of the remaining 90,000 small corporations, a significant number, perhaps another 5,000, will be taxed at the 20 per cent rate on a portion of their income which will depend on the extent to which they are engaged in manufacturing as against other activities.
It is very difficult to estimate the proportion of the 10,000 large corporations that will benefit from the 40 per cent tax rate. The larger corporations, as the hon. member knows, tend to be more diversified, and the number of corporations that are engaged in manufacturing and processing to any extent will appear high. The portion of the total taxable income that will benefit from the 40 per cent rate would be more meaningful. In other words, rather than take the number of corporations that may be eligible, we should try to take a look at what the total proportion of corporate income is that would be eligible.
Of the 10,000 large corporations, approximately 3,000 have manufacturing as their principal activity, and they should receive the 40 per cent rate on most of their income. Perhaps another 2,000 corporations will receive the 40 per cent rate on a portion of their income because they are engaged in the manufacturing process to a lesser degree. Approximately 5 per cent of all corporate taxable income will be taxed at the reduced 20 per cent rate and an additional 35 per cent will be taxed at the 40 per cent rate. Manufacturing represents about 40 per cent of the total corporate taxable income in Canada.


Gérald Laniel: Order, please. I do not want to limit the hon. member for York-Simcoe but I think that some of his colleagues have been seeking the floor and I know that the minister has put to the committee quite a lot of information. Perhaps we could give a chance to the colleagues of the hon. member and return to him in a few moments. However, at this point I will allow him an extra question.


Sinclair McKnight Stevens: I wonder whether the minister could answer the second part of my question which was: To what extent are the corporations to which he referred-let us take the 5,000 the 3,000 and the 2,000 large corporations-foreign controlled?


John Napier Turner: We cannot give the committee that precise information.


Sinclair McKnight Stevens: What about an estimate?


John Napier Turner: We will make an estimate of the figures we have. Of all the manufacturing profits in Canada, I would say approximately 60 per cent are earned by foreign controlled corporations and 40 per cent by Canadian controlled corporations. Just as significant a fact is that these foreign controlled corporations employ about one million Canadians directly and affect
July 3, 1973

the employment of another one million Canadians indirectly.


Donald Alex Blenkarn: Mr. Chairman, prior to the dinner break the hon. member for Saskatoon-Biggar put some questions to the minister in connection with the matter of a feed lot operation, and asked him whether that feed lot operation was considered a farming operation. The minister suggested that perhaps it was processing and therefore might be excluded.
Will the minister still confirm that a feed lot is no longer termed as farming under the provisions of the Income Tax Act? Or, Mr. Chairman, is it a manufacturing operation, and will the minister suggest changes in the act? Will he clarify the situation now?


John Napier Turner: Here again, Mr. Chairman, it is a matter for interpretation of every individual business as the facts are presented to the Minister of National Revenue and, on appeal, to the courts. It may well be that some part of a feed lot operation could be processing, but without absolute precision on the factual details I would not be in a position to interpret that. Nor, frankly, is it my function to interpret, since anything I would say here would not necessarily be binding on a court of law.


Donald Alex Blenkarn: If the minister is not prepared to define this bill with precision, does he expect us to go ahead with the bill? The whole question of interpretation and definition is rather essential to subclause (3) that we are discussing here.
We have had a question concerning farming. Where does farming end and begin? Where does processing end and begin? I refer to the case of a potato chip operator, making chips from potatoes, and to the case of a fishing company that goes into canning and processing and the making of fish cake.
I would like to know from the minister where logging ends and lumbering begins, the making of lumber and plywood products. In view of some of the obvious shortages of these commodities on the market, and the huge inflation rate that has developed in these commodities since May 8, 1972, would the minister at this point be prepared to remove fishing, farming, and logging in particular from the classification where activities in those fields are not treated as manufacturing and processing, so that as a result of this tax reduction we could look forward to stimulating these industries in their activities?


John Napier Turner: You know, Mr. Chairman, I stated before the Standing Committee on Finance that leaving the definition of manufacturing and processing to be general, and allowing the words to be interpreted subject to the exclusions in the bill, according to general business and accounting practices, reinforced by jurisprudence, was far more favourable to the taxpayer than an itemized list of what might or might not be manufacturing and processing, against which every legal situation would have to be judged. I suggest to the committee that the taxpayer will receive far better treatment under this general type of interpretation. There are many words in the
Income Tax Act (No. 2)
Income Tax Act that are not more precise than "manufacturing and processing." I can cite a number.
There is no definition in the Income Tax Act of "income". There is no definition in the Income Tax Act of "profit". There is no definition in the Income Tax Act of "foreign". There is no definition in the Income Tax Act of the word "control". You have to rely on the general understanding of the English language and on general business and accounting terms.
I am suggesting to the hon. member that the taxpayer generally will be better served by general definitions than by specific definitions which, by the very fact of being rendered explicit, exclude that which is not included. I am sure the hon. member for Broadview remembers that principle very well.
As to the latter part of the hon. gentleman's question, the reason that the manufacturing and processing industries, in the opinion of the government, are being given a lower tax rate is because, above all others, they are subject to direct foreign competition, and the jobs supported by those industries are subject to that type of competition. Service industries are sheltered by the very nature of those industries themselves although, as I said earlier today, they depend for their health on the manufacturing complex in this country. Primary resource industries depend on world markets and general supply and demand, but they are not subject to that particular type of competition, against which this bill is meant to fight.


Donald Alex Blenkarn: Mr. Chairman, I am amazed that the minister would suggest that this legislation should not be extended to exclude farming and fishing, but going on to subparagraph (vi) I note that a company involved in processing ore to the primary metal cannot qualify for the lower tax rate. Is it the view of the minister that it is not in the interests of Canada to encourage companies to process or smelt ore to primary metal? This is the kind of manufacturing witch we on this side of the House think should be encouraged in Canada. Is it the view of the minister that a company that decides to smelt its raw ore into primary metal should not receive any tax break as a result of this particular legislation?


John Napier Turner: Of course, in the primary resource field, Mr. Chairman, we already have a number of incentives some of which do not meet with favour in certain quarters in this House. We have depletion allowances. We have accelerated depreciation. We have the expensing of exploration and development costs, and so on, for mining and the oil industries.
When we get into processing the very point of the processing incentive, in terms of accelerated depreciation and the lower tax rate, is to encourage further processing of our own primary resources in this country-metal, ore, oil and gas-by giving corporations the benefit of this 40 per cent rate. So that in Alberta and British Columbia we can encourage the petrochemical industries to refine the mineral resources of those provinces, and the same thing in northern Saskatchewan and Manitoba. This would also apply in other parts of our provinces that have natural resources.
I believe that Canadians, and quite rightly so, want to process more of those resources here, and that is the very

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point of the processing incentive-not only manufacturing but processing. To answer the hon. member for Peel South, the manufacturing benefit is nationwide to encourage the development of a manufacturing base in the Atlantic provinces, which the Atlantic Development Council suggests is so necessary, as well as in western Canada. Even further than that, it will broaden the industrial base of the country closer to the natural resources. I am glad that the hon. gentleman is nodding his head because finally he sees the impact of this bill.


Donald Alex Blenkarn: That is precisely the point. The bill excludes the activity, for a tax reduction of processing to a primary metal stage, or its equivalent of a mineral resource. That is the very point. Therefore I expect the minister, having made that glowing nationalist statement, to exclude from this particular subclause that very item. Because this bill provides that if a company engages in a smelting operation to bring ore to primary metal state, that particular activity does not qualify that company for a tax reduction. I think the minister does not understand his own bill. That is exactly what I am getting at, and I am proud that the minister finally realizes that in his statement. Will the minister remove subparagraph (vi) from subclause (3)?


John Napier Turner: Let me go at this again and just go through these words. There may be ambivalence in the word "processing" here. This bill uses the words "processing to the prime stage" in the exclusion rule. That is not the definition of processing within the ambit of the bill. Anything processed to the prime metal stage is already covered by depletion provisions, accelerated depreciation and the expensing of exploration and development costs. These incentives are already built into the primary resource process.
So what this exclusion does is to say; "We are excluding that processing up to the prime metal stage because you have already got accelerated depreciation, you have already got the depletion and you have already got the expensing." Processing is from the prime metal stage to the secondary stage. Perhaps it is the ambivalence of the word "processing" that has misled the hon. member. If that is so, I want to apologize to him.


William Gordon Ritchie: Mr. Chairman, I should like to ask the minister a few questions. I was wondering what the estimated cost of these tax changes would be; secondly, what would have been the estimated cost if they were applied across the board to all corporations; thirdly, what is the estimated cost of the fast write-offs?


John Napier Turner: Would you give me the third again, please?


William Gordon Ritchie: First, the estimated cost to the Treasury of the corporation tax cuts to manufacturing and processing; secondly, did the minister make any estimation of what would have been the total cost if it had been applied to all corporations; thirdly, what would be the fast write-offs cost to the federal Treasury?


John Napier Turner: If we are talking about 40 per cent of Canadian corporations receiving the rate which is charged, half a billion dollars, then 100 per cent represents $1,250 million. I have not got the breakdown of the capital cost allowance here but I could try to get it for the hon. gentleman. It might be a little difficult because we cannot anticipate the extent of spending intentions and what equipment is going to be purchased to take advantage of that allowance.


