1978-05-17

ROUTINE PROCEEDINGS


Mr. Paul Yewchuk (Athabasca):: Mr. Speaker, I rise under the provisions of Standing Order 43 to move a motion on a matter of urgent and pressing necessity. In view of the partial ban placed on the use of sodium nitrates in bacon by the United States government because of the possible carcinogenic property of nitrosamines, and in view of the usual unwillingness of this government to state its position, I move, seconded by the hon. member for Lambton-Kent (Mr. Holmes):
That the Minister of National Health and Welfare state on motions whether she plans any changes in the use of nitrosamines which many believe pose a threat to the health of Canadians.


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


Some hon. Members:: Agreed.


Some hon. Members:: No.


NATIONAL SECURITY
Mr. Tom Cossitt (Leeds):: Mr. Speaker, I rise on an urgent matter relating to the same subject I raised yesterday, namely, extensive government grants to the Centre for Experimental Art and Communications in Toronto, whose chief spokesman, Amerigo Marrass, has, in addition to their already expressed support for Italian terrorism, stated in a Toronto newspaper today that the "Aldo Moro murder is just a red herring" and that "all this fuss and crying over Moro ... we have to think of more important issues". I move, seconded by the hon. member for Central Nova (Mr. MacKay):
That this House requests the Prime Minister, for a second time, to make a detailed statement as to why the government has given such an organization extensive sums of public money from the Department of Secretary of State and the Department of External Affairs and, specifically, for the Prime Minister to advise the House if the disgraceful statement made by the Secretary of State to


Mr. Speaker:: Is there unanimous consent for the presentation of such a motion?


Some hon. Members:: Agreed.


Some hon. Members:: No.


FINANCE
Mr. Edward Broadbent (Oshawa-Whitby):: Mr. Speaker, I rise under the provisions of Standing Order 43. In view of the unanimous resolution approved by all political parties yesterday in the National Assembly of the province of Quebec indicating strong disapproval of the federal government's intention to make direct income tax payments to Quebec citizens as a means of circumventing the constitutional authority of the government of the province of Quebec, and considering that an identical position has been taken by other provincial governments as well as by opposition parties in this House and a significant number of Liberal members of parliament, I move, seconded by the hon. member for Winnipeg North Centre (Mr. Knowles):
That this House urges the government, in the interests of national unity, to withdraw Bill C-56 and bring forward new legislation which would specifically compensate provincial governments directly in respect of the federal government's sales tax proposal.


Mr. Speaker:: The provisions of Standing Order 43 require unanimous consent for the presentation of such a motion for debate. Is there unanimous consent?


Some hon. Members:: Agreed.


Some hon. Members:: No.
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May 17, 1978


REQUEST PROVINCES HAVE JURISDICTION OVER DIRECT TAXATION-MOTION UNDER S.O. 43
Mr. C. A. Gauthier (Roberval):: Mr. Speaker, under the provisions of Standing Order 43, I ask for the unanimous consent of the House to move a motion dealing with a matter of pressing necessity.
In light of the statement of the Minister of State for Urban Affairs (Mr. Ouellet) who said on television last night that his government would withdraw from joint programs with municipalities, thus admitting that the late Lester B. Pearson was right when he wanted to abolish all joint programs so as to hand over the authority taken from the provinces, and as we have always suggested that it was the only necessary condition to improve the climate in federal-provincial relations, I move, seconded by the hon. member for Bellechasse (Mr. Lambert):
That the federal government withdraw from direct taxation which, before the federal government insidiously laid hands on it, belonged exclusively to the provinces under the original constitution, and give back all direct taxes to those provinces.


Mr. Speaker:: Order. Under Standing Order 43, presentation of such a motion requires the unanimous consent of the House. Is there unanimous consent?


Some hon. Members:: Agreed.


Some hon. Members:: No.


TOURISM
Mr. Benno Friesen (Surrey-White Rock):: Mr. Speaker, I rise under the provisions of Standing Order 43. The province of British Columbia is at present celebrating the two-hundredth anniversary of the coming of Captain Cook to the shores of our province. Through the promotional efforts of the government of British Columbia there is already a large influx of tourists, many of them coming through the Blaine-Douglas port of entry. The province last year enjoyed the highest percentage increase in tourism.
The American authorities have decided to tear down and rebuild their port of entry facilities at Blaine during these crucial months of high tourist traffic in the area. Because there appears to have been no leadership on the part of the Department of Industry, Trade and Commerce, responsible for tourism, there has been no consultation with provincial officials and apparently none with American federal or Washington state officials to meet this emergency, I move, seconded by the hon. member for Fraser Valley West (Mr. Wenman):

That this House instructs the Minister of Industry, Trade and Commerce to forthwith call a meeting of his officials, together with the appropriate officials of the government of British Columbia as well as the state of Washington and United States immigration, to find ways by which the traffic can flow through the Blaine-Douglas port of entry without having the lines of traffic reduced from five to two.


Mr. Speaker:: The provisions of Standing Order 43 require the unanimous consent of the House for introduction of such a motion for debate. Is there unanimous consent?


Some hon. Members:: Agreed.


Some hon. Members:: No.


PRESENCE IN GALLERY OF PRESIDENT OF SOCIAL CREDIT PARTY
Mr. Speaker:: Order, please. Before beginning the oral question period, I ask hon. members to join with me in signalling the presence in our gallery of a very distinguished visitor, the newly-elected president of the Social Credit Party of Canada, Mr. Lome Reznowski.


Some hon. Members:: Hear, hear!



ORAL QUESTION PERIOD


Mr. Roch La Salle (Joliette):: Mr. Speaker, I would like to direct a question to the Minister of Finance.
I suppose the minister is aware of the motion which was passed unanimously yesterday in Quebec City, namely that the governments of Quebec and Canada conclude immediately a firm and final agreement respecting the Quebec proposal announced on April 12.
Given the circumstances, would the minister be prepared to accept the unanimous wish of the National Assembly?


Hon. Jean Chretien (Minister of Finance):: Mr. Speaker, if the Quebec government wants to make some proposals, it is free to do so. After the proposal I made in my budget speech I wrote twice to the Quebec government to propose amendments which would suit them. I have not received any counterproposal so far. If the government of Quebec really wants to propose a solution and discuss it, I would be glad to do so because prior to budget night I did spend three weeks confer-
May 17, 1978

ring on several occasions with the Quebec government and at no time did it suggest any amendment either before or after, except its unilateral decision to cut the sales tax on four items only.


Roch La Salle: Mr. Speaker, unfortunately the minister did not answer the question, because the proposal is clear.
In the light of the general protest from all parties in Quebec against the rebate formula put forward by the Minister of Finance in the sales tax dispute, could he tell us today whether he is at least prepared to defer or withdraw Bill C-56 so long as a solution has not been found?


Joseph Jacques Jean Chrétien: Mr. Speaker, Bill C-56 is the bill deriving from the budget brought down in the House on April 10 last. It is important that the bill is passed as soon as possible.
I remember very well that last fall the opposition criticized us because we delayed the adoption of the budget until the fall rather than having it adopted in the spring. Therefore, I intend to proceed with the budget, and we are going to proceed with the study of the bill following the budget. We shall proceed with the second reading of the bill this afternoon, which does not prevent us from considering in good faith any offer on the part of the government of Quebec if any, as we always did in the past in this area.


INQUIRY WHETHER MINISTER OF FINANCE WILL CONSULT QUEBEC COUNTERPART ON SALES TAX
Roch La Salle: Mr. Speaker, I should like to address my question to the one who is responsible for this parliament, that is the right hon. Prime Minister.
In the face of the dilemma frought with consequences in which we now find ourselves as a result of the wishes expressed yesterday by the Liberal leader at the National Assembly, Mr. Gerard D. Levesque, can the Prime Minister tell us whether, in view of the circumstances, he intends to start making the necessary arrangements to meet his counterpart, the Quebec premier, to discuss this dilemma and try, as leader of this government, to solve the matter in the interest of both sides?


Right Hon. P. E. Trudeau (Prime Minister):: Mr. Speaker, the position of the government is the same as that of the Minister of Finance. If meeting the Quebec government can serve any useful purpose, not only are we ready but we are anxious to do so. The Minister of Finance has already made certain proposals, and we are willing to discuss counter-proposals.
For my part, I should like that meeting to take place. I should also like the Canadian people and parliament to understand clearly what the matter is all about. What we are doing in the case of the province of Quebec, contrary to what the Leader of the New Democratic Party said a while ago in his motion, as I say, what we are doing with the province of
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Quebec is exactly the same thing as with the other eight provinces, that is, Mr. Speaker, we are withdrawing from certains fields of taxation on income so that the provinces may occupy them.
In the case of the other provinces, they already do so; in the case of the province of Quebec, we expect it to occupy that tax field in the same way. I hope that will be clearly understood.


CONSULTATION WITH ALBERTA ON SALES TAX PROPOSALS
Mr. Gordon Towers (Red Deer):: Mr. Speaker, I have a supplementary question for the Minister of Finance which concerns the province of Alberta. Does the minister intend to make Alberta a participating province, so that Albertans too can receive the $100 tax remission under Bill C-56 now that it has been made clear that the government's budgetary measure is no longer exclusively a sales tax credit but includes a direct payment of $85 to the people of Quebec?


Joseph Jacques Jean Chrétien: Mr. Speaker, I had occasion to say earlier that this scheme was designed to help people in the provinces where they are obliged to pay sales tax. I said from the first that this was not the case with Alberta. I discussed that with them at the time of presentation of the budget, at least ten days before the budget, on the day of the budget and later on in other discussions with the minister of finance. This proposition applied to the provinces less fortunate than Alberta which have to pay sales tax.


Thomas Gordon Towers: A supplementary question, Mr. Speaker. The Minister of Finance told this House yesterday that Quebec is being offered the same deal as every other province. Since that is not the interpretation being placed on his measure by some members of his own party, as well as many well informed people, will the minister consider making the same offer of a direct payment, without any strings attached, to taxpayers of every other province in order to dispel this notion of special status for Quebec?


Joseph Jacques Jean Chrétien: Mr. Speaker, I have made the offer to the other provinces in the budget that we will be voting on in the bill before us this afternoon. We have reduced the federal income tax in the other provinces by $100 per taxpayer and the provincial legislatures have increased their income tax accordingly. This is exactly the same deal that we are offering to Quebec.


Thomas Gordon Towers: Mr. Speaker, a further supplementary question. Since the Minister of Finance still leaves Alberta with no status, and since the government is demonstrating flexibility after the fact in this sales tax credit proposal, is the minister prepared to convene an immediate meeting of his provincial counterparts to more adequately explore some of the ideas they expressed to him during his so-called pre-budget consultations with them?


Joseph Jacques Jean Chrétien: Mr. Speaker, we have had some meetings of ministers of finance. I have had two since my appointment,
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May 17, 1978
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and another one is being organized for July. I think it was a very novel and useful initiative on my part to consult the ministers of finance of all the provinces.
I took the liberty, at that time, of saying to the minister of finance of Alberta that because of the special circumstances in Alberta we were offering tax incentives for the development of heavy oil: we were moving in the area of tax incentives for the development of oil. That is something that applies to the western provinces. There is a lot of money in those projects from the federal government and, of course, that benefits the economy of Alberta. In fact, already the situation there in terms of taxes is the best in Canada.


CO-OPERATIVE FEDERALISM IN TAX FIELD
John Edward Broadbent: Mr. Speaker, the minister's arguments may go over well in the Liberal caucus, but they convince no one else: I hope he realizes that.


Some hon. Members:: Hear, hear!


An hon. Member:: There is trouble there, too.


An hon. Member:: Ask Serge Joyal.


John Edward Broadbent: They are not even unanimous in the Liberal caucus, I understand, these days. I ask the Prime Minister, who has written quite a bit on the subject of federalism, especially on the notion of co-operative federalism, would he not agree that in any federal system it is wrong for a federal government to attempt a form of blackmail with a provincial government by offering a direct tax cut to citizens of that province, after the fact, unless the provincial government in question takes a course of action which has been insisted upon by the federal government and which is clearly within the jurisdictional authority of the province? If so, how can the Prime Minister possibly justify the incredible approach that is being taken on this issue vis-a-vis the province of Quebec?


Pierre Elliott Trudeau: Mr. Speaker, generally taken, the statement made by the Leader of the New Democratic Party is one indeed with which I can agree, that the federal government should not use its leverage over taxes to force the provinces to do a certain thing. In this particular case, the Minister of Finance consulted the provinces, all ten of them, over a period of three weeks and asked them if they would do a certain thing provided we cut our taxes-this is not in provincial jurisdiction-and gave them tax room.
Nine provinces said, "Yes, we will go along with that." The tenth province gave no answer. We had to have a budget; the date was Fixed. The minister made his budget statement. It was only after the statement was made that one province said, "We don't go along; you are trying to blackmail us." The Minister of Finance said, "We are not trying to blackmail you; we are offering you tax room." The provinces, as long as I have been around, since 1965, have been constantly asking for tax room. The Minister of Finance offered them tax room.


John Edward Broadbent: In the sales tax area.


Pierre Elliott Trudeau: In direct personal income tax. The Minister of Finance is proposing that we cut the personal income tax of all Canadians. Alberta is a special case.


Some hon. Members:: Oh, oh!


An hon. Member:: Special status.


An hon. Member:: Talk to Jack Horner about that.


Mr. Hnatyshyn:: Nobody understands Alberta!


An hon. Member:: How do you like that, Jack Horner?


Some hon. Members:: Oh, oh!


Pierre Elliott Trudeau: Mr. Speaker, I do not see why hon. members are seemingly dissatisfied because I say that Alberta is a special case. It is obvious: it has no sales tax. Therefore, the proposition that we are making cannot apply to Alberta, and that is why the Minister of Finance has special provisions in his budget for the Alberta situation. But we are talking of provinces where there is a sales tax, Mr. Speaker.
The Minister of Finance made a certain proposal and said, "You, the provinces, will have the resources to carry out this proposal. We are going to give you tax room." He has not, as the Leader of the New Democratic Party suggests, given money to Quebeckers in any different sense than he has given money to Ontarians, to Manitobans, to British Columbians, to Nova Scotians-


An hon. Member:: Sure he has.


Mr. Speaker:: Order, please. We can see that on both sides it would have been unduly restrictive for me to suggest that the question put by the hon. member suggesting blackmail is an argumentative one. I did not want to do that, but obviously it has invited a rather long and prolix answer. It is only fair to stick to informational questions and answers.


John Edward Broadbent: To use parliamentary language, Mr. Speaker, the Prime Minister was just misleading the House. Does he, as Prime Minister, not know that when the Minister of Finance discussed the proposals with his equivalents in the provinces, and indeed when he introduced the budget here in the House, he proposed in that context, vis-a-vis the sales tax we are talking about, a reduction or compensation of federal payment in the sales tax domain by way of a cut which varied from region to region and province to province if, I would add, they took equivalent action in the sales tax field? If so, will he agree that what he is now doing is confusing the issue when talking about a proposal made by the federal government to cut income tax to leave room for the provinces, made in an entirely different context from the one in which the sales tax was originally proposed?


Pierre Elliott Trudeau: Mr. Speaker, I am afraid there is a misunderstanding on the part of the hon. member as to what the Minister of Finance is proposing. The Leader of the New
May 17, 1978

Democratic Party suggests that we are giving money to Quebeckers-to pay them off, or something-in a sense that we are not giving money to the other provinces. Let me make this very clear to the House: the Minister of Finance is cutting personal income tax by $100 in every province.


Mr. Stevens:: How about Alberta?


Pierre Elliott Trudeau: He is cutting personal income tax by $100. He is not giving money to Quebeckers that he is not giving to Ontarians or to Nova Scotians. When citizens fill out their income tax forms, they will see that they are paying $100 less to the federal government, and they will see that the provinces are levying $100. In this sense we are giving money to the citizens so that the province can take this money and use it for indirect taxes.


Some hon. Members:: Oh, oh!


Pierre Elliott Trudeau: The House can disagree with the method taken: this is what the debate is about today. The Minister of Finance will make a speech on second reading. However, it is absolutely essential that hon. members understand what they do not seem to understand.


Some hon. Members:: Oh, oh!


Pierre Elliott Trudeau: I have time, Mr. Speaker. I hope you have. I hope you will not deduct from my time-


Mr. Speaker:: Order, please. We are into two difficulties from a procedural point of view. We are very much anticipating the order of the day, the debate on the measure and getting into a discussion on the merits of the particular bill which will be the subject of debate. We are also getting into very argumentative areas, instead of informational areas. I would ask the hon. member for Oshawa-Whitby to bear that in mind in his third supplementary.


John Edward Broadbent: Mr. Speaker, I can understand why Richard Nixon is a close friend of the Prime Minister, after that answer.


Some hon. Members:: Oh, oh!


John Edward Broadbent: The income tax reduction that the Prime Minister is talking about was made last fall by the Minister of Finance-a $100 tax cut. It was to come into effect for the first two months of this year. It has absolutely nothing to do with the budget the minister brought in about a month ago, which had everything to do with the sales tax.
I ask the Prime Minister to take the opportunity and speak truthfully to the House of Commons in this matter and say whether he agrees with the leader of the Liberal party of the province of Quebec when he said, vis-a-vis the current proposal, not the one made last fall by the Minister of Finance, "It means that whenever the federal government makes any kind of offer to a province, and when the province refuses it for reasons of its own, the federal government retaliates by handing the money over to the people." Mr. Ryan implied that is a
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form of blackmail. That is what everyone in this House sees as a form of blackmail, as do all the people of Canada.


