1976-12-15

ROUTINE PROCEEDINGS


Mr. Roch La Salle (Joliette):: Mr. Speaker, pursuant to the provisions of Standing Order 43, I request the unanimous consent of the House to move a motion.
Given the undertaking made by the government in the Speech from the Throne to give additional assistance to Canadian athletes, and considering the answer given yesterday by the minister responsible, who apparently considers reasonable to earmark for that purpose a meagre 5 per cent of Loto Canada revenue, considering also the unavoidable responsibility of the government to provide the necessary support for training the athletes who will represent our country at the next Olympic Games in Moscow, I move, seconded by the hon. member for Hochelaga (Mr. Lavoie):
That the House unanimously recommend to the minister that a special and sufficient fund be created as soon as possible to ensure that our country be represented in Moscow by a delegation which will deserve our pride and will be a logical continuation of the recent Olympic Games in Montreal.


Mr. Speaker:: Order, please. The House has heard the motion of the hon. member. Pursuant to the provisions of 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:: There is not unanimous consent; therefore, the motion cannot be put.


INCOME TAX
Mr. Max Saltsman (Waterloo-Cambridge):: Mr. Speaker, I rise under the provisions of Standing Order 43 regarding a pressing and urgent matter, namely a report that the Minister of Finance (Mr. Macdonald) at the closed meeting of the First
Ministers indicated that the 1976 surtax on higher income earners, which was brought in as part of the government's anti-inflationary effort, will not be continued. I move, seconded by the hon. member for Winnipeg North (Mr. Orlikow):
That this House condemns the removal of the surtax on higher income earners.


Mr. Speaker:: Such a motion can be presented pursuant to Standing Order 43 only with the unanimous consent of the House. Is there unanimous consent?


Some hon. Members:: Agreed.


Some hon. Members:: No.


AGRICULTURE
Mr. Eudore Allard (Rimouski):: Mr. Speaker, under the provisions of Standing Order 43, I ask for the unanimous consent of the House to discuss a rather important matter.
Considering that, according to the Canadian Institute of Agriculture, Canada is on the verge of losing its place among the great food exporting countries of the world; that our country has all essential factors to undertake a serious program of research and development in agriculture; that programs of agricultural research and development are seriously affected by the lack of funds; and that it is a sector as important as energy or transport, I move, seconded by the hon. member for Bellechasse (Mr. Lambert):
That the House take as soon as possible every necessary step to intensify the programs of agricultural development and research in Canada.


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


Some hon. Members:: Agreed.


Some hon. Members:: No.


Mr. Speaker:: There is not unanimous consent; the motion therefore cannot be put.

December 15, 1976
Oral Questions



ORAL QUESTION PERIOD

[Stage Direction]
[ Translation]

Mr. Jacques Lavoie (Hochelaga):: Mr. Speaker, I have a question for the Solicitor General of Canada but, as he is absent, I will address it to his parliamentary secretary.
In answer to some questions yesterday, particularly those of the hon. members for Regina East and Lisgar to the Minister of Industry, Trade and Commerce, we were told that future imports will be reduced to the 1975 level rather than be maintained at the 1976 level so as to avoid the demise of the Canadian textile industry. Will the parliamentary secretary tell the House whether an effort will be made in the future to favour the Canadian industry rather than foreign firms, because today we can read "Made in China" on the labels of the prisoners' pants?


Mr. Art Lee (Parliamentary Secretary to Solicitor General):: I shall be gratified to take this question as a representation and report it to my minister as soon as possible.


ATOMIC ENERGY OF CANADA LIMITED
Mr. James Gillies (Don Valley):: Mr. Speaker, my question is directed to the Prime Minister. It arises out of some confusion in the Public Accounts Committee with regard to information concerning the use of agents, as well as the presentation of documents to that committee. Yesterday, answering a question in committee, the Minister of Energy, Mines and Resources stated:
My word to you is that there is no reference in the minutes of that cabinet meeting to any discussion of agents fee in Korea, Argentina or anywhere else.
On December 3, answering a question in the House, the Prime Minister said, presumably referring to the same cabinet meeting:
It happened in a cabinet committee at which I was not present but regarding which I checked the minutes. It was discussed with some of my colleagues and it appeared that Mr. Gray, head of AECL, did mention this $500 million contract, that no authorization was sought.
To maintain the consistency of the record and carry the matter to a conclusion, and since the essence of the matter put to the Minister of Energy, Mines and Resources was how much the cabinet knew about the matter at that time, would the Prime Minister clear up this seeming contradiction?


Right Hon. P. E. Trudeau (Prime Minister):: Yes, Mr. Speaker. I have not personally checked the minutes. When I gave that answer a couple of weeks ago I had a talk with some of the ministers involved with that cabinet meeting. Some of

them told me they had no recollection of that particular discussion. One told me he remembered the matter being raised and he thought there had perhaps been some talk of agents-he was not sure, but he thought there was. I am since informed that the minutes do not confirm that there was any talk of agents. I have not personally checked the minutes but I will do so and look at them for myself. Until I do, I will certainly stand by the statement of the Minister of Energy, Mines and Resources.


REFERENCE IN CABINET TO USE OF AGENTS-REQUEST FOR TABLING OF MINUTES OF CABINET MEETING
James McPhail Gillies: Hansard records very clearly on December 3 a statement by the right hon. gentleman that he did check the minutes, that the minutes were checked and that there was something there. In view of the importance of this matter, particularly in relationship to the whole question of how early the government of Canada, through the cabinet, knew about these transactions, would it be possible in this one particular case for the Prime Minister to permit that minute to be tabled with the committee so that any confusion or misunderstanding could once and for all be clearly straightened out?


Pierre Elliott Trudeau: I apologize, Mr. Speaker, I have not the quotation the hon. member puts before me. If I said that I had checked the minutes personally, that was certainly in error and I am sorry I told the House that. I certainly did not check them personally. I meant to say that I had had them checked, or that I was told they were checked, or words to that effect-I do not have the text. If you want to look up the record, the blues and tapes and so on, I would be perfectly happy to listen to them myself and if there is any mistake I would be happy to apologize. But I have not looked at the minutes myself.


Mr. Mazankowski:: Page 1634.


Pierre Elliott Trudeau: I do not think I have looked at minutes of cabinet in about eight years. I am talking of the minutes of discussion. I think that is what we are talking about, not the record of the decision but the minutes of the discussion itself.
I hesitate to give the commitment referred to by the hon. member. It seems to me that discussions in cabinet have to be privileged. If we have them checked by the minister, or by myself, and we say that there is nothing in the record of decision, I would hope that the House would take our word. If they do not, I might consider seeing privately a Privy Councillor from the other side and showing him a copy of that minute, but it would be, as the hon. member says, a unique exception to a request that never would be made again on any other subject, because I think it would be agreed on the other side that discussions in cabinet must be privileged by their very nature, and the work of recording secretaries must be kept privileged for the same reason.
December 15, 1976


POSSIBILITY OF LACK OF ENFORCEMENT OF SAFEGUARDS BY CORPORATION FOLLOWING SALE OF NUCLEAR REACTORS
Mr. David MacDonald (Egmont):: Mr. Speaker, I have a supplementary question on the same matter respecting the statement yesterday outside the House by the Minister of Energy, Mines and Resources that it has proved impossible to get information from one of the agents acting on behalf of AECL. In view of the considerable concern this has raised with respect to the general agreements both with Argentina and with South Korea, and in particular the adequacy of safeguards so important in the sale of both these nuclear reactors, has the Prime Minister conferred with the Minister of Energy, Mines and Resources in view of the conclusions that the minister has arrived at concerning the lack of information and whether he feels in the case of these two nuclear reactor sales to Argentina and South Korea that the safeguards arrangements will be adequately enforced by AECL, in view of the other difficulties that AECL has had with respect to the actual adequacy of information concerning the agents acting on its behalf?


Hon. Alastair Gillespie (Minister of Energy, Mines and Resources):: Mr. Speaker, the hon. member has asked whether AECL would conform with the safeguards. If I understood the question correctly, it seems to me that he is confusing the Atomic Energy Control Board, which is the agency of the government concerned with safeguards, and the bilateral arrangements made between the government of Canada and the government of Argentina, on the one hand, and between the government of Canada and the Republic of Korea on the other. Atomic Energy of Canada Limited is not involved in the safeguards per se. The International Atomic Energy Agency and the NPT are the international agencies with respect to Korea.


SUGGESTED FREEZE ON SALES OF REACTORS TO KOREA AND ARGENTINA IN VIEW OF DIFFICULTY GETTING INFORMATION FROM ITALIMPIANTI
David Samuel Horne MacDonald: Mr. Speaker, a supplementary question. It is my understanding that the minister is responsible for both those agencies and for the agreement. In view of the fact that the minister has been unable to get accurate information with respect, first of all, to the disposition of the funds provided to one firm, Italimpianti, as well as the actual purpose to which these funds were directed, in view of the possibility of establishing agreements which might not be in the interests of this country concerning the safeguards we have signed, would the minister indicate whether or not he has asked for a temporary freeze on both these sales until the numerous questions can be cleared up either in this House or in the public accounts committee?


Alastair William Gillespie: Mr. Speaker, I think the hon. member should reread what the Auditor General had to say. He raised some very legitimate questions on the matter of inadequate docu-
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mentation, and that is why this matter is before the Public Accounts Committee at the present time. We are trying to find the answers. We are trying to assist the committee to find those answers. I agree with the hon. member that we have not got all the information yet that we have asked for from Italimpianti, the partner from Italy. It is not correct to say we have no information. We tabled six documents yesterday in respect of that particular transaction. I have to admit to the House that my patience is running out as far as-


Some hon. Members:: Oh, oh!


Mr. Dick:: Why don't you table the documents?


Some hon. Members:: Oh, oh!


Alastair William Gillespie: Mr. Speaker, perhaps I might complete my answer. I think it is a very important one. As hon. members know, an arrangement was entered into between Atomic Energy of Canada Limited and Italimpianti, its partner. On my instructions they sought the information in respect of the agent's name. That information has not been provided to AECL. That is why I say that after a period of some two weeks my patience is running out. Accordingly, I have contacted the Department of Justice and sought their advice on how we might deal with this matter. I want to tell the House that I think within a very short period of time this matter will be placed in the hands of the RCMP.


NUCLEAR REACTORS-INQUIRY WHETHER NUCLEAR SUPPLIERS CLUB HAS ASKED FOR EXPLANATION OF DIFFICULTY WITH EXPORT PROGRAM
David Samuel Horne MacDonald: Mr. Speaker, at the beginning of his answer the Minister of Energy, Mines and Resources said it was a question of documentation as far as the Auditor General was concerned. If that is the question the Auditor General raised, the question we are raising is one of incompetency and misadministration of this government. In view of the meetings that have been held over the past year with the London Nuclear Suppliers Club, and the attempt to improve and upgrade the safeguards of nuclear sales that will take place on behalf of nuclear suppliers, would the Prime Minister indicate whether his government has given any explanation to the Nuclear Suppliers Club with regard to the considerable difficulty, the incompetence and mismanagement of our nuclear export program, or was he asked for one?


Pierre Elliott Trudeau: Mr. Speaker, as the minister pointed out, this has nothing to do with the Argentine sale. As far as the difficulty is concerned, and it is obvious that we are having difficulty since this has been the subject of discussion in the House, I might, if the House wishes, add to the answer I gave earlier to the hon. member for Don Valley. Do I have the permission of the House to come back to the question asked me?

December 15, 1976
Oral Questions


Some hon. Members:: Agreed.


Pierre Elliott Trudeau: I have reread the quotation and checked with the Minister of Finance, and what I had said there is in fact what happened except in so far as checking the record is concerned. The House wanted to know if there was discussion of an agent. In my answer I say there was a discussion of an agent. I said not all ministers remembered that, but one did, and that is the Minister of Finance, the former Minister of Energy, Mines and Resources. So in so far as the substance of what the opposition wants to know is concerned, Mr. Gray did mention the subject and it was remembered by the Minister of Finance. Whether it is in the written record or not, Mr. Speaker, would seem to me irrelevant at this point because it is admitted that at least one minister recalled and heard it.
So, if I reissue that admission, which is the very subject the opposition is concerned about, whether there was an agent and whether we knew it, that is admitted. With this in mind, I wonder if the hon. member for Don Valley still wants me to check the written record. For the time being I go by the record of the man who did check it personally who says it is not in the record. We are prepared to say that even if it is not in the record, the idea was conveyed to the minister and, therefore, it seems to me that settles the matter.


ATOMIC ENERGY OF CANADA LIMITED
Mr. Edward Broadbent (Oshawa-Whitby):: Mr. Speaker, I have a question either for the Prime Minister or the Minister of Energy, Mines and Resources. On December 3 the Prime Minister told me that no such approval was given for the hiring of Mr. Eisenberg by the subcommittee of cabinet. Since in the Committee of the House that met yesterday the present chairman of AECL said there was no record of approval for the hiring of Mr. Eisenberg on their records, I should like to ask the Prime Minister who did make this decision and on whose authority did Mr. Lome Gray the former president act, or was it entirely on his own initiative, to make this $20 million decision?


Pierre Elliott Trudeau: Mr. Speaker, the explanation which was given to me, and which I gave to the hon. member a couple of weeks ago, was that Mr. Gray reported on this. He explained the matter to the cabinet. He was not asking for authorization of cabinet or the cabinet committee. Presumably, he was not asking for that authorization because it is within his power as head of that corporation to make these decisions without cabinet record or an order in council. That would seem to me the very simple explanation and it certainly is in line with the general procedure for Crown corporations to answer questions when ministers ask them about general administration and budgetary matters but they are not bound by a decision of cabinet in order to make purchases or sales.


John Edward Broadbent: Mr. Speaker, to get it clearly on the record, as I recall I asked the Prime Minister the same question on December 3. When such information is brought to the attention of cabinet and no denial is issued by cabinet, is it therefore understood by the informing body, in this case AECL, that the cabinet is giving its approval for such course of action? I should like to ask the Prime Minister if that is his formal view: That the cabinet's response in fact amounted to approval for this course of action?


Pierre Elliott Trudeau: Mr. Speaker, it would seem to me that this is the kind of question that the Leader of the New Democratic Party would be able to answer himself. A Crown corporation informs cabinet of some proceedings and cabinet does not have the necessity or perhaps even the power to issue an Order in Council in that regard because it is dealing with a Crown corporation; it would seem to me that when I give information to the hon. member opposite that does not mean he necessarily approves it because I have given it to him. It would seem to me that is the way it happens when a Crown corporation explains-


Some hon. Members:: Oh, oh!


Pierre Elliott Trudeau: -It seems this is too difficult logic for the opposition, Mr. Speaker.


Some hon. Members:: Hear, hear!


John Edward Broadbent: Mr. Speaker, I suggest the Prime Minister is testing the credulity of all members of the House.


Some hon. Members:: Hear, hear!


AVAILABILITY TO COMMITTEE OF CONTRACTUAL ARRANGEMENTS WITH MR. EISENBERG
John Edward Broadbent: Mr. Speaker, I should like to put a supplementary question to the Minister of Energy, Mines and Resources. Since the details of the agreement for the sale of CANDU reactors to Argentina and South Korea and the contracts or information on contractual arrangements between AECL and Mr. Eisenberg has not been made available, would the minister assure the House that such contracts as exist in these important areas will be made available to the Public Accounts Committee for careful scrutiny? In case the minister is concerned about the question of commercial confidentiality, would he not agree that this could be dealt with by a special in-camera session or sessions of that committee in order that members of the House may finally get the facts on this important matter?


Alastair William Gillespie: Mr. Speaker, the hon. member raised two questions; first, the question of contracts between AECL and its agent, Mr. Eisenberg. Those have been tabled; they are now part of the public record. The other question he raised was about the commercial contracts themselves. I think he has put forward a very useful suggestion and that is that the Public Accounts Committee might consider contracts which are com-
December 15, 1976

mercially confidential. They are, incidentally, about two to three inches thick as well, but that information might be made available to the committee in camera, and I will be very pleased to take that up with the chairman of the committee.