William Gordon Ritchie: Before the dinner hour the minister gave quite an account of how other countries treated their corporations. I do not recall him answering whether other countries have varying rates of taxation to apply to different segments of the industry or different types of corporations as this bill proposes.


John Napier Turner: In general terms, the answer is yes, but I would have to give the hon. gentleman a book in order to break it down for him.


William Gordon Ritchie: Mr. Chairman, I should like to ask if grain handling and grain transportation could be included in this. We are exporting a couple of billion dollars worth of feed and are looking at a couple of good years ahead of us, but we have had ten lean years. It is well recognized that the whole grain handling and transportation system needs to be renovated, and surely this is the segment of our industry that needs to be looked at. Could the minister reply?


John Napier Turner: Mr. Chairman, the simple answer is no, it does not qualify under the manufacturing and processing concept.


William Gordon Ritchie: Would the minister consider the advisability of this? As was pointed out, manufacturing has had many good years whereas this industry has had a poor decade and really is in need of renovation.


John Napier Turner: Mr. Chairman, we are really talking about a different type of international competition here. There are other ways we have tried to help the grain producers of the country.


Mr. Hees:: I should like to ask the minister a couple of questions. I was interested in his description of how difficult it is to define precisely what is processing and manufacturing and what is not. As I understood it, I think the minister said it was better not to try to bring down a precise definition as in many cases that would have to be left to the courts to decide. This is a little confusing to me since I listened to the minister's first budget on May 8, 1972 in which he said that the objective of the budget was to generate more economic activity and thereby generate more jobs. He hoped that manufacturers and processors would start then-and that is 14 months ago-in the knowledge that they could expect tax reductions on January 1 next, that is January 1, 1973, and start to expand their operations, thereby increasing employment.
People in business are not going to start on an expansive operation unless they know what the reward is going to be. Fourteen months have passed and I would have thought that in that time the minister and his department would have had to come to a very precise decision on
July 3, 1973

a very large number of cases, where people say, "Look, I do this: am I a manufacturer or processor or am I not? If I am, what percentage of my operation will be credited to being a manufacturer and processor, and to what extent can I expect a tax reduction on January 1, 1973?"
I am amazed to hear the minister state now that people may have to go to the courts and get a decision. This is a very lengthy process. How in the world can we expand our operations in business unless the government decides whether this tax reduction is to be made available to certain parts of the manufacturing community?


John Napier Turner: Let me put it this way to the hon. gentleman. I have said that it is more advantageous to the manufacturing and processing community to have a general definition. The marginal cases are probably fewer than 3 per cent to 4 per cent. These are cases where it is not clear whether the operation or part of the operation falls under head of manufacturing or processing. For the last 12 months, in expectation of parliament dealing with the matter, that 3 per cent or 4 per cent has been approaching the Department of National Revenue for rulings on whether, in an administrative sense, they qualify under the definition. Those rulings have been given to eliminate the uncertainty about which the hon. gentleman has been so concerned. I understand his concern. We have been trying to anticipate it and rulings are being given in advance of the passage of this legislation.


George Harris Hees: I am certainly glad to hear that because otherwise it would be very difficult to operate. The minister said that tax reductions were estimated to cost about a quarter of a billion dollars a year-


John Napier Turner: Half a billion.


George Harris Hees: The tax reductions alone?


John Napier Turner: Sorry; the two of them together.


George Harris Hees: I am dealing now with the tax reduction which in my calculation is $260 million a year. Would the minister not agree that businessmen who are given these tax reductions have three choices open to them: they can either expand their operations as the government wants them to, and that is beneficial; they can put the money into reserves if they want to; or they can pay the money out in dividends. Is this a fair statement of the case?


John Napier Turner: That is a fair statement of the case.


George Harris Hees: Then as I see it, the taxpayers of Canada are paying for this 100 per cent, because that $260 million is made available to manufacturers and processors through a tax reduction. That money must be made up by an additional charge on the other taxpayers of Canada and those taxes will not be made available for the general running of government and the nation, which cost a great deal of money as the minister knows only too well.
Now, you have the taxpayers of Canada making up that extra $260 million in a year. They know by the minister's own statement that there is only one chance in three that the money is going to be used as the minister and the
Income Tax Act (No. 2)
government want it to be used-to expand operations. Would the minister mind telling me this, instead of laughing the whole thing off and having a grand old time: Is this $260 million being charged to the taxpayers of Canada?
The minister is smiling. Apparently he thinks this is a huge joke, I want him to take this more seriously. Can he explain to the committee how he can justify this bill for $260 million in one year, when he knows there is only one chance in three that this money will be used to stimulate business? There is one chance in three that it will find its way into company reserves and one chance in three that it will be paid out as dividends to the shareholders of the corporations involved. Would he explain this, without laughing?


John Napier Turner: Mr. Chairman, if I was smiling, I was not smiling at the proposition. That is an interesting theory of probabilities. Apparently, because there are three choices open, the probability of one of them being fulfilled is one in three. That reasoning would not carry the hon. member far in any course on probability. There are three possibilities; that does not mean that there are three definite probabilities.
I would think that parliament would be observing and monitoring this whole process. After all, business, by definition, wants to expand, wants to remain competitive, wants to increase productive capacity and wants, as a Canadian operation, to ward off foreign competition, either abroad or in Canadian markets.
I suggest that increasing the cash flow by reason of the tax reduction will increase the prospects for investment, will increase the prospects for a legitimate return and for an expansion of productive capacity and facilities; and that, eventually, will lead to increased job potential in manufacturing concerns and, certainly, in secondary and tertiary industries, and particularly in service industries which depend on manufacturing concerns. I would think that if the motive of the private sector were a greater return, enhanced because of greater productive capacity- if that makes any sense at all-that motive will be fulfilled.
As I said on budget night, to which statement the hon. member referred, if business does not respond in the way that the government expects, namely with increased production facilities, competitive prices, more competitive prices leading to a preservation and enhancement of Canadian jobs, and an expansion of the whole employment base in this country, then, obviously, the country will be looking for a different minister of finance.


Some hon. Members:: Hear, hear!


George Harris Hees: Mr. Chairman, the minister said very confidently that in one year's time we will know how this policy is working. Does he think it is sensible business practice to toss a gift of $260 million, money supplied by the Canadian taxpayer, to business? Does he think it is fair just to toss this gift into the lap of business and say, "I hope that your good sense will make you use this in a way we believe you should use it?" Has he any reason for

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believing that the majority of businessmen would use the money as he wishes? Has he any guarantee, any assurance, that they will not use most of this money either for paying into their reserves or for paying out in dividends? Has he any assurance that the businessmen who, when he introduced this measure, might have slapped him on the back and said, "John you are the greatest, we are going to do exactly what you want", did not say behind his back, "Boy, we sure conned that guy?" I do not say that they did that, but they could have done it.
Does the Minister of Finance not think, before giving away $260 million of the taxpayers money, that he should have a proper assurance from the people with whom he is dealing as to what they are to do with that money? I should like to know from the minister if he feels that tossing this money into the laps of business, and giving it one year in which to do something, is satisfactory. Does he not think that it would have been better to make that money available to business, or even a great deal more money than that available, and say, "This is what we want you to do, and we will pay you in exact proportion to what you do. We will be much more generous than we have been in the past offers we have made, but we want to make sure that for every dollar we spend we get a dollar in return." Does he not think that business would listen to that proposition?


John Napier Turner: Mr. Chairman, I do not know how the hon. gentleman can reconcile his intervention tonight with the speeches he made when he was minister of trade and commerce.


George Harris Hees: I will answer that question, but you answer mine.


John Napier Turner: I think, after I get back to my office tonight, I will get out some of the hon. member's old speeches and send them back to him for his edification.


George Harris Hees: The minister obviously does not intend to answer my straightforward question, because he has no way of answering it. He is simply throwing this money, provided by the taxpayers of Canada, to business without any assurance that business will spend it in the way he wants.
Further, let me say this about my attitude when I was minister of trade and commerce. Every time a proposition was made to business, it was made on the basis that the proposal was to be lived up to or the money would not be paid. That is the basis on which we worked. I am glad the minister will read my speeches. Perhaps he will learn something about the business he is in. Perhaps he will learn the proper way to handle the taxpayers' money; obviously he is not doing that at present.


Lorne Edmund Nystrom: Mr. Chairman, I should like to pursue the questions of that great red Tory, the hon. member for Prince Edward-Hastings. May I ask the Minister of Finance whether his department has undertaken studies which indicate that manufacturing companies will use the extra funds that will become available as a result of corporate tax cuts for further investment and, thus, for more job creation.


John Napier Turner: Yes, Mr. Chairman, we have received a great deal of information on a confidential basis regarding the investment plans of companies following passage of this bill. Actually, intentions to purchase equipment and plant have been augmented a good deal in the last six months. Businesses have anticipated passage of the bill. Let me say to the hon. gentleman and to the hon. member for Prince Edward-Hastings that part of the proof of the pudding is that between May 1972 and May 1973, 497,000 new jobs have been created in this country, a record that, if the hon. gentleman had been in office, we should have been reminded of every day.