Pierre Elliott Trudeau: Mr. Speaker, when the Leader of the New Democratic Party says we are handing the money over to the people of Quebec, he shows once again that he does not understand the scheme. He refers to last fall's budgetary measure of $100. I am not talking about that, Mr. Speaker; I am saying that in this particular budgetary measure we are making tax room to the extent of $100 in the provinces, and we are making tax room so the provinces can occupy that tax room and take the money into their coffers. This is what is happening in Ontario, and this is what we are proposing should happen in the province of Quebec: it is exactly the same thing.
If the House cannot understand this, I am prepared to answer questions ad nauseam. But members must understand the facts. I realize this is a little complicated and I must ask for the attention of hon. members. But when we are giving tax room-something for which the provinces have asked repeatedly-we are giving it in Quebec in exactly the same way as we are in other provinces; and when members opposite say we are not helping the poor people of Quebec, then in the same sense we are not helping the poor people in Ontario either. We are cutting direct federal income tax for people who pay direct federal income tax, and not for the others.


REQUEST SALES TAX BE REMOVED OR REDUCED AT MANUFACTURERS' LEVEL
Mr. Adrien Lambert (Bellechasse):: Mr. Speaker, my question is for the right hon. Prime Minister. This country is now facing very serious difficulties and 1 am afraid that if we fail to settle this problem very soon it will keep on worsening as it did last week. Here is my question: since the object of the proposal made by the central government to the provincial governments was to lighten the taxpayers' burden, to increase their purchasing power and stimulate consumption so as to put our economy back on the tracks, and such is the government's intention, and since there is no understanding among governments, would the Prime Minister accept the suggestion I once made in the House about reducing or repealing the tax at the manufacturers' level? This would serve the same purpose and nobody would complain that the federal government is overstepping its jurisdiction by interfering with a provincial field of taxation. Would the Prime Minister be willing to consider this alternative?


Pierre Elliott Trudeau: Mr. Speaker, that is a valid suggestion. I want to remind the hon. member that finance ministers of this government have often done that. For example, they abolished the manufacturing tax on children's clothing, other consumer goods, and building materials. So the hon. member's suggestion is quite sensible. However,

May 17, 1978
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since consumers are not quite aware of the manufacturing tax, manufacturers often pocket the difference rather than lowering their prices. This time, as was suggested by several economists, especially from Ontario, we considered ways of cutting taxes, not at the manufacturers' level but at the consumers' level so that he could directly benefit from lower prices. Once again, nine provinces agreed, the tenth, the province of Quebec, said: we cannot give you an answer, we will get back to you on it. I repeat, I do not reject the hon. member's proposal, but I just want to draw his attention to the fact that in trying to establish some form of co-operation within federalism we must not be surprised that a government which is out to prove that federalism does not work should refuse to co-operate. Nevertheless we continue to bargain in good faith with that government, just as with the other nine, in order to provide a system which will benefit the taxpayer. The proof is that, according to figures published yesterday, the cost of living went down as compared with previous months. No doubt the consumer perceives this sales tax decrease as a lowering of prices.


POSSIBILITY OF DISCOUNT APPLIED TO CANADIAN-MADE PRODUCTS
Joseph Adrien Henri Lambert: I wish to put a supplementary question.
I understand quite well the explanations of the Prime Minister. However, the fact is that we are faced with a crucial problem. There is a solution which the government applied in 1972 and 1973 when it enacted a discount on the price of milk. This worked quite well and proved helpful to consumers. Would the Prime Minister agree to enact a discount on the price of all goods made in Canada as an incentive to Canadian industries and as a direct form of assistance to consumers? Would the Prime Minister be in favour of such a solution?


Pierre Elliott Trudeau: Mr. Speaker, as was the case for the previous suggestion, some parts of this proposal are good, and in proof of this, the hon. member recalled that the federal government once took action somewhat along those lines. But I must remind him that we are bound under GATT not to discriminate in favour of Canadian manufacturers, because if we did, other provinces and other countries would devise some tax measures which would be detrimental to Canadian exports, and Canada would be the first to suffer. We must therefore operate within this framework, taking into account the trade agreements among all nations, failing which we should be the first to suffer.


Joseph Adrien Henri Lambert: I have a further supplementary.
Mr. Speaker, a moment ago, the Prime Minister mentioned the fact that the removal of the sales tax at the manufacturers' level would not benefit the consumers. Can the Prime Minister assure the House that the consumers are truly protected by the measure he introduced urging the provincial governments to

lower the retail sales tax? How does the Prime Minister intend to ascertain whether the tax cut has indeed benefited the consumers and whether it is possible for the retailers to add the tax to their sales price without reporting it as sales tax?


Pierre Elliott Trudeau: Mr. Speaker, once again, there is no better evidence that the consumers benefit from the tax cut than the figures on the cost of living that were published yesterday; but in practical terms, the hon. member knows what happens. You go to a store and the price is advertised. You buy an item, the dealer adds the sales tax. If he adds 4 per cent instead of 7 per cent, there is a difference. The Minister of Finance proposes that 4 per cent be added instead of 7 per cent. So the final price to the consumer is much lower as a result of the measure introduced by the Minister of Finance, and I hope the hon. member will support it.


METHOD OF SALES TAX COMPENSATION FOR QUEBECKERS NOT FILING TAX RETURN
Mr. Heward Grafftey (Brome-Missisquoi):: Mr. Speaker, when he presented his budget the Minister of Finance said on several occasions that this reduction of the sales tax was the best way to help all Canadians throughout the country. Given the fact that the right hon. Prime Minister has said today that everything will turn out just fine for the poor people in the province of Quebec and given also the proposition announced yesterday by the Minister of Finance, can he now tell the House how precisely the Quebec taxpayers who pay the sales tax but no income tax-the poor ones-will be compensated by the federal government?
I would also like to elicit from the Minister of Finance-


Mr. Speaker:: Order. The hon. member has already asked a question.


Joseph Jacques Jean Chrétien: Mr. Speaker, the proposition we have made was meant to encourage the provinces to reduce their sales tax. The province of Quebec did not want to go about it exactly like the others. To urge everybody to benefit from this cut, the best way would have been to reduce the tax on all products, as the other provinces did. But Quebec decided to reduce it only on selected items. Thus, only the people who buy these products benefit from the sales tax cut. As in the other provinces, we offer to the public a reduction of the income tax that will give the provinces manoeuvring room in the fiscal area. The same thing goes for Quebec.


William Heward Grafftey: Mr. Speaker, I have a supplementary for the Minister of Finance.
When you were negotiating with the ministers of finance of the other provinces before the budget, did you inform them of the 36,000 jobs lost over the past 18 months in the manufacturing sector in Canada, 30,000 of which were in the province
May 17, 1978

of Quebec alone in the traditional sectors such as clothing and so on, as mentioned in the Quebec National Assembly? Did you explain that to the other ministers of finance during your negotiations?


Joseph Jacques Jean Chrétien: Mr. Speaker, it is obvious that a 3 per cent reduction of the sales tax on textiles, clothing and footwear would be a great help to the Quebec industry. But never did the government of Quebec make a proposal similar to that of the hon. member. If during our negotiations the Quebec government had wanted us to give more compensation to the so-called soft sector, we could have made the same offer to the other provinces and it would have been up to them to accept it or reject it. British Columbia and Saskatchewan preferred a 2 per cent income tax reduction over nine months instead of 3 per cent over six months. We made the necessary adjustments.
I said: Very well, I will talk to the other provinces. I made the same offer to all the provinces but only Saskatchewan and British Columbia accepted it.
But at no time during the three weeks of negotiations did the Quebec government specifically mention the textile, footwear and clothing industries.


REQUEST FOR WITHDRAWAL OF SALES TAX MEASURE
William Heward Grafftey: Mr. Speaker, it is with regret that I put my final question to the right hon. Prime Minister. Many times in the past the Prime Minister has criticized the government of Quebec for acting as though separatism was already a fait accompli. Now we have in this sales tax business one policy for Quebec and one for the rest of Canada: that is clear.
In view of the reaction the Prime Minister has received from the rest of Canada, can he explain why he is already treating Quebec as though separatism was already a fait accompli; and because of the reaction he has received from all of Canada, will he now withdraw this stupidity?


Some hon. Members:: Hear, hear!


Pierre Elliott Trudeau: Mr. Speaker, the hon. member suggests that there is one policy for Quebec and one policy for the other provinces. I must point out to him that in so far as the application of their sales taxes is concerned, this is true. The province of Quebec chose to have a special scheme for its sales tax which, by the admission of the government of Quebec, would help not the Canadian common market but producers in the province of Quebec. In that sense, it is a separatist government, to use the hon. member's phrase, which has chosen to serve itself apart from the rest of the country.
In so far as the Minister of Finance is concerned, he offered to all provinces which had sales taxes exactly the same thing, and he is doing in all provinces exactly the same thing. He is making tax room by abating the federal income tax so that the
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provinces can increase their income taxes and occupy that tax room. In this sense, the minister is transferring money from the federal treasury, which gets its money from the payer of direct income taxes, to the provincial treasuries, which get their money from payers of income taxes.
I wish hon. members opposite would understand that we are not treating Quebec differently. We are treating Quebec in exactly the same way as we are treating the province of Ontario: we are giving it tax room so that the provincial government can use that tax room to cut sales taxes. In the cases of the other provinces, they have cut them according to the scheme discussed among themselves. In the case of Quebec, the sales tax has been cut in a different manner which seems to destroy the idea of a national common market and which seems to favour only jobs in the province of Quebec. This is the difference.


Mr. Clark:: That is nonsense, and you know it.


REASON MANITOBA NOT ALLOWED TO USE TAX REVENUE FOR JOB CREATION
Mr. Jake Epp (Provencher):: Mr. Speaker, I direct my question to the Minister of Finance. I would like to have the unexplainable explained, because the provinces are not being treated equally. On the one hand there are no strings attached and, on the other hand, there are very specific strings attached. What the government is doing is giving federal revenue to eight provinces on the strict condition that they accept the government's sales tax program, while one province gets money with no strings attached.
Under the present proposal, the Quebec government can use the so-called tax room for whatever purpose it chooses. Can the minister explain to me why the province of Manitoba was forbidden by the minister from using its own provincial tax money for direct job creation, when the minister says here today that the flexibility which was granted was granted to all provinces?


Joseph Jacques Jean Chrétien: Mr. Speaker, the proposition I made to the province of Manitoba was exactly the same as the proposition I made to the other provinces. I suggested that Manitoba cut its sales tax by 3 per cent for six months and that I would compensate two of those three percentage points. That proposition was accepted.
Like many other provinces, Manitoba asked me to do something else. I spoke to all ministers of finance and tried to reach a consensus. When I learned that Saskatchewan and British Columbia wanted to have a special proposition, I called the other ministers of finance and made that proposition to them. They all said that I could make that special deal with B.C. and Saskatchewan, but that it was of no interest to them. The scheme was agreed upon and known about before I introduced my budget. But during the course of the discussions many people made all sorts of suggestions and I was not able to get agreement from the other ministers.

May 17, 1978
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Arthur Jacob (Jake) Epp: Mr. Speaker, the Manitoba government proposed that of the 3 per cent sales tax reduction, 1 percentage point should be used for direct job creation in the province of Manitoba. The money involved was paid by Manitoba taxpayers. In view of the flip-flop the minister has done, what was the reason for his rejection of the Manitoba proposal which would have had direct beneficial results in our province?


Joseph Jacques Jean Chrétien: Mr. Speaker, I just explained very clearly that I was trying to get a consensus among all the provinces. The Manitoba government proposed something special which I could not sell to the other provinces. I made exactly the same offer to the government of Manitoba as the one I made to the others. There were two options. The government of Manitoba decided to cut its sales tax by three points for six months and pay for one of those three points, just as Ontario and the other provinces which had the same choice did. They did not want to take the same route as the one taken by Saskatchewan and B.C. Everyone wanted to have a different tax. That was the first time a federal minister of finance had tried in good faith to incorporate the views of all provincial ministers of finance in a budget.
Incidentally, sales tax was not the only thing we discussed. The minister of finance of Manitoba and myself spent only about ten minutes on the sales tax proposal, and he understood. After that we discussed the value of the dollar, the balance of payments, and so forth. We had a very useful meeting.


Charles Joseph Clark: At the airport.


CONSULTATION WITH PROVINCES ON SALES TAX
Mr. John C. Crosbie (St. John's West):: Mr. Speaker, my question is to the Minister of Finance. In connection with the minister's proposal to rebate $85 to each Quebec taxpayer in connection with the sales tax proposals in his budget, did the Minister of Finance consult with his provincial colleagues, the ministers of finance and provincial treasurers, before he made a final decision on that method of proceeding and before he announced it? Did he consult with them all, and did they consent or did they object? What was their reaction? I presume that the minister from Quebec must have objected. Were they all consulted with, and what was their reaction?


Joseph Jacques Jean Chrétien: Mr. Speaker, I previously took the time to call every minister of finance. The only one I could not reach was the minister of finance of Newfoundland, but I talked to the premier, Mr. Moores. He made some comments and then said he would not make any public statement about it, and I guess he has not.


John Carnell Crosbie: Mr. Speaker, I would like to refer the minister to his statement of May 15 in connection with this whole matter. He said, at page 3:
I have discussed this arrangement with my colleagues in each province.
He has now pointed out that he has not discussed it with all his colleagues. The minister went on to say:

They all told me they would have preferred Quebec acceptance of the original proposal.
Is the minister saying that the Premier of Newfoundland and all his other colleagues in finance across Canada, including the Quebec minister-which is what this statement says- all said they would prefer Quebec acceptance of this proposal? If that is the case, why has Mr. Parizeau not accepted? What does this statement mean in the press release the minister put out?


Joseph Jacques Jean Chrétien: Mr. Speaker, I think the hon. member wants a play on words. Of course I did not talk to the minister of finance of Newfoundland; he was in Paris. I decided to talk to his boss. The Newfoundland minister of finance was in Paris on business. He was there to borrow some money for his province. He has a tough time because he had to take over from the hon. member for St. John's West who left the treasury.
In the case of Quebec, of course, there was no agreement. I think it is quite evident that the Quebec minister of finance has not accepted the proposition. The hon. member says I should have said "all but Mr. Parizeau". Perhaps I can add "all but Mr. Parizeau". Mr. Parizeau did not agree. Everyone knows that. This happened a long time ago.


John Carnell Crosbie: Mr. Speaker, when I was the minister of finance in Newfoundland the Canadian dollar did not have the bottom dropped out of it; I can assure the minister of that.


Some hon. Members:: Hear, hear!


John Carnell Crosbie: Our deficits did not approach $11.5 billion, either. I refer the minister to Hansard of May 16: at page 5451 the minister is reported as saying:
We have cut income tax in the federal budget for the citizens of all provinces and the provinces raised their own income tax by the equivalent amount of money.
Has the minister reduced the income tax by $100, or any amount, for the citizens of Alberta? Has Alberta agreed to raise its income tax by an equivalent amount of money? That is what the minister said yesterday.


Joseph Jacques Jean Chrétien: Mr. Speaker, I think it is very obvious why he quit very quickly the treasury of the Newfoundland government. In the case of Alberta, we have explained very clearly that the proposition was related to provinces which had sales tax. Obviously there is no sales tax in Alberta. I explained that in my first discussion with the minister of finance for Alberta:
I said, "This cannot apply to you". But I said at that time that there would be other things in the budget which would be of interest to the people of Alberta.
It is quite evident that it is great that we have decided to give more incentives in this budget for the heavy oil industry from our own tax in order to have that industry in Alberta. Obviously, that province can afford not to have sales tax. In the case of the other provinces, I have cut income tax by $100
May 17, 1978

and they have increased their own income tax by the same amount of money.


EXTERNAL AFFAIRS
Mr. Claude-Andre Lachance (Lafontaine-Rosemont):: Mr. Speaker, my question is directed to the Secretary of State for External Affairs.
According to the observers of the Russian political scene, the trial of Dr. Yuri Orlov is a typical case since it involves the principle underlying the provisions of the third basket of the Helsinki agreements which are thus flouted by the court itself, expecially the way the proceedings are evolving. Does the minister intend to convey to the Soviet authorities the concerns which the trial of Dr. Orlov has raised in the government and among Canadians and is he seriously considering the negative effect of that trial on the implementation of the Helsinki agreement?


Hon. Donald C. Jamieson (Secretary of State for External Affairs):: Mr. Speaker, as a preliminary, of course, I should remind the House that we have on a number of occasions within this chamber unanimously made reference to human rights issues in the Soviet Union including, by inference at least, the trial of Mr. Orlov or the arrest of Mr. Orlov. On the trial itself, I think hon. members will know it has not been possible for outside or western observers to gain access to the place where the trial is being held. We are doing what we can to determine the processes and the procedures which are being used.
As to whether or not there will be some sort of representations to the Soviet Union on this matter, we can only await the outcome of the trial and the assessment of as much evidence as it is possible for us to get together.


FINANCE
Mr. T. C. Douglas (Nanaimo-Cowichan-The Islands):: Mr. Speaker, I should like to direct a question to the Minister of Finance. In his recent budget statement he said that a reduction of retail sales taxes had the advantage of benefiting all those who spend in Canada, even those who do not pay income tax. In view of the fact the minister has recognized that those who do not pay income tax still pay sales tax, and often pay a disproportionate share of their income in sales tax, in seeking to make reparations to the province of Quebec why is he now dealing only with those who pay income tax and making no
Oral Questions
rebate whatsoever to those who have paid money in the form of sales taxes?
While we do think the money should be paid to the government of the province of Quebec in order for it to exercise its own fiscal priorities, which it is entitled to do under the constitution, if the Government of Canada insists on making rebates why are they not made on a fair and equitable basis?


