1977-12-06

ROUTINE PROCEEDINGS


Mr. Sinclair Stevens (York-Simcoe):: Mr. Speaker, I rise under the provisions of Standing Order 43 on a matter of great urgency. Today's unemployment rate of 8.4 per cent coupled with the inflation rate of 8.8 per cent yields an economic misery index of 17.2 per cent. In view of the consistent deterioration of our economic performance, I move, seconded by the hon. member for Meadow Lake (Mr. Cadieu):
That this House instruct the government to consider the advisability of an immediate substantial cut in federal sales taxes on Canadian made consumer durable goods, which would have the effect of both lowering prices and increasing employment in Canada.


Mr. Speaker:: Such a motion can be presented at this time only with unanimous consent. Is there unanimous consent?


Some hon. Members:: Agreed.


Some hon. Members:: No.
* *
*


THE CANADIAN ECONOMY
Mr. Edward Broadbent (Oshawa-Whitby):: Mr. Speaker, I, too, rise, under the provisions of Standing Order 43 on a matter of urgent and pressing necessity. In view of the reported statements by the Minister of Employment and Immigration (Mr. Cullen) that Canadians "have been spoiled rotten and have been living too high on the hog" and further, according to the minister, what Canadians need is a "kick in the gut", and considering that over 1.3 million unemployed Canadians want jobs not handouts or unemployment insurance, I move, seconded by the hon. member for Winnipeg North Centre (Mr. Knowles):
That this House agrees that the Minister of Employment and Immigration in particular and the federal government in general need the strongest possible kick, not in the gut but in the lower part of their anatomy, from the Canadian
people in order to get them to take the leadership required to produce jobs for Canadians.


Some hon. Members:: Hear, hear!


UNEMPLOYMENT-SUGGESTION EMPLOYMENT MINISTER PROVIDE TAPES AND TRANSCRIPTS OF REMARKS AT OTTAWA UNIVERSITY-MOTION UNDER S.O. 43
Mr. Elmer M. MacKay (Central Nova):: Mr. Speaker, I rise under the provisions of Standing Order 43 on a motion similar to that of the hon. member for Oshawa-Whitby (Mr. Broad-bent) with regard to Canada's drastic unemployment. The Minister of Employment and Immigration (Mr. Cullen) made a number of comments to a group of "New" Liberals at the University of Ottawa in which he was reported as saying Canadians need a "kick in the gut" and have been "living too high off the hog". Since most Canadians would like to read the full context of the minister's remarks in order to be aware of the heartlessness of this government and its dismissal of our present economic state as being not its fault but the fault of somebody else, I move, seconded by the hon. member for St. John's West (Mr. Crosbie):
That this House requests the Minister of Employment to make both a tape of his conversation last weekend at the University of Ottawa and a transcript of those remarks available to all individuals who request such.


Mr. Speaker:: Such a motion can be presented for debate at this time only with unanimous consent. Is there unanimous consent?


Some hon. Members:: Agreed.


Some hon. Members:: No.


MANPOWER
Mr. Gerard Laprise (Abitibi):: Mr. Speaker, pursuant to Standing Order 43, I seek the unanimous consent of the House to move a motion on a matter of pressing and urgent necessity.
In view of the fact that the Canada Manpower Centre in the La Sarre region has run out of the money it had earmarked for its adult vocational training program, and that some sixty people would consequently be deprived of their training from February 1978 to September 1978, I move, seconded by the hon. member for Villeneuve (Mr. Caouette):

December 6, 1977
Manpower
That the Department of Employment and Immigration allocate forthwith additional funds to permit these students to complete their vocational training without running the risk of waiting too long between budgets.


Mr. Speaker:: Pursuant to Standing Order 43, this motion requires the unanimous consent of the House. Is there unanimous consent?


Some hon. Members:: Agreed.


Some hon. Members:: No.


SUGGESTION MINISTER MEET PROVINCIAL MINISTERS TO DEVELOP EMPLOYMENT PROGRAM FOR YOUNG PEOPLE-MOTION UNDER S O. 43
Mr. Roch La Salle (Joliette):: Mr. Speaker, pursuant to the provisions of Standing Order 43, I request the unanimous consent of the House to present a motion on a matter of urgent and pressing necessity.
Since young Canadians, though representing only 26 per cent of the labour force, still constitute 48 per cent of all the unemployed in Canada; since in the last year some 83,000 new young workers have joined the labour market while only 22,000 new jobs have been created for them; since that situation threatens to poison further the social climate which is perturbed enough at this time, and bearing in mind the urgent need of a very specific policy for that category of workers, I move, seconded by the hon. member for Selkirk (Mr. Whiteway):
That this House recommend unanimously to the responsible minister that he convene his provincial counterparts to study together a special employment program for young people under 25.


Mr. Speaker:: Under the terms of Standing Order 43, this motion requires the unanimous consent of the House. Is there unanimous consent?


Some hon. Members:: Agreed.


Some hon. Members:: No.


UNEMPLOYMENT-SUGGESTED MEASURES TO CREATE JOBS IN EASTERN PROVINCES-MOTION UNDER S O. 43
Mr. David MacDonald (Egmont):: Mr. Speaker, I rise under the provisions of Standing Order 43. Inasmuch as a very large percentage of those unemployed, over 400,000 people or 42 per cent, are in the five eastern provinces, I move, seconded by the hon. member for Central Nova (Mr. MacKay):
That this House demands as a matter of urgency a program of economic reconstruction for the have-not regions of Canada which shall include the following: a system of tax contracts to encourage the industrialization of the region; the adoption of a job credit scheme in time for this winter's unemployment hardship; a special tax rebate on inventory valuations in areas of slow growth; assistance in developing the more than 30 hydro-electric sites in the Atlantic region; special assistance to small businesses investing in have-not areas; preferred freight rates for key sectors in Atlantic Canada, such as steel, wood and food products; and the use of the government's purchasing power as a tool of economic development.


Mr. Speaker:: Presentation of such a motion for debate can be done only with the unanimous consent of the House pursuant to Standing Order 43. Is there unanimous consent?


Some hon. Members:: Agreed.


Some hon. Members:: No.


RESOURCES
Mr. John Rodriguez (Nickel Belt):: Mr. Speaker, I rise under the provisions of Standing Order 43 on a matter of urgent and pressing necessity.
In view of the fact that the International Nickel Company of Canada Limited, after following a corporate policy for 30 months aimed at the production of a substantial surplus, then turned around and used this surplus as an excuse to lay off 3,000 of its employees; and in view of the fact that today a confidential report from Environment Canada was made public, and that it said in part INCO was following a policy of high grading in the Sudbury basin area, a practice which will substantially reduce the amount of recoverable nickel in that area, I move, seconded by the hon. member for Cape Breton-East Richmond (Mr. Hogan):
That this House call the executive and directors of INCO before the committee on national resources to account to the people of Canada for the way they have mishandled this valuable national resource of this country.


Mr. Speaker:: Presentation of such a motion for debate requires the unanimous consent of the House. Is there unanimous consent?


Some hon. Members:: Agreed.


Some hon. Members:: No.



ORAL QUESTION PERIOD

[Stage Direction]
[ Translation]

Roch La Salle: Mr. Speaker, in light of statistics published this morning concerning unemployment, I have to express my regrets that the Minister of Employment and Immigration is not in the House. Given the fact that those figures demonstrate that Canada is still in a pitiful situation, I would like the Acting Prime Minister to tell me very precisely-and I think Canadians would like to know too-why the Minister of Employment and Immigration is absent from the House when we have to discuss such an important issue and
December 6, 1977

statistics prove that Canada is still in very bad shape. Therefore, 1 ask the Acting Prime Minister the true reasons for the absence of the Minister of Employment and Immigration.


Hon. Allan J. MacEachen (Deputy Prime Minister):: Mr. Speaker, the Minister of Employment and Immigration has been in the House regularly to answer questions in connection with the economy and the unemployment situation. His absence today is in no way related to the release of the unemployment figures, but is as a result of commitments which he has undertaken in the province of Ontario.


THE CANADIAN ECONOMY
Roch La Salle: Mr. Speaker, I have a supplementary question. I am sorry that the Acting Prime Minister seems to consider as normal the absence of the Minister of Employment and Immigration when we discuss these statistics. Since he is undoubtedly aware that young people account for 26 per cent of manpower and for 48 per cent of unemployed people in Canada, the Acting Prime Minister, just like the Prime Minister who told young Canadians a few months ago that if they wanted to work and did not find jobs in the country, they just had to leave-


Some hon. Members:: Question!


Roch La Salle: It's coming. Just like the minister responsible, last week-


Mr. Speaker:: Order, please. If the hon. member wishes to ask a question, would he put it forthwith?


Roch La Salle: Following those two statements, here is my question to the Acting Prime Minister, Mr. Speaker: Has the Prime Minister any new development to announce to the House in order to correct this pitiful situation for this group of young people?


Allan Joseph MacEachen: Mr. Speaker, we would be grateful if it were possible for the opposition to pass the tax bill which, when enacted, will provide a very positive stimulus to the economy of Canada. That would be a very helpful way of easing the economic situation in Canada.


Roch La Salle: Mr. Speaker, I have another supplementary. It is unfortunate that the answers are not more positive. Since the labour force increased by 83,000 new young workers in the last year and during the same period the number of jobs for
Oral Questions
young people only increased by 22,000, has the Acting Prime Minister a concrete proposal to make today in order to correct this imbalance and the threat of a climate which may deteriorate further for this group of young people?


Allan Joseph MacEachen: Mr. Speaker, the hon. member might have noticed that there has been a slight improvement in the employment totals in his province of Quebec, which is worthy of some comment. The proposals of the government for the stimulus of the economy were put forward by the Minister of Finance in his economic statement during the throne speech debate, and it is not the intention of the government to make new policy on a daily basis in response to questions of this kind. When policy is formulated, it will be announced and made known to the House in the normal way.


An hon. Member:: A lot of baloney.


UNEMPLOYMENT-SUGGESTION EMPLOYMENT MINISTER RESIGN IN VIEW OF REMARKS AT OTTAWA UNIVERSITY
Mr. John C. Crosbie (St. John's West):: I would like to point out to the President of the Privy Council first that the Minister of Finance was reported in the Financial Times last week as saying-


Some hon. Members:: Question.


John Carnell Crosbie: -that budget proposals are effective on the date the budget is brought in. So it has nothing to do with the budget proposals.


Some hon. Members:: Hear, hear!


John Carnell Crosbie: There are 117,000 people out of work in the Atlantic provinces compared with 39,000 in 1968, three times as many. Are the comments made by the Minister of Employment and Immigration last Saturday night in connection with unemployment that we have been spoiled rotten, that Canadians have been living too high on the hog and that we need a kick in the guts, a reflection of the government's attitude towards this tragic situation in Canada, and if he is not representing the government's attitude-


Mr. Speaker:: Order, please.


John Carnell Crosbie: -will he be prepared to resign?


Some hon. Members:: Oh, oh!


An hon. Member:: Get up and answer that, Allan.


An hon. Member:: And do something.


Allan Joseph MacEachen: I want to assure the hon. member that the statements alleged to be those of the Minister of Employment and Immigration do not represent any considered policy on the part of the government, although I find much in his statements and comments with which I agree such as, for example, his statement that it is not
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December 6, 1977
Oral Questions
the total obligation of the government-and I presume the hon. member would agree with that-to provide jobs. We look to the private sector to make a very important contribution.


Some hon. Members:: Oh, oh!


An hon. Member:: Create the climate.


An hon. Member:: Get off their backs.


Allan Joseph MacEachen: Furthermore, I should draw to the hon. member's attention the fact that the quotations to which he referred as allegedly having been made by the minister did not refer to the unemployed of Canada. They were general comments relating to what the minister conceives to have been the lifestyle of Canadians, and that is not and has never been a question of government policy.


Some hon. Members:: Oh, oh!


An hon. Member:: You won't get away with that.


REQUEST FOR ACTION ON PROJECT TO CUT TIMBER ON LOWER CHURCHILL TO RELIEVE UNEMPLOYMENT
John Carnell Crosbie: The minister is reflecting the views of the Prime Minister who said in 1972 that we can be obsessed with unemployment. There are 117,000 people in the Atlantic provinces who are obsessed with that.
There are certain things the government can do. There are two Newfoundland projects upon which the minister can act. What has happened to the project suggested in June of 1977? It was suggested that a project be commenced to cut timber at the Lower Churchill water reservoir to create 400 jobs for loggers who are now unemployed as a result of the shutdown of the Labrador Linerboard Mill. That project would bring about a permanent benefit. It has been six months now, and there are 400 who could be employed on that project. Will the Deputy Prime Minister move on that and show some concern?


Allan Joseph MacEachen: Mr. Speaker, I will take note of the hon. member's representations and ensure that whatever proposals have been made will be considered at the earliest possible date.


INDUSTRY
John Carnell Crosbie: Mr. Speaker, I have a supplementary question for the Minster of Industry, Trade and Commerce. The consultants B. L. Hodge and Partners of London, England just made a report to the Newfoundland government and this government in connection with the fluors-

par mine at St. Lawrence. They report that it is feasible to operate it, and that it could be profitable if Alcan would operate it properly and make the necessary investments. Alcan has refused to do this, as the minister knows as a result of a meeting with the Newfoundland government. Will the government take steps to put pressure on Alcan, and will the government tell Alcan that there will be no tax concessions, tax relief or assistance to Alcan in any way, shape or form if Alcan does not operate the only remaining fluorspar mine in Canada, which experts report can be operated profitably?


Hon. Jack H. Horner (Minister of Industry, Trade and Commerce):: Mr. Speaker, I have had discussions with the management of Alcan. They informed me that the fluorspar from the mine at St. Lawrence, Newfoundland, was used mainly as a chemical in spray cans, and because of the drastic reduction in the use of spray cans in Canada it is no longer feasible to operate that mine, bearing in mind the conditions under which it is operating.
They also informed me that without any assistance from the federal government they are investing something like $400 million in the aluminum industry in the province of Quebec, so they are not really withdrawing from the Canadian scene at all. They are fully prepared to participate in the aluminum industry, but they have lost $10 million in recent years operating that mine in Newfoundland, and they feel they can not conceivably carry on. However, they will gradually create a number of jobs easily through their expansion in the province of Quebec.


John Carnell Crosbie: What is the good of this report then?


THE CANADIAN ECONOMY
John Edward Broadbent: Mr. Speaker, I have a question for the Minister of Finance. Can the minister confirm the cynical attitude taken by the Minister of Employment and Immigration at the weekend when he said that Canadians are spoiled rotten and that they need a kick in the gut, which really amounts to blaming the victims of unemployment for their own plight? Can the minister tell the House whether this attitude, which amounts to saying that the government should not be doing anything, accounts for the fact that the government does not plan to do anything to deal with unemployment until a meeting of the first ministers which may or may not take place in February or March?


Hon. Jean Chretien (Minister of Finance):: Mr. Speaker, I do not think we are waiting until the meeting of the premiers and the Prime Minister on the economy. We have before the House at this time a bill containing many incentives. Many people are waiting for this bill to be passed so that they can make investment decisions. In the bill there is a tax cut which will stimulate consumer demand and which will take effect in
December 6, 1977

January and February. We hope to be ready very soon with a tax credit for the private sector in order to create more jobs. I hope I will be able to make a statement on this program before the end of the year. Unfortunately, it has been difficult for me to work on that program because I have had to be in the House for the last four weeks on a daily basis.


John Carnell Crosbie: Why don't you do away with parliament?


UNEMPLOYMENT-EFFECT OF TAX INCENTIVES FOR INDUSTRY
John Edward Broadbent: Has the minister read the report which was published in the business section of the Globe and Mail three days ago? The minister should be familiar with this report. It points out that the utilization rate of Canadian industry is at the lowest level it has been in five years, which means that the kinds of incentives the minister is proposing are the wrong incentives at the wrong time because we are operating at only 83 per cent capacity. If he has read the report by a business group, does he agree with it, that the problem right now is under-utilization? If it is the problem why does he not scrap the silly bill that is now before the House and put that money into the economy directly to create jobs?


Joseph Jacques Jean Chrétien: Mr. Speaker, the budget proposition is twofold. One portion is related to giving a reduction in personal income tax for the lower and medium income people who will be spending the money, and the other is the tax incentive given to corporations to invest. Of course, if they are not investing they will not receive the incentive and if there is no incentive, they will invest less. I think it is quite important to leave the incentive there so that they can plan for the expansion that will come as soon as the economy starts to pick up again.


UNEMPLOYMENT-PROPOSED WINTER CAPITAL WORKS ASSISTANCE PROGRAM TO ALLEVIATE PROBLEM
John Edward Broadbent: I would be glad to send a textbook on first year economics to the minister. It makes no sense at all for a businessman to expand if he already has excess capacity. That means the whole government's program is bankrupt.
Will the minister now accept the proposal made by virtually every premier representing all political parties when they met a short time ago at St. Andrews? They suggested the federal government bring in a special winter capital works assistance program for the municipalities which will be at least up to the level of 1971-72 when unemployment was lower in Canada. Will he bring in that kind of a program now that will provide some spending money and create jobs instead of handouts?


Joseph Jacques Jean Chrétien: We have an important proposal as an alternative plan called Canada Works and Young Canada Works which will put a lot of people to work. It was decided these programs worth $600
Oral Questions
million would enable people to get back to work faster than the route the hon. member is proposing.


MANPOWER
Mr. Gilles Caouette (T6miscamingue):: Mr. Speaker, in the absence of the unemployment minister, because it is becoming more and more difficult to call him Minister of Employment and Immigration, my question will be for the Acting Prime Minister. Contrary to what he said a moment ago in his answer to the hon. member for Joliette, that employment had risen in the province of Quebec, statistics revealed this morning that 50 per cent of the working force was at work, the same as in November, but that on the other hand the unemployment rate was now 10.5 per cent in the province of Quebec compared to 10 per cent last month. In view of the steps which have been taken last month by the government and which are not giving positive results but only negative results as we can see from this morning's reports, in view of all this, I will address my question to the Acting Prime Minister.
In view of the fact that, following the excellent arrangements made by the government, the Falconbridge Company has announced 600 more lay-offs, is the minister prepared to maintain the same negative and passive attitude the government has shown in the case of the 2,800 lay-offs by INCO? If not, what is the government prepared to do immediately to solve this problem of lay-offs in Canada?
[ English]


Allan Joseph MacEachen: In
connection with the hon. member's comments on the province of Quebec, it ought to be pointed out that while the situation is serious in that province, the seasonally adjusted unemployment rate for November is precisely the same as it was last month while there has been an increase of 9,000 in total employment. Although the situation is serious, there is no advantage in trying to make it more difficult than it is.
In reply to the hon. member's question, I do not accept the premise that the government has taken an inactive role in the problem that arose in Sudbury.



INCOME TAX


Gilles Caouette: Mr. Speaker, I would like to ask a supplementary question. Considering that the Acting Prime Minister does not accept the fact that the government did not do anything positive, that it remained passive, I would say to him, if we could obtain intelligent
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answers, our questions might be more straightforward. I will ask the Acting Prime Minister a more intelligent question.
Considering that Falconbridge Nickel Mines Limited owes to the Department of National Revenue $40 million in deferred taxes and that the Minister of National Revenue is not here to answer, is the Acting Prime Minister prepared to take a position and compel companies such as Falconbridge Nickel Mines Limited which owe millions of dollars to the Canadian government to reimburse that money and would he take it to create new jobs?


Allan Joseph MacEachen: Mr. Speaker, I will draw the hon. member's representations to the attention of the Minister of National Revenue.



FINANCE


Sinclair McKnight Stevens: Mr. Speaker, my question is for the Minister of Finance. With today's high unemployment levels and high inflation levels giving us the highest misery index ever in this country, will the minister reconsider his decision not to reduce the sales tax in this country from the present 12 per cent which is 50 per cent higher than even during World War II? Such a reduction would not only help consumer demand but would also help employment.


Joseph Jacques Jean Chrétien: Mr. Speaker, the last time we met the provincial governments, a possible reduction of provincial sales tax and assistance to province to achieve that purpose was discussed but except for one, all of them rejected that alternative. As to the federal sales tax, we thought that a reduction of tax for low and middle income people would spur demand more actively, particularly in the months of January and February.



THE CANADIAN ECONOMY


Sinclair McKnight Stevens: A supplementary question, Mr. Speaker. The minister forgot to remind us that the sales tax is the most regressive tax he has on his books. When may we see the employment credit bill that the Prime Minister has undertaken to have tabled in this House before the end of December? When exactly will we get it? How does the minister plan to ensure that the employment credits will have the effect of relieving some of the unemployment we are heading for later next year?


Joseph Jacques Jean Chrétien: Mr. Speaker, I can promise this House that I will be able to produce this when I can work with my officials on a daily basis. If the bill before the House is passed at the beginning of next week I hope to be able to make-


An hon. Member:: What nonsense.


Some hon. Members:: Oh, oh!


Joseph Jacques Jean Chrétien: I am very pleased with the reaction of the opposition, Mr. Speaker. I can see their sense of guilt showing up. I hope I will be able to make an announcement in the House before the Christmas adjournment, but if I am tied to my seat in the House unfortunately I cannot be two ministers of finance at the same time.



USE OF TAX CONTRACTS TO INDUCE INDUSTRY TO LOCATE IN AREAS OF HIGH UNEMPLOYMENT

Sinclair McKnight Stevens: A supplementary question, Mr. Speaker. The minister might be reminded of the statement "if you cannot stand the heat get out of the kitchen." Bearing in mind the 30 per cent unemployment levels in some areas of the country, would the minister give consideration to entering into tax contracts with those in the private sector who might be willing to go into some of those areas and create jobs if they could get confirmation from the government of what their long-term tax position would be?


Joseph Jacques Jean Chrétien: Mr. Speaker, the best thing would be to pass the bill now before the House. I think the business community is pretty discouraged at this time to see that we are in the fifth week of debate on the budget bill and are on Clause 5. If we proceed at this rate the bill will not be passed for two years.


Some hon. Members:: Oh, oh!


Some hon. Members:: Hear, hear!


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


Joseph Jacques Jean Chrétien: I think if there was a little bit more intelligence-


An hon. Member:: Oh sit down.



REGIONAL ECONOMIC EXPANSION


David Samuel Horne MacDonald: Mr. Speaker, it is obvious that the Minister of Finance is upset because he is speaking out of both sides of his mouth. The other day in the Financial Times he indicated very clearly that the tax measures became effective the night of the budget.
December 6, 1977

I hope I can make more progress with the Deputy Prime Minister with respect to a very serious matter raised by some of his colleagues in terms of the possible abolition of the Department of Regional Economic Expansion. Apparently some of his colleagues have been arguing for this in recent weeks. Can the Deputy Prime Minister indicate whether that problem has been resolved within cabinet and more importantly, what initiatives are being contemplated by the government with respect to a more flexible and effective program under the Department of Regional Economic Expansion to get at the serious unemployment problem in the five eastern provinces?


Allan Joseph MacEachen: Mr. Speaker, I can certainly assure the hon. member that there is no problem whatsoever about the continued existence of the Department of Regional Economic Expansion and no such problem has ever existed. I can assure my hon. friend that there is absolutely no foundation to the speculation that has been current about the possible abolition of the Department of Regional Economic Expansion. It has been a rather useful speculation, however, in the sense that so many people have come forward to praise and support the work of the department.


David Samuel Horne MacDonald: Mr. Speaker, I hope the Acting Prime Minister has communicated this vital information to some of his colleagues sitting near him as well as to the Prime Minister. In light of this new found interest and support can the Deputy Prime Minister indicate whether some of the excellent suggestions made by the five eastern provinces as well as a number of interested groups, such as the Atlantic Provinces Economic Council and the Atlantic Provinces Chamber of Commerce, with respect to major changes in the effectiveness of DREE programs, will be implemented rather than the patchwork programs of the last few months?


Allan Joseph MacEachen: Mr. Speaker, I agree that it may be possible to improve the effectiveness of DREE. It may be possible and to that extent I support the representations made by the hon. member. Ideas have been put forward by provincial premiers and, as the hon. member knows, in the current series of meetings and in subsequent meetings between the Prime Minister and the provincial premiers there will be opportunity to advance this particular discussion. I can reassure the hon. member on two points: First, there is no possibility that DREE will be terminated and, second, the government is diligently seeking new ways to improve the effectiveness of DREE.



REASON FOR ABSENCE OF DEPARTMENT'S PLANS FROM SPEECH FROM THRONE

David Samuel Horne MacDonald: A final supplementary question. Mr. Speaker, some of this equals Saul's experience on the road to Damascus. Can the Deputy Prime Minister tell the House why there was no indication in the Speech from the Throne a few weeks ago of any initiatives within this department and, secondly, why the Minister of Regional Economic
Oral Questions
Expansion for the last two years has been prevented from making major amendments to the most important legislation emanating from that department, the Regional Development Incentives Act?


Allan Joseph MacEachen: Mr. Speaker, the Speech from the Throne has never been regarded as a total statement of government policy under any government whether one supported by the hon. member or this government, so he ought not to draw any conclusions from the fact that a particular reference was not made to DREE in the Speech from the Throne.

[ Translation]



HOUSING


Mr. Gaston Isabelle (Hull):: Mr. Speaker, my question is directed to the Minister of State for Urban Affairs. In view of the minister's answers to my valiant colleague from Gatineau at the Standing Committee on Health, Welfare and Social Affairs as well as weekend reports published in some newspapers to the effect that the agreement concluded between the federal government and the Quebec government to subsidize housing would not apply to the Hull area, could the minister say what the Canadian government can do or intends to do to help solve the problem due to the scarcity of public housing in the Hull area and thus reduce the long waiting list of 1,600 individuals among the poorer in our community?


Hon. Andre Ouellet (Minister of State for Urban Affairs):: Mr. Speaker, it is obviously a very acute problem to which the Canadian government can provide two kinds of solutions. On one hand, we have just signed an agreement under the National Housing Act and the Quebec government would only have to designate some vacant dwellings in Hull for the purposes of public housing. On the other hand, if the Quebec government rejects that alternative, we could always sell it some property, some apartment buildings and I am referring to the Jardins Mont-Bleu which could be sold by the Canadian government to the Quebec government. Indeed, we could finance 90 per cent of such a sale, so that those dwellings could be used by low income families or students who could live in that area near the Quebec University in Hull.