George Harris Hees: Not at all. When I was in office everybody knew what was going on. We told people the facts in an honest, straightforward way. We would not need to remind the country.


John Napier Turner: I think the hon. gentleman must realize that this is a long-term structural change and is part of the series of industrial policies that this government is bringing before the country. Obviously it will take some time to see the full amplitude and effectiveness of this particular measure.


George Harris Hees: That is not an answer at all.


Lorne Edmund Nystrom: Mr. Chairman, I think the Minister of Finance should tell the committee the source of his information. I do not think it should be confidential. I think we should know on what he is basing his judgment.
Let me refer the Minister of Finance to one or two statistics which have to do with the Department of Industry, Trade and Commerce. As the minister knows, in 1971-72 the corporations of this country saw their profits going up; yet, according to Department of Industry, Trade and Commerce statistics, new investment in manufacturing in this country actually went down in those two years.
In view of that information, how can the Minister of Finance suggest that if corporations gain extra funds as a result of the corporate tax cut, they will channel those funds into new investment? For example, in 1970, when corporate profits were at a much lower level, new investment in manufacturing, according to the Department of Industry, Trade and Commerce, was at around $3,223 billion. Two years later, when profits had gone up considerably, corporate investment stood at around $2,956 billion, down several hundred million dollars. In light of that information, can the minister assure the committee that the new windfalls that will accrue to some corporations will necessarily be channeled into investment and, thus, into more job creation in the country?


Robert Lorne Stanfield: I wish to ask the Minister of Finance-


Some hon. Members:: Oh, oh!


Robert Lorne Stanfield: I do not know whether the minister gets a lot of help from those behind him, but I hope he does. The minister speaks about the monitoring process and contemplates making a report shortly after April 1, 1974. Can the minister tell the House what he will be monitoring and what he will regard as a satisfactory performance
July 3, 1973

as a result of the proposal now before the House? What will be the ingredients of this performance? Can the minister tell us in a precise fashion what he anticipates will be a satisfactory result?


John Napier Turner: That's a good one.


Robert Lorne Stanfield: The minister speaks about monitoring. He speaks about results. The committee is entitled to know what the minister is going to monitor, what he is going to be looking for and what he is going to regard, as of now at least, as a satisfactory performance as a result of these tax proposals.


John Napier Turner: Mr. Chairman, I can give the hon. gentleman a description of what we are going to monitor. As to whether the results are satisfactory or not, I will make two comments.
First, these are medium and long term measures. It will take some time in terms of the fulfillment of an industrial strategy to find out how effective they are. I am suggesting that in terms of the competitive fabric of world taxation systems and incentives that our competitors, particularly the United States, the common market and Japan are giving to their own manufacturers, this is a measure to maintain a competitive posture on behalf of Canadian business now and in the future, and for the protection of Canadian jobs.
My second comment is that whether these issues are working or not will be a matter for parliament to decide on the basis of the facts presented to it. The monitoring process will reveal a gradual process, gradual because it will take some time for the structural effect to be assessed in the Canadian economy.
In view of the priority of these corporate tax measures, work has been proceeding on the recording and review procedure to provide the basis for assessing the impact of the measures. The following activities will be undertaken in making this assessment. First, we will be looking for the direct impact of the measures. The direct impact that the measures have had on existing companies or are likely to have will be examined by means of a questionnaire survey and interviews. Questionnaires will be sent to about 1,000 manufacturers and processing corporations representing several times as many establishments. It will include representation from all industrial segments, all regions of the country and virtually all sizes of corporations. This mailing will include all the largest firms in the country as well as a number of smaller companies. Interviews will be held with the 200 largest firms and about 25 medium and 25 small manufacturing and processing companies.
We anticipate that the companies' response to the new tax measures will be motivated in part by their expectation of increased cash flows, but more importantly by a fundamental policy improvement designed to improve the investment climate in this country. For this reason, particular attention will be given to the ways in which the companies have been able to maintain and improve their competitive position in the domestic and international markets, making new investments and expanding their work forces. In addition, an assessment will be made of
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their improved ability to withstand price increases or cause prices to be lowered.
To determine the extent to which the measures have promoted the establishment of entirely new ventures, we will rely largely on the considerable contact DREE and the Department of Industry, Trade and Commerce have with industry. In addition, we will make use of our own contacts with industry and maintain close watch on new plant announcements and other press releases.
We will also be looking for secondary effects. The secondary effects of the measures will be assessed in two ways. Extrapolation of the results of the mailings should enable us to estimate the impact of the measures on the entire manufacturing and processing sector. Through econometric modelling techniques, an assessment will be made of the secondary and subsequent effects on the economy in general. In addition, in the course of the interviews companies will be asked to furnish examples of specific instances where their actions have had secondary effects, on suppliers for example. These findings together with additional analyses, will form the basis for the interim report to be prepared early next year and tabled no latter than April 1, 1974. During 1974 another mailing will be made and another survey conducted. A final report will be prepared in late 1974 for presentation to the House for the end of the year.


Robert Lorne Stanfield: Mr. Chairman, the attitude of the government toward the results of this measure will depend upon the interpretation that the corporations examined will place upon their decisions.


John Napier Turner: No, Mr. Chairman. It will depend partly on their reaction in subjective terms to the legislation and partly on the objective results that we find over a period of time as to how they have responded in terms of plant extension, new products, competitive pricing, international competition, piercing new markets and so on. It will be partly subjective in terms of their own assessment. After all, this depends on a subjective response of the community to the process and also on the objective returns from that response.


Robert Lorne Stanfield: Mr. Chairman, I do not want to push this too far, but has the minister any method of determining whether a decision as a result of this change is due to something else, bearing in mind of course that any company receiving the benefit of a tax cut will naturally wish to continue and therefore wish to ascribe as much as possible to the tax cut? Has the minister any objective method of really measuring the actual results of the tax cut as distinct from the results attributed to the tax cut by those who benefit from it?


John Napier Turner: Mr. Chairman, the hon. member of course raises one of the fundamental problems in estimating the effect of any economic policy. What are the exact motivations and what weight does one attach to every single motive in capital investment or any individual business decision? It is very hard indeed to evaluate in individual cases, but taken over a larger sample, one would think that trends would appear.

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Sinclair McKnight Stevens: Mr. Chairman, I have a question following the question asked by the Leader of the Opposition. Is the minister in a position tonight to at least estimate, after this legislation has to all intents and purposes been in effect for six months now, what number of employees have actually gained employment as a result of the measures within this act?


John Napier Turner: No, Mr. Chairman, I am afraid I cannot. Although some business decisions have already been made in anticipation of the passage of this legislation, a good many other business decisions are awaiting the bill's passage.


Sinclair McKnight Stevens: When I was questioning the Minister of Finance earlier, his deputy indicated some surprise at my suggestion that there may be many manufacturing and processing businesses that will not be able to get the full benefit of the 9 per cent reduction as a result of this proposed formula. I was wondering if the minister could be more specific. I refer to page 7 of the release put out by the minister in which he refers to essentially ancillary activity. There are three descriptive paragraphs on how his ML ingredient will function and how his MC ingredient will function. In the second paragraph, he says that the resulting figures for labour and capital in the enumerators of the formula will not be allowed to exceed their respective figures in the denominator. This adjustment will mean that a corporation which devotes at least 75 per cent of its labour and 85 per cent of its fixed capital directly to manufacturing and processing activities will receive the 40 per cent or 20 per cent tax rate. That is stated in the final paragraph. Is it not true that a corporation which cannot count on at least 75 per cent or, in the case of fixed capital, 85 per cent, will not be able to get the full benefit of the tax reduction inasmuch as it is responsible for a cost which it is not able to charge within the formula?


John Napier Turner: That is true. There are two reasons. First, there is an allocation formula, except for small business, which limits the tax rate to that income derived under the formula from processing and manufacturing-not just direct costs for labour or fixed assets, but also a certain amount of indirect cost by way of the larger enumerator over the smaller denominator, 100 over 75; this is where we get the figures 75 per cent and 85 per cent. To the extent that a corporation derives its income from manufacturing and processing it gets the entire reduction. To the extent that other sources of income are part of its total income, then on its total income the reduction would fall short.


Sinclair McKnight Stevens: With regard to another statement which appears in the release on page six under "Total Fixed Capital", could the minister elaborate on paragraph two in which he states that the cost of fixed capital must be reduced to an annual cost comparable to the annual labour cost. The release says:
The annual cost of fixed capital will be an approximation of the annual cost of the funds necessary to acquire those depreciable assets. This will be obtained by multiplying the original cost of each depreciable asset owned by 10 per cent.

Take the example of a corporation which bought an estate for $100,000 several years ago. Its resale today would be, say, $1 million. Perhaps the company has mortgaged it during the interval. Would it be able to claim only 10 per cent of the original $100,000?


John Napier Turner: Yes, of course, because that is the whole basis for a capital cost on a fixed asset in any event. I think the hon. gentleman will understand that against the original cost, from which capital cost is computed, 10 per cent is a pretty generous allowance.


