1978-05-23

ROUTINE PROCEEDINGS


Mr. G. W. Baldwin (Peace River):: Mr. Speaker, I rise on a matter of urgent and pressing necessity under the provisions of Standing Order 43. I am encouraged to do so by the strong and unanimous vote of condemnation last Thursday at the instance of the Leader of the Opposition (Mr. Clark) expressing indignation at the form of certain trials in the Soviet Union, despite domestic law, because they were contrary to principles of natural justice and against the practice of Canadian courts. On a similar basis, 1 would move if leave be given, seconded by the hon. member for Grenville-Carleton (Mr. Baker):
That this House deplores the dangerous form of secret trial and the continuing restrictions involved in the case of Alexander Peter Treu which are contrary to the usual practice of Canadian justice.


Mr. Speaker:: In accordance with Standing Order 43, such a motion can be presented for debate only with the unanimous consent of the House. Is there unanimous consent?


Some hon. Members:: Agreed.


Some hon. Members:: No.


PUBLIC SERVICE
Mr. Lincoln M. Alexander (Hamilton West):: Mr. Speaker, I rise under the provisions of Standing Order 43 on a matter of urgent and pressing necessity. In light of the fact that the matter that has recently been raised regarding public service overclassification is having an adverse effect on public service morale, I move, seconded by the hon. member for Esquimalt-Saanich (Mr. Munro):
That this House direct the President of the Treasury Board to release his department's October, 1976, report on overclassification in order that public servants will know how they are affected; and, secondly, that the subject matter
of this report be referred to the Standing Committee on Miscellaneous Estimates for full discussion before the Treasury Board undertakes wholesale red-circling of public servants, the policy of red-circling not having been designed for use on such a massive scale.


Mr. Speaker:: Presentation of such a motion for discussion, pursuant to Standing Order 43, requires unanimous consent. Is there unanimous consent?


Some hon. Members:: Agreed.


Some hon. Members:: No.


CRITICISM OF APPLICATION FORM FOR SUMMER EMPLOYMENT-MOTION UNDER S.O. 43
Mr. Andy Hogan (Cape Breton-East Richmond):: Mr. Speaker, I rise on a matter of urgent and pressing necessity. The Solicitor General's office is hiring students this summer to work on a project called Puppet Theatre. Students are being required to fill out a personal history form-I have the form here-which asks, among other things, "Have you travelled to a communist country since July 1, 1945?" It also requires fingerprinting of applicants. I move, seconded by the hon. member for Sault Ste. Marie (Mr. Symes):
That this information should be excluded from the application form for a summer job in the Solicitor General's department.


Mr. Speaker:: Presentation of such a motion for discussion can be done only with unanimous consent. Is there unanimous consent?


Some hon. Members:: Agreed.


Some hon. Members:: No.


EXTERNAL AFFAIRS
Mr. Otto Jelinek (High Park-Humber Valley):: Mr. Speaker, pursuant to the provisions of Standing Order 43 I rise on a matter of grave urgency. In view of the tragic episode this weekend in Zaire, where hundreds of innocent civilians from home and abroad were massacred on the streets of Kolwezi, and because it has been learned that military advisers from Cuba trained and possibly led the Katangan rebels in this

May 23, 1978
horrendous bloodbath, I move, seconded by the hon. member for Central Nova (Mr. MacKay):
That this government discontinue its support of Cuba and its dictator, and that all present and future aid to Cuba by the government be suspended forthwith.


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


Some hon. Members:: Agreed.


Some hon. Members:: No.


TRANSPORT
Mr. S. Victor Railton (Welland):: Mr. Speaker, under Standing Order 43 I would like to present the following motion. Since the policy of total removal of all overhead bridges on the Welland Canal envisages an eventual move to tunnels only for cross-canal traffic, since this policy is completely impractical and since all developed countries use both tunnels and bridges on rivers and canals for crossings and will continue to do so far into the future, I move, seconded by the hon. member for Lincoln (Mr. Andres):
That the Department of Transport and the St. Lawrence Seaway Authority be now instructed by the government to modify or reverse this unrealistic policy, and forthwith make plans to rebuild the canal bridge in Port Robinson in the city of Thorold after a new study has been done.


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


Some hon. Members:: Agreed.


Some hon. Members:: No.


REVISION OF POLICY FOR CONSTRUCTION OF ICE-BREAKERS- MOTION UNDER S.O. 43
Mr. Elmer M. MacKay (Central Nova):: Mr. Speaker, I rise on a matter of urgent and pressing necessity pursuant to the provisions of Standing Order 43. In view of the urgent need to encourage Canada's shipbuilding industry and restore our former pre-eminence in the construction of ice-breaking vessels, which until recently gave Canada the distinction of having designed and constructed the largest ice-breaker in the world, I move, seconded by the hon. member for Surrey-White Rock (Mr. Friesen):
That the Minister of Transport revise and report to the House before the end of this session on the policy which transferred the design staff giving Canada this capability to the Department of Supply and Services, where they have been steadily downgraded and reportedly recently ceased to exist as a design authority as a result of a decision reached at meetings held by Treasury Board and DSS senior management, a decision allegedly having been taken without any input or discussion with this important and prestigious design group who were never invited to the meetings.


Mr. Speaker:: Presentation of such a motion for debate at this time would require unanimous consent of the House. Is there unanimous consent?


Some hon. Members:: Agreed.


Some hon. Members:: No.


CANADA COUNCIL
Mr. Tom Cossitt (Leeds):: Mr. Speaker, I rise on a matter of urgency concerning the continued giving of Canada Council grants to assist terrorist purposes, and refer specifically to a grant to Pulp Press of Vancouver, publishers of a book entitled "Minimanual of the Urban Guerrilla", by Carlos Marighella, dealing with how to commit assaults, raids, ambushes, murder, sabotage and kidnapping; and another book entitled "Anarchists Peril", by Augustine Hamond, which follows the type of terrorism of the Italian Red Brigades. I move, seconded by the hon. member for Winnipeg South Centre (Mr. McKenzie):
That the methods of deciding on Canada Council grants be made fully public at once, that all grants to organizations, groups or individuals under investigation by Canadian security services be immediately suspended, and that the Prime Minister is forthwith ordered by this House to call a judicial inquiry into the shocking aims, decisions and actions of the Canada Council.


Mr. Speaker:: Presentation of such a motion for debate, pursuant to Standing Order 43, requires the unanimous consent of the House. Is there unanimous consent?


Some hon. Members:: Agreed.


Some hon. Members:: No.
 * *


BELL CANADA
Mr. Stanley Knowles (Winnipeg North Centre):: Mr. Speaker, under the provisions of Standing Order 43, and seconded by the hon. member for Sault Ste. Marie (Mr. Symes), I move:
That this House notes that Bell Canada provides extensive telephone service, both local and long distance, completely free for life to its top and highly paid executives, together with free or reduced rates to some 26,000 of its employees, and this House therefore calls on Bell Canada to provide telephone service at half rates to senior citizens and to others to whom telephone service is a necesssity because of health or handicap.


Mr. Speaker:: Presentation of such a motion for debate, pursuant to Standing Order 43, requires the unanimous consent of the House. Is there unanimous consent?


Some hon. Members:: Agreed.


Some hon. Members:: No.
May 23, 1978


OFFICIAL LANGUAGES
Mr. D. M. Collenette (York East):: Mr. Speaker, pursuant to Standing Order 43, I request the unanimous consent of the House to present a motion dealing with an urgent and important matter. I move, seconded by the hon. member for Davenport (Mr. Caccia):

That this House joins in commending the Toronto Blue Jays' organization and team for its presentation of Canada's national anthem during the Victoria Day weekend. ..

... thus showing their confidence in a united Canada and in both official languages.


Mr. Speaker:: Presentation of such a motion at this time requires the unanimous consent of the House. Is there unanimous consent?


Some hon. Members:: Agreed.


Mr. Speaker:: The House has heard the terms of the motion. Is it the pleasure of the House to adopt the said motion?


Some hon. Members:: Agreed.


[Stage Direction]
Motion agreed to.
Some hon. Members:: Hear, hear!



ORAL QUESTION PERIOD


Mr. Ron Huntington (Capilano):: Mr. Speaker, my question is directed to the Minister of Supply and Services: it concerns the contracts to 1ST in Montreal. Since there were five companies involved in bidding for the two contracts, one for the Department of National Health and Welfare and the other for Central Mortgage and Housing Corporation, can the minister indicate whether all of the companies bidding were made aware of the additional criteria prior to submitting their bids?


Hon. Jean-Pierre Goyer (Minister of Supply and Services):: Mr. Speaker, first of all I must say to the hon. member that my department did not call for tenders for Central Mortgage and Housing Corporation. The latter attends to its own needs. As for the Department of National Health and Welfare, I
Oral Questions
have already answered that question, I believe, giving all the necessary details. My parliamentary secretary also answered the question, and I indicated quite clearly that of the five companies, three were highly qualified technically. The three made similar bids. So, it was a matter of deciding, according to other criteria, who would be awarded the contract. That is when I applied the criteria for ensuring a better distribution of government purchases among the various parts of Canada. I have done so for the west and for the maritimes and am doing so now for Quebec. That is one way of achieving the objectives Parliament itself has set. When parliament approved my budget, it accepted that socio-economic considerations occasionally, and exceptionally, apply. That explains what happened.


Arthur Ronald Huntington: Mr. Speaker, my supplementary question concerns government policy in connection with the award of computer contracts. Testimony before the public accounts committee has revealed there are some 17 computers within the Department of Supply and Services' system and that there is available capacity at the moment. Can the minister explain why the government, in this period of restraint, persists in seeking outside computer facilities when its own hardware is perfectly sufficient to fulfil services of this type?


Jean-Pierre Goyer: Mr. Speaker, the hon. member's information is somewhat outdated. There was a time when the department had an over capacity. This is no longer the case and we are using our computers in a most economical and profitable way. As to the policy of purchasing outside the government cheaper and more efficient services, I am not telling the House anything new when I say that such is my department's policy, a policy which I feel is a good one. We intend to pursue this policy because we feel that it benefits the Canadian taxpayers.


Arthur Ronald Huntington: I have to advise the hon. gentleman that testimony before the public accounts committee has shown that an updated program could make all kinds of capacity available within the government's computer system. The minister has mentioned the need to apply socioeconomic criteria when considering the allocation of computer contracts. When 78 per cent of those contracts are for Ontario and 15 per cent are within the province of Quebec, can the minister advise us how these criteria can apply to the other eight provinces which are trying to share the remaining 7 per cent?


Jean-Pierre Goyer: Mr. Speaker, I did not say that I was making exception in the case of computer data processing contracts for socioeconomic considerations. Such considerations apply to all government contracts, but in fact in a most exceptional way-
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May 23, 1978
Oral Questions


Mr. Clark:: Most exceptional!


Jean-Pierre Goyer: -indeed, in a most exceptional way. I said that they were applied under certain circumstances to the benefit of western Canada, and if the Leader of the Opposition is against that policy, let him say so and explain his policy to western Canada. I for one think that it is the government's duty to strike a better balance and to pursue national objectives. If the policy of the Progressive Conservative party is different, the Canadian people will be the judge.


INTRODUCTION OF &quot;SOCIOECONOMIC CONSIDERATIONS&quot; IN COMPUTER CONTRACT BIDDING
Mr. James Gillies (Don Valley):: Mr. Speaker, my question is also to the Minister of Supply and Services. One might applaud what the hon. gentleman says, but I am sure he will agree that the institutions of democracy are ruled by law, not by people. I ask by what authority he introduced the criteria of socioeconomic considerations into the process of calling for tenders.
[ Translation]


Jean-Pierre Goyer: Mr. Speaker, perhaps the hon. member was absent or absent-minded when I answered a few minutes ago. I said that policy was clearly specified and in the objectives of the department and that it is reviewed each year by the committee of the House which considers and approves my departmental estimates. Moreover, it is the objective pursued by my department under the act and we must try to achieve the aims which the government sets for itself. One of those aims is a better distribution of government contracts. But we must keep in mind the golden rule that, in so doing, we must abide by the rules of competition. But when a choice must be made because competition does not make that choice obvious, what criterion must we go by, if not criteria relating to a better distribution of government contracts throughout the country? I think this is quite legitimate.


James McPhail Gillies: I am talking about questions of legality and of propriety which arose during consideration of the awarding of this contract. Was a definition put forward by the government to all bidders making clear what "socioeconomic considerations" meant? There were ten criteria listed for the bidders: "socioeconomic reasons" was not among those defined. Has the government made public a definition, approved by parliament, of what "socioeconomic considerations" means when tenders are being called?
[ Translation]


Jean-Pierre Goyer: Mr. Speaker, I am repeating myself because the questions are the same. But following an analysis of the

tenders submitted by the five companies, when the departmental officials come to the conclusion that three of them are most satisfactory and the prices are similar, how do we make our choice? We could do it in a quite arbitrary way, maybe by tossing a coin. We could also proceed in a more sensible way by following the principles which the government has set for itself and try to alleviate regional disparities. If I had chosen to award the contract myself or if my officials had advised me categorically to award it to one particular company, I would have done so. And if I had used my discretion to pick some other company than the three, let us say one from Ottawa, would the hon. member have asked the same questions under the same conditions, or would he have been satisfied that it was an Ontario company? Personally, I think that one must refer to other objectives and not simply to what the hon. member has in mind, that is mere party considerations.


James McPhail Gillies: Mr. Speaker, let me go back to the Minister of Supply and Services and tell him I would have put precisely the same questions because the issue at stake here is not the general objective; the issue at stake is fairness and propriety in the awarding of contracts. How can the minister say what he says if socioeconomic conditions are not defined? If they are not defined for tenders, how can there be justice, fairness or propriety?
After the Lockheed mess, I would think the minister would want to get these things defined effectively so that we know what they are. If a person is contracting with the Government of Canada, can he go to the Department of Supply and Services and find spelled out in some sort of administrative bulletin a definition of the policy of the government with respect to socioeconomic considerations, what they are and what the government considers them to be, so that if I am bidding or anyone is bidding on a contract, I will know what they are?


Mr. Hees:: It is what Keith Davey says.
[ Translation]


Jean-Pierre Goyer: Mr. Speaker, to be still more specific if the hon. member will listen to me for a few moments, I will say that when three companies are equal, how do you administer the decision process within the department if not by referring to more global objectives, to general government objectives? I wonder just how the hon. member would have decided which one of these three equal companies would be given the contract. By plain patronage, or on the basis of socioeconomic considerations, which are well known to the hon. member and are widely used by the Department of Regional Economic Expansion, and with which I totally concur.
May 23, 1978


FINANCE
[Stage Direction]
ALLEGED SPECULATION ON DOLLAR BY MPs
Stanley Howard Knowles: Mr. Speaker, I should like to put a question to the Prime Minister regarding the serious allegations which were made over the weekend concerning the possibility that a number of Liberal members of parliament and perhaps even some cabinet ministers speculated with respect to the rise or fall of the Canadian dollar. I ask the question because of its serious nature. It is very serious if there is any truth to it, and equally serious if charges have been made without foundation.
In view of the fact that reports indicate that Mr. Michael Pitfield has conducted some kind of an investigation into this matter, and in view of the concern of the whole House about this, will a statement be made to the House on the results of Mr. Pitfield's investigation, or will the matter be referred to one of our standing committees so that it can be sorted out in its entirety?


Right Hon. P. E. Trudeau (Prime Minister):: Mr. Speaker, as you know, we intend to raise a question of privilege on this matter at three o'clock. Perhaps at that time we can state the government's point of view more explicitly. However, I want to tell the hon. member that this kind of insinuation, innuendo and accusation without any substantiation or proof is something which is not only harmful to this side of the House but, I believe, to all those in public life.


Some hon. Members:: Hear, hear!


Pierre Elliott Trudeau: When the hon. member who made these accusations has made this type of accusation before, he generally fails to follow up on a Monday what he has said on a Friday and gets enormous coverage on it. We hope that he will be able later today to either withdraw his allegations or substantiate them.


CONFLICT OF INTEREST LEGISLATION
Stanley Howard Knowles: I thank the Prime Minister for telling us that his side intends to raise this matter at three o'clock. As Your Honour knows, I gave similar notice because I agree with the Prime Minister that the matter is serious, no matter which way it goes.
1 should like to put a supplementary question perhaps to the Deputy Prime Minister. In view of the fact that this kind of thing could not happen, or could not be alleged if we had proper, airtight conflict of interest legislation, can the Deputy Prime Minister say when action will be taken to have such legislation considered by the appropriate committee and placed before the House?
Oral Questions


Hon. Allan J. MacEachen (Deputy Prime Minister and President of Privy Council):: Mr. Speaker, as the hon. member knows, I have had this matter under consideration. In fact, there is a bill ready and if there is a disposition on the part of hon. members to deal with it, I will bring it forward very quickly.


FINANCE
Mr. Adrien Lambert (Bellechasse):: Mr. Speaker, my question is directed to the Minister of Finance. In view of the continuing dispute between Quebec and Ottawa over the remittance of a certain amount of money to the Quebec government, can the minister tell the House whether he has had talks with the Quebec authorities during the weekend over this famous matter of the $186 million to be reimbursed to that province?


Hon. Jean Chretien (Minister of Finance):: Mr. Speaker, last Monday, when the bill was introduced in the House, I spoke over the telephone with the Quebec minister of finance, Mr. Parizeau. He told me that he might phone back, yet eight days have passed since the telephone conversation and I have not heard anything from him.


SUGGESTED MEETING WITH QUEBEC PREMIER TO DISCUSS SALES TAX
Joseph Adrien Henri Lambert: Mr. Speaker, given the present situation, one can look back to the fifties when the government of Quebec adopted its income tax legislation which caused a dispute between the provincial and the federal government. I am talking specifically to the right hon. Prime Minister. At that time, this conflict was settled by a meeting of the two heads of government following two excessively harsh speeches delivered the same day respectively by Quebec Premier Duplessis and the Prime Minister of Canada, Mr. St. Laurent. During the following days, the two men agreed to meet at the Windsor Hotel in Montreal to try and find some common ground between them. Would the Prime Minister be prepared to repeat this gesture and to arrange a meeting with the premier of Quebec before it is too late?


Pierre Elliott Trudeau: Mr. Speaker, I have not delivered any harsh speech, but I answered a similar question last week and indicated that the federal government and I were ready to discuss that question with Quebec representatives, including the premier. But I would remind the hon. member that from the beginning we had very extensive talks with the province of Quebec regarding that matter. Our
80038-66)4

May 23, 1978
Oral Questions
Minister of Finance had talks with Mr. Parizeau for three weeks but unfortunately we never got an answer. At the time of Mr. St. Laurent and Mr. Duplessis, both parties could talk to each other and reach conclusions. Now it is difficult to know where we stand when we try to have talks and the other party does not answer.


EXTERNAL AFFAIRS
Right Hon. J. G. Diefenbaker (Prince Albert):: Mr. Speaker, my question is directed to the Prime Minister. It arises out of the horrifying slaughter in Zaire over the weekend. At the present time, while there is no evidence that Cuban troops were engaged there, nonetheless 32,000-incidentally, transported to their destination by Air Canada-have been acting in such a way as to give leadership in undermining governments in Africa which would lead one to conclude that the leadership of Cuba has been taken over by others in this regard.
A few minutes ago the hon. member for High Park-Humber Valley endeavoured to move a motion to have this question looked into. In view of the utter lawlessness, dangerous to world peace, which has been perpetrated regularly since Angola was occupied by Cuban troops, will the government advise the administration in Cuba that the millions of dollars Canada has given by way of technical assistance and the contributions through the Canadian International Development Association will end once and for all, so that Canada will not be placed in the position of being an accessory to the disreputable international brigandage on the part of Cuba?
Will the Prime Minister give that assurance, because all over the world people wonder why Canada continues to give repeated assistance to a nation which has become lawless internationally?


Some hon. Members:: Hear, hear!


Pierre Elliott Trudeau: Mr. Speaker, something was said in the preamble to the question which I did not quite understand. In some manner the right hon. member linked Air Canada to the presence of troops in Africa. I think this is another of the many unsubstantiated allegations which we hear from-


Some hon. Members:: Oh, oh!


John George Diefenbaker: I will substantiate it right away.


Pierre Elliott Trudeau: It is another of the unsubstantiated allegations which we are hearing constantly from the other side. If the hon. member wants to raise a supplementary question, I am sure Your Honour will recognize him.

As to the substance of the question of foreign aid, I would point out to him that the aid program to Cuba was initiated some years ago under a regime of co-operation with Cuba which began, if my memory is correct, in the right hon. member's day. This program of co-operation began several years ago, before the Angolan incident. It is being brought to termination: the Secretary of State for External Affairs has said so. There are no present plans for any future projects in Cuba. The present projects are either terminated or are on the verge of being terminated.
In so far as concerns representations to Cuba, I would remind the right hon. member they have been made in various circumstances, including by myself to Premier Castro, indicating the degree to which Canada disapproves with horror the participation of Cuban troops in Africa.


Some hon. Members:: Hear, hear!


John George Diefenbaker: Mr. Speaker, that is a typical kind of evasive answer one would expect from the Prime Minister who had a love affair over the years with Castro which began, or at least was participated in by him, by canoe. That is not unsubstantiated. I will go into the particulars, if the Prime Minister wants to hear them.


Some hon. Members:: Hear, hear!


Some hon. Members:: Oh, oh!


John George Diefenbaker: Will he give me the assurance that this love affair will end, that Cuba will be told it is an international brigand, and that we are not going to do anything to assist it by loan, or otherwise make available further funds for the continuance of its aggressive, unjustified actions dangerous to world peace?


Pierre Elliott Trudeau: Mr. Speaker, the hon. member is suggesting that we do things which have been done already: disapprove of the Cuban action in Angola and not continue our foreign aid.


John George Diefenbaker: Done when?


Pierre Elliott Trudeau: As to having a love affair in a canoe, either the hon. member knows nothing about love affairs, or canoes.


Some hon. Members:: Hear, hear!


Some hon. Members:: Oh, oh!


John George Diefenbaker: Mr. Speaker, if the Prime Minister wants proof as to his "canoedling", he can get in touch with the CIA of the United States which entered into the equation and caused him to be denied entry to the United States for years and years.


Some hon. Members:: Oh, oh!


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


Pierre Elliott Trudeau: Mr. Speaker, I just want to-


Some hon. Members:: Order.
May 23, 1978


Gerald William Baldwin: You are up the creek without a paddle.


Pierre Elliott Trudeau: The hon. member has not substantiated his allegations on Air Canada. But I must point out to him that I was denied entry to the United States in the middle fifties. I attempted to paddle to Cuba in 1961 or 1962. Therefore, the CIA is wrong again, if that is where the hon. member gets his information.

[ Translation]


FINANCE
Mr. Roch La Salle (Joliette):: Mr. Speaker, I should like to put a question to the Prime Minister.
He said a while ago that he already had discussions with other premiers and that perhaps communications were smoother then than they are now. I remember quite well, for example, the case of universities when the premier and prime minister at the time had succeeded in finding a solution to a deadlock, and the Prime Minister knows exactly what I mean.
Under the circumstances, in the present conflict and in view of the deadlock between the two levels of governments, would the Prime Minister who is responsible for the administration of Canada be prepared, considering the failure of negotiations by his Minister of Finance, to initiate and arrange a meeting with the Quebec premier to endeavour to find a fair solution for his government as well as for the Quebec government?


Pierre Elliott Trudeau: Mr. Speaker, the Minister of Finance has just answered that question. He tried to arrange such a meeting when he phoned to the Quebec minister of finance on the day he introduced his bill, that is last week or the week before, and he has yet to receive a reply.


SALES TAX-INQUIRY AS TO FORM OF PAYMENT OF $40 MILLION TO QUEBEC
Roch La Salle: Mr. Speaker, the Prime Minister is certainly aware that the Minister of Finance is finding it increasingly difficult to go on with those negotiations. Such was the reason that prompted my question, because many Canadians in my view are concerned, and rightly so, that the minister may not assume responsibility for those negotiations. My supplementary, however, is for the Minister of Finance. Many Canadians I am sure would like to know exactly where the Minister of Finance will find those $40 million he indicated he will be paying the province of Quebec? Under what form and from which account will they be paid to Quebec?
Oral Questions


Joseph Jacques Jean Chrétien: Mr. Speaker, in the legislation that has been put forward, there is provision for the Canadian government, in addition to making fiscal room for the other provinces, to provide compensation because under the agreement entered into with the provinces calling for a 3 per cent sales tax cut over six months, we cannot beforehand determine the exact amount of revenue that will be lost by each province in the process. There is provision in the bill before the House that, if they lose more than the $100 we have recognized as being the normal rate for the tax cut at this point, payments could be made, and we would be using the same provision for the $40 million.


Roch La Salle: Mr. Speaker, I have a supplementary.
In interviews with the Gazette during the weekend, the leader of the Liberal party of Quebec stated about the sales tax that Quebec has just applied its normal jurisdiction by refusing the conditions imposed by the federal government. In the face of such a statement, could the Minister of Finance think a little further and recognize that he made an enormous error, and withdraw his proposal to meet the wish expressed by the leader of the Liberal party of Quebec on this matter?


Joseph Jacques Jean Chrétien: Mr. Speaker, in the circumstances, we offered to withdraw from a taxation field to ensure that the taxpayers in Quebec will not suffer because no agreement can be reached between the provincial government and myself. We do so according to the formula used in 1959 by the universities and in 1965 on the general agreements on the withdrawal of the federal government from some activities. So we follow the tradition which has been applauded in Quebec as being the most normal means in the absence of an agreement between the federal government and the province, namely the withdrawal from a taxation field, and if Quebec wants to increase its taxes, it can always do so because it is its own field.


SALES TAX-INQUIRY WHETHER GOVERNMENT PREPARED TO REIMBURSE QUEBEC $186 MILLION
Mr. Heward Grafftey (Brome-Missisquoi):: Mr. Speaker, 1 have a question for the right hon. Prime Minister.
In view of the declaration of Mr. Ryan, the Liberal party leader in Quebec, that the recent inflexibility of the federal government as concerns the sales tax proposal has greatly encouraged separatism in Quebec, I would like to ask the right hon. Prime Minister if he is now prepared to change his policy of reimbursment for Quebec taxpayers and to negotiate directly with the province of Quebec to give the province the $186 million?


Pierre Elliott Trudeau: Mr. Speaker, since I have not seen Mr. Ryan's statement, I cannot comment on it, but as concerns the suggestion of the hon. member, I would like to say that he is suggesting that the money be paid

May 23, 1978
Oral Questions
to the Quebec government while his chief, the Leader of the Opposition, suggested some days ago that this money be distributed fairly to all Quebec citizens. His party should first of all come to an agreement about the method to be used so as to put an end to the whole matter.