Joseph Jacques Jean Chrétien: Mr. Speaker, we are not making rebates. The Prime Minister spent a lot of time this afternoon explaining to the House that we are making tax room in the province of Quebec. If the provincial government wants to occupy that field, it can do so, just like Ontario, Manitoba, Saskatchewan, British Columbia and the mari-times. Quebec is different from the other provinces. In the other provinces things were done in an easy way because we are collecting their taxes for them. In Quebec they have to raise and collect their own taxes.


Thomas Clement (Tommy) Douglas: Mr. Speaker, my supplementary question is directed to the Minister of Finance. The crux of the whole matter is whether or not the federal government would agree to making the same arrangement with Quebec which it has made with the other provinces in respect of reimbursing them for a loss of sales tax revenue.
Since the minister has insisted repeatedly that they cannot agree to selective sales tax and that it must be an across-the-board sales tax, has he any statistical or economic data to substantiate his position? If he has, will he table such data? Can he show the House that a selective reduction of sales tax in any province would produce less stimulus than the across-the-board provision which he suggested to the other provinces?


Joseph Jacques Jean Chrétien: Mr. Speaker, the question of selectivity in Quebec has come from the fact that the same proposition could not have been made to the other provinces.


Thomas Clement (Tommy) Douglas: Why not?


Joseph Jacques Jean Chrétien: Because it came after the fact. As the hon. member knows, there was an agreement among the provinces to cut their sales taxes the night of the budget. In fact, Manitoba and British Columbia decided to either advance or postpone their budgets to coincide with the same date in my budget. In effect, they have set that date for a tax cut across the board. Quebec came 48 hours after that with a selective system. Of course, it was too late to offer the same selectivity to the other provinces.
If Ontario had a choice, probably it would have been inclined to act in the automobile area. Because of my discussions with the minister of finance for British Columbia, if he had a choice of selectivity I know for sure he would have taken a cut in building materials because they are the only products which British Columbia sells to the rest of Canada.

May 17, 1978
Oral Questions


DIFFERENCE IN METHOD OF COMPENSATION FOR SALES TAX CUTS
Charles Joseph Clark: Mr. Speaker, my question is directed to the Prime Minister. Several times today the Prime Minister said that this proposal applies in exactly the same manner in every province. What we have here is a proposal that Quebeckers will receive a cheque from the federal government, while citizens of the other provinces will not receive a cheque from the federal government. How is that the same?


Pierre Elliott Trudeau: Mr. Speaker, it can be explained very, very simply.


Some hon. Members:: Oh, oh!


Pierre Elliott Trudeau: In the case of people who pay income tax in the province of Quebec, they send cheques to the federal government. Thus, when we want to rebate that income tax we send cheques back. In the case of the other provinces, they have tax collection agreements with us. I think perhaps 90 per cent of Canadians do not understand that. We have tax collection agreements with the other provinces. When a citizen of Ontario or British Columbia files his income tax return, he files it on the same form as that of the federal government. He does not send a cheque to the Ontario government and one to Ottawa; he sends the whole amount to Ottawa and we give the part which belongs to Ontario back to Ontario.
That is the very simple explanation. In the case of nine provinces, they have collection agreements with us. We collect the whole amount for them. Therefore, we give that amount to the provincial treasuries. In the case of Quebec, since 1954 they have insisted on collecting their own taxes. Therefore, when a citizen of the province of Quebec sends a cheque to pay his tax, he sends another cheque to the province of Quebec. If we want to rebate our taxes, we send part of that cheque back.


Some hon. Members:: Oh, oh!


Pierre Elliott Trudeau: I know that is very difficult for members of the opposition to understand.


Some hon. Members:: Hear, hear!


Charles Joseph Clark: Mr. Speaker, my supplementary question is directed to the Prime Minister. It is pretty clear that the purpose of all these contortions by the Prime Minister is to hide the fact that the first proposition by the Minister of Finance was confined to sales tax. This new proposition which he is making to the province of Quebec and Quebec does not want is not confined to sales tax. So he has changed the nature of the proposal.


Some hon. Members:: Hear, hear!


Charles Joseph Clark: The Prime Minister has indicated to this House, in answer to my colleague the hon. member for Joliette, that he is prepared to discuss and negotiate this matter with the

province of Quebec. Will he tell us now whether he is also prepared to discuss this matter with the other provinces of confederation, since it is clear that the arrangement on which the Minister of Finance proceeded without agreement when he brought in the budget is not working and the Government of Canada is now introducing and extending to Quebec an arrangement that Quebec does not want and which is different from the arrangement that is available to the other provinces?


Some hon. Members:: Hear, hear!


Pierre Elliott Trudeau: Mr. Speaker, sometimes I despair of having all members on the other side understand the proposition. But I do not despair of the people in the country understanding it.


Some hon. Members:: Oh, oh!


Pierre Elliott Trudeau: I do not even despair of the Leader of the NDP understanding it; I think he is beginning to understand it, too. When we make tax room in the direction of income taxes, we give place to the provinces so they can tax, in a sense, painlessly because we are giving them some of our tax room and they are just occupying it. What we have offered Quebec and what we have offered other provinces, what we are doing in Quebec and what we are doing in other provinces, is the same thing: we are giving them tax room. The Leader of the Opposition can shake his head, but I would just ask him to think a little bit and to try to understand. He will finally understand it if he tries hard enough.


Charles Joseph Clark: Mr. Speaker, we have thought a great deal about this and we have watched the contortions of the Prime Minister as he tries to bail out his Minister of Finance. It is very, very clear that the Government of Canada has changed the proposal. It is making a proposal to the province of Quebec that it did not make to the rest of the country. The Prime Minister has undertaken to negotiate now with the province of Quebec. Will he also undertake to negotiate with the other provinces?


Some hon. Members:: Hear, hear!


Pierre Elliott Trudeau: Mr. Speaker, perhaps I could make it clear by saying this: exactly what we are offering the province of Quebec-and he says it is a special deal and we do not even have to negotiate again-we are offering at this time to the other provinces. I make this statement right now, Mr. Speaker. The Leader of the Opposition believes we are offering a special deal to Quebec. The only special deal is that we have not been collecting taxes for them since 1954. If the other provinces want to go out and collect these taxes in this tax room we have made, as Quebec will have to do, then they are welcome to do this too.
What we are offering to Quebec the other provinces can have, if they want. I doubt whether they will want to collect these taxes, Mr. Speaker; but if the Leader of the Opposition insists on that, that is fine. He says they have thought a great deal about this. Obviously they have, Mr. Speaker, but they have not arrived at the same conclusion, because yesterday the
May 17, 1978

Leader of the Opposition was complaining that we were not giving the money to a lot of little, poor people, as he put it. So the hon. member for Brome-Missisquoi complains that we are not giving it directly to the Minister of Finance for the province of Quebec. Indeed, two weeks ago that is what the Leader of the Opposition was saying, that we should do what Mr. Parizeau wants; in other words, give him the money. Yesterday, having thought a little more, he was not saying we should give it to Mr. Parizeau; he was saying we should dribble it out to all the little people who are not paying any income tax.


Some hon. Members:: Oh, oh!


Charles Joseph Clark: Mr. Speaker, the Prime Minister has now, as I understand him, extended, for example, to the province of Alberta the proposition that has been extended to the province of Quebec, so that there would be the possibility of a direct payment by the Government of Canada to the taxpayers in the province of Alberta. He has extended to the province of Manitoba the proposition that now there will be available to the province of Manitoba some flexibility in the use of the revenues realized from this proposal that would allow the province of Manitoba, for example, if it chose-as Mr. Craik told the Minister of Finance it did choose-to use that money for job creation purposes. He is providing flexibility to the province of Quebec. Is he, in fact, providing the flexibility I have outlined to the province of Alberta and the province of Manitoba?


Pierre Elliott Trudeau: Mr. Speaker, in the case of Alberta, I think we have explained that the budget contained special provisions for that province which does not have sales taxes. Therefore, we have special provisions in the budget to help it develop its natural resources and add to the wealth of the province. That is the case in respect of Alberta. Obviously, it is in a special circumstance because it does not have sales taxes. In the case of Manitoba, answering the same question, if they want to do as we are suggesting Quebec does-in other words, when we make tax room for both provinces and we are telling Quebec that it can collect the tax if it wants, we are saying the same sort of thing to Manitoba-we are making tax room for Manitoba, and if they would prefer to collect the tax rather than have us collect it, we are agreeable to doing that if that is what they want.
In this sense, in so far as our action is concerned, we are dealing with all provinces on the same basis. In so far as what the provinces want to do with the money they get through the tax room we have given them, the Minister Finance reached an agreement with nine of the provinces and the provinces agreed to this after three weeks of talks. So I would be very surprised if because the province of Quebec, having failed to state its position before the budget, is now coming out with a scheme which tends to balkanize the Canadian market, the other provinces would want to go in the direction of that balkanization. But the Minister of Finance is certainly prepared to hear from them. I said on the first day that I was prepared to meet
Point of Order-Mr. Broadbent
with the premiers of the provinces if they want to come and discuss this.


POINTS OF ORDER
John Edward Broadbent: Mr. Speaker, I rise on a serious point of order that falls directly from what the Prime Minister (Mr. Trudeau) has just said and was said earlier in the question period, if I remember correctly, by both himself and the Minister of Finance (Mr. Chretien). He has just indicated he is prepared to discuss and negotiate this important matter with the province of Quebec. I do not think I overstate the issue when I suggest that what we have before us now in Canada is potentially the most divisive piece of legislation in the past decade, and I say, "potentially".
I would now like to put to the Prime Minister on the point of order this proposal for his consideration, if he is serious that the federal government is still prepared to negotiate this important matter with the province of Quebec. Will he ask the Deputy Prime Minister (Mr. MacEachen) the government House leader, to withdraw this measure from debate today until some kind of arrangement or agreement can possibly be reached with the province of Quebec?


Mr. Walter Baker (Grenville-Carleton):: Mr. Speaker, I rise on the same point of order. Following upon what the leader of the NDP has said, in order to ease the way for the government House leader I want him to know that if it were the choice of the government, and I think it would be a wise choice, to withdraw the bill that is to be called today, we are prepared to carry on with the customs bill which was introduced on Monday so there would be no House time lost.
However, I urge the Prime Minister (Mr. Trudeau) to consider very carefully Bill C-56, not only for the reasons that have been advanced by the leader of the NDP, but in the interests of settling a very difficult and dangerous matter in this country. I hope the Prime Minister will instruct his seatmate to withdraw this bill.


Pierre Elliott Trudeau: Mr. Speaker, this is a very complex and lengthy piece of legislation. I can tell the House right now that we do not need any more time to think about it. We have discussed this in caucus and we have discussed it repeatedly in cabinet. I appreciate the concerns of members opposite, and I say that without any irony, Mr. Speaker. Members opposite, I suspect, do not understand exactly what we are doing. I think most of the questions they have asked this afternoon, including those of the leader of the NDP and of the Leader of the Opposition (Mr. Clark), indicate that they probably need a bit more time to think about this and to say what they really think about it.

May 17, 1978
Point of Order-Mr. Broadbent
What we are suggesting is that we proceed with second reading. The minister has taken a position, and this position is supported by the government and by every member on this side of the House.


Some hon. Members:: Hear, hear!


Some hon. Members:: Oh, oh!


Mr. Beatty:: Look behind you.


Pierre Elliott Trudeau: I know it will be difficult for the opposition to state their position unequivocally on this. If they do not wish to talk about the particular aspect of it which concerns Quebec, certainly they can do that and come back some other day. The House leaders can make the necessary arrangements between themselves.
We have taken a position and we are going to stick with it. We hope the Leader of the Opposition and his party will take a position and that they will hang on that position.


Mr. Alexander:: You will hang on it too.


Pierre Elliott Trudeau: You too.


Charles Joseph Clark: Mr. Speaker, on the point of order, I take it that the answers of the Prime Minister (Mr. Trudeau) in the question period were meant to be taken seriously by the House of Commons-and were not, for example, in the nature of his statements on controls for the 1974 election campaign-when he said he was prepared to negotiate with the province of Quebec and that he would be prepared to discuss the matter with the other provinces. If that is to be the case and the Prime Minister was in fact stating what he intends to do, he is now proposing to waste the time of the House of Commons by having it consider a piece of legislation the content of which he proposes to discuss and negotiate, and I presume that any discussion or negotiation contemplates the possibility of change.
The situation is that we have a bill before the House of Commons, as my friend for Oshawa-Whitby (Mr. Broadbent) and my colleague for Grenville-Carleton (Mr. Baker) have said, which is of very real significance to the country and is potentially of divisive impact upon the country. We also have the possibility that that bill will be changed significantly, if the Prime Minister meant what he said when he talked about a willingness to negotiate with the provinces.
There are two grounds to be considered here. The first is that the government House leader should not waste the time of parliament in debating a measure that the government might then withdraw. Secondly, I suggest that the House of Commons has a right to know what it is dealing with. Is Bill C-56, which is the subject matter for discussion today, a matter the contents of which the Government of Canada is now considering changing? The Prime Minister has said he is going to have negotiations. If he means what he says in the House of

Commons, then he is asking parliament to deal today with a measure that might be changed tomorrow.
I suggest, knowing the respect for parliament that he has evidenced throughout his public career, that he might not want to waste the time of the House of Commons today, but instead go on with other business which is ready and with which we are prepared to deal while he considers what exactly it is he is going to propose in Bill C-56.
It is a matter which the House of Commons has a right to ask the Prime Minister to consider very seriously before bringing to the House. I hope, sir, that in that context, and since this point of order has been raised and argued by two parties on this side of the House, the Prime Minister will consider seriously whether he meant what he said in question period, when he said he was going to consider changing the bill, or whether in fact he meant what he said after question period, when he said the opposite, that he was not going to change the bill.


Mr. Speaker:: Order, please. There have been suggestions made concerning the item to be called under government orders, which occurs later in the day. This is, of course, the prerogative of the government, and when we arrive at orders of the day I presume we will determine whether the matter is going to be proceeded with or whether some other arrangement will be made.


Pierre Elliott Trudeau: Mr. Speaker, this matter was raised on a point of order.


Mr. Speaker:: Order, please. There has been a point of order raised by the hon. member for Oshawa-Whitby (Mr. Broadbent) and contributions were made by members on both sides of the House. There is no procedure whereby we can have two contributions made by one member on the same point of order.
Is the hon. member for Hamilton West (Mr. Alexander) rising on the same point of order?


MR. ALEXANDER-OVERCLASSIFICATION OF JOBS IN PUBLIC SERVICE
Lincoln MacCauley Alexander: Oh no, Mr. Speaker, the Leader of the Opposition (Mr. Clark) has done an excellent job in showing just what is happening with this government.


Some hon. Members:: Hear, hear!


Lincoln MacCauley Alexander: I will not go any further on that point. My point of order has to do with the President of the Treasury Board (Mr. Andras) regarding a question that I asked him on Monday related to overclassification of jobs. It is an extremely important point of order because overclassification is really circumventing the merit principle. As a matter of fact it is feeding the patronage system.
I do not know whether the President of the Treasury Board understands what is going on in his department and whether he has been informed or has misled the House-I would not
May 17, 1978

use the word deliberately. I asked the President of Treasury Board on Monday the following:
Mr. Speaker, I have a question for the President of the Treasury Board regarding job classification. It has come to my attention that there has been a waste of millions of dollars a year as a result of overclassification of jobs in the public service. I am sure the minister is aware of this serious matter and I wonder if he can advise whether a study has been undertaken. If so, would he table the report?
The President of the Treasury Board replied:
Mr. Speaker, I do not accept the premise of the hon. member's question. I am not aware of the situation as he describes it. I will certainly look into it with great interest. I do not believe the hon. member has made a correct statement of the situation.
Those are the governing words.
Subsequently, the following day his own officials indicated that some time in 1976 there was a survey, assessment or audit taken involving some 2,000 public servants in the Ottawa-Hull district, the result of which indicated that some 16 per cent of those public servants audited were overclassified and at that time it meant a loss or waste of money amounting to some $19 million per year. This same situation exists even today. That was phase one of the study.
Phase two is another study that the President of the Treasury Board and/or his department have undertaken which involves overclassification outside the Ottawa-Hull area. If the projection of 16 per cent of 2,000 is carried on it means there is some $75 million being overpaid in terms of overclassification. What is disturbing is that the President of the Treasury Board-Mr. Speaker, this is an extremely important matter and I hope you will have patience. I wanted to get it on yesterday but because of the importance of the situation yesterday afternoon I did not take the time of the House. I have been patient today, and I hope you will be patient with me.
I want to say as well that I am sure that the minister has also been advised that his own department has completed a more recent study on the accuracy of classifications in the personnel administration group. I point out that these are the very people who are responsible for administering the classification systems throughout the entire public service. The minister's own study in this regard, as I understand it, indicates that 22 per cent in this group are misclassified.
My point is this. When I indicated to the President of the Treasury Board there were millions of dollars being wasted because of overclassification, he did not accept that premise at all; and now I would like the President of the Treasury Board to stand up and come clean with the Canadian people and indicate that I am right, that there is-


Mr. Speaker:: Order, please. The hon. member on his own terms is asking, as a result of his point of order, the hon. President of the Treasury Board (Mr. Andras) not to correct any matter in which he may have one way or the other misled the House on Monday, but rather to come to an agreement and say that the hon. member himself is right. This, in essence, is a disagreement and does not in any sense constitute a point of order.
Point of Order-Mr. MacEachen


Lincoln MacCauley Alexander: Mr. Speaker-


Some hon. Members:: Oh, oh!