PROPOSED FIXED CALENDAR FOR OPENING AND CLOSING OF SESSIONS
Mr. Adrien Lambert (Bellechasse):: Mr. Speaker, my question is directed to the President of the Privy Council.
Considering that motions were put to the House on at least two occasions for the adoption of a calendar setting session opening and closing dates, which would make it possible for all hon. members to benefit fully from their holidays-and I was about to add that these motions at the time had appeared to me to be well received by 99 per cent of hon. members-


Some hon. Members:: Hear, hear!


Joseph Adrien Henri Lambert: my question is this: Will the
President of the Privy Council introduce shortly a motion to that effect, so that we may know once and for all whether the government intends to adopt these recommendations of the House?


Hon. Allan J. MacEachen (President of the Privy Council):: Mr. Speaker, it is my intention to give notice of a motion, probably tomorrow, indicating the time of the adjournment of the House for the Christmas break. I am not aware of any recommendation from the House with respect to any broader timetable which would govern the opening and closing of sessions. I know it has been the subject of a subcommittee consideration, but to my knowledge no agreement or consensus has emerged with respect to an over-all arrangement which would make such a proposal workable.


Joseph Adrien Henri Lambert: 1 have a supplementary question, Mr. Speaker.
Since the minister intends to move a motion for recess tomorrow to conclude this first part of the session, will this motion provide for adjournment on Friday December 17 and for a very early return in January 1977.


Mr. Speaker:: Order, please. Of course, the hon. member's question anticipates on the order of the day for tomorrow.
Oral Questions


ATOMIC ENERGY OF CANADA LIMITED
Mr. Joe Clark (Leader of the Opposition):: Mr. Speaker-


Some hon. Members:: Hear, hear!


Some hon. Members:: Oh, oh!


An hon. Member:: Quiet, you rabble!


Charles Joseph Clark: My question is for the Prime Minister. A moment ago the Prime Minister indicated his need to consult the memory of the Minister of Finance on matters relating to the questions posed by my colleague, the hon. member for Don Valley, and others. I think it is clear that the memory of the Minister of Finance contains much of the information that is necessary to parliament and the Standing Committee on Public Accounts in relation to this matter, information that has not been forthcoming from the Minister of Energy, Mines and Resources. The Prime Minister also indicated that he recognised that we are dealing-


Some hon. Members:: Oh, oh!


An hon. Member:: Oh, shut up!


Charles Joseph Clark: -with a very unusual situation, which was sufficiently unusual to lead him to be prepared to take the unusual step of making available on a limited basis to this side a minute of the cabinet. Given the admittedly extraordinary nature of this matter and the special knowledge of the question of the Minister of Finance-


Some hon. Members:: Question.


Charles Joseph Clark: I apologise for all the necessary filling in of information for my colleagues. 1 wonder if the Prime Minister would be prepared to direct his colleague, the Minister of Finance to appear before the Standing Committee on Public Accounts to make available to the committee information which came to him relative to matters now under study by that committee during the period when he was minister of energy, mines and resources.


Some hon. Members:: Hear, hear!


Pierre Elliott Trudeau: I must respond to the question by reminding the House that I checked the memory of the minister because, as I had indicated in my previous answer, I was not a member of that committee and therefore 1 checked with the ministers who were. One of the ministers was the minister responsible at the time for AECL. Obviously, because of his closeness to the subject, he remembered details which apparently were not even recorded in the cabinet minute. If the committee feels it useful to hear the minister, I do not see any great difficulty with that. The committee will just have to ask the minister to appear, and I am sure he will appear.

Oral Questions


CANADA DEVELOPMENT CORPORATION
Mr. Sinclair Stevens (York-Simcoe):: Mr. Speaker, my question is for the Minister of Finance. As the minister responsible for the Canada Development Corporation and its chief shareholder on behalf of the people of Canada, would he indicate if CDC is committed to the investment of $7 million in a new venture to be known as Canadian Investment Partners which is to be headed by Israel Asper, former Liberal leader in Manitoba?


Hon. Donald S. Macdonald (Minister of Finance):: I have no information on that transaction, but I will be glad to inquire of the corporation. If it is appropriate to give the information to the House, the House will be informed of this.


Sinclair McKnight Stevens: My question is directed again to the Minister of Finance. In view of the fact that Mr. Asper as head of the new concern, under a management contract to the year 2000 will receive an annual fee of $100,000 plus expenses and a share of profits, would the minister indicate if he feels this is a fair fee, or does he agree with the staff members of the CDC that it is a high amount but they have no alternative but to go along with it as Mr. Asper will not accept any less?


Donald Stovel Macdonald: The CDC, of course, operates under management which has been expressly set up in an independent capacity. This is obviously the judgment of that management which, I might point out to the hon. gentleman, represents 30 per cent of the private shareholders as well as the government's interests. I will be glad to talk to the management and raise with them the question as to whether or not the details of the kind of contracts they make from time to time may be made available in the House to members or whether, in turn, the competitive position of CDC and its subsidiaries would be adversely affected.


Sinclair McKnight Stevens: Again I wish to direct my question to the Minister of Finance, and I would remind him that it is his ministerial responsibility which perhaps got him into the AECL problem. As it has been represented to CDC that Mr. Asper would bring to the partnership an option to acquire control of Global Communications Limited, that he has such an option and regards it as an exceptional investment opportunity, would the minister indicate if he feels it would be desirable for CDC to make such an indirect investment in Global, or does he feel that one state-run broadcasting network is enough in this country?


Mr. Speaker:: Order, please. With all due respect, this is not the form in which to seek the minister's opinion on that or any other subject.


BILINGUALISM
Mr. Eymard Corbin (Madawaska-Victoria):: Mr. Speaker, my question is directed to the Secretary of State.
Since the new government of Quebec has now and henceforth doomed Francophones outside Quebec to extinction as a linguistic group, although it does not seem to reflect the views of the great majority of Quebecers, could the Secretary of State inform the House if he intends to further reinforce the primary role of the government of Canada towards these French Canadians and if he seriously considers as a priority to further increase funds to be allocated to programs specially designed to support the French minority, according to the hopes expressed with strength and conviction by association representatives?


Hon. John Roberts (Secretary of State):: Yes, Mr. Speaker, we are resolutely determined to assist these groups in their fight against assimilation and we have the matter under active consideration at present.


INCOME TAX
Max Saltsman: Mr. Speaker, I should like to direct my question to the Minister of Finance and ask him whether he would confirm that while the AIB program is to continue until 1978 the surtax on higher incomes which was part of the government's anti-inflation effort, is to be discontinued after this year.


Donald Stovel Macdonald: Mr. Speaker, as the hon. member will know from the tax bill which is now before the House, and which is for the calendar year 1976 only, we have made no indication of an extension into 1977.


Max Saltsman: Will the minister assure the House that he intends to continue this surtax at least as long as the period of the anti-inflation controls?


Donald Stovel Macdonald: I would not give that assurance, Mr. Speaker.


An hon. Member:: Why not?
December 15, 1976



GOVERNMENT ADMINISTRATION


Mr. Ray Hnatyshyn (Saskatoon-Biggar):: Mr. Speaker, 1 would like to direct my question to the Prime Minister. On December 10 the Postmaster General in a rather facile way referred to the fact that the Post Office had taken advantage of a freebee as far as advertising is concerned. Are there any guidelines with respect to any departmental acceptance of so-called freebees in publications or in the communications area about which it is often said that it is not what you know but who you know.


Pierre Elliott Trudeau: Mr. Speaker, I am sorry, but I do not know what "freebee" means.


An hon. Member:: Ask Otto Lang.


An hon. Member:: Ask Eisenberg.


Ramon John Hnatyshyn: I do not want to define too precisely what a freebee is, but the Prime Minister might ask the Minister of National Health and Welfare or the Minister of Consumer and Corporate Affairs about plane rides.
However, I would like to ask the Prime Minister whether there are any guidelines with respect to the acceptance of free advertising in the communications industry or in the publication industry. I ask that specific question with respect to government departments. Will the Prime Minister table the guidelines, if there are any?


Pierre Elliott Trudeau: Mr. Speaker, I do not understand the question. I will look at it.



MANPOWER


Mr. Lincoln M. Alexander (Hamilton West):: Mr. Speaker, I would like to direct a question to the Minister of Manpower and Immigration. I hope he has changed his mind, in light of the very high level of unemployment this country faces as a result of the inadequacies of the programs of this government. The minister will recall that he indicated that the Canada works program and the young Canada works program will not be ready for implementation until some time in April. Notwithstanding that the UIC bill will not be passed in any great hurry, I wonder whether the minister can advise whether he is now prepared to see to it that the Canada works program and the young Canada works program are implemented on January 4, calling for some $230 million; in other words, not waiting until the completion of the UIC amendment debate. Is this what the minister is thinking about now?


Hon. Jack Cullen (Minister of Manpower and Immigration):: No, Mr. Speaker. Given the increase not only on the
Oral Questions
$100 million but also the $150 million increase and the fact that we want to make this program work, there will be an overlapping of LIP, the Canada works program and the young Canada works program. I think we are moving along at an appropriate pace, given the restraints. We do not want to have an inflationary impact or push the deficit too far.


Lincoln MacCauley Alexander: The minister has not answered my question. Has the minister sent out information to several manpower offices across this country to the effect that applications can be received or will be ready by January 4 and the deadline of February 4 will be implemented in terms of receiving applications under the Canada works program and the young Canada works program? In other words, are we not waiting until April?


Jack Sydney George (Bud) Cullen: I do not know whether the hon. member reads his material, but it has always been the situation that the program would in fact be implemented, but the applications would of course come prior to the April deadline.



EFFECT OF MINIMUM WAGE RATES WHICH ARE HIGHER THAN THOSE OF UNITED STATES ON UNEMPLOYMENT

Mr. Bill Clarke (Vancouver Quadra):: Mr. Speaker, my question is also for the Minister of Manpower and Immigration. In light of the bleak prospect of continuing high unemployment, I would like to ask the minister if his department has reviewed the minimum wage rates in Canada and compared them with those in the United States, which are much lower, and can the minister indicate what effect our relatively high rates have on our competitive position with that of our trading partner, the United States, and ultimately on unemployment in Canada?


Jack Sydney George (Bud) Cullen: Mr. Speaker, this does not exactly come under my department, but I do not think the hon. member would go across the country suggesting that the minimum rates set in Canada are too high.



WEIGHTS AND MEASURES


Mr. Dan McKenzie (Winnipeg South Centre):: Mr. Speaker, my question is for the Minister of Industry, Trade and Commerce, who is in charge of metric conversion. In a recent edition of the Engineering Journal, published by the Engineering Institute of Canada, there is an article which states that from midnight on January 3, 1977 the whole of Canada except Ottawa will be converting to metric time. Can the minister confirm or deny this report, and does the government have any plans to switch to metric time?

December 15, 1976
Oral Questions
[ Translation]


Hon. Jean Chretien (Minister of Industry, Trade and Commerce):: Mr. Speaker, I am not aware of that problem. I will look into it and report to the House tomorrow.



EXTERNAL AFFAIRS


Mr. Dean Whiteway (Selkirk):: Mr. Speaker, my question is for the Secretary of State for External Affairs. It is really supplementary to the question asked by the hon. member for Brandon-Souris regarding the Garrison diversion. My question is this: why, why, why, why would the government-


Some hon. Members:: Oh, oh!


Mr. Speaker:: Order, please. One why is enough.


Dean Waldon Whiteway: Why did the government of Canada agree to the extension of the IJC report on the Garrison diversion without asking for a guarantee of a moratorium on construction?


Hon. Donald C. Jamieson (Secretary of State for External Affairs):: Mr. Speaker, with all due respect I do not think I can answer that question in detail.


Some hon. Members:: Why, why, why?


Donald Campbell Jamieson: Well, I will tell you; it is because, because, because.


Some hon. Members:: Hear, hear!


Donald Campbell Jamieson: I appreciate the hon. member's interest and concern, and I would be glad to give him a detailed written explanation. I simply say that this is not something which it is possible to answer within the constraints of the question period.



NATIONAL DEFENCE


Mr. Steven E. Paproski (Edmonton Centre):: Mr. Speaker-


Some hon. Members:: Hear, hear!


Steve Eugene Paproski: I would like to ask my question at this time, but not because His Worship Mayor Cavanaugh of the great city of Edmonton is in your gallery. My question is to the Minister of National Defence. Is it true that when the airborne troops are moved to Petawawa and Ottawa after each jump

they will have to send their parachutes back to Edmonton for repacking.


Mr. Speaker:: Order, please.


Steve Eugene Paproski: Mr. Speaker-


Mr. Speaker:: Order, please. The hon. member for Victoria.


Some hon. Members:: Oh, oh!


Steve Eugene Paproski: Mr. Speaker, on a question of privilege-


Mr. Speaker:: Order, please.



ALLEGATION DISBANDMENT OF AIRBORNE REGIMENT PLANNED-EFFECT OF REMOVAL OF REGIMENT FROM PARACHUTE-PACKING FACILITIES

Mr. Allan B. McKinnon (Victoria):: Mr. Speaker, my question is for the Minister of National Defence. The minister announced outside this House on November 29 that the Canadian Airborne Regiment is being moved to Petawawa. It now appears that one commando is coming to Ottawa, and the other half of the regiment is going to Petawawa. The majority of regimental headquarters will be posted out and their own artillery and engineer units dissolved. Would it not be more truthful for the minister to confess that this is the first stage in a planned program to disband the Airborne Regiment?


Hon. Barney Danson (Minister of National Defence):: Mr. Speaker, I do not appreciate the inference that what I said before was not truthful. Perhaps I should answer the hon. member for Edmonton Centre first. The parachutes are packed before the troops jump.


Some hon. Members:: Hear, hear!


Steve Eugene Paproski: In Edmonton they think you are really funny.


Barnett Jerome Danson: The airborne regiment will be made up of three commandos. Number one commando will be based at Uplands.


An hon. Member:: They will open on impact.


Allan Bruce McKinnon: Can the minister explain in what way it improves the economy or efficiency of an airborne unit to remove it from its air support, its regimental headquarters and its parachute packing facilities?


Barnett Jerome Danson: I hope that the hon. gentlemen opposite who aspire someday to sit on this side of the House will not look at each military decision in such a narrow context. This is part of a much broader rationalization of forces and the effectiveness of our combat units, with a combat unit west, a combat unit east and the regimental combat group central.
December 15, 1976



ALLEGED NECESSITY OF SENDING PARACHUTES OF AIRBORNE


Steve Eugene Paproski: A supplementary question, Mr. Speaker.


Mr. Speaker:: Order, please. I was evidently mistaken in stopping the hon. member for Edmonton Centre from asking a question which did not appear to me to be serious. However, I see that it was a serious question and I recognize the hon. member for Edmonton Centre.


Some hon. Members:: Hear, hear!


Steve Eugene Paproski: Mr. Speaker, my question was serious and is directed to the Minister of National Defence. Is it true that when the airborne troops are moved to Petawawa near Ottawa after each jump they will have to send their parachutes back to Edmonton for repacking, as the parachute packing unit is not scheduled to move; and can the minister explain how this will improve the efficiency, the training and reduce the cost of the airborne regiment?


Barnett Jerome Danson: Mr. Speaker, the parachute packing unit is scheduled to move its operations, and I am sure my hon. friend-


Steve Eugene Paproski: When?


Barnett Jerome Danson: Well, Mr. Speaker, I would not want my hon. friend to think I was two-phased.


Mr. Fairweather:: Oh, dear; it is time to adjourn.



REQUEST FOR REVERSAL OF DECISION TO MOVE AIRBORNE REGIMENT FROM EDMONTON

Steve Eugene Paproski: Mr. Speaker, may I direct a supplementary question to the Minister of National Defence-no, I will direct it to the Prime Minister. Yesterday the Minister of National Defence complained on two or three occasions that he was unable to hear the questions directed to him during the question period because of the interference of his colleagues. Would the Prime Minister now arrange for the Minister of National Defence to receive representations concerning the folly of the removal of the Canadian airborne regiment to Petawawa from those concerned in the regiment and in western Canada, so that the minister can reverse his initial decision without the interference of his colleagues?


Some hon. Members:: Hear, hear!