SALES TAX-POSSIBILITY OF WITHDRAWAL OF BILL C-56 AND RENEGOTIATION WITH PROVINCES
William Heward Grafftey: Mr. Speaker, I have a supplementary for the right hon. Prime Minister.
In view of the clear statement by Mr. Ryan that the federal government's position is helping separatism in the province of Quebec, is the government now prepared to support the amendment suggested by the opposition, that is that Bill C-56 be withdrawn for one month and that the proposal be renegotiated with the provinces to correct the situation?


Pierre Elliott Trudeau: Mr. Speaker, if the hon. member could only tell us what we should do after one month! Renegotiate what? If his party had an idea about this, we could at least listen to their suggestion, but they cannot agree amongst themselves about what should be done.


EXTERNAL AFFAIRS
Mr. Andrew Brewin (Greenwood):: Mr. Speaker, my question is addressed to the right hon. Prime Minister. I note that he will be addressing the special assembly on disarmament at the United Nations on Friday next, May 26.
Will the Prime Minister, either before he speaks there or upon his return, make a statement on motions in the House of Commons on the disarmament conference and Canada's initiatives, so that the Canadian Parliament and the Canadian people can participate in a serious effort to reverse the present trends toward immensely wasteful expenditures on arms which are a curse and a scandal to the world as a whole?


Pierre Elliott Trudeau: Mr. Speaker, 1 appreciate the support and the feelings of the hon. gentleman. I would be interested in debating these matters with the House of Commons and, hopefully, gaining support for the position of the Canadian government. I must point out to him, however, that the special assembly of the United Nations will be going on for as long as a couple of months and we would not be able to report to the House on the results of the conference until it is terminated.
If the hon. member wishes, we could debate the subject either on motions or on a special day. The time will be difficult to find as far as special days are concerned, but there are 8 or 10 opposition' days which might be a good occasion to discuss this important subject. We would participate with pleasure.


Francis Andrew Brewin: A supplementary question, Mr. Speaker. I should like to ask the Prime Minister whether it would be possible, after his visit, for him or the Secretary of State for External Affairs to let the Parliament of Canada know the progress and the prospects of this disarmament conference. I fully appreciate his point that a complete report must await completion of the conference, but I hope that we may not be here at that time. In any event, I think the people of Canada would like to know what is going on in this matter that so much affects their lives and the lives of everybody throughout the world.


Pierre Elliott Trudeau: I repeat, Mr. Speaker, that the government is willing to discuss this matter. The hon. member knows that between now and the end of June the government has less than 20 days at its disposal, and every day there arises a suggestion from the opposition that we do certain things with that time. Today the opposition has suggested we should bring back the independence of parliament. The government House leader has stated that he can bring that forward too, but time is limited between now and the end of June.
The hon. member may want to follow my suggestion of doing it on an opposition day, or having me answer questions on the subject from members of the opposite side when I return. 1 would gladly give answers as lengthy as the House permits.


FINANCE
Mr. Gordon Towers (Red Deer):: Mr. Speaker, my question is directed to the Minister of Finance. In defence of the federal income tax rebate to Quebec taxpayers, the Minister of Finance made the unfounded statement that Alberta receives its share in grants to the oil industry, completely disregarding the fact that all Canadians benefit therefrom through lower than world oil prices, thus leaving Alberta out in the cold.
I ask the minister if he is now prepared to admit his error, to amend Bill C-56 by removing the tax refund provision, and to renegotiate this policy in the best interests of Canada's ten provinces.


Joseph Jacques Jean Chrétien: Mr. Speaker, the first day that I talked to the minister of finance of Alberta I said that the scheme of the federal government was to compensate the provinces that were faced with sales tax. Some provinces have a sales tax of 11 per cent, so we wanted to help them to reduce it. I told this very clearly to the minister of finance of Alberta.
At the same time, I said that as they do not have any sales tax in Alberta, there were other provisions in the budget that would be helpful to that province. Evidently the oil tax break that was given to heavy oil and the tar sands will help the economy of Alberta. For that matter, when we decided to do
May 23, 1978

something for incorporated farms, I think per capita in Alberta is where there are the most.


Thomas Gordon Towers: A supplementary question, Mr. Speaker. The provision respecting incorporated farms affects farmers all across Canada. Bill C-56 is one of the most divisive pieces of legislation presented to any parliament.
In light of the fact that senators and members of parliament representing Quebec would ordinarily qualify for the $85 tax refund and, if resident in Ontario for a major part of the year, would benefit as well from the 3 per cent sales tax reduction in that province-having the best of two worlds-why has this government ignored Albertans who pay income tax on much lower incomes yet do not receive any benefit?


Joseph Jacques Jean Chrétien: Mr. Speaker, I have explained many times that we decided to compensate the provinces where there was a sales tax, and in Alberta there is none. The hon. member speaks about people who have a better deal. When he is in Ottawa he pays sales tax, but he does not pay it back home in Alberta.
I do not think this is creating an injustice to the rest of Canada under my scheme. The maritime provinces could not afford to contribute to the cut in sales tax from their own treasury, so I paid the total sum to them because I recognize that there are some provinces richer than others.


SUPPLY AND SERVICES
Mr. Harvie Andre (Calgary Centre):: Mr. Speaker, I have a question for the Minister of Supply and Services which is supplementary to earlier questions asked by the hon. member for Capilano and the hon. member for Don Valley.
In introducing the question of socioeconomic considerations, the minister has introduced a new factor in adjudicating bids for government construction: at least it is new to members on this side of the House.
Could the minister inform the House whether there have been other circumstances where socioeconomic considerations have resulted in a firm being awarded a contract when the other details of the bid such as price, performance and reliability of service might not have indicated such a choice?


Jean-Pierre Goyer: Mr. Speaker, first I must insist on the fact that my department awards the contract to the company which offers the best product at the best price and which complies with the conditions of the tender call. That is the policy of my department. Exceptionally, we introduce the socioeconomic concept. I will give an example for members from western Canada, from Alberta, who are interested in this question. We went farther than selecting among firms with similar bids, in one case we
Oral Questions
awarded a contract directly to a company without calling tenders for manufacturing furniture to satisfy the needs of western Canada where there were no factories which could fill our requirements. We gave a contract to a company from Edmonton. This factory expanded and today it can be competitive on the national market, so much so that three years ago when we called tenders for furniture for the Canadian Royal Mounted Police headquarters in Montreal, this company from Edmonton submitted a bid and got the contract ahead of companies from central Canada, from Quebec and particularly from Montreal. That is a very intelligent supply policy, Mr. Speaker.


Harvie Andre: Mr. Speaker, the minister has not explained to those of us on this side of the House and the public just what socioeconomic factors are and how one introduces those in submitting one's bids. Perhaps we could get some guidance on this if he would tell the House why a company like 1ST, which is headed by a personal friend of the Minister of State for Urban Affairs, was awarded a contract for computer services, when it is widely held that it is incapable of meeting some of the technical performance standards of the other bidders for the contract.


Jean-Pierre Goyer: Mr. Speaker, the remarks of the hon. member are trite and really out of place in this parliament. If the hon. member can tell me how this company was not technically qualified, I am prepared to listen to him, and the same thing goes for the hon. member for Don Valley. Concerning the contract which was awarded, Mr. Speaker, not only was it awarded upon my recommendation but also with the authority of Treasury Board.


PUBLIC SERVICE
Lincoln MacCauley Alexander: Mr. Speaker, I would like to direct a question to the Prime Minister. I am sure he is aware of the study undertaken by the Treasury Board involving overclassification, a study which revealed that in the Ottawa-Hull area, having looked at some 2,000 cases, 16 per cent of them were overclassified. I am sure the Prime Minister realizes this is a very serious matter for those who have been overclassified.
I ask the Prime Minister if it is his intention and that of the President of the Treasury Board to indicate just who those persons are, as the Prime Minister can readily understand that this is affecting morale in a significant way.

May 23, 1978
Oral Questions


Pierre Elliott Trudeau: Mr. Speaker, I do know the Treasury Board is constantly attempting to improve the efficiency and proficiency of government and inquiring into its administration and the administration of other departments. This study is one of such initiatives of the President of the Treasury Board. As far as details are concerned, I would ask the hon. member to hold his question and I will ask the minister to answer it the next time he is in the House.


Lincoln MacCauley Alexander: Following that answer-after all, the Prime Minister does not know everything that is going on in the country-I would put the matter to him this way. There is a study, and there has been some indication that the government is intending to impose red-circling on a massive scale. Would the Prime Minister, when he is discussing this matter with the President of the Treasury Board, also ask him if he would be prepared to see to it that that 1976 study is referred to the appropriate standing committee, perhaps miscellaneous estimates, in order that the whole matter can be looked into prior to any red-circling, given the fact that red-circling was never envisaged to be used in such a massive way as is indicated in today's press? Would the Prime Minister tell the House that he will be pleased to take this matter up with the President of the Treasury Board as well?


Pierre Elliott Trudeau: Mr. Speaker, the President of the Treasury Board is presently appearing before a Senate committee on some of his policies. The hon. member knows the President of the Treasury Board is available in the House almost every day to answer questions. Of course, he appears before committees of this House, notably on his estimates, where the hon. gentleman can not only put these questions but make some proposals of his own, about which he is always very generous.


Lincoln MacCauley Alexander: Mr. Speaker, why cannot the Prime Minister answer my question, or does he want to continue governing in secrecy? I am asking the Prime Minister whether he will see to it that this matter is brought to the attention of the President of the Treasury Board. After all, this matter has hit the fan over the past two or three days. Would he ask him whether he will see to it that the 1976 report is directed to the appropriate committee before further consideration is given to wholesale red-circling? That is all I am asking the Prime Minister.


Pierre Elliott Trudeau: Mr. Speaker, that is all I am answering, and the hon. member does not have to wax indignant over it. I told him I would note his questions and transfer them to the attention of the hon. minister.


An hon. Member:: And keep them under cover.


SMALL BUSINESS
Otto John Jelinek: Mr. Speaker, my question is for the Minister of State for Small Business. In view of our continuing insistence that action dealing with small business problems in this country is long overdue, and because the minister has now had a full week to absorb the latest positive recommendations made during our opposition day last Tuesday, could the minister confirm to this House his intention to introduce much needed incentive-oriented programs to small business along those lines today or in the near future?


Hon. A. C. Abbott (Minister of State (Small Business)):: Mr. Speaker, as I indicated last week, notwithstanding the helpful intervention of the hon. member we have been planning for some time to initiate new programs of assistance for small business. I hope to be able to announce some of them very shortly.


Otto John Jelinek: Mr. Speaker, I am naturally pleased that the minister is finally succumbing to our initiatives and I look forward to his announcements. However, I wonder why small business rates so low with this government that it was virtually ignored in the recent budget and is now looked at as an afterthought.
Could the minister tell us whether we can look forward to hearing him on motions when he makes these announcements in this House, as is customary, or will he follow the recent examples of his cabinet colleagues and the Prime Minister and once again ignore parliament by making his statements outside the House? Which is it going to be? I hope it will be in the House.


Mr. Speaker:: Order, please.


AGRICULTURE
Mr. Bruce Halliday (Oxford):: Mr. Speaker, my question is for the Minister of Agriculture. Since I have only one question, perhaps you will permit me a little longer preamble. The concern of the dairy farmers of Canada for the future of the dairy industry was heightened this past week by three events. The minister was defeated in a live milking contest by the hon. member for Elgin, the official opposition critic for agriculture.
In view of the obvious need to improve the skills of the minister and his department, some concerned constituents in Oxford have asked me to provide the minister with this new gadget for solving dairy problems. The directions read as follows:
This rather complex gadget
Is one you pull and squeeze It's a Dairy-Problem-Solver-
May 23, 1978

Gives answers in a breeze.
Provides the need for tranquil thought
For skim milk, take one udder,
It's 2 for cheese and 3 for cream,
Grab 4 if you want budder.


An hon. Member:: Table it.


Some hon. Members:: Oh, oh!


Mr. Speaker:: Order, please. Does the hon. member for Oxford have a question?


Bruce Halliday: Mr. Speaker, my question relates to the provision of milk and cheese and the other two events which came to my attention last week. I ask the minister if he can confirm that last week at a banquet in the Chateau Laurier, a CN hotel, given by the National Capital Commission in honour of over 250 students from across Canada, no milk was available for those students.


Some hon. Members:: Oh, oh!


Bruce Halliday: Could he confirm that CEMA, the Canadian Egg Marketing Agency, has negotiated a deal with companies such that they now provide this kind of coupon worth 15 cents in a box of-


Mr. Speaker:: Order, please. I gave the hon. member more than sufficient leniency and I think he has overextended it.


An hon. Member:: Come on, Gene.


An hon. Member:: He wants an answer.


PRIVILEGE
[Stage Direction]
MEMBER FOR YORK-SIMCOE REGARDING SPECULATION ON DOLLAR BY MPs
Hon. Ron Basford (Minister of Justice):: Mr. Speaker, I rise on a question of privilege relating to the matter raised during the question period by the hon. member for Winnipeg North Centre (Mr. Knowles) involving statements made on Friday evening, in a Canadian Press story, by the hon. member for York-Simcoe (Mr. Stevens). I regret that having occupied the headlines of the news media for the week end the hon. member is not in his seat today-


Some hon. Members:: Shame!


Stanley Ronald Basford: Mr. Speaker, on Friday, May 19, 1978, a Canadian Press story was transmitted and subsequently broadcast on a number of radio and television stations, as well as published in a number of newspapers, quoting the hon. member for York-Simcoe (Mr. Stevens). The story in part reads as follows, and 1 am quoting from the Canadian Press story as published in the Ottawa Citizen of May 20, 1978:
Privilege-Mr. Basford
Conservative Finance critic Sinclair Stevens says he has been told by bank sources that nine Liberal MP's, including two or three cabinet ministers, have been involved in speculation against the dollar ...
In the interview, Stevens said: We've learned through the banks that nine Liberal MP's played the Canadian market as it was going down ...
Stevens said in the interview that about two or three cabinet ministers were supposed to have been involved. "Presumably they've broken their oath for secrecy" Stevens said.
The seriousness of this story and these statements was underlined by the hon. member for Winnipeg North Centre (Mr. Knowles) who, in his question to the Prime Minister (Mr. Trudeau), pointed out the serious nature of these statements.
For our part, we on this side find that they have no validity. This interview and the unsubstantiated and grave allegations, in my opinion, constitute a question of privilege, and adversely reflect upon members in our capacity as members or as ministers.
There can be no doubt that such untruths are intended to cast doubt on the honesty and integrity of members on this side of the House. In so doing, the hon. member for York-Simcoe has gravely reflected upon all of us on this side. As the Prime Minister in his answer a moment ago pointed out, he has in fact by these unsubstantiated and, if 1 may say so, reckless statements, reflected upon all in public life.
Since making them, he has done nothing to substantiate them, withdraw them, or correct them, except, I understand, to explain that he was fairly "relaxed". I would not think that loose lips would be a desirable characteristic of an official financial critic of the official opposition.


Some hon. Members:: Hear, hear!


Stanley Ronald Basford: He has done nothing to alert the Prime Minister as to the persons involved or the seriousness, or any facts that he may be in possession of. In my view these statements clearly constitute an abuse of privileges of members of the House. If Your Honour so finds, I am prepared to move a motion.
Having had occasion recently to reflect on a number of cases, I think Your Honour will be familiar with the authorities. May I simply quote Erskine May on Parliamentary Practice, nineteenth edition, page 152:
"Written imputations, as affecting a member of parliament, may amount to breach of privilege, without, perhaps, being libels at common law", but to constitute a breach of privilege a libel upon a member must concern the character or conduct of the member in that capacity.
Your Honour recently had occasion to refer to Beauchesne's citation No. 140, and I quote:
The ruling relating to personal reflections occurring in debate may be stated thus, namely: that it is doubly disorderly for any member, in speaking, to digress from the question before the House and to attack any other member by means of opprobrious language, applied to his person and character, or to his conduct, either in general, or on some particular occasion, and tending to bring into ridicule, contempt, or hatred with his fellow-members, or to create ill blood in the House.
Your Honour's citation at page 11999 of Hansard for March 22, 1976, continues:

May 23, 1978
Privilege-Mr. S. Knowles
The House itself has developed a regime or practice which has grown up to protect members who feel themselves aggrieved by an allegation; it is a protection in the form of a challenge that the allegation either be substantiated, explained, qualified sufficiently or withdrawn.
The story that I have quoted, in my view clearly reflects upon members on this side of the House. Without substantiation or facts, it puts all of us under a cloud. There has been no denial, or clarification. It seems to me, Mr. Speaker, clearly a question of breach of privilege, and that the hon. member either has to be specific in his allegation, or withdraw it. As I say, Mr. Speaker, if you find that my submission is in fact a prima facie case I am prepared to move the necessary motion, that the article as quoted be referred to the Standing Committee on Privileges and Elections.


Mr. Speaker:: As the House knows, I received notice of such a question from the minister and as well from the hon. member for Winnipeg North Centre (Mr. Knowles).


MR. KNOWLES (WINNIPEG NORTH CENTRE)-FINANCE-
[Stage Direction]
ALLEGATIONS MADE BY HON. MEMBER FOR YORK-SIMCOE REGARDING SPECULATION ON DOLLAR BY MPs
Stanley Howard Knowles: Mr. Speaker, as you just indicated, I gave you notice earlier today that if this matter was not raised in some other way, I would do so.
Let me say at the outset of what will be a very brief statement that if this were only a conflict between a member of the official opposition and the government, I would stay out of it. I would let the two of them fight it out. However, when this kind of thing can be said and I refer to the charges that were made over the week end by the hon. member for York-Simcoe (Mr. Stevens), it casts a shadow over parliament itself.


Some hon. Members:: Hear, hear!


Stanley Howard Knowles: As I see it, that shadow is cast either way. If there is any truth to the charges, it is a very serious cloud that hangs over us and it ought to be cleared up right away. On the other hand, if there is nothing to the charges, if the allegations are without foundation, that too is a serious thing to happen on the part of any member of parliament. I feel very strongly that the whole question should be referred to the Standing Committee on Privileges and Elections.
As I said earlier, there have been indications that Mr. Michael Pitfield conducted investigations. I am not sure from the reports whether it was some time ago or recently. This concerns not only Mr. Pitfield and the Privy Council office. This concerns us all. If the matter is referred to the Standing Committee on Privileges and Elections, Mr. Pitfield should be called before that committee.
I realize that in the absence of the hon. member for York-Simcoe, Your Honour will not want to finalize this matter today. However, I strongly urge that you give favourable consideration to referring the matter to the committee. By saying that, I am really admitting quite openly that I do not know the facts. I doubt if many members of the House know

the facts. I do not think we can settle the issue by cross-fire in the House, but it certainly does need to be looked into.
Perhaps as a bit of a sideline, I may say that it concerned me to discover that the Toronto Globe and Mail in its issue of yesterday admitted or reported that it had stopped the run of Saturday's paper, after some 26,000 copies had been printed, to remove a story that it had run because it had been told by the office of the Leader of the Opposition (Mr. Clark) that the story was not true.


Some hon. Members:: Oh, oh!


Stanley Howard Knowles: There are times when the papers report things about us that we think are not true, but I do not know of any instance where they stopped a press run because of our appeal. I think that part of the story ought to be looked into by the committee.
I say, Mr. Speaker, we cannot settle the matter here. We could not settle it even if the hon. member were present. It is interesting that he has denied making certain statements, but over the radio certain statements he made have been played back from a tape. I believe the case is clearly one, not for argument and debate on the floor of the House, but for reference to the appropriate committee.
The Minister of Justice (Mr. Basford) has indicated that he would be prepared to move a motion and I suspect that, under the scheme of things around here, he would have priority over me. But in case his motion does not fit the bill and mine does, I am happy to read the motion I would be prepared to make if your Honour found there was a prima facie case of privilege. It reads:
That the allegations reported to have been made recently concerning speculation by Liberal members of parliament, including two or three cabinet ministers, be referred to the Standing Committee on Privileges and Elections for a full inquiry as to whether there is any foundation for such allegations and as to the circumstances under which they were made.
It would be my hope that at a meeting of that committee we might come more closely to grips than we have done as yet with respect to the whole question of conflict of interest and the independence of parliament. It is time we had this place tied up so tightly in these matters that such things as have been charged could not take place and, therefore, that such charges could not be made.


Mr. Walter Baker (Grenville-Carleton):: Mr. Speaker, I want to say how grateful I am to the officials at the Table who were the first to inform me that a question of privilege would be raised today.
The hon. member for York-Simcoe (Mr. Stevens) is not in his place today. He is in his own constituency attending a function which was arranged some time ago and which could not be avoided. He will, however, be in the House tomorrow at which time he intends to have something to say, and I would naturally hope Your Honour would allow him to make a contribution before you adjudicate on the matter. I wonder if I
May 23, 1978

could reserve that right for my hon. friend from York-Simcoe by asking that the matter be held in abeyance until tomorrow.


Pierre Elliott Trudeau: What about the Globe and Mail?


Stanley Ronald Basford: Mr. Speaker, the hon. member for Winnipeg North Centre (Mr. Knowles) has read his proposed amendment into the record, and it might be useful, for the sake of the orderly conduct of our discussion on this matter, especially tomorrow, if I were to read mine as well. I propose to move, if your Honour finds there is a prima facie case of privilege:
That the allegations purported to have been made by the hon. member for York-Simcoe, namely that members of the House of Commons, including two or three cabinet ministers, have been involved in speculation against the dollar and that the ministers have broken their oath of secrecy, as referred to in a Canadian Press story published by the Ottawa Citizen and other newspapers on Saturday, May 20, 1978, be referred to the Standing Committee on Privileges and Elections.


Mr. Speaker:: Order, please. As all members will recognize, it would be quite inappropriate to proceed with this matter in the absence of the member for York-Simcoe (Mr. Stevens). His absence has been explained by his House leader. In these circumstances the least we can do would be to postpone further debate until the hon. member can be here to make his contribution. It would then be appropriate that hon. members who have contributed to the discussion today be given an opportunity to make further contributions after which it can be determined whether a prima facie case of privilege exists.



ROUTINE PROCEEDINGS


[Stage Direction]
(Questions answered orally are indicated by an asterisk.)
Mr. Yvon Pinard (Parliamentary Secretary to President of Privy Council):: Mr. Speaker, the following questions will be answered today: 934, 1,195, 1,203 and 1,357.
I ask, Mr. Speaker, that the remaining questions be allowed to stand.

MR. PAUL GfiRIN-LAJOIE


Mr. McKenzie: 1.	Did the former chairman of CIDA, Mr. Paul Gerin-Lajoie receive retirement or pension benefits from CIDA or the government and, if so, what were the benefits and in what amounts?
2.	Does Mr. Gerin-Lajoie hold, at present, a position in the government and, if so, what is the position?


Yvon Pinard: I am informed by the Department of Supply and Services as follows: 1. During his employment in the
Order Paper Questions
federal public service, Mr. Paul Gerin-Lajoie was a contributor under the Public Service Superannuation Act and the Supplementary Retirement Benefits Act. Upon the termination of his employment, he became entitled to receive at his option either a refund of his own pension contributions, a full pension payable at age sixty, or a slightly reduced pension payable immediately. A full pension is based on 2 per cent of the average of the salaries received during the person's six most highly paid years for each year of credited service. As a matter of long standing government policy, the specific amounts of the benefits payable to any individual are considered confidential.
2.	No.


Mr. Andre: 1.	What is the Crown's precise financial interest in the Canadian Film Development Corporation as administered by the Department of the Secretary of State and on what date was such interest acquired, at what cost and for what reason?
2.	What was the book value of the Crown's equity on the date of acquisition and what is its latest estimated book value?
3.	To date, what is the Crown's total investment, including equity costs, contributions to operating funds, debt forgiveness and what is the Crown's total realized profit from such investment?
4.	In what manner is the Crown's interest represented (a) on the Board of Directors (b) in its senior management?
5.	Did the government make a policy decision in regard to the future disposition of its interest?


Hon. John Roberts (Secretary of State):: I am informed by the Canadian Film Development Corporation as follows: 1. The Canadian Film Development Corporation is a Crown corporation that was created by parliament (14-15-16 Eliz II, c 78, which received royal assent on March 10, 1967). The act set up an advance account for the corporation in the amount of $10 million. In 1971 the amount was increased to $20 million and in 1975 to $25 million. In 1977-78, the corporation began receiving annual appropriations instead of a statutory fund. Hence the corporation is not a private organization of which the government acquired control, but rather a corporation incorporated by a special act of parliament and included in schedule C of the Financial Administration Act.
2.	(a) Not applicable, (b) According to the corporation's latest financial statements, the book value of the Crown's interests, that is "Federal Assets", is $2,849,984.
3.	(a) $10 million when the corporation was created in 1967; $10 million in 1971; $5 million in 1975; $3,343 million for 1977-78; for a total of $28,343 million from 1967 to 1977-78. (b) The corporation recovered $4,390,000 from its contribution to films it financed, not necessarily in the form of profit but as capital recovery.
4.	(a) The members of the board of directors are appointed by the governor in council, (b) The executive director and secretary are also appointed by the governor in council on the recommendation of the board of directors.
5.	No.
Taxation MR. KEITH SPICER

May 23, 1978


Mr. McKenzie: Did the former Commissioner of Official Languages, Mr. Spicer, receive retirement benefits or a pension and, if so (a) what were they (b) in what amount?


Jean-Pierre Goyer: During his employment in the federal public service, Mr. Keith Spicer was a contributor under the Public Service Superannuation Act and the Supplementary Retirement Benefits Act. Upon the termination of his employment, he became entitled to receive at his option either a refund of his own pension contributions, a full pension payable at age sixty, or a reduced pension payable at age fifty. A full pension is based on 2 per cent of the average of the salaries received during the
person's six most highly paid years for each year of credited service. As a matter of long-standing government policy, the specific amounts of the benefits payable to any individual are considered confidential.


Mr. Haidasz: What was the total amount of federal grants to each province and territory for the teaching of minority official language since the inception of the programme?


John (Moody) Roberts: Department of the Secretary of State: Attached is a chart on the assistance granted to second language education at the elementary and secondary levels.
Cumulative
Province	1970-71	1971-72	1972-73	1973-74	1974-75	1975-76	1976-77	Total
			(000's)					
Newfoundland	113,608	168,502	185,087	140,316	230,220	189,797	459,358	1,486,888Prince Edward Island	42,863	50,463	46,508	50,948	50,443	101,995	111,853	455,073Nova Scotia	310,223	349,733	347,621	296,889	458,441	557,950	694,947	3,015,804New Brunswick	218,585	320,759	289,475	291,886	253,447	284,951	648,798	2,307,901Quebec	5,635,954	6,644,155	5,860,970	8,731,620	7,560,566	9,351,686	14,777,074	58,562,025Ontario	3,061,979	4,674,307	3,971,881	4,229,429	3,722,576	5,871,482	7,022,852	32,554,506Manitoba	354,959	465,742	408,601	288,114	449,972	543,396	701,566	3,212,350Saskatchewan	453,518	318,616	348,766	242,650	432,106	461,043	525,797	2,782,496Alberta	579,653	680,007	578,196	410,827	625,501	756,655	832,021	4,462,860British Columbia	834,645	961,907	756,577	817,491	732,359	1,376,833	1,319,737	6,799,549TOTAL	11,605,987	14,634,191	12,793,682	15,500,170	14,515,631	19,495,788	27,094,003	115,639,452
Assistance to second language education at the elementary and secondary levels. (Contributions at a rate of 5 per cent.) For each pupil registered in a second language class, at the elementary or secondary level, the province receives 5 per cent of the average annual cost per capita. The formula takes into consideration the time spent on studying the second language.