John R. Rodriguez: A question with respect to monitoring the effectiveness of this legislation. The minister told us earlier that mining companies, for example, already receive certain incentives under the tax legislation by way of depreciation allowances, fast write-offs, deferred taxes and so on. I am wondering how effective the minister's proposals will be in terms of job creation. Take INCO as an example. In 20 months its work force fell from 18,000 to 13,000. If one of the primary objectives of a favourable tax system is to stimulate employment, how effective are the incentives presently offered likely to be when it comes to creating new jobs?


John Napier Turner: I hope the hon. member will forgive me if I do not get into actual situations affecting individual companies. The fact remains that under this system of which the hon. gentleman complains this country put together 100,000 more jobs in real terms than the entire industrial complex of Europe, and has in the past year, added 497,000 new jobs to the industrial complex of this country. So the system must have something in its favour.


George Harris Hees: I was interested to hear the answer the minister gave to the Leader of the Opposition regarding the kind of report he would seek from manufacturers and processors a year from now. The answer he read off- obviously something which came out of the department- referred to a series of vague and general questions, such as "Do you think this has been a good thing?" or "Could you tell us how it has helped you to become more effective?", and so on. Obviously, all those who received this questionnaire will answer in general terms, saying how grand the idea has been, since there is no human being who does not like a tax reduction. They will all say; "Dear Mr. Minister, this has been a grand thing, very helpful to our business. Please issue another cheque as soon as you can because we like this nice free money, it is very helpful for the various uses we have in mind: some of it could be higher dividend payments, another part could be used to place more money in our reserves," and so on.
When the minister addresses his questions to the processors and manufacturers next year, does he intend to ask them specifically how they spent the money they received? Does he intend to ask them for a strict accounting of how much was received, how much was spent on expanding operations, increasing research and development, increasing productivity and so on? Does he intend to ask them to report on the increase in their activities and on the new employment created by the company as a result of the concession? Does he intend to carry out a survey to ascertain how many of the 497,000 new jobs of
July 3, 1973

which he spoke, came from the people who were told 14 months ago that they would get this tax reduction, and who could therefore be expected to move ahead and do some of the things the minister wanted them to do, and ascertain what proportion came from people to whom he gave no tax reduction? Has the hon. gentleman made a survey in the last six months to see how things are going, and does he intend to have a definitive answer ready when he makes his report to parliament a year from now?


John Napier Turner: As I said to the Leader of the Opposition, I suppose it would be hard to isolate all the factors which influence business decisions and decide what weight to attach to each. The hon. gentleman knows that a good many business decisions will depend not only on this proposal but on the international trade climate, the monetary situation, the collective market psychology, the effect of an inflationary situation, the efforts of the United States administration to re-assert leadership in economic affairs-


George Harris Hees: And the weather. Don't forget the weather.


John Napier Turner: I will not, and neither should the hon. gentleman, because the weather is very important both in his constituency and in mine. No one can neglect the weather. The hon. member may not agree, but it is the disastrous harvests in parts of Asia, North America and elsewhere which have contributed to the high cost of food. He may not agree, but I am telling him that it happens to be the case. We are attempting, through this monitoring service, to assess these criteria, recognizing that it may be somewhat hard to pinpoint the precise effect of each.
In terms of subjective criteria we will be looking at employment, prices, new facilities and new market penetration, as I told the Leader of the Opposition. In terms of subjective criteria I am surprised at the hon. gentleman denigrating that, because he was one of the best subjective ministers I can remember.


George Harris Hees: You can't fight that, John.


John Napier Turner: The hon. member understands that investment depends on a climate of confidence and the anticipation of reasonable prospects for the country and reasonable returns. He understood the collective psychology of the marketplace, and I am surprised that because he is sitting on the other side of the House he forgets some of the fundamental commonsense he exuded when on this side.


George Harris Hees: On this last occasion when I will rise I will just say that having asked a number of straightforward questions I have received no answers at all, just a lot of guff. I think we can all be sure that the minister's meeting with businessmen a year from now will be a replay of the first meeting. They will get together and everybody will say: "John, it has been great. You sure helped us. The tax reduction was wonderful. We have confidence and we are going ahead. All you have to do, John, as soon as you get back is to write us another cheque and everybody will be
Income Tax Act (No. 2)
happy." And "John" will go away thinking he has done the greatest job of any finance minister.


Robert Jardine McCleave: Order, please. I do not know who this "John" is to whom the hon. member for Prince Edward-Hastings is referring, but if he happens to be the Minister of Finance, I think a more appropriate designation by title should be made.


Donald Alex Blenkarn: Mr. Chairman, the last time I rose on this matter was to direct a question to the minister on the definitions in sub-paragraph (vi) of sub-clause (3), which refers to processing to the prime metal stage. The minister indicated that the mining industry is already covered in respect of depletion and exploration allowances. I suggested that may be a satisfactory explanation for sub-paragraph (v) concerning the extracting of minerals from a mineral resource, but it does not explain the processing to prime metal.
I refer the minister to a situation where pelletized iron ore, which is certainly not a prime metal, is sent to the smelter. Surely the smelting operation is refining to prime metal, and the existing tax laws give no particular relief in respect of that item. There is no question that there may be excessive depletion allowances and excessive exploration allowances in some people's view, but the question really is whether there should not be some incentive to operations geared to processing or refining the raw materials in this country in order that we have more jobs in the refining or metal processing fields. Surely this particular sub-paragraph should be removed from the bill.


John Napier Turner: I want to reassure the hon. gentleman that both stages excluded from this particular incentive, namely those suggested under (v) and (vi), are covered by the existing incentives for mining and oil, particularly in (vi) which refers to those called "production profits" against which depletion allowances can be claimed.


David Lewis: Covered and recovered.
[ Translation]


Joseph Adrien Henri Lambert: Mr. Chairman, we are listening to a very interesting discussion. However, I would like to know on what is based the minister's assertion that many jobs will be created if the proposed 9 per cent tax cut was achieved during 1973. And what surprises me is that he said afterwards that we should wait for some time before knowing whether these measures will work out well. This is staggering. They must believe or not believe in this measure!
What are the minister's advisers doing in all this business? Are they advising the minister simply because of their experience or do they do so with competence? The people, I suggest, have had enough of this advice given by senior officials to cabinet members. They make experiments, then they say: Well, we failed, but we do not offer any alterative. And taxpayers must endure the effect of these unfortunate experiments. I guess that these public servants are paid a salary high enough to be able to give sound advice to the minister. Is it true that this will create employment or is it false? Well, we will only know it after one year of trial, which staggers me.

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When I was secretary-treasury of a municipality and worked at the preparation of a municipal budget, it did not happen often that our forecasts rang false by the end of the year. I understand that we have a larger ship here, but the people are also paid more than simple secretaries of municipalities, because they must have more experience. They are university graduates. They have some value or they do not have any.
Therefore it is my firm opinion, Mr. Chairman, that we are entitled this evening to ask the minister to tell us what the basis is for his statment to the House that the tax reduction wil help create jobs. Are these new jobs that are going to be added to those now existing? Are we sure that these corporations will not use these tax exemptions to modernize their enterprises, or that at the end of the year, it will not help reduce the number of jobs because of modernization? These are all questions we must ask ourselves seriously if we are to know where we are headed.
In all seriousness, I would like to ask the minister to explain to the committee the basis for proposing such a measure. Is sufficient data available to be able to say: This will give such and such a result. In that event, if a certain result is to be achieved, I can understand that there might be a certain margin of error, but it is a different matter to say: it will take some time before we know whether the results will be good. Imagine a doctor advising a patient that he needs a blood transfusion, in the hope that it will do him some good, and then saying to him: We will try it, then we'll see!
Mr. Chairman, I think that we have quite enough serious problems in Canada. Unemployed people waiting for jobs and wanting to make a real contribution, by working, by doing something. This is either going to create jobs or it isn't. As a member of the committee, I would like to know how far we can go in this direction, with assurance, so that it can help create jobs, and on what basis.


Robert Jardine McCleave: Perhaps the Minister of Finance wishes to reply to the hon. member for Bellechasse.
[ Translation]


John Napier Turner: Mr. Chairman, I always listen with interest to the comments of the hon. member for Bellechasse (Mr. Lambert) and I think I know his philosophy; he has some confidence in private industry.
One of the factors of private industry is that if you allow for an increase in funds, you then favour capital investment and production facilities. By doing so, you eventually promote new employment, new jobs within the corporation itself as a manufacture or in other industries whose prosperity depends on that manufacture. If the hon. member has confidence in the system, he has already answered his question.


Joseph Adrien Henri Lambert: Mr. Chairman, I agree with the answer of the minister, but my second point is this:


Robert Jardine McCleave: Order, please. I will return to the hon. member for Bellechasse in a moment. The hon. member for Peel South.


Donald Alex Blenkarn: I want to ask the minister two or three other questions in connection with the specifically excluded industries. Why is it that those persons who produce electrical energy or steam for sale are excluded as manufacturers or processors whereas, I presume, a company that produces electricity or steam for use in its own operation is able to have the lower tax rate? It strikes me as rather peculiar that in a day when we are talking about energy shortages those who produce electric energy or steam for same are excluded from any allowance as manufacturers or processors. I refer to the kind of thing that is likely to develop in my constituency where people involved in getting rid of pollutants are in the process of organizing the sale of steam to neighbouring industries, and presumably that is a good thing to promote and develop; but this bill says that if you produce steam or electricity and sell it, you get no particular allowance.
Another thing that I found strange was with respect to the distribution of gas. Presumably if you distribute gas in operating a private utility as opposed to a public utility, or just distribute gas for your own purposes, you may well have an allowance as a manufacturer or processor; but if you happen to do it as a public utility or on behalf of others for sale, you are excluded. Can the minister explain to me and to the committee the reason for that?