Barnett Jerome Danson: Mr. Speaker, I am not yet Prime Minister, but I will answer the question.


Some hon. Members:: Hear, hear!


Some hon. Members:: Oh, oh!
Oral Questions


Mr. Baker (Grenville-Carleton):: John Turner, you had better listen.


Steve Eugene Paproski: Good bye Barney.


Barnett Jerome Danson: I would not want to mislead the hon. gentleman by indicating that that decision will be reversed. As he may well know, I have had serious discussions with Mayor Cavanagh this morning, who made the same representations. I hope the people of Edmonton understand the necessity of this military decision. I very much appreciate the attachment of the people of Edmonton to the airborne regiment and their understanding of the armed forces. I am sure they will be glad to learn it is part of a rational plan for the betterment of the armed forces. When troops must be moved, it is difficult for the communities concerned because attachments must be broken. That is part of the price we must pay, and I feel badly for the people of Edmonton who must lose such a fine organization.


Steve Eugene Paproski: Thank you for your answer, Mr. Prime Minister.



BORROWERS AND DEPOSITORS PROTECTION ACT


Mr. John Rodriguez (Nickel Belt):: Mr. Speaker, my question is for the Minister of Consumer and Corporate Affairs. Since 20 major areas in Bill C-16, the borrowers and depositors protection bill, are governed by regulation, including such areas as the criminal interest rate, etc., and since the committee on health and welfare is now hearing witnesses and it is impossible to discuss the bill intelligently unless the minister tables the regulations, will the minister assure the House that he will table the regulations governing that bill so that we may discuss it intelligently, and will these regulations be tabled before the next meeting of the committee?


Hon. A. C. Abbott (Minister of Consumer and Corporate Affairs):: Mr. Speaker, I am sorry the hon. member finds it difficult to discuss the bill intelligently. I must confess that, after hearing his interventions at the last committee meeting, I understand that no matter whether we put the regulations before him now or later, he would not be able to discuss it any more intelligently.


Some hon. Members:: Oh, oh!


Charles Joseph Clark: Even the new ministers are arrogant.


Anthony Chisholm Abbott: However, as I said at the last committee hearing, it is not customary to provide draft regulations prior to a bill being passed.


Mr. Hees:: Stanley will not like that one bit.

December 15, 1976
Oral Questions


John R. Rodriguez: A supplementary question, Mr. Speaker. The minister's answer is indicative of the arrogance with which this government treats committees.


Some hon. Members:: Hear, hear!


John R. Rodriguez: This government has in the past tabled regulations concerning bills. I ask the minister again, is he prepared to table the regulations governing the bill?


Some hon. Members:: Oh, oh!


Mr. Speaker:: Order, please.


Anthony Chisholm Abbott: Mr. Speaker, I repeat what I said at the committee hearings, "Consistent with practice, regulations will be tabled as soon as possible" and, as I indicated at the time of the committee meetings, certain regulations about which members of the committee were particularly concerned will be tabled at an early stage of the clause by clause study. As I said at that time, there is nothing to prevent the hon. member from discussing other areas of the bill at this time, and I welcome his interventions.



DATE AND METHOD OF APPLICATION OF MEASURES GOVERNING INTERNATIONAL BOYCOTTS

Hon. Herb Gray (Windsor West):: Mr. Speaker, 1 have a question for the Minister of Industry, Trade and Commerce. The Secretary of State for External Affairs, in a statement he made on October 21 on behalf of the government, announced certain measures which the government had decided to take, to deal with the application of the Arab boycott in Canada. Therefore, I ask the minister, have these measures as yet been put into effect? If not, exactly when and how will this be done?
[ Translation]


Joseph Jacques Jean Chrétien: Mr. Speaker, I have already had conversations with some of my officials in this regard and ordered them to act and implement as soon as possible the rules passed by the cabinet. I believe the orders given by cabinet are, in the main, being followed by governmental organizations.



TRANSPORT


Mr. John C. Crosbie (St. John's West):: Mr. Speaker, my question is for the Minister of Transport. Several weeks ago the president of the CNR recommended the appointment of a royal commission on transportation for Newfoundland. I

believe the minister met with the Premier of Newfoundland and his ministers today. Can he tell us his present views on the appointment of such a royal commission and whether he agrees to certain conditions in connection with continuing the same quality of service as now exists? Has the minister anything to report?


Hon. Otto E. Lang (Minister of Transport):: Mr. Speaker, I will simply report that we had a very positive discussion about trying to work together, to solve the problems of transportation in Newfoundland. We discussed the question of the commission, and will be discussing it further in an effort to find the best possible vehicle for making sure that the right decisions are made as quickly as possible for the good of Newfoundland.


John Carnell Crosbie: A supplementary question, Mr. Speaker. Was the minister discussing with the province a joint commission, or how is the province being involved in the establishment of the commission? What was discussed in that connection?


Otto Emil Lang: Mr. Speaker, I think I can put my own view forward by saying that any commission would have to be fully supported and endorsed by both governments in order to be successful. I would not want to go further into the details of the particular proposal at this time.



INDIAN AFFAIRS


Mr. Jack Murta (Lisgar):: Mr. Speaker, my question is for the Minister of Indian Affairs and Northern Development. On December 29, 1975, a memorandum stated that terms of reference for an independent audit of Thunderbird Lodge, northern Manitoba, were to be drawn up by the local representatives both of DREE and the Department of Indian Affairs. Was this done? If so, what was the outcome of the audit which was supposed to have taken place?


Hon. Warren Allmand (Minister of Indian Affairs and Northern Development):: Mr. Speaker, I will have to check on that particular document, but the papers I read in the briefing concerning Thunderbird Lodge indicated that the department felt this would be a good risk, and consequently they went ahead.


Jack Burnett Murta: A supplementary question, Mr. Speaker. The memorandum also went on to say that a local Indian Affairs official will explore with the Department of Justice the legal implications involved in an apparent breach of trust regarding the use of funds for purposes other than those for which they were provided. Was this matter taken up with the Department of Justice? If so, can the minister report on the outcome of that investigation?


William Warren Allmand: Mr. Speaker, I recall asking my officials about this point; they responded negatively, but I will check
December 15, 1976

once more, in view of the specific question the hon. member asked.



PUBLIC SERVICE


Walter David Baker: Mr. Speaker, my question for the President of the Treasury Board, to whom I gave short notice, concerns the case of federal veterinarians and the interim payment it was indicated would be made while the AIB is looking at the settlement proposed between the government and the employees. Can the minister indicate why it is that employees in Manitoba and Saskatchewan have had their interim payment, I think quite properly? However, all employees in that particular group have not yet had it to date. If the minister has not had time to check the matter, I would appreciate it if he would do so.


Hon. Robert K. Andras (President of the Treasury Board):: That is the case, Mr. Speaker. The hon. member spoke to me about two o'clock. I will certainly take advantage of the notice I have been given and get an answer for him tomorrow.



MESSAGE FROM THE SENATE

Mr. Speaker:: I have the honour to inform the House that a message has been received from the Senate informing this House that the Senate have passed Bill S-2, an act respecting Bell Canada, to which the concurrence of this House is desired.
I also have the honour to inform the House that a message has been received from the Senate informing this House that the Senate have passed Bill C-28, an act for granting to Her Majesty certain sums of money for the public service for the financial year ending 31 March, 1977.



THE ROYAL ASSENT

Mr. Speaker:: 

ROUTINE PROCEEDINGS


[Stage Direction]
First report of Standing Committee on Miscellaneous Estimates, in both official languages.-Mr. Langlois.
[Editor's Note: For text of above report, see today's Votes and Proceedings.]

Mr. Speaker:: I have the honour to inform the House that the Clerk of the House has laid upon the table the sixth report of the Clerk of Petitions, stating that he has examined the petition presented by the hon. member for Battle River (Mr. Malone) and finds that it meets the requirements of the Standing Orders as to form.


[Stage Direction]
TABLING OF REPORT OF ADVISORY COMMITTEE-MR. LeBLANC (WESTMORLAND-KENT)
Hon. Rom£o Le Blanc (Minister of Fisheries and the Environment): Mr. Speaker, I wish to table the report of the advisory committee of the Atmospheric Environment Service on stratospheric pollution entitled: "Enthropogenic modification of the ozone layer-The CFM effect".

Mr. Ralph E. Goodale (Parliamentary Secretary to President of the Privy Council):: Mr. Speaker, I would ask that all

December 15, 1976
Income Tax
questions and all notices of motions for the production of papers be allowed to stand today.


Mr. Speaker:: Is that agreed?


Some hon. Members:: Agreed.



GOVERNMENT ORDERS


[Stage Direction]
The House resumed, from Thursday, December 2, consideration in committee of Bill C-22, to amend the statute law relating to income tax-Mr. Macdonald (Rosedale)-Mr. Turner in the chair.
The Deputy Chairman:: When the House rose on Thursday, December 2,	1976, clause 1 of the bill was under
consideration.
On clause 1-


Donald Stovel Macdonald: Mr. Chairman, on the last occasion when we discussed this matter, the hon. member for Winnipeg North had raised a number of questions about the beneficiaries of registered retirement savings plans and registered pension plans, and in particular suggested that deferred income plans of this kind were of particular benefit to those with higher incomes. I have taken advantage of the break in the debate to have some examination made thereof. In particular, I want to bring to the committee and to the hon. member the conclusions from examining the tax records for 1974 which is the last year for which the complete analysis is available. Of course, the 1975 returns which were filed on or before April 30, 1976, have not as yet been fully calculated.
The present $2,500 limit upon contributions to RRSPs, for those who belong to an employee pension plan, is reached at an earned income level of $12,500, which is well below the average family income. The change,of course, was made for the purpose of offsetting the effects of inflation on the limits which had been in effect since 1971. In 1974, the latest year for which the data are available, the average family income was $14,485.
There is a large number of employees whose contractual pension plan contributions, which are expressed as a percentage of employment income, have increased as a result of the growth in nominal incomes and now exceed the limits. Such employees do not get a full deduction for their contributions, while their pension benefits will be fully taxable. The increase in the limits was felt necessary, given the large number of employees who are affected in this manner by the current limits. For the 1974 taxation year, approximately 2.87 million taxpayers claimed a deduction for registered pension plan

contributions totalling $1.3 billion dollars, and 936,000 taxpayers claimed RRSP contributions totalling $1.2 billion.
These figures can be broken down as follows: first, I will deal with registered pension plan contributions. The number of those with an annual income between zero and $10,000 is 1,231,712. For those in the income level between $10,000 and $15,000, the number is 1,020,101. For those between $15,000 and $25,000, the number is 530,845, and for those earning $25,000 and over the number is 94,889. By way of comparison with the registered retirement savings plan, the number of those with an annual income between zero and $10,000 is 229,331. In the $10,000 to $15,000 group, the number is 269,299. In the $15,000 to $25,000 income group, the number of taxpayers is 287,221; and $25,000 and over, 150,535.
It will be clear that a substantial number of taxpayers with modest income have been in the position to take advantage of either the registered pension plan deduction or the registered retirement savings plan deduction. In that sense, it would be a mistake to regard these particular deductions as being of benefit only, or principally, to those in the highest income level.


Mr. Douglas (Nanaimo-Cowichan-The Islands):: Mr. Chairman, in respect of the information which the minister has just given to the committee, can he also give the committee the respective benefits which will be derived by each of the income groups to which he has referred?


Donald Stovel Macdonald: The relevant benefit in terms of retirement pension secured? What, exactly, does the hon. member mean?


Thomas Clement (Tommy) Douglas: In terms of the income tax savings from the deductibility which they are permitted under these plans.


Donald Stovel Macdonald: Mr. Chairman, I cannot give it in individual cases. Naturally, the higher the obligation to pay tax, the larger the dollar amount which will be of assistance to taxpayers.


Thomas Clement (Tommy) Douglas: Does the minister have the average amount, in each of the categories, which will be saved by the respective members of those groups with regard to the amount of tax savings from which they will benefit?


Donald Stovel Macdonald: No, Mr. Chairman. We have not done a computer run for the purpose of obtaining that information.


Max Saltsman: I am very disappointed with the Minister of Finance, who can often be very straightforward. The question asked by my hon. friend from Nanaimo-Cowichan-The Islands is really the relevant question. It is not enough to know the numbers of people who are benefiting. The minister keeps repeating, on these occasions, that he has knocked 1 xh million people or so from the tax rolls. Yes-probably the ones who
December 15, 1976

were paying 75 cents on the dollar in tax. In the last five years or so it would seem so many taxpayers have been taken off the rolls that nobody is left to pay taxes at all. But taxes are still paid. The situation is somewhat like that of a large corporation which announces it has 12,000 shareholders. What we are not told is how many of those shareholders hold 20 per cent, or perhaps 90 per cent of the stock. That is the point we are trying to make-not that some people in the lower or middle income groups derive no benefit from RRSPs, but that a disproportionate benefit goes to those with high incomes.
The present system is becoming increasingly regressive, and there is no greater indication of this than what the minister is doing with regard to RRSPs. He is proposing that in some cases the ceiling be raised from $2,500 to $3,500, and from $4,000 to $5,500. I ask the minister, how many ordinary wage-earners are able to save $3,500 a year? How many ordinary wage earners are able to save $5,500 a year? In this case, the concession applies to both wage earners, where a couple is concerned, so we are talking about a family capable of saving $11,000 a year. This is hardly the small-time proletariat; it is hardly the family of the ordinary man who works in the shop.
The information which the Minister of Finance is putting before the House in attempting to rebut the excellent argument made by my hon. friend from Winnipeg North is really a put-on. I should like to quote from the words used by the National Council of Welfare: "The present system is totally regressive and the minister now proposes to make it more so."
I want to confine my remarks to two main issues: first, the raising of the ceilings and the effect this will have: second, the removal of the 10 per cent surtax. I propose to quote further from an article in which the Welfare Council says: "Canada's hidden welfare system allows the federal government to transfer billions of dollars to wealthy taxpayers through inequitable income tax deductions and exemptions". This is what the article says:
In a report released last night, the Council estimates that 17 "subsidies" such as education deductions and registered home ownership plans cost the government $6.4 billion in lost revenue in 1974 with the bulk going to high-income taxpayers.
A chart based on information from the Department of National Revenue shows the average benefit per taxpayer from the 17 subsidies in 1974 was about $244 for those with incomes less than $5,000.
After all, everybody in society does get some benefit from the working of the tax system in one way or another. What we are contending is that the benefits should be equitable. The article goes on:
But persons earning more than $50,000 realized a tax saving of about $4,000.
That is a terrible state of affairs. It certainly shows that society is not moving in the direction of equality or shared responsibility in terms of bearing the tax load. To continue:
No government would dare propose such a program. Yet the hidden welfare system does just that and there is hardly a protest to be heard.
This is one of the points we are trying to make today. If the government wants to subsidize the rich, if the government wants to encourage savings, let it grant a subsidy and let that subsidy be open, rather than buried in the tax system while the
Income Tax
pretence is maintained that the major welfare benefits go to the poor rather than to the wealthy as is the case with these particular programs. I turn, now, to the issue of the 10 per cent surtax. This afternoon I asked the minister about his intentions. It is becoming common knowledge that the minister has no intention of continuing the 10 per cent surtax beyond this year. This afternoon I asked the minister a question in order to confirm whether that was his position or not. He was evasive; he did not answer my inquiry. When I gave him a further opportunity to clarify the matter and sought an assurance that the stories circulating to the effect that he intends to remove the 5 per cent surtax at the end of the year were wrong, and that he intends to continue the tax for at least the duration of the anti-inflation program, he did not answer that question either and refused to give such an assurance. I should like to quote something the minister had to say on an earlier occasion when he was asked about the surtax placed upon higher incomes as part of the anti-inflation effort. He stated on that occasion:
In terms of fairness and equity, it is, we believe, only fair that those at the upper end of the income scale, who are able to absorb the impact of rising living costs without undue hardship, should be asked to shoulder some share of the burden ... It is fair to ask those who already enjoy ample means to make a proportionately greater sacrifice in the national interest.
Those were the minister's words. The idea behind that statement was to reassure people that while it was easy enough for the government, under the AIB program, to control increases in wages and salaries, it was admittedly far more difficult to control higher incomes and incomes at the professional level. The 5 per cent surtax, meagre as it is, was designed to siphon off part of the extra income as a way of injecting some element of fairness, at least, into this program. The very least the minister can do, in the interest of maintaining some sense of fairness, is to assure the House that the 5 per cent surtax will remain in place, unchanged, or possibly increased, until the conclusion of the AIB program.
What justification is there for the government to continue rolling back wages and salaries when it is not prepared to continue even this small penalty affecting those with higher incomes? Not only that, Mr. Chairman, but by raising the ceilings the minister is proposing to allow these groups to shelter more and more of their income from taxation. Let me quote from the first annual report of the Anti-Inflation Board to indicate that professional income has in fact been rising considerably faster than has wage and salary income:
Preliminary information indicates that on average, the net incomes of professionals rose 13.7 per cent in the first compliance period, from the base period. Table 3.3 provides an initial tabulation of approximately 7,500 reports processed by the end of August. Several problems make it extremely difficult to interpret the data. The measurement of professional "net incomes" does not reflect simply the change in the rate of remuneration professionals receive. The changes in net incomes are also influenced by such factors as changed workload, changes in the type of work performed, and the costs of providing new investment in working capital and overhead. These factors are very difficult, if not impossible-
The word I want to stress there, Mr. Chairman, is "impossible". Everybody knows that if you try to monitor all income, some incomes are more difficult to monitor than others. We