December 6, 1977
Oral Questions



ROYAL CANADIAN MOUNTED POLICE


Mr. Bill Jarvis (Perth-Wilmot):: Mr. Speaker, my question is directed to the Solicitor General and it relates to the inquiry in Ontario set up to investigate the use of medical data obtained from files of the Ontario Health Insurance Plan. Has the Solicitor General or his officials been in touch with officials of the Ontario government with respect to the terms of reference of that inquiry and has the hon. gentleman made known to the Ontario officials any objection he or his department might have to the commission's terms of reference?


Hon. Francis Fox (Solicitor General):: No, Mr. Speaker, I have not been in touch with the officials in question nor have I made any representations regarding the terms of reference of the inquiry.


William Herbert Jarvis: Has the Solicitor General or his officials given any indication to the Ontario government with respect to co-operation with that inquiry and, specifically, is the Solicitor General of the opinion that he will make available to that inquiry procedural manuals outlining the procedures under which this confidential data was obtained?


Francis Fox: Following the discovery of the use made of the OHIP files there was a meeting between my department and officials of the Department of the Attorney General of Ontario to acquaint them with all the information in our possession with respect to that practice. We offered our complete co-operation to the Ontario government in connection with any inquiry they might wish to set up to look into the matter.



NORTHERN AFFAIRS


Mr. Wally Firth (Northwest Territories):: Mr. Speaker, I have a question for the Minister of Indian Affairs and Northern Development. According to the federal officials responsible for employment training in the Northwest Territories, the unemployment rate in the Mackenzie Valley averages 26 per cent and the rates in some communities are higher than 70 per cent; in my own home village of Fort McPherson the unemployment rate is now 72.5 per cent. Can the minister tell us what specific plans his department is preparing to create new job opportunities in the Northwest Territories?


Hon. James Hugh Faulkner (Minister of Indian Affairs and Northern Development):: Yes, Mr. Speaker. As I have indicated to the hon. member in private conversation we are now working in the department on a strategy for increased econom-

ic activity in the Mackenzie Valley. There have been meetings in the Northwest Territories attended by representatives of the territorial government to encourage a community consultation process. As soon as I have worked this through I shall get in touch with the hon. member to obtain his views. I hope to be making a statement in Yellowknife on the subject some time in January.



GOVERNMENT POSITION ON CONTRACTING OUT WORK TO PRIVATE OPERATORS

Walter (Wally) Firth: I should like also to ask the minister to explain the government's policy with respect to contracting out government operations to the private sector. The two most recent examples concern workers on the Merv-Hardie Ferry in Fort Providence and also, I believe, maintenance workers at the Frobisher Bay airport. While the government puts out tenders to the private sector, workers involved in these operations have received lay-off notices. It appears that this policy is reducing the number of jobs rather than creating employment and I should like to know what the government intends to do about the situation. Is this government policy? Will this policy be continued in the future?


James Hugh Faulkner: The hon. member was kind enough to let my office know an hour ago, I guess, that he would be asking this question. I have not had a chance to look into the matter but I will do so and get back to him tomorrow.



ROYAL CANADIAN MOUNTED POLICE


Elmer MacIntosh MacKay: Mr. Speaker, I have a question for the Solicitor General. Can the hon. gentleman enlighten us as to the current situation resulting from the serious constitutional conflict between federal and provincial jurisdictions which is being manifested in the order by Commissioner Keable, directed toward the Solicitor General and the production of security files of his department directing the Solicitor General to produce documents from his departmental files concerning the security service or to appear in person to explain his refusal to do so?


Francis Fox: The whole question of the Writ of Evocation is presently before the courts in Montreal where we are arguing the constitutional question, what exactly are the limits of the mandate given to the Keable Commission by the Lieutenant-Governor of the Province of Quebec and the extent to which a provincial authority can inquire into the day to day operations of a Crown agency under the guise of the administration of justice in a province.
December 6, 1977



MINISTER'S USE OF TERM &quot;NATIONAL SECURITY&quot;

Elmer MacIntosh MacKay: On that point, Mr. Speaker, can the Solicitor General tell us this-his answer would be useful in the context of parliamentary discussion: when he uses the term "national security", as he does from time to time in our debates, is he using the term in a jurisdictional or legal sense or merely as a descriptive phrase? Is he relating it to any part of the British North America Act?


Francis Fox: When we are talking about national security in this House I take a great deal of guidance from what was decided upon by parliament itself as described in Section 16 of the Official Secrets Act, 1974. This set out what the term "subversive activities" is meant to convey in Canada. The mandate of the RCMP Security Service has been derived almost totally from the definition given by parliament of that term in 1974.



NORTHERN AFFAIRS


Mr. Doug Neil (Moose Jaw):: My question is directed to the Minister of Indian Affairs and Northern Development. It arises from the statement made by the hon. gentleman's parliamentary secretary on Friday when he told the first Alberta NWT mining industry forum, in effect, that the days of open handed government assistance to the private sector of the northern economy are over and that Ottawa will consider supporting business ventures which meet the government's social and economic goals, apparently on a joint venture basis. My question is this: is the minister prepared to make a statement on motions setting out in detail the government's social and economic goals and, further, can he tell us whether it is government policy to scrap traditional incentives in favour of state interference?


James Hugh Faulkner: On the last point, Mr. Speaker, the answer is, no. As to the more general question about our social and economic goals, these have been outlined by myself in meetings with the Chamber of Mines in Yellowknife and in Whitehorse. They have been outlined, as well, by predecessors of mine. It will not come as any great surprise to the hon. member that when we are considering economic development in the north we take into account not only the jobs which can be created but the number which can be made available to the native people, the degree to which a mining venture, for example, can introduce as part of its expansion plans a training program so that there might be full involvement on the part of the native people wherever mines are located near their communities. Those are some of the social and economic objectives but if the hon. member needs a more elaborate statement I would be pleased to provide it. I shall be saying
Oral Questions
something more about this subject when I speak in Yellowknife in January.


An hon. Member:: We will all go up there!



EXTERNAL AFFAIRS


Mr. Bob Kaplan (York Centre):: Mr. Speaker, in the absence of the Prime Minister and the Secretary of State for External Affairs my question is directed to the Deputy Prime Minister. What position is the federal government prepared to take toward the plight of the Soviet dissident Anatoly Shcharansky who attempted within the Soviet Union to monitor compliance with the Helsinki Agreement and who has been seized and held for months in prison in Moscow without trial, without charges even being laid and without any contact with his family?


Allan Joseph MacEachen: Mr. Speaker, the Canadian government at the Conference in Belgrade has been pressing other countries for the acceptance of the principles of human rights which are involved in this particular case, namely, freedom to emigrate and the freedom of an individual to monitor the implementation of the Helsinki final act which I understand was the activity engaged in by 5 -charansky. We have not yet made direct representations to the Soviet Union about this particular case, although the apparent denial of human rights concerns us a great deal.
However, I understand a meeting has been arranged between the government and Mr. Shcharansky's relatives in Canada. From that meeting it may be possible to establish a basis to make direct representations to the Soviet Union. In the meantime, however, we are pressing forward at Belgrade the principles of human rights that are involved in this particular case.



LABOUR CONDITIONS


Mr. Donald W. Munro (Esquimalt-Saanich):: Mr. Speaker, my question relates to the disruption of telephone service in British Columbia as a result of a labour dispute involving B.C. Telephone and its employees. It is therefore addressed to the Minister of Labour. In view of the fact that the unions concerned are asking for government intervention, the lead editorial in this morning's Vancouver Province asks for the same thing and the spokesman for our party is today speaking with both sides in this dispute, can the minister say what role he sees for himself and the government at this juncture to

December 6, 1977
Oral Questions
bring the disputants together and get B.C. Telephone service back into operating shape?


Hon. John C. Munro (Minister of Labour):: Yes, Mr. Speaker. The hon. member will be interested to know that one of our most able officers, the chief conciliation officer on the west coast, has been appointed today by myself to endeavour to see what he can do to bring the parties together to resolve this dispute. We will have to count on the parties to resolve their dispute. I urge them to accept the assistance of the mediator because we have gone through the entire dispute settlement process. We have supplied the service conciliation before. That failing, we appointed a commissioner in lieu of a conciliation board. The report of the commissioner was not acceptable to the company although it was to the union. 1 am hopeful that because of the ability of the mediator I have appointed, we might find a resolution to this dispute.



AIR TRANSPORT


Mr. J. R. Ellis (Hastings):: Mr. Speaker, I want to ask the Minister of Transport a question regarding electronic locater transmitters. The department's policy some years ago was that private pilots had to install these in their aircraft. A few months ago the department asked that they be taken out. First, has the department any program to compensate pilots who have put in these ELT's which have not acted satisfactorily. Second, has the department any program to devise new ELT's which will work more effectively?


Hon. Otto E. Lang (Minister of Transport):: Mr. Speaker, there is no program for compensation. However, the department is very actively engaged in the work with the makers of the device to develop new appropriate batteries with which to recharge it. It was discovered, after it was operating, that the Lithium batteries were a danger. For that reason, they were removed. It is our hope that by the end of January something will have been developed in the way of a new facility.


John Raymond Ellis: I thank the minister for his answer. Given the fact there is a possibility of a breakthrough in the lithium batteries, will the minister consider recompensing the pilots at least for the battery portion of ELT's that have gone bad?


Otto Emil Lang: Mr. Speaker, that is a matter to which we will have to give some consideration. It was, of course, a part of an aircraft which seemed to us to be an advantage. The discovery which was made that the lithium itself caused some danger was through no one's fault and probably would not, in precedent terms, justify compensation.



NATIONAL CAPITAL COMMISSION


Mrs. Jean E. Pigott (Ottawa-Carleton):: Mr. Speaker, my question is to the Minister of State for Urban Affairs. Can the minister inform the House what measures have been taken to investigate allegations by the Quebec minister of public works that the National Capital Commission is a public liar with regard to details of the purchase of land in the city of Hull?
[ Translation]


André Ouellet: Mr. Speaker, those who live on the other side of the river and who are well aware of the kind of statements this elected Quebec representative makes regularly are not as concerned as the hon. member by these unfounded allegations. People living on the other side of the river are used to this kind of statements and simply ignore them.


Jean Elizabeth Pigott: While that may be true, Mr. Speaker, there are people on both sides of the river who would very much like to know what lands have been purchased and for what reason. Can we have a statement on this?


André Ouellet: Mr. Speaker, I should be pleased to provide the hon. member with statistical data which categorically refute the statements made by the Quebec public works minister.



PUBLIC WORKS


Mr. R. E. McKinley (Huron-Middlesex):: Mr. Speaker, my question is for the Minister of Public Works. As his department is responsible for the construction of federal penitentiaries, can he advise whether it is still the intention of the government to establish a penitentiary in London? If so, has a site been selected and when will construction begin?


Hon. Judd Buchanan (Minister of Public Works):: Mr. Speaker, negotiations are proceeding very satisfactorily with the city of London concerning location. The areas we are looking at are south of highway 401 in the industrial park. We hope to conclude arrangements very quickly.
December 6, 1977



ENVIRONMENTAL AFFAIRS


Mr. Bob Brisco (Kootenay West):: Mr. Speaker, I have a question for the Minister of the Environment. As there have been violations of the federal Fisheries Act on the Kootenay River below Mica and there will follow similar violations if the Kootenay River diversion goes through, is the minister prepared to act other than through his provincial official with regard to federal legislation?


Hon. Len Marchand (Minister of State (Environment)):: Mr. Speaker, I will have to take the question as notice and study it very carefully.



TRANSPORT


Mr. Les Benjamin (Regina-Lake Centre):: Mr. Speaker, my question concerns a proposal I made to the Minister of Transport last July and which my leader made to the Minister of Finance during this parliament. I direct it to the Acting Prime Minister. There are a few thousand miles of railway lines in Canada that require upgrading. This will involve hundreds of steel rails, millions of ties, tie plates, anchors and so forth. In order to alleviate unemployment in the Atlantic provinces, particularly Cape Breton Island and Pictou county, will the government ensure that sufficient capital is advanced so that orders can be placed now by both the national railroads and Via Rail for the steel rails, equipment and other infrastructure that will be required over the next several years? That could be produced now and stockpiled in western Canada where it will be needed.


Otto Emil Lang: Mr. Speaker, I thank the hon. member for his suggestion. It is one upon which we have effectively acted already to the extent that it is reasonable. We have obtained $100 million for the construction of branch lines in 1977 and 1978. That includes $47 million for equipment which was ordered to be built at various plants across the country, including Hamilton and Trenton, Nova Scotia. In addition, Canadian National has taken some steps to advance orders and obtain rails ahead of their actual needs. The rail for the branch line program will largely be obtained in the prairies from those lines which the Hall commission recommended be abandoned. CN have been pursuing the matter of additional rail for their own on-going program, including double tracking where that is necessary, in line with the railway's very vigorous program of ensuring that all of the additional capacity for moving freight is available when it is needed. The railways have been doing a very good job on that. They should be applauded for ordering steel and rails in advance of their actual need.
Oral Questions



ROYAL CANADIAN MOUNTED POLICE


Mr. Pierre De Bane (Matane):: Mr. Speaker, my question is directed to the Solicitor General.
I should like him to tell me whether there is any truth in the allegation made yesterday during the CBC French network news broadcast to the effect that for a number of years I have been under police surveillance. Have other hon. members been subjected to police surveillance over the past ten years?


Francis Fox: Mr. Speaker, I am not aware of the precise allegation made yesterday over the CBC French network. I am advised, however, that the hon. member was allegedly under the surveillance of the Quebec Police Force and not of the Royal Canadian Mounted Police.
As to the second part of his question, which is more general in scope, I feel that the Prime Minister has already provided the reply in a letter which he sent to the leaders of the opposition concerning the surveillance of House members.



FISHERIES


Mr. Lloyd R. Crouse (South Shore):: 
Some hon. Members:: Oh, oh!


Lloyd Roseville Crouse: Mr. Speaker, my supplementary question is directed to the Minister of Fisheries and the Environment. According to the press, the plan purports to be concerned with broad economic terms which tie the industry to the economic
1592

December 6, 1977
Textile and Clothing Reports
well-being of Atlantic Canada. Since the minister stated in his speech in Yarmouth on November 30 his desire to develop an independently owned fisheries fleet, separate and apart from the processor owned fleet, is it the minister's intention to announce a program for the replacement of some of our aging fleet, and the development of an inshore and offshore fishery? If so, when can we expect a statement from him which will put this broad spectrum of fleet development in process?


Mr. LeBlanc (Westmorland-Kent):: Mr. Speaker, the hon. member does exactly what the press has been doing for the last 2Vt months. He is speculating on a plan which does not exist yet, to my knowledge, since I have not seen it. Obviously, I owe the ministers of fisheries on the east coast the courtesy of reading what is suggested before coming out with my own plan. I intend to separate the catching operation from the processing operation in order for fisheries to be in the hands of fishermen.


Some hon. Members:: Hear, hear!



INCOME TAX ACT


Mr. Speaker:: As reported at page 1571 of Hansard dated December 5, 1977, the Minister of Finance presented amendments to clause 14 and following clauses in Bill C-ll which is now before the House. At that time it was ordered that the amendments be printed in Hansard as if the minister had read them.
I regret to advise the House that, through an administrative error on the part of the House, the wrong group of amendments was printed in Hansard. Perhaps that will be misleading and will make it difficult for members attempting to follow the debate today and on subsequent days in committee of the whole. In order to reduce the impact of the error, I have ordered copies to be made of the amendments presented by the Minister of Finance at that time, and the correct list will be distributed to all members who wish to use it during today's debate.



ROUTINE PROCEEDINGS


[Stage Direction]
tabling of board reports
John (Jack) Henry Horner: Mr. Speaker, pursuant to Standing Order 41(2), I have the honour of tabling three reports of the Textile and Clothing Board concerning woven cotton terry towels, hats, caps and work gloves.


NATIONAL REVENUE
Mr. Yves Demers (Parliamentary Secretary to Minister of National Revenue):: Mr. Speaker, according to Standing Order 41(2), I have the honour to table copy of a letter dated December 5, 1977, from the Minister of National Revenue to the hon. member for Wellington-Grey-Dufferin-Waterloo.


CANADA ELECTIONS ACT
Mr. Bill Clarke (Vancouver Quadra) moved: for leave to introduce Bill C-408, to amend the Canada Elections Act.
He said: Mr. Speaker, this bill is simply a repeat of one I had on the list last year. On reviewing the proposed amendments to the Canada Elections Act under Bill C-5, I noted these still have not been taken care of. My bill intends to provide some relief to certain classes of electors.


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

Robert Phillip Kaplan: for leave to introduce Bill C-409, respecting fair foreign exchange.
He said: Mr. Speaker, tourism surveys indicate that American tourists are finding Canada a less and less welcome place to visit. One of the reasons for this is the fact that an unfair exchange rate is often offered to them and paid to them. The purpose of this bill is to make it illegal to offer or to pay an exchange rate on American currency which is outside 2 per cent of the over-the-counter rate current at a bank in Canada.


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

[Stage Direction]
MOTION RESPECTING COMMITTEE SITTINGS Hon. Francis Fox (Solicitor General) moved:
That the Standing Committee on Justice and Legal Affairs be authorized to hold, during the month of December, 1977, in camera meetings to examine the Solicitor General's interim report following the recommendations of the parlia-
December 6, 1977
[Stage Direction]
mentary sub-committee on the penitentiary system in Canada, and to report thereon.
Mr. Knowles (Winnipeg North Centre):: Mr. Speaker, we will give consent for the motion to be presented; but when it is moved, the hon. member for New Westminster would like to say a word.


Mr. Speaker:: A motion can only be presented at this time with unanimous consent. Is there unanimous consent for its presentation?


Mr. Jones:: Mr. Speaker, on the copy of the motion which was handed to me, the words "and to report thereon" appear. I did not hear those words read by the hon. Solicitor General. I am wondering whether that was intended.


Francis Fox: Mr. Speaker, on the copy of the document I will table, the words "and to report thereon" and "et de faire rapport" appear.


Mr. Leggatt:: Mr. Speaker, before adopting the motion I should like to point out that the committee did not have very much opportunity to discuss the terms of the motion. Would the Solicitor General take the opportunity now to explain why the motion proposes that meetings be held in camera, rather than leaving it to the committee, at its discretion, to determine what is appropriate to be heard in camera or otherwise. The uniqueness surrounding this motion is that it is fairly limiting on the committee. I thought the Solicitor General would want to give the committee its head in terms of determining what should or should not be heard in-camera. Would the Solicitor General care to respond to that question?


Francis Fox: Mr. Speaker, this matter was discussed in committee and it was agreed to by all members present at that time. The best way to ensure that a parliamentary committee has access to relevant officials, and the best way to ensure that the committee report is implemented, would be to hold in camera hearings. Also, it was indicated that the main estimates of the Department of the Solicitor General would be before the committee some time in February and that there would be ample opportunity to discuss all matters which would be of interest.
It was thought by all members of the committee who were present at the time it was discussed that it was more important to have input into progress being made in the implementation of the report than into the possibility of making a few partisan political points.


William Herbert Jarvis: I think the Solicitor General has outlined to the House quite accurately what occurred in the committee. However, I take some objection to his reference to partisan political points, because it has been my information that that particular subcommittee of the Standing Committee on Justice and Legal Affairs has worked very well and very productively. I think I would have preferred, on balance, that the motion
Justice and Legal Affairs
today had not included the words "in camera" and had let the committee be the master of its own fortunes. But the countervailing force that exists here is the very sincere and deep concern of the committee to get back to work as quickly as possible.
I would take more comfort-and I think my colleagues share my view-if the Solicitor General would take the occasion now to indicate to the House his receptiveness, should the situation arise-as I anticipate if might-that the committee might ask for an amendment to this motion so that all its meetings need not be held in camera where no good reason exists.
The Solicitor General's reference to partisan political points does not have much application to that particular standing committee on penitentiaries. When it comes to some other matters the Solicitor General might bring before the committee, we agree the meetings should not be held in camera and there will be many partisan points scored.


Mr. Baldwin:: Mr. Speaker, I will not detain the House long. 1 take strong objection to the House agreeing to a motion of this kind. I do not want to precipifate a crisis or a vote, and I understand my friends' views on this, but I think for this House to give consent of this kind, in advance, without someone saying something about it, could launch us into a precedent which we might have reason to regret. I simply say, as my friend, the hon. member for Perth-Wilmot said, that when a committee comes to a decision which suggests that in its opinion it should make a decision on its own and come to the House for confirmation, that is one thing; but to give blanket approval in advance is quite wrong, and I want to register my objection to it.


Mr. Peters:: Mr. Speaker, I want to join in that objection. I am not a member of that committee, but I have been one many times-more often than my hon. friend, I presume-and I am interested in the deliberations of the committee and in the decisions and recommendations which the committee made previously. We are interested in knowing what progress has been made on those recommendations and why some meetings cannot be held in public.
I am quite aware that there might be reasons for having some meetings in camera to discuss, for example, why a certain person has or has not been fired, or why changes have been made in personnel. Those meetings are normally held in camera. They have been held in camera because the committee agrees to that.
I agree entirely with the hon. member for Peace River that if the minister thinks there is any political mileage to be made on the committee, he is wrong. Most of the penitentiary officials do not vote, and the staff members probably have already made up their minds on how they will handle this matter, so I do not think that is a good explanation. It is necessary that we protect the individuals involved in the changes that have taken place; but I for one, as a member of parliament, am very interested in knowing what the minister has done.
80027 -32 Vi

December 6, 1977
Justice and Legal Affairs
Occasionally we read in the newspapers about changes which appear to have taken place, and that problems are developing in various penitentiaries for reasons which seem to be exactly the same as those given years ago, which makes it apparent that certan recommendations of the committee have not been implemented.
Although I do not feel too strongly about this, I think it is certainly a very bad precedent. I have never known of a committee being set up with terms of reference requiring it to meet in camera from its inception. It is quite normal, on occasions when personnel changes are being discussed, when a report is discussed or when concessions are made in the development of a report, to have meetings in camera. This is advantageous from the political point of view and from the view of developing the best possible report. But I cannot recollect a committee ever having been established requiring it to hold meetings in camera, and I am certainly not in favour of such a precedent in this case.
I am opposed to the establishment of any such committee- which, after all, is an extension of the House; and you, Mr. Speaker, would have great difficulty, I am sure, in recalling any time when the House has met in camera-yet we are being asked to agree to a committee starting its hearings in camera by order of the House. I am violently opposed to such a recommendation.


Mr. Nielsen:: Mr. Speaker, it is seldom that I come to the rescue of any minister opposite, but I rise to do so on this occasion. It is good for members of the House to appreciate the reason for the motion of the Solicitor General in the form that it was presented today.
The subcommittee on penitentiaries-on which I served throughout its lengthy travels and deliberations in order to produce its report-produced that report on an absolutely non-partisan basis. It was a unanimous report, cutting across all party lines. We want to continue that way. The report was presented, the Solicitor General's response was given, and now we are asked to consider the progress that has been made with respect to the report and the minister's response. Normally, that kind of deliberation is held in camera. That matter was discussed at the meeting of the Standing Committee on Justice and Legal Affairs and it was agreed by all members present that we would ask the Solicitor General to present the motion in the terms in which he has presented it.
We in the official opposition intend to abide by that agreement which we reached in committee, and I would urge the House, notwithstanding the fact that some hon. members believe that this creates an exception to the general rule-a point with which I have some sympathy-to accept the motion which was agreed to unanimously by all members present at the meeting of the standing committee. I urge all members to pass the motion without debate. Incidentally, another matter that was agreed to by the committee was that the motion would be accepted without debate.
[Mr. Peters.J


Mr. Beaudoin:: Mr. Speaker, I think it is most unfortunate that several hon. members do not understand the effect of this motion. As the former speaker the hon. member for Yukon (Mr. Nielsen) has just said, we agreed to the presentation of the motion as drawn up. Above all, I want the House to know that this sub-committee, which is an extension of the House, sat in an extraordinary atmosphere absolutely devoid of partisanship. Political considerations never entered the picture at this sub-committee's sittings. We all proved a great sense of responsibility, which is all to the credit of the members of the committee and the House of Commons. I think that, before presenting such a motion, we should be able, as members of that type of committee, to meet our caucuses and explain to hon. members of every party why an in camera meeting is held at the report stage.


Mr. MacGuigan:: Mr. Speaker, I would like to say a word on this motion. I certainly agree with the comments of the hon. member for Yukon. I would also like to echo the comments of the hon. member for Perth-Wilmot. It seems to me that while there are strong reasons for having in camera meetings, it may be that the committee will find at some point that it wishes to hold some meetings in public. I anticipate that the Solicitor General would agree to granting that power to the committee if it makes a report to that effect. I repeat the suggestion made by the hon. member opposite, that that would be the secret to unravelling this small problem.


Leonard C. Jones: Mr. Speaker, it seems to me that there is a big hullabaloo about nothing. The motion seems to be quite adequate for the purposes for which it is intended. It says the committee "be authorized". It does not say it shall, or has to, or that it is mandatory. It is a permissive motion which leaves it up to the committee to decide whether the meetings are to be held in camera. Actually, I see no real problem. I do not usually support any particular party or group here, but 1 think there is really nothing wrong with the motion. It is a permissive motion, and there is no necessity for meetings to be held in camera unless the committee decides that it wants them held in camera.


Mr. Baker (Grenville-Carleton):: Mr. Speaker, the last point made by the hon. member for Moncton is an interesting one. After the words "Justice and Legal Affairs" the motion says, "be authorized to hold in camera hearings during the month of December, 1977". I think the motion could possibly be interpreted as being permissive, but I think it is equally possible that it could not. In other words, the motion in its form is equivocal.
I understand what the minister and the members of the committee have talked about, and I listened very carefully to what the chairman of the committee, the hon. member for Windsor-Walkerville, said about the attitude in the committee.
I do not think we should be bound one way or the other to deal
December 6, 1977

with an equivocal motion. I think it is possible that that is the case. What the committee may have agreed to does not necessarily bind the Elouse, but ought to be considered very carefully by the House.
I wonder if it would be possible, in the circumstances, for the minister to withdraw the motion today, with the idea of presenting it-if he feels he must present it with the words "in camera" in it-tomorrow. I hope that overnight the minister might consider removing the words "in camera" which offend some members-who want to see this report go ahead, by the way-thus recognizing the good faith which the committee has demonstrated. I think that might bring an end to this argument and allow the committee to proceed, because I am satisfied from what the hon. member for Yukon and others have said that the hearings, where necessary to accommodate the government, would be held in camera if that was the appropriate way to do it.