Mr. Speaker:: Order, order.


Lincoln MacCauley Alexander: A question of privilege, Mr. Speaker-


Pierre Elliott Trudeau: Oh, sit down.


Lincoln MacCauley Alexander: Don't tell me to sit down.


Mr. Speaker:: Order, order.


Lincoln MacCauley Alexander: Let the Speaker tell me to sit down.


Mr. Speaker:: Order, order.


Lincoln MacCauley Alexander: You have destroyed this country enough; don't try to destroy parliament.


Some hon. Members:: Hear, hear!


Mr. Speaker:: Order, order.
MR. MacEACHEN-EXTENSIONS OF ORAL QUESTION PERIOD


Hon. Allan J. MacEachen (Deputy Prime Minister and President of Privy Council):: Mr. Speaker, I rise on a point of order. I should like to draw to the attention of the House Standing Order 15(2), which reads as follows:
Not more than two minutes after the reading of prayers, the business of the House shall commence. Members, other than Ministers of the Crown, may propose motions pursuant to Standing Order 43 at this time. Not later than 2:15 p.m., or 11:15 a.m., as the case may be, oral questions shall be taken up. At 3:00 p.m., or 12:00 noon, as the case may be, the House shall proceed to the ordinary daily routine of business, which shall be as follows:
Of course, it begins with presenting reports from standing and special committees.
Today, Mr. Speaker, the hon. Leader of the Opposition (Mr. Clark) rose and began to ask questions at a few minutes before three o'clock and the question period was extended until about 10 minutes after three. We extended that courtesy-


An hon. Member:: The Speaker did, not you.


Some hon. Members:: Hear, hear!


Allan Joseph MacEachen: We extended that courtesy to the Leader of the Opposition, as we have done on previous occasions when he rose at a minute or two before three o'clock. I want to make it very clear that we reserve the right in the future to rise at three o'clock and ask that, in accordance with the rules, we proceed with the ordinary daily routine of business. We do not admit at all that there is any discretion in any member of the House to alter the standing orders, which are clear.


Mr. Paproski:: Shame on you!


Mr. Speaker:: Order, please. The President of Privy Council (Mr. MacEachen) raises, not 1 presume by way of a

May 17, 1978
Point of Order-Mr. MacEachen point of order but by way of caveat, the opportunity to arguethis matter at some other time. Hon. members will be aware that the point raised has several elements, the first of which is the discretion in the Chair, having recognized a questioner prior to 3:00 o'clock in the afternoon, to grant that questioner sufficient supplementaries to pursue the matter to a conclusion.


Some hon. Members:: Hear, hear!


Mr. Speaker:: The second element that has been raised directs itself to the difficulty that arose some time ago in the last session of this parliament when a motion pursuant to Standing Order 43, having been accepted with unanimous consent, was put to the House, debate began and then the Chair had to decide whether that debate should be interrupted in accordance with the strict terms of the Standing Order so as to commence the question period at 11:15 a.m., that day being a Friday, and conclude at twelve o'clock, and somehow determine the status of that measure which had been taken under consideration by the House prior to 11:15.
The third element in the point of order raised by the hon. President of Privy Council is that in fact the order which has been cited is one that was adopted by this House in the last session of this parliament and which has not been readopted in this session. The provision order under which we are operating and following this procedure, therefore, is one which-it seems on the consensus of everyone-is a beneficial procedure. The alternative is to revert to the previous routine proceedings and take up questions of privilege and points of order during the question period, and then somehow try to deduct those from a 40-minute question period. That is the way it was before and I think most members agree it was not as satisfactory an arrangement as the present one.
The fourth element relates to other proceedings which take place at a fixed time during the day, such as whether the Chair has any discretion to interrupt, for example, private members' hour if some point of privilege is raised which takes time away from that period, or whether other proceedings which take place at a fixed time can be moved aside at the discretion of the Chair.
The last point that has been raised and ought to be considered by hon. members in respect of this is that on previous occasions questions have been raised prior to 2:15 since the adoption of this provisional order in which ministers, for example, have sought the opportunity to make a statement to the House knowing that the statement would have some fundamental relationship to the question period which was about to take place. They have therefore sought the consent of the House or the discretion of the Chair, as the case may be- I am not aware of the details at the moment-to make that statement prior to the question period in the expectation, I am sure, that the Chair would guard a certain 45-minute question period following that. On some occasions the Chair has taken that discretion.
It seems to me, therefore, that this is not a single point of issue. It has at least the five elements I have just mentioned and probably several others that hon. members will want to

consider. If we launch into a discussion of this matter I would certainly want it to cover all these points comprehensively before coming to a final decision about whether we can even operate on this basis at all or whether we have to go back to orders the way they were.



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: 1,258, 1,467, 1,477, 1,484, 1,489 and 1,490.
I ask, Mr. Speaker, that the remaining questions be allowed to stand.


Mr. Lambert (Bellechasse): Was there any cost to Canada for the visit of Her Majesty in October 1977 and, if so, what was the cost for travel, receptions, etc.?


Hon. John Roberts (Secretary of State):: During 1977, Canada was honoured by the visits of HRH The Prince of Wales (July 5-9, 1977) and Her Majesty the Queen and HRH The Duke of Edinburgh (October 14-19, 1977). The total cost of these visits amounted to $484,752 as at February 28, 1978. Separate expenditure records were not maintained for each visit as the planning and administrative functions were ongoing, and were applicable to both visits.


Mr. Allard: 1.	Since the implementation of the Canada at Work Programme, did the government allocate money to the Constituency of Rimouski and, if so, in what amount?
2.	For each project accepted, what was the (a) name of the project (b) amount allocated (c) year of acceptance (d) name of the municipality involved (e) number of jobs created?


Hon. Bud Cullen (Minister of Employment and Immigration):: 1. Yes, $1,198,000 under Canada Works Program phase I and $1,907,000 under Canada Works Program phase II.
May 17, 1978


Mr. McKenzie: 1.	Is Mr. Ian Howard working in the office of the Minister of State (Fitness and Amateur Sport) and, if so (a) since what date (b) what is the title of his position (c) what is his classification in the Public Service (d) what was his salary range on joining the Minister and what range is he in now?
2.	Has Mr. Howard worked "overtime" since he joined the Minister and, if so, has he been remunerated, at what rate and what total amount as of March 1, 1978?
3.	What travel expenses of Mr. Howard's have been paid by the government up to March 1, 1978, exclusive of any travel he may have done in the company of the Minister?


Hon. Iona Campagnolo (Minister of State (Fitness and Amateur Sport)):: 1. Yes. (a) September 19, 1978. (b) Executive assistant, (c) On leave of absence from a position at the level of program manager 5. (d) (i) Salary range in previous position $22,695 to $25,473; (ii) Salary in present position not to exceed $29,450.
2.	Yes, with no remuneration.
3.	$2,568.22 since September 19, 1977. However, during the period of the assignment, Mr. Howard has received, in addition to this sum, $2,480 to cover accommodation and $1,402 in per diem allowances to compensate him for expenses incurred due to his absence from his home in Vancouver.

May 17, 1978
Order Paper Questions CANADIAN ARMED FORCES


Mr. Oberle: 1.	Was General Walter Dabros and the Intelligence and Security Branch of the Canadian Armed Forces involved in ascertaining the voting patterns of Canadian Armed Forces personnel and their dependents in provincial or federal elections in the 1960s and 1970s and, if so (a) to what extent (b) who authorized such action?
2.	Were numbers of Francophone personnel moved from the Province of Quebec as a result of one such study of the 1970 election results?


Hon. Barney Danson (Minister of National Defence):: 1. In
April, 1977 the Canadian armed forces intelligence and security directorate undertook a review of newspaper reports of the November, 1976 Quebec election to ascertain what impact, if any, the armed forces members may have had on the vote in ridings that included defence establishments. The review was inconclusive, and the project was abandoned. Brigadier General Dabros was not involved.
2. No.


Mr. Oberle: 1.	What are the formal duties of the Security Branch of the Department of Supply and Services?
2.	Who is the present director of the Branch and what is his salary, including military pay or pensions?
3.	What is the relationship of the domestic intelligence gathering activities of the Branch to (a) Colonel Robin Bourne or members of the Police and Security Planning and Analysis Group of the Solicitor General's Department (b) the Department of National Defence Intelligence and Security Branch (c) the Security Service of the RCMP?


Hon. Jean-Pierre Goyer (Minister of Supply and Services):: 1. The formal duties of the security branch of the Department of Supply and Services are to manage an industrial security program for protection of classified defence work on behalf of Canadian, NATO and other governments in accordance with national regulations and international agreements, including protection or related data in departmental facilities and normal loss prevention activities. Apart from these security responsibilities, the branch also administers an emergency supply planning division. In so far as private guard companies are concerned, the security branch provides a contract quality control function for all private security guard contracts issued by the Department of Supply and Services in the national capital region.
2.	S. M. Jenkyns; classification-pm 7; salary range- $27,900-$34,900 (under review)-no pension nor military pay.
3.	The security branch of the Department of Supply and Services conducts no domestic intelligence gathering activities.


Mr. Oberle: Is the Director of the Department of Supply and Services Security Branch a member of the Interdepartmental Security Advisory Committee?


Jean-Pierre Goyer: It is not the policy of the government to divulge the composition of the Interdepartmental Security Advisory Committee.


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


Some hon. Members:: Agreed.


Yvon Pinard: Mr. Speaker, I ask that all notices of motions for the production of papers be allowed to stand.


Mr. Speaker:: Shall the notices of motions for production of papers be allowed to stand?


Some hon. Members:: Agreed.



GOVERNMENT ORDERS


[Stage Direction]
On the order: Government bills (Commons):
May 15, 1978-Second reading and reference to a committee of the whole of Bill C-56, an Act to amend the statute law relating to income tax and to authorize payments related to provincial sales tax reductions-The Minister of Finance.
Sinclair McKnight Stevens: Mr. Speaker, before we consider this bill I want to put an argument before you of a procedural nature concerning the relevance of this bill when we consider the income tax motion from which the bill arises. If now is not the proper time for my point of order, I could raise it at the appropriate time, as you advise.


Mr. Speaker:: Order please. If it relates to proceedings at second reading stage I would think that the appropriate time would be now.


Sinclair McKnight Stevens: Mr. Speaker, my point of order arises from Standing Order 60(11) which, as you know, reads as follows:
The adoption of any Ways and Means motion shall be an order to bring in a bill or bills based on the provisions of any such motion.
A number of rulings have been made with respect to this question of the similarity between ways and means motions and the provisions of subsequent Income Tax Act proposals. The question was dealt with at some length on December 18,
May 17, 1978

1974,	as recorded in Journals, pages 224-6, on June 14, 15 and 16, as recorded in Journals, pages 706, 710 and in Hansard of
1975,	on page 7638.
Mr. Speaker, I want to explain what we feel is the extent to which a bill arising from a ways and means motion may go under the provision that the bill must be based on any such motion. I would suggest that the various citations to which I have referred establish the following points. First, that "based on" did not mean ''identical with"; minor variations are permissible if the essential nature of the taxation provision originally proposed is unchanged.
Second, the taxing power of the Crown is limited by the ways and means motion. Therefore, it is not an acceptable variation between the ways and means motion and the bill to increase the burden that will fall on any group at any time. It follows that moving a measure of tax relief from one year to another will increase the tax on taxpayers for the originally proposed year, and will in addition increase the total tax burden on some specific individuals who might have benefited from the tax proposal being left as it was in the motion.
Third, substantial changes in the ways and means motion ought to be made by the House.
Fourth, when the Chair decides that a substantial difference exists between the motion and the bill, the two must be brought into closer conformity with each other. This can be done by obtaining a new resolution amending the existing one or deleting the offensive provisions of the bill. We will be making a suggestion as to what would be the proper solution in this case. The guiding consideration I would suggest was given in a ruling by Mr. Speaker on December 18, 1974. I quote:
I wish to repeat and emphasize however that the terms of the Ways and Means motion are a carefully prepared expression of the financial initiative of the Crown and frequent departures from them can only invite deterioration of that most important power.
I contend, Mr. Speaker, that the ways and means motion- and we are now considering the bill arising from it-proposed a level of taxation for a given year, that the variations I have outlined and will outline more fully significantly shift the burden of taxation for some individuals and result in a total taxation package significantly different from that originally proposed to the House.
It would have been impossible to predict from the motion the eventual provisions we now find in this bill. The bill is based on events which occurred after the budget was brought in and the motion was put down. It should be based instead on a different ways and means motion which properly reflects the change in the government's policy and approach.
My job in making this point of order was perhaps made easier today during question period when the Minister of Finance (Mr. Chretien) stated, to paraphrase what he said: "I made changes in my proposal after my budget", referring to the type of Quebec proposal that we are now considering.
Point of Order-Mr. Stevens
To be specific, the income tax motion which is paragraph (13) in the budgetary documents tabled by the minister of April 10, 1978 states:
(13) That for the 1978 taxation year the tax otherwise payable by an individual resident in a prescribed province on December 31, 1978 be reduced by $100.
That is all the motion stated. The word "prescribed" is defined in the Income Tax Act as meaning prescribed as set out in regulations.
In the margin notes the paragraph is identified as an "Abatement for provincial sales tax reduction". In effect, the paragraph authorizes a reduction in federal personal income taxes of up to $100 per taxpayer in a prescribed province. I emphasize the words "prescribed province". Each prescribed province was expected to raise its provincial personal income taxes by the same amount. This was confirmed in our question period today. Each of the prescribed provinces was then expected to reduce its sales tax rates by the amount agreed upon earlier prior to the budget being introduced.
In reviewing the provisions of the bill before us, I would draw attention to clause 30 and clause 59. I would suggest that clause 30 in section 122.1(1) deals with essentially what was contemplated in the income tax motion, paragraph (13), to which I have referred. As I read it, it in effect gives life, if you like, to that provision in the bill that we have before us. I point out that that subsection deals with prescribed provinces. It deals with fiscal years ending December 31, 1978 and it deals with the $100 income tax amount; all are within the income tax motion No. (13).
Unfortunately, we then find there is a subsection (2) to section 122.1 which deals with a much different subject than is referred to in the motion itself. If I may read into the record the section, it states:
(2) An individual (other than a trust) who resided on December 31, 1977 in a province (other than the Northwest Territories, the Yukon Territory or a province prescribed for the purposes of subsection (1) with which the Government of Canada did not, on April 10, 1978, have a tax collection agreement pursuant to Part III of the Federal-Provincial Fiscal Arrangements and Established Programs Financing Act, 1977 shall deduct from the tax otherwise payable under this Part by him for the 1977 taxation year an amount equal to the lesser of
(a)	$85, and
(b)	the amount that would, but for this subsection, be the tax payable by him
under this Part for the year.
In three important respects that subsection is not in accordance with the income tax motion. First, it deals with the 1977 taxation year, not the 1978 taxation year. Secondly, it deals with an amount of $85, not the $100 that is referred to in the income tax motion. Third, it deals with a province, not a prescribed province. Clearly in the original motion what was contemplated was only prescribed provinces.
The hard truth is that, as we read the motion and then the resulting legislation which is found in Bill C-56, there seems to have been a change in thinking. There seems to have been a change in thinking since April 10, certainly up to the date this legislation was drafted. The net result is that we find the relevant income tax amendments differ from the income tax

May 17, 1978
Point of Order-Mr. Stevens
motion in at least two respects: the date of effectiveness and the range of application.
First, let me deal specifically with that date. While the motion states the measure applies to the 1978 taxation year, the act-and I have referred to this section, subsection 122.1(2)-states that the measure may apply to the 1977 taxation year. Clause 30(3) of Bill C-56 also states that subsection 122.1(2) applies to the 1977 taxation year. The motion became effective, as we know, on April 10, 1978. If it applies to the 1978 taxation year, its effect would appear in the federal accounts for the 1979 fiscal year, in short, the year we are now in. If, on the other hand, the measure applies to the 1977 taxation year, its effect should appear in the federal accounts for the 1978 fiscal year which just ended last March 31, or at least you would think that provision should have been made for some type of accrual in these 1978 fiscal figures. If the latter is the case, the budgetary accounts for the fiscal year 1978 would need to be retroactively adjusted to reflect the reduction in revenues and the increase in the budgetary deficit.
We are dealing with a very large amount of revenue as far as the federal government is concerned. Our finance minister has indicated that the personal income tax reduction in Quebec, which is really what is being affected by the clause I have referred to, namely, subsection 122.1(2), is $186 million. This reduction represents 1.4 per cent of the total federal personal income tax collections for the fiscal year 1978. The amount and timing of the tax reduction in Quebec is both of financial and economic significance. The change of the date from taxation year 1978 to taxation year 1977 represents a perceptible shift in federal budgetary policies.
Second, if I may deal with the general subject of the range we now find in Bill C-56 compared to what was stated in the income tax motion, I suggest that if the clauses as they now appear were accepted, it would mean that the Income Tax Act, through paragraph 13 of the motion would permit three quite different types of tax reductions. In short, out of the rather narrowly confined income tax motion, if we accept the motion that is now presented in Bill C-56 there are three types of tax reductions that would be included. We suggest that was never the intention of the income tax motion.
First, there would be a temporary transfer of tax revenues to eight provinces, which are the prescribed provinces, to provide for the general retail sales tax reduction which the minister referred to in his April 10 budget. Second, there would be a temporary transfer of tax revenues to Quebec to provide for partial financing of a total retail sales tax cut on specific goods and services. Incidentally, that was not announced in the budget. Third, direct payment of federal revenues to taxpayers in Quebec would be facilitated. Again that was not announced in the budget.
The fiscal effect of each of these measures is quite different. One is a general fiscal stimulus to increase consumption. Another is sectoral stimulus to aid particular industries. The third is localized general fiscal stimulus to raise purchasing

power. Neither the sectoral stimulus nor the localized general stimulus was mentioned in the budget speech. They are quite different from the economic policies debated in the House and subsequently approved in the budget motion.
Further, section 122.1(1) of the Income Tax Act provides tax abatements to the eight prescribed provinces to finance their reduction of retail sales taxes. The abatement is worth up to $100 per taxpayer. Section 122.1(2) provides for that different payment to which I have referred, namely $85 per taxpayer or resident of Quebec. Not only a resident of Quebec but only a resident of Quebec on December 31, 1977 would be eligible for the tax rebate of $85.
As the motion provides for a tax reduction of $100 per taxpayer, section 122.1(2) provides for somewhat less than the amount designated by the motion. The remaining $15 per taxpayer is presumably intended to finance the federal contribution to the sectoral tax reductions in Quebec. However, this amount is not identified in the Income Tax Act amendments, and thus it is not clear under what authority this federal revenue will be transferred.
I would also draw Your Honour's attention to clause 30 of Bill C-56, page 35 of the bill. Subclause (4) reads:
For the purposes of subsection 164(3), the portion of any overpayment that arose as a consequence of a deduction made by an individual pursuant to subsection (2) shall be deemed to have arisen on the day the portion is refunded or applied on other liability.
What this is contemplating is an actual pay-out from the consolidated revenue fund which will be authorized by the amendments we are now considering. Nothing like that was contemplated in the income tax motion to which I have referred. I would say on all counts the bill in its present form must be challenged as not being in conformity with the income tax motion as tabled on April 10.
That is my case, Mr. Speaker. I hope you will give it favourable consideration.