Mr. Speaker:: The questions enumerated by the parliamentary secretary have been answered. Shall the remaining questions stand?


Some hon. Members:: Agreed.



GOVERNMENT ORDERS


Mr. Dan McKenzie (Winnipeg South Centre) moved:: That a special committee of this House be established to determine whether the federal tax structure is inhibiting economic growth in Canada and promoting the export of employment opportunities to the United States.
He said: Mr. Speaker, this is a straightforward motion and it concerns a subject the government should have been dealing with long before today. As a matter of fact the serious disparity between the United States and Canada with regard to tax structures was first pointed out in 1966. It is closely tied to a subject which has been raised in the House on a number

of occasions by myself and others-the serious outflow of capital from Canada. There is a brain drain, a business drain, a money drain, and a mass exodus of people. All this movement has been in evidence for a couple of years.
I read some figures into the record on May 17, Mr. Speaker, on research done in nine states, and I pointed out that approximately $6.9 billion of investment money had gone into these nine states, and I asked the question: how much has gone into the other 41 states? What are we looking at? Has $50 billion left this country, or $100 billion? We really do not know, and it is time some committee in this parliament started an investigation into this mass exodus to see what we can do to stop the flow.
I have some information provided by Peat, Marwick on the tax problem, Mr. Speaker, it is very difficult information to obtain. The government does not seem to be keeping any statistical information on the exodus of money and businesses or if it has it is keeping it to itself. We in the opposition have to rely on American newspapers, information from the United States government, and research done by investment counsellors in Canada. I have here some examples set out in detail which show the relative positions, after tax, of individuals residing in New York State and in Ontario, Canada. The date for the examples has been taken from the tax files of two Peat,
May 23, 1978

Marwick files and the information has been simplified somewhat for illustrative purposes.
It is assumed in both cases that the individuals have been transferred to Canada by their employers for a period of more than one year and that their families would also reside in Canada. The housing allowance which the employer pays is an amount to compensate the employee for the higher cost of housing in Ontario and other parts of Canada compared to New York, and the agreed amount is received by the employee in addition to his base salary. The two examples are based on certain assumptions-the employee would file a joint return for his non-working spouse in the United States, each individual has two children under 16 at the end of the year, OHIP premiums are paid by the employers, and 1977 tax rates are used. Also, an employer does not compensate the employee for any difference in tax arising from income which is not employment related, and there is no currency adjustment.
Now, if a United States firm transferred an employee from New York to Ontario and he was receiving a base salary in the States of $19,700, he would need, by way of housing allowance, the amount of $5,328; $384 in the form of OHIP assistance, and $3,968 in tax equalization. He would have to receive a salary of $29,380 in Canada to equal his $19,700 salary in the United States. This means the American firm would have to assist him with a payment of an additional $9,680 in Canada if the employee was transferred here. An American earning $35,460 working for that same firm, who is transferred to Canada, would have to be subsidized in the amount of $18,638. Hon. members can see the vast difference between the two countries.
For an employee to obtain a net disposable income of $15,887 in Canada he would have to be paid $28,996. To obtain a net disposable income in the United States of the same amount, $15,887, all a person has to receive is $19,700. Taxes on that amount in the United States would be $3,813, and in Canada they would amount to $7,781, more than double.
In another comparison, an employee in New York State receiving $19,700 in salary would pay taxes amounting to $3,813. A person being paid the same amount in Canada would have to pay taxes amounting to $7,781.
Hon. members can see how serious is the problem. This problem has much to do with the brain drain and the exodus of capital and business from Canada. That is why we presented this motion. We want to call witnesses, do research in a parliamentary committee, and study our whole tax structure.
There are many other examples which I would like to read into the record. This problem was first highlighted by the Royal Commission on Taxation in 1966. In a document entitled "International Tax Comparisons" the commission stated:
For many Canadian workers, the market for their services is continental, not Canadian. This is especially true for highly skilled and professional employees who are increasingly sought by United States and other foreign employers as
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well as by employers in Canada. The so-called "brain-drain" from Canada has been widely noted and deplored by many observers. We are anxious that the Canadian tax system should not contribute to that drain.
So are we, Mr. Speaker.
Taxes are not the only factor that affects an individual's decision to emigrate from Canada. For example, the persistently large differential between Canadian and United States mortgage interest rates may be as important a factor as taxes for many individuals.
As is emphasized, differences in tax burdens are probably not as important as differences in salaries, working conditions and living costs. For reasons that need not concern us here, Canadian employers generally do not offer competitive salaries and frequently have not been able to offer work as interesting as that offered by United States employers. We are, however, concerned with reducing Canadian taxes on skilled workers and professionals to the point where there are no major tax incentives for emigration to the United States.
I will provide examples of the difference between the income taxes currently paid by taxpayers in equivalent positions in the United States and Canada. The examples will show, in several different situations, the total income taxes paid to all levels of government by a family with two children, both of whom are assumed to qualify for family allowances, and with an income of $12,000 earned by the head of the family. Comparisons will be provided for the average taxpayer earning this amount in the United States and in the Canadian provinces with the lowest tax rates, as well as for the average taxpayer residing in the state of New York and in Saskatchewan. In both of the latter cases taxes are substantially above the average for the respective countries.
As can be seen from the data given in my table, income taxes paid by a Canadian family living in the provinces with the lowest tax rates are even higher than those paid by a family residing in New York State. The differential is especially large for a family living in a house it owns because mortgage interest payments and property taxes are deductible in computing taxable income in the United States.
The examples in my table, which I will read from in a moment, show only the higher taxes paid by a Canadian family with two children at one income level. The percentage differences between Canadian and United States income taxes for different taxpayers with different incomes is given in my next table. In all cases the comparison is between United States taxpayers with average state and local income taxes, and Canadian taxpayers in provinces with the lowest income taxes. The data given in the table thus compare average United States income taxes with income taxes in all provinces other than Quebec, Manitoba, and Saskatchewan. Because 13 states in the United States do not levy any state income tax at all, this comparison is somewhat biased in favour of Canada. In spite of this bias it is apparent from my table that middle income taxpayers pay substantially higher taxes in Canada than in the United States. The difference in taxes arises in part from more liberal deductions in the United States, in part from lower tax rates, and in part from the right of husbands and wives in the United States to file joint returns.
The difference is lowest for a single individual with no dependents who does not claim itemized deductions. Such an individual, on the average, pays less income tax in the United States than in Canada if his income is between $8,000 and

May 23, 1978
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$30,000. If the United States taxpayer lives in a state such as Pennsylvania, which has no state income tax, his income taxes are less for incomes ranging from $5,000 to $30,000.
For a married couple, average income taxes are less in the United States if the couple's income is greater than $7,000, even if only the standard deduction is claimed. However, over 60 per cent of United States taxable returns filed jointly by husbands and wives claim itemized deductions.
I have a few examples. The typical home owner in the state of New York pays an average of $1,419. In Saskatchewan he pays $1,914, or 25.9 per cent more income tax. The average in the United States is $1,318. In all provinces other than Saskatchewan, Manitoba, and Quebec, the average is $1,827, which means that the average in the United States is 27.9 per cent less. The average taxpayer filing itemized deductions in New York state pays $1,529. In Saskatchewan the amount is $1,914, or 20.1 per cent more.
The average taxpayer in the United States filing itemized deductions pays $1,409. In all provinces other than Saskatchewan, Manitoba, and Quebec the average is $1,827, or 22.9 per cent more than in the United States. Hon. members can see the wide variance, and it is time we got down to business and looked at our whole tax structure to see what we can do about lowering taxes so that we can keep Canadians, businesses, and investment money right here in Canada.
The average taxpayer using standard deductions in New York State pays $1,843. In Saskatchewan the amount is $2,178, or 15.4 per cent more than in the United States. The average taxpayer in the United States using standard deductions pays $1,634. In all provinces other than Saskatchewan, Manitoba, and Quebec the amount is $2,060, or 20.7 per cent more than in the United States. The Royal Commission on Taxation also made the following note:
Income taxes include provincial income taxes and old age security tax in Canada, and average state and local income taxes in the United States. They do not include compulsory contributions to government pension plans in either country. In all cases, the percentage difference is calculated using the Canadian tax figure as base.
I have a few other examples which I would like to read into the record. The first is examples of the percentage differences between U.S. and Canadian income taxes. If you earn $8,000 in the U.S. and $8,000 in Canada, you pay 17.3 per cent less in taxes in the U.S. If you earn $10,000, you pay 19.1 per cent less in the U.S. On $12,000 in each country, you pay 22.9 per cent less in the U.S. On $15,000, you pay 27.3 per cent less in the U.S. On $25,000, the difference is 36.6 per cent. No wonder people are moving to the United States.
I have some other comparisons to put on the record. These are more up to date figures. This is a tax equalization table for 1977. If you earn $20,000 in Canada, after all the deductions you pay $3,708 in taxes. On $20,000 in the U.S. you only pay $2,734, or $1,000 less. On $40,000, in Canada you pay on the average $12,369 in taxes, but in the U.S. only $8,472. There are many professional people in the $40,000 bracket, lawyers, businessmen and so on, and on about the same income they

pay approximately $4,000 less in the U.S. That is quite an incentive to go to the United States.
In the higher income brackets, in Canada if you earn $61,000 you pay $23,094. If you earn $54,881 in the U.S., you only pay $13,400 in taxes, or $10,000 less. In what is called the middle income group in Canada, if you earn $27,776 a year you pay $12,377 in taxes. On a similar amount in the United States you pay only $6,198. That means $6,179 less in taxes after all the comparable deductions are made.
Some other examples I have here show that a Canadian earning $29,544 has to pay $9,418 in taxes. On the same amount in the United States he pays $5,317 in taxes which is approximately $4,000 less.
A question was raised a couple of weeks ago about the different tax structures in the two countries, and the Minister of Finance (Mr. Chretien) made a comment regarding the medical and hospitalization costs in the United States. There are private plans there and you can get insurance coverage for medical and hospitalization costs both of which are tax deductible. Also, senior citizens have a social security plan under which medical and hospitalization costs are paid. They are well covered there, and it is not a penalty for them to become sick. You do not become bankrupt when you become sick, but you can claim your expenses in tax deductions. You can pay into private pension plans.
Many firms in the U.S. have their own medical and hospitalization plans. They also have deductions for dental expenses. There is quite an extensive list of deductible medical expenses. People in the U.S. are well covered. I obtained this information from the 1978 U.S. tax guide. We can certainly use these documents for study in committee in comparing the two tax structures.
I have further examples of tax deductions between Canada and the U.S. In the 1977 tax guide you will find information on profit or loss from business or profession, capital gains and losses, supplemental income schedule, credit for the elderly, computation of social security self employment tax, tax computation schedule, and credit for child and dependent care expenses. All these are areas that we can study.
There was a very interesting article in the latest Executive magazine entitled, "Trudeau Played To A Great Hush". It reads:
Executive spoke with columnist Janeway shortly after Trudeau addressed the Economic Club in New York City.
There was little doubt Trudeau wished to impress upon that audience that our economic nationalism is behind us, that his government now sees the value of the private sector, and that we wished to be taken back into the North American fold. Did he convince that audience of powerful business figures?
He played to a great hush.
I don't think anyone here believes that Canadian economic nationalism is behind you. I recently was in Fargo, North Dakota, right under Winnipeg. They tell me there that every week end you can't get a hotel room, and that all the shops that are well stocked are cleaned out by Canadian buyers. That is a lot more potent evidence than a press release to a group of stuffed shirts in New York. This has gone on every week in every border market centre between Seattle and Bangor, Maine.
May 23, 1978

As long as our people see your people flocking down here to buy their preferential merchandise and to park their money, they are not going to believe that economic nationalism is behind you in Canada.
We think, as I see it, the Trudeau visit meant nothing. If you are weak against the U.S. dollar, buddy, you're weak.
There seems to be less worry on Wall Street about Quebec separating. Since you are closer to the Canadian scene than some of those Wall Street people, wouldn't you agree they still have reason to be concerned?
Wall Street's got so much to worry about Wall Street. I don't think it's got Quebec on it's mind. Wall Street can't see beyond Fulton Street, beyond the ferry that goes to Staten Island.
In Grand Forks, North Dakota, they are building a $20 million shopping centre for Canadian visitors. This is a serious situation, but we hear nothing from the government. Actually we are the best boosters of the American economy. It is time we sat down together and found out how we can keep our people here.
Prior to the provincial election in Manitoba last October, financial experts, Peter Jerch and Associates, compiled a list of 19 clients whom they were assisting to move to the United States due to the political climate in Manitoba prior to the change of government there. These people who were moving out of Manitoba were taking some $40 million in investment money with them, and this was going to cost Manitoba 4,000 jobs. We were able to stop this trend in Manitoba with the change of government. Peter Jerch and Associates have done other studies. They are working on behalf of another 30 Canadian businesses which are planning to move to the United States. They are going to take $196 million of investment capital with them. Peter Jerch and Associates say that this will cost Canada up to 17,000 jobs.
The seriousness of the situation is quite apparent. My motion is perfectly legitimate. Certainly we have received no answers from the government in the past year in spite of having addressed questions to the Minister of Industry, Trade and Commerce (Mr. Horner) and the Minister of Finance. Also we have received no answer from the Prime Minister (Mr. Trudeau). This is a serious and dangerous trend, but there is no evidence that the government is doing anything about it. It is time we forgot partisan politics and referred this subject to a standing committee which could start an investigation and study of this serious situation.
U.S. magazines have done a considerable amount of research into foreign investment. One article points out the following:
This year alone foreign interests are likely to reinvest over $2 billion into their U.S. holdings-no small vote of confidence in the U.S. economy.
That is the direction in which they are going.
Last week I mentioned some figures regarding the geographic breakdown of where Canadian capital is flowing. The estimated capital expenditure in the State of Florida is more than $2.5 billion. While Florida is attracting larger amounts of Canadian capital, California has become the second most invested area. To this date over $1.5 billion out of Canadian pockets has ended up in California. Texas and New York
Taxation
comprise the third largest area of investment for Canadians, the figure is $1.3 billion; Colorado is $500 million; New Jersey is $400 million; North Carolina is $400 million; Georgia and Illinois are $300 million. This totals approximately $6.5 billion.
Some of our small businesses and individual investors, as well as our large companies, are moving large sums of money into the United States. For example, Canadian Pacific has moved $185 million to New York. Also 140 Canadian manufacturing firms have moved to the state of New York, taking with them $28.6 million. Union Nationale leader Rodrigue Biron indicated that $4 billion of economic exodus has gone to the United States. As reported in December, 1977, the Financial Times indicated that Cadillac Fairview invested $80 million in the United States. Canada Development Corporation invested $50 million; Bell Canada, $30 million; Inco Limited, $25 million; and Asamera Oil Corporation Ltd., $11 million.
Canada is no longer an attractive country in which to invest. Since 1975-1976 the flow of capital coming into Canada has decreased. Certainly it is most disturbing to read articles in Canadian and United States newspapers with headlines similar to: "Canadians Race to Buy up Florida". Approximately $7.5 million went to a north Miami beach apartment complex; $1.3 million for the Hawaiian Inn. The list is endless. Canadians have invested in businesses, motels, banks, and insurance companies.
Much of the Canadian investment from western Canada is going into Colorado. For example, $11 million was invested in two Denver apartment buildings by Hillcrest Investment Ltd. of Calgary. Canlea, a Canadian investment group, invested $16 million in an 850-unit apartment building in Houston.
I should like to refer to some of the larger takeovers. There was a $70 million takeover by B.C. Forest Products Ltd. of a Minnesota paper company plant; a $140 million takeover of a Revere Copper and Brass Company plant in Alabama by Alcan Aluminium Ltd.; and a $95 million acquisition and reconstruction by Co-Steel of Toronto of a New Jersey plant.
Between the exodus of capital and the serious disparities in the tax structure, it is time for the government to take a responsible stand. I hope we will hear some encouraging words from the government today on what will be done about this serious situation. It is not the purpose of governments to see how much money they can take away from the people. But certainly that is the philosophy of the federal government. I hope we receive some words of encouragement today. Tax reductions will stimulate the economy.
I should like to refer to one proposal which was offered by my party. A tax cut can be financed by a massive cut in federal expenditures, and an increase in federal revenues resulting from increased economic activity. As economic expansion takes hold and the restraint program matures, the federal deficit will grow smaller than would be the case with existing fiscal policies. Cuts in federal spending need be neither economically nor socially harmful. In proportional terms,

May 23, 1978
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the room to cut appears small. In terms of taxpayers' dollars, there is plenty of room.
Notwithstanding ministerial statements about restraint, operating costs have increased by 37 per cent over the last two years. Why has that occurred? If these costs had increased only at the target inflation rates of the controls program, which were 8 per cent, and 6 per cent, federal budgetary spending would be $2 billion lower than it is now.
On February 2, 1978, we presented a motion which would give committees the power to examine all government departments and their expenditures, as well as the introduction of sunset laws. Nothing is being done in Canada about various programs. Once a program is established, whether provincial or federal, it carries on to infinity. Every government program does not have to continue for all time. They should be reviewed, along with the functions of all governmental departments. They should be reviewed to ensure they are still necessary and should carry on. Once a program is commenced-


The Acting Speaker (Mr. Turner):: Order, please, I regret to inform the hon. member that his allotted time has expired. He may continue with unanimous consent. Is there unanimous consent?


Some hon. Members:: Agreed.


A. Daniel McKenzie: In closing, personnel expenditures account for close to 60 per cent of operating costs. These expenditures must bear the brunt of expenditure cutbacks. Firings or layoffs in the public service are not required. A new hiring freeze, in conjunction with a policy of not replacing staff who resign or retire, would reduce on-strength personnel by more than 20,000 per year. Military personnel, prison guards and the RCMP would be exempt. The staff reduction program would apply to the remaining 470,000 in the employ of the federal government.
Further savings can be achieved over the medium-term by sunset laws and zero-based budgeting. Some of the nearly 400 federal Crown corporations can be dismantled, integrated within departments, or sold to the private sector. Non-budgetary or borrowings of Crown corporations must be curtailed, especially where the interest rate does not reflect market conditions.
The only federal department, Crown corporation, or agency which has shown any leadership in attrition has been Air Canada. I heard no objections from anyone in Canada when Mr. Claude Taylor, the president of Air Canada, announced that he was going to implement an attrition program within Air Canada. He reduced the staff by over 2,000 people during the last two years, taking into account deaths, early retirements, and what have you. The net result is a more efficient airline which is making a profit. We should follow the example of Air Canada. When the president of Air Canada announced the attrition program, I heard no complaints from the New Democratic Party or the Liberal party. In fact I received one complaint from an Air Canada employee who did not like where he was being moved. That was the only ruffle I heard. If

it can be done in Air Canada, certainly it can done in the various departments of the federal government. We must get started now.


Some hon. Members:: Hear, hear!


Mr. Max Saltsman (Waterloo-Cambridge):: Mr. Speaker, having listened carefully to the remarks of the hon. member for Winnipeg South Centre (Mr. McKenzie), in conjunction with the previous unfounded charges made against members of the House, I should like to indicate that this is not a good day for the Conservative party.
I found it very very difficult to understand what the hon. member for Winnipeg South Centre was trying to say on behalf of the Progressive Conservative party. He quoted a lot of things, and I presume he intended them to leave some kind of impression or message. As I listened to him I kept thinking that when Sir John A. Macdonald was trying to put this country together he must have listened to people like that. There must have been people who said, "Why create Canada? Things are so much better in the United States. Look how much better off we would be if we stayed with the American colonies instead of trying to create a separate country."
There are obviously advantages to being an American, Mr. Speaker, but there are advantages to being a Canadian as well, and I think the advantages of being a Canadian far outweigh the disadvantages.


Some hon. Members:: Hear, hear!


Max Saltsman: The only conclusion I can come to is that some people say, "Isn't it great to be an American rather than a Canadian" and poor-mouth this country for everything we have tried to do. It may be true that some of our taxes in this country are higher, but it is also true that we have things in this country of which we should be thoroughly proud. To a greater extent than the United States we have brought in programs which have benefited many of the small people of this country.
I sometimes wonder for whom the great Progressive Conservative party speaks. Is it only for the rich? Are there no poor people who vote Conservative? The argument they are making is really an argument against progressive income tax. Let me show by example the kind of virtues they hold up in the United States and encourage us to adopt.
In showing us how much better things are in the United States than in Canada, the hon. member for Winnipeg South Centre used a table-and I think it is fairly accurate-which illustrated that at the $8,000 income level in the United States they pay 17.3 per cent less taxes than Canadians; at the next level it is 19.1 per cent less taxes; at the next level, 22.9 per cent less; at $15,000 income in the United States compared to Canada it is 27.3 per cent less taxes, and at the $25,000 income level it is 36.3 per cent less taxes than in Canada. That is what he is holding up as an example.
May 23, 1978

How else do we read this except as an attack on progressive income tax? Using those figures it is obvious that in the United States the income tax system is better than it is in Canada because in Canada it is too progressive. Mr. Speaker, we are far from having the most progressive income tax system in the world, but it is better than in the United States. The hon. member for Don Valley (Mr. Gillies) says that is not so. He is a learned economist and a scholar, but I do not see what other conclusion can be drawn from this than the conclusion that it is a good thing for the rich to pay less taxes. 1 think it is a good thing for everybody to pay less taxes, but let us be honest in this debate. The extent to which the rich pay less taxes is the extent to which the poor have to pay more. There is no such thing as tax avoidance. If some people avoid or do not pay taxes, they have to be made up by somebody else, and that somebody else is at the lower end of the income scale. Otherwise, services must be cut out.
I know the hon. member for Winnipeg South Centre went to some pains-not great pains but some pains, because I think it occupied less than two minutes of his presentation-to say that if the Progressive Conservatives were in power they would have a way of reducing government expenditures, in other words, a way of reducing taxes without hurting anyone. They would do it by attrition and would not cut out essential services. Mr. Speaker, if you look at any budget, provincial or municipal, there is always some fat that can be cut out. An efficient government could do that. Let us be honest, however. Most of the expenditures are in transfer payments; the overwhelming bulk of expenditures at every level of government is the transfer of income from one group of people to another. No matter how efficient you make the administration, no matter how much attrition you have in the staff of that administration, the amount of savings is negligible in comparison to the profits. This does not mean you do not have to do everything you can, but doing everything you can at the administration level is not really going to result in a substantial decrease in taxes.
There is only one way in which taxes can be reduced and that is one thing the Progressive Conservative party does not want to admit, that is, to cut services. If you cut out services you are cutting out the poor.
The Conservative party is showing itself to be the champion of the rich without really caring what happens to those who are not rich. The examples they put forward in this House benefit the rich, not the ordinary citizens, and particularly not poor citizens.
Let us talk now about the brain drain. What brain drain, Mr. Speaker? The brain drain from Canada to the United States? Is there any evidence to support the argument that the brains of Canada are dissolving into the United States? I think there is some considerable evidence that a lot of Americans are coming to Canada because they find it a very attractive place in which to live. I have heard more Americans say they like the way we do things in this country than I have heard Canadians say they like the way things are done in the United States. So what is this brain drain? If the hon. member for
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Winnipeg South Centre wanted to call it a venality drain or a cupidity drain I would go along with him. We have that kind of drain.
Let us take one example, Mr. Speaker. Recently there has been a series of newspaper articles about doctors moving to the United States. Why is this? Are doctors in Canada so poor, so underpaid? Is life in Canada so miserable that they have to move to the United States? Are doctors at the lowest end of the economic ladder here? Surely no one would say that is the case. It may be true that doctors make more money in the United States, and probably is, but there are other advantages that they do not take into account. In the United States it costs a lot more money for a doctor to receive medical training. It costs him more to practice, because of their system.
Why should a doctor, who has been educated in this country at public expense, costing us close to $100,000, say, "I can make more money south of the border?" It is not as though he needs it for survival. Doctors may not be at the top of the income ladder, but they are close. They work hard and deserve it, and I am not critical of them. However, if we are going to match the incomes of the United States for our doctors, is the Conservative party then prepared to say that medical costs in Canada should rise? After all, the chief cost of medical care is doctors' salaries and the things that surround doctors' incomes.
Hospital services and medical services cost much less in Canada and are of equal quality to those of the United States. Part of the reason for this is that our doctors are not paid as much, part of the reason is that our hospital services are more efficient, and a great part of the reason is that we have a national health system.
What does a national health system mean? Is the Conservative party saying that we should abandon our national health system and that people should pay privately? If they are not saying that, then they are saying we should raise taxes in order to pay for those high incomes that doctors in the United States are earning, and if we want to keep doctors in Canada we will have to pay. They are not talking about cutting services because the bulk of services is paid through the national health scheme-hospital insurance programs and medicare services. Are they saying they are going to raise taxes? That is the implication they are leaving with us. They do not want to say that, but it is the obvious conclusion.
Those doctors who are so ungrateful to this country and who have forgotten how much it costs Canada to provide them with an education and an opportunity, and who want to go to the United States because they can make a few more bucks-the Americans are welcome to them. I do not want them. That is all they care about. It is not a brain drain, it is a venality drain. If their system of values is oriented only to how much money they can make-most doctors are not like that, at least the doctors I know are not-but those few who are, if that is all that life means to them, to shop around to see which country will give them a few bucks more, that country is welcome to them. I have no regrets at losing them beyond

May 23, 1978
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saying that we should make these doctors pay back what it cost us for their education-


Mrs. Campagnolo:: Same as New Zealand.


Max Saltsman: That is right. Brain drain! That is not a brain drain. It is always popular to argue that we should lower taxes. There are occasions when all of us have to argue that as politicians. It is a worth-while objective to lower taxes. But we should not use those kinds of arguments on the basis of arousing expectations or being dishonest in terms of how that can be done.
I want to take a more specific look at some of the things that the hon. member for Winnipeg South Centre was saying. He was talking about executive salaries. Executives get all kinds of benefits in the United States which they do not get in Canada. Is there one shred of evidence that Canada is short of executive talent? Is there one shred of evidence to suggest that the benefits they get in the United States have deprived this country of the ability to direct its affairs and its economy, and to create a fine society? There is not. I know many people in Canada of the highest calibre. I have matched them against their counterparts in other countries. They know they can get a few dollars more by going to the United States. But they do not care. These people think it is worth while to live in Canada. I do not see any evidence that there is any shortage of brains or talent in this country because of the differences in the tax system.
Those people for whom money is so important that they will switch loyalties and switch nationalities, and bounce around looking for the big take, I say those countries they go to are welcome to these people. There is enough of the others in this country to make sure that we do not have to worry about them.
Not once throughout the intervention of the hon. member for Winnipeg South Centre did I hear him say a good word about Canada-a good word about some of the things we have done in this country-so that the picture is not one-sided and it does not look as though everything the Americans do is good and everything we do in this country is bad. We do a lot of bad things in this country. I wish we had a much better government than the one we have. But judging from what I have heard today that government will not come from the Conservative party. That party would not make a better government. That is just an offset.
How about some of the things we have done in this country? Is there nothing that the Conservative party can find that is good in Canada? Is medicare not good? Is hospital insurance not good? Are old age pensions not good? Is family allowance not good? Is DREE not good? None of these things are good-


An hon. Member:: Let us have some honesty.