Mr. Speaker:: The Solicitor General has already moved the motion and spoken once. In order for the Solicitor General to speak again, there would have to be unanimous consent. Is there unanimous consent?


Some hon. Members:: Agreed.


Francis Fox: Mr. Speaker, I would like to make it quite clear why the motion was put in the first place. It was felt by members of the committee that, with the early reporting date on estimates, they did not have sufficient time to consider the implementation process of that very important subcommittee report. I thought at that point it was of sufficient importance that I would like to give the committee an opportunity to examine the question during the remainder of the month of December. That was the reason the motion was put.
It was also thought that it would be a good way of handling things if the committee members had access to the senior officials of various working groups, and that perhaps the best way for the committee to bring to bear its own thoughts on the implementation as it progressed was for it to have almost informal sessions with these senior officials. However, I would be more than willing to withdraw the motion and to consult with hon. members opposite, of all parties, to see what type of motion we could set up which would be acceptable.
My impression, when I presented the motion today, was that it was acceptable to all parties and that it would be passed without debate. However, that process has obviously broken down, and I would be more than willing to follow the suggestion of the House leader of the official opposition and see what type of motion would be acceptable to all parties.


Mr. Speaker:: The Solicitor General has moved the motion and it is in the possession of the House. If it were to be withdrawn at this time, it would have to be withdrawn by the minister with the unanimous consent of the House. Does the Solicitor General have the unanimous consent of the House to withdraw his motion at this time?


Some hon. Members:: Agreed.
Order Paper Questions


An hon. Member:: No.


Mr. Speaker:: There is not unanimous consent. Is the House ready for the question?


Some hon. Members:: Question.


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


Some hon. Members:: Agreed.


Some hon. Members:: No.


Gerald William Baldwin: On division.


Mr. Speaker:: Shall I record the motion as having been agreed to on division?


Some hon. Members:: Agreed.


[Stage Direction]
Motion agreed to.

[Stage Direction]
(Questions answered orally are indicated by an asterisk.)
Mr. Yvon Pinard (Parliamentary Secretary to President of Privy Council):: Mr. Speaker, questions Nos. 206, 284, 304, 401 and 794 will be answered today.
I ask, Mr. Speaker, that the other questions be allowed to stand.


Mr. McKenzie: 1.	What is the total number of persons under contract to the Commission of Inquiry into Bilingual Air Traffic Services in Quebec and how many are retired public servants?
2.	What was the total amount in (a) 1975 (b) 1976 paid to those under contract and how much of this was to retired public servants?


Yvon Pinard: 1. Currently three (no retired public servants).
2. (a) 1975-76, Not applicable; (b) 1976-77, $304,394,55. No retired public servants


Mr. McKenzie: 1.	Has the Canadian Intergovernmental Conference Secretariat obtained (a) part-time (b) full-time employees from private employment agencies in (i) British Columbia (ii) Alberta (iii) Saskatchewan (iv) Manitoba (v) Ontario (vi) Quebec (vii) New Brunswick (viii) Nova Scotia (ix) Prince Edward Island (x) Newfoundland and, if so, in each case, how many?

December 6, 1977
Order Paper Questions
2.	Are such employees paid from supplementary estimates and, if not, from what estimates are they paid?
3.	By province, what was the (a) average hourly rate paid to employment agencies (b) average hourly rate paid to employees (c) total amount paid by the Canadian Intergovernmental Conference Secretariat in (i) 1975 (ii) 1976?


Yvon Pinard: 1. (a) Ontario-three to 10; (b) No.
2.	Regular Estimates.
3.	(a) Ontario, $8-$9. (b) Not applicable; (c) (i) 1975-76, $58,361; (ii) 1976-77, $58,335.


Mr. McKenzie: 1.	Has the Economic Council of Canada obtained (a) part-time (b) full-time employees from private employment agencies in (i) British Columbia (ii) Alberta (iii) Saskatchewan (iv) Manitoba (v) Ontario (vi) Quebec (vii) New Brunswick (viii) Nova Scotia (ix) Prince Edward Island (x) Newfoundland and, if so, in each case, how many?
2.	Are such employees paid from supplementary estimates and, if not, from what estimates are they paid?
3.	By province, what was the (a) average hourly rate paid to employment agencies (b) average hourly rate paid to employees (c) total amount paid by the Economic Council of Canada in (i) 1975 (ii) 1976?


Yvon Pinard: 1. (a) Ontario, 37; (b) Ontario, three.
2.	Paid from main estimates.
3.	(a) Ontario-$6.18; (b) Not applicable; (c) (i) $30,894; (ii) $8,078.


Mr. McKenzie: 1.	What is the total number of persons under contract to the Commission of Inquiry into the Marketing of Beef and how many are retired public servants?
2.	What was the total amount in (a) 1975 (b) 1976 paid to those under contract and how much of this was to retired public servants?


Yvon Pinard: 1. Nil.
2. (a) 1974-75, Nil; (b) 1975-76, $37,659.04. Retired public servants, $4,759.55.


Mr. Knowles (Winnipeg North Centre): What is the name of the (a) acting minister (b) second acting minister of each department of the government?


Yvon Pinard: See Sessional Paper 303-1/205; tabled October 19, 1977.


Leonard C. Jones: Mr. Speaker, I rise on a point of order. I want to remind the parliamentary secretary about question No. 145.

Every time I speak to him about it, he says "soon". How soon is soon, or is it a monsoon?


Yvon Pinard: In the near future, Mr. Speaker.


Mr. Speaker:: Shall the remaining questions be allowed to stand?


Some hon. Members:: Agreed.



LABOUR CONDITIONS


John Edward Broadbent: Mr. Speaker, I ask leave, seconded by the hon. member for Winnipeg North Centre, to move the adjournment of the House under Standing Order 26 for the purpose of discussing a specific and important matter requiring urgent consideration, namely, the revelation this morning that the continuing chronic level of unemployment has now reached crisis proportions with 900,000 unemployed, the highest level since the great depression and the highest level in Statistics Canada's history; it being noted that as bad as these figures are, they do not include additional thousands of unemployed who have withdrawn completely from the labour force in recent months; and it being also noted that related to this, the government has indicated that it plans no new initiatives to alleviate unemployment at least until after a first ministers' meeting which may or may not take place in February or March. This, I submit, constitutes a crisis and an emergency situation.


Mr. Speaker:: In accordance with the provisions of Standing Order 26, the hon. member for Oshawa-Whitby gave the Chair the appropriate notice, which has given me the opportunity to review the contents of his proposed motion and the considerations which must be taken into account by the Chair in any situation of this sort when an application is made by any hon. member pursuant to Standing Order 26 to set up a special debate on any subject.
The hon. member and other hon. members will know that several applications of this sort have been made by him and, on occasion, by other hon. members at times in the past when economic figures of one kind or another have been released. On several occasions in the past, I have-and I will now- referred to Hansard for March 13, 1974, and November 9, 1976, two recent occasions on which I have had occasion to analyse the rule with respect to its application to chronic, as opposed to acute, problems.
The hon. member now endeavours to establish as a crisis, as 1 think he must, an aspect of our economic situation, namely, the unemployment situation. That problem is, of course, part of our continuing economy. It is, therefore, a chronic problem. The hon. member makes what I think is a valiant effort to put the problem into crisis proportions, as opposed to one of

December 6, 1977

chronic dimensions. However, I think I must continue, with faithful respect for precedents in the past, to regard economic problems as matters of a chronic nature and, therefore, unsuitable, in their very basic nature, to an application pursuant to Standing Order 26. Without some other special item or aspect-which does not occur to the Chair at the present time-I feel obliged to set aside the application for a special debate pursuant to Standing Order 26.
I do now leave the chair for the House to resolve itself into committee of the whole.



GOVERNMENT ORDERS


[Stage Direction]
The House resumed, from Monday, December 5, consideration in committee of Bill C-ll, to amend the statute law relating to income tax and to provide other authority for the raising of funds-Mr. Chretien-Mr. Laniel in the chair.
The Chairman:: When the committee rose at its last sitting, clause 6 was under consideration and an amendment of the minister had been presented to the committee.
On clause 6-Exchanges of Property


Sinclair McKnight Stevens: Mr. Chairman, as we consider the three interrelated amendments which the minister tabled yesterday, I feel I should put one or two questions on them. As I read what the minister is now proposing, clause 6 will be amended as follows:
(b)(i) an amount received under a program that is a prescribed program of the government of Canada for the purposes of paragraph 56(1 )(s)-
From that, it would appear that any prescribed program with respect to insulation could be taxed. Am I correct in that? Does it mean that the Prince Edward Island and Nova Scotia insulation programs are likely to be taxed, in that they will be prescribed programs under this new section?


Joseph Jacques Jean Chrétien: Mr. Chairman, on the first part of the amendment, the hon. member's interpretation is right. On the second part, the Prince Edward Island and Nova Scotia programs will not be taxed because they are not prescribed.


Sinclair McKnight Stevens: 
Sinclair McKnight Stevens: May I ask the minister why he did not bring some simplification to the act, in referring specifically to the Canadian Home Insulation Program, by using the wording in the income tax motion, rather than bringing in this piece of ambiguity speaking about prescribed programs which could presumably be greatly extended over the initial program that we understood from the income tax motion would be dealt with in this section?


Mr. Chr6tien:: Mr. Chairman, I understand there is a technical problem because the appropriate act has not been passed yet and we cannot describe it that way. That is why there is the difference.


Sinclair McKnight Stevens: I take it that we have the assurance of the minister that, while the wording is a little ambiguous, the department has no taxation in mind at this time other than the taxation of the Canadian Home Insulation Program itself.


Joseph Jacques Jean Chrétien: That is right, Mr. Chairman.


Sinclair McKnight Stevens: That would be the only prescribed program?


Joseph Jacques Jean Chrétien: The hon. member is right.


Gérald Laniel: Shall the amendment carry?


Some hon. Members:: Agreed.


Joseph Jacques Jean Chrétien: A point of order, Mr. Chairman. There are consequential amendments to clauses 23 and 115(1). I do not know if the hon. member for York-Simcoe would be agreeable to make sure that the whole aspect of the bill is covered by what the House has voted on at this moment; and, of course, the New Democratic Party and the Social Credit party-


Sinclair McKnight Stevens: Mr. Chairman, we have no reason to object to the minister's suggestion that we deal with the three amendments touching on the insulation question at the same time. Perhaps it would help save confusion when we come back to those amendments later.


Gérald Laniel: Order, please. I have to object. Hon. members can only go from one clause to another and come back if there is unanimous consent. There is no way we can adopt an amendment unless the clause concerned is before the committee.


Joseph Jacques Jean Chrétien: Mr. Chairman, I should like to move an amendment to clause 23(2). I would make a consequential amendment, and by unanimous consent go to subclause 115(1).


Gérald Laniel: There is nothing to prevent the committee from doing that, and if hon. members agree, it will have to be done one by one. The hon. minister makes the proposal, and if it is accepted by the committee I shall call the amendment to subclause 6(5) and then by consent we will go to the two

December 6, 1977
Income Tax
appropriate clauses and put the amendments to those clauses. Then we can revert to clause 6(5). Is that agreed?


Sinclair McKnight Stevens: That would be agreeable to us, Mr. Chairman on the understanding, which I take it I do not even have to express, that the clauses themselves will still be subject to debate later in committee of the whole session, as amended.


Joseph Jacques Jean Chrétien: Agreed.


Gérald Laniel: That is understood. The question is on the amendment to clause 6(5), by the Minister of Finance, as put to the committee yesterday. Shall the amendment carry?


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


Gérald Laniel: By unanimous consent, the committee will go to consideration of clause 23(2). It is moved by Mr. Chretien:
That clause 23(2) of Bill C-11 be amended by striking out line 6 on page 35 thereof and substituting the following:
"of the government of Canada relating to home insulation by"


Gérald Laniel: Shall the amendment carry?
Amendment (Mr. Chretien) agreed to.


Gérald Laniel: By consent, the committee will move to clause 115(1). I will put to the committee the amendment moved by the minister. It is moved by Mr. Chretien:
That clause 115(1) of Bill C-l 1 be amended by striking out line 8 on page 210 thereof and substituting the following:
"the government of Canada relating to home insulation for the pur-"


Gérald Laniel: Shall the amendment carry?


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


Gérald Laniel: The committee will revert to consideration of clause 6 as amended.


Sinclair McKnight Stevens: Mr. Chairman, clause 6 states that the taxation year shall be referred to as a fiscal period. I wonder if the minister could explain why we need this complicated terminology in the Income Tax Act. We use the term "taxation year" in various provisions, and then for some reason it is defined as the "fiscal year" or "fiscal period". Would it not be simpler to use one term, rather than have a definition clause to explain a term that the drafters in the first place presumably wanted to read as "fiscal period"?


Joseph Jacques Jean Chrétien: Mr. Chairman, I can give no special reason. Naturally, we are dealing here with the terminology used by those who drafted the bills. I too, like the hon. member, would prefer more simple terminology. It seems, however, that the people who draft the bills are constantly up against special problems which are difficult to explain.
[The Chairman.]


Sinclair McKnight Stevens: Mr. Chairman, perhaps while the minister is taking counsel on my first question he could consider the second question which is dealing with subclause (2) of clause 6. The committee should have an explanation as to why this amendment is being requested. It deals with the acquiring of property, its disposal and replacement thereof, including such things as stolen property and various options open to a taxpayer. If the minister could describe to the committee the purported thrust of this suggested amendment, it would be helpful.


Joseph Jacques Jean Chrétien: Mr. Chairman, perhaps 1 could read the explanation into the record for the committee. When a depreciable asset is disposed of for proceeds which exceed its undepreciated capital cost, a recapture of the depreciation allowed in previous years may occur. The special roll-over rule eliminates this recapture to the extent that the proceeds are reinvested in a replacement property. Under a roll-over, the profit is not exempted; the tax is simply deferred until the replacement property is disposed of. Under the present rule, amounts received on expropriation of property receive the roll-over treatment if replacement assets are acquired within two years.
There are two important amendments to the present rules. The roll-over is extended to voluntary replacements of certain business and farm properties. To qualify, the property must be real property and the replacement must be acquired before the end of the year following the year of sale. In addition, the existing rules are extended to property that has been stolen.
We spent some time the other day discussing that matter in the committee. If the hon. member has a specific question, perhaps he would like to ask it,


Sinclair McKnight Stevens: Some of my colleagues are quite concerned about the roll-over provisions, especially in relation to farm properties and smaller businesses and, in particular, why there is not more latitude with respect to corporate farms and corporate small businesses. Perhaps the easiest way would be for the minister to answer a few questions from my colleagues. Hopefully, he could suggest further amendments, or satisfy my colleagues.


Mr. Hargrave:: Mr. Chairman, I would like to remind the minister of the comments I made during second reading debate on this very important bill. I spoke on November 17 on two aspects. One was the roll-over provision for incorporated small businesses, but especially including family farms; that is, from one generation to another. In the latter part of my speech 1 mentioned the possibility of an income tax deferral for the drought areas of southern Alberta and southwestern Saskatchewan. On the latter point I have written several letters to the former minister of finance and, of course, to the present minister.
My point regarding the roll-over provisions regarding capital gains tax on incorporated family farms was that because of the tremendously high capitalization now, seven years after the capital gains tax came into being-that is, after January 1,

December 6, 1977

1972-in many cases land values have increased dramatically. I cited case histories: for example, a cattle ranch in British Columbia. The land value there went up well up well over four times. There was another case in southern Alberta where the land value increased between three and four times. The impact on an incorporated family farm operation is that the ranch operation has to be sold in order for the appropriate tax to be financed by the next generation.
The tax office permits this, of course, in the case of an individual operator. They make the assumption, I am sure, that prior to the capital gains tax era of 1972 there was no need for the incorporated family farm because of the nature of passing on shares from one generation to another. Because of the ravages of inflation and what it has done to land values and non-agricultural financing money, that has come into agriculture as a hedge against inflation, surely the time is proper to take another look at this question. I would appreciate the minister's comments.


Joseph Jacques Jean Chrétien: We have received letters from the hon. member, which we have looked into. In handling the taxation of corporations, it would be difficult to do it for one type of incorporation-whether it is an incorporated farm or not-and not for the others. This would open a whole new ball game. I am told that 98 per cent of farms are not incorporated in Canada. The fact that a farm is incorporated means the roll-over is not needed, because there is a little more flexibility when you have shares in a corporation to transfer your assets to the other generation or dispose of the assets.
Accordingly, we are still looking at this matter to find a way to meet the requirements requested by the hon. member. But my tax advisers tell me that just to extend the roll-over on incorporated farms would create all sorts of problems. That is the reason, therefore, we have not proceeded with it in this bill.


Herbert Thomas (Bert) Hargrave: Further to the minister's comments, 1 might add that the minister has responded almost exactly the same as one of his predecessors, Mr. Turner, did on February 18, 1975. He suggested that if they allowed this provision for an incorporated family farm, they would have to do it for other incorporated family businesses. I said at that time, and I say now: Why not? Surely, the basis of our private enterprise system in Canada is the family-type business. For the minister to shake his head and say there are administrative problems is a negative approach. There has been no change in the department's view for almost three years. The impact of inflation on the capitalized value of small business corporations is such that we have to take a new look at this problem.


Joseph Jacques Jean Chrétien: I take note of the representations of the hon. member.


Herbert Thomas (Bert) Hargrave: Mr. Chairman, I would like to make another representation to the minister and his officials with respect to the second point 1 raised. I made representations on November 17 respecting the very serious drought, and implications arising out of the drought that was with us all last winter and has been up to the present time. Although it is close to 40 degrees
Income Tax
below in southern Alberta and the southwest corner of Saskatchewan, the drought is still there. I know that from personal experience.
The general public, because of the generous rains we received during the harvest and in the fall of the year in most of the grain areas, made the assumption that the drought was over. That is not the case in southern Alberta. We received very scanty rains, and the lack of moisture is every bit as serious as it was in the 1930s. To recap very briefly, the suggestion I made was that the lesson of the thirties on how to live with a drought situation, especially in the cattle industry, was to make the number of your cattle fit growth and production on the drought lands; that is, essentially with respect to grass and feed supplies. During the 1930s there was no problem; we had no alternative but to reduce our cattle numbers drastically. In many cases we reduced them to one-half to two-thirds of what they normally would be.
The situation now is different, though the drought is quite as serious. The surface stock watering situation is worse than it was at any time in the thirties. The difficulty is that when we cut down the number of our cattle to the number we can feed on our ranges, we find ourselves in a very disadvantageous tax situation.
A presentation was made to the former minister of finance, not only by myself but by every cattle organization in western Canada. It was fully supported by the governments of Alberta and Saskatchewan. Obviously, Mr. Chairman, it would be foolish to spend three times a cow's value on feed to enable it to get through the winter. The prudent thing to do is to reduce the number of cattle to be fed. This we are doing, but we need some understanding in relation to the tax position in which we find ourselves. The drought took several years to develop, and it will take two or three years to overcome-contingent, of course, on there being plentiful rain and a good snow run-off.
I ask the minister to give serious consideration to the suggestion that income tax might be deferred until the drought is over. In my opinion, this is a sensible proposal-much better than spending massive amounts of money on feed, particularly if some of it were to come from the taxpayer.


Joseph Jacques Jean Chrétien: I have received representations on this subject and I am aware there is difficulty particularly for some taxpayers in southern Alberta and southern Saskatchewan. A task force within the government has looked into the proposition the hon. member is making, and it came to the conclusion that the situation did not call for the use of the tax system as a remedy. I understand the task force concluded that some provision could be made through PFRA channels.
I have a good deal of sympathy for the argument put forward by the hon. member, but the solution he offers was rejected by a committee of officials, including representatives of the departments of agriculture and finance, because of the complexity of the problems it raised. However, I will take note

December 6, 1977
Income Tax
of the representations and consider the matter again, though I do not think I can do anything at the moment.


Herbert Thomas (Bert) Hargrave: A further comment with respect to the activities, first, of the cabinet committee of eight, the contingency committee which was set up under the chairmanship of the Minister of Agriculture: the Minister of Agriculture was among its members. This committee worked through the arm of a task force under the agency of the PFRA authorities whose headquarters are in Regina. As a result of representations made by myself and others about the suggestion of a tax deferral, a two-man survey team consisting of Mr. Herringer and Mr. Wiens, both of the Department of Regional Economic Expansion, was sent to assess the situation and, I suppose, to ascertain whether my representations were well-founded or not. Evidently, that survey team reported to headquarters in Regina that the reduction in cattle numbers, and especially the reduction in the number of cows, was no larger than the amount of reduction which takes place normally every fall.
1 am amazed that Mr. Herringer, who was born and raised in Maple Creek, Saskatchewan-not far from my own ranch in the heart of the drought area-should make such a report. I do not believe he did. Anyway, the suggestion was made that the reduction in cattle numbers was a normal one. Believe me, Mr. Chairman, it was not. The cattle population in western Canada has been reduced dramatically, and it needs to be reduced still further. This is an exceptional situation which I think should be recognized in the taxation procedure which is to be followed.


Joseph Jacques Jean Chrétien: I should like to make myself clear, Mr. Chairman. 1 did not say that the gentleman to whom the hon. member referred was the one who recommended that this proposal should not be accepted. I believe his report was referred back to the task force under the departments of agriculture and finance. The task force reported to my colleague, the Minister of Agriculture, and to my predecessor, that the situation did not call for a special amendment to the Income Tax Act. However, as I say, I take note of the hon. member's very eloquent representation and perhaps I will ask the Minister of Agriculture to take a look at the whole question, especially if the drought situation is likely to continue for some time.


Herbert Thomas (Bert) Hargrave: One further short question, Mr. Chairman. 1 appreciate the indulgence of the Chair. I should like to ask the minister whether he would consider meeting with representatives of the cattlemen's organizations on the two points I addressed in my remarks during the second reading debate- the roll-over provision for family incorporated farms, and this matter of a tax deferral, because of circumstances connected with the drought, to apply within a specific drought area. I know representatives of the cattle industry are anxious to come here and will be prepared to present a more detailed explanation of their proposal.


Joseph Jacques Jean Chrétien: The hon. member for Assiniboia has asked me the same thing, and I should like to agree. However, as the

committee knows, I have been Minister of Finance for the last two months and I have spent every day of the last five weeks here in the House of Commons. My possibilities of meeting people have thereby become somewhat limited. Moreover, I do not want to go back to the debate we had earlier on this point. I should, however, like to find a date which might be suitable, and I will ask my staff to get in touch with the hon. member. If this cannot be arranged, I shall certainly make sure there is a meeting with my officials on this subject.


Herbert Thomas (Bert) Hargrave: Thank you.


Mr. Ritchie:: Mr. Chairman, as one who has studied the white paper and subsequent legislation, 1 should like to point out how bad this capital gains tax is, particularly as it is applied to individuals who are by no means wealthy-and, unfortunately, the tax often hits small family farms. The minister told us a few minutes ago that shares were relatively easy to turn over, meaning that large businesses have few problems in the area of the capital gains tax. The original idea of the capital gains tax was to catch the individual who bought a farm one year and sold it the next: the person who was making a business of it.
The suggestion we put forward was this: if a person who owned a piece of property for ten years sold it the first year, he would pay 90 per cent, but if he held it ten years there would be no tax. It would have been a much better approach to the problem than this. It has turned out to be confiscation of capital rather than tax on income.
Canada needs small entrepreneurs because of our large geographic area. Small businessmen and farmers I have talked with look upon capital gains as very important. What would be the effect of expanding a business? Would a person have to pay a higher capital gains tax if he disposed of it? We have the example of herds of cattle being liquidated because of weather conditions. After ten years of work and effort, this will probably be lost to the tax department. This is very discouraging to small businesses.
There are many small businesses with three or four employees. Rather than expanding as the government would like them to do, they stay with four, five or six employees. In this way, a small businessman can have a good living, take holidays or go fishing more often-something he could not do if he expanded his business to ten or twelve employees.
I was not quite sure what the minister said in his definition.
I would like to ask him whether this applies to individuals. The minister mentioned something other than farming. Does the legislation apply to an unincorporated hardware merchant, blacksmith shop or machine shop?


Joseph Jacques Jean Chrétien: The answer is yes.


William Gordon Ritchie: If an individual goes from farming to keeping a store, will he be able to take advantage of this roll-over position?
December 6, 1977


Joseph Jacques Jean Chrétien: He has to remain in the same field. If he has a farm which he turns over and buys another farm, this provision can apply. If he is in a particular type of business and can roll-over in the same business, it applies. But he cannot move to another type of business; he must stay in the same field of operation.


William Gordon Ritchie: Would moving from farming to a farm implement agency, which happens quite often, qualify?


Joseph Jacques Jean Chrétien: In that specific case, the answer is no.


William Gordon Ritchie: If a merchant sells his hardware store and goes into groceries, would this apply?


Joseph Jacques Jean Chrétien: It is difficult to swallow hardware. It is not exactly the same type of business. I just wanted to bring a little humour to the very difficult task we are dealing with at this time.


William Gordon Ritchie: Who will make the definition of what is a "like" business? Will an individual be able to get an advance ruling or some sort of indication on this? Obviously, there will be a great many cases that will be indefinite. I used the example of hardware and groceries, but there are many businesses that are much closer related. What about a person who sells his hardware store and purchases a general store which carries some hardware?


Joseph Jacques Jean Chrétien: On the question of advance rulings, Mr. Chairman, the rulings are made by Revenue Canada. If a ruling is not acceptable to a taxpayer, he can appeal. That is the normal process. I doubt whether Revenue Canada would want to give an advance ruling in such a situation. I will try to find this out and get the information to the hon. member. It is an administrative decision, not a legislative one.


William Gordon Ritchie: Mr. Chairman, we went through this with the white paper. It is a bone of contention. Often, if a person does not have the advantage of an advance ruling or some indication from the tax people, he will not go through with his plans. In many instances there is no assurance. A grain farmer may buy a feed lot. Obviously, there is as much difference there as between a hardware store and a general store. Unless Revenue Canada defines the rules and lays down guidelines, this legislation will lose a lot of value.