December 15, 1976
Income Tax
recognize that, and this is where the importance of a surtax of some kind comes in. It tries to take into account the fact that some incomes are difficult to monitor and that they will rise. In order to get a program accepted in terms of its fair application, these kinds of incomes have to be treated in a different way from, let us say, wages and salaries, which are very easy to monitor.
Table 3.3 in the same report shows average net incomes of professional practitioners by category. Dentists' incomes show a percentage change of 19.6 per cent. The argument made about professional income is that you cannot say that because it increases it is a reflection of increased fees. It could be that professionals are working longer and harder, though my personal experience of dentists leads me to wonder how many more waiting rooms and chairs they are going to have to shunt people around. I do not know where they get the hours of the day or the extra chairs from to work harder, and this 19.6 per cent has to be a reflection of increased pricing and nothing more. Either that, or dentists have become superhuman overnight.
In the case of engineers, their income percentage change is 20.2 per cent, according to the report. Lawyers are up 14.6 per cent. If the minister wonders why his AIB program has not received the acceptance which he hoped for, here is one clear indication of what every workingman in this country must see as bad faith on the part of the government. The government has sat on wages and salaries. It has controlled wages and salaries. But when it comes to controlling high incomes, not only does it put a very meagre 10 per cent surtax on those incomes but at the earliest opportunity it tucks its tail between its legs and runs from it instead of continuing it for the duration of the program. To ask people to accept that this is a fair approach to this kind of problem is to ask too much.
I want to raise one additional problem with Bill C-22, Mr. Chairman, and it has to do particularly with registered plans and encouragement to save. When one deals with economic matters one can never be certain that one knows exactly what are the consequences of any particular program. But there is a growing body of opinion now-as well, 1 think, as growing evidence-which indicates that this encouragement to save may be saving ourselves right into a depression, that we are saving too much.
Perhaps one of the reasons-and it is only one-that interest rates will continue to be so high in this country and why mortgage rates are so high is these enormously attractive tax benefits the government offers people with savings. All the other forms of investment have to compete with this very attractive form of shelter income. The government has to consider what it is doing in this respect, aside from the equity argument that is made.
I do not buy for a moment the minister's Bell Telephone argument that all of the people buying registered retirement savings plans are widows and orphans, and that all of the poor are benefiting from that kind of program. The very ceilings of the program are an indication that, disproportionately, the rich are getting enormous benefits, or those with substantial sav-

ings are getting the benefit, or those with high tax liability are getting the benefit.
One can argue that even though a program may be inequitable, or that there may be substantial costs which working people have to bear, it is nevertheless a benefit to the nation in some way to have this kind of saving. It seems to me that there is almost a relationship here to the rise in unemployment. Personal savings have been rising very substantially in the five years between 1970 and 1975, the latest period for which I have figures. In 1970 they were 3.3 per cent; in 1971, 4.75 per cent; in 1972, 5.79 per cent; in 1973, 5.62 per cent; in 1974, 5.47 per cent; and in 1975, 6.05 per cent. In fact, there has been this upward movement of personal savings in recent times and, as I said earlier, we may be saving ourselves right into a depression as a result of socking away too much money instead of putting it back into the spending programs necessary to get the economy off the ground. I should like to quote from a news report that appeared in the Toronto Star for December 3, 1975:
A growing number of U.S. economists have begun expressing increased concern that a potentially serious flaw may exist in the west's sought after recovery from its worst recession in 40 years.
The weakness which is disturbing them is savings-far too much savings for far too long, in their opinion.
Those indicating various degrees of worry range from Federal Reserve Board chairman Arthur Burns to academic economists at the renowned Brookings Institute here.
Their anxiety appears to be shared to some extent as well in Europe.
We are living at a time, Mr. Chairman, when standard economics do not seem to be working out; I think most people would agree with that. Everyone is trying to figure out what is happening and why we cannot shake this recession. This is as true in other countries as it is in Canada. It seems that we have to go back to something that Keynes said a long time ago about the encouragement of excessive saving in society-that it is a good way to put yourself into a depression or a recession, particularly when it is done at the expense of the ordinary taxpayer and is given as a gift to the well-off. There can be no justification for these increases in the ceilings on registered retirement plans. Nor can there be any justification, in our view, for withdrawing the 5 per cent surtax at the end of this year.
I noticed, in this morning's Globe and Mail, an article by Hugh Anderson that again raised the question of the need for consumer spending rather than for savings. There was a report of a meeting with economist Jacques Singer, who said that the whole predication of recovery is really one which depends on increasing consumer spending. Saving is always a good thing; like motherhood, it is always difficult to argue against it. I do not want to argue against savings in general; I am simply arguing in respect of excessive savings and the kind of bonuses the government is giving on those savings and the consequence of that kind of high level bribery at the expense of the ordinary taxpayer in Canada.
December 15, 1976


Charles Robert Turner: Order, please. I regret to interrupt the hon. member, but his allotted time has expired.


William Hillary (Bill) Clarke: Mr. Chairman, I am having a little difficulty and would like to ask the minister about the explanatory notes in Bill C-22. In the first explanatory note there is a reference to the income tax motion, and under paragraph (d) of subclause 1 there is a reference to $5,500 as the maximum deductible amount. I want to know when that amount will be considered, because I do not see any reference to it in clause I which we are presently considering.


Donald Stovel Macdonald: Mr. Chairman, that amount is with regard to registered retirement savings plans and will be considered under clause 56.


William Hillary (Bill) Clarke: Having regard to the amount of $3,500 in clause 1, I should like to ask whether consideration has been given, not to changing the dollar limit but to making the percentage limit 25 per cent of earned income rather than 20 per cent, as it now stands, in order that those earning something less than $17,500 a year can take maximum advantage of this provision. As it presently stands, it seems that only the higher income earners are able to or entitled to claim the full 20 per cent because of their income rate.


Donald Stovel Macdonald: Actually, I had an exchange with the hon. member for Edmonton West about this particular question at our last sitting. I suppose there is nothing magic about the 20 per cent or the 25 per cent, but in the outcome we felt that the 25 per cent figure would favour those with investment income. Perhaps the hon. member would like to look back at the earlier answer which appears at page 1626 of Hansard.
Perhaps I could just deal with some of the arguments made by the hon. member for Waterloo-Cambridge. He accused me of being evasive in answering his questions about the surtax. He asked me whether the surtax was confined to 1976 or to subsequent years, and I said to 1976 only. He asked if I could give him the assurance that it would continue, and 1 said I could not give him that assurance. If those are not direct enough answers, then I do not know how I can answer him more directly than that. If he wishes to rephrase the questions in another way, I will be glad to deal with them; but I can hardly deal more directly with the questions he has asked about surtax.
As we explained, this was really a corollary to the fact that as a restraint of government expenditures we were withholding for one year the indexing that would have occurred in family allowance payments. It seemed to us at the time that the family allowance payments favoured, as they do, those primarily at the lower income levels. Therefore, it was those who would have to forgo that income, and it seemed to us it was reasonable that those at the upper end of the income level should also have to forgo something. It was one against the other. The indexing will go ahead for family allowances on January 1, 1977. Conversely, the surtax will not go ahead.
Income Tax
The hon. member founded an extensive argument on the Anti-Inflation Board report on professional incomes. I would remind him of the answer I gave to the hon. member for Nanaimo-Cowichan-The Islands some weeks ago in the House, that the figures he was referring to were for the first control period-we used the year 1975, 9'/2 months of which were before the control period-and it has not been possible or, indeed, feasible for a number of professionals to break their income down for the last 2Vi months. For that reason, the increase in, for example, dentistry rates in Ontario prior to the anti-inflation program are not good guides as to actual income under the program.


Thomas Clement (Tommy) Douglas: Could I ask the minister a question before he sits down?


Mr. Lambert (Edmonton West):: Mr. Chairman, I have a comment on this exchange that has been taking place, which I think would be of assistance to the committee. It was my impression that we were on clause 1, dealing with registered retirement savings plans, rather than sundry items throughout the entire bill. Is that correct, or are we getting back into a second reading debate? The hon. member for Waterloo-Cambridge sort of ranged all over and was citing an article which I thought I had dealt with quite adequately at second reading. In order to develop some coherence, I would hope we could get some indication from the Chair in this regard. Are we going to be dealing with all sorts of things, or are we dealing with registered retirement savings plans?


Donald Stovel Macdonald: I would have to concede that I should have withheld my comments on surtax until we reached clause 15 of the bill.


Charles Robert Turner: Order, please. I would suggest to hon. members that they restrict their comments to clause 1 of the bill.


Marcel Joseph Aimé Lambert: In dealing with the nature of registered retirement savings plans, I think hon. members should take a look at the taxation statistics to which I referred toward the close of the debate the other day, particularly table 15. The minister has been good enough to put partial information on the record with regard to 1974 income. Unfortunately, the 1975 book I have is only for 1973 income.
I suppose all one can say in a general way is that in 1974 there would have been an approximately 10 per cent or 12 per cent increase in average incomes, and a similar increase in income in 1975. As a matter of fact, that is pretty well borne out when we look at the number of taxpayers who contributed to registered pension plans in 1974. The number approaches some three million, and the number of taxpayers from zero taxable income to $100,000 and over was some 936,000. With regard to the suggested argument of the hon. member for Waterloo-Cambridge, I think we can get some perspective by looking at table 15. The hon. member will see that contributions to the Canada Pension Plan are required, and thereby a forced saving on the part of all income earners whether

December 15, 1976
Income Tax
self-employed or salaried: they all make their contributions to the Canada Pension Plan.
In 1973 there were 8.8 million contributors. If one looks at the peak of the chart, he will see it relates to those people with $5,000 to $17,000 taxable income. There is then a dip, followed by a resurgence among those earning over $20,000. If we look at the number of unemployment insurance premiums, again we find this relates to the same group. If we look at the 1974 income statistics and compare them with the 1975 statistics, which are not available, I am sure we would see that the same broad band is involved, showing the increase or hump of the curve at a slightly higher income, perhaps 10 per cent higher because of general inflation.
I do not wish to get back into the argument or debate I was involved in on second reading. I think whoever wrote that article which appeared under the name of the National Council of Welfare misunderstood the nature of tax, misunderstood the nature of earning income and misunderstood the nature of relative deductions. All I can say is that as far as registered retirement savings plans are concerned, I think everyone should be encouraged as much as possible to go beyond the Canada Pension Plan and private savings.
It seems to me that the tax policy in this country should be designed to encourage savings. So far, the philosophy of many people in this country is that if anyone does anything, it is to make sure that the government gets the biggest chunk; that anyone who displays initiative or works hard has to be punished by high taxes. I find that incomprehensible, Mr. Speaker. It is not a question of ability to pay; it is a willingness to work a little harder that results in a higher income. That should be encouraged through savings. One of the reasons we have lost so much Canadian industry and have so few Canadian investors is that people have no money to save. We take it all through taxation at all levels.
In any event, I would hope the government would consider the proposition I made on December 2 with regard to greater flexibility in the formula, and not have just this limitation of 20 per cent but increase the amount to $3,500. I think that is wrong and there should be a much more flexible formula which would allow the benefits of the increases to flow through to all levels of income and thereby increase as much as possible the incentive to save through this kind of plan.


Mr. Orlikow:: Mr. Chairman, I listened to the hon. member for Edmonton West, and it is obvious to me that he completely misunderstands the basis of the argument which members of this party made today and on earlier occasions in respect of clause 1. We are not opposed to people saving money toward the day when they retire; on the contrary, we want all Canadians to save so that when they retire they will have a pension which will permit them to live with some comfort and dignity. What we object to about this particular clause is what we have continuously objected to since the proposal was brought forward.

This kind of provision in the income tax law is an invitation to those who have an income to save. It says to them that if they save the money now, they will not have to pay income tax on the relatively higher income they will have when they retire and will get their pension benefit; their income will be much lower, and not only will they pay less income tax but they will pay at a lower rate. That is a benefit which all the people of this country give to a select group.
I accept the figures the minister gave and those given by the hon. member for Edmonton West. It is not just a few thousand people, but more than half the people in Canada who cannot avail themselves of this kind of provision. More than half the people in Canada will have to depend on three sources of income when they retire: first, on the old age pension, which is indexed, and we have always supported that; second, those who have worked and have contributed to the Canada Pension Plan will receive benefits from that plan; and third, those who work for companies which have private contributory pension plans will receive the benefits under those plans.
There are tens of thousands of Canadians in the latter category, Mr. Chairman. I am not being critical of employers, because I assume they do the best they can, but there is a great deal wrong with those plans. Most of them are not portable, which means if a person works for a company, then is fired or laid off, or decides he wants to work for a different employer, he loses very substantially, if not entirely, the money he put into the private pension plan and which his employer should have matched.
With very few exceptions, these plans are not indexed, which means that when a person retires 5, 10 or 15 years ahead, he will get just the amount for which he contracts in the pension plan. The fact that we may have 5 per cent or 10 per cent inflation each year between now and the time he retires, and that the dollar will probably be worth 20 per cent or 25 per cent less than when he contributed the money, is not taken into account by any of the private pension plans. I am not being critical of them, Mr. Chairman. It is obvious that private pension plans are not big enough to cover that kind of problem.
What we are proposing is an alternative to this kind of provision which we say benefits only those people who can afford to put savings into this special kind of pension plan. We propose that the government should immediately-not ten years from now-look at the kind of pension plan available in some European countries. The other day I mentioned West Germany and Sweden. Both countries have a high standard of living, both countries have fuller employment than we have, and they have pension plans which are run by the state and are compulsory. I am speaking from memory, and if I am not quite correct I am not too far afield. Every person who works pays into the plan. In West Germany, the employer and employee between them pay into a social security fund which covers pensions and certain other provisions-a total of 16 per cent of the employee's wage. The plan is not only run by the state, it is not only universal but completely portable. A worker in West Germany can change jobs many times and his
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right to an adequate pension is not hurt in any way. That has tremendous advantages in terms of employment policies and in terms of mobility which are things we need in this country.
The plan provides that when a worker retires at age 65 he gets between 60 per cent and 65 per cent of the average of his best five years' earnings. This is far superior to anything we have in Canada. On top of that-and I am sure this will astound the private insurance companies, the actuaries and pension experts in this country who have been attacking the civil service pension plan-in both countries pensions are indexed either to take care of the cost of living or increased by the average increase in the industrial wage for the country.
So when we oppose this, it is not because we are opposed to saving, it is not because we oppose adequate pensions on which people can live in their years of retirement with dignity and comfort, but because we say this is not fair and is not good enough. We want the government to come up with a pension plan which will protect all people who work in this country, so that when they retire they can live with some sense of security, comfort and dignity. We will continue to oppose this kind of tax benefit and what we believe is an unfair bonus to people who are already mainly in the middle and upper income brackets in this country.