Hon. Marcel Lambert (Edmonton West):: Mr. Speaker, on several occasions I have had the privilege to rise on questions of procedure, that is on a point of order concerning legislation stemming from resolutions introduced by the Minister of Finance during presentation of the budget. I refer to 1971 when I had serious doubts about the contents and the congrui-ty of the so-called legislation to amend the Income Tax Act. I believe that at the time I had pointed out 39 incompatibilities, if my memory serves me right, some minor some major, between the resolution and the legislation.
On one occasion Mr. Speaker Lamoureux ruled in my favour and the government had to table a new resolution, that is a new motion complying with the bill it had introduced. One might say that all we were doing then was to set tnings right. Well yes. But when there are procedural problems we should not go by trial and error and adopt a band-aid approach. Or else, on a point of order, we say: Let us forget it. That is not the way things are done, Mr. Speaker.
May 17, 1978

During the time when Mr. Lamoureux was in the Chair, I rose on points of order to set things straight with regard to bills arising from the budget. Even you, Sir, on one occasion did not rule in my favour because the argument I put did not concern a basic matter but a detail. I think it was about the excise tax on gas engines for boats. That was when Mr. Turner was minister of finance.
But every time we had a major point, and the point that was raised by my colleague for York-Simcoe (Mr. Stevens) is definitely a major one. It strikes at the heart of Bill C-56. True, it is a bill to amend the Income Tax Act and there are several points in it, no question about that, but he has already touched directly on a point, namely paragraph 13 of the motion introduced by the hon. minister. I will not read it, it is well known, and it is simply that the Minister of Finance (Mr. Chretien) was proposing that every taxpayer in the prescribed provinces be entitled to a $100 allowance on his tax payable to the federal government for the year 1978. This would be for every taxpayer at December 31, 1978. That is all. You would have the explanation that the provinces themselves could then move up their contribution brackets by $100 to compensate. Why? Because the Minister of Finance said he had a draft agreement with eight out of nine provinces on the reduction under the Excise Tax Act.
However, the excise tax being exclusively of provincial jurisdiction, he was using a formula to bring the provinces to act in such and such a way in their field of jurisdiction. That is not a federal jurisdiction, but entirely and exclusively a provincial jurisdiction. For some provinces, Mr. Speaker, it was quite simply a case of interference because they do not have the financial strength to push back the federal government. I am talking about the Atlantic provinces and even the other average provinces, Manitoba and Saskatchewan.
Those provinces are not strong enough financially to turn down the federal government, except perhaps four provinces which could in effect discuss and negotiate with the federal government. The province of Alberta was not involved because it does not have any excise tax. As far as the province of Quebec is concerned, however, it did not agree. At the present time, Quebec is not one of those provinces coming under the fiscal arrangements legislation in any way. There was no agreement with Quebec-perhaps a hope of agreement. Later, however, we know there was disagreement. What do they come up with? A refund! But where is the authority for a refund under that legislation arising from the motion?
On budget night the Minister of Finance never said a word about a refund. Where would we find the authority to refund, Mr. Speaker, because it is not simply a matter of a deduction on the income tax return for the fiscal year 1977? No, because these returns have already been filed. Under the law, they must be completed and sent to the Minister of National Revenue by April 30. So we are looking at this moment, and it is this moment that matters, not the night the budget was
Point of Order-Mr. Stevens
tabled, because the reaction of the Prime Minister (Mr. Trudeau) and of the Minister of Finance only goes back to this week. Only this week, with the introduction of Bill C-56, have we heard about this proposal whereby the federal government itself will reimburse to Quebec taxpayers, as of December 1977, a sum ranging from $85 to $1. Because we must realize that the amount to be deducted is not merely $85, but the difference between $85 and, according to the bill, clause 30(2)(b), line 33, page 34, and I quote:
the amount that would, but for this subsection, be the tax payable by him under this part for the year.
So a taxpayer who had only $40 to pay would be entitled to $40 in compensation. He does not get more than what he had to pay in income tax. Where does this formula come from, Mr. Speaker? Not in paragraph 13 of the ways and means motion. Not at all. No details there. Would the Minister of Finance dare at this time ask the House for the right to reimburse this amount for which he had not given notice? Although there was no mention of it in the budget speech, he can rise today and say: Well yes, this goes, anything goes. Mr. Speaker, I want to insist, as the previous speaker did, on the fact that each bill arising from a budget and the motions stemming from the presentation of a budget should comply in principle and in its major details with the motion. There is no question. That is the rule here. We have all the precedents. Mr. Speaker, I suggest you should rule on this matter in line with my proposal.


Allan Joseph MacEachen: Mr. Speaker, I have a few brief comments to make on the point of order which has been argued by members of the official opposition. I might say that those arguments have been directed to the specifics of the legislation rather than to the procedure. It may be that the purpose of the intervention is to achieve by procedural tactics a further opportunity for members of the official opposition to understand the bill and finally decide what position they will take during the course of the debate. But that is an aside.


Mr. Knowles (Winnipeg North Centre):: It would have been better if it had been left aside!


Allan Joseph MacEachen: In the view of the hon. member for Winnipeg North Centre (Mr. Knowles), it would have been better if I had not said that members of the official opposition were stalling for time so that they could understand the bill. Obviously they do not understand it, based on the evidence of the questions which were put and answered during the question period today. It was obvious that the member for Oshawa-Whitby (Mr. Broadbent) did not understand the bill either; perhaps both parties over there want more time to determine exactly what they are against. Maybe if they did understand it they would change their views.
Nevertheless, with due respect to the hon. member for Winnipeg North Centre, the argument is that somehow the

May 17, 1978
Point of Order-Mr. Stevens
ways and means motion to be adopted has to be a carbon copy of the bill which goes forward in the name of the Minister of Finance (Mr. Chretien). That is the basic argument. Standing Order 60(11) reads as follows:
The adoption of any Ways and Means motion shall be an order to bring in a bill or bills based on the provisions of any such motion.
Of course, it depends upon the meaning one attaches to the word "based". Obviously the bill as brought in is founded four square upon the ways and means motion. The hon. member for York-Simcoe (Mr. Stevens) attempted to draw a distinction that payments were to be made in one case in 1978 and in the other case in 1977. Of course, the payments will be made in 1978 and are applicable in the tax year 1978 even though they may draw upon data which is provided in the taxation year 1977.


Mr. Gillies:: Based upon the facts of the 1977 year.


Allan Joseph MacEachen: That is exactly what I am telling the hon. member-based upon the data and information available in 1977 but payable in the taxation year 1978. So that even the substantive argument made by the hon. member is not accurate at all.


Sinclair McKnight Stevens: You are not accurate.


Charles Joseph Clark: You don't understand it, Allan.


Allan Joseph MacEachen: The argument does not rest upon a point of substance. The argument rests upon the procedural fact that the adoption of any ways and means motion shall be in order to bring in a bill or bills based on the provisions of any such motion, and the bill obviously is based upon the provisions of the ways and means motion.
In addition to that, the Minister of Finance has succeeded in securing from His Excellency the Governor General a recommendation to the House of Commons providing for the appropriation of public revenue under the circumstances, in the manner and for the purposes set out in a measure entitled "An Act to amend the statute law relating to income tax and to authorize payments related to provincial sales tax reductions."
Perhaps the hon. member is confusing what used to be the view, that the royal recommendation ought to contain, in a sense, all the items of the subsequent bill. Mr. Speaker Lamoureux disposed of that argument entirely by suggesting more than once that a single line recommendation, generally put, would authorize any number of provisions in any bill and, of course, what the royal recommendation does here is recommend to the House all that is contained, and all the purposes which are set forward, in the bill itself.
The precedents are not numerous on this particular issue, but there was a case which was dealt with, I believe, in 1973 which is dead on with this particular proposition brought forward by the opposition. It had reference to the oil charge bill and has all the elements of similarity with the present case.

In summary, I am saying that the Minister of Finance has presented a ways and means motion which has been adopted by the House, constituting an order of the House authorizing him to bring in a bill or bills based upon the provisions of the ways and means motion. There is no suggestion that the bill must be a carbon copy of the ways and means motion. It is fully based upon the principles which have been incorporated in the ways and means motion.
Second, the Minister of Finance has satisfied the rules of the House by securing a recommendation from His Excellency which is cast in the broadest possible terms and which contains , none of the details which have drawn the attention of the hon. members who have argued the point of order.


Stanley Howard Knowles: Mr. Speaker, in case the point of my interjection in the opening sentences we just heard from the Deputy Prime Minister (Mr. MacEachen) was not clear, what I was trying to say was that I thought it was unfair to accuse the hon. member for York Simcoe (Mr. Stevens) and the hon. member for Edmonton West (Mr. Lambert) of using time on substance instead of on procedure. Sometimes those hon. members, like some of the rest of us, can confuse substance with procedure, but I felt today that they were arguing as to the procedural regularity of certain parts of Bill C-56.
It seems to me that the meaning of Standing Order 60(11) and of rulings which have been made from the Chair on this point are quite clear, namely, that a tax measure cannot depart substantially from what has been proposed in a ways and means resolution.
The ways and means resolution on this point is quite clear. It has been read several times already. It reads: "That for the 1978 taxation year the tax otherwise payable by an individual resident in a prescribed province on December 31, 1978 be reduced by $100". Clause 30 of Bill C-56 carries out the terms of that ways and means resolution in part in subclause (1), but in subclauses (2) and (3) something totally different is imported into the bill.
I think that if this were only a tax bill, Your Honour would have almost no option but to rule that there should be a new resolution to cover what is in subclauses (2) and (3) of clause 30. The Deputy Prime Minister sought to get around this by drawing attention to the recommendation of the Governor General which is printed opposite page one of the bill. The Deputy Prime Minister interprets that recommendation as an approval of everything that is in the bill. My submission is that the only reason a Governor General's recommendation was attached to this bill is that it is not only a tax bill but also an appropriation bill. Part III, which is entitled "Compensating payments", provides for money to be paid out of the consolidated revenue fund. I would say that if there had not been a Governor General's recommendation, Part III of the bill would in effect have been an appropriation bill for which there would have been no authority at all.
The Deputy Prime Minister says that a recommendation has been obtained in this case. Most tax bills do not have Governor
May 17, 1978

General's recommendations because they are based on proper ways and means resolutions. However, in this case the recommendation of the Governor General is specific and narrow. It recommends to the House the appropriation of public revenue in the circumstances, in the manner and for the purposes set out in this measure. As I say, that applies to the spending aspect of this bill, Part III, which is not a normal part of a tax bill at all. It is an appropriation bill, and I do not see how it can be argued that a Governor General's recommendation which covers the spending provisions in Part III gets away from the fact that an ordinary tax bill must have as its base a proper ways and means resolution. I agree with the Deputy Prime Minister that we do not expect every "t" to be crossed and every "i" to be dotted in ways and means resolutions, but there have been sufficient rulings in the past that, so far as a tax bill is concerned, it should be supported by a ways and means resolution.
1 contend that subclauses (2) and (3) of clause 30 of the bill go beyond ways and means resolution No. 13, and that Your Honour should so find. I repeat myself by saying that I do not see how a Governor General's recommendation approving the expenditure portion of this bill can be taken as carte blanche for the government to make any other changes it wishes to make in the bill itself. If it had not been for the Governor General's recommendation I would have argued that Part III of the bill is completely out of order and that we would have to get that recommendation.
These things are in the hands of the government. We are talking about ways and means resolutions and about recommendations from the Governor General as though they were hard to get. We know they are not. The government can get them any time, but still there are the niceties of our rules and the procedural points that are laid down, and it has been clearly established that if the government is going to spend money, it has to have a recommendation from the Governor General. If the government is going to impose a tax-and this goes back to section 54 of the British North America Act-it has to have a ways and means resolution.
Therefore, I submit the points made by the hon. member for York-Simcoe and the hon. member for Edmonton West are valid. This bill is imperfect in the sense that subclauses (2) and (3) of clause 30 are not based on any ways and means resolution which has been presented to or passed by the House.


Mr. Paul Dick (Lanark-Renfrew-Carleton):: Mr. Speaker, earlier I had a discussion with the hon. member for York-Simcoe (Mr. Stevens). As a way of exemplifying the situation, on April 10 the Minister of Finance (Mr. Chretien) had a certain pot of X millions of dollars in mind. This pot was to be divided in a certain fashion. As a result of the changes and the division into two tax years, we now find a person who was resident in the province of Quebec as of December 31, 1977 will be entitled to an $85 rebate, whereas that person may have moved to the province of Ontario on January 15, 1978 and will receive a second advantage by way of the 3 per cent
Business of the House
reduction in provincial sales tax for the six-month period following April 10. If that person is to benefit twice, once in 1977 and once in 1978, then someone else will lose if it is the same pot of money. That exemplifies the problem the government has as a result of dividing it into two tax years, which is different from the original motion.


Mr. Speaker:: Order, please. The point raised by the hon. member for York-Simcoe (Mr. Stevens) of course is a serious one which deserves very serious consideration. The arguments which have been presented are similar to ones which were presented in the past when this difficulty arose-the relationship between the ways and means motion and the ultimate tax measure itself.
I want to examine the precedents, including the ones referred to by the hon. member for York-Simcoe and particularly the hon. member for Edmonton West (Mr. Lambert), and the more recent case referred to by the Deputy Prime Minister and President of Privy Council (Mr. MacEachen). I will endeavour to make a decision on this as soon as possible.
I know I ought not to anticipate this, but I doubt very much that the remainder of the time available this afternoon will be sufficient to cover all discussion which might take place. Therefore, in the meantime perhaps the matter can go forward this afternoon while I have this question under review. Of course, I will endeavour to bring a decision to the House as soon as possible.


BUSINESS OF THE HOUSE
Walter David Baker: Mr. Speaker, I realize what business is called is at the discretion of the government. We are dealing with a matter which is quite fundamental to dealing with this bill in parliament. It is a very serious matter in that sense. It is regrettable that there may have been an error, or on the other hand, there may not have been. One way or the other, Your Honour has been put in the position of legitimately reserving judgment on a matter which is fundamental to the right of government to introduce a bill and proceed with it.
I respectfully suggest that what we all want to accomplish could be accomplished in another manner. For the balance of today and until Your Honour renders a judgment, the government could call the customs tariff bill. Earlier I indicated that we are prepared to proceed with that bill. The debate is under the general direction of the hon. member for Edmonton West (Mr. Lambert). We should not assume that we can start debating the bill in view of what happened in the House today. Respecting the government's position, we do not know whether the government will negotiate. I think the government indicated that it will negotiate. It is not fundamental to proceed in this manner, especially when there is other business which the House can properly deal with.
I do not want to hold the government up in terms of business. I am not suggesting that the House close down while

May 17, 1978
Business of the House
Your Honour considers this. On behalf of the official opposition we are prepared to proceed with the other government order today. I am referring to the customs matter. This will provide Your Honour with the required time to deal with this matter, to decide whether or not debate on the bill should commence, or whether there ought to be a new ways and means motion. My proposition is not unreasonable in the most unusual circumstances the House found itself in this afternoon.


Some hon. Members:: Hear, hear!


Allan Joseph MacEachen: Mr. Speaker, I appreciate the effort of the hon. member for Grenville-Carleton (Mr. Baker) to be helpful, but we are not faced with an unusual situation at all. Frequently points of order are raised in respect of matters before the House, and Your Honour requests some time to consider the points of order and render judgment later. In the meantime, usually we proceed with the business before the House. In this case, I believe it would be desirable to proceed, as was indicated earlier by the Prime Minister (Mr. Trudeau). If the speech of the Minister of Finance (Mr. Chretien) is a long one, perhaps hon. members of the opposition will have a chance to make up their minds before they speak at eight o'clock.