Max Saltsman: The hon. member for Winnipeg South Centre says that I am the one who is dishonest. I would like to sit down, if I may, and give him a chance to say in which way I

am dishonest and in which way the arguments I am putting forward are not correct. I ask him for some sense of balance so it does not look as though we are some kind of a pariah country where nothing is any good, and where the only thing in life that is important is taxes.
If I were an archaeologist, and I was in some dig and I wanted to know something about a civilization, the one thing I would hope to find would be the tax tables of that civilization. Those tax tables would tell me something about that civilization. They would tell me what that civilization valued. If one saw a progressive tax table, one would say that that civilization cared about the poor. On the other hand if one saw a regressive tax table, one could conclude that that civilization was run for the benefit of the rich. When history digs up the tax tables of our two countries, if they could ever be understood, it will be apparent, even with all the faults in this country and with some of the higher taxes in Canada, that we have built a more sensitive, intelligent civilization than our friends across the border. The poor in this country benefit more from this civilization than the poor and disadvantaged in the United States.
As a politician and member of this House I am proud that our civilization is that different. The founders of the Conservative party, Sir John A. Macdonald and the people who had the vision to want to create a different kind of society, would also have been proud to see the gamble and the chance that they took to try and create a different kind of civilization worked out, that we did create something worth-while by being independent and separate even though it cost us something in taxing the rich.
Let us talk about the flight of capital. One can argue, as the hon. member for Winnipeg South Centre argued, the reason that capital is flowing to the United States is that the tax system is better in the United States. It does not occur to the hon. member that perhaps the reason capital is flowing to the United States is our tax system is too good to the rich in Canada. There is evidence to suggest much of the capital flowing out of Canada is not because of lower taxes in the United States but because we have enabled people with income to save so much that they do not know where to invest it any more, that the level of savings in this country is too high in the business and the private sector.


Some hon. Members:: Oh, oh!


Max Saltsman: This constitutes an area of mirth for my friends to my right. The evidence is startling. We have been too generous in this country to those people who have money. An example that was given illustrated that people in higher income brackets, where the husband and wife are working and making a great deal of money, saved a lot of tax in the United States. Should they? We have a number of examples of senior civil servants or senior business executives where husbands and wives are both working and making large salaries. How much solicitude should we have for them? They still have lots of money after they pay their taxes. There is evidence that we are saving more money in this country than we have ever saved

May 23, 1978

before in our lives. We are doing it because of an over-generous tax system.
We were the last country, as far as the western industrialized world was concerned, to introduce a capital gains tax-


An hon. Member:: France.


Max Saltsman: France? We were the last country. The United States had it long before we had the capital gains tax. What was the consequence-


The Acting Speaker (Mr. Turner):: I regret to inform the hon. member his allotted time has expired. He may continue if there is unanimous consent. Is there unanimous consent?


Some hon. Members:: Agreed.


Max Saltsman: I would like to thank my colleagues in the House. I will be very brief and I will conclude the capital gains example.
One reason this country lost so much of its industry to foreign investors was not because our tax system was tough but because it was too easy for them. The absence of the capital gains tax meant that the businessman who could sell his industry to a foreign investor could take all his money without paying any tax at all, whereas if he operated his business he had to pay tax. Faced with that kind of solution, many Canadians simply sold out because our tax system was so soft, easy, and solicitous that it encouraged them to do so.
You can have tax systems that are too onerous. All members of parliament, in fact all politicians, have to be conscious of that. You can also have tax systems, as we have in this country and even more in other countries, being too generous to those to whom there is no need to be that generous. One of the problems in this country has been that we have been too generous to the well-to-do.
The message we get today from the Progressive Conservative party is that if they were in office, following the American example, they would be even more generous to the rich than this government.


Mr. Bill Kempling (Halton-Wentworth):: Mr. Speaker, 1 thought there would be a speaker from the other side coming on, but I will be glad to contribute to the debate at this time.
Before getting into my main remarks, and while he is still in the House, I was hoping the hon. member for Waterloo-Cam-bridge (Mr. Saitsman) would explain to the people why he has bought, or is a major shareholder in, a motel in the United States, and whether he is being greedy, venal or whatever, and whether it is cupidity. As usual, he is speaking out of both sides of his mouth.


Harvie Andre: He has too much money.


William James Kempling: We should tax him more so he will not have money left to invest in the United States.
Taxation
The motion put down by my colleague, the hon. member for Winnipeg South Centre (Mr. McKenzie), reads:
That a special committee of this House be established to determine whether the federal tax structure is inhibiting economic growth in Canada and promoting the export of employment opportunities to the United States.
1 think that is a very responsible motion. We have a million officially unemployed. We have approximately another 400,000 unoficially unemployed in that they are not entitled to benefits.
There is a large number of graduate students who will be leaving our universities and coming into the labour market. There are a number who are leaving our secondary institutions who, for one reason or another, have decided not to go on with their education. They are going to be added to the unemployed.
What we are really talking about in this motion is whether our tax structure is inhibiting economic growth. I think it is. There has not been this flight of industry to the United States for nothing. They have gone there for reasons, but not the reasons given by the hon. member for Waterloo-Cambridge. Can you imagine anyone being so silly as to say they went to the United States because the tax benefits are too good for them in Canada? Can you imagine that? That has to be the most illogical reasoning I have heard as long as I have been around.
When we look at why some of these plants have gone to the United States, we must look at some of the difficulties our companies have had here in Canada. The DISC program in the United States is a clear example. There has been an erosion of industry in Canada, moving to the United States, ever since the DISC program has been in place.
We hear, as we heard in January when some of us visited the United States, that the DISC program will be discontinued. We will have to wait and see whether it is or not. However, it would be worth while to have a committee of this House do a comparative study on the federal tax programs and a parallel study of the provincial tax programs as opposed to the state programs in the United States.
What is going on today is a barter. We saw it recently in Ontario when the state of Ohio gave some taxation benefits to one of the automotive companies to put a plant there rather than in Ontario. As a matter of fact there is quite a strategy being developed by many of the southern states of the United States to attract many Canadian companies there.
In my own small company, I have four letters on my desk from southern states which are inviting me to move my company or establish a business there. They are offering tax benefits from the state, forgiveable tax from the municipality, capital tax allowances, or assistance with the construction of plants. They offer to subsidize wages if we employ people who are unemployed and teach them skills and so forth. This is a concerted program on their part. For that reason, and no other, it would be worth while for this House to look into the discrepancies between the two taxation systems in Canada and the United States to see what can be done.

May 23, 1978
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My colleague from Winnipeg South Centre listed several companies and gave several examples of companies and people who have taken money out of Canada and invested it in the United States. They are from every Canadian province.
I wish to quote from an article that appeared in the New York Times a week ago Sunday. The heading is "French Canadians in Florida". I quote:
In south Florida, some real estate men estimate that French Canadian investors have spent more than $500 million in the last three years; a company controlled by Canada's Hudson's Bay Company recently announced that it would Finance half the cost of a $1 billion new town of 50,000 people in Dade county.
Canada's Olympia and York Development Ltd. recently bought eight New York city office buildings for almost $350 million, and has made several other acquisitions in this country.
It went on to name another Canadian company, Nu-West Development Corporation Ltd. of Calgary, which recently paid $16 million for 2,000 acres of undeveloped land overlooking the coast at San Clemente, south of Sacramento, near the home of the former president, and recently offered to buy 80 per cent of a major Phoenix homebuilder. If further states that Canadians in Sacramento bought a hotel for some $4 million.
From coast to coast Canadians are moving their money, for one reason or another. It may be the tax rates. I cannot comment. I would have to look at each individual case to determine whether that is correct. However, it is the general temper in the country.
The hon. member for Waterloo-Cambridge mentioned doctors. I thought his comments were very unfair. In my constituency a number of doctors have already left or are in the throes of leaving. One of them circulated a letter, in which he said in part:
Unfortunately I Find it necessary for the future welfare of my family, especially my children, to emigrate to the United States. Some time this summer we will be moving to-
He then names a place in Texas. The letter continues:
I am a fifth generation Canadian and grew up in a society which valued free enterprise and industriousness. In the last decade our government has become a democratic socialistic government, and individuals and industries who have shown initiative and made profits and expanded have been denigrated by the public and government alike.
It goes on to tell why he is leaving Canada and going to the United States. I have a letter here from another doctor, a copy of which was addressed to me. I quote:
The Joseph Brant Memorial Hospital is being threatened by a mass defection by its medical staff to the United States.
It goes on to describe the difficulties hospitals are experiencing. People are leaving for the United States for various reasons.
The motion my hon. friend has put down asks that a committee of the House be empowered to look into this whole question and make recommendations to the government about what could be done to halt the flow of capital and people from the country. A few years ago we were encouraging U.S. industries to come to Canada-whether this was right or

wrong depends, I suppose, upon which part of the political spectrum one happens to belong to. Some of those industries came here because by doing so they were able to enter the Commonwealth market. The pattern of development which disturbs me is this: they have pulled their operations out and chosen to return to the United States keeping only a shell here, a corporate presence. All the jobs on production, the acquisition of raw materials, transportation and so on, have been transferred south of the border. Why did they go? One reason is, obviously, the incidence of the taxation system in this country. I suppose the capital gains tax was a factor. Then again, they were influenced by legislation in the United States-the DICC legislation was an important factor in many instances. The proposal which the President of the United States presently has on his desk to tax U.S. subsidiaries in other countries on the profits they earn in those countries would, if adopted, no doubt draw more of these companies back.
My hon. friend's motion is really a plea to the government. Why cannot members from all parties discuss this subject in committee, hear witnesses, draw conclusions, and make recommendations? This, really, is all the motion is asking for, not the silly nonsense which was put forward by the hon. member for Waterloo-Cambridge. Every time he speaks we wonder what party he represents; he is a chameleon; he can turn colour from one day to the next.
The situation facing us is serious. We have 1.5 million people unemployed, and the value of the gross national product has to grow if we are to deal with the needs of the labour force. We can only make progress by expanding the private sector. It reminds me, Mr. Speaker, of the book "If This Is Such a Bowl of Cherries, Why Are We In The Pits".


An hon. Member:: Who wrote that?


William James Kempling: That is about as succinct as one could get on this subject.
To return to the security aspect, my hon. friend from Winnipeg South Centre said we have to get our statistics from foreign publications, private analysts, and so on. I would think it would be of major importance to the government to know just how much money had gone out of the country to the United States, why it had left, and what the effect is likely to be on future employment, tax revenue, and so forth. We do not get this information as members of parliament. I would think the Minister of Industry, the Minister of Finance (Mr. Chretien) or whoever was concerned about economic policy would be glad to let a study of this kind go forward and have a committee of the House make recommendations, even if only to the extent of proposing that the situation should continue to be monitored.
Another difficulty which we face is the reluctance of the government to make forecasts of future trends. As a result we must go to the private sector and take a look at the forecasts for the Canadian economy put out by Wood Gundy. They say our gross national product for 1978 is likely to increase by 3.8 per cent followed by a decline in 1979 to 3.2 per cent, and a
May 23, 1978

slight increase to 4 per cent in 1980. This means our growth would not be sufficient to meet the needs of the labour force. Unemployment is, of course, the other factor to be considered. An unemployment rate of 8.6 is estimated for 1978, 9.1 per cent for 1979, and a slight drop to 8.7 per cent for 1980. Those are the forecasts.
This is certainly a subject we should be looking into in committee. The government has enough economists to put forecasts together; there can be no doubt about that. It is likely that for political reasons they do not want such forecasts made. But as a committee, we could ask the representatives of Wood Gundy to appear and question them about the forecasts they have made, the assumptions behind them, and so on. There are many matters which could be discussed in a standing committee, and 1 commend my friend for putting his motion down on the order paper so at least we could prod the government and urge it to take heed of the warning signals. Until the estimates were brought in, the Standing Committee on Finance, Trade and Economic Affairs held few meetings. Once the estimates had been considered we had, of course, the Bank Act ahead of us. We have had plenty of time to look at this, and I think it would have been a very useful exercise for us to have gone through.
I feel that a committee of this type could look at the report of the Royal Commission on Corporate Concentration which came down the other day. We cannot agree with all its recommendations, but there is a tremendous amount of good, hard information there which should be examined. It is interesting that while there were only three or four pages in the report dealing with taxation, it has been given major play in the media. There are many things in that report at which we should be looking. I was interested in some of the comments about "what else could we expect from a business group?" I think anyone with a brain in his head who looks at the terms of reference of the royal commission would expect the report to come out pro-business but, by the same token, 1 defend that to some extent.
The Prime Minister (Mr. Trudeau), various ministers of the Crown, some of our own people, and even members of the New Democratic Party say that the only way we are going to employ our unemployed and stimulate our economy is by stimulating the private sector. The report of that royal commission suggests one way to do that, but that is not the only way. We think priorities regarding corporate taxation could be put into a different order. However, many items in the report would be good information to bring before a committee. It would be good background information, and it would be a good exercise for the committee to study that report. Such a study would probably make better committee members out of all hon. members.


The Acting Speaker (Mr. Turner):: Order, please. I regret to inform the hon. member that his allotted time has expired. He may continue with unanimous consent. Does the hon. member have unanimous consent?
Taxation


Some hon. Members:: Agreed.


William James Kempling: Thank you, Mr. Speaker. I will wind up my remarks very shortly. When we consider the flight of capital, as it is called, and that is just a term, from Canada, the last three years are the interesting ones. The net flow of capital from Canada, particularly in the last two years-$950 million in 1976, and $380 million net outflow in 1977-is what really interests me, and it is interesting to note the climb in direct Canadian investment abroad from $225 million in 1968 to $790 million in 1977, about three quarters of a billion dollars.
We are not suggesting that there should not be investment abroad. After all, there is a normal flow of commerce back and forth. If investment goes abroad for the expansion of a business enterprise, whatever it might happen to be, that is fine. I do not see anything wrong with that. That is a normal flow of capital which should be good, but we are concerned about the fact that much of the capital that is going out now is just closing down Canadian operations and opening up operations in the United States. I suggest that that is not the normal flow of capital. It is more an escape of funds than foreign expansion.
We are concerned when we hear that the Cadillac Fair-view's of this world, along with many others-generally Canadian-are major holders of lands and buildings in New York city. That is something about which we should be concerned. There is a more difficult problem. Arcrad Limited, a small Toronto firm composed of an innovative group of fellows who got together to discuss the production of energy devices such as windmills for farms in Canada, sought funds from the government and from private financial institutions, without success. Arcrad Limited wanted to develop its ideas. A large multinational opened its hands and took the Firm to the United States. That company is now located in Buffalo. It is developing its product there and exporting it back into Canada. That is one of our problems.
In my own constituency the same thing happened. A man invented a device and had it patented and so forth, but he could not sell it in Canada in any great volume, so he went to the largest market in the world, the United States. He introduced his product at a trade show there and took orders he could not believe. He came back to Canada and found that he could not get the funds required to produce his product. I spoke to him. I went to two or three banks with him. He just could not get the thing off the ground. Consequently, his American customers got together and told him they would help him finance his production. They got together with state of New York business development people. A factory was built for him down there, and he was given all kinds of assistance. He is now manufacturing his product in the United States and exporting it back into Canada. These are the kinds of things we are concerned about. Why is it happening?
It is not necessarily happening because of taxation. In this instance there just was not enough venture capital available. That is why my constituent went to the United States. There was not enough venture capital available in this country. He found it in some other place. What can we say to this fellow?

May 23, 1978
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Can we tell him not to develop his invention? We cannot do that. That is not human nature.
I will close in just a couple of minutes. If I wanted to, I could give the names of many people who, when they saw the patent laws which were proposed by this government, decided not to continue with their developments here. They decided that if they were going to develop, they would patent in the United States and export into Canada because they were concerned that they might lose their patent rights if the patent legislation which was proposed by the Department of Consumer and Corporate Affairs had gone ahead. Fortunately, it was withdrawn, and I commend the minister for withdrawing it because it was dangerous. However, there is a great lesson to be learned, and the lesson is this: do not put that kind of information out. When these great studies are put out, they should not be put out under an official cover stating that what is contained in those studies will become government policy. That is where all the damage is really done. The government should have said that those studies were just proposals. The thing should have been down-played.
It should have been made clear that the studies were put out for discussion by industry and by patent attorneys and so forth. Out of that something reasonable might have been the result. However, that was not done. There was a great outcry by patent attorneys and inventors generally. Finally the government realized it was under the gun, and the proposed legislation was withdrawn. It is undergoing a re-write now. I assume it will be re-introduced at some time in the near future. That particular proposal by the government caused numerous companies to hold back investment in this country. The other day we were talking about why we have no research and development in Canada. That is one of the reasons. People looked at that proposed legislation.
My own little company has three devices it hopes to patent this year. One of my directors asked me if we should proceed here or whether we should patent outside the country and come back. I said that we had no alternative, as far as I was concerned, but to proceed here because I thought the patent laws the government will finally come forward with will make some sense.
There is no one thing upon which we can put our finger which explains why companies and people are leaving Canada. It is a collection of things.
In conclusion, I think the motion put down by my colleague, the hon. member for Winnipeg South Centre is a very sensible motion. I think we should support it and establish a committee of this House to look into this matter and report to the government recommending what we can do to bring a more equitable balance to this situation. I thank the House very much for its kind attention.



PROCEEDINGS ON ADJOURNMENT MOTION


The Acting Speaker (Mr. Turner):: Order, please. 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 Fort William (Mr. McRae)-The Canadian Economy-Value of dollar-Effect on Canadian entrepreneurs; the hon. member for Winnipeg North (Mr. Orlikow)-External Affairs-Bell Canada contract with Saudi Arabia; the hon. member for Surrey-WhiteRock (Mr. Friesen)-Fisheries-Arrangements with U.S. on reciprocal fishing.



GOVERNMENT ORDERS


[Stage Direction]
The House resumed consideration of the motion of the hon. member for Winnipeg South Centre (Mr. McKenzie):
That a special committee of this House be established to determine whether the federal tax structure is inhibiting economic growth in Canada and promoting the export of employment opportunities to the United States.
Anthony Chisholm Abbott: Mr. Speaker, I am certainly glad to be on my feet to speak about small business and its importance to the economy, even though it is the second time in a week. I am sorry that I was not here earlier to hear my hon. friends opposite discuss why we should set up a special committee of the House to find out whether our tax system inhibits growth in Canada.


William James Kempling: Read the motion.


Anthony Chisholm Abbott: It reads:
That a special committee of this House be established to determine whether the federal tax structure is inhibiting economic growth in Canada-
I simply want to say, as I said in the budget debate and during the recent opposition day debate with regard to small business, that our tax structure, far from inhibiting economic growth, is one of the most progressive in the world and has gone a long way toward providing a stimulus in the small business area in particular.
Today I am pleased to announce the beginning of new initiatives with regard to small business, one of the most important of which is with respect to the federal sales tax. When the regulations are changed, manufacturers doing a volume of business worth $50,000 or less will not need to be

May 23, 1978

licensed and will not be obliged to pay federal sales tax. This will relieve some 11,000 manufacturers of the obligation to pay sales tax, and I think it will contribute greatly to the development of the small business community in Canada.


Some hon. Members:: Hear, hear!


Anthony Chisholm Abbott: In addition to that, greater flexibility will be introduced in the regulations regarding the federal sales tax, which require that a return be filed monthly on any amount, no matter how small. When the amendments are brought forward, the filing of reports will not be required more than twice a year.


Some hon. Members:: Hear, hear!


Anthony Chisholm Abbott: In addition, the Minister of Supply and Services (Mr. Goyer) has announced certain initiatives which we have worked out with his department respecting the procurement policy of the government. The government will now require all major contractors bidding on government work to provide a subcontracting plan. This will show what Canadian companies will be receiving subcontracts, and thus small business concerns in Canada will be assured benefits under government contracts.


Some hon. Members:: Hear, hear!


Anthony Chisholm Abbott: It might be of interest to members to know that some 41 per cent of all government business in dollar volume terms is done by small business for the federal government. This represents some 84 per cent of the 11,640 small business firms which won contracts. A further breakdown shows that these businesses won 71 per cent of the contracts let in Canada, worth a total of $585 million in the year the study was made. We are determined to ensure that this percentage occupied by small business is continued and will grow. We are certain that the monitoring procedures which will be established through the subcontracting obligation will enable us to know better how much is going to small business.
Also, we are able to confirm through the Department of Supply and Service that a faster payment scheme has been put in operation under DSS and that small business concerns doing business with the government will receive their payments faster.


Some hon. Members:: Hear, hear!


Anthony Chisholm Abbott: Hon. members may know that some 90 per cent of the business done with the government is done through the client departments rather than directly with DSS, so that DSS does not have all the information concerning how fast the payments are being made. But judging from the complaints we have received it is none too fast, so I think those measures go quite a way to assisting small business.
There are a number of other measures which I am able to confirm today. One of them is with regard to the important area of paperwork required by the government. As hon. members are aware, the paper burden that is imposed on business-
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men, particularly small businessmen, is onerous. Statistics Canada will confirm that the merchandising survey done on a decennial basis will be modified. It is estimated that some 265,000 businesses will be relieved of this reporting requirement by 1981.
A paperwork controller has already been active, although this function has only been established in April of this year. He comes from Saskatchewan, and he has already succeeded in dealing with a number of important areas, among them the Small Businesses Loans Act under which the government has hitherto expected banks not only to complete their own borrowing documents but also to fill in government forms which, as might be expected, are complex. Now a change will be made so that banks will have the option of either using government forms or using their own forms. This is a modest but, I think, significant example of the kind of work that can be done in this area.
There are a number of other initiatives with which, I hope, hon. members will acquaint themselves. Tomorrow I will be introducing for discussion in the House a paper concerned with venture capital.


Some hon. Members:: Hear, hear!


Anthony Chisholm Abbott: I hope hon. members will take a good look at it because I think it represents a thorough study of the possibilities of small business investment companies, and I hope it will elicit a great deal of discussion. We hope, when this paper is tabled, it will lead to legislation which can benefit Canadian business ventures. I understand that on Thursday the Minister of Finance (Mr. Chretien) will be making some comments on initiatives to complete the package we are offering for small business commencing today.
I have not prepared a formal speech today because I had not anticipated that I would have a chance to speak in the debate until a little while ago, but I am pleased to give this brief resume. As hon. members can understand, some of these announcements are of a technical order and they refer to a review of the departments' policies. The hon. member for High Park-Humber Valley (Mr. Jelinek) suggested that parliament was the place to make these announcements. Under the procedures of the House, we have been provided with an opportunity today to discuss them. I hope in the weeks to come that hon. members will take an opportunity to look at them and acquaint their constituents, particularly small businessmen, to make certain that full advantage is taken of these beneficial programs.
If one reviews the policies of this government respecting taxation, he will see that benefits have been created. Those who know, as opposed to those who simply talk-


A. Daniel McKenzie: I have all the quotes from the United States.


Anthony Chisholm Abbott: The hon. member for Winnipeg South Centre (Mr. McKenzie) does a good deal of research when he travels around the United States. If he paid a little more heed to the

May 23, 1978
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laws of Canada and some of the policies of the government, he would be better informed and more able to discuss this subject.


Some hon. Members:: Hear, hear!


A. Daniel McKenzie: I was the first one to bring up the subject of venture capital.


Anthony Chisholm Abbott: If that is the case-


A. Daniel McKenzie: I am glad the government adopted my suggestion. Thank you.


The Acting Speaker (Mr. Turner):: Order, please. If the hon. member for Winnipeg South Centre (Mr. McKenzie) wants to pass any flak to the minister, I suggest he should do it from his own seat.


Anthony Chisholm Abbott: Thank you, Mr. Speaker. It is hard to believe the hon. member for Winnipeg South Centre was the originator of the concept of venture capital, or anything else.


A. Daniel McKenzie: Read the record.


Anthony Chisholm Abbott: Perhaps he is correct when he says that he is the first member to refer to venture capital. I will take his word for it.
When hon. members have acquainted themselves with the small business initiatives and the package being offered today, I am sure they will realize, in the relatively short time the government has created and had in operation a ministry for small business, that we have been able, by co-ordinating the efforts of other departments, to provide Canada's small business community with a solid program of which we can be proud.


Some hon. Members:: Hear, hear!


Harvie Andre: Mr. Speaker, the Minister of State for Small Business (Mr. Abbott) has just admitted to the House and to the country the fact that the government has been a horrendous burden on small business.


Some hon. Members:: Hear, hear!


Harvie Andre: That is the message we have been attempting to communicate for approximately four years. The receptiveness of government increases and its obtuseness decreases as we near an election. Now government members are reviewing entire speeches of members on this side, such as of the hon. member for Winnipeg South Centre (Mr. McKenzie). The government is gathering together ideas in order to have something to say prior to facing the electorate.
I congratulate the hon. Minister of State for Small Business. Since these ideas came from my side of the House, I can say nothing else but that they are good ideas. I congratulate him for introducing them. Having admitted that the Government of Canada has been in fact a burden on small business in this country, and having taken a small step today toward reducing some of that burden, I call upon the minister to ask his

colleagues to be open-minded enough to look at the extent to which the Canadian tax system is a burden upon individual Canadians who may or may not operate small businesses.
The motion before us is to have a committee of the House look at the extent to which the Canadian tax system in fact imposes a burden upon individual Canadians, greater than the burden imposed by the United States tax system on its citizens. Also it is to examine the degree to which that is an inhibiting factor in terms of economic growth in Canada. That is a very reasonable approach. Now that the government has admitted it is a burden upon small business, surely it is a small and reasonable step to allow an examination of the extent to which the tax system is a burden upon individuals. That is all this motion requests. It is a very reasonable and responsible motion which should be adopted.
A committee charged with that responsibility could work in a non-partisan atmosphere in order to take a good, hard look at some of the information provided by hon. members in the debate today, and other data which are available. The committee could come up with some assessment of the impact of our tax system upon individuals, where improvements should be made, and whether they should be made.
The spokesman for the New Democratic Party, the hon. member for Waterloo-Cambridge (Mr. Saltsman), indicated in his opening remarks that to talk about the burden of federal government taxation is somehow unpatriotic. If we mention the fact that taxes in Canada are substantially higher for all salary levels than in the United States, that is somehow unpatriotic. To state that other countries have lower tax levels is an unpatriotic act. That is absolutely absurd, because it is not Canada which imposes taxes. It is the Canadian government, this Liberal government, which has implemented the tax regime under which we are living. If anything, criticizing the government is one of the most patriotic things any Canadian can do.