John Napier Turner: Primarily the reason is that in the case of public utilities, they are established by the province or the federal government and for that reason they are not subject to the international competitive price structure or to the international direct impact of foreign competition.
The hon. gentleman mentioned pollution. There are already incentives in the Income Tax Act providing for accelerated depreciation against equipment purchased for anti-pollutant purposes.
[ Transla tion]


Joseph Adrien Henri Lambert: Mr. Chairman, I would also like to ask the minister, in view of the statement made by him a moment ago, if we will have to wait a while before knowing if those measures will give, the results hoped for. Since it is a matter of mathematics it seems to me that it would be easy to get an answer. If the tax reduction is in the whereabouts of, let us say, $500 million and that amount is actually invested and not cashed in to the benefit of shareholders, in order to produce expansion and create jobs, it should be possible to say today that it will produce a specific result. So I think that we should not have to wait a year to say that it will produce a given result. We should be receiving today an answer as correct as possible to the effect that it will produce a specific result.
I think that we are entitled to ask and receive an answer.


John Napier Turner: I suppose, Mr. Chairman, that if the business does not use those funds to expand, to improve its production facilities in a field where competition is so rigorous, so brutal, particularly from the United States, Europe and Japan, it will not survive.
July 3, 1973


Mr.   La Salle@: Mr. Chairman, in the same line of thought as the hon. member for Bellechasse (Mr. Lambert) I would like to direct a question to the minister.
Let us imagine, for example, that 50 per cent of those industries which will have those benefits available to them reinvest those amounts of money to generate additional jobs but that, on the other hand, it is also proven that 50 per cent will not do so. What would then be the position of the government?


John Napier Turner: Mr. Chairman, that question is hypothetical; the result must be considered and it will be the duty of Parliament to do the same. We will be back on it in coming months.


Mr. Latulippe:: Mr. Chairman, I should like to direct a question to the Minister of Finance.
I should like to ask him what the difference is between a bill that grants a 9 per cent tax reduction to the corporations, and one that increases interest rates, to make up for the tax reduction, if not more. I wonder where the solution lies in that.
In one clause, the bill offers certain advantages, but in others it cancels them. I wonder where we are going, and I ask the minister to tell us, for the manufacturers borrow capital in huge quantities. Because they do, interest rates go up. So, I ask the minister to tell us what the advantages of this bill are.


John Napier Turner: Mr. Chairman, there are two aspects to the problem; first of all, we must consider the tax reduction from 49 to 40 per cent in relation to the 1 per cent increase in the rate of interest, half of which is tax deductible to balance that; then, if a given company has more investment money at its disposal because of the tax reduction, it can then limit its demand for loans.


Mr. Caouette (Charlevoix):: The hon. member for Bellechasse (Mr. Lambert) asked a while ago to the minister what were the real projections as to the 9 per cent tax reduction granted to corporations. We know that Mr. Benson's budget authorized a 1 per cent tax reduction to corporations as a result of which the minister would be in a position to say, with the support of statistics, whether the measure would have created employment or if at least it would have help preserve jobs.
Now, as the minister pointed out a while ago, it is rather difficult to say whether the measure can create employment, because it is merely a hypothetical issue. However, according to statistics, even if it did not create employment it has surely contributed to preserve jobs which normally would have been eliminated for lack of government intervention.
Now, according to those statistics based on the 1 per cent reduction granted in the previous budget of Mr. Benson, can the minister tell us whether there is a valid reason to increase again the deductions by 9 per cent?


John Napier Turner: I don't believe so, Mr. Chairman, especially since there is always a lapse of time between the introduction of an economic policy and its impact, and this delay is underestimated not only by
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economists, I think, but also by newspapermen and politicians.
One must also consider that there were several consecutive budgets and I believe that in the present circumstances it would be very difficult to identify the effects of one budget in particular, among those of 1969, 1970 and 1971.


Gerald William Baldwin: Mr. Chairman, I know the minister is anxious to get this legislation through-


John Napier Turner: I am at the disposition of the Committee.


Gerald William Baldwin: I am not saying that in any sense of criticism. He has been very generous with his explanations. They have not always been good explanations, in fact some were pretty awful, but he has been perfectly willing to give them. I am now going to test him with one or two questions and I am sure that, with the advice he will be receiving from his officials, he will be able to answer them immediately.
With respect to the definitions, he has taken the unique approach that instead of saying what processing and manufacturing are he has drafted the subclause to say what they are not.


John Napier Turner: That is not the first time.


Gerald William Baldwin: Taken with subclause (3) (a), in which the income of a corporation which has carried on business is taken into account by rules and regulations prescribed by the minister to determine its profits, these two provisions give quite a lot of scope to the minister, and he will probably need a lot of scope before he is finished. But why is there the exclusion of farming and fishing? I am not relating this to farmers particularly, although God knows they need the help, but rather to the type of processing and manufacturing that takes place, on a secondary or tertiary basis, of farm products.
I was not in the chamber earlier, and the minister may have answered this already. I was with his colleague in the other house where we were trying to expedite the business of the House, in spite of the obstacles, in spite of the sand thrown in the machinery by those on the other side.


John Napier Turner: Mr. Chairman, with deference to the hon. member for Peace River may I say that we did go into this subject with some amplitude earlier in the evening. Basically we are leaving the definition to the general dictionary definition of business and manufacturing, and of those words as understood by the accounting and business professions, subject to exclusions, to make it clear that we are dealing not with the primary resources and the service sector but with manufacturing and processing, upon which there can be the most immediate impact of the pressures of world competition. That is the general philosophy of it. It is not the first time that

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something is defined, particularly in the Income Tax Act, by way of exclusion.


Gerald William Baldwin: I am thinking in particular of the north country, the northern parts of Saskatchewan and Alberta. The farmers up there have been told to grow wheat, then not to grow wheat, and now they have been told to grow it again. I know that if this government is still in power for another year they will probably be told not to grow wheat again. They have been told that land should be put into grass, and later told it should be taken out of grass, and so on.
A number of farmers in the north country did get together over the last year or two, and with their own funds and some assistance, guided by the intelligence which the Lord has given them and which has been sharpened by living in the north country, they have established pelletizing plants, rapeseed crushing plants, and so on. These are private organizations, not co-operatives at all, and it seems to me there should be a very good reason for excluding them.
To take the rapeseed process one step further, they convert it into crude oil, which is the crushing, and then it is mixed with other substances to make a cooking oil. That is the tertiary process.


John Napier Turner: Mr. Chairman, I said earlier that I would not want to get into the position of interpreting and pronouncing on individual situations. Anyway the hon. gentleman knows that whatever I say on the floor of this committee is not necessarily going to bind a court, except to give an indication of the intention of the minister.
I would point out to the hon. member that the Minister of National Revenue is already giving advance rulings on whether individual situations qualify within the definition of manufacturing and processing. Certainly in the agricultural and fishing fields the conversion of grain and fish into a type of substance by way of pelletizing, or processing of the fish, would qualify under the definition of processing. We have already made that clear to a number of concerns right across the country.


Gerald William Baldwin: But the minister is not precisely ruling out a rapeseed crushing plant.


John Napier Turner: I am not the world's greatest authority on that type of plant, so I am certainly not ruling it out.


Alfred Pullen Gleave: Mr. Chairman, further to the question raised by the hon. member for Peace River, there are a number of alfalfa pellet plants, and in this process' the reduction of the product is very closely intergrated. I would ask the minister whether such an operation would fit into the definition of processing as it appears in the bill?


John Napier Turner: Here again, I really have not got the factual background to answer this question. However, if it is within that general concept of processing that I described to the hon. member for Peace River, it would; but the hon. gentleman, on behalf of his constituents, should get a more precise ruling, on the basis

of the factual situation he describes, from my colleague the Minister of National Revenue.


Marcel Joseph Aimé Lambert: Mr. Chairman, the point on which I seek an explanation from the minister for clarification purposes is a rather complicated one, in that first of all it arises out of the fact that regulations are going to be made on recommendations of the minister regarding the definition of income from manufacturing and processing, which however excludes-and I refer to subparagraph (x) at line 22 on page 4-any manufacturing or processing in which less than 10 per cent of its gross revenues are derived from manufacturing and processing of goods for sale or lease.
In other words, 10 per cent or more of the gross revenues must be from the permitted activities under paragraphs (A) and (B), but then going on to subclause (4) on page 5, there is permitted to be added to whatever may be the active business, or principal activity of the company, a proportion of gross revenue arising from am activity that such corporation carries on in partnership with others. I put it to the minister that there are such circumstances, let us say in the manufacture and leasing of machinery in partnership with other corporations; it may be an offshore operation, which is permissible, and which is very lucrative from the point of view of Canadian business. But whereas there may have been substantial gross revenues in the particular year, there may have been extraordinary losses or costs imposed upon it as a result of which the net income is very low-as a matter of fact it might even be negative-and the company has not been able, on that basis, to apportion to itself the appropriate proportion of gross revenues from the partnership operations. Therefore it finds itself disqualified under (x).
I put this case before the minister not to have a definitive answer, unless he has it here, but for consideration in the formulation of the regulations for the determination of income. I think there are a number of Canadian specialty firms making very sophisticated machinery, say in oil field work, in construction and many other activities, where its activity is conducted offshore. This is something that I think we should attempt to preserve, and that the proportion of the gross revenue from the partnership operation should not be exclusively related to the proportion of the income from the partnership operation. I think there should be an alternative, although I am in no position to indicate precisely what it might be. It might be, shall we say, on the basis of the partnership interest-that if company A owns a 25 per cent interest in the partnership, it can allocate to the gross revenues of its active business 25 per cent of the gross revenues of the partnership operation, when these might be an alternative, rather than net income. I think one can get into difficulty with this.