Stanley Howard Knowles: This happens to be Wednesday. We do not sit at eight o'clock.


An hon. Member:: You do not even realize that it is Wednesday.


Allan Joseph MacEachen: Then hon. members opposite would have a chance to consider the matter until tomorrow.


Charles Joseph Clark: Mr. Speaker, the Deputy Prime Minister and President of Privy Council (Mr. MacEachen) should know that the position of my party is very clear, not only on second reading, which is the extent of the agreement in government caucus, but on the bill as it stands. We propose to oppose the bill as it now stands.
However, that is not the issue. I imagine it is entirely at Your Honour's discretion, but the issue is whether or not it is a wise precedent for parliament to begin consideration of a bill today which may not be properly before parliament. If that in fact is a dangerous course upon which we might be embarking, it would be in the interests of parliament, of orderly debate, and of providing the government with the time to speak with members of its caucus who are not prepared to support this matter on second reading to defer the bill. It would provide the government with time to arrive at a more complete agreement in support of the measure in the name of the hon. Minister of Finance (Mr. Chretien).


Some hon. Members:: Hear, hear!


Mr. Speaker:: Order, please. The discretion for the calling of business on the order paper under government orders is entirely that of the government. Certainly we are not making a new precedent by having a matter considered by the House while it is under review procedurally. Obviously it would not be desirable to become involved in several days of debate on a matter

which might be reversed on procedural grounds, but it is certainly not a new practice or a new experience for us to allow the matter to go ahead while the Chair is reserving. That discretion is not one the Chair enjoys, to presume on the decision one way or another, until such time as I have had an oppotunity to examine the precedents and render a decision. Under the circumstances, I will attempt to render a decision as soon as I possibly can.




Joseph Jacques Jean Chrétien: that Bill C-56, to amend the statute law relating to income tax and to authorize payments related to provincial sales tax reductions, be read the second time and referred to committee of the whole.
He said: Mr. Speaker, before I commence my remarks, I should like to indicate that I am pleased with the decision to proceed at this time. A debate on this bill will be extremely useful because it has stirred up a lot of confusion and discussion. It is appropriate for everyone to speak his mind on this matter. The hon. Leader of the Opposition (Mr. Clark) was worried about the extent of support that this measure received in our caucus. In due course he will see that discussions occur among government members, and that the bill has been discussed in many forums. The position I will attempt to establish will assist opposition members in making up their minds. They do not seem to understand what we are talking about.
It was unbelievable to hear the hon. member for Oshawa-Whitby (Mr. Broadbent) talking about the tax proposition of October 1 when we are dealing with the April 10 budget. For that reason, and in order to facilitate the debate so that people will understand, I think I should make this speech. I will make it as factual as I can so that the people will be able to understand the issue a little bit better.
Bill C-56 implements the principal measures advanced in my budget of April 10. That budget was designed to provide a modest and responsible stimulus to give a lift to our economic recovery and to ease inflation. It was also designed to encourage structural adjustment in the Canadian economy, particularly in the fields of energy, transportation and research and development.
I will deal today with the specific measures of the budget, and discuss in some detail the proposal to contribute toward temporary reductions in provincial retail sales taxes. But I would like to speak first about the economic context of the
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budget, a context of continuing adjustment and underlying improvement in the economic health of our country.
Since 1975 the challenge facing us all in Canada has been to pull our economy back into line as a trading nation, to restore our competitive position in the world. We have come a long way in this direction. We have some distance still to go. The ground we have lost is most evident in our current rate of unemployment. In this area, more than any other, we have had to live with damage for some time after we have made corrections elsewhere.
What are those corrections? We have brought our costs down to much more reasonable levels. Increases in our wage costs and unit labour costs are at or close to those in the United States. Demands for future increases are by and large responsible. Government expenditures are being held down. Federal spending has been kept within the growth rate of g.n.p. for two years, and we will continue to make whatever cuts are necessary to stay within that goal.
A series of target ranges has been established for increases in the money supply to ensure that monetary policy supports economic growth at declining rates of inflation.
Fiscal policy has followed the same goal. The tax burden on individuals and corporations has been eased, both indexing and through deep cuts in federal taxes.
Indexing of exemptions and brackets since 1974 means that personal income taxes this year are more than $5 billion below what they would have been in the absence of the indexing adjustments. Specific personal tax cuts totalling $2.9 billion have been introduced since 1974. Over the same period, the government has introduced tax cuts for business large and small totalling $1.6 billion.
The fast write-off for manufacturing and processing assets was made permanent. An investment tax credit of 5 per cent was introduced, and later increased in amount, extended in term and applied to research and development expenditures. Further incentives were introduced for frontier oil and gas exploration. The corporation tax was significantly simplified in important areas. A measure was introduced to reduce the impact of inflation on inventories. An employment tax credit was introduced.
Other measures were designed in particular to help smaller business operations in this country. I speak of increases in the profits taxed at reduced rates, the annual limit tripled to $150,000 and the cumulative limit increased to $750,000 from $400,000. I refer to the increased dividend tax credit, higher deductions for capital losses, preferred treatment of stock options and gains on venture investments, and the deferral of tax on replacement of business property.
The government will soon introduce new measures to help small business.
Because of these tax cuts and the weakness in the economy, the federal deficit has risen. As the recovery picks up and inflation recedes further, our cash requirements will come down. In the meantime, our borrowing program is manageable
Income Tax Act
and fully within the capacity of the capital markets and the economy.
One of our basic adjustments in the past 18 months has been the depreciation of the Canadian dollar. In the last two weeks the dollar has regained ground and stabilized demonstrating that fundamental forces have reasserted themselves in the exchange market. Largely because of the dollar's adjustment, our trade and balance of payments picture is improving sharply. The improvement began last year when we almost tripled our trade surplus. It strengthened even further in the first quarter this year when the merchandise balance jumped to an annual rate of $5.6 billion, twice that of last year.
There are many recent signs of more growth with less inflation. Retail sales were up 4.3 per cent between January and February. In real terms, the sales in those two months were 6.1 per cent higher at an annual rate than in the fourth quarter of 1977. This suggests that the $100 tax cut early this year has helped boost consumer demand.
Employment continues to rise in Canada. The most promising part of this picture is a strong rebound in manufacturing jobs. They increased 4.2 per cent in the past six months.
We have corporate data now for the fourth quarter of 1977, showing an upswing in profitability and continued improvements in liquidity.
The working capital ratio in the last quarter almost reached its all time peak of 1973.
Because of the sales tax cut in last month's budget, the consumer price index is now 0.7 per cent lower than it would otherwise have been. The increase in the CPI for April was only 0.2 per cent, the lowest month-to-month increase since the fall of 1975.
An indicator of costs and prices used more and more in industrial countries is the CPI less the impact of food and energy. In Canada, the increase in that index has declined from 9.7 per cent in 1975, to 8.8 per cent in 1976 and to 7.3 per cent in 1977. The year-over-year rate to April was 5.7 per cent.
Data Resources Incorporated, a private research group, has calculated that output this year will grow by 0.4 per cent more than it would have in the absence of the sales tax reductions.
These are all clear indications of improving trends in the Canadian economy. The measures of this budget are already part of that story, and they will continue to support those improvements. Let me move now to a brief examination of those measures.
I have referred to the budget's contribution to structural change in the economy. I should mention that the incentives with respect to tertiary recovery and non-conventional oil are being put into effect by regulation, and do not appear in this bill. The same applies to the changes in capital cost allowance applying to major investments in railway transportation.
On the other hand, a third set of structural measures, those applying to research and development in Canada, do require legislative amendment and are set out in Bill C-56. They

May 17, 1978
Income Tax Act
provide a deduction equal to 50 per cent of current and capital expenditures incurred in a year on R and D which are in excess of a corporation's average annual R and D expenditures over a moving three-year base period. The deductions are to be available over a 10-year period, that is in computing income for the 1978 to 1988 taxation years.
Personal tax measures in this bill provide additional alternatives to holders of registered retirement savings plans, expand the exclusions from income where employees at remote work sites receive board and lodging from their employers, and extend the types of loans received by employees which may be excluded from income.
This bill will allow a person to receive retirement income from his RRSP in the form of a fixed-term annuity as well as a life annuity. To ensure that RRSPs are used to meet genuine retirement income needs, the bill provides that an annuity under an RRSP is not to commence before age 60 or after age 71. The fixed-term annuity purchased under an RRSP arrangement must provide a retirement income until the annuitant reaches age 90, with a special rule to extend the fixed term of the annuity in case of a younger, surviving spouse.
Another option will permit RRSP funds to be transferred to an entirely new investment vehicle-a registered retirement income fund-after the holder reaches age 60. Where this fund is chosen, annual payments will be made from the fund each year until the individual reaches age 90. However, unlike an annuity arrangement in which the amount of the annual payments is pre-determined, the annual payments out of an RRIF will grow over time. They will be based on the size of the fund and the age of the beneficiary year by year. The fund may be self-administered.
The bill includes two amendments of major importance to farmers. One of these permits shares of the capital stock of a family farm corporation to be transferred to a farmer's children without immediate tax on any capital gain at that time. The special rule will apply not only to a transfer on death, but also to one made before death by way of a sale or gift to the child.
The same treatment is extended to transfers to children who have an interest in a family farm partnership. The new rules will place the farmer who carries on business as a family farm corporation or a partnership on the same basis as unincorporated farms.
Further measures will ease the financing problems of many Canadian private corporations and will facilitate joint undertakings by groups of Canadian corporations. This will be achieved by reducing the scope of the special 25 per cent tax that applies on certain dividends received by Canadian-controlled private corporations.
Other amendments in this bill are necessary to ensure that the Income Tax Act deals appropriately with the division of property between spouses in light of changes in a number of provincial laws covering marital property. In a number of

circumstances, these provincial changes would require certain gains to be taxable on transfers between spouses or former spouses. The amendments are designed to permit the division of property between spouses pursuant to the family law without an immediate tax on capital gains. Other important matters are dealt with in this bill, including a measure made necessary by the recent introduction of an income tax levied by the Northwest Territories.

Mr. Speaker, as I said on April 10, the short-term action required at this stage of the recovery is a fast-acting nudge to growth, one that encourages consumer spending and one that offsets temporary factors which have been pushing up prices. I would like to take this opportunity to clarify some misunderstanding about the nature and purpose of the federal-provincial initiative to reduce temporarily provincial sales taxes.
First of all, it is important to put the federal proposal concerning a reduction of provincial sales taxes in the context of the historical evolution of fiscal relations between the two levels of government. Since the end of the Second World War, the federal share of over-all revenues levied by the public sector in Canada has declined steadily. Whereas in 1945 the federal government held about 70 per cent of government revenues, after transfers, that percentage gradually went to 50 per cent in the early 1960s and is now in the order of 40 per cent. The share of revenues of the provincial-municipal sector grew correspondingly.
Indeed, whereas in 1945 the provincial-municipal sector had only 30 per cent of total government revenues, it now has about 60 per cent. In short, the provincial-municipal sector actually holds a larger share of total government revenues than does the federal government. Most economists have agreed for some years that this degree of fiscal decentralization makes joint action necessary by the two levels of government in the area of economic and fiscal policy. Moreover, this requirement of our federal system was recognized unanimously by the recent conference of first ministers.
In this context it is essential to understand the growing importance given over the past several years to consultative mechanisms between the two senior levels of government, particularly to the conferences of ministers of finance. It is also in this context that the idea evolved for the federal proposal regarding provincial sales taxes. Given the high level of savings at present, it is generally accepted that a sales tax reduction is the most effective instrument for stimulating the economy. It has the advantage of providing a stimulus which has an immediate effect on prices, consumption, production and employment.
Several weeks ago, I suggested to provincial governments that we undertake joint action, through a reduction in the retail sales tax, to stimulate the economic recovery. I would like to emphasize that this offer was made in good faith and was discussed thoroughly with both ministers and officials of
May 17, 1978

all the provinces including Quebec. These discussions took place in the three weeks prior to my budget speech. During the discussions, the provinces had ample opportunity to make their own suggestions and proposals. British Columbia and Saskatchewan did request adjustments to meet their particular situations. These we accommodated.
No one suggested that the federal government was invading a field of provincial jurisdiction. The proposal was taken under consideration. The province of Quebec did not, in either my discussions with Mr. Parizeau or in discussions between officials, make any special requests or object to the proposal itself. Not until the federal budget was presented, all other provinces having agreed to the proposal, did Quebec decide to announce its selective cuts designed mainly to help the provincial economy.
What is now in dispute is not whether Mr. Parizeau's selective sales tax cuts are a good thing. I fully agree that they are good for Quebec. Indeed by removing sales tax on clothes and shoes, Mr. Parizeau is putting Quebec taxpayers in the same position as those living in the four Atlantic provinces where there has not been sales tax on these items. But in these provinces, the federal government does not pay for the revenue loss. The cost is assumed by the provincial governments.
I recognize that there is a need for special measures to be taken to promote the furniture, footwear, textile and clothing industries of Quebec. That is why the federal government has imposed heavy tariffs on the imports of such goods into Canada, and that is why, as Minister of Industry, Trade and Commerce, I was responsible for imposing quotas on imports into Canada of clothing, textiles and shoes. The result of these measures is that Canadians across the country pay more to buy these Quebec products than they would if imports were unlimited and if tariffs were lower. Canadians are prepared to pay this price because it is necessary for the economic wellbeing of one part of Canada, i.e. Quebec.
What is in dispute, therefore, is not whether the government of Quebec should take special measures to help Quebec industries, but rather whether these special measures should be financed primarily by the federal government in the context of general budgetary policies. For the federal government to do so would mean first to give Quebec a deal which, through the fault of Mr. Parizeau, was not offered to the other provinces at the time of the budget discussions. More important, even if it were possible to offer a system of selective tax cuts to all provinces, the results would be detrimental to the economic unity of the country.
The Atlantic provinces and western Canada, with little or no manufacturing industry, would undoubtedly be uninterested in schemes of benefit mainly to Quebec and Ontario. Ontario and Quebec could conceivably engage in a series of moves of a protectionist nature-financed by federal funds-which would make a mockery of the economic common market which is an
Income Tax Act
essential element of Canadian federalism. This would be harmful to all Canadians including Quebeckers.
Mr. Speaker, because Quebec sells 20 per cent of its manufactured products to Ontario, while Ontario sells only 11 per cent of its manufactured products to Quebec, any type of protectionist competition between the two would hurt Quebec more than Ontario. That is why what looks like a clever move to use federal money in a special way to protect Quebec industries would not be of benefit to the people of Quebec if the province of Ontario were to ask the federal government for a comparable deal for Ontario industries.
Therefore, in the long-term interests of the people of Quebec, I must insist that the federal proposal apply in the same way to all provinces. We cannot encourage a reduction in provincial sales taxes financed by federal money that would lead consumers to purchase certain products as opposed to others, unless of course there was agreement among all governments. This was the case for alcoholic beverages, tobacco and amusements. Other products no doubt could have been the object of such agreements if they had been suggested at the appropriate time.
Thus, because the Quebec action was so late, and because the federal government could not be party to bilateral agreements representing discriminatory measures impeding the free flow of goods between provinces, I advised Mr. Parizeau that he cannot expect to obtain the full financial assistance available under the national plan which was aimed at all Canadian consumers and all sectors of the economy. I offered to pay the cost of the first 2 per cent for six months of Mr. Parizeau's selective tax cuts.
In addition, and these are concessions I made after my first proposal, I offered to finance totally a 2 per cent cut across the board for six months of sales tax on all other goods and services sold in Quebec. The value of this offer to Quebeckers would have been $226 million. Mr. Parizeau refused this offer of the federal government. It is clear to me that the separatist government in Quebec does not want to have any part of a deal with the federal government because it does not want federalism to work. How else can one explain his failure to make any suggestions until after the budget. However, because the federal government does not want to penalize the people of Quebec for the actions of the separatist government of Quebec, I am introducing amendments in this bill to permit the return of $186 million to taxpayers in Quebec.


Some hon. Members:: Hear, hear!