Joseph Jacques Jean Chrétien: I do not think so, Mr. Chairman. If everyone were entitled to an advance ruling, it would complicate the life of Revenue Canada tremendously. Even before an individual seeks advice from his lawyer or accountant on a transaction, the officials of Revenue Canada would have to make a decision on the matter. The usual procedure is that we pass the law, Revenue Canada issues some circulars informing the public and gives as much explanation as possible. From then on it is up to the individual and his advisers to decide if it is a proper course. If we were to burden Revenue Canada even more by having to make a series of advance rulings, it would increase fantastically the amount of bureaucracy in that department.


Sinclair McKnight Stevens: The present minister could never handle it.
Income Tax


Joseph Jacques Jean Chrétien: No minister can handle every aspect of his department, including the minister of national revenue of the day.


Sinclair McKnight Stevens: Especially this one.


William Gordon Ritchie: I have been involved in one or two farm assessments of capital gains on farm sales. I think the department is usually wrong in the principle it applies to the rule. The departmental officials I have dealt with do not know much about farming.


An hon. Member:: Especially in Saskatchewan.


Joseph Jacques Jean Chrétien: I would like to inform the hon. member that the adviser here with me is the son of a farmer from Saskatchewan. He decided to quit the farm and work with the Department of Finance.


William Gordon Ritchie: He is a smart fellow; he has come to where the gravy is, the federal civil service. No more milking cows for him. Unless the capital gains tax is applied fairly, it will be a serious problem when changing businesses. The tax accountants can advise you. In Winnipeg, where I have my dealings, there is no rhyme or reason in relation to fact. What is done at one time will be contradicted at another time.
In the white paper on taxation we were told how the problem of capital gains went on and on in the United Kingdom. A way was usually found to get around the government. It is a real problem. The minister must simplify the definition and the guidelines so that an individual will know what to expect. I agree that the department cannot be absolutely sure about any given situation. However, there must be some way in which the department can indicate whether a certain situation qualify under the rules. If not, it is a difficult problem for the taxpayer.
The definition of "like" business is also a real problem. If it is too narrow, all cases will be turned down. If it is too wide, almost every business will escape the net. How the word "like" is defined is very crucial to this piece of legislation when dealing with farms. As this is only a postponement of the tax, I presume there is no reason why the individual taxpayer cannot pay his tax when he makes the change, or if he sells his business, even though he may buy a like business.


Joseph Jacques Jean Chrétien: Would you repeat the question, please?


William Gordon Ritchie: If the individual decides to pay his tax at the time he makes the roll-over-which is what a smart person would do-will he have the privilege to do so?


Joseph Jacques Jean Chrétien: Mr. Chairman, we are always very happy when someone is eager to pay taxes, yes.


William Gordon Ritchie: Is recovered depreciation charged as a full tax liability, as opposed to capital gains which are only half?

December 6, 1977
Income Tax


Joseph Jacques Jean Chrétien: Mr. Chairman, depreciation is fully included in income; it is not related to capital gains.


William Gordon Ritchie: If an individual had an item worth $20,000 which was depreciated to $10,000, and then he sold it for $30,000, what is his tax liability?


Joseph Jacques Jean Chrétien: He would have $5,000 of taxable capital gains and $10,000 depreciation.


William Gordon Ritchie: The minister's intentions are good, but to be effective the effect of capital gains taxes on small business must be mitigated. The change would not do much good unless the Department of National Revenue lays down guidelines. If it is narrowly interpreted, hardly anything will get into it. If it is widely interpreted, almost everything goes.


Mr. Towers:: Mr. Chairman, I would like to take the minister back a few years to some of the comments which were made. Perhaps I might induce him to lend his ear to the farmers in western Canada, instead of his advisers in the Department of Finance. He will receive sounder advice from the producers of this country than he will from those who live off the fruits of the land.
The former minister of agriculture, Senator Harry Hays, made a comment indicating that the time will probably come when agricultural producers will not own their land. This would be the most dangerous thing which could happen to Canadian agriculture today. The minute that takes place, the cost of food will escalate 50 per cent, 75 per cent or 100 per cent. Pride of ownership makes the individual producer work harder and produce more. I am talking about the consumers of Canada and not just the Department of National Revenue. I am not just speaking for the individual producer; I am speaking for the benefit of all of us.


Joseph Jacques Jean Chrétien: Mr. Chairman, the roll-over provision is in the act in order to facilitate the ownership of land by individuals. I do not dispute the statement of the hon. member. In fact, something is being done about it.


Thomas Gordon Towers: When Mr. John Turner was minister of finance he agreed to do something about the corporate part of our agricultural industry. At that time it was debated adamantly that there should be a roll-over from one generation to the next. That was good and it was a step in the right direction. Mr. Turner indicated that if we would wait in order to give him an opportunity, he would bring in the corporate part.
We are not asking for a holus-bolus opening up of the corporate share of the industry. The hon. member for Wetaski-win has a bill before this House to limit the roll-over to $5 million and, as was suggested by the hon. member for Dauphin, it should incorporate small business. It would be in the best interests of everyone if a policy of that nature came into play.
The agricultural debt will escalate to the point the industry will not be able to carry it. The hon. member for Vegreville pointed out that during the last six years the agricultural debt

has risen from $4.3 billion to $8.5 billion. If the debt continues to escalate, the producers will not be able to afford to own land and thereby will lose control of it. I am not asking the minister to delete that tax entirely. He should delay it when it passes from one generation to the next, as long as the persons involved stay in the agricultural business or small business. It is difficult to separate agricultural business and small business when dealing with the corporate structure. As long as it remains within the family, it would be in the best interests of everyone if consideration could be given to delaying the tax. I would have no quarrel with that. Even if the minister would index it, that would provide some relief.
When the capital gains tax was brought in, it was argued that the tax was unfair. Also, it was argued that the department was gathering data which would not be available to those involved in sales and would be caught up in the tax. This has happened. At that time we warned the minister it would happen. It is causing problems. Now we are speaking about something which will cause greater difficulties.
The minister has indicated that he will look into this problem, but that is not good enough. We need a firmer promise from this minister than we had from the former minister, Mr. John Turner. Mr. Turner indicated at that time that he would look into it, and we are in the same position today as we were then. We need a minister of finance who is committed to this policy. Until the minister listens to those in the agricultural industry, we will be in trouble. Also, he must listen to those in small business. I am not referring to large corporations; I am referring to up to $5 million, which is the suggested figure.
Unless the minister does these things there will be a continuing problem and members on this side will delay this bill. The minister has criticized our members for the debate we have had on this bill, but I should like to indicate that we are right and he is wrong. Can the minister promise that in his next budget he will bring in something like this, if he will not bring in an amendment to the present bill?


Joseph Jacques Jean Chrétien: Mr. Chairman, I am willing to look into that matter. 1 have talked with my officials about the point raised by the hon. member. We have looked into incorporated farms which do not qualify for the roll-over provision. As yet, we have not found a mechanism to cope with the hon. member's point. An individual who is not incorporated can use the roll-over technique to transfer to his son. That cannot be done by an individual who is incorporated. The tax advisers of the Crown have been aware of this problem for some time and they have been unable to arrive at a proper solution.
The elimination of the powers of corporations can be amended by additional letters patent, and so on. Apparently it is extremely difficult to find a way to confine the operation to farming. The hon. member referred to a proposition which should be attached to it. He referred to $5 million. Of course, when a corporation is in the $5 million bracket, in my opinion it is no longer a small business but is a rather important business.
December 6, 1977

We are looking into the problem. I cannot commit myself to dealing with it in the next budget, but I can assure the hon. member that I will ask my officials to try to find a way to satisfy the representations of the three hon. members opposite who have spoken on it this afternoon, and of some other members such as the hon. member for Assiniboia who has mentioned it to me privately. We do not have the solution as yet, but we are trying to find one.


Thomas Gordon Towers: Mr. Chairman, 1 wonder if the minister would accept a formula from some of the farm organizations if they could come up with a reasonable solution to this problem, because apparently the administrators in the department will not do it and, as I said earlier, the minister is listening to the wrong people. He is listening to the people who introduced the tax in the first place. He should be listening, to the people who want the tax lifted and retain ownership of the lands in the hands of the producers. This is what is important.
I would hope that the minister could at least promise to work with farm organizations and small business, groups of people who are interested in the roll-over aspect of the provision. I would hope he would meet with them and work with them to arrive at a solution to this serious problem.


Joseph Jacques Jean Chrétien: Of course I will be looking at any positive suggestion with regard to that problem. I welcome the proposition of the hon. member that farm organizations should meet with me or my officials. We will try to find a positive solution, and if someone has an idea, will he please let us know. We are already coping with 98 per cent of the farming people with regard to the roll-over provisions, and if we can find an acceptable mechanism to deal with the rest, that would be very good. I am told this is a very difficult problem and that no one can define it in such a fashion as to satisfy all the requirements.


Mr. Kempling:: I want to say to the minister that it is very important for the corporate farm and also for the small business sector, as, I am sure, he is well aware. In my experience with business, I have seen literally hundreds of family-owned businesses destroyed since the capital gains tax was brought in. Certainly, it is a matter that must be dealt with. I would like to add my voice to those of my colleagues and urge the minister to deal with this matter.
We talk in the House about unemployment, and we hear many members quote statistics and say that 60 per cent of our labour force is employed by small business which does 50 per cent of the manufacturing in the country; but a large percentage of our small businesses are in a precarious position. Part of the difficulty lies in the fact that in order to obtain adequate financing, their bankers and auditors are advising them to incorporate. It would appear that under the provisions of this bill, they would be better off, from the point of view of taxation, not to incorporate. So they are caught in a difficult position.
Income Tax
I know, and I am sure the minister knows from his experience as a lawyer in his constituency, people who have a family business and who have gone to him for legal advice on this matter. They want to hand over the business to their children, but now they are facing this problem. The other factor is that, as the minister knows, it happens often in a family business that the sons and daughters work in the business and often are paid only nominal wages. They are prepared to work in the business because they know that some time in the future the business may be theirs. But now the matter of taking it over is another question. As I recall, the minister said in his remarks that because of the share structure of an incorporated company it is easier to transfer the assets. I would like him to tell us how easy this is. This is what we are told, and this is what I experienced myself. How different is it from the situation of the non-incorporated company?


Joseph Jacques Jean Chrétien: I want to repeat what I said. It is not easy to do that with the limitation we are seeking in the roll-over provision. We have decided that it would not apply to the corporations. It applies only to businesses supplying the farms.


Herbert Thomas (Bert) Hargrave: Mr. Chairman, I have one brief point which 1 omitted to raise in my earlier remarks. I wanted to say that in view of the dramatic increase in farm land values since the advent of the Carter commission and the days of the white paper, which is now about seven years ago, in many cases non-agricultural money has been invested in agricultural land as a hedge against inflation.
Is the minister giving any consideration to the suggestion, which I know has been made, of a new valuation date which might be introduced which would be closer to the circumstances in which we find ourselves now? I point this out in view of the fact that we are in a situation now which was never envisaged at the time the new concept in taxation was brought in; that is, approximately seven years ago. At that time, nobody would have dreamed that such a situation would arise, brought on by inflation. Perhaps this does, indeed, warrant the introduction of a new valuation day closer to present day circumstances. Would the minister comment on that point?


Joseph Jacques Jean Chrétien: I would like to say to the hon. member that in my judgment it is not possible to change the valuation date which was established in 1972. If we were to do that for the farming community because the price of land in some parts of Canada has gone up by 400 per cent in some cases, we would probably have to do it for everyone. It was a date chosen at the time of the tax reform, and we have to live with it.


Sinclair McKnight Stevens: Why?


Joseph Jacques Jean Chrétien: One cannot change the valuation date.


Sinclair McKnight Stevens: You can change the whole tax.


Joseph Jacques Jean Chrétien: We are not planning to do so.


Mr. Bawden:: Mr. Chairman, I was very interested in the comments of the hon. member for Halton-Wentworth. I thought he made a good point, and I do not believe we have

December 6, 1977
Income Tax
had a sufficient response from the minister to questions regarding small businesses and what he is prepared to do to provide stimulus and incentive to people to carry on. In many small family businesses that I know, members of the family are working to make ends meet. In many cases this is much less rewarding than working in a large company, working as a civil servant or, for that matter, working as a member of parliament, because the work is carried out by family members. Also, the few employees in a small business are not paid overtime, they do not get programmed holidays nor do they get indexed pensions.
I am interested in the fact that small businesses are usually the beginnings of pools of capital which could ultimately be available to Canadians to invest in our country. In his remarks at second reading of this bill, the minister said he wanted to stimulate private investment. But we are all aware that small companies generally die with their owners; they generally die with the family or with the individual who had the initiative to get a business going. In this world where capital is so vital to jobs and to building a business, the fact of the matter is that when a small company goes out of business, instead of going on to employees, members of a family or others who might continue the business, the assets or shares usually go to a larger company. The minister knows very well that larger companies generally do not die. Companies like Imperial Oil and the big companies of this country go on and on; they have nothing to do with the life of any particular individual.
The point about farms was well made by the hon. member for Medicine Hat and the hon. member for Red Deer. Farms are vital to this country. They are the best examples of small business in Canada. They are the best examples of small family businesses, but in small businesses other than farming there are equally as many concerns and there is equally as great a need.
The minister took issue with the comment made by the hon. member for Red Deer that $5 million was no longer small business. That $5 million might be the investment only. The minister is concerned about jobs. These days an investment of $5 million would probably mean jobs for no more than 100 people. I do not know whether a business employing 100 people is a small business or a big business, but I think there is far too much concern on the part of this government that somebody in Canada is going to make money for a change. "Profit" is still a dirty word.
I think the minister owes it to the House to tell us what he intends to do to encourage Canadians. He has all kinds of answers about dividend credits and things of that nature. That is important. But small businesses with investments of $2 million, $4 million or $6 million are not concerned about dividends. Dividends have nothing to do with their motivation. They are trying to build their assets. They are concerned about building profits and creating jobs. 1 think the minister is interested in creating jobs, too, but I have not seen any initiatives on his part which are meaningful in creating jobs.

The development of small business is not a short-term proposition. It cannot be dealt with on a "turning the tap on" "turning the tap off' basis. We must have long-range programs which will enable the ownership of companies to be Canadian, because often when a small business is sold, it goes to foreign owners. If it has been successful and it does not go to foreign owners, it is bought up by big business. This government has a well advanced program for eliminating small businesses as well as eliminating Canadians as owners, principal shareholders or controlling shareholders of their own companies.
The minister owes it to the House to tell us what his long-range plans are and whether he has anything meaningful to offer in this area. I think he will have to hurry, because I do not know if this minister will have a chance to present another budget. Perhaps he will be replaced, or perhaps he will soon be sitting on the other side of the House.


William Gordon Ritchie: Mr. Chairman, can the minister give us a rough idea of how much the capital gains tax brings in each year? If he cannot give us that information now, I would be grateful if he would give it to us at some later time. Second, how much does the minister's department estimate is involved in these tax changes? How much is involved in this roll-over? How many cases might be involved in a year, or were perhaps last year, and how much money is the government going to forgo based on last year or previous years?


Joseph Jacques Jean Chrétien: Mr. Chairman, we have not made studies to assess what will be the loss of revenue as a result of introducing this roll-over. We do not make that type of study, and it is not extremely important.


William Gordon Ritchie: Would the minister try to obtain the figures as to how much the capital gains tax brings in per year?


Joseph Jacques Jean Chrétien: We have already answered that question, but I can provide the information later. 1 do not have it in front of me. This question was already answered in the debate, but I will try to find it out again and give the information to the hon. member.


Sinclair McKnight Stevens: Mr. Chairman, the Minister of Finance must agree that there is considerable concern in this House about the welfare of farmers and small businessmen, especially in relation to the implications of many of the matters dealt with in this bill. In view of this concern, and bearing in mind that the minister has ruthlessly gagged this parliament and prevented any type of extensive debate by bringing in his closure motion, would the minister consider making a special reference to the Standing Committee on Finance, Trade and Economic Affairs so that the committee could deal with possible amendments to the Income Tax Act in order to resolve some of the problems which have been outlined here today which are faced by farmers and small business people in Canada?


Joseph Jacques Jean Chrétien: Mr. Chairman, I said to the Canadian Tax Foundation meeting the other day that I was planning to introduce a new system which would perhaps be more appro-
December 6, 1977

priate. I would like to make some references to the committee, pre-budget, of some tax problems so that the committee could look into them before I introduce measures. The members of the committee would have an input before changes are made in some areas. I do not know if this area could be one of them. At this time I am contemplating referring possible tax changes to the committee. Of course, that would have to be done on a non-commitment basis. Because I refer a certain matter to the committee does not mean I will make changes, because that might be counter to the traditional ways of handling budgets.
Up to now there has been a lot of secrecy until the night of the budget when the minister announces changes. On an experimental basis, I would like to identify four or five areas and refer them to the committee for comments and recommendations, but I would not be bound by those recommendations because 1 would not want to reveal measures before announcing a budget. There might be some proposition which would make so much sense that I could not resist it. I am planning to introduce that mechanism, on an experimental basis, right after Christmas. If that leads to some positive results, I will try to persuade the government to change the system we have had for over 100 years. Perhaps the system is no longer conducive to the effective transaction of national business.


Sinclair McKnight Stevens: I am familiar with the minister's idea of doing a little kite-flying in the future. Instead of just bringing in proposed changes harshly, the minister would like to test them to find out if they fly, by means of some kind of committee proceeding. I do not know if we have any objection to his trying that, but I am dealing with a much more general question. The question is not how we should react once the bureacracy decides it would like to change the Income Tax Act in a particular fashion; the idea, basically, is to familiarize this House and the public with the pros and cons of various tax measures with which we have to deal.
What I had in mind is the specific field we have been dealing with this afternoon, that is, the impact of federal tax upon farmers and business people who are deducting a relatively small portion. Could we have a reference to find out to what extent this is a hardship, to what extent provisions could be introduced to relieve some of the problems, to what extent other jurisdictions such as the United States and Great Britain are treating their small business people and farmers in a fair way?
The whole question of capital gains tax on small business people should be looked into. Rather than the narrow terms of reference the minister speaks of-which is essential when the bureaucrats have made up their minds on what kind of income tax change they would like to test-the minister is saying, in effect, "Let us try it at committee and see what happens." I say it would be more meaningful to get some input before that decision is made by the bureaucracy, to see to what extent we have a problem in a field such as that discussed this afternoon, and let a committee such as the Standing Committee on Finance, Trade and Economic Affairs deal with it.
Income Tax


Joseph Jacques Jean Chrétien: Mr. Chairman, I have listened to the representations of the hon. member. The suggestion of referring problems to a committee ahead of a budget is a far reaching approach. I am disappointed that the hon. member takes a cheap shot at the bureaucrats, because I have persuaded a lot of people this is the way to go at the problem. I think the hon. member should be grateful we are moving. If the opposition were as willing as I am to make changes, we would not be stuck in the House on the same problem for five weeks as we are now.


Sinclair McKnight Stevens: Mr. Chairman, the arrogance of this government is unbelievable. That there should be a suggestion that because they are absolutely the vassals of the bureaucracy, we should be grateful to have a preview of what the bureaucracy has in store for us in the next budget, is unforgivable. I think the minister should be asked to retract that suggestion.


Joseph Jacques Jean Chrétien: Mr. Chairman, if the hon. member does not want to discuss these things, we can do that with the NDP or the Creditistes or independents.


Sinclair McKnight Stevens: Mr. Chairman, the minister is obviously trying to distract the House from the very simple proposition I put to him of why there cannot be the general reference I suggest to the Standing Committee on Finance, Trade and Economic Affairs. The committee could look at the problems raised in this closure debate and consider the impact of taxation at the present time on small businessmen and farmers. Are there relieving provisions to be considered which would put parliament back in the position of instructing the bureaucracy, instead of reacting to what the bureaucracy wants?


Joseph Jacques Jean Chrétien: Mr. Chairman, at the beginning of this debate on Bill C-11, for days and days I heard speeches on all sorts of things except the tax aspect of the bill. I heard about the RCMP, and so on, but we were not dealing with the specific problems we have to deal with in committee. Last week they were trying to ride to power on the back of the RCMP. Now they are trying to ride to power on the back of the bureaucracy.


Sinclair McKnight Stevens: Mr. Chairman, the seals have moved back into the arena. Obviously, the minister is not disposed to allow the people of Canada a reference that would give them an opportunity to explain to the government some of the problems they face with the present tax policy. I should like to go on to four more subsections of the bill.


Joseph Jacques Jean Chrétien: On a point of order, Mr. Chairman, earlier the hon. member asked me a question on clause 6(1).


Sinclair McKnight Stevens: Mr. Chairman-


Joseph Jacques Jean Chrétien: I should like to give the answer; but if he does not want it, I can keep silent.


Sinclair McKnight Stevens: Mr. Chairman, I fully intend to ask the minister for his answer before we are through with clause 6. Now I want to refer to subclauses (3), (4), (7) and (9) of

December 6, 1977
Income Tax
clause 6. The minister will know that these deal mainly with clause 14(4) with which we will be dealing a little later. The explanatory note refers to the income tax motion which reads as follows:
(5) That for taxation years ending after March 31, 1977, in respect of depreciable property, a taxpayer be required to deduct a terminal loss in the year in which it arises whether or not the taxpayer has a source of income in that year.
Dealing first of all with subclause (3), could the minister indicate to the House what his officials had in mind with this change? Why must a terminal loss be taken in a certain year, irrespective of income in that year? Why is the taxpayer not given the privilege of matching losses with income in an easier approach?


Joseph Jacques Jean Chrétien: Mr. Chairman, this is a technical deficiency in the existing terminal loss provision in the regulations which threw out the deductible loss whenever a leasehold interest is converted into a full ownership interest. This deficiency is corrected by this amendment. The amendment is related to the changes with respect to terminal losses in clause 14(4). It is applied where a taxpayer who has leasehold interest in a particular property acquires complete ownership of the same property. The amendment provides for transfer of the capital cost and undepreciated capital cost of the leasehold property to the converted property which will be included in a different class.


Sinclair McKnight Stevens: Could the minister tell us why it is felt necessary to have the terminal losses fall in a year, to use the wording of the income tax motion, "whether or not the taxpayer has a source of income in that year". Why has the minister not given some facility to allow the loss to be applied against income in another year?


Joseph Jacques Jean Chrétien: Technically, if the taxpayer does not have a source of income he is not entitled to the deduction.


Sinclair McKnight Stevens: That is just what I read out, and that is true. That is what the income tax motion says, but I should like a better understanding of why this is the case.


Joseph Jacques Jean Chrétien: It is because they found a technical deficiency in the act and wanted to correct it.


Sinclair McKnight Stevens: The way the officials seem to approach this is that if somebody ends up not having to pay tax, that is a loophole and it must be plugged. I want to know why the departmental officials felt it necessary to stop the taking of a loss and applying it against income regardless of which year the income was earned. Why discriminate against the person who, perhaps for reasons beyond his control, has to take a transfer loss and has not sufficient income in that year? They say, that is too bad but they cannot apply it to income in future or past years. I think the committee deserves a better answer than just that it was a technical loophole the bureaucracy wanted to fill.


Joseph Jacques Jean Chrétien: Mr. Chairman, this technical change simply transfers the terminal loss rules from the regulations to the act itself. A terminal loss arises when depreciable property is disposed of for proceeds less than its undepreciated capital cost. The remaining balance, or terminal loss, is deducted from other income in the year. The amendment also ensures that a terminal loss can be claimed by a taxpayer whether or not he still operates the business in which the assets were used. Technically, under the existing act, a terminal loss arising in a year after the business has ceased is not deductible. In fact, what we are doing is making it deductible.


Sinclair McKnight Stevens: Mr. Chairman, I would like to direct another question to the minister. Are you making the terminal loss deductible in a year that the taxpayer has no income, or can he in fact make it deductible against another year-either before or after

in which he does have income?


Joseph Jacques Jean Chrétien: It can be carried over.


Sinclair McKnight Stevens: Did the minister say the loss can be carried over to a future year?


Alexandre Cyr: Yes.


Sinclair McKnight Stevens: Can it be carried back?


Alexandre Cyr: One year.


Sinclair McKnight Stevens: How many ahead?


Joseph Jacques Jean Chrétien: Five.


Sinclair McKnight Stevens: Five years ahead, and one year back?


Joseph Jacques Jean Chrétien: Yes.


Peter Colwell Bawden: On the question of terminal losses, there is a very related remark made by the minister. In his speech on second reading the minister stated, as reported at page 645 of Hansard:
For example, any unused commercial loss, any capital loss or investment tax credit of a corporation belonging to a group of corporations will be transferable to another corporation of that same group when there is a merger or a liquidation.
I would like to ask the minister why it is not much simpler. It is available to taxpayers in the United States. It seems that here it is a very complicated way of giving the benefit that is proposed. I have a specific instance in my constituency at the present time where the owner of several small companies is forced to merge these companies to take advantage of this particular opportunity, except that it will cost him $20,000 in legal and accounting fees to accomplish this fact. I would ask the minister if he is considering, or would consider, enabling companies that have common ownership to file a joint tax return, which would be the same thing.


Joseph Jacques Jean Chrétien: That is a suggestion which has some merit. I am told we are looking into that already. However, it is extremely complicated to find a good formula for its applica-
December 6, 1977

tion. We will be looking into it further, and I appreciate the comments of the hon. member.


Peter Colwell Bawden: That it is extremely complicated seems to be an answer the minister is giving to a lot of things. We do not agree with that answer or many of the answers the minister has given. I am of the view that it is simply not good enough. I would like something more specific from the minister. This is something which is done in the United States. There is a pattern there to look at. The fact that it is too complicated reminds me of this whole bill.
A few moments ago I was very disturbed when the minister made reference to members on this side holding up this bill for five weeks. I think that is very unfair of the minister. This complex bill has something like 225 pages in it, and I am wondering if five weeks is too long to consider all the clauses of the bill. The minister said we are not dealing with specific problems. Five weeks is not too long to deal with this legislation.
While the minister is on his feet, I would be interested to hear why we first received the proposals contained in this bill in the House on March 31. It is something like seven months since the minister brought before the House and the committee these proposals in the form of a bill. Rather than say it is too complicated, why don't we get some action? Why don't we create jobs and get people investing, which is what we want?