John Napier Turner: I think we will go over that point and look into it. To the moment I have not received any submissions, but we will look into it.


Marcel Joseph Aimé Lambert: I hope I am not setting up a straw man in order to knock it down. It seems to me there is here a conceivable operation, and one would not want the regulations to be so tight that there would not be
July 3, 1973

the maximum scope for Canadian business. I hope under the Income Tax Act-and this was a fundamental principle certainly that I advocated-that there will be no unnecessary obstacle put before Canadian business competing abroad.


Sinclair McKnight Stevens: Mr. Chairman, when I was raising some points with the Minister of Finance earlier I touched on this question of the total fixed capital and how his formula proposed to deal with it, and I proposed to ask a further question when the hon. member for Nickel Belt interceded. I was wondering if the minister would indicate, as I believe he agrees, that my interpretation of his page 6 summation of this item is correct-whether it has the net effect of increasing or lowering the rate to the corporation which subsequently will receive the tax reduction contemplated by this bill.


John Napier Turner: Mr. Chairman, I think it has a neutral effect as it applies to fixed capital because it applies to the enumerator of the equation and the denominator. The enumerator as it applies to the operation is directly related to the manufacturing and processing part and the denominator to the entire operation of a firm, so it cancels out. It is neutral in its application.


Sinclair McKnight Stevens: All I can say is that I am very interested in that answer. I hope the Minister of Finance is correct, as that is not my understanding from one of his professional advisers.
To go on to another point, earlier the Minister of Finance indicated that he felt that a rough estimate of the number of foreign corporations or perhaps the larger foreign corporations that will benefit from this act would amount to about 60 per cent of the total number that will actually receive a benefit. I was wondering if the minister could indicate in what way he was able to reconcile the benefit he appears to be conferring on those foreign corporations with the effect that the Minister of Industry, Trade and Commerce feels that his bill C-132 would have concerning the screening of foreign companies that might wish to set up business in future in Canada.


John Napier Turner: Mr. Chairman, I do not see any problem of reconcilation there. My concern at the moment is that, since the fundamental purpose of the legislation is to protect the manufacturing and processing jobs, we have to enhance that potential against world competition here and abroad. Since foreign-owned corporations contribute about half those jobs, we have to continue to move forward to better control of our own economy and resources, and to add a base that does not risk the immediate job potential. I see no difficulty in reconciling these propositions.


Sinclair McKnight Stevens: Are we to understand that the minister in effect in saying that foreign corporations within the country, provided that they create employment, are, to use the reference of the Minister of Industry, Trade and Commerce, of significant benefit to the country, whereas those that may be coming in will have to be screened to ensure that they are of significant benefit?


John Napier Turner: That is a normal situation; I am not saying that or denying that. Obviously the
Income Tax Act (No. 2)
definition of "significant benefit" includes employment potential among its factors. What I am saying is that my immediate job is to try and enhance and protect the job potential of the country That is the purpose of the bill.


Sinclair McKnight Stevens: Coming back to the actual definition of manufacturing and processing which is the main part of clause (3) which we have been considering, I was wondering if the minister or his deputy would have any comment for the committee concerning an area such as data processing. I notice in the press release that they specifically exclude wages with respect to data processing as a cost in determining income. I was wondering if the minister could indicate whether he felt that the data processing firm itself would be clearly a manufacturer or processor who would have the benefit of the act.


John Napier Turner: Yes, subject to whatever interpretation my colleagues would give to it. I would think it is primarily a service industry.


Robert Jardine McCleave: Does this complete the consideration of subparagraph (3) on pages 3 and 4?


Marcel Joseph Aimé Lambert: I just want to make sure that (3) and (4) have been completed and there are no other points, since I inferentially spoke on No. (4) in my discussion of No. (3). I just want to guard against anybody who wanted to speak on (4) not having done so.


Robert Jardine McCleave: We will now proceed to subparagraph (4) just mentioned by the hon. member for Edmonton West which is to be found on page 5. Is that considered to be completed?


Some hon. Members:: Agreed.


Robert Jardine McCleave: We will now proceed to the consideration of subclause (2) which is found at the bottom of page 5.
On subclause (2)


Marcel Joseph Aimé Lambert: The effect of subclause (2) as it appears on page 5 is to keep the open-ended nature of the tax deduction allowed on corporate profits arising out of manufacturing and processing.
As you know, Mr. Chairman, the party of which I am a member has taken the position that this type of deduction should not be a permanent feature of our tax system. The Leader of the Opposition and other spokesmen of my party have suggested that we should place a limit on this during the year 1973 because, as the result of the budget of May, 1972, it was obvious that businesses which should otherwise qualify under this act took action. They based their decisions and operations on the word of the minister. They, therefore, may have committed themselves, and it was only equitable that at least these provisions should be effective for this year, so that what they had committed themselves to during 1972 and in the early part of 1973 could be carried out.
We fur.her said that some businesses during the fiscal year 1973 would enter into firm commitments to receive equipment, particularly equipment that was to be paid for

July 3, 1973
Income Tax Act (No. 2)
over a longer term. We said we would do this, because if we go into accelerated capital cost allowances, we will find that the definition of manufacturing and processing, under the regulations provided for in the section of block three which we have discussed will form the basis for the order in council that will be passed by the government, on the recommendation of the Minister of Finance, dealing with capital cost allowances. Therefore, these are inextricably tied together. We felt that commitments for the purchase of machinery and equipment during the 1973 fiscal year would need to be honoured.
It may be said, why do we not object to this particular clause? In order to mesh with subclause (3), which appears at the top to page 6 and in which a review process is provided for with regard to March 31, 1974, one must say this: if this is to be at all meaningful, one must include the words, "and subsequent years after 1973". It is for this reason that this part establishes the nature of the review process.
The minister is to propose an amendment which will not alter the heart and core of that review process but will make modifications to it that, I hope, will meet the views of the official opposition in that connection. In any event, as I said at the opening of the debate this afternoon, there is no way that one can expect these tax cuts, which affect a limited segment of Canadian industry and do not affect all Canadian industry, to become a permanent feature of the tax system. So we took our position, and I think it is a perfectly logical position, as the minister himself recognized.
In the budget of May 8, 1972, the accelerated capital cost allowances, as proposed, were open ended as to time. That was not the case in the February 19, 1973 budget, when the minister introduced the two year limitation. His two year proposal, in view of the commitments that have been made in 1973, is not far different from ours in essence. I remember the hon. member for York South applauding on budget night when the minister proposed to review capital cost allowances, and so on. This review process was proposed, but it was not something that had been proposed on the night of the budget. I am referring to the review after March 31, 1974. It need not be a single, annual review. It can be repeated, under the provisions of the legislation, on the basis of information that is available either from the government monitoring service or from other sources.
I do not apologize for the questions that were asked by members of the opposition and members of other parties with regard to the monitoring service. They were to test its probity and the minister's understanding, and were to elicit an elaboration in detail of that monitoring service so that the interim report to be brought down in April, 1974 may be of some utility. I do not know how great its value will be.
Certainly, we will look forward to a good and comprehensive report, which the minister has undertaken will be filed by March 31, 1974. It will be filed, I am sure, with the monitoring service, if this whole tax legislation is still in operation and if this monitoring service is in operation. It will be reporting and will make information available not only to the government but to outside sources. The opposition, whatever it may be at the time, will have information

available to it which could trigger off, if need be, the review process provided for in subclause (3).
That is why we say that subclause (2) in its present form does not negate but actually establishes the base for the review process and also the monitoring process that the government has undertaken to carry on with regard to this provision and other capital cost allowances that will apply to industry.


Robert Jardine McCleave: Does this complete consideration of subclause (2)?


Some hon. Members:: Agreed.


Marcel Joseph Aimé Lambert: Ten o'clock.


Gerald William Baldwin: On a point of order, Mr. Chairman, before progress is reported may I ask the minister if we will be going once more into the fray on this particular bill tomorrow?


John Napier Turner: Mr. Chairman, I had the House leader beside me. It is my understanding that we will be back in committee stage on Bill C-192, and if that is completed tomorrow we will go into committee on Bill C-193, and carry on with that on Thursday as well.
Progress reported.



PROCEEDINGS ON ADJOURNMENT MOTION

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

Mr. Heath Macquarrie (Hillsborough):: Mr. Speaker, I am overwhelmed by the influx of my colleagues who have come here this evening to hear my address.