Some hon. Members:: Hear, hear!


Harvie Andre: We live in a superb country. We live in a country which is second to none in the world. We have enormous natural resources. No other country in the world has a similar natural resource base per capita. Only the U.S.S.R. has more in actual amount. Canada has enormous human resources. We have a highly educated population. Anyone in this country can be educated to the total extent of his or her ability. No one is prevented from that. Canada has superb universities, colleges, high schools, technical schools and elementary schools. Those institutions turn out graduates with educational standards, technical competence, and human resource potential which are second to none.
A few years ago Canada had the highest standard of living in the world. Now we place eighth or ninth. Why has that happened? Given our enormous natural resource potential, our very sophisticated and superb structure for improving our human resources through education, and the fact that at one time we had the highest standard of living in the world, why
May 23, 1978

are we eighth or ninth now? What has happened? Why are other countries which have less than us able to outperform us?
Has Canada used up its natural resources? Are we running out of natural resources? Of course not. Have we experienced some natural disasters which have prevented Canada from performing as well in recent years? Of course not. Are Canadians genetically lazier or less productive than Americans, Germans and other nationalities? Is there something inferior about Canadians? Of course not.
Obviously there must be something in our society or our economy which prevents us from achieving the greatness which could be ours. We had that greatness at one time, compared to the rest of the world. It could be achieved again, and even more so. Obviously that opens up the question to what extent is that an inhibiting factor that is precluding Canadians from participating collectively in business, small, medium and large, and from performing as well as people in other countries? For the answer one has to look at the tax system-the way our Liberal government interacts with the economy, the effect of the tax system on our ability to compete, to perform, to grow, to invest and so on. This motion simply suggests that we take a look at that. Surely it is not unreasonable to suggest that a group of duly elected members of parliament examine the situation to see whether we have brought ourselves into a system which is restricting the potential of Canada and Canadians and restricting their opportunities.
The hon. member for Winnipeg South Centre and the hon. member for Halton-Wentworth (Mr. Kempling) gave examples of Canadian companies that are investing in the United States. The hon. member for Waterloo-Cambridge implied that this was unpatriotic and that we were well rid of them, neglecting to mention that he was one of those, having invested in a motel in Florida. The reality is that capital is international, Mr. Speaker, and this capital is going where the opportunity is. It is not unpatriotic.
There is the example of ATCO which is possibly the world's largest manufacturer of temporary shelter. The company is based in Calgary because the owner grew up there. It supplies temporary housing to a growing market throughout the world. Within the last two years it needed to build a new plant in order to satisfy the growing demand by companies engaged in oil exploration in the middle east. The president and chief shareholder of the company lives in Calgary, has no intention of moving away, is as loyal a Canadian as anyone in this House, but he found that building a new factory in Canada would have meant he would be unable to compete in the world market. The choice was either to get the business by building the new plant in Texas, or not get the business. It was not a choice about leaving Canada-it was get the business or not get the business. In the end, Canada lost about 300 jobs and lost enormous trade because this factory was designed to supply the international market. We ended up the losers.
It does no good to say that this was a case of an unpatriotic capitalist who was greedy for money and went to another
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country. It was simply a matter of doing business or not doing business. If it is greedy to be in business, then we need more greedy people so that we can get the business and put our one million unemployed back to work.
One does not need a Ph.D. in economics to discern the cause of the cost difference. It is the tax system. The hon. member for Halton-Wentworth mentioned Nu-West Development Corporation Ltd. which is the largest housebuilder in Canada. It did a comparative study on the cost of building a house in Denver versus Calgary and found there was a 30 per cent difference. A more detailed analysis of the Canadian house found that 40 per cent of the cost was as a result of the direct involvement of the government through the tax system. The difference in the cost of housing in Denver and Calgary can be totally attributed to the different taxation systems. It is not just federal taxes, of course, but also municipal and provincial.
It does the country no good to say that high taxes are a sign of civilization and that if you do not like high taxes you are a disloyal Canadian and we are better off without you. It is time for reasonable people, elected by the people of Canada, to sit down in committee and examine the effect of our taxation system on our economic development. The hon. member for Waterloo-Cambridge said that our high tax system is primarily due to the fact that we have enormous transfer payments and that this is a sign of civilization. We collect the money from the rich and give it to the poor. The reality is that after 20 years of tremendous expansion in transfer payments, the difference between the rich and the poor in Canada is greater than it was. This is shown in the study conducted by the C. D. Howe Institute which indicates that, for all the great progressive modern civilizations the collection of taxes and distribution of taxes, ostensibly to reduce disparity, have actually made the disparity marginally worse. All this has put a tremendous disincentive into the system for people who would like to work for themselves-which is a natural human instinct-which only the most myopic would deny.
We have a marvellous country, Mr. Speaker. We are indeed fortunate to be citizens of this country-a fortune for which if we have not thanked God lately, we should. Realizing that simple elementary fact does not mean that it is unfair or unreasonable to look for improvements. I for one and, I think, the majority of Canadians want for this country and for ourselves, primarily, an opportunity to pursue excellence. We want a country in which excellence is rewarded, in which performance is rewarded, and in which there is a stimulus for better behaviour and better activity. We want in this country a tax system, a set of rules and regulations, an attitude which promotes adjustment, encourages excellence and development. It is living in that kind of atmosphere which is true living. That is what distinguishes man from other beasts-living in an environment where excellence and growth are encouraged. Fundamental to that is the tax system. If there is a tax system which penalizes excellence and performance, which denies reward for effort, then there is less effort.
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There was some pooh-poohing of the notion of a brain drain to the United States. That is nonsense. There is a brain drain to the United States. We are losing people who are going there for what they perceive to be a better opportunity at this point in time. They are not going there for better security or for more room. There is more room in Canada for growth than there is in the United States. They are not going there for better social conditions, because the social conditions in the United States are not better than they are in Canada. They are better in Canada. They are going for opportunity, the opportunity for personal growth.
It is myopic in the extreme to deny that we live on the North American continent. Every year one million Canadians travel to the United States for vacation. To believe that what happens south of the border is something we need not be concerned about, that we need not make these north-south comparisons in terms of taxes and other things, is just insane. With the kind of mobility we have nowadays those comparisons will be made. Those million Canadians holidaying in the United States will make those comparisons. There will be that temptation to leave for the greater opportunity. Indeed some are leaving right now.
We cannot ignore competition from the United States in anything, whether it is lumber, manufacturing, automobiles or people. We have to realize that we are competing. But more important than that is the question of what about the individual Canadian who does his job, performs a certain function, and wants to stay here and will stay here. But when he realizes at the end of the year, when he sees what he has left to keep for himself, he says the society in the United States values the kind of service he provides more than Canada does. What does that do for his sense of nationality and patriotism? So it is not just the competition of the United States, Mr. Speaker, it is the fact that we should understand and appreciate our own citizens and reward them and appreciate their efforts, and appreciate those who perform as much as other countries appreciate their citizens.


Mr. Cliff Mclsaac (Battleford-Kindersley):: Mr. Speaker, the motion put forward today by the hon. member for Winnipeg South Centre (Mr. McKenzie) seeks to establish a special committee of this House, conveniently ignoring the fact that we have been, you might say, in a special committee debating the budget for the last several days and well could be for further days to come. The motion seeks to establish a special committee to determine whether the federal tax structure is inhibiting economic growth in Canada and promoting the export of employment opportunities to the United States.
I suggest the motion implies that Canadian economic growth is losing out to the Americans. In the first place that assertion has not been proven by the hon. member himself in his rather inconclusive suggestions and remarks put forward, or by any other speaker from the opposition benches. Secondly, there is the assumption in his motion that tax structures in the United States are considerably more advantageous and

therefore more attractive to both business and workers in the United States of America.
The hon. member tried to tell us in his introductory remarks that medical care and hospitalization, which costs a good deal in this country to provide and which no group of Canadians and no political party wants to be without, are available in the U.S. at considerably less cost.
His motion conveniently ignores the basic differences in the nature and the scale of the economies of both countries. He seeks to compare only the tax structure. He does not look at the fact, for example, the state of New York in the eastern U.S.A. was roughly equivalent a few years ago to the total Canadian population. For another example, one can cite the state of California on the west side of the United States where there is a population tenfold that of Canada. My hon. friend seeks to compare the two countries without any recognition of this basic fact.
I suggest the motion is a typical Conservative effort, the kind of thing we have heard from members opposite for many months now to downgrade the country and promote the concept they have worked at practically since the beginning of this session on January 23. At that time the Leader of the Opposition (Mr. Clark) wound up his first question in the House on January 23 like this:
I should like to direct a question to the Prime Minister. This is the first day of parliament in 1978, a year which looks like it will become known as the year the country closes down.
That has been the kind of rhetoric and negativism that we have heard for a considerable period of time from members opposite.
My hon. friend is concerned about the civil servants. He has made his speeches here and elsewhere concerning the civil servants of this country. We could go into that topic-if he chooses! I suggest we could leave that one until later. I could perhaps comment on that suggestion of his later on as well.
I want to suggest that the budget of the Minister of Finance (Mr. Chretien) of April 10 is and represents the kind of responsible change in tax structure that this country needs. Perhaps we need more of it, that is true, but hon. members opposite have so far not advanced any additional measures of their own, other than an income tax reduction to further add to the existing deficit about which they continue to express some considerable concern.
The budget of April 10 contained a number of specific measures to deal with economic growth, to promote greater short-term growth, at the same time looking at some of the long-term problems as well. I suggest to my hon. friends opposite that rather than embark on a study of United States tax structures they would be best advised to adopt these measures put forward by the Minister of Finance in his budget just as quickly as possible, and put forward some of their own specific suggestions as well while they are at it. Instead, they have chosen to delay the budget and prolong the debate.
In the course of that they have chosen a new route for the Conservatives. It is not surprising really because any route is a
May 23, 1978

good route for them. They have chosen to side with the PQ government of Quebec, judging by press and media reports. They have chosen not to debate the budget and the changes put forward, but rather to engage in the phony issue at this point in time of provincial rights. This is an issue which was manufactured and put together by the Levesque government in Quebec whose sole purpose in existing as a government is to dismember the country, and we have our friends opposite siding with that government.
One can forgive provincial political parties in Quebec for standing up with the Levesque government on the question of provincial rights. It has long been part of the Canadian political tradition to blast Ottawa, to blast the federal government at almost the drop of a hat, and to oppose federal initiatives, many of which, to varying degrees, could be said to intrude or infringe in some manner on provincial fields of responsibility. That certainly is not new. The Tory opposition fell into that trap. They condemn separatism in one speech in one part of the country, and then slide in others to make Parizeau and Levesque look more or less like Canadian heroes in this tax debate. I make this point to indicate the insincerity of the motion today to come to grips with the federal tax structure.
The April 10 budget of the Minister of Finance contained a move to reduce the provincial sales tax all across the country. It was a good move, one that deserves the support of all parties in this House. That move obtained the support of nine provinces in a joint effort to come to grips with economic problems in this country. I say again that the minister deserves the full support of the House for a very timely initiative on his part. Incidentally, that move was recommended by many economists and economic advisers of a wide variety of political stripes.
I suggest to hon. members opposite that Canadians want more action of the kind contained in the Minister of Finance's budget. Western Canadians in particular prefer action to the kind of rhetoric we have heard today from the hon. member for Winnipeg South Centre (Mr. McKenzie).
Canadians from one coast to another are not interested in any more of the kind of grandstanding we are hearing today, that we have heard outside the House and in previous debates in the House from the official opposition. Putting forward a suggestion to establish a parliamentary committee to study American tax policy is another red herring to propagate the supposed tax advantages of the United States.
I suggest to the hon. member who moved the motion that western Canadians welcomed the changes in the April 10 budget. Indeed, the thrust of that budget was almost entirely directed to the concerns of the industrial development and the concerns of western Canada. There are about six concerns I would like to touch on very briefly as being indicative of the kind of change and policy with which we should be, and indeed the government is, proceeding.
First, there is the provision to increase the tax write-off for research and development, a special allowance to permit a
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deducting from taxable income of 50 per cent of the costs of increases in research and development activity. That will benefit not only the small implement manufacturers and other farm oriented types of manufacturing activity going on in western Canada, but other industrial activity there as well.
The cost of machinery, equipment and other facilities for enhanced capital recovery systems becomes eligible to earn a depletion allowance of $1 for every $2 spent, an increase from the previous $1 for every $3. That move is designed to encourage oil and gas exploration in Canada, Saskatchewan and Alberta primarily.
Another move is the increased limit on the deduction on the depletion earned on certain expenditures on non-conventional oil projects, such as the heavy oil and tar sands projects. It is increased to 50 per cent of total profit. That incentive is designed to bring about development of those programs and large bodies of primarily undeveloped sources of energy in western Canada.
Fourth, the tax-free rollover provisions apply to incorporated family farms. That goes along with the provision which has been there for some time for the unincorporated family farm. Fifth, plants established to upgrade heavy oil will be deemed to be manufacturing and processing facilities. Once again, it will give those plants a better tax advantage and tax breaks.
The final point of particular interest in western Canada is that an additional capital cost allowance will be provided on depreciable railway system assets acquired by railways before 1983. This comes at a time when the government is putting up $175 million this year, with the promise of more money to come, to improve and upgrade not only the rail network but the running stock and other stock, as well as spending associated with rebuilding and upgrading the rail network which is so vital not only to agriculture but to other industries in western Canada. I say again that the April 10 budget certainly has been designed for western Canada. It is one that should be adopted and moved forward.
I want to take a few moments to deal with the question of capital gains tax and the provision to allow the tax-free rollover provision to be extended from the individually owned farm to the incorporated family farm. Someone said earlier today that there are probably more of those farms set up in western Canada than anywhere else.
That move has been endorsed by practically all members of all parties in the House. It will be welcomed by all members. It has certainly been promoted and pushed for by the Liberal party in western Canada, particularly in Saskatchewan and by many provincial constituency associations. I know it has also been sought by farm organizations, members opposite, and others.
It is another modification of the capital gains provisions which came into effect in 1971 at the time of the abolition of estate taxes and a number of other major changes to the income tax structure.
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While I congratulate the minister and his cabinet colleagues for this particular change, I would like to see them go further in terms of modifying the capital gains tax structure. For example, to continue the 1971 valuation for land and other business assets such as buildings and facilities is not realistic in terms of the level of inflation we have had since 1971.
Over the past several years, most tax rates such as income tax and others have been indexed. Indeed, most government spending programs have been indexed. I think specifically of old age pensions, family allowances and veterans pensions. I should say that I concur in the fact that we should continue to index veterans pensions and old age pensions. I am not so sure about family allowances and some of the other programs.
If we are going to pursue indexing and adopting that principle, we should do something about the fact that farm land values across this country, in the western provinces in particular, have increased dramatically since 1971, particularly as the result of inflation. Not all of the increase is due to inflation. The temporary $5 wheat and the strong market demand were certainly a factor in pushing up land values. The depreciation of the dollar is a major factor in that upward change in land values.
The Canadian tax structure in so far as it relates to capital gains should be changed so that the taxpayer is not paying for illusory inflationary gains. Farmers and small businesses in particular will welcome the moves announced in this debate this afternoon by the Minister of State (Small Business) (Mr. Abbott) which will facilitate the operating of their businesses, be it farming or some other business.
I think there should be further relaxation of the provision with respect to the capital gains tax. I acknowledge the fact that last year amendments were introduced and passed allowing people who sold their land or businesses to incur no capital gains tax when the funds realized from the sale were reinvested in a similar business or purchase. That was a good move and one which will go a considerable distance, but I believe it could be extended still further.
Perhaps the idea of a once in a lifetime exemption from capital gains tax is one which we might look at. If a farmer wishes to sell his farm and take up another business, possibly within his own local community, I think he should be permitted to do so. If the tax is not remitted he should be given several years, anyway, in which to make payment. The proposal in the report of the Bryce commission that we should get out of the capital gains tax entirely might be worth considering, at least for a period, so as to stimulate entrepreneurship. I know the report did not go into much detail with regard to the inequalities such a move would create but I believe this whole complex subject of the capital gains tax and the effect it may be having on entrepreneurship and investment should be examined more closely.
I am sure that setting up a parliamentary committee as suggested by the hon. member for Winnipeg South Centre is not the place to begin. A committee is not the best forum in

which to consider complex matters involving the tax structure. It is true there are a few accountants on both sides of the House but basically we are not in a position as members to inquire into specific details of tax law and suggest changes in such a complex piece of legislation as the Income Tax Act. This should not, of course, prevent our putting forward concepts and proposals embodying the changes we would like to see.
In conclusion may I say that it is long past the time when members of the official opposition should begin to turn their attention to restoring confidence in the country and promoting Canada for what it is, one of the great world democracies and an example of how people from different backgrounds and with different histories can live and work together. I submit that economic growth has been inhibited to a much greater degree by the attitude of members opposite, and others like them, than by any tax structure or bureaucratic system. I am not too optimistic that this will happen but I should like to hope that, as a result of this debate, members opposite will change their tune, become more optimistic about opportunities which still exist in Canada and demonstrate their pride in their country.


Hon. Alvin Hamilton (Qu'Appelle-Moose Mountain):: Mr. Speaker, it is fortunate that the luck of the draw allows me to follow the hon. member for Battleford-Kindersley (Mr. Mclsaac). It is evident from the attention the House gave him that we recognize the soundness of his thinking. It was one of the rare occasions I have witnessed in the last few years upon which a member on the government side has come out with a positive and constructive suggestion.
He had to spoil his speech, of course, as any supporter of the government is obliged to do, by praising the budget of April 10. Automatic support of this kind is one of the reasons the Liberal party is disappearing in Western Canada. Young Liberal MLAs in Saskatchewan leave their party, an old, traditional party in the province which for a long time dominated the political history of Saskatchewan, giving as their reason the fact that the party supported whatever the federal Liberal party was doing in Ottawa in spite of the fact that what the federal Liberal party has done to this country in the last ten years has probably made them the champions when it comes to taking a strong country with so much potential and putting the brakes on all the forces which enable it to go ahead.
I prefer to deal with the more positive aspects of the hon. member's speech. He spoke about the case for changes in the capital gains tax. He referred sympathetically to the proposal in the Bryce report. Mr. Speaker, this is the first occasion on which I have heard a member of the Liberal party say a good word about that royal commission. We on this side have been telling the government for a long time-and I have been in a good position to do so since I myself voted in favour of the capital gains tax-that this question should be reviewed as a matter of necessity. It is a brake on our growth at the present time.
May 23, 1978

If the hon. member for Battleford-Kindersley is sincere, that is why he should support the motion now before the House. The Prime Minister (Mr. Trudeau) wants us now to work on economic matters, get away from the fooling around we have been doing in the House for the last ten years and take this opportunity of a year's delay before the election to do some sound work such as we have not done for ten years. I think the hon. member would agree that since parliament is doing nothing about this suggestion of changing the capital gains tax as a result of the apparent opposition of the government, it would be wise for him to show his sincerity as a backbencher by voting for this motion. Let parliament have a chance to look at the tax legislation, get evidence from people who know something about it and then recommend ways in which we believe it could be improved.
The hon. member suggested that we in the opposition have not been coming forward with constructive proposals. All 1 can say is that he has not been reading Hansard very carefully. Idea after idea has been put forward from this side of the House to make our country stronger and better. I propose to talk about one of them today.
Last fall, when the mini-budget was brought forward, I knew the Minister of Finance (Mr. Chretien) was in trouble. He is a well liked, ambitious, hard working young member who was suddenly pushed into the job of Minister of Finance knowing full well that every minister going back to the days of Walter Harris 30 years ago had failed in this job. It was my hope, since he appreciates the value of common sense, that he would have realized that the biggest load on the back of our nation, one which retarded our growth more than anything else and prevented the achievement of our national objectives, is the taxation system developed in the last 40 years. Ever since the war it has been clear that this restrictive tax system has been the heaviest load on all classes of people, rich and poor, in this country.
In my day I have seen young men get lucky breaks. When the oil boom first started in Alberta in 1947 and some people made a few dollars, they realized that because of our tax system they would have to take their money they had earned in the early stages when small companies were able to operate to the United States, form an American company with that money and then come back into Canada to invest it under American tax law. That was not because they were disloyal to this country. It was because, as the hon. member for Calgary Centre (Mr. Andre) pointed out, there was no choice. If you want to go into business, you have to be able to survive. The House has avoided studying this tax system of ours ever since I have been here. On more than one occasion I have criticized heavily the people in the Department of Finance who have systematically followed a mythology of taxation which does not stand up to quantitative analysis.
I am going to give an example of what I am going to propose as a positive suggestion. I would like at least to see a select committee talk about the concept of potential budgeting. I
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spoke about this in the mini budget debate. The minister was very interested; he came over to me to talk to me about it. He said he liked that kind of idea. Later the parliamentary secretary asked me if I would put it into writing, so I wrote a positive, constructive letter to the Minister of Finance. I have a copy of it with me here. I suggested how this could be done and gave more details than I had given in my speech. I finally received a letter from the minister stating, in effect, that the idea was very sound but that it created a new principle, a new precedent. The minister said that I was asking the government to give individuals in Canada the same equity and fairness in the tax system which business gets, and he said the government could not do that because it would erode the tax base. It is not a matter of just reducing the amount of taxes owing to the government; it is a matter of the growth of the country.
For example, a French-Canadian farmer spent $85,000 over a 20-year period to develop a new technique for making every part of an implement go to the same depth in the ground. His name was Jerome Bechard. He happened to live in my constituency. The tax system would not allow him to take one cent of deduction off his farm income for the sum of close to $85,000 spent in developing a new technique for better cultivation, which would have meant many hundreds of millions of dollars each year for the farmers of the west and to any farmer who had the chance of using this big machinery in any part of the United States or Canada.
Last year an American entrepreneur took up this particular invention, which was patented and put into production, and now this French-Canadian farmer is allowed to take all his receipts for the last 20 years and deduct them from the income he makes from the small royalty he gets from the utilization of this invention of his. Thank God he waited and lived long enough to be able to find an opportunity under the tax law to deduct the huge expenses he put into developing his technology.
Another example of potential budgeting can be seen in the fact that we have to convert our country quickly from the utilization of energy from non-renewable resources. The state of the art is such that there are only a dozen or so of these technologies which come close to the economies which are necessary to make them viable. In my speech last November I put forward to the Minister of Finance, in the hope that I could help him, the suggestion that since these things were not presently being made in Canada, it would cost his budgeting nothing to say that, if any person goes ahead and tries these things out on an experimental basis, that individual should be allowed the same exemptions under the tax law that the hon. member for Battleford-Kindersley mentioned: that if any person does research, he should be allowed to write the expense off his income.
The research I am talking about is not the fundamental research. That is already done. Our National Research Council has developed an upright windmill in the wind tunnel here in Ottawa. It has been written about all over the world, but no single company mass produces this windmill for sale to the public even with an 80 per cent write-off for research work. It

May 23, 1978
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has to be the individual who takes it on. If civil servant scientists can make it work, I am sure that two thirds of our farmers can make it work. It runs soundly. If you put an induction motor on the bottom of it, you can pump this power into the power grids and sell your excess power to the power grids; and when the wind is not blowing, you can draw your power back from the power grids. It has been done for years in Wisconsin.
Last October the province of Saskatchewan announced its willingness to do it, but we still do not have that windmill's introduction because of the tax law. I think it is a fairly reasonable idea. It is just as reasonable as the change in the capital gains tax which many hon. members on this side have mentioned and which now has the support of the hon. member for Battleford-Kindersley. It is news when a backbencher of the government supports a royal commission.
All the pundits say that no one dares to support the latest royal commission report because it is pro-business. One of the mythologies of Canadian politics is that to be "with it" you must be anti-business. That has been the curse of both the United States and Canada for the last 30 years. Most people assume a "rip-off' attitude toward business. God knows that business needs to be kicked around, but we cannot get along without it. I suggest that there is a good case to be made, considering all the ideas which have been put forward in this House. We are not getting publicity for them because it is not news to make a constructive suggestion, but let us get our suggestions into a select committee, and just maybe, in its desperation of having to face the people, the government might consider some tax changes.
Our tax system has held this country back. We have had double taxation on corporate income for all the years I have been around here, and long before that. A royal commission now recommends that we stop that double taxation. The Carter royal commission recommended it in 1969 and 1970, but no action was taken. A royal commission recommends it in 1978, and, judging by the sounds we hear from the government benches, we know what will happen to that recommendation.
The government does not want to be caught going into an election ending double taxation on business. Double taxation occurs when a corporation is taxed at the rate of 45 per cent to 50 per cent and then the fellow who has invested and who owns the corporation is also taxed. If one royal commission recommended in 1970 that we get rid of double taxation and now another royal commission recommends it, the same thing will happen as happened in the case of the last four royal commissions on transportation. The government gets busy immediately and hides the whole report on transportation. We have before us now the Hall Commission report. The government does everything to delay it, hoping to get by the election. That is what the budget was for. The deduction of sales tax for six months was designed to get the government by the election, but there is not to be an election. When the six months is up, their tail will be in the fire and the fat will really flow.

I suggest that if the Prime Minister is honest and wants parliament to go to work, then let us set up this select committee. 1 am sure that among the laymen and the few accountants on this side and among the few accountants on the government side there can be found some who could put forward some proposals, because certainly the Department of Finance ran out of ideas 30 years ago after the white paper in 1946.
As for the remarks of the hon. member for Waterloo-Cam-bridge (Mr. Saltsman), let me say that it is clear that here is a man preaching for the call. He wants to join Crowfoot on the government benches. The crow from Waterloo-Cambridge hopes that the Prime Minister will hear the call of the wild and answer his appeal.


Stanley Howard Knowles: That is the ultimate insult.