Mr. Ritchie:: Mr. Chairman, I would like to make a few comments. Having been a self-employed person before I became a member, I have come to the conclusion that by and large this is not a good way of saving. I think that perhaps now is the opportunity to ask the minister to answer some of the questions I have for him. I know he will not be able to answer these questions today, but perhaps he could give us some idea of the long-range effect of this type of saving.
First of all, I think we must remember that the government is putting up a substantial amount of money when they allow people to deduct money from their income. I know this will be a major project for the department, but I would like to ask the minister if he could produce some figures for a representative year, such as 1975, if possible, showing what proportion of the money saved and put in a registered retirement plan would be collected by government either federal or provincial. Perhaps the minister could give us an estimate now, a reasonable ball park figure. I think this is important, because if the money is not paid into the treasury by the federal or provincial governments, money which is put into the registered retirement plans but which normally would be charged on income, it means that other forms of taxation would have to be increased to make up for the loss.
The hon. member for Winnipeg North mentioned that people on high incomes would also benefit to some extent, and I think this is true, but it also means that the government would forgo a substantial amount of revenue which normally would be paid in tax. I have my reservations as to this. I believe that registered retirement plans are one of the greatest fuels of inflation because they increase the tax load in other areas. I think the tax system does not really function well if it
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does not generate enough tax for the government because of the large amounts of pre-tax savings.
I should like to point out, also, that the government, having given a lot of tax money at one stage of an individual's life, must get it back some time in the future. They will get it back, but inflation will take away the value of a man's savings. Also, in the matter of pay-outs, which tend to be punitive, it can be said that the government will take back a great deal of it in a person's later years. I can remember the time only 30 years ago when a man took out a small life insurance worth $25 a month at the age of 65. That person said that it may not really be a living, but he could live on $25 a month. That is what conditions were like in 1944 or 1945. Obviously, any savings plan based on that is so far from reality now that it is laughable.
The second question I should like to pose to the minister is this: What percentage of the so-called total savings is to be found in the retirement plan? I suppose that would include company retirement plans, and so on. Perhaps the minister could give us the over-all percentage. This would encourage a closer look at this savings feature. Thirdly, I would ask the minister to tell us how many people, or groups of people have this money in their pension plans. I know that people in my profession, medical people, send their savings to the Toronto General Trust where large sums of money are sent from all over the country and put into one pool. Can the minister give us some idea of how large this pool is? This would be useful information.
It is my contention, living as I do in a small town, that practically none of the money in registered retirement plans gets back to the people from which it originated. The reason we have had such urban concentration is that normal savings have been disrupted and that capital is not available in small communities because it is siphoned off into registered retirement plans and taken to the large centres. The same pension plan managers who deal with hundreds of millions of dollars cannot involve themselves in the day to day business of lending money to small entrepreneurs, to small businessmen, farmers and such people. This is very difficult, and I appreciate their problems.
The minister might also indicate what is the limit of lending allowed the managers of these pensions funds. It is my observation that these pensions plans are in the hands of far too few managers in this large country of ours. I would appreciate hearing the minister's answer to some of my questions now or some time in the future.


Donald Stovel Macdonald: Mr. Chairman, the first question of the hon. member was, what is the tax forgone, which is the same question as that raised by the hon. member for Nanaimo-Cowichan-The Islands in answer to which I had to say that I have not had a recent rundown on this question and therefore I could not answer it now. I would like to take it as notice of a long-range question.
As I said on second reading of the bill and in a previous debate, we are engaged in an internal examination with refer-
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ence to private retirement income carriers. It is a question of how the tax law is structured in Canada and I think the study will produce useful results. It is very likely that the study will provide an answer to this question, in which case it will be important for hon. members and for the country to know what is the tax forgone by this kind of arrangement. I will undertake to supply the answer in the future when that work is done. What is the percentage of total savings in these plans? I do not know if we can aggregate that. Certainly, I cannot give it this afternoon and, although I am not certain, I suspect it might be possible to aggregate.
How many financial intermediaries are operating the pension? How many trust companies, life insurance companies, and so on? There, again, I suspect that that is not beyond recovery on a factual basis. I can get it. I do not have it today. The hon. member referred very accurately to life insurance companies, trusteed pension plans, whether under union administration under trust company administration, and a whole range of financial intermediaries like this, and on the whole I think the comment the hon. member made with regard to the use these financial intermediaries make of the collected savings-that is to say, to invest partly in government securities but also in the equity and securities of major corporations-is probably correct and that on the whole these financial intermediaries do not primarily make their funds available to the small business sector.
The federal government has moved into this area through the Federal Business Development Bank and through small business loans to try to meet this structural difference in the way funds have been handled. I recognize that it is a matter of legitimate debate as to whether that is being done effectively. That is one of the important questions to which my colleague, the Minister of State (Small Business), will have to address himself, and I am sure we will have occasion to discuss it at some length with regard to the Bank Act.


Mr. McCain:: Mr. Chairman, does the minister, by suggestion or regulation, have any control over the various charges which the various agencies may levy as administrators of the funds established when contributions are made through the RRSP means? Could the minister advise the committee what charges trust companies, banks, insurance companies, et cetera, levy? What is the relative rate of return of each? Is there any comparative information or data collected with regard to where the ordinary citizen, who is not a knowledgeable investor as such, should put his money?


Donald Stovel Macdonald: Under the aegis of the Income Tax Act we do not have control over the cost of operation of these various funds, whether they are held by a life insurance company or a trust company. In many cases the rules of operation of the fund are governed by provincial law. All we are really doing is making room in the tax system in which they would operate. I think this is a valid question, and I think we are really not talking about registered pension plans, but registered retirement savings plans where the individual has

some quality of choice. I think it is a valid question as to where a person is best advised to put his money, into a trust company plan, into one which will be invested in relatively short-term notes, or into real estate investments.
That is not just the "$64,000 question," but it is one of infinite amounts as to where the best investment is in this regard. There is a whole range of different institutions, and I think it would be hard to make a comparative examination of the relative front-end or overhead costs of the management of each particular one. I suppose that depends on the skill of the investor in choosing. One presumes that over time, competition will be effective in keeping this down, but I agree that knowledge is very imperfect in this area and that perfect competition is hard to achieve.


Fred Alward McCain: Is the minister accumulating any information on that subject, and can he give any advice to the little guy who is not accustomed to investing? I think there are probably many people who can seek advice from people whom they know as to where they should put their money, what they can hope to accumulate, what will be the administrative fee, and what will be the long-term outlook if they put it through a bank, trust company or some other agency; but can the minister accumulate any statistics to help the unsophisticated investor to do the best he can? Has the minister tried to do so, or does he intend to try?


Donald Stovel Macdonald: I think the fundamental questions being put are really beyond the scope of any humankind to determine in advance because there are different ways in which people can accrue RRSP benefits. For example, is a whole life policy issued by an insurance company a better, or worse, investment because it has a life insurance element as well as a savings element, than, for example, putting money into some trusteed plan with equity shares in it? I suppose the real question is which return, over any period of time, is going to be bigger in the equity market or the insurance company acting partly in the equity market and partly on its investment in government bonds. I must say that if I knew the clear answer to that question I would be delighted to try to make arrangements in my own case, and I would be delighted to pass it on to the small investor. I think it is almost beyond ability to know. I think I would have to make inquiries on the rather narrow question the hon. member asked as to the relative carrying costs of these.
There were two questions: how much does it cost to operate the plan, and what are the operating costs from year to year? The second question is how well, over a period of time, is my money going to do in relation to investments? I think the second question is almost impossible to answer, although there are many prejudiced opinions around. With regard to the first question, I would have to inquire to see if there has been any private or public analysis on the relative merits of these.


Fred Alward McCain: Is there, now, a system whereby an individual who may have life insurance or who may anticipate taking life insurance can consider this as part of an RRSP?
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Donald Stovel Macdonald: Yes, indeed. With a whole life policy where there is not only a life insurance element but also a savings component, you can, in effect, file in respect to some part of the annual premium paid and be able to take the RRSP benefits in relation to that particular policy. I have just a little advice. When people are doing this, they will, of course, be restricted in their ability to take loans on those policies while they are under the RRSP.


Fred Alward McCain: Or that portion.


Donald Stovel Macdonald: Well, on the policy, period. If people do decide to borrow, they may find that in the particular year of taking the loan all of it is brought into tax. In connection with life policies , I am not here to tender that kind of advice, but I would inquire very carefully about the kind of benefits which are lost under the life policy if it has to be terminated or drawn on in any way.


Mr. Francis:: Mr. Chairman, I would like to ask the minister whether, when normally an RRSP would be converted into an annuity, it could be carried in Canada savings bonds and the beneficiary would be able to draw the interest on Canada savings bonds and perhaps encroach on the capital at an agreed upon rate. Obviously, this kind of return is infinitely better than the option which most insurance companies are offering at this time.


Some hon. Members:: Hear, hear!


Donald Stovel Macdonald: Yes, Mr. Chairman. The question has been under active consideration, not in the least because of the representations made by the Canadian Association of Consumers. This is one of the questions to which I have asked the retirement income study to give particular attention. I suppose one might put it on a broader basis. If there has been a particular investment carrier, for example a trust company under some kind of trusteed plan, what is the ill in having the arrangement so that that can be continued under that plan but that there would be a pay-out after retirement? It is a question which is being considered by the retirement income study and upon which I hope in due course we can make some suggestions to the House.


Marcel Joseph Aimé Lambert: Mr. Chairman, I would like to add that there is one difficulty with regard to this particular point, and that is that Canada savings bonds have an accumulated coupon feature. If the interest is taken annually to provide additional living income to the owner, then the bonus after taking the Canada savings bonds up to, shall we say, the market rate is thereby lost. I will agree that there is a considerable advantage, too, in drawing the bond interest at a rate of under $1,000 per year because that exemption would also benefit the holder. There is also the question of losing the bonus for not cashing the coupons.
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Cyril Lloyd Francis: Mr. Chairman, I am sure the minister is capable of finding a method to adapt Canada savings bond issues to meet these circumstances.


Mr. Munro (Esquimalt-Saanich):: Mr. Chairman, I am glad the hon. member for Ottawa West raised that question, since it was among those I intended raising during my intervention in the present debate. I am sure many other hon. members are equally concerned about the question of Canada savings bonds. Certain features about the registered retirement savings plan ought to be reconsidered. With great respect to the Chair, I may find it difficult to confine my remarks to clause 1 since clause 56 on page 62 also deals with the RRSP.
What is the function of the RRSP? The scheme which many Canadians found attractive, they are now beginning to find is loaded. It contains a deceptive feature of which people were not aware when they first decided to invest in such plans. Has anyone made representations to the minister in this respect, and is he prepared to act? Before I continue, may I refer to the question asked by the hon. member for Ottawa West and ask: when will the government be prepared to introduce flexibility with respect to the use of the RRSP? Will this be done in the next budget or will this be done by way of a separate statute?
Registered retirement savings plans have appealed to many who are at the peak of their earning power, as a temporary tax haven. These plans have been looked on by the prudent citizen as a means for building a fund for retirement, when income will be lower and income tax payable lower as well. Unfortunately, the Canadian economy today does not assure even the return of the cash value of investments. We can lay a fair portion of the blame for this on the government. It has failed to provide incentives for industry to grow. Only if industry grows can the value of one's investment grow. Such growth would profit investors. As I said, many income earners at the peak of their earning power decided to invest in RRSPs as a temporary tax haven. They hope to withdraw their invested funds in times when their incomes are not so high and they are in lower tax brackets.
The government has reduced the benefits of this apparent advantage because the plan has been turned into a form of insurance. The government has done this by requiring the conversion at age 71 of the accumulated fund into an annuity based on actuarial criteria. I find this provision iniquitous. Many of my constituents have written to me about it and I am sure the minister and other members have received letters on this subject. My constituents complain about being forced to convert into annuities moneys they have accumulated through savings before the age of 71. The point is, criteria governing such converted funds are different from criteria applying to normal savings.
Why has such provision been included in this extremely complex bill? Why is there not a provision allowing the withdrawal, without penalty, of funds accumulated before age 71, say for investment in some other form of saving? Perhaps the money could be taxable as to dividends but not as to
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capital. I raise this point because the present provision will result in eventual loss to the prudent taxpayer, earner and contributor to this country's economy. At present there is an absolute obligation to convert such savings into an annuity or withdraw the total sum and face the consequences in terms of tax.
I suggest that the current approach to the RRSP is geared more to providing money for mortgages and loans to insurance companies which normally register these plans. As we know, insurance compagnies are always on the look-out for funds an income earner may be prepared to invest. The minister admitted that insurance companies which register such plans unfortunately are not overly ready to make such accumulated funds available to small businessmen. The money is lent to large corporate bodies, perhaps housing corporations or real estate development firms and not to small entrepreneurs who in these tight days find it difficult to obtain funds.
I suggest that the present provisions should be reconsidered. The inflexibilities governing RRSPs should be reviewed. Funds derived from these plans are steadily accumulating in the hands of insurance companies and the money is not readily available to small businessmen and other sectors of the community which need the money. Also, there is a great risk of loss if a person opts for the annuity at age 71, because the annuitant can die the day after he is 71 and so lose his entire savings. Was consideration given to a provision whereby such funds accumulated should go into the estate of the person who had saved, so at least the survivors would have the benefit of the money?
Will the minister reply to the various questions I have raised and say why the 71-year age provision was included in the act, whether there is complete inflexibility with regard to the options open to the saver at age 71, and whether he can opt for the annuity, withdraw his money and pay tax, or opt for the annuity without paying tax; or are there any other alternatives?


Donald Stovel Macdonald: Mr. Chairman, may I refer back to the beginning of the RRSP program. As I said in the previous debate, the purpose of the program was to put the self-employed person or persons who did not have the benefit of a company registered pension plan on the same basis as those who had such plan. The hon. member asked, why is the program structured in the present way? It is an attempt to put people in the categories mentioned on the same basis as those who are participants in a company pension plan; hence the annuity element.
The person coming under the company pension plan, normally-I must confess I do not know of any exceptions- would not be entitled to a lump sum payment upon retirement. Under the company pension plan a person would be entitled to a periodic pay-out under the plan during retirement. That is to say, he would be entitled to periodic payments of equal amounts except in such cases as that of Shell Canada where there are periodic payments indexed in relation to the gross national product. In order to put such individual into this situation there had to be some limit at the upper end so that he

would not be given an additional provision which the registered pension plan person does not have, namely, that of being able to choose what kind of assets to put in. That is why in 1957 the annuity requirement was written into the plan. The 70-year provision reflected what was the current age of retirement experience at that time. It has, of course, become much lower since then. At that time the normal age of retirement was 70 years.
As to the options in tax terms, a person has a choice of putting the funds into an annuity on attaining retirement age or having to pay tax, even with the benefit of the averaging provision on the pay-out of the funds. That is his option under the present plan. To a degree, he does have an advantage over somebody in a company pension plan. He can at least take it all out and pay tax on it-but who would want to do that?
In terms of annuities, two things can be said. If someone wants to purchase an annuity of guaranteed term, he avoids the risk that the hon. member mentioned, of buying the annuity plan on Monday and then his estate losing all his capital if he dies on Tuesday. On the other hand, if he does buy a guaranteed term, his capital return on the annuity will be lower than if he is prepared to take his chances. If he does take his chances, in due course he may get a higher pay-out than his capital would have justified. This is one of the things about which none of us can be certain.
It is because of the fact we are looking at a program that was first brought in 20 years ago-the twentieth anniversary will be next March 14-that we are examining this under the retirement study to see to what extent it has departed from established practice and to what extent it would be desirable to give present savings under RRSPs more flexibility than is now in the law.