The Acting Speaker (Mr. Boulanger):: Order, please. Would hon. members please resume their seats. The hon. member for Hillsborough has the floor.


Heath Nelson Macquarrie: Thank you, Mr. Speaker. I was paying tribute to my colleagues who are rushing back to hear my evening deliberations. On June 11 I asked the Minister of Transport the following question:
... It is based on a statement by Lome Mitton of the Atlantic provinces Transportation Commission to the effect that the CNR is planning a large freight rate increase and a change in demurrage rules which, according to the Commission, will cause undue hardship in Atlantic Canada. Has the minister been made aware of these deplorable proposals, and what steps has he in mind to forestall what would be the tenth freight rate increase in Atlantic Canada in the last four years?
July 3, 1973

He replied:
There was no general increase in freight rates in the Maritimes. There might be some specific increases. I can inquire and see to what extent there has been and make a report to the hon. gentleman some time this week.
I had to remind the minister that there had in fact been nine increases in four years. A week later I asked him further:
Has the minister received from the Premier of Prince Edward Island and or the other Atlantic premiers protests against the outrageous increase in freight rates announced by the CNR and, if so, what was his response to these hon. gentlemen?
He replied:
I do not remember having received any telegram worded in the way the hon. gentleman mentioned.
On a matter of such compelling importance as transportation, I am amazed that any political leaders in the Atlantic region would regard the subject with anything other than extreme concern. Nor can I understand why the proposed freight rate increase would not have been a major item on the agenda of the meeting which the minister held with the premiers of the four eastern provinces. What the Atlantic region needs is not a freight increase but a decrease.
On July 1, just two days ago, we in Prince Edward Island celebrated the centenary of our entrance into confederation. A major if not the major issue in the negotiations which preceded our joining the dominion concerned transportation.
Through all the years since, along with our sister provinces by the eastern seas, PEI has been troubled and injured by the transportation policies of the national government. Commissions, investigations, subsidies have brought some amelioration but still the problem lingers, still our economic growth is held back. Being on the extremity of the transportation link, it is not surprising that this should be the case. We must get our goods to market cheaply and expeditiously. The manufactured products of the affluent centre of the country should not arrive in our area with an excessive write-up resultant from burdensome freight rates.
It has always been my belief that while the DREE programs can be helpful, it would be far sounder economics for the federal government to assist the region in areas of its own economic advantage. For instance, PEI is enjoying a rapidly expanding tourist trade. People in the industry are doing well in coping with the increased influx. Eastern Provincial Airways has given us the finest direct service from Montreal, but the Department of Transport, which might have been expected to give the fullest possible boost to a local industry which is expending and expansive, has been slow to upgrade the Charlottetown airport to the standing which the traffic of today, to say nothing of tomorrow, warrants.
In my view, the transportation issue, always of concern, requires a new look with the most urgent priority. I rejoice that the government has discovered the west and I hope that despite the blunderings of the Minister of Justice (Mr. Lang), the forthcoming meeting will be fruitful.
Adjournment Debate
However, I wonder why there was not a meeting of the Prime Minister (Mr. Trudeau) with the premiers of the Atlantic provinces. Because our problems are of long duration is no reason why we should be expected to rest easily with them.
Certainly, on this projected freight rate boost we will not be complaisant. I urge the minister to not only contact the provincial people, but also to give leadership himself to prevent this further blow to our regional economy.


Joseph-Phillippe Guay: Mr. Speaker, I wish to say to the hon. member for Hillsborough (Mr. Macquarrie) that the minister and the government are concerned with all regions, not only Prince Edward Island.
The minister reviewed the agreed charge and demurrage increases in a letter to the hon. member dated June 13. This was after the hon. member asked his question in the House. Canadian railways have given notice that they will increase agreed charges for all contracts which are one year old on September 1, 1973, by 6 per cent, and on other contracts when they become one year old. These contracts may be terminated by either side on three months written notice. Agreed charges are low-contract rates voluntarily agreed to by shippers and railways in return for which the shippers agreed to ship a stated percentage of their traffic by rail.
Shippers affected by the increases have a number of options. They can agree to the increased rates, they can ship by rail under the regular open tariff rates, or by other modes of transport, such as trucks; they can use their own trucks. But there is no general increase in freight rates anticipated in the maritimes.
Furthermore, it should be noted that under the Transport Act, after an agreed charge has been in effect for three months, any association or other body representative of shippers in any locality can complain to the minister that an agreed charge discriminates unjustly against a shipper or places his business at an unfair disadvantage. In such circumstances, the minister can refer the complaints to the Canadian Transport Commission for investigation.
With reference to demurrage charges, these are tariffs designed not to produce revenue but rather to impose a penalty so as to prevent shippers from using railway cars for storage. The railways gave notice that they would reduce free time for loading from 38 hours to 24 hours by July 1, 1973 in order to increase utilization of railway equipment. No changes in demurrage rates are proposed and I should stress that these charges can be quite flexible in special cases.
Just two weeks ago, the minister announced that the federal-provincial committee on Atlantic region transportation is making good progress toward finalizing recommendations for selective increases in west-bound freight rate subsidies. These increases would aid Atlantic region shippers east of Quebec City. The federal-provincial committee itself stated that the increased subsidies should apply to commodities manufactured in the Atlantic region as wall as to fishery and agricultural products.

July 3, 1973
Adjournment Debate


REGIONAL ECONOMIC EXPANSION-NORTHERN ONTARIO-GOVERNMENT ACTION FOLLOWING DISCUSSIONS WITH PROVINCIAL MINISTERS AND OFFICIALS
John R. Rodriguez: Mr. Speaker, on June 11 I asked the Minister of Regional Economic Expansion (Mr. Jamieson) a question with respect to action on the part of the government in relation to economic developments in Northern Ontario. The minister replied that discussions were underway between federal and provincial officials in connection with economic developments in the region.
Last Friday, June 29, the minister tabled a document entitled "Ontario: Economic Circumstances and Opportunities". This report on regional development affecting my part of the country is shallow and prejudicial; it reinforces the long-held colonialist view that the residents of Northern Ontario are condemned forever to be hewers of wood and drawers or water while their resources, both material and human, are shipped out to enrich other parts of the country and of the world.
In his comments at the end of the report the minister says: "I do not believe in instant solutions." Well, Mr. Speaker, he need have no fear on that score, because we in Northern Ontario have waited a long time to hear the federal government's position on regional development and we cannot but compare the time taken for this report to be prepared and tabled with the qestation period of the Asiatic elephant. That animal takes 22 months to deliver a calf, whereas this report took 100 years in the making but produced only a big fat zero. In other words, it is a nothing report. The minister says this is a working paper. Well, the fool in Shakespeare's Lear said: "Nothing will come of nothing."
The report makes out that Northern Ontario has a narrow economic base, slow employment growth, below average incomes and a high emigration rate. The report admits that the slow rate of population growth in northern Ontario is due mainly to the lack of employment opportunities, which has also caused rising unemployment and reduced income.
In a classic example of "pin the tail on the donkey" Liberal analysis, we find the report speaking of the hardships visited upon those areas of northern Ontario which were completely dependent upon a single resource, namely the gold mining areas. With the depletion of the ore reserves came the demise of the gold towns.
The report then goes on to say that despite increasing competition from alternate sources of supply in Canada and abroad, substantial output increases in mining, forestry and related manufacturing will probably occur, but- and I repeat, but-the employment gains will be small. In addition the report talks about prohibitive transportation costs and the uncertainty experienced as a result of mineral resource depletion in single-industry towns.
In the face of their own documentation of these problems, what does this report propose as solutions? For one, it proposes that there be a further expansion in the extraction and the processing of resources indigenous to the region. In other words, we are to let our non-renewable

resources be ripped from under our feet in the same manner that gold was ripped from under the feet of the gold mining towns. Indeed, while admitting to increasing competition from alternate sources of supply in Canada and abroad, there is no mention of the fact that much of this competition will come from the very multi-national corporations located in northern Ontario and presently engaged in the business of exploiting our resources.
Another so-called solution is the increase in the service industries associated with the growth of the major urban areas. The statement is made that urbanization itself is a job-creating industry. I ask, when there are no jobs, when there are no people, how will urbanization occur?
The report suggests-and this is incredible-that northern Ontario commence the exploitation and utilization of our abundant recreational resources. Now we are asked not only to deplete our mineral resources for shipment to southern Ontario and other countries where jobs are produced as a result of our labour, and not only are we asked to accelerate the chopping down of our forests, but we are slated to become southern Ontario's very own giant hot dog stand.
The report blatantly proposes tourism for northern Ontario, not simply as a solution to our problems, but as an accommodation to the people in southern Ontario where, as the report states, people are earning more money and finding that they have more time to devote to leisure activities.
It is clearly obvious that this report was written by individuals who have never set foot in northern Ontario and who view our area from a safe distance behind an Ottawa desk.
I offer eleven alternatives for regional development in northern Ontario. These are viable and completely within federal jurisdiction, and many of them have been concurred in by the Ontario provincial government. These alternatives are as follows: A permanent secretariat for regional development in northern Ontario; a regulatory agency within the secretariat to ensure long-range conservation and skilful exploitation of our non-renewable resources; a Crown corporation should be established for direct public investment in ventures in which private investors for one reason or another will not enter; designated special areas, a vehicle for establishing the proper infrastructure for the location of industrial parks in northern Ontario; incentives to the residents of northern Ontario in a graduated tax system declining as one moved into the designated area; disincentives for other wealthier parts of the province; selective transport and freight rate subsidies which should be co-ordinated with provincial carriers; the development of the growth centre complex for northern Ontario communities; direct government funding for municipalities in northern Ontario to develop cultural and social dimensions; co-ordinated air transport and communications systems throughout northern Ontario; and wherever incentive grants are made to corporations equity must be taken by the people of Canada, with no grants to foreign-owned companies.
These are proposed to the minister in all sincerity. In addition, I have invited him to visit northern Ontario on July 21 to meet and answer the questions of the people of northern Ontario.
July 3, 1973


Mr. Marcel Prud'homme (Parliamentary Secretary to Minister of Regional Economic Expansion):: Mr. Speaker, I thank you for your presentation, and I hope we will not make you stay up too late tonight.