Francis Alvin George Hamilton: The hon. member is right, it is the ultimate insult.
When I heard the hon. member for Waterloo-Cambridge devote his whole attack to the simple idea of establishing a select committee to examine the tax law and say it was unpatriotic, that we should stay in Canada with the high taxes, and that they support the Liberal government because of their high taxes and because they are a good government, I knew that that man was preaching for the call and has been preaching for the call for a long time. He must be very jealous of the hon. member for Crowfoot (Mr. Horner) for having made it across the way. But what a price he had to pay! Now he has to come along and attack the poor old Conservatives.
We have not been in power since 1963 because the hon. member for Winnipeg North Centre (Mr. Knowles) has steadily led his party in support of the government. He helped defeat the government of the right hon. member for Prince Albert (Mr. Diefenbaker) in 1963. He helped to keep in power the minority government under Pearson, and he helped to keep in power the minority government as well as the full majority under the present Prime Minister. Is that party doing its duty of pointing out the weaknesses in the government so that we get a better government? No, sir; their main financial spokesman attacked the official opposition. I am just warning him. David Lewis destroyed the NDP in 1974. He went up and down this country attacking the Conservatives because he said their 90 days of price and wage controls would ruin the country. He frightened the labouring man in the cities into voting Liberal, and the NDP disappeared out of our cities.
Now we have another member of the NDP wanting to repeat what David Lewis did. You cannot frighten people all the time. When I was a kid, the first time I was on a farm I noticed horses coming up to the water trough. If you jumped out of the pump house and yelled "boo", they all ran. After a while, the horses stopped paying attention to it and they came to the water trough in spite of the shouting and yelling. I want to remind the hon. member for Waterloo-Cambridge that his



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job here is to take each subject as it comes up and look at arguments for or against it. All he did was to attack the Conservatives and make charges that are as silly as the charges made by the hon. member for Battleford-Kindersley (Mr. Mclsaac). We have the right to stand for a certain federal system with the right of the province to tax without being attacked by the government in Ottawa. He stands up and says we support the PQ. How believable is that type of remark?
If the government wants to show that it will make parliament work next year, then let us set up this committee and see what we can do. Let us end this silly political science type of yelling at each other which we heard in one or two disgraceful speeches today. This is a good opportunity for serious minded members of the government to show their Prime Minister that they would like this parliament to work. Maybe we can produce some ideas that will improve this tax system. I repeat again and again that our tax system is not perfect. Our tax system must be competitive with the tax system in every other country, and it is not competitive with other countries at present. It is time to compare our tax system with that of our main opponent in business, namely the United States. Let us see if we cannot produce one that will compete, that will allow capital to flow into this country and allow Canadians as individuals to own this country instead of the large U.S. companies, the way it is now.


Mr. Benno Friesen (Surrey-White Rock):: Mr. Speaker, I am pleased to be able to participate in this debate on the motion presented by the hon. member for Winnipeg South Centre (Mr. McKenzie), which reads:
That a special committee of this House be established to determine whether the federal tax structure is inhibiting economic growth in Canada and promoting the export of employment opportunities to the United States.
I am particularly honoured to be able to speak on this motion following the hon. member for Qu'Appelle-Moose Mountain (Mr. Hamilton), a gentleman who has been in the House for better than 20 years and provided valuable service, not only to the House but to the country. I cannot help but stand here in admiration to the kind of service he has given to the House through the years, having provided leadership in the cabinet of a former prime minister, and now continually providing constructive and fertile ideas to the government party, even to the present Minister of Finance (Mr. Chretien), elaborating on those ideas in order to provide wholesome leadership to our country, and then seeing those ideas turned aside. I admire him for continually coming forward with more ideas to help the country in spite of seeing them taken over by the government. It is no small measure of the man that he refuses to give in to discouragement. It would be natural for an opposition member who has served in opposition for the number of years that this member has served to give way to discouragement. As I say, it is a tribute to this man that he has not given over to that kind of discouragement but that he continues to provide new and vibrant ideas.
I see it is almost six o'clock, Mr. Speaker; may I call it six o'clock?
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Mr. Deputy Speaker:: It being six o'clock, I do now leave the chair until 8 p.m. tonight.
At six o'clock the House took recess.


[Stage Direction]
AFTER RECESS

The House resumed at 8 p.m.
The Acting Speaker (Mr. Turner):: Prior to the dinner hour, the hon. member for Surrey-White Rock (Mr. Friesen) had the floor. He has 17 minutes remaining.


Benno Friesen: Mr. Speaker, it will seem like seven minutes. Prior to the dinner hour, I was complimenting the hon. member for Qu'Appelle-Moose Mountain on his contributions not only to the debates in the House of Commons, but also for the ideas he has presented in his service to the country.
I wish I could say the same thing about the hon. member for Waterloo-Cambridge (Mr. Saltsman). Far be it for me to be partisan in any debate here, but we are debating an opposition motion. The hon. member for Waterloo-Cambridge is a member of an opposition party, but his entire speech was devoted to attacking another opposition party. 1 could not help but conclude that he was like a homing pigeon. No matter how far afield they fly, when the distress signal goes out, they all come home to roost and are all together in the same nest. Just a few weeks ago the New Democratic polls were down by 3 per cent. Obviously he realizes the threat is from the Conservative party rather than the government party, so his duty is to attack the real enemy.
The hon. member for Waterloo-Cambridge referred to the fact that the kind of debate we are involved in today supports the rich to the disadvantage of the poor. I understand a news release came out today concerning Mr. Lewis, the former leader of his party, who was granted an $80,000 donation from the Canada Council to write his memoirs. He is one of these labour lawyers who does not charge the lowest fees.


Arthur Ronald Huntington: A millionaire lawyer.


Benno Friesen: Yes, a millionaire labour lawyer. He needs that $80,000 in order to make ends meet, this poor man from the NDP. He has already received this $80,000 grant, but he has not written his book. He is an example of the poor people the hon. member for Waterloo-Cambridge was attempting to support today. We in the province of British Columbia have had a three-year reminder of what members of the NDP think of poor people. They really hate poverty. As soon as they are elected to office, they double their salaries.


Arthur Ronald Huntington: They purchase $2,000 desks.


Benno Friesen: That is correct. The hon. member for Waterloo-Cambridge indicated that we are not talking about a brain drain when we talk about the talent which is going from Canada to the United States. He indicated that it is a "banal-

May 23, 1978
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ity drain" rather than a brain drain. A few minutes after that, I learned that he is one of the people who has an investment in a hotel in Florida. I suppose he ought to recognize banality when he sees it. He should be careful about using such terms in the House. Apparently he has a limited view of human nature.
I represent a business community in my riding which has worked hard to keep its end of the economy going. Yet in a 12-month period 66 businesses went out of operation. I asked the local chamber of commerce in Surrey to do a count of those businesses which had gone out of business, gone bankrupt, closed their resources, tightened them up, moved to another province or moved to the United States. For one reason or another, 66 companies representing 2,500 jobs went out of business in a 12-month period.
Let us assume some were mismanaged and that some may have been undercapitalized, but surely not all 66. We have to look for some other reasons. The hon. member for Waterloo-Cambridge said it was a "banality drain" if they go to the United States, but maybe it is a survival drain. Maybe these people want to keep their lives, their bodies, their souls together.
I know a young lady just out of university with a talent for designing clothes. She is specializing in designing tennis wear for ladies. She is very creative and loves this business. She started operation in Surrey but has found it very difficult, not because she does not have the expertise or the creativity, but because of tax, regulations and other strangleholds by the government. Out of curiosity she went to the United States and there found the freedom she wanted to expand her business. This is a brain drain rather than a move by some tired businessman who wants to get rich quickly. This is a young person who is creative and has imagination. She wants the freedom of spirit to work with her talents, but she finds the atmosphere in Canada is just too stifling.
The hon. member for Waterloo-Cambridge referred to the number of doctors moving to the United States, and assumed that all doctors who move there to practise medicine are doing so exclusively in order to earn more money. I suggest these are creative people, and naturally they want to earn as much as possible, as does everyone else. But that is not the only reason they are moving. As a matter of fact, a doctor acquaintance of mine who is now practising in Calgary plans to move to Texas. He is not planning to move so he can earn more money but rather because the atmosphere and the incentive in the United States for his profession are so much better.
The Minister of State (Small Business) (Mr. Abbott) made some grand announcements today regarding the freedom the small business community will experience as a result of his changes in policy. He wanted us all to join in singing "Hail the Conquering Hero" because he had brought in some new measures. The Minister of Finance suggests that is what we should be doing right now. Of course, I am sure he will lead us in that singing. This is much like thanking someone who stops

hitting you on the head. This government has instituted a lot of policies that have been oppressive and a blow to businessmen. The minister now says the government is going to take away those oppressive regulations and that we should thank him for doing so. I do not know that we are in a mood for that.
I talked to one of the local businessmen in Surrey this evening about this motion. He gave me the following information regarding differences in taxation policy between Canada and the United States. He said that in Canada there is a small business deduction at the low rate of tax on up to $150,000 a year, cumulative to $750,000. That rate is 25 per cent, but it is assessed on all associated companies. If you go to the United States you will find the same kind of tax, but the tax there is on each $200,000 in a year at the rate of 25 per cent up to $50,000. That seems to be more, but when you realize that it is on up to $200,000 for each company, and the tax is not associated, you will find the tax burden is considerably less in the United States than in Canada, and there is no cumulative clause in that tax policy.
In this country we find that for manufacturers there is a 5 per cent tax credit on capital equipment. This is helpful. It can accrue to $5,000 and represents a deduction from tax payable. In the United States the tax credit is 10 per cent or 12 per cent, plus depreciation, and they are considering increasing it to 17 per cent. Perhaps some will think that is not an incentive for businesses to move from Canada to the United States. Certainly it is not responsible for a brain drain but rather has caused a survival drain. Business people like to stay alive and when they find that kind of difference in taxation policy on small businesses between Canada and the United States they move to where they can survive.
Some time ago this same businessman sent me some of his suggestions. Among other things, he said there ought to be some relief for municipalities from federal government taxation. We all know that the federal and provincial governments have first right to taxation powers and the municipalities get what is left over. For that reason the municipalities get what is left over. For that reason the municipalities use whatever source they can find, such as a tax on machinery. That may be all right when the machinery is operating at 100 per cent capacity, but when there is an economic slowdown, such as we are facing today with machinery shut down for 20 per cent, 30 per cent or 40 per cent of the time, while the tax carries on, this becomes very oppressive and only the sharpest of business people can remain in operation.
This businessman had another observation which I think is worth presenting to members of the House. It is one of those creative ideas the Minister of Finance may want to entertain. Since he likes to adopt those ideas presented by the hon. member for Qu'Appelle-Moose Mountain, perhaps this is an idea he would like to accept. My business friend in Surrey suggests this:
My proposal would be to charge no duty as such at all. Instead each country would be rated by labour standards. The lower the standard, the higher the surcharge. On top of this surcharge would be a direct tax. This tax would be applicable to Canadian products as well as imported.
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This type of taxing arrangement, if the details are worked out right, should be designed to give:
A.	Canadian industry the protection it needs from low-wage areas.
B.	Foreign high-wage countries a better opportunity to compete in Canada with other foreign countries.
C.	Low-wage countries a better chance to obtain a higher standard, because it will become advantageous to get classified in a higher wage category to lower their surcharge.
We are losing our markets to low-wage countries or third world countries around the world. This does not mean that the people we want to help are getting the benefit of those exports to our country. We may be buying shoes from Korea but the people who are making the money are the industrialists, the factory owners in that country; the benefits do not necessarily filter down to the working people.
What my constituent suggests is that if we set up a labour code for all countries of the world, especially applicable to third world countries, perhaps there would be some kind of incentive to those countries to upgrade their working standards, wage standards and conditions in their factories, and pass on the profits from their products to the workers. This idea represents some insight into human nature.
Everyone wants to make as much money as possible. We believe in the incentive system, but human nature is such that too often those who have money get more at the expense of those who are defenceless, particularly the masses in those third world countries. The suggestion this gentleman makes is that we provide a kind of incentive in our country through our import policies in order to encourage manufacturers, industrialists and investors in those third world countries to improve living standards for their workers which would in turn enhance their opportunity to export their products to Canada. If we do not provide that prod, it is not likely that they will do it on their own initiative.
As 1 said earlier, what we need is a proper understanding of human nature. Business people have great incentive, great inventiveness and they want to be rewarded for their work. There is nothing wrong with that but there are many people in this country who regard "profit" as a dirty word. Unconscionable profit, illicit profit, is dirty, but hard won profit is a compliment to the ingenuity, foresight and creativity of our people.
I want to compliment the hon. member for Winnipeg South Centre on putting this motion before the House and bringing to our attention the very serious investment climate which is draining productivity from our country to the United States and taking manpower and personnel south of the border.
[ Translation]


Joseph Jacques Jean Chrétien: Mr. Speaker, the motion now before us gives us an opportunity to outline the comparative performances of the Canadian and American economies as well as our fiscal structures. I welcome this opportunity and I hope that today's discussion will leave us with a better appreciation of the matter. The growing econom-
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ic closeness with the United States has been of concern to all successive ministers of finance since confederation. This is an important issue, because of the sizes and proximity of our two nations, the nature of our resources and respective attitudes, and also the free flow of capitals, goods and services across our common border.
Our two countries are interdependent. Clearly, none of my predecessors has been free to take any decision of economic policy without prior scrutiny of the impact on that economic closeness. For some people, that kind of interdependence is an unhappy or indeed untolerable situation. Such an attitude in my view is neither useful nor realistic. There is no way our two countries can be separated geographically. What we can do, is maintain the largest possible degree of freedom of action, and make the best possible use of the advantages in that huge market down south.
I would like to expand today on the comparative economic performances of our two countries during the last few years. Such differences as may be are the best pointers to our accomplishments and shortcomings in the last few years.
I will continue by dealing with certain aspects of our respective tax burdens. The economic growth curves of Canada and the United States have diverged in the last few years as almost never before. This has generally been in our favour and comes from the fact that most of the policy decisions taken in Canada were good ones. As world oil prices quadrupled in 1973 and 1974, we took advantage of our energy reserves to compensate for higher domestic oil prices. We took action to protect Canadians against inflation and the impact of a world recession. We maintained incomes and production in Canada more successully than they did in the United States. Contrary to what happened in all other industrialized countries of the world, we never had a decline in the gross national product. Real income of Canadians has continued to grow and employment has risen steadily.
Economic recovery in the U.S. was slow in coming, and it is because it was under way that for two years the rate of economic growth in that country was faster than here. That situation came as a result of the fact that the U.S. was coming out of a recession to cover lost ground. Canadian production nevertheless went up by 21 per cent last year over 1972, whereas in the United States it increased only 14 per cent over the same period. Employment in Canada over the past five years increased by 16.1 per cent, compared to 10.8 per cent in the U.S. Real disposable income per capital has risen 24.7 per cent in Canada since 1972. South of the border, it increased only by 11.8 per cent, less than half, Mr. Speaker.
On the negative side, we of course experienced a set-back in terms of costs and prices as compared to the United States. We have been concerned with this situation for several years. Our poor performance relative to the Americans is largely responsible for our present economic problems. The economic gap between our two countries was bound to have general
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repercussions. It was bound, sooner or later, to lead to appreciable increases in unemployment.
As the increases in manpower unit costs were larger here than in the U.S., there were no buyers, both here and elsewhere, for a number of our products. We had to devise a way to rectify the situation and we of course implemented the prices and income control program whose main objective was to restore our competitive position. In 1975, the unit cost for labour in the manufacturing sector increased by 11.8 per cent in Canada as compared with 6 per cent in the United States, which means a margin of 5.8 per cent. That gap was gradually reduced to 5.1 per cent in 1976 and 1.8 per cent in 1977. I have repeatedly pointed out the advantage for Canadian trade and our balance of payment of the recent evolution in the rate of the Canadian dollar. Its depreciation is the answer of the market to our imbalance. It has helped restore our balance in terms of foreign trade. If we take into account the effect of the depreciation on the unit cost for labour, the latter in fact decreased last year.
As I have explained several times already, we must not bank exclusively on our floating dollar to pull us out of the whirlpool of inflation in which we were caught. To keep the gains we have registered, we must make sure there is also a decrease in the underlying rate of prices and costs increases. We have not yet restored ourselves to the strong international position that was ours in the early '70s. Unless we manage to reduce progressively the rate of increase in our costs, nothing can prevent another inflation spiral or yet another serious imbalance in our balance of payments and new depreciation of the Canadian dollar.

We have before us today a motion which implies that the tax system is behind all our problems. The motion suggests that taxes are holding down growth in Canada and forcing entrepreneurs into the United States where presumably they will get better treatment. Of course, tax levels are very important in business decisions-decisions about location of production, about expansion of production and about the balance between capital investment and employment of labour.
In Canada more than half of all revenues are collected by provincial and local governments. To a far greater degree than in the United States the second level of government shares a responsibility to ensure that the total burden of taxation is competitive on an international basis. I am glad to say that the provinces are keenly aware of this.
The communique from the first ministers' conference in February committed both levels of government to a tax policy that will establish our tax system in line with those of other trading nations. We have made a careful calculation of overall tax levels in Canada and the United States. We have made specific comparisons of personal income taxes and corporate income taxes in the two countries. It is possible, of course, to find specific states where some extraordinary tax incentives are offered to industries if they locate there. For federal and

provincial governments in this country to try to match every one of these incentives would be to sell out our tax system. We should not be in the business of creating tax havens in Canada. We should be levying a fair burden of taxes on corporations and individuals and delivering needed and effective government services to both groups in return. In fact, our comparisons of average tax burdens between Canada and the U.S.A. show that Canada is competitive.
Let me outline our main conclusions. First, over-all burdens. Despite the fact that Canadians enjoy substantially more government services than Americans, such as universal medical care, family allowances and higher old age security payments, the total level of taxation as a percentage of total output in the economy is only slightly higher in Canada. In 1977 we estimate taxes as a percentage of the g.n.p. were 32.7 per cent in Canada and 30.8 per cent in the U.S. The difference was 1.9 per cent. The difference was slightly smaller than in earlier years of the 1970s. This level of taxation ranks both Canada and the U.S. in the middle among industrialized countries.
I might note that the mix of tax revenues is quite different between Canada and the U.S. While corporation taxes are about the same in relation to total, personal income taxes and indirect taxes are relatively more important in our tax structure while social security taxes are much higher in the United States.
I should say a word about indirect taxes; that is, the federal sales tax and customs duties. I want to make it clear that the federal sales tax, which is applied at the manufacturers' level, is not charged on goods which are exported from this country. In other words, our system favours those industries which must compete internationally. This is very important. For example, if the federal sales tax were to be replaced by an increase in corporate income tax, about 15 percentage points would be added to the rate of tax on corporate profits. Clearly, the mix of Canadian taxes is favourable to the operation of business in our open economy.
As I said, the corporate income taxes take up about the same proportion of total taxes in Canada as the U.S.; the percentages are 12.3 for Canada and 11.5 for the U.S. I will come back to that in a moment.
A comparison of taxes on individuals in Canada and the United States should include social security taxes as well as income taxes. In 1977, average tax rates in Canada for these two taxes together totalled 15.8 per cent of personal income. For years these burdens have been very nearly identical on average in the countries.
I should point out that here again the structure of the system differs significantly in the two countries. Unlike Canada, the U.S. assesses tax on aggregate family income. It does not tax government transfers or pensions. It uses different rate structures for different family types, and it does not index its tax structure. The U.S. provides more itemized deductions but fewer exemptions. The Canadian system therefore tends to
May 23, 1978

be fairer since exemptions are automatically available to all taxpayers, while deductions are based on particular expenses which tend to be larger at higher income ranges. A further factor is that our dividend tax credit partly integrates personal and corporate taxes which, to some degree, eliminates double taxation on corporate income. The credit has the effect of refunding to shareholders part of the taxes already paid at the corporate level. No such mechanism exists in the U.S.
Furthermore, Canadian taxes on family income tend to be more progressive; that is, they are relatively lower at the bottom end of the income scale and higher at the top. Our system is also more favourable to families with children, and it is more favourable to families where more than one member is employed.
Let me turn to corporation income taxes. On balance, Canadian corporation income tax rates are now substantially lower than the same tax rates in the United States. In 1977, federal and provincial corporation income taxes as a percentage of corporation book profits totalled 35.2 per cent in Canada and 40.2 per cent in the U.S.A. In the important manufacturing sector, Canada's two-year write-off for machinery and equipment, together with the lower corporate tax rate of 40 per cent, gives Canadian manufacturers a much lower rate than their U.S. counterparts.
In the corporate area as well the structures of the two systems are substantially different. The Canadian rate structure is more generous with its lower general rate; that is, 46 per cent compared with 48 per cent. The Canadian federal small business deduction applies a rate of 20 per cent or 25 per cent over a large range of taxable income. A company in Canada may enjoy this rate on up to $150,000 of profits a year. In the U.S. the low rate is available on $50,000 annually only. As I mentioned, the 40 per cent manufacturing and processing rate is available in Canada.
The U.S. treatment of business losses is more generous than in Canada. In Canada all domestic intercorporate dividends are deductible while in the U.S. some dividends are not fully deductible. In the U.S. inventory valuation is made on the last-in, first-out basis. In Canada, a 3 per cent inventory valuation adjustment has been introduced. The relative generosity of these two inventory methods depends on the particular circumstances of a company.
The value of the Canadian and U.S. investment tax credits are difficult to compare because coverage differs. The rate in the U.S. is generally higher; that is, 10 per cent compared with 5 per cent, IVi per cent or 10 per cent in Canada. The Canadian credit applies to both investments in structures and in machinery and equipment. The U.S. credit does not apply to buildings but covers more industries. In the area of depreciation provisions, Canadian rates are much more favourable.
I have introduced these comparisons to make the point that in broad terms tax burdens in this country are reasonable and fully competitive with those in the U.S. In many respects, it can be argued that our tax system is fairer and provides more boost to growth and employment. But I have also pointed out that all sorts of special incentives can be found in one state or
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another, incentives that we should not try to duplicate if we are to retain the integrity of our tax system. Nor would we expect that the U.S. federal tax system would try to match every incentive offered by individual Canadian provinces.
Our job as legislators and my task as Minister of Finance, Mr. Speaker, is not to make sweetheart tax deals to entice industry to this country. Our job is to develop tax law fairly in the interest of all taxpayers. When we give up tax revenues in the interest of special deals and special privilege, we deny the use of that revenue to the benefit of other deserving Canadians. Our job is to make decisions in this chamber that will help promote a positive environment and sustain a sound economy, where business leaders will be encouraged to take the risks that are required in the market system, where worthwhile new jobs are being created, where planning and investments go forward in step with the great potential of our economy.
Above all-and I say this very seriously-we can best inspire confidence in our economy, and ensure growth and new employment, by keeping Canada united. The battle for unity is being won. When the outcome is clear to employer and investor, we will have cleared a hurdle standing in the way of our best economic performance. Certainly, we are not being held back by any lack of skills or resources in this country. And we are not being held back by the Canadian tax system.
This is a good occasion for me to speak on this because rumours are being spread across this country that our tax system is bad in relation to the American system. It was important to clear up some of that misinterpretation. We have a different tax system, but the spread is only 1.5 between the two nations. We have a much more developed social system than exists in the United States. We should be very proud of the fact that we are still in a very competitive position as far as our tax system is concerned with regard to the United States.


Some hon. Members:: Hear, hear!


Joseph Jacques Jean Chrétien: The previous speaker referred to the speech made by the hon. member for Waterloo-Cambridge (Mr. Saltsman). He could react in no other way to the motion by the hon. member for Winnipeg South Centre (Mr. McKenzie). That kind of absolutely negative speech creates the impression that Canada is about the last among all nations of the world. That kind of proposition makes no sense.


The Acting Speaker (Mr. Turner):: Order, please. 1 regret to interrupt the hon. minister but his allotted time has expired. He may continue with unanimous consent.


Some hon. Members:: Agreed.


Joseph Jacques Jean Chrétien: I just want to conclude, Mr. Speaker. We can have our differences in policy, there is no doubt about it. However, to create the picture that this country is about to die economically and socially is a disservice to Canadians.


Some hon. Members:: Hear, hear!
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Joseph Jacques Jean Chrétien: I do not mind criticism. It is part of my job and I love it. As Mike Pearson said, it is great because it keeps a person clean. I do not at all mind being criticized. However, when I see someone using this chamber to depreciate this country as was done this afternoon, I cannot stand back and say nothing.


Some hon. Members:: Hear, hear!


Joseph Jacques Jean Chrétien: We are here to debate. This afternoon a question of privilege was raised with regard to accusations that had been made against members of this place. They threw a cloud over every member of this place. The accusation had been made that some members had used their position to try and make a profit for themselves. Every member who is here could probably do better outside than in this chamber.
It is absolutely unacceptable to throw around accusations which cast a cloud over the integrity of all members of this place. It is all right to question the incompetence or intelligence of members. However, everyone who came here did so with one motivation, to serve his country in the best way he could. It is wrong to say that some of us are trying to use our position in order to pocket some money. I am happy to be here. I see that some of my predecessors are doing well on the outside. I see that it is possible to make more money there than here.
The performance we saw over the weekend and again this afternoon, a depreciation of those who serve the nation and a depreciation of the nation as a whole, is absolutely unacceptable. Despite the many other things I have to do, this is why I decided to get up and speak this evening.


Mr. Ray Hnatyshyn (Saskatoon-Biggar):: Mr. Speaker, we have just observed another hair-shirt emotional speech by the Minister of Finance (Mr. Chretien). He read the first part of his speech. That is the way the Minister of Finance likes to make a speech. First he reads a bunch of statistics from the department so it will appear he knows something about the portfolio. It is a very learned type of reading. He then goes on to make an emotional speech which, as is so typical of members of this government, equates the good of the Liberal party and the Liberal government with our country. He says in effect that any suggestion for a review of our tax measures by the House of Commons is an attack on Canada.
What a ridiculous proposition the minister puts before us. The reason we are sitting here debating measures on allotted days and on government days is that the Prime Minister (Mr. Trudeau) could not screw up his courage to call an election. He was twisting and turning. He was frightened. The polls were and continue to be against him. He was very concerned about the fact that parliament should do some work.


Benno Friesen: The people did not want an election.


Ramon John Hnatyshyn: As the hon. member for Surrey-White Rock (Mr. Friesen) says, the people did not want an election. The Prime Minister's excuse for not calling an election was that parliament had work to do.

On one of its allotted days, the opposition makes the suggestion that maybe parliament has a role in studying the tax system in Canada. It is an opportunity to review our situation today. A prima facie case has apparently been made by spokesmen in various businesses, such as construction, manufacturing and so on.
We have a situation where officials in the Department of Industry, Trade and Commerce are expressing serious concern about the flow of capital to real estate investment in the United States. What happens when we in the official opposition suggest that, since we are going to be sitting here for another year or so, parliament should take an active role in trying to come to terms with the taxation system of our country? It is considered by the government and its henchmen in the NDP. They support the government at will. They are going from 14 per cent to possibly 12 per cent in the next Gallup poll. That is because they keep supporting the government regardless of its policies.
We are told that this motion is some sort of an attack on Canada. They say we should be proud of having one of the highest rates of taxation, that we should be proud to sit here and listen to speeches about the beneficence of this government.
If parliament is to turn to performing a useful role and if we are to take the Prime Minister at his word, which is very difficult with his record, this motion should receive the wholehearted support of every member of this House. There should be a non-partisan, non-political look at our tax system, a review of the experience in this country with regard to the flight of capital to the United States and other countries. We should consider the extent of the problem. What has the government to fear from that kind of consideration by a committee of parliament?
There is nothing wrong with this motion. The government feels it is in a box, that it is losing the support of the country and will be turned out of office. What is its reaction to any response by this party in bringing forward a resolution that in effect allows parliament to operate? By a committee set up by this motion, parliament could consider our tax levels and mode of taxation with respect to individuals, corporations and businesses in general.
This motion gives an opportunity to the government to show it is prepared to listen, as opposed to the spectacle we saw today when there was no one here to speak on behalf of the government. That is the way they operate government. That is the way they approach matters in the House of Commons. It is a reflection of the attitude taken by this government, particularly by the Prime Minister who has absolutely no time for parliament.