Joseph Jacques Jean Chrétien: We will be reducing the income taxes of Quebec taxpayers, thereby vacating an income tax field temporarily, by an amount of $186 million. In order to ensure that taxpayers in Quebec enjoy the full value of the federal offer and are put on the same footing as other Canadians who pay
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Income Tax Act
sales taxes, each Quebec taxpayer will receive a rebate on 1977 federal personal income tax. The federal government is doing this to provide Quebec residents with compensation to bear the cost of the sales tax on all items for which the tax has not been reduced by two points for six months by the Quebec government. The $40 million we have offered to the Quebec government for a two-point reduction over six months on the selected items is worth up to $15 per taxpayer. This leaves about $186 million-or up to $85 per Quebec taxpayer- outstanding from the federal offer. Thus, the amount of the rebate for each Quebec taxpayer will be $85 or the amount of federal income tax payable, whichever is less.
Once the bill has been passed, Revenue Canada will process rebates from the computer record of Quebec taxpayers who filed returns on their 1977 income. Rebates will be sent out later this year while the retail sales tax cuts still are in effect in the other provinces. Of course, if to straighten things out, this reimbursement to the Quebec taxpayers could be geared to a tax increase which the Quebec government might decide to impose then I am prepared to discuss it.
Mr. Speaker, I have been discussing the matter with the provinces since March 23. On that day I called Mr. Parizeau and Mr. McKeough on the telephone to find out what they thought of the proposal. We had already discussed it previously in October and January. Then, on Friday, March 24, I discussed the matter again with Mr. Parizeau on the telephone and since he himself had problems with the federal government, he asked me to help him settle them. I immediately called my officials in an effort to help him in another area; it was quite a difficult situation for Quebec since it was the end of the fiscal year. These things do not come out but they happen just the same, Mr. Speaker.
On Monday, March 27, my deputy minister, Mr. Shoyama, contacted all the provincial deputy ministers, except Mr. Collins from Alberta who was not available. He explained the proposal to them and they discussed their intentions in general terms. No one can say that all the deputy ministers were not informed. On Tuesday, March 28, I got in touch with every single minister of finance and on Wednesday 29th, I went West where I met the minister of finance of British Columbia, Mr. Wolfe, Mr. Smishek and Mr. Craik. On that very day I spoke on the telephone with the minister of finance of Alberta. When I came back to Ottawa, I spoke again on several occasions with Mr. Parizeau and Mr. McKeough. Several times I put a call through which sometimes was not even returned. It does not really matter; I am a patient and very humble man.
I still kept on trying in an effort to get a consensus. On Saturday, April 1 and on Sunday, April 2, the officials of all the provinces were called and told: Come and see us here in Ottawa; there will be a meeting on Monday, April 3. All of them, including Quebec and Alberta, sent representatives. The proposal was discussed, hypothetically, all day; changes were

made to accommodate the requests made by some of the provinces; telephone conversations went on throughout the week.
When, at the request of the ministers of finance of British Columbia and Saskatchewan I made certain changes, I myself took the initiative of calling the other ministers of finance to tell them: Those provinces would like such and such a solution; do you agree with it? They answered: We see no objection to it. If you want to do that for thoses provinces, go ahead, Mr. Chretien. Throughout that debate, that is, during almost three weeks of intensive consultations, at no time did the province of Quebec mention selective cuts. At no time did they make suggestions, either Mr. Parizeau himself or the officials. Mr. Speaker, what I did was quite simply try to be a little innovative because, as I said at the beginning of my speech, the taxation base of the federal government is constantly shrinking. The possibility of the central government influencing the economy is being reduced accordingly. And it is in that spirit following the conference of the first ministers, who were urging consultation, that I took a big chance to try and reflect the spirit of the first ministers' conference.
I took the initiative at the very great risk of being blamed in this House-and I was blamed in this House-for having talked about the budget with people who are not members of the Canadian cabinet. Mr. Speaker, I took that chance which could have been fatal, but I wanted to try to be innovative and convince the provinces to do in their jurisdictions, with my help, what could be best. I acted in extremely good faith. What I am proposing at this time, Mr. Speaker, is quite simple. I do not want to penalize Quebec residents who pay taxes at the federal and provincial levels because the government of Quebec did not want to follow me as another provincial government might have taken in good faith an extremely important initiative. On top of that, in all my conversations with the ministers of finance, Mr. Speaker, I did not talk only about the sales tax. I consulted them on the monetary and fiscal policy of the government. I consulted them on the effect of the Canadian dollar on their economies, on the effect of the fall of the Canadian dollar on exports, on the effect of their internal financing because very often, having borrowed on the U.S. market, they must pay in U.S. dollars and that adds to their budgetary burden.
I did that in trying to develop a new mechanism which is essential in this country. If I made a mistake, Mr. Speaker, it is in believing in federalism, in believing that it was possible to speak in good faith with finance ministers and try in speaking to the finance ministers to develop a consensus beyond partisan considerations. I knew full well, Mr. Speaker, that there were only two governments at this time with the same political stripes as mine and that I was taking political risks but when you believe in an institution such as Canada you take chances to try and develop an acceptable economic policy, and instead of relying exclusively on the constitution as is so easy to do, we

May 17, 1978

have tried to take that into consideration. I could have acted arbitrarily and made the offer here in the House during my budget speech. Then the pressure would have been on the provincial finance ministers. All economists, commentators were saying: the sales tax should be cut. The C.D. Howe Research Institute, the Chamber of Commerce, all people analysing the economic situation since October, realizing that demand had declined too much in Canada, were suggesting a sales tax cut. Unfortunately, Mr. Speaker, because of the constitution, even though I believe that we would be entitled to get involved with the sales tax if we wanted to, we have not occupied this tax room because it comes under provincial jurisdiction.
I took it upon myself to ask the provinces to do this, and I did not only consult them just before the budget. We started to discuss this in October, Mr. Speaker, at the finance ministers' conference. If I have been guilty of anything, Mr. Speaker, it is of having believed in Canada, of having believed the Quebec government when it said that it had been elected to be a good government and to provide sound management, that it would behave like a government still within confederation and not like a government that wanted to get out of it. If I have been guilty of anything, Mr. Speaker, it is of having talked with Mr. Parizeau for the first time in Canadian history before the tabling of a budget, not only about the sales tax, but also about the fiscal and monetary policy and about the policy of the Bank of Canada. Mr. Parizeau, Mr. McKeough and myself spent four hours one evening in Montreal discussing all this. And at no time was there any mention of a selective cut because it is fairly obvious that if we wanted to get into selective cuts, at that time-
It was evident when we discussed that. Everyone should realize this has been done before. Ontario paid from its own pocket. Two years ago the province of Ontario decided to stimulate the automobile industry. The minister of finance of that province decided within his own jurisdiction to reduce his own sales tax on cars from 6 per cent to zero for a period of time.


An hon. Member:: He did it right.


Joseph Jacques Jean Chrétien: He did it. He was very keen to convince everyone in Canada that it was the thing to do following his own experience-


An hon. Member:: And you bungled it!


Joseph Jacques Jean Chrétien: -to do it across the board.


An hon. Member:: And he did it right.


Joseph Jacques Jean Chrétien: I thought it was a good move. If someone is to be blamed because I played with the cards on the table by deciding to be novel and try to find a mechanism to help
Income Tax Act
Canada solve its economic problems, then, if I am guilty of that, I will plead guilty. I will not apologize to anyone.


Some hon. Members:: Hear, hear!


Mr. Chr6tien:: When I hear so many accusations in this House that I am doing that just to try to separate the country even more-


An hon. Member:: That is what you have done.


Joseph Jacques Jean Chrétien: I think it is unbelievable that hon. members are making that kind of accusation. As I have said, we were acting in good faith.
I will meet the provincial ministers of finance next month. We are trying to arrange a meeting. I know it will be embarrassing for them and for us because we tried something. It was very difficult because the ministers from the west were uneasy about it; they do not have a big manufacturing base. I told them that as the maritimes could not afford to be part of the scheme the federal government would be paying 100 per cent as it applied to the maritimes. I went to Alberta and explained to its minister of finance that since I was moving into an area where that province does not pay any taxes, Alberta would not be part of this scheme. It was not a proposition that would apply equally across the land. For example, the maritimes treasuries would pay nothing. The provinces which manufacture goods and the others which can afford to do so would pay one-third of the cost. Alberta was not to be part of it. I remember they were not completely happy but they behaved in a responsible way before the budget and up to the budget, after everyone had agreed.
I would like to deal with a touchy problem concerning what was said by the western premiers after that. I believe I have to speak about it. The B.C. government decided to move the date of their budget in order to be able to produce exactly the same tax cut the same day as I. I presume they had discussions in their cabinet because no budget is proposed without approval of the cabinet. In Manitoba they did exactly the same thing. I had occasion to meet the premier of Manitoba. He was in Ottawa and I invited him to come and talk with me. We discussed this problem and other problems for almost two hours. It was useful for me and useful for him. After the fact, after it had been explained to them that their cabinets, except for Alberta, had approved it, I find it a bit incredible that they should say we forced them.


Ramon John Hnatyshyn: Are you calling them liars?


Joseph Jacques Jean Chrétien: No, I do not say they are liars. They said they agreed with the substance, but they did not like the procedures and so on that we were following. If they did not want to be a part of it, it would have been very easy for them to call me-


An hon. Member:: What?


Joseph Jacques Jean Chrétien: -any day before and say "We are not going to agree". I would have advised my colleagues that there were
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Income Tax Act
no takers and I would have done something less valuable than that.


An hon. Member:: Too bad.


Joseph Jacques Jean Chrétien: I wanted to explain that point.
We are having problems at this moment, I do not deny it. We are trying to be fair. We do not want to penalize the taxpayers in Quebec because Mr. Parizeau wants a confrontation with me. It is not I who wants a confrontation with him. I said, and I repeat, that if he had said "I will go along with the other provinces", I would have praised him because he had been able to look at the national economy and the Quebec economy as a man who could look at problems as a minister of finance should look at them, in a non-partisan way.
Let us talk about the facts. I am talking about what happened. I am not surprised that the National Assembly does not like my proposition. What I am surprised at is that the opposition, even in the Quebec Assembly, make no suggestions as to how to solve this question. They just blame the government. At no point since the beginning of this debate have we received any suggestion on how to resolve this.
The Quebec government just want me to send them a cheque. The Prime Minister (Mr. Trudeau) explained that very carefully today. The reason Quebec will have to raise their taxes is because they collect their own taxes. It is as simple as that. We made room in Ontario and in the other provinces. On the same day as my budget, or the day after, they introduced an increase in their income tax equal to my decrease in income tax. That is exactly what happened.
I was amazed to hear the Leader of the New Democratic Party talk about the budget of October. It is not that. If he will read the bill, he will understand. They have raised their taxes. Now that I have made room in Quebec, they can tax their own taxpayers.

All Quebec premiers have said it was essential for Quebec to raise its own taxes. Yet, in this case, I collect for the other provinces the income tax they increased since my budget. In fact, it is the federal government that collects it for them. As concerns the province of Quebec, the only way to transfer funds exactly as for the other provinces, is to leave some tax room.
If the Quebec government wants to raise taxes, let it do it! Since 1954, they have been asking to raise their own taxes, and I made it easier for them through this tax cut. Obviously, the taxpayers will think that this tax cut is due to the generosity of the federal government. We are generous, but not any more than we are towards the other provinces.
The only difference is that in the other provinces, as the finance ministers wanted to share with the Canadian government the economic and political credit for the sales tax cuts, no mention was made either in the debates or in the press that

we had actually reduced our taxes while they had increased theirs. In the province of Quebec, every taxpayer gets an $85 tax cut, which is the amount of the difference.
If the Quebec government wants to negotiate with me, I am waiting for their proposals. I cannot send them a cheque directly, as I do not do that for the other provinces. It is easy to understand. Each time I send a cheque, I consider it as an expense. To avoid any increase in government spending, since everybody complains about the level of spending, we decided to leave some tax room in Ontario, Manitoba, Saskatchewan, British Columbia and the maritimes. It is as simple as that. We do the same thing for the province of Quebec. But as they do not agree about tax collection in Quebec, they choose not to collect the taxes we cut. They would like me to send them the money directly. In so doing, I would increase my expenditures and the members of the opposition who are asking me to do this are those who complain about our spending. If I leave some tax room, I do not spend anything, I just reduce my revenue.

The tax is very important. If I had decided just to pay by cheque, the increase in the expenditures of the federal government would have been more than $800 million. Everyone would have said that the Minister of Finance is increasing his expenditures, while in fact it would have just been a matter of transferring cash to the provinces to reduce their taxes.
In order to be imaginative and to do what I wanted to do without creating the false impression that we are spending money-and the ministers of finance agreed with me-I said we would reduce our taxes and they could increase their taxes. As we are collecting taxes, nobody has noticed what is happening. The federal tax in Ontario and elsewhere has been reduced by $100. The legislatures of Ontario, Manitoba, Saskatchewan, British Columbia and the maritimes have introduced legislation increasing their income tax accordingly. However, as we collected it, nobody noticed.
We do not have an agreement with Quebec to collect their taxes. I offered that at the time of the negotiations, but we never came to an agreement with Mr. Parizeau. He did not respond before the budget. Then after the budget he said, and has been saying since that time, "Send me a cheque". That is the only proposition he has made. I told him that we have to be fair to everybody. We have to make tax rules for Quebec like everywhere else. Because the system is different in terms of collections, he does not want us to have credit for reducing our income tax in Quebec. He wants to take the credit for what he will do if he raises the taxes we have vacated.
There was no problem in the other provinces. I did not take credit for cutting taxes in my budget because the provinces were generous enough to let me share in the benefit of cutting sales tax. Nobody else talked about the income tax mechanism. The problem is that the mechanism does not exist in the same way in Quebec.
I cannot understand the Quebec government not wanting to raise their taxes to collect the amount I am vacating. In 1954
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Mr. Duplessis said that it was fundamental to the autonomy of Quebec. You cannot have it both ways. Either you sign a collection agreement with the federal government or you do not. We have not had any counter-offer. They have merely tried to force me to send them a cheque. I am not sending a cheque to the other provinces in which I have vacated the tax field. Of course, it is a difficult situation.
Because I believe in our institutions and in the good faith of those who are elected across this land, regardless of political stripe, I did this. Perhaps I was too generous in believing that in economic and fiscal matters I could deal in good faith with everybody. Unfortunately, it is not possible. However, I will keep trying-


Some hon. Members:: Hear, hear!


Joseph Jacques Jean Chrétien: because I believe one of the problems in this land is that we are destroying a very necessary instrument, the national government. That is extremely important. At this moment, I am not comfortable as Minister of Finance of this country. I will not be partisan or political in the sense of raising the problem in Quebec.
I compared the books of the province of Newfoundland with the books of the province of Alberta, both of which have Conservative governments, and it made me extremely uncomfortable. The highest sales tax in the land is in Newfoundland. There is no sales tax in Alberta. The highest tax on gasoline is in Newfoundland. There is none in Alberta. Most of the taxes that exist in Newfoundland do not exist in Alberta. That is good for Alberta. However, in a country like Canada, is it not normal to have a federal government strong enough to help those who are poor with the money of those who are rich?


Some hon. Members:: Hear, hear!


Joseph Jacques Jean Chrétien: I came to this House 15 years ago. Some people outside this place say that I have moved to the right. I do not mind when they say that. I try to do what is right. However, when I came to this House it was because I believed in distribution. There was no medicare. All sorts of programs were lacking. I have been associated with many of the programs which were initiated by Mr. Pearson and by the present Prime Minister. This week, if I am not mistaken-I speak from memory-the OECD stated that this year the level of income per capita in Canada is above that of the United States.


Sinclair McKnight Stevens: Read the whole report.


Joseph Jacques Jean Chrétien: We are surpassed only by Switzerland and Sweden. Bearing in mind the kind of land in which we live, with its provinces running 4,000 miles from coast to coast and another 4,000 miles from Windsor to the North Pole, and considering what we have managed to achieve in the last 110 years, I am proud to be a Canadian.


Some hon. Members:: Hear, hear!
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Joseph Jacques Jean Chrétien: I am proud to try to find ways to keep our country as it is and to bridge the gap between the rich and the poor. If I did not risk my skin, I would be at rest with my conscience-


Some hon. Members:: Oh, oh!


Joseph Jacques Jean Chrétien: Members opposite can laugh. For years I have been a member of this House and I have devoted six years, one month, three days and two hours to trying to solve the problems of the weakest in our society, the Eskimo and the Indian.


Steve Eugene Paproski: Who is laughing?


An hon. Member:: We are all Canadians.


The Acting Speaker (Mr. Turner):: The Minister of Finance has the floor. This is going to be a long debate and we shall all have our turn.


Joseph Jacques Jean Chrétien: I have done it because I believe this country can offer something that is different. One of the proudest moments in my life was when one day I took the taxpayers' money to help an Eskimo print the first book in the Eskimo language ever printed in the world. We believed it was important that the smallest minority in this land should keep its language and its culture for generations to come.
I can take a lot of abuse from the opposition. I do not mind. But I will do my duty as I believe is right. It is to try to find a new formula in order to achieve greater equality in this nation. Perhaps we shall have to change the constitution. The Prime Minister has spoken often on that subject. I will just tell the House that I think we are on a dangerous course at this moment.


Some hon. Members:: Hear, hear!


Sinclair McKnight Stevens: You put us there!


Joseph Jacques Jean Chrétien: Some people are willing to make any compromise but I am not. This measure is a just measure. We are not penalizing the people of Quebec at all. We are not discriminating against other provinces. Members over there can introduce all the nuances they like, but basically this measure is sound. I have talked with the ministers of finance of the land, excluding Mr. Parizeau, and I have talked with my colleagues. They are uncomfortable with it, but-


Some hon. Members:: Oh, oh!


Joseph Jacques Jean Chrétien: I tried before. I talked to them. I will meet them again. I will try to carry out this duty. As Minister of Finance I must try to bring about, in conjunction with the provinces, an economic policy. That is an avenue which has to be explored. Of course, it has given me some problems, but not problems I am afraid of. I can face problems and difficulties. What I am concerned about are sensible solutions.
I should like to compensate the people of Quebec. I do not want them to lose. If the Quebec government wants to raise its

May 17, 1978
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income tax, it can do that. But basically we have to realize that with Canada as it is, the weakening of federal institutions being a la mode, the result may be that Canada will not have to hold a referendum to split up. You will have de facto separation. I will try to bring about policies which will produce the maximum economic growth with the maximum distribution from east to west. We have to be careful about all these things. I will carry on as long as I have the support of the Prime Minister and of my colleagues. It is very important to try to bring about justice in this country.


Thomas Clement (Tommy) Douglas: Could I ask the Minister of Finance a question? On three occasions in the course of his speech he said Quebec could always increase its income tax and take up the room the federal government has provided. In order to clarify this matter, would the hon. gentleman explain clause 30 of the bill? How could this be done in view of the fact that the taxable income dealt with in reference to the tax is for the taxation year 1977 for Quebec and 1978 for the other provinces? How could the Quebec government move into that field when the tax has already been paid?