Mr. Leggatt:: Mr. Chairman, I want to make a brief comment on several things that other speakers have mentioned. The question of the retirement at age 71 to convert into a life insurance contract is one that seems fairly obvious. I am surprised the minister has taken so long with the suggestions made to him by the Canadian Association of Consumers and the National Association of Credit Unions to change that proposal. Conversion to Canada savings bonds, as suggested by the hon. member for Ottawa West, seems an eminently sensible suggestion.
I want to get to a subject that has not been dealt with on the question of RRSPs. I refer to the net loss to the treasury as a result of these kinds of tax shelters and this tax shelter in particular. It has been described by many people as an average man's tax shelter. The fact is that in 1974 it was estimated that the loss to the treasury was $513 million. This was as a result of the difference between the tax paid when it was brought out and the tax saved at the time it was placed into the shelter. This shelter is not enjoyed by the average and poor income earner; it is enjoyed largely by the above-average income earners. I see the minister shaking his head. I would
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like him to look at the figures that have been developed around this particular subject.
The income group under $5,000 received an average tax saving, as a result of RRSPs, of $1.02. For those earning over $20,000, the average saving was $551.88. The result is that as you examine the income earners and income levels and the effect the RRSP has had, you find that it does encourage savings.
The hon. member for Edmonton West suggested that we need all kinds of legislation which encourages savings. This legislation encourages savings, but only for the above-average and high-income earners. It provides tax credits and tax benefits to above-average and high-income earners. We had better take a look at some legislation which does something for low and average-income earners. Any fair examination of this legislation will show that the real tax benefit and real tax shelter is still among the professional groups.
The net loss to the treasury, as a result of this, is $513 million. If you take that amount, plus the losses through the failure to tax capital gains at its full amount, rather than the reduced amount, and if you take the other loopholes, we are talking about a loss to the treasury of $6.4 billion. That is 20 per cent of this government's budget. The RRSP is just one example of the mess we have got into under the tax system by not having a rational plan or at least a philosophy in terms of a progressive tax system. The RRSP is an anti-progressive feature of the income tax system.
I could go on at some length concerning more figures in terms of income groups and their enjoyment of RRSPs. I know that a broad range of Canadians like the idea of being able to save tax and keep the money for their old age. However, I would ask Canadians to look at the fact that their own tax would be significantly reduced if you unplugged some of these tax shelter loopholes and spread the burden in a progressive way. Many of those in the low income groups would be better off if we unplugged some of the tax shelters such as capital gains where we tax at only 50 per cent of the rate.
I know the hon. member for Ottawa West has read the Carter report on taxation. He may have had some sympathy with it at one time. I may be wrong; it was a long time ago. That is exactly what Carter recommended. If we had looked at the Carter report on taxation we would not have all these problems we now have, with a little shelter here and a big shelter there. When you assess these shelters, you find that it is not the average and low income earners who are taking advantage of them.
Let me go back to the RRSPs we are now debating in the House. Under $5,000, the average tax saved as a result of RRSPs is $1.02. Between $15,000 and $20,000, the average saving is $125.01 right off the top. This is a non-progressive feature in the tax system. I do not have objection to it in terms of the broad range of income tax earners. However, the high and above-average income people have enough tax shelters built into the system: there are all kinds of them. Many of us in the House probably enjoy these tax shelters. However, we have to look at the other end.
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One way is to do something unpopular initially. It may be unpopular to cut out all RRSPs. However, I suggest we take a look at cutting out all RRSPs and going to the Carter commission kind of recommendation where a buck is a buck and you tax it as it flows. The result would be a reduction in the amount of tax that the broad range of Canadians would have to pay. Certainly, the average and lower income people would see a reduction in their tax if we taxed dollars as they flowed.
If we take these three items, the RRSP, the amount of tax we would recover if we taxed capital gains as Carter suggested we should, and if we look at the tax shelters built into the registered home ownership program, we would see that the amount of tax revenue now being lost is $6.4 billion a year. That is 20 per cent of the budget.
It seems to me that when we debate shelters of this kind we become involved in detail, as we should, but the principle is wrong. The principle of tax shelters such as these which do not benefit the average and low income earner is one which we should abandon or, at least, if we do not abandon it, we should seek to change the formula under which claims are made. There may be some way of income-testing ability to use these shelters. I do not doubt that those who are able to buy and sell property on a fairly frequent basis are in a position to provide decent retirement incomes for themselves. But others are unable to do so, and in my view we should be making an exemption in favour of those who are financially unable to provide for their retirement years. What the government is doing under the RRSP plan is rewarding those who already have the capacity to look after themselves in retirement.


Donald Stovel Macdonald: Perhaps I might reply, Mr. Chairman. First, the hon. member asked why it had taken so long to give the RRSP holder the option of putting his money into Canada savings bonds or something else. Here the question of equity has to be considered. In effect, it would be unfair to the union member to do that. We would be giving to members of this group who, in another argument, the hon. member said probably should not have the right to take the benefit of RRSP, a greater option than the ordinary union member has under a company pension plan.
I believe the hon. member might wish, when he has a chance, to look at Hansard and study the figures I have put on the record. He said the benefits from the registered pension plan have largely flowed to the taxpayer whose income is above average. As I indicated, the average family income in 1974 was $14,485. Of the 2.87 million taxpayers who claimed a reduction in respect of registered pension plan contributions, 2,251,813 had incomes of less than $15,000 a year. So the notion that this plan is loaded at the upper end is not justified.
With respect to self-employed people, I would acknowledge, again, that there is a heavier weight in favour of those with higher incomes, but still the majority of people who are obtaining the benefit of the plan are people with an income of $15,000 and under. The suggestion is that we should cancel the benefit for the self-employed or for people working for a

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Income Tax
small firm which does not operate a pension plan. At the same time, we should keep the company pension plan for the employees of large firms. It seems to me this would be inequitable, too. There is, obviously, a fundamental difference between the hon. member and myself in the sense that we have provided through old age security measures a basic and, in effect, a non-contributory plan although contributions are made through taxes over a period of years. The Canada Pension Plan enables people to set money aside for themselves out of their earned income sums for their retirement. One could argue about the benefits they should receive, but I must disagree fundamentally with the notion that those who enjoy higher levels of income should not be able to put funds aside. I think it is in the general interest of us all that some of their income should be saved for retirement.


Cyril Lloyd Francis: Mr. Chairman, I have followed this exchange with a great deal of interest. The minister has made the point that the retirement savings plan is really an alternative available to those who are not participating in pension plans as members of employee groups. Also, those who are members of pension plans which offer low levels of contribution and inadequate pensions are permitted some supplementation. I wonder whether the minister has given consideration to broadening the agencies which are allowed to administer pension plans. I am thinking, for example, of co-operatives and credit unions with whom the small wage-earner is often accustomed to dealing and to whom he looks as being his financial agent. What is the possibility of permitting institutions of this kind to administer RRSPs as well as the trust companies? It seems to me this would be a much more positive approach than simply denying the benefit of RRSPs, as the hon. member on the other side appeared to suggest, though I should like to think that upon mature reflection he would retract that idea.


Donald W. Munro: In reply to a question put by the hon. member for New Westminster, the minister gave some statistics, possibly from tables prepared by Statistics Canada. Would it be possible to have that particular table appended to today's issue of Hansard?


Donald Stovel Macdonald: I have already read the figures into the record.


An hon. Member:: The whole thing?


Donald Stovel Macdonald: Yes.


Fred Alward McCain: Mr. Chairman, with respect to the utilization of the money at the age of 65, I believe there is still some ambiguity as to just how an individual may take advantages of his RRSP benefits. Can the minister give us an explanation of the way in which the plan operates at the moment in this regard? I do not have a speech to make at this point, but I do have one or two questions I wish to ask on this subject.


Donald Stovel Macdonald: If the individual has, for example, a life policy which has reached a certain paid-up value, he can, at the age of 65, apply that value for the purpose of purchasing an annuity. Alternatively, he can cash in the

policy, recognizing that he would be subject to payment of income tax. It would all count as income for that year. He would have the benefit of the averaging provisions of the act, but there is no doubt there would be a tax penalty if he withdrew it all in one year.


Fred Alward McCain: I had difficulty in following the hon. gentleman. Did he say that the tax would be paid on an averaging basis and, if so, what would be that basis for averaging?


Donald Stovel Macdonald: The Income Tax Act does provide for averaging income in relation to tehe experience of previous years. I could give a quick tax opinion to the hon. member, but not while I am on my feet.


Fred Alward McCain: I would appreciate it. It seems to me it is rather rough justice to have this whole deal subject to tax as a lump at any particular moment in time. I should like to ask the minister a question or two with respect to a person's obligation to put his RRSP money into an annuity at age 71. What options does a person have? Does he pay income tax on the amount he receives on an annual basis at the age of 71? Can he put this money into an annuity, let us say on a "term certain" basis or some other certain basis so that there would be some accrual to his descendants or estate if he does not take it all at once, or does he have to buy a simple life annuity the benefits of which might be lost upon his demise in a couple of years? Can he, for example, take out a joint annuity covering his wife as well as himself? In short, what limitations are placed on the kind of annuity he can take out? The principle of the annuity is something we understand, but the regulations prescribing it certainly affect its value to the individual or to his estate upon death.


Donald Stovel Macdonald: Section 118 of the Income Tax Act provides for income averaging. An individual who chooses to put the money into an annuity will be taxed in the year of receipt on the whole of the annuity payments in that year. However, he can, if he chooses, either buy a guaranteed term annuity or one in which he undertakes the hazards of longevity.


Fred Alward McCain: Then he will have the choice of a term certain annuity or a lifetime annuity, whichever he considers best, or both, if they are available to him. In these circumstances, he would not pay income tax by virtue of the transfer of his RRSP assets to an annuity position, except on the annuity payments as received and in the year received; is that correct?


Donald Stovel Macdonald: That is correct. There is no tax attributable in the rollover from the RRSPs into the annuity, and the annuity payments in successive years would be taxable in those years.


Fred Alward McCain: Let us suppose that at age 65 he finds that he must withdraw some money from his RRSP savings. Is he permitted to make piecemeal withdrawals when he reaches 65 or over and pay tax only on that portion that he withdraws?
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After all, if the RRSP has a purpose, it is the accumulation of funds which would be spread over his retirement years. If at age 65 he cannot withdraw some portion for that year's use without paying tax on the total in the RRSP, it is really defeating the purpose of the initial savings that he made. It seems to me that he should only pay tax on that portion that he must withdraw in any given year after reaching 65. This would then put it in a position comparable to a pension. As the hon. member for Ottawa said, and also the minister, in many instances these plans are in lieu of a pension. If a man is to be penalized for withdrawing any portion on an annual basis, then it does not conform with the concept of a pension.


Donald Stovel Macdonald: In effect, Mr. Chairman, the provisions in the law, as amended by the bill, will not permit a person to make a partial withdrawal. He either has to make a total withdrawal and put it into an annuity plan, or he has to bear the tax cost. There, again, it is a parallel situation with that of the recipient of a registered pension plan who may have the right under the plan, though it is not common, to receive a lump sum payment, which presumably is something less than he would get if you aggregated his pension over a period of years.


Fred Alward McCain: If you live long enough.


Donald Stovel Macdonald: If you live long enough, that is right. But in both cases it is brought into his income in that year and he will have to bear the tax consequences of that.


Fred Alward McCain: Mr. Chairman, I would respectfully suggest to the minister that some scale of regular withdrawals at age 65 should become part of this amendment or of some amendment in the very near future. Maybe you wish to regulate the withdrawal. Maybe you do not want to withdraw it all. But I do not think that a person should be compelled to pay income tax on it all if he finds it necessary to withdraw some, hoping that the balance of it will contribute toward his comfort, say, at the age of 67.


Donald Stovel Macdonald: Mr. Chairman, neither these plans nor the registered retirement pension plan has been regarded as a savings plan, like, for example, RHOSPs. It has always been regarded as a provision for retirement with specific benefits taken as retirement income. The hon. member is suggesting what other members have suggested, namely, that it should be changed from being a retirement program to a savings program. That is one of the fundamental questions that we are studying under the retirement pensions study.


Stuart Malcolm Leggatt: Mr. Chairman, may I just clarify a point that the minister and I were discussing which dealt with the progressivity on this particular plan? I think the minister should re-examine the figures which his own department has prepared, because they show that the top 5 per cent of tax filers under this particular plan get 57 per cent of the benefits under RRSPs. The remaining 95 per cent of tax filers get 43 per cent of the benefits.
Income Tax
The minister's point is valid, that in the middle there is a fairly broad range of people receiving benefits. But the point to which I do not think the minister has addressed himself is the non-progressive nature of this particular tax shelter. You find that persons making over $20,000 received, on the average, four times the benefit of a person earning between $15,000 and $20,000. They received 14 times the average benefit of persons making between $10,000 and $15,000. That is taxation in reverse. That is how the poor get poorer and the rich get richer, and it is a point that we think the minister should examine.
The minister has argued in this committee that if you take the average income level there are significant benefits in this regard. The fact is that those in the middle level are still heavily penalized by the amount that goes to the benefit of those earning over $20,000. Let me just repeat the figures. The top 5 per cent of tax filers get 57 per cent of the benefits under an RRSP. That is a figure that the minister should take into consideration in determining whether we should have some examination of income limits, or even abandon the plan.


Mr. O'Connell:: Mr. Chairman, I should like to raise a few questions with the minister respecting RRSPs, beginning with subsection 8(1) which is being amended. I refer to the notion of computing a taxpayer's income, and my point is with respect to computing the income of grain producers and their access to the improved provisions under which they can set aside sums for their retirement. A problem arises from an interpretation bulletin published by the Department of National Revenue. The bulletin is described as IT-184 and is dated November 14, 1974. The subject matter of the bulletin is the Income Tax Act and deferred cash purchase tickets issued by the Canadian Wheat Board. These deferred tickets are important to grain producers since they enable them to defer receipt of cash in any given taxation year to the next taxation year, and in that sense level out to some extent their incomes and thus be in a better position to take full advantage of these improved provisions for one's retirement.
The specific problems raised by the bulletin are of two kinds. One is grains which are referred to as grains on which cash receipts may be deferred, and these are the six grains coming under the quota system of the Canadian Wheat Board. That is a restriction that does not help when one is considering retirement savings plans. It may have had some particular purpose when the bulletin was first issued, but the appeal that I am making to the minister is to ask him whether we could alter that interpretation by widening it.
The grains are wheat, oats, barley, rye, flaxseed and rape-seed. The point here is that there are many specialty grains grown and sold for cash, which raises incomes in the year. This may cause fluctuations in farmer income because of the movement of producers in and out of various grains. The appeal I am making to the minister is that the grains defined in that interpretation bulletin include such grains as sunflower seeds, corn, mustard, peas, buckwheat-in fact, all the grains described by the Canada Grains Commission. These have become important cash earners in many parts of Canada. For

Income Tax
example, we need think only of the volumes of corn which are raised. These grains are of particular interest to western producers who are moving into these cash specialty crops in an effort to diversify western agriculture.
The second difficulty with this interpretation bulletin which I think relates to registered retirement savings plans in the sense that income may be deferred and levelled out so that farmers do not have ups and downs in their income and can take advantage of the higher amounts for deduction is that delivery under the present plan has to be made to a primary elevator. Delivery of these kinds of grains that I mentioned is often to processing plants or feed plants or crushing plants. So I think the interpretation requires changing in those two respects. The total range of grains which farmers would have to have classified for the purpose of registered retirement savings is the first change; the second has to do with delivery points.
I hope the minister will take a look at this. If there was sense to the original interpretation, it certainly did not relate to registered retirement savings plans. What I am suggesting is that perhaps we can get a change in interpretation for this purpose.


Donald Stovel Macdonald: I would be prepared to undertake that, Mr. Chairman. With regard to the one-year deferral, that was primarily for another purpose, namely, to persuade producers not to hold products off the market purely for taxation reasons. But I am prepared to undertake an examination of the question to see why, if at all, there should be differentiation between the different kinds of grains.