Mr. LeBlanc (Westmorland-Kent):: He is here every day and you are not.


Ramon John Hnatyshyn: The Minister of Fisheries (Mr. LeBlanc) is renowned for making speeches from the seat of his pants. He
May 23, 1978

says the Prime Minister is here every day. I can assure the minister that it is a great honour for us to see the Prime Minister here in this chamber to answer the questions we put to him. Ele does us all a great honour. The emperor comes into parliament and gives his time to answer questions. Then at three o'clock he retires to his office to be surrounded by a phalanx of 101 members of his staff. Since I have been in parliament he has not participated in a debate on any motion or item of business before the Elouse except for the debate on the Address in Reply to the Speech from the Throne, when he makes a contribution whose only effect is to put people all across the country to sleep.
When the Prime Minister says of members of parliament, including his own party members, that within 50 yards of Parliament Hill they are nobodies, he is revealing his attitude toward them. If I were a backbencher on the government side I would be more concerned about being a nobody while I was on Parliament Hill. The present government, more than any other in history, fears parliament. It fears debate. It fears any suggestion on our part for a constructive review of taxation and its reasons are well founded. Members opposite have placed themselves in a position where they are criticized universally for their mismanagement. They have brought a country whose potential is unsurpassed in the world to a point where there is apprehension and concern felt by citizens from coast to coast and from north to south.
My hon. friend from Winnipeg South Centre (Mr. McKenzie) is responsible for the motion which has had an immediate effect on the government. After the first round of speeches when the government whip had difficulty finding anyone to take part, in came the Minister of State for Small Business (Mr. Abbott). His face was flushed. He had no written or carefully prepared notes. The upshot was that he made a number of statements about what the government proposed to do for small business, that very important sector of society. In that act alone was an admission of guilt on the part of the government, an admission that their attitude toward the taxation of business, both individual and corporate, leaves a great deal to be desired.
There is no thought of setting out a taxation strategy with respect to business. The notion of industrial strategy is altogether foreign to them. Their only approach to these matters is the "finger in the dyke" approach. The minister talked about relieving the paper burden imposed on a limited number of businesses. Mr. Speaker, it makes no sense to come into the House and occupy time with unrelated statements which show only that the government doesn't know where it is going.
Canada is a country of unlimited potential. Nobody is standing up and saying we do not have the greatest country in the world. We do. What we have, unfortunately, is a government which leaves everything to be desired, a government in need of replacement by a new government. That is why we need an election very soon.
I want to deal in the few minutes remaining to me with some of the evidence for the existence of the problem referred
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to in the motion. People inside government who have studied this question have expressed concern about the flight of capital. I refer to a story in the Ottawa Citizen of April 20 in which Mr. Carl Wenaas, senior policy maker at the Department of Industry, Trade and Commerce, is quoted as saying that the federal government is concerned about increased Canadian investment in foreign real estate. According to this report he stated:
If companies are transferring funds out of the country, it is not desirable, obviously.
The article continues:
The federal government, he says, keeps close track of net direct investment abroad by Canadian firms but "we have no way of knowing if a Canadian is spending $2 million on a condominium in Florida."
Here we have a statement that records of investments outside Canada are being kept. But when we ask ministers during the question period about this flow of capital, they refuse to answer. The ministers responsible for economic planning do not give out any information on the subject, another example of the government's preoccupation with secrecy. Ministers opposite believe that only they can reach direct decisions and that parliament should have no voice in economic or financial planning. That is why my hon. friend asks that a committee be charged with studying these matters so as to determine the extent of the problem.
There are indications of its cause in a statement by Robert Dodge reported in the Dallas Times-Herald of February 19, 1978. John Meyer, vice-president for corporate relations at the Trizec Corporation of Montreal had this to say:
Canada has been taken over by a lot of planning boards and agencies. Here you have to undergo financial analysis by the government to do business. We said "Screw it" and started looking for U.S. properties.
This was a statement made by a vice-president of a very large Canadian corporation. What does Canadian Pacific Investments say about investment in Canada? Here is a story from the Montreal Gazette of May 2, 1978:
Canadian Pacific Investments of Montreal plans to continue expanding into the U.S. because business conditions are more favourable there, Willian Moodie, CPI president, told shareholders at the annual meeting yesterday.
I could go on and on quoting spokesmen for business across this country. They all indicate concern about the investment climate in Canada. Yet the government in its arrogance and its disdain for parliament refuses to accept the reasonable proposition put forward by my hon. friend from Winnipeg South Centre. He proposes that we, as members representing all parts of Canada, take this opportunity to make parliament work, as the Prime Minister has asked us to do, by coming to grips with the taxation system to determine whether there are ways in which it might be improved. At present it is no secret that there is lack of confidence in the government and in the economy. Even the most ardent partisan backbencher in the Liberal party cannot deny that we are going through an economic crisis and that we face a serious prospect in the future. I am not here to gloat over that. In fact, I feel very badly about it. But when we do come forward with a reasonable proposition it is rejected out of hand by government spokesmen.

May 23, 1978
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Somehow our suggestions are taken as an attack on the future of Canada. What a ridiculous proposition it is for the Minister of Finance to suggest that, because we want to study our taxation system, that is the extent of our concern about the Canadian economy. Clearly, that is one important aspect which has to be looked into by parliamentarians and by people who are involved in the governing of our country.
The Minister of State (Small Business) himself pointed out this afternoon that small business feels particular concern about bureaucratic red tape, and in response to this motion he came forward and made certain statements, attempting in small part to remove some of these items of red tape and paper work. We all know that this red tape affects business in Canada, the confidence of people in Canada and our economy. The Minister of Finance said that if we are critical of the performance of this government, somehow we are being unpatriotic. The temptation to criticize this government's mismanagement and mishandling of economic affairs is to me irresistible, and I hope I will not be considered unpatriotic if I point out the record of this minister with respect to the handling of his portfolio.
It has been my observation that during the time the present minister has been Minister of Finance there has been more criticism of our economy than under any previous minister of finance appointed by this Prime Minister. I suggest that perhaps one of the fundamental problems which underlies our economy is lack of confidence in this government.
In the last quarter of 1977, according to Bank of Canada statistics, over $180 million in direct investment was drained out of our economy, despite the improvement in trade balances. To date it has taken over $7 billion in either loans or international stand-by credits to shore up the dollar. In my estimation one of the reasons the world has so little confidence in our economy is the way this Minister of Finance has on a number of occasions dealt badly or failed to deal with serious problems facing our country.
As far as parliament is concerned the minister has been non-communicative or has given us information which has not been in accordance with the actual facts. I want to list a few of these things. The minister indicated to us in answers about the situation relating to the dollar that the dollar was not being supported by our government when in fact it was. At one stage the government was spending something over $700 million a month to support the dollar, all the while proclaiming that it was a "clean float".
Another example of the government's saying one thing and acting in another way is the retail sales tax legislation we are now considering. In trying to convince the people of Canada, we see the Prime Minister twisting and turning in his seat. He never speaks about anything, but the only time we saw him sitting in the House of Commons during a debate-and it was the subject of newspaper comments across the country-was when we watched the Minister of Finance twist and turn through the sales tax debate at second reading. He was here that time because he knew he was on a sticky wicket. The
[Mr. Hnatyshyn.j
Prime Minister knows that the people of Canada are on to him. They know he says one thing and does another.


The Acting Speaker (Mr. Turner):: Order, please. I regret to inform the hon. member that his allotted time has expired. He may continue with unanimous consent. Does the hon. member have unanimous consent?


Some hon. Members:: Agreed.


Ramon John Hnatyshyn: What concerns me even more than some of these things are the answers we are getting in this parliament with respect to our economy. I am concerned about the aura of incompetence which seems to pervade this government's handling of economic matters. On March 9, the minister raised the bank rate by half a point, only to have to raise it by another half point on April 3. In the meantime, hundreds of thousands of dollars in foreign exchange reserves were flushed down the drain, together, I suggest with all respect, with the government's credibility.
This minister has put us in hock to the point where we are dependent on foreigners for our economic well-being as never before in the history of our country. For example, without the $2.1 billion the government has been forced to borrow from foreign banks, our reserves would be down to $423 million, a decline of something like 88 per cent from October of 1976.
The government is so inept that it cannot even identify the capital flows which are taking place, or it refuses to tell us. In 1977 the unidentified capital flows plus the balancing items totalled $3,176 billion. In the last quarter of 1977 money was flowing out of the country at the rate of $10 million a day, yet the government was unable or unwilling to identify publicly the reason for this haemorrhage.
I hope that in the brief time which has been available to me I have set out some of the compelling reasons why this motion should be supported by all members of the House. This motion should be supported, not in the interest of any partisan political gain by one side or the other, but in order to give an opportunity to members of parliament from both sides of the House through the medium of parliament in one of its standing committees to come to grips with and deal with the serious economic future we face. I thank hon. members for the extra time, and I thank the House for this opportunity to speak.


Joseph Adrien Henri Lambert: Very objectively, Mr. Speaker, I would like to take part in the debate on this motion proposed by the official opposition of the Canadian Parliament according to our rules of procedure which specify that a certain number of days called opposition days be set apart to allow members to introduce motions criticizing in a valid way the shortcomings of the government, so as to provide our country with an efficient administration.
Now, Mr. Speaker, I would like to take part in the debate on the motion moved by the hon. member for Winnipeg South Centre (Mr. McKenzie). In this motion, the hon. member suggests that the federal tax structure inhibits the economic
May 23, 1978

growth in Canada and contributes to the brain drain towards the United States, be they financial or research brains.
Mr. Speaker, all members agree with the mover of this motion that the American rate of taxation is lower than the Canadian rate. That is recognized and accepted. But we must face facts. This rate of taxation imposed on incomes, on taxpayers, on workers is of course lower than in Canada. However, Canada's program of social services is much more extensive and equitable than in the United States. Compared to that country, our social benefits are much greater and Canadians must necessarily pay for them and be taxed on their income, in comparison with the American system.
Having said this, Mr. Speaker, it does not mean that I support the present tax system: I merely want to make a comparison from which to draw conclusions on possibilities of improving our tax system as compared with that in the United States.
Those social programs are obviously very costly and they must be paid; under our present system, the only way the government can do so is through our taxes, that is, personal income and corporate taxes. Mr. Speaker, the bill must be paid. At the present time, the bill is paid through taxes levied on income: the higher the income, the higher the tax. That system of personal income tax, setting aside that corporate taxes, bears no relation whatsoever with the tax system south of the border, in the United States.
Mr. Speaker, in the United States, in the case of the average taxpayer it is true that he seems to pay less than we do here in Canada-but after having weighed the pros and cons objectively, it will be found that, all in all, the two systems are comparable. We pay more in Canada but, on the other hand, we get more services. We have more services and so we must pay more. The Americans have fewer services, but they are satisfied because they pay less.
Some would say that it all amounts to the same thing. Why not follow the American system? In my opinion, the answer is quite simple. In Canada, those who have the highest incomes pay most services, which seems fair in a society which advocates as much egalitarianism as possible. Those who have higher incomes pay a higher percentage than those who earn less. However, Mr. Speaker, that is the role of government. They must establish a certain balance, see that a certain percentage of economic justice is applied to each individual and each taxpayer living in a country such as we know, Canada.
When he introduced his motion, the hon. member did not say that he wanted cuts in these areas. He did not talk about this. He did not say that there should be cuts in certain areas and increases in others so as to strike a certain balance. But experience tells us that when the income tax is reduced, the government must cut certain services, and too often, these cuts affect the social services. We have seen this in the past. Under the pretext that government spending must be cut, the governments have tended to reduce certain social services before introducing a balanced budget, even at the risk of causing
Taxation
some harship to those who are unable to contribute the equivalent because their income is lower than that of people in higher income brackets.
If this government could guarantee that this will not happen, if they could suggest a formula that would prove to me that they are able to go about it differently, I would certainly support their proposal because it would tend to increase indirectly the purchasing power of the disadvantaged without penalizing the efforts of the taxpayers with higher incomes because they work harder or have better positions.
Mr. Speaker, I would also like to talk about another point raised by the mover of the motion, the hon. member for Winnipeg South Centre. Because of our taxation system, many of our Canadian brains go to the United States in search of less excessive taxation rates. Mr. Speaker, I must say that I am somewhat sceptic about this statement. What exactly is the brain drain? Have the people involved been identified? Has the public been told who are the people who flee to the United States because of inadequate incomes for the services they have rendered to the Canadian people? No mention is made of this. Mr. Speaker, who are those professionals rich enough to pay taxes here in Canada but who are so vain and materialistic that they move to a foreign country to increase their income? Very seldom low income earners because although they know they would pay fewer taxes in the United States they stay in Canada where they get more free social services than anywhere in the world.
However, Mr. Speaker, we should be realistic. Without advocating a socialistic system, through the years and following the representations from grass roots organizations to hon. members of various political parties, every one of us on various occasions has made representations to the government party which we usually call the party in power but which is not necessarily in power if the results achieved are any indication. Those results should be analysed on the basis of accounting revenues affecting the income of Canadians throughout the years, on the basis of the budgets proposed by the majority party, budgets which throughout the years increasingly affect the income of private citizens who have to pay for the social services demanded by the people, but for which the whole population has to pay. And I am upset when I hear in this House or on radio or TV a government member tell the people that if we have old age security in Canada we owe it to the Liberal party, that if we have family allowances we owe it to the Liberal party, and that if there is a guaranteed income supplement for people aged 60 or more living with a spouse aged 65 or more we owe it to the Liberal party. Mr. Speaker, I am upset by such assertions. After all, hon. members who have been sitting here for as many years as the hon. member for Winnipeg North Centre (Mr. Knowles) and his colleagues of the same age have fought to push through parliament legislation recognizing the right to security and freedom in our country. We owe it to the work and efforts of these people throughout Canada who have done their best to develop our country and make it more affluent to ensure a certain security

May 23, 1978
Taxation
to senior citizens. But it is false to say that all that prosperity and our capacity to pay pensions to people aged 60, 65 or more is the result of the efforts made by the political party in power like the Liberal party. Because, Mr. Speaker, all Canadians whatever their age, whatever their political allegience have worked in agreement to give to our country this momentum toward prosperity so that it could give its aging citizens the possibility of enjoying this security, this assurance of going through their later days in a certain feeling of security coupled with a feeling of independence.
Mr. Speaker, today's young workers, and I have some among my relatives, as all members of this House probably have, these young people are working in conditions which are often difficult. Let us take for instance the case of construction workers. In summer time they have to withstand extremely difficult heat conditions which affects them considerably, and when winter comes, these same construction workers-and I am talking about them because I know their situation, Mr. Speaker, for if did not I would not speak so passionately about them-these same construction workers who are on the job, during December, January, February and March work through difficult conditions but they accept to do so and they also accept to pay on their wages a tax which will ensure the people who preceded them, their father, their uncle, relatives or just friends, some security for those who are over sixty because they recognize that while they are holding their jobs, they enjoy working conditions which are perhaps not always very advantageous but still better than those which prevailed some 40, 50, 60 years ago. These people accept to do their share to ensure their kind of security to the present generation of retired people.
Mr. Speaker, I understood the motion moved by the hon. member for Winnipeg South Centre to the effect that there is a difference between the conditions which prevail in the U.S. and in Canada. I also understand that there are Canadians working in lumber camps or elsewhere in the United States who pay taxes which are perhaps inferior to those which Canadians must pay when they work in Canada. Yet, Mr. Speaker, even if by that kind of work, even because of situations, conveniences, agreements which exist between the United States and Canada and even if there is a flight of Canadian capital to the United States which is detrimental to us, the fact remains, Mr. Speaker, that governments share a great responsibility in all that-


The Acting Speaker (Mr. Turner):: Order, please. 1 regret to inform the hon. member that his allotted time has expired. He may continue if he receives unanimous consent. Is there unanimous consent?


An hon. Member:: No.


David Michael Collenette: Mr. Speaker, I was not sure whether I would have an opportunity to participate this evening. I am glad I have been provided with that opportunity. I am grateful to the hon. member for Winnipeg South Centre (Mr. McKenzie) for putting his motion before the House.


An hon. Member:: Then why did you not let the hon. member for Bellechase (Mr. Lambert) continue?


Joseph Adrien Henri Lambert: Mr. Speaker, I rise on a point of order.


David Michael Collenette: Let the record show that I did not say
"No".


The Acting Speaker (Mr. Turner):: Order, please. The Chair definitely heard a "No" when unanimous consent was requested.
[ Translation]


Joseph Adrien Henri Lambert: Mr. Speaker, I rise on a point of order.


The Acting Speaker (Mr. Turner):: The hon. member for Bellechasse on a point of order.


Joseph Adrien Henri Lambert: Mr. Speaker, I rise on a point of order.
When I read the official report of last Friday's debate, I noted that all hon. members had been kind enough to grant additional time to all those who took part in the debate. I had thought that today they would demonstrate the same generosity to us. If hon. members should decide not to grant the hon. member for Bellechasse additional time to complete his remarks, they may rest assured that I shall indeed remember that in future when the time comes to grant additional time. [English]


The Acting Speaker (Mr. Turner):: Order, please. I suggest to the hon. member for Bellechasse that it is the responsibility of the Chair to listen. Definitely I heard a "No".


Stanley Howard Knowles: From where?


David Michael Collenette: Mr. Speaker, actually I was surprised to be recognized by the Chair. Hon. members on this side of the House were prepared to let the hon. member for Bellechasse continue. Distinctly I heard a "No". I am sure the "No" came from the Conservative side. It is evident that that party denied the hon. member for Bellechasse the opportunity to finish his very thoughtful speech.
I am grateful for the opportunity provided by the member for Winnipeg South Centre (Mr. McKenzie), who I see has re-entered the chamber after some absence. I am glad he is here this evening to hear my remarks as well as the remarks of the hon. member for Saskatoon-Biggar (Mr. Hnatyshyn).

May 23, 1978

Ad hon. Member: Well, say something then.


David Michael Collenette: This debate is decidedly a non-event. After sitting here listening to what one of my old professors used to call pure and unmitigated eyewash or drivel, such as passed for a speech by the hon. member for Saskatoon-Biggar, I feel perhaps I should counter some of the bold and bald assertions he made in that speech.
I do not propose to get into a lengthy debate on Canadian tax measures in comparison with United States tax measures. The Minister of Finance (Mr. Chretien) in a very able speech set out the main features of the Canadian tax system and the weaknesses, as we perceive them, of the United States tax system. On the facts the minister presented to us I am sure all members would agree there is no real comparison, and that in this country we do by and large have a very fair and equitable tax system.
I want to address my remarks to two particular points of view, the first of which deals with this comparative study of our lifestyle and standard of living with that of the United States. This does touch upon the general economic climate and tax systems of both countries. Secondly, I want to talk about one particular tax system, namely, sales tax as covered in the budget and which has been part of a national taxation or constitutional debate.


An hon. Member:: You aren't going to muck that one up further, are you?


David Michael Collenette: An hon. member asks whether I am "going to muck that one up further". I think he should be patient, hear my remarks and then see how very ably I am going to try to expose the position of the Conservative party as being very duplicit, a position that most Canadians will see through on the election trail.
When we talk about comparisons between Canada and the United States the Conservative party is obsessed with the fact that everything south of the border is better than it is in this country. The minister said a number of times that the Conservative party is continually carping, complaining and tearing down our institutions and the confidence and morale of Canadians. This has some effect, and I do not deny that. When the official opposition in the House of Commons continues day after day to tear down the great confidence and feelings that we have developed in this country over the past 100 years, this does start to have some kind of effect on the Canadian people. I think many of our problems at this time result from lack of confidence, and that lack of confidence must be placed squarely at the doorstep of the official opposition.
When we talk about the United States let us consider a few basic facts. The per capita income in Canada is higher than it is in the United States, as supported by figures released recently, I think last week. This contradicts some of the suggestions of hon. members on the other side to the effect that this country is falling behind our American neighbours.
Taxation
Over the last ten years the disposable incomes of Canadians in Canada have been considerably higher than those in the United States. The number of new jobs that have been created in this country on a per capita or relative basis has been considerably greater not only than the number in the United States but also in all of the industrial trading nations in Europe and Japan, our major trading partners.
The official opposition will be riding in the next election, whenever that comes-this year, next year or whenever-on what I call the "Stirling Lyon white horse". It will be ridden across this country by those hon. members taking pot shots at our social services and at our bureaucracy. I do not think Canadians are going to buy their arguments, and those hon. members will find themselves in the same kind of difficulties their counterparts in Manitoba are finding themselves in now.
It is fine to talk about efficient and effective government. I think everyone on this side would agree that what we stand for is efficient and effective government. Over the last 30 years we have developed in this country, throughout all of industrialized society, a kind of social system, social tolerance and economy whereby a large number of people, perhaps the largest ever in history, have equitable access to income. I want to support that system as it has and is developed. I want to support the social programs which have been developed over the last 30 years. This does not mean to say we cannot administer those programs in a better way and thereby save taxpayers dollars.
Hon. members of the Conservative party, when comparing the United States and Canada, are always talking about our higher unemployment benefits. It is clear that the members who criticize our unemployment insurance system do not represent major urban constituencies. I do not hear very much criticism of UIC benefits from our Atlantic area colleagues. Those hon. members who criticize certainly do not represent constituencies in Quebec and northern Ontario where unemployment is high and where opportunities available in the relatively wealthy areas of southern Ontario and B.C. are not available to the people there.
I have to defend the unemployment insurance system we have today, and I am not embarrassed to do so. There have been some terrible administrative problems with that system, but those problems are being ironed out. It is true, perhaps, that some aspects of the system have encouraged disincentive to work, but simply to rip through this whole system, as some members opposite would do, solely in the guise of a work ethic, higher productivity and emulating the free enterprise of our American neighbours to the hilt, would be disastrous to many regions in this country.
Hon. members are very quick to criticize the universal and portable medicare system we have in this country, which the United States does not have. When they talk about the favourable position of the U.S. economic system, they fail to point out that many thousands of Americans every year are forced to pay hundreds if not thousands of dollars in medical coverage, which literally bankrupts whole families, causing a degree of hardship which I do not think any of us in this chamber would ever want to see return.

May 23, 1978
Taxation
We have a very much more favourable old age security system.


Mr. Clarke:: Order, order.


The Acting Speaker (Mr. Turner):: Order, please. The hon. member for Vancouver Quadra (Mr. Clarke) rises on a point of order.


William Hillary (Bill) Clarke: Mr. Speaker, I have looked very carefully at the motion of my colleague the hon. member for Winnipeg South Centre (Mr. McKenzie), and I can see no relationship between it and the contribution to the debate being made by the hon. member for York East (Mr. Collenette).


David Michael Collenette: With all due respect, Mr. Speaker, that was not a point of order but rather a point of debate.


An hon. Member:: Relevance is surely something.


David Michael Collenette: I have carefully studied the motion and we are talking about the federal tax structure inhibiting economic growth in Canada. When we talk about economic growth we are talking about all of the economic infrastructure of this country, which includes as far as I am concerned unemployment insurance, direct and indirect taxation, social benefits and other things. As can be seen by the lack of tolerance exhibited by the hon. member for Vancouver Quadra (Mr. Clarke), this is the callous kind of approach we are used to from members of the Conservative party.
As I was saying before I was rudely interrupted, we have in this country an old age security system that is very good. That is not to suggest it cannot be improved, but when you compare the level of benefits here with that level in the United States you will see that United States citizens are not afforded equal benefits. In my constituency and throughout metropolitan Toronto there are many government sponsored senior citizens' homes-that is, federal, provincial and metro-which provide a level of accommodation for senior citizens of which we as Canadians can be proud. Senior citizens in the United States do not enjoy that level of care.
I suggest we have a better education system in terms of available facilities and uniformity. There is not the degree of uniformity I would like, but I will be talking about that during the latter part of my speech, particularly in reference to the sales tax difficulty.
We were talking about taxation and services the government provides. Even if you compare Air Canada with other air services you will see that Air Canada provides a level of service to people in all communities across this country. The hon. member for Winnipeg South Centre is continually complaining about the operation of Air Canada. It is suggested that this service is provided as a result of our tax system-


A. Daniel McKenzie: Read my speeches.


David Michael Collenette: I read your speeches, my dear friend. In fact, I sit on a committee with you and have listened day after day to criticisms you make in respect of the minister of

Transport (Mr. Lang), officials of Air Canada and Canadian National Railways. I hope those kinds of remarks are circulated around the country during the next election to demonstrate what the Progressive Conservative party's transportation policy is. However, I am getting a little off the track, Mr. Speaker.
When we talk about the level of services and the taxes to pay for those services, we are talking about the high quality of service that the national airline provides. My friends opposite are continually knocking the postal service-


William Hillary (Bill) Clarke: A point of order, Mr. Speaker, with the greatest of respect. I know you did not rule on my earlier point of order but I have listened carefully to the hon. member for York East since then and he has talked about Air Canada, Toronto real estate taxes, the transportation policy of the Progressive Conservative party, health insurance in the United States and finally, he wants to give us a diatribe on the post office. I would like to remind the Chair that the debate is on the motion:
That a special committee of this House be established to determine whether the federal tax structure is inhibiting economic growth in Canada-
With respect I would hope you would rule that the hon. member for York East is not on the topic.


The Acting Speaker (Mr. Turner):: Order, please. I should like to suggest to the hon. member for Vancouver Quadra (Mr. Clarke) that the Chair has been very tolerant with hon. members and they have all wandered over the field. The hon. member for York East.