Joseph Jacques Jean Chrétien: I will have other occasions at the committee stage to explain this point but perhaps it is worthy of explanation at this moment. The problem is that this year for the first two months, January and February, we have cut the income tax for the fiscal year 1978 by $100. Everyone knows about it. It was for the first two months. If I choose to apply this reduction to the same fiscal year-1978-making a further credit of $85 available to the Quebec taxpayers, what would happen? It would mean that the taxpayers in Quebec who already have received an exemption of $100 this year would not receive anything. So I would be affecting in a negative way the people who would be paying least taxes.
Suppose that in 1978 they were paying $100 in taxes. We have already said to them that for January and February they will pay no tax at all. If I give another tax credit in 1978 they will not qualify to receive it. That is why I decided to look at the situation for 1977 which, even though it may not be perfect, is an attempt to protect as much as possible the taxpayers who are at the lower end of the scale. This is the reason I am doing that. If hon. members over there have a better suggestion to guarantee that result, I am willing to look into it. I am not stubborn about it. 1 have just given an explanation for my actions; it is a technical explanation.
There is another thing, too. The other provinces have increased their taxes already and we have effectively decreased our taxes for them since the night of the budget by collecting them for them. Because of the time of the year at which we have now arrived we will have to wait until October to bring about a reduction for the taxpayers in Quebec. As to the problem of those who pay only $ 100, we can give them a credit for the whole year of 1979 and they would receive the cash in the spring. I do not think this is fair to them.


Sinclair McKnight Stevens: Mr. Speaker, having listened to the Minister of Finance (Mr. Chretien) in his

introductory remarks to Bill C-56,1 think there is a fundamental misunderstanding by this government as to what an agreement means.
In his remarks the Minister of Finance took us through those trying times when he tried to negotiate with various provinces. But the important thing he omitted to tell us is why he chose on April 10 to go ahead with his budget knowing that he had no agreement with such a key province as Quebec. The Prime Minister (Mr. Trudeau) has indicated that he feels there is no rush for an election now. Presumably he felt that way on April 10, so why was there a rush for a budget? Why could one or two more weeks not have been taken in the earnest hope that there could have been an understanding arrived at, not just with eight or nine provinces but with all ten provinces in the country.
I believe that the minister clearly demonstrates that there is no understanding on his side of the House as to how to negotiate, bearing in mind the sensitivities of other levels of government. If the government made a mistake on April 10 by going ahead rashly and bringing in a proposal which was subsequently shown to be clearly unacceptable to the government and, presumably, to the members of the National Assembly of Quebec, why did the federal government then hasten to bring in Bill C-56, again to create the consternation we are now living with in this country? What was the rush? Why first reading on May 15 and second reading debate beginning on May 17?
In what has happened on the government side we can see that the government feels there are three distinct divisions in Canada. There is Alberta, which is treated, in a sense, as the outcast. It gets no benefit whatsoever as a result either of the budgetary measures announced or of the provisions now written into Bill C-56. There are the eight provinces which do receive the benefit of the initially announced budget of April 10. Finally there is Quebec, which seems to be treated in a unique fashion. Quebec residents-certainly those resident in Quebec as of December 31, 1977-will be geeting a tax credit of up to $85 simply because they are residents of Quebec. We know that Caesar divided Gaul into three. Our emperor has divided Canada into three. Is this the way the Minister of Industry, Trade and Commerce (Mr. Horner) wins big for Alberta?
To support Bill C-56 would be to condone government incompetence. To facilitate passage of this legislation would be to aid and abet a Minister of Finance who is the most inept minister to hold that office in living memory.
Any member of this House who chooses to vote for Bill C-56 will contribute to divisive forces in this country and will seriously undermine a satisfactory working relationship between our federal and provincial levels of government. As it has been presented to us, this legislation contains insidious provisions which were not contained in the minister's budgetary statement of April 10. Indeed, they were never even thought of as of that date. These provisions, to which I will
May 17, 1978

refer shortly, are so odious that we in the official opposition ought not, must not and will not vote at second reading to support them in their present form.
What other Minister of Finance or Prime Minister in Canadian history has ever been so inept? Within a six-week period the minister has taken an essentially good idea and mishandled it to the point where at least the majority of the nine provinces with which he had agreement now feel they have been double-crossed, while the tenth, as reflected in the Quebec National Assembly, which has voted unanimously, rejects the federal government's offer of $186 million to go to the residents of the province of Quebec. This government, frankly, cannot even give money away without causing dissension.
For example, when the Minister of Industry, Trade and Commerce was at a football game in Edmonton he was booed when he attempted to present a $1 million cheque to the Commonwealth Games people there. Now we have the spectacle of every member in a provincial legislature, Liberal, Union Nationale, Creditiste or what-have-you, voting unanimously to condemn the Trudeau-Chretien approach with respect to giving funds to individual residents of Quebec.
Let there be no mistake, their opposition is a fundamental opposition. The federal government is wantonly trying to circumvent provincial jurisdiction in an approach which is designed to blackmail a provincial government into submission. That is hardly the recipe for federal-provincial relations. It is hardly the approach to ensuring national unity. The Minister of Finance has spoken about being proud to be a Canadian. I am proud to be a Canadian, and I believe the time has come when the divisive forces this government is letting loose should be ended so that we can all continue to be proud Canadians.


Some hon. Members:: Hear, hear!


Sinclair McKnight Stevens: I was somewhat surprised that in his remarks the minister reiterated many of the things he said on budget night. He attempted to rationalize his record, but in that context perhaps we should put a few things on the record.
Since taking office in September of last year the record of this Minister of Finance has been one of a continuous series of errors. The plunge of the dollar was accelerated by the minister's lack of comprehension of the magnitude of the problem, with the result that we lost twice as much in foreign exchange reserves as was needed, and now we end up seeking credit to the extent of some $7 billion from not only our own chartered banks but also from foreign banks and other lending institutions around the world.
Hon. members will recall that the minister took the concept of a $700 million income tax cut in his October 20 statement and dropped it in as a $100 per person tax credit to be felt in January and February, but in fact it went virtually unnoticed by most Canadians. We lost, in effect, $700 million in revenue, with virtually no fiscal stimulant to show for it. It was a maximum loss, speaking fiscally, for a minimum gain.
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The minister stole the concept of an employment tax credit from this party and from others. He threw it into his October 20 statement but, unfortunately, he threw it in without knowing what he was talking about. For weeks we watched the government wince and agonize over what legislation it should put in place. Hon. members will recall that eventually a bill was introduced and passed, with our acquiescence, within one day; but then we found that it took the government such a long period of time to put the measure into operation that there was little benefit for the unemployed during the recent wintry months.
Perhaps the easiest thing for me to do in attempting to rebut some of the statements made by the Minister of Finance, concerning the desirable things he claims he has done in his budgets is simply to refer the House and the minister to the last two forecasts put out by Wood Gundy in Toronto. That firm forecasts regularly on a quarterly basis what it anticipates to be the Canadian economic growth in coming years. In October last year they put out a forecast, as well as one in April. It is sad reading. We received a comparison of what Wood Gundy felt would be the Canadian economic situation as of last October, and currently how they feel their forecasts have measured up. By coincidence, those months happen to be the months the Minister of Finance has been tending shop in Canada.
For example, last October Wood Gundy felt that in 1978 the unemployment level in Canada would be 8 per cent. Currently they are indicating that it will be 8.6 per cent. They feel that in 1979 our unemployment level will rise to 9.1 per cent. Only last October they anticipated that it would be 7.8 per cent. Last October they felt the real growth for 1978 would be 4 per cent. Now they have marked that down to 3.8 per cent. More importantly, they anticipated the growth in Canada in 1979 would be 4.1 per cent. Now they see it to be only 3.2 per cent. On all counts they see their October forecasts will not be met, and that our inflation levels in Canada will be higher in 1978 and 1979.
Page 3 of the Wood Gundy report indicates that 1979 will be an even slower year than 1978. Even assuming that the recent sales tax cuts are extended indefinitely, they are now forecasting a 3.8 per cent real growth this year, compared to 4 per cent in their earlier forecast. Also they are forecasting a 3.2 per cent real growth in 1979, compared to 4.1 per cent in their October forecast. Also Wood Gundy have indicated that their figures will be accompanied by an unemployment rate rising to over 9 per cent.
Do I have to say any more to show how inadequate the minister has been in respect of the budgets he has brought in? Not only are the forecasters downgrading the real growth and upgrading inflation and unemployment levels in this country, but we find the government has been systematically underestimating its expenditures and overestimating its revenues. The result is the $11.5 billion deficit we are now living with. Over

May 17, 1978
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20 per cent of the government's total spending ends up in the form of debt.
The provisions of Bill C-56 relating to provincial sales tax reductions are poorly conceived, drafted and explained. I should like to make one thing clear. Bill C-56 is an all-inclusive bill. It gives legislative effect to various measures which were announced in the budget. Many of these measures are welcome. Certainly we in this party welcome them. We supported those measures in the budget debate, and we will continue to support them. Let there be no doubt: these measures are already in effect. They are in place.
In this respect, I should like to refer to page 60 of the budget speech presented by the Minister of Finance on April 10. The effective date for various budgetary measures appears on that page. The reason I dwell on this is that I noticed during question period today that the government is insinuating that if there is any extended debate on Bill C-56, certain budgetary measures will not become the law of the land. That is just not true. That has been spelled out in the minister's budgetary document.
I should like to make the record clear. For example, special allowances to permit deduction from taxable income of 50 per cent of the costs of increases in research and development activity became effective on January 1, 1978. The federal income tax rate reductions in the Northwest Territories to facilitate introduction of a territorial income tax with no tax increase for individuals or corporations became effective on January 1, 1978. Costs of machinery, equipment and other facilities for enhanced oil recovery systems became eligible to earn depletion allowances of $1 for each $2 on April 10, 1978. The limit on the deduction of depletion earned on certain expenditures on non-conventional oil projects increased to 50 per cent of total profit as of April 10, 1978.
Taxfree rollover provisions apply to incorporated family farms as of April 10, 1978. Plans established to upgrade heavy oil manufacturing and processing facilities were effective on April 10, 1978, budget night. Additional capital cost allowances provided on depreciable railway system assets acquired by railways before 1983 were effective on April 10, 1978. As far as the registered retirement savings plan provisions are concerned, according to the minister a special provision will allow RRSP owners reaching age 71 after April 10, 1978 to make use of the new options proposed.
Let there be absolutely no clouding of the issue. Those measures are in place. They are the law of the land. The passage or non-passage of Bill C-56 is immaterial to those provisions being felt by all Canadians. As we debate Bill C-56,
I suggest we look at it for what it is. Not only will we be asked to judge whether the government has mishandled a basically good idea, that is, a provincial sales tax reduction concept, but whether they have mishandled it to a point where it is totally unacceptable in its present form as found in Bill C-56.
I should like to review exactly what the government has done in respect of this matter. As has been indicated, the idea was borrowed from one or more provincial governments. It was felt to be a good idea. The government never explained why it

chose to go the provincial sales tax route as opposed to the federal sales tax route which could be used as a device to increase the buying power of Canadians. It never explained that because there were political advantages open to the governement which were not open if the federal sales tax approach was followed.
Unfortunately, a federal sales tax of 12 per cent on most items has been left intact. It is one of the most outdated taxes of any industrialized nation in the world. It is inflationary, regressive, and it hits the poor more than any other sector. Unfortunately, the minister did not choose the federal tax, which is entirely within his domain, in order to do whatever he felt was necessary in the form of an incentive to Canadians.
Today the Minister of Finance indicated that intensive negotiations with the provinces of Canada have taken place for three weeks. We understand that certain provinces asked for flexibility. They said, in effect, "If we go along with the provincial sales tax approach, will you give us some flexibility-that is, if we find, as in the case of Manitoba, we would like to divert some funds to some type of job creation in our province as opposed to exclusively lowering our sale tax?" For reasons that are not totally explained by the government it chose to be rigid and said no to Manitoba.
The government negotiated with the provinces on the basis of one agreement for everybody, and that one agreement would exclude Alberta. It would include nine prescribed provinces, and in effect the agreement would work very simply. The government would give up $100 of its tax revenue; that is very clear in Bill C-56 when we look at clause 30. The government would give up $100 of its tax revenue, and that was anticipated to be taken up. The difference was to be taken up, in the case of the eight prescribed provinces, by those provinces adopting companion legislation to increase provincial personal income taxes by $100.
As far as the income tax returns of the residents of the eight prescribed provinces are concerned, one can see that this was a rather simple thing. The federal government would give a credit of $100 and the provincial tax would go up by $100, so the tax simply shifted from being a federal tax to being a provincial tax. That put the provinces into a sufficient revenue position to reduce provincial sales taxes under the agreement this government had with the provinces.
If there was an overrun as far as provincial sales tax expenditure was concerned-that is, in addition to the actual tax revenue the federal government had given to the provinces-the provinces would be getting a consolidated revenue payment. On the other hand, if there was a deficiency it would be reversed and the federal government would get money back. That would be the case when an excess payment had been made in terms of aggregate personal income tax revenue given up by the federal government. In short, that was the working agreement.
The minister confused the issue today when he wrapped himself in the flag and started to talk about equalization
May 17, 1978

problems, poor provinces and rich provinces. We all understand that to be the case, but we do have a provincial equalization agreement in this country. This is an entirely different matter. The significant thing is that we now have a situation in which, rather than having nine provinces accepting the approach the government outlined, we have only eight. The ninth province, being Quebec, said it did not like the terms laid down by the federal government and wanted the flexibility of reducing provincial sales tax in the form it had in mind.
Frankly, that has been a wise move. First of all, the sales tax was to be reduced by 100 per cent on certain specific items, and the specific items referred to are those that are sluggish in the province of Quebec. That is a smart move. It is a smart move to reduce the tax by 100 per cent rather than a few percentage points. The people understand a 100 per cent reduction much more than they would understand a reduction of from 6 per cent to 3 per cent, or whatever the case may be. Zeroing in on particularly sluggish industries was a good idea, and making this a program for a year was also a good idea. Clearly a one-year time frame did not suit this government, which was anticipating a spring or, certainly, an early fall election.
We are now faced with this problem of what to do when the minister brings in a budget without having an agreement with all the provinces, and subsequently finds he cannot make a satisfactory agreement so brings in Bill C-56, which really by-passes the government of the province of Quebec. It in effect puts into place an $85 payment for any resident of Quebec who lived there on December 31, 1977, providing he pays taxes. What an absolute affront to any provincial government. This in effect is saying that if the province does not join with the bilateral agreement this government will unilaterally go ahead and the province is on its own. If it wishes to increase its taxes, that is its business, but this government is going to make this credit available to its residents whether or not the province likes it.
It is most unfortunate in the context of how this deal has been put together that the government has been so insensitive. Realizing it made a mistake on budget night, surely the government should have hesitated before bringing in Bill C-56 until it had negotiated a more satisfactory arrangement with the province of Quebec.
If this government is now willing to listen to proposals from Quebec, why was it not willing to listen to those proposals before bringing in Bill C-56? Why are we faced with a piece of legislation that is so obviously not to the liking of not only the government of Quebec but of all members of the National Assembly of that province? This is why we feel we must oppose this bill at second reading. How can any member of this House support in principle legislation such as Bill C-56, when he knows it will be so divisive in the country if it ever becomes the law of the land?
If it becomes the law of the land will not the residents of Alberta be taking the right position in saying they should be included? If the government is shifting from an essentially
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sales tax related type of revenue sharing scheme to an income tax credit arrangement for at least one province, why should the province of Alberta not also be included? Certainly if I were a resident of Alberta I would Find most objectionable the fact that, by being a resident of that province, I am deemed to have more wealth than those in other areas of the country and should receive absolutely no benefit. If I were a resident of Quebec I would be getting an income tax credit, or at least if I lived in that province as of December 31, 1977 and paid income tax. Surely the government has created another problem here, setting a precedent by what it has done for Quebec. It will be very difficult for this government to deny the residents of Alberta the same accommodation.
What this means is that more revenue will have to be found to be given back to the citizens of Alberta in order to allow them some equity in relation to what has taken place in Quebec. A colleague of mine suggests they do not care about Alberta. Certainly if one were to read Bill C-56 one would see that not only do they not care about Alberta, they are indifferent to that province.


An hon. Member:: Read the bill.


Sinclair McKnight Stevens: Some of those seals in the back rows on the Liberal side suggest we should read the bill. Clearly they have not read it or they would not be making such a comment.
This is the nub of the problem. Bill C-56 is an indication of the incompetent and inept handling of an arrangement by the federal government involving ten provinces that would have resulted in a provincial sales tax reduction for nine of those provinces. There is nothing wrong with the idea, but this government basically blew it.
In response to a question put earlier the minister said, "If you have a better system, we'll look at it." That seems to be his attitude. He is so over his head in this portfolio that he demonstrates it by seeking help constantly-"Tell me what to do." You cannot run an economy, Mr. Speaker, as this Minister of Finance is attempting to do on a touch and feel system. There has to be a change, or the forecast figures that I put on the record today will be still bleaker come September and October of this year. This country cannot stand the type of economic conditions it is being thrust into by an incompetent government such as we have had for over ten years.


John Edward Broadbent: Mr. Speaker, given the importance of a budget debate, I wonder if this House would be in agreement at this point to calling it six o'clock.


Some hon. Members:: Agreed.


The Acting Speaker (Mr. Turner):: Agreed and so ordered. It being six o'clock p.m., the House stands adjourned until tomorrow at two o'clock p.m., pursuant to Standing Order 2(1).
At six o'clock the House adjourned, without question put, pursuant to Standing Order.

Thursday, May 18, 1978