Joseph Jacques Jean Chrétien: Mr. Speaker, if the hon. member went to the United States to check the regulations concerning this proposal, he would see that even if the proposal appears very simple at first sight, it becomes extremely complex once embodied in regulations. The officials of my department studied the technique used by the U.S. Department of Revenue and they did not find it very simple. They continue to examine the problem. Perhaps, the hon. member has some suggestions on the possibility for several companies to fill in only one tax report. At first sight it looks extremely simple but I am told that neither in Canada nor in the United States has the mechanism to do this been found. Moreover we must ensure that this does not become a mechanism enabling people to avoid regular taxes.


Sinclair McKnight Stevens: We now jump to subclause (11) which is a new clause brought in with the October 20 statement of the minister. It appears for the first time in Bill C-ll. The minister likes to dwell on the little talk he keeps giving about how we have had five weeks on this bill. I see I do not have enough time now, but after dinner I would like to take the minister through the time, exactly, that has been spent on this bill. In no way has five weeks been spent on the bill before us. It is a misrepresentation of the fact for the minister to continually tell the House and the Canadian public that five weeks have been spent on the bill.
If there is consent, we could do it before the break. Could the minister give us an explanation with respect to subclause
Adjournment Motion
(11) which leads us into the insurance question, the new approach that the government intends to take with regard to taxation of insurance companies?


Joseph Jacques Jean Chrétien: It is five o'clock, and I have a long explanation which I can read to the committee. I have another reply to give to the hon. member, and we can come to that too.


The Deputy Chairman:: It being five o'clock, it is my duty to rise, report progress and request leave to consider the bill again later this day.
Progress reported.


The Acting Speaker (Mr. Turner):: Order, please. The House will now proceed to the consideration of private members' business as listed on today's order paper, namely, public bills, private bills, notices of motions.



PROCEEDINGS ON ADJOURNMENT MOTION


The Acting Speaker (Mr. Turner):: Order. It is my duty, pursuant to Standing Order 40, to inform the House that the questions to be raised tonight at the time of adjournment are as follows:	the hon. member for Nickel Belt (Mr. Rodriguez)-Regional Economic Expansion-Reason for grant to Italian company to manufacture refrigerators in Quebec; the hon. member for Kootenay West (Mr. Brisco)- Canadian International Development Agency-Oxfam-Proposed study of funding; the hon. member for Surrey-White Rock (Mr. Friesen)-Environmental Affairs-Delay in responding to Steveston oil spill-Government action to rectify.
[ Translation]


Yvon Pinard: Mr. Speaker, I ask the House to proceed this afternoon with Bill C-214, an Act to amend the Divorce Act, and that the other bills preceding Bill C-214 on the order paper be allowed to stand with the unanimous consent of the House.


The Acting Speaker (Mr. Turner):: Is there unanimous consent that all orders preceding No. 14 be allowed to stand?


Some hon. Members:: Agreed.

December 6, 1977
Divorce Act


PRIVATE MEMBERS' PUBLIC BILLS
Mr. W. Kenneth Robinson (Toronto-Lakeshore) moved: that Bill C-214, an act to amend the Divorce Act (living separate and apart) be read the second time and referred to the Standing Committee on Justice and Legal Affairs.
Lie said: Mr. Speaker, ten years ago, on December 4, 1967, the 1968 Divorce Act was given first reading in this chamber. At that time, the government felt it was time to reform our archaic divorce laws and bring them into line with the social climate of the 1960s.
Prior to 1968, the only effective ground for divorce in every province, save Nova Scotia, was adultery. Most provinces entered confederation without divorce laws or procedures, and it was not until after 1930 that they were granted the authority to establish provincial divorce courts. Residents of Quebec and Newfoundland, however, were required to apply for a parliamentary divorce because these two provinces had no divorce courts until 1968. In 1966, the question of divorce reform was referred to a special joint committee of the Senate and the House of Commons. Its Report on Divorce was presented to parliament in June, 1967, and in 1968 the Divorce Act became law. The act retained many of the traditional marital offences as grounds for divorce, but it also included a modified concept of marriage breakdown as a new ground for divorce.
One of the grounds established was a separation period of three to five years-three years separation if the petitioner is the non-deserting spouse, five years separation if he or she is the deserting spouse. This separation ground conferred on each married person significant powers of individual control as to whether he or she desired to remain married. Today, about 40 per cent of all divorces are based on this ground.
It is important to remember, Mr. Speaker, that although the government was anxious to modernize our divorce laws, it was conscious of Canadians' interest in maintaining the sanctity of marriage and of the family unit. It is in this same light that I have put forward an amendment to the Divorce Act, an amendment which will reduce to 18 months the three to five-year waiting period required for a marriage which has broken down to be dissolved. It also eliminates the question of fault under this ground for divorce. Mr. Speaker, I hope hon. members will see fit not to talk this bill out, and that it will be referred to the standing committee.
Let me take a moment to examine the divorce legislation of other countries with regard to the concept of marriage breakdown and the period of separation. Several countries differentiate between unopposed and opposed actions. For example, in England the waiting period is two years if the divorce is unopposed, and five years if it is opposed. Norway requires one year separation if the action is unopposed, and two years if it is opposed. In Australia, the family law act of 1975 states that a ground for divorce is established if the parties separated and lived separately and apart for a continuous period of not less
[The Acting Speaker (Mr. I urner).]
than 12 months immediately preceding the date of filing for the dissolution of marriage. The separation need not be agreed upon by both parties.
Sweden, in 1973, introduced divorce on demand, which includes both unilateral and consensual dissolution of marriage. Either spouse is at any time entitled to have the marriage terminated on formal request, without having to show separation for a period of time, marital offence or irretrievable marriage breakdown. The state's function is to approve the request. The only qualification provided for in Swedish law is a "reconsideration" period of six months if the divorce is opposed or if the family contains children under the age of 16.
In the United States, some states-namely, California, Michigan, Georgia and Nebraska-have adopted divorce by consent. Divorce by consent subjects marriage to the joint will of the parties involved and limits the involvement of the court or state. In fact, in Canada it is argued that because 90 per cent of our divorce cases are uncontested, divorce by consent already prevails. Hence, it is often recommended that the government may as well legalize its present existence.
Since 1968 there has been a myriad of studies, reports and recommendations concerned with the divorce issue. The concepts of marriage breakdown, divorce by consent, divorce on demand, and others, are constantly being rehashed by various legal groups, people involved with the status of women and by religious affiliations. One of the most foremost bodies engaged in this study on divorce is the Law Reform Commission of Canada. In the commission's attempt to formulate a coherent legal policy for the family, the commission put forward a number of proposals. Their commitment to the concept of a unified family court is one such proposal. This unified family court would have wide jurisdiction in family law. Its jurisdiction would include dissolution of marriage, interspousal property matters, areas involving children, and other social and economic issues of a family nature which would call for legal solutions.
At the present time there are experimental unified family courts in existence. There is one, for example, in the judicial district of Hamilton-Wentworth. Central to the concept of the unified family court is the importance of resolving the weaknesses of the laws affecting family relationships and marriage and the strengthening of the institution itself.
The Law Reform Commission also examined the subject clause of my proposed bill and has advanced several arguments against the imposition of a designated period of separation as a prerequisite to divorce. It referred to the dilemma faced by an economically dependent spouse who may be forced to leave the matrimonial home, and also to the hardship faced by responsible spouses who encounter marriage breakdown yet must go through the loneliness of an enforced period of separation, being neither married or unmarried, in a coupled society.
Professor Herman R. Hahlo, who presented a research paper entitled "Reform of the Divorce Act, 1968 (Canada)" to the Law Reform Commission, also examined the three-year separation period and recommended that it be reduced to one year. He reasoned thus:
December 6, 1977

To take a large slice out of a person's life by withholding a divorce long after the prospects of reconciliation have vanished can only be explained by a conscious or subconscious desire to punish a spouse for seeking a divorce. Many experienced marriage counsellors suggest that six months are normally sufficient to determine whether there is any hope of reconciliation-
Professor Hahlo also touched upon the five-year period imposed on the deserting spouse and recommended that in this case, too, the required period of separation be reduced to one year.
Mr. Speaker, in the last few minutes I have outlined the history of divorce law in Canada, touched on divorce legislation in other countries and discussed some of the recommendations made by the Law Reform Commission. However, the fundamental question faced by everyone who examines this amendment to the Divorce Act is: how will this affect the institution of marriage and the family unit? One glance at Canadian divorce statistics after 1968 would seem to indicate that the permanence of marriage is indeed threatened. Yet at the same time the figures relating to the number of marriages undertaken each year show that in no way has the popularity of marriage declined.
Here are some statistics. In 1967, the number of divorces in Canada was 11,165, and the number of marriages 165,879. It is true that in 1969, after the new act was passed, the number of divorces rose to 26,093. The number of marriages rose in that year to 182,183. Two years later, in 1971, the number of divorces was 29,685, and the number of marriages 191,324. In 1973, the latest year for which I have been able to obtain the figures, there were 36,704 divorces and, continuing a steady increase, the number of marriages had reached 199,064.
I think everyone should bear in mind, however, that official divorce statistics merely tell us about the number of divorces. They tell us nothing about marital conflict and disruption. Not every marriage breakdown ends in divorce; a couple may choose to continue to live together in disharmony rather than participate in a divorce process which is often painful.
Therefore, the correlation between divorce rates and the collapse of the institution of marriage in indeed difficult to prove. How is the reduction of the length of required separation going to affect the stability of marriage? The Joint Committee of the Senate and House of Commons on Divorce in its report made note that in establishing the period of separation, the prime consideration should be whether the period provides a fair test that the marriage in question has broken down. As I see it, the time required must be sufficiently long enough to give the couple a chance to reconcile their differences, but not so long as to force individuals to remain in unsatisfactory and unhealthy relationships.
It is extremely important, especially where children are involved-for an unhappy marriage is a detriment to children-that the parties be able to dissolve their marriage as painlessly as possible in order that they may build a new life and provide a more healthy, positive environment for themselves as well as their children. To quote Professor Wolfgang Friedman:
Divorce Act
People should be able to live out their lives as joyfully as possible under conditions which enable them to develop their personal capacities and potentialities. This means the right to correct errors, the right to cast off a burden that has become intolerable and may lead to the sapping of vital energies and the moral fibre of the affected parties.
My amendment which calls for a l'/2 year period of separation for either party, regardless of who deserted whom, is a fair test of the state of the marital relationship. It may not be the magic figure; however, it does serve to bring our divorce laws into the 1970s at a lower social and individual cost to the parties involved, and perhaps helps pave the way for additional divorce reform and for continued strengthening of the institution of marriage. Once again, I hope the bill will not be talked out but will be referred to the Standing Committee on Justice and Legal Affairs for further consideration.


Mr. Ray Hnatyshyn (Saskatoon-Biggar):: Mr. Speaker, I rise to make a brief intervention in connection with this debate, taking heed of the request of the proposer of the bill that he wants the matter dealt with by the Standing Committee on Justice and Legal Affairs. The proposal in the bill is simplicity itself. The bill is very brief. It purports to simply reduce the time a person must wait before being entitled to go before the courts to petition for a divorce. I understand the reasoning and the background given by the hon. member in support of his bill. He articulated many of the concerns expressed by social workers, lawyers and people involved in family law in support of his proposal in this bill.
Since I came to this chamber in 1974, the question of amendments to our divorce law has been a matter of considerable speculation and study, not only by the government but by people involved in that area. A number of suggestions have been made since 1974, if not since 1968, as pointed out by the hon. member, with regard to revisions to our existing divorce legislation. In or about the month of June, 1976, the cabinet considered, and apparently approved, the concept of no-fault divorce. The next step in that process was apparently consultation with the various provinces to determine whether this principle and concept was acceptable to all jurisdictions in Canada. After this period of time, no such agreement has been reached. There has been a series of representations against no-fault divorce and a series of representations in favour of it.
What I am leading up to is that passage of this bill in principle or otherwise will not go any distance toward solving some fundamental questions with regard to the attitude of Canadians to divorce; or, perhaps more important, toward the institution of marriage in our society. If we go over the gamut of areas of concern and the various points of view, I wonder whether we will accomplish anything by simply passing the bill, approving it in principle and sending it to the Standing Committee on Justice and Legal Affairs. There may be some agreement on the part of the proposer of the bill and the government to have the subject matter referred to the standing committee so that the widest possible consideration can be given to the status of divorce law in Canada today. The purport of this bill is to replace one arbitrary period of time before one can petition for divorce, with another. I am not sure that solves any fundamental questions with regard to the

December 6, 1977
Divorce Act
institution of marriage and the support we give to that institution.
I hope the proposer of the bill and the government will be receptive to the suggestion that the subject matter be referred to a committee. I would support that move. Representations could be made by all interested parties on the current standing of divorce law in Canada and the attitude of Canadians toward it. Interested groups and parties could have some input as to the kind of legislation that should be brought forward, if any, in amendments to the existing divorce law.
There are a variety of groups, such as religious groups, women's groups and family groups, which have particular points of view that could be very helpful in the formulation of legislation relating to divorce in Canada. In presenting this bill to the House, the hon. member for Toronto-Lakeshore (Mr. Robinson) pointed out some of the statistics. The statistic that sticks in my mind is that approximately one family in nine ends up in a divorce situation. There are many more families that are unstable, unhappy, unhealty and non-productive.
In this and other countries there is an epidemic of marriage breakdown and the serious consequences that flow from it. Many of us are hard pressed to explain this phenomenon of destruction and deterioration of family life. A number of suggestions have been made with regard to structural changes in the forums in which divorces are heard. Those experienced in the courts, such as lawyers, social workers, the clergy and others involved with regard to family breakdown, appreciate that divorce is a very difficult situation to deal with. In addition, there are ancillary considerations which tend to exacerbate the differences between the parties involved, as opposed to providing a forum which could provide some assistance to them in their very unfortunate situation.
The matter of unified family courts is something the standing committee could consider in conjunction with its consideration of the subject matter of this bill. Support of this concept and the idea of the unified family court comes from diverse groups such as Catholic bishops and the Advisory Council on the Status of Women. I am giving the range of groups which support this particular concept as far as the family court is concerned. I hope there will be some agreement to the idea I propose in order what we may have a broad and fundamental look at the entire concept of divorce in our society. There has been no substantial legislation or attention given to this question in parliament since 1968. Marriage and divorce in Canada is an important topic: we must consider this social problem.
In conclusion, I commend the hon. member for bringing the matter before the House. I understand the motivation behind the introduction of this bill. If at all possible, the matter should be referred to committee in order that the widest possible consideration may be given to it. I hope this bill receives favourable consideration from the government side of the House.


William Arnold Peters: Mr. Speaker, I am pleased to rise and speak on this matter. Approximately ten years have passed since the problem of divorce was last handled by the House. Approximately 20 years have passed since I developed an interest in the parliamentary relationship to divorce. As the previous speaker indicated, it is time to have another look at it in a fairly broad manner.
I congratulate the hon. member for Toronto-Lakeshore (Mr. Robinson) for bringing the matter forward. But really this is just the tip of the iceberg. As yet, we have not had a chance to assess in committee whether marriage breakdown should be the only ground for divorce and whether we should get rid of the adversary system. Although we in the federal parliament have the right to pass substantive legislation on divorce, we have not given much consideration to the problem the family unit faces under provincial jurisdiction.
Over the years, I have encountered one problem when handling hundreds and hundreds of divorce cases and being required to go into the intimate details of those cases. The problem I am referring to is the argument that someone must be guilty and someone must be innocent. The parties to a marriage and the proteges thereof were not given very much consideration. The provinces handled the disposition of the children of the marriage in various ways. Quite often it was totally unsatisfactory.
When the legislation was put into effect, we were not in a position, because of constitutional problems, to make any recommendations in terms of who would receive custody of the children, why they should receive that custody, and whether suitable financial arrangements had been undertaken. On many occasions the former hon. member for Skeena indicated that consideration should be given to the maintenance of the family affected by divorce. Marriage is a contract entered into by two people. Marriage breakdown is an amiable way of getting out of a marriage. I am in favour of the situation in Sweden where a divorce can be obtained by either the innocent or the guilty party without any proof. That situation would differ, depending upon who made the request, but in all cases consideration would be given to members of the family and how the divorce affected them.
The new law has been in effect for approximately ten years.
I was surprised when the joint parliamentary committee looking into this whole problem came to an almost unanimous conclusion that the logical reason for granting a divorce should be solely on the basis of marriage breakdown. Some people believe Ithat a divorce should be almost automatic after a marriage has broken down and every effort at reconciliation has been attempted.
At one point this House handled the divorces of the provinces of Quebec and Newfoundland. The former hon. member for Skeena, Mr. Frank Howard, and I decided that this was not the place to discuss the breakdown of someone's marriage. We felt that marriage breakdown should be handled in the courts, as was the case in the other provinces. At that time there was absolutely no support for any change. Everyone hid

December 6, 1977

behind various religious reasons, but they never looked at the problem facing them.
When marriage breakdown occurs, in effect, there is no marriage. It does not really matter whether one has to wait 18 months, a year or three years; an immense social problem is faced by the family concerned. The decision as to finances is dealt with in the family courts which some provinces have. Those courts operate reasonably well in most provinces. The desire of both parties to finalize whatever decision they wish cannot be eliminated.
This is a good time to take another look at our divorce laws. Even members of parliament can change their minds and collectively improve on any suggestion by a member, even though that hon. member has acted to the best of his ability and in good faith. Divorce reform commenced in this House almost 20 years ago. At that time there were 265 members, and 263 of them were opposed to the method we were using to have the matter brought to a head. In 1967, when the changes were brought before the House, as far as I can remember there were no members in opposition to the report of the committee.
For these reasons, I should like to move, seconded by the hon. member for Winnipeg North Centre (Mr. Knowles), the following:
That the motion be amended by deleting all the words after the word "That" and substituting the following therefor:
"Bill C-214, an act to amend the Divorce Act (living separate and apart), be
not now read a second time but that the order be discharged, the bill
withdrawn and the subject matter referred to the Standing Committee on
Justice and Legal Affairs."


Mr. Gilbert Parent (Parliamentary Secretary to Minister of Veterans Affairs):: Mr. Speaker, I congratulate the hon. member for Lakeshore (Mr. Robinson) for bringing in this particular bill. I would like to say at the outset that I am in favour of reducing the period of time which a person would have to wait before being granted a divorce from three years to a year and a half. I must comment on what the hon. member for Timiskaming (Mr. Peters) has said. I understand that some years ago he engaged in a filibuster which brought about some changes in the old divorce laws. He has changed his stance now. Very rarely do I see him filibustering in the House.


Stanley Howard Knowles: Don't put ideas in his head.


Gilbert Parent: The hon. member says they should eliminate the whole process of divorce. I am happy they did not eliminate the hon. member along with it.
I think the bill is good. I would suggest that there are some other changes which could be considered, and perhaps the hon. member will take these few thoughts to the committee with him along with the ones he has suggested. I believe that the change he suggests would improve our divorce laws, and I hope that the suggestion I will make will be considered at the same time.
Divorce Act
Although Canadians have always considered it self-evident that a family has a special and central place in our society, there have in fact only been a few occasions when the legal basis of the family and the legal relationship of its members have received official attention over the past century. Changes we hav.* experienced socially, as well as changes in the composition, structure, expectations and thwarted hopes of families and their members have at best led to halting accommodations by the law to social pressures. Accommodations such as making divorce generally available, but hardly to a re-examination of the image of the family the law reflects. This image may by now be so far removed from reality that the law and its institutions may weaken rather than strengthen family life, especially in crisis situations.
In fact, in the ordinary course of family life nothing is more remote than the use of the law for dealing with personal, economic or other needs. Not so in crisis situations, when the network of relations and understandings breaks down and personal and community resources are no longer able to relieve pressures. It is at these points that the law is seriously considered as an instrument for ordering family relationships and it is also at these points that the law and its institutions show their strengths and weaknesses.
That there are weaknesses was brought forcefully to my attention when I inquired into areas of public dissatisfaction. A great deal of concern was expressed about the divorce process and its aftermath in terms of maintenance, property settlements, and the way it dealt with children. Dissatisfaction was expressed not only by those who were or had been involved in the process, but also by agencies and professions working with families in trouble-including the legal profession.
The Law Reform Commission put out a paper with regard to jurisdictions. The following are my thoughts on the subject. With respect to jurisdiction, it is one thing to put divorce into a tidy constitutional category of federal law, and something else again to keep it there. A law is what it does. Most of what the divorce law does, in concrete reality, is anchored in issues of child welfare, property and support which, in almost all contexts other than divorce, are provincial concerns. It would be rather sterile to limit the reform approach to a consideration of grounds for divorce as if they could somehow be isolated from their consequences. I have instead taken another approach, proposing that the process for dissolution of marriage should be structured on the basis of social and economic consequences. The more important the issue-such as cases where young children are involved-the more time and resources should be brought to bear to keep families together, or where this is not possible, to diminish the harm that is invariably involved. Legal concentration on grounds for divorce, such as fault, clearly reinforces the adversary and accusatory elements of a crisis situation. Anybody who lives in a family or any other close relationship knows that this is no basis for arriving at a mutual understanding.
There is a legitimate concern about fast and easy divorce, often expressed as "divorce on demand". I do not think it should be so easy that all we have to do is simply to walk up to

December 6, 1977
Divorce Act
a judge today, and next week obtain the divorce, as is now possible in such states as Nevada in the United States, and in Mexico where you can get a "quickie" divorce in a matter of days or weeks.
It is easily overlooked, however, that what we have now is divorce on demand when, in one way or another, the legal grounds, which may have little or nothing to do with the actual problems facing the spouses, are fulfilled. Most divorces are uncontested but many are based on a bargaining process, often harmful and expensive, that not only shatters the family but also its individual members. The fact that divorce is a painful process does not foster family stability in Canada. It only fosters pain.
Traditionally, for example, the law has not considered the work of the homemaker as a contribution to or as having anything to do with the acquisition of property in marriage; equally it did not foresee that women could be independent and responsible for their own lives. Whether the changes in the position of men and women in society and their relation to each other are good or bad is a matter for partisan discussions. That the situation is different there can be no doubt, and this difference must find its expression in the law. There is an evolution in this area at this time, if not a revolution. The law therefore cannot be fixed but must have room to evolve creatively, allowing men and women to define their own roles within marriage, supporting rather than confining individual choices.
1 would like to point out especially how children are affected and that they should have some say about their future. Yes, even young children should have that right, if not through their own voices then through those of others who will take the stand for them.
The position of children is even more difficult than that of parents. Although protected by a system of obligations, they have never had independent legal claims. They have no standing to make their voices heard in a system that allows one parent to deprive them of the other because of an instance of adultery. I do not suggest that they should have such a right, but neither do I suggest the retention of the system we have. What we should have is a process that tries to get to the reality of why one parent would seriously consider doing this in the first place, a process in which children are hurt, in which their interests are always important and at times dominant, one in which children do not serve as bargaining pawns or as objects to be kept and used.
Many parents involved in a marriage breakdown cannot see beyond their own needs. The process for dissolution of marriage must compensate for this. It is also important for children to understand as best they can-and this is often a great deal better than we assume-what the situation is and what their parents are facing. A new approach to the problems of children when marriage breaks down is essential.
The main thrust of this speech, therefore, is on the change of perceptions of family relationships and a change of the means

for resolution of family problems. First, as was mentioned earlier by the hon. member for Toronto-Lakeshore, we need courts which are capable of assisting constructively in such resolutions.
Second, we need a legal framework which recognizes present day conditions in dealing with the responsibilities and expectations of members of families.
Third, we need a new legal process for dealing with a family in crisis which abandons concepts received from the past which have become artificial and destructive in the context of present family life in Canada. This process should also give us a better understanding of what divides families and what is needed to preserve their stability, something which should be, although it is not now, an effective function of the law.
Changes must be made, and that must be done in close co-operation with the provinces if it is not to lead to further fragmentation. Various provinces have already made advances in this area, and others are in the process of preparing for significant changes. The Government of Canada has also made some beginnings, but further steps are necessary if the present ferment of study, exploration and experimentation is to be fruitful. I have some specific suggestions which I would like to put on the record.
I suggest that the only basis for dissolution of marriage should be the failure of the personal relationship between husband and wife.
The doctrines of matrimonial offence, matrimonial fault, collusion or connivance should be inapplicable in all future marriage breakdown cases.
All adversarial pleadings should be removed from the law of dissolution of marriage. The dissolution process should be commenced by either or both spouses filing with the court a simple and non-accusatory notice of intent to seek dissolution.
Dissolution of marriage should be a ministerial act of the court, established in a formal but not adversarial hearing.
A husband and wife should not be required to separate or live apart as a condition of participating in the dissolution process. Nor should remaining together prejudice any right or otherwise adversely affect the legal position of either spouse. I raise this because of the financial hardship which is imposed on one or the other spouse if he or she has to move out of the house while the other spouse stays in the house. There is the upkeep of an extra home, and this need not necessarily be the case.
With regard to financial settlements I suggest that the settlement of property matters and financial provision on dissolution of marriage should be done in the context of economic readjustment and kept separate from matters relating to the breakdown of the personal relationship between the spouses.
Property acquired, for example, by either spouse during the marriage by gift, inheritance, bequest, trust or settlement should be exempt from sharing.
December 6, 1977

As far as financial provision is concerned, marriage per se should not create a right to receive or an obligation to make financial provision after dissolution. A formerly married person should be responsible for himself or herself.
Elowever, the right to financial provision should be created by reasonable needs flowing from the division of function in the marriage, the express or tacit understanding of the spouses that one will make financial provision for the other, custodial arrangements made with respect to the children of the marriage at the time of dissolution, the physical or mental disability of either spouse which affects his or her ability to provide for himself or herself or, finally, the inability of a spouse to obtain gainful employment.
I believe that a maintained spouse should have an obligation to assume responsibility for himself or herself within a reasonable period of time following dissolution of marriage unless, considering the age of the spouses, the duration of the marriage, the nature of the needs of the maintained spouse and the origins of those needs, it would be unreasonable to expect the maintained spouse to do so, and it would not be unreasonable to require the other spouse to continue to bear this responsibility.
I have one final point to make. The amount of financial provision should be determined by the reasonable needs of the spouse with a right to financial provision and the reasonable needs of the spouse obliged to make financial provision.
Am I running a little bit over?


An hon. Member:: No.


An hon. Member:: Yes, you are.