Sinclair McKnight Stevens: Mr. Chairman, following up some of the questions put to the minister concerning registered retirement savings plans, I notice the minister has likened them to retirement pension plans in which many people are involved. There is quite an essential difference between the two approaches in that a retirement pension plan is, in fact, a general contract in which hundreds, and even thousands of people are automatically caught up, if it is a company plan, whereas a registered retirement savings plan is much more of an individual type contract in which you make a deal with whatever company you wish to place the business.
Would the minister not consider having a little more pliable attitude in order to accommodate the wishes of the people? I certainly disagree with the hon. member for New Westminster who would apparently scrap this program. I think it is very commendable that the government of Canada is encouraging people to provide for their old age opposed to simply being dependent on the state at some later time.
In view of the fact that these are individual contracts, would the minister not agree that greater flexibility could be given? As I understand it, the resentment relates to the fact that this is a shotgun approach in that when an individual reaches the age of 65 or 70 he is required to take the cash out and pay the tax. As the minister has indicated, he would not want to do

that because of the degree of tax, and alternatively the individual should put it into an annuity.
Could there not be an individual plan set up so that a person could shift his cash into a trust to be administered according to whatever he felt would be suitable guidelines for that trust, with the interest and a certain amount of the principal withdrawable over the period of years that the individual lives, with the balance eventually going into the estate of that person who had the registered retirement savings plan? Why cannot that flexibility be given, bearing in mind that these are not general contracts, like many retirement pension plans, but are individual contracts these people have with the company? Why cannot they identify with a trust arrangement during their retirement years?


Donald Stovel Macdonald: That is basically the point made by the hon. member for Ottawa West-the notion of putting it into another form of security or annuity. As I indicated in response to him, we would be prepared to consider broadening the kind of security in which this can be held. Indeed, we are going even further than that; we are considering whether what has been heretofore a retirement program should or should not be changed really to a savings program.


Sinclair McKnight Stevens: Referring to the question of an annuity, I was wondering whether the minister could give the Committee any help as to what, in fact, are the interest restraints the companies set on annuities at the present time? As I understand it, there seems to be considerable resentment. People are well acquainted with the high interest structure we have in this country, that is, 10 per cent, 11 per cent and 12 per cent on mortgages, but when they are applying for an annuity they are quoted very low rates relative to current interest rates. When they complain, it is represented to them generally that these are governmental restraints in order to make the plans actuarially sound. Can the minister indicate what, in fact, those restraints are that apply to those who are in the position of giving such annuities?


Donald Stovel Macdonald: They certainly are not under the Income Tax Act. This really relates to the governing jurisdiction in so far as annuity contracts are concerned. The analysis of the Superintendent of Insurance in this respect is that on the whole the rates being offered in the spectrum of different annuities are reasonable.


Sinclair McKnight Stevens: In view of the relatively high interest structure we have in this country and the high rate of inflation, it may be there is a case for increasing the latitude the companies now have. I noted the minister's reply, but would he at least take that matter into account and give it some consideration? As I understand it, the resentment occurs because of the dramatic difference the people see in comparing the two. A $20,000 registered plan would produce $2,000 a year. People can work that out, and they know they would have the $2,000 plus the principal. However, if they put the money into an annuity I think it can be demonstrated that within 11 years, because of the inflation rate, they will have lost the value of the capital
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and the entire interest. Compared to that, they would have the $2,000 a year and would still have the principal at the end of 11 years.
In other words, an annuity is structured on such a low interest rate today that there is a tremendous contrast between what you can get if you invest your money in a mortgage or some other interest-bearing security as compared to the relatively low rate required on annuities.


Donald Stovel Macdonald: There is really just one comment I can make arising out of the question. The examination by the superintendent did indicate there is quite a difference from company to company in respect of annuities. Therefore, someone in these circumstances would be well advised to shop around in terms of getting the best return. With regard to the reasonableness or otherwise of the return, I think the feeling of the superintendent was that the return was not unreasonable under the circumstances. It really gets back to the question of whether the individual should be entitled to hold his assets in some other way, as trustee assets or otherwise, and receive a periodic payment. That, I say, is a question for consideration.


Sinclair McKnight Stevens: I have another question which really arises from the point raised by the hon. member for Ottawa West. Is the minister giving any consideration to expanding the number of institutions which can handle registered retirement savings plans? I believe the hon. member referred to co-ops and credit unions. The minister did not say whether the general field might be extended rather than being limited as at the present time.


Donald Stovel Macdonald: There is no restriction on co-ops and credit unions except such as may be imposed by provisions under the general law. There is certainly no restriction under the Income Tax Act. Again, as the hon. member knows, these particular institutions are set up under provincial legislation, and without a very full examination of the provincial legislation I would not want to give an opinion as to whether or not they are entitled to write annuity contracts. To give a quick opinion, I would say there is no hesitation to allow co-ops or credit unions to set up registered retirement pension plans and have them registered under the Income Tax Act.


Sinclair McKnight Stevens: In the minister's capacity as a member of this government, bearing in mind that trust and loan companies' administration comes under his department, is he prepared to recommend that the trust legislation of a federal nature be amended to make it clear that institutions such as co-ops and credit unions would be deemed to have this power to handle registered retirement savings plans?


Donald Stovel Macdonald: The federal trust companies' legislation is enabling legislation to provide for the incorporation of trust companies under federal law, having regard to certain powers. The legislation does not in any sense purport to restrain provincial institutions set up under provincial law. In that sense, the enabling legislation of the particular jurisdiction would determine whether a co-op or credit union could
Income Tax
engage in and be a trustee under a registered retirement savings plan and, indeed, could be an annuity carrier.


Sinclair McKnight Stevens: Earlier the minister said there were few, to use his words, earning $10,000, $12,000 or even $15,000 who could use the full 20 per cent limit. I was wondering whether the minister could indicate why that 20 per cent limit is left in place. I can understand the figures may indicate that there are what he regards as relatively low percentages or there are few earning of the level that reach the 20 per cent limit, to partly answer the point raised by the hon. member for New Westminster who seems to think this was a plan unduly in favour of those on high income levels. But why is more latitude not given to those who earn $10,000 if they are in a position where they can put $5,000 away because of some peculiar circumstance? Why does the minister arbitrarily say that $2,000 is the limit in that case?


Donald Stovel Macdonald: It is for the reason I gave at page 1626 of Hansard, Mr. Chairman. It is conceivable, under some circumstances, that investment income would be available for the party to live off, and he could take advantage of an unlimited right available against income for contribution to this kind of plan.


A. Daniel McKenzie: Mr. Chairman, I should like to ask the minister if he has considered allowing the transfer of RRSPs into spousal plans. Under present legislation it is not possible for a taxpayer to roll funds already accumulated in his own plan into a plan held by his spouse. The advantage of this change to those approaching retirement age, particularly those who have not been able to benefit from the recently introduced spousal provisions, is that they could split their income for tax purposes.


Donald Stovel Macdonald: Mr. Chairman, it is possible at the present time, in effect, to collapse one's own plan and have an annuity for a long time, but at the moment there is no provision for the hon. member's suggestion. I am prepared to undertake consideration of it, but I would say that probably, for the reason given in the last few words of the hon. member's question, generally speaking we have sought to avoid incomesplitting between husband and wife. I think the question is whether in those circumstances there might be inequity in relation to other taxpayers.


A. Daniel McKenzie: Mr. Chairman, I thank the minister and I hope he will consider that recommendation. It would mean both would qualify for the $1,000 exemption beyond age 65 for funds withdrawn for the RRSP. I have another question, Mr. Chairman. On February 28 there will be a scramble to meet the deadline for registering funds and there is a hold-up in filing income tax returns. This would be almost eliminated if the deadline for registering plans could be extended from 60 days from February 28 to, say, 120 days to April 30, after the year ends. Is the minister giving consideration to extending the period?
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Income Tax


Donald Stovel Macdonald: No, Mr. Chairman. The principal reason is that an administrative problem would be created going right up to the filing date. On the whole, it seems to me the latitude of 60 days is quite reasonable. I am not sure there is any serious inequity involved in not extending it at the present time.


A. Daniel McKenzie: Mr. Chairman, is it possible that we could have a uniform official receipt issued similar to a T-4 slip? This could be issued on the date of investment in an RRSP plan. It would eliminate reliance upon temporary receipts and deposit slips that are of no value because they are unofficial. I have had complaints about the February 28 deadline. This official receipt could also speed filing for people in these circumstances.


Donald Stovel Macdonald: Mr. Chairman, this would be an administrative problem for Revenue Canada. I am prepared to take it up, but it seems to me it is almost the obverse of the previous question that the hon. member asked. The delay in getting the receipt is an administrative problem initially.


A. Daniel McKenzie: One final question, Mr. Chairman. The Consumers Association of Canada filed a brief with a number of recommendations. This was countered by the Canada Life Assurance Association. Has the minister studied both documents, and is he planning to implement any of the recommendations contained in the brief of the Consumers Association, or has he given any thought to who is right or wrong in light of the two presentations?


Donald Stovel Macdonald: I have examined both, Mr. Chairman, and in this controversy I have referred them to the study on retirement income to which I referred earlier.


Fred Alward McCain: Mr. Chairman, at age 65 can a participant in the plan use the income from the accumulated funds of an RRSP? Can he withdraw them and use them for living purposes on an annual basis, without penalty?


Donald Stovel Macdonald: No, Mr. Chairman.


Fred Alward McCain: Mr. Chairman, to a very large degree this seems to me to defeat the purpose of the RRSP program. After all, if anyone has accumulated savings in any fashion during his lifetime, he anticipates that those savings, plus the income from them, will contribute to his greater comfort at age 65, or retirement, whenever that may be. The strict regulations which now control the use of these funds at retirement age are a detrimental aspect of the program.
It seems to me it is pretty nearly time we began to get this to the stage where the minister said earlier it was intended to be, namely, a pension opportunity for those who otherwise do not have an opportunity to accrue funds; for instance, a selfemployed, small merchant who might have no pension opportunity other than an insurance program or RRSP. Let us assume he contributes the maximum from a fair wage for 30 or 35 years. It is not inconceivable that he might accumulate $100,000 in savings, plus interest or income of another kind
[Mr. McKenzie.)
which accumulates to this plan. If, at age 65, when he retires he does not even have an opportunity of using the income from this without withdrawing it all, it becomes taxed very heavily. It seems to me that if some flexibility is not introduced at age 65, it is not as useful as it should be. It seems to me the minister has said he has the opportunity at age 65 to put it into an annuity; is that correct?


Donald Stovel Macdonald: That is correct.


Fred Alward McCain: Mr. Chairman, the next thing is, I think we should have a little bit of flexibility in this annuity. What opportunity is there at the moment for anyone to invest his money in an annuity? Basically, it is the life insurance companies who are experts in this field. For instance, there is no opportunity for anyone to devise his own scheme of annuity.
Let us assume that the Canada savings market would give him a better income from this money than would the annuity market in the life insurance industry. He has no opportunity to get in there. I believe that while we are considering this bill, at least in its application for the next year, it is imperative that an element of flexibility of opportunity at age 65 be introduced. Surely a contributor should be entitled to the income from the money because it will be invested either in a stock fund, a bond fund, a trust fund, or a trust company. Has the minister given any thought to the fact that most trust companies do not have an insured guarantee beyond the level of $40,000 of savings? This dictates that a man with wisdom, in investing money in a trust company, should under no circumstances put more that $40,000 in a single trust company.
Should we not, then, have legislation so that any authorized agent who is to be the receiver of RRSP funds should be insured, as are banks, life insurance companies and others, so that the funds put into RRSP will be protected and will be certain to be there?


Donald Stovel Macdonald: That, of course, is a question currently under study by the retirement committee. As to whether we should have deposit insurance up to any amount whatsoever, what we are inclined to do is provide deposit insurance up to a maximum, with general scrutiny by the administration as to the solvency of corporations taking over, to ensure the solvency of assets. Under the circumstances, I am not sure that the additional cost which will be imposed by deposit insurance to an unlimited amount is a real necessity in this program. I can say that in general terms those under federal jurisdiction are well run companies whose solvency is not in question, and in that sense I do not know that deposit insurance should be required up to the last dollar.


Fred Alward McCain: I only say that the recommendation has been made, and I think properly made, that a greater number of those dealing in the money markets should be considered as eligible for administrators of RRSP funds. I do not think that if we brought in this new element it would be wise to leave it uninsured, and any area in which these moneys may be placed
December 15, 1976

should be insured. I hope the minister will give consideration to going beyond a certain point and letting people know about it, because if you go beyond a certain point and a trust company is not insured, the money is not guaranteed and I think people should know about it. They should be told to put the money in a second or third fund if they want it used as the minister said it was intended to be used, namely, as a pension opportunity.
It is in this situation that the accumulation of funds would exceed the amount which would be insurable under the existing regulations for trust companies. I wish the minister would give serious thought to it. Let us not leave anybody high and dry when they think they are secure.


Mr. Towers:: Mr. Chairman, much of the well-being of Canadians depends on the amount of savings they can accrue during their lifetime. I do not think that necessarily all the blame rests with this government, but I believe that a series of governments has not given sufficient consideration to encouraging Canadian citizens to try to save. There seems to be a trend in our society at present, which is perhaps due to inflation or other reasons, which encourages people to spend everything they make and never think about a rainy day. I believe governments should encourage Canadian people to save.
One of the areas which I should like to bring to the attention of the minister is a roll-over from a company savings plan. I have in mind an individual who wanted to take money out of a government savings plan and put it into an annuity, but the only way in which that could be done was directly from the savings fund into the annuity. In other words, the individual was not permitted to take that money from the fund and put it into the annuity. As a result of this cumbersome and complicated system, the individual lost on the interest on the lifetime annuity because at that point the interest on the annuity was very high. The representative of the insurance company was aware that the interest rate was going to drop, but he could not get his hands on that money; he had to wait until the time when the savings fund was available for transfer. If there were some flexibility so that an individual could put that money into the annuity when the interest rate was high and at a later date take the money out of the fund, so long as it was done within a certain period of time, I do not see why it should cause any problem.
I am wondering what is the minister's approach to these problems. What I am proposing would not be setting a precedent. There have been occasions when once in a lifetime individuals could make a certain kind of bequest or deal of some sort. I should like to hear the minister comment on these roll-overs.


Donald Stovel Macdonald: I am not sure I have captured the intent of the question of the hon. gentleman. The maturity date is determined by contract under the registered retirement savings plan. In order to afford tax concessions, he is required to roll it over into an annuity. I do not really understand the problem on which the hon. member is focusing. If it is the
Income Tax
broader consideration as to whether the money should be in an annuity, a trust fund or the Canada savings bonds, that is another question.


Thomas Gordon Towers: This has to do with a savings plan under federal jurisdiction. In the case I mentioned, the money could be rolled over into an annuity, but the problem was that it had to go directly from the plan to the annuity. If the individual had the right to take that money out, he could have taken it out at a later date, because he lost on the interest.


Donald Stovel Macdonald: It seems to me that the point is that the individual has to agree in advance on the maturity date, which may or may not fall at a time when the interest rate is high. Here is another situation in which the position of someone with money in a registered pension plan is similar to someone with money in a registered retirement savings plan. It is conceivable that one could give greater benefits to someone who is self-employed than to an employee of a substantial firm. There is a problem of equity involved between the two. I would be prepared to suggest that the retirement income study look at this question, but it seems to me that here, again, when you start talking about more flexibility for holders of registered retirements savings plans you face an equity problem as against the fellow in a company plan who does not have the same field of action.


Sinclair McKnight Stevens: Mr. Chairman, I was wondering if the minister could give us an indication as to the extent to which trust companies and those administering registered retirement savings plans are controlled with respect to the fees that they charge to the participants of the plan. The minister will recall that not long ago there was considerable concern about the fee structure, many feeling that they were being charged at too high a level.


Donald Stovel Macdonald: They are not controlled under the Income Tax Act to the extent to which they are controlled under the general law. I would have to say that under the federal law they are not controlled.


Sinclair McKnight Stevens: Would the minister indicate if any review has been done by the government as to what, in fact, the fee structure is, whether it has been found that there is quite a range of fees, or whether they are fairly uniform; and does the government know of any instances where it feels that the fee may be excessive?


Donald Stovel Macdonald: This is an area where we would be inclined to leave it to the competitive market situation.


Sinclair McKnight Stevens: Another thing I feel would be helpful to the committee is if the minister could indicate whether the government has made a review as to what in fact-and I am looking only for ratios-the companies have been investing the registered retirement savings funds in. What percentage is going into Canadian equity investments, into mortgages and into bonds? I think it might be a helpful answer because those who
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Income Tax
are challenging the program, such as the hon. member for New Westminster, surely are forgetting the fact that a very worth-while investment pool is being created here. I wonder if the minister could give us any indication as to how that pool is actually being invested.