Mr. Speaker, I am pleased to reply this evening to the hon. member for Nickel Belt (Mr. Rodriguez) as it gives me the opportunity to comment briefly on the progress achieved by the minister responsible for regional development policy in Canada. I think there is agreement that this is a most complex matter, and that it is certainly not subject to any one simple solution.
Notwithstanding this, I want to commend the hon. member for bringing forward the idea of a Crown corporation, an opinion that is shared by many of my colleagues on this side of the House. It is a possibility and should be studied further to see if it would be practical in northern Ontario. I mentioned some examples to the hon. member on Thursday, June 28, as recorded at page 5188 of the French version of Hansard, of federal-provincial corporations which have been established.
In order to determine this and in order to develop the most effective way in which to fight regional disparities in northern Ontario and other parts of Canada, the federal government must seek the most accurate and up to date data available. The Department of Regional Economic Expansion is researching this information and is cooperating with provincial government in seeking solutions. Last Friday the minister tabled in the House a series of staff papers or reports prepared by his department as a contribution to federal-provincial consultations on regional development policy.
I have been reading some of the reports on the economic circumstances and opportunities in each of the provinces. They are quite comprehensive and appear to me to be a pretty good analysis of the problems. I have looked only briefly at the report for Ontario and it appears to me to be an appropriate document to use as the basis for a wider investigation of the factors affecting regional development in that province. Hon. members will have their own opinions on how best to proceed. No doubt the provincial governments and various municipalities will as well, and with these there will be business groups and social organizations which will also want to contribute to the formation of a more effective regional development policy.
I am confident that progress is being made. The federal-provincial work forces established as a result of the minister's meetings with the provinces are hard at work. They are reviewing all the documentation that is available and they will be reaching conclusions when all the relevant data has been considered.


AGRICULTURE-EASTERN ONTARIO-REQUEST FOR AID TO FARMERS BECAUSE WET CONDITIONS PROHIBIT PLANTING OF CROPS
Walter David Baker: Mr. Speaker, on June 14, 1973, as recorded at page 4757 of Hansard, I directed a question to the Minister of Agriculture (Mr. Whelan), who I am pleased to see is in the House tonight, concerning the desperate situation of farmers in eastern
Adjournment Debate
Ontario, particularly farmers in parts of Dundas, Carleton and Grenville counties and indeed in other areas as well. The minister indicated that he had discussed the matter with the Ontario minister of agriculture and food and that his officials are carrying on the discussions.
This is not a satisfactory answer to the farmer who is caught in a dreadful position, not for the first time but for the second disastrous year in a row.
The farmer in eastern Ontario in 1972 is caught between the hammer and the anvil. First, it is the second year of disaster. Last year through wetness he could not take off the crop he planted, and this year he cannot get on his land to plant his crop. Never have I had as many anguished telephone calls from farmers as I have this year.
Secondly, farm input costs are galloping as never before. Statistics Canada has reported that farm input prices went up 6.1 per cent in the first quarter of 1973, a total increase of 10.2 per cent since the first quarter of 1972. This increase is fed by the cost of livestock feed, seed, labour, replacement costs, fertilizer, credit, all of the things vital to farmers. These are the costs of production that would be regulated by my party's policy of economic controls.
How critical the situation is can be shown by the figures given to me by a farmer constituent a few days ago. Oats in May of 1972 were $42.95 per ton; in June of 1973 they were $83.95 a ton. Barley in May of 1972 was $46.75 per ton; in June of 1973 it was $86.65. And so it goes. These prices are at Prescott, Ontario, with the federal subsidy of $6 per ton included.
Thirdly, the eastern Ontario farmer finds himself undermined by the weather. I cannot blame the government for the rain and the wet weather, but I am prepared to blame them if, in the face of a steadily worsening situation, they only consult and do not act. I do not accept the assertion that it is too early to take action. For many farmers it is in fact too late. I ask the federal government to take the lead in bringing a measure of relief to the eastern Ontario farmer.
On the long term basis there ought to be a full investigation under the Inquiries Act into farm production costs. On the short run basis I would like the process of federal-provincial consultation to be speeded up to arrive at a conclusion. I would also like the Ontario Federation of Agriculture and other farm organizations directly involved to be included as formal parties.
I would like the federal government to remember that there are few, if any, farmers who have any surplus of hay or silage. The barns of eastern Ontario are empty. I have never seen dairymen so unsure of themselves. I have never seen more auction sales of farms and herds that are now gone from production, many of them forever. I ask the minister to look at the pages of the weekly newspapers and see the auction sales ads.
I do not believe I have to remind you, Mr. Speaker, that the time for talk has come and gone; the time for leadership is now upon us. This has become a matter of public concern. The united counties of Stormont, Dundas and

July 3, 1973
Adjournment Debate
Glengarry have called on us. in no uncertain terms, for leadership. The Dundas County Federation of Agriculture has called for the same action. If these farms are to be saved, if there is to be a real effort to maintain them for supplying food in the future, I would like to see the following steps taken:
(1)	The counties of Dundas, Grenville and Carleton to be declared a disaster area.
(2)	That there be an assessment of the actual crop loss to farmers by the Crop Insurance Commission.
(3)	That the federal government take the lead with the Ontario government in suggesting an equal contribution by each of them to a forgiveable loan fund, to be provided to farmers on the basis of (a) an amount equal to at least two-thirds of the farmer's loss and (b) this loan to be forgiveable over a period of five years, with a provision for charging the loan, or the balance from time to time, against the farm over a period of five years, with the balance collectible if the farm is sold within the five year period; otherwise it ought to be forgiven at 20 per cent per year over the five year period.
If the answer is to be that this would be an expensive proposition, I ask the government to consider the expense to consumers as a result of the disaster in eastern Ontario, and in other parts of Ontario, and to stack that cost against the cost of the program itself. This is an industry in peril, and the situation requires dramatic action by the whole community. I hope we will have evidence from the Minister of Agriculture tonight of what dramatic action the government proposes.


Eugene Whelan: Mr. Speaker, the question that the hon. member raises is one of great concern to me and my officials, and to many people in different parts of Canada, because this is not the only part of Canada that had trouble this year from wet weather conditions. This is true with respect to the Peace River district in both Alberta and British Columbia. It is true of parts of northern Saskatchewan, where some 70 townships are affected by wet conditions. It is not an isolated condition in eastern Ontario; it also exists in great parts of the province of Quebec where farmers have not been able to sow crops.
As I mentioned to the hon. member earlier, I have discussed this situation with the Minister of Agriculture
for Ontario. Also his officials, and other officials from the province have had discussions with my department concerning this situation. However, I remind the hon. member that the principal responsibility for developing proposals for assistance rests with the provincial government or provincial governments concerned. The policy has been that the federal government will assist, upon request by the province or provinces concerned, with the cost of assistance programs where these programs would impose a financial hardship on the province or provinces.
The government's main program to assist farmers when crops are below normal is of course the crop insurance program, which is administered jointly with the provinces. I am sure all hon. members are aware of the very positive amendments which have been proposed to make crop insurance an even better buy. I have been telling farmers that crop insurance is a good investment, and I note that farmers across Canada have increased their participation in crop insurance by 100 per cent over last year. In eastern Canada, as anywhere else in Canada, those farmers with crop insurance have income protection.
The hon. member seems to have made a study of farm costs. I congratulate him on this. I hope he passes his information on to some of his colleagues who seem to think that farmers can produce food cheaply despite the high input costs to which they are subjected. Very little can be done about some of these costs when the products used, as in the case of protein, are imported. A disaster must be declared first and foremost by the prophets.
In the case of farmers in certain counties in eastern Ontario, special provisions have been made under the federal-provincial crop insurance agreement to extend the date for seeding to enable farmers to get a crop in and still qualify for crop insurance. Second, we have amended our agreement with the Ontario crop insurance commission to extend insurance coverage for corn, spring grain, soya beans and white and coloured beans even if farmers holding crop insurance contracts are not able to get a crop planted.
In conclusion, Mr. Speaker, I am aware of this situation and can assure the hon. member that if the federal government is approached by any province with disastrous crop conditions, this request will be given every consideration.
Motion agreed to and the House adjourned at 10.27 p.m.

Wednesday, July 4, 1973