Gilbert Parent: The amount of financial provision should also be determined by the property of each spouse after dissolution of the marriage, the ability to pay of the spouse who is obliged to make financial provision, the ability of the maintained spouse to assume partial responsibility for himself or herself, and the obligations of each spouse toward the children of the marriage.
These are the specific points I hope the hon. member for Toronto-Lakeshore will bring to the committee along with his very worth-while suggestion, which I wholeheartedly support.


William Kenneth Robinson: You have talked the bill out.


Mr. Benno Friesen (Surrey-White Rock):: Mr. Speaker, 1 do not want to speak for too long because 1 want to see the subject matter of this bill referred to the committee. I appreciate what the hon. member for Toronto-Lakeshore (Mr. Robinson) has done. I appreciate his honesty and his sincere concern for the worth of the family unit and the integrity of the family unit when he proposes this bill. I am not sure I agree with all the provisions in the bill, but 1 do know from my association with the hon. member, when I had my own private members' bill before the Elouse last year, that he has a definite and genuine concern for the maintenance of the family unit. I
Divorce Act
certainly support him in that, but I want to point out a couple of things which I think are important.
We live in a very pluralistic society, and it is not right-and not even possible, let alone right-that we impose on all of society what some of our individual philosophies might be, as much as we might believe in them, so I tend to agree a little bit with the hon. member for Timiskaming (Mr. Peters) that there has been a history in our society of trying to impose certain philosophies and beliefs on all of society. That we can no longer do. Much to my regret, we cannot have a more pervasive morality about the institution of marriage.
However, 1 think this bill circumvents the problem, and we need to deal with the problem. I do not think this bill, or for that matter any divorce act, deals with the problem, that is, marriage breakdown. We must consider that.
I would like to point out that in our society there is an ominous trend-which I think is destructive-to relieve individuals of responsibility for their decisions more and more all the time. We tend to make it easier for individuals to escape responsibility for the decisions they make, and to make it easier for them to get out of marriage. 1 think that is part of the trend. While I support the concern of the hon. member, 1 am not too sure that this bill is the solution. Rather than making it easier to get a divorce, I think we ought to make it more difficult to get married. I do not know how we should go about doing that, but 1 think hon. members know me well enough to know that I am firmly committed to the institution of marriage. 1 do not know if all hon. members know it, but at the outset of this session 1 celebrated my twenty-fifth wedding anniversary.


Some hon. Members:: Hear, hear!


Benno Friesen: So did my wife, I hasten to add. As a matter of fact we celebrated it on the day the Queen opened parliament, and thought it very kind of Her Majesty to celebrate the occasion with us.
I am totally committed to this institution and I think members know I am also totally committed to the institution of the church. Because I am committed to that, however, I take the liberty of criticizing the church for its negligence. Many starry eyed young people go to a minister because they like the architecture of the church rather than the institution of marriage being sanctified by the church. I recall that my admiration for a local Anglican minister grew when he turned aside the opportunity to marry young people who came because they liked his church. He thought there ought to be a better reason for performing the marriage than simply the beautiful esthetic surroundings.
The irony is that the marriage vow says it ought not to be entered into lightly, but that part of the vow is often violated by the minister performing the ceremony.
I think that the churches and provincial governments ought to require ministers of the gospel who marry young people to

December 6, 1977
Divorce Act
call the couples for a series of pre-marital lessons or instruction on the nature of marriage. Many marriage counsellors agree that marriage breakdown is not the result of a "falling out of love" but rather that couples encounter very heavy financial obligations. Some young couples want to acquire in one year what it took their parents 30 years to assemble, and within a few months of marriage are more worried about their financial obligations than about the marriage itself. It is not just because the emotional strain is so intense that they start bickering but that the financial strain is great.
My point is that love will never hold an ailing marriage together-love is an emotion and goes up and down. What will keep them together is a commitment to each other. I do not think ministers of the gospel are doing a good job in counselling young people who come to them wanting to be married.
I do not want to talk this bill out, Mr. Speaker, as I should like to see the matter referred to a committee. The health of our society rests upon an understanding of our obligations to each other in marriage, in the home, and to our children. Members deserve an opportunity to explore this subject in committee. I should therefore like to see the bill go to committee where it could be studied thoroughly and sent back to the House with recommendations.


Leonard C. Jones: Mr. Speaker, I cannot support this bill. I have long experience with divorce and marital problems and it seems to me that a bill of this type is likely to propound the problems by making divorce easier. I know the mover of the motion would like the bill to go to committee, and if I sit down in time that may happen.
From my experience I know many cases are not reported where reconciliation has been possible through the efforts of lawyers. Sections 7 and 8 of the Divorce Act put a heavy responsibility on barristers and solicitors to try to resolve differences between persons who have been living separate and apart or where there is marriage breakdown. Many times people have come to my office-sometimes as many as three families are involved-and later I see them walk up the aisle on Sunday arm in arm. Surely 18 months is not long enough to live separate and apart to determine that there has been marriage breakdown.
The hon. member for Surrey-White Rock (Mr. Friesen) suggests that perhaps the problem is not marriage breakdown by the fact of a couple living separate and apart but is rather the cause for them living separate and apart. That is the problem we should try to resolve.
I believe this bill is tantamount to divorce on demand and will make marriage a mockery. It would make it too easy to obtain a decree nisi or a decree absolute. The last time the Divorce Act was amended divorce was made easier. I think we should be getting back to the position of trying to strengthen the family unit. There is responsibility on the church and on everyone in society to support the family unit.
It should be pointed out that this amendment has no public support, Mr. Speaker. There has been no hue and cry for this type of legislation. We have so many other problems such as
{Mr. Friesen.]
unemployment and inflation that we should be trying to resolve.
A bill of this kind would not strengthen the family unit but rather would do the opposite. If people live separate and apart for some 500 days it will not necessarily cause the breakdown of marriage. During the war men lived apart from their wives for as much as five years without marriage breakdown.
Statistics have been quoted but none were given for cases where there has been reconciliation and the resolution of problems. Couples sometimes go to marriage counsellors, clergymen, and even to lawyers for help. Even though I am a lawyer I suggest this type of legislation would give lawyers a field day if divorce were so easy after one and a half years of separation.


William Arnold Peters: On a point of order, Mr. Speaker, because of the interest shown by members and the fact that all hon. members have not been able to participate, I should like to move that you ask for consent that this bill retain its position on the order paper.


The Acting Speaker (Mr. Turner):: Is it agreed?


Leonard C. Jones: Mr. Speaker, I still have the floor.


The Acting Speaker (Mr. Turner):: Order, please. The hour appointed for the consideration of private bills has expired.
Would the House give the Chair permission to go into Committee of the Whole before we adjourn?


Some hon. Members:: Agreed.



GOVERNMENT ORDERS


[Stage Direction]
The House resumed consideration in committee of Bill C-11, to amend the statute law relating to income tax and to provide other authority for the raising of funds-Mr. Chretien-Mr. Turner in the chair.
Charles Robert Turner: It being six o'clock 1 do now leave the chair until 8 p.m. this day.
At six o'clock the House took recess.


[Stage Direction]
AFTER RECESS

The committee resumed at 8 p.m.
December 6, 1977
Gérald Laniel: When the committee rose at six o'clock, clause 6 as amended was under consideration.


Joseph Jacques Jean Chrétien: Mr. Chairman, the problem under consideration was this: By virtue of special provisions in the act, multinational insurance companies employed certain benefits which their Canadian counterparts did not, more specifically in the way their revenue income was computed, some investments located in foreign lands were deducted from income made in Canada; thus they were, or could be placed in a more favourable situation than Canadian companies without operations abroad. That is why clause 6(11) was suggested in committee: it placed Canadian insurers on the same footing as multinational insurance companies. We reached that decision as a result of the many representations made to us by Canadian life insurers. If hon. members want me to give them a highly technical explanation, I have here a four-page text I can read to them, unless they feel that the explanation I have just given them in laymen's terms is adequate.


Mr. Clermont:: Mr. Chairman, I would like to get some information on that clause. The minister changed the recommendations contained in the budget of March 31, 1977, and in his intervention on October 20, 1977, he mentioned that with respect to capital gains, the difference between the premiums paid and the surrender value would no longer be considered as a gain of income but the matter of the interest on loans was not taken out. With the recommended amendments is the person borrowing on his insurance paying interest to create income? Can that person consider the interest paid on his loan from the insurance company as an expense and reduce his income by that amount when he prepared his tax return for, let us say, the year 1977?


Alexandre Cyr: Mr. Chairman, the question asked by the hon. member is valid but I intend to deal with it later under clause 14. It is indeed my intention to consider the interest paid by an insured to his insurer when he receives part of his capital- what used to be called a loan on the insurance policy-as deductible. That would not really be called interest but a premium for the privilege of having part of his capital available immediately. Those amendments will be dealt with later in the debate under clause 14. We are now considering clause 6(11) dealing with an entirely different problem-the problem of insurance.


Gaston Clermont: Mr. Chairman, I put the question to the minister because I wonder at times if we are really going to get to clause 14.


Joseph Jacques Jean Chrétien: I hope, Mr. Chairman, that we will be able to get to clause 14, and I am quite pleased that the hon. member anticipated the debate. That is why if the explanation I gave earlier on clause 6(11) is satisfactory to the hon. member for York-Simcoe (Mr. Stevens) then we will be able to pass that clause and move to clause 14 as quickly as possible.
Income Tax


Sinclair McKnight Stevens: The minister has given us a synopsis of what we understand to be the effect of paragraph 11 of subclause 6. He did refer to a more technical, four-page description of what is happening under this paragraph. I think that very often the explanation of the reason for putting in amendments is forgotten. I wonder, therefore, whether we might take those four pages of technical comment as read, with a view to having the benefit of the Hansard record tomorrow. We would then have the advantage of a more technical description of what is proposed, and then be able to move on.


Joseph Jacques Jean Chrétien: I have no objection to this more complete explanation being on the record, but I should also like to dispose of the clause as soon as possible. If there is no objection, I will read the description to which the hon. member has referred. I can understand that it may be painful for some people to listen to me while I am reading a technical text, but it might be good practice. That might be the better way, because I want to make progress.
This important addition to the act is one of the measures to eliminate the unwarranted tax advantages gained by some multinational insurers who benefited from certain defects in the act before 1976. It applies to those companies which were on the branch election basis for the purpose of determining their investment revenue. By exploiting these deficiences some insurers obtained a major advantage over other insurers such as purely domestic companies, multinationals which were on the branch election basis but did not take advantage of the deficiencies and other multinationals which used the alternative method-the "proportional basis"-of determining investment revenue.
The branch election basis permitted the insurer to designate as having been held in the Canadian corporation's insurance business any of its property, subject only to the requirement that the value thereof had an aggregate value of not less than its Canadian insurance liabilities. For tax purposes, only the income from such designated property was included in the insurer's income. The deficiencies in the branch election basis, when exploited, presented the opportunity for significant tax avoidance. The deficiencies permitted the artificial reduction of investment revenues wherever the company
-selected cash and other assets-such as accounts receivable-that did not produce any revenue or that yielded a low return, or
-selected assets that were held for only a short period of time during the year and therefore produced very little investment revenue.
By using these deficiencies those insurers on the branch election basis could reduce gross income and thereby show a loss for tax purposes or, in the more typical situation, claim less than the maximum amount deductible as a reserve or as capital cost allowance. In either event the result was that the insurer in subsequent years had a backlog of unclaimed deduc-
1616

December 6, 1977
Income Tax
tions and/or loss carryovers which could be used to reduce income for many years into the future.
These deficiencies were effectively eliminated in 1976. This bill attempts to deal with the carryover problem from years before 1976. The amendments require those insurers who used the branch election basis in 1975 to recalculate their gross investment revenue for that year using the proportional basis. If the recomputation produces additional revenue, the excess will be applied to reduce two specific unused reserves that would otherwise have been deductible in 1977 and subsequent years. Any balance is referred to in the bill as "the 1975 branch accounting election deficiency."
The amount of the 1975 branch accounting election deficiency will be applied in the following order:
(a)	to reduce unclaimed investment reserve
(b)	to reduce unclaimed capital cost allowances
(c)	to reduce loss carry forwards from the year 1972 to 1976
(d)	to reduce the unclaimed reserve for group term policies, and
(e)	to reduce unclaimed policy reserves for other life insurance policies and annuities.
Any remaining balance of the deficiency will be deducted on a pro-rata basis from the undepreciated capital cost of any depreciable property of the insurer.
The amendment deems the insurer to have deducted, prior to its 1977 taxation year, additional capital cost allowance on the basis referred to above. The effect is to reduce capital cost allowances that would otherwise be deductible in computing the insurer's income for 1977 and subsequent taxation years.
The addition of subsection 13(23) is one of a series of amendments related to the introduction in 1978 of a new, more stringent method of determining the policy reserves that may be deducted by life insurance companies. A life insurer is allowed to deduct certain policy reserves in computing income. The reserve claimed in one year is added to income in the following year, and an appropriate reserve is then deducted for that year. Because the policy reserves under the new method to apply in 1978 will be less than those under the existing act, the foregoing rule would force the insurer to include the entire reserve difference in income in 1978. In order to ease the impact of the transition, a special provision has been introduced-see proposed subsection 138(4.2)-to permit a life insurer to include in income in 1978, not the amount actually claimed in 1977, but a lesser amount equal to the amount the 1977 reserves would have been if they had been computed under the new method. Thus the differences between the two reserving methods will not be taxed and will in effect provide a source of base capital that will facilitate the transition.
As a corollary to this relieving measure it is necessary to scale down certain amounts which the insurer would otherwise be permitted to deduct in computing income in subsequent years. One of these amounts is capital cost allowance that the insurer was entitled to claim in the taxation years 1969 to 1977 inclusive-the years in which the old method of computing

policy reserves was operative. To the extent that capital cost allowance was underclaimed in that period because of the generosity of those reserves, the amount that was unclaimed should not be available after 1977. This is accomplished in part by the amendment to subsection 13(23) of the act.
The proposed subsection 13(23) deems any unclaimed capital cost allowance to have been claimed prior to 1978.
Regulations under section 138(3)(a)(i) will ensure that capital cost allowance and other deductions in excess of the transitional difference will not be eliminated. The net result of this approach is that life insurers will have a level of income and deductions calculated on the assumption that the reserving method for 1978 had been in existence in the 1969-1977 period.


Leonard C. Jones: Mr. Chairman, having heard the great epistle from the minister, his summary or synopsis, and then the technical part, will the minister now be good enough to explain what his summary means and what he just read means in ordinary laymen's terms? A tax law should be in ordinary laymen's terms.


Alexandre Cyr: If the hon. member had been in the House, he would know I did that before reading the technical explanation.


Leonard C. Jones: I was here and heard both.


Joseph Jacques Jean Chrétien: The first time it was in French. Perhaps I have to repeat it in English.


Stanley Howard Knowles: No.


Joseph Jacques Jean Chrétien: Stanley says no. I just explained the difficulty. There are some corporations and insurance companies which operate in Canada and elsewhere. Some were using a loophole in order to avoid taxes in Canada. It was unfair to the multinationals which are not using that loophole and the Canadians which could not use it. These technical amendments will put insurance companies on an equal basis for that purpose.


Sinclair McKnight Stevens: Mr. Chairman, I thank the minister for putting his summary and technical explanation on the record concerning this clause. To the best of his knowledge is the amendment which he has described satisfactory to the Canadian life insurance companies? Has he any representation from them indicating that they feel this will plug the loophole about which they have been complaining?


Joseph Jacques Jean Chrétien: Mr. Chairman, we have received many representations from all the insurance companies, both the Canadian companies and the multinationals. They could not develop a position on which they could all agree. This will meet the requirements of most of them. We are not sure that everyone will be happy with the technique we have adopted,
December 6, 1977

but it will go a long way to ensure the multinationals do not have an unfair advantage over Canadian insurance companies.


Sinclair McKnight Stevens: I would like the minister to confirm or otherwise that some companies still feel there is a substantial loophole that foreign life insurance companies will be able to take advantage of, notwithstanding the amendment to which he is now referring.


Joseph Jacques Jean Chrétien: I do not think that will be the case. We are quite satisfied that this will plug the loophole and everyone will be on the same footing. We will, of course, be monitoring the activities of the insurance companies in that field. If that is not sufficient, obviously we will have to implement further amendments. My advisers, the experts in the department, are quite sure this will cure the problem.


Sinclair McKnight Stevens: The minister was going to give me an explanation with regard to subclause (6) (2). I believe he is ready to give that now. I trust it is not as long as his last explanation.


Joseph Jacques Jean Chrétien: It is shorter, Mr. Chairman. With regard to subclause 6(1), the distinction between taxation year and fiscal period is crucial throughout the act. The taxation year refers to the taxpayer which, for an individual, is the calendar year. Fiscal period refers to the accounting period of business. That difference has long been in the Income Tax Act. The change in subclause 6(1) simply changes a reference.
In order to meet the requirement of the hon. member for Moncton, this is a very simple proposition. The fiscal year of any individual such as a member of parliament is the calendar year when reporting his profits or losses. When the hon. member for York-Simcoe was in the banking system, when he was reporting his profits or losses that was for what we call the taxation year.


Sinclair McKnight Stevens: The Fiscal period.


Joseph Jacques Jean Chrétien: Yes, the fiscal period.


William Gordon Ritchie: Mr. Chairman, I wish to speak on the problems regarding insurance companies. I would like to voice some of the criticisms that were made when the budget was brought down, dealing with the taxation of insurance companies. It was suggested by Mr. Patterson, president of Actuarial Consultants of Canada Limited, that the industry is mainly fighting brush fires in its attacks against the policy gains tax at death and on proposals to tax the policy gains part of policy loans and to disallow interest on policy loans as a deductible expense.


Joseph Jacques Jean Chrétien: Mr. Chairman, the problem being raised at this time by the hon. member for Dauphin is with regard to clause 14. If we can go to that clause, I have some amendments that cope with the problem raised earlier in the evening by the hon. member for Gatineau. He referred to the same points now being raised by the hon. member for Dauphin. If we can move to clause 14, I will deal with the problem.
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Mr. Whittaker:: Mr. Chairman, I have some questions with regard to subclause (5), on insulation conservation, which is really energy conservation. The minister and his department are very conscious of energy conservation. They are doing all they can to remove the tax on energy conservation equipment and materials.
For over two years I prodded the former minister of finance to take the tax off wood stoves, which he finally did. It has now become a matter of an interpretation of what is a wood stove under the act. I just got a ruling for a Canadian company in my constituency which is fully owned by Canadians and which manufactures wood stoves. The Minister of National Revenue said that under the act these are not wood stoves, but fireplace heaters.
A company in the United States markets a similar product in Canada. The interpretation of what they are marketing is that it is a wood stove. That company manufactures a chalet model heater that can be used in any home, cottage or building. It is adaptable to a chimney in almost any type of dwelling. This unit can be used also as a cooking stove. It will fit into a fireplace and can be used in fireplaces for efficiency. Instead of there being a 93 per cent heat loss as with an open fireplace, this unit reduces the heat loss to 65 per cent. The Minister of National Revenue has made a ruling on this unit indicating that it is really a fireplace. Instead of applying the 12 per cent tax, he has indicated that it should go down to 5 per cent. I maintain this is gross discrimination against a Canadian manufacturer. It is a small business which is doing a service in energy conservation for our country by efficiently using wood.
Last week in Time magazine in the "Living" section there was an article entitled "Back to the Wood Flame". It indicated that Americans are experiencing new romance in the old flame. Also it referred to similar types of units which are being used extensively in the United States and which can be used in Canada. These heaters are highly efficient. They conserve energy such as oil, gas, and electricity. There is no tax on oil, gas or electric stoves. I brought up this topic before because there was a 12 per cent tax on wood stoves and nothing on oil, gas or electric stoves. We want to conserve this type of energy.
There has been a ruling by the Department of Finance to the effect that the tax should be taken off wood stoves, yet we have the Department of National Revenue making a ruling which indicates in fact that these heaters are not wood stoves but are fireplaces. Who has the final ruling on this type of situation? Does the minister not have an obligation to make sure that what is indicated in the act is carried out?


Joseph Jacques Jean Chrétien: Mr. Chairman, I should like to reply to the hon. member's question. I have listened to history of the problem. The Department of National Revenue has the authority to rule under the Excise Tax Act. Of course its ruling does not remedy the situation. It is necessary to have an amendment to the act. If that is not satisfactory to the hon. member, the only thing I can do, when I come back to the
80027-335/2

December 6, 1977
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House with some other budget, is change it. In the present budget we are not dealing with a change to the Excise Tax Act. There is not even a possibility of an amendment at this stage.


George H. Whittaker: Mr. Chairman, there is some urgency here. During this time of energy conservation these types of units have to be sold and should be sold. As far as I am concerned, the ruling of the Department of National Revenue is not correct. I should like to refer to the section of the act which deals with energy conservation equipment. That section deals with wood burning stoves, furnaces and space heaters, not including fireplaces, stoves, furnaces or space heaters which burn oil or gas. That section is something like an asparagus root, pretty badly tangled.
I listened to the remarks of the lawyers in this Chamber. As a layman, to me this section seems to indicate that the tax will be removed from woodburning stoves and heaters, unless it is necessary to use gas or oil along with the wood.
In this instance a Canadian company is manufacturing a heating unit which conserves energy. A ruling has been made with regard to an American company which indicates that it is all right for them, but it is not all right for a Canadian company in my riding. This really upsets me. Because this unit can be plugged into a fireplace, the ruling is that it is a fireplace. It has to be modified in order to be plugged into a fireplace.
For the last two months I have worked with the Minister of National Revenue in an attempt to get a ruling. I received a ruling yesterday indicating a reduction to 5 per cent. I believe heatilators should be dealt with in exactly the same manner as wood stoves or wood burning units. We have argued for over two years in an attempt to place wood stoves and wood burning units in exactly the same position as oil, gas and electricity. What kind of ruling is this?
1 believe the Minister of Finance is fair and reasonable, but his department is not doing anything to remove the taxes from these types of units, machines, and materials which conserve energy. We have not got that much time. Time is running out for this company. As far as I am concerned, we must look after our Canadian companies. I realize this firm is in my riding, and I have an axe to grind because of that. Nevertheless, 1 believe the argument is valid. We do not have the time to look at it, and then come back with a different interpretation and a different ruling. I am asking for that now before it is too late.


Gérald Laniel: I do not want the hon. member to think I am preventing him from speaking, but he is seeking an amendment which cannot be presented under the clause being dealt with in committee at this point.


John Raymond Ellis: Mr. Chairman, I may find myself in a very difficult position and I support my friend, the hon. member for Okanagan Boundary, simply because I have encountered the same problem that heatilators conserve a good deal of energy. The majority are made in Hastings county. They should be

down to zero per cent as well. The point I wanted to make to the minister is that in the United States the Senate is considering a tax credit for those people who use wood exclusively as a form of fuel. This is a step further than we have considered here. I want to make a representation to the minister that he look at the possibility of a tax credit for people who use the renewable resource, namely, wood, for heating, rather than coal, oil or gas.


Sinclair McKnight Stevens: Mr. Chairman, before we vote on clause 6 may I point out that I indicated before dinner that I would like to set the record straight concerning the various comments the minister keeps making about the time that this bill has been before the House. He has repeatedly stated that it has been before the House for 32 days. As you know, Mr. Chairman, the first reading of this bill was on November 2, so clearly in no way could it have been before the House for 32 days. We have not even spent a month on it yet.
But the more important point is that the bill was not even introduced for second reading until November 7, and since that time, including the time we spent on second reading, the time we spent debating the first closure motion and the time we spent in committee of the whole, only 14 days have been spent on the bill. Of those 14 days, most were short days in the sense they were either Wednesdays or days when we had extensive questions of privilege or notices of motions with which Mr. Speaker had to deal. In short, it is totally misleading to convey the impression that the bill has been unduly delayed. It is particularly so when we bear in mind that this bill is really the son, if you like, of Bill C-56, which was brought out for first reading on June 15 and came out of the March 31 budget. That bill was not debated for one day in the House. In short, I hope the minister will refrain in future from misleading the House with any suggestion that there has been any undue delay in considering this bill, because it is not true.


Joseph Jacques Jean Chrétien: I rise on a point of order, Mr. Chairman. I never said that the bill was before the House for 32 days. The hon. member mentioned 14 days. I think it was before the House more than 14 days, because the hon. member has not referred to the fact that there was an agreement in the House to permit longer sitting hours to make up, for example, for the day which was lost to permit the Conservative opposition party to have its national convention. On top of those longer days we spent six days debating the spring budget of the former minister of finance. I recognize that was not on the bill, but we spent six days debating those measures. Also, the opposition had warned the government that when the House resumed in the fall economic problems would be debated. In fact, in the eight day debate on the Speech from the Throne mostly economic matters were under discussion. When you add up all those days you find they come to more than 30 days.


Gérald Laniel: In no way can the remarks of both hon. members who have spoken be related to clause 6.


Benno Friesen: Mr. Chairman, I rise on the same point of order. I would like to ask the Minister of Finance if there is
December 6, 1977

any significance in the fact that this bill was introduced for second reading on the sixtieth anniversary of the Russian revolution.


Some hon. Members:: Oh, oh!


Sinclair McKnight Stevens: Dealing specifically with your reference to clause 6, and before we vote on the clause, may I point out to the minister that the time we have spent on clause 6 has been very fruitful because, if we check last Thursday's Hansard, we will find that in dealing with the insulation grant provision the minister stated that he could not understand my point about the legislative provision not being in accordance with the income tax motion. He went on to state that there is no fundamental difference between the two. He reiterated that several times, and now I am very pleased to see that, as of yesterday, with the bringing in of the new amendments with which we dealt today, the minister has come around 180 degrees and he now says that he agrees with me. He said he has checked this and he feels I have a good point. He said that rather than having a complicated procedural problem referred to Mr. Speaker, he agrees with me that the Ways and Means motion is more narrow than the bill and that this should not be so. In short, the time has been well spent if we have corrected that error alone in Bill C-ll. Let me assure you, Mr. Chairman that I could go on and point out at least ten other errors which we have had a hand in correcting so far.


Joseph Jacques Jean Chrétien: I am surprised that the hon. member is belabouring this point. He put that before me and I said he had a point. It is obvious to me that he is so entrenched in the opposition that, when he has a little victory, it takes him 24 hours to realize it.


Gérald Laniel: Is clause 6 agreed to?


Some hon. Members:: Agreed.
Clause 6 agreed to.
On clause 7.