David Michael Collenette: Thank you very much, Mr. Speaker, for the discretion you have shown. I have not seen the degree of impertinence that I have seen this evening from the hon. member for Vancouver Quadra in a long time. I am sure he will cease and desist now that you have made your very effective ruling.
When I talk of these services and the level of taxation necessary to pay for them, I am relating it directly to this motion. In the last sentence the motion talks about the export of employment opportunities to the United States. The hon. member for Winnipeg South Centre in this way is talking about jobs being created in the United States and people leaving Canada. I am relating this directly to people staying in Canada. The reason they want to stay in Canada is the many social and economic programs that have been built up over the last 30 or 40 years. However, I am digressing but I hope my time will not be cut into.
This afternoon the hon. member for Battleford-Kindersley (Mr. Mclsaac) said it all when he quoted a speech made by the Leader of the Opposition (Mr. Clark) after Christmas in this House. The Leader of the Opposition said that this is the year the country closes down. Mr. Speaker, I hope that in the election campaign that comes up in the next few months or in
May 23, 1978

the next year or so the country will close the opposition down. That is long overdue.
The hon. member for Saskatoon-Biggar talked about the flight of capital. I thought he was going to get down on his knees and sing an A1 Jolson swan song. What does the Conservative party propose to do about the flight of capital? Is he saying to members of this House that the Conservative party favours exchange controls? I challenge him to tell us where the Conservative party stands. Do they want exchange controls? Let him tell that to the business community of the country and to ordinary Canadians. That is what he is implying when he talks about the flight of capital.
I should not get myself worked up over these points of order, Mr. Speaker, because I am missing one of the central themes that I want to talk about, and that is the sales tax measure in the budget. I think it was a pretty good budget and I think the sales tax measure was pretty good.
There has been a tradition of secrecy in budget preparation in this country, Mr. Speaker. Hon. members opposite have always demanded that this secrecy be respected. They would decry any kind of leak. A few years ago there was the case where the hon. member for Kerora-Rainy River (Mr. Reid) was charged with having previous knowledge of the budget of a former minister, Mr. Turner. This was disproven in committee.
The opposition has jealousy guarded this tradition but at the same time they are the foremost spokesmen in this country in defence of provincial rights. First of all, the Prime Minister (Mr. Trudeau) saw the premiers last fall. Then there was a federal-provincial conference. We recognize that the federal government only has direct control of 40 per cent of all government money spent in this country. A federal-provincial conference was called and some good things came out of that, one of which was the sales tax proposal. It did not come from the federal government but from the government of Ontario. The Minister of Finance (Mr. Chretien) consulted with all the provinces and told them that he wanted to co-operate and act in consort with them in economic planning in this country. But what happened? The Quebec government pulled the rug from under him. The Quebec government in its own budget brought in a sales tax proposal which, in a sense, is a protectionist proposal-not in the absolute sense but it is a protectionist proposal for industries in Quebec.
Mr. Speaker, we talk about the free exchange and movement of goods in this country. No one in his right mind who stands for the concept of a united, federalist Canada can support the position of the Parti Quebecois.


Ramon John Hnatyshyn: Claude Ryan does.


David Michael Collenette: When the official opposition talks about special status and accuses the federal government of according special status because of the $85 tax payment to Quebeckers, they are the ones who are favouring the Quebec sales tax system which would promote only Quebec-based industries. No federalist in his right mind who has integrity can countenance that proposal.
Taxation


Ramon John Hnatyshyn: A point of order, Mr. Speaker. I apologize to the hon. member because he is in full flight. I have not seen him so agitated since the day he got married. I wonder if the hon. member would permit a question on the matter he is now raising.


David Michael Collenette: Mr. Speaker, I wanted to do the official opposition the courtesy of finishing this matter this evening. It is their motion. They have already cut into my time, however, and now the hon. member wants to ask a question. I will be prepared to answer questions when my 20 minutes is up and not before, if there is unanimous consent. I warn hon. members, however, that they are probably going to run out the clock in doing so.
As the hon. member said, he caught me in full flight. I sat here all last week and heard these incredible charges coming from the Leader of the Opposition, from the hon. member for York Simcoe (Mr. Stevens) and all the other so-called financial critics on the other side. They attacked the federal government for giving in to special status. That is absolute rubbish. They are the ones who want special status; they are the ones who are backing Jacques Parizeau to the hilt.
If they want to talk about Claude Ryan I can answer them. The hon. member for Battleford-Kindersley answered that this afternoon when he said it is fair game for all provincial politicians to criticize the federal government. That is one of the greatest weaknesses we have in this country. It is not just Rene Levesque-it is the Alberta heritage fund, it is the Allan Blakeneys of this world, it is all these provincial potentates with their little empires who are chipping away at the nation state we have known for the last hundred years.
Members on the other side smirk about it, but this is the most fundamental and central issue facing this country at this time. The opposition does not want to talk about national unity, but here is an economic measure, this sales tax proposal, which is not only a taxation measure but something that affects the very fibre of the country. They cannot see that, however.
It has often been said that we are one of the most decentralized federations in the world. In the United States 60 per cent of all government revenues come under the control of Washington. It is the same in West Germany. But in this country it is only 40 per cent. Last week the Governor of the Bank of Canada appeared before the Standing Committee on Finance, Trade and Economic Affairs and more or less admitted that the way fiscal and taxation policies have gone in the last 30 years makes it difficult for the Bank of Canada to exercise monetary and fiscal control in this country. The Bank of Canada is responsible to parliament through the Minister of Finance, yet 60 per cent of all government revenues is spent by municipal and provincial governments.
There is Bill Davis running off to Zurich and Rene Levesque running off to New York, borrowing money indiscriminately and not paying attention to how much interest has to be paid. What we need in this country is a centralized and economic planning system, and we are not getting it.

May 23, 1978
Taxation
I am not sure where we are with respect to time, Mr. Speaker, but if we are getting back to this sales tax measure in the province of Quebec and talking about the federal tax structure, I must say that the Minister of Finance has shown his ability to co-operate, his willingness to talk. He admits it is difficult because essentially he is prodding the provinces to do something in their jurisdictions. Most of the ministers of finance wanted it. It was only a week after the Parti Quebecois started making noises that the four western provincial governments started to say-


The Acting Speaker (Mr. Turner):: Order, please. The hon. member for Bellechasse (Mr. Lambert) on a point of order.
[ Translation]


Joseph Adrien Henri Lambert: Mr. Speaker, I rise on a point of order.
You will note that the hon. member who has the floor is not sticking to the motion under consideration, that is the establishment of a special committee of this House, and that his statements relate to Bill C-56 which the House will debate in due time.
I would therefore ask that you call the hon. member to order so that his statements pertain to the motion under consideration.


The Acting Speaker (Mr. Turner):: Order, please. I would like to suggest to the hon. member for York East (Mr. Collenette) that his time has expired. He may continue with unanimous consent. Does the hon. member have unanimous consent?


Some hon. Members:: Agreed.


Joseph Adrien Henri Lambert: Mr. Speaker, I object. There is not unanimous consent. A moment ago I had the floor and, if I understood correctly, you asked for unanimous consent-


The Acting Speaker (Mr. Turner):: Order, please. Due to the fact there is no unanimous consent I have to recognize another member. The hon. member for Oxford. The hon. member for Bellechasse (Mr. Lambert) is rising on a point of order?


Joseph Adrien Henri Lambert: Mr. Speaker, I rise again on a point of order. With all due respect for your authority in the House, a short while ago, while I had the floor, if I understood you well, you asked the House if there was unanimous consent to allow me to continue my remarks. You then ruled that my time had expired.

I would like to know on which side of the House somebody refused to allow me to continue my remarks. I ask that the name of the hon. member who objected be put in the record.


The Acting Speaker (Mr. Turner):: Order, please. I would like to suggest to the hon. member for Bellechasse (Mr. Lambert) that I asked for unanimous consent for the hon. member to continue with his speech. There was a definite "No" in the House. Therefore, I went to the hon. member for York East. The hon. member for York East is rising on a point of order.


David Michael Collenette: Mr. Speaker, I hate to prolong the debate but I was quite surprised that I was cut off immediately on a point of order by my colleague the hon. member for Bellechasse (Mr. Lambert). I did point out that it was on the Conservative side that denied him unanimous consent. For my part, I would certainly have agreed that he should go on. I am sure he would allow me to go on, but the hon. member for Saskatoon-Biggar wanted to ask me a question, Mr. Speaker. 1 said I would be fully prepared to answer the question-


The Acting Speaker (Mr. Turner):: Order, please. I would like to suggest to the hon. member for York East that I asked for unanimous consent for the hon. member for York East to proceed and there was a definite "No". The hon. member for Oxford.


Bruce Halliday: Mr. Speaker, thank you once again for recognizing me. I had the pleasure of speaking in a similar debate last Friday, the last day this House was in session. At that time I had the last eight minutes and tonight I have the last five minutes.
It is perhaps significant that the nature of the motion before us today is not unlike the motion that was before us last Friday which was brought to us by the Creditistes. That was indeed an excellent motion which condemned the government for their lack of concern about our economy. It pointed out about four main areas where the government has failed to tackle the economic needs of this country. I would like to read the motion that is before us today, as so many others have, because there are two important parts that I would like to refer to for a minute or two. The motion reads:
That a special committee of this House be established to determine whether the federal tax structure is inhibiting economic growth in Canada and promoting the export of employment opportunities to the United States.
I want to congratulate the hon. member for Winnipeg South Centre (Mr. McKenzie) who has brought this motion before the House. He has pointed out, as the Creditistes did last Friday, that the main issue before Canada today is the issue of the economy. It is not the issue of bilingualism and it is not the issue of our foreign affairs, as the Prime Minister (Mr. Trudeau) would have us believe; rather it is the issue of the economy. On two consecutive days two opposition parties have each picked on this matter of the economy as being the key issue before us.
May 23, 1978

I was pleased to note that this motion started off by referring to the establishment of a special committee of this House, as framed by my colleague the hon. member for Winnipeg South Centre. I believe my colleague, the hon. member for Saskatoon-Biggar (Mr. Hnatyshyn), and perhaps one or two other members have mentioned the fact that the proposal was for a subcommittee or a special committee of the House to deal with this matter. I have to spend a minute or two on this, Mr. Speaker, because it has been obvious to us during the last three or four years that the government has done all in its power to avoid having committees of this House study something that is of special concern to this country.
There have been one or two exceptions. The one I am most familiar with is the subcommittee on the penitentiary system. I am a little surprised the government allowed this particular body to be formed and given a mandate. I feel sure now that they regret it. They have been put in the awkward position where it is possible for members from both sides of this House, if they want to, to get together and to come to a consensus. As a result the government is then in the difficult position of having to implement the report.
I am certain the government would be reluctant now to have any kind of common consent on the matter of the economy because they would be so embarrassed by what their own members on the committee would say. The backbenchers on the government side would want to agree with the opposition, and the front benchers of the government would not want to be embarrassed in that way. Therefore they are going all out to prevent establishment of any kind of a parliamentary committee.
There is one obvious place where there ought to be a parliamentary committee and that is for the post office mess. If the government wants to clear up a problem in this country such as the post office, or deal with our penitentiaries or the economy, it will not be done by royal commissions or special commissions but by a group of parliamentarians. I want to congratulate the hon. member for Winnipeg South Centre for identifying this factor. More and more Canadians are recognizing that we do have to use parliament more instead of adopting the Prime Minister's attitude of ignoring parliament, downgrading parliament-


Some hon. Members:: Hear, hear!


Bruce Halliday: -and just allowing royal commissions to be set up, the reports of which the Prime Minister perhaps ignores completely if he does not like what they have to say.
I did want to talk for 15 minutes or so on a form of taxation that I think could bring some sense and order into our whole economy in Canada which is now seen as being so messed up. If we want to do something to bring the economy back into order, we must do what the government has failed to do, and that is look at our tax system. I am not talking on behalf of my party, I am talking as an individual member of the opposition. I think this House of Commons has ignored the whole problem of taxation too much. The area in taxation that we must look at and about which I want to talk at greater length some time
Adjournment Debate
when time permits is the area of taxation based on services received. That is the way municipal taxes are generally levied and it is time we looked at it from the point of view of both federal government and provincial government.
I see it is ten o'clock. I hope I will have an opportunity in the near future to elaborate further on this matter of how we raise our taxes.


The Acting Speaker (Mr. Turner):: Order, please. It being ten o'clock p.m. it is my duty to inform the House, pursuant to Section (11) of Standing Order 58, that proceedings on the motion have expired.



PROCEEDINGS ON ADJOURNMENT MOTION

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

Mr. Paul E. McRae (Fort William):: Mr. Speaker, on May 5 I asked the Minister of Finance (Mr. Chretien) a question dealing with the value of the Canadian dollar, and in particular one aspect of it that has not been looked at. This concerns Canadian entrepreneurs selling in Canada having an advantage when the price of imports rises. The minister in his reply indicated that from March, 1977 to March, 1978 our exports increased from $40 billion to $50 billion. There was a 25 per cent increase in these exports which is certainly attributable to the change in the cost of the dollar. Also our imports did not increase over this period. In fact, we gained an advantage in this regard. Even though purchasing power did not increase during this period, it is obvious that Canadians were buying more Canadian goods.
A good many Canadians are concerned about the dollar. Perhaps there is more concern than is necessary. They are concerned that in some ways we are not as competitive as our neighbour to the south. Sometimes our costs of production have risen higher and faster than theirs. This is reflected in the value of the dollar.
There are other factors as well. There is the matter of pure speculation. That may have been ironed out to some extent at this point, given the fact that the dollar has been closer to 90 cents for the past few weeks. The government has taken some necessary steps to keep the swing from being too great. However, I would not like the government to do much more than it has done because there are some definite advantages to having an 89 or 90 cent dollar. One of the disadvantages has to do

May 23, 1978
Adjournment Debate
with inflation in terms of imported goods. With an 89 or 90 cent dollar, imported goods will cost ten or 11 cents more per dollar. That, of course, fuels inflation. If the dollar stabilized at this point, we would not expect a great deal more inflationary effect than that which has already occurred. There are two very definite advantages. One is well known to most Canadians, the advantage of being able to sell our exports in a more competitive way around the world.
The community from which I come and represent, part of Thunder Bay, is very fortunate. Last year it had one of the lowest rates of unemployment of any community in Canada with a population of over 100,000. A good deal of this can be attributed to the fact that our community does a geat deal of exporting.
Between 80 and 90 per cent of our pulp and paper is exported to the United States and other parts of the world. We are very heavily into the grain business with the largest grain port in Canada and one of the largest in the world. Exports in that area are supported by the lower dollar. This is one reason why there is a great advantage to having our dollar at around 90 cents in terms of American dollars.
The other advantage has not been discussed to any great extent. This is the whole point of my question. I refer to the advantage of Canadian entrepreneurs selling on the Canadian markets to Canadians and competing with imports from foreign countries.
When the cost of imports is higher, Canadian entrepreneurs have a great advantage in terms of competing with foreign goods. This area has not been looked at carefully enough by Canadian entrepreneurs. The federal government should be encouraging Canadian businesses to look at the higher cost of imports to see how we can compete in this market.
I would hope that if the dollar is held at 90 cents or 89 cents for a year or two a whole series of businesses will spring up able to compete with the higher cost imports, the greenhouse industry among a number of others would benefit a great deal from this situation. So I end by suggesting that the government should refrain from further support than what may be necessary to keep the dollar around 89 cents or 90 cents and that the dollar be allowed to float at that point in the hope that this will stimulate our export companies as well as many of our own industries which do business on the Canadian market.


Mr. Ed Lumley (Parliamentary Secretary to Minister of Finance):: Mr. Speaker, as the hon. member for Fort William (Mr. McRae) has stated, the recent decline in the external value of the dollar has improved the competitive position of Canadian firms by reducing the price of Canadian goods relative to foreign goods when measured in the same currency. The benefits to our exporters from this relative price change are clear. In fact in 1977, despite the relatively weak performance in the economies of most of our industrial trading partners, the volume of our merchandise exports increased by 10 per cent; preliminary indications for the first quarter of 1978
[Mr. McRae.)
suggest that this pace is being maintained. This is a direct benefit of the depreciation and has received fairly widespread recognition.
Hon. members are also aware that the other side of this coin is also important. Indeed, one of the main results of the rapid increase in Canadian costs and prices in the mid-70's was that Canadian producers were being squeezed out of our own market. The depreciation of the dollar has reversed this by raising the price Canadians must pay for imported goods, thus making home produced substitutes relatively cheaper. In quantitative terms, movements in the exchange rate since October 1976 have resulted in more than a 13 per cent increase in the relative price of goods imported from the United States.
The level of domestic demand stimulation induced by an exchange rate depreciation depends upon such factors as the availability of domestic substitutes and the ease with which Canadians can divert their expenditures towards domestically produced alternatives. In these terms, conditions in Canada have been favourable to take advantage of the exchange rate change.
The evidence amply demonstrates the impact of Canadian price performance on imports. Between 1973 and 1976 when the Canadian dollar was often above par with the U.S. dollar despite our unfavorable cost performance, merchandise imports rose over 13 per cent in volume at a time when g.n.p. grew only 10 per cent and exports declined. In 1977, however, imports rose only one per cent and by the end of the year were actually below year-earlier levels. The numbers so far available for the first quarter of 1978 suggest this favourable trend is continuing this year.
In summary, Mr. Speaker, the data support the view that the recent depreciation of the Canadian currency has aided Canadian business by improving its competitive position, not only abroad but also at home. As a result Canadian consumers are switching back from foreign produced imports to domestically produced goods to an important extent.


EXTERNAL AFFAIRS-BELL CANADA CONTRACT WITH SAUDI ARABIA
Mr. David Orlikow (Winnipeg North):: Mr. Speaker, Bell Canada has concluded an agreement to improve and operate the telephone system in Saudi Arabia from a contract worth more than $1 billion. Several hundred Canadian citizens will be working in that country. Bell Canada has assured Saudi Arabia under the agreement that it does not do business with the state of Israel. Prospective employees of Bell Canada who are to go to Saudi Arabia are required to fill out application forms which ask for their religion. There is evidence that Jewish applicants are not issued visas by Saudi Arabia.
When I asked the Prime Minister (Mr. Trudeau) on May 5 whether he was aware of these discriminatory practices and whether he would take action to deal with this discriminatory situation, he evaded the issue, as he did on earlier occasions when answering similar questions by the hon. member for Windsor West (Mj. Gray). That Saudi policy, as I have
May 23, 1978

indicated, was proven in a recent United States court decision. The United States has passed two bills dealing with boycotts, such as the Arab boycott to which I have been referring. They are the tax reform act, 1976 and the export administration act, 1977. Under terms of those two bills U.S. companies are prohibited from signing contracts which contain boycott clauses of the kind Bell signed, or even from providing undertakings to the same effect.
The American system operates on the basis of the view that the Arab boycott is successful as long as uninvolved third parties, like U.S. or Canadian companies, agree to go along with boycott demands, as Bell Canada has done. The Americans argue, on the basis of a successful experience, that a refusal to go along with boycott demands does not lead to a loss of any trade. In fact, what happens is that it leads to renegotiation of contracts so that boycott undertakings are left out. United States laws are what give American companies their government's support in resisting these discriminating terms of trade.
Bell has admitted that its contract contains a so-called statement of fact that neither it, its associates or subsidiaries, have or are at present engaged in any business relationship with Israel. This clause is an intrinsic part of a five-year contract. This clause would, presumably, have to remain in place for the duration of the five-year contract. Bell spokesmen have admitted they have made a five-year undertaking with regard to this clause as well as the contract as a whole.
The Export Development Corporation has insured this contract for $430 million, the largest single insurance coverage in its history. Its president, John MacDonald, has said that this clause does not contravene the policy of the government because it is not overtly written in the future tense; that is, Bell does not agree that it will never deal with Israel in future. This distinction between present and future tense in a boycott undertaking, especially when the contract is clearly of a five-year duration, is a nonsensical distinction, yet it is distinctions of this kind which lie at the heart of the anti-boycott policy of the Canadian government and which, in my view, have made the Export Development Corporation a partner in this reprehensible contract.
I want to deal with the question of visas for Bell employees. It is the stated policy of Saudi Arabia not to grant visas or work permits to members of the Jewish faith. The only exceptions are officials of governments, important journalists, industrialists who accompany officials or those who have been individually approached by the Saudis and asked to come. All application forms for visas to Saudi Arabia contain requests for information, and at a further stage in the process proof in the form of a baptismal or other certificate regarding the religion of the application. All this is specifically requested for the purpose of selecting out and excluding Jews.
The United States government's policy on this issue, as given to American applicants for Saudi visas, is that the religion question should not be answered and that it should be
Adjournment Debate
left blank. The U.S. government has made representations to the Saudis which have succeeded in developing a situation in which Saudi visas are granted to U.S. citizens without any specification as to religion. It seems to me that Canada has the same moral obligation to its citizens and to its corporations as has the United States, and we could well take a leaf from the experience and the policies of the United States government.


Mr. Charles Lapointe (Parliamentary Secretary to Minister of Transport):: Mr. Speaker, I have followed very closely the hon. member in his comments and there is something he did not mention, that we should congratulate ourselves that a Canadian corporation such as Bell Canada has their expertise recognized by a friendly country such as Saudi Arabia. It is all to our honour as Canadians that this corporation's technology is put to help a country technologically less developed than we are in building a large scale telephone network.
Turning to the substance of the question, namely the Arab boycott clause, I am not in a position to confirm whether Bell Canada signed that clause in their contract. I share the hon. member's concern that Canadians, and more specifically those to which we are addressing tonight, Canadians of Jewish origin, could be denied the right to work through Bell Canada in a country such as Saudi Arabia. However, I feel we must exercise a degree of caution, we should not suggest that certain things are done in the United States and we, in Canada, should sign a blank cheque or blindly follow what is now done in the United States. And it appears to me that I am not, nor is any member of this House in a position to state specifically that Bell Canada's contract with Saudi Arabia would have been refused under the American legislation.
I feel, Mr. Speaker, that on various occasions the Secretary of State for External Affairs (Mr. Jamieson) and the right hon. Prime Minister (Mr. Trudeau) indicated our deep repulsion for any boycott clause, whether the anti-Jewish boycott as proposed by some Arabian countries, or any other boycott for that matter, and this country's reputation is by far the best among countries of the world in the matter of human rights. We have always made it a point, both in our domestic and foreign policies, to ensure equal status for all our citizens, equal rights to every citizen whatever his ethnic, national, racial or religious origin. I feel that Canada's record in that respect is one of the most glorious, and I have no fear whatever that the Canadian government will go on defending human rights, and certainly those of our own citizens.


FISHERIES-ARRANGEMENTS WITH U.S. ON RECIPROCAL FISHING
Benno Friesen: Mr. Speaker, for some years now Canadian and U.S. fishermen have enjoyed reciprocity in fishing rights off Canadian and American waters. In 1976 and 1977 an agreement was signed between

May 23, 1978
Adjournment Debate
the two governments, but about three weeks ago some of the American fishermen decided to ask for a court injunction against Canadian fishermen fishing off the coast of the state of Washington. On May 3, the Minister of Fisheries (Mr. LeBlanc) spoke in Montreal, and one of the subtitles of his speech was "What can go wrong". On May 8 I rose in the House to ask the following question, with the preamble quoting the minister's statement:
As we know now on the west coast, plenty can go wrong. I would like to read a sentence or two from the joint report to the governments of Canada and the United States:
"The negotiators have agreed to recommend to governments the terms of interim arrangements to govern reciprocal fishing during 1978. The proposed arrangements would continue reciprocal fishing as previously agreed, with new mechanisms for consultation and resolution of differences and to help ensure that existing fishing patterns are maintained."
As I have said, previous to that joint statement the Americans had asked for a court injunction against Canadian fisheries. That is the backdrop to the problems we face today.
The proposed 1978 agreement also included expanding fishing areas in the U.S. waters for Canadian fishermen. So far as
I	know, to this day the United States Congress has not signed that agreement. I understand from a newspaper report of May
II	in Victoria that the American fishermen agreed to drop the court injunction because they fully believe that the Canadian fishermen will not get the expanded areas in the U.S. waters.
Since that time the Canadian authorities have agreed to close down the Swiftsure bank to Canadian and U.S. fishermen, even though the Canadian authorities see no threat to the salmon stock from fishing there. The U.S. authorities feel that it is a threat but, so far as I know, they will not share their information with Canadians. This means that Canadians have lost their fishing rights to the Swiftsure banks, they have lost the rights to American waters, and, as I say, the Americans have not allowed the Canadians into their waters, even though the Canadians have kept their part of the bargain, albeit perhaps a few days or a few weeks late.
According to the minister's answers to the questions from the hon. member for New Westminster (Mr. Leggatt) a few days after I asked the question, the minister admitted that this might have been a bargaining position for the U.S. fishermen. It could well be that Canadians will never get the expanded fishing rights as proposed in the 1978 agreement. We are not talking about sport fishing or anything casual; we are talking about a major industry of Canada, and certainly of the Pacific coast. We are talking about a catch last year which amounted to 138 million pounds of salmon with a wholesale value of $230 million. The salmon resource base of British Columbia is the fourth most valuable primary industry. It supports 14,000 jobs, a large number of processing plants and a fleet of 5,000 vessels in the commercial industry.
I am concerned about the minister's answer to the question posed by the hon. member for New Westminster which reads as follows:

It is not as dramatic as the hon. member makes it sound. The fact is, however, that we have given the United States authorities a period of time in which to consult following the discussions which took place here last week. We have indicated that we cannot see a situation which would drag on all summer, because our fishermen would then be paying the price of the delay.
I might add that the significant fishery off the U.S. coast is not in early May but begins slightly later than that, and that our fishermen are still fishing off the coast of Alaska under the terms of the 1978 agreement.
How long is it going to be until we receive a firm commitment from the government that action against United States fishermen will be taken? Do our fishermen have to wait and wait until a decision is reached, during which time they lose their incomes? Do they have to sit by idly waiting for some casual agreement to take place before they can commence fishing? Are they to commence their fishing after the fish stock is gone, which has occurred in other years? Are they to sit by and let their livelihoods disappear while we take a casual approach to this matter?


Mr. Hugh A. Anderson (Parliamentary Secretary to Minister of Fisheries and the Environment):: Mr. Speaker, I am very, very pleased to respond to the hon. member for Surrey-White Rock (Mr. Friesen). Before I do, I should like to preface my remarks by making one very short statement. It is very easy to become involved in a war. It takes a bit of diplomacy and common sense not to get into that type of situation. It is not to the benefit of any fishermen, whether American or Canadian, to become involved in a war which will hurt both sides.
For a number of months we have been attempting to negotiate the maritime boundaries with the United States. Hopefully its congress will approve the interim agreement for 1978 which was signed in good faith by Ambassador Cadieux for the Dominion of Canada and Mr. Cutler for the United States of America. The fact that fishermen off the coast of Washington have chosen to bring in an injunction through the courts of the United States is perfectly within their rights. The fact that they have withdrawn it again is perfectly within their rights.
Surely the hon. member for Surrey-White Rock would not hold the federal government responsible for the fact that fishermen in the United States felt that Canada had negotiated an interim agreement which was to the benefit of Canadians rather than Americans. Senator Magnusson of the United States Senate committee on fisheries indicated in very strong terms that the United States had sold out its interests to Canadian fishermen. He asked for Canadians to be stopped from sneaking into the 200-mile limit, after the United States had taken very strong steps to put into effect that limit. Also he indicated that Canadians are the ones who take advantage and the ones who have the greatest benefits from the system. That is exactly the opposite to what various people in British Columbia have said-that it is the United States which gains all the benefits from negotiations with Canada. I would hope there is some sanity brought into the discussions of what has happened in respect of trailers off the coast of Washington of Canadian origin. I suggest it is in the best interest of those trailers-
May 23, 1978


The Acting Speaker (Mr. Turner):: Order, please. I regret to interrupt the hon. parliamentary secretary but his allotted time has expired. The motion to adjourn the House is now deemed
Adjournment Debate
to have been adopted. Accordingly, this House stands adjourned until tomorrow at 2 o'clock p.m.
At 10:27 p.m. the House adjourned, without question put, pursuant to Standing Order.

Wednesday, May 24, 1978