Donald Stovel Macdonald: I cannot give any figures this afternoon on the relative distribution of investments. It involves assessing quite a large range of financial institutions, both under and outside the jurisdiction of the government of Canada, as to how they are holding their assets.


Sinclair McKnight Stevens: As the minister undoubtedly knows, Statistics Canada has relatively up to date figures in this regard, and I hope the minister can inform the committee of some of those figures. Certainly as far as pension plans are concerned, to which he has referred several times, it is common knowledge that there is approximately $21 billion or $22 billion in those plans at the present time, that of that amount about 25 per cent is invested in common shares of Canadian concerns, and that that $4 billion or $5 billion investment means that workers in companies across Canada are the largest single holders of equity in Canadian industry of any group in Canada. I think it would be very relevant if we could get on the record the comparable figures for the pool of funds under registered retirement savings plans.


Donald Stovel Macdonald: My advice is that the figures are not broken down so finely as to registered retirement savings plans to yield that kind of figure.


Sinclair McKnight Stevens: As we are on clause 1,1 wonder if I could get a few comments from the minister concerning statements he made at the time of the budget with respect to taking a new look at the whole area of budgetary secrecy and the budgetary process. Specifically at that time he stated that he intended to seek the guidance of his colleague, the House leader, as to the best way in which to achieve a re-examination by members of the procedures we have followed for many years. He was referring to budgetary procedures. Since we are on clause 1, I wonder if the minister could give us a general indication as to what advances he has made with respect to seeking guidance or coming to a conclusion as to some different approach.


Donald Stovel Macdonald: There are really two questions here involving the extent to which there can be consultations in advance without breaching the question of budgetary secrecy. I have had discussions, particularly with the executive director of the Canadian Tax Foundation, on this particular question, but because of the pressure of other matters, the anti-inflation program and the fiscal arrangements legislation, we have not been able to bring this to an early conclusion.


Sinclair McKnight Stevens: I believe the minister referred to the executive director of the Canadian Tax Foundation. Would I be correct in saying that that is Mr. D. J. Sherbaniuk?


Donald Stovel Macdonald: That is correct.


Sinclair McKnight Stevens: In that connection, Mr. Sherbaniuk, in an article entitled "Budget Secrecy" in the Canadian Tax Journal of May-June 1976, sums up the arguments of those favouring an open budget process when he states that-


The Chairman:: Order, please. I wonder if the hon. member is getting away from the clause when he touches the question of budgetary secrecy.


Sinclair McKnight Stevens: Mr. Chairman, I realize your point, but on the other hand I am not sure where I can deal with this question in a meaningful way in the committee of the whole. I thought the most appropriate clause would be clause 1 in that the questions which have been raised today indicate that there is concern about the department's approach to the question of taxation, especially with reference to registered retirement savings plans, and the question of secrecy is a much broader question, as the minister has indicated.
Could there be some preliminary review of the proposals which will be coming into a budget in order to hear all views- for example, the views of the Canadian Tax Foundation people and others-with a view to coming to some consensus before the minister actually brings in his budget and budgetary papers? I feel it is quite relevant to the general debate which is taking place in the committee, and I am puzzled as to whether I should question the minister on this under clause 1 or under some other clause.


Gérald Laniel: The hon. member might think he has a good point, but this bill is the result of a budget and perhaps the point would have been better made during the budget debate. We have before us legislation to amend the statute law relating to income tax, specifically clause 1. I understand the concern of the hon. member, and this is why I allowed him to touch on the subject matter, but to go deeper and start an exchange of opinion with the minister as to budgetary secrecy or as to the presentation of budgets I think is going too far from the clause before us. It is not my responsibility to define another clause which would allow the hon. member at a later time in the committee to raise this matter. However, in the meantime I must ask him to come as quickly as possible to the subject matter of clause 1.


Sinclair McKnight Stevens: Dealing, then, with clause 1, perhaps I could put a question to the minister. Would he have felt it helpful in drafting the proposals which are now before us and as embodied in clause 1 if there had been an independent tax board which, like the Auditor General's office or the public accounts committee, would lie within the parliamentary system, but this independent tax board would be something along the lines of the suggestion of Mr. Sherbaniuk, in order to give some type of preview of what the relative options are, in the case of clause 1, dealing with registered retirement savings plan aspects of the income tax legislation?


Donald Stovel Macdonald: It is very hard to say whether that would have been helpful in this case.
December 15, 1976


Max Saltsman: Mr. Chairman, I should say to the hon. member for York-Simcoe that that is what this debate is all about. There is no such thing as an independent tax board. Every tax which is levied affects somebody in a different way, and I cannot think of any board which could be put together, which would reach a consensus outside parliament on who gets benefits and who is deprived of them.


Sinclair McKnight Stevens: This is before the fact.


Max Saltsman: I wonder who the hon. member for York-Simcoe would put on the board. Would he appoint just bankers and investment dealers in Canada? If we appoint members from the Canadian Labour Congress to that board, there would be no more agreement on the board than we get here, because they are obviously not going to see things the same way. I am sure the investment dealers might find some community of interest in suggesting some changes to the minister. However, that is an aside and I suppose I really should direct my question to the minister. I would like to follow up on some of the questions which have been asked of the Minister of Finance regarding the briefs of the Consumers' Association and, more particularly, the brief from the credit unions. The minister has indicated he has read the brief of the Consumers' Association and also the rebuttal from the Life Insurance Association, and I wonder whether he has seen the significant difference in the brief of the Consumers' Association regarding the disposition of the plans at age 71 in this way.
Credit unions suggest that since the holders of plans may die before they cash in their plans, and since there is no federal estate tax which is commensurate with the income tax schedule, present provisions would confer a benefit on those who receive moneys from the estate. They therefore suggest, in contrast to what was suggested by the Consumers' Association, that if the minister decides to change the options available at age 71, he should make sure that such moneys are taxed at the marginal rate of the person who owns the plan as if he were subject to tax prior to death, in order to avoid any loss to the federal treasury. Has the minister examined the proposals, and is he prepared to consider, in his review, the two proposals before him?


Donald Stovel Macdonald: Mr. Chairman, I would be prepared to have them considered in that context.


Fred Alward McCain: Mr. Chairman, a multitude of questions has been asked and the minister has been most co-operative with his answers. Although we are in the early stages of a plan which is to last many years, we have reached the point at which we must provide individual savers under this plan with some flexibility of choice and freedom to plan. Certain people will save money for up to 25 years, say, and invest it. By the time they reach age 65 they may have accumulated, by way of capital gains, dividends or other methods, a fair bit of money for retirement.
Income Tax
It is regrettable that the government should say to such people who reach age 65, "If you remove this money from the plan, you will have to average your income tax. We will not allow you to average forward." I understand one may average back four years, and forward one year. If the saver worked all his life, his income was probably greatest just before age 65; probably that is when he paid most income tax. Therefore, requiring him to average back four years, when he paid most income tax, would discourage his participation in the plan.
If the plan is reviewed, we must introduce new concepts to make it work. We should not apply the concept of income tax to pension plan money. Rather, we should be governed by the concept of the maximum good for all, a concept which should apply both to the individual who has saved money, and to the state. If a man chooses not to buy an annuity at age 65, the state should not come to him with its hand out, ready to grab the maximum from him. We should allow the investor to place his RRSP funds with a trust company, for example, which could use the money to secure a mortgage. Over 25 years, such mortgage might provide a secure, reasonable return. Perhaps the saver could do this through a lawyer or other agent who could invest money in absolutely secure property. On reflection, perhaps a trust company is a better agent because of its insured position. At present, existing government income tax laws and regulations discourage individuals from putting all their eggs in one basket.
I should like one question to be clarified. Let us assume a person at age 65 places money in an annuity. What proportion of the money is taxed? Is the entire amount received taxable? Is every payment taxable? Is any part of the money considered as capital, or is it all considered as income in the year in which annuity payments are made? I hope the minister will not in future follow the narrow path with respect to the RRSP program presently being followed. Alternative methods of investing should be considered, methods other than the simple annuity.
I am not aware of companies other than insurance companies from which one can buy an annuity. Thus, a group of companies has a corner on business which should be shared with other companies. Such a corner removes what the minister calls the competitive aspect. He has suggested that charges for administered RRSP programs will be established by competition in the marketplace.
Unfortunately, there is little competition in the annuities market. Therefore, we should give investors several alternative opportunities for so investing their money. For example, the government sells bonds, some of which mature, say, in 1979. The government must pay interest on the money it borrows. Could not such an investment on the part of an individual be considered as an annuity? Not long ago the government adjusted upward the low rate of interest it paid on old, outstanding annuities. Since the government pays 2 per cent or 3 per cent more on Canada savings bonds than insurance companies pay on annuities, why could the government not accept money from the RRSP investor and consider such money as an investment in a government annuity? After all,

December 15, 1976
Income Tax
the interest it must pay is comparable to what it must pay for other funds it needs to finance its operations.
The government raises money through bonds, and sometimes it must refund money. I submit that the government could be just as flexible with regard to an annuity structure as it is with regard to Canada savings bonds. There is no assurance, when the government floats $1 billion worth of Canada savings bonds, that the bonds will stay in the hands of the original individual investors. To discourage the cashing in of such bonds, the government offers a relatively high rate of interest and guarantees immediate liquidity. I therefore suggest that such bonds could provide an alternative investment for the RRSP investor. The government could easily change the rules and regulations governing the situation. Am I interfering with the next ceremony, Mr. Chairman? Is Black Rod at the door?


Charles Robert Turner: The hon. member may carry on.


Fred Alward McCain: More than ever, the government is encouraging people to manage their money. If we are attempting to help people manage their money, we must do so. At the same time, we must assure the RRSP investor who is looking forward to an assured income in later years of flexibility in the management of his money. I hope the minister will consider introducing legislation in the near future for encouraging ever more people to participate in the RRSP program. It is an advantage; it does accumulate funds. Some of these funds go into the speculative market; they go into the bond market; they are satisfying a real need in Canadian money circles. Having satisfied this need, and having served the country while at the same time serving themselves, the government should introduce flexibility so that the individual can have an opportunity to serve himself to the best possible advantage when the maturity time comes for these moneys.
The annuity and the compulsory movement in an annuity is not good. I would again ask the minister to be more flexible. Let us get out of the compulsive aspect of what can be done with this money, and get into a flexible position. Accordingly, it must be regulated by government and regulated in a fashion ensuring income to keep the man as comfortable as he hoped he might have been. There should not be a single road down which this money has to flow by regulation of government, when there are so many alternatives that offer reasonable security for any man with money at any moment in time.
If this program were 25 years old today, instead of five or six, we would get a great deal more support for the demand on the minister to give these considerations, because at that moment in time, at 25 years old, the amount of money put into RRSPs will be very substantial. The amount of penalty that can be imposed under these regulations for the emergent need of money can be excessive. The regulation which says it must all come out at any moment in time, regardless of the emergency in which the individual finds himself, is not good: it is

too rigid, too strict. I do not think the ordinary individual who is putting money into this program realizes the strictures which this puts on the structure.
As this act is considered, and as future amendments and requirements are considered for this purpose, let us give some thought to the idea that most people putting money into this expect that it will be available for emergencies. Let us give an emergent opportunity for people to use it. Let us give people, within proper regulations and elements of safety, an alternate way of investing in what they may consider to be their best interests and keep tabs on the fact that this money is used in the best possible way.
It is imperative that we get away from the narrow confines of regulations and legislation which keep us going down such a straight line at the minister's demand or at the demand of regulation which may be made in connection with the tax structure.


Thomas Gordon Towers: Mr. Chairman, I have one short question which has to do with double-taxation. I realize the minister has made arrangements with other countries in order that there will be no double-taxation. However, there seems to be within the RRSP a way that on occasion principals are caught with double-taxation. It has to do with the amount paid in. Income tax is not paid until the end of April. However, the funds have to go into the plan prior to the end of February. The money that goes into the plan may be greater than what is allowed by the Income Tax Act. That money is left in there. I realize it can be used in the next year if the participant recognizes this. However, when they make out their income tax form at the end of April, they have to pay income tax on that portion over and above what the RRSP allows, to the amount that they put in.
If that money is taken out of the plan after April 30, they are again taxed on it. Therefore, that portion of the money is taxed twice. Could the department not bring in a plan to negate this? It seems to be unfair. The situation has developed as a result of misunderstanding. Possibly the allowable amount could be increased rather than held at 20 per cent. Will the minister give consideration to this question so that those who are caught in this situation do not pay double taxation on that portion of the money taken out?


Donald Stovel Macdonald: Mr. Speaker, there are, indeed, provisions in this bill dealing with the situation of overpayment. I will be glad to deal with this matter when we get to that point.


Mr. Knowles (Winnipeg North Centre):: Mr. Chairman, I do not know whether Black Rod will stay away long enough to let me say what I want to say. At least I can start. A good many times in this discussion on clause 1 the Minister of Finance has referred to what I believe he calls the retirement committee. I believe that is a committee of persons from the Department of Finance, the Department of National Health and Welfare and Treasury Board which is engaged in an overall discussion on pensions, presumably from all aspects.
December 15, 1976

In my view, this whole discussion on registered retirement savings plans raises a question which I would like to put to the minister. Fundamentally, I suppose I am asking him whether the committee to which he has referred is discussing this aspect of it. However, let me take a moment to outline what I have in mind. I may say I am glad to see the hon. member for Eglinton in his place. If my memory serves me correctly, I can call him as a witness for a proposition I should like to present.
There is a school of thought with respect to pensions which contends that in actual fact pensions are not paid out of savings from the past but are paid out of current production. After all those who live on pensions purchase food, clothing and various services. These are not things that have been saved. These things are being purchased at the present time. In other words, if a person had a pension of $1 million a year and the current society were not producing food, clothing and services, his pension would not be worth anything to him. That raises the whole question as to whether pensions based on accumulated funds are the best way to provide for retirement or whether we should be realistic, realize that pensions are paid out of current production and develop our pension plans accordingly.
This school of thought-and I happen to concur with it- takes the view that these many funds we have, whether the public service superannuation fund or the various other funds the government operates, or funds put away by private employers, or funds which are saved through RRSPs, are really just a way of deciding how much of current production a retired person is to receive. Therefore, those who think in these terms ask, should we not come directly to grips with this issue and decide as a society how much our people are to get by way of pensions. I guess I shall have to deal with this tomorrow.
Progress reported.


BUSINESS OF THE HOUSE
Allan Joseph MacEachen: I am rising on a point of order, Mr. Speaker. It has to do with the future progress of Bill C-19
Royal Assent
which has been reported from the committee. The usual order of the House is that all questions related to that bill should be put at a quarter to four. I am suggesting that the order be altered so that all outstanding questions on that bill be called at a quarter to five on Thursday, tomorrow. I shall call the bill as the first item tomorrow, and if the debate expires before a quarter to five we can have the division. But if not, we shall have the division at a quarter to five.


Walter David Baker: I cannot agree with the government House leader on every occasion, but I can certainly agree with him on this occasion. It is a sensible course to take.


Stanley Howard Knowles: This proposal is one we have discussed and accepted.



THE ROYAL ASSENT

[Stage Direction]
A message was delivered by the Gentleman Usher of the Black Rod, as follows:
Mr. Speaker, the honourable the Deputy Governor General desires the immediate attendance of this honourable House in the chamber of the honourable the Senate.
Accordingly, Mr. Speaker with the House went up to the Senate chamber.
[Stage Direction]
And being returned:
Mr. Speaker informed the House that the Deputy Governor General had been pleased to give, in Her Majesty's name, the royal assent to the following bill:
Bill C-28, An Act for granting to Her Majesty certain sums of money for the public service for the financial year ending the 31st March, 1977-Chapter No.
2.
Mr. Speaker:: It being six o'clock, the House stands adjourned until tomorrow at 2 p.m.
At 6.07 the House adjourned, without question put, pursuant to Standing Order.


Thursday, December 16, 1976