Sinclair McKnight Stevens: Again clause 7 is one of those rather complicated clauses and I wonder if the minister could give us a quick summary of what, in his understanding, clause 7 is attempting to do.


Joseph Jacques Jean Chrétien: Mr. Chairman, it reminds me of the old song "Roll over, roll over again". This clause is another roll over. I think now the hon. member will understand.


Some hon. Members:: Oh, oh!


Sinclair McKnight Stevens: Mr. Chairman, I am not as familiar with the roll over song as is the minister apparently. Perhaps for the record he should give us a more serious explanation of what clause 7 is about, bearing in mind it has some ramifications for certain corporations in the country.


Joseph Jacques Jean Chrétien: Everyone knows that I am an extremely serious person, Mr. Chairman, but sometimes it is important
Income Tax
to relax for a while and to bring in a good atmosphere to the House.
The clause is, first, to permit proceeds on the sale of eligible capital property to be offset by any costs relating to their disposition. Second, the purpose of the clause is to permit rollover when eligible capital property is disposed of and the proceeds are reinvested in the business.


Gérald Laniel: Shall clause 7 carry?


Some hon. Members:: Agreed.
Clause 7 agreed to.
On clause 8.


William Arnold Peters: Mr. Chairman, again this clause appears to provide more for one segment of the economy than it does for another. The old Section 15, according to my advisers at Osgoode Hall, was designed to prevent generally the distribution of corporate profits in a form other than taxable dividends. Specifically, Section 15(2) is designed to prevent the withdrawal of corporate profits in the form of loans to shareholders. If a loan, other than one made for the specific purposes enumerated below, is made by a corporation to a shareholder, it is considered income in the hands of an individual shareholder and a deemed dividend if the shareholder is a corporation.


Some hon. Members:: Explain.


William Arnold Peters: The obvious loophole in the present section is that loans not made directly to a shareholder but to a person not dealing at arm's length with the shareholder are not caught by that section. Under the proposed amendments a loan from a particular corporation, a related corporation, or a partnership including the particular corporation, to a shareholder of that particular corporation, a person with whom the shareholder does not deal at arm's length, or a related corporation, will now be loans for the purpose of the section. Those are the comments of students who have looked at this and, as I said the other day, Osgoode students are going to be the government officials of tomorrow. They will replace the ones we have today. It is very good that their professors tell them to use their heads.
The minister is very practical and down to earth. He must know that that gobbledygook is for the birds. These young students have looked at it and have made some suggestions. That gobbledygook is very complicated, but it does not really have to be. It refers to "arm's length" and all that stuff. They say that the changes are a substantial step toward closing the present abuses. Loans from a closely held corporation to the provincial shareholder's wife will now be taxed under the section. Related corporations will no longer be able to lend to a shareholder of a different but related corporation.
The act will still permit corporations to make substantial interest-free loans to officers and employees for the purchase of homes and cars. This is a common method of deriving a

December 6, 1977
Income Tax
benefit from the use of corporate surplus. Interest on similar loans is brought into the shareholder's income in the United States. It is doubtful that the tax-free status of such loans can be justified. In this regard an article appeared in the Globe and Mail on Thursday, November 24, under the headline "Company Loans to Executives Still Rated Good Perks Under Proposed Amendments", and it reads as follows:
While interest-free or low interest loans will no longer be the perfect perk for executives if proposed changes to the Income Tax Act come into effect in 1979, they will still be a good perk, according to Lyman Maclnnis of Touche Ross and Co. of Toronto.
Under present law, no interest or low interest on a loan to an employee, for buying a house, for example, is not a taxable benefit.
Under the proposed law an employee would have to pay tax on the difference in interest between a prescribed rate, now set 8 per cent, and the rate on housing loans over $50,000.
Other interest-free and low-interest loans, with certain exceptions, would record the difference between the prescribed rate and the rate at which the loan was made as a taxable benefit.
There is a deductible of $500, in total, from the benefit.
He illustrated the proposed law by citing the case of two taxpayers, X and Y, both of whom have to borrow $50,000.
If X borrows at the bank for 11 per cent, his annual interest cost on the loan is $5,500 and, if he is in a 50 per cent income tax bracket and cannot deduct the cost of the loan for tax purposes, the effective cost of his interest is $11,000.
If Y receives a loan of $50,000 from his employer at no interest, before 1979, he would suffer no tax consequences and be between $5,500 and $11,000 better off than X.
The argument against making Y's benefit taxable because it is not from employment is ridiculous, he said.
'Try to negotiate an interest-free loan from anyone other than an employer and find out just how ridiculous that argument really is.'
There is further proof that Y's benefit came from employment, he said. If his employer gave Y $5,500 to pay the interest on the loan, Y would be fully taxable on the money. After paying the tax on the money he would not have enough to pay the interest unless the loan were fully deductible for tax purposes.
'All of this suggests that Y shouldn't really be too upset if Revenue Canada includes $3,500 in income as a result of the interest-free loan. At the 50 per cent tax bracket this cost is still only $1,750, compared to X's $5,500.'
I am not interested in arguing the difference between X and Y in this example, but even the newspapers indicate that it is unfair. Because of this stupid tax dodge-and certainly the AIB has pointed this out-we allow these extra perks where a person is not paid anything but is given a benefit instead. A man can get a benefit of $5,500. That is more than some of the people in my area get to live on, yet we give that kind of benefit. All the taxpayers pay for it.
The poor little guy who has to carry a lunch pail, who has to buy clothes for a particular job or who has to have transportation to get to his job, gets a maximum exemption of $250, but we give the rich people, the fat cats, civil servants, and those making $50,000, benefits of $5,500. Why do we do that? It is because they are the ones who draw up the act. They do not draw up the act for my workers or the people in the minister's riding who carry lunch pails. They do it for themselves, the civil servants of this country. Here is a case where the minister could save money if he so wanted. He should cut out those perks. Is the minister arguing that all this is wrong?


Joseph Jacques Jean Chrétien: Yes.


William Arnold Peters: Is the minister arguing that the amendment he is putting in is to cut down some of these advantages?


Joseph Jacques Jean Chrétien: Sure.


William Arnold Peters: Does the minister agree that there are still quite a number of perks in that section? If he does not, these students are wrong and the financial expert from the Globe and Mail is wrong. If the minister is right and all these perks have been cut out, he has a batch of civil servants different from the batch he had a year ago, because that batch put them all in, and I do not think the present batch has taken them all out.


Joseph Jacques Jean Chrétien: Mr. Chairman, the purpose of this move is to close a loophole. Prior to this there was no limit on the loans which could be given to someone buying a house. He could borrow interest-free from his company. We are plugging that loophole completely. We had a long debate last week, and the only purpose for which money can be borrowed is for buying a house when moving, and the maximum is $50,000. Many hon. members opposite said that was really too harsh. I remember many interventions by the hon. member for Churchill, who said that very often people in his area move, and they need that kind of fringe benefit. The hon. member for Churchill was not talking about management. He was talking about blue collar workers who have to move into mining towns.
We are preventing many abuses. Clause 8 will not permit something to be done indirectly which was not permitted directly. Clause 8 will not permit making a loan to a wife. We are trying to make sure that we prevent what could have become a loophole. We are moving in the same direction the hon. member is arguing about, and we are diminishing very substantially the abuse which can take place when money is borrowed interest-free. I do not see why the hon. member argues against that. If he refers to the loans that are permissible when they borrow shares from their company, any loans that are made are deductible from income. My officials inform me there is no abuse in that case.


William Arnold Peters: That is not really true, Mr. Chairman, and the minister's officials are not informing him correctly, unless I misread this. It appears to me they have closed the loophole about the relationship of the wife, or have made a substantial step toward that, but where a shareholder or employee borrows money at less than the going interest rate, he is to be taxed on the difference between the prime interest rate and the rate he is being charged. He may be paying no interest or the full prime interest rate, but he will pay tax on the difference between his rate and the prime rate.
Two persons borrowing under identical circumstances may find that on $50,000 one gets an advantage of $3,500 because of his taxable income, while the other one has an advantage of $1,750. To be in the perfect position, taking the same example, a taxpayer would get $5,500. The students point out that this is taxable in the United States and claim there is no justification for such loans to be tax-free in this country.
December 6, 1977

In order, to be fair, I suggest the tax structure should be related to the total family income. The deduction should not be a flat $250 but should be related to need. In that case the minister's statement would be correct, and indeed it may be correct in certain circumstances. It would mean that if an individual got an interest-free loan or a loan at a reduced rate of interest as part of his wages, he would be in a reasonable position vis-a-vis the person earning, for example, $50,000. If that kind of tax exemption is given to some people it seems to me the same advantage should be given the average person.


Joseph Jacques Jean Chrétien: Mr. Chairman, I think I am faced with a disagreement with the hon. member that I cannot solve overnight. He takes a different view of the situation. At this time we are trying to cope with a situation that was abused whereby a company was lending money to, say, 20 employees-and not only managers. Very often in a mining town the blue collar workers had this advantage as well, as mentioned last week by the hon. member for Churchill. That is why we decided to limit it to $50,000 for a house, and $6,000 for extras that go into the house, and the provision when it is a loan for buying shares relating to the company.
The hon. member can claim that we should abolish it completely, but that would create problems for those people who use it in an honest way to cope with the problem of moving employees. I think the method is fair.
The hon. member referred to the situation in the United States. As I understand it with interest-free loans, the benefit of the interest is not considered as revenue in that country.


Gérald Laniel: Shall clause 8 carry?


Some hon. Members:: Agreed.
Clause 8 agreed to.
Clause 9 agreed to.
On clause 10.


Sinclair McKnight Stevens: Mr. Chairman, I wonder if the minister could give an explanation of this clause. Specifically what prescribed rate do they have in mind to substitute for the 5 per cent now in the act?


Joseph Jacques Jean Chrétien: Mr. Chairman, last week we had a very interesting discussion when we decided the end of summer was before the coming of fall. It is the same rate of interest. At this time it will be 8 per cent.


Gérald Laniel: Shall clause 10 carry?


Some hon. Members:: Agreed.
Clause 10 agreed to.
Clause 11 agreed to.
On clause 12.


Sinclair McKnight Stevens: Mr. Chairman, this is a new clause in the bill and I think the committee should have some explanation of what the minister has in mind. This deals with advertising in
Income Tax
non-Canadian periodicals, and this is quite a controversial question.


Joseph Jacques Jean Chrétien: Mr. Chairman, this was a very controversial problem, but I think it is less so now. The amendment clarifies the meaning of the expression "substantially the same" by defining it to mean more that 20 per cent the same. Thus, an issue of a periodical more than 20 per cent of the content of which is the same as a foreign periodical, cannot qualify as Canadian. The amendment simply clarifies the expression of Revenue Canada. In fact it is just clarifying the decision of the Department of National Revenue.


Sinclair McKnight Stevens: Could the minister give examples of magazines excluded as a result of this terminology, that more than 20 per cent of the content is the same? Where do Reader's Digest and Time come in?


Joseph Jacques Jean Chrétien: Mr. Chairman, Time Canada, which has a continuing arrangement with the United States parent, could not meet the 20 per cent nor the Canadian ownership requirement and has ceased publication in Canada. Reader's Digest does not have a continuing arrangement with a foreign periodical and has met the 20 per cent test and complies with the ownership rules.


Sinclair McKnight Stevens: Dealing with Time, what does the department feel is the aftermath of Time being deemed a non-Canadian periodical? I understand they are selling more advertising than ever in Canada although they cut the rate in half because of the non-deductible feature.


Joseph Jacques Jean Chrétien: We do not know what they charge clients for advertising in Time. Companies that advertise in the magazine cannot deduct the cost on the same basis they would when advertising in the old Time magazine. The hon. member claims the price of advertising in Time has been cut in half in order to be competitive in the Canadian market. That could be the case, but we do not know.


Sinclair McKnight Stevens: Could the minister tell us if his department or any other intends to follow up the approach taken by the government on Time and Reader's Digest? Has there been any follow-up of the aftermath on either of these magazines?


Joseph Jacques Jean Chrétien: I think that the administration of this program is under the control of the Secretary of State and someone is monitoring those aspects there-I really don't know. I know since that time Maclean's magazine has decided to publish on a different basis. They are going to publish weekly, and some claim this is as a result of these amendments. The hon. member could ask that question of the Secretary of State, or if you want me to ask him to provide the information, I will be pleased to do so.


Sinclair McKnight Stevens: I will be pleased if the minister is pleased to do so.


Joseph Jacques Jean Chrétien: I am such a nice guy.

December 6, 1977
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Clause 12 agreed to.
On clause 13.


Sinclair McKnight Stevens: Mr. Chairman, this is dealing with the question of advertising involving television stations and broadcasting. Perhaps the minister could lead off by giving a fuller explanation of what they hope to achieve by this clause.


Joseph Jacques Jean Chrétien: I would like to give the explanation in my own words first. The amendments to clause 14-


Sinclair McKnight Stevens: No, clause 13.	.


Gérald Laniel: The hon. member for Sault Ste. Marie- unless the Minister of Finance is not finished.


Joseph Jacques Jean Chrétien: I will allow the hon. member for Sault Ste. Marie to go ahead.


Mr. Symes:: Mr. Chairman, I support clause 13. It relates to Bill C-58 which we had before the House earlier. It deals with the problem of advertising placed on American border television stations which was draining about $20 million a year from Canadian television stations. This amendment is to prevent such advertising from being deductible for Canadian companies for income tax purposes. I feel there is a loophole under the legislation as it is designed because it seems to me the clause in section 19(1) does not have the anti-avoidance affect which was presumably intended by the budget resolution, because the clause only refers to the date on which the contract was paid, and not the date on which it was executed. With the present clause, there is still the potential for long term contracts to have been executed before January 23, 1975, and paid before September 21, 1977, to escape tax liability. I wonder if the minister might explain if my interpretation is correct.


Joseph Jacques Jean Chrétien: The interpretation of the hon. member I feel is incorrect. The amendment is exactly to cope with the problem the hon. member is dealing with, and I can read this technical section or explanation here. Some taxpayers sought to take advantage of this traditional deduction by signing a series of successive one year contracts in the hope of avoiding this allowance for an extended period of years. We are just closing the loophole with this clause 13.


Reginald Cyril Symes: Mr. Chairman, for further clarity, specifically then, if a long term contract was executed before January 23, 1975, and paid for before September 21, 1977, that contract would therefore not escape tax liability, according to the minister. It is that specific time frame with which I am concerned.


Joseph Jacques Jean Chrétien: I do not follow the hon. member very clearly, but perhaps I can read these three lines. This amendment will ensure that the expenses will not be deductible if they are incurred after September 21, 1977, one full year after the section of the act was proclaimed in force. Therefore they cannot have a long term contract because the clause will cover them after the expiry of the first year.
[Mr. Chrttien.l


Benno Friesen: Mr. Chairman, as an example, a hotel chain that wishes to advertise in American journals, American magazines down the west coast and in Florida-is that considered a legitimate advertising expense, a deductible expense for the purpose of bringing business into Canada? We are interested in tourism, and I would like to know. Perhaps the minister could answer that.


Joseph Jacques Jean Chrétien: It will be deductible because it is not directed to the Canadian market. It is advertising which is directed to the American market to induce them to Canada. However, if they were to advertise in an American magazine to ask Canadians to buy a certain car in Canada, that will not be permitted.


Benno Friesen: Just outside of Vancouver in Bellingham, Washington, we have an American television station. There are a lot of Canadian businesses that like to advertise on that television station, both for the benefit of the Canadian market as well as for the American market. I would ask the minister what is the difference between advertising on that television station and advertising in periodicals down the west coast for the businessman in the Vancouver area?


Joseph Jacques Jean Chrétien: The Department of National Revenue will have to assess whether the advertising is directed to the Canadian clientele. If it is not directed to the Canadian clientele but the American clientele, that could be deductible. The ruling will be made by the Department of National Revenue after looking into the nature of the advertising program. If it is buying time on American television by Canadian businessmen for Canadian clientele this is not deductible. If it is for an American market, that can be deductible.


Benno Friesen: Is the minister then saying that for a Canadian businessman advertising on a television station in Bellingham, Washington, trying to attract American business into Canada, his advertising expense is going to be a legitimate deductible business expense?


Joseph Jacques Jean Chrétien: According to the law there will have to be a ruling by the Department of National Revenue, as the terms of the act are directed primarily to the market in Canada. This is not deductible, and National Revenue will have to look at the nature of the advertisement. Of course, because it is a border case you are taking one of the most difficult points. To simplify it you would be better off with the first question. If the advertising in California invited the Americans to come to British Columbia, it is deductible because it is directed to the American market. If you advertise at the border to attract the attention of the Canadian consumer through an American television station, this will not be deductible.


Benno Friesen: I asked a difficult question knowing the minister is equal to it. I simply want to establish the point that there are some deductions available for advertising on American television stations. Some are available as a legitimate tax deductible expense to a Canadian business? That is the principle I want to establish.
December 6, 1977


Joseph Jacques Jean Chrétien: The principle is yes, it could be.


Benno Friesen: The second question I have in relation to that is in connection with the point raised by the hon. member for Sault Ste. Marie relating to Bill C-58 and the effect it has had on Canada, especially the convention trade. I think there is well documented evidence to the effect that the Americans have taken issue with this particular piece of legislation which we passed two years ago, and they have undertaken seemingly retaliatory measures. At least there have been movements afoot in the American Congress to have their tax measures altered in order to combat what they think is a prejudicial tax arrangement which we have in Canada.
I know that some months ago there was talk about some kind of dialogue between External Affairs or the Department of Finance here and their American counterparts. I would like to know what is happening in that interchange and if there is any movement toward mitigating that circumstance.


Joseph Jacques Jean Chrétien: I do not buy the argument of the hon. member that the Americans have retaliated. Their law with regard to the reduction of expenses abroad by U.S. companies was not directed only against Canada. It was directed against all the nations of the world, because there had been some abuses taking place. I do not think we can link the fact that we passed Bill C-58 with the action of the U.S. Congress affecting conventions. It was not related at all.
In an effort to resolve the situation when I was Minister of Industry, Trade and Commerce, I talked with my counterpart in Washington. I explained the problem which had arisen for us-that we felt the U.S. action was unfair because Canadians were spending so much on vacations and conventions in the United States, and I was told that on the first occasion possible the situation would be remedied. In fact it was almost remedied by an amendment introduced into the Senate by Senator Goldwater-an amendment which was lost by one vote. The U.S. administration tells me that in its tax reform program being presented at this time the intention is to make the provision much more reasonable as far as Canada is concerned. I do not quarrel with the fact that only two conventions are permitted; it would be surprising if businessmen would want to have more than two conventions in the same year for the same group. The difficulty is that the level of permitted expenditure is not high enough at $35 a day. If you are in Toronto with an allowance of $35 a day, you would be lucky to be able to go out after breakfast.


An hon. Member:: In Montreal, too.


Benno Friesen: Well, it seems very strange that within a year after that bill was passed Canada, according to the figures given me by a member of the government in the other place, lost something like $120 million in convention business. The minister would have a hard time convincing me that there was not a cause and effect relationship, especially since I have read
Income Tax
the resolutions which were discussed in the United States Congress in connection with this matter.
I should like to point out-further that in the Vancouver area several hundreds of jobs have been lost because of the passage of that bill. An animation company which employed scores of people went out of business because of it; advertising companies went out of business; companies which were filming advertising for television productions and other companies making short features also went out of business. All these operations ended, with consequent unemployment, because of that particular measure. I should like the minister to reconsider the provisions of the bill before us in an attempt to improve the situation.
There is another matter I should like to bring to the attention of the committee. If the present restrictive taxation policy is to be applied to advertising over United States television stations, and since there is only a limited amount of television advertising time available, does this not amount to a conspiracy in restraint of trade? After all, the CTV station is saturated. The CBC station is saturated, and the new television station has about as much advertising as it can take- anyway, the ratings are so low that many of the advertisers do not want to be on there. The Prime Minister says we are not producing enough-that we are producing at only some 85 per cent of our capacity. Well, we could be producing at 100 per cent of our productive capacity but if there is no opportunity to tell people about the products which are available, all the productivity in the world will not do any good. I ask the minister to reconsider this policy and to make it less stringent so that those who wish to advertise in the Vancouver area over stations south of the border would have the right to deduct expenses for advertising carried, say, by KVOS.


Joseph Jacques Jean Chrétien: Mr. Chairman, I cannot begin once again the whole discussion on Bill C-58 which was debated last year. Obviously the hon. member did not agree at that time. I said earlier that I did not see any relationship between Bill C-58 and the restrictive situation concerning U.S. conventions on Canadian territory. There is no relationship because, as a matter of fact, U.S. conventions are limited not only in Canada but also in Mexico and in Europe. Even in Canada, we imposed some restrictions because there was abuse in conventions abroad. Each country would like to protect its treasury by plugging up these sometimes very large holes of which some groups in society take unfair advantage, but there was no relationship between the two. So I note the fact that so far the hon. member is certainly less than enthusiastic over Bill C-58.


Mr. Orlikow:: Does the minister have any figures as to the practical results flowing from that legislation? It seems to me that in the Winnipeg area some of the television stations in the United States are still carrying fairly extensive advertising which obviously originates in Winnipeg. I am wondering whether the minister has any information on the effect of this
1624

December 6, 1977
Income Tax
legislation restricting advertising over foreign television stations.


Joseph Jacques Jean Chrétien: We do not know exactly what the effect is on the monetary side. It is very much a matter of cultural policy for Canada. Obviously, under the bill we passed last year, a company in southern Manitoba which is advertising in the northern states will have to pay more in exchange for time there. The goal of the policy was to make such advertising expenses non-deductible against Canadian taxes. If the hon. member wishes an assessment in terms of the benefit to the Canadian television industry, perhaps he would address his questions to my colleague, the Secretary of State.
It is evident that with respect to magazines this has permitted Macleans to expand considerably in Canada since Time is not considered a Canadian magazine. Macleans magazine went from being a monthly publication to one which is published every two weeks, and I am told that next year it will be on a weekly basis. I might also mention that there were two bills but each was addressed to the same principle-the protection of the Canadian market.


David Orlikow: Since any revenue which American Television stations get from Canadian companies is, really, an extra bonus to them, gravy, we would call it, I understand that what those stations have done is to cut the price charged for commercials by half. In that way, Canadian companies are able to advertise and really not pay any more than they did before. Has the government given consideration to further restrictions on this kind of advertising which is being sold in the United States?


Joseph Jacques Jean Chrétien: Mr. Chairman, you cannot do more than we have done in terms of the tax system. Perhaps the solution is to black out American stations in Canada. However, I am not about to promote that.


David Orlikow: Perhaps it is not the minister's business, but I suggest that blacking out the commercials is not only a good idea but, according to our courts, legal.


Léonel Beaudoin: Mr. Chairman, I agree with the minister when he says that these magazines which advertise outside Canada should pay taxes pursuant to the Income Tax Act. There is something I should like to ask the minister: Are Macleans and Reader's Digest the only two magazines Bill C-l 1 is dealing with?


Joseph Jacques Jean Chrétien: Bill C-l 1 simply clarifies the provisions which the Department of National Revenue uses as a basis for its decisions. Yes, those are the only two magazines, because they were in fact the only two foreign magazines published in Canada. Naturally, we are receiving magazines from all over the world, including France, England, and the United States. But in the case of Time magazine, Reader's Digest and Selection du Reader's Digest, those were American publications published right here in Canada. One qualified as a

Canadian publication and the other could not. The others are not attempting to publish here in Canada. Therefore, advertising expenses in foreign magazines directed to the Canadian market are not deductible.


Léonel Beaudoin: Mr. Chairman, since those magazines are near-multinationals, can the Minister of Finance who is responsible for the bill tell us how he can check these two magazines' revenues for the purpose of Bill C-l 1?


Joseph Jacques Jean Chrétien: Well, we do not have to check that. We say that a corporation inserting ads aimed at Canadian readers in Time magazine cannot deduct this as a legitimate expenditure. It can spend wherever it likes, but such expenditure is not tax deductible. This is the kind of checking being done. Any corporation wishing to spend $100,000 or $200,000 on advertisements in Newsweek magazine or any other U.S. magazine for that matter is perfectly free to do so providing this is not aimed at the Canadian market. Where a corporation wishes to buy space in a U.S. magazine to invite Americans to come to Canada, the expenditure is deductible, because it is not aimed at the Canadian but the American market.


Léonel Beaudoin: There is something I do not understand. You are saying that a corporation advertising in those two American magazines cannot make a deduction for it. This is what I cannot understand. How come you can check the impact of advertisements relative to the Canadian market, whether the expenditure is deductible, because this in my view is a one way proposition. You want to prevent those corporations from advertising in a U.S.-Canadian magazine, you are preventing them from advertising profitably, without checking across the board their advertising expenditures in Canada. This is what I do not understand.


Joseph Jacques Jean Chrétien: I would first like to clarify this. Reader's Digest magazine qualifies as a Canadian magazine. So, in order not to confuse committee members, let us forget about it. All advertisement expenditures in the Reader's Digest magazine which is published in Canada, are deductible from the advertiser's income. But where an advertisement is inserted in Time magazine, the cost of that advertisement is not deductible from the corporation's revenues for income tax purposes. That's crystal clear. When an advertisement is directed to the Canadian public, when that advertisement has a Canadian content, when Canadians are for example invited to drink vodka by an advertisement which reads: "Drink Canadian vodka"-and Time has an advertisement section directed to Canadians only-no deduction is allowed. When the U.S. issue of Time publishes an advertisement to invite Americans to visit Canada, a deduction will be allowed. The Department of National Revenue has to compare the two advertisements and decide whether one is directed to Canadians or whether the other is directed to Americans.
Clause 13 agreed to.
On clause 14-
December 6, 1977


Joseph Jacques Jean Chrétien: Mr. Chairman, before I give my explanations, I would like to table some amendments related to clause 14(1). Next, I will present an amendment to clause 14(2). So I will table the amendments forthwith and give the explanation.
I move:
That subclause 14(1) of Bill C-l 1 be amended as follows:
(a)	by striking out lines 32 to 35 on page 21 thereof and substituting the following:
"the end of paragraph (ee) thereof and by adding thereto the following paragraphs:"; and
(b)	by striking out line 7 on page 22 thereof and substituting the following: "365; and
Policy loan repayments
(hh) an amount in respect of all or any part of any policy loan repaid by the taxpayer in the year not exceeding the amount, if any, by which
(i)	the amount required by subsection 148(1) to be included in computing his income in the year or a previous year from a disposition described in subparagraph 148(9)(c)(ii) in respect of that policy
exceeds
(ii)	the part of any loan on that policy repaid by the taxpayer that was deductible under this paragraph in computing his income for a previous taxation year."
That subclause 14(2) of Bill C-l 1 be amended by striking out line 21 on page 22 thereof and substituting the following:
"March 31, 1977 except to the extent the amount thereof it verified by the insurer in prescribed manner and prescribed form to be interest paid in the year on that loan that is not added to the adjusted cost basis (within the meaning given that expression in subsection 148(9)) of the policy.
"Life insurance policy"
(2.2) For the purposes of paragraphs (l)(c) and (d) a "life insurance policy" does not include a policy referred to in paragraph 148(l)(b)."
He said: Mr. Chairman, these very important amendments are being introduced following the many representations that I have received and which were mentioned earlier this evening in the committee by the hon. member for Gatineau (Mr. Clermont). Mr. Chairman, these amendments concern what the hon. member called insurance policy loans, but this expression can be misleading. The hon. member for Parry Sound-Mus-koka (Mr. Darling) also made many representations in this regard. This is what the government has decided to do. Mr. Chairman, in spite of what was provided in the bill, when someone borrows, to use the popular expression, a certain amount on his insurance policy, the amount he must pay and which was previously considered as interest but which legally constitutes charges, will actually be considered as tax deductible within the year for businessmen as well as for ordinary taxpayers. The amount of the charges or interest will be considered as a payment on the policy and will be deductible when the policy comes to maturity. To make myself better understood, I should perhaps read a very long-no, it is shorter than what I have already read. 1 shall therefore read more technical explanations after giving a layman's version of these changes.
These amendments relate to the treatment of advances on insurance policies, the so-called policy loans. I have carefully gone over the recent representations I have received on this
Income Tax
matter, particularly from small businesses, and I have reviewed the comments on second reading of Bill C-l 1. The impression I have formed is that there is general satisfaction the bill will, for the first time, give tax recognition to the vast majority of policyholders for the interest they pay to an insurance company when they take out a policy loan. I want to clarify this. It is not really a loan. It is an advance. The word "loan" was used to facilitate the discussion. It will do this by an upward adjustment in the recorded cost base of the policy. However, I have also formed the impression that the small proportion of policyholders who use the proceeds of policy loans to earn income would prefer to receive such relief in the form of a current deduction from taxable income, rather than through an adjustment to the cost base of their policy. Amendments to clauses 14 and 74 will achieve this.
Furthermore, the amendments will enable a policy holder, on repayment of an advance on a policy, to reduce his current taxable income by the amount it was increased as a result of taking out the advance. In the bill this tax adjustment takes the form of an upward adjustment in the cost base of the policy. Representations to us indicate that policyholders would prefer to have the relief in the form provided by the amendment, rather than in the form provided by the bill as it is.
In short, there were some changes which were advantageous in the bill. They will remain. It will provide an added option to the person borrowing on his policy to deduct from his income the payments made on a yearly basis. I can see the hon. member for Parry Sound-Muskoka is listening. I appreciate that. Many members on the government side have asked me to reconsider that. Everyone knows I am an extremely flexible person.


Sinclair McKnight Stevens: Mr. Chairman, I have a couple of questions for the minister. Dealing with subclause (1) of clause 14, would the minister agree that this amendment provides, on the repayment of a policy loan, that the taxpayer may deduct from his income any amount previously included in income by virtue of his policy loan?


Joseph Jacques Jean Chrétien: The answer is yes, Mr. Chairman.


Sinclair McKnight Stevens: Dealing with subclause (2) of clause 14, would the minister agree that this amendment provides for interest payable on a policy loan being deductible, subject to the insurance company making certain recommendations concerning how they are treating the loan interest?


Joseph Jacques Jean Chrétien: Mr. Chairman, if the loan is used to earn income, the answer is yes.


Gaston Clermont: Mr. Chairman, the minister said that he must choose his words but he is not sure, he did not accept that it could be considered as a loan; he called that an advance. But I could quote a great number of experts who claim that it is actually a loan which complies with the requirements of a loan
80027-34Vi

December 6, 1977
Income Tax
made by a financial institution, a bank or a credit union. So in the case of a policyholder who applies for a loan-I do not have to be as cautious as the minister-for, say $3,000, from his insurer for the year 1978 only, his loan will be considered as income and if it is reimbursed in 1979, it could be charged against his income in 1979.


Joseph Jacques Jean Chrétien: I will use everyday language instead of the legal jargon I tried to use a few minutes ago. Let us suppose a person borrows, as the hon. member suggests, $3,000. If that $3,000 is to increase his income, if he is a businessman, if he wants to invest in his business or earn additional income, the interest he must pay back annually to the insurance company, if he does pay it back, will be considered as an expense on his tax return for the following year.


Gaston Clermont: Mr. Chairman, that was one of the remaining problems about life insurance. With respect to the loan will the two amendments tabled in the House correct the two problems I see with clause 14. The first one is taxing the policyholder when he takes out a loan on an insurance policy; the second is prohibiting in any case the interest on a policy loan from being deductible as an expense. So I understand that, as one of the amendments, the interest paid by a businessman or the head of a small business on a loan made on his insurance can be considered as an expense. But at page 31 of his Economic and Fiscal Statement the Minister of Finance (Mr. Chretien) says, and I quote:
That where, after March 31, 1978, a life insurance policy is surrendered or matures, otherwise than on death, a policyholder be required to include in his income the excess of the amount received in respect of the surrender or maturity over the greater of the cash surrender value of the policy at its first anniversary date after March 31, 1977 plus the net premiums paid after that date and his net cost of the policy.
Mr. Chairman, I gave the example but I am sorry the minister did not answer it. Here it is again: In 1978, I borrow $3,000 on an insurance policy I have with a certain life insurance company. In 1979, according to clause 14 I must consider that loan as income and add it to my income for 1978. But if I pay that loan back the same year or the year after I have the right to deduct it from my income. Is my interpretation correct or not, Mr. Chairman?


Joseph Jacques Jean Chrétien: Mr. Chairman, the interpretation of the hon. member is partially correct that in the sense that if you borrow money on your policy, there are two aspects to consider. First is the life insurance and second the gains made by the company on that policy. If you withdraw a part of what is called gains, it will be considered as an income but if you repay it to the company, the situation will then be corrected. So, on those $3,000 there might be $2,700 that are strictly a loan on the policy and $300 that will be considered as the company's gain, the $300 being considered as an income.


Gaston Clermont: Mr. Chairman, the minister has given in to 90 per cent of the representations made by several of his colleagues on the government side.
(Mr. Clermont.]


Joseph Jacques Jean Chrétien: No, 100 per cent.


Gaston Clermont: Mr. Chairman, I do not withdraw my thanks, I maintain them, because they have corrected, first the question of an eventual tax on policy proceeds at death and also the other two problems I just mentioned. As the minister said, he is very generous and understanding, particularly when his colleagues on the government side make representations to him.


Mr. Trudel:: Mr. Chairman, the minister underlined earlier in his remarks that there are some people who borrow money on their insurance policy and do not pay back these loans. If I understand correctly the minister's interpretation, if for a reason or another you repay this amount, you then diminish your income accordingly. If for instance you keep the loan over a period of years, can you claim its costs, which are minimal incidently, but as being an expense on this loan for a period of years, because policyholders contract loans on their insurance policy and never intend to pay back these amounts of money which, in certain cases, are rather considerable? Are the costs of these loans or the service cost of this loan by the insurance company going to be deductible over a period of years?


Joseph Jacques Jean Chrétien: The cost of the loans will be considered when they are reimbursed as being payments which are tax deductible.


Jacques L. Trudel: Mr. Chairman, I understood the minister's explanation because he has been very clear about it. What I mean is whether this does not apply to the loan per se. I am talking about the cost, the interest which the insurance company charges the borrower. In certain cases, the sum of $3,000 was mentioned earlier, but there are people in business who have borrowed fairly large amounts, so the question is whether the cost of this loan toward the insurance company is going to last over a period of years because in certain cases this amount is never paid back to the insurance company, then it is deducted from the proceeds instead of being reimbursed?


Joseph Jacques Jean Chrétien: The interest that will be reimbursed will be included in the cost of the policy when it comes to maturity, and at such time it will be deducted from the part of the insurance policy which is taxable as we are all aware. There is the part which is strictly life insurance and the part which represents an investment and the interest costs will be deductible from the tax to be paid on the investment part of the policy.


Mr. Darling:: Mr. Chairman, as the minister knows, I am interested in these particular clauses and I want to pay him full marks, as well as his parliamentary secretary and, I am sure, a great many other colleagues on the other side of the House-


An hon. Member:: Is this a love-in?


Stan Darling: -who have considered the representations made by some of us at the very beginning, and the representa-
December 6, 1977

tions made to the hon. member for Rosedale when he was minister of finance. It is certain that he did not give us the same consideration as did the present minister, so again 1 commend him for this.
I was interested in some of the comments made regarding interest. Of course the interest for legitimate business is deductible, and that is plain common sense because the government will end up with more money in its coffers by making that allowance than by having businessmen borrow from some place else and putting the policy up as collateral.
Although it might be difficult to come up with the exact figure, I would assume that the amount in insurance policies is in the billions of dollars and the great majority of these policies are of a long term nature. The ones on which loans would be made which would be eligible for business interests would be, for the most part, whole life policies or even an endowment. In those particular policies there would be no profit on the policy whatever so far as the cash value is concerned. In other words, the amount of loan value on them would certainly not bring a profit, if the minister understands what I mean, because if you borrowed $10,000 on it, you would have paid in at least $10,000 and perhaps $12,000. So there is a very small percentage of people who will apply. Because of the small number who might, I do not know why the minister would keep this provision. In other words, a few will borrow more than they paid in, and I bet you could count them on your fingers and toes. Does the minister not think that?


Joseph Jacques Jean Chrétien: I think the hon. member is right. Because of the very small proportion involved perhaps we should not have imposed that, but I would like to give the technical explanation to the hon. member tomorrow when we resume discussion on this bill.


Charles Robert Turner: Order. It being ten o'clock, it is my duty to rise, report progress and request leave to consider the bill again at the next sitting of the House. Is it agreed?


Some hon. Members:: Agreed.
Progress reported.



PROCEEDINGS ON ADJOURNMENT MOTION

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

John R. Rodriguez: Mr. Speaker, in the time I have been here I have learned not to expect Liberal economic policies to make sense, but I must admit that the action the government has recently taken with the small refrigerator and freezer industry makes less sense than most other policies it has enunciated.
We know that a few years ago the government permitted the merger of the appliance division of GSW Limited and West-inghouse Canada to form a new venture, Canadian Appliance Manufacturing Company Ltd., or CAMCO, located in London, Ontario. This was done to rationalize that industry and make it more cost competitive, with the eventual hope that CAMCO would eventually capture foreign markets. There was surely some hope for this because is this sector of the small appliance industry Canadian firms have done very well. In fact in 1975 close to 500,000 small appliances were sold in Canada, and 99.3 per cent of them were produced in Canada.
Yet, in spite of these government policies and some success in the industry, what has the government done? It has turned around and given an Italian firm, Merloni Finanziaria, over $2.5 million as an incentive grant under DREE to set up a compact refrigerator firm in Granby, Quebec. What is the rationale for the grant by DREE? In its release the department said the company would create 179 jobs and that within three years 50 per cent of its products would be exported.
As it happens, Merloni is expected to produce somewhere in the neighbourhood of 100,000 units a year. That means that at least 50,000 units a year are going to go into the Canadian market, a market which this year has declined to less than 300,000 units.
The only thing more baffling than the DREE decision was the decision by the Foreign Investment Review Agency last May to permit the investment. If the rationale by DREE was sublime, then the FIRA rationale was ridiculous. They said in their release that "imports of compact appliances should be reduced considerably" by the Merloni investment. I suppose the considerable reduction in imports will cut into the 0.7 per cent of the market which is presently served by imports!
So if the company is not going to reduce imports and it will throw thousands of units onto a market which is already using only 60 per cent of its capacity, what will be the result? The obvious eventual result will be that they will take part of the market from the other four Companies in Canada-or rather five, because in the minister's response to my question he alluded to the fact that DREE is giving yet another grant to a compact refrigerator company, Astral Refrigeration, this time in Moose Jaw.
What will happen is that, as this company begins to produce more refrigerators, the other companies will produce less in Canada. What will happen is that as jobs are created by Merloni in Granby and Astral in Moose Jaw, others will be

December 6, 1977
Adjournment Debate
lost in other companies in other parts of Canada. Obviously a game of musical chairs is being played with the unemployed and being paid for by Canadian taxpayers.
If there are foreign markets which could have been exploited, why did the government go to an Italian company? We have Canadian businesses as in this sector which have proven their ability. Why were they not given the chance to open a branch plant in Quebec to service foreign markets? Why could the government not have given Canadian business money to expand in foreign markets?
Instead, the government has followed a course of action which will cause unemployment in other parts of the country, reduce the level of Canadian ownership in this industrial segment, and subsidize a foreign competitor.
It is obvious that in this proposal DREE violates its own mandate to reduce unemployment by simply shuffling the unemployed. Even more seriously, the criterion of FIRA has been violated, as Merloni will not reduce imports, will not improve productivity in this sector, and surely cannot, by any stretch of the imagination, be considered of significant benefit to Canada.
I call on the Minister of Regional Economic Expansion (Mr. Lessard) to withdraw immediately his offers to Merloni and Astral Refrigeration. To do less would be a disservice to Canada and Canadians.


Mr. Donald Wood (Parliamentary Secretary to Minister of Regional Economic Expansion):: Mr. Speaker, as you are aware, the Department of Regional Economic Expansion has made an offer of assistance of $2.6 million to the Merloni Group to establish a facility in the province of Quebec to manufacture compact household refrigerator units. This offer was made under the terms of the Regional Development Incentives Act. This project is expected to create 179 jobs and generate investments of some $ 11 million in a region of the province facing very high unemployment at the present time.
Before going into details concerning the case raised by the hon. member for Nickel Belt (Mr. Rodriguez), I would like to explain briefly the approach used by this department when evaluating an application made by a firm for a development grant under RDIA. Before offering an incentive to any applicant, the government-DREE among other departments- undertakes an extremely careful analysis of the project, in order to satisfy itself as to the net benefits that will accrue from it.
In the case of the firm to which the hon. member is referring, the principal product to be manufactured will be compact refrigerators for use by owners of hotels, cottages, condominiums, and recreational vehicles. In addition, a secondary product line of compact freezers will be manufactured which will represent only a relatively small proportion of the company's output.
At the present time Canada is importing a very large proportion of its requirements for compact refrigerators, that

is, with a capacity of less than 10 cubic feet. With the anticipated arrival of the Merloni Group in Canada, we would expect that Canada would become more self-sufficient in the production of this line.
Finally, Mr. Speaker, I would like to add that the implementation of this project meets the regional development objectives set by the Canadian government, since the new company will contribute to creating new export outlets for a Canadian firm. It will reinforce Quebec's industrial base and create a substantial number of jobs in a region that suffers from high unemployment.
I am sure, Mr. Speaker, that members of this House will agree with me that these are important factors which justify our decision in this case.


CANADIAN INTERNATIONAL DEVELOPMENT AGENCY- OXFAM-PROPOSED STUDY OF FUNDING
Robert Hylton Brisco: Mr. Speaker, on November 16 and again on December 2 I raised questions concerning the organization of Oxfam Canada. On November 16 my question was put to the Secretary of State for External Affairs (Mr. Jamieson) who formerly, at least, had a connection with CIDA. My concern at that time was that in certain statements contained in documents that came to me there was an indication, not an outright suggestion or recommendation but an indication, that it was possible to deceive CIDA about certain funds because CIDA might have poor accounting practices.
I found that alarming in itself but what I found even more alarming was that when I addressed a question to the Minister of National Revenue (Mr. Guay) on December 2 to the effect that, according to further documentation and information that had come to me, it was possible, on the basis of the statements made by an officer of Oxfam, that Oxfam could set out to deceive large corporations and well-to-do citizens deliberately by failing to inform them that one of the motives of an officer or officers of Oxfam was to equalize distribution of wealth in Canada.
I am not prepared to argue whether that doctrine is acceptable, but I am certainly prepared to argue that political overtones of this nature should not invade meetings or discussions of directors of an organization that is registered as a charitable foundation or organization with the Department of National Revenue which qualifies subscribers to it for tax deductions. On the basis of information that I have provided to the Secretary of State for External Affairs and to the Minister of National Revenue, I have sought from the Minister of National Revenue an indication of whether he is prepared to take action.
It may well be that certain individuals on the board of Oxfam have political philosophies that have seeped into the structure of the organization. If that be the case then let me draw to the attention of the House the fact that over a year ago I happened to see an advertisement which had been passed, as I remember, to two members of the opposition-the hon. member for South Shore (Mr. Crouse) and the hon.
December 6, 1977

member for Central Nova (Mr. MacKay). It was a newspaper advertisement from an overseas paper making clear reference to the fact that Oxfam Quebec-and I divorce Oxfam Quebec from Oxfam Canada but nevertheless an organization carrying the same name, an organization of international repute-that Oxfam Quebec was soliciting funds to aid it in gaining its independence. If these are indeed the aims and objectives of the Oxfam organization, be it Oxfam Canada or Oxfam Quebec, surely as a charitable foundation, to which Canadians are asked to subscribe, it should come under the most close scrutiny by the Minister of National Revenue.
In connection with the comments of one of its officers regarding the accounting practices of CIDA-it should also come under the scrutiny of the minister responsible for CIDA who in turn provides funds to some non-governmental organizations. I find it regrettable that I should have to stand and speak about an organization which has in the past done a great deal for the aid and comfort of those, particularly in the Third World countries. I suggest to you, Mr. Speaker, if this organization has now taken upon itself a political flavour, which I personally find unacceptable, then I think it is incumbent upon the government to inquire as to whether or not it should be entitled to qualify for tax deductions as a registered charitable organization.
In addition let me say that the practice of deception by any officer of any charitable organization which seeks funding from willing Canadians, and Canadians are well known for their charity, and which would attempt to deceive the public by failing to reveal the true political intent of the organization when it should have none, opens that organization to the most serious question. I find it regrettable that I should have to throw into question this particular organization.


Mr. Maurice Dupras (Parliamentary Secretary to Secretary of State for External Affairs):: Mr. Speaker, I hope to be able to reassure my distinguished colleague from Kootenay West (Mr. Brisco) concerning the operation of Oxfam Canada. I will begin by telling him that I am not divorcing Quebec Oxfam from the Canada operation; there is only one Oxfam operation.
CIDA has recently completed a careful analysis of the Oxfam Canada financial position, covering the period May, 1973, to April, 1977. This analysis was done in consultation with Oxfam and was based on a review of their annual audited statements for this period, all of which are on file with CIDA NGO division. No problem concerning advance payments was noted during the CIDA review.

CIDA supplies OXFAM with funds for special projects sponsored by the latter abroad and payments are made through Treasury Board. When OXFAM asks for co-financing of a project, it also advises CIDA of when funds will be needed. Small and medium-sized projects are usually financed through a single payment made in a single fiscal year. More important projects are usually spread out over a period of
Adjournment Debate
several years and the second and third payments are made by CIDA only on the strength of descriptions and financial reports which meet its requirements. Upon receiving funds from CIDA for a specific project, OXFAM supplies the agency with copies of the document through which both CIDA and OXFAM funds were transferred overseas. In 1975-76, CIDA granted OXFAM-Canada a total amount of $324,940, and in 1976-77, $418,664. This year, total contributions by CIDA are estimated to reach from $320,000 to $350,000.
CIDA will continue to exercise regular control over the financial statements published by OXFAM-Canada, as it does for all organizations that receive funds through its Non-Governmental Organizations Division.


ENVIRONMENTAL AFFAIRS-DELAY IN RESPONDING TO STEVESTON OIL SPILL-GOVERNMENT ACTION TO RECTIFY
Benno Friesen: Mr. Speaker, on November 22 I rose to ask a question of the Minister of the Environment (Mr. Marchand), who is one of the ministers representing British Columbia in the cabinet. I rose to ask him about the oil spill which took place on August 29 at Steveston on the Fraser River. I pointed out that the spill had been reported at 11 p.m. on the evening of August 29 but that, according to all reports, nothing was done until 15 hours later, some time in the afternoon of August 30, and that the bulk of the equipment did not reach the spot until over 40 hours later.
I asked the minister whether anybody in his department had been sacked as a result of that gross exhibition of negligence and mismanagement, and the incredible answer the minister gave me was that no one had been sacked following the Steveston spill. He went on to say:
I was satisfied that everything possible had been done. There was a little delay in getting the spill reported, but once it was reported. Environment Canada officials were on the spot right away and did a very thorough clean-up.
Mr. Speaker, that is simply not accurate. There was no delay in reporting the spill. The delay was in the department's reaction to that report.
Ever since I was elected three years ago I have been pressing the minister for the environment, whoever he might be, to assure us that there was adequate clean-up equipment available in British Columbia to deal with a major spill on the west coast. And always I was informed that there was ample equipment available and that it could be deployed very quickly if necessary, with the use of up-to-date computer techniques and so on. But it still took almost 15 hours for the equipment to get through in spite of all those technological marvels in the department. It so happens that the man in charge, the regional manager of the emergency operation, Captain Young, said the spill was reported to him but he was not asked to supply any clean-up equipment. Mr. Speaker, I hope that man is never in receipt of a May-day signal because his response would be, "Do you want me to come and help?"
I went to look at this particular spill. It was an incredible sight. Here was a blind slough-there was no place for the

December 6, 1977
Adjournment Debate
spill to go except into the main stream. If you were to take a boom and string it across that slough-it would need to be no more than 200 years long-you would enclose that entire spill and prevent it getting into the main stream of the Fraser River. But because the department was so slow or negligent, the main part of the spill got into the Fraser and was swept as far down as Cherry Point.
Maybe the officials of the department think that oil spills can be so regulated as to occur between the hours of nine and five when they would not interfere with normal office hours. Incidentally, that particular spill is supposed to have cost anywhere between $70,000 and $200,000, which represents the labour cost of cleaning up. That does not include the cost of supplies and equipment. It certainly does not include the wages lost by the fishermen who were out of commission for about ten days. Meanwhile all the salmon were going up stream. The Americans were continuing to fish. They are getting their catch. The Canadians are losing it all. I wonder if the loss by the fishermen is not upwards of around $1 million because of that one spill.
I asked whether anyone had been sacked. The minister had the audacity to say no. He said he looked into it thoroughly, they gave him a run-through, and no one was sacked. Why did heads not roll? Had that happened in a free enterprise company dealing with the logging industry or something like that, heads would have rolled.
Anyone acquainted with the operations of MacMillan Bloe-del on the west coast knows that they wanted a more efficient operation and heads rolled. However, in the government it is necessary to protect these people. I assume there was not even a lateral transfer.
We know it was not the fault of the equipment. It has to be the fault of the personnel. What kind of protection do the fishermen on the west coast have when we have that kind of personnel and this minister who protects that personnel?
This is the reason I have been asking for stand-by equipment in Surrey and White Rock, which would be the first to get the effect of a spill should it come north from Cherry Point. It is not because the equipment will be any better there, but because the people living there have a vested personal interest in making sure that equipment will get out to where the oil spill is doing damage.
Maybe the minister will now respond to my request and provide us with that kind of emergency equipment. We cannot depend on officials in Environment Canada in Vancouver to deploy that equipment from as close as 15 miles to Steveston.
I would like a categorical answer from the parliamentary secretary as to what will happen to the officials in the department. Will they share some of the responsibility? Will we get some equipment in Surrey and White Rock to make sure that people who have a personal interest at heart will get that equipment there and give them the opportunity to protect
themselves, because Environment Canada sure is not going to do it?


Mr. Mike Landers (Parliamentary Secretary to Minister of State (Environment)):: Mr. Speaker, on November 22 the hon. member for Surrey-White Rock (Mr. Friesen) questioned the Minister of the Environment (Mr. LeBlanc) about his department's response to the oil spill from the Canadian Fishing Company Limited at Steveston, B.C. The hon. member stated that officials did not follow up on the spill report until the next day and that it took 44 hours to get equipment to the spill scene.
The facts are as follows. On Monday, August 29, 1977, an abandoned fueling pipeline under the Canadian Fishing Company Limited, known as CANFISCO, cannery dock began leaking heavy bunker B fuel into Steveston harbour. In-coming fishermen reported the presence of oil to the CANFISCO manager who investigated the cannery wharf area at about 7.30 p.m. He found nothing out of the ordinary and took no further action.
At 10.50 p.m. the DPW dredger Fort Langley, inbound to Steveston harbour, reported to the Canadian Coast Guard's Vessel Traffic Management Centre the presence of oil in the Fraser River channel. The centre then began to alert responsible agencies. At 11.45 p.m. the environmental protection service duty officer called the resident departmental officer at Steveston and asked him to investigate. Contrary to the hon. member's allegations, immediate action was taken. The departmental officer carried out an on-site investigation and reported that he could see very little oil.
At 6.45 a.m. on August 30 the two departmental officers began a careful search for oil under the old wharves at Steveston harbour and soon found an estimated 5,000 gallons of oil among the debris, logs and abandoned nets under the cannery wharf. The source of the spill was soon identified as a broken six inch pipe leading to the CANFISCO storage tank. Some 10,000 gallons had spilled. CANFISCO officials assumed responsiblity for the spill and Clean Seas Canada Limited were called in to contain and clean up the spill. By 8.45 a.m., a small crew from Clean Seas were on the scene and spread peat moss in the oil to consolidate it under the wharves. Environmental protection service officers asked that the area be boomed to ensure containment during recovery operations. The contractor did not manage to do this until 1.45 p.m.
The facts speak for themselves. Departmental officers did not fail to respond immediately to notification of a spill. It did not take 44 hours to get equipment to the scene. While I regret the inconvenience to the fishermen, I believe the delay in opening of the salmon fishing period was the prudent and responsible course of action to take.


The Acting Speaker (Mr. Ethier):: The motion to adjourn the House is now deemed to have been adopted. Accordingly, this House stands adjourned until tomorrow at 2 p.m.
Motion agreed to and the House adjourned at 10.28 p.m.

Wednesday, December 7, 1977